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Private Letter Ruling Number: 202301002 Internal Revenue Service October 7, 2022 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202301002 Release Date: 1/6/2023 Index Number: 9100.00-00, 9100.22-00, 1400Z.02-00 [Third Party Communication: Date of Communication: Month DD, YYYY] Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:B04 PLR-107551-22 Date: October 07, 2022 Dear *******: This letter responds to Taxpayer's request dated Date 1. Specifically, Taxpayer requests relief under Treasury Regulation §§ 301.9100-1 and 301.9100-3 for an extension of time to make an election to: (1) to self-certify the Taxpayer as a qualified opportunity fund (QOF), as defined in § 1400Z-2(d) of the Internal Revenue Code (Code); and (2) for the Taxpayer to be treated as a QOF, effective as of Date 2, as provided under Code § 1400Z-2 and Treasury Regulation § 1.1400Z2(d)-1(a). FACTS According to the information and representations provided, Taxpayer, a partnership treated as limited liability company for U.S. tax purposes, formed on Date 2, for the purpose of qualifying as a QOF and investing in "qualified opportunity zone property" as defined in Section 1400Z-2. Taxpayer currently has two members, Members. Members each own a *** percent interest in Taxpayer. Taxpayer's LLC operating agreement states the Taxpayer's intention to be a QOF and to invest in at least 90 percent of Taxpayer's assets in one or more qualified opportunity zone businesses. Members employed a financial advisor to assist in forming and structuring Taxpayer to meet the requirements under § 1400Z-2 and be a valid QOF. On Date 3, Members first invested gains into Taxpayer, who subsequently invested those gains into a qualified opportunity zone business (QOZB). The QOZB then acquired and developed a piece of real estate in an opportunity zone. Taxpayer represents that other than the missed election to be a QOF, Taxpayer and QOZB meet all the rules under section 1400Z-2 and the regulations thereunder. For tax year Year 1, Members engaged Advisor to advise them on reporting related to their Year 1 investments, including their investments in Taxpayer. Advisor has filed all of the Members' individual and business tax returns for a number of years. During the process of advising Members on how to file returns for Taxpayer, Advisor incorrectly believed that the Members had the option to classify Taxpayer as either a partnership or a disregarded entity. Specifically, Advisor advised that Taxpayer could qualify as a joint venture and Members could report Taxpayer's activity directly on the Members' federal income tax return. In addition, Advisor failed to timely file an extension to file Taxpayer's Form 1065 for Year 1. As such, Taxpayer did not file a federal tax return and a Form 8996 for Year 1. Rather, all activity for tax year Year 1 related to Taxpayer was reported on the Members' Form 1040 for Year 1. In the summer of Year 3, Advisor realized that Taxpayer was not certified as a QOF beginning in tax year Year 1 due to Members incorrectly reporting Taxpayer's activities on their return. On Date 4, Advisor informed Members that Taxpayer's improper classification as a disregarded entity disqualified Taxpayer from being a QOF. Upon being made aware of this mistake, Taxpayer engaged Advisor to prepare this private letter ruling request. According to the representations provided, Taxpayer could not have ever qualified to be a joint venture under federal law and therefore cannot be treated as a disregarded entity. Rather, Taxpayer represents that it must be treated as a partnership by default under section 301.7701-3(b)(1). In addition, Taxpayer filed Form 1065 along with a Form 8996 for tax years Year 2 and Year 3. LAW AND ANALYSIS Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations for rules for the certification of QOFs. Treasury Regulation § 1.1400Z2(d)-1(a)(2)(i) provides that the self-certification of a QOF must be timely-filed and effectuated annually in such form and manner as may be prescribed by the Commissioner of Internal Revenue in the Internal Revenue Service forms or instructions, or in publications or guidance published in the Internal Revenue Bulletin. To self-certify as a QOF, a taxpayer must file Form 8996 (Qualified Opportunity Fund) with its tax return for the year to which the certification applies. The Form 8996 must be filed by the due date of the tax return (including extensions). The information provided indicates that the Taxpayer did not file its Form 8996 by the due date of its income tax return (including extensions) due to Advisor incorrectly advising that Taxpayer could be classified as a disregarded entity. Section 1.1400Z2(d)-1(a)(2)(i) sets forth the manner and timing for electing to be a QOF and electing to self-certify as a QOF. As such, these elections are regulatory elections, as defined in section 301.9100-1(b). According to Treasury Regulation § 301.9100-3(a), requests for extensions of time for regulatory elections that do not meet the requirements of Treasury Regulation § 301.9100-2 (automatic extensions) must be made under the rules of Treasury Regulation § 301.9100-3. Additionally, requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that the granting of relief will not prejudice the interests of the government. Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections (other than automatic extensions covered in section 301.9100-2) will be granted when the taxpayer provides evidence (including affidavits) to establish that the taxpayer acted reasonably and in good faith and the grant of relief will not prejudice the interests of the Government. Section 301.9100-3(b)(1) provides that a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer-- (i) requests relief before the failure to make the regulatory election is discovered by the Service; (ii) failed to make the election because of intervening events beyond the taxpayer's control; (iii) failed to make the election because, after exercising reasonable diligence, the taxpayer was unaware of the necessity for the election; (iv) reasonably relied on the written advice of the Service; or (v) reasonably relied on a qualified tax professional, and the professional failed to make, or advise the taxpayer to make, the election. In addition, section 301.9100-3(b)(3) provides that a taxpayer is deemed not to have acted reasonably and in good faith if the taxpayer-- (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under § 6662 at the time the taxpayer requests relief, and the new position requires or permits a regulatory election for which relief is requested; (ii) was fully informed in all material respects of the required election and related tax consequences but chose not to make the election; or (iii) uses hindsight in requesting relief. If specific facts have changed since the original deadline that make the election advantageous to a taxpayer, the Service will not ordinarily grant relief. Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under § 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. Based on the facts and information submitted and the representations made, we conclude that Taxpayer's request for extension of time to elect to be a QOF and to self-certify as a QOF is a regulatory election governed by Treasury Regulation § 301.9100-3. We further conclude that, based on the facts and information submitted in connection with this request, Taxpayer has acted reasonably and in good faith, and that the granting of relief would not prejudice the interests of the government. Accordingly, Taxpayer has satisfied the requirements of the regulations for the granting of relief, and is granted ran extension of 45 days from the date of this letter ruling to file a Federal income tax return to make the election to self-certify as a QOF under section 1400Z-2 and section 1.1400Z2(d)-1(a)(2)(i). The election is to be made on a completed Form 8996. CAVEATS This ruling is based upon facts and representations submitted by the Taxpayer and accompanied by penalty of perjury statements executed by the appropriate parties. This office has not verified any of the material submitted in support of the request for a ruling. However, as part of an examination process, the Service may verify the factual information, representations, and other data submitted. This ruling addresses the granting of Treasury Regulation § 301.9100-3 relief as applied to the election to self-certify the Taxpayer as a QOF by filing Form 8996 for Year 1. Specifically, we have no opinion, either express or implied, concerning whether any investments made into Taxpayer are qualifying investments as defined in Treasury Regulation § 1.1400Z2 (a)-1(b)(34) or whether Taxpayer meets the requirements and structure under section 1400Z-2 and the regulations thereunder to be a QOF. In addition, we also express no opinion on whether any interest owned in any entity by Taxpayer qualifies as qualified opportunity zone property, as defined in section 1400Z-2(d)(2), or whether such entity would be treated as a qualified opportunity zone business, as defined in section 1400Z-2(d)(3). We express no opinion regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction, including whether Taxpayer could not have been classified as a disregarded entity or whether Taxpayer is classified as a partnership. A copy of this letter must be attached to any tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. This ruling is directed only to the taxpayer requesting it. Code § 6110(k)(3) provides that it may not be used or cited as precedent. Enclosed is a copy of the letter ruling showing the deletions proposed to be made when it is disclosed under Code § 6110. Pursuant to the Form 2848, Power of Attorney and Declaration of Representation, on file, we are sending a copy of this letter to Taxpayer's authorized representative. This letter is being issued electronically in accordance with Rev. Proc. 2020-29, 2020-21 I.R.B. 859. A paper copy will not be mailed to the taxpayer. Sincerely, Lisa Mojiri-Azad Senior Technician Reviewer, Branch 4 Office of Chief Counsel (Income Tax & Accounting) cc:

Private Letter Ruling Number: 202221012 Internal Revenue Service February 17, 2021 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Release Number: 202221012 Release Date: 5/27/2022 UIL: 501.07-00 Date: February 17, 2021 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: CERTIFIED MAIL - RETURN RECEIPT REQUESTED Dear *******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(7), for the tax periods above. Your determination letter dated February 18, 19**, is revoked. Our adverse determination as to your exempt status was made for the following reasons: You have not established that you are operated substantially for pleasure and recreation of its members or other non-profitable purposes and no part of the earnings inures to the benefit of private shareholder within the meaning of IRC Section 501(c)(7). You have made your recreational and social facilities available to the general public. You have exceeded the non-member income test for tax years ending *******, ******* and *******. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit www.irs.gov. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims or 3) the United States District Court for the District of Columbia. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing an action for declaratory judgment by referring to the enclosed Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 U.S. Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 U.S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, DC 20001 Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Internal Revenue Service Taxpayer Advocate Office Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.irs.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting www.irs.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. Keep the original letter for your records. Sincerely, Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Publication 1. Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: September 17, 2020 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name. ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: CERTIFIED MAIL -- Return Receipt Requested Dear *******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501 C 7. If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501 C 7 for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to he valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: F 4621-A Form 6018 Form 886-A Pub 892 Pub 3498 ISSUE: Whether the tax-exempt status of ******* (*******) an IRC Section 501(c)(7) social club, should be revoked. FACTS: ******* articles of incorporation were filed in the state of ******* on September 12, 19xx. The exact legal name of the organization in the articles of incorporation is *******. The purpose stated in the articles of incorporation were to acquire and maintain a community house and grounds in the village of ******* for promoting and fostering the educational and religious purpose of the community. The ******* Secretary of State website indicated, ******* was reinstated on July 18, 20xx, its principal office address is *******. ******* entity status with the State is active and in good standing. On August 23, 19** the organization submitted form 1024, Application for Recognition of Exemption Under Section 501(a) and requested exemption as a social welfare organization exempt under section IRC 501 C 4. ******* stated is purpose was to provide swimming, tennis and basketball activities for its members. ******* was granted exemption as a social club and exempt under section IRC 501 C 7. The letter of exemption as a section IRC 501 C 7 social club was issued on Feb. 18, 19xx. On May 1, 20xx, ******* filed form ******* and form ******* for the year ending ******* and reported the following revenues 1. Membership dues 2. Clubhouse rental 3. Tennis 4. Pool 5. Other Total Revenues ******* $ ******* On March 5, 20xx, ******* was contacted by letter 3611, informing the organization that its form ******* for 20xx had been selected form examination. The organization was informed that the examination and request for documents was to verify the non-member usage of the club's facilities and the organization's continued qualification for exemption under section IRC 501 C 7 as a social club. On August 04, 20xx, ******* submitted the response to information document request. The organization submitted books, records and bank statements for the year ending December 31, 20xx. On August 06, 20xx, the organization was informed that the examination would be expanded to include form ******* for the year ending ******* and the form ******* for the years of 20xx and 20xx. On August 19, 20xx, a telephone interview was conducted with the organization's treasurer, *******. As per the interview, ******* owns its building in which its activities are conducted. ******* operates a club house, swimming pool and tennis court. The sources of income are membership dues, club house rental, pool and tennis court usage. The organization is governed by a board of directors. Different members of the board oversee the different club activities. Membership is for one year; membership dues is normally due in February. Memorial Day to Labor Day is the clubs busiest time. Tennis is year-round. The organization conducts movie nights and cook outs for members. Club house rental to nonmembers is year-round. The total number of members is between xxx to xxx. The members include an entire family as one member. The annual membership fees are based on the number in the family. On August 19, 20xx, as per interview with the organization's treasurer, nonmembers/guests can use the pool and the tennis courts but must be accompanied by a member. For the pool use, member pay $ ******* per guest. For the tennis court use, members pay $ ******* per guest. The organization did not provide the substantiation to document the usage of the pool and the tennis courts by nonmembers/guest. The organization also rents out its club house to non-members. The organization submitted journals and rental agreements with the nonmembers. As per form *******, the organization reported nonmember or unrelated business income as follows: As per examination of the organization's books, records and review of the forms ****** and forms ******* filed by the organization, the following is a computation of the organization total revenue and the nonmember percentage of the total revenue. NONMEMBER INCOME PERCENTAGE OF TOTAL REVENUE LAW IRC § 501(c)(7) exempts from federal income tax clubs organized for pleasure, recreation, and other non-profitable purposes, substantially all of the activities of which are for such purposes and not part of the net earnings of which inures to the benefit of any private shareholder. Section 1.501(c)(7) of the Regulations provides that, in general, the exemption extends to social and recreation clubs supported solely by membership fees, dues and assessments. However, a club that engages in a business, such as making its social and recreational facilities open to the general public, is not organized and operated exclusively for pleasure, recreation and other non-profitable purposes, and is not exempt under section 501(a). Prior to its amendment in 1976, IRC § 501(c)(7) required that social clubs be operated exclusively for pleasure, recreation and other nonprofitable purposes. Public Law 94-568 amended the "exclusive" provision to read "substantially' in order to allow an IRC § 501(c)(7) organization to receive up to 35 percent of its gross receipts, including investment income, from sources outside its membership without losing its tax exempt status. The Committee Reports for Public Law 94-568 (Senate Report No. 94-1318 2d Session, 1976-2 C.B. 597) further states; (a) Within the 35 percent amount, not more than 15 percent of the gross receipts should be derived from the use of a social club's facilities or services by the general public. This means that an exempt social club may receive up to 35 percent of its gross receipts from a combination of investment income and receipts from non-members, so long as the latter do not represent more than 15 percent of total receipts. (b) Thus, a social club may receive investment income up to the full 35 percent of its gross receipts if no income is derived from non-members' use of club facilities. Revenue Ruling 66-149 holds a social club as not exempt as an organization described in IRC § 501(c)(1) where it derives a substantial part of its income from non-member sources. Revenue Ruling 60-324 states by making its social facilities available to the general public the club cannot be treated as being operated exclusively for pleasure, recreation or other non-profitable purposes. Revenue Procedure 71-17 sets forth the guidelines for determining the effect of gross receipts derived from the general public's use of a social club's facilities on exemption under IRC § 501(c)(7). Where nonmember income from the usage exceeds the standard as outlined in this Revenue procedure, the conclusion reached is that there is a non-exempt purpose and operating in this manner jeopardizes the organization's exempt status. TAXPAYER POSITION On September 11, 20xx, revenue agent spoke with organizations treasurer, treasurer agreed with determination GOVERNMENT POSITION The cited Code and Regulations above provide criteria for recognition of a tax-exempt organization under IRC 501(c)(7). Generally, an organization is to be organized and operated exclusively for pleasure, recreation, and other nonprofit purposes. In general, this exemption extends to social and recreation clubs which are supported solely by membership fees, dues, and assessments. In the case of the organization under examination, it was granted exemption in 19xx, as a social club under IRC 501(c)(7). IRC 501 c 7 organizations are limited to the amount of nonmember income that it can receive and still maintain its exempt status. The nonmember income limitation is 15% of the gross revenue received. In the year of examination, ******* nonmember income was ** % of the total income received. The facts provided about the organization under examination shows that for the years 20xx - 20xx, the entity exceeded the nonmember income limitation. The ******* has exceeded the 15% nonmember limitation in all ******* of the identified years. The subject organization does not qualify for exemption under IRC 501 C 7. The exemption status should be changed and revoked. CONCLUSION Based on the above facts and circumstances, and considering the statutory law and rulings cited. The organization has exceeded the 15% nonmember income limitation. The organization does not qualify for tax-exemption under IRC §501(c)(7) and should be revoked. The proposed date of the revocation is January 1, 20xx. Form 1120, U.S. Corporation Income Tax Return should be filed for 20xx and thereafter if the organization continues to be subject to income tax. ALTERNATIVE POSITION Issue If the proposed revocation of exempt status is not upheld, the organization form ******* should be adjusted to include nonmember income from the usage of the pool and tennis courts and nonmember income from the lease revenues from the cell tower. Facts The organization filed form ******* and form ******* for 20xx and 20xx timely. The organization reported a total of unrelated nonmember income on form ******* in the amount of $ ******* for 20xx and $ ******* for 20xx. As per interview with the treasurer on August 19, 20xx, the organization allows nonmembers to use their pool and tennis courts, the nonmember must be accompanied by a member. The member is required to pay $ ******* on behalf of their guest. The organization received $ ******* for 20xx and $ ******* for 20xx for nonmember usage of the pool and tennis courts. This amount was not reported on form *******. The organization received income from leasing its cell tower in the amount of $ *******, this amount was not reported on form *******. As per examination of books, records, bank and financial statements. The organization did not provide the required substantiation of Revenue Procedure 71-17 for social clubs to substantiate nonmember usage of the club's facilities. LAW IRC§ 511(a)(1) imposes a tax on the unrelated business taxable income (UBTI) of organizations described in § 501(c). IRC § 512(a)(3)(A) defines unrelated business taxable income for IRC 501(c)(7) social clubs as gross income excluding any exempt function income, less the deductions allowed that are directly connected with the production of the income. IRC § 512(a)(3)(B) Exempt function income is defined as "gross income from dues, fees, charges, or similar amounts paid by members of the organization as consideration for providing such members or their dependents or guests goods, facilities, or services in furtherance of the purposes constituting the basis for the exemption of the organization to which such income is paid." Revenue Procedure 71-17 sets forth the guidelines for determining the effect of gross receipts derived from the general public's use of a social club's facilities on exemption under IRC § 501(c)(7). Where nonmember income from the usage exceeds the standard as outlined in this Revenue procedure, the conclusion reached is that there is a non-exempt purpose and operating in this manner jeopardizes the organization's exempt status. TAXPAYERS POSITION On September 11, 20xx, discussed findings with organizations treasurer. Advised officer that the converted return form 1120, must include the adjustments to unrelated business income not reported on form *******. GOVERNMENT POSITION The organization received nonmember income for 20xx in the amount $ ******* and cell tower lease revenue in the amount of $ *******. The organization received nonmember income in 20XX in the amount $ ******* and cell tower lease revenue in the amount of $ *******. The organization did not provide the substantiation of nonmember income as required by revenue procedure 71-17, therefore nonmember usage of the pool and tennis court is determined to be unrelated business income and subject to tax. The organizations form ******* for 20xx and 20xx should be adjusted and taxable income should be increased as follows: CONCLUSION If revocation is not upheld, the organization form ******* for 20xx and 20xx should be adjusted and the taxable income and tax liability increased.

Private Letter Ruling Number: 202336018 Internal Revenue Service March 28, 2023 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Number: 202336018 Release Date: 9/8/2023 Date: 03/28/2023 Taxpayer ID number (last 4 digits): Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with United States Tax Court: UIL: 501.03-00 CERTIFIED MAIL - Return Receipt Requested Dear ******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective ****** Your determination letter dated ****** is revoked. Our adverse determination as to your exempt status was made for the following reasons: Organizations described in IRC Section 501(c)(3) and exempt under IRC Section 501(a) must be both organized and operated exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 501(c)(3). You have not demonstrated that you are operated exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 501(c)(3) and that no part of your net earnings inure to the benefit of private shareholders or individuals. You failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by IRC sections 6001, 6033(a)(1) and Rev.Rul. 59-95, 1959-1 C.B. 627. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov. Contributions to your organization are no longer deductible under IRC Section 170. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: US Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3). Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. You may fax your documents to the fax number shown above, using either a fax machine or online fax service. Protect yourself when sending digital data by understanding the fax service's privacy and security policies. Keep the original letter for your records. Sincerely, ******, for Lynn A. Brinkley Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Exempt Organizations Examinations Date: May 17, 2022 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. Well issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, ****** for Lynn A. Brinkley Acting Director Exempt Organizations Examinations Enclosures: Form 886-A and Attachments Form 6018 Issue: Whether ****** (******) continues to qualify for exemption from Federal income tax under section 501(a) of the Internal Revenue Code (Code) as a charitable organization described in Code section 501(c)(3). Facts: ****** was incorporated in the ****** on ******, under the state's ****** law. The Articles of Incorporation filed with ****** provide that the corporate purpose for which ****** was formed is ****** in the city of ****** The ****** article of ****** organizing document sets forth restrictions on activities that can be performed and provides for a dissolution clause intended to allow ****** to satisfy the organizational requirements for Federal exemption. According to the ****** of ****** Articles of Incorporation, the corporation was formed by ****** who gave his address located in ****** The ****** article provides that the street address for ****** principal office is ******, ******. The ****** article of the organizing document identifies ****** as the registered agent for the corporation. ****** is also listed as the ****** director of ****** at the time it was formed. In ****** filed Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, with the Internal Revenue Service (IRS). The Form 1023 application is signed by ****** according to the declaration on page ****** of the Form 1023. ****** is the only individual listed in Part V of Form 1023 which requires applicant organizations to list the names, titles and mailing addresses of all officers, directors, and trustees. The address of the organization as reported on the Form 1023 is ******. The Form 1023 application is accompanied by a conformed copy of ****** Articles of Incorporation and several attachments providing narrative responses to certain questions in Form 1023. According to the attachment providing a narrative description of past, present, and planned activities as requested in Part IV of Form 1023, ****** states the following: Based on the Form 1023 application and accompanying records filed by ****** the IRS issued a determination letter dated ******, granting ****** recognition of exemption under section 501(c)(3) of the Code. ****** was classified as a public charity under sections 509(a)(1) and 170(b)(1)(A)(vi) of the Code based on its planned fundraising programs and projected financial support. IRS records show that ****** filed Form 990-N, Electronic Notice (e-Postcard), beginning with the ******. ****** filed Form 990-N in lieu of a Form 990 or Form 990-EZ return. The organization indicated on Form 990-N that its gross receipts are normally $ ******. The address for ****** as reported on Forms 990-N filed through ****** is the same address reported on the Form 1023 application - ****** The address furnished by ****** corresponds to a ****** (****** which offers mailbox services. A copy of the pertinent website content posted by or on behalf of the store is appended as Exhibit A. As described in Exhibit A, the following ****** are ****** at its ******: - Package and mail receipt notifications - Mail holding and forwarding - Call-in mail check In ****** the Tax Exempt and Governmental Entities (TE/GE) division of the IRS selected for examination of its books and records covering the ******. The notice of examination package, which is dated ****** consists of IRS letter #6031, Form, 4564, Information Document Request (IDR), Publication 1, Your Rights as a Taxpayer, Notice 609, Privacy Act Notice, and Publication 3498-A, The Examination Process (Audits by Mail). The notice of examination package was mailed to ****** at the last known address on file for the organization which is as follows: ****** changed its address to the current one in S ****** when it filed its Form 990-N with the IRS. The ****** address furnished by ****** also corresponds to a ****** retail store which offers mailbox services. A copy of the pertinent website content posted by or on behalf of the ****** store is appended as Exhibit B. As noted on page ****** of the ****** IDR issued with the examination notice, the examination of ****** books and records is intended to verify that the organization: 1. Operates in accordance with section 501(c)(3) of the Code 2. Is eligible to file Form 990-N based on gross receipts, and 3. Filed all required returns including information returns. As part of standard audit procedures, the ****** requested that ****** furnish certain records and information needed to determine whether the organization is operating in furtherance of charitable and other exempt purposes described in section 501(c)(3) of the Code. IDR ****** issued to ****** on ****** requests copies of the following records and information covering the ****** calendar year under examination: - Chart of accounts - General ledger - Adjusted trial balance - Cash disbursements journal. - Monthly bank statements for ****** primary operating (checking) account together with canceled checks or check images furnished by the bank. - Monthly statements for all credit cards that may have been issued to ****** under a corporate account. - Minutes of meetings held by ****** Board of Directors and committees of the Board. - Internal policies and procedures regarding the handling and recording of cash donations. - Lease agreements and other information relating to any office or other facility used by ****** to conduct activities. - Contracts and other arrangements with individuals and/or organizations which solicit and raise funds for ****** including, but not limited to, professional fundraising organizations. - The organization's website address, if any, and the identity of the party that hosts the website. - Information regarding the accounting software used by ****** for preparation of its books and records. Due to the Covid-19 pandemic, ****** was given additional time to compile and furnish the records and information requested by the ****** The response due date on the IDR was ****** On ****** the ****** received a telephone call from an officer of ******. With ****** consent, the ****** conferenced in the ****** assigned to the case. ****** acknowledged receipt of the IRS notice of examination package for ****** However, he did not discuss the finances or activities of the organization. Instead, he described circumstances that he believed warranted an extension of time to compile records and respond to the initial IDR. The ****** granted an extension to ****** ****** did not respond to the IDR or otherwise contact the ****** or the ****** by the extended due date. In early ******, the ****** attempted to contact ****** by telephone using the contact telephone numbers that he provided, ****** did not answer the phone and the ****** did not subsequently receive a return call. Neither the ****** nor the ****** subsequently received any of the requested records and information from ****** or any other officer or director of ******. In accordance with established IRS procedures, a follow-up "Delinquency Notice" letter was issued to ****** with a copy of IDR ****** on ******. The delinquency notice states, in part, that if the organization does not fully respond to the IDR by the response due date, the IRS will propose revocation of ****** exempt status. ****** did not respond to the delinquency notice or otherwise contact the ****** The delinquency notice was not returned by the post office as undeliverable. A search of the ****** corporate database on ******, which provides information on the status of entities incorporated under ****** state law, shows that ****** is not in good standing. According to information posted by the ****** Department of Assessments and Taxation, the term "Not in Good Standing" means the business entity is not in compliance with ****** laws that apply to businesses and their responsibilities in the State. Only business entities that are active can have a good standing status, so a business that has been voluntarily terminated will also show "not in good standing" because it is no longer active. According to the status search for ****** which was downloaded from the state website and is appended as Exhibit C, ****** has not complied with one or more annual report filing requirements. Despite its name, there is no evidence that ****** is an ****** of the ****** that operate within the ******. The ****** maintains a website which allows users to search for ******. ****** is not among the local or state chapters listed. The ****** Form 990-N filed by ****** with the IRS in ****** identifies a website address (******) in section E. The ****** was not able to locate the website domain address referenced on the ****** Form 990-N. The ****** Form 990-N filed by ****** does not identify any website address. Applicable Law: Section 501(c)(3) of the Code provides that an organization organized and operated exclusively for charitable or educational purposes is exempt from Federal income tax, provided no part of its net earnings inures to the benefit of any private shareholder or individual. Section 1.501(c)(3)-1(a)(1) of the Treasury Regulations states that to be exempt as an organization described in section 501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section - charitable, religious, educational, scientific, literary, testing for public safety, or for the prevention of cruelty to children or animals. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Section 1.501(c)((3)-1(c) of the regulations describes the operational test requirements for 501(c)(3) exemption. The operational test focuses on how the organization is actually operated, regardless of whether it is properly organized for tax-exempt purposes. Section 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. This is referred to as the "primary activities" test. Section 1.501(c)(3)-1(c)(2) of the regulations provides that an organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Section 511 of the Code imposes a tax at corporate rates under section 11 on the unrelated business taxable income of certain tax-exempt organizations. Section 6001 of the Code provides, in part, that every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax under this title. Section 1.6001-1(c) of the regulations provides that in addition to such permanent books and records as are required by paragraph (a) of this section with respect to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under section 501(a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 6033 and regulations sections 1.6033-1 through 1.6033-3. Section1.6001-1(e) of the regulations provides that the books or records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and, shall be retained as long as the contents thereof may be material in the administration of any internal revenue law. Section 6033 of the Code provides, in general, that every organization exempt under IRC 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the Internal Revenue laws as the Secretary may by forms of regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Section 6033 of the Code provides an exception to the annual filing requirement in the case of an organization described in section 501(c) (other than a private foundation or a supporting organization described in section 509(a)(3)) the gross receipts of which in each taxable year are normally not more than $50,000. See section 1.6033-2(g)(1)(iii) of the regulations. Section 1.6033-2(g)(5) of the regulations provide that an organization that is not required to file an annual return by virtue of the gross receipts exception must submit an annual electronic notice notification as described in section 6033(i) of the Code. Section 1.6033-2(i)(2) of the regulations provides that every organization which is exempt from tax, whether or not it is required to file an annual information return, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of subchapter F (section 501 and following), chapter 1 of subtitle A of the Code and section 6033. Rev.Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The Service held that the failure or inability to file the required information return or otherwise to comply with the provisions of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status. Organization's Position: Taxpayer's position is unknown at this time. Government's Position: Analysis The facts indicate that ****** received recognition of exemption under section 501(c)(3) of the Code in ****** based on information presented in its Form 1023 application and accompanying attachments. The TE/GE division of the IRS maintains an examination program for exempt organizations to determine whether they are complying with statutory requirements regarding their tax-exempt status, the proper filing of returns, and other tax reporting matters. ****** filed Form 990-N, an electronic notice, with the IRS for the ******. ****** was selected for audit to ensure that the organization's activities and operations align with their approved exempt status and to verify that the filing of Form 990-N was proper based on the organization's gross receipts. Section 6001 of the Code and the regulations thereunder impose requirements on exempt organizations to keep books and records to substantiate information required under section 6033 of the Code. Although ****** filed an electronic notice in lieu of a return, the organization is nevertheless required to produce records and other information requested by the IRS to verify that it operates in furtherance of its exempt purpose. See regulations section 1.6033-2(i)(2). ****** failed to respond to repeated reasonable requests to allow the IRS to examine its books and records including its receipts, disbursements, and other items required to be kept and maintained pursuant to sections 6001 and 6033(a)(1) of the Code. Accordingly, ****** has failed to meet the requirements of section 501(c)(3) of the Code and sections 1.501(c)(3)-1(a) and 1.501(c)(3)-1(c) of the regulations, in that the organization has not established that it is operated exclusively for exempt purposes and that no part of its net earnings inures to the benefit of private shareholders or individuals. See also Rev.Rul. 59-95. 1959-1 C.B. 627. Conclusion: For the reasons stated above, the IRS has determined that ****** is no longer exempt from Federal income tax under section 501(a) of the Code as an organization described in Code section 501(c)(3). The IRS is proposing to revoke ****** 501(c)(3) tax-exempt status effective ****** the ****** of the ****** calendar year under examination. Please note that this Form 886-A, Explanation of Items, which is also known as the revenue agent report (RAR), constitutes an integral part of the attached 30-day letter #3618. Please refer to the attached letter #3618 for additional information including appeal rights and other options available to the organization and the instructions for how to respond.

Internal Revenue Service - Information Release IR-2023-62 Dirty Dozen: IRS urges tax pros and other businesses to beware of spearphishing; offers tips to avoid dangerous common scams March 29, 2023 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 Dirty Dozen: IRS urges tax pros and other businesses to beware of spearphishing; offers tips to avoid dangerous common scams IR-2023-62, March 29, 2023 WASHINGTON --The Internal Revenue Service today warned tax professionals and businesses that they remain a top target for identity thieves and face threats from common scams on this year's Dirty Dozen list. As part of the annual Dirty Dozen tax scams effort, the IRS and the Security Summit partners urged tax professionals and businesses to be on the lookout for a variety of suspicious email requests. Through these spearphishing emails, scammers try to steal client data, tax software preparation credentials and tax preparer identities with the goal of getting fraudulent tax refunds. These requests can range from an email that looks like it's from a potential new client to a request targeting payroll and human resource departments asking for sensitive Form W-2 information. "It's vitally important for tax professionals and businesses to maintain a strong defense against cyberattacks like spearphishing," said IRS Commissioner Danny Werfel. "The information these businesses have on their systems is extremely valuable to an identity thief looking to steal identities and file fraudulent tax returns. There are simple steps that tax pros and businesses can take to avoid being fooled by these common schemes, including extra caution when opening emails, clicking on links or sharing sensitive client data. Extra care can go a long way to protect tax professionals and businesses as well as their clients." Working together as the Security Summit, the IRS, state tax agencies and the nation's tax industry have taken numerous steps since 2015 to strengthen internal systems and controls to protects against tax-related identity theft. As part of this effort, the IRS and Summit partners continue to warn people about common scams and schemes during tax season and beyond that can threaten a taxpayer's personal and financial information. The Security Summit initiative is committed to protecting taxpayers, businesses and the tax system from scammers and identity thieves, and the Dirty Dozen is part of the larger effort. The IRS' annual Dirty Dozen campaign is a list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more. Some items on the Dirty Dozen are new and some make a return visit. While the Dirty Dozen is not a legal document or a formal listing of agency enforcement priorities, it is intended to alert taxpayers and the tax professional community about various scams and schemes. Side-step spearphishing: Cyber security tips for tax pros and businesses Phishing is a term given to emails or text messages designed to get users to provide personal information, either directly or by clicking on a link or attachment. Spearphishing is a tailored phishing attempt to a specific organization or business. The IRS is warning tax professionals about spearphishing because there is greater potential for harm if the tax preparer has a data breach. A successful spearphishing attack can ultimately steal client data and the tax preparer's identity, allowing the thief to file fraudulent returns. A taxpayer becoming a victim of tax-related identity theft is certainly an issue with spearphishing, but criminals seeking tax preparer credentials or access to their client's tax-related information increases the potential number of victims. Spearphishing begins with a suspicious email - one that may appear as a tax preparation application or another e-service or platform. Some scammers will even use the IRS logo and claim something like "Action Required: Your account has now been put on hold." Often these emails stress urgency and will ask tax pros or businesses to click on links to input or verify information. How to side-step spearphishing: - Never click suspicious links. - Double check the requests with the original sender. - Be vigilant year-round, not just during filing season. Client impersonation: Spearphishing aimed at tax pros The IRS and its Security Summit partners continue to see spearphishing attempts that impersonate a new potential client, known as the "New Client" scam. If the tax preparer responds, the scammer sends a malicious attachment or URL that ultimately enables them to gain access to sensitive client information on the tax preparer's computer systems. Bogus requests for W-2s: Spearphishing aimed at businesses The IRS wants to warn businesses about another specific spearphishing scam that targets employees in payroll or accounting departments. These employees might get an email that looks like it comes from an official source requesting W-2s for all employees. The payroll department might accidentally reply with these important documents, which would provide scammers with W-2 data on employees that can be used to commit fraud. The IRS recommends using a two-person review process when receiving these types of requests for W-2s. The IRS also recommends any requests for payroll be submitted through an official process, like the employer's Human Resources portal. Make a difference: Report fraud, scams and schemes Individuals should never respond to tax-related phishing or spearfishing or click on the URL link. Instead, the scams should be reported by sending the email or a copy of the text/SMS as an attachment to phishing@irs.gov. The report should include the caller ID (email or phone number), date, time and time zone, and the number that received the message. Taxpayers can also report scams to the Treasury Inspector General for Tax Administration or the Internet Crime Complaint Center. The Report Phishing and Online Scams page at IRS.gov provides complete details. The Federal Communications Commission's Smartphone Security Checker is a useful tool against mobile security threats. As part of the Dirty Dozen awareness effort, the IRS encourages people to report individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns. To report an abusive tax scheme or a tax return preparer, people should mail or fax a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers PDF and any supporting materials to the IRS Lead Development Center in the Office of Promoter Investigations. Mail: Internal Revenue Service Lead Development Center Stop MS5040 24000 Avila Road Laguna Niguel, CA 92677-3405 Fax: 877-477-9135 Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary reward. For more information, see Abusive Tax Schemes and Abusive Tax Return Preparers.

Proposed Regulation REG-118913-21 Internal Revenue Service 2022-20 I.R.B. 1089 Notice of Proposed Rulemaking Estate and Gift Taxes; Limitation on the Special Rule Regarding a Difference in the Basic Exclusion Amount REG-118913-21 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: This document contains proposed amendments to the Estate Tax Regulations relating to the basic exclusion amount (BEA) applicable to the computation of Federal estate and gift taxes. The proposed regulations affect the estates of decedents dying after a reduction in the BEA who made certain types of gifts after 2017 and before a reduction in the BEA. DATES: Written or electronic comments and requests for a public hearing must be received by July 26, 2022. Requests for a public hearing must be submitted as prescribed in the "Comments and Requests for a Public Hearing" section. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically. Submit electronic submissions via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-118913-21) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The IRS expects to have limited personnel available to process public comments that are submitted on paper through the mail. Until further notice, any comments submitted on paper will be considered to the extent practicable. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comment submitted electronically, and to the extent practicable on paper, to its public docket. Send paper submissions to: CC:PA:LPD:PR (REG-118913-21), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, John D. MacEachen at (202) 317-6859; concerning submissions of comments, the public hearing, and the access code to attend the hearing by telephone, Regina Johnson at (202) 317-5177 (not toll-free numbers) or by sending an email to Publichearings@irs.gov. SUPPLEMENTARY INFORMATION: Background Section 11061 of the Tax Cuts and Jobs Act, Pub. L. 115-97, 131 Stat. 2054, 2091 (2017) (TCJA), amended section 2010(c)(3) of the Internal Revenue Code (Code) to provide that, for decedents dying and gifts made after December 31, 2017, and before January 1, 2026, the BEA is increased by $5 million to $10 million as adjusted for inflation (increased BEA). Under the TCJA, on January 1, 2026, the BEA will revert to $5 million as adjusted for inflation. Section 11061 of the TCJA also added new section 2001(g)(2) to the general statute of the Code that imposes the Federal estate tax. Section 2001(g)(2) grants the Secretary of the Treasury or her delegate (Secretary) authority to prescribe such regulations as may be necessary or appropriate to carry out section 2001 with respect to any difference between the BEA applicable at the time of a decedent's death and the BEA applicable with respect to any gifts made by the decedent. This specific authority is in addition to the Secretary's preexisting authority under section 2010(c)(6) to prescribe such regulations as may be necessary or appropriate to carry out section 2010(c). On November 26, 2019, the Treasury Department and the IRS published final regulations under section 2010 (TD 9884) in the Federal Register (84 FR 64995) to address situations described in section 2001(g)(2) (final regulations). The final regulations adopted §20.2010-1(c), a special rule (special rule) applicable in cases where the credit against the estate tax that is attributable to the BEA is less at the date of death than the sum of the credits attributable to the BEA allowable in computing gift tax payable within the meaning of section 2001(b)(2) with regard to the decedent's lifetime gifts. In such cases, the portion of the credit against the net tentative estate tax that is attributable to the BEA is based on the sum of the credits attributable to the BEA allowable in computing gift tax payable regarding the decedent's lifetime gifts. The rule ensures that the estate of a donor is not taxed on completed gifts that, as a result of the increased BEA, were free of gift tax when made. The preamble to the final regulations stated that further consideration would be given to the issue of whether gifts that are not true inter vivos transfers, but rather are includible in the gross estate, should be excepted from the special rule, and that any proposal addressing this issue would benefit from notice and comment. This document contains proposed amendments to the Estate Tax Regulations (26 CFR part 20) relating to the BEA described in section 2010(c)(3) of the Code (proposed regulations), for which purpose the final regulations reserved §20.2010-1(c)(3). The special rule currently does not distinguish between: (i) completed gifts that are treated as adjusted taxable gifts for estate tax purposes and that, by definition, are not included in the donor's gross estate; and (ii) completed gifts that are treated as testamentary transfers for estate tax purposes and are included in the donor's gross estate (includible gift). The Code and the regulations, however, do distinguish between these two types of transfers. Section 2001(b) (flush language) excludes from the term "adjusted taxable gifts" gifts that are includible in the gross estate. Section 2701(e)(6) and §25.2701-5 similarly remove from adjusted taxable gifts transfers includible in the gross estate that previously were subject to the special valuation rules of section 2701. See also §25.2702-6 (excluding from adjusted taxable gifts certain transfers includible in the gross estate that previously were subject to the special valuation rules of section 2702) and Rev. Rul. 84-25, 1984-1 C.B. 191 (excluding from adjusted taxable gifts completed transfers that will be satisfied with assets includible in the gross estate). In keeping with the statutory distinction between completed gifts that are treated as adjusted taxable gifts and completed gifts that are treated as testamentary transfers, these proposed regulations generally would deny the benefit of the special rule to includible gifts. Regardless of whether a gift is treated as an adjusted taxable gift or as an includible gift for estate tax purposes, the Code ensures that the gift is treated consistently with respect to the credits allowable in the year in which the gift was made. See discussion of the five statutory steps of the estate tax computation in part III, Federal Estate Tax Computation Generally, in the Background section of the preamble to the notice of proposed rulemaking under section 2010 (REG-106706-18) published in the Federal Register (83 FR 59343) on November 23, 2018. The exclusion from adjusted taxable gifts of transfers includible in the gross estate does not affect the second step of the estate tax computation, the determination of a hypothetical gift tax referred to as the gift tax payable. Gift tax payable is based upon all post-1976 taxable gifts, whether or not included in the gross estate. See sections 2001(b)(2) and (g)(1), requiring the determination of a hypothetical gift tax on all post-1976 taxable gifts, which is a gift tax reduced, but not to below zero, by the credit amounts allowable in the years of the gifts. Both the hypothetical gift tax and the credit amounts are computed using the gift tax rates in effect at the date of death. Thus, for purposes of computing the estate tax, an includible gift receives credit for all credit amounts, including those attributable to the increased BEA, allowable in the years in which the gift was made. A commenter recommended consideration of whether the special rule should apply to taxable gifts made during an increased BEA period that are essentially testamentary and thus are included in the gross estate rather than in adjusted taxable gifts. See discussion in part 6, Anti-Abuse Rule, of the Summary of Comments and Explanation of Revisions in the final regulations. If such transfers are subject to the special rule, they can be made in a manner designed to make the increased BEA available against the donor's estate tax despite the fact that the donor has retained the beneficial use of or the control of the transferred property. Examples of such transfers include gifts subject to a retained life estate or subject to other powers or interests as described in sections 2035 through 2038 and 2042 of the Code, gifts made by enforceable promise as described in Rev. Rul. 84-25, supra, and gifts subject to the special valuation rules of sections 2701 and 2702. In recommending an exception to the special rule, the commenter cautioned that attention should also be given to the potential to work around an exception that relies solely on whether gifts are includible in the gross estate. For example, a donor may attempt to make the increased BEA available against the estate tax under the special rule by the removal shortly before the donor's death of the donor's beneficial use of or the control of the transferred property. Examples of these types of transfers include the elimination by a third party, shortly before the donor's death, of the interests or powers that otherwise would have resulted in the inclusion of the transferred interest or property in the donor's gross estate; the payment shortly before death of a gift made by enforceable promise as described in Rev. Rul. 84-25, supra; and the transfer shortly before death of a section 2701 interest within the meaning of §25.2701-5(a)(4) or a section 2702 interest within the meaning of §25.2702-6(a)(1). The purpose of the special rule is to ensure that bona fide inter vivos transfers of property are consistently treated as a transfer of property by gift for both gift and estate tax purposes. Bona fide inter vivos gifts are subject to the gift tax based on the values, gift tax rates, and exclusions applicable as of the date of the gift. While such a gift is treated as an adjusted taxable gift for purposes of determining the estate tax rate to be applied to the value of the taxable estate, the gift is not includible in the donor's gross estate at death and is not subject to the estate tax. The special rule avoids the imposition of the estate tax on the gift by ensuring that the gifted property is treated solely as an adjusted taxable gift and not also as property includible in the gross estate. Unlike an adjusted taxable gift, however, a gift of property that is includible in the donor's gross estate is subject to estate tax based on the values, estate tax rates, and exclusions applicable as of the date of death. The Code itself ensures that an includible gift is not treated as both an adjusted taxable gift and an inclusion in the gross estate. See section 2001(b) (flush language), excluding from "adjusted taxable gifts" gifts that are includible in the gross estate. The Code also ensures that an includible gift receives credit for any credit amounts allowable in the years in which the gift was made. See sections 2001(b)(2) and (g)(1). The treatment of an includible gift for estate tax purposes results in the correct outcome without any application of the special rule: the property is included in the gross estate and subject to the BEA in effect at the donor's death. There is a subset of includible gifts that the Code treats in a different fashion, but still in a way that results in the correct outcome without the application of the special rule. That subset consists of gifts made during an increased BEA period that are essentially testamentary, but the entire value of which is deductible for gift tax purposes by reason of the charitable or marital deduction (or both). Such transfers are excluded from adjusted taxable gifts because they never were taxable gifts in the first place. See section 2503(a), defining taxable gifts as the total amount of gifts made during the calendar year less the deductions provided in sections 2522 and 2523 for charitable and marital gifts, respectively. As a result of the exclusion of charitable and marital gifts from taxable gifts, and thus from adjusted taxable gifts, there would be no credits allocable to these gifts attributable to the BEA in computing gift tax payable within the meaning of section 2001(b)(2). Because no BEA is applicable to the deductible gifts, there will be no difference between the BEA applicable to these gifts attributable to the increased BEA and the BEA applicable to the decedent's estate. As a result, there is no possibility of inconsistent gift and estate taxation of such an includible gift, and thus no need for the application of the special rule. Without additional rules, however, the application of the special rule to includible gifts results in securing the benefit of the increased BEA in circumstances where the donor continues to have the title, possession, use, benefit, control, or enjoyment of the transferred property during life. In those circumstances, there is no possibility of the inclusion of the gift in adjusted taxable gifts at the death of the donor, and therefore no need for the application of the special rule to transfers of such property. In those circumstances, it is appropriate that the amount includible or treated as includible as part of the gross estate (rather than as an adjusted taxable gift) is subject to estate tax with the benefit of only the BEA available at the date of death. Section 2001(g)(2) directs the Secretary to prescribe such regulations as may be necessary or appropriate to carry out section 2001 with respect to any difference between the BEA applicable at the time of the decedent's death and the BEA applicable with respect to any gifts made by the decedent. Given the plain language of the Code describing the computation of the estate tax and directing that certain transfers, including transfers made within three years of death that otherwise would have been includible in the gross estate, are treated as testamentary transfers and not as adjusted taxable gifts, it would be inappropriate to apply the special rule to includible gifts. This is particularly true where the inter vivos transfers are not true bona fide transfers in which the decedent "absolutely, unequivocally, irrevocably, and without possible reservations, parts with all of his title and all of his possession and all of his enjoyment of the transferred property." Commissioner v. Church's Estate, 335 U.S. 632, 645 (1949). To prevent this inappropriate result, these proposed regulations would create an exception to the special rule applicable to includible gifts. The same commenter suggested that any exception to the special rule relating to transfers within the scope of section 2701 be specifically addressed in §25.2701-5. This suggestion is not adopted. Section 25.2701-5(a)(3) provides rules under which the estate of a decedent who made a transfer subject to section 2701 may reduce the decedent's adjusted taxable gifts in a manner similar to that of section 2001(b) so as to eliminate the amount duplicated in the transfer tax base. The amount of the reduction in adjusted taxable gifts is determined under §25.2701-5(b). See also §25.2702-6(b), providing a similar rule for certain interests previously subject to section 2702. Both §§25.2701-5 and 25.2702-6 address only the amount of adjusted taxable gifts but, with the exception of §25.2701-5(e)(3), do not address the amount of the credits allowable in the multiple steps necessary to determine the estate tax. As previously discussed, the effect of the estate tax computation is to provide the decedent the benefit of any credit amounts allowable in the years of the gifts, determined at date of death gift tax rates, including the credit amount attributable to a section 2701 or 2702 transfer that was free of gift tax when made as a result of the increased BEA, regardless of whether the amount of adjusted taxable gifts is later reduced for estate tax purposes. Thus, while a reduction in the amount of adjusted taxable gifts eliminates amounts duplicated in the transfer tax base, it neither changes the existence of the transfer nor frees up the credit allocable to that transfer. See, e.g., the Background section of the preamble to Adjustments Under Special Valuation Rules (TD 8536), published in the Federal Register (59 FR 23152) on May 5, 1994, explaining that the §25.2701-5 regulations do not "purge" a section 2701 transfer as if it had not occurred, but rather mitigate the effect of double taxation through a reduction in a decedent's adjusted taxable gifts. As noted earlier, §25.2701-5(e)(3) permits an adjustment to both the adjusted taxable gifts and gift tax payable of a consenting spouse. In the case of an election under section 2513 to split a section 2701 transfer with the donor's spouse, a later testamentary transfer of the section 2701 interest is treated as made solely by the donor spouse. The consenting spouse's adjusted taxable gifts and gift tax payable are each reduced to eliminate any remaining effect of the section 2701 interest on the consenting spouse in a manner that is generally consistent with the principles of sections 2001(d) and (e) (pertaining to the treatment of split gifts in the computation of the estate tax). This exception has no application to the donor spouse, who remains subject to the general rule of §25.2701-5(a)(3). Thus, it is not necessary to address differences in the BEA in either §25.2701-5 or §25.2702-6(b). Explanation of Provisions Pursuant to sections 2010(c)(6) and 2001(g)(2) of the Code, the proposed regulations would add proposed §20.2010-1(c)(3) to provide an exception to the special rule for transfers that are includible in the gross estate or are treated as includible in the gross estate for purposes of section 2001(b), including for example gifts subject to a retained life estate or subject to other powers or interests as described in sections 2035 through 2038 and 2042 of the Code regardless of whether the transfer was deductible pursuant to section 2522 or 2523, gifts made by enforceable promise, and other amounts that are duplicated in the transfer tax base, including a section 2701 interest within the meaning of §25.2701-5(a)(4) and a section 2702 interest within the meaning of §25.2702-6(a)(1). The exception to the special rule also would apply to transfers that would be described in the preceding sentence but for the transfer, elimination, or relinquishment within 18 months of the donor's date of death of the interest or power that would have caused inclusion in the gross estate, effectively allowing the donor to retain the enjoyment of the property for life. In addition to transfers, eliminations, or relinquishments by the donor, examples include the elimination, by a third party having the power to eliminate or extinguish the interest or power, of the interests or powers that otherwise would have resulted in inclusion of transferred property in the donor's gross estate; the payment of a gift made by enforceable promise as described in Rev. Rul. 84-25, supra; and the transfer of a section 2701 interest within the meaning of §25.2701-5(a)(4) or a section 2702 interest within the meaning of §25.2702-6(a)(1). For purposes of the preceding sentence, such transfers, eliminations, and relinquishments include those effectuated by the donor, the donor in conjunction with any other person, or by any other person, but do not include those effectuated by the expiration of the period described in the original instrument of transfer, whether by a death or the lapse of time. The special rule, however, would continue to apply to transfers includible in the gross estate when the taxable amount of the gift is not material, that is, the taxable amount is 5 percent or less of the total amount of the transfer, valued as of the date of the transfer. Compare section 2037(a)(2), excluding from the gross estate property subject to a reversionary interest where the value of such interest immediately before death is 5 percent or less of the value of the transferred property; and section 2042(2), excluding from the term "incidents of ownership" reversionary interests where the value of such interest immediately before death is 5 percent or less of the value of the life insurance policy. See also section 673(a), treating the grantor as the owner for income tax purposes of any portion of a trust in which the grantor's reversionary interest exceeds 5 percent of the value of such portion as of the date of inception of that portion of the trust. This bright-line exception to the special rule is proposed in lieu of a facts and circumstances determination of whether a particular transfer was intended to take advantage of the increased BEA without depriving the donor of the use and enjoyment of the property. The proposed exception to the special rule may be illustrated by the following example. Assume that when the BEA was $11.4 million, a donor gratuitously transferred the donor's enforceable $9 million promissory note to the donor's child. The transfer constituted a completed gift of $9 million. On the donor's death, the assets that are to be used to satisfy the note are part of the donor's gross estate, with the result that the note is treated as includible in the gross estate for purposes of section 2001(b). Thus, the $9 million gift is excluded from adjusted taxable gifts in computing the tentative estate tax under section 2001(b)(1). Nonetheless, if the donor dies after a statutory reduction in the BEA to $6.8 million, the credit to be applied in computing the estate tax is the credit based upon the $6.8 million of the BEA allowable as of the date of death. Applicability Date Once these regulations have been published as final regulations, it is proposed that these regulations be applicable to the estates of decedents dying on or after April 27, 2022. The special rule will not be needed until the basic exclusion amount has been decreased by statute; under current law, that is scheduled to occur for the estates of decedents dying after 2025. However, if such a decrease is enacted on or after April 27, 2022 but before the issuance of final regulations, the best way to ensure that all estates will be subject to the same rules is to make this proposed exception to the special rule applicable to the estates of decedents dying on or after April 27, 2022. Special Analyses These proposed regulations are not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget regarding review of tax regulations. Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these proposed regulations will not have a significant economic impact on a substantial number of small entities. These proposed regulations apply to donors of gifts made after 2017 and to the estates of donors dying after a reduction in the BEA, and implement a change in the amount that is excluded from estate tax. Neither an individual nor the estate of a deceased individual is a small entity within the meaning of 5 U.S.C. 601(6). Accordingly, a regulatory flexibility analysis is not required. Pursuant to section 7805(f) of the Code, this regulation has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business. Comments and Request for a Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written or electronic comments that are submitted timely (in the manner described under the ADDRESSES heading) to the IRS. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. Any electronic comments submitted, and to the extent practicable any paper comments submitted, will be made available at https://www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person who timely submits electronic or written comments. Requests for a hearing are strongly encouraged to be submitted electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register. Announcement 2020-4, 2020-17 IRB 1, provides that until further notice, public hearings conducted by the IRS will be held telephonically. Any telephonic hearing will be made accessible to people with disabilities. Statement of Availability of IRS Documents Rev. Rul. 84-25, 1984-1 C.B. 191, and Announcement 2020-4, 2020-17 IRB 1, are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov. Drafting Information The principal author of these proposed regulations is John D. MacEachen, Office of the Associate Chief Counsel (Passthroughs and Special Industries). Other personnel from the Treasury Department and the IRS participated in their development. List of Subjects in 26 CFR Part 20 Estate taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, 26 CFR part 20 is proposed to be amended as follows: PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954 Par. 1. The authority citation for part 20 continues to read in part as follows: Authority: 26 U.S.C. 7805. * * * * * Section 20.2010-1 also issued under 26 U.S.C. 2001(g)(2) and 26 U.S.C. 2010(c)(6). * * * * * Par. 2. Section 20.2010-1 is amended by: 1. Adding paragraph (c)(3); and 2. Revising the first sentence of paragraph (f)(2) and adding a sentence after the second sentence. The revision and additions read as follows: §20.2010-1 Unified credit against estate tax; in general. * * * * * (c) * * * (3) Exception to the special rule --(i) Transfers to which the special rule does not apply. Except as provided in paragraph (c)(3)(ii) of this section, the special rule of paragraph (c) of this section does not apply to transfers includible in the gross estate, or treated as includible in the gross estate for purposes of section 2001(b), including without limitation the following transfers: (A) Transfers includible in the gross estate pursuant to section 2035, 2036, 2037, 2038, or 2042, regardless of whether all or any part of the transfer was deductible pursuant to section 2522 or 2523; (B) Transfers made by enforceable promise to the extent they remain unsatisfied as of the date of death; (C) Transfers described in §25.2701-5(a)(4) or §25.2702-6(a)(1) of this chapter; and (D) Transfers that would have been described in paragraph (c)(3)(i)(A), (B), or (C) of this section but for the transfer, relinquishment, or elimination of an interest, power, or property, effectuated within 18 months of the date of the decedent's death by the decedent alone, by the decedent in conjunction with any other person, or by any other person. (ii) Transfers to which the special rule continues to apply. Notwithstanding paragraph (c)(3)(i) of this section, the special rule of paragraph (c) of this section applies to the following transfers: (A) Transfers includible in the gross estate in which the value of the taxable portion of the transfer, determined as of the date of the transfer, was 5 percent or less of the total value of the transfer; and (B) Transfers, relinquishments, or eliminations described in paragraph (c)(3)(i)(D) of this section effectuated by the termination of the durational period described in the original instrument of transfer by either the mere passage of time or the death of any person. (iii) Examples. In each example, the basic exclusion amount on the date of the gift was $11.4 million, the basic exclusion amount on the date of death is $6.8 million, and both amounts include hypothetical inflation adjustments. The donor's executor does not elect to use the alternate valuation date and, unless otherwise stated, the donor never married and made no other gifts during life. (A) Example 1. Individual A made a completed gift of A's promissory note in the amount of $9 million. The note remained unpaid as of the date of A's death. The assets that are to be used to satisfy the note are part of A's gross estate, with the result that the note is treated as includible in the gross estate for purposes of section 2001(b) and is not included in A's adjusted taxable gifts. Because the note is treated as includible in the gross estate and does not qualify for the 5 percent de minimis rule in paragraph (c)(3)(ii)(A) of this section, the exception to the special rule found in paragraph (c)(3) of this section applies to the gift of the note. The credit to be applied for purposes of computing A's estate tax is based on the $6.8 million basic exclusion amount as of A's date of death, subject to the limitation of section 2010(d). The result would be the same if A or a person empowered to act on A's behalf had paid the note within the 18 months prior to the date of A's death. (B) Example 2. Assume that the facts are the same as in paragraph (c)(3)(iii)(A) of this section ( Example 1 ) except that A's promissory note had a value of $2 million and, on the same date that A made the gift of the promissory note, A also made a gift of $9 million in cash. The cash gift was paid immediately, whereas the $2 million note remained unpaid as of the date of A's death. The assets that are to be used to satisfy the note are part of A's gross estate, with the result that the note is treated as includible in the gross estate for purposes of section 2001(b) and is not included in A's adjusted taxable gifts. Because the $2 million note is treated as includible in the gross estate and does not qualify for the 5 percent de minimis rule in paragraph (c)(3)(ii)(A) of this section, the exception to the special rule found in paragraph (c)(3) of this section applies to the gift of the note. On the other hand, the $9 million cash gift was paid immediately, and no portion of that gift is includible or treated as includible in the gross estate. Because the amount allowable as a credit in computing the gift tax payable on A's $9 million cash gift exceeds the credit based on the $6.8 million basic exclusion amount allowable on A's date of death, the special rule of paragraph (c) of this section applies to that gift. The credit to be applied for purposes of computing A's estate tax is based on a basic exclusion amount of $9 million, the amount used to determine the credit allowable in computing the gift tax payable on A's $9 million cash gift. (C) Example 3. Assume that the facts are the same as in paragraph (c)(3)(iii)(A) of this section ( Example 1 ) except that, prior to A's gift of the note, the executor of the estate of A's predeceased spouse elected, pursuant to §20.2010-2, to allow A to take into account the predeceased spouse's $2 million DSUE amount. Assume further that A's promissory note had a value of $2 million on the date of the gift, and that A made a gift of $9 million in cash a few days later. The cash gift was paid immediately, whereas the $2 million note remained unpaid as of the date of A's death. The assets that are to be used to satisfy the note are part of A's gross estate, with the result that the note is treated as includible in the gross estate for purposes of section 2001(b) and is not included in A's adjusted taxable gifts. Because A's DSUE amount was sufficient to shield the gift of the note from gift tax, no basic exclusion amount was applicable to the $2 million gift pursuant to paragraph (c)(1)(ii)(A) of this section and the special rule of paragraph (c) of this section does not apply to that gift. On the other hand, the $9 million cash gift was paid immediately, and no portion of that gift is includible or treated as includible in the gross estate. Because the amount allowable as a credit in computing the gift tax payable on A's $9 million cash gift exceeds the credit based on the $6.8 million basic exclusion amount allowable on A's date of death, the special rule of paragraph (c) of this section applies to that gift. The credit to be applied for purposes of computing A's estate tax is based on A's $11 million applicable exclusion amount, consisting of the $2 million DSUE amount plus the $9 million amount used to determine the credit allowable in computing the gift tax payable on A's $9 million cash gift. (D) Example 4. Individual B transferred $9 million to a grantor retained annuity trust (GRAT), retaining a qualified annuity interest within the meaning of §25.2702-3(b) of this chapter valued at $8,550,000. The taxable portion of the transfer valued as of the date of the transfer was $450,000. B died during the term of the GRAT. The entire GRAT corpus is includible in the gross estate pursuant to §20.2036-1(c)(2). Because the value of the taxable portion of the transfer was 5 percent or less of the total value of the transfer determined as of the date of the gift, the 5 percent de minimis rule in paragraph (c)(3)(ii)(A) of this section is met and the exception to the special rule found in paragraph (c)(3) of this section does not apply to the gift. However, because the total of the amounts allowable as a credit in computing the gift tax payable on B's post-1976 gift of $450,000 is less than the credit based on the $6.8 million basic exclusion amount allowable on B's date of death, the special rule of paragraph (c) of this section does not apply to the gift. The credit to be applied for purposes of computing B's estate tax is based on the $6.8 million basic exclusion amount as of B's date of death, subject to the limitation of section 2010(d). (E) Example 5. Assume that the facts are the same as in paragraph (c)(3)(iii)(D) of this section ( Example 4 ) except that B's qualified annuity interest is valued at $8 million. The taxable portion of the transfer valued as of the date of the transfer was $1 million. Because the value of the taxable portion of the transfer was more than 5 percent of the total value of the transfer determined as of the date of the gift, the 5 percent de minimis rule in paragraph (c)(3)(ii)(A) of this section is not met and the exception to the special rule found in paragraph (c)(3) of this section applies to the gift. The credit to be applied for purposes of computing B's estate tax is based on the $6.8 million basic exclusion amount as of B's date of death, subject to the limitation of section 2010(d). (F) Example 6. Assume that the facts are the same as in paragraph (c)(3)(iii)(D) of this section ( Example 4 ) except that B's qualified annuity interest is valued at $2 million. The taxable portion of the transfer valued as of the date of the transfer was $7 million. B survived the term of the GRAT. Because B survived the original unaltered term of the GRAT, no part of the value of the assets transferred to the GRAT is includible in B's gross estate, and the exception to the special rule found in paragraph (c)(3) of this section does not apply to the gift. Moreover, because the amount allowable as a credit in computing the gift tax payable on B's $7 million gift exceeds the credit based on the $6.8 million basic exclusion amount allowable on B's date of death, the special rule of paragraph (c) of this section applies to the gift. The credit to be applied for purposes of computing B's estate tax is based on a basic exclusion amount of $7 million, the amount used to determine the credit allowable in computing the gift tax payable on B's transfer to the GRAT. (G) Example 7. Individual C transferred $9 million to a grantor retained income trust (GRIT), retaining an income interest valued at $0 pursuant to section 2702(a)(2)(A). The taxable portion of the transfer valued as of the date of the transfer was $9 million. C died during the term of the GRIT. The entire GRIT corpus is includible in C's gross estate pursuant to section 2036(a)(1) because C retained the right to receive all of the income of the GRIT. Because the transferred assets are includible in the gross estate and do not qualify for the 5 percent de minimis rule in paragraph (c)(3)(ii)(A) of this section, the exception to the special rule found in paragraph (c)(3) of this section applies to the gift. The credit to be applied for purposes of computing C's estate tax is based on the $6.8 million basic exclusion amount as of C's date of death, subject to the limitation of section 2010(d). * * * * * (f) * * * (2) Exceptions. Except as specifically provided in this paragraph (f)(2), paragraphs (c) and (e)(3) of this section apply to estates of decedents dying on or after November 26, 2019. * * * Paragraph (c)(3) of this section is applicable to the estates of decedents dying on or after April 27, 2022. * * * Douglas W. O'Donnell, Deputy Commissioner for Services and Enforcement. (Filed by the Office of the Federal Register on April 26, 2022, 8:45 a.m., and published in the issue of the Federal Register for April 27, 2022, 87 F.R. 24918)

Private Letter Ruling Number: 202336010 Internal Revenue Service May 23, 2023 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202336010 Release Date: 9/8/2023 Index Number: 7872.05-00, 9100.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:FIP:B02 PLR-123094-22 Date: May 23, 2023 Dear ********: This ruling responds to a letter dated November 21, 2022, and subsequent correspondence, submitted on behalf of Taxpayer. Taxpayer requests an extension of time under sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to make a written representation under section 1.7872-15(d)(2) of the Income Tax Regulations to elect to treat otherwise noncontingent payments on split-dollar loans that are nonrecourse to the borrower as noncontingent. FACTS Taxpayer is an employee of Employer, a non-profit healthcare corporation that is a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code (the "Code"). In Year, Employer met with a consulting team from Company to consult on matters relating to employee recognition and retention. Company recommended and assisted with implementing a split-dollar life insurance plan ("SDP") for key employees of Employer. Neither Employer nor Taxpayer had prior experience with or knowledge of SDPs. Employer contracted Company to serve as the SDP third-party administrator in Month 1. Company was responsible for administering, implementing, and providing ongoing guidance related to the SDP and the loans thereunder. These responsibilities included set-up of the SDP, document preparation, and advising on document execution. Taxpayer represents that both Employer and Taxpayer reasonably relied on Company's expertise regarding the SDP including all information, representations, conclusions, and assistance, and that Company was aware of this reliance. Company intended for the SDP to be subject to the regulations under section 1.7872-15 ("Split-Dollar Regulations") and designed the plan to utilize nonrecourse premium loans to the employee participants secured by life insurance policies owned by each employee (the "SDP Loans"). Taxpayer is an employee participant in the SDP and in Year, Taxpayer received Taxpayer's first SDP Loan. Taxpayer represents that each of Taxpayer's SDP Loans has stated interest equal to the applicable federal rate and is not a "below-market split-dollar loan" under the Split-Dollar Regulations. Company projected that the proceeds of the insurance policies securing each SDP Loan are sufficient to pay all interest and principal due on that SDP Loan. Taxpayer also represents that a reasonable person would expect that all payments under each of Taxpayer's SDP Loans will be made. The due date for making Taxpayer's written representation was Date. In Month 2, Company advised Employer that the parties to a SDP Loan were required to make a written representation pursuant to section 1.7872-15(d)(2)(i) and (ii) and file a copy of the representation with their tax returns for the years SDP Loans were made to avoid having the payments treated as contingent payments for purposes of the Split-Dollar Regulations. Taxpayer represents that they were informed of this requirement by Employer. However, in the process of providing the initial SDP execution documents, Company and Employer inadvertently failed to provide Taxpayer with the written representation for execution. In Month 3, Company provided executed documents under the SDP to Employer counsel for review. During the review, it was discovered that Company had inadvertently failed to provide Taxpayer and Employer with the written representation necessary to make the section 1.7872-15(d)(2) election for Taxpayer's SDP Loans. The written representation was subsequently prepared by Employer counsel and executed by both Taxpayer and Employer in Month 4. Taxpayer represents that Taxpayer has been accounting for the SDP Loans as though the written representation was timely made. 1 ******** 1 Employer has also requested relief under sections 301.9100-1 and 301.9100-3. ******** Taxpayer makes the following additional representations: 1. Granting the relief will not result in Taxpayer having a lower tax liability in the aggregate for all years to which the regulatory election applies than Taxpayer would have had if the election had been timely made (taking into account the time value of money). 2. Taxpayer is not seeking to alter a return position for which an accuracy related penalty has been or could have been imposed under section 6662 at the time Taxpayer requested relief and the new position requires or permits a regulatory election for which relief is requested. 3. Being fully informed of the required regulatory election and related tax consequences, the Taxpayer did not choose to not make the election. 4. Taxpayer is not using hindsight in requesting relief. No facts have changed between the time the election should have been made and the time this request for relief was filed that would make the election advantageous to Taxpayer. 5. The request for relief was filed before the failure to make the regulatory election was discovered by the Service. 6. Although the period of limitations on assessment under section 6501(a) of the Code has expired for the taxable year at issue, an affidavit from an independent auditor certifying that the interests of the Government are not prejudiced under the standards of section 301.9100-3(c)(1)(i) by a ruling granting relief has been provided. Affidavits on behalf of Taxpayer have been provided as required by section 301.9100-3(e). LAW AND ANALYSIS Section 1.7872-15(d)(1) provides that, except as provided in section 1.7872-15(d)(2), if a payment on a split-dollar loan is nonrecourse to the borrower, the payment is a contingent payment for purposes of section 1.7872-15. Section 1.7872-15(d)(2)(i) provides that an otherwise noncontingent payment on a split-dollar loan that is nonrecourse to the borrower is not a contingent payment under section 1.7872-15 if the parties to the split-dollar life insurance arrangement represent in writing that a reasonable person would expect that all payments under the loan will be made. Section 1.7872-15(d)(2)(ii) describes the time and manner requirements for providing the written representation required by section 1.7872-15(d)(2)(i). Section 1.7872-15(d)(2)(ii) provides, in part, that the written representation must be signed by both the borrower and lender not later than the last day (including extensions) for filing the Federal income tax return of the borrower or lender, whichever is earlier, for the taxable year in which the lender makes the first split-dollar loan under the split-dollar life insurance arrangement. This representation must include the names, addresses, and taxpayer identification numbers of the borrower, lender, and any indirect participants. Unless otherwise stated therein, this representation applies to all subsequent split-dollar loans made pursuant to the split-dollar life insurance arrangement. Each party should retain an original of the representation as part of its books and records and should attach a copy of the representation to its Federal income tax return for any taxable year in which the lender makes a loan to which the representation applies. Section 301.9100-1(b) defines "election" to include an application for relief in respect of tax; a request to adopt, change, or retain an accounting method or accounting period. The term does not include an application for an extension of time for filing a return under section 6081. "Regulatory election" is defined as an election whose due date is prescribed by regulations or by a revenue ruling, a revenue procedure, a notice, or an announcement published in the Internal Revenue Bulletin. Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles E, G, H, and I. Section 301.9100-3(a) through (c)(1) sets forth rules that the Service generally will use to determine whether, under the particular facts and circumstances of each situation, the Commissioner will grant an extension of time for regulatory elections that do not meet the requirements of section 301.9100-2. Section 301.9100-3(a) provides that requests for relief subject to section 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in section 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government. Section 301.9100-3(b) provides that a taxpayer generally is deemed to have acted reasonably and in good faith if the taxpayer (i) requests relief under section 301.9100-3 before the failure to make the regulatory election is discovered by the Service; (ii) failed to make the election because of intervening events beyond the taxpayer's control; (iii) failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer's experience and the complexity of the return or issue), the taxpayer was unaware of the necessity for the election; (iv) reasonably relied on the written advice of the Service; or (v) reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election. A taxpayer will be deemed to have not acted reasonably and in good faith, however, if the taxpayer (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested; (ii) was informed in all material respects of the required election and related tax consequences, but chose not to file the election; or (iii) uses hindsight in requesting relief. Section 301.9100-3(c)(1) provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in the taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Similarly, if the tax consequences of more than one taxpayer are affected by the election, the Government's interests are prejudiced if extending the time for making the election may result in the affected taxpayers, in the aggregate, having a lower tax liability than if the election had been timely made. Section 301.9100-3(c)(1)(ii) provides that the interests of the Government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under section 301.9100-3. The Service may condition a grant of relief on the taxpayer providing the Service with a statement from an independent auditor (other than an auditor providing an affidavit pursuant to section 301.9100-3(e)) certifying that the interests of the Government are not prejudiced under the standards set forth in section 301.9100-3(c)(1)(i). CONCLUSION Based on the information submitted and representations made, we conclude that Taxpayer has satisfied the requirements for granting a reasonable extension of time to make the written representation under section 1.7872-15(d)(2). Accordingly, the fully executed written representation made in Month 4 will be deemed to have been timely made. Provided that a copy of the fully executed written representation is attached to Taxpayer's Federal income tax return for the taxable year in which this letter is received, the written representation will be deemed effective beginning in Year. In accordance with section 1.7872-15(d)(2)(ii), a copy of the written representation should be attached to Taxpayer's tax return for any subsequent taxable year in which Employer makes a SDP Loan to Taxpayer to which the written representation applies. This ruling is limited to the timeliness of making a written representation under section 1.7872-15(d)(2). This ruling's application is limited to the facts, representations, and Code and regulation sections cited herein. Except as provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, no opinion is expressed with regard to whether Taxpayer satisfied the other requirements under section 1.7872-15(d)(2)(i) and (ii), the loan treatment requirements under section 1.7872-15(a)(2), or whether payments under each SDP Loan are otherwise noncontingent payments for purposes of section 1.7872-15. No opinion is expressed with regard to whether the SDP Loans are below-market loans for purposes of section 7872 of the Code and section 1.7872-15 of the Regulations. No opinion is expressed with regard to whether the tax liability of Taxpayer is not lower in the aggregate for all years to which the election applies than such tax liability would have been if the election had been timely made (taking into account the time value of money). Upon audit of the Federal income tax returns involved, the director's office will determine such tax liability for the years involved. If the director's office determines that such tax liability is lower, that office will determine the Federal income tax effect. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. Sincerely, Andrea M. Hoffenson Andrea M. Hoffenson Branch Chief, Branch 2 Office of the Associate Chief Counsel (Financial Institutions and Products) cc:

Notice 2022-36 Internal Revenue Service 2022-36 I.R.B. 188 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 Notice 2022-36 SECTION 1. PURPOSE This notice provides relief for certain taxpayers from certain failure to file penalties and certain international information return (IIR) penalties with respect to tax returns for taxable years 2019 and 2020 that are filed on or before September 30, 2022. This notice also provides relief from certain information return penalties with respect to taxable year 2019 returns that were filed on or before August 1, 2020, and with respect to taxable year 2020 returns that were filed on or before August 1, 2021. The relevant penalties will be waived or, to the extent previously assessed, abated, refunded, or credited, as described in section 3.A of this notice. Situations where penalty relief does not apply are described in section 3.B of this notice. SECTION 2. BACKGROUND Section 6651(a)(1) of the Internal Revenue Code (Code) generally imposes an addition to tax for a failure to file (on or before the date prescribed) a tax return that is required under the authority of subchapter A of chapter 61 (other than part III regarding information returns) of the Code, including certain income tax returns. 1 ******** 1 Unless otherwise stated, all "section" references are to provisions of the Code. ******** Section 6038 generally imposes a penalty for the failure of certain United States persons to furnish (on or before the date prescribed) certain information with respect to a controlled foreign corporation or a controlled foreign partnership that the person owns. Section 6038A(d) imposes a penalty on a "25-percent foreign-owned" domestic corporation or wholly foreign-owned domestic disregarded entity for the failure to furnish (on or before the date prescribed) certain information or the failure to maintain certain records. Section 6038C(c) imposes a penalty on a foreign corporation engaged in a U.S. trade or business for the failure to furnish (on or before the date prescribed) certain information or the failure to maintain certain records. Section 6039F(c) imposes a penalty on a United States person for the failure to furnish (on or before the date prescribed) certain information with respect to the receipt of large gifts or bequests from foreign persons. Section 6677 generally imposes a penalty on a United States person for the failure to file (on or before the date prescribed) a notice or return required by section 6048 with respect to transactions with, or ownership of, a foreign trust. Section 6698(a)(1) generally imposes a penalty for the failure of any partnership to file (on or before the date prescribed) the return required under section 6031. Section 6698(a)(2) generally imposes a penalty for filing a return that fails to show the information required under section 6031. Section 6699(a)(1) generally imposes a penalty for the failure of any S corporation (as defined in section 1361(a)(1)) to file (on or before the date prescribed) a return required under section 6037. Section 6699(a)(2) generally imposes a penalty for filing a return that fails to show the information required under section 6037. Section 6721(a)(2)(A) generally imposes a penalty for the failure to file an information return (as defined in section 6724(d)(1)) on or before the required filing date. The foregoing penalties do not apply if the taxpayer can show that the failure to timely file the return or to furnish the required information or to provide the required notice, as applicable, is due to reasonable cause. See §§ 6651(a)(1), 6038(c)(4)(B), 6038A(d)(3), 6038C(c), 6039F(c)(2), 6677(d), 6698(a) flush language, 6699(a) flush language, and 6724(a). On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq., in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (Emergency Declaration). 2 The Emergency Declaration instructed the Secretary of the Treasury "to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a)." In response, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) issued a series of notices and other guidance to provide relief to affected taxpayers. In particular, Notice 2020-17, 2020-15 I.R.B. 590, postponed the due date for certain Federal income tax payments from April 15, 2020, until July 15, 2020. Notice 2020-18, 2020-15 I.R.B. 590, superseded Notice 2020-17 and provided expanded relief postponing the due date for filing Federal income tax returns that were originally due on April 15, 2020, to July 15, 2020, among other things. Notice 2021-21, 2021-15 I.R.B. 986, postponed the due date for filing Federal income tax returns in the Form 1040 series and making certain Federal income tax payments that were originally due on April 15, 2021, to May 17, 2021. ******** 2 https://trumpwhitehouse.archives.gov/briefings-statements/letter-president-donald-j-trump-emergency- determination-stafford-act/. ******** Additions to tax or penalties for failure to timely file returns continued to accrue for taxpayers who did not file by the postponed due dates. The COVID-19 pandemic has also had an unprecedented effect on the IRS's personnel and operations. The agency was called upon to support emergency relief for taxpayers, such as distributing economic impact payments, 3 while sustaining its regular operations in a pandemic environment with limited resources, where employees were sometimes unable to be physically present to process tax returns and correspondence. In response to these challenges, the IRS has been working aggressively to process backlogged returns and taxpayer correspondence to return to normal operations for the 2023 filing season. The Treasury Department and the IRS have determined that the penalty relief described in this notice will allow the IRS to focus its resources more effectively, as well as provide relief to taxpayers affected by the COVID-19 pandemic. ******** 3 The IRS, in coordination with the Bureau of the Fiscal Service, issued more than 476.1 million payments through three rounds of economic impact payments, totaling more than $814.4 billion during 2020 and 2021. IRS Data Book, 2021, Publication 55-B. ******** SECTION 3. GRANT OF RELIEF A. Waiver and Abatement of Certain Penalties for Taxpayers The IRS will not impose the penalties listed in section 3.A.(1) through (4) of this notice with respect to the specified tax returns for taxable years 2019 and 2020 that are filed on or before September 30, 2022. The penalties listed in this section 3.A of this notice will be automatically abated, refunded, or credited, as appropriate without any need for taxpayers to request this relief. (1) Additions to tax under section 6651(a)(1) for failure to file the following income tax returns: - Form 1040, U.S. Individual Income Tax Return; Form 1040-C, U.S. Departing Alien Income Tax Return; Form 1040-NR, U.S. Nonresident Alien Income Tax Return; Form 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents; Form 1040 (PR), Federal Self-Employment Contribution Statement for Residents of Puerto Rico; Form 1040-SR, U.S. Tax Return for Seniors; and Form 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico ); - Form 1041, U.S. Income Tax Return for Estates and Trusts; Form 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts; and Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts; - Form 1120, U.S. Corporation Income Tax Return; Form 1120-C, U.S. Income Tax Return for Cooperative Associations; Form 1120-F, U.S. Income Tax Return of a Foreign Corporation; Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation; Form 1120-H, U.S. Income Tax Return for Homeowners Associations; Form 1120-L, U.S. Life Insurance Company Income Tax Return; Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons; Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations; Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts; Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies; and Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B); - Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return; and - Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation; and Form 990-T, Exempt Organization Business Income Tax Return (and Proxy Tax Under Section 6033(e)). (2) Certain penalties under sections 6038, 6038A, 6038C, 6039F and 6677 for failure to timely file the following IIRs: - Penalties systematically assessed when a Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, and/or Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is attached to a late-filed Form 1120 or Form 1065; and - Penalties assessed by the campus assessment program with respect to filings on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and on Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner (Under section 6048(b)). (3) Penalties under section 6698(a)(1) for failure to timely file and under section 6698(a)(2) for failure to show the required information on a Form 1065, U.S. Return of Partnership Income. (4) Penalties under section 6699(a)(1) for failure to timely file and under section 6699(a)(2) for failure to show the required information on a Form 1120-S, U.S. Income Tax Return for an S corporation. In addition, the IRS will not impose the penalties under section 6721(a)(2)(A) for failure to timely file any information return (as defined in section 6724(d)(1)) that meets the following criteria: - 2019 returns that were filed on or before August 1, 2020, with an original due date of January 31, 2020; February 28, 2020 (if filed on paper) or March 31, 2020 (if filed electronically); or March 15, 2020; or - 2020 returns that were filed on or before August 1, 2021, with an original due date of January 31, 2021; February 28, 2021 (if filed on paper) or March 31, 2021 (if filed electronically); or March 15, 2021. B. Exceptions The penalty relief described in this notice does not apply to any penalties that are not specifically listed in the grant of relief under section 3.A of this notice. In addition, the penalty relief described in section 3.A of this notice is not available with respect to any return to which the penalty for fraudulent failure to file under section 6651(f) or the penalty for fraud under section 6663 applies. The penalty relief described in this notice also does not apply to any penalties in an accepted offer in compromise under section 7122 because acceptance of the offer conclusively settled all of the liabilities in the offer under § 301.7122-1(e)(5) of the Procedure and Administration Regulations. The penalty relief described in this notice does not apply to any penalty settled in a closing agreement under section 7121 or finally determined in a judicial proceeding. SECTION 4. DRAFTING INFORMATION The principal author of this notice is Han Huang of the Office of the Associate Chief Counsel (Procedure and Administration). For further information regarding this notice, contact Ms. Huang at (202) 317-6844 (not a toll-free number).

Proposed Regulation REG-108761-22 Internal Revenue Service 2024-16 I.R.B. 933 Charitable Remainder Annuity Trust Listed Transaction REG-108761-22 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking and public hearing. SUMMARY: This document contains proposed regulations that would identify certain charitable remainder annuity trust (CRAT) transactions and substantially similar transactions as listed transactions, a type of reportable transaction. Material advisors and certain participants in these listed transactions would be required to file disclosures with the IRS and would be subject to penalties for failure to disclose. The proposed regulations would affect participants in these transactions as well as material advisors but provide that certain organizations whose only role or interest in the transaction is as a charitable remainderman will not be treated as participants in the transaction or as parties to a prohibited tax shelter transaction subject to excise taxes and disclosure requirements. Finally, this document provides notice of a public hearing on the proposed regulations. DATES: Comments: Electronic or written comments must be received by May 24, 2024. Public Hearing: A public hearing on the proposed regulation is scheduled for July 11, 2024, at 10 a.m. ET. Requests to speak and outlines of topics to be discussed at the public hearing must be received by May 24, 2024. If no outlines are received by May 24, 2024, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5 p.m. on July 9, 2024. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at https://regulations.gov (indicate IRS and REG-108761-22) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the "Comments and Requests for a Public Hearing" section. Once submitted to the Federal eRulemaking Portal comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish availability any comments submitted to the IRS's public docket. Send paper submission to CC:PA:01:PR (REG-108761-22) room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Charles D. Wien of the Office of Associate Chief Counsel (Passthroughs & Special Industries), (202) 317-5279; concerning submissions of comments and requests for hearing, Vivian Hayes at (202) 317-6901 (not toll-free numbers) or by sending an email to publichearings@irs.gov (preferred). SUPPLEMENTARY INFORMATION: Background This document contains proposed additions to 26 CFR part 1 (Income Tax Regulations) under section 6011 of the Internal Revenue Code (Code). The additions identify certain transactions as "listed transactions" for purposes of section 6011. I. Disclosure of Reportable Transactions by Participants and Penalties for Failure to Disclose Section 6011(a) generally provides that, when required by regulations prescribed by the Secretary of the Treasury or her delegate (Secretary), "any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and regulations prescribed by the Secretary. Every person required to make a return or statement shall include therein the information required by such forms or regulations." Section 1.6011-4(a) provides that every taxpayer that has participated in a reportable transaction within the meaning of§1.6011-4(b) and who is required to file a tax return must file a disclosure statement within the time prescribed in§1.6011-4(e). Reportable transactions are identified in§1.6011-4 and include listed transactions, confidential transactions, transactions with contractual protection, loss transactions, and transactions of interest. See§1.6011-4(b)(2) through (6). Section 1.6011-4(b)(2) defines a listed transaction as a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction. Section 1.6011-4(c)(4) provides that a transaction is "substantially similar" if it is expected to obtain the same or similar types of tax consequences and is either factually similar or based on the same or similar tax strategy. Receipt of an opinion regarding the tax consequences of the transaction is not relevant to the determination of whether the transaction is the same as or substantially similar to another transaction. Further, the term substantially similar must be broadly construed in favor of disclosure. For example, a transaction may be substantially similar to a listed transaction even though it may involve different entities or use different Code provisions. Section 1.6011-4(c)(3)(i)(A) provides that a taxpayer has participated in a listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described in the published guidance that lists the transaction under§1.6011-4(b)(2). Published guidance may identify other types or classes of persons that will be treated as participants in a listed transaction. Published guidance also may identify types or classes of persons that will not be treated as participants in a listed transaction. Section 1.6011-4(d) and (e) provide that the disclosure statement Form 8886, Reportable Transaction Disclosure Statement (or successor form), must be attached to the taxpayer's tax return for each taxable year for which a taxpayer participates in a reportable transaction. A copy of the disclosure statement must be sent to the IRS's Office of Tax Shelter Analysis (OTSA) at the same time that any disclosure statement is first filed by the taxpayer pertaining to a particular reportable transaction. Section 1.6011-4(e)(2)(i) provides that, if a transaction becomes a listed transaction after the filing of a taxpayer's tax return reflecting the taxpayer's participation in the listed transaction and before the end of the period of limitations for assessment for any taxable year in which the taxpayer participated in the listed transaction, then a disclosure statement must be filed with OTSA within 90 calendar days after the date on which the transaction becomes a listed transaction. This requirement extends to an amended return and exists regardless of whether the taxpayer participated in the transaction in the year the transaction became a listed transaction. The Commissioner of Internal Revenue (Commissioner) also may determine the time for disclosure of listed transactions in the published guidance identifying the transaction. Participants required to disclose these transactions under§1.6011-4 who fail to do so are subject to penalties under section 6707A of the Code. Section 6707A(b) provides that the amount of the penalty is 75 percent of the decrease in tax shown on the return as a result of the reportable transaction (or which would have resulted from such transaction if such transaction were respected for Federal tax purposes), subject to minimum and maximum penalty amounts. The minimum penalty amount is $5,000 in the case of a natural person and $10,000 in any other case. For a listed transaction, the maximum penalty amount is $100,000 in the case of a natural person and $200,000 in any other case. Additional penalties also may apply. In general, section 6662A of the Code imposes a 20 percent accuracy-related penalty on any understatement (as defined in section 6662A(b)(1)) attributable to an adequately disclosed reportable transaction. If the taxpayer had a requirement to disclose participation in the reportable transaction but did not adequately disclose the transaction in accordance with the regulations under section 6011, the taxpayer is subject to an increased penalty rate equal to 30 percent of the understatement. See section 6662A(c). Section 6662A(b)(2) provides that section 6662A applies to any item that is attributable to any listed transaction and any reportable transaction (other than a listed transaction) if a significant purpose of such transaction is the avoidance or evasion of Federal income tax. Participants required to disclose listed transactions who fail to do so also are subject to an extended period of limitations under section 6501(c)(10) of the Code. That section provides that the time for assessment of any tax with respect to the transaction shall not expire before the date that is one year after the earlier of the date the participant discloses the transaction or the date a material advisor discloses the participation pursuant to a written request under section 6112(b)(1)(A) of the Code. II. Disclosure of Reportable Transactions by Material Advisors and Penalties for Failure to Disclose Section 6111(a) provides that each material advisor with respect to any reportable transaction shall make a return setting forth: (1) information identifying and describing the transaction, (2) information describing any potential tax benefits expected to result from the transaction, and (3) such other information as the Secretary may prescribe. Such return shall be filed not later than the date specified by the Secretary. Section 301.6111-3(a) of the Procedure and Administration Regulations provides that each material advisor with respect to any reportable transaction, as defined in§1.6011-4(b), must file a return as described in§301.6111-3(d) by the date described in§301.6111-3(e). Section 301.6111-3(b)(1) provides that a person is a material advisor with respect to a transaction if the person provides any material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and directly or indirectly derives gross income in excess of the threshold amount as defined in§301.6111-3(b)(3) for the material aid, assistance, or advice. Under§301.6111-3(b)(2)(i) and (ii), a person provides material aid, assistance, or advice if the person provides a tax statement, which is any statement (including another person's statement), oral or written, that relates to a tax aspect of a transaction that causes the transaction to be a reportable transaction as defined in§1.6011-4(b)(2) through (7). Material advisors must disclose transactions on Form 8918, Material Advisor Disclosure Statement (or successor form), as provided in§301.6111-3(d) and (e). Section 301.6111-3(e) provides that the material advisor's disclosure statement for a reportable transaction must be filed with the OTSA by the last day of the month that follows the end of the calendar quarter in which the advisor becomes a material advisor with respect to a reportable transaction or in which the circumstances necessitating an amended disclosure statement occur. The disclosure statement must be sent to the OTSA at the address provided in the instructions for Form 8918 (or successor form). Section 301.6111-3(d)(2) provides that the IRS will issue to a material advisor a reportable transaction number with respect to the disclosed reportable transaction. Receipt of a reportable transaction number does not indicate that the disclosure statement is complete, nor does it indicate that the transaction has been reviewed, examined, or approved by the IRS. Material advisors must provide the reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor as defined in§301.6111-3(b). The reportable transaction number must be provided at the time the transaction is entered into, or, if the transaction is entered into prior to the material advisor's receipt of the reportable transaction number, within 60 calendar days from the date the reportable transaction number is mailed to the material advisor. Section 6707(a) of the Code provides that a material advisor who fails to file a timely disclosure, or files an incomplete or false disclosure statement, is subject to a penalty. Pursuant to section 6707(b)(2), for listed transactions, the penalty is the greater of (A) $200,000, or (B) 50 percent of the gross income derived by such person with respect to aid, assistance, or advice that is provided with respect to the listed transaction before the date the return is filed under section 6111. Additionally, section 6112(a) provides that each material advisor with respect to any reportable transaction shall (whether or not required to file a return under section 6111 with respect to such transaction) maintain a list (1) identifying each person with respect to whom such advisor acted as a material advisor with respect to such transaction and (2) containing such other information as the Secretary may by regulations require. Material advisors must furnish such lists to the IRS in accordance with§301.6112-1(e). A material advisor may be subject to a penalty under section 6708 of the Code for failing to maintain a list under section 6112(a) and failing to make the list available upon written request to the Secretary in accordance with section 6112(b) within 20 business days after the date of such request. Section 6708(a) provides that the penalty is $10,000 per day for each day of the failure after the 20th day. However, no penalty will be imposed with respect to the failure on any day if such failure is due to reasonable cause. III. Tax-Exempt Entities as Parties to Prohibited Tax Shelter Transactions Section 4965 of the Code is intended to deter certain "tax-exempt entities" (as defined in section 4965(c)) from facilitating "prohibited tax shelter transactions," which include listed transactions. Section 4965(a)(1), in part, imposes an excise tax on a tax-exempt entity for the taxable year in which the tax-exempt entity becomes a party to a transaction that is a "prohibited tax shelter transaction" at the time it becomes a party to the transaction, and for any subsequent taxable year, in the amount determined under section 4965(b)(1) (section 4965 tax). Tax-exempt entities subject to the section 4965 tax are listed in section 4965(c)(1) through (3) and include, among others, entities and governmental units described in sections 501(c) and 170(c) of the Code (other than the United States). A tax-exempt entity that is a party to a prohibited tax shelter transaction generally also is subject to various reporting and disclosure obligations. Additionally, section 4965(a)(2) imposes an excise tax on an "entity manager" if the manager approves the tax-exempt entity as a party (or otherwise causes the tax-exempt entity to be a party) to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. The amount of this excise tax is determined under section 4965(b)(2) (entity manager tax). A. The section 4965 tax The amount of the section 4965 tax owed by a tax-exempt entity depends on whether the tax-exempt entity knows, or has reason to know, that a transaction is a prohibited tax shelter transaction at the time the entity becomes a party to the transaction. A tax-exempt entity is treated as knowing or having reason to know that a transaction is a prohibited tax shelter transaction if one or more of its entity managers knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time the entity manager(s) approved the tax-exempt entity as (or otherwise caused the entity to be) a party to the transaction. 1 The tax-exempt entity also is attributed the knowledge or reason to know of certain entity managers--those persons with authority or responsibility similar to that exercised by an officer, director, or trustee of an organization--even if the entity manager does not approve the entity as (or otherwise cause the entity to be) a party to the transaction. ******** 1 Section 53.4965-6 of the Foundation and Similar Excise Tax Regulations (26 CFR part 53) provides factors to be considered in determining whether an entity manager knows or has reason to know that a transaction is a prohibited tax shelter transaction. ******** Section 53.4965-4(a)(1) provides that a tax-exempt entity is a "party" to a prohibited tax shelter transaction if it facilitates a prohibited tax shelter transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status. In addition, under§53.4965-4(a)(2) and (b), the Secretary may issue published guidance to identify tax-exempt entities by type, class, or role that will or will not be treated as parties to a prohibited tax shelter transaction. If the tax-exempt entity unknowingly becomes a party to a prohibited tax shelter transaction, the section 4965 tax generally equals the greater of (1) the product of the highest rate of tax under section 11 of the Code (currently 21 percent) and the tax-exempt entity's net income attributable to the prohibited tax shelter transaction, or (2) the product of the highest rate of tax under section 11 and 75 percent of the proceeds received by the tax-exempt entity that are attributable to the prohibited tax shelter transaction. If the tax-exempt entity knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time the tax-exempt entity became a party to the transaction, the section 4965 tax increases to the greater of (1) 100 percent of the tax-exempt entity's net income attributable to the prohibited tax shelter transaction, or (2) 75 percent of the tax-exempt entity's proceeds attributable to the prohibited tax shelter transaction. The terms "net income" and "proceeds" are defined in§53.4965-8. In general, a tax-exempt entity's net income attributable to a prohibited tax shelter transaction is its gross income derived from the transaction, reduced by those deductions that are attributable to the transaction and that would be allowed by chapter 1 of the Code (chapter 1) if the tax-exempt entity were treated as a taxable entity for this purpose, and further reduced by the taxes imposed by subtitle D of the Code (other than the section 4965 tax) with respect to the transaction. In the case of a tax-exempt entity that is a party to the transaction by reason of facilitating a prohibited tax shelter transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status, the term "proceeds," solely for purposes of section 4965, means the gross amount of the tax-exempt entity's consideration for facilitating the transaction, not reduced for any costs or expenses attributable to the transaction. Published guidance with respect to a particular prohibited tax shelter transaction may designate additional amounts as proceeds from the transaction for purposes of section 4965. In addition, for all tax-exempt entities that are parties to a prohibited tax shelter transaction, any amount that is a gift or a contribution to a tax-exempt entity and that is attributable to a prohibited tax shelter transaction is treated as proceeds for purposes of section 4965, unreduced by any associated expenses. B. Entity manager tax The amount of the entity manager tax determined under section 4965(b)(2) on an entity manager (as defined in section 4965(d)) equals $20,000 for each instance that the manager approves the tax-exempt entity as (or otherwise causes such entity to be) a party to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. This liability is not joint and several. C. Disclosures Section 53.6011-1 requires that a tax-exempt entity subject to the section 4965 excise tax must file Form 4720, Return of Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, to report the liability and pay the tax due under section 4965(a)(1). Under§1.6033-5, a tax-exempt entity that is a party to a prohibited tax shelter transaction must file Form 8886-T, Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction, to disclose that it is a party to a prohibited tax shelter transaction, the identity of any other party (whether taxable or tax-exempt) to such transaction that is known to the tax-exempt entity, and certain other information. Under§1.6033-2, if the tax-exempt entity is required to file Form 990, Return of Organization Exempt From Income Tax, it must disclose on that form that it is a party to a prohibited tax shelter transaction, whether any taxable party notified the tax-exempt entity that it was or is a party to a prohibited tax shelter transaction, and whether the tax-exempt entity filed Form 8886-T. Section 6011(g) and§301.6011(g)-1 provide that any taxable party to a prohibited tax shelter transaction must disclose to each tax-exempt entity that the taxable party knows or has reason to know is a party to such transaction that the transaction is a prohibited tax shelter transaction. IV. Charitable Remainder Annuity Trusts (CRATs) For purposes of section 664 of the Code, section 664(d)(1) provides that a charitable remainder annuity trust (CRAT) is a trust: (A) From which a sum certain (which is not less than 5 percent nor more than 50 percent of the initial fair market value (FMV) of all property placed in trust) is to be paid, not less often than annually, to one or more persons (at least one of which is not an organization described in section 170(c), and, in the case of individuals, only to an individual who is living at the time of the creation of the trust) for a term of years (not in excess of 20 years) or for the life or lives of such individual or individuals; (B) From which no amount other than the payments described in section 664(d)(1)(A) and other qualified gratuitous transfers described in section 664(d)(1)(C) may be paid to or for the use of any person other than an organization described in section 170(c); (C) Whose remainder interest, following the termination of the payments described in section 664(d)(1)(A), is to be transferred to, or for the use of, an organization described in section 170(c) or is to be retained by the trust for such a use or, to the extent the remainder interest is in qualified employment securities (as defined by section 664(g)(4)), all or part of such securities are to be transferred to an employee stock ownership plan (as defined in section 4975(e)(7) of the Code) in a qualified gratuitous transfer (as defined by 664(g)); and (D) Whose remainder interest has a value (determined under section 7520) of at least 10 percent of the initial net FMV of all property placed in the trust. Section 664(b) provides, in part, that amounts distributed by a CRAT are considered as having the following characteristics in the hands of a beneficiary to whom the annuity described in section 664(d)(1)(A) is paid: (1) First, as amounts of income (other than gains, and amounts treated as gains, from the sale or other disposition of capital assets) includible in gross income to the extent of such income of the trust for the year and such undistributed income of the trust for prior years; (2) Second, as a capital gain to the extent of the capital gain of the trust for the year and the undistributed capital gain of the trust for prior years; (3) Third, as other income to the extent of such income of the trust for the year and such undistributed income of the trust for prior years; and (4) Fourth, as a distribution of trust corpus. Under section 664(c)(1), a CRAT is not subject to any tax imposed by subtitle A of the Code. Section 664(c)(2), in part, imposes an excise tax on a CRAT that has unrelated business taxable income (within the meaning of section 512, determined as if part III of subchapter F of chapter 1 applies to such trust) for a taxable year. That excise tax is equal to the amount of such unrelated business taxable income. V. Tax Avoidance Transactions using a CRAT The Treasury Department and the IRS are aware of transactions in which taxpayers attempt to use a CRAT and a single premium immediate annuity (SPIA) to permanently avoid recognition of ordinary income and/or capital gain. Taxpayers engaging in these transactions claim that distributions from the trust are not taxable to the beneficiaries as ordinary income or capital gain under section 664(b) because the distributions constitute the trust's unrecovered investment in the SPIA, thus claiming that a significant portion of the distributions is excluded from gross income under section 72(b)(2) of the Code. Taxpayers also claim that the trust qualifies as a CRAT and thus is not subject to tax on the trust's realized ordinary income or capital gain under section 664(c)(1), even though the trust may not meet all of the requirements of section 664(d)(1). In these transactions, a grantor creates a trust purporting to qualify as a CRAT under section 664. Generally, the grantor funds the trust with property having a FMV in excess of its basis (appreciated property) such as interests in a closely-held business, and/or assets used or produced in a trade or business. The trust then sells the appreciated property and uses some or all of the proceeds from the sale of the contributed property to purchase an annuity. On a Federal income tax return, the beneficiary of the trust treats the annuity amount payable from the trust as if it were, in whole or in part, an annuity payment subject to section 72 2, instead of as carrying out to the beneficiary amounts in the ordinary income and capital gain tiers of the trust in accordance with section 664(b). ******** 2 Section 72 governs the tax treatment of payments received as an annuity, and generally causes only the portion of each payment in excess of the investment in the contract (basis) to be included in the recipient's gross income. ******** As result of treating section 72 as applying to the amounts received (typically paid by an insurance company) as part of the annuity amount, the beneficiary reports as income only a small portion of the amount the beneficiary received from the SPIA. The beneficiary treats the balance of the annuity amount as an excluded portion representing a return of investment. 3 The beneficiary thus claims that the beneficiary is taxed as if the beneficiary were the owner of the SPIA, rather than the SPIA being an asset owned by the CRAT, which the trustee purchased to fund the annuity amount payable from the trust. Under the beneficiary's theory, until the entire investment in the SPIA has been recovered, the only portion of the annuity amount includable in the beneficiary's income is that portion of the SPIA annuity required to be included in income under section 72. The beneficiary also maintains that the distribution is not subject to section 664(b), which would treat a substantial portion of the annuity amount as gain attributable to the sale of the appreciated property contributed to the CRAT. ******** 3 The beneficiary also claims that section 72(u) does not apply because the SPIA is an "immediate annuity" under section 72(u)(3)(E). ******** The trustee also might take the position that the transfer of the appreciated property to the purported CRAT gives those assets a step-up in basis to FMV as if they had been sold to the trust. The transfer of property to a CRAT, however, does not give those assets a step-up in basis to FMV, as if they had been sold to the trust, giving the trust a cost basis under section 1012 of the Code. Instead, the transfer to the CRAT is a gift for Federal tax purposes. When a grantor transfers appreciated property to a CRAT, the CRAT's basis in the assets is determined under section 1015 of the Code. Under section 1015(a) and (d), property transferred by gift (whether or not in trust) retains its basis in the hands of the donor, increased (but not above FMV) by any gift tax paid on the transfer. The claimed application of sections 664 and 72 to the transaction is incorrect. Proper application of the rules of sections 664 and 72 to the transaction results in annual ordinary income from the annuity payments from the SPIA being added to the section 664(b)(1) (ordinary income) tier of the CRAT's income each year, and a one-time amount being added to the section 664(b)(2) (capital gains) tier at the time of the sale of the property by the CRAT (assuming the asset is of a kind to produce capital gain). Assuming no other activity in the CRAT, under section 664(b), the beneficiary of the CRAT must treat the annuity amount each year as first consisting of the ordinary income portion of the annuity payments from the SPIA. The balance of the annuity amount must be treated as consisting of any accumulated ordinary income of the CRAT, then accumulated capital gain, and then other income of the CRAT, only reaching non-taxable corpus to the extent these three accounts have been exhausted. In addition, certain features of the trust may cause the trust to fail to meet all of the requirements of section 664(d)(1). While the trust instrument generally resembles one of the eight sample CRAT forms provided in Rev. Proc. 2003-53, 2003-2 C.B. 230; Rev. Proc. 2003-54, 2003-2 C.B. 236; Rev. Proc, 2003-55, 2003-2 C.B. 242; Rev. Proc. 2003-56, 2003-2 C.B. 249; Rev. Proc. 2003-57, 2003-2 C.B. 257; Rev. Proc. 2003-58, 2003-2 C.B. 262; Rev. Proc. 2003-59, 2003-2 C.B 268; and Rev. Proc. 2003-60, 2003-2 C.B. 274 (Sample CRAT Revenue Procedures), it might have one or more significant modifications. For example, the trust instrument might provide that, in each taxable year of the trust, the trustee must pay to the beneficiary during the annuity period, an annuity amount equal to the greater of (1) an amount which meets the requirements of section 664(d)(1)(A) or (2) the payments received by the trustee from one or more SPIAs purchased by the trustee. The trust instrument also might provide for a current payment to an organization described in section 170(c) (Charitable Remainderman) in lieu of the payment of the remainder interest described in section 664(d)(1)(C). For example, the trust instrument might state that, in lieu of transferring the remainder amount required pursuant to section 664(d)(1)(C) (Remainder Interest) to the Charitable Remainderman, the trustee, upon the availability of adequate funding, currently may pay to the Charitable Remainderman a cash sum equal to at least 10 percent of the initial FMV of the trust property plus a nominal amount of cash. The trust agreement also might provide that the trustee cannot make a distribution in kind to satisfy this cash distribution. This payment, equal to at least 10 percent of the initial FMV of the trust property, would be the only payment to the Charitable Remainderman. The governing instrument of a CRAT may provide for an amount other than the annuity amount described in§1.664-2(a)(1) to be paid (or to be paid in the discretion of the trustee) to an organization described in§170(c) provided that, in the case of distributions in kind, the adjusted basis of the property distributed is fairly representative of the adjusted basis of the property available for payment on the date of payment. See§1.664-2(a)(4). However, nowhere in section 664(d)(1)(D) does it permit a current payment, determined based on the value of the trust at its funding, to be made in lieu of, and as a substitute for, the required payment of the remainder interest (that is, the entire corpus of the trust at termination of the annuity period) described in section 664(d)(1)(C) to the Charitable Remainderman. The significant modifications identified in the prior paragraphs deviate from the Sample CRAT Revenue Procedures in ways that prevent the qualification of the trust as a valid CRAT under section 664, regardless of the actual administration of the CRAT. These modifications are made in these transactions in order to effectuate the structure. Specifically, a provision authorizing the payment of an annuity amount in excess of the amount described in section 664(d)(1)(A), and a provision authorizing a current payment in lieu of the payment of the remainder interest described in section 664(d)(1)(C), violate mandatory requirements of a valid CRAT. VI. Purpose of Proposed Regulations On March 3, 2022, the Sixth Circuit issued an order in Mann Construction v. United States, 27 F.4th 1138, 1147 (6th Cir. 2022), holding that Notice 2007-83, 2007-2 C.B. 960, which identified certain trust arrangements claiming to be welfare benefit funds and involving cash value life insurance policies as listed transactions, violated the Administrative Procedure Act (APA), 5 U.S.C. 551-559, because the notice was issued without following the notice-and-comment procedures required by section 553 of the APA. The Sixth Circuit reversed the decision of the district court, which held that Congress had authorized the IRS to identify listed transactions without notice and comment. See Mann Construction, Inc. v. United States, 539 F.Supp.3d 745, 763 (E.D. Mich. 2021). Relying on the Sixth Circuit's analysis in Mann Construction, three district courts and the Tax Court have concluded that IRS notices identifying listed transactions were improperly issued because they were issued without following the APA's notice and comment procedures. See Green Rock, LLC v. IRS, 2023 WL 1478444 (N.D. AL., February 2, 2023) (Notice 2017-10); GBX Associates, LLC, v. United States, 1:22cv401 (N.D. Ohio, Nov. 14, 2022) (same); Green Valley Investors, LLC, et al. v. Commissioner, 159 T.C. No. 5 (Nov. 9, 2022) (same); see also CIC Services, LLC v. IRS, 2022 WL 985619 (E.D. Tenn. March 21, 2022), as modified by 2022 WL 2078036 (E.D. Tenn. June 2, 2022) (Notice 2016-66, identifying a transaction of interest). The Treasury Department and the IRS disagree with the Sixth Circuit's decision in Mann Construction and the subsequent decisions that have applied that reasoning to find other IRS notices invalid and are continuing to defend the validity of notices identifying transactions as listed transactions in circuits other than the Sixth Circuit. At the same time, however, to avoid any confusion and to ensure consistent enforcement of the tax laws throughout the nation, the Treasury Department and the IRS are issuing these proposed regulations to identify certain charitable remainder trust transactions as listed transactions for purposes of all relevant provisions of the Code and Treasury Regulations. These proposed regulations propose to identify the charitable remainder trust transactions described in proposed§1.6011-15(b), and substantially similar transactions, as listed transactions for purposes of§1.6011-4(b)(2) and sections 6111 and 6112. In addition, they inform taxpayers that participate in these transactions, and persons who act as material advisors with respect to these transactions, that they would need to disclose the transaction in accordance with the final regulations and the regulations issued under sections 6011 and 6111. Material advisors must also maintain lists as required by section 6112. Explanation of Provisions I. Charitable Remainder Annuity Trust Transaction Proposed§1.6011-15(a) would identify a transaction that is the same as, or substantially similar to, the transaction described in proposed§1.6011-15(b) as a listed transaction for purposes of§1.6011-4(b)(2). "Substantially similar" is defined in§1.6011-4(c)(4) to include any transaction that is expected to obtain the same or similar types of tax consequences and that is either factually similar or based on the same or a similar tax strategy. A transaction is described in proposed§1.6011-15(b) if it includes the following elements: (i) The grantor creates a trust purporting to qualify as a CRAT under section 664; (ii) The grantor funds the trust with property having a FMV in excess of its basis (contributed property); (iii) The trustee sells the contributed property; (iv) The trustee uses some or all of the proceeds from the sale of the contributed property to purchase an annuity; and (v) On a Federal income tax return, the beneficiary of the trust (Beneficiary) treats the amount payable from the trust as if it were, in whole or in part, an annuity payment subject to section 72, instead of as carrying out to the Beneficiary amounts in the ordinary income and capital gain tiers of the trust in accordance with section 664(b). II. Participants Whether a taxpayer has participated in the listed transaction described in proposed§1.6011-15(b) is determined under§1.6011-4(c)(3)(i)(A). Participants include any person whose tax return reflects tax consequences or a tax strategy described in proposed§1.6011-15(b). These tax consequences include those tax consequences described in proposed§1.6011-15(b) that would affect any gift tax return, whether or not such gift tax return was filed. See§25.6011-4. A taxpayer also has participated in a transaction described in proposed§1.6011-15(b) if the taxpayer knows or has reason to know that the taxpayer's tax benefits are derived directly or indirectly from tax consequences, or a tax strategy, described in proposed§1.6011-15(b). III. Material Advisors Material advisors who make a tax statement with respect to transactions identified as listed transactions in proposed§1.6011-15(b) would have disclosure and list maintenance obligations under sections 6111 and 6112. See§§301.6111-3 and 301.6112-1. One of the requirements to be a material advisor under section 6111(b)(1) is that the person must directly or indirectly derive gross income in excess of the threshold amount provided in 6111(b)(1)(B) for providing material aid, assistance, or advice with respect to the listed transaction. That threshold in the case of a listed transaction is reduced to $10,000 if substantially all of the tax benefits are provided to natural persons (looking through any partnerships, S corporations, or trusts), or to $25,000 for any other transaction. See§301.6111-3(b)(3)(i)(B). The regulations under section 6111 provide that gross income includes all fees for a tax strategy, for services for advice (whether or not tax advice), and for the implementation of a reportable transaction. See§301.6111-3(b)(2)(ii). However, a fee does not include amounts paid to a person, including an advisor, in that person's capacity as a party to the transaction. See§301.6111-3(b)(3)(ii). IV. Effect of Participating in Listed Transaction Described in Proposed§1.6011-15(b) Participants required to disclose these transactions under§1.6011-4 who fail to do so will be subject to penalties under section 6707A. Such disclosure also must include any gift tax consequences. See§25.6011-4. Participants required to disclose these transactions under§1.6011-4 who fail to do so also are subject to an extended period of limitations under section 6501(c)(10). Material advisors required to disclose these transactions under section 6111 who fail to do so are subject to penalties under section 6707. Material advisors required to maintain lists of investors under section 6112 who fail to do so (or who fail to provide such lists when requested by the IRS) are subject to penalties under section 6708(a). In addition, the IRS may impose other penalties on persons involved in these transactions or substantially similar transactions, including accuracy-related penalties under section 6662 or section 6662A, the penalty under section 6694 for understatements of a taxpayer's liability by a tax return preparer, the penalty under section 6700 for promoting abusive tax shelters, and the penalty under section 6701 for aiding and abetting understatement of tax liability. In addition, material advisors have disclosure requirements with regard to transactions occurring in prior years. However, notwithstanding§301.6111-3(b)(4)(i) and (iii), material advisors are required to disclose only if they have made a tax statement on or after [ DATE 6 YEARS BEFORE DATE OF PUBLICATION OF FINAL RULE]. Because the IRS will take the position that taxpayers are not entitled to the purported tax benefits of the listed transactions described in the proposed regulations, taxpayers who have filed tax returns taking the position that they were entitled to the purported tax benefits should consider filing amended returns or otherwise ensure that their transactions are disclosed properly. V. Role of Charitable Remainderman in the Transaction As stated in section 1 of this Explanation of Provisions, the transaction described in proposed§1.6011-15(b) attempts to use a CRAT under section 664 to permanently avoid recognition of ordinary income and/or capital gain on the sale of contributed property having a FMV in excess of its basis. Under the mandatory requirements of section 664(d), a trust does not qualify as a CRAT unless, following the termination of the annuity payments described in section 664(d)(1)(A), the Remainder Interest is to be transferred to or for the use of an organization described in section 170(c). A. Charitable Remainderman as a Party to a Transaction under Section 4965 As stated in section III of the Background, section 4965 provides, in part, that, if a transaction is a prohibited tax shelter transaction at the time a tax-exempt entity (which includes an organization described in section 170(c), other than the United States) becomes a party to the transaction, the entity must pay the section 4965 tax for the taxable year and any subsequent taxable year as determined under section 4965(b)(1). Section 4965(e)(1) provides in part that the term "prohibited tax shelter transaction" means any listed transaction (within the meaning of section 6707A(c)(2)). A tax-exempt entity that is a party to a prohibited tax shelter transaction generally is subject to various reporting and disclosure obligations. Additionally, an entity manager is subject to the entity manager tax imposed by section 4965(a)(2) if the entity manager approves the tax-exempt entity as a party (or otherwise causes the entity to be a party) to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. Section 53.4965-4(a) provides in part that a tax-exempt entity is a "party" to a prohibited tax shelter transaction if it facilitates a prohibited tax shelter transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status. The trust used in a transaction identified as a listed transaction in proposed§1.6011-15(a) would not qualify as a CRAT unless the entire Remainder Interest is required to be transferred to or for the use of a Charitable Remainderman. Thus, the tax-exempt entity that the CRAT designates for the Remainder Interest facilitates the transaction by reason of its tax-exempt status because, absent that status, the CRAT would not satisfy the mandatory requirement of section 664(d)(1)(C). Accordingly, that designated tax-exempt entity would meet the definition of a party to a prohibited tax shelter transaction in§53.4965-4(a)(1). However, notwithstanding the general rule in§53.4965-4(a),§53.4965-4(b) provides that published guidance may identify, by type, class, or role, which tax-exempt entities will or will not be treated as parties to a prohibited tax shelter transaction. The Treasury Department and the IRS understand that, in a transaction described in proposed§1.6011-15(b), an organization described in section 170(c) that is designated as the Charitable Remainderman might not become aware of its Remainder Interest in the purported CRAT until it receives a distribution from the trust. In that situation, it may be difficult for the organization described in section 170(c) to determine when section 4965 excise taxes and related reporting requirements apply. For this reason, these proposed regulations would provide that an organization described in section 170(c) that the purported CRAT designates as the recipient of the Remainder Interest will not be treated as a party under section 4965 to the listed transaction described in proposed§1.6011-15 solely by reason of its status as a Charitable Remainderman. B. Participation by a Charitable Remainderman As stated in section II of the Background, a taxpayer has participated in a listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described in this proposed regulation. See§1.6011-4(c)(3)(i)(A). Published guidance may identify other types or classes of persons that will be treated as participants in a listed transaction. Published guidance also may identify types or classes of persons that will not be treated as participants in a listed transaction. In general, the Treasury Department and the IRS do not expect that an organization described in section 170(c), whose only role or interest in the transaction described in these proposed regulations is as a Charitable Remainderman, would meet the definition of a participant under§1.6011-4(c)(3)(i)(A). Nevertheless, to avoid potential uncertainty, the proposed regulations provide that an organization described in section 170(c) that the purported CRAT designates as the recipient of the Remainder Interest is not treated as a participant in the listed transaction described in these proposed regulations solely by reason of its status as a Charitable Remainderman. C. Charitable Remainderman as a Material Advisor As stated in section III of the Background, a person is a material advisor with respect to a transaction if the person provides any material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and directly or indirectly derives gross income in excess of the threshold amount for the material aid, assistance, or advice. See section 6111(b)(1)(A). The regulations provide that gross income includes all fees for a tax strategy, for services or advice (whether or not tax advice), and for the implementation of a reportable transaction. However, a fee does not include amounts paid to a person, including an advisor, in that person's capacity as a party to the transaction. See§301.6111-3(b)(3)(ii)). The Treasury Department and the IRS request comments on whether the Charitable Remainderman ever provides material aid, assistance, or advice with respect to transactions described in proposed§1.6011-15(b) and the nature of the services being provided. The Treasury Department and the IRS also request comments on what fees the Charitable Remainderman receives, either directly or indirectly, for providing such material aid, assistance or advice. Comments and Public Hearing Before these proposed amendments to the regulations are adopted as final regulations, consideration will be given to comments regarding the notice of proposed rulemaking that are submitted timely to the IRS as prescribed under the ADDRESSES section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. All comments will be made available at https://www.regulations. gov. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. A public hearing has been scheduled for July 11, 2024, beginning at 10 a.m. ET, in the Auditorium at the Internal Revenue Service Building, 1111 Constitution Avenue, NW. Washington, DC. Due to the building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. Participants alternatively may attend the public hearing by telephone. The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present comments at the hearing must submit an outline of the topics to be discussed and the time to be devoted to each topic by May 24, 2024. A period of 10 minutes will be allocated to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be free of charge at the hearing. If no outline of topics to be discussed at the hearing is received by May 24, 2024, the public hearing will be cancelled. If the public hearing is cancelled, a notice of cancellation of the public hearing will be published in the Federal Register. Individuals who want to testify in person at the public hearing must send an email to publichearings@irs.gov to have your name added to the building access list. The subject line of the email must contain the regulation number (REG-108761-22) and the language "TESTIFY In Person". For example, the subject line may say: Request to TESTIFY In Person at Hearing for REG-108761-22. Individuals who want to testify by telephone at the public hearing must send an email to publichearings@irs.gov to receive the telephone number and access code for the hearing. The subject line of the email must contain the regulation number REG-108761-22 and the language "TESTIFY Telephonically". For example, the subject line may say: Request to TESTIFY Telephonically at Hearing for REG-108761-22. Individuals who want to attend the public hearing in person without testifying also must send an email to publichearings@irs.gov to have their names added to the building access list. The subject line of the email must contain the regulation number REG-108761-22 and the language "ATTEND in Person". For example, the subject line may say: Request to ATTEND Hearing In Person REG-108761-22. Requests to attend the public hearing must be received by 5 p.m. ET on July 9, 2024. Individuals who want to attend the public hearing by telephone without testifying also must send an email to publichearings@irs.gov to receive the telephone number and access code for the hearing. The subject line of email must contain the regulation number (REG-108761-22 and the language "ATTEND Hearing Telephonically". For example, the subject line may say: Request to ATTEND Hearing Telephonically for REG-108761-22. Requests to attend the public hearing must be received by 5 p.m. ET on July 9, 2024. Hearings will be made accessible to people with disabilities. To request special assistance during a hearing, please contact the Publication and Regulations Section of the Office of Associate Chief Counsel (Procedure and Administration) by sending an email to publichearings@irs.gov (preferred) or by telephone at (202) 317-6901 (not a toll-free number) at least July 8, 2024. Applicability Date Proposed§1.6011-15 would identify charitable remainder annuity trust transactions described in proposed§1.6011-15(b), and transactions that are substantially similar to those transactions, as listed transactions, effective as of the date the final regulations are published in the Federal Register. Special Analyses I. Paperwork Reduction Act The estimated number of taxpayers impacted by these proposed regulations is between 50 to 100 per year. No burden on these taxpayers is imposed by these proposed regulations. Instead, the collection of information contained in these proposed regulations is reflected in the collection of information for Forms 8886 and 8918 that have been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act (44 U.S.C. 3507(c)) under control numbers 1545-1800 and 1545-0865. To the extent there is a change in burden as a result of these regulations, the change in burden will be reflected in the updated burden estimates for Forms 8886 and 8918. The requirement to maintain records to substantiate information on Forms 8886 and 8918 already is contained in the burden associated with the control number for the forms and remains unchanged. 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. II. Regulatory Flexibility Act When an agency issues a proposed rulemaking, the Regulatory Flexibility Act (5 U.S.C. chapter 6) (Act) requires the agency to "prepare and make available for public comment an initial regulatory flexibility analysis" that "describe[s] the impact of the proposed rule on small entities." 5 U.S.C. 603(a). The term "small entities" is defined in 5 U.S.C. 601 to mean "small business," "small organization," and "small governmental jurisdiction," which are also defined in 5 U.S.C. 601. Small business size standards define whether a business is "small" and have been established for types of economic activities, or industry, generally under the North American Industry Classification System (NAICS). See Title 13, Part 121 of the Code of Federal Regulations (titled "Small Business Size Regulations"). The size standards look at various factors, including annual receipts, number of employees, and amount of assets, to determine whether the business is small. See Title 13, Part 121.201 of the Code of Federal Regulations for the Small Business Size Standards by NAICS Industry. Section 605 of the Act provides an exception to the requirement to prepare an initial regulatory flexibility analysis if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities. The Treasury Department and the IRS hereby certify that these proposed regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the majority of the effect of the proposed regulations falls on trusts. Further, the Treasury Department and the IRS expect that the reporting burden is low; the information sought is necessary for regular annual return preparation and ordinary recordkeeping. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business. III. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million (updated annually for inflation). This proposed rule does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold. IV. Executive Order 13132: Federalism Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order. V. Regulatory Planning and Review Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required. Statement of Availability of IRS Documents Guidance cited in this preamble is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov. Drafting Information The principal author of these proposed regulations is Charles D. Wien, Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the IRS and the Treasury Department participated in the development of these regulations. List of Subjects in 26 CFR Part 1 Income Taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 1 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 * * * * * * * * Section 1.6011-15 also issued under 26 U.S.C. 6001 and 26 U.S.C. 6011 * * * * * * * * Par. 2. Section 1.6011-15 is added to read as follows:§1.6011-15 Charitable Remainder Annuity Trust Listed Transaction. (a) In general. Transactions that are the same as, or substantially similar to, a transaction described in paragraph (b) of this section are identified as listed transactions for purposes of§1.6011-4(b)(2). (b) Charitable remainder annuity trusts. A transaction is described in this paragraph (b) if: (1) The grantor creates a trust purporting to qualify as a charitable remainder annuity trust under section 664(d)(1) of the Internal Revenue Code (Code); (2) The grantor funds the trust with property having a fair market value in excess of its basis (contributed property); (3) The trustee sells the contributed property; (4) The trustee uses some or all of the proceeds from the sale of the contributed property to purchase an annuity; and (5) On a Federal income tax return, the beneficiary of the trust treats the annuity amount payable from the trust as if it were, in whole or in part, an annuity payment subject to section 72 of the Code, instead of as carrying out to the beneficiary amounts in the ordinary income and capital gain tiers of the trust in accordance with section 664(b). (c) Participation --(1) In general. A taxpayer has participated in a transaction identified as a listed transaction in paragraph (a) of this section if the taxpayer's tax return reflects tax consequences or a tax strategy described in this section as provided under§1.6011-4(c)(3)(i)(A). These tax consequences include those tax consequences that would affect any gift tax return, whether or not such gift tax return was filed. See§25.6011-4 of this chapter. (2) Treatment of charitable remainderman. An organization described in section 170(c) of the Code that the purported Charitable Remainder Annuity Trust designates as a recipient of the remainder interest described in section 664(d)(1) is not treated as a participant under§1.6011-4(c)(3)(i)(A) in the transaction described in this section solely by reason of its status as a recipient of the remainder interest described in section 664(d)(1). (d) Treatment of charitable remainderman under section 4965. A tax-exempt entity (as defined in section 4965 of the Code) that is an organization described in section 170(c) and that the purported Charitable Remainder Annuity Trust designates as a recipient of the remainder interest described in section 664(d)(1) is not treated as a party to the transaction described in this section for purposes of section 4965 solely by reason of its status as a recipient of the remainder interest described in section 664(d)(1). (e) Applicability date. This section's identification of transactions that are the same as, or substantially similar to, the transaction described in paragraph (b) of this section as listed transactions for purposes of§1.6011-4(b)(2) is effective on [date of publication of final regulations in the Federal Register ]. Douglas W. O'Donnell, Deputy Commissioner for Services and Enforcement (Filed by the Office of the Federal Register March 5, 2024, 8:45 a.m., and published in the issue of the Federal Register for March 11, 2024, 89 FR 17613)

Private Letter Ruling Number: 202321001 Internal Revenue Service February 24, 2023 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202321001 Release Date: 5/26/2023 Index Number: 9100.09-00 Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:B05 PLR-116306-22 Date: February 24, 2023 Dear ******: This letter responds to Taxpayer's request dated Date 1, seeking a private letter ruling granting relief to make a late election pursuant to §§ 301.9100-1 through 301.9100-3 of the Procedure and Administration Regulations. Specifically, Taxpayer requests an extension of time to file Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to adopt a taxable year ending on Date 3, effective for Year 1. FACTS Formed on Date 2, Taxpayer is a limited liability company organized under the laws of State. Taxpayer is classified as a partnership for U.S. Federal income tax purposes and was formed for the purpose of leasing real property to a related party. Taxpayer represents that it intended to adopt a taxable year ending Date 3. Taxpayer informed Advisor that Taxpayer would have a Date 3 year end and instructed Advisor to file its return with this taxable year. Advisor was not aware of the need to file Form 8716, nor the need to file Form 8752, Required Payment or Refund Under Section 7519, to effectuate a tax return year end other than the required tax year. Since Advisor was unaware of the need to file these two forms, Advisor failed to advise Taxpayer of the need to file forms 8716 or 8752. Taxpayer has timely filed Forms 1065 on a year end consistent with its intent, and the members have reported the income/loss on their individual tax returns consistently. The Taxpayer also timely filed Form 8752 for Year 2 and Year 3. Upon the filing of the Form 8752 on Date 4 and payment of $x, for Year 3, the Taxpayer has paid and is current with the Required Payments under Section 7519. The Taxpayer did not file the Form 8752 for Year 1. It is the Taxpayer's intent to file Form 8752 for Year 1 upon a favorable ruling. On Date 5, the Taxpayer received Letter 3916C from the Internal Revenue Service (IRS), notifying the Taxpayer that the IRS did not have a record of the Form 8716 being filed and therefore, could not process the Form 8752 for Year 2. Taxpayer asked Advisor why the form was rejected by the IRS. Advisor reviewed its files and determined that Advisor failed to file the Form 8716 and Form 8752 for Year 1. Advisor responded to the notice to the IRS that the Advisor failed to file Form 8716, and that Taxpayer would submit a Private Letter Ruling Request to resolve the issue. The Taxpayer intends to file Forms 8716 and 8752 for the Year 1 upon a favorable ruling. LAW AND ANALYSIS Section 441(a) provides that taxable income is computed on the basis of the taxpayer's taxable year. Section 441(b) and section 1.441-1(b)(1) of the Income Tax Regulations provide that the term "taxable year'' generally means the taxpayer's annual accounting period, if it is a calendar or fiscal year, or, if applicable, the taxpayer's required taxable year. In the case of a partnership, the required taxable year is the taxable year determined under section 706 and section 1.706-1. Section 1.441-1(b)(2)(i)(G). Under section 706(b)(1)(B)(i), a partnership's required taxable year is the majority interest taxable year defined in section 706(b)(4), unless the taxpayer elects under section 444 to use a taxable year other than its required taxable year. Section 706(b)(4) provides, in general, that the majority interest taxable year is the taxable year (if any) which, on each testing day, constitutes the taxable year of 1 or more partners having (on such day) an aggregate interest in partnership profits and capital of more than 50 percent. Section 1.706-1(b)(7) provides, in relevant part, that a newly-formed partnership may adopt, in accordance with section 1.441-1(c), its required taxable year or a taxable year elected under section 444 without the consent of the Commissioner. Section 444(a) provides that, except as otherwise provided in section 444, a partnership may elect to have a taxable year other than its required taxable year. Section 444(b)(1) and (2) provide that an election under section 444(a) may be made only if the deferral period of the taxable year elected is not longer than the shorter of three (3) months or the deferral period of the taxable year being changed. The term "deferral period" generally refers to the number of months between the beginning of the entity's taxable year and the close of the first required taxable year ending within such taxable year. Section 444(b)(4). Section 1.444-3T(b)(1) of the temporary Income Tax Regulations provides, among other requirements, that Form 8716 must be filed by the earlier of (i) the 15th day of the fifth month following the month that includes the first day of the taxable year for which the election will first be effective, or (ii) the due date (without regard to extensions) of the income tax return resulting from the election under § 444 of the Internal Revenue Code. Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections (other than automatic extensions covered in section 301.9100-2) will be granted when the taxpayer provides evidence (including affidavits) to establish that the taxpayer acted reasonably and in good faith and the grant of relief will not prejudice the interests of the Government. Section 301.9100-3 sets forth standards that the Commissioner will employ in determining whether to grant discretionary relief in situations that do not meet the requirements of § 301.9100-2. The standards applied are whether the taxpayer acted reasonably and in good faith in the matter, and whether the granting of relief will prejudice the interests of the government. Generally, a taxpayer will be deemed to have acted reasonably and in good faith if the taxpayer reasonably relied on a qualified tax professional, and that professional failed to make, or advise the taxpayer to make, the election at issue. Regulation section 301.9100-3(c)(1)(i) states that the interests of the Government are prejudiced if granting relief will result in the affected Taxpayers, in the aggregate, having a lower tax liability in the aggregate for all years to which the election applies than if the election had been made on a timely basis. Regulation section 301.9100-3(c)(1)(ii) provides that relief ordinarily will not be granted if the tax year in which the regulatory election should have been made, or any tax year that would have been affected by the election had it been timely made, is closed by the statute of limitations on assessment before the Taxpayer's receipt of the ruling granting 9100 relief. Section 7519 -- "Required payments for entities electing not to have required taxable year" -- applies to a partnership or S corporation for any taxable year if (1) an election under section 444 is in effect for the taxable year and (2) the required payment determined under subsection (b) for such taxable year (or any preceding taxable year) exceeds $500. Section 7519(b) defines the required payment. The term "required payment" means, with respect to any applicable election year of a partnership or S corporation, an amount equal to (1) the excess of the product of (A) the applicable percentage of the adjusted highest section 1 rate, multiplied by (B) the net base year income of the entity, over (2) the net required payment balance. For purposes of paragraph (1)(A), the term "adjusted highest section 1 rate" means the highest rate of tax in effect under section 1 as of the end of the base year plus 1 percentage point. Based on the facts and information submitted and the representations made, we conclude that Taxpayer has acted reasonably and in good faith, and that the granting of relief would not prejudice the interests of the government. Accordingly, based solely on the facts and information submitted, and the representations made in the ruling request, Taxpayer has satisfied the requirements for the granting of relief. A copy of this letter and Taxpayer's Form 8716 electing to use a taxable year ending Date 3 effective for Year 1 and accompanying Form 8752 should be forwarded to the service center where Taxpayer files its returns of tax within 60 days of the date of this letter. A copy of this letter must be attached to any income tax return to which it is relevant. This ruling is based upon facts and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. This office has not verified any of the material submitted in support of the request for a ruling. However, as part of an examination process, the Service may verify the factual information, representations, and other data submitted. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being faxed to your authorized representative. Sincerely, John M. Aramburu Senior Counsel, Branch 5 Office of Associate Chief Counsel (Income Tax & Accounting) cc: ******

Private Letter Ruling Number: 202213001 Internal Revenue Service December 30, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202213001 Release Date: 4/1/2022 Index Number: 167.22-01 [Third Party Communication: Date of Communication: Month DD, YYYY] Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:B06 PLR-114037-21 Date: December 30, 2021 Dear *******: This letter responds to your letter, dated June 28, 2021, requesting a ruling on the application of the depreciation normalization requirements with respect to the computation of accumulated deferred income taxes in its calculation of rate base. FACTS Taxpayer files a consolidated federal income tax return on a calendar year basis with its affiliates, including its parent company, Parent. Taxpayer uses the accrual method of accounting. Parent is a State business trust and voluntary association. Taxpayer is a regulated electric utility that provides both distribution and transmission services. Taxpayer's utility services are, in general, subject to regulation by Commission A and Commission B, as detailed below. Taxpayer's distribution business consists primarily of the purchase, delivery, and sale of electricity to residential, commercial, and industrial customers within its franchise service territory in both the eastern and western regions of State. Taxpayer's distribution business is subject to regulation by Commission A. Taxpayer's wholesale electric transmission business is the focus of this ruling. Taxpayer owns and maintains transmission facilities that are part of an interstate power transmission grid over which electricity is transmitted throughout Region. Taxpayer, its affiliates, and most other utilities in Region are parties to a series of agreements that provide for coordinated planning and operation of Region's transmission facilities and the rules by which they acquire transmission services. Under this agreement, Operator serves as the independent systems operator and regional transmission organization of Region. Taxpayer's wholesale transmission revenues are recovered through Commission B-approved formula rates. Transmission revenues are collected from Region customers, including distribution customers of Taxpayer and its affiliated utilities. Annual transmission revenue requirements rates are based on a cost-of-service model allowing for recovery of transmission costs, including a return on equity applied to transmission rate base. Accumulated Deferred Federal Income Taxes (ADFIT) reduce rate base in the formula rate templates for regional and local transmission rates. The transmission formula rates provide for an annual reconciliation and recovery or refund (true-up adjustment) of the rates set based on a projected revenue requirement computed prior to the beginning of the service year. The true-up adjustment reflects differences primarily between projected and actual operating costs, rate base and interest expense as well as differences between projected and actual customer loads. The true-up adjustment is recovered from, or refunded to, transmission customers in the next annual rate cycle. Interest is charged with respect to under-recovered amounts and interest is payable with respect to over-recovered amounts. Both are computed in accordance with Commission B-prescribed rules. The revenue requirements for transmission services pursuant to Operator tariff are effective for a one-year service period that begins on January 1 and ends on December 31. Each year on or before July 31, Taxpayer and the other Region transmission owners collectively submit to Commission B an informational filing that details the updated annual transmission revenue requirement and the resulting derivation of the rate for transmission service that will be in effect from January 1 through December 31 of the subsequent year. The two components of the revenue requirement for transmission services for a given calendar-year service period are: 1. A projection of the revenue requirement based on the following: a. Actual (recorded) balances for transmission assets and costs reported in the most recently-filed Commission B Form (the calendar-year period ending prior to the year preceding the beginning of the service period), plus b. A projection of the additions to be placed in service in the two calendar years after the period described above (the year immediately after the filing of Commission B Form and the year corresponding to the service period. 2. A true-up component, representing the difference between rates charged based on the projected revenue requirement for the prior service period (including the forecasted costs for facilities expected to be placed in service through the end of the service period) and the actual revenue requirement (calculated based on actual transmission costs and actual plant additions for such service period), including interest. The computation of the component of a projected revenue requirement described in 1.b, above also reflects projected depreciation-related ADFIT amounts corresponding to plant additions in the two calendar years after the filing of Commission B Form. The following amounts are used to compute the depreciation-related ADFIT for projected plant additions: - Forecasted depreciation-related ADFIT activity in service in the year immediately after the year for which the most recent Commission B Form was filed with respect to projected plant additions during such year, plus - Forecasted depreciation-related ADFIT activity for the service year with respect to plant additions during such year and the immediately preceding year as computed in accordance with application of the proration formula of Treas.Reg. § 1.167(l)-1(h)(6) to the entire 365 or 366 day service period. In the computation of the true-up component, the actual allowed return is based on the actual (recorded) net plant balances and depreciation-related ADFIT balances during such period. Gross plant balances and accumulated book depreciation reflected in actual rate base are computed based on five-quarter averaging. Depreciation-related ADFIT balances reflected in actual rate base will be based on averaging using the methodology of the proration formula of Treas.Reg. § 1.167(l)-1(h)(6). Operating expenses, including depreciation expense, will be amounts reported in Commission B Form for such period. The allowed return will be computed with reference to the actual capital structure and weighted average cost of capital for the period as determined based on amount reported in the Commission B Form for such period. Income tax expense is calculated based on a tax gross-up of the computed allowed equity return. RULINGS REQUESTED 1. The normalization requirements apply separately to the two computations comprising the projected revenue requirement: a. The portion of the calculation based on a filed Commission B Form; and b. The portion of the calculation based on projected additions of public utility property 2. The portion of the computation of the projected revenue requirement based on a filed Commission B Form is subject to the rules under § 1.167(l)-1(h)(6)(ii) applicable where solely a historical period is used to determine depreciation for federal income tax expense for ratemaking purposes and the proration formula does not apply. 3. The consistency requirement of IRC Section 168(i)(9)(B) applies separately to each component of the projected revenue requirement. As such, the portion of the projected revenue requirement calculation based on a Commission B Form using point-in-time balances of net depreciable plant and ADFIT (as of the same date for all rate base items in this portion of the calculation) complies with IRC Section 168(i)(9)(B) deferred-tax consistency requirement without regard to the methodology employed for the portion of the projected revenue requirement calculation based on projected additions of public utility property after such date. 4. For the portion of the projected revenue requirement based on application of a carrying charge to forecasted gross additions of public utility property averaged using a five-quarter methodology over a test period that begins on the first day that rates are effective and reduced by associated prorated ADFIT, Taxpayer would comply with the consistency requirement under IRC Section 168(i)(9)(B) and the rules of Treas.Reg. Sec. 1.167(l)-1(h)(6) in computing such portion of its projected revenue requirement employing a future test period with an average rate base by (a) applying the proration formula rules under Treas.Reg.Sec. 1.167(l)-1(h)(6) to the projected monthly increases or decreases in ADFIT without (b) further applying an averaging convention, notwithstanding averaging of other elements of rate base including net depreciable plant, to either the prorated endof-period ADFIT balance or the prorated increases or decreases in ADFIT used to compute the prorated end-of-period ADFIT balance. 5. The portion of the computation of the projected revenue requirement based on a calculation with respect to projected additions of public utility property is subject to the rules under Treas.Reg. Sec. 1.167(l)-1(h)(6)(ii) applicable if solely a future test period is used to determine depreciation for federal income tax expense for ratemaking purposes and the proration formula must be applied. 6. For purposes of computing ADFIT in the actual revenue requirement and resulting true-up adjustment, the proration formula of Treas.Reg. Sec. 1.167(l)-1(h)(6) must be applied to ADFIT increases or decreases to which the proration formula was applied in the projected revenue requirement. Taxpayer would be inconsistent with the normalization rules in computing its actual revenue requirement used to determine its true-up adjustment if the portions of its actual ADFIT increases or decreases that were subject to the proration formula of Treas.Reg. Sec. 1.167(l)-1(h)(6) in the computation of the projected revenue requirement were not again prorated in determining the actual revenue requirement. 7. Application of the proration formula of Treas.Reg. Sec. 1.167(l)-1(h)(6) to all actual ADFIT increases or decreases (including to amounts related to vintages of public utility property for which the proration formula was not applied in the first component of the projected revenue requirement as well as to differences between actual and projected ADFIT activity for vintages of public utility property for which the proration formula was applied in the second component of the projected revenue requirement) to determine the actual revenue requirement and the resulting true-up adjustment would not violate the normalization rules of Treas.Reg. Sec. 1.167)l)-(h)(6) and would comply with the IRC Section 168(i)(9)(B) consistency requirement notwithstanding the computation of average rate base using a five-quarter average for plant and accumulate depreciation balances. LAW AND ANALYSIS Section 168(f)(2) of the Code provides that the depreciation deduction determined under § 168 shall not apply to any public utility property (within the meaning of § 168(i)(10)) if the taxpayer does not use a normalization method of accounting. Section 168(i)(10) defines, in part, public utility property as property used predominantly in the trade or business of the furnishing or sale of electrical energy if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof. Prior to The Revenue Reconciliation Act of 1990, the definition of public utility property was contained in § 167(l)(3)(A) and that definition is essentially unchanged in § 168(i)(10) and the regulations promulgated under former section 167(l) remain valid for application of the normalization rules. Section 1.167(l)-1(a)(1) provides that the normalization requirements for public utility property pertain only to the deferral of federal income tax liability resulting from the use of an accelerated method of depreciation for computing the allowance for depreciation under § 167 and the use of straight-line depreciation for computing tax expense and depreciation expense for purposes of establishing cost of services and for reflecting operating results in regulated books of account. In order to use a normalization method of accounting, § 168(i)(9)(A) of the Code requires that a taxpayer, in computing its tax expense for establishing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account, to use a method of depreciation with respect to public utility property that is the same as, and a depreciation period for such property that is not shorter than, the method and period used to compute its depreciation expense for such purposes. Under § 168(i)(9)(A)(ii), if the amount allowable as a deduction under § 168 differs from the amount that would be allowable as a deduction under § 167 using the method, period, first and last year convention, and salvage value used to compute regulated tax expense under § 168(i)(9)(A)(i), the taxpayer must make adjustments to a reserve to reflect the deferral of taxes resulting from such difference. Section 168(i)(9)(B)(i) provides that one way the requirements of § 168(i)(9)(A) will not be satisfied is if the taxpayer, for ratemaking purposes, uses a procedure or adjustment which is inconsistent with such requirements. Under § 168(i)(9)(B)(ii), such inconsistent procedures and adjustments include the use of an estimate or projection of the taxpayer's tax expense, depreciation expense, or reserve for deferred taxes under § 168(i)(9)(A)(ii), unless such estimate or projection is also used, for ratemaking purposes, with respect to all three of these items and with respect to the rate base (hereinafter referred to as the "Consistency Rule"). Section 1.167(l)-1(a)(1) of the Income Tax Regulations provides that the normalization requirements of former § 167(l) with respect to public utility property defined in former § 167(l)(3)(A) pertain only to the deferral of federal income tax liability resulting from the use of an accelerated method of depreciation for computing the allowance for depreciation under § 167 and the use of straight line depreciation for computing tax expense and depreciation expense for purposes of establishing cost of services and for reflecting operating results in regulated books of account. Section 1.167(l)-1(h) requires that a utility must maintain a reserve reflecting the total amount of the deferral of federal income tax liability resulting from the taxpayer's use of different depreciation methods for tax and ratemaking purposes. Section 1.167(l)-1(h)(1)(iii) provides that the amount of federal income tax liability deferred as a result of the use of different depreciation methods for tax and ratemaking purposes is the excess (computed without regard to credits) of the amount the tax liability would have been had the depreciation method for ratemaking purposes been used over the amount of the actual tax liability. This amount shall be taken into account for the taxable year in which the different methods of depreciation are used. If, however, in respect of any taxable year the use of a method of depreciation other than a subsection (1) method for purposes of determining the taxpayer's reasonable allowance under § 167(a) results in a net operating loss carryover to a year succeeding such taxable year which would not have arisen (or an increase in such carryover which would not have arisen) had the taxpayer determined his reasonable allowance under § 167(a) using a subsection (1) method, then the amount and time of the deferral of tax liability shall be taken into account in such appropriate time and manner as is satisfactory to the district director. Section 1.167(l)-1(h)(2)(i) provides that the taxpayer must credit this amount of deferred taxes to a reserve for deferred taxes, a depreciation reserve, or other reserve account. This regulation further provides that, with respect to any account, the aggregate amount allocable to deferred tax under § 167(1) shall not be reduced except to reflect the amount for any taxable year by which Federal income taxes are greater by reason of the prior use of different methods of depreciation. That section also notes that the aggregate amount allocable to deferred taxes may be reduced to reflect the amount for any taxable year by which federal income taxes are greater by reason of the prior use of different methods of depreciation under § 1.167(l)-1(h)(1)(i) or to reflect asset retirements or the expiration of the period for depreciation used for determining the allowance for depreciation under § 167(a). Section 1.167(l)-1(h)(6)(i) provides that, notwithstanding the provisions of subparagraph (1) of that paragraph, a taxpayer does not use a normalization method of regulated accounting if, for ratemaking purposes, the amount of the reserve for deferred taxes under § 167(l) which is excluded from the base to which the taxpayer's rate of return is applied, or which is treated as no-cost capital in those rate cases in which the rate of return is based upon the cost of capital, exceeds the amount of such reserve for deferred taxes for the period used in determining the taxpayer's expense in computing cost of service in such ratemaking. Section 1.167(l)-1(h)(6)(ii) provides that for the purpose of determining the maximum amount of the reserve to be excluded from the rate base (or to be included as no-cost capital) under § 1.167(l)-1(h)(6)(i), if solely an historical test period is used to determine depreciation for federal income tax expense for ratemaking purposes, then the amount of the reserve account for the period is the amount of the reserve (determined under § 1.167(l)-1(h)(2)) at the end of the historical period. Section 1.167(l)-1(h)(6)(ii) provides that if solely a future period is used for such determination, the amount of the reserve account for the period is the amount of the reserve at the beginning of the period and a pro rata portion of the amount of any projected increase to be credited or decrease to be charged to the account during such period. Section 1.167(l)-1(h)(6)(ii) of the Regulations provides if, in determining depreciation for ratemaking tax expense, the test period used is part historical and part future, then the amount of the reserve account for this period is the amount of the reserve at the end of the historical portion of the period and a pro rata amount of any projected increase to be credited to the account during the future portion of the period. The pro rata amount of any increase during the future portion of the period is determined by multiplying the increase by a fraction, the numerator of which is the number of days remaining in the period at the time the increase is to accrue, and the denominator of which is the total number of days in the future portion of the period. Ruling 1 and Ruling 3 Taxpayer has asked whether each of the two computations comprising the projected revenue requirement must be evaluated independently for compliance with the normalization rules or whether they are evaluated in the aggregate. The computations are: (a) the portion of the revenue requirement calculation based on a filed Commission B Form and (b) the portion of the revenue requirement calculation based on projected additions of public utility property. In this case the separate calculations of revenue requirement use a different time period and a different set of assets. Thus, the normalization rules must be applied separately to (a) the portion of the revenue requirement calculation based on a filed Commission B Form and (b) the portion of the revenue requirement calculation based on projected additions of public utility property. Furthermore, because the normalization rules apply separately to the two components of the revenue requirement, the consistency requirement of IRC Section 168(i)9(B) is also applied independently to the two components of the revenue requirement listed above. Ruling 2, Ruling 5, and Ruling 6 The purpose of the proration formula is to prevent the immediate flow-through of the benefits of accelerated depreciation to ratepayers. It applies when a test period is partially or fully a "future" test period, as explained below. The proration formula stops flow-through by limiting the deferred tax reserve accruals that may be excluded from rate base, and thus the earnings on rate base that may be disallowed, according to the length of time these accruals are actually in the reserve account. The effectiveness of § 1.167(l)-1(h)(6)(ii) in resolving the timing issue has been questioned by its failure to define some key terms. Nowhere does this provision state what is meant by the terms "historical" and "future" in relation to the period for determining depreciation for ratemaking tax expense (the "test period"). One interpretation focuses on the type or quality of the data used in the ratemaking process. According to this interpretation, the historical period is that portion of the test period for which actual data is used, while the portion of the period for which data is estimated is the future period. The second interpretation focuses on when the utility rates become effective. Under this interpretation, the historical period is that portion of the test period before rates go into effect, while the portion of the test period after the effective date of the rate order is the future period. The first interpretation, which focuses on the quality of the ratemaking data, is an attractive one. It proposes a simple rule, easy to follow and to enforce: any portion of the reserve for deferred taxes based on estimated data must be prorated in determining the amount to be deducted from rate base. The actual passage of time between the date ratemaking data is submitted and the date rates become effective is of no importance. But this interpretation of the regulations achieves simplicity at the expense of precision; in other words, it is overbroad. The proration of all estimated deferred tax data does serve to magnify the benefits of accelerated depreciation to the utility, but this is not the purpose of normalization. Congress was explicit: normalization "in no way diminishes whatever power the [utility regulatory] agency may have to require that the deferred taxes reserve be excluded from the base upon which the utility's permitted rate of return is calculated." H.R. Rep. No. 413, 91st Cong., 1st Sess. 133 (1969). In contrast, the second interpretation of section 1.167(l)-1(h)(6)(ii) of the regulations is consistent with the purpose of normalization, which is to preserve for regulated utilities the benefits of accelerated depreciation as a source of cost-free capital. The availability of this capital is ensured by prohibiting flow-through. But whether or not flow-through can even be accomplished by means of rate base exclusions depends primarily on whether, at the time rates become effective, the amounts originally projected to accrue to the deferred tax reserve have actually accrued. If rates go into effect before the end of the test period, and the rate base reduction is not prorated, the utility commission is denying a current return for accelerated depreciation benefits the utility is only projected to have. This procedure is a form of flow-through, for current rates are reduced to reflect the capital cost savings of accelerated depreciation deductions not yet claimed or accrued by the utility. Yet projected data is often necessary in determining rates, since historical data by itself is rarely an accurate indication of future utility operating results. Thus, the regulations provide that as long as the portion of the deferred tax reserve based on projected (future estimated) data is prorated according to the formula in section 1.167(l)-1(h)(6)(ii), a regulator may deduct this reserve from rate base in determining a utility's allowable return. In other words, a utility regulator using projected data in computing ratemaking tax expense and rate base exclusion must account for the passage of time if it is to avoid flow-through. But if rates go into effect after the end of the test period, the opportunity to flow through the benefits of future accelerated depreciation to current ratepayers is gone, and so too is the need to apply the proration formula. In this situation, the only question that is important for the purpose of rate base exclusion is the amount in the deferred tax reserve, whether actual or estimated. Once the future period, the period over which accruals to the reserve were projected, is no longer future, the question of when the amounts in the reserve accrued is no longer relevant (at the time the new rate order takes effect, the projected increases have accrued, and the amounts to be excluded from rate base are no longer projected but historical, even though based on estimates). As discussed earlier, the normalization rules apply separately to (a) the portion of the revenue requirement calculation based on a filed Commission B Form and (b) the portion of the revenue requirement calculation based on projected additions of public utility property. For the portion of the projected revenue requirement based on the filed Commission B Form, the period used is purely a historical period as the assets filed on the Commission B Form were placed into service the two years preceding the date the rates go into effect. Therefore, the proration formula rules under Treas.Reg. Sec. 1.167(l)-1(h)(6) are not applicable to this portion of the projected revenue requirement. For the portion of the projected revenue requirement based on projected additions of public utility property, the period is purely a future test period. These assets are a projection of public utility property additions that will occur after the rates would go into effect, thus necessitating the application of the proration formula in order to prevent the flow through of benefits of future accelerated depreciation to current ratepayers. Therefore, the proration formula rules under Treas.Reg. Sec. 1.167(l)-1(h)(6) are applicable to this portion of the projected revenue requirement. Also, we agree with Taxpayer's assessment that it would be inconsistent with the normalization rules to compute the ADFIT in its actual revenue requirement and resulting true-up adjustment if the proration formula of § 1.167(l)-1(h)(6) is not applied to those increases or decreases that had been subject to the proration formula when those increases or decreases were used in the computation of the projected revenue requirement in the prior computation. The effect of not applying the proration formula in the actual revenue requirement to these amounts would be to remove the effect of the proration formula rather than the required maintaining of these effects. Ruling 4 For this ruling, Taxpayer requests confirmation that in determining the limitation on the amount by which ADFIT balance may reduce rate base the § 168(i)(9)(B) consistency requirement does not require that the averaging conventions applied by Taxpayer to all other elements of rate base (plant, accumulated depreciation, cash, working capital, etc.) be applied to its prorated ADFIT balances. That is, the applicable normalization rules and Treasury regulations do not require Taxpayer to apply both conventions (averaging and proration) serially to changes in ADFIT balances. We agree with Taxpayer that the applicable normalization rules and Treasury regulations do not require Taxpayer to apply both conventions serially to changes in ADFIT balances. The purpose of the Proration Requirement is to take into account for ratemaking purposes the economic fact that changes in ADFIT balances in a future test period will occur over a period of time. When applied to entirely future test periods, the averaging convention should presumptively be treated as having the same purpose as the proration requirement, thereby negating the necessity to apply both conventions serially to changes in ADFIT balances. Ruling 7 For this ruling, Taxpayer requests confirmation that the proration formula may be applied to all actual ADFIT increases or decreases (including to amounts related to vintages of public utility property for which the proration formula was not applied in the first component of the projected revenue requirement as well as to differences between actual and projected ADFIT activity for vintages of public utility property for which the proration formula was applied in the second component of the projected revenue requirement) to determine the actual revenue requirement and the true-up adjustment consistent with the normalization rules. We agree with Taxpayer that the proration formula may be used as an averaging methodology in situations such as those described here. Further, such application does not violate the "consistency rule" described in § 168(i)(9)(B), notwithstanding the use of a different averaging convention (here a five-quarter average) to determine gross plant balances and accumulated book depreciation reflected in actual rate base. Except as expressly provided herein, we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. A copy of this letter must be attached to any income tax return to which it is relevant. The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. This letter is being issued electronically in accordance with Rev.Proc. 2020-29, 2020-21 I.R.B. 859. A paper copy will not be mailed to Taxpayer. Sincerely, Patrick S. Kirwan Branch Chief, Branch 6 (Passthroughs & Special Industries) cc:

Private Letter Ruling Number: 202206014 Internal Revenue Service November 18, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202206014 Release Date: 2/11/2022 Index Number: 2010.04-00, 9100.35-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:B4 PLR-113284-21 Date: November 18, 2021 Dear ********: This letter responds to a letter dated June 21, 2021, submitted on behalf of Decedent's estate, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make an election. Decedent's estate is requesting to make an election under § 2010(c)(5)(A) of the Internal Revenue Code (a "portability" election) to allow a decedent's surviving spouse to take into account that decedent's deceased spousal unused exclusion (DSUE) amount. The information submitted for consideration is summarized below. Decedent died on Date, survived by Spouse. It is represented that based on the value of Decedent's gross estate and taking into account any taxable gifts, Decedent's estate is not required under § 6018(a) to file an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return). It is further represented that there is an unused portion of Decedent's applicable exclusion amount and that a portability election is required to allow Spouse to take into account that amount (the "DSUE" amount)). A portability election is made upon the timely filing of a complete and properly prepared estate tax return, unless the requirements for opting out are satisfied. See § 20.2010-2(a)(2) of the Estate Tax Regulations. For various reasons, an estate tax return was not timely filed and a portability election was not made. After discovery of this, Decedent's estate submitted this request for an extension of time under § 301.9100-3 to make a portability election. LAW AND ANALYSIS Section 2001(a) imposes a tax on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States. Section 2010(a) provides that a credit of the applicable credit amount shall be allowed to the estate of every decedent against the tax imposed by § 2001. Section 2010(c)(1) provides that the applicable credit amount is the amount of the tentative tax that would be determined under § 2001(c) if the amount with respect to which such tentative tax is to be computed were equal to the applicable exclusion amount. On December 17, 2010, Congress amended § 2010(c), effective for estates of decedents dying and gifts made after December 31, 2010, to allow portability of a decedent's unused applicable exclusion amount between spouses. Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, § 303, 124 Stat. 3296, 3302 (2010). Section 2010(c)(2) provides that the applicable exclusion amount is the sum of the basic exclusion amount, and, in the case of a surviving spouse, the DSUE amount. Section 2010(c)(3) provides the basic exclusion amount available to the estate of every decedent, an amount to be adjusted for inflation annually after calendar year 2011. Section 2010(c)(4) defines the DSUE amount to mean the lesser of (A) the basic exclusion amount, or (B) the excess of -- (i) the applicable exclusion amount of the last deceased spouse of the surviving spouse, over (ii) the amount with respect to which the tentative tax is determined under § 2001(b)(1) on the estate of such deceased spouse. Section 2010(c)(5)(A) provides that a DSUE amount may not be taken into account by a surviving spouse under § 2010(c)(2) unless the executor of the estate of the deceased spouse files an estate tax return on which such amount is computed and makes an election on such return that such amount may be so taken into account. The election, once made, shall be irrevocable. No election may be made if such return is filed after the time prescribed by law (including extensions) for filing such return. Section 20.2010-2(a)(1) provides that the due date of an estate tax return required to elect portability is nine months after the decedent's date of death or the last day of the period covered by an extension (if an extension of time for filing has been obtained). Further, an extension of time under § 301.9100-3 to make a portability election may be granted in the case of an estate that is not required to file an estate tax return under § 6018(a), as determined solely based on the value of the gross estate and any adjusted taxable gifts (and without regard to § 20.2010-2(a)). Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I. Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time to make an election whose due date is prescribed by a regulation (and not expressly provided by statute). Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. In this case, based on the representation as to the value of the gross estate and any adjusted taxable gifts, the time for filing the portability election is fixed by the regulations. Therefore, the Commissioner has discretionary authority under § 301.9100-3 to grant an extension of time for Decedent's estate to elect portability, provided Decedent's estate establishes it acted reasonably and in good faith, the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the interests of the government. Information, affidavits, and representations submitted on behalf of Decedent's estate explain the circumstances that resulted in the failure to timely file a valid election. Based solely on the information submitted and the representations made, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Therefore, we grant an extension of time of 120 days from the date of this letter in which to make the portability election. The election should be made by filing a complete and properly prepared Form 706 and a copy of this letter, within 120 days from the date of this letter, with the Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999. For purposes of electing portability, a Form 706 filed by Decedent's estate within 120 days from the date of this letter will be considered to be timely filed. If it is later determined that, based on the value of the gross estate and taking into account any taxable gifts, Decedent's estate is required to file an estate tax return pursuant to § 6018(a), the Commissioner is without authority under § 301.9100-3 to grant an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void. See § 20.2010-2(a)(1). We neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. In particular, we express no opinion as to the DSUE amount to be potentially taken into account by Spouse. Any claimed DSUE amount will be included in the applicable exclusion amount of Spouse only to the extent that Spouse can substantiate such amount and will be subject to determination by the Director's office upon audit of relevant Federal gift or estate tax returns. See § 20.2010-3(c)(1) and (d). The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, we have sent a copy of this letter to your authorized representatives. Sincerely, Associate Chief Counsel Passthroughs & Special Industries Karlene Lesho By: ______________________________ Karlene Lesho Senior Technician Reviewer, Branch 4 Office of the Associate Chief Counsel (Passthroughs & Special Industries) Enclosure (1) Copy for § 6110 purposes cc:

Internal Revenue Service - Information Release IR-2020-34 IRS increases visits to high-income taxpayers who haven't filed tax returns February 19, 2020 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS increases visits to high-income taxpayers who haven't filed tax returns IR-2020-34, February 19, 2020 WASHINGTON -- As part of a larger effort to ensure compliance and fairness, the Internal Revenue Service today announced that it will step up efforts to visit high-income taxpayers who in prior years have failed to timely file one or more of their tax returns. Following the recent and ongoing hiring of additional enforcement personnel, IRS revenue officers across the country will increase face-to-face visits with high-income taxpayers who haven't filed tax returns in 2018 or previous years. These visits are primarily aimed at informing these taxpayers of their tax filing and paying obligations and bringing these taxpayers into compliance. "The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes," said Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. "These visits focusing on high-income taxpayers will be taking place across the country. We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later." For the current tax season, the IRS reminds taxpayers that everyone should file their 2019 tax return by the April 15 filing deadline regardless of whether they can pay in full. Six-month filing extensions are also available, although that does not extend the April deadline for paying any taxes owed. "Taxpayers having delinquent filing or payment obligations should consult a competent tax advisor before waiting to be contacted by an IRS revenue officer, Mamo said. "It is always worthwhile to take advantage of various methods of getting back into filing or payment compliance before being personally contacted by the IRS." For the new visits taking place, high-income non-filers taxpayers are those who generally received income in excess of $100,000 during a tax year and did not file a tax return with the IRS. Taxpayers who exercise their best efforts in filing their tax returns and paying or entering into agreements to pay their taxes deserve to know that the IRS is aggressively pursuing others who have failed to satisfy their filing and payment obligations. During the visits, IRS revenue officers will share information and work with the taxpayer to hopefully resolve the tax issue. How to pay There are many payment options for people having trouble paying their tax bill. Payment plans can be set up quickly online. Once returns are filed or an assessment occurs, there are various online payment options available at IRS.gov, including direct pay through a bank account or using a debit or credit card. Other ways to pay include the Electronic Federal Tax Payment System (best option for businesses or large payments; enrollment required), Electronic Funds Withdrawal (using during e-filing), same-day wire (bank fees may apply), check or money order or cash (at a participating retail partner). Those who can't pay immediately may be able to meet their tax obligation in monthly installments by applying for a payment plan (including installment agreements and those who owe less than $50,000), they can find out if they qualify for an offer in compromise (a way to settle their tax debt for less than the full amount), or request that the IRS temporarily delay collection until their financial situation improves. For those who refuse to pay, the IRS has a number of options available under the law, ranging from a series of civil enforcement actions and, when appropriate, pursuing criminal cases against taxpayers. IRS compliance personnel are also now working more closely with IRS criminal investigators on priority compliance issues, including high-income cases. "These compliance visits underscore the importance of people filing their taxes this April, even if they can't pay the full amount of tax due," said Hank Kea, Director of Field Collection Operations, Small Business/Self Employed Division. "Not filing because you don't believe you can pay at the time of filing makes the problem worse, as interest and penalties mount over time. We have many payment options available on IRS.gov to help taxpayers. It's better to work on these issues up front rather than ignoring it and ultimately getting to the point of the IRS taking more serious action. Our continued use of ever-changing technologies, coupled with additional enforcement personnel, would suggest that waiting is not a viable option for delinquent taxpayers." What's a revenue officer's job? Revenue officers are trained IRS civil enforcement employees who work to resolve compliance issues, such as missing returns or taxes owed. Revenue officers conduct interviews to gather financial information and provide taxpayers with the necessary steps to become and remain compliant with the law. When necessary, they will take the appropriate enforcement actions to collect the amount owed, following the law while respecting taxpayer rights and following the law. Don't be confused: Visits are not a scam For this new initiative, these high-income taxpayers have typically received numerous letters from the IRS over an extended period of time, so they generally realize they have a tax issue. Revenue officer visits shouldn't be confused with scams. Here's what to look for: - While most IRS revenue officer visits to a taxpayer are unannounced, they will always provide two forms of official credentials, both include a serial number and photo of the IRS employee. Taxpayers have the right to see each of these credentials. - A legitimate revenue officer helps taxpayers understand and meet their tax obligations. The officer will explain the liability to the taxpayer, along with the consequences of failing to comply with the law. The IRS employee will not make threats nor demand an unusual form of payment for a nonexistent liability. - Visits by revenue officers generally occur after numerous contacts by mail about an existing tax issue; taxpayers should be aware they have a tax issue when these visits occur. - If someone has an outstanding federal tax debt, the visiting officer will request payment but will provide a range of options, including paying by check written to the United States Treasury. - More information on identifying legitimate IRS representatives and how to report scams can be found at IRS.gov. Related Items: - FS-2020-02, IRS increasing focus on taxpayers who have not filed tax return

Private Letter Ruling Number: 202117011 Internal Revenue Service January 28, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202117011 Release Date: 4/30/2021 Index Number: 1502.21-00, 9100.22-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:CORP:5 PLR-120485-20 Date: January 28, 2021 Dear *******: This letter responds to a letter dated September 18, 2020, submitted on behalf of Parent, requesting an extension of time under §§301.9100-1 through 301.9100-3 of the Procedure and Administration Regulations to make an election. The extension is being requested for Parent to make an election under §1.1502-21(b)(3)(i) of the Income Tax Regulations to relinquish the entire carryback period for the consolidated net operating loss ("CNOL") for the consolidated group of which Parent is the common parent (the "Parent Group") for the tax year ending Date 1 (the "Election"). The material information submitted for consideration is summarized below. Parent Group incurred a CNOL in the tax year ending Date 1. Parent intended to relinquish the carryback period for its consolidated group's CNOL on its tax return for the tax year ending Date 1. All returns for Parent Group were filed consistent with a valid Election having been made. However, for various reasons, a valid Election was not filed. After the date that the Election was due, it was discovered that a valid Election was not filed. Subsequently, this request was submitted for an extension of time to file a valid Election. Parent has represented that the Parent Group has not carried back, and will not carry back, any portion of the CNOL for the tax year ending Date 1 to a prior consolidated return year of the Parent Group. Appropriate representations have been received from Parent indicating that no portion of the CNOL for the tax year ending on Date 1 has been or will be carried back to a prior separate return year (within the meaning of §1.1502-1(e)) of any member of the Parent Group. Parent also has represented that it is not seeking to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662. Section 1.1502-21(b)(3)(i) provides that a consolidated group may make an irrevocable election under section 172(b)(3) to relinquish the entire carryback period with respect to a CNOL for any consolidated return year. The election is made in a separate statement entitled "THIS IS AN ELECTION UNDER § 1.1502-21(b)(3)(i) TO WAIVE THE ENTIRE CARRYBACK PERIOD PURSUANT TO SECTION 172(b)(3) FOR THE [insert consolidated return year] CNOLs OF THE CONSOLIDATED GROUP OF WHICH [insert name and employer identification number of common parent] IS THE COMMON PARENT." Section 1.1502-21(b)(3)(i) also provides that the statement must be filed with the group's income tax return for the consolidated return year in which the loss arises. Under §301.9100-1(c), the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I. Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of §301.9100-2. Requests for relief under §301.9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. Section 301.9100-3(a). In this case, the time for filing the Election is fixed by regulations (i.e., §1.1502-21(b)(3)(i)). Therefore, the Commissioner has discretionary authority under §301.9100-1 to grant an extension of time for Parent to file the Election, provided Parent acted reasonably and in good faith, the requirements of §§301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the interests of the government. Information, affidavits, and representations submitted Parent, Company Officials, and Tax Professional explain the circumstances that resulted in the failure to timely file a valid Election. The information establishes that Parent reasonably relied on a qualified tax professional who failed to make, or advise Parent to make, the Election, and that the request for relief was filed before the failure to timely make the Election was discovered by the Internal Revenue Service. See §301.9100-3(b)(1)(i), (v). Based on the facts and information submitted, including the representations made, we conclude that Parent has shown it acted reasonably and in good faith, the requirements of §§301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the interests of the government. Accordingly, an extension of time is granted under §301.9100-1, until 90 days from the date on this letter, for Parent to file the election with respect to the relinquishment of the entire carryback period for the CNOL for the tax year ending Date 1, as described above. The above extension of time is conditioned on the taxpayers' (Parent and the members of the Parent Group) tax liability (if any) being not lower, in the aggregate, for all years to which the Election applies, than it would have been if the Election had been timely made (taking into account the time value of money). No opinion is expressed as to the taxpayers' tax liability for the years involved. A determination thereof will be made by the Director's office upon audit of the federal income tax returns involved. Parent must file the Election in accordance with §1.1502-21(b)(3)(i). The Parent Group's tax return for the tax year ending Date 1 must be amended to attach the election statement required by §1.1502-21(b)(3)(i). A copy of this letter must be attached to the election statement. Alternatively, if the Parent Group files its returns electronically, Parent may satisfy this latter requirement by attaching a statement to the return that provides the date on, and control number (PLR-120485-20) of, this letter ruling. We express no opinion as to the tax effects or consequences of filing the Election late under the provisions of any other section of the Code and regulations, or as to the tax treatment of any conditions existing at the time of, or resulting from, filing the Election late that are not specifically set forth in the above ruling. For purposes of granting relief under §301.9100-1, we have relied on certain statements and representations made by Parent, Company Officials, and Tax Professional. However, the Director should verify all essential facts. Moreover, notwithstanding that an extension is granted under §301.9100-1 to file the Election, penalties and interest that would otherwise be applicable, if any, continue to apply. This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent. Pursuant to the power of attorney on file with this office, a copy of this letter is being sent to your authorized representative. Sincerely, Thomas I. Russell Chief, Branch 1 Office of Associate Chief Counsel (Corporate) cc:

Treasury Decision 9965 Internal Revenue Service 2022-37 I.R.B. 192 26 CFR 54.9816-6: Methodology for calculating QPA; 26 CFR 54.9816-8: IDR process; 26 CFR 54.9817-2: IDR process for air ambulance services T.D. 9965 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 54 Requirements Related to Surprise Billing AGENCY: Internal Revenue Service, Department of the Treasury; Employee Benefits Security Administration, Department of Labor; Centers for Medicare & Medicaid Services, Department of Health and Human Services. ACTION: Final rules. SUMMARY: This document includes final rules under the No Surprises Act, which was enacted as part of the Consolidated Appropriations Act, 2021 (CAA). The document finalizes certain disclosure requirements relating to information that group health plans, and health insurance issuers offering group or individual health insurance coverage, must share about the qualifying payment amount (QPA) under the interim final rules issued in July 2021, titled Requirements Related to Surprise Billing; Part I (July 2021 interim final rules). Additionally, this document finalizes select provisions under the October 2021 interim final rules, titled Requirements Related to Surprise Billing; Part II (October 2021 interim final rules), to address certain requirements related to consideration of information when a certified independent dispute resolution (IDR) entity makes a payment determination under the Federal IDR process. DATES: Effective date: These final rules are effective on October 25, 2022. Applicability date: See Section III of the SUPPLEMENTARY INFORMATION section for information on the applicability dates. FOR FURTHER INFORMATION CONTACT: Shira McKinlay, Internal Revenue Service, Department of the Treasury, at 202-317-5500; Elizabeth Schumacher or David Sydlik, Employee Benefits Security Administration, Department of Labor, at 202-693-8335; Deborah Bryant, Centers for Medicare & Medicaid Services, Department of Health and Human Services, at 301-492-4293; Lindsey Murtagh, Centers for Medicare & Medicaid Services, Department of Health and Human Services, at 301-492-4106. Customer Service Information: Individuals interested in obtaining information from the Department of Labor (DOL) concerning employment-based health coverage laws may call the Employee Benefits Security Administration (EBSA) Toll-Free Hotline at 1-866-444-EBSA (3272) or visit the DOL's website (www.dol.gov/agencies/ebsa). In addition, information from the Department of Health and Human Services (HHS) on private health insurance coverage, coverage provided by non-Federal governmental group health plans, and requirements that apply to health care providers, health care facilities, and providers of air ambulance services can be found on the Centers for Medicare & Medicaid Services (CMS) website (www.cms.gov/cciio), and information on surprise medical bills can be found at www.cms.gov/nosurprises. SUPPLEMENTARY INFORMATION: I. Background A. Preventing Surprise Medical Bills under the CAA On December 27, 2020, the CAA, which includes the No Surprises Act, was enacted. 1 The No Surprises Act provides Federal protections against surprise billing by limiting out-of-network cost sharing and prohibiting "balance billing," in many of the circumstances in which surprise bills arise most frequently. Balance billing refers to the practice of out-of-network providers billing patients for the difference between: (1) the provider's billed charges, and (2) the amount collected from the plan or issuer plus the amount collected from the patient in the form of cost sharing (such as a copayment, coinsurance, or amounts paid toward a deductible). In particular, the No Surprises Act added new provisions applicable to group health plans and health insurance issuers offering group or individual health insurance coverage to Subchapter B of chapter 100 of the Internal Revenue Code (Code), Part 7 of the Employee Retirement Income Security Act (ERISA), and Part D of title XXVII of the Public Health Service Act (PHS Act). Section 102 of the No Surprises Act added section 9816 of the Code, section 716 of ERISA, and section 2799A-1 of the PHS Act, 2 which contain limitations on cost sharing and requirements regarding the timing of initial payments and notices of denial of payment for emergency services furnished by nonparticipating providers and emergency facilities, and for non-emergency services furnished by nonparticipating providers with respect to patient visits to participating health care facilities, defined as hospitals, hospital outpatient departments, critical access hospitals, and ambulatory surgical centers. Section 103 of the No Surprises Act amended section 9816 of the Code, section 716 of ERISA, and section 2799A-1 of the PHS Act to establish a Federal IDR process that allows plans and issuers and nonparticipating providers and facilities to resolve disputes regarding out-of-network rates. Section 105 of the No Surprises Act added section 9817 of the Code, section 717 of ERISA, and section 2799A-2 of the PHS Act. These sections contain limitations on cost sharing and requirements for the timing of initial payments and notices of denial of payment for air ambulance services furnished by nonparticipating providers of air ambulance services, and allow plans and issuers and nonparticipating providers of air ambulance services to access the Federal IDR process described in section 9816 of the Code, section 716 of ERISA, and section 2799A-1 of the PHS Act. ******** 1 Pub. L. 116-260 (December 27, 2020). 2 Section 102(d)(1) of the No Surprises Act amended the Federal Employees Health Benefits Act, 5 U.S.C. 8901 et seq., by adding a new subsection (p) to 5 U.S.C. 8902. Under this new provision, each Federal Employees Health Benefits (FEHB) Program contract must require a carrier to comply with requirements described in sections 9816 and 9817 of the Code, sections 716 and 717 of ERISA, and sections 2799A-1 and 2799A-2 of the PHS Act (as applicable) in the same manner as these provisions apply with respect to a group health plan or health insurance issuer offering group or individual health insurance coverage. ******** The No Surprises Act provisions that apply to health care providers, facilities, and providers of air ambulance services, such as prohibitions on balance billing for certain items and services and requirements related to disclosures about balance billing protections, were added to title XXVII of the PHS Act in a new part E. The Departments of the Treasury, Labor, and Health and Human Services (the Departments) previously issued interim final rules implementing provisions of sections 9816 and 9817 of the Code, sections 716 and 717 of ERISA, and sections 2799A-1 and 2799A-2 of the PHS Act to protect consumers from surprise medical bills for emergency services, non-emergency services furnished by nonparticipating providers with respect to patient visits to participating facilities in certain circumstances, and air ambulance services furnished by nonparticipating providers of air ambulance services. 3 The interim final rules also implement provisions requiring the Departments to create a Federal IDR process to determine payment amounts when there is a dispute between payers and providers or facilities over the out-of-network rate due for emergency services, non-emergency services furnished by nonparticipating providers with respect to patient visits to participating facilities in certain circumstances, and air ambulance services furnished by nonparticipating providers of air ambulance services. 4 To implement these provisions, the Departments published in the Federal Register the July 2021 interim final rules on July 13, 2021 (86 FR 36872), and the October 2021 interim final rules on October 7, 2021 (86 FR 55980). 5 The July 2021 interim final rules and October 2021 interim final rules generally apply to group health plans and health insurance issuers offering group or individual health insurance coverage (including grandfathered health plans) with respect to plan years (in the individual market, policy years) beginning on or after January 1, 2022; and to health care providers and facilities, and providers of air ambulance services with respect to items and services provided during plan years (in the individual market, policy years) beginning on or after January 1, 2022. 6 ******** 3 86 FR 36872 (July 13, 2021) and 86 FR 55980 (October 7, 2021). 4 The Federal IDR process does not apply if an All-Payer Model Agreement under section 1115A of the Social Security Act or a specified State law applies. 5 The interim final rules also include interim final regulations under 5 U.S.C. 8902(p) issued by the Office of Personnel Management that specify how certain provisions of the No Surprises Act apply to health benefit plans offered by carriers under the Federal Employees Health Benefits Act. 6 86 FR 36872 (July 13, 2021) and 86 FR 55980 (October 7, 2021). These provisions apply to carriers in the Federal Employees Health Benefits Program with respect to contract years beginning on or after January 1, 2022. The disclosure requirements at 45 CFR 149.430 regarding patient protections against balance billing are applicable as of January 1, 2022. ******** B. July 2021 Interim Final Rules The July 2021 interim final rules implement sections 9816(a)-(b) and 9817(a) of the Code, sections 716(a)-(b) and 717(a) of ERISA, and sections 2799A-1(a)-(b), 2799A-2(a), 2799A-7, 2799B-1, 2799B-2, 2799B-3, and 2799B-5 of the PHS Act. Among other requirements, the July 2021 interim final rules generally prohibit balance billing for items and services subject to the requirements in those interim final rules. 7 The July 2021 interim final rules also specify that consumer cost-sharing amounts for emergency services furnished by nonparticipating providers or facilities, and for non-emergency services furnished by nonparticipating providers with respect to patient visits to certain participating facilities, must be calculated based on the "recognized amount," which is defined as one of the following amounts: (1) an amount determined by an applicable All-Payer Model Agreement under section 1115A of the Social Security Act; (2) if there is no such applicable All-Payer Model Agreement, an amount determined by a specified State law; or (3) if there is no such applicable All-Payer Model Agreement or specified State law, the lesser of the billed charge or the QPA. The July 2021 interim final rules establish the methodology for calculating the QPA, which in most circumstances will be the plan's or issuer's median contracted rate that was in effect for the particular item or service on January 31, 2019, increased for inflation. Cost-sharing amounts for air ambulance services provided by nonparticipating providers of air ambulance services must be the same as the cost-sharing amounts that would apply if the services were provided by a participating provider of air ambulance services, and these cost-sharing amounts must be calculated using the lesser of the billed charge or the QPA. ******** 7 45 CFR 149.410(a), 149.420(a), and 149.440(a). ******** The No Surprises Act directs the Departments to specify the information that a plan or issuer must share with a nonparticipating provider, nonparticipating emergency facility, or nonparticipating provider of air ambulance services, as applicable, after determining the QPA. Therefore, 26 CFR 54.9816-6T(d), 29 CFR 2590.716-6(d), and 45 CFR 149.140(d) require that plans and issuers make certain disclosures about the QPA with each initial payment or notice of denial of payment, and that plans and issuers provide certain additional information upon request of the provider, facility, or provider of air ambulance services. This information must be provided in writing, either on paper or electronically, to a nonparticipating provider, facility, or provider of air ambulance services, as applicable, when the QPA serves as the recognized amount. With an initial payment or notice of denial of payment, a plan or issuer must provide the QPA for each item or service involved as well as a statement certifying that, based on the determination of the plan or issuer: (1) the QPA applies for purposes of the recognized amount (or, in the case of air ambulance services, for calculating the participant's, beneficiary's, or enrollee's cost sharing), and (2) each QPA shared with the provider, facility, or provider of air ambulance services was determined in compliance with the methodology outlined in the July 2021 interim final rules. A plan or issuer is also required to provide a statement that, if the provider, facility, or provider of air ambulance services wishes to initiate a 30-day open negotiation period for purposes of determining the amount of total payment, the provider, facility, or provider of air ambulance services may contact the appropriate person or office to initiate open negotiation, and that if the 30-day open negotiation period does not result in an agreement on the payment amount, the provider, facility, or provider of air ambulance services typically may initiate the Federal IDR process within 4 days after the end of the open negotiation period. The Departments note that these time frames are measured in business days, and plans and issuers should reflect this in the statement. The plan or issuer must provide contact information, including a telephone number and email address, for the appropriate office or person for the provider, facility, or provider of air ambulance services to contact to initiate open negotiation for purposes of determining an amount of payment (with the amount including cost sharing) for the item or service. It has come to the Departments' attention that some plans and issuers are requiring nonparticipating providers, nonparticipating emergency facilities, and nonparticipating providers of air ambulance services to utilize plan- or issuer-owned web systems to initiate an open negotiation period. As discussed earlier, the July 2021 interim final rules require plans and issuers to provide a telephone number and email address for providers, facilities, and providers of air ambulance services to initiate the open negotiation period. When a party to a payment dispute chooses to initiate the open negotiation period, the October 2021 interim final rules specify that the party must use the standard notice of initiation of open negotiation issued by the Departments and may satisfy the requirement to provide notice to the opposing party by sending the notice electronically if the party sending the notice has a good faith belief that the electronic method is readily accessible to the other party and the notice is also provided free of charge in paper form upon request. 8 For example, it is reasonable for a provider, facility, or provider of air ambulance services to have a good faith belief that an email address provided by a plan or issuer with the initial payment or notice of denial of payment is readily accessible to the plan or issuer. Thus, if a provider, facility, or provider of air ambulance services sends the standard notice of initiation of open negotiation to the email address identified by the plan or issuer in the notice of denial of payment or initial payment, that transmission would satisfy the regulatory requirement to provide notice to the opposing party (so long as the provider, facility, or provider of air ambulance services also sends the notice free of charge in paper form upon request). 9 Although plans and issuers may encourage the use of an online portal for nonparticipating providers, facilities, and providers of air ambulance services to submit the information necessary to initiate the open negotiation period, or may seek additional information to inform good faith open negotiations, such as through use of a supplemental open negotiation form, the July 2021 interim final rules require plans and issuers to provide a telephone number and email address for providers, facilities, and providers of air ambulance services to initiate the open negotiation period, and the October 2021 interim final rules permit a party to initiate the open negotiation period by sending the standard notice of initiation electronically to the email address identified in the notice of denial of payment or initial payment. Accordingly, a plan or issuer cannot refuse to accept the standard notice of initiation of open negotiation from a provider, facility, or provider of air ambulance services because the provider or facility did not utilize the plan's or issuer's online portal when the standard notice of initiation of open negotiation is provided in a manner consistent with the requirements of the July 2021 and October 2021 interim final rules. ******** 8 26 CFR 54.9816-8T(b)(2)(iii)(B), 29 CFR 2590.716-8(b)(2)(iii)(B), and 45 CFR 149.510(b)(2)(iii)(B). 9 86 FR 55980, 55990 (Oct. 7, 2021). ******** In addition, upon request by the provider, facility, or provider of air ambulance services, a plan or issuer must provide, in a timely manner, information about whether the QPA includes contracted rates that were not set on a fee-for-service basis for the specific items and services and whether the QPA for those items and services was determined using underlying fee schedule rates or a derived amount. 10 If an eligible database was used to determine the QPA, the plan or issuer must provide information to identify which database was used. Similarly, if a related service code was used to determine the QPA for an item or service billed under a new service code, the plan or issuer must provide information to identify which related service code was used. ******** 10 26 CFR 54.9816-6T(d)(2)(i), 29 CFR 2590.716-6(d)(2)(i), and 45 CFR 149.140(d)(2)(i). Under the July 2021 interim final rules, plans and issuers are required to calculate the QPA using underlying fee schedule rates or derived amounts when the plan or issuer has sufficient information to calculate the median of its contracted rates, but the payments under the contractual agreements are not on a fee-for-service basis (such as bundled or capitation payments). 26 CFR 54.9816-6T(b)(2)(iii), 29 CFR 2590.716-6(b)(2)(iii), 45 CFR 149.140(b)(2)(iii). Plans and issuers are not otherwise permitted to use underlying fee schedule rates or derived amounts to calculate the QPA. ******** Finally, upon request by the provider, facility, or provider of air ambulance services, the plan or issuer must provide a statement, if applicable, that the plan's or issuer's contracted rates include risk-sharing, bonus, penalty, or other incentive-based or retrospective payments or payment adjustments that were excluded for purposes of calculating the QPA for the items and services involved. C. October 2021 Interim Final Rules The October 2021 interim final rules build on the July 2021 interim final rules and implement the Federal IDR process under sections 9816(c) and 9817(b) of the Code, sections 716(c) and 717(b) of ERISA, and sections 2799A-1(c) and 2799A-2(b) of the PHS Act. The October 2021 interim final rules provide for a Federal IDR process that group health plans and health insurance issuers offering group or individual health insurance coverage and nonparticipating providers, facilities, and providers of air ambulance services may use to determine the out-of-network rate for items and services that are emergency services, non-emergency services furnished by nonparticipating providers with respect to patient visits to participating facilities, and air ambulance services furnished by nonparticipating providers of air ambulance services, where an All-Payer Model Agreement or specified State law does not apply. The October 2021 interim final rules generally specify rules to implement the Federal IDR process, including the requirements governing the open negotiation period; the initiation of the Federal IDR process; the Federal IDR process following initiation, including the selection of a certified IDR entity, submission of offers, payment determinations, and written decisions; costs of the Federal IDR process; certification of IDR entities, including the denial or revocation of certification of an IDR entity; and the collection of information related to the Federal IDR process from certified IDR entities to satisfy reporting requirements under the statute. The October 2021 interim final rules provide that, not later than 30 business days after selection of a certified IDR entity, the certified IDR entity must select one of the offers submitted by the plan or issuer and the provider, facility, or provider of air ambulance services to be the out-of-network rate for the qualified IDR item or service. 11 For each qualified IDR item or service, the amount by which this out-of-network rate exceeds the cost-sharing amount for the qualified IDR item or service is the total plan or coverage payment (with any initial payment made by the plan or issuer counted towards the total plan or coverage payment). ******** 11 Qualified IDR item or service has the same meaning as set forth in 26 CFR 54.9816-8T(a)(2)(xii), 29 CFR 2590.716-8(a)(2)(xii), and 45 CFR 149.510(a)(2)(xii). ******** The October 2021 interim final rules state that, in selecting the offer, the certified IDR entity must consider the QPA for the applicable year for the same or similar item or service, or, in the case of batched or bundled items or services, the QPA or QPAs for the applicable year. The preamble to the July 2021 interim final rules provides that if multiple items and services are reimbursed under non-fee-for-service contractual arrangements, such as a bundled or capitated arrangement, and are billed for under a single billing code, plans and issuers must calculate a QPA for each item or service using the underlying fee schedule rates for the relevant items and services if the underlying fee schedule rates are available. 12 If there is no underlying fee schedule rate for an item or service, the plan or issuer must calculate the QPA using a derived amount. 13 In addition, the October 2021 interim final rules state that the certified IDR entity must also consider information requested by, or submitted by the parties to, the certified IDR entity relating to the offer, to the extent a party provides credible information that is not otherwise prohibited under 26 CFR 54.9816-8T(c)(4)(v), 29 CFR 2590.716-8(c)(4)(v), and 45 CFR 149.510(c)(4)(v). ******** 12 86 FR 36893 (July 13, 2021). 13 The Departments also specify an alternative method to calculate the QPA when there is insufficient information based on contracted rates. See 26 CFR 54.9816-6T(c)(2)-(4), 29 CFR 2590.716-6(c)(2)-(4), and 45 CFR 149.140(c)(2)-(4). ******** The October 2021 interim final rules also require the parties to provide certain information to the certified IDR entity, including practice size and practice specialty or type; geographic region used to calculate the QPA; the QPA for the applicable year for the same or similar item or service as the qualified IDR item or service; and, if applicable, information showing that the Federal IDR process is inapplicable to the dispute. In addition, prior to vacatur in the United States District Court for the Eastern District of Texas, in the cases of Texas Medical Association, et al. v. United States Department of Health and Human Services, et al., Case No. 6:21-cv-425 (E.D. Tex.) ( Texas Medical Association ) (February 23, 2022) and LifeNet, Inc. v. United States Department of Health and Human Services, et al., Case No. 6:22-cv-162 (E.D. Tex.) ( LifeNet ) (July 26, 2022), these interim final rules specified that the certified IDR entity may request additional information relating to the parties' offers and must consider credible additional information submitted, as further described in the next paragraph, that relates to the parties' offers and the qualified IDR item or service that is the subject of a payment determination to determine if the information submitted clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate (unless the information relates to a factor that the certified IDR entity is prohibited from considering). For this purpose, the October 2021 interim final rules specify that credible information is information that upon critical analysis is worthy of belief and is trustworthy. 14 Prior to vacatur in Texas Medical Association, the term "material difference" was defined to mean a substantial likelihood that a reasonable person with the training and qualifications of a certified IDR entity making a payment determination would consider the information important in determining the out-of-network rate and view the information as showing that the QPA is not the appropriate out-of-network rate. 15 ******** 14 26 CFR 54.9816-8T(a)(2)(v), 29 CFR 2590.716-8(a)(2)(v), and 45 CFR 149.510(a)(2)(v). 15 26 CFR 54.9816-8T(a)(2)(viii), 29 CFR 2590.716-8(a)(2)(viii), and 45 CFR 149.510(a)(2)(viii). ******** For items and services that are not air ambulance services, in determining which offer to select, the certified IDR entity must consider the following additional information under certain circumstances: 1. The level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (such as those endorsed by the consensus-based entity authorized in section 1890 of the Social Security Act). 2. The market share held by the provider or facility or that of the plan or issuer in the geographic region in which the qualified IDR item or service was provided. 3. The acuity of the participant, beneficiary, or enrollee who received the qualified IDR item or service, or the complexity of furnishing the qualified IDR item or service to the participant, beneficiary, or enrollee. 4. The teaching status, case mix, and scope of services of the facility that furnished the qualified IDR item or service, if applicable. 5. Demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility and the plan or issuer during the previous 4 plan years. Under the October 2021 interim final rules, the certified IDR entity may only consider this information submitted by the parties if the information is credible and relates to the offer submitted by either party. 16 The certified IDR entity may not consider any information submitted on the prohibited factors, including usual and customary charges (including payment or reimbursement rates expressed as a proportion of usual and customary charges); the amount that would have been billed if the provider, facility, or provider of air ambulance services were not subject to a prohibition on balance billing; and payment or reimbursement rates payable by a public payor, in whole or in part, for items and services furnished by the providers, facilities, or providers of air ambulance services. 17 ******** 16 This requirement was vacated by the District Court in Texas Medical Association. 17 26 CFR 54.9816-8T(c)(4)(v), 29 CFR 2590.716-8(c)(4)(v), and 45 CFR 149.510(c)(4)(v). For this purpose, payment or reimbursement rates payable by a public payor include payments or reimbursement rates under the Medicare program under title XVIII of the Social Security Act, the Medicaid program under title XIX of the Social Security Act, the Children's Health Insurance Program under title XXI of the Social Security Act, the TRICARE program under chapter 55 of title 10, United States Code, chapter 17 of title 38, United States Code, and payment rates for demonstration projects under section 1115 of the Social Security Act. ******** The October 2021 interim final rules also provided, prior to vacatur in Texas Medical Association and LifeNet, that after considering the QPA, additional information requested by the certified IDR entity from the parties, and all of the credible information submitted by the parties that is consistent with the requirements and is not prohibited information, the certified IDR entity must select the offer closest to the QPA, unless the certified IDR entity determined that the credible information submitted by the parties clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate, or if the offers are equally distant from the QPA but in opposing directions. In those cases, the October 2021 interim final rules required the certified IDR entity to select the offer that the certified IDR entity determines best represents the value of the item or service, which could be either party's offer. Not later than 30 business days after the selection of the certified IDR entity, the certified IDR entity must notify parties to the dispute of the selection of the offer and provide a written decision, 18 which must be submitted to the parties and the Departments through the Federal IDR portal. 19 The October 2021 interim final rules also provided that if the certified IDR entity did not choose the offer closest to the QPA, this written decision must include an explanation of the credible information that the certified IDR entity determined demonstrated that the QPA was materially different from the appropriate out-of-network rate. ******** 18 26 CFR 54.9816-8T(c)(4)(vi)(A), 29 CFR 2590.716-8(c)(4)(vi)(A), and 45 CFR 149.510(c)(4)(vi)(A). 19 The Federal IDR portal is available at https://www.nsa-idr.cms.gov and must be used throughout the Federal IDR process to maximize efficiency and reduce burden. ******** The October 2021 interim final rules also implemented the Federal IDR process for qualified IDR services that are air ambulance services. The process for a certified IDR entity to select an offer in a dispute related to qualified IDR services that are air ambulance services is essentially the same as that for other qualified IDR items or services. As with disputes related to qualified IDR items or services that are not air ambulance services, in determining which offer to select, the No Surprises Act and October 2021 interim final rules provide that the certified IDR entity must consider the QPA for the applicable year for the qualified IDR services that are air ambulance services. The No Surprises Act and the October 2021 interim final rules likewise specified additional circumstances, in addition to the QPA, that the certified IDR entity must consider in making the payment determination for air ambulance services. With respect to air ambulance services, the certified IDR entity is required to consider, to the extent the parties provide credible information, a different set of additional circumstances: 1. The quality and outcomes measurements of the provider that furnished the services. 2. The acuity of the condition of the participant, beneficiary, or enrollee receiving the service, or the complexity of furnishing the service to the participant, beneficiary, or enrollee. 3. The training, experience, and quality of the medical personnel that furnished the air ambulance services. 4. Ambulance vehicle type, including the clinical capability level of the vehicle. 5. Population density of the point of pick-up (as defined in 42 CFR 414.605) for the air ambulance (such as urban, suburban, rural, or frontier). 6. Demonstrations of good faith efforts (or lack thereof) made by the nonparticipating provider of air ambulance services or the plan or issuer to enter into network agreements with each other and, if applicable, contracted rates between the provider of air ambulance services and the plan or issuer during the previous 4 plan years. As with qualified IDR items or services that are not air ambulance services, the October 2021 interim final rules provide that after considering the QPA, additional information requested by the certified IDR entity from the parties, and all of the credible information submitted by the parties that is consistent with the requirements and is not prohibited information, the certified IDR entity must select the offer closest to the QPA, unless the certified IDR entity determined that the credible information submitted by the parties clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate, or if the offers are equally distant from the QPA but in opposing directions. In those cases, the October 2021 interim final rules require the certified IDR entity to select the offer that the certified IDR entity determined best represents the value of the item or service, which could be either party's offer. D. Public Comments Received in Response to the July 2021 and October 2021 Interim Final Rules In response to the July 2021 and October 2021 interim final rules, the Departments received thousands of comments on many different aspects of the rules. In particular, the Departments received many comments related to a clarification in the preamble to the October 2021 interim final rules 20 stating that the July 2021 interim final rules do not require the plan or issuer to calculate the participant's, beneficiary's, or enrollee's cost sharing using the QPA for the service code submitted by the provider or facility, and that instead the plan or issuer could calculate the participant's, beneficiary's, or enrollee's cost sharing using the QPA for a downcoded service code that the plan or issuer determined was more appropriate. Many of these comments addressed the information required by the July 2021 interim final rules that must be shared about the QPA, the importance of this disclosure, and how additional disclosures related to the QPA would be useful in the context of the Federal IDR process, particularly when the QPA is based on a service code or modifier that is different than the one the provider or facility billed. The Departments also received many comments related to the payment determination standards under the Federal IDR process, including the provisions that govern the certified IDR entity's consideration of the enumerated factors. These final rules address only the provisions related to these comments, and they make changes in light of the decisions in Texas Medical Association and LifeNet. The Departments intend to address comments related to other provisions of the July 2021 and October 2021 interim final rules, including comments received in response to the July 2021 interim final rules related to the disclosure requirements that are not specifically related to downcoded service codes, at a later date. ******** 20 See 86 FR 55997-98 n.35. ******** 1. QPA Disclosure Requirements With respect to the information that must be shared about the QPA, the Departments received comments on both the July 2021 interim final rules and the October 2021 interim final rules supporting the disclosure requirement and emphasizing the importance of ensuring that the QPA and other information related to the item or service are provided to providers, facilities, and providers of air ambulance services at the time of the initial payment or notice of denial of payment. Many commenters on the July 2021 interim final rules stressed that the methodology to calculate the QPA should be transparent, and that the Departments should expand the range of information that is shared with providers, facilities, and providers of air ambulance services with the QPA. Some commenters felt the degree of disclosure was insufficient, and that it provided too much power and discretion to plans and issuers. Others, however, questioned whether plans, in particular, would be able to obtain the information required under the July 2021 interim final rules, as much of the information may be in the control of vendors or other service providers. In particular, the Departments received comments in response to the July 2021 interim final rules and the October 2021 interim final rules requesting that the disclosures that must be provided with each initial payment or notice of denial of payment include additional information about how the QPA was determined to ensure that providers, facilities, and providers of air ambulance services have sufficient information when the Federal IDR process is used for a payment determination. For example, commenters requested that plans and issuers be required, without a request, to provide information on the number of contracts and the geographic region used to calculate the QPA, whether the QPA is based on downcoding 21 of the billed claim, information about the use of modifiers in calculating the QPA, the types of specialties and subspecialties that have contracted rates included in the data set used to determine the QPA, and whether bonuses and supplemental payments were paid to in-network providers. ******** 21 Downcode is defined in these final rules at 26 CFR 54.9816-6, 29 CFR 2590.716-6, and 45 CFR 149.30, to mean the alteration by a plan or issuer of a service code to another service code, or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower QPA than the service code or modifier billed by the provider, facility, or provider of air ambulance services. ******** The manner in which items and services are coded, including the concept of downcoding claims was reflected in both the July 2021 interim final rules and the October 2021 interim final rules. The preamble to the July 2021 interim final rules noted that it is important that the QPA methodology account for modifiers that affect payment rates. 22 The preamble to the October 2021 interim final rules noted that the Departments are aware that some plans and issuers review claims and alter the service code or modifier submitted by the provider or facility to another service code or modifier that the plan or issuer determines to be more appropriate (a practice commonly referred to as "downcoding" when the adjustment results in a lower reimbursement, as noted in the preamble to the October 2021 interim final rules). 23 Some commenters expressed concern that plans and issuers may calculate the QPA for a lower level service code (and/or modifier) instead of calculating the QPA for the particular service code or modifier specified in the claim submitted for reimbursement. These commenters stated that it is important for providers and facilities to know whether the plan or issuer has downcoded a particular claim that is subject to the balance billing protections in the No Surprises Act to ensure that providers receive information that may be relevant to the open negotiation process and that could inform a provider's offer in the Federal IDR process, and which the provider has no other means of ascertaining. Several commenters requested that these final rules require plans and issuers to disclose whether the claim has been downcoded for purposes of computing the QPA and include an explanation of why the claim was downcoded, as well as what the QPA would have been had the claim not been downcoded. ******** 22 The preamble to the July 2021 interim final rules also noted that modifiers affect the payment rate because, for example, modifiers can be used to indicate that the work required to provide a service in a particular instance was significantly greater--or significantly less--than the service typically required. See 86 FR 36891. 23 See 86 FR 55997-98. ******** 2. Payment Determination Standards under the Federal IDR Process With respect to the payment determination standards under the Federal IDR process, the Departments received numerous comments from various stakeholders about the provisions that govern the certified IDR entity's consideration of the statutory factors during the payment determination process. Many commenters supported the approach set forth in the October 2021 interim final rules that directs the certified IDR entity to begin with the QPA as a baseline when making a payment determination, which those commenters highlighted as an important part of the payment determination process that would ensure that the surprise billing provisions lead to lower health care costs for all consumers. Furthermore, some commenters stated that the approach taken in the October 2021 interim final rules is crucial to achieving the budget savings the Congressional Budget Office calculated. Those commenters stated that the approach taken would shield consumers from surprise bills and ever higher insurance premium costs. Commenters stated that the October 2021 interim final rules reinforce the statutory directive that the QPA is the primary consideration for the certified IDR entity. Commenters also stated this use of the QPA represents a reasonable, market-based rate and would encourage greater participation in health plan networks. Commenters noted that there may be circumstances in which the appropriate out-of-network rate would exceed the QPA, and that the October 2021 interim final rules properly provide a pathway for the certified IDR entity to reach that determination when it can be justified. These commenters highlighted that nothing in the October 2021 interim final rules required a certified IDR entity to default to the selection of the QPA or the offer closest to it, but rather that the rule correctly mandated that all credible information be considered. Commenters also stated that it was not unreasonable to require a party to document why the QPA is not the appropriate payment amount. Other commenters raised concerns about giving the same weight to all factors because many of the additional circumstances outlined in the rule, such as patient acuity and complexity of care, could already be incorporated into the QPA calculation. Commenters also noted that the October 2021 interim final rules provide clear guidance to certified IDR entities, which would reduce variability in payment determinations and better position the parties to settle disputes before reaching the Federal IDR process, by giving the parties a better sense of how payment determinations would be made. Other commenters disagreed with the approach under the October 2021 interim final rules and expressed opposition to the emphasis placed on the QPA during the Federal IDR process. Many of these commenters criticized the rule as establishing a rebuttable presumption in favor of the QPA as the out-of-network rate while failing to equip the parties with the necessary information to rebut the presumption. Some commenters stated that the Departments disregarded bipartisan Congressional intent and tipped the scales in the Federal IDR process in favor of health plans and issuers. Commenters expressed concern that emphasizing the QPA ignores the complexity of billing factors, such as modifiers and the practice of bundling multiple health care services under a single billing code, and creates an incentive for the plan or issuer to downcode claims in bad faith. Commenters also expressed concern that the prominence of the QPA could drive down reimbursement rates for providers that are currently reimbursed above the median contracted rate, which they argued could jeopardize network adequacy and viability of physician practices and, commenters claimed, further drive down the QPA. A number of commenters stated that the emphasis given to the QPA would provide an incentive for plans and issuers to prefer out-of-network care, potentially resulting in reduced networks, because, ultimately, plans and issuers would pay the QPA rather than a market rate driven by the particular circumstances of the care delivered. Commenters also asserted that showing that the QPA is materially different from the appropriate out-of-network rate would burden providers and facilities who lack the resources to gather and submit this information during the Federal IDR process. Commenters who disagreed with the approach set forth in the October 2021 interim final rules stated that certain provisions created a rebuttable presumption that the QPA is the appropriate out-of-network rate, and these commenters requested that the Departments remove these provisions, and instead issue rulemaking and guidance that instructs certified IDR entities to consider all permissible and relevant information submitted by the parties. Other commenters suggested alternative approaches for the provisions that govern the certified IDR entity's consideration of the enumerated factors. Some commenters requested that equal weight be given to the QPA and the contracted rates between the provider or facility and plan or issuer during the previous 4 years. Other commenters requested that the Departments replace the QPA as the baseline in the Federal IDR process with a different amount, such as the actual amount paid to a particular out-of-network provider for the same or similar item or service or the median contracted rate based on the amount negotiated under each contract the provider has with a plan or issuer. 3. Payment Determinations for Air Ambulance Services A majority of commenters raised similar points with regard to the Federal IDR process for both non-air ambulance items and services and air ambulance services. Some supported the emphasis on the QPA, while others disagreed with the use of the QPA as the baseline in the Federal IDR process. These commenters raised concerns about the transparency of the calculation of the QPA, and questioned whether the QPA is the appropriate out-of-network rate. Several commenters stressed that the use of the QPA as a baseline also raises concerns that are unique to air ambulance services. Some commenters highlighted the prevalence of single-case agreements for air ambulance services, which the commenters interpreted as including settlements of post-service claims. The commenters asserted that, because of the prevalence of these agreements, the QPA does not adequately reflect market rates for air ambulance services and the QPA would be lower than appropriate. Other commenters argued that hospital-based providers of air ambulance services are subsidized by the related hospitals, so including the rates of these providers in the QPA calculation with the rates of other air ambulance providers would improperly lower the QPA and therefore the use of the QPA as a baseline would not be appropriate. Another commenter argued that the negotiated rates of the few in-network providers for air ambulance services tend to be inflated by their disproportionately large market power, leading to artificially high air ambulance rates and an inflated QPA value. These commenters proposed that the rules should direct the certified IDR entities to take into account market concentration and prices charged by non-profit affiliated air ambulance providers because air ambulance services owned by private equity and publicly-traded companies receive higher payments and subsequently generate larger and more frequent surprise bills than their non-profit-affiliated counterparts. Other commenters disagreed and stated that the Federal IDR process should not make such a distinction among providers of air ambulance services. One commenter stated that Congress clearly recognized the variation in air ambulance services in distinguishing the six "additional circumstances" 24 specific to air ambulance services that certified IDR entities should consider. ******** 24 Under section 9817(b)(5)(C) of the Code, section 717(b)(5)(C) of ERISA, and section 2799A-2(b)(5)(C) of the PHS Act, those six additional circumstances are: (1) the quality and outcomes measurements of the provider that furnished such services; (2) the acuity of the individual receiving such services or the complexity of furnishing such services to such individual; (3) the training, experience, and quality of the medical personnel that furnished such services; (4) the ambulance vehicle type, including the clinical capability level of such vehicle; (5) population density of the point of pick-up (such as urban, suburban, rural, or frontier); and (6) demonstrations of good faith efforts (or lack of good faith efforts) made by the nonparticipating provider or nonparticipating facility or the plan or issuer to enter into network agreements and, if applicable, contracted rates between the provider and the plan or issuer, as applicable, during the previous 4 plan years. ******** 4. The Certified IDR Entity's Written Decision With respect to the certified IDR entity's written decision, several commenters supported the requirement for the certified IDR entity to provide a written decision, including the explanation of the underlying rationale for the certified IDR entity's determination. Other commenters stressed, however, that requiring the explanation of the rationale only if the certified IDR entity determined that the QPA was materially different from the appropriate out-of-network rate could discourage certified IDR entities from considering additional factors. A few commenters requested an explanation be required when the certified IDR entity selected the amount closest to the QPA, including how the information about the other required considerations was assessed while others stated that a robust explanation should be required of the certified IDR entity in all cases. Commenters also stated that requiring an explanation in all cases would ensure that certified IDR entities considered all information submitted by the parties and allow the parties to fully understand the rationale behind the certified IDR entity's determination. Commenters asserted that this could improve the quality and efficiency of the IDR process over time, as parties become better informed as to the types of information certified IDR entities find credible and the circumstances in which the parties should pursue the IDR process. Other commenters requested the Departments either eliminate the requirement for a written decision or require a similar analysis in all written decisions. E. Litigation Regarding Requirements Related to Surprise Billing; Part II On October 28, 2021, the Texas Medical Association, a trade association representing physicians, and a Texas physician filed a lawsuit against the Departments and the Office of Personnel Management (OPM), asserting that certain provisions of the October 2021 interim final rules relating to the certified IDR entities' consideration of the QPA, as well as additional factors related to items and services that are not air ambulance services, should be vacated. Plaintiffs argued that the interim final rules ignored Congress's intent that certified IDR entities weigh the QPA and other factors without favoring any factor, and they asserted that, as a result, the rules would skew IDR results in favor of plans and issuers. On February 23, 2022, the United States District Court for the Eastern District of Texas (District Court) issued a memorandum opinion and order that vacated portions of the October 2021 interim final rules governing aspects of the Federal IDR process related to non-air ambulance qualified IDR items or services including: (1) the definition of "material difference;" (2) the requirement that a certified IDR entity must select the offer closest to the QPA unless the certified IDR entity determines that credible information submitted by either party under 26 CFR 54.9816-8T(c)(4)(i), 29 CFR 2590.716-8(c)(4)(i), and 45 CFR 149.510(c)(4)(i) clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate for non-air ambulance qualified IDR items or services, or if the offers are equally distant from the QPA but in opposing directions; (3) the requirement that the certified IDR entity may only consider the additional information submitted by either party to the extent that the credible information related to the circumstances under 26 CFR 54.9816-8T(c)(4)(i), 29 CFR 2590.716-8(c)(4)(i), and 45 CFR 149.510(c)(4)(i) clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate for non-air ambulance qualified IDR items or services; (4) the dispute resolution examples; and (5) the requirement that, if the certified IDR entity does not choose the offer closest to the QPA, the certified IDR entity's written decision must include an explanation of the credible information that the certified IDR entity determined demonstrated that the QPA was materially different from the appropriate out-of-network rate, based on the factors certified IDR entities are permitted to consider with respect to the qualified IDR item or service. 25 ******** 25 Tex. Med. Ass'n, et al. v. U. S. Dept. of Health and Human Servs., et al., Case No. 6:21-cv-425 (E.D. Tex.). ******** On April 27, 2022, LifeNet, Inc., a provider of air ambulance services, filed a lawsuit against the Departments and OPM seeking the vacatur of additional provisions of the October 2021 interim final rules applicable to air ambulance services. In particular, LifeNet alleged that the requirement codified in the last sentence of 26 CFR 54.9817-2T(b)(2), 29 CFR 2590.717-2(b)(2), and 45 CFR 149.520(b)(2) that the certified IDR entity may consider information submitted by a party only if the information "clearly demonstrate[s] that the qualifying payment amount is materially different from the appropriate out-of-network rate" should be vacated. On July 26, 2022, the District Court issued a memorandum opinion and order vacating this language. 26 ******** 26 LifeNet, Inc. v. United States Department of Health and Human Services, et al., Case No. 6:22-cv-162 (E.D. Tex.). ******** F. Scope and Purpose of This Rulemaking As discussed in more detail later in this preamble, upon review of the comments the Departments received on the information that must be shared about the QPA when a service is downcoded and with respect to the Federal IDR process, and in light of the District Court's memorandum opinions and orders in Texas Medical Association and LifeNet, the Departments have determined that it is appropriate to issue these final rules to finalize parts of the July 2021 and October 2021 interim final rules related to the information that must be disclosed about the QPA under 26 CFR 54.9816-6T(d), 29 CFR 2590.716-6(d), and 45 CFR 149.140(d) to address downcoding; related to the certified IDR entity's consideration of the statutory factors when making a payment determination under the Federal IDR process at 26 CFR 54.9816-8T(c)(4)(iii)-(iv) and 54.9817T-2(b), 29 CFR 2590.716-8(c)(4)(iii)-(iv) and 2590.717-2(b), and 45 CFR 149.510(c)(4)(iii)-(iv) and 149.520(b); and related to the certified IDR entity's written decision at 26 CFR 54.9816-8T(c)(4)(vi)(B), 29 CFR 2590.716-8(c)(4)(vi)(B), and 45 CFR 149.510(c)(4)(vi)(B). These final rules also include changes to remove from the regulations the language vacated by the District Court. This rulemaking is purposefully narrow in scope and is intended to address only certain issues critical to the implementation and effective operation of the Federal IDR process. The Departments intend to finalize the remaining provisions of the July 2021 and October 2021 interim final rules after further consideration of comments. II. Overview of Final Rules A. Information to be Shared About the Qualifying Payment Amount As described earlier in this preamble, the July 2021 interim final rules require plans and issuers to make certain disclosures with each initial payment or notice of denial of payment. When the QPA serves as the recognized amount, or as the amount upon which cost sharing is based with respect to air ambulance services, plans and issuers must disclose the QPA and certain information related to the QPA for the item or service involved, as well as certain additional information, upon request of the provider, facility, or provider of air ambulance services for each item or service involved. 27 ******** 27 26 CFR 54.9816-6T(d), 29 CFR 2590.716-6(d), and 45 CFR 149.140(d). ******** As stated in the preamble to the July 2021 interim final rules, the Departments seek to ensure transparent and meaningful disclosure of information relating to the calculation of the QPA for providers, facilities, and providers of air ambulance services, while at the same time minimizing administrative burdens on health plans and issuers and on the Federal IDR process. The Departments sought to balance those competing interests by, on the one hand, requiring plans and issuers to make certain disclosures with each initial payment or notice of denial of payment and to provide certain additional information upon request by the provider, facility, or provider of air ambulance services and, on the other hand, avoiding more wide-reaching disclosure requirements that could add to the costs and burdens of adjudicating claims subject to the surprise billing protections in the No Surprises Act. After review of the comments submitted on the July 2021 interim final rules regarding downcoding and on the clarification in the preamble to the October 2021 interim final rules stating that, under the July 2021 interim final rules, a plan or issuer may calculate the QPA using a downcoded service code, including the comments suggesting how the disclosure requirements could be modified in light of this clarification, the Departments have concluded that additional disclosure of information about the QPA is appropriate. 28 This additional disclosure will ensure that providers, facilities, and providers of air ambulance services receive information regarding the QPA that aids in their meaningful participation in open negotiation and the Federal IDR process in all payment disputes that involve qualified items or services that have been subject to downcoding. ******** 28 86 FR 55997-98 (October 7, 2021). ******** Specifically, the Departments are of the view that additional information would be helpful in cases in which the plan or issuer has downcoded the billed claim to ensure that providers, facilities, and providers of air ambulance services receive the relevant information from a plan or issuer that is needed to engage in a productive open negotiation period. Without information on what the QPA would have been had the claim not been downcoded, the provider, facility, or provider of air ambulance services may be at a disadvantage compared to the plan or issuer. In cases in which the plan or issuer has downcoded the billed claim and asserts that the QPA that corresponds with the downcoded claim is the correct total payment amount, it is of particular importance that the provider, facility, or provider of air ambulance services knows that the item or service in question has been downcoded and has information regarding both the QPA for the downcoded claim and the amount that would have been the QPA had the service code or modifier not been downcoded. In the Departments' view, this information may be critical to the provider, facility, or provider of air ambulance services in developing an offer or submitting information if it believes that the QPA calculated by the plan or issuer does not best represent the value of the item or service provided. Furthermore, the requirement to disclose this additional information will increase transparency by ensuring that the provider, facility, or provider of air ambulance services has sufficient information about the QPA to submit an informed offer, including how it relates to the billed claim. This increased transparency will aid in the open negotiation process by helping providers, facilities, and providers of air ambulance services to understand how the plan or issuer arrived at the relevant QPA in relation to the billed claim. This increased transparency will inform the provider's, facility's, or provider of air ambulance services' decision whether to initiate open negotiation and the Federal IDR process, as well as its determination of the amount that it submits as its offer. 29 Further, this requirement will help a provider, facility, or provider of air ambulance services ascertain what information to provide the certified IDR entity to demonstrate that the provider's, facility's, or provider of air ambulance services' offer best represents the value of the item or service. If submitted for the certified IDR entity's consideration, this information will also aid the certified IDR entity in selecting the offer that best represents the value of the item or service by ensuring that the certified IDR entity will have additional pertinent information about the item or service. For example, in a dispute that concerns a qualified IDR service for which the plan or issuer downcoded the billed service code, the provider, facility, or provider of air ambulance services may present information showing that the billed service code was more appropriate than the downcoded service code. In such an instance, the certified IDR entity could determine that the QPA based on the downcoded service code does not sufficiently encompass the complexity of furnishing the qualified IDR service because it was based on a service code for a different service from the one furnished. If the certified IDR entity makes such a determination, then the amount that would have been the QPA had the service code or modifier not been downcoded may be relevant to the certified IDR entity in determining which offer best represents the value of the qualified IDR item or service. ******** 29 The Departments understand that many plans and issuers make initial payments that are equivalent to or are informed by the corresponding QPA for the item or service at issue. As noted in in the preamble to the July 2021 interim final rules, the initial payment should be an amount that the plan or issuer reasonably intends to be payment in full based on the relevant facts and circumstances, which may be higher or lower than the QPA, as required under the terms of the plan or coverage, prior to the beginning of any open negotiation or initiation of the Federal IDR process. 86 FR 36872, 36900 (July 13, 2021) ******** Therefore, the Departments are issuing these final rules to add a definition for the term "downcode" to 26 CFR 54.9816-6, 29 CFR 2590.716-6, and 45 CFR 149.140; and final rules under 26 CFR 54.9816-6(d), 29 CFR 2590.716-6(d), and 45 CFR 149.140(d) to require additional information about the QPA that must be provided with an initial payment or notice of denial of payment, without a provider, facility, or provider of air ambulance services having to make a request for this information, in cases in which the plan or issuer has downcoded the billed claim. Although "downcoding" is being defined for the first time in these final rules, the concept was reflected in both sets of interim final rules. Though neither set of interim final rules specifically defines a term for this practice, the interim final rules described the practice and explained that it was permissible under certain circumstances. See 86 FR 55997-98 n.35 (clarification in October 2021 interim final rules regarding requirements of July 2021 interim final rules). Indeed, as described previously, the Departments received several comments in response to the July 2021 interim final rules and the October 2021 interim final rules requesting that the disclosures that must be provided with each initial payment or notice of denial of payment include additional information about how the QPA was calculated to ensure that providers, facilities, and providers of air ambulance services have sufficient information when the Federal IDR process is used for a payment determination. For example, commenters requested that plans and issuers be required, without a request, to provide information on the number of contracts and the geographic region used to calculate the QPA, whether the QPA was calculated based on a downcoded billed claim, information about the use of modifiers in calculating the QPA, the types of specialties and subspecialties that have contracted rates included in the data set used to determine the QPA, and whether bonuses and supplemental payments were paid to in-network providers. These final rules define the term "downcode," as described in the preamble to the October 2021 interim final rules, to mean the alteration by a plan or issuer of a service code to another service code, or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower QPA than the service code or modifier billed by the provider, facility, or provider of air ambulance services. These final rules also specify that, if a QPA is based on a downcoded service code or modifier, in addition to the information already required to be provided with an initial payment or notice of denial of payment, a plan or issuer must provide a statement that the service code or modifier billed by the provider, facility, or provider of air ambulance services was downcoded; an explanation of why the claim was downcoded, including a description of which service codes were altered, if any, and which modifiers were altered, added, or removed, if any; and the amount that would have been the QPA had the service code or modifier not been downcoded. The Departments are continuing to consider comments on the July 2021 interim final rules about whether additional disclosures related to the QPA calculation methodology should be required to be provided with an initial payment or notice of denial of payment, or upon request. The Departments note that the statute places the responsibility for monitoring the accuracy of plans' and issuers' QPA calculation methodologies with the Departments (and applicable state authorities) by requiring audits of plans' and issuers' QPA calculation methodologies, 30 and the Departments have committed to conducting audits. The Departments also stress that payment determinations in the Federal IDR process should center on a determination of a total payment amount for a particular item or service based on the facts and circumstances of the dispute at issue, rather than an examination of a plan's or issuer's QPA methodology. ******** 30 86 FR 36872, 36899 (July 13, 2021). ******** B. Payment Determinations Under the Federal IDR Process The October 2021 interim final rules provide that, not later than 30 business days after the selection of the certified IDR entity, the certified IDR entity must select one of the offers submitted by the plan or issuer or the provider, facility, or provider of air ambulance services as the out-of-network rate for the qualified IDR item or service. In determining which offer to select, the October 2021 interim final rules provided, prior to Texas Medical Association and LifeNet, that the certified IDR entity must first look to the QPA, as it represents a reasonable market-based payment for relevant items and services, and then to additional information requested by the certified IDR entity from the parties and other additional information submitted by the parties. After considering the QPA and additional information, the October 2021 interim final rules required the certified IDR entity to select the offer closest to the QPA, unless the certified IDR entity determined that the additional information requested by the certified IDR entity and the credible information submitted by the parties demonstrated that the QPA was materially different from the appropriate out-of-network rate, or if the offers were equally distant from the QPA but in opposing directions. In instances in which the certified IDR entity determined that the credible information submitted by the parties clearly demonstrated that the QPA was materially different from the appropriate out-of-network rate, or when the offers were equally distant from the QPA but in opposing directions, the October 2021 interim final rules state that the certified IDR entity must select the offer that the certified IDR entity determined best represents the value of the item or service, which could be either party's offer. As stated earlier in this preamble, on February 23, 2022 and July 26, 2022, the District Court in Texas Medical Association and LifeNet issued memorandum opinions and orders that vacated certain provisions of the October 2021 interim final rules that govern aspects of the Federal IDR process, including provisions that provided guidance to certified IDR entities on selecting the appropriate out-of-network rate in a payment determination. In the October 2021 interim final rules, the Departments required certified IDR entities to view the QPA as an appropriate payment amount, subject to consideration of the information submitted by the parties related to the additional circumstances outlined in the statute, as a mechanism to ensure that certified IDR entities approached making payment determinations in the Federal IDR process in a consistent manner. The regulatory text required certified IDR entities to select the offer closest to the QPA unless the certified IDR entity determined that credible information submitted by a party clearly demonstrated that the QPA was materially different from the appropriate out-of-network rate. The preamble to the October 2021 interim final rules described the relevant instructions to certified IDR entities as a "rebuttable presumption" in favor of the QPA. The District Court in Texas Medical Association and LifeNet vacated the portions of the October 2021 interim final rules that it construed as creating a rebuttable presumption in favor of the QPA. The Departments note that these final rules are not intended to impose a rebuttable presumption for payment determinations in the Federal IDR process. The regulatory text in these final rules does not include the provisions that the District Court reasoned would have the effect of imposing such a presumption. The Departments note that, in all cases, the QPA, which is generally based on the median contracted rate for a qualified IDR item or service, will be relevant to a payment determination, as it represents the typical payment amount that a plan or issuer that is a party to a payment determination will pay in-network providers, facilities, and providers of air ambulance services for that particular qualified IDR item or service. The Departments also note that, to the extent the QPA is calculated in a manner that is consistent with the detailed rules issued under the July 2021 interim final rules, and is communicated in a way that satisfies the applicable disclosure requirements, the QPA will meet the credibility requirement that applies to the additional information and circumstances set forth in these final rules. 31 The credibility requirement is designed to ensure that the additional information submitted by the parties to a payment determination meet the same credibility standard that the QPA already meets through other mechanisms, by virtue of the requirements related to the QPA set forth in the July 2021 interim final rules. The Departments also note that the credibility requirement is designed to ensure that certified IDR entities have clear guidance on how to evaluate potentially voluminous and complex information in a methodical and consistent manner. Absent clear guidance on a process for evaluating the different factors, there would be no guarantee of consistency in how certified IDR entities reached determinations in different cases. The Departments are of the view that this guidance is also important because the QPA must be a quantitative figure, like the offers that will be submitted in a payment determination. Generally, these quantitative figures will be unlike the information received related to the additional circumstances, which will often be qualitative and open to subjective evaluation. Although the QPA is a quantitative figure, the amount that best represents the value of the qualified IDR items and services may be more or less than the QPA due to additional circumstances that are not easily quantifiable such as the care setting or the teaching status of the facility. It therefore is reasonable to ensure that certified IDR entities consider the QPA, a quantitative figure, and then consider the additional, likely-qualitative factors, when determining the out-of-network rate - another quantitative figure. ******** 31 To the extent there is a question whether a plan or issuer has complied with the July 2021 interim final rules' requirements for calculating the QPA, it is the Departments' (or applicable State authorities') responsibility, not the certified IDR entity's, to monitor the accuracy of the plan's or issuer's QPA calculation methodology by conducting an audit of the plan's or issuer's QPA calculation methodology. However, a provider or facility may always assert to the certified IDR entity that additional information points in favor of the selection of its offer as the out-of-network payment amount, even where that offer is for a payment amount that is different from the QPA. ******** 1. Requirement to Consider the QPA and Additional Information Submitted In light of the Texas Medical Association and LifeNet decisions, and in response to comments received on these provisions, the Departments are finalizing rules that remove the provisions that the District Court vacated and that adopt standards for making a payment determination that are intended to achieve the statutory aims articulated earlier in this preamble. Congress granted the Departments statutory authority to "establish by regulation one independent dispute resolution process" under which certified IDR entities determine the amount of payment for an out-of-network item or service. 32 The Federal IDR process that the Departments establish under this authority is to be "in accordance with the succeeding provisions of" the cited statutory subsections, 33 including the statutory provisions describing the factors for the certified IDR entity to consider in determining the out-of-network payment amount. Under sections 9816(c)(5) and 9817(b)(5) of the Code, sections 716(c)(5) and 717(b)(5) of ERISA, and sections 2799A-1(c)(5) and 2799A-2(b)(5) of the PHS Act, the statute provides that with respect to payment determinations, the certified IDR entity must always consider the QPA without the parties specifically bringing it to the certified IDR entity's attention. Next, the statute provides that the certified IDR entity must also consider "additional information" or "additional circumstances" submitted to the certified IDR entity. ******** 32 See section 9816(c)(2)(A) of the Code, section 716(c)(2)(A) of ERISA, and section 2799A-1(c)(2)(A) of the PHS Act; see also section 9817(b)(2)(A) of the Code, section 717(b)(2)(A) of ERISA, and section 2799A-2(b)(2)(A) of the PHS Act. 33 Id. ******** As explained later in this preamble, the Departments are of the view that it is appropriate to exercise their authority under this provision, and that it is in accordance with these statutory provisions, to adopt a Federal IDR process that encourages a consistent methodology for evaluation of information when making a payment determination. The Departments are of the view that there is value in ensuring that all certified IDR entities approach payment determinations in a similar manner, which will promote consistency and predictability in the process, thereby lowering administrative costs and encouraging consistency in appropriate payments for out-of-network services. 34 The statute requires certified IDR entities to always consider the QPA when making a payment determination, as it is the one statutory consideration that will always be present in each payment determination, whereas the parties may or may not choose to submit information related to the additional circumstances as part of their offer. Consideration of the QPA, which is the first-listed statutory factor and a quantitative figure, will aid certified IDR entities in their consideration of each of the other statutory factors, as these entities will then be in a position to evaluate whether the "additional" factors present information that may not have already been captured in the calculation of the QPA. ******** 34 See Cong. Budget Office, H.R. 5826, the Consumer Protections Against Surprise Medical Bills Act of 2020, as Introduced on February 10, 2020: Estimated Budgetary Effects at 1 (Feb. 11, 2020) (arbitrators "would be instructed to look to the health plan's median payment rate for in-network rate care," and as a result "average payment rates for both in- and out-of-network care would move toward the median in-network rate," thereby lowering health insurance premiums and budget deficits); see also H.R. Rep. No. 116-615, pt. I, at 57-58 (2020). ******** As commenters noted, there may be instances in which the QPA would not adequately account for one or more of the additional factors. The Departments note that these final rules do not require certified IDR entities to default to the offer closest to the QPA or to apply a presumption in favor of that offer. The Departments are of the view that it will often be the case that the QPA represents an appropriate out-of-network rate, as the QPA is largely informed by similar information to what would be provided as information in support of the additional statutory circumstances. Nonetheless, the Departments acknowledge that the additional factors may be relevant in determining the appropriate out-of-network rate, because the QPA may not account for information specific to a particular item or service. Therefore, these final rules do not require the certified IDR entity to select the offer closest to the QPA. Rather, these final rules specify that certified IDR entities should select the offer that best represents the value of the item or service under dispute after considering the QPA and all permissible information submitted by the parties. Accordingly, in determining which offer to select during the Federal IDR process under these final rules, the certified IDR entity must consider the QPA for the applicable year for the same or similar item or service and then must consider all additional information submitted by a party to determine which offer best reflects the appropriate out-of-network rate, provided that the information relates to the party's offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination (and does not include information that the certified IDR entity is prohibited from considering in making the payment determination under section 9816(c)(5)(D) of the Code, section 716(c)(5)(D) of ERISA, and section 2799A-1(c)(5)(D) of the PHS Act). 35 For this purpose, the Departments understand that information requested by a certified IDR entity, or submitted by a party, would be information relating to a party's offer if it tends to show that the offer best represents the value of the item or service under dispute. Therefore, these rules require the certified IDR entity to evaluate whether the information relates to the offer submitted by either party for the payment amount for the qualified IDR item or service that is the subject of the payment determination. In considering this additional information, the certified IDR entity should evaluate whether information that is offered is credible and should not give weight to information that is not credible. 36 The appropriate out-of-network rate must be the offer that the certified IDR entity determines best represents the value of the qualified IDR item or service. ******** 35 See also 26 CFR 54.9816-8T(c)(4)(v), 29 CFR 2590.716-8(c)(4)(v), and 45 CFR 149.510(c)(4)(v). 36 For this purpose, credible information is information that upon critical analysis is worthy of belief and is trustworthy. 26 CFR 54.9816-8T(a)(2)(v), 29 CFR 2590.716-8(a)(2)(v), and 45 CFR 149.510(a)(2)(v). ******** For non-air ambulance items and services, the additional information to be considered includes information related to the following factors: 1. the level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (such as those endorsed by the consensus-based entity authorized in section 1890 of the Social Security Act); 2. the market share held by the provider or facility or that of the plan or issuer in the geographic region in which the qualified IDR item or service was provided; 3. the acuity of the participant, beneficiary, or enrollee receiving the qualified IDR item or service, or the complexity of furnishing the qualified IDR item or service to the participant, beneficiary, or enrollee; 4. the teaching status, case mix, and scope of services of the facility that furnished the qualified IDR item or service, if applicable; and 5. the demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility, as applicable, and the plan or issuer, as applicable, during the previous 4 plan years. Under these final rules, the certified IDR entity must also consider information related to the offer provided in response to a request from the certified IDR entity under 26 CFR 54.9816-8T(c)(4)(i)(A)( 2 ), 29 CFR 2590.716-8(c)(4)(i)(A)( 2 ), and 45 CFR 149.510(c)(4)(i)(A)( 2 ). 2. Avoidance of Double-counting Information When considering the additional information under 26 CFR 54.9816-8(c)(4)(iii), 29 CFR 2590.716-8(c)(4)(iii), and 45 CFR 149.510(c)(4)(iii), the certified IDR entity should evaluate the information and should not give weight to that information if it is already accounted for by any of the other information submitted by the parties. The certified IDR entity should consider whether the additional information is already accounted for in the QPA and should not give weight to information related to a factor if the certified IDR entity determines the information was already accounted for in the calculation of the QPA, to avoid weighting the same information twice. In addition, if the parties submit information related to more than one of the additional factors, the certified IDR entity should also consider whether the information submitted regarding those factors is already accounted for by information submitted relating to other credible information submitted to the certified IDR entity in relation to another factor and, if so, should not weigh this information more than once. Numerous comments received on the October 2021 interim final rules highlighted that, in many cases, certain factors, such as patient acuity or the complexity of furnishing the qualified IDR item or service to the participant, beneficiary, or enrollee, will already be accounted for in the calculation of the QPA and should therefore not receive additional weight. For example, because the plan or issuer is required to calculate the QPA using median contracted rates for service codes, as well as modifiers (if applicable), and because service codes and modifiers in many cases reflect patient acuity and the complexity of the service provided, these factors will often already be reflected in the QPA. Commenters also acknowledged that there could be instances in which the QPA would not adequately account for the acuity of the patient or complexity of the service: for example, if the complexity of a case is an outlier such that the time or intensity of care exceeds what is typical for a service code. A certified IDR entity may also conclude that the QPA does not already account for patient acuity or the complexity of furnishing the qualified IDR item or service in instances where the parties disagree on what service code or modifier accurately describes the qualified IDR item or service, such as when a plan or issuer has downcoded a claim and the QPA is based on the downcoded service code or modifier, rather than the billed service code or modifier. The Departments agree with the commenters that, in many cases, the additional factors for the certified IDR entity to consider other than the QPA will already be reflected in the QPA. The QPA is generally calculated to include characteristics that affect costs, including medical specialty, geographic region, and patient acuity and case severity, all captured in different billing codes or the QPA calculation methodology. 37 Therefore, in the Departments' view, giving additional weight to information that is already incorporated into the calculation of the QPA would be redundant, possibly resulting in the selection of an offer that does not best represent the value of the qualified IDR item or service and potentially over time contributing to higher health care costs. As noted earlier in this preamble, the Departments are also aware that there are instances when certain factors related to the qualified IDR item or service may not be adequately reflected in the QPA. Under these final rules, certified IDR entities are required to consider the QPA and then must consider all additional information submitted by the parties relating to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination, but each factor should be weighted only once in the evaluation of each party's payment offer. To the extent a factor is not already reflected in the QPA, the certified IDR entity should accord that factor appropriate weight based on information related to it provided by the parties. For example, some providers and facilities that provide high-acuity care, such as level 1 trauma or neonatal care, may contend that additional factors such as their case mix and the scope of services offered were not accounted for in the QPA and could justify the selection of a higher amount as the out-of-network payment amount. ******** 37 Plans and issuers are required to calculate separate QPAs for the same service code by provider specialty if the plan or issuer has contracted rates for the service code that vary based on provider specialty. See 26 CFR 54.9816-6T(b)(3), 29 CFR 2590.716-6(b)(3), and 45 CFR 149.140(b)(3). ******** 3. Examples Provided These final rules also include examples to illustrate the consideration of factors when making a payment determination, including whether and how to give weight to additional information submitted by a party. Each example assumes that the Federal IDR process applies for purposes of determining the out-of-network rate, that both parties have submitted the information parties are required to submit as part of the Federal IDR process, including the applicable QPA(s), and the submitted information does not include information on the prohibited factors. In the first new example, a level 1 trauma center that is a nonparticipating emergency facility submits an offer that is higher than the QPA. Along with the offer, the nonparticipating emergency facility submits additional written information showing that the scope of services available at the nonparticipating emergency facility was critical to the delivery of care for the qualified IDR item or service provided, given the particular patient's acuity, and the information is determined to be credible by the certified IDR entity. The nonparticipating emergency facility also submits information showing that the contracted rates used to calculate the QPA were based on a level of service that is typical in cases in which the services are delivered by a facility that is not a level 1 trauma center and that does not have the capability to provide the scope of services provided by a level 1 trauma center. This information is also determined to be credible by the certified IDR entity. The issuer submits an offer equal to the QPA. No additional information is submitted by either party. The certified IDR entity determines that the information submitted by the nonparticipating emergency facility relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. If the certified IDR entity determines that it is appropriate to give weight to the additional credible information submitted by the nonparticipating emergency facility and that this information demonstrates that the facility's offer best represents the value of the qualified IDR item or service, the certified IDR entity should select the facility's offer. In the second new example, a nonparticipating provider submits an offer that is higher than the QPA. Along with the offer, the nonparticipating provider submits additional written information regarding the level of training and experience of the provider, and the information is determined to be credible by the certified IDR entity, but the certified IDR entity finds that the provider does not demonstrate that the level of training and experience relates to the offer for the appropriate payment amount for the qualified IDR item or service that is the subject of the payment determination (for example, the information does not show that the level of training and experience was necessary to provide the qualified IDR service or that the training or experience made an impact on the care that was provided). The nonparticipating provider does not submit any additional information. The issuer submits an amount equal to the QPA as its offer, with no additional information. Even if the certified IDR entity determines that the additional information regarding the level of training and experience is credible, if the certified IDR entity determines that the information does not relate to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination, the certified IDR entity should not give weight to the additional information. In the absence of any other credible information that relates to a party's offer, the certified IDR entity should select the issuer's offer as the offer that best represents the value of the qualified IDR service. In the third new example, in connection with an emergency department visit for the evaluation and management of a patient, a nonparticipating provider submits an offer that is higher than the QPA. Along with the offer, the nonparticipating provider submits additional written information showing that the acuity of the patient's condition and the complexity of the qualified IDR service required the taking of a comprehensive history, a comprehensive examination, and medical decision making of high complexity, and the information is determined to be credible by the certified IDR entity. The issuer submits an offer equal to the QPA for Current Procedural Terminology (CPT) code 99285, which is the CPT code for an emergency department visit for the evaluation and management of a patient requiring a comprehensive history, a comprehensive examination, and medical decision making of high complexity. The issuer also submits additional written information showing that this CPT code accounts for the acuity of the patient's condition, and the information is determined to be credible by the certified IDR entity. The certified IDR entity determines that this information relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. Neither party submits any additional information. If the certified IDR entity determines the information on the acuity of the patient and complexity of the service is already accounted for in the calculation of the QPA, the certified IDR entity should not give weight to the additional information provided by the nonparticipating provider. If, after evaluating the information submitted by the parties, the IDR entity determines that the issuer's offer best represents the value of the qualified IDR service, then the certified IDR entity should select the issuer's offer. In the fourth new example, the issuer submits an offer that is higher than the QPA and that is equal to the nonparticipating emergency facility's prior contracted rate (adjusted for inflation) with the issuer for the previous year for the qualified IDR service. Although the facility is not participating in the issuer's network this year, it was a participating facility in the issuer's network in the previous 4 plan years. Along with the offer, the issuer submits additional written information showing that the contracted rates between the nonparticipating facility and the issuer during the previous 4 plan years were higher than the QPA, and that these prior contracted rates took into account the case mix and scope of services typically furnished at the facility. The certified IDR entity determines that the information is credible and that it relates to the offer submitted by the facility for the payment amount for the qualified IDR service that is the subject of the payment determination. The nonparticipating emergency facility submits an offer that is higher than both the QPA and the prior contracted rate (adjusted for inflation) and submits additional written information intending to show that the case mix and scope of services available at the facility that furnished the qualified IDR service were integral to the services provided. The certified IDR entity determines this information is credible and relates to the offer submitted by the facility for the payment amount for the qualified IDR service that is the subject of the payment determination. If the certified IDR entity determines that the information submitted by the facility regarding the case mix and scope of services available at the facility includes information that is also accounted for in the information that the issuer submitted regarding prior contracted rates, then that same information that has been submitted twice should be weighted only once by the certified IDR entity. The certified IDR entity also should not give weight to the same information provided by the nonparticipating emergency facility in relation to any other factor. If the certified IDR entity determines that the issuer's offer best represents the value of the qualified IDR service, the certified IDR entity should select the issuer's offer. In the fifth new example, regarding a qualified IDR service for which the issuer downcoded the service code that the provider billed, the issuer submits an offer equal to the QPA (which was calculated using the downcoded service code). The issuer also submits the additional written information that it was required to disclose to the nonparticipating provider at the time of the initial payment. The certified IDR entity determines the additional information to be credible and that it relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. The nonparticipating provider submits an offer equal to the amount that would have been the QPA had the service code not been downcoded. The nonparticipating provider submits additional written information that includes the same documentation provided by the issuer, as well as information that explains why the billed service code was more appropriate than the downcoded service code, as evidence that the provider's offer best represents the value of the service furnished, given its complexity. Neither party submits any additional information. The certified IDR entity determines that the information submitted by the provider is credible and that it is related to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. If the certified IDR entity determines that it is appropriate to give weight to the additional credible information submitted by the provider and that this information demonstrates that the provider's offer best represents the value of the qualified IDR service, the certified IDR entity should select the provider's offer. The Departments note that the statute and the October 2021 interim final rules continue to provide that when making a payment determination, a certified IDR entity must not consider information on the prohibited factors, such as the usual and customary charges (including payment or reimbursement rates expressed as a proportion of usual and customary charges); the amount that would have been billed by the provider, facility, or provider of air ambulance services with respect to the qualified IDR item or service had the balance billing provisions of 45 CFR 149.410, 149.420, and 149.440 (as applicable) not applied; or the payment or reimbursement rate for items and services furnished by the provider, facility, or provider of air ambulance services payable by a public payor. 38, 39 In considering all the permissible information submitted by the parties, the Departments expect that the certified IDR entity will conduct a thorough review of the information submitted to evaluate whether the information includes any of the prohibited factors, so as to ensure that prohibited factors are not considered in any payment determinations. In conducting this review, the certified IDR entity may request additional information from the disputing parties, including confirmation that information submitted does not include information on the prohibited factors. ******** 38 Contracted rates are frequently based on a percentage of rates payable by a public payor, such as Medicare. In these cases, because contracting parties have chosen to set their rates in this way, the contracted rates represent an independent decision by contracting parties. Thus, if a party submits information on such rates to a certified IDR entity, consideration of these contracted rates does not violate the prohibition on considering the factors described in 26 CFR 54.9816-8T(c)(4)(v), 29 CFR 2590.716-8(c)(4)(v), and 45 CFR 149.510(c)(4)(v). In contrast, if a party submits evidence showing that its offer was a percentage of the rates paid by Medicare, a certified IDR entity is prohibited from considering such information. 39 Under 5 U.S.C. 8904(b), in the case of a retired individual who is over age 65 and enrolled in the Federal Employees Health Benefits (FEHB) Program but not covered by Medicare part A or B, fee-for-service FEHB carriers may not pay a charge imposed by a hospital provider for inpatient services or a physician to the extent that charge exceeds applicable Medicare limits. The Departments, after consulting with OPM, clarify that a certified IDR entity is not considered to violate the prohibition on considering the payment or reimbursement rate for items and services furnished by the provider, facility, or provider of air ambulance services payable by a public payor to the extent the certified IDR entity's selection of an offer is made to allow compliance with 5 U.S.C. 8904(b) and 5 CFR part 890, subpart I. That is, if 5 U.S.C. 8904(b) applies, and either offer exceeds the applicable Medicare limit referenced in 5 U.S.C. 8904(b), the certified IDR entity must ensure that the payment determination does not exceed the applicable Medicare limit. A certified IDR entity would not be considered to violate the prohibition on considering Medicare reimbursement rates when it selects an offer on this basis. ******** The Departments are committed to establishing a fair, cost-effective, and reasonable IDR payment determination process that does not have an inflationary impact on health care costs. To that end, the Departments will monitor the effects of these payment determination requirements and make appropriate adjustments as necessary to achieve the intended goals articulated in this preamble. C. Payment Determinations Under the Federal IDR Process for Air Ambulance Services As discussed in section I.C of this preamble, the process for a certified IDR entity to select an offer in a dispute related to qualified IDR services that are air ambulance services is generally the same as the process applicable to disputes related to qualified IDR items or services that are not air ambulance services. However, section 9817(b)(5)(C) of the Code, section 717(b)(5)(C) of ERISA, section 2799A-2(b)(5)(C) of the PHS Act, and the October 2021 interim final rules specify different additional circumstances, in addition to the QPA, that the certified IDR entity must consider in making the payment determination for air ambulance services. Upon review of the comments the Departments received on the Federal IDR process, and in light of the District Court's memorandum opinions and orders in Texas Medical Association and LifeNet, the Departments have determined that it is appropriate to issue the final rules under the Federal IDR process for air ambulance services. As for non-air ambulance items and services, these final rules provide that in determining which offer to select in a dispute related to air ambulance services, the certified IDR entity must consider certain additional information submitted by a party. Also, for non-air ambulance items and services, these final rules for air ambulance services provide that the certified IDR entity must consider the QPA for the applicable year for the same or similar service and then consider all additional permissible information to determine the appropriate out-of-network rate. For air ambulance services, this information includes information related to the following factors: 1. quality and outcomes measurements of the provider that furnished the services; 2. the acuity of the condition of the participant, beneficiary, or enrollee receiving the service, or the complexity of furnishing the service to the participant, beneficiary, or enrollee; 3. training, experience, and quality of the medical personnel that furnished the air ambulance service; 4. ambulance vehicle type, including the clinical capability level of the vehicle; 5. population density of the point of pick-up; and 6. demonstrations of good faith efforts (or lack thereof) by the disputing parties to enter into network agreements with each other, as well as, if applicable, contracted rates between the parties during the previous 4 plan years. Additionally, as with non-air ambulance disputes, the certified IDR entity must also consider information related to the offer provided in a response to the certified IDR entity's request under 26 CFR 54.9816-8T(c)(4)(i)(A)( 2 ), 29 CFR 2590.716-8(c)(4)(i)(A)( 2 ), and 45 CFR 149.510(c)(4)(i)(A)( 2 ). The certified IDR entity must also consider other information provided by the parties under 26 CFR 54.9816-8(c)(4)(iii)(D), 29 CFR 2590.716-8(c)(4)(iii)(D), and 45 CFR 149.510(c)(4)(iii)(D). As with non-air ambulance disputes, the certified IDR entity should evaluate whether each piece of submitted information is credible, relates to the offer for the payment amount for the qualified IDR service submitted by either party, and does not include information on factors described in 26 CFR 54.9816-8T(c)(4)(v), 29 CFR 2590.716-8(c)(4)(v), or 45 CFR 149.510(c)(4)(v) (regarding prohibited considerations). When considering the additional information listed above, the certified IDR entity should not give weight to the information to the extent it is not credible, does not relate to either party's offer for the payment amount for the qualified IDR service, or is included in the QPA calculation or other credible information. The Departments note that these final rules do not require certified IDR entities to default to the offer closest to the QPA or to apply a presumption in favor of that offer. Rather, these final rules specify that certified IDR entities should select the offer that best represents the value of the air ambulance service under dispute after considering the QPA and all permissible information submitted by the parties. D. The Certified IDR Entity's Written Decision Under section 9816(c)(7) of the Code, section 716(c)(7) of ERISA, and section 2799A-1(c)(7) of the PHS Act, the Departments are required to publish a variety of information relating to the Federal IDR process, including the number of times a payment amount determined or agreed to under this process exceeds the QPA; the amount of each offer submitted in the Federal IDR process expressed as a percentage of the QPA; and any other information specified by the Departments. The statute also instructs certified IDR entities to submit to the Departments such information as the Departments determine necessary to carry out the provisions of section 9816(c) of the Code, section 716(c) of ERISA, and section 2799A-1(c) of the PHS Act, which include these reporting requirements as well as the Departments' obligations to establish and oversee the Federal IDR process. The Departments have determined it is necessary under this provision to require certified IDR entities to submit certain information, including a written statement of the certified IDR entity's reasons for a particular determination of an out-of-network rate. Under the October 2021 interim final rules, the certified IDR entity must explain its payment determination and the underlying rationale in a written decision submitted to the parties and the Departments, in a form and manner specified by the Departments. The October 2021 interim final rules also required the certified IDR entity to include in its written decision an explanation of the credible information that the certified IDR entity determined demonstrated that the QPA was materially different from the appropriate out-of-network rate if the certified IDR entity did not choose the offer closest to the QPA. As stated earlier in this preamble, on February 23, 2022, the District Court in Texas Medical Association issued a memorandum opinion and order that invalidated the requirement to provide an explanation of the credible information that the certified IDR entity determined demonstrated that the QPA was materially different from the appropriate out-of-network rate (but not the general requirement that a certified IDR entity issue a written decision). The Departments are of the view that, in all cases, a written decision with a comprehensive discussion of the rationale for the decision is important to ensure that the parties understand the outcome of a payment determination under the Federal IDR process. The Departments note that commenters generally supported the requirement that certified IDR entities provide a written rationale for determinations. The Departments agree with commenters' assertions that the certified IDR entity should be required to provide an explanation for its decision in all cases, and not only when the offer furthest from the QPA is determined to best represent the value of the qualified IDR item or service. This requirement will ensure that all parties understand the certified IDR entity's payment determination and how the various information was considered. The Departments are finalizing standards for the written decision that are intended to achieve transparency and consistency in the Federal IDR process. Accordingly, similar to the October 2021 interim final rules these final rules require that the certified IDR entity explain in all cases its determination in a written decision provided to the parties and the Departments, in a form and manner specified by the Departments in separate guidance. Additionally, these final rules continue to require that the rationale be included in the written decision. In response to comments requesting additional transparency and explanation, these final rules also provide that the certified IDR entity's written decision must include an explanation of its determination, including what information the certified IDR entity determined demonstrated that the offer selected as the out-of-network rate is the offer that best represents the value of the qualified IDR item or service, including the weight given to the QPA and any additional credible information submitted in accordance with these final rules. This requirement will help ensure that certified IDR entities carefully evaluate all credible information and promote transparency with respect to payment determinations. These final rules also provide that, if the certified IDR entity relies on additional information or additional circumstances in selecting an offer, its written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the QPA. The Departments are of the view that, in these cases, the certified IDR entity should provide this additional explanation so that the Departments may fulfill their statutory functions to monitor and to report on how often, and why, an offer that is selected exceeds the QPA for a given qualified IDR item or service. Additionally, this requirement will provide the Departments with valuable information to inform future policy making, in particular, policy making related to the QPA methodology. As stated elsewhere in this preamble, the Departments are committed to establishing a reasonable and fair Federal IDR process. Finally, the Departments are also including two technical corrections to address a regulatory cross-references in the provisions that set forth the requirements for the certified IDR entity to include a rationale for its written decision for both air ambulance and non-air ambulance qualified IDR items and services in monthly reporting to the Departments, and to clarify that the certified IDR entity should report to the Departments the extent to which the decision relied on 26 CFR 54.9816-8(c)(4)(iii)(B)-(D), 29 CFR 2590.716-8(c)(4)(iii)(B)-(D), and 45 CFR 149.510(c)(4)(iii)(B)-(D). This requirement aligns the reporting requirement with the requirement for the written decision, and with the intent of the October 2021 interim final rules to gather such information. III. Applicability of the Final Rules These rules finalize certain provisions of the July 2021 and October 2021 interim final rules and address the decisions in Texas Medical Association and LifeNet. The July 2021 and October 2021 interim final rules apply for plan years (in the individual market, policy years) beginning on or after January 1, 2022, except to the extent provided below. The final rules that implement the requirements related to the additional information that must be provided with each initial payment or notice of denial of payment if the QPA is based on a downcoded service code or modifier are applicable with respect to items or services furnished on or after October 25, 2022, for plan years (in the individual market, policy years) beginning on or after January 1, 2022. With respect to the additional information that must be provided with each initial payment or notice of denial of payment if a QPA is based on a downcoded service code or modifier, the Departments recognize that plans and issuers often provide these notices through an automated or other streamlined system for efficiency and that plans and issuers may need additional time to update their operating systems to amend the notices that are currently generated to satisfy the QPA disclosure requirements under the July 2021 interim final rules. Plans and issuers may use reasonable methods to provide this additional disclosure with the initial payment or notice of denial of payment while plan or issuer systems and procedures are updated to provide the additional notice in a more streamlined and automated manner. Even when using other reasonable methods, plans and issuers must provide the required information starting on the date these final rules are applicable to the relevant plan or policy and in accordance with the timeframes specified in the July 2021 interim final rules. The Departments expect that plans and issuers will work to make sure that systems are updated in a timely fashion, and the Departments may provide additional guidance, as warranted. For requirements that finalize certain provisions of the October 2021 interim final rules, the final rules addressing the payment determination standards for certified IDR entities, written decisions, and reporting are applicable with respect to items or services provided or furnished on or after October 25, 2022, for plan years (in the individual market, policy years) beginning on or after January 1, 2022. This approach will ensure uniformity and predictability in standards for qualified IDR items and services (including between non-air ambulance items and services and air ambulance services, to the extent applicable), and will allow time for the Departments to provide updated guidance to certified IDR entities and stakeholders. If any provision in this rulemaking is held to be invalid or unenforceable facially, or as applied to any person, plaintiff, or circumstance, the provision shall be severable from the remainder of this rulemaking, and shall not affect the remainder thereof, and the invalidation of any specific application of a provision shall not affect the application of the provision to other persons or circumstances. IV. Regulatory Impact Analysis A. Summary The Departments have examined the effects of these final rules as required by Executive Order 12866, 40 Executive Order 13563, 41 the Paperwork Reduction Act of 1995, 42 the Regulatory Flexibility Act, 43 section 202 of the Unfunded Mandates Reform Act of 1995, 44 Executive Order 13132, 45 and the Congressional Review Act. 46 ******** 40 Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993). 41 Improving Regulation and Regulatory Review, 76 FR 3821 (Jan. 18, 2011). 42 44 U.S.C. 3506(c)(2)(A) (1995). 43 5 U.S.C. 601 et seq. (1980). 44 2 U.S.C. 1501 et seq. (1995). 45 Federalism, 64 FR 153 (Aug. 4, 1999). 46 5 U.S.C. 804(2) (1996). ******** B. Executive Orders 12866 and 13563 Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits 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 costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Under Executive Order 12866, "significant" regulatory actions are subject to review by the Office of Management and Budget (OMB). Section 3(f) of the Executive order defines a "significant regulatory action" as an action that is likely to result in a rule: (1) having an annual effect on the economy of $100 million or more, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities (also referred to as "economically significant"); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive order. Based on the Departments' estimates, OMB's Office of Information and Regulatory Affairs has determined this rulemaking is "economically significant" under section 3(f)(1) of Executive Order 12866 as measured by the $100 million threshold. 47 Therefore, the Departments have prepared a Regulatory Impact Analysis that presents the costs, benefits, and transfers associated with this rulemaking. Pursuant to the Congressional Review Act, OMB has designated these final rules as a "major rule," as defined by 5 U.S.C. 804(2). ******** 47 This rulemaking builds on the July 2021 and October 2021 interim final rules described in this preamble. The interim final rules were deemed to be economically significant. The economic analyses for each of these interim final rules can be found in the Federal Register at 86 FR 36872 and 86 FR 55980. ******** C. Need for Regulatory Action On December 27, 2020, the CAA, which includes the No Surprises Act, was enacted. 48 The No Surprises Act provides Federal protections against surprise billing by limiting out-of-network cost sharing and prohibiting balance billing in many of the circumstances in which surprise bills arise most frequently. ******** 48 Pub. L. 116-260 (Dec. 27, 2020). ******** On July 13, 2021, the Departments published the July 2021 interim final rules. 49 The July 2021 interim final rules implemented provisions of the No Surprises Act to protect participants, beneficiaries, and enrollees in group health plans and group and individual health insurance coverage from surprise medical bills when they receive emergency services, non-emergency services furnished by nonparticipating providers with respect to patient visits to certain participating facilities, and air ambulance services provided by nonparticipating providers of air ambulance services. ******** 49 86 FR 36872 (July 13, 2021). ******** On October 7, 2021, the Departments published the October 2021 interim final rules. 50 The October 2021 interim final rules build on the July 2021 interim final rules and implement the Federal IDR process. 51 The October 2021 interim final rules generally apply to group health plans and health insurance issuers offering group or individual health insurance coverage (including grandfathered health plans) with respect to plan years (in the individual market, policy years) beginning on or after January 1, 2022; and to health care providers and facilities, providers of air ambulance services, and certified IDR entities beginning on January 1, 2022 with respect to items and services furnished during a plan year (in the individual market, policy year) beginning on or after January 1, 2022. ******** 50 86 FR 55980 (October 7, 2021). 51 The July 2021 and October 2021 interim final rules also include interim final regulations under 5 U.S.C. 8902(p) issued by OPM that specify how certain provisions of the No Surprises Act apply to health benefit plans offered by carriers under the Federal Employees Health Benefits Act. The rules apply to carriers in the FEHB Program with respect to contract years beginning on or after January 1, 2022. ******** On February 23, 2022, the District Court in Texas Medical Association issued a memorandum opinion and order that vacated portions of the October 2021 interim final rules governing aspects of the Federal IDR process, as discussed earlier in this preamble. On July 26, 2022, the District Court in LifeNet issued a memorandum opinion and order that vacated additional portions of the October 2021 interim final rules, as discussed earlier in this preamble. In response to the decisions in Texas Medical Association and LifeNet and comments received on the October 2021 interim final rules and July 2021 interim final rules, these final rules address certain issues critical to the implementation and effective operation of the Federal IDR process, including the disclosure requirements relating to information that group health plans and health insurance issuers offering group or individual health insurance coverage must share about the QPA, and certain requirements related to consideration of information when a certified IDR entity makes a payment determination under the Federal IDR process. i. Final Rules on Information to be Shared About the Qualifying Payment Amount As described earlier in this preamble, the July 2021 interim final rules require plans and issuers to make certain disclosures with each initial payment or notice of denial of payment in cases in which the recognized amount with respect to an item or service furnished by a nonparticipating provider or nonparticipating emergency facility, or the amount upon which cost sharing is based for air ambulance services furnished by a nonparticipating provider of air ambulance services, is the QPA. After review of the comments on the July 2021 interim final rules and October 2021 interim final rules, the Departments are finalizing parts of the July 2021 interim final rules to add a new definition and make changes to require additional information about the QPA that is provided by a plan or issuer with an initial payment or notice of denial of payment in certain cases. These disclosures are required in cases in which the recognized amount with respect to an item or service furnished by a nonparticipating provider or nonparticipating emergency facility, or the amount upon which cost sharing is based for air ambulance services furnished by a nonparticipating provider of air ambulance services, is the QPA. Specifically, these final rules provide a definition of the term "downcode" to mean the alteration by a plan or issuer of a service code to another service code, or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower QPA than the service code or modifier billed by the provider, facility, or provider of air ambulance services. These final rules also specify that when a QPA is calculated based on a downcoded service code or modifier, in addition to the information already required to be provided with an initial payment or notice of denial of payment under the July 2021 interim final rules, a plan or issuer must provide a statement that the claim was downcoded; an explanation of why the claim was downcoded, including a description of which service codes were altered, if applicable, and a description of which modifiers were altered, added, or removed, if applicable; and the amount that would have been the QPA had the service code or modifier not been downcoded. The Departments are of the view that this additional disclosure of information about the QPA will be helpful to ensure that providers, facilities, and providers of air ambulance services receive the information regarding the QPA that may assist in their meaningful participation in open negotiation and in the Federal IDR process in all payment disputes that involve qualified items or services that have been subject to downcoding. In particular, in cases in which the plan or issuer has downcoded the billed claim, it is of particular importance that the provider, facility, or provider of air ambulance services has information regarding both the QPA (based on the downcoded service code or modifier) and the amount that would have been the QPA had the service code or modifier not been downcoded in order to ascertain what information will demonstrate that the provider's, facility's, or provider of air ambulance services' offer best represents the value of the item or service and aid the certified IDR entity in selecting an offer that best represents the value of the item or service provided. ii. Final Rules on Payment Determinations Under the Federal IDR Process As discussed earlier in this preamble, the October 2021 interim final rules provided that, not later than 30 business days after the selection of the certified IDR entity, the certified IDR entity must select one of the offers submitted by the plan or issuer or the provider, facility, or provider of air ambulance services to be the out-of-network rate for the qualified IDR item or service. In determining which offer to select, the October 2021 interim final rules provided that the certified IDR entity must select the offer closest to the QPA unless the certified IDR entity were to determine that additional permissible information demonstrated that the QPA is materially different from the appropriate out-of-network rate, or if the offers are equally distant from the QPA but in opposing directions. A key goal in facilitating consistency in the Federal IDR process through the October 2021 interim final rules was to ensure a level of predictability in outcomes in the Federal IDR process. In the Departments' view, greater predictability in the Federal IDR process would encourage parties to settle disputes through open negotiation or earlier through the offer and acceptance of an adequate initial payment, which would increase efficiencies in how disputes are handled and ultimately lead to lower administrative costs associated with health care. As articulated earlier in this preamble, in light of the Texas Medical Association and LifeNet decisions, and in response to comments received on these provisions, the Departments are finalizing standards for making payment determinations that are intended to lead to greater predictability and regularity in the Federal IDR process. Accordingly, these final rules require that, in determining which offer to select during the Federal IDR process, the certified IDR entity must consider the QPA for the applicable year for the same or similar item or service. The certified IDR entity must then consider all additional information submitted by a party to determine which offer best reflects the appropriate out-of-network rate, provided that the information relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and does not include information that the certified IDR entity is prohibited from weighing in making the payment determination. In considering this additional information, the certified IDR entity should evaluate whether information that is offered is credible and should not give weight to information that is not credible. The appropriate out-of-network rate must be the offer that the certified IDR entity determines best represents the value of the qualified IDR item or service. For non-air ambulance items and services, this information includes information related to the following factors: (1) the level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (such as those endorsed by the consensus-based entity authorized in section 1890 of the Social Security Act); (2) the market share held by the provider or facility or that of the plan or issuer in the geographic region in which the qualified IDR item or service was provided; (3) the acuity of the participant, beneficiary, or enrollee receiving the qualified IDR item or service, or the complexity of furnishing the qualified IDR item or service to the participant, beneficiary, or enrollee; (4) the teaching status, case mix, and scope of services of the facility that furnished the qualified IDR item or service, if applicable; and (5) demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility, as applicable, and the plan or issuer, as applicable, during the previous 4 plan years. Under these final rules, the certified IDR entity must also consider information related to the offer provided in a response to a request from the certified IDR entity. The certified IDR entity must also consider additional information submitted by a party, provided the information relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and does not include information that the certified IDR entity is prohibited from weighing in making the payment determination under section 9816(c)(5)(D) of the Code, section 716(c)(5)(D) of ERISA, and section 2799A-1(c)(5)(D) of the PHS Act. In considering either form of information, the certified IDR entity should evaluate whether the information is credible and should not give weight to information that is not credible. When considering the additional credible information under 26 CFR 54.9816-8(c)(4)(iii), 29 CFR 2590.716-8(c)(4)(iii), and 45 CFR 149.510(c)(4)(iii), the certified IDR entity should evaluate whether the information is already accounted for by any of the other credible information submitted by the parties. Because the certified IDR entity must consider the QPA, the certified IDR entity should always consider whether the additional credible information is already accounted for by the QPA and should avoid giving weight to information related to a factor if the certified IDR entity determines the information was already accounted for in the calculation of the QPA, to avoid weighting the same information twice. In addition, if the parties submit credible information related to more than one of the additional factors, the certified IDR entity should also consider whether the information submitted regarding those factors is already accounted for by information submitted relating to other credible information already before the certified IDR entity in relation to another factor and, if so, should not weigh the information more than once. Regarding air ambulance services, these final rules state that the certified IDR entity must consider the QPA for the applicable year for the same or similar service and then consider all additional permissible information to determine the appropriate out-of-network rate. In considering this additional information, the certified IDR entity should evaluate whether information that is offered is credible and should not give weight to information that is not credible. For air ambulance services, this information includes information related to the following factors: (1) quality and outcomes measurements of the provider that furnished the air ambulance services; (2) the acuity of the condition of the participant or beneficiary receiving the air ambulance service, or the complexity of furnishing the service to the participant or beneficiary; (3) training, experience, and quality of the medical personnel that furnished the air ambulance services; (4) ambulance vehicle type, including the clinical capability level of the vehicle; (5) population density of the point of pick-up; and (6) demonstrations of good faith efforts (or lack thereof) by the disputing parties to enter into network agreements with each other, as well as, if applicable, contracted rates between the parties during the previous 4 plan years. After the certified IDR entity has reviewed and selected the offer it determines best represents the value of the qualified IDR item or service as the out-of-network rate, the certified IDR entity must explain its determination in a written decision submitted to the parties and the Departments, in a form and manner specified by the Departments. These final rules require that the certified IDR entity's written decision must include an explanation of what information the certified IDR entity determined demonstrated that the offer selected as the out-of-network rate is the offer that best represents the value of the qualified IDR item or service, including the weight given to the QPA and any additional credible information submitted in accordance with these final rules. If the certified IDR entity relies on any additional information in selecting an offer, the written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the QPA. iii. Summary of Impacts Plans, issuers, third-party administrators (TPAs), Federal Employees Health Benefits (FEHB) Program carriers, health care providers, facilities, providers of air ambulance services, and certified IDR entities will incur costs to comply with the requirements in these final rules. However, these final rules will help ensure that the payment determination in the Federal IDR process is a more consistent process for providers, facilities, providers of air ambulance services, plans, and issuers. These final rules will improve transparency in the Federal IDR process. This increased transparency will aid in the open negotiation process, the decision whether to initiate the Federal IDR process, and the determination of the amount a provider, facility, or provider of air ambulance services submits as an offer. Therefore, the Departments have determined the benefits of these final rules justify the costs. This regulatory action finalizes certain provisions in the July 2021 interim final rules and the October 2021 interim final rules, including changes to remove the language vacated by the District Court in Texas Medical Association and LifeNet. This cost-benefit analysis focuses on the incremental costs of complying with the requirements that are included in these final rules. One baseline assumption for this analysis is the existence of the requirements of the July 2021 and October 2021 interim final rules, with a second baseline assumption being the use of a comparison with a hypothetical state of the world absent those interim final rules. As discussed in the analysis of the July 2021 interim final rules, the total annualized cost associated with the July 2021 interim final rules is $2,252 million, using the 7 percent discount rate. 52 As discussed in the analysis of the October 2021 interim final rules, the total annualized cost associated with the October 2021 interim final rules is $517 million, using the 7 percent discount rate. 53 The Departments consider these cost estimates to be reflected in the analytic baseline of these final rules and to form a subset of total costs of these final rules for the purposes of this cost-benefit analysis relative to the hypothetical state of the world absent the July 2021 and October 2021 interim final rules. 54 As noted in Table 1 (Accounting Statement) the Departments estimate the additional total annualized cost associated with the parts these final rules to be $5.9 million, using the 7 percent discount rate. ******** 52 As discussed in the analysis of the July 2021 interim final rules, the total annualized cost associated with the July 2021 interim final rules is $2,177 million, using the 3 percent discount rate. The Departments note that these cost estimates have not been updated. 53 As discussed in the analysis of the October 2021 interim final rules, the total annualized cost associated with the October 2021 interim final rules is $491 million, using the 3 percent discount rate. The Departments note that these cost estimates have not been updated. 54 The Departments are accounting for the additional costs associated with these final rules due to parts of the July 2021 interim final rules and October 2021 interim final rules being finalized. For those parts being finalized, the Texas Medical Association and LifeNet decisions do not impact the quantified costs. ******** To avoid repeating the analysis of the July 2021 and October 2021 interim final rules, only a short summary of the benefits and costs is provided, and readers are directed to the analysis in the July 2021 and October 2021 interim final rules for more detail. Numbers in this analysis may not match numbers in the analysis for the July 2021 and October 2021 interim final rules because the estimates have been updated with the most current data. However, the methodology remains the same, except for the calculation of the burden to prepare the certified IDR entity's written decision for payment determinations, as explained later in this section. The Departments also discuss the impacts of changes made by these final rules is this section. In accordance with OMB Circular A-4, Table 1 depicts an accounting statement summarizing the Departments' assessment of the benefits, costs, and transfers associated with this regulatory action. The Departments are unable to quantify all benefits, costs, and transfers associated with this regulatory action, but have sought, where possible, to describe these non-quantified impacts. The effects in Table 1 reflect non-quantified impacts and estimated direct monetary costs resulting from the provisions of these final rules. D. Affected Entities These final rules will affect health care providers, health care facilities, providers of air ambulance services, group health plans, issuers, TPAs, FEHB carriers, and certified IDR entities. Based on data from 2020, CMS estimated that there were 1,477 issuers in the U.S. health insurance market, of which 1,212 served the individual market, 6 served the student health insurance market, 623 served the small group market, and 784 served the large group market. 55 Further, of the plans that filed a Form 5500 in 2019, 30,181 plans were self-insured. 56 Additionally, in the October 2021 interim final rules, the Departments previously estimated that there are 205 TPAs. 57 The Departments also estimate that there are 44 FEHB carriers. While there is a significant amount of research that demonstrates the prevalence of surprise billing, the Departments do not have data on the percentage of surprise bills covered by health insurance issuers and self-insured plans. However, given the size of health insurance issuers and the scope of their activities, the Departments assume that all health insurance issuers, TPAs, and FEHB carriers will be affected by these final rules. ******** 55 Centers for Medicare and Medicaid Services. "Medical Loss Ratio Data and System Resources" (2020). https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr. 56 Employee Benefits Security Administration. "Group Health Plans Report." (July 2021). https://www.dol.gov/sites/dolgov/files/EBSA/researchers/statistics/retirement-bulletins/annual-report-on-self-insured-group-health-plans-2022-appendix-a.pdf. 57 Non-issuer TPAs based on data derived from the 2016 Benefit Year reinsurance program contributions. ******** In 2019, 183 million individuals had employer-sponsored coverage and 33.2 million had other private insurance, including individual market insurance. 58 The Departments do not expect that these final rules will directly affect individuals with private health coverage who visit an emergency room, visit a health care facility, 59 or are transported by an air ambulance, as these final rules contain only provisions that affect the relationships among plans and issuers; providers, facilities, and providers of air ambulance services; and certified IDR entities. However, the Departments estimate that these final rules will indirectly affect covered individuals, as the outcomes of payment disputes will have implications for premiums. ******** 58 Employee Benefits Security Administration. "Health Insurance Coverage Bulletin." (March 2020). https://www.dol.gov/sites/dolgov/files/EBSA/researchers/data/health-and-welfare/health-insurance-coverage-bulletin-2020.pdf. 59 Health care facility is defined in the July 2021 interim final rules. See 26 CFR 54.9816-3T; 29 CFR 2590.716-3; and 45 CFR 149.30. ******** In the October 2021 interim final rules, the Departments estimated that there are 16,992 emergency and other health care facilities, including 6,090 hospitals, 60 29,227 diagnostic and medical laboratories, 61 270 independent freestanding emergency departments, 62 9,280 ambulatory surgical centers, 63 and 1,352 critical access hospitals. 64 These entities will also be affected by these final rules. ******** 60 American Hospital Association. "Fast Facts on U.S. Hospitals, 2021." (January 2021). https://www.aha.org/statistics/fast-facts-us-hospitals. 61 IBIS World. Definitive Healthcare. "Diagnostic & Medical Laboratories Industry in the US--Market Research Report?" (May 2021). https://www.ibisworld.com/industry-statistics/number-of-businesses/diagnostic-medical-laboratories-united-states/. 62 Emergency Medicine Network. "2018 National Emergency Department Inventory." (2021). https://www.emnet-usa.org/research/studies/nedi/nedi2018/. 63 Definitive Healthcare. "How Many Ambulatory Surgery Centers are in the US?" (April 2019). https://www.definitivehc.com/blog/how-many-ascs-are-in-the-us. 64 Flex Monitoring Team. "Historical CAH Data." https://www.flexmonitoring.org/historical-cah-data- ******** In the October 2021 interim final rules, the Departments also estimated that in 2018, the current year for which data are available, there were 1,114 air ambulance bases in the United States. 65 The Departments do not have data on the number of providers of air ambulance services that submit out-of-network claims; however, given the prevalence of out-of-network billing among providers of air ambulance services, the Departments assume that all businesses in the industry will be affected by these final rules. ******** 65 Assistant Secretary for Planning and Evaluation (ASPE) Office of Health Policy. "Air Ambulance Use and Surprise Billing" (September 2021). https://aspe.hhs.gov/sites/default/files/2021-09/aspe-air-ambulance-ib-09-10-2021.pdf. ******** Furthermore, in the October 2021 interim final rules, the Departments estimated that 140,270 physicians, on average, bill on an out-of-network basis and will be affected by these final rules. 66 These final rules are also expected to affect non-physician providers who bill on an out-of-network basis. The Departments lack data on the number of non-physician providers who would be impacted. ******** 66 Please see the October 2021 interim final rules for more information on how these estimates were obtained. ******** Finally, there are currently 11 certified IDR entities that will be affected by these final rules. 67 The number of certified IDR entities may increase or decrease due to new IDR entities applying for certification or the Departments revoking certification because of noncompliance with the certification requirements or a certified IDR entity's inability to handle its caseload. ******** 67 As of July 31, 2022, there are 11 certified IDR entities. Center for Medicare and Medicaid Services. "List of Certified Independent Dispute Resolution Entities." https://www.cms.gov/nosurprises/Help-resolve-payment-disputes/certified-IDRE-list. ******** E. Benefits These final rules will require plans and issuers to provide additional information about the QPA with an initial payment or notice of denial of payment in cases involving downcoding, without the provider, facility, or provider of air ambulance services having to ask for this information. These final rules will be helpful to the provider, facility, or provider of air ambulance services in developing an offer or submitting information if it believes that the QPA calculated by the plan or issuer does not best represent the value of the item or service. Furthermore, the requirement to disclose this additional information will increase transparency in the Federal IDR process. This increased transparency will aid in the open negotiation process, the decision whether to initiate the Federal IDR process, and the determination of the amount a provider, facility, or provider of air ambulance services submits as an offer. Further, these final rules will help a provider, facility, or provider of air ambulance services ascertain what information will demonstrate that the provider's, facility's, or provider of air ambulance services' offer best represents the value of the item or service and aid the certified IDR entity in selecting an offer that best represents the value of the item or service. In addition, these final rules require that certified IDR entities must consider the QPA and then must consider all additional permissible information submitted by a party to determine which offer best reflects the appropriate out-of-network rate, provided the information relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and does not include information that the certified IDR entity is prohibited from weighing in making the payment determination under section 9816(c)(5)(D) of the Code, section 716(c)(5)(D) of ERISA, and section 2799A-1(c)(5)(D) of the PHS Act. In considering this additional information, the certified IDR entity should evaluate whether information that is offered is credible and should not give weight to information that is not credible. The appropriate out-of-network rate must be the offer that the certified IDR entity determines best represents the value of the qualified IDR item or service. Because the certified IDR entity must consider the QPA, the certified IDR entity should always consider whether the additional credible information is already accounted for by the QPA and should not give weight to information related to a factor if the certified IDR entity determines the information was already accounted for in the calculation of the QPA, to avoid weighting the same information twice. In addition, if the parties submit credible information related to more than one of the additional factors, the certified IDR entity should also consider whether the information submitted regarding each of those factors is already accounted for by information submitted relating to other credible information already before the certified IDR entity in relation to another factor and, if so, should not weigh such information more than once. These final rules will help ensure that the payment determination in the Federal IDR process is a consistent process for providers, facilities, providers of air ambulance services, plans, and issuers. The certified IDR entity's written decision must include an explanation of what information the certified IDR entity determined demonstrated that the offer selected as the out-of-network rate is the offer that best represents the value of the qualified IDR item or service, including the weight given to the QPA and any additional credible information submitted in accordance with these final rules. If the certified IDR entity relies on any additional information in selecting an offer, the written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the qualifying payment amount. These final rules will help ensure that certified IDR entities carefully evaluate all credible non-duplicative information. These final rules will also promote transparency with respect to the certified IDR entity's payment determination. F. Costs This regulatory action seeks to minimize costs to providers, facilities, providers of air ambulance services, plans, issuers, TPAs, and certified IDR entities. i. Federal IDR Process for Nonparticipating Providers or Nonparticipating Emergency Facilities As explained in the analysis provided in the October 2021 interim final rules, the Departments estimate that there will be approximately 17,435 claims submitted to the Federal IDR process each year. 68 ******** 68 For more details, please refer to the Paperwork Reduction Act analysis, found in section V of this preamble. ******** After the selected certified IDR entity has reviewed the offers, the certified IDR entity must notify the provider or facility and the plan, issuer, or FEHB carrier and the Departments of the payment determination and the reason for such determination, in a form and manner specified by the Departments. 69 The Departments estimate that the annual cost to prepare the notice of the certified IDR entity's determination is $1.2 million. For more information on this calculation, please refer to the Paperwork Reduction Act analysis, found in section V of this preamble. ******** 69 IDR Payment Determination Notification (section 716(c)(5)(A) of ERISA). ******** In addition to the information already required to be provided with an initial payment or notice of denial of payment under the July 2021 interim final rules, including the QPA, these final rules require that a plan or issuer must provide, if applicable, an acknowledgement if all or any portion of the claim was downcoded; an explanation of why the claim was downcoded, including a description of which service codes were altered, if any, and a description of any modifiers that were altered, added, or removed, if any; and the amount that would have been the QPA had the service code or modifier not been downcoded. In the July 2021 interim final rules, the Departments estimated that plans and issuers will be required to provide documents related to the QPA along with the initial payment or notice of denial of payment for approximately 5,068,512 claims annually from nonparticipating providers or facilities. 70 The Departments assume that approximately 10 percent of those claims will involve downcoding and estimate that the annual cost to prepare the required documentation and attach it to each initial payment or notice of denial of payment sent to the nonparticipating provider or facility is $4.3 million. For more information on this calculation, please refer to the Paperwork Reduction Act analysis, found in section V of this preamble. ******** 70 See 86 FR 36872 for more information on this estimate. ******** In total, the Departments estimate that certified IDR entities, TPAs, and issuers will incur costs of approximately $5.5 million annually to provide, as applicable, payment determination notifications and the additional QPA information required under these rules. ii. Federal IDR Process for Nonparticipating Providers of Air Ambulance Services As explained in the October 2021 interim final rules, the Departments assume that 10 percent of out-of-network claims for air ambulance services will be submitted to the Federal IDR process, 71 which would result in nearly 5,000 annual air ambulance payment determinations via the Federal IDR process. 72 ******** 71 The Departments utilize 10 percent as an assumption to estimate the overall number of providers of air ambulance services billing out-of-network at least once in a year. 72 The Departments estimate that of the 216.2 million individuals with employer-sponsored and other private health coverage (183 million individuals with employer-sponsored health coverage and 33.2 million individuals with other private coverage), there are 33.3 air transports per 100,000 individuals, of which 69 percent result in out-of-network bills. The Departments assume that 10 percent of the out-of-network bills will end up in the Federal IDR process. This is calculated as: 216,200,000 individuals x 0.000333 air transports per individual x 69% x 10%= 4,968. ******** After the certified IDR entity has reviewed and selected the offer, the certified IDR entity must notify the provider of air ambulance services and the plan, issuer, or FEHB carrier and the Departments of the payment determination and include the written decision explaining such determination. 73 The Departments estimate that the annual cost to prepare this notice of the certified IDR entity's determination for air ambulance claims is $0.3 million. For more details, please refer to the Paperwork Reduction Act analysis, found in section V of this document. ******** 73 IDR Payment Determination Notification (section 716(c)(5)(A) of ERISA). ******** Similar to these final rules' provisions related to the disclosure of downcoded claims for nonparticipating providers and nonparticipating emergency facilities, these final rules require that a plan or issuer must provide, if applicable, an acknowledgement if all or any portion of the claim pertaining to air ambulance services was downcoded; an explanation of why the claim was downcoded, including a description of which service codes were altered, if any, and a description of any modifiers that were altered, added, or removed, if any; and the amount that would have been the QPA had the service code or modifier not been downcoded. The Departments estimate that plans and issuers will be required to provide these documents for approximately 49,676 claims annually from providers of air ambulance services. 74 The Departments assume that approximately 10 percent of those claims will involve downcoding and estimate that the annual cost to prepare the required documentation and attach it to each initial payment or notice of denial of payment sent to the providers of air ambulance service is approximately $42,000. For more details, please refer to the Paperwork Reduction Act analysis, found in section V of this preamble. ******** 74 The Departments estimate that of the 216.2 million individuals with employer-sponsored and other private health coverage, there are 33.3 air transports per 100,000 individuals, of which 69 percent result in an out-of-network bill. The number of air ambulance claims is estimated as: 216,200,000 individuals x 0.000333 air transports per individual x 69% = 49,676. ******** In total, the Departments estimate that certified IDR entities, TPAs, and issuers will incur costs of approximately $0.4 million annually to provide payment determination notifications and the additional QPA information required under these final rules. iii. Summary The Departments estimate the total annual cost associated with these final rules to be $5.9 million with $4.3 million annually attributable to the additional information related to the QPAs, $1.2 million annually attributable to the certified IDR entity's payment determination for nonparticipating provider and emergency facility claims, and $0.3 million annually attributable to the certified IDR entity's payment determination notification for nonparticipating provider of air ambulance service claims. G. Transfers These final rules make no changes that impact the transfers as described in the July 2021 and October 2021 interim final rules. H. Uncertainty These final rules make no changes that impact the uncertainties as described in the July 2021 and October 2021 interim final rules. I. Regulatory Alternatives Section 6(a)(3)(C)(iii) of Executive Order 12866 requires an economically significant regulation, and encourages other regulations, to include an assessment of the costs and benefits of potentially effective and reasonable alternatives to the planned regulation. A discussion of the regulatory alternatives is included in this section. As described in Section I.E. of this preamble, the District Court in Texas Medical Association and LifeNet vacated provisions in the October 2021 interim final rules addressing how certified IDR entities were to weigh the QPA and the additional factors. The Departments considered the possibility of not replacing the provisions vacated by the District Court. However, in the Departments' view, this would have resulted in uncertainty regarding the Federal IDR process, because certain aspects of the process would be governed by the October 2021 interim final rules as published in the Federal Register, while others would not. This approach could result in confusion on the part of the public and certified IDR entities, likely making the decisions of certified IDR entities less predictable, adding to the uncertainty and the costs of the Federal IDR process. Therefore, the Departments are of the view that it is more appropriate to make changes to the Federal IDR process for both non-air ambulance and air ambulance items and services in these final rules. The Departments considered finalizing the additional factors other than the QPA that a certified IDR entity may consider when submitted by one of the disputing parties without addressing the possibility that these factors may already have been accounted for in the QPA. Numerous comments received on the October 2021 interim final rules highlighted that in many cases, certain factors, such as patient acuity or the complexity of furnishing the qualified IDR item or service to the participant, beneficiary, or enrollee, will already be accounted for in the calculation of the QPA. Commenters acknowledged, however, that there could be instances in which the QPA would not adequately account for the acuity of the patient or complexity of the service: for example, if the complexity of a case is an outlier such that the time or intensity of care exceeds what is typical for the service code. The Departments are of the view that, in many cases, factors that a certified IDR entity may consider other than the QPA will already be reflected in the QPA. The QPA is generally calculated to include characteristics that can affect costs, including medical specialty, geographic region, and patient acuity and case severity, all captured in different billing codes or aspects of the methodology that plans and issuers are required to follow in calculating the QPA. Therefore, weighting additional information that is already taken into account in the calculation of the QPA would be redundant and in the Departments' view, would result in increased administrative burden to the certified IDR entity, potentially resulting in the selection of an offer that does not best reflect the most appropriate value insofar as additional weight would be given to information related to a factor that is already accounted for in the QPA, effectively weighting that information twice. Under these final rules, certified IDR entities must consider the QPA and then must consider all additional information submitted by the parties. To help ensure that the Federal IDR process results in determinations that accurately reflect the fair value of a given item or service, the certified IDR entity should consider all additional information submitted by the parties but should not give weight to information if it is already accounted for by any of the other information submitted by the parties. J. Conclusion and Summary of Economic Impacts The Departments are of the view that these final rules will promote transparency, consistency, and predictability in the Federal IDR process. These final rules provide a market-based approach that will help encourage plans and issuers, and providers, facilities, and providers of air ambulance services to arrive at reasonable payment rates. The Departments estimate that these final rules will impose incremental annual costs of approximately $5.9 million. Over 10 years, the associated costs will be approximately $44.1 million with an annualized cost of $5.9 million, using a 7 percent discount rate. 75 ******** 75 The costs would be $51.5 million over 10-year period with an annualized cost of $5.9 million, applying a 3 percent discount rate. ******** V. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995 (PRA 95) (44 U.S.C. 3506(c)(2)(A)), the Departments solicited comments concerning the information collection requirements (ICRs) included in the July 2021 and October 2021 interim final rules. At the same time, the Departments also submitted ICRs to OMB, in accordance with 44 U.S.C. 3507(d). The Departments received comments that specifically addressed the paperwork burden analysis of the information collection requirements contained in the July 2021 and October 2021 interim final rules. The Departments reviewed these public comments in developing the paperwork burden analysis discussed here. The changes made by these final rules affect the existing OMB control number, 1210-0169. A copy of the ICR for OMB Control Number 1210-0169 may be obtained by contacting the PRA addressee listed in the following sentence or at www.RegInfo.gov. For additional information, contact James Butikofer, Office of Research and Analysis, U.S. Department of Labor, Employee Benefits Security Administration, 200 Constitution Avenue NW, Room N-5718, Washington, DC 20210; or sent to ebsa.opr@dol.gov. The OMB will consider all written comments that they receive on or before September 26, 2022. Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to www.reginfo.gov/public/do/PRAMain. Find this particular information collection by selecting "Currently under 30-day Review--Open for Public Comments" or by using the search function. Comments are invited on: (1) whether the collection of information is necessary for the proper performance of the functions of the Departments, including whether the information will have practical utility; (2) if the information will be processed and used in a timely manner; (3) the accuracy of the Departments' estimates of the burden and cost of the collection of information, including the validity of the methodology and assumptions used; (4) ways to enhance the quality, utility, and clarity of the information collection; and (5) ways to minimize the burden of the collection of information on those who are to respond, including the use of automated collection techniques or other forms of information technology. Group health plans, health insurance issuers, FEHB carriers, and certified IDR entities are responsible for ensuring compliance with these final rules. Accordingly, the Departments refer to costs incurred by plans, issuers, FEHB carriers, and certified IDR entities. However, it is expected that most self-insured group health plans will work with a TPA to meet the requirements of these final rules. The Departments recognize the potential that some of the largest self-insured plans may seek to meet the requirements of these final rules in-house and not use a TPA or other third party. In these cases, those plans will incur the estimated hour burden and cost directly. These final rules add additional burdens to the ICR presented in the October 2021 interim final rules. The following discussion covers the changes being made to the ICR and the additional burden these changes impose, followed by a summary of the ICR. Copies of the ICR may be obtained by contacting the PRA addressee. A. ICRs Regarding Additional Information to Be Shared with the Initial Payment or Notice of Denial of Payment (26 CFR 54.9816-6(d), 29 CFR 2590.716-6(d), and 45 CFR 149.140(d); OMB Control Number: 1210-0169) These final rules specify that where a QPA is calculated based on a downcoded service code, in addition to the information already required to be provided with an initial payment or notice of denial of payment under the July 2021 interim final rules, a plan or issuer must provide, if applicable, a statement that all or a portion of the claim was downcoded; an explanation of why the claim was downcoded, including a description of which service codes were altered, if any, and a description of any modifiers that were altered or added, if any; and the amount that would have been the QPA had the service codes or modifiers not been downcoded. The Departments assume that TPAs will provide this information on behalf of self-insured plans. In addition, the Departments assume that issuers and TPAs will automate the process of preparing and providing this information in a format similar to an explanation of benefits as part of the system to calculate the QPA. The Departments estimate that a total of 1,477 issuers and 205 TPAs will incur a burden to comply with this provision. In the July 2021 interim final rules, the Departments estimated that plans and issuers will be required to provide documents related to QPAs along with the initial payment or notice of denial of payment for approximately 5,068,512 claims annually from nonparticipating providers or facilities. 76 Additionally, the Departments estimated that plans and issuers will be required to provide these documents for approximately 49,676 claims annually from nonparticipating providers of air ambulance services. 77 In the absence of data, the Departments assume that approximately 10 percent, or 511,819, of claims from nonparticipating providers, facilities, and nonparticipating providers of air ambulance services will involve downcoding and that it will take a medical secretary 10 minutes (at an hourly rate of $50.76 78 ) to prepare the required documentation and include it with each initial payment or notice of denial of payment sent to the nonparticipating provider, facility, or provider of air ambulance services. ******** 76 See 86 FR 36872 for more information on this estimate. 77 The Departments estimate that of the 216.2 million individuals with employer-sponsored and other private health coverage, there are 33.3 air transports per 100,000 individuals, of which 69 percent result in an out-of-network bill. The number of air ambulance claims is estimated as: 216,200,000 individuals x 0.000333 air transports per individual x 0.69% = 49,676 claims. 78 Internal DOL calculation based on 2021 labor cost data. For a description of DOL's methodology for calculating wage rates, see https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra- burden-calculations-june-2019.pdf ******** The Departments estimate the additional QPA information will be provided for approximately 506,851 claims from nonparticipating providers or facilities. The annual burden to prepare the required documentation and attach it to each initial payment or notice of denial of payment sent to the nonparticipating providers or facilities will be approximately 84,475 hours annually, with an associated equivalent cost of $4.3 million. 79 The Departments estimate that the additional QPA information will be provided for approximately 4,968 claims from providers of air ambulance services. The annual burden to prepare the required documentation and attach it to each initial payment or notice of denial of payment sent to providers of air ambulance services will be approximately 828 hours annually, with an associated equivalent cost of $42,029. 80 Thus, the total estimated burden to provide the additional QPA information with initial payments or notices of denial of payment sent to the nonparticipating providers, facilities, and providers of air ambulance services, for all issuers and TPAs, will be approximately 85,303 hours annually, with an associated equivalent cost of approximately $4.3 million. 81 As shown in Table 2, the Departments share jurisdiction, and it is estimated that 50 percent of the burden will be accounted for by HHS, 25 percent of the burden will be accounted for by DOL, and 25 percent will be accounted for by Department of the Treasury. Thus, HHS will account for approximately 42,652 hours with an equivalent cost of approximately $2,164,990. DOL and the Department of the Treasury will each account for approximately 21,326 hours with an equivalent cost of approximately $1,082,495. ******** 79 This is calculated as: (5,068,512 documents for nonparticipating providers or facilities) x (10%) x (10 minutes) = 84,475 hours. 84,475 hours x $50.76 = $4,287,951. 80 This is calculated as: (49,676 documents for nonparticipating providers of air ambulance services) x (10%) x (10 minutes) = 828 hours. 828 hours x $50.76 = $42,029. 81 This is calculated as: (5,068,512 documents for nonparticipating providers or facilities + 49,676 documents for nonparticipating providers of air ambulance services) x (10%) x (10 minutes) = 85,303 hours. 85,303 hours x $50.76 = $4,329,980. ******** TABLE 2: Summary Annual Cost and Burden Regarding Information to Be Shared About QPA Starting in 2022 B. ICRs regarding the Certified IDR Entity's Payment Determination Written Decision in the Federal IDR Process for Nonparticipating Providers or Nonparticipating Emergency Facilities (26 CFR 54.9816-8T, 26 CFR 54.9816-8, 29 CFR 2590.716-8, and 45 CFR 149.510; OMB Control Number: 1210-0169) The Departments estimate that 17,435 claims will be submitted as part of the Federal IDR process each year. 82 After the certified IDR entity has reviewed the offers and credible information submitted by the parties and selected an offer, the certified IDR entity must notify the provider, facility, or provider of air ambulance services and the plan, issuer, or FEHB carrier and the Departments of the payment determination and the reason for such determination, in a form and manner specified by the Departments. 83 The certified IDR entity's written decision must include an explanation of the additional non-prohibited information that the certified IDR entity determined demonstrated that the offer selected is the out-of-network rate that best represents the value of the qualified IDR item or service, including the weight given to the QPA and any additional credible information submitted in accordance with these final rules. If the certified IDR entity relies on any additional information in selecting an offer, the written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the qualifying payment amount. 82 In 2020, 10.7 million individuals had employer-sponsored coverage and 1.7 million individuals had other private coverage in New York State, while 183 million individuals had employer-sponsored coverage and 33.2 million individuals had other private coverage nationally. The Departments estimate that New York accounts for 5.7 percent of the private insurance market ((10.7 + 1.7) / (183 + 33.2) = 5.7 percent). ( See Employee Benefits Security Administration. "Health Insurance Coverage Bulletin." (March 2020).) In 2018, New York State had 1,014 IDR decisions, up from 650 in 2017 and 396 in 2016. ( See Adler, Loren. "Experience with New York's Arbitration Process for Surprise Out-of-Network Bills." USC-Brookings Schaeffer on Health Policy. (October 2019).) For purposes of this analysis, the Departments assume that, going forward, New York State will continue to see 1,000 IDR cases each year and that the number of Federal IDR cases will be proportional to that in New York State by share of covered individuals in the private health coverage market. The number of claims in the Federal IDR process is calculated in the following manner: 1,000 / 0.057= 17,435. 83 IDR Payment Determination Notification (section 716(c)(5)(A) of ERISA). The Departments estimate that, on average, it will take a physician and medical billing specialist 0.5 hours to prepare the notice at a composite hourly wage rate of $136.81. 84 The burden for each certified IDR entity will be 0.5 hours, with an equivalent cost of approximately $69.24. Thus, the total cost burden for all certified IDR entities to prepare this notice for Federal IDR claims will be $1.2 million. 85 84 The Departments use a composite wage rate because different professionals will review different types of claims and groups of individuals. The wage rate of a physician is $192.37, and the wage rate of a medical billing specialist is $109.03. (Internal DOL calculation based on 2021 labor cost data. For a description of DOL's methodology for calculating wage rates, see https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra- burden-calculations-june-2019.pdf.) The composite wage rate is estimated in the following manner: ($192.37 x (1/3) + $109.03 x (2/3) = $136.81). 85 17,453 claims x 0.5 hours x $136.81 as the composite wage rate for a physician and medical billing specialist = $1,192,641. The total annual cost burden for certified IDR entities to provide the payment determination notices regarding Federal IDR claims will be $1,192,641. As shown in Table 3, the Departments and OPM share jurisdiction, and it is estimated that 45 percent of the burden will be accounted for by HHS, 25 percent will be accounted for by DOL, 25 percent of the burden will be accounted for by the Department of the Treasury, and 5 percent will be accounted for by OPM. Thus, HHS will account for a cost burden of $536,689. DOL and the Department of the Treasury will each account for a cost burden of $298,160. OPM will account for a cost burden of $59,632. TABLE 3: Summary Annual Cost and Burden Starting in 2022 Regarding Certified IDR Entity's Payment Determination Written Decision in the Federal IDR Process for Nonparticipating Providers or Nonparticipating Emergency Facilities Claims C. ICRs Regarding the Certified IDR Entity's Payment Determination Written Decision in the Federal IDR Process for Nonparticipating Providers of Air Ambulance Services (26 CFR 54.9817-2T, 26 CFR 54.9817-2, 29 CFR 2590.717-2, and 45 CFR 149.520; OMB Control Number: 1210-0169) The Departments estimate there will be 4,968 claims for air ambulance services submitted to the Federal IDR process each year. 86 After the certified IDR entity has reviewed the offers and any submitted credible information, and selected an offer, the certified IDR entity must notify the provider of air ambulance services and the plan, issuer, or FEHB carrier and the Departments of the payment determination and include the written decision explaining such determination. 87 The certified IDR entity's written decision must include an explanation of what information that the certified IDR entity determined demonstrated that the offer selected is the out-of-network rate that best represents the value of the qualified IDR service. This explanation must include the weight given to the QPA and any additional non-prohibited, credible information submitted in accordance with these final rules. If the certified IDR entity relies on any additional information in selecting an offer, the written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the qualifying payment amount. 86 The Departments estimate that of the 183 million individuals with employment-related health insurance and 33.2 million individuals with other private coverage, there are 33.3 air transports per 100,000 individuals, of which 69 percent result in an out-of-network bill. The Departments assume that 10 percent of the out-of-network bills will end up in the Federal IDR process. The number of air ambulance service claims is calculated in the following manner: (183,000,000 individuals + 33,200,000 individuals) x 0.000333 air transports per individual x 69% x 10%= 4,968 claims. 87 IDR Payment Determination Notification (section 716(c)(5)(A) of ERISA). The Departments estimate that, on average, it will take a physician and medical billing specialist working for the certified IDR entity 0.5 hour to prepare the notice of the certified IDR entity's determination at a composite hourly wage rate of $136.81. 88 The burden for each certified IDR entity will be 0.5 hours, with an equivalent cost of approximately $69.24. Thus, the total cost burden for certified IDR entities to provide this notice for air ambulance claims will be $0.3 million. 89 88 The Departments use a composite wage rate because different professionals will review different types of claims and groups of individuals. The wage rate of a physician is $192.37, and the wage rate of a medical billing specialist is $109.03. (Internal DOL calculation based on 2021 labor cost data. For a description of DOL's methodology for calculating wage rates, see https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra- burden-calculations-june-2019.pdf.) The composite wage rate is estimated in the following manner: ($192.37 x (1/3) + $109.03 x (2/3) = $136.81). 89 4,968 air ambulance claims x 0.5 hours x $136.81 as the composite wage rate for a physician and medical billing specialist = $339,836. The total annual cost burden for the certified IDR entities to provide the payment determination notices regarding air ambulance claims will be $339,836. As shown in Table 4, the Departments and OPM share jurisdiction, and it is estimated that 45 percent of the burden will be accounted for by HHS, 25 percent will be accounted for by DOL, 25 percent of the burden will be accounted for by the Department of the Treasury, and 5 percent will be accounted for by OPM. Thus, HHS will account for a cost burden of $152,926. DOL and the Department of the Treasury will each account for a cost burden of $84,959. OPM will account for a cost burden of $16,992. TABLE 4: Summary Annual Cost and Burden Starting in 2022 Regarding Certified IDR Entity's Payment Determination Written Decision in the Federal IDR Process for Air Ambulance Claims Summary The total annual cost burden for certified IDR entities to provide payment determination notices regarding non-air ambulance and air ambulance claims will be $1,532,477. As shown in Table 5, HHS will account for a cost burden of approximately $689,615. DOL and the Department of the Treasury will each account for a cost burden of approximately $383,119. OPM will account for a cost burden of approximately $76,624. TABLE 5: Summary Annual Cost and Burden Starting in 2022 Regarding Certified IDR Entity's Payment Determination Written Decision in the Federal IDR Process for Non-air Ambulance and Air Ambulance Claims These paperwork burden estimates are summarized as follows: Agency: Employee Benefits Security Administration, Department of Labor. Type of Review: Revision of existing collection. Title: Requirements Related to Surprise Billing: Payment Determination OMB Control Number: 1210-0169. Affected Public: Private Sector -- Businesses or other for-profits; not-for-profit institutions. Estimated Number of Respondents: 22,828 Estimated Number of Annual Responses: 163,542 Frequency of Response: Occasionally. Estimated Total Annual Burden Hours: 89,521 Estimated Total Annual Burden Cost: $555,427 VI. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) 90 imposes certain requirements with respect to Federal rules that are subject to the notice and comment requirements of section 553(b) of the Administrative Procedure Act (APA) and are not likely to have a significant economic impact on a substantial number of small entities. Unless the head of an agency determines that a final rule is not likely to have a significant economic impact on a substantial number of small entities, section 604 91 of the RFA requires the agency to present a final regulatory flexibility analysis of these final rules. 90 5 U.S.C. 601 et seq. (1980). 91 5 U.S.C. 604 (1980). The Departments certify that these final rules would not have a significant impact on a substantial number of small entities during the first year. The Departments have prepared a justification for this determination below. A. Affected Small Entities The Small Business Administration (SBA), pursuant to the Small Business Act, 92 defines small businesses and issues size standards by industry. These final rules will affect all health insurance issuers, TPAs, and certified IDR entities. 92 15 U.S.C. 631 et seq. For purposes of analysis under the RFA, the Departments consider an employee benefit plan with fewer than 100 participants to be a small entity. 93 The basis of this definition is found in section 104(a)(2) of ERISA, which permits the Secretary of Labor to prescribe simplified annual reports for plans that cover fewer than 100 participants. Under section 104(a)(3) of ERISA, the Secretary may also provide for exemptions or simplified annual reporting and disclosure for welfare benefit plans. Pursuant to the authority of section 104(a)(3), DOL has previously issued simplified reporting provisions and limited exemptions from reporting and disclosure requirements for small plans, including unfunded or insured welfare plans, which cover fewer than 100 participants and satisfy certain requirements. See 29 CFR 2520.104-20, 2520.104-21, 2520.104-41, 2520.104-46, and 2520.104b-10. While some large employers have small plans, small plans are maintained generally by small employers. Thus, the Departments are of the view that assessing the impact of these final rules on small plans is an appropriate substitute for evaluating the effect on small entities. The definition of small entity considered appropriate for this purpose differs, however, from a definition of small business based on size standards promulgated by the SBA 94 pursuant to the Small Business Act. 95 93 The Departments consulted with the Small Business Administration Office of Advocacy in making this determination, as required by 5 U.S.C. 603(c) and 13 CFR 121.903(c) in a memo dated June 4, 2020. 94 13 CFR 121.201 (2011). 95 15 U.S.C. 631 et seq. (2011). As discussed in the regulatory impact analysis, these final rules will affect health insurance issuers and TPAs. In 2020, there were 205 TPAs 96 and 1,477 issuers in the U.S. health insurance market. 97 Most TPAs would be classified under the North American Industry Classification System (NAICS) code 524292 (Third Party Administration of Insurance and Pension Funds). According to SBA size standards, 98 entities with average annual receipts of $40 million or less are considered small entities. By this standard, the Departments estimate that 63.5 percent of TPAs (130 TPAs) are small under the SBA's size standards. 99 Most health insurance issuers would be classified under the NAICS code 524114 (Direct Health and Medical Insurance Carriers). According to SBA size standards, 100 entities with average annual receipts of $41.5 million or less are considered small entities. By this standard, the Departments estimate that 8.5 percent of issuers (125 issuers), are small under the SBA's size standards. 101 96 Non-issuer TPAs based on data derived from the 2016 Benefit Year reinsurance program contributions. 97 Centers for Medicare and Medicaid Services. "Medical Loss Ratio Data and System Resources" (2020). https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr 98 Available at https://www.sba.gov/document/support--table-size-standards. 99 Based on data from the NAICS Association for NAICS code 524292, the Departments estimate the percent of businesses within the industry of Third Party Administration of Insurance and Pension Funds with less than $40 million in annual sales. (See NAICS Association. "Market Analysis Profile: NAICS Code & Annual Sales." https://www.naics.com/business-lists/counts-by-naics-code/.) 100 Available at https://www.sba.gov/document/support--table-size-standards. 101 Based on data from the NAICS Association for NAICS code 524114, the Departments estimate the percent of businesses within the industry of Direct Health and Medical Insurer Carriers with less than $41.5 million in annual sales. ( See NAICS Association. "Market Analysis Profile: NAICS Code & Annual Sales." https://www.naics.com/business-lists/counts-by-naics-code/.) This estimate may overstate the actual number of small health insurance issuers that may be affected. The Departments expect that few insurance issuers underwriting comprehensive health insurance coverage fall below these size thresholds. Based on data from medical loss ratio (MLR) annual report 102 submissions for the 2020 MLR reporting year, approximately 78 out of 481 issuers of health insurance coverage nationwide had total premium revenue of $41.5 million or less. This estimate may overstate the actual number of small health insurance issuers that may be affected, since over 72 percent of these small issuers belong to larger holding groups, and many, if not all, of these small issuers are likely to have non-health lines of business that will result in their revenues exceeding $41.5 million. However, to produce a conservative estimate, for the purposes of this analysis, the Departments assume 8.5 percent, (125 issuers) are considered small entities. 102 Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html. These final rules will also affect health care providers because the Departments assume that the cost of preparing and delivering the notice of the certified IDR entity's determination is included in the certified IDR entity fees paid by providers, facilities, providers of air ambulance services, plans, issuers, and FEHB carriers. The Departments estimate that 140,270 physicians, on average, bill on an out-of-network basis. The number of small physicians is estimated based on the SBA's size standards. The size standard applied for providers is NAICS 62111 (Offices of Physicians), for which a business with less than $14 million in receipts is considered to be small. By this standard, the Departments estimate that 45.8 percent (64,232 physicians) are considered small under the SBA's size standards. 103 These final rules are also expected to affect non-physician providers who bill on an out-of-network basis. The Departments lack data on the number of non-physician providers who would be impacted. 103 Based on data from the NAICS Association for NAICS code 62111, the Departments estimate the percent of businesses within the industry of Offices of Physicians with less than $14 million in annual sales. ( See NAICS Association. "Market Analysis Profile: NAICS Code & Annual Sales." https://www.naics.com/business-lists/counts-by-naics-code/.) The Departments do not have the same level of data for the air ambulance sub-sector. In 2020, the total revenue of providers of air ambulance services is estimated to be $4.2 billion with 1,114 air ambulance bases. 104 This results in an industry average of $3.8 million per air ambulance base. Accordingly, the Departments are of the view that most providers of air ambulance services are likely to be small entities. 104 ASPE Office of Health Policy. "Air Ambulance Use and Surprise Billing" (September 2021). https://aspe.hhs.gov/sites/default/files/2021-09/aspe-air-ambulance-ib-09-10-2021.pdf. U.S. Small Business Administration. "Table of Small Business Size Standards Matched to North American Industry Classification System Codes." https://www.naics.com/business-lists/counts-by-naics-code/. https://www.sba.gov/sites/default/files/2022-05/Table%20of%20Size%20Standards_Effective%20May%202%202022_Final.pdf. B. Impact of the Final Rules In addition to the information already required to be provided with an initial payment or notice of denial of payment under the July 2021 interim final rules, including the QPA, these final rules require that a plan or issuer must provide, if applicable, an acknowledgement if all or any portion of the claim was downcoded; an explanation of why the claim was downcoded, including a description of which service codes were altered, if any, and a description of any modifiers that were altered, added, or removed, if any; and the amount that would have been the QPA had the service code or modifier not been downcoded. The total annual burden for all issuers and TPAs for providing the additional information related to the QPA is estimated to be 85,303 hours with an equivalent cost of approximately $4.3 million. For more details, please refer to the Paperwork Reduction Act analysis, found in section VI of this preamble. In addition, after the certified IDR entity has reviewed the offers and selected an offer, the certified IDR entity must explain its determination in a written decision submitted to the parties and the Departments, in a form and manner specified by the Departments. The certified IDR entity's written decision must include an explanation of what information the certified IDR entity determined demonstrated that the offer selected is the out-of-network rate that best represents the value of the qualified IDR item or service. This explanation must include the weight given to the QPA and any additional non-prohibited, credible information submitted in accordance with these final rules. If the certified IDR entity relies on any additional information in selecting an offer, the written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the qualifying payment amount. The total estimated annual cost burden for certified IDR entities to provide payment determination notices regarding non-air ambulance Federal IDR claims is estimated to be $1.2 million and the total estimated annual cost burden for certified IDR entities to provide payment determination notices regarding air ambulance Federal IDR claims is estimated to be $0.3 million. The Departments assume for this calculation that half of the cost will fall on the providers, providers of air ambulance services, and facilities and the remaining half will fall on plans, issuers, and FEHB carriers. For more details, please refer to the Paperwork Reduction Act analysis, found in section V of this preamble. To estimate the proportion of the total costs that would fall onto small entities, the Departments assume that the proportion of costs is proportional to the industry receipts. The Departments are of the view that this assumption is reasonable because the number of providers, facilities, and providers of air ambulance services that receive initial and additional information about the QPA is likely to be proportional to the amount of business in which the entity is involved. Applying data from the Census Bureau of receipts by size for each industry, the Departments estimate that small issuers will incur 0.2 percent of the total costs incurred by all issuers and small providers will incur 37 percent of the total cost by all providers. 105 105 Census Bureau. "2017 SUSB Annual Data Tables by Establishment Industry, Data by Enterprise Receipt Size." (May 2021). https://www.census.gov/data/tables/2017/econ/susb/2017-susb-annual.html. Accordingly, the Departments estimate that small issuers and TPAs will incur an annual cost of $4,330 associated with disclosing additional information about the QPA. 106 For each small issuer and TPA, this results in an estimated annual cost of $16.98. 107 106 The annual cost is estimated as: $4,329,980 x 0.5 x 0.2% = $4,330. 107 The cost is estimated as: $4,330 / (125 Issuers + 130 TPAs) = $16.98. For the payment determination notice regarding disputes involving non-air ambulance claims, the Departments estimate that the total annual cost for all small issuers will be $1,193 and the total annual cost for small providers will be $219,446. 108 This results in a per-entity annual cost of $9.54 for small issuers and a per-entity annual cost of $3.42 for small providers that are not providers of air ambulance services. 109 108 The annual cost for issuers is estimated as: $1,192,641 x 0.5 x 0.2% = $1,193. The annual cost for small physicians is estimated as: $1,192,641 x 0.5 x 36.8% = $219,446. 109 The annual per-claim cost for issuers is estimated as: $1,193 / 125 Issuers = $9.54. The annual per-claim cost for small physicians is estimated as: $219,446 / 64,232 small physicians = $3.42. For the payment determination notice regarding a dispute involving air ambulance claims, the Departments estimate that the total annual cost for small issuers will be $344 and the total annual cost for all small providers of air ambulance services will be $62,530. 110 This results in a per-entity annual cost of $2.72 for small issuers and a per-entity annual cost of $56.13 for small providers of air ambulance services. 111 110 The annual cost for issuers is estimated as: $339,836 x 0.5 x 0.2% = $340. The annual cost for small providers of air ambulance services is estimated as: $339,836 x 0.5 x 36.8% = $62,530. 111 The annual per-claim cost for issuers is estimated as: $340 / 125 Issuers = $2.72. The annual per-claim cost for small providers of air ambulance services is estimated as: $62,530 / 1,114 providers of air ambulance services = $56.13. The number of impacted small health plans is not a significant number of plans compared to the total universe of 1.9 million small health plans. Assuming that 17,435 non-air ambulance claims and 4,968 air ambulance claims are submitted to the Federal IDR process each year, only one percent of small health plans will be impacted. 112 The number of impacted plans and issuers may be even smaller, if some plans and issuers have multiple disputes that are batched in the Federal IDR process. By batching qualified IDR items and services, there may be a reduction in the per-service cost of the Federal IDR process, and potentially the aggregate administrative costs, because the Federal IDR process is likely to exhibit at least some economies of scale. 113 112 (17,435 claims + 4,968 air ambulance claims) / 1,927,786 ERISA health plans = 1% ( Source: 2020 Medical Expenditure Panel Survey-Insurance Component). 113 Matthew Fiedler, Loren Adler, and Benedic Ippolito. "Recommendations for Implementing the No Surprises Act." U.S.C.-Brookings Schaeffer on Health Policy. (March 2021). https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2021/03/16/recommendations-for-implementing-the-no-surprises-act/ VII. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed agency rule, or a finalization of such a proposal, that may result in an expenditure of $100 million or more (adjusted annually for inflation with the base year 1995) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector. 114 In 2022, that threshold is approximately $165 million. For purposes of the UMRA, these final rules do not include any Federal mandate that the Departments expect to result in such expenditures by State, local, or tribal governments. 114 2 U.S.C. 1501 et seq. (1995). VIII. Federalism Statement Executive Order 13132 outlines fundamental principles of federalism and requires Federal agencies to adhere to specific criteria when formulating and implementing policies that have "substantial direct effects" on the States, the relationship between the National Government and States, or on the distribution of power and responsibilities among the various levels of government. Federal agencies promulgating regulations that have federalism implications must consult with State and local officials and describe the extent of their consultation and the nature of the concerns of State and local officials in the preamble to these final rules. In the Departments' view, these final rules have federalism implications because they have direct effects on the States, the relationship between the National Government and the States, or the distribution of power and responsibilities among various levels of government. State and local government providers, facilities, and health plans may be subject to the Federal IDR process or an All-Payer Model Agreement or a specified State law. Additionally, the No Surprises Act authorizes States to enforce the new requirements, including those related to balance billing, with respect to issuers, providers, facilities, and providers of air ambulance services, with HHS enforcing only in cases in which the State has notified HHS that the State does not have the authority to enforce or is otherwise not enforcing, or HHS has made a determination that a State has failed to substantially enforce the requirements. However, in the Departments' view, the federalism implications of these final rules are substantially mitigated because the Departments expect that some States will have their own process for determining the total amount payable under a plan or coverage. Where a State does not have an applicable All-Payer Model Agreement, but does have such a specified State law, the State law, rather than the Federal IDR process, will apply. The Departments anticipate that some States with their own IDR processes or other mechanism for determining the out-of-network rate may want to change their laws or adopt new laws in response to these final rules. The Departments anticipate that these States will incur a small incremental cost when making changes to their laws. In general, section 514 of ERISA preempts state laws to the extent that they relate to any private covered employee benefit plan, including covered group health plans, and preserves State laws that regulate insurance, banking, or securities. While ERISA prohibits States from regulating a plan as an insurance or investment company or bank, the preemption provisions of section 731 of ERISA and section 2724 of the PHS Act (implemented in 29 CFR 2590.731(a) and 45 CFR 146.143(a)) apply so that requirements of Part 7 of ERISA and title XXVII of the PHS Act (including those of the No Surprises 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 health insurance coverage except to the extent that such standard or requirement prevents the application of a requirement" of a Federal standard. The conference report accompanying the Health Insurance Portability and Accountability Act of 1996 (HIPAA) indicates that this is intended to be the "narrowest" preemption of State laws. 115 Additionally, the No Surprises Act requires that when a State law determines the total amount payable under such a plan, coverage, or issuer for emergency services or to nonparticipating providers related to patient visits to participating facilities for nonemergency services, the State law will apply, rather than the Federal IDR process specified in these final rules. 115 See House Conf. Rep. No. 104-736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018. In compliance with the requirement of Executive Order 13132 that agencies examine closely any policies that may have federalism implications or limit the policy-making discretion of the States, the Departments engaged in efforts to consult with and work cooperatively with affected States, including participating in conference calls with and attending conferences of the NAIC and consulting with State insurance officials on a state-by-state basis. In addition, the Departments consulted with the NAIC, as required by the No Surprises Act, to establish the geographic regions to be used in the methodology for calculating the QPA as detailed in the July 2021 interim final rules. In developing these final rules, the Departments attempted to balance the States' interests in regulating health insurance issuers, providers, and facilities with the need to ensure at least the minimum Federal consumer protections in every State. By doing so, the Departments complied with the requirements of Executive Order 13132. List of Subjects 26 CFR Part 54 Excise taxes, Health care, Health insurance, Pensions, Reporting and recordkeeping requirements. 29 CFR Part 2590 Continuation coverage, Disclosure, Employee benefit plans, Group health plans, Health care, Health insurance, Medical child support, Reporting and recordkeeping requirements. 45 CFR Part 149 Balance billing, Health care, Health insurance, Reporting and recordkeeping requirements, Surprise billing, State regulation of health insurance, Transparency in coverage. Douglas W. O'Donnell, Deputy Commissioner for Services and Enforcement, Internal Revenue Service. Lily L. Batchelder, Assistant Secretary of the Treasury (Tax Policy). Ali Khawar, Acting Assistant Secretary, Employee Benefits Security Administration, U.S. Department of Labor. Xavier Becerra, Secretary, Department of Health and Human Services. DEPARTMENT OF THE TREASURY Internal Revenue Service Adoption of the Amendments to the Regulations Accordingly, the Treasury Department and the IRS adopts as final the temporary regulations adding 26 CFR 54.9816-6T and 54.9817-2T published at 86 FR 36872 (July 13, 2021) and 54.9816-8T published at 86 FR 55980 (October 7, 2021), with the following changes to 26 CFR part 54: PART 54--PENSION EXCISE TAXES 1. The authority citation for part 54 continues to read in part as follows: Authority: 26 U.S.C. 7805, unless otherwise noted. 2. Section 54.9816-6 is added to read as follows:§ 54.9816-6 Methodology for calculating qualifying payment amount. (a) For further guidance see§ 54.9816-6T(a) introductory text through (a)(17). (1) - (17) [Reserved] (18) Downcode means the alteration by a plan or issuer of a service code to another service code, or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower qualifying payment amount than the service code or modifier billed by the provider, facility, or provider of air ambulance services. (b) - (c) For further guidance see§ 54.9816-6T(b) and (c). (d) For further guidance see§ 54.9816-6T(d) introductory text through (d)(1)(i). (1) [Reserved] (i) [Reserved] (ii) If the qualifying payment amount is based on a downcoded service code or modifier- (A) A statement that the service code or modifier billed by the provider, facility, or provider of air ambulance services was downcoded; (B) An explanation of why the claim was downcoded, which must include a description of which service codes were altered, if any, and a description of which modifiers were altered, added, or removed, if any; and (C) The amount that would have been the qualifying payment amount had the service code or modifier not been downcoded. (iii) - (v) For further guidance see§ 54.9816-6T(d)(1)(iii) through (v). (2) For further guidance see§ 54.9816-6T(d)(2). (e) - (f) For further guidance see§ 54.9816-6T(e) and (f). (g) Applicability date. The provisions of this section are applicable for plan years beginning on or after January 1, 2022, except that paragraph (a)(18) of this section regarding the definition of the term "downcode" and paragraph (d)(1)(ii) of this section regarding additional information that must be provided if the qualifying payment amount is based on a downcoded service code or modifier are applicable with respect to items or services provided or furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. 3. Section 54.9816-6T is amended by: a. Adding paragraph (a)(18); b. Redesignating paragraphs (d)(1)(ii) through and (iv) as paragraphs (d)(1)(iii) through (v), respectively; and c. Adding a new paragraph (d)(1)(ii). The additions read as follows:§ 54.9816-6T Methodology for calculating qualifying payment amount (temporary). (a) * * * (18) For further guidance see§ 54.9816-6(a)(18). (d) * * * (1) * * * (ii) For further guidance see§ 54.9816-6(d)(1)(ii); 4. Section 54.9816-8 is added to read as follows:§ 54.9816-8 Independent dispute resolution process. (a) - (b) For further guidance see§ 54.9816-8T(a) and (b). (c) For further guidance see§ 54.9816-8T(c) introductory text through (c)(3). (1) - (3) [Reserved] (4) For further guidance see§ 54.9816-8T(c)(4) introductory text through (c)(4)(ii) introductory text. (i) [Reserved] (ii) [Reserved] (A) Select as the out-of-network rate for the qualified IDR item or service one of the offers submitted under§ 54.9816-8T(c)(4)(i), weighing only the considerations specified in paragraph (c)(4)(iii) of this section (as applied to the information provided by the parties pursuant to§ 54.9816-8T(c)(4)(i)). The certified IDR entity must select the offer that the certified IDR entity determines best represents the value of the qualified IDR item or service as the out-of-network rate. (B) For further guidance see§ 54.9816-8T(c)(4)(ii)(B). (iii) Considerations in determination. In determining which offer to select: (A) The certified IDR entity must consider the qualifying payment amount(s) for the applicable year for the same or similar item or service. (B) The certified IDR entity must then consider information submitted by a party that relates to the following circumstances: ( 1 ) The level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (such as those endorsed by the consensus-based entity authorized in section 1890 of the Social Security Act). ( 2 ) The market share held by the provider or facility or that of the plan or issuer in the geographic region in which the qualified IDR item or service was provided. ( 3 ) The acuity of the participant or beneficiary receiving the qualified IDR item or service, or the complexity of furnishing the qualified IDR item or service to the participant or beneficiary. ( 4 ) The teaching status, case mix, and scope of services of the facility that furnished the qualified IDR item or service, if applicable. ( 5 ) Demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility, as applicable, and the plan or issuer, as applicable, during the previous 4 plan years. (C) The certified IDR entity must also consider information provided by a party in response to a request by the certified IDR entity under§ 54.9816-8T(c)(4)(i)(A)( 2 ) that relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and that does not include information on factors described in§ 54.9816-8T(c)(4)(v). (D) The certified IDR entity must also consider additional information submitted by a party that relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and that does not include information on factors described in§ 54.9816-8T(c)(4)(v). (E) In weighing the considerations described in paragraphs (c)(4)(iii)(B) through (D) of this section, the certified IDR entity should evaluate whether the information is credible and relates to the offer submitted by either party for the payment amount for the qualified IDR item or service that is the subject of the payment determination. The certified IDR entity should not give weight to information to the extent it is not credible, it does not relate to either party's offer for the payment amount for the qualified IDR item or service, or it is already accounted for by the qualifying payment amount under paragraph (c)(4)(iii)(A) of this section or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. (iv) Examples. The rules of paragraph (c)(4)(iii) of this section are illustrated in the following paragraphs. Each example assumes that the Federal IDR process applies for purposes of determining the out-of-network rate, that both parties have submitted the information parties are required to submit as part of the Federal IDR process, and that the submitted information does not include information on factors described in paragraph (c)(4)(v) of this section: (A) Example 1 - ( 1 ) Facts. A level 1 trauma center that is a nonparticipating emergency facility and an issuer are parties to a payment determination in the Federal IDR process. The facility submits an offer that is higher than the qualifying payment amount. The facility also submits additional written information showing that the scope of services available at the facility was critical to the delivery of care for the qualified IDR item or service provided, given the particular patient's acuity. This information is determined to be credible by the certified IDR entity. Further, the facility submits additional information showing the contracted rates used to calculate the qualifying payment amount for the qualified IDR item or service were based on a level of service that is typical in cases in which the services are delivered by a facility that is not a level 1 trauma center and that does not have the capability to provide the scope of services provided by a level 1 trauma center. This information is also determined to be credible by the certified IDR entity. The issuer submits an offer equal to the qualifying payment amount. No additional information is submitted by either party. The certified IDR entity determines that all the information submitted by the nonparticipating emergency facility relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(A) ( Example 1 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the nonparticipating emergency facility, provided the information relates to circumstances described in paragraphs (c)(4)(iii)(B) through (D) of this section and relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. If the certified IDR entity determines that it is appropriate to give weight to the additional credible information submitted by the nonparticipating emergency facility and that the additional credible information submitted by the facility demonstrates that the facility's offer best represents the value of the qualified IDR item or service, the certified IDR entity should select the facility's offer. (B) Example 2 - ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process. The provider submits an offer that is higher than the qualifying payment amount. The provider also submits additional written information regarding the level of training and experience the provider possesses. This information is determined to be credible by the certified IDR entity, but the certified IDR entity finds that the information does not demonstrate that the provider's level of training and experience relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination (for example, the information does not show that the provider's level of training and experience was necessary for providing the qualified IDR service that is the subject of the payment determination to the particular patient, or that the training or experience made an impact on the care that was provided). The nonparticipating provider does not submit any additional information. The issuer submits an offer equal to the qualifying payment amount, with no additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(B) ( Example 2 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity must then consider the additional information submitted by the nonparticipating provider, provided the information relates to circumstances described in paragraphs (c)(4)(iii)(B) through (D) of this section and relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. In addition, the certified IDR entity should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines that the additional information submitted by the provider is credible but does not relate to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination, and determines that the issuer's offer best represents the value of the qualified IDR service, in the absence of any other credible information that relates to either party's offer, the certified IDR entity should select the issuer's offer. (C) Example 3 - ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process involving an emergency department visit for the evaluation and management of a patient. The provider submits an offer that is higher than the qualifying payment amount. The provider also submits additional written information showing that the acuity of the patient's condition and complexity of the qualified IDR service furnished required the taking of a comprehensive history, a comprehensive examination, and medical decision making of high complexity. This information is determined to be credible by the certified IDR entity. The issuer submits an offer equal to the qualifying payment amount for CPT code 99285, which is the CPT code for an emergency department visit for the evaluation and management of a patient requiring a comprehensive history, a comprehensive examination, and medical decision making of high complexity. The issuer also submits additional written information showing that this CPT code accounts for the acuity of the patient's condition. This information is determined to be credible by the certified IDR entity. The certified IDR entity determines that the information provided by the provider and issuer relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(C) ( Example 3 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the parties, but the certified IDR entity should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines the additional information on the acuity of the patient and complexity of the service is already accounted for in the calculation of the qualifying payment amount, the certified IDR entity should not give weight to the additional information provided by the provider. If the certified IDR entity determines that the issuer's offer best represents the value of the qualified IDR service, the certified IDR entity should select the issuer's offer. (D) Example 4 -- ( 1 ) Facts. A nonparticipating emergency facility and an issuer are parties to a payment determination in the Federal IDR process. Although the facility is not participating in the issuer's network during the relevant plan year, it was a participating facility in the issuer's network in the previous 4 plan years. The issuer submits an offer that is higher than the qualifying payment amount and that is equal to the facility's contracted rate (adjusted for inflation) for the previous year with the issuer for the qualified IDR service. The issuer also submits additional written information showing that the contracted rates between the facility and the issuer during the previous 4 plan years were higher than the qualifying payment amount submitted by the issuer, and that these prior contracted rates account for the case mix and scope of services typically furnished at the nonparticipating facility. The certified IDR entity determines this information is credible and that it relates to the offer submitted by the issuer for the payment amount for the qualified IDR service that is the subject of the payment determination. The facility submits an o f er that is higher than both the qualifying payment amount and the contracted rate (adjusted for inflation) for the previous year with the issuer for the qualified IDR service. The facility also submits additional written information, with the intent to show that the case mix and scope of services available at the facility were integral to the service provided. The certified IDR entity determines this information is credible and that it relates to the offer submitted by the facility for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(D) ( Example 4 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the parties, but should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines that the information submitted by the facility regarding the case mix and scope of services available at the facility includes information that is also accounted for in the information the issuer submitted regarding prior contracted rates, then the certified IDR entity should give weight to that information only once. The certified IDR entity also should not give weight to the same information provided by the nonparticipating emergency facility in relation to any other factor. If the certified IDR entity determines that the issuer's offer best represents the value of the qualified IDR service, the certified IDR entity should select the issuer's offer. (E) Example 5 -- ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process regarding a qualified IDR service for which the issuer downcoded the service code that the provider billed. The issuer submits an offer equal to the qualifying payment amount (which was calculated using the downcoded service code). The issuer also submits additional written information that includes the documentation disclosed to the nonparticipating provider under§ 54.9816-6(d)(1)(ii) at the time of the initial payment (which describes why the service code was downcoded). The certified IDR entity determines this information is credible and that it relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. The provider submits an offer equal to the amount that would have been the qualifying payment amount had the service code not been downcoded. The provider also submits additional written information that includes the documentation disclosed to the nonparticipating provider under§ 54.9816-6(d)(1)(ii) at the time of the initial payment. Further, the provider submits additional written information that explains why the billed service code was more appropriate than the downcoded service code, as evidence that the provider's offer, which is equal to the amount the qualifying payment amount would have been for the service code that the provider billed, best represents the value of the service furnished, given its complexity. The certified IDR entity determines this information to be credible and that it relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(E) ( Example 5 ), the certified IDR entity must consider the qualifying payment amount, which is based on the downcoded service code. The certified IDR entity then must consider whether to give weight to additional information submitted by the parties. If the certified IDR entity determines that the additional credible information submitted by the provider demonstrates that the nonparticipating provider's offer, which is equal to the qualifying payment amount for the service code that the provider billed, best represents the value of the qualified IDR service, the certified IDR entity should select the nonparticipating provider's offer. (v) For further guidance see§ 54.9816-8T(c)(4)(v) through (c)(4)(vi)(A). (vi) [Reserved] (A) [Reserved] (B) The certified IDR entity's written decision must include an explanation of their determination, including what information the certified IDR entity determined demonstrated that the offer selected as the out-of-network rate is the offer that best represents the value of the qualified IDR item or service, including the weight given to the qualifying payment amount and any additional credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity relies on information described under paragraphs (c)(4)(iii)(B) through (D) of this section in selecting an offer, the written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the qualifying payment amount. (vii) - (ix) For further guidance see§ 54.9816-8T(c)(4)(vii) through (ix). (d) - (e) For further guidance see§ 54.9816-8T(d) through (e). (f) For further guidance see§ 54.9816-8T(f) introductory text through (f)(1)(iv). (1) [Reserved] (i) - (iv) [Reserved] (v) For further guidance see§ 54.9816-8T(f)(1)(v) introductory text through (f)(1)(v)(E). (A) - (E) [Reserved] (F) The rationale for the certified IDR entity's decision, including the extent to which the decision relied on the criteria in paragraphs (c)(4)(iii)(B) through (D) of this section. (G) - (I) For further guidance see§ 54.9816-8T(f)(1)(v)(G) through (I). (vi) For further guidance see§ 54.9816-8T(f)(1)(vi). (2) [Reserved] (g) For further guidance see§ 54.9816-8T(g). (h) Applicability date. The provisions of this section are applicable with respect to plan years beginning on or after January 1, 2022, except that paragraphs (c)(4)(ii) through (iv) of this section regarding payment determinations, paragraph (c)(4)(vi)(B) of this section regarding written decisions, and paragraph (f)(1)(v)(F) of this section regarding reporting of information relating to the Federal IDR process are applicable with respect to items or services provided or furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. 5. Section 54.9816-8T is amended by: a. Removing paragraph (a)(2)(viii); b. Redesignating paragraphs (a)(2)(ix) through (xiii) as paragraphs (a)(2)(viii) through (xii), respectively; and c. Revising paragraphs (c)(4)(ii)(A), (c)(4)(iii) and (iv), (c)(4)(vi)(B), (f)(1)(v)(F), and (h). The revisions read as follows:§ 54.9816-8T Independent dispute resolution process (temporary). (c) *** (4) *** (ii) *** (A) For further guidance see§ 54.9816-8(c)(4)(ii)(A). (iii) For further guidance see§ 54.9816-8(c)(4)(iii). (iv) For further guidance see§ 54.9816-8(c)(4)(iv). (vi) *** (B) For further guidance see§ 54.9816-8(c)(4)(vi)(B). (f) *** (1) *** (v) *** (F) For further guidance see§ 54.9816-8(f)(1)(v)(F); (h) Applicability date. The provisions of this section are applicable with respect to plan years beginning on or after January 1, 2022, except that the provisions regarding IDR entity certification at paragraphs (a) and (e) of this section are applicable beginning on October 7, 2021; and paragraphs (c)(4)(ii) through (iv) of this section regarding payment determinations, paragraph (c)(4)(vi)(B) of this section regarding written decisions, and paragraph (f)(1)(v)(F) of this section regarding reporting of information relating to the Federal IDR process are applicable with respect to items or services provided or furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. 6. Section 54.9817-2 is added to read as follows:§ 54.9817-2 Independent dispute resolution process for air ambulance services (a) For further guidance see§ 54.9817-2T(a). (b) For further guidance see§ 54.9817-2T(b) introductory text. (1) In general. Except as provided in paragraphs (b)(2) and (3) of this section and§ 54.9817-2T(b)(2) and (4), in determining the out-of-network rate to be paid by group health plans and health insurance issuers offering group health insurance coverage for out-of-network air ambulance services, plans and issuers must comply with the requirements of§§ 54.9816-8T and 54.9816-8, except that references in§§ 54.9816-8T and 54.9816-8 to the additional circumstances in§ 54.9816-8(c)(4)(iii)(B) shall be understood to refer to paragraph (b)(2) of this section and§ 54.9817-2T(b)(2). (2) Considerations for air ambulance services. In determining which offer to select, in addition to considering the applicable qualifying payment amount(s), the certified IDR entity must consider information submitted by a party that relates to the following circumstances: (i) - (vi) For further guidance see§ 54.9817-2T(b)(2)(i) through (vi). (3) Weighing considerations. In weighing the considerations described in paragraph (b)(2) of this section and§ 54.9817-2T(b)(2), the certified IDR entity should evaluate whether the information is credible and relates to the offer submitted by either party for the payment amount for the qualified IDR service that is the subject of the payment determination. The certified IDR entity should not give weight to information to the extent it is not credible, it does not relate to either party's offer for the payment amount for the qualified IDR service, or it is already accounted for by the qualifying payment amount under§ 54.9816-8(c)(4)(iii)(A) or other credible information under§ 54.9816-8(c)(4)(iii)(B) through (D), except that the additional circumstances in§ 54.9816-8(c)(4)(iii)(B) shall be understood to refer to paragraph (b)(2) of this section and§ 54.9817-2T(b)(2). (4) For further guidance see§ 54.9817-2T(b)(4) introductory text through (b)(4)(iii). (i) - (iii) [Reserved] (iv) For further guidance see§ 54.9817-2T(b)(4)(iv) introductory text through (b)(4)(iv)(E). (A) - (E) [Reserved] (F) The rationale for the certified IDR entity's decision, including the extent to which the decision relied on the criteria in paragraph (b)(2) of this section and§ 54.9816-8(c)(4)(iii)(C) and (D). (G) - (I) For further guidance see§ 54.9817-2T(b)(4)(iv)(G) through (I). (c) Applicability date. The provisions of this section are applicable with respect to plan years beginning on or after January 1, 2022, except that paragraphs (b)(1), (2), and (3) and (b)(4)(iv)(F) of this section regarding payment determinations are applicable with respect to services provided or furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. 7. Section 54.9817-2T is amended by: a. Revising paragraphs (b)(1) and (2); b. Redesignating paragraph (b)(3) as paragraph (b)(4); c. Adding a new paragraph (b)(3); and d. Revising newly redesignated paragraph (b)(4)(iv)(F) and paragraph (c). The revisions and addition read as follows:§ 54.9817-2T Independent dispute resolution process for air ambulance services (temporary). * * * * * (b) *** (1) For further guidance see§ 54.9817-2(b)(1). (2) For further guidance see§ 54.9817-2(b)(2). (3) For further guidance see§ 54.9817-2(b)(3). (4) *** (iv) *** (F) For further guidance see§ 54.9817-2(b)(4)(iv)(F); * * * * * (c) Applicability date. The provisions of this section are applicable with respect to plan years beginning on or after January 1, 2022, except that paragraphs (b)(1), (2), and (3) and (b)(4)(iv)(F) of this section regarding payment determinations are applicable with respect to services provided or furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. DEPARTMENT OF LABOR Employee Benefits Security Administration 29 CFR Chapter XXV For the reasons set forth in the preamble, the Department of Labor adopts as final the interim rules adding 29 CFR 2590.716-6 published at 86 FR 36872 (July 13, 2021), and 2590.716-8, and 2590.717-2, and 86 FR 55980 (October 7, 2021), with the following: PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS 8. 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-n, 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; Division M, Pub. L. 113-235, 128 Stat. 2130; Pub. L. 116-260 134 Stat. 1182; Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9, 2012). 9. Section 2590.716-6 is amended by: a. Adding paragraph (a)(18); b. Redesignating paragraphs (d)(1)(ii) through (iv) as paragraphs (d)(1)(iii) through (v), respectively; c. Adding a new paragraph (d)(1)(ii); and d. Revising paragraph (f). The revisions and additions read as follows:§ 2590.716-6 Methodology for calculating qualifying payment amount. (a) * * * (18) Downcode means the alteration by a plan or issuer of a service code to another service code, or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower qualifying payment amount than the service code or modifier billed by the provider, facility, or provider of air ambulance services. * * * * * (d) * * * (1) * * * (ii) If the qualifying payment amount is based on a downcoded service code or modifier- (A) A statement that the service code or modifier billed by the provider, facility, or provider of air ambulance services was downcoded; (B) An explanation of why the claim was downcoded, which must include a description of which service codes were altered, if any, and a description of which modifiers were altered, added, or removed, if any; and (C) The amount that would have been the qualifying payment amount had the service code or modifier not been downcoded; * * * * * (f) Applicability date. The provisions of this section are applicable for plan years beginning on or after January 1, 2022, except that paragraph (a)(18) of this section regarding the definition of the term "downcode" and paragraph (d)(1)(ii) of this section regarding additional information that must be provided if the qualifying payment amount is based on a downcoded service code or modifier are applicable with respect to items or services provided or furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. 10. Section 2590.716-8 is amended by: a. Removing paragraph (a)(2)(viii); b. Redesignating paragraphs (a)(2)(ix) through (xiii) as paragraphs (a)(2)(viii) through (xii), respectively; and c. Revising paragraphs (c)(4)(ii)(A), (c)(4)(iii) and (iv), (c)(4)(vi)(B), (f)(1)(v)(F), and (h). The revisions read as follows:§ 2590.716-8 Independent dispute resolution process. * * * * * (c) * * * (4) * * * (ii) * * * (A) Select as the out-of-network rate for the qualified IDR item or service one of the offers submitted under paragraph (c)(4)(i) of this section, weighing only the considerations specified in paragraph (c)(4)(iii) of this section (as applied to the information provided by the parties pursuant to paragraph (c)(4)(i) of this section). The certified IDR entity must select the offer that the certified IDR entity determines best represents the value of the qualified IDR item or service as the out-of-network rate. ***** (iii) Considerations in determination. In determining which offer to select: (A) The certified IDR entity must consider the qualifying payment amount(s) for the applicable year for the same or similar item or service. (B) The certified IDR entity must then consider information submitted by a party that relates to the following circumstances: ( 1 ) The level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (such as those endorsed by the consensus-based entity authorized in section 1890 of the Social Security Act). ( 2 ) The market share held by the provider or facility or that of the plan or issuer in the geographic region in which the qualified IDR item or service was provided. ( 3 ) The acuity of the participant or beneficiary receiving the qualified IDR item or service, or the complexity of furnishing the qualified IDR item or service to the participant or beneficiary. ( 4 ) The teaching status, case mix, and scope of services of the facility that furnished the qualified IDR item or service, if applicable. ( 5 ) Demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility, as applicable, and the plan or issuer, as applicable, during the previous 4 plan years. (C) The certified IDR entity must also consider information provided by a party in response to a request by the certified IDR entity under paragraph (c)(4)(i)(A)( 2 ) of this section that relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and that does not include information on factors described in paragraph (c)(4)(v) of this section. (D) The certified IDR entity must also consider additional information submitted by a party that relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and that does not include information on factors described in paragraph (c)(4)(v) of this section. (E) In weighing the considerations described in paragraphs (c)(4)(iii)(B) through (D) of this section, the certified IDR entity should evaluate whether the information is credible and relates to the offer submitted by either party for the payment amount for the qualified IDR item or service that is the subject of the payment determination. The certified IDR entity should not give weight to information to the extent it is not credible, it does not relate to either party's offer for the payment amount for the qualified IDR item or service, or it is already accounted for by the qualifying payment amount under paragraph (c)(4)(iii)(A) of this section or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. (iv) Examples. The rules of paragraph (c)(4)(iii) of this section are illustrated in the following paragraphs. Each example assumes that the Federal IDR process applies for purposes of determining the out-of-network rate, that both parties have submitted the information parties are required to submit as part of the Federal IDR process, and that the submitted information does not include information on factors described in paragraph (c)(4)(v) of this section: (A) Example 1 - ( 1 ) Facts. A level 1 trauma center that is a nonparticipating emergency facility and an issuer are parties to a payment determination in the Federal IDR process. The facility submits an offer that is higher than the qualifying payment amount. The facility also submits additional written information showing that the scope of services available at the facility was critical to the delivery of care for the qualified IDR item or service provided, given the particular patient's acuity. This information is determined to be credible by the certified IDR entity. Further, the facility submits additional information showing the contracted rates used to calculate the qualifying payment amount for the qualified IDR item or service were based on a level of service that is typical in cases in which the services are delivered by a facility that is not a level 1 trauma center and that does not have the capability to provide the scope of services provided by a level 1 trauma center. This information is also determined to be credible by the certified IDR entity. The issuer submits an offer equal to the qualifying payment amount. No additional information is submitted by either party. The certified IDR entity determines that all the information submitted by the nonparticipating emergency facility relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(A) ( Example 1 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the nonparticipating emergency facility, provided the information relates to circumstances described in paragraphs (c)(4)(iii)(B) through (D) of this section and relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. If the certified IDR entity determines that it is appropriate to give weight to the additional credible information submitted by the nonparticipating emergency facility and that the additional credible information submitted by the facility demonstrates that the facility's offer best represents the value of the qualified IDR item or service, the certified IDR entity should select the facility's offer. (B) Example 2 - ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process. The provider submits an offer that is higher than the qualifying payment amount. The provider also submits additional written information regarding the level of training and experience the provider possesses. This information is determined to be credible by the certified IDR entity, but the certified IDR entity finds that the information does not demonstrate that the provider's level of training and experience relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination (for example, the information does not show that the provider's level of training and experience was necessary for providing the qualified IDR service that is the subject of the payment determination to the particular patient, or that the training or experience made an impact on the care that was provided). The nonparticipating provider does not submit any additional information. The issuer submits an offer equal to the qualifying payment amount, with no additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(B) ( Example 2 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity must then consider the additional information submitted by the nonparticipating provider, provided the information relates to circumstances described in paragraphs (c)(4)(iii)(B) through (D) of this section and relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. In addition, the certified IDR entity should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines that the additional information submitted by the provider is credible but does not relate to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination, and determines that the issuer's offer best represents the value of the qualified IDR service, in the absence of any other credible information that relates to either party's offer, the certified IDR entity should select the issuer's offer. (C) Example 3 - ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process involving an emergency department visit for the evaluation and management of a patient. The provider submits an offer that is higher than the qualifying payment amount. The provider also submits additional written information showing that the acuity of the patient's condition and complexity of the qualified IDR service furnished required the taking of a comprehensive history, a comprehensive examination, and medical decision making of high complexity. This information is determined to be credible by the certified IDR entity. The issuer submits an offer equal to the qualifying payment amount for CPT code 99285, which is the CPT code for an emergency department visit for the evaluation and management of a patient requiring a comprehensive history, a comprehensive examination, and medical decision making of high complexity. The issuer also submits additional written information showing that this CPT code accounts for the acuity of the patient's condition. This information is determined to be credible by the certified IDR entity. The certified IDR entity determines that the information provided by the provider and issuer relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(C) ( Example 3 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the parties, but the certified IDR entity should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines the additional information on the acuity of the patient and complexity of the service is already accounted for in the calculation of the qualifying payment amount, the certified IDR entity should not give weight to the additional information provided by the provider. If the certified IDR entity determines that the issuer's offer best represents the value of the qualified IDR service, the certified IDR entity should select the issuer's offer. (D) Example 4 -- ( 1 ) Facts. A nonparticipating emergency facility and an issuer are parties to a payment determination in the Federal IDR process. Although the facility is not participating in the issuer's network during the relevant plan year, it was a participating facility in the issuer's network in the previous 4 plan years. The issuer submits an offer that is higher than the qualifying payment amount and that is equal to the facility's contracted rate (adjusted for inflation) for the previous year with the issuer for the qualified IDR service. The issuer also submits additional written information showing that the contracted rates between the facility and the issuer during the previous 4 plan years were higher than the qualifying payment amount submitted by the issuer, and that these prior contracted rates account for the case mix and scope of services typically furnished at the nonparticipating facility. The certified IDR entity determines this information is credible and that it relates to the offer submitted by the issuer for the payment amount for the qualified IDR service that is the subject of the payment determination. The facility submits an offer that is higher than both the qualifying payment amount and the contracted rate (adjusted for inflation) for the previous year with the issuer for the qualified IDR service. The facility also submits additional written information, with the intent to show that the case mix and scope of services available at the facility were integral to the service provided. The certified IDR entity determines this information is credible and that it relates to the offer submitted by the facility for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(D) ( Example 4 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the parties, but should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines that the information submitted by the facility regarding the case mix and scope of services available at the facility includes information that is also accounted for in the information the issuer submitted regarding prior contracted rates, then the certified IDR entity should give weight to that information only once. The certified IDR entity also should not give weight to the same information provided by the nonparticipating emergency facility in relation to any other factor. If the certified IDR entity determines that the issuer's offer best represents the value of the qualified IDR service, the certified IDR entity should select the issuer's offer. (E) Example 5 -- ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process regarding a qualified IDR service for which the issuer downcoded the service code that the provider billed. The issuer submits an offer equal to the qualifying payment amount (which was calculated using the downcoded service code). The issuer also submits additional written information that includes the documentation disclosed to the nonparticipating provider under§ 2590.716-6(d)(1)(ii) at the time of the initial payment (which describes why the service code was downcoded). The certified IDR entity determines this information is credible and that it relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. The provider submits an offer equal to the amount that would have been the qualifying payment amount had the service code not been downcoded. The provider also submits additional written information that includes the documentation disclosed to the nonparticipating provider under§ 2590.716-6(d)(1)(ii) at the time of the initial payment. Further, the provider submits additional written information that explains why the billed service code was more appropriate than the downcoded service code, as evidence that the provider's offer, which is equal to the amount the qualifying payment amount would have been for the service code that the provider billed, best represents the value of the service furnished, given its complexity. The certified IDR entity determines this information to be credible and that it relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(E) ( Example 5 ), the certified IDR entity must consider the qualifying payment amount, which is based on the downcoded service code. The certified IDR entity then must consider whether to give weight to additional information submitted by the parties. If the certified IDR entity determines that the additional credible information submitted by the provider demonstrates that the nonparticipating provider's offer, which is equal to the qualifying payment amount for the service code that the provider billed, best represents the value of the qualified IDR service, the certified IDR entity should select the nonparticipating provider's offer. * * * * * (vi) * * * (B) The certified IDR entity's written decision must include an explanation of their determination, including what information the certified IDR entity determined demonstrated that the offer selected as the out-of-network rate is the offer that best represents the value of the qualified IDR item or service, including the weight given to the qualifying payment amount and any additional credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity relies on information described under paragraphs (c)(4)(iii)(B) through (D) of this section in selecting an offer, the written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the qualifying payment amount. * * * * * (f) * * * (1) * * * (v) * * * (F) The rationale for the certified IDR entity's decision, including the extent to which the decision relied on the criteria in paragraphs (c)(4)(iii)(B) through (D) of this section; * * * * * (h) Applicability date. The provisions of this section are applicable with respect to plan years beginning on or after January 1, 2022, except that the provisions regarding IDR entity certification at paragraphs (a) and (e) of this section are applicable beginning on October 7, 2021; and paragraphs (c)(4)(ii) through (iv) of this section regarding payment determinations, paragraph (c)(4)(vi)(B) of this section regarding written decisions, and paragraph (f)(1)(v)(F) of this section regarding reporting of information relating to the Federal IDR process are applicable with respect to items or services provided or furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. 11. Section 2590.717-2 is amended by: a. Revising paragraphs (b)(1) and (b)(2) introductory text; b. Redesignating paragraph (b)(3) as paragraph (b)(4); c. Adding a new paragraph (b)(3); and d. Revising newly redesignated paragraph (b)(4)(iv)(F) and paragraph (c). The addition and revisions read as follows:§ 2590.717-2 Independent dispute resolution process for air ambulance services. * * * * * (b) * * * (1) In general. Except as provided in paragraphs (b)(2) and (3) of this section, in determining the out-of-network rate to be paid by group health plans and health insurance issuers offering group health insurance coverage for out-of-network air ambulance services, plans and issuers must comply with the requirements of§ 2590.716-8, except that references in§ 2590.716-8 to the additional circumstances in§ 2590.716-8(c)(4)(iii)(B) shall be understood to refer to paragraph (b)(2) of this section. (2) Considerations for air ambulance services. In determining which offer to select, in addition to considering the applicable qualifying payment amount(s), the certified IDR entity must consider information submitted by a party that relates to the following circumstances: * * * * * (3) Weighing considerations. In weighing the considerations described in paragraph (b)(2) of this section, the certified IDR entity should evaluate whether the information is credible and relates to the offer submitted by either party for the payment amount for the qualified IDR service that is the subject of the payment determination. The certified IDR entity should not give weight to information to the extent it is not credible, it does not relate to either party's offer for the payment amount for the qualified IDR service, or it is already accounted for by the qualifying payment amount under§ 2590.716-8(c)(4)(iii)(A) or other credible information under§ 2590.716-8(c)(4)(iii)(B) through (D), except that the additional circumstances in§ 2590.716-8(c)(4)(iii)(B) shall be understood to refer to paragraph (b)(2) of this section. (4) * * * (iv) * * * (F) The rationale for the certified IDR entity's decision, including the extent to which the decision relied on the criteria in paragraph (b)(2) of this section and§ 2590.716-8(c)(4)(iii)(C) and (D); * * * * * (c) Applicability date. The provisions of this section are applicable with respect to plan years beginning on or after January 1, 2022, except that paragraphs (b)(1), (2), and (3) and (b)(4)(iv)(F) of this section regarding payment determinations are applicable with respect to services provided or furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. DEPARTMENT OF HEALTH AND HUMAN SERVICES 45 CFR Subtitle A, Subchapter B For the reasons set forth in the preamble, the Department of Health and Human Services adopts as final the interim rules adding 45 CFR 149.140 published at 86 FR 36872 (July 13, 2021) and 149.510, and 149.520, published at 86 FR 55980 (October 7, 2021), with the following changes to 45 CFR part 149 as set forth below: PART 149 - SURPRISE BILLING AND TRANSPARENCY REQUIREMENTS 12. The authority citation for part 149 continues to read as follows: Authority: 42 U.S.C. 300gg-92 and 300gg-111 through 300gg-139, as amended. 13. Section 149.140 is amended by: a. Adding paragraph (a)(18); b. Redesignating paragraphs (d)(1)(ii) through (iv) as paragraphs (d)(1)(iii) through (v), respectively; c. Adding a new paragraph (d)(1)(ii); and d. Revising paragraph (g). The revisions and additions read as follows:§ 149.140 Methodology for calculating qualifying payment amount. (a) * * * (18) Downcode means the alteration by a plan or issuer of a service code to another service code, or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower qualifying payment amount than the service code or modifier billed by the provider, facility, or provider of air ambulance services. * * * * * (d) * * * (1) * * * (ii) If the qualifying payment amount is based on a downcoded service code or modifier- (A) A statement that the service code or modifier billed by the provider, facility, or provider of air ambulance services was downcoded; (B) An explanation of why the claim was downcoded, which must include a description of which service codes were altered, if any, and a description of which modifiers were altered, added, or removed, if any; and (C) The amount that would have been the qualifying payment amount had the service code or modifier not been downcoded; * * * * * (g) Applicability date. The provisions of this section are applicable for plan years or in the individual market, policy years beginning on or after January 1, 2022, except that paragraph (a)(18) of this section regarding the definition of the term "downcode" and paragraph (d)(1)(ii) of this section regarding additional information that must be provided if the qualifying payment amount is based on a downcoded service code or modifier are applicable with respect to items or services provided or furnished on or after October 25, 2022, for plan years or in the individual market, policy years beginning on or after January 1, 2022. 14. Section 149.510 is amended by: a. Removing paragraph (a)(2)(viii); b. Redesignating paragraphs (a)(2)(ix) through (xiii) as paragraphs (a)(2)(viii) through (xii), respectively; and c. Revising paragraphs (c)(4)(ii)(A), (c)(4)(iii) and (iv), (c)(4)(vi)(B), (f)(1)(v)(F), and (h). The revisions read as follows:§ 149.510 Independent dispute resolution process. * * * * * (c) * * * (4) * * * (ii) * * * (A) Select as the out-of-network rate for the qualified IDR item or service one of the offers submitted under paragraph (c)(4)(i) of this section, weighing only the considerations specified in paragraph (c)(4)(iii) of this section (as applied to the information provided by the parties pursuant to paragraph (c)(4)(i) of this section). The certified IDR entity must select the offer that the certified IDR entity determines best represents the value of the qualified IDR item or service as the out-of-network rate. ***** (iii) Considerations in determination. In determining which offer to select: (A) The certified IDR entity must consider the qualifying payment amount(s) for the applicable year for the same or similar item or service. (B) The certified IDR entity must then consider information submitted by a party that relates to the following circumstances: ( 1 ) The level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (such as those endorsed by the consensus-based entity authorized in section 1890 of the Social Security Act). ( 2 ) The market share held by the provider or facility or that of the plan or issuer in the geographic region in which the qualified IDR item or service was provided. ( 3 ) The acuity of the participant, beneficiary, or enrollee receiving the qualified IDR item or service, or the complexity of furnishing the qualified IDR item or service to the participant, beneficiary, or enrollee. ( 4 ) The teaching status, case mix, and scope of services of the facility that furnished the qualified IDR item or service, if applicable. ( 5 ) Demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility, as applicable, and the plan or issuer, as applicable, during the previous 4 plan years. (C) The certified IDR entity must also consider information provided by a party in response to a request by the certified IDR entity under paragraph (c)(4)(i)(A)( 2 ) of this section that relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and that does not include information on factors described in paragraph (c)(4)(v) of this section. (D) The certified IDR entity must also consider additional information submitted by a party that relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination and that does not include information on factors described in paragraph (c)(4)(v) of this section. (E) In weighing the considerations described in paragraphs (c)(4)(iii)(B) through (D) of this section, the certified IDR entity should evaluate whether the information is credible and relates to the offer submitted by either party for the payment amount for the qualified IDR item or service that is the subject of the payment determination. The certified IDR entity should not give weight to information to the extent it is not credible, it does not relate to either party's offer for the payment amount for the qualified IDR item or service, or it is already accounted for by the qualifying payment amount under paragraph (c)(4)(iii)(A) of this section or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. (iv) Examples. The rules of paragraph (c)(4)(iii) of this section are illustrated in the following paragraphs. Each example assumes that the Federal IDR process applies for purposes of determining the out-of-network rate, that both parties have submitted the information parties are required to submit as part of the Federal IDR process, and that the submitted information does not include information on factors described in paragraph (c)(4)(v) of this section: (A) Example 1 - ( 1 ) Facts. A level 1 trauma center that is a nonparticipating emergency facility and an issuer are parties to a payment determination in the Federal IDR process. The facility submits an offer that is higher than the qualifying payment amount. The facility also submits additional written information showing that the scope of services available at the facility was critical to the delivery of care for the qualified IDR item or service provided, given the particular patient's acuity. This information is determined to be credible by the certified IDR entity. Further, the facility submits additional information showing the contracted rates used to calculate the qualifying payment amount for the qualified IDR item or service were based on a level of service that is typical in cases in which the services are delivered by a facility that is not a level 1 trauma center and that does not have the capability to provide the scope of services provided by a level 1 trauma center. This information is also determined to be credible by the certified IDR entity. The issuer submits an offer equal to the qualifying payment amount. No additional information is submitted by either party. The certified IDR entity determines that all the information submitted by the nonparticipating emergency facility relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(A) ( Example 1 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the nonparticipating emergency facility, provided the information relates to circumstances described in paragraphs (c)(4)(iii)(B) through (D) of this section and relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. If the certified IDR entity determines that it is appropriate to give weight to the additional credible information submitted by the nonparticipating emergency facility and that the additional credible information submitted by the facility demonstrates that the facility's offer best represents the value of the qualified IDR item or service, the certified IDR entity should select the facility's offer. (B) Example 2 - ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process. The provider submits an offer that is higher than the qualifying payment amount. The provider also submits additional written information regarding the level of training and experience the provider possesses. This information is determined to be credible by the certified IDR entity, but the certified IDR entity finds that the information does not demonstrate that the provider's level of training and experience relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination (for example, the information does not show that the provider's level of training and experience was necessary for providing the qualified IDR service that is the subject of the payment determination to the particular patient, or that the training or experience made an impact on the care that was provided). The nonparticipating provider does not submit any additional information. The issuer submits an offer equal to the qualifying payment amount, with no additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(B) ( Example 2 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity must then consider the additional information submitted by the nonparticipating provider, provided the information relates to circumstances described in paragraphs (c)(4)(iii)(B) through (D) of this section and relates to the offer for the payment amount for the qualified IDR item or service that is the subject of the payment determination. In addition, the certified IDR entity should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines that the additional information submitted by the provider is credible but does not relate to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination, and determines that the issuer's offer best represents the value of the qualified IDR service, in the absence of any other credible information that relates to either party's offer, the certified IDR entity should select the issuer's offer. (C) Example 3 - ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process involving an emergency department visit for the evaluation and management of a patient. The provider submits an offer that is higher than the qualifying payment amount. The provider also submits additional written information showing that the acuity of the patient's condition and complexity of the qualified IDR service furnished required the taking of a comprehensive history, a comprehensive examination, and medical decision making of high complexity. This information is determined to be credible by the certified IDR entity. The issuer submits an offer equal to the qualifying payment amount for CPT code 99285, which is the CPT code for an emergency department visit for the evaluation and management of a patient requiring a comprehensive history, a comprehensive examination, and medical decision making of high complexity. The issuer also submits additional written information showing that this CPT code accounts for the acuity of the patient's condition. This information is determined to be credible by the certified IDR entity. The certified IDR entity determines that the information provided by the provider and issuer relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(C) ( Example 3 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the parties, but the certified IDR entity should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines the additional information on the acuity of the patient and complexity of the service is already accounted for in the calculation of the qualifying payment amount, the certified IDR entity should not give weight to the additional information provided by the provider. If the certified IDR entity determines that the issuer's offer best represents the value of the qualified IDR service, the certified IDR entity should select the issuer's offer. (D) Example 4 -- ( 1 ) Facts. A nonparticipating emergency facility and an issuer are parties to a payment determination in the Federal IDR process. Although the facility is not participating in the issuer's network during the relevant plan year, it was a participating facility in the issuer's network in the previous 4 plan years. The issuer submits an offer that is higher than the qualifying payment amount and that is equal to the facility's contracted rate (adjusted for inflation) for the previous year with the issuer for the qualified IDR service. The issuer also submits additional written information showing that the contracted rates between the facility and the issuer during the previous 4 plan years were higher than the qualifying payment amount submitted by the issuer, and that these prior contracted rates account for the case mix and scope of services typically furnished at the nonparticipating facility. The certified IDR entity determines this information is credible and that it relates to the offer submitted by the issuer for the payment amount for the qualified IDR service that is the subject of the payment determination. The facility submits an offer that is higher than both the qualifying payment amount and the contracted rate (adjusted for inflation) for the previous year with the issuer for the qualified IDR service. The facility also submits additional written information, with the intent to show that the case mix and scope of services available at the facility were integral to the service provided. The certified IDR entity determines this information is credible and that it relates to the offer submitted by the facility for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(D) ( Example 4 ), the certified IDR entity must consider the qualifying payment amount. The certified IDR entity then must consider the additional information submitted by the parties, but should not give weight to information to the extent it is already accounted for by the qualifying payment amount or other credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity determines that the information submitted by the facility regarding the case mix and scope of services available at the facility includes information that is also accounted for in the information the issuer submitted regarding prior contracted rates, then the certified IDR entity should give weight to that information only once. The certified IDR entity also should not give weight to the same information provided by the nonparticipating emergency facility in relation to any other factor. If the certified IDR entity determines that the issuer's offer best represents the value of the qualified IDR service, the certified IDR entity should select the issuer's offer. (E) Example 5 -- ( 1 ) Facts. A nonparticipating provider and an issuer are parties to a payment determination in the Federal IDR process regarding a qualified IDR service for which the issuer downcoded the service code that the provider billed. The issuer submits an offer equal to the qualifying payment amount (which was calculated using the downcoded service code). The issuer also submits additional written information that includes the documentation disclosed to the nonparticipating provider under§ 149.140(d)(1)(ii) at the time of the initial payment (which describes why the service code was downcoded). The certified IDR entity determines this information is credible and that it relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. The provider submits an offer equal to the amount that would have been the qualifying payment amount had the service code not been downcoded. The provider also submits additional written information that includes the documentation disclosed to the nonparticipating provider under§ 149.140(d)(1)(ii) at the time of the initial payment. Further, the provider submits additional written information that explains why the billed service code was more appropriate than the downcoded service code, as evidence that the provider's offer, which is equal to the amount the qualifying payment amount would have been for the service code that the provider billed, best represents the value of the service furnished, given its complexity. The certified IDR entity determines this information to be credible and that it relates to the offer for the payment amount for the qualified IDR service that is the subject of the payment determination. Neither party submits any additional information. ( 2 ) Conclusion. In this paragraph (c)(4)(iv)(E) ( Example 5 ), the certified IDR entity must consider the qualifying payment amount, which is based on the downcoded service code. The certified IDR entity then must consider whether to give weight to additional information submitted by the parties. If the certified IDR entity determines that the additional credible information submitted by the provider demonstrates that the nonparticipating provider's offer, which is equal to the qualifying payment amount for the service code that the provider billed, best represents the value of the qualified IDR service, the certified IDR entity should select the nonparticipating provider's offer. * * * * * (vi) * * * (B) The certified IDR entity's written decision must include an explanation of their determination, including what information the certified IDR entity determined demonstrated that the offer selected as the out-of-network rate is the offer that best represents the value of the qualified IDR item or service, including the weight given to the qualifying payment amount and any additional credible information under paragraphs (c)(4)(iii)(B) through (D) of this section. If the certified IDR entity relies on information described under paragraphs (c)(4)(iii)(B) through (D) of this section in selecting an offer, the written decision must include an explanation of why the certified IDR entity concluded that this information was not already reflected in the qualifying payment amount. * * * * * (f) * * * (1) * * * (v) * * * (F) The rationale for the certified IDR entity's decision, including the extent to which the decision relied on the criteria in paragraphs (c)(4)(iii)(B) through (D) of this section; * * * * * (h) Applicability date. The provisions of this section are applicable with respect to plan years or in the individual market policy years beginning on or after January 1, 2022, except that the provisions regarding IDR entity certification at paragraphs (a) and (e) of this section are applicable beginning on October 7, 2021; and paragraphs (c)(4)(ii) through (iv) of this section regarding payment determinations, paragraph (c)(4)(vi)(B) of this section regarding written decisions, and paragraph (f)(1)(v)(F) of this section regarding reporting of information relating to the Federal IDR process are applicable with respect to items or services provided or furnished on or after October 25, 2022, for plan years or in the individual market policy years beginning on or after January 1, 2022. 15. Section 149.520 is amended by: a. Revising paragraphs (b)(1) and (b)(2) introductory text; b. Redesignating paragraph (b)(3) as paragraph (b)(4); c. Adding a new paragraph (b)(3); and d. Revising newly redesignated paragraph (b)(4)(iv)(F) and paragraph (c). The addition and revisions read as follows:§ 149.520 Independent dispute resolution process for air ambulance services. * * * * * (b) * * * (1) In general. Except as provided in paragraphs (b)(2) and (3) of this section, in determining the out-of-network rate to be paid by group health plans and health insurance issuers offering group or individual health insurance coverage for out-of-network air ambulance services, plans and issuers must comply with the requirements of§ 149.510, except that references in§ 149.510 to the additional circumstances in§ 149.510(c)(4)(iii)(B) shall be understood to refer to paragraph (b)(2) of this section. (2) Considerations for air ambulance services. In determining which offer to select, in addition to considering the applicable qualifying payment amount(s), the certified IDR entity must consider information submitted by a party that relates to the following circumstances: * * * * * (3) Weighing considerations. In weighing the considerations described in paragraph (b)(2) of this section, the certified IDR entity should evaluate whether the information is credible and relates to the offer submitted by either party for the payment amount for the qualified IDR service that is the subject of the payment determination. The certified IDR entity should not give weight to information to the extent it is not credible, it does not relate to either party's offer for the payment amount for the qualified IDR service, or it is already accounted for by the qualifying payment amount under§ 149.510(c)(4)(iii)(A) or other credible information under§ 149.510(c)(4)(iii)(B) through (D), except that the additional circumstances in§ 149.510(c)(4)(iii)(B) shall be understood to refer to paragraph (b)(2) of this section. (4) * * * (iv) * * * (F) The rationale for the certified IDR entity's decision, including the extent to which the decision relied on the criteria in paragraph (b)(2) of this section and§ 149.510(c)(4)(iii)(C) and (D); * * * * * (c) Applicability date. The provisions of this section are applicable with respect to plan years, or in the individual market, policy years, beginning on or after January 1, 2022, except that paragraphs (b)(1), (2), and (3) and (b)(4)(iv)(F) of this section regarding payment determinations are applicable with respect to services provided or furnished on or after October 25, 2022, for plan years or in the individual market policy years beginning on or after January 1, 2022. (Filed by the Office of the Federal Register on August 24, 2022, 11:15 a.m. and published in the issue of the Federal Register for August 26, 2022, 87 FR 52618)

Private Letter Ruling Number: 202315011 Internal Revenue Service January 19, 2023 Department of the Treasury Internal Revenue Service Independent Office of Appeals Release Number: 202315011 Release Date: 4/14/2023 Date: JAN 19 2023 Person to contact: Name: Employee ID Number: Phone: Hours: Employer ID number: Uniform issue list (UIL): 0501.00-00 Certified Mail Dear ******: This is a final adverse determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3). We have hereby revoked the favorable determination letter to you dated ****** _ and you are no longer exempt under IRC Section 501(a) effective ******, ******. We made the adverse determination for the following reasons: You have failed to produce documents or otherwise demonstrate that you are operated exclusively for exempt purposes. You have also failed to show that expenditures by your President were for exempt purposes. Accordingly, you have failed to demonstrate that you are not operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such private interests. You have also failed to show that your net earnings do not inure in whole or in part to the benefit of private shareholders or individuals. Contributions to your organization are not deductible under IRC Section 170. You're required to file federal income tax returns on Forms 1120, U.S. Corporation Income Tax Return. Mail your form to the appropriate Internal Revenue Service Center per the form's instructions. You can get forms and instructions by visiting our website at IRS.gov/forms or by calling 800-TAX-FORM (800-829-3676). We'll make this letter and the proposed adverse determination letter available for public inspection under IRC Section 6110 after deleting certain identifying information. We provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437. If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of IRC Section 7428 in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: U.S. Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov U.S. District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Note: We will not delay processing income tax returns and assessing any taxes due even if you file a petition for declaratory judgment under IRC Section 7428. Taxpayer rights and sources for assistance The Internal Revenue Code (IRC) gives taxpayers specific rights. The Taxpayer Bill of Rights groups these into 10 fundamental rights. See IRC Section 7803(a)(3). IRS employees are responsible for being familiar with and following these rights. For additional information about your taxpayer rights, please see the enclosed Publication 1, Your Rights as a Taxpayer, or visit IRS.gov/taxpayer-bill-of-rights. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayers' rights. TAS can offer you help if your tax problem is causing a financial difficulty, you've tried but been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure isn't working as it should. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. To learn more, visit taxpayeradvocate.IRS.gov or call 877-777-4778. Tax professionals who are independent from the IRS may be able to help you. Low Income Taxpayer Clinics (LITCs) can represent low-income persons before the IRS or in court. LITCs can also help persons who speak English as a second language. Any services provided by an LITC must be for free or a small fee. To find an LITC near you: - Go to taxpayeradvocate.IRS.gov/litcmap; - Download IRS Publication 4134, Low Income Taxpayer Clinic List, available at IRS.gov/forms; or - Call the IRS toll-free at 800-829-3676 and ask for a copy of Publication 4134. State bar associations, state or local societies of accountants or enrolled agents, or other nonprofit tax professional organizations may also be able to provide referrals. TAS assistance is not a substitute for established IRS procedures, such as the formal appeals process. TAS cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States Court. If you have questions, contact the person at the top of this letter. Sincerely, Doug O'Donnell Acting Commissioner By Valeria B Farr Appeals Team Manager Enclosures: Publication 1 IRS Appeals Survey cc: Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: April 26, 2022 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: May 26, 2022 CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Lynn A. Brinkley Lynn A. Brinkley Acting Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Publication 892 Publication 3498 ISSUES: 1. Whether ******, continues to qualify for exemption as an organization described in the Internal Revenue Code (IRC) Section 501(c)(3) as a Public Charity. 2. Whether ****** engaged in transactions for personal benefit rather than exclusively for charitable purposes. FACTS: Organizational History: ****** applied for tax-exempt status by filing Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, on ******. The Service determined on ****** the organization will be classified as exempt under 170(b)(1)(A)(vi) of the Internal Revenue Code as an organization described in section 501(c)(3). The organization has been filing Form ****** since ******. Operation History During the review of the original Form 1023 dated ******, and per the bylaws, "****** is a metropolitan and central city faith organization designed to reinstall moral values and normative principles in culture and community through education and vocational equipping efforts. The ****** initiatives are carried out through inner city outreach nurture and educational training modules involving youth and young adults-and through re-integrative training and recovery support projects which involve recovering substance abusers and displaced veterans. The primary focus of the organization and its ministry is aimed at reviving values in culture and the re-integration of the misplaced in society and community." "Through these services, the organization is committed to outreach their initiatives to involve the youth and young adults in the inner city in educational training, re-integrative training and recovery support projects." The organization would conduct fundraising events and secure fundraising through foundation grants, government grant solicitations and other methods. Current Operations On ******, conducted a phone interview with, President ******, who states that "he works with the organization around ****** hours a week, supervisors all the activities/event of the organization and controls all the financial documents of the organization." The Organization has ****** officers, including himself, ******, Treasurer (who is also the Organization's power of attorney) and ******, Secretary. There are no other officers in the Organization and there is no Board of Directors. ******controls all the Organizations operations, fundraising activities, and financial information. ****** states, "the solicitation for fundraising has not been performed and therefore no documents were associated with fundraising activities". ****** also states "the organization holds ****** events per month, but there is no publication or documents on events held by the organization that further the exempt purpose. The events are held at ****** places, my residence, my church, and at my former place of employment, ******". According to ******, during the tax year of ******, he was employed at the ****** as a ******. The people that attended meetings held by the Organization at the ******, some were patients and others were not. The Organization held meetings during the normal operating hours of the ******. During meetings, individuals that attended were served food and drinks supplied by the Organization. The Organization provided documents related to food expenses. (Refer to Attachment A, for tax year ending ******) The Organization provided documents related to travel ****** (Refer to Attachment B, for tax year ending ******) The Organization provided financial records with ****** and the Organization's name on the account. ****** states " I have had direct deposits from my ****** salary placed in the account to fund the 501(c)(3) for its operations during the year ******. My personal salary was used to fund the exemption purpose. " ****** also stated that the board approved of his personal income, to be used for funding the Organization. He also states, " Since around ******, to the best of my knowledge, deposits from my ****** have been deposited into the organizations account. However, after being advised by a reviewer in the year ******, the practice of deposit from the ****** into the account no longer occurs and was discontinued in ****** and ******. " The Organization has bank accounts; the total amount from all ****** accounts, per bank statements, shows income of $ ****** out of that amount in the Organization's bank account, $ ****** was supplied by ****** compensation from his W2 employer, as his compensation was direct deposited into the Organizations account. ****** provided a Leave and Earrings Statement from his employer, ******, for the month of ****** of ******. Listed below are the direct deposits from ****** employer directly into the to the Organization's bank account by date, depositor, amount: Listed below are personal expenses of ****** paid by the Organization's account by date, description and amount: During the ******, interview the Revenue Agent asked the Treasurer (also the POA) about the preparation of the ****** tax return. ****** states " he reviews the Organization's bank statements and expense records sent to him by ******, but since the Organization's gross receipts are less than $ ******, no return is required to be filed ". When asked if the documents are examined and questioned for any inaccurate information, by ****** he replied " No, I do not question the documents sent by ****** ". LAW: IRC section 170(b)(1)(A) In the case of an individual, the deduction provided in subsection (a) shall be limited as provided in the succeeding subparagraphs. Any charitable contribution to-- (i) a church or a convention or association of churches, (ii) an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on, (iii) an organization the principal purpose or functions of which are the providing of medical or hospital care or medical education or medical research, if the organization is a hospital, or if the organization is a medical research organization directly engaged in the continuous active conduct of medical research in conjunction with a hospital, and during the calendar year in which the contribution is made such organization is committed to spend such contributions for such research before January 1 of the fifth calendar year which begins after the date such contribution is made, (iv) an organization which normally receives a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under section 501(a)) from the United States or any State or political subdivision thereof or from direct or indirect contributions from the general public, and which is organized and operated exclusively to receive, hold, invest, and administer property and to make expenditures to or for the benefit of a college or university which is an organization referred to in clause (ii) of this subparagraph and which is an agency or instrumentality of a State or political subdivision thereof, or which is owned or operated by a State or political subdivision thereof or by an agency or instrumentality of one or more States or political subdivisions, (v) a governmental unit referred to in subsection (c)(1) IRC section 501(c)(3) exempts from federal income tax organizations which are organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. Income Tax Regulations ("Treas.Reg.") Treas.Reg. Section 1.501(c)(3)-1(d)(i) states that an organization may be exempt as an organization described in 501(c)(3) if it is organized and operated exclusively for one or more of the following purposes: religious, charitable, scientific, testing for public safety, literary, educational, or prevention of cruelty to children or animals. Treas.Reg. Section 1.501(c)(3)-1(a)(1) of the regulations provides that in order to be exempt as an organization described in section 501(c)(3) of the Code, the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section. Treas.Reg. Section 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3) Treas.Reg. Section 1.501(c)(3)-1(d)(1)(ii) is an organization is not organized or operated exclusively for one or more of the purposes specified in subdivision (i) of this subparagraph unless it serves a public rather than a private interest. Thus, to meet the requirement of this subdivision, it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such private interests. Revenue Ruling 72-369 states, in part, that in order for an organization to pass the operational test, the organization's resources must be devoted to purposes that qualify as exclusively charitable. Revenue Ruling 68-489, an organization will not jeopardize its exemption under IRC 501(c)(3) if it distributes funds to nonexempt organizations provided it retains discretion over the use of funds for IRC 501(c)(3) purposes Revenue Ruling 81-94, A "church" that was formed by a professional nurse (who is also the "church's" minister, director, and principal officer) and that is used primarily as a vehicle for handling the nurse's personal financial transactions is not exempt from tax under section 501(c)(3) of the Code. Christian Manner International Inc. V. Commissioner, 71. T.C. 661, exemption denied because principal activity not verified as in furtherance of exempt purpose. Principle activity not an education purpose activity. Mysteryboy Inc. v. Comm'r, 2010 Tax Ct., exemption was denied because the corporation was not exempt from tax under section 501(a) because it was not an organization described in section 501(c)(3). P.L.L. Scholarship Fund v. Commissioner, court finds that the petitioner has not carried its burden of showing that it was operated exclusively for an exempt purpose under the required standards. Basic Bible Church v. Commissioner, court determined that petitioner is not exempt from Federal income tax under section 501(c)(3), 1 and that petitioner is not a church described in section 170(b)(1)(A)(i)[*847]. Southern-Church of Universal Brotherhood Assembled v. Commissioner, concluded that the organization is not described as in section 501(c)(3) of the Code. The organizations net earnings inure to the benefit of your minister since funds are provided to meet his personal expenses. Further, the organization appears to be serving a private rather than a public interest, since the funding of your organization almost entirely by contributions from one person, your minister, and the subsequent paying of expenses for his residence and his food expenses have the effect of reducing his Federal income tax liability. TAXPAYER'S POSITION: Issue 1: The Organization stated they qualify for exemption under 501(c)(3). Issue 2: The Organization has not provided a response to engaging in transactions for personal benefit rather than exclusively for charitable purposes. Government Position: Issue 1: The Organization does not qualify for exemption under IRC section 501(c)(3) as organized and operated exclusively for one or more of the following purposes: religious, charitable, scientific, testing for public safety, literary, educational, or prevention of cruelty to children or animals. The Organization has stated that they do not have documentation that furthers the exempt purpose of the Organization and did not provide any documentation that furthers exemption. The Organization received income in the form of compensation from the Officer's Employer. The Officer had W2 compensation direct deposited into the Organization's bank account from tax years ******, through ******. The Service section 501(c)(3) tax exempt status of ****** should be revoked because it is not being operated exclusively for tax exempt purposes pursuant to the requirements set forth in section 1.501(c)(3)-1(c)(1) of the regulations. The Organization's lack of activities for more than three years also stands in contrast to section 1.501(c)(3)-1(c)(1) of the regulations in that the lack of operations is evidence that there is no furtherance of any exempt purpose. In contrast to section 1.501(c)(3)-1(d)(ii) of the regulations which calls for an organization to be organized and operated for a public rather than a private benefit, the Organization has not operated or engaged in any charitable activities in the last years based on lack of activities performed by the organization with relation to exempt purposes. The Organization does not pass the operational test as specified in section 1.501(c)(3)-1(c) of the regulations because the lack of activities means they were not operated exclusively for one or more exempt purposes. To be considered as operating exclusively for exempt purposes, the Organization would have had to engage primarily in activities which accomplish one or more of such exempt purposes as specified in section 501(c)(3) of the Code. The Organization's activity relates to "Revenue Ruling 81-94"; where the principal officer formed an organization, and it was used primarily as a vehicle for handling the Officer's personal financial transactions. As the Organization has not operated exclusively for charitable purposes for an extended period, the tax-exempt status of the Organization should be revoked. Issue 2: The President co-mingled his personal income with the income of the Organization, by having his W2 compensation direct deposited into the Organizations bank account every month from tax years ****** to ******. Section 501(c)(3) prohibits private benefit and inurement. Co-mingling of the funds between an exempt organization and the president's personal finances may result in the funds of the organization inuring to the benefit of a private individual. Although, according to " Revenue Ruling 68-489 ", an organization will not jeopardize its exemption under IRC 501(c)(3) if it distributes funds to nonexempt organizations provided it retains discretion over the use of funds for IRC 501(c)(3) purposes. However, during the ******, interview, the President stated that the Organization has no documents to further an exemption purpose and the reason for depositing non-exempt income in the Organization's account, was to fund the Organization. In the Organizations ****** bank accounts, the combine income was $ ******, with ** % been provide from ****** personal compensation from his W2 employer, *** % coming from interest and other income that cannot be detected. The documents provided by the Organization to show the income received, did not display that they retain discretion over the use of the funds. The Organization provided spread sheets of expenses relating to food and travel, along with credit card payment receipts that were listed on the bank statements. It is unknown if the expenses incurred for food and travel were paid with the Organization's credit card. There was no given explanation for food and travel by the Organization, to show how these expenses further the Organizations exemption's purpose. All the Organization's gross income and expenses were not used exclusively for charitable purposes of the organization as described in Treas.Reg. Section 1.501(c)(3)-1(c)(1). All of the income and expenses incurred by the Organization was used for the benefit of private interests. Conclusion: Issue 1 ****** is not operating exclusively as a Charitable Foundation as described in IRC Section 501(c)(3). The Organization's activities are not consistent with been organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals. The Organization's net earrings are a private benefit as the income and expenses serve no exempt purpose of the organization. The net earrings of the Organization serve as personal income and expenses of the Officer, ******. The Organization should be revocation and organization should file a Form 1120 for tax year and all subsequent years. Issue 2 ****** is not operating exclusively as Charitable Foundation as described in IRC Section 501(c)(3); since all its income and expenses were used for personal purposes. The issue of excess benefit transaction pursuant to IRC section 4958 for payments to a disqualified person will be addressed in a separate report. As a result, the organization has inurement that serves private interest, we have proposed revocation for tax year ******and all subsequent years.

Private Letter Ruling Number: 202334016 Internal Revenue Service May 30, 2023 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Number: 202334016 Release Date: 8/25/2023 UIL: 501.03-00 Date: May 30, 2023 Taxpayer ID number (last 4 digits): Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with United States Tax Court: CERTIFIED MAIL - Return Receipt Requested Dear ******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective ******. Your determination letter dated ******, is revoked. Our adverse determination as to your exempt status was made for the following reasons: Organizations described in IRC Section 501(c)(3) must be both organized and operated exclusively for exempt purposes and no part of the net earnings may inure to the benefit of any private shareholder or individual. You operate like the organization described in Capital Gymnastics Booster Club v. Comm. T.C. Memo 2013-193; raising funds to benefit only families of athletes that participated in the fundraisers. More than an insubstantial part of your activities benefit individual and private interests rather than benefiting all members of your organization whether they participate in fundraiser activities or not. Therefore, you are not operated exclusively for exempt purposes. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov. Contributions to your organization are no longer deductible under IRC Section 170. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: US Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Internal Revenue Service Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. You may fax your documents to the fax number shown above, using either a fax machine or online fax service. Protect yourself when sending digital data by understanding the fax service's privacy and security policies. Keep the original letter for your records. Sincerely, Lynn A. Brinkley Lynn A. Brinkley Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 cc: Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: June 9, 2022 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TA.S can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Eli N. Munoz for Lynn A. Brinkley Acting Director Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Form 4621-A Publication 892 Publication 3498 cc: Issues 1. Whether ****** continues to qualify for exemption as an organization described in Internal Revenue Code 501(c)(3). Facts Background ****** initially operated as a ****** in year ****** before converting to a nonprofit organization. ****** formed as a nonprofit organization on ******, with ****** Secretary of State. Activities described in ****** Articles of Incorporation states: - Develop ******, ******, and ****** among ****** and ****** of ******, and surrounding areas. - Emphasize the inclusion of new ****** and foster the ****** skills by providing a supportive environment for ****** education. - Promote, encourage, and improve standards of ******. - Associate with other ******. - Provide scholarships to ****** of ******, and surrounding areas to enable ****** to participate in ******. - Attract and retain ****** and ****** to participate in ****** or ******, ******, ******, and ******. - Sponsor ****** in each participating ******. - Engage in other activities properly carried out and organized under ****** laws and described in Section 501(c)(7) of the Internal Revenue Code of 1986, as amended. ****** Articles of Incorporation amended ******, added purpose clause language under Internal Revenue Code Section (IRC) 501(c)(3). ****** purpose clause states, "The corporation is organized exclusively for charitable, religious, educational and scientific purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code. The corporation does not have the authority to issue capital stock." References to ****** were also replaced with ****** as part of your amendment. ****** Bylaws describes the ****** duties as ****** to the ******. The ****** ensures ******. The ****** consists of up to ****** voting members. Bylaws' article ****** states, "Compensation - Members of the Board of Directors may pay themselves ******." Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, was signed ******, by ******, *****. To qualify for exemption as a section 501(c)(3) organization, ****** attested under Part ******, ****** Specific Activities, question ******, that ****** organized and operated exclusively to further charitable and educational activities. ****** also attested that ****** have not conducted and will not conduct activities that violate mentioned prohibitions and restrictions, such as, - Ensure that ****** net earnings do not inure in whole or in part to the benefit of private shareholders or individuals. - Not further non-exempt purposes (such as purposes that benefit private interests) more than insubstantially. - Not be organized or operated for the primary purpose of conducting a trade or business that is not related to ****** exempt purposes(s). Part ******, questions and ******, ****** affirmed 'yes'. Question ****** states, "Do ****** or will ****** donate funds to or pay expenses for individual(s)?" Question ****** states, "Do ****** or will ****** engage in financial transactions (for example, loans, payments, rents, etc.) with any of ****** officers, directors, or trustees, or any entities they own or control?" Part ******, ******, question ******, ****** attested recognition under Internal Revenue Code 501(c)(3) under Section 509(a)(2). Attested statement says, "****** normally receive more than one-third of ****** support from a combination of gifts, grants, contributions, membership fees, and gross receipts (from permitted sources) from activities related to ****** exempt functions and normally receive not more than ****** of ****** support from investment income and unrelated business taxable income." According to ****** Determination Letter 5436 dated ******, ****** were granted public charity status under IRC 501(c)(3) Section 509(a)(2). The Examination Forms 990-N filed for tax years ended ******, and ******. Before conversion from a for-profit organization, ****** indicated that ****** activities were the same as now. ****** conduct fundraisers for ****** which is an ****** organization with approximately ****** - ******. ****** consists of ****** competitive travel teams. There are approximately ****** recreational in-house teams that internally play. Athletes are ages ****** to ******. ****** reside in ****** and ****** surrounding areas. Training and competition seasons are ****** - ******. ****** season is ****** to ******. ****** is ****** to ******. Fundraisers are mostly held during ******. ****** also indicated that ****** only fundraise for ******, so no facilities are rented or owned. ****** do not have scholarship or grant programs. ****** have no sponsorships; and no sponsorship income was received during years ****** and ******. ****** indicated there are no employees and volunteers are used. ****** indicated ****** of ****** activities relate to conducting fundraisers for ******. ****** funding comes exclusively from fundraisers. ****** have no website. ****** used to inform teams of upcoming fundraisers; and details to ****** participate in fundraisers. Several fundraisers held ****** the ****** to help offset ****** expenses such as season ******, ******, and other ****** expenses. After fundraiser events conclude, fundraiser expenses are paid, and net fundraiser proceeds are allocated ****** among those who participated in the fundraiser. Net fundraiser income goes in participants' separate recorded accounts. ****** in separate recorded fundraiser accounts are paid directly to ****** since they are ******. ****** are primarily paid by checks. ****** written response described several fundraisers held ****** the ******. ****** fundraisers listed were as follows: - ******/****** - ****** attend ****** at ******. They stand near ****** and request ****** from ******. ****** split ****** between ****** that attend. - ******-****** stand near store entrances. They request donations from store customers. ****** paid based on ****** of ******. - ******-****** that sells ****** receives ****** of ******. - ****** Sales - ****** receives a ****** of ****** sold ****** - ****** - ****** are ****** and sold. ****** receives $ ****** for ****** sold. - ****** - No description provided ****** - ****** Sales - ****** receives sales percentage of ****** sold. - ******/****** - Participation based on sharing event on social media. ****** split equally between participants. - ****** -- Participants receive ****** of items bought ******. - ****** - ****** sold ******. Everyone that participated received $ ******. ****** - Contributes portion of raised income to ******. ****** operation policy dated ****** describes how finances are handled. ******/******, ****** (******), cuts expense checks. Checks mailed ****** of ******. Funds Disbursement Policy: - ****** emails ****** to ****** by ****** of ******. - ****** emails ****** invoice to ****** family on ****** of ******. - Families email ****** by ****** of ****** to receive fundraising check by ******. - Must email ****** by ****** of ******, else family must wait the ****** to request check for funds disbursement. - ****** retains ****** of each fundraiser to accommodate administrative expenses. - All fundraisers will go through ******. ****** operation policy also describes ****** invoice internal process: - ****** emails Board President, ******, after all credit invoice statements are emailed to ****** families. - Board President, ******, randomly contact ****** to ensure they received ****** credit invoice statement. - Board President, ******, refers families to ****** to resolve any discrepancies of not receiving ****** invoice statements. ****** income and expense transactions are recorded in Excel spreadsheets and check registers. No formal books and records such as account ledgers were used. ******, recorded transactions into spreadsheets since the organization ******. ****** took over ******. ****** duties for maintaining Excel spreadsheets in ******. Board ****** and board ****** reviewed spreadsheets. ****** have ****** account used to transact business. Check and cash bank deposits were made by electronic and direct formats. Board ******, board ****** and ***** have authority to write checks, sign checks, and make deposits. ****** signature required to write checks. The Board of Directors authorize ****** items. Board ****** and board ****** open mail. ****** provided accounting records such as Excel spreadsheets, bank records, check register log, and sample of ****** invoice statements. We noted net fundraiser proceeds were equally shared and paid to those who participated in each fundraiser. For example, comments on the bottom of ****** invoice statements dated ******, and ******, to ****** state, "******. Terms: ******, with the requested ******, by the ****** of ******. The check will then be mailed directly to ****** within ******. Please provide ****** mailing address...." ****** provided operating income and expenses as follows: * Note: ****** Support identifies amounts disbursed to ******. ****** compensated ****** from fundraiser proceeds. Checks and cash paid to ****** for participation in fundraiser events. Some ****** compensated at least $ ****** or more in year ****** and year ******. No Forms W-9, Request for Taxpayer Identification Number and Certification, were secured, and no Forms 1099 were issued to ****** of ****** who participated in these fundraisers. Reference attachment A list of those required to receive forms 1099. Board ****** whose ****** participated in fundraisers also were paid an allocation of funds raised. We noted ****** compensation paid to board officers for board duties as noted in article ****** of ****** bylaws. There are also no scholarships, grants, or need based programs available for those in need. Law IRC 501(c)(3) exempts from federal income tax organizations which are organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. Treas.Reg. Section 1.501(c)(3)-1(a)(1) states that, to be exempt as an organization described in Section 501(c)(3) of the Code, an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Treas.Reg. Section 1.501(c)(3)-1(c)(1) states that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more exempt purposes specified under Code Section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. Treas.Reg. 1.501(c)(3)-1(c)(2) provides that, "an organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals." Treas.Reg. Section 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest. To meet the requirement of this subsection, the burden of proof is on the organization to show that is not organized or operated for the benefit of private interests, such as designated individuals, the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such private interests. In Wendy Parker Rehabilitation Foundation, Inc. v. Commissioner, T.C. Memo 1986-348, an organization was formed to aid coma victims, however 30% of funds went to the benefit of Wendy Parker. Significant contributions were made to the organization by the Parker family, and the Parker family controlled the organization. Wendy's selection as a substantial recipient of funds substantially benefited the Parker family by assisting with the economic burden of caring for her. The benefit didn't flow primarily to the public as required under Section 1.501(c)(3)-1(d)(1)(ii). Therefore, the foundation was not exempt under IRC 501(c)(3). In Capital Gymnastics Booster Club v. Comm. T.C. Memo 2013-193, analyzed the fundraising activity of a gymnastic booster club. Parent-members sold items and were awarded points in proportion to the profit that the family generated. Each point was valued at $10 and used to offset the family's assessed costs of competition for their children. Parents who did not fundraise did not receive a benefit from the activity, they were responsible for writing a check to the organization for the full assessment for their children. The court held that the fundraising structure allowed assets of the organization to inure to members who control the organization. In Better Business Bureau of Washington, D.C., Inc. v. U.S., 326 U.S. 279 (1945), the United States Supreme Court found that an important, if not the primary, pursuit of the organization was to promote not only an ethical but also a profitable business community. The organization was not operated exclusively for an educational purpose under Code Section 501(c)(3). The United States Supreme Court provided that "the presence of a single nonexempt purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of truly exempt purposes." IRC Section 61, define gross income as all income from whatever source derived, including but not limited to compensation for services, including fees, commissions, fringe benefits, and similar items; gross income derived from business; gains derived from dealings in property; interest; rents; royalties; dividends; alimony and separate maintenance payments; annuities; income from life insurance and endowment contracts; pensions; income from discharge of indebtedness; distributive share of partnership gross income; income in respect of a decedent; and income from an interest in an estate or trust. Taxpayer's Position ****** position is not known. Government's Position 1. ****** are not described in IRC 501(c)(3) and Treasury Regulation Section 501(c)(3)-1(a)(1) because ****** do not satisfy operational requirements. More than an insubstantial part of ****** activities do not further exempt purposes. ****** don't meet provisions of Treasury Regulation Section 1.501(c)(3)-1(c)(1) because more than an insubstantial part of activities are not in the furtherance of an exempt purpose to function like a booster (support) organization for an ******. ****** activities benefit individual and private interests instead of benefiting all members of ****** organization whether they participate in fundraiser activities or not. For example, ****** / ****** of ****** organization have separate individual accounts to record earned income from fundraiser events. Income from individual accounts are disbursed directly to ****** of ****** since they are ******. ****** / ****** receive no share of raised funds or other benefits if they don't participate in raising money. ****** primary activity is to raise income and share net income exclusively with fundraiser participants. ****** primary activity is not regarded as operated exclusively for one or more exempt purposes under IRC 501(c)(3). More than an insubstantial part of ****** activities is not in furtherance of an exempt purpose. This arrangement results in private benefit and inurement to insiders. ****** operate like the organization described in Capital Gymnastics Booster Club v. Comm. T.C. Memo 2013-193. ******-members participated in fundraisers and received a share of profits used to offset the family's assessed competition costs for their ******. ****** who did not fundraise did not receive a benefit from the activity, they were responsible for writing a check to the organization for the full assessment for their ******. The court ruled fundraising activities only benefited certain ****** and ******. Substantial inurement and private benefit occurred which does not meet charitable criteria as an exempt organization under IRC 501(c)(3). Like ****** organization, the primary activity for the organization is raising funds to benefit a ****** organization, and raised funds only benefited ****** families that participated in the fundraisers, instead of benefitting all ****** whether they participated in the fundraiser or not. An individual fundraising account is any method by which a ****** and other supporting ****** organizations ****** an individual or family for all, or a portion, of the funds raised by the individual, family, or organization. Funds placed in individual accounts and disbursed to individuals are not considered a tax-exempt activity under IRC 501(c)(3). Tax-exempt organizations must benefit the entire group instead of benefiting individual members of a group, regardless of volunteer or fundraising participation. ****** may not maintain individual accounts that are earmarked for a particular individual. A ****** is defined as "an organization formed to help support the efforts of a sports team or organization. Support is shown in many ways, including volunteering time, raising money, and contributing funds to better enhance the team or organization's performance. ****** and other supporting ****** organizations cannot credit "individual" student accounts based on a ****** participation in fundraising events. Like the organization described in Wendy L Parker Rehabilitation Foundation, Inc. v. Commissioner, T.C. Memo 1986-348, at least 30 percent of your funds went to benefit selected ****** and ****** who participated in fundraiser events. In year ******, ****** disbursed *** % of shared income to fundraiser participants. For year ******, you disbursed *** % of shared raised income to fundraiser participants. In Wendy L. Parker, she and family received 30% of the organization's disbursed funds, and they were deemed a substantial beneficiary. ****** organization like Wendy L Parker, prohibits using funds of a tax-exempt organization to inure to the benefit of private individuals. The benefit didn't flow primarily to the public but to a select individual and her family. The organization was not exempt under IRC 501(c)(3). Similar to Better Business Bureau of Washington, D.C., Inc. v. U.S., 326 U.S. 279 (1945), ****** organization does not operated exclusively for an educational purpose under Code Section 501(c)(3). ****** disbursed funds provided exclusively to fundraiser participants, substantially benefited them. The presence of a single nonexempt purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of exempt purposes. Fundraiser income paid to participants is considered taxable income. Internal Revenue Code Section 61 defines gross income as taxable income, unless specifically exempt as nontaxable income. ****** required to file information returns, Forms 1099 and Forms 1096, Annual Summary and Transmittal of U.S, for those receiving $ ****** or more. ****** failed to file required Forms 1099 and Forms 1096. We requested these delinquent returns, Forms 1099, and Forms 1096, be filed by you. Again, disbursed fundraiser income substantially benefited those who received it. An organization is regarded as operated exclusively for one or more exempt purposes only if they engage primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. Raising funds and primarily disbursing those funds to a nonexempt entity, ****** / ******, is not an exempt activity. Fundraiser activities should benefit the entire organization whether a person participates in the activity or not. As such, ****** fail to meet the operational requirements to continue exempt status under IRC 501(c)(3). Conclusion Based on the preceding reasons, ****** do not qualify for exemption under section 501(c)(3). More than an insubstantial part of activities are not in the furtherance of an exempt purpose. ****** primarily compensated ****** who participated in fundraiser events. Individual fundraiser accounts were established for ******/******, to record specific funds ****** raised, then funds were directly disbursed to these families. Some ****** were compensated $ ****** or more for participation in these fundraiser events. ****** activities benefit individual and private interests instead of benefiting all members of ****** organization whether they participate in fundraiser activities or not. Accordingly, your exempt status is revoked effective ******. File Form 1120 return for tax periods ending after ******.

Private Letter Ruling Number: 202220001 Internal Revenue Service February 22, 2022 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202220001 Release Date: 5/20/2022 Index Number: 9100.35-00, 2010.04-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:4 PLR-103060-22 Date: February 22, 2022 Dear *******: This letter responds to a letter dated January 25, 2022, and subsequent correspondence, submitted on behalf of Decedent's estate, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make an election. Decedent's estate is requesting to make an election under § 2010(c)(5)(A) of the Internal Revenue Code (a "portability" election) to allow a decedent's surviving spouse to take into account that decedent's deceased spousal unused exclusion (DSUE) amount. The information submitted for consideration is summarized below. Decedent died on Date, survived by Spouse. It is represented that based on the value of Decedent's gross estate and taking into account any taxable gifts, Decedent's estate is not required under § 6018(a) to file an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return). It is further represented that there is an unused portion of Decedent's applicable exclusion amount and that a portability election is required to allow Spouse to take into account that amount (the "DSUE" amount). A portability election is made upon the timely filing of a complete and properly prepared estate tax return, unless the requirements for opting out are satisfied. See § 20.2010-2(a)(2) of the Estate Tax Regulations. For various reasons, an estate tax return was not timely filed and a portability election was not made. After discovery of this, Decedent's estate submitted this request for an extension of time under § 301.9100-3 to make a portability election. LAW AND ANALYSIS Section 2001(a) imposes a tax on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States. Section 2010(a) provides that a credit of the applicable credit amount shall be allowed to the estate of every decedent against the tax imposed by § 2001. Section 2010(c)(1) provides that the applicable credit amount is the amount of the tentative tax that would be determined under § 2001(c) if the amount with respect to which such tentative tax is to be computed were equal to the applicable exclusion amount. On December 17, 2010, Congress amended § 2010(c), effective for estates of decedents dying and gifts made after December 31, 2010, to allow portability of a decedent's unused applicable exclusion amount between spouses. Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, § 303, 124 Stat. 3296, 3302 (2010). Section 2010(c)(2) provides that the applicable exclusion amount is the sum of the basic exclusion amount, and, in the case of a surviving spouse, the DSUE amount. Section 2010(c)(3) provides the basic exclusion amount available to the estate of every decedent, an amount to be adjusted for inflation annually after calendar year 2011. Section 2010(c)(4) defines the DSUE amount to mean the lesser of (A) the basic exclusion amount, or (B) the excess of -- (i) the applicable exclusion amount of the last deceased spouse of the surviving spouse, over (ii) the amount with respect to which the tentative tax is determined under § 2001(b)(1) on the estate of such deceased spouse. Section 2010(c)(5)(A) provides that a DSUE amount may not be taken into account by a surviving spouse under § 2010(c)(2) unless the executor of the estate of the deceased spouse files an estate tax return on which such amount is computed and makes an election on such return that such amount may be so taken into account. The election, once made, shall be irrevocable. No election may be made if such return is filed after the time prescribed by law (including extensions) for filing such return. Section 20.2010-2(a)(1) provides that the due date of an estate tax return required to elect portability is nine months after the decedent's date of death or the last day of the period covered by an extension (if an extension of time for filing has been obtained). Further, an extension of time under § 301.9100-3 to make a portability election may be granted in the case of an estate that is not required to file an estate tax return under § 6018(a), as determined solely based on the value of the gross estate and any adjusted taxable gifts (and without regard to § 20.2010-2(a)). Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I. Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time to make an election whose due date is prescribed by a regulation (and not expressly provided by statute). Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. In this case, based on the representation as to the value of the gross estate and any adjusted taxable gifts, the time for filing the portability election is fixed by the regulations. Therefore, the Commissioner has discretionary authority under § 301.9100-3 to grant an extension of time for Decedent's estate to elect portability, provided Decedent's estate establishes it acted reasonably and in good faith, the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the interests of the government. Information, affidavits, and representations submitted on behalf of Decedent's estate explain the circumstances that resulted in the failure to timely file a valid election. Based solely on the information submitted and the representations made, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Therefore, we grant an extension of time of 120 days from the date of this letter in which to make the portability election. The election should be made by filing a complete and properly prepared Form 706 and a copy of this letter, within 120 days from the date of this letter, with the Kansas City Service Center, at the following address: Department of the Treasury, Internal Revenue Center, Kansas City, MO 64999. For purposes of electing portability, a Form 706 filed by Decedent's estate within 120 days from the date of this letter will be considered to be timely filed. If it is later determined that, based on the value of the gross estate and taking into account any taxable gifts, Decedent's estate is required to file an estate tax return pursuant to § 6018(a), the Commissioner is without authority under § 301.9100-3 to grant an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void. See § 20.2010-2(a)(1). We neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. In particular, we express no opinion as to the DSUE amount to be potentially taken into account by Spouse. Any claimed DSUE amount will be included in the applicable ex clusion amount of Spouse only to the extent that Spouse can substantiate such amount and will be subject to determination by the Director's office upon audit of relevant Federal gift or estate tax returns. See § 20.2010-3(c)(1) and (d). The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, we have sent a copy of this letter to your authorized representative. Sincerely, Associate Chief Counsel (Passthroughs & Special Industries) By: Melissa C. Liquerman Melissa C. Liquerman Chief, Branch 4 Office of the Associate Chief Counsel (Passthroughs & Special Industries) Enclosure Copy for § 6110 purposes cc:

Private Letter Ruling Number: 202151012 Internal Revenue Service November 30, 2018 DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE TEGE EO Examinations Mail Stop 4920 DAL 1100 Commerce St. Dallas, Texas 75242 TAX EXEMPT AND GOVERNMENT ENTITIES DIVISION Number: 202151012 Release Date: 12/23/2021 Date: November 30, 2018 Tax Year Ending: Taxpayer Identification Number: Person to Contact: Employee Identification Number: Employee Telephone Number: UIL: 501.03-00 CERTIFIED MAIL--RETURN RECEIPT Dear *******: This is a final determination that you do not qualify for exemption from Federal income tax under Internal Revenue Code (the "Code") section 501(a) as an organization described in Code section 501(c)(3) effective January 1, 20XX. Your determination letter dated December 12, 20XX is revoked. The revocation of your exempt status was made for the following reason(s): Organizations described in section 501(c)(3) of the Internal Revenue Code and exempt from tax under section 501(a) must be both organized and operated exclusively for exempt purposes. You have failed to respond sufficiently to establish that you are operated exclusively for exempt purposes and that no part of your net earnings inure to the benefit of private shareholders or individuals. You failed to respond sufficiently to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by sections 6001 and 6033(a)(1) and the regulations thereunder. Contributions to your organization are no longer deductible under IRC §170 after January 1, 20XX. Organizations that are not exempt under section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms, and information, please visit www.irs.gov. If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims, or 3) the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed within 90 days from the date this determination letter was mailed to you. Please contact the clerk of the appropriate court for rules and the appropriate farms for filing petitions for declaratory judgment by referring to the enclosed Publication 892. You may write to the courts at the following addresses: United States Tax Court 400 Second Street; N.W. Washington, D.C. 20217 U.S. Court of Federal Claims 717 Madison Place, N.W. Washington, D.C. 20439 U.S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, D.C. 20001 Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under section 7428 of the Internal Revenue Code. The Taxpayer. Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778. If you have any questions about this letter, please contact the person whose name and telephone number are shown in the heading of this letter. Sincerely, Maria Hooke Director, EO Examinations Enclosure: Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Division Exempt Organizations Examination Date: 08/14/2018 Taxpayer ID number: Form: Tax periods ended: Person to contact: Employee ID number: Telephone number: Fax: Manager's contact information: Employee ID number: Telephone number: Response due date: CERTIFIED MAIL -- Return Receipt Requested Dear *******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. Additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Maria Hooke Director, Exempt Organizations Examinations Enclosures: Form 6018 Form 4621-A Report of Examination Form 886-A Publication 892 Publication 3498-A Date of Notice August 14, 2 0 XX Issues: Whether ******* (the organization), which qualified for exemption from Federal income tax under Section 501(c)(3) of the Internal Revenue Code, should be revoked due to its failure to respond and produce records to substantiated that the organization is meeting the operational test? Facts: ******* applied for tax-exempt status by filing the Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, on December 05, 20XX, and was granted tax-exempt status as a 501(c)(3) on December 12, 20XX, with an effective date of October 31, 20XX. An organization exempt under 501(c)(3) needs to be organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes and to foster national and amateur sports competition. The organization was selected for audit to ensure that the activities and operations align with their approved exempt status. The organization failed to fully respond to the Internal Revenue Service attempts to obtain all the necessary information to perform an audit of Form 990-N for the tax year ending December 31, 20XX. The Form 1023-EZ application lists the phone number of ******* for the Executive Director of *******. ******* attested on Form 1023-EZ, Part III, that the organization would be organized and operated exclusively to further charitable and religious purposes. By marking "yes" on Form 1023-EZ, Part III, questions 5, 6, and 11, ******* indicated that the organization would pay compensation to officers, directors, or trustees; donate funds to or pay expenses for individuals; and provide disaster relief. Letter 3606 (Rev. 6-2012) with attachments, was mailed to the organization on January 16, 20XX with a response date of February 16, 20XX. This letter requested the organization's organizing documents, a detailed description of each of their activities, minutes, and financials. Form 4564, Information Document Request, (IDR) also asked questions about what was marked as "yes" on the Form 1023-EZ, Part III. A response was received from organization on February 8, 20XX. The response indicated that the organization would be dissolving the week of February 14, 20XX and does not wish to maintain their exempt status. It also stated all activities ended December 31, 20XX. Per the State of ******* web-site, it lists the organization as dissolved as of December 01, 20XX. See the attached copy from state website. Another response was received from the organization on April 06, 20XX which was responding to the information requested in Letter 3606. It stated that business income for the 20XX tax year was cash donations from four individuals that totaled $ *******. The expenses listed were $ ******* for funds allocated for charitable activities, $ ******* was listed for expenses for 20XX and $ ******* for vehicle purchase. The organization further broke down the expenses listed as $ ******* for charitable purposes as $ ******* for Eviction Prevention paid February 10, 20XX, $ ******* for Eviction Prevention paid May 20, 20XX, Utility Shut off Prevention for $ ******* paid June 12, 20XX and Food Emergency for $ ******* paid August 19, 20XX. No receipts, invoices, canceled checks, or documentation was included in the response as to the individual and/or business who received the funds. The organization does not have any bank statements. The response explained that the executive director would receive the donations by cash when a recipient's need arises and then she would travel directly to pay the recipients emergency. The response went on to state that, ''0% of ******* time is spent on maintaining the company in order to provide our non-profit services to others. This maintenance includes: maintaining website, grant writing & applying for grants, Graphic Design/Marketing. & Outreach Material/Publishing, Research & other Office activities (data entry, clerical, copying/faxing, phone calls & emails, local travel, 0% of ******* time is spent on the actual Charitable Activities of responding/interacting with recipients in need i.e. phone calls, traveling to their location, traveling to obtain funds, making the assistance transactions and accounting. During the year of ******* did not publicize our chartable activities. We are still a young company and cannot assist the number of community residents we would like to. We do however maintain our website where we outline our endeavors." The organization responded to the compensation questions with this statement, "No Compensation was allocated for 20XX. All finances went to overhead and charitable activities. ******* will not compensate it's members until after public fundraising and outreach activities begin; which will be in 20XX." The response also addressed the questions about donating funds to or paying expenses for individuals. Form 4564 asked the organization to describe in detail the purpose of the funds and/or the types of goods they distributed during the year(s) under examination and how the funds and/or goods were used by the individual recipients. The organization replied with a breakdown of their expenses. The initial letter also asked the organization to describe their organization's recipient selection process, including the criteria that was used to determine the recipients of the funds and/or goods. The organization's response was that the recipients become aware of their services through word of mouth or website. The response also went on to explain that the recipient contacts the organization and then must verify their emergency and low-income status by way of documents. The recipient is then approved or denied based on ability to verify their emergency and low-income status. There were no examples/samples of applications and what type documents were reviewed for the organization to make their determination. Letter 3844-B (Rev. 11-2015) with attachments, was mailed certified to the ******* on July 25, 20XX, with a response date of August 8, 20XX, Article Number *******. It included a copy of Form 1023-EZ, Letter 5436, Form 990-N for the tax period ending December 31, 20XX, and Form 4564. Law: Internal Revenue Code (IRC) §501(c)(3) of the Code provides that an organization organized and operated exclusively for charitable or educational purposes is exempt from Federal income tax, provided no part of its net earnings inures to the benefit of any private shareholder or individual. IRC §511 of the Internal Revenue Code imposes a tax at corporate rates under section 11 on the unrelated business taxable income of certain tax-exempt organizations. IRC §6001 of the Code provides that every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax under this title. IRC §6033(a)(1) of the Code provides, except as provided in section 6033(a)(2), every organization exempt from tax under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts and disbursements, and such other information for the purposes of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Treasury Regulations (Regulation)1.501(c)(3)-1 In order to be exempt under §501(c)(3) the organization must be both organized and operated exclusively for one or more of the purposes specified in the section. (religious, charitable, scientific, testing for public safety, literary or educational). Regulation §1.501(c)(3)-1(a)(1) of the regulations states that in order to be exempt as an organization described in section 501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Regulation 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will not be regarded as "operated exclusively" for one or more exempt purposes described in section 501(c)(3) of the Code if more than an insubstantial part of its activities is not in furtherance of a 501(c)(3) purpose. Accordingly, the organization does not qualify for exemption under section 501(c)(3) of the Code, Regulation §1.6001-1(c) of the Code provides that such permanent books and records as are required by paragraph (a) of this section with respect to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under section 501(a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 6033 and §§ 1.6033-1 through.1.6033-3. Regulation §1.6001-1(e) of the Code provides that the books or records required by this section shall be kept at all time available for inspection by authorized internal revenue officers or employees, and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law. Regulation §1.6033-1(h)(2) of the regulations provides that every organization which has established its right to exemption from tax, whether or not it is required to file an annual return of information, shall submit such additional information as may be required by the district director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter F (section 601 and the following), chapter 1 of the Code and section 6033. Regulation §1.6033-2(a)(1) of the Regulations provides, in part, that, except for certain exceptions not here applicable, every organization exempt from taxation under section 501(a) shall file an annual information return specifically setting forth its items of gross income, gross receipts and disbursements, and such other information as may be prescribed in the instructions issued with respect to the return. R egulation §1.6033-2(i)(2) of the Regulations provides, in part, that every organization which is exempt from tax, whether or not it is required to file an annual information return, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of subchapter F, chapter 1 of subtitle A of the Code, section 6033, and chapter 42 of subtitle D of the Code. Regulation §1.61-1 of the regulations provides that Gross income means all income from whatever source derived, unless excluded by law. Gross income includes income realized in any form, whether in money, property, or services. Income may be realized, therefore, in the form of services, meals, accommodations, stock, or other property, as well as in cash. Rev. Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The Service held that the failure or inability to file the required information return or otherwise to comply with the provisions of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status. Organization's Position Taxpayer's position is unknown at this time. Government's Position During the examination, the organization did not respond fully to verify that they are organized and operated exclusively for one or more of the purposes specified in IRC Section 501(c)(3). If an organization fails to meet either the organizational test or the operational test, it is not exempt. The books and records are not adequate to permit the Internal Revenue Service to verify that the funds and activities were used for an exempt purpose. The organization did not maintain original source documents to support your transactions. Specifically, we cannot determine how and under what circumstances funds were distributed. Also, we cannot confirm the recipients of the charitable distributions, and whether they were charitable organizations or of a charitable class. Consequently, we cannot ascertain whether the organization's assets were dedicated exclusively for charitable purposes in order to justify continued recognition of tax-exempt status under IRC 501(c)(3) of the Code. In accordance with the above-cited provisions of the Code and regulations under sections 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated business income tax. Section 1.6033-1(h)(2) of the regulations specifically state that exempt organizations shall submit additional information for the purpose on enabling the Internal Revenue Service to inquire further into its exempt status. Using the rationale that was developed in Revenue Ruling 59-95, the Organization's failure to provide requested information should result in the termination of exempt status. Conclusion: Based on the foregoing reasons, the organization does not qualify for exemption under section 501(c)(3) and its tax-exempt status should be revoked. It is the IRS' position that the organization failed to establish that it meets the reporting requirements under IRC § 6001 and 6033 to be recognized as exempt from federal income tax under IRC § 501(c)(3). Furthermore, the organization has not established that it is observing the conditions required for the continuation of its exempt status or that it is organized and operated exclusively for an exempt purpose. Accordingly, the organization's exempt status is revoked effective January 1, 20XX. Form 1120, U.S. Corporation Income Tax Return, should be filed for the tax periods after December 31, 20XX.

Internal Revenue Service - Information Release IR-2020-256 Get Ready for Taxes: Get ready now to file 2020 federal income tax returns November 17, 2020 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 Get Ready for Taxes: Get ready now to file 2020 federal income tax returns IR-2020-256, November 17, 2020 WASHINGTON - The Internal Revenue Service today encouraged taxpayers to take necessary actions this fall to help them file their federal tax returns timely and accurately in 2021, including special steps related to Economic Impact Payments (EIP). This is the first in a series of reminders to help taxpayers get ready for the upcoming tax filing season. A special page, updated and available on IRS.gov, outlines steps taxpayers can take now to prepare for the 2021 tax return filing season ahead. Steps taxpayers can take now to make tax filing easier in 2021 Taxpayers should gather Forms W-2, Wage and Tax Statement, Forms 1099-MISC, Miscellaneous Income, and other income documents to help determine if they're eligible for deductions or credits. They'll also need their Notice 1444, Your Economic Impact Payment, to calculate any Recovery Rebate Credit they may be eligible for on their 2020 Federal income tax return. Most income is taxable, including unemployment compensation, refund interest and income from the gig economy and virtual currencies. Taxpayers with an Individual Taxpayer Identification Number (ITIN) should ensure it hasn't expired before they file their 2020 federal tax return. If it has, IRS recommends they submit a Form W-7, Application for IRS Individual Taxpayer Identification Number, now to renew their ITIN. Taxpayers who fail to renew an ITIN before filing a tax return next year could face a delayed refund and may be ineligible for certain tax credits. Taxpayers can use the Tax Withholding Estimator on IRS.gov to help determine the right amount of tax to have withheld from their paychecks. If they need to adjust their withholding for the rest of the year time is running out, they should submit a new Form W-4, Employee's Withholding Certificate, to their employer as soon as possible. Taxpayers who received non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income, may have to make estimated tax payments. Payment options can be found at IRS.gov/payments. New in 2021: Those who didn't receive an EIP may be able to claim the Recovery Rebate Credit Taxpayers may be able to claim the Recovery Rebate Credit if they met the eligibility criteria in 2020 and: - They didn't receive an Economic Impact Payment this year, or - Their Economic Impact Payment was less than $1,200 ($2,400 if married filing jointly for 2019 or 2018) plus $500 for each qualifying child. - For additional information about the Economic Impact Payment, taxpayers can visit the Economic Impact Payment Information Center. Received interest on a federal tax refund? Remember these are taxable; include when filing Taxpayers who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest totaling at least $10. Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a 2020 federal tax refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer. EITC/ACTC-related refunds should be available by first week of March By law, the IRS cannot issue refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund even the portion not associated with EITC or ACTC. The IRS expects most EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they chose direct deposit and there are no other issues with their tax return. Taxpayers should use Where's My Refund? for their personalized refund date. With social distancing continuing, taxpayers can stay home and stay safe with IRS online tools Taxpayers can find online tools and resources to help get the information they need. These IRS.gov tools are easy-to-use and available 24 hours a day. Millions of people use them to find information about their accounts, get answers to tax questions or file and pay their taxes. Almost everyone can file electronically for free.The IRS Free File program, available only through IRS.gov or the IRS2Go app, offers brand-name tax preparation software packages at no cost. The software does all the work of finding deductions, credits and exemptions for you. It's free for those who earned $72,000 or less in 2020. Some of the Free File packages also offer free state tax return preparation. If you're comfortable filling out your own tax forms electronically, you can use Free File Fillable Forms, regardless of your income, to file your tax returns either by mail or online. Taxpayers have several options to find a tax preparer. One resource is Choosing a Tax Professional, which offers a wealth of information for selecting a tax professional. The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help taxpayers find preparers in their area who currently hold professional credentials recognized by the IRS, or who hold an Annual Filing Season Program Record of Completion. Taxpayers can use the Interactive Tax Assistant (ITA) beginning in January 2021 to get answers to a number of tax law questions. The ITA can help determine if a type of income is taxable, if someone is eligible to claim certain credits, or if they can deduct expenses on their tax return. Taxpayers can check the status of their refund using Where's My Refund? The status is available within 24 hours after the IRS receives their e-filed tax return or up to four weeks if they after they mailed a paper return. The Where's My Refund? tool updates once every 24 hours, usually overnight, so taxpayers only need to check once a day. The best and fastest way for taxpayers to get their tax refund is to have it direct deposited into their financial account. Taxpayers who don't have a financial account can visit the Federal Deposit Insurance Corporation (FDIC) website for information to help open an account online. Taxpayers are invited to join the Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA/TCE) programs. VITA/TCE volunteers receive training to provide free tax return preparation for eligible taxpayers. There's never been a better time to get ready to help others file and the IRS is rolling out new ways to make volunteering easier. Visit IRS.gov/volunteers to learn more

Private Letter Ruling Number: 202229013 Internal Revenue Service April 12, 2022 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202229013 Release Date: 7/22/2022 Index Number: 2601.00-00, 2518.00-00, 2501.00-00, 2041.00-00, 2038.00-00, 2037.00-00, 2036.00-00, 1001.00-00, 61.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:B04 PLR-121254-21 Date: April 12, 2022 Dear *******: This letter responds to your authorized representative's letter dated September 28, 2021, and subsequent correspondence, requesting federal tax rulings on certain proposed transactions involving Trust. The facts and representations submitted are summarized as follows: On Date 1, Settlor and Settlor's Spouse (collectively, the "Settlors") created an irrevocable trust, Trust, for the benefit of Son (generally referred to in the trust instrument as the "Beneficiary"). Date 1 is a date prior to October 21, 1942. Trust is governed by the laws of State. Article III, Section 1 of Trust provides that the Beneficiary has no right to the corpus of Trust and does not have a right to partition, divide, or dissolve Trust. The Beneficiary has no right with respect to Trust other than to receive distributions of net earnings awarded him by the trustee with the consent of Trust's Advisory Board and the right to distribution of the trust estate made by the trustee at the termination of Trust. Article III, Section 2 provides that the death, insolvency or bankruptcy of the Beneficiary hereunder, or the transfer of his interest in any manner, or by descent or otherwise, during the continuance of Trust, shall not operate as a dissolution of, nor terminate Trust, nor shall it have any effect whatever upon the trust estate, its operation or mode of business, nor shall it entitle his heirs or assigns or representatives to take any action in the courts of law or equity against the estate, its trustees or property or its business operations of any kind, all of which shall remain intact and undistributed thereby; but shall succeed only to the rights of the original Beneficiary. Article III, Section 3 provides that at the time of the death of the Beneficiary, his equitable interest in the trust estate, unless disposed of otherwise by said Beneficiary, shall pass to and vest in his heirs in accordance with the laws of descent and distribution then in force, applicable to the equitable interest of such Beneficiary in the trust estate. Section 3 further provides that the term "Beneficiary" applies not only to Son but to all of his successors to beneficial interests under Trust. Article IV, Section 3 provides that Trust will continue until the death of Son, and for twenty-one years after Son's death. At the expiration of that period, the trustee is to distribute the trust corpus among the then existing beneficiaries. Article IV, Section 4 provides that the Beneficiary may receive from time to time a portion of the net profits accruing from time to time to the trust estate, as the trustee, acting with the advice and consent of the Advisory Board, may see fit to pay over and deliver to the Beneficiary. No duty is imposed upon the trustee to make distributions of net profits, but the power is conferred upon the trustee, acting with the advice and consent of the Advisory Board. In exercising this discretion, the trustee and Advisory Board will give full consideration to the interest of both the Beneficiary and the trust estate. By order dated Date 2 (Date 2 Order), Court modified the terms of Trust and approved a completely restated trust agreement. In the Date 2 Order, Court made several significant findings and holdings with respect to Trust. Specifically, Court found that Trust expressly provides that the term "Beneficiary" applies not only to Son but to all his successors to beneficial interests under Trust. The Court further found that the heirs of Son who succeed to his equitable interest in Trust will be referred to as "Successor Beneficiaries." In addition, Court found that, (i) upon Son's death, Son's equitable interest in Trust will pass to and vest in Son's heirs in accordance with the laws of descent and distribution of State then in force, applicable to his equitable interest in Trust; (ii) upon Son's death, Trust will be divided into separate shares for each of his heirs; if Son's Spouse survives him, one-third of Trust will be allocated to a share for Son's Spouse and the other two-thirds will be divided into shares for the children and descendants of Son, in accordance with the laws of descent and distribution of State then in force; and (iii) each such share for Son's heirs will be separate, and the Successor Beneficiaries of Trust will not become common beneficiaries of an undivided trust. Consequently, the interests and powers of a Successor Beneficiary with respect to his or her share extend only to that Successor Beneficiary's respective share and not to any share held for any other Successor Beneficiary. Trust is administered by Trustee and a three-person Advisory Board. An individual serving as a trustee is also a member of the Advisory Board. In the event Trustee should fail or cease to serve, the remaining members of the Advisory Board will appoint a new member to fill the vacancy on the board. Then the Advisory Board will appoint one of its members or a Qualified Family Trust Company to serve as trustee. The Beneficiary and individuals related and subordinate to the Beneficiary within the meaning of § 672(c) of the Internal Revenue Code (Code) may serve on the Advisory Board but may not serve as a trustee. Currently, Son is married to Son's Spouse and they have five children (Grandchildren 1 through 5), sixteen Grandchildren (Great Grandchildren 1 through 16), and thirty-two Great Grandchildren (Great-Great Grandchildren 1 through 32). Under Article III, Section 3, as construed by Court (discussed below), Son is determined to possess a testamentary general power of appointment over Trust. Son intends to allow his power of appointment over Trust to lapse at his death. Further, one or more of the Successor Beneficiaries plans to irrevocably and unqualifiedly disclaim, in accordance with State Statute 1 and § 2518 of the Code, in a writing delivered to Trustee, all or an undivided portion of his or her beneficial interest in Trust no later than nine months after Son's death. A Successor Beneficiary disclaiming his or her interest in Trust will not (i) accept an interest in or any benefits from the property subject to the disclaimer; or (ii) voluntarily assign, convey, encumber, pledge or transfer the interest in property subject to the disclaimer or contract to do any of the foregoing. As a result of the disclaimer, the disclaimed interest will pass without any direction from the Successor Beneficiary disclaiming his or her interest in Trust, and the interest will pass to someone other than the Successor Beneficiary disclaiming his or her interest in Trust. Finally, a Successor Beneficiary disclaiming his or her interest in Trust will not serve on the Advisory Board or as a trustee of Trust. On Date 3, Trustee filed in Court a petition for construction and modification of terms of Trust. Trustee proposes to make certain modifications to Trust in order to facilitate the administration of Trust after the death of Son. Trust currently provides that Trust will terminate twenty-one years after Son's death and will then be distributed outright to the Successor Beneficiaries. It is represented that the amounts distributed upon termination of Trust will be substantial, and that if a Successor Beneficiary is under the age of x, it would not be in his or her best interest to receive his or her share outright. Son and the Successor Beneficiaries have consented to the proposed modifications. State Statute 1 provides that if an interest in property passes because of the death of a decedent, a disclaimer of the interest takes effect as of the time of the decedent's death, and relates back for all purposes to the time of the decedent's death. State Statute 2 provides that on the petition of a trustee or a beneficiary, a court may order that the terms of the trust be modified if, because of circumstances not known to or anticipated by the settlor, the order will further the purposes of the trust. State Statute 3 provides that the court may not take the action permitted by State Statute 2 unless all beneficiaries of the trust have consented to the order or are deemed to have consented to the order. Further, a minor, incapacitated, unborn, or unascertained beneficiary is deemed to have consented if a person representing the beneficiary's interest has consented or if a guardian ad litem appointed to represent the beneficiary's interest consents on the beneficiary's behalf. State Statute 4 provides that when distributing trust property or dividing or terminating a trust, a trustee may make distributions in divided or undivided interests, and allocate particular assets in proportionate or disproportionate shares. On Date 4, Court issued an order ("Court Order") approving the following construction and modification of Trust ("Trust Construction and Modification"), subject to a favorable private letter ruling from the Internal Revenue Service. Trust Construction In Court Order, Court ruled as follows: (1) Upon Son's death, Trust shall be divided into separate trusts (hereinafter, "Successor Trusts") for each Successor Beneficiary, and that upon the subsequent death of a Successor Beneficiary during the twenty-one year term following Son's death, the Successor Trusts of which the deceased Successor Beneficiary was an income beneficiary shall be similarly divided into separate Successor Trusts. (2) Trust grants Son a general power of appointment with respect to Trust and Successor Beneficiaries hold the same general power of appointment with respect to his or her Successor Trust. (3) After Son's death, each Successor Beneficiary will have three separate beneficial interests in his or her Successor Trust: (i) a discretionary income interest for twenty-one years after Son's death; (ii) a remainder interest which vests in possession twenty-one years after Son's death; and (iii) a general power of appointment. Each of the beneficial interests may be disclaimed independently of the others. (4) The class of a disclaiming Successor Beneficiary's descendants who are heirs of Son shall remain open to new members born to such disclaiming Successor Beneficiary during the twenty-one years after the death of Son, including descendants born to a disclaiming Successor Beneficiary who has no children or other descendants living on the death of Son. (5) Upon a Successor Beneficiary's disclaimer of a beneficial interest in his or her Successor Trust, the following will apply: (i) If a Successor Beneficiary disclaims an interest in Trust and survives Son, the disclaimed interest will pass, at Son's death, to Son's heirs (which would exclude a Successor Beneficiary's spouse) determined as though the disclaiming beneficiary did not survive Son ( i.e., to the beneficiary's descendants who survive Son). (ii) If a Successor Beneficiary disclaims an interest in Trust, survives Son but dies within twenty-one years after Son's death, the disclaimed interest will not be affected by the Successor Beneficiary's death. (iii) If a Successor Beneficiary survives Son but dies within twenty-one years after Son's death, the Successor Beneficiary's retained interest in Trust will pass to Successor Beneficiary's heirs at law, which include Successor Beneficiary's spouse. (6) Successor Trust shall be divided and funded in the following manner: (i) Where no disclaimers are made, the separate trusts created for Successor Beneficiaries will hold equal percentages of income and remainder interests and the undistributed income produced by a particular portion will be added to principal of that particular portion. (ii) Where a Successor Beneficiary disclaims an equal portion of his or her income and remainder interests, the retained and disclaimed interests would be administered similarly, and the undistributed income produced by a particular portion will be added to principal of that particular portion. (iii) Where a Successor Beneficiary disclaims a greater percentage of the remainder interest than an income interest, at least two trusts will be created for the disclaimant. Under one trust, the disclaimant will be both the income and remainder beneficiary of the trust. Under the second trust, the disclaimant will have an income interest in the trust but no remainder interest. The remainder interest in the second trust will belong to the heirs of the beneficiary immediately preceding the disclaimant in interest (that is, the "prior beneficiary") who are descendants of the disclaiming beneficiary, determined as if the disclaiming beneficiary predeceased the prior beneficiary. (7) When Trustee divides Trust into separate trusts after Son's death, or after the death of one of the Successor Beneficiaries, Trustee shall create the least number of trusts under each family branch of a particular child of Son (Grandchild 1 through 5) that can be established with only one income beneficiary of each trust. (8) If an income beneficiary of a separate trust dies within twenty-one years after Son's death with an heir at law who is already an income beneficiary of a separate trust, then such heir's share of the deceased income beneficiary's trust shall be added to his or her existing trust of which he or she is the income beneficiary in conformance with the general rule in Construction #7. (9) If, during the twenty-one year term after Son's death, a new beneficiary is born into the class of beneficiaries who are lineal descendants of the disclaimant (the "Disclaimant Class") and a trust or trusts are in existence with members of the Disclaimant Class as income beneficiaries, a new trust is created for the new beneficiary. (10) The terms "net earnings" and "net profits" as they appear in Trust are construed to mean trust "income" under State Trust Code and State law. Trust Modification In Court Order, Court modified Trust as follows: (1) A new Section 6 of Article IV of Trust is added to provide that when Trust terminates twenty-one years after the death of Son, any share distributable to a beneficiary who is then under the age of x (a "Continuing Beneficiary") shall be held in a trust (a "Continuing Trust") until such Continuing Beneficiary attains the age of x. If the Continuing Beneficiary survives Son but dies before reaching the age of x, he or she shall have a general testamentary power of appointment over his or her Continuing Trust. Any Continuing Trust shall terminate when the Continuing Beneficiary attains x years of age or dies, whichever event occurs first. At that time, the trustee shall deliver all remaining property in Continuing Trust to the Continuing Beneficiary, or if not living, as the Continuing Beneficiary may appoint by will (including to the Continuing Beneficiary's estate or the creditors of the Continuing Beneficiary or the creditors of the Continuing Beneficiary's estate). If the Continuing Beneficiary dies before reaching age x and does not exercise his or her general testamentary power of appointment, the Continuing Trust is distributed to the Continuing Beneficiary's estate. Equitable title to the property held in the Continuing Beneficiary's Continuing Trust shall be vested in the Continuing Beneficiary and shall be alienable. No power shall be exercised so as to violate any rule against perpetuities or rule against restraint against alienation. (Modification #1) (2) A new Section 7 of Article IV of Trust is added governing the succession of trustees with respect to each Continuing Trust as described under new Section 6. A Continuing Beneficiary will have the power to remove the trustee of his or her Continuing Trust and replace the trustee with a trustee of his or her choosing, other than the Continuing Beneficiary. Until a Continuing Beneficiary attains the age of eighteen, the Continuing Beneficiary's parent or legal guardian will hold this power. (Modification #2) (3) Section 10 of Article I of Trust provides that as near as possible after the close of each calendar year, Trust must have the books and records of Trust audited by a certified public accountant (the "Audit Requirement"). After Son's death, the trust estate will be divided into several Successor Trusts and the Audit Requirement will be burdensome and costly given the number of separate trusts subject to the Audit Requirement. Accordingly, Section 10 of Article I of Trust is modified to eliminate the Audit Requirement for separate trusts with assets under $A and make the Audit Requirement optional for trusts whose beneficiaries were not an adult party to the petition filed on Date 3 and with assets under $A. (Modification #3) It is represented that no actual or constructive additions within the meaning of § 26.2601-1(b) of the Generation-Skipping Transfer Tax Regulations have been made to Trust after September 25, 1985. You have requested the following rulings: 1. Trust is exempt from chapter 13 pursuant to § 2601. 2. Trust grants Son and each Successor Beneficiary of Trust a power of appointment that is a general power of appointment created before October 21, 1942, under §§ 2041(a)(1) and 2514(a), so that the lapse or complete release of the power of appointment will not subject any portion of Trust to federal estate, gift, or generation-skipping transfer (GST) tax. 3. The proposed disclaimer by any one or more of the Successor Beneficiaries of Trust will (a) be a qualified disclaimer under § 2518; (b) not result in a taxable gift by any of Successor Beneficiaries disclaiming his or her interest in Trust, and will not subject any portion of Trust to federal estate tax in the gross estate of a Successor Beneficiary disclaiming his or her interest; and (c) not result in a loss of GST exempt status with respect to any portion of Trust. 4. The assets of a Continuing Trust created pursuant to Modification #1 after Son's death will be includible in the gross estate of any Continuing Beneficiary of such Continuing Trust under § 2041(a)(2) if the Continuing Beneficiary dies before the Continuing Trust terminates. 5. Trust Construction and Modification will not cause Trust or any Successor Trust to be subject to GST tax pursuant to chapter 13. 6. Trust Construction and Modification will not result in any Successor Beneficiary of Trust making a taxable gift. 7. Trust Construction and Modification will not result in inclusion of any asset of, or interest in Trust or any Successor Trusts in the gross estate of any Successor Beneficiary whose death occurs prior to the termination of Trust under § 2036, 2037 or 2038. 8. The non-pro rata distribution of assets from Trust to one or more Successor Trusts created for the benefit of any Successor Beneficiaries will not be treated as a pro rata distribution of assets followed by a taxable sale and exchange of assets between the Successor Trusts. LAW AND ANALYSIS Ruling #1 Section 2601 imposes a tax on every generation-skipping transfer (GST) which is defined under § 2611 as a taxable distribution, taxable termination, and a direct skip. Section 1433(b)(2)(A) of the Tax Reform Act of 1986 (Act) and § 26.2601-1(b)(1) of the Generation-Skipping Transfer Tax Regulations provide that the GST tax shall not apply to any GST under a trust that was irrevocable on September 25, 1985, but shall apply to the extent that the transfer is not made out of corpus added to the trust after September 25, 1985 (or out of income attributable to corpus so added). Section 26.2601-1(b)(1)(i) provides that a trust qualifies for transitional rule relief from the provisions of chapter 13 if the trust was irrevocable on September 25, 1985, and no addition (actual or constructive) was made to the trust after that date. Section 26.2601-1(b)(1)(iv) provides that an addition made after September 25, 1985, to an irrevocable trust will subject to the provisions of chapter 13 a proportionate amount of distributions from, and terminations of interest in, property held in the trust. In this case, Trust was in existence and irrevocable prior to September 25, 1985. Additionally, it is represented that no actual or constructive additions within the meaning of § 26.2601-1(b) have been made to Trust after September 25, 1985. Therefore, based upon the facts submitted and representations made, we conclude that Trust is exempt from the application of chapter 13 pursuant to § 2601. Ruling #2 Section 2041(a)(1) provides, in part, that the value of the gross estate includes the value of all property to the extent of any property with respect to which a general power of appointment created on or before October 21, 1942, is exercised by the decedent by will; but the failure to exercise such a power or the complete release of such a power is not deemed an exercise thereof. See § 20.2041-2(d) of the Estate Tax Regulations. Section 2041(b)(1) provides that, for purposes of § 2041(a), the term "general power of appointment" means a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate. Section 20.2041-1(b) provides that a power of appointment includes all powers that are in substance and effect powers of appointment, regardless of the nomenclature used in creating the power. Section 20.2041-1(e) provides that a power of appointment created by an inter vivos instrument is considered created on the date the instrument takes effect. The power is not treated as created at a future date merely because the power is not exercisable on the date the instrument takes effect or because the identity of the powerholder is not ascertainable until a later date. Example 3 of § 20.2041-1(e) provides an illustration of the above rule. In the example, F creates an irrevocable inter vivos trust created before October 21, 1942, providing for payment of income to G for life with the remainder as G appoints by will, but in default of G's appointment, the trust will pass with income to H for life and the remainder as H shall appoint by will. If G dies after October 2, 1942, without exercising the power of appointment, H's power is considered a power created on or before October 21, 1942, even though H's power of appointment was only a contingent interest until G's death. Section 20.2041-2(d) provides that a failure to exercise a general power of appointment created on or before October 21, 1942, or a complete release of the power is not an exercise of the power. The phrase "a complete release" means a release of all powers over all or a portion of the property subject to the power of appointment, as distinguished from a reduction of a power of appointment to a lesser power. Thus, if the decedent completely relinquished all powers over one-half of the property subject to a power of appointment, the power is completely released as to that one-half. Section 2514(a) provides that an exercise of a general power of appointment created on or before October 21, 1942, is deemed a transfer of the property by the individual possessing such power for gift tax purposes, but the failure to exercise such power or the complete release of such power is not deemed an exercise thereof. Section 25.2514-2(c) of the Gift Tax Regulations provides that a failure to exercise a general power of appointment created on or before October 21, 1942, or a complete release of such power is not considered to be an exercise of a general power of appointment. The phrase "complete release" means a release of all powers over all or a portion of the property subject to the power of appointment, as distinguished from the reduction of a power of appointment to a lesser power. Thus, if the possessor completely relinquished all powers over one-half of the property subject to a power of appointment, the power is completely released as to that one-half. Section 26.2601-1(b)(1)(v)(A) provides that where any portion of a trust remains in trust after the post-September 25, 1985, release, exercise, or lapse of a power of appointment over that portion of the trust, and the release, exercise, or lapse is treated to any extent as a taxable transfer under chapter 11 or chapter 12, the value of the entire portion of the trust subject to the power that was released, exercised, or lapsed will be treated as if that portion had been withdrawn and immediately retransferred to the trust at the time of the release, exercise, or lapse. In this case, Trust was executed on a date prior to October 21, 1942. Article III, Section 3 of Trust provides that at the time of the death of the Beneficiary, his equitable interest in Trust, unless disposed of otherwise by such Beneficiary, shall pass to and vest in his heirs in accordance with the laws of descent and distribution then in force, applicable to the equitable interest of such Beneficiary in the trust estate. The language of Trust indicates that Settlors intended for Son to have the power to dispose of his equitable interest, without limitation. Further, Trust indicates that the Settlors intended each Successor Beneficiary to have the same rights with respect to his or her share of Trust as Son, including a general power of appointment over such Successor Beneficiary's interest in his or her Successor Trust. In the Court order, Court construed Trust as granting Son and Successor Beneficiaries a testamentary power of appointment to appoint such beneficiary's interest in Trust to any appointee. Trust was executed prior to October 21, 1942, hence Son's power of appointment is a power created before October 21, 1942. Successor Beneficiaries of Trust possess a general power of appointment that is contingent on surviving Son's death. As in the case of Example 3 of § 20.2041-1(e), the power of appointment held by Successor Beneficiaries is considered a power created before October 21, 1942. Accordingly, based upon the facts submitted and representations made, we conclude that Son and each Successor Beneficiary possess a general power of appointment created before October 21, 1942. Son proposes to allow his testamentary general power of appointment to lapse. Under §§ 2041(a)(1) and 2514(a), the lapse or complete release of Son's general power of appointment will not cause Son to be treated as making a taxable gift or cause any portion of Trust to be included in Son's gross estate for federal estate tax purposes. Therefore, based upon the facts submitted and representations made, we conclude that the lapse (or complete release) of Son's general power of appointment will not subject any portion of Trust to federal estate or gift tax under §§ 2041(a)(1) and 2514(a). If one or more Successor Beneficiaries allow his or her power to lapse or completely releases his or her power of appointment, under §§ 2041(a)(1) and 2514(a), the lapse or complete release of a Successor Beneficiary's general power of appointment will not cause a Successor Beneficiary to be treated as making a taxable gift or cause any portion of Trust to be included in a Successor Beneficiary's gross estate for federal estate tax purposes. Therefore, based upon the facts submitted and representations made, we conclude that the lapse (or complete release) of a Successor Beneficiary's general power of appointment will not subject any portion of Trust to federal estate or gift tax under §§ 2041(a)(1) and 2514(a). Finally, in this case, Trust was irrevocable prior to September 25, 1985. It is represented that there have been no additions (actual or constructive) to Trust after September 25, 1985. The lapse or complete release of a general power of appointment by Son or a Successor Beneficiary will not be a taxable lapse or release of a general power of appointment because the power of appointment was created prior to October 21, 1942. Therefore, based upon the facts submitted and the representations made, we conclude that the lapse or complete release of a general power of appointment by Son or a Successor Beneficiary will not be treated as a constructive addition to Trust and will not result in a loss of GST exempt status with respect to any portion of the trust over which such powers lapsed or were released. Ruling #3 Section 2046 provides that for estate tax purposes, disclaimers of property interests passing upon death are treated as provided in § 2518. Section 2518(a) provides that if a person makes a qualified disclaimer with respect to any interest in property, subtitle B shall apply with respect to such interest as if the interest had never been transferred to such person. Section 2518(b) provides that the term "qualified disclaimer" means an irrevocable and unqualified refusal by a person to accept an interest in property but only if (1) the refusal is in writing; (2) the writing is received by the transferor of the interest, his legal representative, or the holder of the legal title to the property to which the interest relates not later than the date that is nine months after the later of (A) the date on which the transfer creating the interest in the person is made, or (B) the day on which the person attains age 21; (3) the person has not accepted the interest or any of its benefits; and (4) as a result of such refusal, the interest passes without any direction on the part of the person making the disclaimer and passes either (A) to the spouse of the decedent, or (B) to a person other than the person making the disclaimer. Section 2518(c)(1) provides that a disclaimer with respect to an undivided portion of an interest which meets the requirements of § 2518(b) shall be treated as a qualified disclaimer of such portion of the interest. Section 2518(c)(2) provides that a power over property is to be treated as an interest in that property. Section 25.2518-1(b) provides, in relevant part, that if a person makes a qualified disclaimer as described in § 2518(b) and § 25.2518-2, for purposes of the federal estate, gift, and GST provisions, the disclaimed interest in property is treated as if it had never been transferred to the person making the qualified disclaimer. Instead, it is considered as passing directly from the transferor of the property to the person entitled to receive the property as a result of the disclaimer. Accordingly, a person making a qualified disclaimer is not treated as making a gift. Similarly, the value of a decedent's gross estate for purposes of the federal estate tax does not include the value of property with respect to which the decedent, or the decedent's executor or administrator on behalf of the decedent, has made a qualified disclaimer. Section 25.2518-2(c)(3) provides, in relevant part, that the nine-month period for making a disclaimer generally is to be determined with reference to the transfer creating the interests in the disclaimant. With respect to inter vivos transfers, a transfer creating an interest occurs when there is a completed gift for federal gift tax purposes regardless of whether a gift tax is imposed on the completed gift. With respect to transfers made by a decedent at death or transfers that become irrevocable at death, the transfer creating the interest occurs on the date of the decedent's death, even if an estate tax is not imposed on the transfer. Section 25.2518-2(c)(3) further provides that if a person to whom an interest in property passes by reason of the exercise, release, or lapse of a general power of appointment desires to make a qualified disclaimer, the disclaimer must be made within a nine-month period after the exercise, release, or lapse regardless of whether the exercise, release, or lapse is subject to estate or gift tax. A person who receives an interest in property as the result of a qualified disclaimer of the interest must disclaim the previously disclaimed interest no later than nine months after the date of the transfer creating the interest in the preceding disclaimant. Thus, if A were to make a qualified disclaimer of a specific bequest and as a result of the qualified disclaimer the property passed as part of the residue, the beneficiary of the residue could make a qualified disclaimer no later than nine months after the date of the testator's death. Section 25.2518-3(a)(1)(i) provides that if the requirements of the section are satisfied, the disclaimer of all or an undivided portion of any separate interest in property may be a qualified disclaimer, even if the disclaimant has another interest in the same property. Under 25.2518-3(a)(1)(iii), a power of appointment with respect to property is treated as a separate interest in such property and such power of appointment with respect to all or an undivided portion of such property may be disclaimed independently from any other interests separately created by the transferor in the property. Further, a disclaimer of a power of appointment with respect to property is a qualified disclaimer only if any right to direct the beneficial enjoyment of the property which is retained by the disclaimant is limited by an ascertainable standard. Section 25.2518-3(a)(2) provides that a disclaimer of an undivided portion of an interest in a trust may be a qualified disclaimer. Under § 25.2518-3(b), the disclaimer of an undivided portion of a disclaimant's separate interest in property will be a qualified disclaimer if the undivided portion consists of a fraction or percentage of each and every substantial interest or right owned by the disclaimant in the property and extends over the entire term of the disclaimant's interest in the property. A disclaimer of some specific rights while retaining other rights with respect to an interest in property is not a qualified disclaimer of an undivided portion of the disclaimant's interest in the property. In this case, as construed by Court, Son's power of appointment under Trust was created before October 21, 1942, and is a general power of appointment as described in §§ 2041(a)(1) and 2514(a). Under the terms of Trust, Son's heirs cannot succeed to any interests in Trust until Son's death. If Son lets his power lapse at his death, as proposed, the lapse will create various interests, including a testamentary general power of appointment, in Trust for Successor Beneficiaries. See § 2518(c)(2). For purposes of § 2518, these powers will be considered as created on the date of Son's death, the date when Son's general power of appointment lapses. One or more of the Successor Beneficiaries propose to disclaim an undivided portion of or all of the interest in Trust to which he or she may be entitled to at Son's death. A disclaiming Successor Beneficiary will not accept an interest in or any benefit from the property subject to the disclaimer or voluntarily assign, convey, encumber, pledge, or transfer the interest or property subject to the disclaimer. Further, each disclaimer will be irrevocable and in writing delivered to the trustee. As a result, the proposed disclaimer will pass without any direction from the disclaiming Successor Beneficiary and the interest will pass to someone other than the disclaiming Successor Beneficiary. Finally, a disclaiming Successor Beneficiary will be prohibited from serving on the Advisory Board of Trust or as a trustee of Trust. Accordingly, based on the facts submitted and representations made, we conclude that the proposed disclaimer by any one or more Successor Beneficiary will not result in a taxable gift by the disclaimant and will not subject any portion of Trust to estate tax in the gross estate of the disclaimant. Under § 25.2518-1(b), the disclaimed interest in property is treated as if it had never been transferred to the person making the qualified disclaimer. Instead, it is considered as passing directly from the transferor of the property to the person entitled to receive the property as a result of the disclaimer. Therefore, the disclaimant is not a transferor, as defined in § 2652 and is not treated as making a constructive addition to Trust. Accordingly, we conclude that a proposed disclaimer by any one or more Successor Beneficiary will not result in Trust losing GST exempt status. Ruling #4 Section 2041(a)(2) provides that to the extent of any property with respect to which the decedent has at the time of his death a general power of appointment created after October 21, 1942, or with respect to which the decedent has at any time exercised or released such a power of appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent, such property would be includible in the decedent's gross estate under §§ 2035 to 2038, inclusive. Trust currently provides for outright distribution to the Successor Beneficiaries on Trust's termination. Under Modification #1, any share upon Trust's termination distributable to a Successor Beneficiary under the age of x is to be held in a Continuing Trust until that Continuing Beneficiary reaches the age of x. If the Continuing Beneficiary survives Son but dies before reaching age x, Continuing Trust grants the Continuing Beneficiary a general power of appointment to appoint the assets of his or her Continuing Trust to any appointee, including the Continuing Beneficiary's estate or the creditors of the Continuing Beneficiary or the creditors of the Continuing Beneficiary's estate. Thus, if the Continuing Beneficiary survives the twenty-one year term following Son's death but dies before the termination of Continuing Trust, the remaining assets in the Continuing Trust are includible in the gross estate of the Continuing Beneficiary under § 2041(a)(2). Based upon the facts submitted and representations made, we conclude that the assets of a Continuing Trust created pursuant to Modification #1 after Son's death will be includible in the gross estate for federal estate tax purposes of any Continuing Beneficiary of such Continuing Trust under § 2041(a)(2) if the Continuing Beneficiary dies before the Continuing Trust terminates. Ruling #5 Section 26.2601-1(b)(4) provides rules for determining when a modification, judicial construction, settlement agreement, or trustee action with respect to a trust that is exempt from GST tax under § 26.2601-1(b)(1), (2), or (3) will not cause the trust to lose its exempt status. The rules in § 26.2601-1(b)(4) are applicable only for purposes of determining whether an exempt trust retains its exempt status for GST purposes. The rules do not apply, for example, in determining whether the transaction results in a gift subject to gift tax, or may cause the trust to be included in the gross estate of a beneficiary, or may result in the realization of gain for purposes of § 1001. Section 26.2601-1(b)(4)(i)(C) provides that judicial construction of a governing instrument to resolve an ambiguity in the terms of the instrument will not cause an exempt trust to be subject to the provisions of chapter 13 if the judicial action involves a bona fide issue and the construction is consistent with applicable state law that would be applied by the highest court of the state. Section 26.2601-1(b)(4)(i)(D)(1) provides that a modification of the governing instrument of an exempt trust by judicial reformation, or nonjudicial reformation that is valid under applicable state law, will not cause an exempt trust to be subject to the provisions of chapter 13, if the modification does not shift a beneficial interest in the trust to any beneficiary who occupies a lower generation (as defined in § 2651) than the person or persons who held the beneficial interest prior to the modification, and the modification does not extent the time for vesting of any beneficial interest in the trust beyond the period provided for in the original trust. Section 26.2601-1(b)(4)(i)(D)(2) provides that a modification of an exempt trust will result in a shift in a beneficial interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a GST transfer or the creation of a new GST transfer. To determine whether a modification of an irrevocable trust will shift a beneficial interest in a trust to a beneficiary who occupies a lower generation, the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification. If the effect of the modification cannot be immediately determined, it is deemed to shift a beneficial interest in the trust to a beneficiary who occupies a lower generation (as defined in § 2651) than the person or persons who held the beneficial interest prior to the modification. A modification that is administrative in nature that only indirectly increases the amount transferred (for example, by lowering administrative costs or income taxes) will not be considered to shift a beneficial interest in the trust. Section 26.2601-1(b)(4)(i)(E), Example 10 considers the following situation. In 1980, Grantor established an irrevocable trust for the benefit of Grantor's issue, naming a bank and five other individuals as trustees. In 2002, the appropriate local court approves a modification of the trust that decreases the number of trustees which results in lower administrative costs. The modification pertains to the administration of the trust and does not shift a beneficial interest in the trust to any beneficiary who occupies a lower generation (as defined in § 2651) than the person or persons who held the beneficial interest prior to the modification. In addition, the modification does not extend the time for vesting of any beneficial interest in the trust beyond the period provided for in the original trust. Therefore, the trust will not be subject to the provisions of chapter 13. In this case, Trust Construction by Court resolves ambiguities in the terms of the trust instrument. The judicial action involved bona fide issues regarding whether Son and the Successor Beneficiaries possess general powers of appointment and whether such powers were created before October 21, 1942. Trust Construction is consistent with applicable state law that would be applied by the highest court of the state. Further, Modification #1 grants each beneficiary of a Continuing Trust a general power of appointment which will cause the assets of a Continuing Trust to be includible in the gross estate of such beneficiary under § 2041(a)(2). Therefore, Modification #1 does not shift a beneficial interest in the trust to any beneficiary who occupies a lower generation (as defined in § 2651) than the person or persons who held the beneficial interest prior to the modification, and the modification does not extend the time for vesting of any beneficial interest in the trust beyond the period provided for in the original trust. Modification #2 and #3 relate to the appointment and replacement of successor trustees in Continuing Trust and the application of the Audit Requirement after Trust is divided into separate trusts. Modifications #2 and #3 are administrative in nature and under § 26.2601-1(b)(4)(i)(D)(2), will not be considered to shift a beneficial interest to a lower generation in the trust or extend the time for vesting of any beneficial interest in the trust beyond the period provided for in Trust. See Example 10 of § 26.2601-1(b)(4)(i)(E). Therefore, based upon the facts submitted and representations made, we conclude that Trust Construction and Modification by Court will not cause Trust or any Successor Trusts to be subject to GST tax pursuant to chapter 13. Ruling #6 Section 2501 provides that a tax is imposed for each calendar year on the transfer of property by gift during such calendar year by any individual, resident or nonresident. Section 2511(a) provides that the tax imposed by § 2501 will apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible on intangible. Section 25.2511-1(c) provides that any transaction in which an interest in property is gratuitously passed or conferred upon another, regardless of the means or device employed, constitutes a gift subject to tax. Section 2512(a) provides that if the gift is made in property, the value thereof at the date of the gift is considered the amount of the gift. Section 2512(b) provides that where property is transferred for less than adequate and full consideration in money or money's worth, then the amount by which the value of the property exceeded the value of the consideration is deemed to be a gift and is included in computing the amount of gifts made during the calendar year. In this case, Trust Construction and Modification by Court do not change the beneficial interests in Trust. Accordingly, based upon the facts submitted and representations made, we conclude that the Trust Construction and Modification will not cause Son or any of the Successor Beneficiaries to have made a taxable gift for purposes of § 2501. Ruling #7 Section 2036(a) provides that the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death: (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom. Section 2037(a) provides that the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, if: (1) possession or enjoyment of the property can, through ownership of such interest, be obtained only by surviving the decedent, and (2) the decedent has retained a reversionary interest in the property, and the value of such reversionary interest immediately before the death of the decedent exceeds five percent of the value of such property. Section 2038(a)(1) provides that the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke, or terminate, or where any such power is relinquished during the 3-year period ending on the date of the decedent's death. In order for §§ 2036, 2037 and 2038 to apply, a decedent must have made a transfer of property of any interest therein (except in case of a bona fide sale for adequate and full consideration in money or money's worth) under which the decedent retained an interest in, or power over, the income or corpus of the transferred property. In this case, Trust Construction and Modification do not constitute transfers within the meaning of §§ 2036, 2037 and 2038. Accordingly, based upon the facts submitted and representations made, we conclude that Trust Construction and Modification by Court will not result in inclusion of any asset of, or interest in Trust or any Successor Trusts in the gross estate of any beneficiary whose death occurs prior to the termination of Trust under § 2036, 2037 or 2038. Ruling #8 Section 61(a) defines gross income as "all income from whatever source derived." Under section 61(a)(3), gross income includes "[g]ains derived from dealings in property." Section 1001(a) provides that the gain from the sale or other disposition of property is the excess of the amount realized over the adjusted basis provided in § 1011 for determining gain, and the loss is the excess of the adjusted basis provided in § 1011 for determining loss over the amount realized. Under § 1001(c), the entire amount of gain or loss must be recognized, except as otherwise provided. Section 1.1001-1(a) of the Income Tax Regulations provides that, except as otherwise provided in subtitle A of the Code, the gain or loss realized from the exchange of property for other property differing materially either in kind or in extent is treated as income or as loss sustained. Under § 1.1001-1(h), the severance of a trust, occurring on or after August 2, 2007, is not an exchange of property for other property differing materially either in kind or in extent, if (i) an applicable state statute or the governing instrument authorizes or directs the trustee to sever the trust; and (ii) any non-pro rata funding of the separate trusts resulting from the severance, whether mandatory or in the discretion of the trustee, is authorized by an applicable state statute or the governing instrument. In the present case, the Trust will be severed into multiple trusts, Successor Trusts, on a non-pro rata basis. Trustees represent that the contemplated trust severance is authorized by the agreement governing Trust. Trustee further represents that the nonpro rata funding of Successor Trusts is authorized under State Statute 4 which allows a trustee to make distributions in divided or undivided interest and to allocate assets in proportionate or disproportionate shares. The proposed transaction is consistent with the criteria set forth in § 1.1001-1(h)(1). Accordingly, based upon the facts submitted and representations made, we conclude that the severance of the Trust and non-pro rata funding of the Successor Trusts should not be treated as pro rata distributions followed by a taxable sale and exchange of assets between the Successor Trusts and, therefore, will not be subject to recognition of gain or loss from a sale or other disposition of property under § 1001. In accordance with the Powers of Attorney on file with this office, we have sent copies of this letter to your representatives. Except as expressly provided herein, we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. The rulings contained in this letter are based upon information and representations submitted by the taxpayers accompanied by penalty of perjury statements executed by the appropriate parties. While this office has not verified the material submitted in support of the request for rulings, it is subject to verification on examination. This ruling is directed only to the taxpayer requesting it. Section 6100(k)(3) provides that it may not be used as precedent. Sincerely, Leslie H. Finlow _______________________________ Leslie H. Finlow Senior Technician Reviewer, Branch 4 Office of Associate Chief Counsel (Passthroughs & Special Industries) Enclosure Copy for § 6110 purposes cc:

Announcement 2024-10 Internal Revenue Service 2024-11 I.R.B. 711 Replacement of Lead Service Lines under Certain Governmental Programs Announcement 2024-10 This announcement addresses the Federal income tax treatment of certain lead service line replacement programs for residential property owners. The Environmental Protection Agency (EPA) has determined that lead has no safe exposure level. In drinking water, it causes serious and long-term health problems. Lead enters the drinking water when lead pipes and plumbing fixtures corrode. Given the health risks, many governmental entities have adopted programs for replacing lead service lines. The 2021 Infrastructure Investment and Jobs Act appropriated approximately $15 billion to governmental entities, as administered by the EPA, for the identification and replacement of lead service lines, almost half of which will be provided to disadvantaged communities as grants or principal forgiveness. See Pub. L. No. 117-58, 135 Stat. 429, div. J, tit. VI. A lead service line is defined in 40 CFR 141.2 as a pipe and its fittings, which are not lead free, that connect a drinking water main to a building inlet. A lead service line can be owned by a public water system, owned by a property owner, or jointly owned. Typically, a lead service line is part-owned by the public water system and part-owned by the property owner. The portion of the lead service line on public property (public portion) runs from the water main to the boundary of the residential property. The portion on the residential property (privately-owned portion) runs from the residential property's boundary to the house or building. The Federal government and many state governments require that the privately-owned portion of the lead service line be replaced simultaneously with the other relevant parts of the water system that contain lead. Digging and cutting during partial replacement is known to release more lead into the drinking water. New materials from partial lead service line replacement activities can also increase corrosion. Generally, governmental entities replace lead service lines at no cost to property owners in two ways. In many cases, the public water system, using its own workers and contractors, replaces the public portion and private portion simultaneously and controls the timing and scope of the work performed by its employees and its approved contractors. The public water system typically obtains the owner's explicit consent to enter the residential property to replace the privately-owned portion. In some municipalities, however, consent is deemed granted under local laws. See, for example, N.J.S.A. C.58:12A-39 (2020). In other cases, the public water system reimburses residential property owners, or directly pays contractors on the residential property owners' behalf, to replace the privately owned portions of lead service lines. For jurisdictions that choose this method, replacement of the private and public portions typically occurs simultaneously in order to prevent further lead contamination in the system. In these cases, the public water system generally controls the quality and reliability of the contractors either by providing a pre-approved list for the local area or by individually approving a contractor before work may be started. The Department of the Treasury (Treasury Department) and Internal Revenue Service (IRS) have considered the Federal income tax treatment of the lead service line replacement programs described above. In both scenarios, the public water system controls all or virtually all aspects of the replacement work. While there are factual variations, the Treasury Department and the IRS have determined that these variations do not warrant a different outcome under the Federal tax laws. Accordingly, the replacement of lead service lines under the programs described above does not result in income to the residential property owners under § 61 of the Internal Revenue Code. 1 See Bailey v. Commissioner, 88 T.C. 1293 (1987), acq. 1989-1 C.B. 1 (recipient of a rehabilitation grant from municipality lacked dominion and control where city controlled the rehabilitation work). The rules under § 6041 and § 1.6041-1(a) and (f)(1) requiring information reporting (such as on a Form 1099-Misc., Miscellaneous Information or Form 1099-G, Certain Government Payments ) do not apply to the cost or value of replacing lead service lines under the programs described above, based on the determination that such replacement does not give rise to gross income to the property owner under § 61. Accordingly, water systems and state governments are not required to file information returns or furnish payee statements with respect to the replacement of lead service lines under these programs. ******** 1 Unless otherwise specified, all "§" references are to sections of the Internal Revenue Code or to the Income Tax Regulations (26 CFR part 1). ******** The principal author of this announcement is Alina Lewandowski of the Office of Associate Chief Counsel (Income Tax & Accounting). Other personnel from the Treasury Department and IRS participated in its development. For further information regarding this announcement, please contact Ms. Lewandowski at (202) 317-7006 (not a toll-free number).

Private Letter Ruling Number: 202022009 Internal Revenue Service February 20, 2020 Department of the Treasury Internal Revenue Service Appeals Office Date: FEB 20 2020 Number: 202022009 Release Date: 5/29/2020 Employer Identification Number: Person to Contact: Employee ID Number: Tel: Fax: UIL Codes: 501.04.00, 501.04-03 Certified Mail Dear Sir or Madam: This is a final adverse determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (the "Code") section 501(a) as an organization described in Section 501(c)(4) of the Code. We made the adverse determination for the following reason(s): Your organization is not operated exclusively for the promotion of social welfare. The organization's primary activity is making political expenditures in support or in opposition of candidates running for elected office. You're required to file Federal income tax returns on Form 1120, U.S. Corporation Income Tax Return. Mail your form to the appropriate Internal Revenue Service Center per the form's instructions. You can get forms and instructions by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). We'll make this letter and the proposed adverse determination letter available for public inspection under Code section 6110 after deleting certain identifying information. We have provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437. If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in either: - United States Tax Court, - The United States Court of Federal Claims, - The United States District Court for the District of Columbia. You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. Contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment. You can write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 US Court of Federal Claims 717 Madison Place, NW Washington, DC 20005 U.S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, DC 20001 Note: We will not delay processing income tax returns and assessing any taxes due even if you file petition for declaratory judgment under section 7428 of the Code. Please refer to the enclosed Publication 892, How to Appeals an IRS Determination on Tax -Exempt Status, for more information about the Appeals process. You also have the right to contact the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. Advocate assistance, please contact the Taxpayer Advocate for the IRS office that issued this letter. You If you qualify for TAS assistance, which is always free. TAX will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. TAS assistance is not a substitute for established IRS procedures, such as the formal appeals process. TAS cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States Court. If you have any questions, contact the person at the top of this letter. Sincerely, Appeals Team Manager Enclosure: Publication 892 DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE WASHINGTON, D.C. 20224 TAX EXEMPT AND GOVERNMENT ENTITIES DIVISION Date: FEB 20, 2020 Contact Person: Identification Number: Contact Number: FAX Number: Employer Identification Number: Dear Applicant: We have considered your application for recognition of exemption from federal income tax under Internal Revenue Code § 501(a). Based on the information provided in connection with your application, we have concluded that you do not qualify for exemption under § 501(c)(4). The basis for our conclusion is set forth below. FACTS You incorporated on Date1, in State1 Your Articles of Incorporation state that you are organized and operated exclusively for the promotion of social welfare, including your mission to promote and defend the causes that recognize the *******. You state on your Form 1024 that you will conduct two activities: public education and outreach and grant making. Public education and outreach programs, which you initially indicated would comprise 90% of your time, are intended to inform the general public about current issues that may impact them and to promote non-partisan causes that will help *******. You plan to publish information in print, on the Internet, and through e-mail distributions. To ensure that you effectively identify new issues and legislation that could impact your ideals, you state that you will monitor legislation, court decisions, administrative orders, and executive actions on an on-going basis. You plan to send public officials letters and issue press releases to educate and advocate your position. In order to help inform and educate the public in a more comprehensive and effective manner, you plan to utilize direct mail as well as television and radio advertisements to advocate your positions on issues and legislation. According to your Form 1024, in order to further your goal of *******, you may also make grants to state or local organizations and other exempt organizations to increase the advocacy and legislative involvement work on behalf of such policies. You indicate this will comprise 10% of your time. In your letter dated Date2, you indicated that you have focused on issues of government accountability and transparency, health care, and economic issues at both the federal and state level. You state you have used mail, television, and the Internet to communicate your message and you intend to continue to use these mediums to further your mission. You state you have engaged in grassroots lobbying by encouraging citizens to contact elected representatives and policy leaders who are in a position to affect government policy and the current public policy debate. You do not have employees. Rather, you compensate vendors for various services including fundraising, polling, research, legal and accounting services, and producing and distributing direct mail, Internet, and television communications. You indicate that you began directly or indirectly participating or intervening in a political campaign on behalf of or in opposition to a political candidate on Date3. Specifically, you state that you have engaged in "political intervention" activities that you state have largely consisted of direct mail and television advertising advocating your support of candidates that you believe will further your mission if elected to public office, as well as your opposition to candidates you believe will not. You state that political campaign activities constitute less than one-third of your expenditures, and in no event shall political intervention exceed 40% of your total activities. Excluding the amounts you paid vendors for fundraising, legal services, and administrative support, you reported approximately $x1 in expenditures in Year, as of Date2, and projected to incur another $x2 of such expenditures (hereinafter referred to as "direct expenditures") by the end of Year. Substantially all (more than 90%) of your direct expenditures and more than three-quarters of your total expenditures in Year were for producing and distributing ******* printed communications and ******* television advertisements. Television Advertisements You submitted ******* television advertisements that you aired in Year. You reported ******* of your ******* Year television advertisements to the Federal Election Commission (FEC) as independent expenditures 1 [enclosed 2 ]. These television advertisements criticized Candidate1, who, early in Year, had officially announced his intention to challenge incumbent Candidate2 to be the State2 Party nominee for U.S. Senate. The advertisements criticized Candidate1's voting record as a ******* and questioned his suitability to serve as a U.S. Senator. 1 An independent expenditure is an expenditure made for a communication "expressly advocating the election or defeat of a clearly identified candidate that is not made in cooperation, consultation, or concert with, or at the request or suggestion of, a candidate, a candidate's authorized committee, or their agents, or a political party or its agents." 11 C.F.R. § 100.16(a). 2 Because we have provided a copy of this information to you, it will be available for public inspection as part of your exemption application if you are ultimately recognized as tax-exempt. You reported another of your Year television advertisements to the FEC as an electioneering communication because the advertisement aired within 30 days of the State2 Party convention on Date4, where candidates could win the Party nomination for U.S. Senate outright with a sufficient percentage of the delegate vote. 3 This television advertisement expressed concerns about the ******* and praised Candidate2 for authoring the Bill to address this issue. No vote on the Bill was scheduled around the time the advertisement aired. Rather, the Bill had been introduced early in the previous year and referred to a committee, with no further action taken. In addition, while you provided a few mailers that criticized the ******* without also praising Candidate2 for trying to address it, you did not provide any communications that urged support for the Bill or addressed the issue of ******* produced or distributed after the Date5, State2 primary election. Finally, Candidate1, as well as other outside groups, had been criticizing Candidate2 for contributing to the ******* and Candidate1 raised it as an issue distinguishing himself from Candidate2. 4 3 The term "electioneering communication" generally means any broadcast, cable, or satellite communication that (1) refers to a clearly identified candidate for federal office; (2) is made within 60 days before a general, special, or runoff election for the office sought by the candidate or 30 days before a primary or preference election, or a convention or caucus of a political party that has authority to nominate a candidate, for the office sought by the candidate; and (3) in the case of a communication that refers to a candidate for an office other than President or vice President, is targeted to the relevant electorate. 2 U.S.C. § 434(f)(3)(A). 4 See enclosure. See also Citation (enclosed). Because we have provided a copy of this information to you, it will be available for public inspection as part of your exemption application if you are ultimately recognized as tax-exempt. Yet another of your Year television advertisements began with a few sentences criticizing the Legislation, which had been passed several years earlier, and concluded by praising Candidate2 for "*******" The advertisement mentions that Candidate2 had sponsored a bill to repeal the Legislation. However, no vote on that bill was scheduled around the time the advertisement aired; rather, the bill was introduced early in the previous year and then placed on the Senate Legislative Calendar, with no further action taken. In addition, while you did provide other communications (including ******* television advertisement, which was the ******* of your ******* Year television advertisements that you submitted) that criticized the Legislation without also praising Candidate2 for trying to repeal it, you did not provide any communications you produced or distributed after the Date5, primary election that addressed the Legislation or efforts to repeal it. Finally, Candidate1 criticized Candidate2 for laying the groundwork (both though past legislation and foundational arguments) for the passage of the Legislation and thereby raised it as issue distinguishing himself from Candidate2. 5 5 See enclosure. Direct Mail Communications You provided a total of ******* direct mail communications ("mailers'') that you paid for, ******* of which expressed disapproval for Candidate1 and ******* of which expressed approval for Candidate2. Based on the information you provided regarding your expenditures, it appears that almost all of the mailers you provided were produced and distributed in Year--in the months leading up to the Date4, nominating convention and the Date5, primary election. Of the ******* mailers that expressed disapproval of Candidate1, you reported at least ******* to the FEC as independent expenditures. One such mailer criticized Candidate1 for being a "*******" as a state legislator and concluded that State2 "*******" Candidate1. A second mailer criticized Candidate1 for******* and urged the reader to "Vote NO on [Candidate1]." A third mailer criticized Candidate1's voting record on a variety of issues and stated "*******." Of the remaining ******* mailers that expressed disapproval of Candidate1, one criticized Candidate1 for Description1 and concluded that Candidate1 was a "*******" but State2 "*******" 6 The other criticized Candidate1 for Description2. 6 This mailer, as well as the mailer described above that criticized Candidate1 for being a *******'," also criticized Candidate3. Candidate3 was another State2 ******* who had announced he would challenge Candidate2 for the State2 Party nomination for U.S. Senate. None of the ******* mailers expressing disapproval for Candidate1 urged either Candidate1 or the reader to take any action with respect to the issues identified. As indicated above, you also distributed ******* mailers that expressed approval of Candidate2. One communication praised Candidate2 for being a "*******" As examples of Candidate2's "*******" the mailer commended Candidate2 for stopping ******* (including by authoring the Bill), eliminating regulations that "*******" "*******" and fighting the government's Description3 (including by co-sponsoring a bill to repeal the Legislation). The mailer asked the reader to call Candidate2 to *******" Another mailer praised Candidate2 for ******* but did not urge any action with respect to the Legislation. A third mailer praised Candidate2 for "*******" for not "*******" and for his efforts to fight and repeal the Legislation. The mailer urged the reader to call Candidate2 to *******." However, as noted above, no vote on repealing the Legislation was scheduled in the U.S. Senate at the time, and the timing of the mailer and identification of Candidate2 do not appear to be related to any other non-electoral event. In addition, you have not provided any communications that you distributed after the Date5, primary election that advocated for the repeal of the Legislation. You also provided ******* mailers that do not identify Candidate1, Candidate2, or any other candidate for public office. ******* of these mailers criticized federal and state government actions on various issues and urged viewers to contact their legislators to take action on the issues. The other ******* urged readers to vote for "[Descriptive] values" in the upcoming Date5, primary election. Other Expenditures In addition to your expenditures on television advertisements and mailers, you also reported paying vendors for "conducting research," "conducting polling," "producing internet communications," and "providing photograph rights." You have not provided sufficient information about these expenditures to determine whether or not the associated activities promote social welfare within the meaning of § 501(c)(4). However, these expenditures constituted only about 6 to 7% of your direct expenditures in Year and 5 to 6% of your total expenditures in Year. You further state that "Internet Activities have comprised less than 5% of [y]our activities" as of Date2, and that you spent about $x3 on the Internet, expenditures that presumably overlap with the amounts paid to vendors for "producing internet communications." Much of the content on your website consists of the television and printed communications described above. In addition, you provided a web banner advertisement that appeared on your website that praised Candidate2 for "*******." The web banner advertisement commends Candidate2 for a ******* Descriptive votes; for being named by another organization as a ******* Senator; for authoring the Bill; and for co-sponsoring a bill to repeal the Legislation. The advertisement does not urge any action with respect to either the Bill or the Legislation. Finally, you reported paying vendors for fundraising, legal services, and administrative support. Together, these expenditures accounted for about 14% of your actual total expenditures in Year as of Date2, and about 19% of your total expenditures that you projected for Year. LAW Section 501(c)(4) of the Code provides for the exemption from federal income tax of organizations not organized for profit but operated exclusively for the promotion of social welfare. Section 1.501(c)(4)-1(a)(2) of the Income Tax Regulations provides that an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community. An organization embraced within § 501(c)(4) is one that is operated primarily for the purpose of bringing about civic betterments and social improvements. In addition, the regulations provide that the promotion of social welfare does not include direct or indirect participation in political campaigns on behalf of or in opposition to any candidate for public office. Rev.Rul. 68-45, 1968-1 C.B. 259, states that "[a]ll facts and circumstances are taken into account in determining an organization's primary activity" for purposes of determining whether an organization primarily engages in activities which promote in some way the common good and general welfare of the people of the community. Rev.Rul. 67-368, 1967-2 C.B. 194, held that an organization, which was formed to promote an enlightened electorate and whose primary activity was rating candidates for public office, was not exempt under § 501(c)(4) because it did not promote social welfare. The ruling stated that the comparative rating of candidates, even on a non-partisan basis, constitutes the participation or intervention on behalf of candidates favorably rated and in opposition to those less favorably rated. Rev.Rul. 81-95, 1981-1 C.B. 332, considered the effect of engaging in political campaign activities on a § 501(c)(4) organization. The ruling refers to five revenue rulings, including Rev.Rul. 78-248, for other examples of what constitutes participation or intervention in political campaigns. Each of those rulings involves a § 501(c)(3) organization. The organization was primarily engaged in activities designed to promote social welfare. In addition, it conducted activities involving participation and intervention in political campaigns on behalf of or in opposition to candidates for nomination or election to public office. The ruling concluded that, because the organization's primary activities promoted social welfare, its lawful participation or intervention in political campaigns on behalf of or in opposition to candidates for public office would not adversely affect its exempt status under § 501(c)(4). Rev.Rul. 2004-6, 2004-1 C.B. 328, analyzes six situations to determine whether the organization described in each has expended funds for a § 527(e)(2) exempt function as a result of an advocacy communication on a public policy issue. A § 527(e)(2) exempt function means "the function of influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any federal, state or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed." All the facts and circumstances must be considered when making this determination. Factors that tend to show that an advocacy communication on a public policy issue is for a § 527(e)(2) exempt function include, but are not limited to, the following: - The communication identifies a candidate for public office; - The timing of the communication coincides with an electoral campaign; - The communication targets voters in a particular election; - The communication identifies that candidate's position on the public policy issue that is the subject of the communication; - The position of the candidate on the public policy issue has been raised as distinguishing the candidate from others in the campaign, either in the communication itself or in other public communications; and - The communication is not part of an ongoing series of substantially similar advocacy communications by the organization on the same issue. In facts and circumstances, such as those described in the six situations, factors that tend to show that an advocacy communication on a public policy issue is not for a § 527(e)(2) exempt function include, but are not limited to, the following: - The absence of any one or more of the factors listed above; - The communication identifies specific legislation, or a specific event outside the control of the organization, that the organization hopes to influence; - The timing of the communication coincides with a specific event outside the control of the organization that the organization hopes to influence, such as a legislative vote or other major legislative action (for example, a hearing before a legislative committee on the issue that is the subject of the communication); - The communication identifies the candidate solely as a government official who is in a position to act on the public policy issue in connection with the specific event (such as a legislator who is eligible to vote on the legislation); and - The communication identifies the candidate solely in the list of key or principal sponsors of the legislation that is the subject of the communication. Rev.Rul. 2007-41, 2007-1 C.B. 1421, analyzes 21 situations to determine whether the § 501(c)(3) organization described in each has directly or indirectly participated in a political campaign on behalf of or in opposition to a candidate for public office. All facts and circumstances are considered when making this determination. When determining whether a communication results in political campaign intervention, key factors include: - Whether the statement identifies one or more candidates for a given public office; - Whether the statement expresses approval or disapproval for one or more candidates' positions and/or actions; - Whether the statement is delivered close in time to the election; - Whether the statement makes reference to voting or an election; - Whether the issue addressed in the communication has been raised as an issue distinguishing candidates for a given office; - Whether the communication is part of an ongoing series of communications by the organization on the same issue that are made independent of the timing of any election; and - Whether the timing of the communication and identification of the candidate are related to a non-electoral event such as a scheduled vote on specific legislation by an officeholder who also happens to be a candidate for public office. A communication is particularly at risk of political campaign intervention when it makes reference to candidates or voting in a specific upcoming election. Nevertheless, the communication must still be considered in context before arriving at any conclusions. ANALYSIS Based on our analysis of the information you submitted with your application, we have determined that you are not operated exclusively for the promotion of social welfare within the meaning of § 501(c)(4) and the regulations thereunder. Therefore, you do not qualify for exemption from federal income tax as an organization described in § 501(c)(4). ******* of your ******* Year television advertisements and ******* of your ******* Year mailers expressed disapproval of Candidate1 or approval of Candidate2 and were distributed in the months leading up to the Date4, nominating convention and the Date5, primary election in which these candidates were competing against one another for the nomination. You reported ******* television advertisements and ******* mailers expressing disapproval of Candidate 1 to the FEC as independent expenditures. These communications, as well as the ******* additional mailers expressing disapproval of Candidate1 that you apparently did not report to the FEC as independent expenditures, criticized Candidate1 for a variety of aspects of his record as a *******. These ******* television advertisements and ******* mailers made no attempt to advocate action on particular issues but rather focused on criticizing Candidate1, with a number of the communications concluding that Candidate1 was not suited to serve as a U.S. Senator and/or expressly stating "Vote NO on [Candidate1]." Accordingly, all ******* of the television advertisements and all ******* of the mailers expressing disapproval of Candidate1 constituted political campaign intervention. The ******* Year television advertisements and ******* mailers expressing approval of Candidate2 praised Candidate2's past efforts related to addressing the national debt and repealing the Legislation. While these communications mentioned bills that Candidate2 had authored or sponsored, there was no vote scheduled on either bill; indeed, no action had been taken on either bill since they had been introduced more than a year before the advertisements aired. In addition, you did not provide us with any communications on either the particular bills or the general issues they addressed that you produced or distributed after the Date5, primary election. Moreover, Candidate1 had raised both the national debt and the Legislation as issues distinguishing him from Candidate 2. Accordingly, based on all of the facts and circumstances, we conclude that the ******* television advertisements and ******* mailers that express approval for Candidate2 also constituted political campaign intervention. 7 7 You aired ******* television advertisement praising Candidate2 for his efforts related to the ******* that was very similar to the television advertisement you aired in the 30 days prior to the Date4, nominating convention. However, this advertisement appeared to have aired not in Year but in the previous year. A print-out of the webpage showing the date this advertisement was posted is enclosed. Because we have provided a copy of this information to you, it will be available for public inspection as part of your exemption application if you are ultimately recognized as tax-exempt. If this television advertisement aired only in the previous year, it is not part of the analysis of the relative proportion of your activities in Year. If it aired in Year, all of the factors set forth in the paragraph accompanying this footnote would apply and the advertisement would constitute political campaign intervention. Although we requested the amount you spent on each television advertisement and mailer (as well as the specific dates during which these communications were distributed), you did not provide this information. However, it can be estimated from the information you did provide that your ******* television advertisements and ******* mailers that constitute political campaign intervention accounted for about 60% of all of your Year direct expenditures. By contrast, the ******* Year television advertisement and ******* Year mailers that did not express either disapproval for Candidate1 or approval for Candidate2 accounted for about 30% of all of your Year direct expenditures. In addition to your expenditures on television advertisements and mailers, you also reported paying vendors for "conducting research," "conducting polling," "producing internet communications," and "providing photograph rights." You have not provided sufficient information about these expenditures to determine whether or not the associated activities promote social welfare within the meaning of § 501(c)(4), and, in any event, these expenditures constituted only about 6 to 7% of your direct expenditures in Year and 5 to 6% of your total expenditures in Year. Your expenditures not included in Year direct expenditures--the amounts you paid independent contractors to perform fundraising, legal, and administrative support services--accounted for about 14% of your actual total expenditures in Year as of Date2, and about 19% of your total expenditures that you projected for Year. You provided no information to suggest that these expenditures should not be proportionately attributable to your ******* television advertisements and ******* printed communications that constitute political campaign intervention. In your letter dated Date2, you stated that political campaign activity "currently constitutes less than one-third of [your] expenditures, and in no event shall political intervention exceed 40% of [your] activities." However, the information you have provided on your expenditures does not support your estimate of the relative proportion of your political campaign activities. While all facts and circumstances are taken into account in determining an organization's primary activity for purposes of determining whether an organization primarily engages in activities that promote social welfare, you have provided no information suggesting that your expenditures are not a reasonable measure of your relative proportion of activities, nor have you provided any alternative measures to use. CONCLUSION Based on our analysis of the information you provided in connection with your application, we have determined that you are not operated exclusively for the promotion of social welfare within the meaning of § 501(c)(4). Accordingly, you are not exempt under § 501(c)(4). You have the right to file a protest if you believe this determination is incorrect. To protest, you must submit a statement of your views and fully explain your reasoning. You must submit the statement, signed by one of your officers, within 30 days from the date of this letter. We will consider your statement and decide if the information affects our determination. Your protest statement should be accompanied by the following declaration: Under penalties of perjury, I declare that I have examined this protest statement, including accompanying documents, and, to the best of my knowledge and belief, the statement contains all the relevant facts, and such facts are true, correct, and complete. You also have a right to request a conference to discuss your protest. This request should be made when you file your protest statement. An attorney, certified public accountant, or an individual enrolled to practice before the Internal Revenue Service may represent you. If you want representation during the conference procedures, you must file a proper power of attorney, Form 2848, Power of Attorney and Declaration of Representative, if you have not already done so. For more information about representation, see Publication 947, Practice before the IRS and Power of Attorney. All forms and publications mentioned in this letter can be found at www.irs.gov, Forms and Publications. If you do not intend to protest this determination, you do not need to take any further action. If we do not hear from you within 30 days, we will issue a final adverse determination letter. That letter will provide information about filing tax returns and other matters. Please send your protest statement, Form 2848, and any supporting documents to this address: Internal Revenue Service TE/GE SE:T:EO:RA ATTN: 1111 Constitution Ave, N.W. Washington, DC 20224-0002 You may also fax your statement using the fax number shown in the heading of this letter. If you fax your statement, please call the person identified in the heading of this letter to confirm that he or she received your fax. If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter. Sincerely,

Private Letter Ruling Number: 202307002 Internal Revenue Service November 16, 2022 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202307002 Release Date: 2/17/2023 Index Number: 9100.02-03 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:B06 PLR-106675-22 Date: November 16, 2022 Dear ******: This letter responds to a letter dated April 1, 2022, and subsequent correspondence, submitted by P on behalf of S1, S2 and S3 requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to make elections under § 59(e) of the Internal Revenue Code (Code) and § 1.59-1(b)(1) of the Income Tax Regulations to deduct ratably over a 10-year period S1, S2 and S3's research and experimental (R&E) expenditures described in § 174(a) incurred in Tax Year. This letter is being issued electronically in accordance with Rev.Proc. 2020-29, 2020-21 I.R.B. 859. A paper copy will not be mailed to P. FACTS P is the common parent of an affiliated group of corporations, including S1, S2 and S3, that files a consolidated federal income tax return on a calendar year basis using the accrual method of accounting (hereinafter P, S1, S2 and S3 will be collectively referred to as Taxpayer). Taxpayer represents that it, through its tax advisors, consistently explored and discussed the possibility of making elections under § 59(e) and § 1.59-1(b)(1). However, Taxpayer was misinformed regarding knowable, material facts at the time Taxpayer's tax advisors prepared and filed its tax return for Tax Year. Taxpayer represents that if had been fully informed regarding these material facts, it would have made the § 59(e) elections totaling approximately $a with its timely filed return for Tax Year. Taxpayer further represents that no facts have changed since it filed its tax return for Tax Year that make the § 59(e) elections more advantageous to Taxpayer. Taxpayer represents that, in requesting an extension of time to make the § 59(e) elections for Tax Year, it has acted reasonably and in good faith and, further, there is no prejudice to the interests of the government. RULING REQUESTED Taxpayer requests an extension of time under §§ 301.9100-1 and 301.9100-3 to make elections under § 59(e) to capitalize and amortize Taxpayer's R&E expenditures incurred during Tax Year. LAW AND ANALYSIS Section 59(e)(1) allows a taxpayer, in general, to deduct ratably over the 10-year period any qualified expenditure to which an election under § 59(e) applies, beginning with the taxable year in which such expenditure was made. Section 59(e)(2)(B) includes in the definition of "qualified expenditure" any amount which, but for an election under § 59(e), would have been allowable as a deduction for the taxable year in which paid or incurred under § 174(a) (relating to R&E expenditures). Section 59(e)(3) specifically prohibits the deduction of the qualified expenditures under any other section of the Code if the option under § 59(e) is elected. Section 59(e)(4)(A) provides that an election under § 59(e)(1) may be made with respect to any portion of any qualified expenditure. Section 59(e)(4)(B) provides that an election made under § 59(e) may be revoked only with the consent of the Secretary. Section 1.59-1(b)(1) provides that an election under § 59(e) shall only be made by attaching a statement to the taxpayer's income tax return (or amended return) for the taxable year in which the amortization of the qualified expenditures subject to the § 59(e) election begins. The statement must be filed no later than the date prescribed by law for filing the taxpayer's original income tax return (including any extensions of time) for the taxable year in which the amortization of the qualified expenditures subject to the § 59(e) election begins. Additionally, the statement must include the taxpayer's name, address, and taxpayer identification number, and the type and amount of qualified expenditures identified in § 59(e)(2) that the taxpayer elects to deduct ratably over the applicable period described in § 59(e)(1). Section 1.59-1(b)(2) provides, in part, that a taxpayer may make an election under § 59(e) with respect to any portion of any qualified expenditure paid or incurred by the taxpayer in the taxable year to which the election applies. An election under § 59(e) must be for a specific dollar amount and the amount subject to an election under § 59(e) may not be made by reference to a formula. Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles E, G, H, and I. Section 301.9100-1(b) provides that the term "regulatory election" includes an election the due date of which is prescribed by a regulation published in the Federal Register. Sections 301.9100-1 through 301.9100-3 provide the standards used to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of § 301.9100-2. The Commissioner will grant requests for relief under § 301.9100-3 when the taxpayer provides the evidence (including affidavits described in § 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the government. Section 301.9100-3(a). CONCLUSION Based solely on the information submitted and representations made, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, the Commissioner grants Taxpayer an extension of time of 120 days from the date of this letter to make the elections under § 59(e) and § 1.59-1(b)(1) to deduct ratably over a 10-year period its R&E expenditures incurred for Tax Year. The § 59(e) elections must comply with the manner-of-election requirements of § 1.59-1(b)(1). In making the elections for Tax Year, Taxpayer must attach a copy of this letter ruling to its amended consolidated federal income tax return. Alternatively, if Taxpayer files its amended consolidated federal income tax return electronically, it may satisfy this requirement by attaching a statement to its amended return that provides the date and control number of the letter ruling. The ruling contained in this letter is based upon information and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for a ruling, it is subject to verification on examination. Except as specifically set forth above, we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the Code and the regulations thereunder. Specifically, we express or imply no opinion concerning whether Taxpayer satisfies the requirements of §§ 59(e) or 174(a). This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. Sincerely, Associate Chief Counsel (Passthroughs and Special Industries) Jennifer A. Records By: _______________________________ Jennifer A. Records Senior Technician Reviewer, Branch 6 Office of the Associate Chief Counsel (Passthroughs and Special Industries) Enclosure Copy for § 6110 Purposes cc:

Private Letter Ruling Number: 202052023 Internal Revenue Service April 24, 2020 DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE 1100 Commerce Street, MC 4920DAL Dallas, TX 75242 Number: 202052023 Release Date: 12/24/2020 UIL: 501.03-00 Date: April 24, 2020 Taxpayer ID Number: Form: Tax Period(s) ended: Person to Contact: Identification Number: Telephone Number: Fax Number: CERTIFIED MAIL -- Return Receipt Requested LAST DAY FOR FILING A PETITION WITH THE TAX COURT: Dear *******: This is a final determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective January 1, 20XX. Your determination letter dated August 26, 20XX is revoked. Our adverse determination as to your exempt status was made for the following reasons: You have not established that you are operated exclusively for an exempt purpose or that you have been engaged primarily in activities that accomplish one or more exempt purposes and that no part of your net earnings inure to the benefit of private shareholders or individuals within the meaning of IRC Section 501(c)(3). You did not respond to our repeated requests to you about material matters concerning your operations as required by Sections 6001 and 6033(a)(1) and Rev.Rul. 59-95, 1959-1 C.B. 627 As such, you failed to meet the requirements of IRC Section 501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1(c), in that you have not established that you were operated exclusively for exempt purposes. Contributions to your organization are no longer deductible under IRC Section 170. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms, and information please visit www.irs.gov. If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims, or 3) the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed within 90 days from the date this determination was mailed to you. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment by referring to the enclosed Publication 892. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 U.S. Court of Federal Claims 717 Madison Place, NW Washington, DC 20005 U.S. District Court for the District of Columbia 333 Constitution Ave., NW Washington, DC 20001 Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3). You may be eligible for help from the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778. Taxpayer Advocate assistance can't be used as substitute for established IRS procedures, formal appeals processes, etc. The Taxpayer Advocate is not able to reverse legal or technically correct tax determination, nor extend the time fixed by law that you have to file a petition in Court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling. You can get any of the forms or publications mentioned in this letter by calling 800-TAX-FORM (800-829-3676) or visiting our website at www.irs.gov/forms-pubs. If you have any questions about this letter, please contact the person whose name and telephone number are shown in the heading of this letter. Sincerely, Maria D. Hooke Director, EO Examinations Enclosures: Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: 11/04/2020 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: CERTIFIED MAIL -- Return Receipt Requested Dear *******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocateirs.gov or call 877-777-4778. Additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, ******* for Maria Hooke Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 ISSUE: Whether *******, located in *******, *******, continues to qualify for exemption under Section 501(c)(3) of the Internal Revenue Code? FACTS: ******* was granted tax-exempt status under Internal Revenue Code Section 501(a)(9) and 170(b)(1)(A)(vi) as an organization described in Section 501(c)(3) and established on December 29, 20XX. The organization conducted its operations out of *******. The organization filed Form 990-EZ for the year ended December 31, 20XX on August 28, 20XX. As of October 30, 20XX, the return been filed for all of the tax years through December 31, 20XX. The 20XX Form 990-EZ tax return showed gross receipts of $0 and expenditures of $0 The examination began on August 29, 20XX. The request for information (Information Document Request, or IDR) was issued on September 9, 20XX. The request was for financial and organizational information for the year under examination. The information was due on October 29, 20XX. Phone number was available for the organization with message being left on October 14, 20XX. EO did not return call, on October 21, 20XX to date the phone has a message that it is temporarily unavailable. The second request for information (a copy of the first IDR) was sent Certified Mail on October 18, 20XX. The organization failed to respond to this request the signed certified mail card was returned on October 29, 20XX. To date, no response or submission of the financial statements, organizational information, meeting minutes, board of director lists, and other documents requested on IDR 001. LAW: IRC Section 501(c)(3) exempts from Federal income tax corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office. IRC Section 6001 provides that every person liable for any tax imposed by the IRC, or for the collection thereof, shall keep adequate records as the Secretary of the Treasury or his delegate may from time to time prescribe. IRC Section 6033(a)(1) provides, except as provided in IRC Section 6033(a)(2), every organization exempt from tax under Section 501(a) shall file an annual return, stating specifically the items of gross income receipts and disbursements, and such other information for the purposes of carring out the internal revenue laws. The Secretary may also prescribe by forms or regulations the requirement of every organization to keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Treas.Reg. Section 1.6001-1(c) states that in addition to such permanent books and records as are required by paragraph (a) of this section with respect to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under Section 501(a) shall keep such permanent books of account or records, including inventories as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 2033 and Section 1.6033-1 through 3 Treas.Reg. § 1.6001-1(e) states that the books or records required by this section shall be kept at all times available for inspection by authorized Internal Revenue Service officers or employees, and shall be retained as long as the contents thereof may be material in the administration of any Internal Revenue law. In accordance with the above cited provisions of the Code and Regulations under IRC § 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status. GOVERNMENT'S POSITION: Failure to Provide Records The EO has failed to provide records as is required in Code § 6033(a)(1) and Regulation § 1.6033-1(h)(2). They failed to provide any organizational or financial information that we requested during the examination. We attempted to obtain these records numerous times by mail and phone Without the EO's records, we cannot verify that they are operating according to their exempt purpose. Our position is that the organization, then, is not operating for exempt purposes. They have provided nothing to the contrary TAXPAYER'S POSITION: The taxpayer's position is unknown at this time. CONCLUSION: By not complying with the Code and Regulations, the organization has jeopardized its exempt status. They have failed to provide required documentation, thereby failing to be complaint with the Code, and failing to show any evidence of their exempt activities. We have no reason to believe that the EO is operating for exempt purposes. As a result of the examination, we have determined that the EO is not operating for exempt purposes as a §501(c)(3) organization. They have not provided any information to the contrary. Accordingly, since the organization failed to operate primarily for exempt purposes, we are proposing revocation of their tax-exempt status, effective January 1, 20XX. Since the organization will no longer have tax-exempt status beginning January 1, 20XX, they are liable for filing Form 1120, U.S. Corporation Income Tax Return, as of that date.

Private Letter Ruling Number: 202352008 Internal Revenue Service October 3, 2023 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202352008 Release Date: 12/29/2023 Index Number: 1400Z.02-00, 9100.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:B08 PLR-107707-23 Date: October 03, 2023 Dear ******: This ruling responds to Taxpayer's request for a letter ruling dated Date 1. Specifically, Taxpayer requests relief for an extension of time under sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations, to (1) make a timely election under section 1.1400Z2(d)-1(a)(2)(i) to be certified as a qualified opportunity fund (QOF), as defined in section 1400Z-2(d) of the Internal Revenue Code, and (2) for Taxpayer to be treated as a QOF, effective for its taxable year ended Date 3, effective as of Date 2, as provided by section 1400Z-2(d) and section 1.1400Z2(d)-1(a) of the Income Tax Regulations. FACTS According to the affidavits and additional information provided, Taxpayer is a limited liability company organized under the laws of State. Taxpayer is classified as a partnership for U.S. Federal income tax purposes and was formed for the purpose of investing in qualified opportunity zone property and serving as a QOF. Taxpayer's annual accounting period is the calendar year and uses the cash method of accounting. Taxpayer is owned by Owners and President handles the business of Taxpayer. President, Taxpayer, and its Advisors were aware of the requirement to file Form 8996, Qualified Opportunity Fund (Form 8996) to be treated as a QOF in the year of formation. Taxpayer retained Advisors so that Taxpayer could comply with the Form 8996 requirement and the expectation was to file for an automatic extension of time to file Taxpayer's income tax return for Year 1 (as Owners also extended their individual income tax return for Year 1). Taxpayer contacted CPA prior to the deadline for filing an automatic extension of time to file Taxpayer's income tax return for Year 1 to confirm compliance with Taxpayer's tax obligations. However, because of an administrative oversight between the Advisors, no such extension of time to file Taxpayer's income tax return for Year 1 was filed. Consequently, the election to self-certify as a QOF on the Form 8996 was not timely made. On Date 4, upon learning that Taxpayer's Year 1 Forms 1065, U.S. Return of Partnership Income and 8996 were not timely filed, Taxpayer discussed the situation with Advisors and instructed Advisors to prepare and file this request for a ruling. Taxpayer then filed this ruling request seeking an extension of time to file Form 8996 for Taxpayer's Year 1 tax year. Taxpayer also filed the Year 1 Form 1065 with an attached Form 8996 on Date 5. Taxpayer represents that granting relief under section 301.9100-3 of the Procedure and Administration Regulations will not result in a lower tax liability for the year affected by the election. LAW AND ANALYSIS Section 1400Z-2(e)(4)(A) of the Internal Revenue Code directs the Secretary to prescribe regulations for rules for the certification of QOFs. Section 1.1400Z2(d)-1(a)(2) of the Income Tax Regulations provides the rules for an entity to self-certify as a QOF. Section 1.1400Z2(d)-1(a)(2)(i) provides that the entity electing to be certified as a QOF must do so annually on a timely filed return in such form and manner as may be prescribed by the Commissioner of Internal Revenue in the Internal Revenue Serv ice forms or instructions, or in publications or guidance published in the Internal Revenue Bulletin. To self-certify as a QOF, a taxpayer must file Form 8996, with its tax return for the year to which the certification applies. The Form 8996 must be filed by the due date of the tax return (including extensions). The information provided indicates that Taxpayer did not file its Form 1065 and Form 8996 by the due date of its Federal income tax return (including extensions) due to administrative oversight by Advisors. Because section 1.1400Z2(d)-1(a)(2)(i) sets forth the manner and timing for an entity to self-certify as a QOF, these elections are regulatory elections, as defined in section 301.9100-1(b). Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections (other than automatic extensions covered in section 301.9100-2) will be granted when the taxpayer provides evidence (including affidavits) to establish that the taxpayer acted reasonably and in good faith and the grant of relief will not prejudice the interests of the government. Under section 301.9100-3(b), a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer requests relief before the failure to make the regulatory election is discovered by the Service, or reasonably relied on a qualified tax professional, and the tax professional failed to make, or advise the taxpayer to make, the election. However, a taxpayer is not considered to have reasonably relied on a qualified tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or was not aware of all relevant facts. In addition, section 301.9100-3(b)(3) provides that a taxpayer is deemed not to have acted reasonably and in good faith if the taxpayer-- (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662 at the time the taxpayer requests relief, and the new position requires or permits a regulatory election for which relief is requested; (ii) was fully informed in all material respects of the required election and related tax consequences but chose not to make the election; or (iii) uses hindsight in requesting relief. If specific facts have changed since the original deadline that make the election advantageous to a taxpayer, the Service will not ordinarily grant relief. Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. Based on the facts and information submitted and the representations made, we conclude that Taxpayer has acted reasonably and in good faith, and that the granting of relief would not prejudice the interests of the government. Consequently, the Form 8996 attached to Taxpayer's return for Year 1, filed on Date 5, is considered timely filed, and Taxpayer has thereby made the election under § 1400Z-2 and § 1.1400Z2(d)-1(a)(2)(i) to self-certify as a QOF for Year 1. Taxpayer should submit a copy of this letter ruling to the Service Center where Taxpayer files its returns along with a cover letter requesting that the Service associate this ruling with the Year 1 return. This ruling is based upon facts and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. This office has not verified any of the material submitted in support of the request for a ruling. However, as part of an examination process, the Service may verify the factual information, representations, and other data submitted. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we express no opinion, either express or implied, concerning whether any investments made into Taxpayer are qualifying investments as defined in section 1.1400Z2(a)-1(b)(34) or whether the taxpayer meets the requirements under section 1400Z-2 and the regulations thereunder to be a QOF. Further, we also express no opinion on whether any interest owned by Taxpayer qualifies as qualified opportunity zone property, as defined in section 1400Z(d)(2), or whether such interest would be treated as a qualified opportunity zone business, as defined in section 1400Z-2(d)(3). We express no opinion regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. Sincerely, Shareen S. Pflanz Branch Chief, Branch 8 Office of Associate Chief Counsel (Income Tax and Accounting) cc: ******

Private Letter Ruling Number: 202120006 Internal Revenue Service November 24, 2020 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202120006 Release Date: 5/21/2021 Index Number: 856.00-00, 9100.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:FIP:B02 PLR-114399-20 Date: November 24, 2020 Dear *******: This letter responds to a letter dated June 23, 2020, submitted on behalf of Taxpayer. Taxpayer requests an extension of time under sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to make an election under section 856(c) of the Internal Revenue Code (the Code) to be treated as a real estate investment trust (REIT) effective Date 3. FACTS Taxpayer is a State limited liability company that was formed on Date 1 for the purpose of investing in real estate located across the United States. Taxpayer made an initial classification election on Form 8832, Entity Classification Election, to be treated as a corporation for U.S. income tax purposes effective Date 1. Taxpayer had no activity in the year ended Date 2 and did not file a U.S. income tax return for that year. Taxpayer intended to be treated as a REIT under subchapter M of the Code effective for the calendar year ended Date 4 (the First REIT Taxable Year). Taxpayer has no employees, and relies on Firm for all tax compliance matters, including the preparation and timely filing of its U.S. income tax returns. Firm timely filed Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, on behalf of Taxpayer for the First REIT Taxable Year, extending the filing deadline to Date 5. Part I of the Form 7004 indicated that the application was for Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts. Due to an administrative error, Firm did not file Taxpayer's Form 1120-REIT by the filing deadline of Date 5. In Month 1 of Year, Firm completed preparation of the Form 1120-REIT and provided it to Taxpayer for review. Shortly thereafter, Taxpayer reviewed and signed the Form 1120-REIT, and directed Firm to paper file the Form 1120-REIT. Prior to Year, Firm's process for filing returns on behalf of clients was as follows: paper filed returns were filed by the Firm employees that prepared those returns (the Engagement Team), and electronically filed returns were filed by Firm's centralized processing team (the Processing Team). Beginning in Year, Firm implemented a new process where all returns filed on behalf of clients, including Taxpayer, would be filed by the Processing Team. Pursuant to this new filing process, in Month 1 of Year, the Engagement Team provided Taxpayer's signed Form 1120-REIT to the Processing Team to paper file. Both Taxpayer and the Engagement Team believed the Form 1120-REIT was timely filed, and that no further action was required. The Processing Team assembled the returns for Firm clients, including Taxpayer, and a temporary hire collected the returns to deliver to the mailroom. It was after working hours and the mailroom staff had left for the evening, so the temporary hire placed the returns in a box without telling the Processing Team. The Processing Team recorded in its records that the mailing had taken place. By the next day, the temporary hire was busy and forgot about the returns placed in the box. Due to the high volume of work, the Processing Team maintained many boxes with paper, and the box containing Taxpayer's return was overlooked. In early Month 2 of Year, the Processing Team discovered that the box containing Taxpayer's Form 1120-REIT had not been processed and the returns did not get mailed out. The Processing Team immediately informed the Engagement Team, who shortly thereafter informed Taxpayer of the inadvertent failure to timely file Taxpayer's Form 1120-REIT. At all times prior to that discovery, Taxpayer believed that Firm had timely filed its Form 1120-REIT. On Date 6, Firm filed Taxpayer's Form 1120-REIT for the First REIT Taxable Year. Immediately thereafter, Taxpayer engaged Firm to prepare a ruling request seeking under sections 301.9100-1 and 301.9100-3 an extension of time to allow Taxpayer to make an election pursuant to section 856(c)(1) to be treated as a REIT under subchapter M of the Code effective Date 3. REPRESENTATIONS Taxpayer makes the following representations in connection with this request for an extension of time: 1. Taxpayer filed the request for relief before the failure to make the election was discovered by the Service. 2. The interests of the government are not prejudiced within the meaning of section 301.9100-3(c). Granting the relief will not result in Taxpayer having a lower U.S. income tax liability in the aggregate for all years to which the regulatory election applies than Taxpayer would have had if the election had been timely made (taking into account the time value of money). 3. Taxpayer does not seek to alter a return position for which an accuracy-related penalty has or could have been imposed under section 6662 at the time it requested relief and the new position requires or permits a regulatory election for which relief is requested. 4. Being fully informed of the required regulatory election and related tax consequences, Taxpayer did not choose not to file the election. 5. Taxpayer is not using hindsight in requesting this relief. No specific facts have changed since the due date for making the election that makes this election advantageous to Taxpayer. 6. The period of limitations on assessment under section 6501(a) has not expired for Taxpayer for the taxable year for which the election should have been filed, nor for any taxable year(s) that would have been affected by the election had it been timely filed. In addition, affidavits on behalf of Taxpayer have been provided as required by section 301.9100-3(e)(2) and (3). LAW AND ANALYSIS Section 856(c)(1) provides that a corporation, trust, or association shall not be considered a REIT for any taxable year unless it files with its return for the taxable year an election to be a REIT or has made such an election for a previous taxable year, and such election has not been terminated or revoked. Pursuant to section 1.856-2(b) of the Income Tax Regulations, the election shall be made by the trust by computing taxable income as a REIT in its return for the first taxable year for which it desires the election to apply. Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles E, G, H, and I. Section 301.9100-1(b) defines a regulatory election to mean an election whose due date is prescribed by a regulation, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin. Section 301.9100-3(a) through (c)(1) sets forth rules that the Service generally will use to determine whether, under the particular facts and circumstances of each situation, the Commissioner will grant an extension of time for regulatory elections that do not meet the requirements of section 301.9100-2. Section 301.9100-3(a) provides that requests for relief subject to this section will be granted when the taxpayer provides the evidence (including affidavits described in section 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government. Section 301.9100-3(b) provides that a taxpayer is deemed to have acted reasonably and good faith if the taxpayer (i) requests relief under this section before the failure to make the regulatory election is discovered by the Service; (ii) failed to make the election because of intervening events beyond the taxpayer's control; (iii) failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer's experience and the complexity of the return or issue), the taxpayer was unaware of the necessity for the election; (iv) reasonably relied on the written advice of the Service; or (v) reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election. A taxpayer will not be considered to have reasonably relied on a qualified tax professional if the taxpayer knew or should have known that the professional was not (i) competent to render advice on the regulatory election, or (ii) aware of all relevant facts. A taxpayer will be deemed to have not acted reasonably and in good faith if the taxpayer (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested; (ii) was informed of the required election, but chose not to file the election; or (iii) uses hindsight in requesting relief. Section 301.9100-3(c)(1) provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-(3)(c)(ii) provides that the interests of the Government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. CONCLUSION Based on the information submitted and representations made, we conclude that Taxpayer has satisfied the requirements for granting a reasonable extension of time to elect under section 856(c) to be treated as a REIT effective Date 3. Accordingly, due to the reasonable extension of time granted to Taxpayer, Taxpayer's Form 1120-REIT filed on Date 6 for the First REIT Taxable Year is considered a timely election under section 856(c) for Taxpayer to be treated as a REIT under subchapter M of the Code effective Date 3. CAVEATS This ruling is limited to the timeliness of the filing of Taxpayer's election under section 856(c). This ruling's application is limited to the facts, representations, and Code and regulation sections cited herein. Except as provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. In particular, no opinion is expressed or implied regarding whether Taxpayer otherwise qualifies as a REIT under part II of subchapter M of chapter 1 of the Code. No opinion is expressed with regard to whether the tax liability of Taxpayer is not lower in the aggregate for all years to which the election applies than such tax liability would have been if the election had been timely made (taking into account the time value of money). Upon audit of the U.S. federal income tax returns involved, the director's office will determine such tax liability for the years involved. If the director's office determines that such tax liability is lower, that office will determine the federal income tax effect. This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent. In accordance with the power of attorney on file with this office, a copy of this letter is being sent to your authorized representatives. Sincerely, ______________________________ John W. Rogers, III Senior Technician Reviewer, Branch 2 Office of the Associate Chief Counsel (Financial Institutions & Products) cc:

Private Letter Ruling Number: 202051007 Internal Revenue Service September 18, 2020 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202051007 Release Date: 12/18/2020 Index Number: 953.06-00, 9100.22-00 [Third Party Communication: Date of Communication: Month DD, YYYY] Person To Contact: ID No. Telephone Number: Refer Reply To: CC:INTL:B02 PLR-112094-20 Date: September 18, 2020 Dear *******: This is in response to a letter received by our office on May 22, 2020, submitted on behalf of Taxpayer by its parent company, Company X, requesting an extension of time under Treas.Reg. § 301.9100-3 to make the election provided under section 953(d) for Taxpayer's taxable year ending Date 1. The ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. This office has not verified any of the material submitted in support of the request for a ruling. Verification of the factual information, representations, and other data may be required as part of the audit process. FACTS On Date 1, Taxpayer was organized under the laws of Country Y and is indirectly wholly owned by Company X. Company X is the parent company of an affiliated group which files a consolidated federal income tax return. Taxpayer will be a member of such affiliated group as a result of its election under section 953(d). Taxpayer represents that at all relevant times, it has met the requirements to be taxed as an insurance company for federal income tax purposes. Taxpayer represents that in Year 2, Tax Professional Z, Vice President of Tax for Company X, timely filed a section 953(d) election statement to be treated as a domestic corporation for federal income tax purposes as of Date 1. Tax Professional Z was a qualified in-house tax professional, on whom Company X and Taxpayer relied to ensure that the section 953(d) election statement was properly filed and that all necessary elements required to effect the election were completed. Taxpayer has submitted supporting documentation that shows Tax Professional Z timely filed a section 953(d) election statement. Taxpayer represented that, as part of Company X's consolidated group since Date 1, Company X has always treated Taxpayer as if a valid section 953(d) election were made to treat Taxpayer as a domestic corporation and member of the consolidated group. Taxpayer and Company X have filed consistently with Taxpayer having made a section 953(d) election for all affected tax years. According to IDRS records, the Internal Revenue Service has treated Taxpayer as a domestic corporation and member of Company X's consolidated group since Date 1 as well. However, in Date 3, Company X failed to locate any documentation in support of an approval from the IRS of Taxpayer's section 953(d) election. Taxpayer represents that it does not seek to alter a return position for which the accuracy-related penalty has been or could have been imposed under section 6662 at the time Taxpayer requested relief, and the new position requires or permits a regulatory election for which relief is requested. Taxpayer represents that it has not used hindsight to seek an extension of time to make the election. Taxpayer represents that granting relief will not result in a lower tax liability than it would have had if it had filed the section 953(d) timely. LAW AND ANAYLSIS Under section 953(d), certain foreign insurance companies may elect to be treated as domestic corporations for U.S. tax purposes. The substantive and procedural rules for making a section 953(d) election are contained in Notice 89-79, 1989-2 C.B. 392, and Rev.Proc. 2003-47, 2003-2 C.B. 55. Rev.Proc. 2003-47 provides that the election must be filed by the due date prescribed in section 6072(b) (including extensions) for the U.S. income tax return that is due if the election becomes effective. Rev.Proc. 2003-47, section 4.04(2). In addition, an electing corporation must use the calendar year as its annual accounting period for U.S. tax purposes, unless it joins in the filing of a consolidated return and adopts the parent corporation's tax year. Notice 89-79, section 1. Rev.Proc. 2003-47 fixes the time to make the election under section 953(d). Therefore, the Commissioner has discretionary authority under Treas.Reg. § 301.9100-1(c) to grant Taxpayer an extension of time, provided that Taxpayer satisfies the standards set forth under Treas.Reg. § 301.9100-3(a). Treas.Reg. § 301.9100-3(a) provides that requests for relief subject to this section will be granted when the taxpayer provides the evidence (including affidavits described in Treas.Reg. § 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government. Treas.Reg. § 301.9100-3(b)(1) provides that except as provided in paragraphs (b)(3)(i) through (iii) of that section, a taxpayer is deemed to have acted reasonably and in good faith if it meets one of the conditions described in Treas.Reg. § 301.9100-3(b)(1)(i) through (v): (i) Requests relief before the failure to make the regulatory election is discovered by the Internal Revenue Service; (ii) Failed to make the election because of intervening events beyond the taxpayer's control; (iii) Failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer's experience and complexity of the return or issue), the taxpayer was unaware of the necessity for the election; (iv) Reasonably relied on the written advice of the Internal Revenue Service; or (v) Reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election. Further, the Commissioner will grant a reasonable extension of time to make a regulatory election only when the interests of the Government will not be prejudiced by the granting of relief. Treas.Reg. § 301.9100-3(c)(1). The interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Treas.Reg. § 301.9100-3(c)(1)(i). Lastly, Treas.Reg. § 301.9100-1(a) cautions that granting an extension of time to make an election is not a determination that the taxpayer is otherwise eligible to make the election. CONCLUSION Based on the facts and information submitted, we conclude that Taxpayer satisfies Treas.Reg. § 301.9100-3(a). Taxpayer qualifies for an extension of time to make the election under section 953(d). Taxpayer is deemed to have acted in good faith, as defined by Treas.Reg. § 301.9100-3(b), and the grant of relief will not prejudice the interests of the Government. Accordingly, Taxpayer is granted an extension of time of 60 days from the date of this ruling letter to make the election provided by section 953(d), in accordance with the procedural rules set forth in Rev.Proc. 2003-47, to be treated as a domestic corporation for federal income tax purposes effective for Date 1. The above extension of time is conditioned on Taxpayer's tax liability (if any) being not lower, in the aggregate, for all years to which the section 953(d) election applies than it would have been if the election had been timely filed (taking into account the time value of money). No opinion is expressed as to Taxpayer's tax liability for the taxable years involved. Further, the granting of the above extension is not a determination that Taxpayer is otherwise eligible to make the section 953(d) election. Treas.Reg. § 301.9100-1(a). Also, no ruling is granted with respect to Taxpayer's entity classification for federal income tax purposes. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives. Sincerely, /s/ Kristine Crabtree Kristine A. Crabtree Senior Technical Reviewer, Branch 2 Office of Associate Chief Counsel (International) cc:

Announcement 2023-18 Internal Revenue Service 2023-30 I.R.B. 366 Transitional Guidance with Respect to Stock Repurchase Excise Tax Announcement 2023-18 This announcement confirms that no taxpayer is required to report the new excise tax imposed by section 4501 of the Internal Revenue Code (Code) on repurchases of corporate stock during a covered corporation's taxable year (stock repurchase excise tax) on any returns filed with the Internal Revenue Service (IRS), or to make any payments of such tax, before the time specified in forthcoming regulations. The stock repurchase excise tax applies to repurchases made after December 31, 2022. On January 17, 2023, the Department of the Treasury (Treasury Department) and the IRS published Notice 2023-2, 2023-3 I.R.B. 374, to provide initial guidance regarding the application of the stock repurchase excise tax. The notice announced that the Treasury Department and the IRS intend to issue forthcoming regulations addressing the application of the stock repurchase excise tax. The notice describes certain rules for determining the amount of stock repurchase excise tax owed that the Treasury Department and the IRS intend to include in the forthcoming regulations and provides that taxpayers may rely on these rules until the publication of the forthcoming regulations. Additionally, the notice describes anticipated procedures for reporting and paying any liability for the stock repurchase excise tax that the Treasury Department and the IRS intend to include in the forthcoming regulations. Specifically, the notice states that the forthcoming regulations are expected to provide that (i) the stock repurchase excise tax will be reported once per taxable year on the Form 720, Quarterly Federal Excise Tax Return, that is due for the first full quarter after the close of the taxpayer's taxable year, (ii) the deadline for payment of the stock repurchase excise tax will be the same as the filing deadline, and (iii) no extensions will be permitted for reporting or paying the stock repurchase excise tax. For those taxpayers with a taxable year ending after December 31, 2022, but prior to publication of the forthcoming regulations, such regulations are expected to provide that any liability for the stock repurchase excise tax for such taxable year will be reported on the Form 720 that is due for the first full quarter after the date of publication of the forthcoming regulations, and that the deadline for payment of the stock repurchase excise tax is the same as the filing deadline. There will be no addition to tax under section 6651(a) of the Code (or any other provision of the Code) for failure to file a return reporting the stock repurchase excise tax, or for failure to pay the stock repurchase excise tax, before the time specified in the forthcoming regulations. The Treasury Department and the IRS expect the forthcoming regulations will require covered corporations to keep complete and detailed records to establish accurately any amount of stock repurchases (including repurchases made after December 31, 2022, but before the forthcoming regulations are published) and to retain these records as long as their contents may become material. DRAFTING INFORMATION The principal author of this announcement is Samuel G. Trammell of the Office of the Associate Chief Counsel (Corporate). For further information regarding this announcement contact Mr. Trammell at (202) 317-6975 (not a toll-free number).

Internal Revenue Service - Information Release IR-2024-24 2024 tax filing season starts as IRS begins accepting tax returns today; taxpayer help expands this year with more in-person hours, better service, improved tools January 29, 2024 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 2024 tax filing season starts as IRS begins accepting tax returns today; taxpayer help expands this year with more in-person hours, better service, improved tools IR-2024-24, Jan. 29, 2024 WASHINGTON -- The Internal Revenue Service successfully opened the 2024 tax season today by accepting and processing federal individual tax returns as the agency continues focusing on expanding options to help taxpayers. The IRS expects more than 146 million individual tax returns for 2023 to be filed this filing season, which has a deadline of April 15, 2024. With the start of the 2024 filing season, the IRS will be extending hours of service in nearly 250 Taxpayer Assistance Centers (TACs) across the country, providing additional help to people. The IRS will also be working to continue improvements on its phone service as well as expanding online tools. The Where's My Refund? tool on IRS.gov will add more details for taxpayers checking on the status of their tax refund. Building off the success of the 2023 tax season that saw significant improvements following passage of the Inflation Reduction Act, the 2024 filing season will continue reflecting the focus on improving services to taxpayers. "For months, IRS employees have been working hard to be ready to help taxpayers and make tax season as easy and smooth as possible," said IRS Commissioner Danny Werfel. "We've taken important steps to add more improvements to help taxpayers, ranging from expanded in-person hours, better online options and improved phone service." The IRS reminds taxpayers the deadline to file a 2023 tax return and pay any tax owed is Monday, April 15, 2024. Taxpayers living in Maine or Massachusetts have until April 17, 2024, due to the Patriot's Day and Emancipation Day holidays. If a taxpayer resides in a federally declared disaster area, they may have additional time to file. Nearly 250 Taxpayer Assistance Centers expand hours; Where's My Refund? updates Taxpayer Assistance Center hours expanded. As part of expanded taxpayer service efforts, nearly 250 IRS TACs around the country will extend their weekly office hours to give taxpayers additional time to get the help they need during the filing season. The extended office hours will run through Tuesday, April 16. To see if a nearby TAC is offering extended hours, taxpayers can visit Contact your local office to access the IRS.gov TAC Locator tool. The site lists services offered, including extended hours and directions to each office. Taxpayers can call 844-545-5640 to make an appointment or walk in to get help at designated TACs offering the additional time. Normally, TACs are open from 8:30 a.m. to 4:30 p.m., Monday through Friday, and operate by appointment. Special Saturday hours available. In addition to extended hours during the work week, the IRS will again offer special Saturday hours at many TACs across the country February through May. On these special Saturdays, taxpayers can walk in to receive all services routinely provided at participating offices, except for cash payments. These extra hours are in addition to the IRS opening or reopening 50 Taxpayer Assistance Centers that have occurred since Inflation Reduction Act funding became available in 2022. "Where's My Refund?" expanded. Taxpayers will also see important new updates to the "Where's My Refund?" tool on IRS.gov. These ongoing updates will allow taxpayers to see more detailed refund status messages in plain language, and they will also ensure Where's My Refund? works seamlessly on mobile devices. Taxpayers often see a generic message stating that their returns are still being processed and to check back later. With the new and improved Where's My Refund?, taxpayers will see clearer and more detailed updates, including whether the IRS needs them to respond to a letter requesting additional information. The new updates will reduce the need for taxpayers to call the IRS for answers to these basic questions. The IRS plans to continue expanding the information available on Where's My Refund? later this year. Taxpayers will also see other improvements this tax season, including: - Phone service. Increased help available on the toll-free line and an expanded customer call back feature designed to significantly reduce wait times. - Paperless processing. Enhanced paperless processing that will enable taxpayers to submit all correspondence, non-tax forms, and responses to notices digitally and will be able to e-File nine additional tax forms with 11 more planned. Achieving this milestone will enable up to 125 million paper documents to be submitted digitally per year. - Online Account. An enhanced IRS Individual Online Account that includes chat, the option to schedule and cancel future payments, revise payment plans and validate and save bank accounts. Individuals with a Social Security number or an Individual Taxpayer Identification number can log-in or sign-up for an IRS Individual Online Account to securely access information about their federal tax account, view balance and payment options, view and approve authorizations from their tax professional, view digital copies of select IRS notices and get information on their most recently filed return that includes their Adjusted Gross Income. Get free help preparing and filing taxes electronically Taxpayers can visit IRS.gov 24 hours a day to get answers to tax questions. IRS.gov is the quickest and easiest option to get help. The Interactive Tax Assistant (ITA) is a tool that provides answers to several tax law questions specific to individual circumstances. Based on input, it can determine a taxpayer's filing status, if a person should file a tax return, if someone can be claimed as a dependent, if a type of income is taxable, if a filer is eligible to claim a credit or if an expense can be deducted. The IRS encourages people to file their tax returns electronically and choose direct deposit for faster refunds. Filing electronically reduces tax return errors as the tax software does the calculations, flags common errors and prompts taxpayers for missing information. The IRS offers free online and in-person tax preparation options for qualifying taxpayers through the IRS Free File program and the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs. Taxpayers with income of $79,000 or less last year - and that's most taxpayers - can use IRS Free File Guided Tax Software now through Oct 15. IRS Free File Fillable forms, a part of this program, is available at no cost to any income level and provides electronic forms that people fill out and e-file themselves, also at no cost. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $64,000 or less, persons with disabilities and taxpayers whose preferred language is not English. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals. In addition to VITA, the Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 and older, specializing in questions about pensions and retirement-related issues unique to seniors. MilTax, a Department of Defense program, generally offers free return preparation and electronic filing software for federal income tax returns and up to three state income tax returns for all military members, and some veterans, with no income limit. Another option is the Direct File pilot program. This program gives eligible taxpayers a new choice to file their 2023 federal tax returns online, for free, directly with the IRS. It will be rolled out in phases and is expected to be widely available in mid-March. Find more about Direct File pilot eligibility, scope and the 12 participating states on Direct File. Sign and validate electronically filed tax returns The IRS reminds taxpayers that they should keep copies of their prior-year tax returns for at least three years. Taxpayers who are using the same tax software they used last year will not need to enter prior-year information to electronically sign their 2023 tax return. Taxpayers who are using a tax software product for the first time will need their adjusted gross income from their 2022 tax return to file electronically. Review these steps to validate and sign an electronically filed return. Use IRS.gov to find a reputable tax professional The IRS also reminds taxpayers that a trusted tax professional can prepare their tax return and provide helpful information and advice. People can use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to find a preparer who is skilled in tax preparation and accurately files income tax returns. Most tax return preparers provide outstanding and professional tax service. However, choosing the wrong tax return preparer hurts taxpayers financially every year. Be sure to check tips for choosing a tax preparer and how to avoid unethical "ghost" return preparers. Questions about refunds? EITC, ACTC available for many by Feb. 27 Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer. The easiest way to check a refund's status is by using Where's My Refund? on IRS.gov or the IRS2Go app. Most Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) related refunds should be available in bank accounts or on debit cards by Feb. 27 if taxpayers chose direct deposit and there are no other issues with their tax return. Taxpayers can check Where's My Refund? for their personalized refund date. Where's My Refund? will be updated with projected deposit dates for most early EITC and ACTC refund filers by Feb. 17. Know the signs of identity theft Tax-related identity theft occurs when someone uses stolen personal information, including Social Security numbers, to file a tax return claiming a fraudulent refund. If a person suspects they are a victim of identity theft, they should continue to pay their taxes and file their tax return, even if they must file a paper return. Visit Identity Theft Central to find out more. Thousands of people have lost millions of dollars and their personal information to tax scams. Scammers use the regular mail, telephone and email to set up individuals, businesses, payroll and tax professionals. Check out the latest consumer alerts and read more about the most recent tax related scams identified by the IRS.

Private Letter Ruling Number: 202107004 Internal Revenue Service November 17, 2020 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202107004 Release Date: 2/19/2021 Index Number: 1092.05-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:FIP:2 PLR-112073-20 Date: November 17, 2020 Dear *******: This is in reply to a request for a private letter ruling, dated May 19, 2020, and supplemental correspondence, seeking an extension of time for Taxpayer to make a mixed straddle account election under section 1.1092(b)-4T(f)(1) of the Temporary Income Tax Regulations ("Election") to establish one or more mixed straddle accounts for its taxable year ending Date 1. FACTS Taxpayer is treated as a partnership for federal income tax purposes and is engaged in the business of trading in securities. Taxpayer represents that, through entities disregarded for federal income tax purposes, it has been entering into straddles and making timely Elections since Year 1. However, Taxpayer failed to make the Election for Year 2 by the due date of Date 2. Taxpayer has an internal tax department that provides tax and related services to Taxpayer including the preparation and filing of federal and state tax returns for Taxpayer and affiliated entities. Taxpayer's internal tax department uses Software to track the various federal, state, local, and foreign tax filing obligations for Taxpayer and its affiliates. Taxpayer represents that it intended to make the Election to establish one or more mixed straddle accounts for Year 2 by Date 2; however, its business has been substantially disrupted by the global COVID-19 pandemic. Three days prior to Date 2, Taxpayer implemented an immediately effective, mandatory work from home policy for all non-essential employees. Virtually all the members of the tax department immediately began working from home, which significantly disrupted the performance of their professional duties. In addition to the disruptions caused by the COVID-19 pandemic, recent statutory changes also contributed to Taxpayer's failure to timely file the Election. Section 2006 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Pub. L. No. 114-41, 129 Stat. 443, 457 (2015), ("Surface Act") changed the due date for filing a partnership return from the fifteenth day of the fourth month of the taxable year to the fifteenth day of the third month of the taxable year. Following the enactment of the Surface Act, Software used by Taxpayer's tax department was updated to reflect the new filing date for Form 1065 ( U.S. Return of Partnership Income ), but the corresponding due date for filing Form 6781 ( Gains and Losses From Section 1256 Contracts and Straddles ) was inadvertently not updated. For the taxable years occurring between the enactment of the Surface Act and Year 2, Taxpayer filed the Elections before the due date of its federal income tax returns, and thus did not rely on the due date that was recorded in Software. However, because of the business disruptions occurring in Year 2, the Election was not filed before the due date of Taxpayer's federal income tax return. This in turn resulted in Taxpayer missing the filing deadline for the Election because Software had not been properly updated to reflect the new, correct due date for the Election. On Date 3, Taxpayer discovered that no Election had been filed for Year 2. Following this discovery, Taxpayer's internal tax department corrected the inaccurate due date information for making the Election in Software to prevent a similar mistake from being made in the future. LAW AND ANALYSIS Section 1.1092(b)-4T(a) generally permits a taxpayer to elect (in accordance with paragraph (f) of section 1.1092(b)-4T) to establish one or more "mixed straddle accounts." Section 1.1092(b)-4T(b) defines a mixed straddle account to mean an account for determining gains and losses from all positions held as capital assets in a designated class of activities by the taxpayer at the time the taxpayer elects to establish a mixed straddle account. Section 1.1092(b)-4T(f)(1) generally provides that, except as otherwise provided, the election to establish one or more mixed straddle accounts for a taxable year must be made by the due date (without regard to any extensions) of the taxpayer's income tax return for the immediately preceding taxable year (or part thereof). Section 1.1092(b)-4T(f)(1) further provides that if a taxpayer begins trading or investing in positions in a new class of activities during a taxable year, the election with respect to the new class of activities must be made by the taxpayer by the later of the due date of the taxpayer's income tax return for the immediately preceding taxable year (without regard to any extensions), or 60 days after the first mixed straddle in the new class of activities is entered into. Section 1.1092(b)-4T(f)(1) also provides that if an election is made after the time specified above, the election will be permitted only if the Commissioner concludes that the taxpayer had reasonable cause for failing to make a timely election. Because section 1.1092(b)-4T(f)(1) provides specific guidance about making a late mixed straddle account election, the rules generally applicable to late elections described in section 301.9100-3 do not apply to this late mixed straddle account election. Section 1.1092(b)-4T(f)(2) sets forth the manner for making the election, including that the election is to be made on Form 6781. CONCLUSION Based on the facts and representations submitted, we conclude that Taxpayer has shown reasonable cause for failing to timely make the Election. Therefore, we grant Taxpayer's request for an extension of time to make the Election for one or more mixed straddle accounts for Year 2. This extension will expire 30 days from the date of this letter. The Election must be made in the manner prescribed in section 1.1092(b)-4T(f)(2) and filed with the Director having audit jurisdiction over Taxpayer's federal income tax return. Except as specifically ruled upon above, no opinion is expressed as to the tax treatment of any transactions under the provisions of any other sections of the Internal Revenue Code ("Code") or Income Tax Regulations which may be applicable thereto, or the tax treatment of any conditions existing at the time of or effects resulting from the transaction. Specifically, no opinion is expressed concerning whether the positions designated by Taxpayer as the class of activities is a permissible designation under section 1.1092(b)-4T(b)(2). This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, copies of this letter are being sent to your authorized representatives. Sincerely, Andrea M. Hoffenson Andrea M. Hoffenson Chief, Branch 2 Office of the Associate Chief Counsel (Financial Institutions and Products)

Private Letter Ruling Number: 202145023 Internal Revenue Service August 10, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202145023 Release Date: 11/12/2021 Index Number: 9100.00-00, 9100.04-00, 9100.31-00, 168.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:B04 PLR-109132-21 Date: August 10, 2021 Dear *******: This letter responds to a request, dated April 15, 2021, for a private letter ruling granting an extension of time to make an election under § 168(h)(6)(F)(ii) of the Internal Revenue Code (Code) to Taxpayer, a tax-exempt controlled entity under § 168(h)(6)(F)(iii). FACTS Based on the information submitted and representations made, the relevant facts are as follows: Taxpayer is organized under the laws of State and is a limited liability company that elected to be treated as a corporation for Federal income tax purposes as of the date of formation. Taxpayer uses the accrual method of accounting and the calendar year as its taxable year. Taxpayer is wholly owned by Exempt Organization, a tax-exempt organization described in § 501(c)(3). Because Exempt Organization owns more than 50 percent in value of the stock of Taxpayer, Taxpayer is a "tax-exempt controlled entity" within the meaning of § 168(h)(6)(F)(iii). Taxpayer owns X percentage of Partnership 1, a limited liability company organized under the laws of State and treated as a domestic partnership. Partnership 1 owns Y percentage of Partnership 2, which is a limited liability company organized under the laws of State treated as a domestic partnership. As a result, Taxpayer is an indirect owner of Partnership 2. Partnership 2 was formed to acquire, rehabilitate, and lease a vacant commercial property. The property was purchased in Year 1 and placed in service in Year 2. Taxpayer filed an untimely Year 1 Federal income tax return, as Taxpayer inadvertently failed to obtain an extension of time to file its Year 1 federal income tax return. No § 168(h)(f)(F)(ii) election was filed with the Year 1 federal income tax return. The Operating Agreement contemplates that Taxpayer would make the § 168(h)(f)(F)(ii) election. Affidavits from legal counsel for Taxpayer provide that Taxpayer was advised to make the § 168(h)(f)(F)(ii) election and that Taxpayer intended to follow this advice. A miscommunication between Taxpayer and Taxpayer's professional advisors resulted in the § 168(h)(f)(F)(ii) election being inadvertently omitted from the Taxpayer's Year 1 Federal income tax return. Taxpayer should have made its election under § 168(h)(6)(F)(ii) on a timely-filed return for Year 1, but due to a lack of communication, Taxpayer failed to obtain an extension for its Taxable Year 1 Federal income tax return and failed to timely make the election. However, from the materials submitted, it is clear that Taxpayer at all times intended to make the election under § 168(h)(6)(F)(ii) and filed all applicable returns as if the election had been timely made. Upon discovering its failure to make the election under § 168(h)(6)(F)(ii), Taxpayer promptly filed a request for relief under § 9100 to obtain an extension of time in which to make the election. APPLICABLE LAW Section 167(a) of the Internal Revenue Code provides generally for a depreciation deduction for property used in a trade or business. Under § 168(g), the alternative depreciation system must be used for any tax-exempt use property as defined in § 168(h). Section 168(h)(6)(A) provides that, for purposes of § 168(h), if any property which (but for this subparagraph) is not tax-exempt use property is owned by a partnership having both a tax-exempt entity and a nontax-exempt entity as partners and any allocation to the tax-exempt entity is not a qualified allocation, then an amount equal to such tax-exempt entity's proportionate share of such property is treated as tax-exempt use property. Section 168(h)(6)(F)(i) provides generally that any tax-exempt controlled entity is treated as a tax-exempt entity for purposes of § 168(h)(6). Under § 168(h)(6)(F)(iii)(I), a corporation (without regard to that subparagraph and § 168(h)(2)(E)) constitutes a "tax-exempt controlled entity" if 50 percent or more (in value) of the corporation's stock is held by one or more tax-exempt entities (other than a foreign person or entity). In the case of tiered partnerships and other entities, § 168(h)(6)(E) applies similar rules. Under § 168(h)(6)(F)(ii), a tax-exempt controlled entity can elect not to be treated as a tax-exempt entity. Once made, the election is irrevocable and will bind all tax-exempt entities holding an interest in the tax-exempt controlled entity. Under § 301.9100-7T(a)(2)(i) of the Procedure and Administration Regulations, a § 168(h)(6)(F)(ii) election must be made by the due date of the tax return for the first taxable year for which the election is to be effective. Section 301.9100-7T(a)(3)(i) provides that the § 168(h)(6)(F)(ii) election must be made by attaching a statement to the tax return for the taxable year for which the election is to be effective. Per § 301.9100-7T(a)(3)(ii), a copy of the election must also be attached to the income tax returns of the tax-exempt shareholders of the tax-exempt controlled entity. Section 301.9100-1(c) provides that the Commissioner of Internal Revenue has the discretion to grant a reasonable extension of time to make a regulatory election. Per § 301.9100-1(b), the term "regulatory election" includes any election the due date for which is prescribed by a regulation. Because the due date of the § 168(h)(6)(F)(ii) election is prescribed in § 301.9100-7T, the § 168(h)(6)(F)(ii) election is a regulatory election. The Service uses standards set forth in §§ 301.9100-1 through 301.9100-3 to determine whether to grant an extension of time to make a regulatory election. Under § 301.9100-3(a), the Service will grant requests for extensions of time for regulatory elections (other than automatic extensions of time covered in § 301.9100-2) when the taxpayer provides evidence (including affidavits) to establish that the taxpayer acted reasonably and in good faith, and granting relief will not prejudice the interests of the Government. Section 301.9100-3(b)(1) provides that a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer: (i) requests relief before the failure to make the regulatory election is discovered by the Service; (ii) failed to make the election because of intervening events beyond the taxpayer's control; (iii) failed to make the election because, after exercising due diligence, the taxpayer was unaware of the necessity for the election; (iv) reasonably relied on the written advice of the Service; or (v) reasonably relied on a qualified tax professional, and the tax professional failed to make, or advise the taxpayer to make, the election. Per § 301.9100-3(b)(3), a taxpayer is considered to have not acted reasonably and in good faith if the taxpayer: (i) seeks to alter a return position for which an accuracy-related penalty could be imposed under § 6662 at the time the taxpayer requests relief, and the new position requires a regulatory election for which relief is requested; (ii) was fully informed of the required election and related tax consequences, but chose not to file the election; or (iii) uses hindsight in requesting relief. If specific facts have changed since the original deadline that make the election advantageous to a taxpayer, the Service will not ordinarily grant relief. Section 301.9100-3(c)(1) provides that the Service will grant a reasonable extension of time only when doing so will not prejudice the interests of the Government. Section 301.9100-3(c)(1)(i) states that the interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made. Under § 301.9100-3(c)(1)(ii), the interests of the Government may be prejudiced if the taxable year in which the regulatory election should have been made, or any taxable years affected by the election had it been timely made, are closed by the period of limitations on assessment under § 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. ANALYSIS The representations made and information provided by Taxpayer establishes that Taxpayer acted reasonably and in good faith. Taxpayer has shown that it intended to make the § 168(h)(6)(F)(ii) election and would have but for the inadvertent mistake by its tax professional on whom Taxpayer reasonably relied. In addition, Taxpayer has filed its returns and calculated its tax due as if the election had been timely made. Taxpayer requested this relief before failure to make the election was discovered by the Service. Taxpayer does not seek to alter a return position for which an accuracy-related penalty could be imposed under § 6662 at the time Taxpayer's request for relief. Taxpayer did not affirmatively choose not to make the § 168(h)(6)(F)(ii) election and is not using hindsight in requesting relief. In addition, an extension of time granted to Taxpayer will not prejudice the interests of the Government. Based on representations made by the Taxpayer, granting the request for relief will not provide Taxpayer with a lower tax liability in the aggregate for all taxable years to which the election applies than Taxpayer would have had if the election was timely made. As such, granting an extension to make the § 168(h)(6)(F)(ii) election does not prejudice the interests of the Government. CONCLUSION Based solely on the facts as represented and the applicable law, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been met and Taxpayer's § 168(h)(6)(F)(ii) election will be deemed timely as provided below. Taxpayer is granted an extension of 45 days from the date of this ruling to file the § 168(h)(6)(F)(ii) election statement with the appropriate service center containing the information required in § 301.9100-7T(a)(3). Taxpayer must attach a copy of this ruling letter to the election statement. In addition, a copy of this ruling letter should be attached to the next Federal tax return filed by Taxpayer. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. The ruling contained in this letter is based upon information and representations submitted by Taxpayer, accompanied by a penalty of perjury statement executed by an appropriate party, and on other affidavits. This office has not verified any of the material submitted in support of the request for a ruling. However, as part of an examination process, the Service may verify the information, representations, and other data submitted. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, this ruling grants an extension of time to make a § 168(h)(6)(F)(ii) election; however, this ruling does not address whether taxpayer is eligible to make the election. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent. Pursuant to the Form 2848, Power of Attorney and Declaration of Representation, on file, we are sending a copy of this letter to Taxpayer's authorized representative. This letter is being issued electronically in accordance with Rev.Proc. 2020-28, 2020-21 I.R.B. 859. A paper copy will not be mailed to Taxpayer. Sincerely, Ronald J. Goldstein Senior Technician Reviewer, Branch 4 (Income Tax & Accounting)

Internal Revenue Service - Fact Sheet FS-2022-1 IRS updates 2020 unemployment compensation exclusion FAQs January 2022 Internal Revenue Service Media Relations Office Washington, D.C. Media Contact: 202.317.4000 Public Contact: 800.829.1040 www.irs.gov/newsroom IRS updates 2020 unemployment compensation exclusion FAQs FS-2022-01, January 2022 This Fact Sheet updates the 2020 unemployment compensation exclusion frequently-asked-questions (FAQs). These updates are: Question 10, Topic G: Receiving a Refund, Letter, or Notice (added January 7, 2022) These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer's specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer's case, the law will control the taxpayer's tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so. More information about reliance is available. These FAQs were announced in IR-2022-05. 2020 Unemployment Compensation Exclusion FAQs Background The American Rescue Plan Act of 2021 provides relief to individuals who received unemployment compensation in 2020. It excludes up to $10,200 of their unemployment compensation from their gross income if their modified adjusted gross income (AGI) is less than $150,000. In the case of married individuals filing a joint tax return, this exclusion of up to $10,200 applies to each spouse. For additional information about this exclusion, refer to the frequently asked questions on this page. Please do not call the IRS. IRS phone assistors don't have additional information beyond what's available on IRS.gov. - Topic A: Eligibility - Topic B: Calculating the Exclusion - Topic C: Claiming the Exclusion (Before Filing) - Topic D: Amended Return (Form 1040-X) - Topic E: Impact to Income, Credits, and Deductions - Topic F: Victims of Unemployment Fraud and Identity Theft - Topic G: Receiving a Refund, Letter, or Notice (updated) - Topic H: Finding the Unemployment Compensation Amount - Topic I: Post Unemployment Compensation Exclusion Adjustment - Topic J: Economic Impact Payment 2020 Unemployment Compensation Exclusion FAQs -- Topic A: Eligibility Q1. Am I eligible to exclude my unemployment compensation? (added April 29, 2021) A1. It depends. You're eligible to exclude the unemployment compensation if it was received in 2020 and your modified adjusted gross income (AGI) is less than $150,000. The modified AGI for purposes of qualifying for this exclusion is your adjusted gross income for 2020 minus the total unemployment compensation you received. This threshold stays the same for all filing statuses, regardless of whether you're married and file a joint tax return (it doesn't double to $300,000). To determine if you're under the $150,000 threshold and qualify for the exclusion, subtract all of the unemployment compensation reported on Schedule 1, Line 7, from the amount of your AGI reported on Line 11 of Form 1040, 1040-SR, or 1040-NR. If you're eligible, you should exclude up to $10,200 of your unemployment compensation from income on your 2020 Form 1040, 1040-SR, or 1040-NR. This means up to $10,200 of unemployment compensation is not taxable on your 2020 tax return. Unemployment compensation amounts over $10,200 are still taxable. If you're married, the exclusion can apply to you and a separate exclusion can apply to your spouse. If you and your spouse file a joint return and your joint modified AGI is less than $150,000, you should exclude up to $10,200 of your unemployment compensation and up to $10,200 of your spouse's unemployment compensation. If you file Form 1040-NR or file Form 1040 or 1040-SR separately from your spouse, you generally don't report your spouse's unemployment compensation on your tax return. You can't exclude any of your spouse's unemployment compensation that's not reported on your tax return, even if you claim your spouse as a dependent. You're eligible to exclude only up to $10,200 of the unemployment compensation you received in 2020. If your modified AGI is $150,000 or more, you can't exclude any unemployment compensation from your income. This applies to all filing statuses. Example: You are single and your AGI amount on Line 11 of your Form 1040 is $170,000. The amount on Schedule 1, Line 7, is $25,000. Subtract the $25,000 amount from $170,000, the result is $145,000. Your modified AGI is $145,000 for the purpose of determining if your modified AGI is less than $150,000 to qualify for this exclusion. For further assistance in calculating your modified AGI, use the Unemployment Compensation Exclusion Worksheet in the Instructions for Schedule 1 in the 2020 Form 1040 and 1040-SR instructions. Q2. If I have an IRS Individual Taxpayer Identification Number (ITIN) instead of a Social Security Number (SSN), am I eligible for the exclusion? (added April 29, 2021) A2: Yes. Individuals with a valid ITIN are eligible for the exclusion, the same as those with a valid SSN. Their modified AGI must be less than $150,000 regardless of their filing status. Q3. I'm a non-resident alien who files Form 1040-NR. Am I eligible for the exclusion? (added April 29, 2021) A3. Yes. You should exclude up to $10,200 of your unemployment compensation in 2020 if your modified AGI is less than $150,000. If you're married, your spouse generally reports their unemployment compensation on their Form 1040-NR and excludes up to $10,200 of unemployment compensation paid to your spouse on that return if their modified AGI is less than $150,000. You can't exclude any of your spouse's unemployment compensation that's not reported on your tax return, even if you claim your spouse as a dependent. Q4. I'm married and live in a community property state. Am I eligible for the exclusion? (updated July 7, 2021) A4. Yes. Because you live in a community property state, if you file a Married Filing Separately return, you report half of your unemployment compensation and half of your spouse's unemployment compensation on your tax return and your spouse reports the other half of your unemployment compensation and half of his or her unemployment compensation on his or her tax return. You should exclude up to $10,200 on your tax return if your modified AGI is less than $150,000. Your spouse should exclude up to another $10,200 on his or her tax return if your spouse's modified AGI is less than $150,000. Neither of you should exclude more than the amount of unemployment compensation you report on your Schedule 1, Line 7. If you file a Married Filing Jointly return, when completing the Unemployment Compensation Exclusion Worksheet -Schedule 1, Line 8, you should report half of your unemployment compensation and half of your spouse's unemployment compensation on line 8 of the worksheet and your spouse reports the other half of your unemployment compensation and half of his or her unemployment compensation on line 9 of the worksheet. Do not enter more than $10,200 on either line 8 or line 9 of the worksheet. If your joint modified AGI is less than $150,000, you and your spouse can exclude up to $10,200 each. Do not exclude more than the amount of unemployment compensation you report on your Schedule 1, Line 7. If you already filed your return and entered a smaller exclusion amount on Schedule 1, line 8 than you are entitled to, see Do I need to file an amended return if I live in a community property state and did not enter the correct exclusion amount on Schedule 1, line 8 ? Q5. Am I eligible for the exclusion if I live in American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands? (added June 25, 2021) A5. Residents of U.S. territories (American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands) who receive unemployment compensation payments that are otherwise subject to U.S. income tax, may be eligible to exclude up to $10,200 per person of unemployment compensation from U.S. income tax for 2020. Eligible residents must have modified adjusted income of less than $150,000 to exclude up to $10,200 of unemployment compensation from their 2020 federal income tax return. In the case of taxpayers that are married filing jointly, the maximum exclusion would be $10,200 for each spouse for a maximum of $20,400. You may not exclude more than the amount of unemployment compensation you (and your spouse if filing jointly) actually received. U.S. territory residents with questions relating to the taxation of COVID-related unemployment compensation by the territory should contact their territory tax department. More information is also available in News Release IR-2021-81, IRS reminds U.S. territory residents about U.S. income tax rules relating to pandemic unemployment compensation. 2020 Unemployment Compensation Exclusion FAQs -- Topic B: Calculating the Exclusion Q1. How much unemployment compensation do I exclude from my gross income? (added April 29, 2021) A1. If eligible, exclude up to $10,200 of unemployment compensation paid to you in 2020 (and up to another $10,200 of unemployment compensation paid to your spouse if you're married and file a joint tax return). You don't have to pay tax on unemployment compensation that is excluded from your gross income. Example 1: You're single and your modified AGI is less than $150,000. If you received a total of $3,500 in unemployment compensation in 2020, exclude $3,500 in unemployment compensation from your gross income so that none of your unemployment compensation is taxable. If you received $15,000 in unemployment compensation, exclude $10,200 from your gross income so that only $4,800 (that is, $15,000 minus $10,200) is taxable. Example 2: You're married and file a joint return with your spouse. Your joint modified AGI is less than $150,000. If you received $15,000 in unemployment compensation and your spouse received $10,000 in unemployment compensation, exclude $10,200 of your unemployment compensation and all $10,000 of your spouse's unemployment compensation so that only $4,800 of your unemployment compensation is taxable. Use the Unemployment Compensation Exclusion Worksheet in the Instructions for Schedule 1 in the 2020 Form 1040 and 1040-SR instructions to figure the amount to exclude. If you're married and file Form 1040-NR or file Form 1040 or 1040-SR separately from your spouse, you generally don't report your spouse's unemployment compensation on your tax return. You can't exclude any of your spouse's unemployment compensation that's not reported on your tax return, even if you claim your spouse as a dependent. You're eligible only for an exclusion up to $10,200. Q2. What do you mean by "modified adjusted gross income (MAGI)"? (added June 25, 2021) A2. For purposes of this exclusion, the MAGI is your adjusted gross income reported on Line 11 of Form 1040, 1040-SR or 1040-NR minus the full amount of unemployment compensation reported on Schedule 1, Line 7. You can also use the Unemployment Compensation Exclusion Worksheet in the Form 1040/1040-SR instructions for Schedule 1 to figure your MAGI. Q3. What if my unemployment compensation is more than $10,200? (added April 29, 2021) A3. If eligible, you should exclude only the lesser of your unemployment compensation amount reported on Schedule 1, Line 7, or $10,200 from your gross income. Amounts over $10,200 are still taxable. If your spouse is eligible and you file a joint return with your spouse, you should also exclude the lesser of your spouse's unemployment compensation amount reported on Schedule 1, line 7, or $10,200 from your gross income. The $10,200 limitation applies to each spouse individually, not jointly. 2020 Unemployment Compensation Exclusion FAQs -- Topic C: Claiming the Exclusion (Before Filing) Q1. How do I report the exclusion if I haven't filed my 2020 tax return? (added April 29, 2021) A1. If you haven't filed your 2020 tax return and are eligible for an exclusion, report the exclusion separately (on Schedule 1, Line 8) from the full amount of your unemployment compensation that you report on Schedule 1, Line 7. - The full amount of your unemployment compensation (and your spouse's unemployment compensation if filing a joint return with your spouse) continues to be reported on Schedule 1, Line 7. - The amount of the unemployment compensation exclusion is reported as a negative amount (in parentheses) on Schedule 1, Line 8. - Enter " UCE " on the dotted line to the left of your Schedule 1, Line 8, entry and show the amount of unemployment compensation exclusion in parentheses on the dotted line. Use caution when calculating certain credits and deductions that use your AGI in the calculation. Your unemployment compensation exclusion amount should not be excluded from your AGI when doing many of those calculations. See the updated instructions and the Unemployment Compensation Exclusion Worksheet in the Instructions for Schedule 1 in the 2020 Form 1040 and 1040-SR instructions to figure your exclusion and the amount to enter on Schedule 1, Line 8. Alternatively, filing electronically is the easiest way to figure the correct amount as tax return preparation software and tax professionals will ask you to provide the needed information. 2020 Unemployment Compensation Exclusion FAQs -- Topic D: Amended Return (Form 1040-X) Q1. What if I already filed my 2020 tax return? Do I need to file a Form 1040-X to amend my tax return to report the exclusion? (updated July 8, 2021) A1. Unless you're entitled to a new credit or additional deductions as described in Topic E, there's no need to file an amended return (Form 1040-X) to report the amount of unemployment compensation to exclude. The IRS will perform the corrections starting in late May and continue throughout the summer and into the fall. If you already filed your tax return, we'll determine the correct taxable amount of unemployment compensation and tax. We'll also adjust any non-refundable or refundable credits that you reported on your return that are impacted by the exclusion. In addition, if you did not claim the Recovery Rebate Credit, Earned Income Credit with no qualifying dependents or the Advance Premium Tax Credit on your tax return, but are now eligible when the unemployment exclusion is applied, you do not need to file an amended return. The IRS will calculate the credit for you and include it in any overpayment. Any resulting overpayment of tax will be either refunded by direct deposit or by paper check or will be applied to your other outstanding tax liabilities. A notice confirming the change will be sent to you when your return is corrected. Keep that notice for your records in case your tax return preparer or state department of taxation requests a copy. Q2. What if I know I'll be entitled to a credit or deduction that wasn't claimed on my tax return? Should I file an amended return? (updated November 12, 2021) A2. It depends. If you are eligible to exclude up to $10,200 in unemployment compensation and the exclusion makes you eligible for a credit or deduction not claimed on your original return, you should file an amended return to claim the new credit or deduction. You can file this amended return electronically if the original return was filed electronically. See Form 1040-X, Amended U.S. Individual Income Tax Return for additional information. Exceptions: - If you are eligible to exclude up to $10,200 in unemployment compensation, you do not need to file an amended return to claim the Recovery Rebate Credit, Earned Income Tax Credit with no qualifying children or the Premium Tax Credit, even if it wasn't claimed on your return. If you are now eligible for these credits when the unemployment exclusion is applied, the IRS will calculate the credit for you and include it in any overpayment. - You should not file an amended return to claim the Additional Child Tax Credit (ACTC) or Earned Income Tax Credit (EITC) if you reply to a CP08 or CP09 notice stating you may be eligible for one of these credits and you are not requesting any other changes be made to your 2020 tax return. If you received one of these notices, see FAQ Why did I receive an IRS CP08 notice saying I may be eligible for the Additional Child Tax Credit? and FAQ Why did I receive an IRS CP09 notice saying I may be eligible for the Earned Income Credit? The IRS will adjust the credits already claimed on your return that are impacted by the exclusion. Example: You didn't claim the EITC or ACTC for your qualifying children on your 2020 tax return because your AGI was too high. Because the unemployment compensation exclusion reduced your AGI, you're now eligible for an EITC or ACTC, but did not receive the credit after your unemployment compensation exclusion was applied. In this case, you need to either (1) reply to a CP08 or a CP09 notice if you received it or (2) file an amended return including a Schedule EIC to claim the EITC, Schedule 8812 to claim ACTC, and any other credits (other than the Recovery Rebate Credit, the Earned Income Tax Credit with no qualifying children or the Premium Tax Credit) not claimed on your original return. If, instead, you claimed $50 in EITC on your 2020 tax return, don't file a Form 1040-X solely to change the EITC amount. The amount of this and other credits that you claimed on the original return will automatically be adjusted by the IRS when we apply the exclusion. Q3. I already filed an amended return (Form 1040-X) to claim the unemployment compensation exclusion, will this cause any issues or delay my refund? (added April 29, 2021) A3. No. The IRS can identify a duplicate claim or mixed adjustment scenarios. If the Form 1040-X has changes other than unemployment compensation exclusion, only the part of the claim that was not adjusted when we applied the exclusion will be considered after we apply the exclusion. Filing a Form 1040-X won't increase the time it takes the IRS to make the automatic correction or reduce the time it takes to process your automatic correction. Q4. Do I need to file an amended return if I live in a community property state and did not enter the correct exclusion amount on Schedule 1, line 8? (added July 7, 2021) A4. If you entered an exclusion amount less than what it should have been based on FAQ I'm married and live in a community property state. Am I eligible for the exclusion?, you do not need to file an amended return. The IRS will recalculate your exclusion amount following this guidance and adjust your return for the difference. These corrections are currently planned for later this summer. You will receive a notice regarding the correction within 30 days of your account being adjusted. 2020 Unemployment Compensation Exclusion FAQs -- Topic E: Impact to Income, Credits, and Deductions Q1. Will this exclusion affect how I calculate certain income and/or credits on my 2020 tax return? (added April 29, 2021) A1. Yes. When figuring modified adjusted gross income for any of the following deductions or exclusions, include the full amount of your unemployment compensation reported on Schedule 1, Line 7, unreduced by any exclusion amount: - Taxable Social Security Benefits (Social Security Benefits Worksheet in the Instructions for Form 1040 and 1040-SR) - IRA Deduction (IRA Deduction Worksheet in the Instructions for Schedule 1 in the Instructions for Form 1040 and 1040-SR) - Student Loan Interest Deduction (Student Loan Interest Deduction Worksheet in the Instructions for Schedule 1 in the Instructions for Form 1040 and 1040-SR) - The exclusion of Interest from Series EE and I U.S. Savings Bonds issued after 1989 (Form 8815) - The exclusion of Employer-Provided Adoption Benefits (Form 8839) - Tuition and Fees Deduction (Form 8917) - The deduction of up to $25,000 for active participation in a Passive Rental Real Estate Activity (Form 8582) See the specific form or instructions for more information. Q2. Will the IRS automatically adjust other impacted items on my return if I claimed them originally, such as credits and deductions? (updated July 8, 2021) A2. Yes. The IRS will recalculate any other credit or deduction that was claimed on the original return that was impacted by this automatic correction. Example: You claimed $50 for the Earned Income Tax Credit (EITC) on your 2020 tax return. Because the unemployment compensation exclusion reduced your AGI, you're now eligible for a $250 EITC. We'll recalculate the credit amount and make the adjustment. In addition, if you did not claim the Recovery Rebate Credit, Earned Income Credit with no qualifying dependents or the Advance Premium Tax Credit on your tax return, but are now eligible when the unemployment exclusion is applied, you do not need to file an amended return. The IRS will calculate the credit for you and include it in any overpayment. 2020 Unemployment Compensation Exclusion FAQs -- Topic F: Victims of Unemployment Fraud and Identity Theft Q1. I received an incorrect Form 1099-G for unemployment benefits I did not receive and didn't report the fraudulent unemployment compensation income on my tax return. Will the IRS attempt to add it back then apply the exclusion? (updated June 25, 2021) A1. No, we won't make any adjustments to correct unemployment compensation if fraudulent unemployment compensation was paid under your name and you didn't report it as income on a tax return you already filed. You should report fraud to the state workforce agency that issued the incorrect form. For more information, please see Identity Theft and Unemployment Benefits. Q2. I received unemployment compensation but didn't claim the exclusion for up to $10,200 on the 2020 federal income tax return I filed. If I reported to the IRS that I was a victim of identity theft, when will the exclusion adjustment be completed if I'm eligible for it? (added June 25, 2021) A2. Identity theft is when someone uses stolen personal information to file a tax return claiming a fraudulent refund. If you reported to the IRS that you're a victim of tax-related identity theft and your case remains open, the exclusion adjustment won't be made until your identity theft issue has been resolved. Q3. I received unemployment compensation but didn't claim the exclusion for up to $10,200 on the 2020 federal income tax return I filed. If I suspect that my exclusion adjustment is delayed because I'm a victim of tax-related identity theft but have not reported my identity theft issues to the IRS yet, what can I do to speed up the refund from the exclusion adjustment? (added June 25, 2021) A3. Tax-related identity theft is when someone uses stolen personal information to file a tax return claiming a fraudulent refund. If you believe you're a victim of tax-related identity theft, and haven't reported the identity theft issue to the IRS, you should notify the IRS by filing a Form 14039, Identity Theft Affidavit PDF through www.identitytheft.gov or by filing the Form 14039 by paper. You won't receive your refund from the exclusion adjustment until the identity theft issue can be resolved. For more information about identity theft, please go to our Taxpayer Guide to Identity Theft. 2020 Unemployment Compensation Exclusion FAQs -- Topic G: Receiving a Refund, Letter, or Notice Q1. Will I receive a $10,200 refund? (added April 29, 2021) A1. No. The American Rescue Plan allows eligible taxpayers to exclude up to $10,200 (up to $10,200 for each spouse if married filing jointly) from your taxable income, thereby lowering your tax liability on your 2020 tax return. The exclusion from adjusted income is not a refundable tax credit. However, the exclusion could result in an overpayment (refund) [of income taxes/of the tax paid on the amount of excluded unemployment compensation]. Q2. If the exclusion adjustment results in an overpayment (refund), how will it be issued to me? (added April 29, 2021) A2. Any refund resulting from the exclusion adjustment will be issued to you in one of the following ways: - If we have bank account information for you on file, we'll issue your refund by direct deposit to that bank account. Note: If your account is no longer valid or is closed, the bank will return your refund to the IRS and a check will be mailed to the address we have on file for you. - If we don't have any bank account information for you, then we'll mail your refund to the address we have on file for you. Q3. Will the IRS send a letter or notice if they make changes to my unemployment compensation? (updated June 8, 2021) A3. Yes. We will send a notice when your account is corrected for the unemployment compensation exclusion. The notice will be mailed to the address we have on file for you. Usually, a notice of adjustment is received within 30 days of when the correction is made. Please keep this notice for your records. Q4. If the exclusion adjustment results in a refund, will the IRS use the refund to pay (offset) any unpaid debts I may have? (added April 29, 2021) A4. Yes. Unpaid debts include past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or certain federal nontax debts, such as student loans. If the refund is offset to pay unpaid debts, a notice will be sent to inform you of the offset. Q5. I didn't claim the exclusion for up to $10,200 when I filed my 2020 federal income tax return and I owed tax shown on my return and paid it in full, but the exclusion adjustment results in a refund. Will my payment also be refunded? (added June 25, 2021) A5. If you owed on your original return and paid the amount in full, the refund from the exclusion adjustment will take into account the additional payment you made to your account. The additional payment will be processed and any overpayment resulting from the exclusion adjustment will be refunded when your account is corrected but can be applied to other federal or state debts you owe. Q6. What if the exclusion adjustment reduces (or increases) the amount I still owe from my original return, but I can't pay in full? (added June 25, 2021) A6. It's highly recommended that you pay the amount you owe in full to minimize any penalties and interest. If you can't pay in full, pay as much as you can now and then apply for a short-term or long-term payment plan if you haven't done so already. Refer to Paying Your Taxes for additional information, including about the available methods to pay. Q7. I received a notice CP 21 or 22 saying that my 2020 account was adjusted due to the exclusion adjustment. Do I need to respond or take any action? (added June 25, 2021) A7. The notice is informing you that we changed your tax return to correct your unemployment compensation because of recent changes in tax laws, rulings, or regulations and as a result, you'll receive a refund, you'll have a reduced balance due, or neither (no refund due nor amount owed). - If you agree with the changes, you don't need to respond but we recommend that you keep the notice with a copy of your tax return for your records. - If you disagree with the changes, you may call the toll-free number listed on the top right corner of your notice. If you are due a refund, allow the timeframe provided in the notice to receive it. If you owe, pay the amount you owe by the due date on the notice's payment coupon. Make payment arrangements if you can't pay the full amount you owe. Refer to Paying Your Taxes for additional information, including about the available methods to pay. Q8. Why did I receive an IRS CP08 notice saying I may be eligible for the Additional Child Tax Credit? (added November 12, 2021) A8. Because we made changes to your 2020 tax account to exclude unemployment compensation, you may be eligible for the Additional Child Tax Credit. In November and December 2021, the IRS is sending the CP08 notice to individuals who did not claim the credit on their return but may now be eligible for it. This notice is not confirmation that you are eligible. You are not required to file an amended return to claim the Additional Child Tax Credit if you reply to the CP08 notice. See Understanding Your CP08 Notice for more information. Q9. Why did I receive an IRS CP09 notice saying I may be eligible for the Earned Income Credit? (added November 12, 2021) A9. Because we made changes to your 2020 tax account to exclude up to $10,200 of unemployment compensation, you may be eligible for the Earned Income Credit. In November and December 2021, the IRS is sending the CP09 notice to individuals who did not claim the credit on their return but may now be eligible for it. This notice is not confirmation that you are eligible. You are not required file an amended return to claim the Earned Income Credit if you reply to the CP09 notice. See Understanding Your CP09 Notice for more information. Q10. I'm married, do not live in a community property state and filed a joint 2020 tax return with my spouse. We received a notice stating the IRS corrected our return to allow the unemployment compensation exclusion, but we believe the exclusion amount is too much. Do we need to file an amended return or pay back all or some of the refund we received? (added January7, 2022) A10. The IRS moved quickly to implement the provisions of the American Recovery Plan Act (ARPA) of 2021. ARPA allows eligible taxpayers to exclude up to $10,200 of unemployment compensation on their 2020 income tax return. For married taxpayers, separate exclusions can apply to the unemployment compensation paid to each spouse. In some cases, when Form 1099-G, Certain Government Payments, information was not available, the IRS automatically allowed an exclusion amount of up to $20,400 for married individuals who live in a non-community property state and who filed a joint 2020 tax return when: - The total unemployment compensation was $10,201 or more; - The modified adjusted gross income of the taxpayers was less than $150,000; and - Form 1099-G data was not available at the time when the IRS completed the correction. If the IRS determined you qualified for the exclusion based on the criteria above and as a result you received a refund, then you are not required to pay back all or part of the refund. There is no need to contact the IRS or to file an amended return. If you're married and live-in community property state, refer to Q4 under Topic A: I'm married and live in a community property state. Am I eligible for the exclusion? 2020 Unemployment Compensation Exclusion FAQs -- Topic H: Finding the Unemployment Compensation Amount Q1. Where can I find the amount of my unemployment compensation? (added April 29, 2021) A1. You should receive a Form 1099-G from your state unemployment agency showing in Box 1 the total unemployment compensation paid to you in 2020. Your state may issue separate Forms 1099-G for unemployment compensation received from the state and the additional weekly $600 federal pandemic unemployment assistance (PUA). If you didn't receive a Form 1099-G, please visit your state's unemployment website as many states make them available online. Include all unemployment compensation received on Schedule 1, Line 7. The exclusion amount will be reported on Schedule 1, Line 8. Note: If the amount reported in Box 1 of your Form(s) 1099-G is incorrect, report on Line 7 only the actual amount of unemployment compensation paid to you in 2020. Q2. Will Where's My Amended Return? track process for this or will the IRS otherwise provide information to taxpayers wishing to track their exclusion? (added April 29, 2021) A2: No. Where's My Amended Return? and similar applications won't display information for the automatic corrections we are performing. Refer to IRS to recalculate taxes on unemployment benefits; refunds to start in May for information on when taxpayers should start receiving refunds, unless they owe other taxes. Do not call the IRS. IRS assistors don't have information beyond what's available on IRS.gov. 2020 Unemployment Compensation Exclusion FAQs -- Topic I: Post Unemployment Compensation Exclusion Adjustment Q1. If I file my 2021 tax return electronically in 2022, what amount do I enter as my prior year Adjusted Gross Income (AGI) to submit my return? Where do I find this information? (added April 29, 2021) A1. When you prepare your 2021 tax return and file it electronically in 2022, you must sign and validate your electronic tax return by entering your prior-year Adjusted Gross Income (AGI) or your prior-year Self-Select PIN. If using your AGI for this purpose, you'll use the AGI as originally reported on Line 11 of your 2020 Form 1040 or 1040-SR. Next year when you file your 2021 return, do not use the corrected AGI even if it was adjusted because of the unemployment exclusion. To find your original 2020 AGI amount, you can view or create your online account or access Get Transcript online or by mail. Q2. What are other ways to get my adjusted figures if I don't have the adjustment notice? (added June 25, 2021) A2. You can request a Record of Account transcript in one of the following ways: - Online or by mail using Get Transcript; - Call our automated phone transcript service at 800-908-9946 for it be sent by mail; or - Submit Form 4506-T. A Record of Account will show the information on the return as originally filed and the exclusion adjustment. For more information about transcripts, see Transcript Types and Ways to Order Them. Q3. Where do I find my updated return information for my FAFSA form if my income was reduced for the unemployment compensation exclusion (UCE) after filing my 2020 tax return? (added November 12, 2021) A3. Based on information received from the U.S. Department of Education, an announcement is posted on fafsa.gov asking users to complete the FAFSA questions as instructed (including using the IRS Data Retrieval Tool, if eligible), then submit the FAFSA form. Afterward, users should contact their school's financial aid office regarding any financial changes (including unemployment compensation exclusion) that may have impacted their financial aid. If you need updated account information and you received a notice CP21 stating your account was changed because of the unemployment compensation exclusion, you can use a combination of your tax return and the information provided in your notice. If there were changes made to your income tax, your notice will show a "Decrease in tax" and the amount in the Summary section of the notice. If there were any changes made to the American Opportunity Tax Credit or any other credits, the change would also be reflected in the Summary section of your notice. If you no longer have your notice or a copy of your tax return, request a Record of Account transcript, which shows information from your tax return and any changes made to your account. If you prefer to have these items shown separately, you can request a Tax Return transcript (shows return information we have on file from your tax return) and a Tax Account transcript (shows adjustments made to your account). You can request this information in one of the following ways: - For a Record of Account Transcript, use Get Transcript Online. - For Tax Return and Tax Account Transcripts, use Get Transcript (Online or by Mail) or call our automated phone transcript service at 800-908-9946. - Submit Form 4506-T for all transcripts. 2020 Unemployment Compensation Exclusion FAQs -- Topic J: Economic Impact Payment Q1. What if I already filed my 2020 tax return and didn't qualify for the third round of Economic Impact Payment (EIP) or received less of it because of my AGI, will the payment now be sent to me if the unemployment compensation exclusion reduced my AGI and makes me eligible for the payment or for more? (updated September 15, 2021) A1. No. Your third EIP is evaluated based on your originally filed tax return. We will not reevaluate or send more money after applying the unemployment compensation exclusion. If you didn't qualify for the payment or received less than the full amount based on your 2020 tax return, you may be eligible to claim the 2021 Recovery Rebate Credit when you file your tax return next year. For additional information about the third payment, see Third economic impact payment. IRS-FAQ

Announcement 2022-7 Internal Revenue Service 2022-15 I.R.B. 946 Announcement and Report Concerning Advance Pricing Agreements Announcement 2022-7 March 22, 2022 This Announcement is issued pursuant to § 521(b) of Pub. L. 106-170, the Ticket to Work and Work Incentives Improvement Act of 1999, which requires the Secretary of the Treasury to report annually to the public concerning advance pricing agreements (APAs) and the Advance Pricing and Mutual Agreement Program (APMA Program), formerly known as the Advance Pricing Agreement Program (APA Program). The first report covered calendar years 1991 through 1999. Subsequent reports covered each calendar year 2000 through 2020 separately. This twenty-third report describes the experience, structure, and activities of the APMA Program during calendar year 2021. It does not provide guidance regarding the application of the arm's length standard. Part I of this report includes information on the structure, composition, and operation of the APMA Program; Part II presents statistical data; and Part III includes general descriptions of various elements of the APAs executed in 2021, including types of transactions covered, transfer pricing methods used, and completion time. Nicole L. Welch Acting Director, Advance Pricing and Mutual Agreement Program Part I. The APMA Program - Structure, Composition, and Operation [Pub. L. 106-170 § 521(b)(2)(A)] In February 2012, the former APA Program was moved from the Office of Chief Counsel to the Office of Transfer Pricing Operations 1 within the Large Business and International Division of the IRS and combined with the U.S. Competent Authority staff responsible for transfer pricing cases, thereby forming the APMA Program (APMA). ******** 1 In 2017, Transfer Pricing Operations became Treaty & Transfer Pricing Operations ("TTPO"). ******** As of December 31, 2021, APMA's APA cases were handled by 80 team leaders, 25 economists, 9 managers, and 3 assistant directors. 2 Each assistant director oversees three managers who lead teams consisting of both team leaders and economists. APMA's main office is in Washington, DC, and it also has offices in northern California (San Francisco and San Jose), southern California (Los Angeles and Laguna Niguel), Chicago, and New York. ******** 2 In late 2020, TTPO's Treaty Assistance and Interpretation Team (TAIT) joined APMA, bringing the total number of groups in APMA to four. The three legacy APMA groups have primary responsibility for cases arising under the business profits and associated enterprises articles of U.S. tax treaties. TAIT endeavors to resolve competent authority issues arising under all other articles of U.S. tax treaties including issues arising under U.S. tax treaties relating to estate and gift taxes. As such, TAIT is separate from APMA's APA program, and the total numbers of team leaders and managers handling APA cases do not include TAIT analysts and managers. ******** On August 31, 2015, a new revenue procedure governing APA applications was published in 2015-35 I.R.B. on page 263. Revenue Procedure (Rev. Proc.) 2015-41 provides guidance, information and instructions on APA requests and the administration of APAs. Rev. Proc. 2015-41 updates and supersedes Rev. Proc. 2006-9, 2006-1 C.B. 278, as modified by Rev. Proc. 2008-31, 2008-1 C.B. 1133, which is also superseded. Model APAs appear as appendices to this report. Appendix 1 is the model for APAs covered by Rev. Proc. 2006-9. Appendix 2 is the current model APA for APAs covered by Rev. Proc. 2015-41. A list of primary APMA contacts is available at https://www.irs.gov/businesses/corporations/apma-contacts. Part II. APMA Program Statistical Data [Pub.L. 106-170 § 521(b)(2)(C)(i-viii)] Table 1: APA Application Filed § 521(b)(2)(C)(i) ******** 3 The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number of applications for those years by submission type, so the cumulative totals cannot be reported in that manner. ******** The charts above illustrate the number of complete applications filed per year and the bilateral requests received in 2021 per foreign country. As of December 31, 2021, APMA had also received 29 user fee filings that were not yet accompanied by substantially complete APA applications, in addition to the 145 complete APA applications. Table 2: Executed 4 and Pending APAs § 521(b)(2)(C)(ii-vi) 4 Executed APAs refers to all APAs finalized or renewed. 5 The number of renewals executed is included in the total number of APAs executed during the year. 6 The number of renewals still pending as of year-end is also included in the total number of pending APAs. In 2021, the percentage of renewals executed increased (63 percent of all APAs executed in 2021 versus 59 percent in 2020). The charts above illustrate trends in the number of APAs executed per year and the countries involved in the bilateral APAs that were executed in 2021. As the top chart illustrates, the number of pending requests increased slightly relative to December 31, 2020. As of December 31, 2021, almost half of the pending bilateral APA requests involved either Japan or India. Table 3: APAs Revoked or Cancelled and Applications Withdrawn § 521(b)(2)(C)(vii) ******** 7 The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number of applications for those years by submission type, so the cumulative totals cannot be reported in that manner. 8 See supra note 7. ******** Table 4: APAs Executed in 2021 by Industry § 521(b)(2)(C)(viii) Table 4a: Manufacturing APAs Executed in 2021 ******** 9 Industries in the Miscellaneous Manufacturing subsector (NAICS Code 339) make a wide range of products that cannot readily be classified in specific NAICS manufacturing subsectors. ******** Table 4b: Wholesale/Retail Trade APAs Executed in 2021 Part III. General Descriptions of APAs Executed in 2021 [Pub. L. 106-170 § 521(b)(2)(D) and (E)] Nature of the Relationships § 521(b)(2)(D)(i) As in prior years, more than half of the APAs executed in 2021 involved transactions between non-U.S. parents and U.S. subsidiaries. Covered Transactions, Functions and Risks, and Tested Parties § 521(b)(2)(D)(ii-iii) Most of the transactions 10 covered in APAs executed in 2021 involve the sale of tangible goods or the provision of services. Fifteen percent of the transactions involve the use of intangible property, which can be among the most challenging transactions in APMA's inventory. ******** 10 APAs often cover more than one type of transaction. ******** In the majority of APAs, the covered transactions involve numerous business functions and risks. For instance, with respect to functions, APAs involving manufactured products typically involve a controlled group that conducts research and development (R&D), engages in product design and engineering, manufactures the product, markets and distributes the product, and performs support functions such as legal, finance, and human resources. Regarding risks, the controlled group may assume a variety of risks, including market risks, R&D risks, financial risks, credit and collection risks, product liability risks, and general business risks. In the APA evaluation process, a significant amount of time and effort is devoted to understanding how the functions and risks are allocated among the controlled group of companies that are party to the covered transactions. For methods requiring the selection of a tested party, the tested party chosen generally will be the least complex of the controlled taxpayers. Consistent with prior years, a majority of tested parties 11 in 2021 were U.S. distributors, U.S. manufacturers, or U.S. service providers. ******** 11 Not all the executed APAs involve a tested party. ******** Transfer Pricing Methods Used § 521(b)(2)(D)(iv) In 2021, the most commonly used transfer pricing method (TPM) for both the sale of tangible property and the use of intangible property continued to be the comparable profits method/transactional net margin method (CPM/TNMM). The CPM/TNMM was used for 85 percent of these types of transactions. For covered transactions involving tangible and intangible property that used the CPM/TNMM, the operating margin (OM) is still the most common profit level indicator (PLI) used to benchmark results. It was used 65 percent of the time. Other PLIs, such as the Berry Ratio and return on total cost, made up the other 35 percent. As used here, "OM" is defined as the ratio of operating profit to sales, 12 and "Berry Ratio" is defined as the ratio of gross profit to operating expenses. 13 Most services transactions (90 percent) also used the CPM/TNMM with the OM and operating profit to operating expense being the most common PLIs (used 56 percent of the time). 14 ******** 12 See Treas. Reg. § 1.482-5(b)(4)(ii)(A). 13 See Treas. Reg. § 1.482-5(b)(4)(ii)(B). 14 The majority of APAs that covered services transactions also included tangible/intangible transactions and are not tested under a separate PLI. ******** Sources of Comparables, Comparables Selection Criteria, and Nature of Adjustments to Comparables or Tested Party Data§ 521(b)(2)(D)(v-vii) For the APAs executed in 2021 that involved the CPM/TNMM with a North American tested party, the most widely used data source for comparables was Standard and Poor's Compustat/Capital IQ database. Different sources were used in other cases (e.g., where the tested party was not a U.S. or Canadian entity or where transaction-based methods were applied). The other most commonly used databases are listed in the table below. Table 5: Sources of Comparable Data In making comparability adjustments, typical balance sheet adjustments, as identified in Treas. Reg. §§ 1.482-1(d)(2) and 1.482-5(c)(2)(iv), were made in most cases, including where appropriate, adjustments for payables, receivables, and inventory. In addition, where appropriate, adjustments for different accounting practices were made to convert from LIFO to FIFO inventory accounting, and a small number of cases involved the accounting reclassification of expenses, e.g., from COGS to operating expenses. Ranges, Goals, and Adjustment Mechanisms § 521(b)(2)(D)(viii-ix) Most transactions covered in APAs target an interquartile range as described in Treas. Reg. § 1.482-1(e)(2)(iii)(C). Where the transaction involves a royalty payment for the use of intangible property, both specific royalty rates and ranges have been used. Where the covered transaction is the sale or license of intangible property, and the payment for such transfer would be a royalty based solely on external comparable uncontrolled transactions, a secondary or confirming method, e.g., a test of the post-royalty operating margin or cost-plus mark-up, has sometimes also been used. The testing periods of the APAs executed in 2021 were either a single year, the term of the APA only, or the term of the APA plus rollback years. APAs executed in 2021 included several mechanisms for making adjustments to the tested party results when the results fall outside the interquartile range or do not match the point required by the APA. Examples of the mechanisms used include an adjustment bringing the tested party's results for a single year to either the closer edge of the range or the median of the range, an adjustment to bring the results over the APA term to the closer edge of the range, or an adjustment to bring the results to a specified point or royalty rate. Critical Assumptions § 521(b)(2)(D)(v) The model APAs used by the IRS (included as Appendix 1 and Appendix 2 of this report) include standard critical assumptions that there will be no material changes to the taxpayer's business or to its tax or financial accounting practices during the APA term. A few bilateral cases have also included critical assumptions tied to the taxpayer's profitability in a certain year or over the term of the APA. Pursuant to § 7.06(3) of Rev. Proc. 2015-41, APMA will cancel an APA in the event of a failure of a critical assumption unless the parties agree to revise the APA. Term Lengths of APAs Executed in 2021 § 521(b)(2)(D)(x) Table 6: Term Lengths of APAs Executed in 2021 As described in § 3.03(1) of Rev. Proc. 2015-41, taxpayers should request an APA term that would cover at least five prospective years and may also request that the APA be "rolled back" to cover one or more earlier taxable years, although the appropriate APA term is decided on a case-by-case basis. Of the APAs executed in 2021, 22 percent included rollback years. A substantial number of those APAs with terms of greater than five years were submitted as a request for a five-year term, and the additional years were agreed to between the taxpayer and the IRS (or, in the case of a bilateral APA, between the IRS and the foreign government upon the taxpayer's request) to ensure a reasonable amount of prospectivity in the APA term. Amount of Time Taken to Complete New and Renewal APAs § 521(b)(2)(E) Table 7: Months to Complete New and Renewal APAs Executed in 2021 Although the median time required to complete an APA increased in 2021 to 35.1 months (versus 32.7 months in 2020), it remains lower than the median completion times in 2019 (38.8 months) and in 2018 (40.2 months). Efforts to Ensure Compliance with APAs § 521(b)(2)(F) As described in § 7.02(1) of Rev. Proc. 2015-41, taxpayers are required to fi le annual reports to demonstrate compliance with the terms and conditions of their APAs. The fi ling and review of these annual reports are critical parts of the APA process. Through annual report review, the APMA Program monitors taxpayer compliance with APAs on a contemporaneous basis. Annual report review also provides current information on the success or problems associated with the various TPMs adopted in the APA process. Nature of Documentation Required in Annual Report § 521(b)(2)(D)(xi) APAs require taxpayers to file timely and complete annual reports describing their operations and demonstrating compliance with the APA's terms and conditions. Not every annual report will include each of the items listed in the following table; they are required where the facts demonstrate a need for such documentation. Approaches for Sharing of Currency or Other Risks § 521(b)(2)(D)(xii) In appropriate cases, APAs may provide specific approaches for dealing with risks, including currency risk, such as adjustment mechanisms and/or critical assumptions. APPENDIX 1- Model APA (based on Rev. Proc. 2006-9) ADVANCE PRICING AGREEMENT between [ Insert Taxpayer's Name ] and THE INTERNAL REVENUE SERVICE PARTIES The Parties to this Advance Pricing Agreement (APA) are the Internal Revenue Service (IRS) and [ Insert Taxpayer's Name ], EIN ________. RECITALS [ Insert Taxpayer Name ] is the common parent of an affiliated group filing consolidated U.S. tax returns (collectively referred to as "Taxpayer") and is entering into this APA on behalf of itself and other members of its consolidated group. Taxpayer's principal place of business is [ City, State ]. [ Insert general description of taxpayer and other relevant parties ]. This APA contains the Parties' agreement on the best method for determining arm's-length prices of the Covered Transactions under I.R.C. section 482, the Treasury Regulations thereunder, and any applicable tax treaties. {If renewal, add} [Taxpayer and IRS previously entered into an APA covering taxable years ending _____ to ______, executed on ________.] AGREEMENT The Parties agree as follows: 1. Covered Transactions. This APA applies to the Covered Transactions, as defined in Appendix A. 2. Transfer Pricing Method. Appendix A sets forth the Transfer Pricing Method (TPM) for the Covered Transactions. 3. Term. This APA applies to the APA Term, as defined in Appendix A. 4. Operation. a. Revenue Procedure 2006-9 governs the interpretation, legal effect, and administration of this APA. b. Nonfactual oral and written representations, within the meaning of sections 10.04 and 10.05 of Revenue Procedure 2006-9 (including any proposals to use particular TPMs), made in conjunction with the APA Request constitute statements made in compromise negotiations within the meaning of Rule 408 of the Federal Rules of Evidence. 5. Compliance. a. Taxpayer must report its taxable income in an amount that is consistent with Appendix A and all other requirements of this APA on its timely filed U.S. Return. However, if Taxpayer's timely filed U.S. Return for any taxable year covered by this APA (APA Year) is filed prior to, or no later than 60 days after, the effective date of this APA, then Taxpayer must report its taxable income for that APA Year in an amount that is consistent with Appendix A and all other requirements of this APA either on the original U.S. Return or on an amended U.S. Return filed no later than 120 days after the effective date of this APA, or through such other means as may be specified herein. b. { Use or edit the following when U.S. Group or Foreign Group contains more than one member.} [This APA addresses the arm's-length nature of prices charged or received in the aggregate between Taxpayer and Foreign Participants with respect to the Covered Transactions. Except as explicitly provided, this APA does not address and does not bind the IRS with respect to prices charged or received, or the relative amounts of income or loss realized, by particular legal entities that are members of U.S. Group or that are members of Foreign Group.] c. For each APA Year, if Taxpayer complies with the terms and conditions of this APA, then the IRS will not make or propose any allocation or adjustment under I.R.C. section 482 to the amounts charged in the aggregate between Taxpayer and Foreign Participant[s] with respect to the Covered Transactions. d. If Taxpayer does not comply with the terms and conditions of this APA, then the IRS may: i. enforce the terms and conditions of this APA and make or propose allocations or adjustments under I.R.C. section 482 consistent with this APA; ii. cancel or revoke this APA under section 11.06 of Revenue Procedure 2006-9; or iii. revise this APA, if the Parties agree. e. Taxpayer must timely file an Annual Report (an original and four copies) for each APA Year in accordance with Appendix C and section 11.01 of Revenue Procedure 2006-9. Taxpayer must file the Annual Report for all APA Years through the APA Year ending [insert year] by [insert date]. Taxpayer must file the Annual Report for each subsequent APA Year by [insert month and day] immediately following the close of that APA Year. (If any date falls on a weekend or holiday, the Annual Report shall be due on the next date that is not a weekend or holiday.) The IRS may request additional information reasonably necessary to clarify or complete the Annual Report. Taxpayer will provide such requested information within 30 days. Additional time may be allowed for good cause. f. The IRS will determine whether Taxpayer has complied with this APA based on Taxpayer's U.S. Returns, the Financial Statements, and other APA Records, for the APA Term and any other year necessary to verify compliance. For Taxpayer to comply with this APA, {use the following or an alternative} an independent certified public accountant must render an opinion that Taxpayer's Financial Statements present fairly, in all material respects, Taxpayer's financial position under U.S. GAAP. g. In accordance with section 11.04 of Revenue Procedure 2006-9, Taxpayer will (1) maintain the APA Records, and (2) make them available to the IRS in connection with an examination under section 11.03. Compliance with this subparagraph constitutes compliance with the record-maintenance provisions of I.R.C. sections 6038A and 6038C for the Covered Transactions for any taxable year during the APA Term. h. The True Taxable Income within the meaning of Treasury Regulations sections 1.482-1(a)(1) and (i)(9) of a member of an affiliated group filing a U.S. consolidated return will be determined under the I.R.C. section 1502 Treasury Regulations. i. {Optional for US Parent Signatories} To the extent that Taxpayer's compliance with this APA depends on certain acts of Foreign Group members, Taxpayer will ensure that each Foreign Group member will perform such acts. 6. Critical Assumptions. This APA's critical assumptions, within the meaning of Revenue Procedure 2006-9, section 4.05, appear in Appendix B. If any critical assumption has not been met, then Revenue Procedure 2006-9, section 11.06, governs. 7. Disclosure. This APA, and any background information related to this APA or the APA Request, are: (1) considered "return information" under I.R.C. section 6103(b)(2)(C); and (2) not subject to public inspection as a "written determination" under I.R.C. section 6110(b)(1). Section 521(b) of Pub. L. 106-170 provides that the Secretary of the Treasury must prepare a report for public disclosure that includes certain specifically designated information concerning all APAs, including this APA, in a form that does not reveal taxpayers' identities, trade secrets, and proprietary or confidential business or financial information. 8. Disputes. If a dispute arises concerning the interpretation of this APA, the Parties will seek a resolution by the Director of the Advance Pricing and Mutual Agreement Program, to the extent reasonably practicable, before seeking alternative remedies. 9. Materiality. In this APA the terms "material" and "materially" will be interpreted consistently with the definition of "material facts" in Revenue Procedure 2006-9, section 11.06(4). 10. Section Captions. This APA's section captions, which appear in italics, are for convenience and reference only. The captions do not affect in any way the interpretation or application of this APA. 11. Terms and Definitions. Unless otherwise specified, terms in the plural include the singular and vice versa. Appendix D contains definitions for capitalized terms not elsewhere defined in this APA. 12. Entire Agreement and Severability. This APA is the complete statement of the Parties' agreement. The Parties will sever, delete, or reform any invalid or unenforceable provision in this APA to approximate the Parties' intent as nearly as possible. 13. Successor in Interest. This APA binds, and inures to the benefit of, any successor in interest to Taxpayer. 14. Notice. Any notices required by this APA or Revenue Procedure 2006-9 must be in writing. Taxpayer will send notices to the IRS at the address and in the manner set forth in Revenue Procedure 2006-9, section 4.11. The IRS will send notices to: 15. Effective Date and Counterparts. This APA is effective starting on the date, or later date of the dates, upon which all Parties execute this APA. The Parties may execute this APA in counterparts, with each counterpart constituting an original. WITNESS, The Parties have executed this APA on the dates below. [Taxpayer Name in all caps] By: ___________________________ Date: ___________________, 201___ Jane Doe Sr. Vice President (Taxes) IRS By: ___________________________ Date: ___________________, 201___ Nicole L. Welch Acting Director, Advance Pricing and Mutual Agreement Program APPENDIX A COVERED TRANSACTIONS AND TRANSFER PRICING METHOD (TPM) 1. Covered Transactions. [ Define the Covered Transactions. ] 2. APA Term. This APA applies to Taxpayer's taxable years ending __________ through ________ (APA Term). 3. TPM. { Note: If appropriate, adapt language from the following examples. } [The Tested Party is __________.] - CUP Method The TPM is the comparable uncontrolled price (CUP) method. The Arm's Length Range of the price charged for _________ is between _______ and ___________ per unit. - CUT Method The TPM is the CUT Method. The Arm's Length Range of the royalty charged for the license of ______is between ____% and ___ % of [Taxpayer's, Foreign Participants', or other specified party's] Net Sales Revenue. [Insert definition of net sales revenue or other royalty base.] - Resale Price Method (RPM) The TPM is the resale price method (RPM). The Tested Party's Gross Margin for any APA Year is defined as follows: the Tested Party's gross profit divided by its sales revenue (as those terms are defined in Treasury Regulations sections 1.482-5(d)(1) and (2)) for that APA Year. The Arm's Length Range is between ____% and ___ %, and the Median of the Arm's Length Range is ___%. - Cost Plus Method The TPM is the cost plus method. The Tested Party's Cost Plus Markup is defined as follows for any APA Year: the Tested Party's ratio of gross profit to production costs (as those terms are defined in Treasury Regulations sections 1.482-3(d)(1) and (2)) for that APA Year. The Arm's Length Range is between ___% and ___%, and the Median of the Arm's Length Range is ___%. - CPM with Berry Ratio PLI The TPM is the comparable profits method (CPM). The profit level indicator is a Berry Ratio. The Tested Party's Berry Ratio is defined as follows for any APA Year: the Tested Party's gross profit divided by its operating expenses (as those terms are defined in Treasury Regulations sections 1.482-5(d)(2) and (3)) for that APA Year. The Arm's Length Range is between ____ and ___, and the Median of the Arm's Length Range is ___. - CPM using an Operating Margin PLI The TPM is the comparable profits method (CPM). The profit level indicator is an operating margin. The Tested Party's Operating Margin is defined as follows for any APA Year: the Tested Party's operating profit divided by its sales revenue (as those terms are defined in Treasury Regulations section 1.482-5(d)(1) and (4)) for that APA Year. The Arm's Length Range is between ____% and ___ %, and the Median of the Arm's Length Range is ___%. - CPM using a Three-year Rolling Average Operating Margin PLI The TPM is the comparable profits method (CPM). The profit level indicator is an operating margin. The Tested Party's Three-Year Rolling Average operating margin is defined as follows for any APA Year: the sum of the Tested Party's operating profit (within the meaning of Treasury Regulation section 1.482-5(d)(4) for that APA Year and the two preceding years, divided by the sum of its sales revenue (within the meaning of Treasury Regulation section 1.482-5(d)(1)) for that APA Year and the two preceding years. The Arm's Length Range is between ____% and ____%, and the Median of the Arm's Length Range is ___%. - Residual Profit Split Method The TPM is the residual profit split method. [I nsert description of routine profit level determinations and residual profit-split mechanism ]. [ Insert additional provisions as needed. ] 4. Application of TPM. For any APA Year, if the results of Taxpayer's actual transactions produce a [price per unit, royalty rate for the Covered Transactions] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin for the Tested Party] within the Arm's Length Range, then the amounts reported on Taxpayer's U.S. Return must clearly reflect such results. For any APA year, if the results of Taxpayer's actual transactions produce a [price per unit, royalty rate] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin for the Tested Party] outside the Arm's Length Range, then amounts reported on Taxpayer's U.S. Return must clearly reflect an adjustment that brings the [price per unit, royalty rate] [or] [Tested Party's Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin] to the Median. For purposes of this Appendix A, the "results of Taxpayer's actual transactions" means the results reflected in Taxpayer's and Tested Party's books and records as computed under U.S. GAAP [ insert another relevant accounting standard if applicable ], with the following adjustments: (a) [The fair value of stock-based compensation as disclosed in the Tested Party's audited financial statements shall be treated as an operating expense]; and (b) To the extent that the results in any prior APA Year are relevant (for example, to compute a multi-year average), such results shall be adjusted to reflect the amount of any adjustment made for that prior APA Year under this Appendix A. 5. APA Revenue Procedure Treatment If Taxpayer makes an adjustment under paragraph 4 of this Appendix A (a "primary adjustment"), Taxpayer and its related foreign entity may elect APA Revenue Procedure Treatment in accordance with section 11.02(3) of Revenue Procedure 2006-9 and avoid the possible adverse tax consequences of a secondary adjustment that would otherwise follow the primary adjustment. [ Insert additional provisions as needed. ] APPENDIX B CRITICAL ASSUMPTIONS This APA's critical assumptions are: 1. The business activities, functions performed, risks assumed, assets employed, and financial and tax accounting methods and classifications [and methods of estimation] of Taxpayer in relation to the Covered Transactions will remain materially the same as described or used in Taxpayer's APA Request. A mere change in business results will not be a material change. [ Insert additional provisions as needed. ] APPENDIX C APA RECORDS AND ANNUAL REPORT APA RECORDS The APA Records will consist of all documents listed below for inclusion in the Annual Report, as well as all documents, notes, work papers, records, or other writings that support the information provided in such documents. ANNUAL REPORT The Annual Report (and each of the four copies required by paragraph 5(e) of this APA) will include: 1. Two copies of a properly completed APA Annual Report Summary in the form of Appendix E to this APA, one copy of the form bound with, and one copy provided separately from, the rest of the Annual Report. 2. A table of contents, organized as follows: 3. Statements that fully identify, describe, analyze, and explain: a. All material differences between the U.S. Group's business operations (including functions, risks assumed, markets, contractual terms, economic conditions, property, services, and assets employed) during the APA Year from the business operations described in the APA Request. If there have been no material differences, the Annual Report will include a statement to that effect. b. All material differences between the U.S. Group's accounting methods and classifications, and methods of estimation used during the APA Year, from those described or used in the APA Request. If any change was made to conform to changes in U.S. GAAP (or other relevant accounting standards) Taxpayer will specifically identify the change. If there has been no material change in accounting methods and classifications or methods of estimation, the Annual Report will include a statement to that effect. c. Any change to the Taxpayer notice information in paragraph 14 of this APA. d. Any failure to meet any critical assumption. If there has been no failure, the Annual Report will include a statement to that effect. e. Whether or not material information submitted while the APA Request was pending is discovered to be false, incorrect, or incomplete. f. Any change to any entity classification for federal income tax purposes (including any change that causes an entity to be disregarded for federal income tax purposes) of any Worldwide Group member that is a party to the Covered Transactions or is otherwise relevant to the TPM. g. The amount, reason for, and financial analysis of (1) any primary adjustments made under Appendix A for the APA Year; and (2) any ( a ) secondary adjustments that follow such primary adjustments or ( b ) accounts receivable that Taxpayer establishes, in lieu of secondary adjustments, by electing APA Revenue Procedure Treatment pursuant to paragraph 5 of Appendix A and Revenue Procedure 2006-9, section 11.02(3), for the APA Year, including but not limited to: i. the amounts due or owed, and paid or received by each affected entity; ii. the character (such as capital, ordinary, income, expense) and country source of the funds transferred, and the specific affected line item(s) of any affected U.S. Return; iii. the date(s) and means by which the payments are or will be made; and iv. whether or not APA Revenue Procedure Treatment was elected pursuant to paragraph 5 of Appendix A and Revenue Procedure 2006-9, section 11.02(3). h. The amounts, description, reason for, and financial analysis of any book-tax difference relevant to the TPM for the APA Year, as reflected on Schedule M-1 or Schedule M-3 of the U.S. Return for the APA Year. i. Whether Taxpayer contemplates requesting, or has requested, to renew, modify, or cancel the APA. 4. The Financial Statements, and any necessary account detail to show compliance with the TPM, including consolidating financial statements, segmented financial data, records from the general ledger, or similar information if the assets, liabilities, income, or expenses relevant to showing compliance with the TPM are a subset of the assets, liabilities, income, or expenses presented in the Financial Statements. 5. {Use the following or the alternative prescribed by paragraph 5(f) of this APA:} A copy of the independent certified public accountant's opinion required by paragraph 5(f) of this APA. 6. A financial analysis that reflects Taxpayer's TPM calculations for the APA Year. The calculations must reconcile with and reference the information required under item 4 above in sufficient account detail to allow the IRS to determine whether Taxpayer has complied with the TPM. 7. An organizational chart for the Worldwide Group, revised annually to reflect all ownership or structural changes of entities that are parties to the Covered Transactions or are otherwise relevant to the TPM. 8. A copy of the APA and any amendment. 9. A penalty of perjury statement, executed in accordance with Revenue Procedure 2006-9, section 11.01(6) and (7). APPENDIX D DEFINITIONS The following definitions control for all purposes of this APA. The definitions appear alphabetically below: APPENDIX E APA ANNUAL REPORT SUMMARY FORM The APA Annual Report Summary on the next page is a required APA Record. The APA Team Leader supplies some of the information requested on the form. Taxpayer is to supply the remaining information requested by the form and submit the form as part of its Annual Report. APPENDIX 2- Model APA (based on Rev. Proc. 2015-41) TEMPLATE FOR ADVANCE PRICING AGREEMENT UNDER REVENUE PROCEDURE 2015-41 _______________ The Advance Pricing and Mutual Agreement Program ("APMA") of the Internal Revenue Service ("IRS") is providing this template for use in drafting advance pricing agreements ("APAs") issued under IRS Revenue Procedure 2015-41, 2015-35 I.R.B. 263 ("Rev. Proc. 2015-41"). This template is designed to systematize how taxpayers propose terms for their APAs and standardize language used in executed APAs. It will improve efficiency in the APA process and enhance consistency in the administration of the APA program. Rev. Proc. 2015-41 requires that taxpayers include as part of a complete APA request a draft APA and a "redline" comparison of the proposed draft APA against the current model APA. See section 2.03, exhibit 15, of the Appendix to Rev. Proc. 2015-41. This template serves as the model APA. A taxpayer is required to produce the "redline" comparison by following the instructions below to edit this template with tracked changes. The draft APA and "redline" comparison are then to be included in Word format in the complete APA request. (Before editing the template with tracked changes, a taxpayer should remove this introduction and the instructions below from the Microsoft Word file.) The assigned APMA team will review the APA's terms proposed in the draft APA. If the APMA team accepts the proposed terms in light of its review of the taxpayer's complete APA request and other information obtained during the APA process, then the text of the draft APA, edited as needed to fill in any information not available at the time of the APA Request, will be adopted as the text of a finally executed APA. If the APMA team does not accept the proposed terms, it will discuss modifications to the draft APA with the taxpayer during the APA process. For bilateral and multilateral APAs, the terms of the executed APA will of necessity be consistent with the terms of the underlying mutual agreement between the United States and one or more treaty partners. GENERAL INSTRUCTIONS The template is designed to minimize editing by using an options-based format for selecting from terms presented in certain sections of the model APA. The options presented are those which APMA considers standard and which it has accepted in final APAs. These options are not binding on APMA, however. APMA reserves the right to modify the option selections, the specific option language used, or any other terms before executing an APA with the taxpayer. Options are indicated by square brackets ("[]"). An "x" should be inserted between the brackets to indicate the selected option ("[x]"). Options that are not selected should not be deleted, but instead should be left in the text of the draft APA. The options to which APMA and the taxpayer ultimately agree for the final APA will be indicated by the presence or absence of an "x". The term associated with the "x" will be given operative effect in the executed APA. Certain options are flagged with an asterisk after the square brackets ("[]*"). To facilitate the APMA team's subsequent review of the draft APA, the asterisks should not be deleted. Taxpayers that select flagged options are required to specifically provide justification for the selection in the APA request. See section 1.02, Part 5, of the Appendix to Rev. Proc. 2015-41. The template contains placeholder phrases consisting of a hashtag followed by one or more words in block capital letters (e.g., "#COUNTRY"). Generally, the taxpayer should replace a placeholder phrase with appropriate text, subject to the following conventions: - If a placeholder phrase occurs within an option that the taxpayer has rejected, the taxpayer should change the hashtag to a caret (e.g., change "#COUNTRY" to "^COUNTRY") but otherwise leave the phrase intact. 15 The caret indicates that the Taxpayer has rejected this option. For example, for a bilateral APA with Japan, the lines on the first page just below the title would read: ******** 15 As a result, almost all occurrences of the hashtag in the template will be replaced with a caret or other text in the taxpayer's draft APA. The few remaining occurrences of the hashtag will mark a placeholder phrase that cannot yet be replaced with appropriate text (see, for example, the placeholder phrase in paragraph 6(e) for a date that cannot be determined until the APA nears execution). Searching the draft APA for the hashtag will locate all placeholder phrases that still need replacement. ******** [x] Bilateral with Japan [] Multilateral with ^COUNTRIES [] Unilateral - The placeholder phrase "#CURRENCY" should be replaced, for example, with "U.S. dollars," "Euros," or "Japanese yen." - The placeholder phrase "#DATE" should be replaced with a date in the format of "December 31, 2020." The APA Term will be expressed as dates certain, e.g., "January 1, 2017 to December 31, 2022, inclusive", rather than as particular tax years. Taxpayers may need to draft custom text for situations or options not included in the template. For example, a taxpayer may propose additional critical assumptions to address specific regulatory contingencies or conditions the taxpayer is expected to face during the term of the APA. As another example, the provision titled "Limitation on Assistance" at the end of the Recitals might be modified based on an understanding reached in the prefiling stage of the APA process. In some cases, a particular critical assumption might facilitate reaching an agreement on an APA. Taxpayers that include custom text are required to specifically provide justification for the inclusion in the APA request, just as selecting an option with an asterisk requires justification. Any custom text must also be evident in the "redline" comparison of the proposed draft APA. INSTRUCTIONS ON TABLES The template contains certain tables that the taxpayer should edit. Entries in the tables will not contain hashtags, but taxpayers nevertheless should fill in the information and add additional rows to the tables if needed. Taxpayers also should fill in the "APA Information" in the table in Appendix D, to the extent available or proposed. INSTRUCTIONS ON APPENDIX A Appendix A of this template contains the description of the APA's covered issue(s) and covered method(s). Taxpayers should note the following points in completing Appendix A: - The template includes just one covered issue with one corresponding covered method. If there is more than one covered Issue proposed for the APA, the taxpayer should add additional covered issues in Appendix A, section 3, with tracked changes. - If there is more than one covered method, the taxpayer should first replicate the template's entire text for Covered Method 1 in Appendix A, section 4, without tracked changes, to provide template text for each additional covered method, and then edit the text for each covered method with tracked changes. - Normally, each covered issue will have its own corresponding covered method. However, in some cases, a covered method may apply at once to more than one covered issue. For example, covered issues may be proposed to be aggregated and tested by a single covered method. In such cases, the heading for that covered method could read, for example, "Covered Method for Covered Issues 1-3". - Any interaction between different covered methods should be adequately explained in the text, and in an appropriate manner. For example, an explanation might be provided in an introduction at the start of section 4 of Appendix A, preceding the description of the respective covered methods. Appendix A uses the term "Tested Party." When applied in the context of methods that consider, or test, data from only one party to a transaction, this term is similar in concept to the term "tested party" as discussed in the OECD Guidelines at paragraphs 3.18 and 3.19, and as defined in the U.S. Treasury Regulations section 1.482-5(b)(2). However, some methods consider, or test, data from both parties to a transaction, where there is no singular "tested" party. Even in applying such methods, however, it is typically the case that one particular party's results are formally tested for compliance with the method. For purposes of this template, in such circumstances, the party whose results are formally tested in applying any particular method is the "Tested Party", even if that party is not strictly a "tested party" as discussed in the OECD Guidelines paragraphs 3.18 and 3.19, or as defined in the U.S. Treasury Regulations section 1.482-5(b)(2). ADVANCE PRICING AGREEMENT between #SIGNATORY and THE INTERNAL REVENUE SERVICE [] Bilateral with #COUNTRY [] Multilateral with #COUNTRIES [] Unilateral Term: #DATE to #DATE, inclusive [] This APA is commonly referred to as #APA NAME. PARTIES The Parties to this APA are the Internal Revenue Service ("IRS") and #NAME OF EACH NON-IRS SIGNATORY, WITH EIN. [] #SIGNATORY will be referred to as "U.S. Taxpayer." [] #SIGNATORY is the common parent of an affiliated group filing consolidated U.S. tax returns and is entering into this APA on behalf of both itself and the following members of its consolidated group: #MEMBERS OF GROUP. All members of this consolidated group will be referred to collectively as "U.S. Taxpayer." RECITALS [] This APA is a renewal of one or more prior APAs, which are listed below in reverse chronological order: Key: - Party(ies): The signatory(ies) to the prior APA, other than the IRS, with each signatory's taxpayer identification number; - Execution Date: The date, or the later of the dates, on which the prior APA was executed; - Term: The term of the prior APA. [] This is a bilateral APA within the meaning of Rev. Proc. 2015-41 and implements the terms of a mutual agreement reached between the United States and #COUNTRY. [] This is a multilateral APA within the meaning of Rev. Proc. 2015-41 and implements the terms of a mutual agreement reached among the United States, #COUNTRIES. [] This APA is a unilateral APA within the meaning of Rev. Proc. 2015-41 and is not based on any mutual agreement. The Parties to this APA are defined in the "Parties" section above. Regarding the Party(ies) to this APA other than the IRS: [] No such Party has an immediate parent or owner that is not a U.S. entity. [] One or more such Parties has an immediate parent or owner that is not a U.S. entity, as follows: Key: - Party: Name of the Party having an immediate parent or owner that is not a U.S. entity; - Parent's or Owner's Identifying Information: Name of the immediate parent or owner of such Party, and the taxpayer identification number of that parent or owner for income tax purposes in its country of residence; - Parent's or Owner's Contact Information: The immediate parent's or owner's address and phone number. The term "Worldwide Group" is defined below in paragraph 12 of this APA. The ultimate parent entity or owner of Worldwide Group is: #ENTITY NAME, ADDRESS, AND PHONE U.S. Taxpayer's principal place of business is #CITY, #STATE. #BRIEF DESCRIPTION OF U.S. TAXPAYER AND NON-U.S. TAXPAYER (DEFINED IN SECTION 1 OF APPENDIX A), AND SPECIFICALLY OF EACH COVERED ENTITY (DEFINED IN SECTION 1 OF APPENDIX A). This APA contains the Parties' agreement on the Covered Method(s) for resolving the Covered Issue(s) under Code section 482 and any other Code sections that are identified in Appendix A to this APA, the U.S. Treasury Regulations thereunder, and (if applicable): [] The income tax convention(s) between the United States and #COUNTRY(IES). This APA shall not limit the authority of the IRS to (1) verify compliance with this APA as to the Covered Issue(s), or (2) audit issues other than Covered Issue(s), including issues that arise under Code section 482 and any other Code sections identified in Appendix A to this APA, and the U.S. Treasury Regulations thereunder. LIMITATION ON ASSISTANCE The Covered Issue(s) may relate to one or more countries which (i) have an income tax convention with the United States, but (ii) are not a party to a mutual agreement whose terms are implemented by this APA. U.S. Taxpayer acknowledges that the IRS may decline to provide competent authority assistance concerning taxation by such country(ies) that relates to the Covered Issue(s). See section 2.02(4)(d) of Rev. Proc. 2015-41. AGREEMENT The Parties agree as follows: 1. Covered Entities. This APA's Covered Entities are defined in Appendix A. 2. Covered Issue(s). This APA applies to the Covered Issue(s), as defined in Appendix A. 3. Covered Method(s). Appendix A sets forth the Covered Method(s) for the Covered Issue(s). 4. Term. This APA applies to the APA Term, as defined in Appendix A. 5. Operation. a. Rev. Proc. 2015-41 governs the interpretation, legal effect, and administration of this APA. b. The APMA program provides a voluntary process whereby the IRS and taxpayers may resolve transfer pricing issues and issues for which transfer pricing principles may be relevant in a principled and cooperative manner on a prospective basis. As such, the APA process (as defined in Rev. Proc. 2015-41) is an alternative to dispute resolution that benefits both taxpayers and the IRS and that is intended to promote and encourage open communication. Accordingly, the IRS and U.S. Taxpayer agree that neither party will attempt to use nonfactual oral or written representations, within the meaning of sections 6.04 and 6.05 of IRS Revenue Procedure 2015-41 (including any proposals to use particular Covered Method(s)), made in conjunction with the APA Request in any judicial or administrative proceeding. The IRS and U.S. Taxpayer also agree that factual representations made in conjunction with the APA Request may be used in judicial and administrative proceedings. 6. Compliance. a. U.S. Taxpayer must report its taxable income in an amount that is consistent with Appendix A and all other requirements of this APA. U.S. Taxpayer must so report its taxable income in the following manner: i. For any APA Tax Year for which U.S. Taxpayer timely files its original U.S. return prior to, or no later than 60 days after, the U.S. Effective Date, U.S. Taxpayer must so report its taxable income for that APA Tax Year in one of the following ways: A. on such original U.S. return; B. on an amended U.S. return submitted no later than 120 days after the U.S. Effective Date; C. through a means proposed by U.S. Taxpayer and accepted by the applicable IRS practice area no later than 120 days after the U.S. Effective Date (or by such other deadline as is agreed between U.S. Taxpayer and the applicable IRS practice area); or D. if applicable: []* no later than 120 days after the U.S. Effective Date through the following means: #DESCRIPTION OF MEANS. ii. For all other APA Tax Years, U.S. Taxpayer must so report its taxable income on its timely filed original U.S. return. iii. The provisions of paragraphs 6(a)(i) and 6(a)(ii) are modified by this paragraph 6(a)(iii). If a Covered Method includes a term test (including the case of an annual test with a supplemental term test) or a subterm test, as described in section 4 of Appendix A, then the APA Covered Year as of which the term test or subterm test applies would change in the event of an Early Termination. Specifically, while in the absence of an Early Termination a term test would apply as of the last APA Covered Year, in the event of an Early Termination the term test would apply as of an earlier APA Covered Year. Similarly, while in the absence of an Early Termination a subterm test would apply as of the last APA Covered Year in the subterm, in the event of an Early Termination the subterm test might apply as of an earlier APA Covered Year. In these situations, the Early Termination might not be established in time for U.S. Taxpayer to know to apply the term test or subterm test as of the earlier APA Covered Year in reporting taxable income as required under paragraphs 6(a)(i) and 6(a)(ii) for the APA Tax Year corresponding to that earlier APA Covered Year. In such cases, U.S. Taxpayer may need to correct its reporting for that APA Tax Year. Specifically, U.S. Taxpayer will need to correct its income reporting for that APA Tax Year if the application of the term test or subterm test in that earlier APA Covered Year changes the existence or amount of an APA Primary Adjustment for the Covered Method for that APA Tax Year. In such cases: A) The resulting incorrectness in the prior reporting for that APA Tax Year is excused; and B) U.S. Taxpayer must correct such prior reporting through a means listed in paragraph 6(a)(i) within 120 days of the Early Termination being established. b. For each Covered Issue, if any, that involves determination of pricing and/or income allocation 16 under Code section 482 (or Code section 367(d)) as modified by any applicable income tax convention, this APA addresses the pricing and/or income allocation between U.S. Taxpayer and Non-U.S. Taxpayer in the aggregate. Except as explicitly provided, this APA does not address and does not bind the IRS with respect to pricing or income allocation (1) among particular legal entities that are members of U.S. Taxpayer, or (2) among particular legal entities that are members of Non-U.S. Taxpayer. In addition, this APA does not address pricing or income allocation between an entity that is not a Covered Entity, and any entity. ******** 16 As used in this APA, "income allocation" includes allocation of loss. ******** c. For each APA Tax Year, if U.S. Taxpayer complies with the terms and conditions of this APA, then, provided that this APA remains effective for that APA Tax Year for a particular Covered Issue, the IRS will not make or propose any allocation or adjustment that is inconsistent with the application under this APA of the applicable Covered Method to that Covered Issue. d. If U.S. Taxpayer does not comply with the terms and conditions of this APA, then the IRS may: i. enforce the terms and conditions of this APA and make or propose allocations or adjustments based on the application of the Covered Method(s) to the Covered Issue(s) as provided in this APA; ii. cancel or revoke this APA under section 7.06 of Rev. Proc. 2015-41; or iii. revise this APA, if the Parties agree. e. U.S. Taxpayer must timely file an Annual Report for each APA Tax Year in accordance with this paragraph 6(e), Appendix C to this APA, and section 7.02 of Rev. Proc. 2015-41. Annual Reports for multiple APA Tax Years may be combined, provided that all required information for each APA Tax Year is clearly presented. For each Annual Report, U.S. Taxpayer must submit an original printed version containing a signed original "penalties of perjury" declaration, one printed copy of the contents of the original printed version, and an electronic copy of the contents of the original printed version. Any exhibits in the printed version must be tabbed, and the electronic copy is subject to the same requirements, as to medium and format, that are specified for APA requests in section 2 of the Appendix to Rev. Proc. 2015-41. Upon request, U.S. Taxpayer must provide additional copies of the printed version, at addresses specified by the IRS. U.S. Taxpayer must file the Annual Report for each APA Tax Year by the later of (i) #DATE CERTAIN, NORMALLY APPROXIMATELY 90 DAYS AFTER THE U.S. EFFECTIVE DATE, and (ii) the fifteenth day of the twelfth month following the close of the APA Tax Year. The IRS may by notice request additional information reasonably necessary to clarify or complete the Annual Report. (See paragraph 16, and section 3(c) of Appendix C, regarding notices.) U.S. Taxpayer will provide such requested information within 30 days from the date of the notice unless a later date is specified in the notice. Additional time may be allowed for good cause in the discretion of the Director of the Advance Pricing and Mutual Agreement Program. f. The IRS will determine whether U.S. Taxpayer has complied with this APA based on U.S. Taxpayer's U.S. returns, the Financial Statements and additional statements required under this paragraph 6(f), and other APA Records, for all APA Tax Years and any other tax year necessary to verify compliance. The Financial Statements and additional statements required for a particular tax year are: [] For every U.S. Covered Entity, the Financial Statements together with the additional statements specified in paragraph 6(f)(i); and for every Non-U.S. Covered Entity, the Financial Statements together with the additional statements specified in paragraph 6(f)(ii). []* For every U.S. Covered Entity, the Financial Statements together with the additional statements specified in paragraph 6(f)(i). []* For every Non-U.S. Covered Entity, the Financial Statements together with the additional statements specified in paragraph 6(f)(ii). i. For each U.S. Covered Entity, the additional statements consist of the following statement(s): [] An audit opinion for that U.S. Covered Entity's Financial Statements, as defined in paragraph 6(f)(iii). []* One or more of the following, as indicated: [] An accountant's report for that U.S. Covered Entity's Financial Statements, as defined in paragraph 6(f)(iii). [] A self-certification for that U.S. Covered Entity's Financial Statements, as defined in paragraph 6(f)(iii). [] A self-certification for that U.S. Covered Entity's Financial Statements, together with a tying certification for that entity's Financial Statements, as defined in paragraph 6(f)(iii). [] #OTHER MEANS OF VERIFYING THE RELIABILITY OF THE U.S. COVERED ENTITY'S FINANCIAL STATEMENTS. ii. For each Non-U.S. Covered Entity, the additional statements consist of the following statement(s): [] An audit opinion for that Non-U.S. Covered Entity's Financial Statements, as defined in paragraph 6(f)(iii). []* One or more of the following, as indicated: [] An accountant's report for that Non-U.S. Covered Entity's Financial Statements, as defined in paragraph 6(f)(iii). [] A self-certification for that Non-U.S. Covered Entity's Financial Statements, as defined in paragraph 6(f)(iii). [] A self-certification for that Non-U.S. Covered Entity's Financial Statements, together with a tying certification for that Covered Entity's Financial Statements, as defined in paragraph 6(f)(iii). [] #OTHER MEANS OF VERIFYING THE RELIABILITY OF THE NON-U.S. COVERED ENTITY'S FINANCIAL STATEMENTS. iii. With reference to the Financial Statements for a particular Covered Entity for a particular tax year, certain terms used in paragraphs 6(f)(i) and 6(f)(ii) are defined as follows: A. An audit opinion is an opinion of an independent certified public or chartered accountant who audited the Financial Statements. B. An accountant's report is a report of an independent certified public or chartered accountant who is associated with the Financial Statements. C. A self-certification is an attestation, as defined in paragraph 6(f)(iii)(E), that the Financial Statements have been prepared according to the Applicable Accounting Standard. D. A tying certification consists of the following: (1) An attestation, as defined in paragraph 6(f)(iii)(E), that the Financial Statements can be reconciled to the consolidated Financial Statements for that entity's direct or indirect parent according to workpapers provided with the attestation; (2) The workpapers referred to in paragraph 6(f)(iii)(D)(1), which must demonstrate the consolidation of the Covered Entity's Financial Statements into the Financial Statements of the parent referred to in paragraph 6(f)(iii)(D)(1); (3) The Financial Statements of the parent referred to in paragraph 6(f)(iii)(D)(1); and (4) An audit opinion (as defined in paragraph 6(f)(iii)(A)) for the Financial Statements of the parent referred to in paragraph 6(f)(iii)(D)(1). E. An attestation is an affirmation by an officer of the Covered Entity in the following form: I, [Officer's Name and Title], of [Name of Covered Entity] affirm under penalties of perjury that the facts stated below are true. I either have adequate first-hand knowledge to make this affirmation or have gained adequate knowledge to make this affirmation through diligent consultation(s) with one or more individuals who have first-hand knowledge. [Facts attested to.] [Signature] g. In accordance with section 7.04 of Rev. Proc. 2015-41, U.S. Taxpayer will (1) maintain the APA Records, and (2) make them available to the IRS in connection with an examination under section 7.03 of Rev. Proc. 2015-41. Compliance with this subparagraph constitutes compliance with the record-maintenance provisions of Code sections 6038A and 6038C for the Covered Issue(s) for any APA Covered Year. h. The "true taxable income" within the meaning of U.S. Treasury Regulations sections 1.482-1(a)(1) and (i)(9) of a member of an affiliated group filing a U.S. consolidated return will be determined under the U.S. Treasury Regulations under Code section 1502. i. To the extent that U.S. Taxpayer's compliance with this APA depends on certain acts of other members of Worldwide Group, U.S. Taxpayer will ensure that such other members will perform such acts. 7. Critical Assumptions. The Critical Assumptions, which are this APA's critical assumptions as defined in Rev. Proc. 2015-41, appear in Appendix B. If any Critical Assumption has not been met, then Rev. Proc. 2015-41, section 7.06, governs, as modified by Appendix B to this APA. 8. Disclosure. This APA, and any background information related to this APA or the APA Request, are: (1) considered "return information" under Code section 6103(b)(2)(C); and (2) not subject to public inspection as a "written determination" under Code section 6110(b)(1). Section 521(b) of Pub. L. 106-170 provides that the Secretary of the Treasury must prepare a report for public disclosure that includes certain specifically designated information concerning all APAs, including this APA, in a form that does not reveal taxpayers' identities, trade secrets, and proprietary or confidential business or financial information. 9. Disputes. If a dispute arises concerning the interpretation or application of this APA, the Parties will seek a resolution by the Director, Treaty and Transfer Pricing Operations, to the extent reasonably practicable, before seeking alternative remedies. 10. Materiality. In this APA the terms "material" and "materially" will be interpreted in a manner consistent with the description of "material facts" in Rev. Proc. 2015-41, section 7.06(4). 11. Paragraph Captions. This APA's paragraph captions, which appear in italic type, are for convenience and reference only. The captions do not affect in any way the interpretation or application of this APA. 12. Terms and Definitions. a. Unless otherwise specified, terms in the plural include the singular and vice versa. b. Appendix A contains definitions for certain terms used in this APA's body and appendices. c. Certain terms used in this APA's body and appendices are defined as follows: 13. Deadline References. If a deadline under this APA falls on a Saturday, Sunday, or a legal holiday in the District of Columbia, the deadline is extended to the next succeeding day that is not a Saturday, Sunday, or legal holiday in the District of Columbia. 14. Entire Agreement and Severability. This APA is the complete statement of the Parties' agreement. The Parties will sever, delete, or reform any invalid or unenforceable provision in this APA to approximate the Parties' intent as nearly as possible. 15. Successor in Interest. This APA binds, and inures to the benefit of, any successor in interest to U.S. Taxpayer. 16. Notice. Any notices required by this APA or Rev. Proc. 2015-41 must be in writing. U.S. Taxpayer will send notices to the IRS at: Commissioner, Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, NW SE:LB:TTPO:APMA:NCA534-01 Washington, DC 20224 (Attention: APMA) The IRS will send notices to: #NAME AND ADDRESS (phone: #PHONE) The IRS also will send notices to, if applicable: [] #REPRESENTATIVE'S NAME AND ADDRESS (phone: #PHONE) provided that a valid IRS Form 2848 "Power of Attorney and Declaration of Representative" for that person was included in the most recent Annual Report (or, if no Annual Report has been filed, was included in the APA Request). 17. U.S. Effective Date and Counterparts. This APA is effective starting on the date, or later date of the dates, upon which all Parties execute this APA ("U.S. Effective Date"). The Parties may execute this APA in counterparts, with each counterpart constituting an original. WITNESS, The Parties have executed this APA on the dates below. #SIGNATORY NAME IN BOLD FACE BLOCK CAPITAL LETTERS By: __________________________ Date: _________________, 20____ #NAME #TITLE INTERNAL REVENUE SERVICE By: __________________________ Date: _________________, 20____ Nicole L. Welch Acting Director, Advance Pricing and Mutual Agreement Program APPENDIX A COVERED ENTITIES, TERM, COVERED ISSUE(S), COVERED METHOD(S), INCOME REPORTING, CONFORMING ADJUSTMENTS AND REPATRITION OF FUNDS, CERTAIN SUBSEQUENT ADJUSTMENTS, AND DEFINITIONS Section 1 of this Appendix lists the Covered Entities. Section 2 defines the APA Term, APA Tax Years, and APA Covered Years. Section 3 describes the Covered Issue(s). Section 4 describes the Covered Method applicable to each Covered Issue. Section 5 describes the application of the Covered Method(s) to income reporting and the possible need for an APA Primary Adjustment under one or more Covered Methods. Section 6 addresses conforming adjustments and repatriation of funds following APA Primary Adjustments. Section 7 provides definitions that apply both to this Appendix and to the APA as a whole. The definitions table is based on a standard, inclusive model, and thus may include terms not used in this APA. 1. Covered Entities The U.S. Covered Entity(ies) are: #LIST OF EACH U.S. ENTITY INVOLVED IN ONE OR MORE COVERED ISSUE(S), AND ALSO (LISTED FIRST) ANY CONSOLIDATED RETURN PARENT FOR ANY SUCH ENTITY. FOR EACH ENTITY, NAME, ADDRESS, PHONE, AND EIN. The term "U.S. Taxpayer" includes collectively all U.S. Covered Entities and any other entities that are in a consolidated return group with a U.S. Covered Entity. The Non-U.S. Covered Entity(ies) are: # LIST OF EACH NON-U.S. ENTITY INVOLVED IN ONE OR MORE COVERED ISSUE(S), AND ALSO (LISTED FIRST) ANY COMMON TAX REPORTING PARENT FOR ANY SUCH ENTITY. FOR EACH ENTITY, NAME, ADDRESS, AND PHONE. The term "Non-U.S. Taxpayer" includes collectively all Non-U.S. Covered Entities and any other entities that are in a common tax reporting group with a Non-U.S. Covered Entity. The term "Covered Entities" includes both the U.S. Covered Entities and the Non-U.S. Covered Entities. 2. APA Term, APA Tax Years, and APA Covered Years The APA applies to the period from #DATE to #DATE, inclusive (the "APA Term"). [] The APA Term does not include a Rollback. [] The APA Term includes a Rollback, which covers from #DATE to #DATE, inclusive (the "Rollback Period"). A tax year of U.S. Taxpayer that is wholly or partly contained in the APA Term is called an "APA Tax Year." For a particular APA Tax Year, the portion of such APA Tax Year that is contained in the APA Term is called an "APA Covered Year." Such APA Tax Year and APA Covered Year are said to "correspond" to each other or to be "corresponding." 3. Covered Issue(s) The Covered Issue(s) are as described below. Covered Issue 1: #DESCRIPTION OF COVERED ISSUE. 4. Covered Method(s) Each Covered Method applies to one or more Covered Issues. A Covered Method and the Covered Issue(s) to which the Covered Method applies are said to "correspond," or to be "corresponding". The Covered Methods are summarized in the following table and are described in detail below. In case of conflict with this table, the detailed descriptions of the Covered Methods below, and the descriptions in section 3 above of the Covered Issues, control. This Appendix A uses the term "Tested Party." When applied in the context of methods that consider, or test, data from only one party to a transaction, this term is similar in concept to the term "tested party" as discussed in the OECD Guidelines paragraphs 3.18 and 3.19, and as defined in the U.S. Treasury Regulations section 1.482-5(b)(2). However, some methods consider, or test, data from both parties to a transaction, where there is no singular "tested" party. Even in applying such methods, however, it is typically the case that one particular party's results are formally tested for compliance with the method. For purposes of this template, in such circumstances, the party whose results are formally tested in applying any particular method is the "Tested Party", even if that party is not strictly a "tested party" as discussed in the OECD Guidelines paragraphs 3.18 and 3.19, or as defined in the U.S. Treasury Regulations section 1.482-5(b)(2). Covered Method for Covered Issue 1: a. Tested Party The Tested Party is #TESTED PARTY. b. Financial Results Tested (Type of Method) [] The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and of the comparable uncontrolled price method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are: [] per unit price paid, defined as the total amount paid for #DESCRIPTION OF GOODS divided by the number of #DESCRIPTION OF A UNIT OF GOODS purchased. [] per unit price received, defined as the total amount received for #DESCRIPTION OF GOODS divided by the number of #DESCRIPTION OF A UNIT OF GOODS sold. [] The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and of the comparable uncontrolled services price method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are: [] per unit price paid, defined as the total amount paid for #DESCRIPTION OF SERVICES divided by the number of #DESCRIPTION OF A UNIT OF SERVICES received. [] per unit price received, defined as the total amount received for #DESCRIPTION OF SERVICES divided by the number of #DESCRIPTION OF A UNIT OF SERVICES provided. [] The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and of the comparable uncontrolled transaction method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are the royalty paid for the license of #DESCRIPTION OF LICENSED INTANGIBLE PROPERTY divided by the Tested Party's: [] sales revenue from sales of #DESCRIPTION OF GOODS/SERVICES. [] #OTHER ROYALTY BASE. [] The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and of the acquisition price method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are described in subsection (c) below. [] The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and of the market capitalization method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are described in subsection (c) below. [] The Covered Method is an implementation of the resale price method under the OECD Guidelines and of the resale price method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are the gross profit margin from the sale of #DESCRIPTION OF GOODS. [] The Covered Method is an implementation of the resale price method under the OECD Guidelines and of the gross services margin method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are the gross services margin from the provision of #DESCRIPTION OF SERVICES. [] The Covered Method is an implementation of the cost plus method under the OECD Guidelines and of the cost plus method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are the gross profit markup. [] The Covered Method is an implementation of the cost plus method under the OECD Guidelines and of the cost of services plus method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are the gross services profit markup from the provision of #DESCRIPTION OF SERVICES. [] The Covered Method is based on the principles of the low value-adding intra-group services approach under the OECD Guidelines and of the services cost method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are the markup on total costs for providing #DESCRIPTION OF SERVICES. [] The Covered Method is an implementation of the transactional net margin method under the OECD Guidelines and of the comparable profits method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested, as reflected in its net profit indicator (per OECD Guidelines) or profit level indicator (per U.S. Treasury Regulations), are its: [] operating margin. [] markup on total costs. [] Berry ratio. [] return on operating assets. [] return on invested capital. []* #OTHER NET PROFIT INDICATOR OR PROFIT LEVEL INDICATOR, WITH DEFINITION. [] The Covered Method is an implementation of the profit split (residual analysis) method under the OECD Guidelines and of the residual profit split method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are described in subsection (c) below. [] The Covered Method is an implementation of the profit split (contribution analysis) method under the OECD Guidelines and of the comparable profit split method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are described in subsection (c) below. [] The Covered Method is an implementation of an income based valuation technique as referenced in paragraph 6.153 of the OECD Guidelines and of the income method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are described in subsection (c) below. [] The Covered Method is an implementation of (i) a sharing of the cost of current contributions in proportion to overall expected benefits, within a cost contribution arrangement under the OECD Guidelines, and (ii) a sharing of intangible development costs in proportion to reasonably anticipated benefits, within a cost sharing arrangement under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are described in subsection (c) below. [] The Covered Method is a method that is not specified under the OECD Guidelines and not specified under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are described in subsection (c) below. Such financial results are determined according to the Applicable Accounting Standard, with the proviso that in determining such results, accounting principles and conventions that are generally accepted in the trade or industry must be used. Such financial results are tested against a point or range as described below. The test is carried out with a frequency, and for certain time periods, as described below. If and when these financial results do not satisfy the test, they must be adjusted as described in section 5 of this Appendix A. c. Testing of Financial Results Against a Point or Range The Tested Party's financial results are tested as follows: [] The financial results must equal #X. [] The financial results must be within an Arm's Length Range. [] The Arm's Length Range is from #X to #Y inclusive. [] This Arm's Length Range has an associated Median value of #Z. [] This Arm's Length Range has no associated Median value. [] Two Arm's Length Ranges apply. The first is from #W to #X inclusive and applies to the annual test described in subsection (d) below. The second is from #Y to #Z inclusive and applies to the term test described in subsection (d) below. [] The first Arm's Length Range has an associated Median value of #P, and the second Arm's Length Range has an associated Median value of #Q. [] These Arm's Length Ranges have no associated Median value. [] Two Arm's Length Ranges apply. The first is from #W to #X inclusive and applies to the subterm test described in subsection (d) below. The second is from #Y to #Z inclusive and applies to the annual test described in subsection (d) below. [] The first Arm's Length Range has an associated Median value of #P, and the second Arm's Length Range has an associated Median value of #Q. [] These Arm's Length Ranges have no associated Median value. [] Two Arm's Length Ranges apply. The first is from #W to #X inclusive and applies to the test for the first subterm described in subsection (d) below. The second is from #Y to #Z inclusive and applies to the test for the second subterm described in subsection (d) below. [] The first Arm's Length Range has an associated Median value of #P, and the second Arm's Length Range has an associated Median value of #Q. [] These Arm's Length Ranges have no associated Median value. [] #OTHER DESCRIPTION, FOR EXAMPLE THE EVALUATION AND TESTING MECHANICS FOR A PROFIT SPLIT, AN INCOME METHOD, AN UNSPECIFIED METHOD, OR A SHARING OF COSTS UNDER A COST CONTRIBUTION ARRANGMENT/COST SHARING ARRANGEMENT. d. Testing Frequency and Testing Periods The Tested Party's financial results are tested as of certain APA Covered Years, and for certain time periods, as follows: [] The results are tested annually, meaning that they are tested as of each APA Covered Year, for a period consisting of that APA Covered Year. [] There is no additional term test. [] There is an additional term test. For this test, the results are tested as of the Last Effective APA Covered Year, for the period consisting of the Last Effective APA Covered Year and all prior APA Covered Years. The application of the annual test and the application of the additional term test are coordinated as described in section 5 of this Appendix A. []* The results are tested on a term basis, meaning that they are tested only once, as of the Last Effective APA Covered Year, for a period consisting of the Last Effective APA Covered Year and all prior APA Covered Years. []* The results are tested on the basis of two subterms. For this purpose, the APA Term is divided into two subterms. The first subterm consists of all APA Covered Years ending on or before #DATE, and the second subterm consists of all other APA Covered Years. For each subterm, the results are tested as of the Last Effective APA Subterm Covered Year, for a period consisting of the Last Effective APA Subterm Covered Year and all prior APA Covered Years in the subterm. []* The results are tested on a subterm basis for all APA Covered Years ending on or before #DATE (the "subterm"), and are tested annually for each other APA Covered Year, as follows: The results are tested as of the Last Effective APA Subterm Covered Year, for a period consisting of the Last Effective APA Subterm Covered Year and all prior APA Covered Years in the subterm. The results are tested as of each APA Covered Year that is not in the subterm, for a period consisting of that APA Covered Year. []* The results are tested on a cumulative basis, meaning that (except as provided in the following sentence) they are not tested as of the first APA Covered Year but they are tested as of each other particular APA Covered Year for a period consisting of such particular APA Covered Year and all prior APA Covered Years. However, if the Last Effective APA Covered Year is the first APA Covered Year, then the results are tested as of the first APA Covered Year, for a period consisting of such APA Covered Year. []* The results are tested on a three-year rolling average basis, meaning that the results are tested as of each APA Covered Year, for a period consisting of the APA Tax Year corresponding to the APA Covered Year (but excluding any portion of that APA Tax Year that is after the APA Term), and the Tested Party's two preceding tax years. e. Other Provisions The Tested Party's financial results, to be tested as described above, are for: [] The Tested Party as a whole. [] Only a segment of the Tested Party's activity. #DETAILED DESCRIPTION OF THE SEGMENT AND OF THE ALLOCATION AND APPORTIONMENT METHODS USED, INCLUDING ANY APPLICABLE FORMULAS AND DEFINITIONS OF QUANTITIES USED IN THOSE FORMULAS. THIS DESCRIPTION SHOULD BE DETAILED ENOUGH TO ENABLE A STRAIGHTFORWARD VERIFICATION OF COMPLIANCE BY THE IRS EXAMINATION TEAM. When the Tested Party's financial results are tested as of a given APA Covered Year, those results shall reflect, to the extent relevant, any APA Primary Adjustment for this Covered Method made under section 5 of this Appendix A for the APA Tax Year corresponding to any prior APA Covered Year. For this Covered Method, if applicable: []* For APA Covered Years ending on or before #DATE, it is agreed that this Covered Method, yields financial results as shown below, and that any APA Primary Adjustments under section 5 of this Appendix A are as shown below. #TEXT AND/OR TABLES SHOWING THE FINANCIAL RESULTS, THE TESTING OF THOSE FINANCIAL RESULTS UNDER THE COVERED METHOD, AND ANY RESULTING APA PRIMARY ADJUSTMENTS. For this Covered Method, if applicable: [] This Covered Method addresses the pricing for a transfer of intangible property (which does not constitute a platform contribution transaction as defined in U.S. Treasury Regulations section 1.482-7(b)(1)(ii)) within the meaning of U.S. Treasury Regulations section 1.482-4. That pricing will not be subject to periodic adjustments by the IRS, during or after the APA Term, under U.S. Treasury Regulations section 1.482-4(f)(2) or (6). [] This Covered Method addresses the pricing for a platform contribution transaction ("PCT"). That PCT will not be treated as a Trigger PCT within the meaning of U.S. Treasury Regulations section 1.482-7(i)(6)(i) for purposes of making periodic adjustments, during or after the APA Term, under U.S. Treasury Regulations section 1.482-7(i)(6). 5. Application of Covered Method(s) to Income Reporting For each APA Tax Year, and for each Covered Method and corresponding Covered Issue(s), the amounts reported by U.S. Taxpayer and Non-U.S. Taxpayer for income tax purposes under the laws of the United States and #COUNTRY(IES) must clearly reflect the Tested Party's actual transactions, allocations, and/or recordkeeping, as applicable, that relate to such Covered Issue(s), adjusted as necessary to conform with section 4 of this Appendix A. Accordingly, for each particular APA Tax Year and corresponding APA Covered Year, and for each such Covered Method: i. If the Tested Party's financial results are tested as of such APA Covered Year and do not conform with section 4 of this Appendix A, then the tax reporting for such APA Tax Year must clearly reflect an adjustment that brings such results into conformance (an "APA Primary Adjustment"). If section 4 of this Appendix A specifies conformance to an Arm's Length Range, then the adjustment shall be to: [] the Median. []* the near edge of the Arm's Length Range. []* the Median for Covered Issues #SPECIFY WHICH ONES, and the near edge of the Arm's Length Range for Covered Issues #SPECIFY WHICH ONES. ii. If an adjustment is not required under paragraph (i) above, then the tax reporting must clearly reflect the Tested Party's financial results, with no adjustment. In this case there is no APA Primary Adjustment. iii. If both an annual test and an additional term test apply under such Covered Method, and such APA Covered Year is the Last Effective APA Covered Year, so that as of such APA Covered Year the Tested Party's financial results are tested under both the annual test and the term test, then paragraphs (i) and (ii) above are modified by this paragraph (iii), which coordinates the application of both tests. As explained in more detail below, the annual test is applied first, followed by the term test. Specifically, the need for and amount of any APA Primary Adjustment for such APA Covered Year will be determined as follows: A. First apply paragraphs (i) and (ii) above under the assumption that only the annual test applies. Any required adjustment will be referred to as the "annual adjustment" rather than an "APA Primary Adjustment." If there is no required adjustment, the annual adjustment is considered to be zero. B. Next, apply paragraphs (i) and (ii) above to the Tested Party's financial results as adjusted by any nonzero annual adjustment, under the assumption that only the term test applies to those results. Any required adjustment under this application of paragraphs (i) and (ii) will be referred to as the "term adjustment" rather than an "APA Primary Adjustment." If there is no such required adjustment, the term adjustment is considered to be zero. C. Add the annual adjustment and term adjustment, taking account of the magnitude and (if nonzero) direction of each. If this sum is zero, there is no APA Primary Adjustment for such APA Covered Year. If this sum is nonzero, this sum gives the magnitude and direction of the APA Primary Adjustment for such APA Covered Year. Any APA Primary Adjustment, or the lack of an APA Primary Adjustment, must be clearly reflected in the tax reporting for such APA Tax Year (see paragraphs (i) and (ii) above). iv. If this APA is unilateral and such APA Covered Year is within the Rollback Period, then: [] Paragraphs (i)-(iii) above notwithstanding, an APA Primary Adjustment will not be made if that APA Primary Adjustment would decrease the income of U.S. Taxpayer for such APA Tax Year. []* Paragraphs (i)-(iii) above apply without modification. If indicated, the above provisions on APA Primary Adjustments are modified as follows: []* Any APA Primary Adjustment that would be made under the above provisions for an APA Tax Year ending before #DATE will instead be made for the APA Tax Year ending #THE SAME DATE (the "Telescoping Year"). For each particular Covered Method, all APA Primary Adjustments that are made for the Telescoping Year (including any APA Primary Adjustments that are moved to the Telescoping Year as just described, as well as any APA Primary Adjustment originally made for the Telescoping Year) are netted. [] The foregoing provision applies without modification. [] The foregoing provision applies with the following modification. An APA Primary Adjustment that is thus moved from a particular APA Tax Year (the "Original Year") to the Telescoping Year shall be increased in amount to reflect the time value of money. That increase will consist of multiplication by a factor that is an annual rate raised to a power. The annual rate is 1. #XY. The power is the quotient of (i) the average of the number of months by which the end of the Telescoping Year is later than the end of the Original Year, and the number of months by which the start of the Telescoping Year is later than the start of the Original Year (with any fractions of months rounded to whole months), (ii) divided by twelve. For U.S. tax purposes, the generally applicable Code rules will apply with respect to APA Primary Adjustments, except as otherwise provided in Rev. Proc. 2015-41 or in this APA. 6. Conforming Adjustments and Repatriation of Funds The provisions in this section 6 apply to "Repatriable Issues," which are Covered Issues that concern transactions between associated enterprises that fall under Article 9 of the OECD Model Tax Convention. Such transactions correspond to transactions that under U.S. law are subject to application of Code section 482, as modified by any applicable treaty provision. If the application of a Covered Method to a Repatriable Issue requires an APA Primary Adjustment under section 5 of this Appendix A for a given APA Tax Year, then for U.S. tax purposes there generally must be a corresponding conforming adjustment as specified in U.S. Treasury Regulations section 1.482-1(g)(3) as amplified by Rev. Proc. 99-32 or any successor revenue procedure. However, for this purpose, all APA Primary Adjustments for such APA Tax Year arising from the application of a Covered Method to a Repatriable Issue are first netted to yield a net APA Primary Adjustment for such APA Tax Year. Only if the net APA Primary Adjustment is nonzero is a conforming adjustment required. For each APA Tax Year with a nonzero net APA Primary Adjustment, for U.S. tax purposes the conforming adjustment will be accomplished in the following steps: i. The conforming adjustment will be accomplished between #U.S. ENTITY and #NON-U.S. ENTITY, which will be referred to here as "U.S. Entity" and "Non-U.S. Entity", respectively. An intercompany payable will be established between U.S. Entity and Non-U.S. Entity in the amount and direction of the net APA Primary Adjustment, as of the last day of such APA Tax Year. This payable will be denominated in #CURRENCY. The payable will be treated as indebtedness for all U.S. federal tax purposes; provided, however, that the payable will not be treated as indebtedness for purposes of Code section 956 if the payable is satisfied within 90 days of the close of the APA Tax Year with respect to which it is established. ii. [] The intercompany payable will bear interest at an arm's length rate. [] Such arm's length rate is not specified in this APA and will be determined under applicable legal principles. [] Such arm's length rate is determined as follows. #DESCRIPTION OF ARM'S LENGTH RATE (FOR EXAMPLE, FOR A U.S. DOLLAR PAYABLE, A CERTAIN APPLICABLE FEDERAL RATE UNDER U.S. TREASURY REGULATIONS SECTION 1.482-2(a)(2)(iii)(C)). [] This APA is bilateral or multilateral. As agreed between the United States and #COUNTRY(IES), the intercompany payable will not bear interest. iii. The intercompany payable must be satisfied, in a manner permitted under Rev. Proc. 99-32 or any successor revenue procedure, within 90 days of the later of (1) the date for timely filing (with extensions) of the U.S. return for such APA Tax Year, and (2) the APA's U.S. Effective Date. If any amount of the intercompany payable is not otherwise so satisfied within that 90-day period, such amount, on the last day of such period, will be deemed (1) to be paid between U.S. Entity and Non-U.S. Entity in satisfaction of the payable, and (2) to be paid (directly or indirectly, as specified below) between U.S. Entity and Non-U.S. Entity in the opposite direction (that is, from the deemed recipient of the intercompany payable to the deemed payor of the intercompany payable). These two deemed payments on the same day will cancel and thus yield no net cash flow between these two entities. The second of these deemed payments will be referred to as the "reverse payment." The reverse payment will be deemed to be as follows: A. If the net APA Primary Adjustment increases U.S. income: [] The reverse payment will be deemed to be a contribution to capital from U.S. Entity to Non-U.S. Entity, either directly, or indirectly through the corporate chain, as the case may be. [] The reverse payment will be deemed to be a distribution from U.S. Entity to Non-U.S. Entity, either directly, or indirectly through the corporate chain, as the case may be. [] The reverse payment will be deemed to be a distribution from U.S. Entity to #COMMON PARENT, either directly, or indirectly through the corporate chain, as the case may be, followed by a contribution by #COMMON PARENT to non-U.S. Entity, either directly or indirectly through the corporate chain, as the case may be. B. If the net APA Primary Adjustment decreases U.S. income: [] The reverse payment will be deemed to be a contribution to capital from non-U.S. Entity to U.S. Entity, either directly, or indirectly through the corporate chain, as the case may be. [] The reverse payment will be deemed to be a distribution from non-U.S. Entity to U.S. Entity, either directly, or indirectly through the corporate chain, as the case may be. [] The reverse payment will be deemed to be a distribution from non-U.S. Entity to #COMMON PARENT, either directly, or indirectly through the corporate chain, as the case may be, followed by a contribution by #COMMON PARENT to U.S. Entity, either directly, or indirectly through the corporate chain, as the case may be. This situation is generally described in paragraph 4.66 of the OECD Guidelines, and in U.S. Treasury Regulations section 1.482-1(g) and Rev. Proc. 99-32. In this APA, if applicable: []* For the APA Tax Year(s) ending on or before #DATE, it is agreed that the net APA Primary Adjustment(s), if any, from the application of the Covered Methods are as follows: #FOR EACH SUCH APA TAX YEAR, DESCRIPTION OF WHETHER THERE IS A NET APA PRIMARY ADJUSTMENT, AND IF SO THE AMOUNT AND DIRECTION. IF THERE IS MORE THAN ONE COVERED METHOD FOR A REPATRIABLE ISSUE, ALSO PROVIDE A TABLE SHOWING THE DERIVATION, FOR EACH SUCH APA TAX YEAR, OF THE NET APA PRIMARY ADJUSTMENT FROM THE APA PRIMARY ADJUSTMENT (OR LACK OF ONE) FOR EACH SUCH COVERED METHOD. #FOR ANY SUCH NET APA PRIMARY ADJUSTMENTS, DESCRIPTION OF THE MEANS BY WHICH THE CONFORMING ADJUSTMENT HAS BEEN OR WILL BE SATISFIED, WITH APPLICABLE DATES. 7. Definitions The definitions in the table below apply to this APA. The defined terms in this table include certain measures of profitability (e.g., operating profit, operating margin). Most of these measures are ultimately defined in terms of sales revenue, operating expenses, and operating assets (defined terms), and cogs and non-interest-bearing liabilities (undefined terms). The definitions of sales revenue, operating expenses, and operating assets contain a limitation to the relevant business activity. Similarly, each use of the terms "cogs" and "non-interest-bearing liabilities" is accompanied by a limitation to the relevant business activity. Therefore, the measures of profitability based on these five terms all are defined with a limitation to the relevant business activity. (Certain other measures of profitability in this table relate to the provision of services and are defined with reference to those services. Therefore, those measures as well contain a limitation to the relevant business activity.) APPENDIX B CRITICAL ASSUMPTIONS The Critical Assumptions are: 1. The Covered Entities' business activities, functions performed, risks assumed, assets employed, contractual terms, markets, and economic conditions faced in relation to the Covered Issue(s) will remain materially the same as described in the APA Request. For this purpose, a mere change in business results will not be a material change. 2. The Covered Entities' financial accounting methods and classifications and methods of estimation in relation to the Covered Issue(s) and Covered Method(s) will remain materially the same as described or used in the APA Request. If indicated, the effect of a critical assumption failure may be limited as follows: [] The failure of Critical Assumptions #XXX listed above will affect the effectiveness of this APA only as to Covered Issues #YYY listed in Appendix A. Thus, as to the other Covered Issues, the APA will remain in force (except to the extent some other condition affects the APA's effectiveness as to those Covered Issues). The Covered Entities will not cause a critical assumption to fail for the purpose of rendering the APA ineffective, unless they have an independent business justification (unrelated to rendering the APA ineffective) for the action that causes the critical assumption to fail. If one or more Covered Entities do cause a critical assumption to fail for the purpose of rendering the APA ineffective, and without such independent business justification, then the Covered Entities will not withhold consent to an amendment to this APA to the effect that this APA will continue in force without regard to such failure. In this case, if a Covered Entity refuses to sign such an amendment, such an amendment may be executed without such signature and will then have the same force and effect as if the amendment had such signature. APPENDIX C APA RECORDS AND ANNUAL REPORT APA RECORDS The APA Records will consist of all documents listed below for inclusion in the Annual Report, as well as all documents, notes, work papers, records, or other writings that support the information provided in such documents. ANNUAL REPORT An Annual Report must be submitted for each APA Tax Year in accordance with paragraph 6(e) of the APA and section 7.02 of Rev. Proc. 2015-41. For each APA Tax Year, the Annual Report (and each copy or version as required by paragraph 6(e) of the APA) will include: 1. Two copies of a properly completed APA Annual Report Summary in the form of Appendix D to this APA, one copy of the form bound with, and one copy provided separately from, the rest of the Annual Report. (The electronic version of the Annual Report need have only one copy of this item.) 2. A table of contents organized according to the additional required items listed below. 3. For such APA Tax Year and the corresponding APA Covered Year, statements that fully identify, describe, analyze, and explain: a. All material differences between the Covered Entities' business activities, functions performed, risks assumed, assets employed, contractual terms, markets, and economic conditions faced in relation to the Covered Issues during such APA Covered Year from those same items described in the APA Request. If there have been no such material differences, the Annual Report will include a statement to that effect. b. All material differences between Covered Entities' financial accounting methods and classifications and methods of estimation in relation to the Covered Issues and Covered Methods used during such APA Covered Year, from those described or used in the APA Request. If any change was made to conform to changes in the Applicable Accounting Standard, U.S. Taxpayer will specifically identify the change. If there have been no such material differences, the Annual Report will include a statement to that effect. c. Regarding notices under paragraph 16 of the APA: i. A current statement of how the IRS should provide such notices to U.S. Taxpayer (and, if applicable, to U.S. Taxpayer's representative). ii. A copy of any such notices that were submitted by U.S. Taxpayer to the IRS after the last Annual Report was submitted (or, if there was no prior Annual Report, after the APA was executed). If there were no such notices, the Annual Report will include a statement to that effect. d. Any failure of any Critical Assumption. If there has been no such failure, the Annual Report will include a statement to that effect. e. Whether or not material information submitted while the APA Request was pending is discovered to be false, incorrect, or incomplete, and if so a correction or completion of that information, as applicable. f. Any change to any entity classification for federal income tax purposes (including any change that causes an entity to be disregarded for federal income tax purposes) of any Worldwide Group member that is a Covered Entity or is otherwise relevant to the Covered Issue(s) or Covered Method(s). g. The following regarding any APA Primary Adjustments made for such APA Tax Year under Appendix A to this APA: i. The amounts of any APA Primary Adjustments; ii. The circumstances that led to such APA Primary Adjustments being necessary; iii. A calculation of the net APA Primary Adjustment as defined in Appendix A to this APA; and iv. A complete description of the means by which the conforming adjustment (see section 6 of Appendix A to this APA) is accomplished, including: A. a description of any accounts payable established, including the entities involved and when the payables are established; B. a description of any amounts paid or deemed paid (including amounts paid or deemed paid in satisfaction of an intercompany payable established as described in section 6 of Appendix A to this APA, and including any deemed reverse payments as described in section 6 of Appendix A to this APA), that specifies the entities involved, when the amounts are paid or deemed paid, and by what means any amounts are actually paid; and C. the character (such as capital, ordinary, income, expense, dividend, contribution to capital) and country source of any payments and deemed payments, and the specific affected line item(s) of any affected U.S. return; h. A detailed numerical explanation of how the result of the application of the Covered Methods is reflected on the U.S. return, with reference to particular line items on the U.S. return. This explanation shall include the amounts, description, reason for, and financial analysis of any book-tax differences, as reflected on Schedule M-1 or Schedule M-3 of the U.S. return for such APA Tax Year, that (i) are relevant to an APA Primary Adjustment, (ii) otherwise are relevant to the book and tax treatment of any income or expense item that is part of the Relevant Financial Data for, or is determined by, any Covered Method for such APA Tax Year, or (iii) otherwise are relevant to the APA. U.S. Taxpayer shall not simply attach a copy of the pertinent schedule. Rather, U.S. Taxpayer shall specifically identify the relevant items from that schedule and shall describe in appropriate detail the nature of those items, how they arose, and how they are accounted for. i. Whether or not U.S. Taxpayer contemplates requesting, or has requested, to renew, modify, or cancel the APA. 4. The Financial Statements and additional statements required under paragraph 6(f) of the APA, for such APA Tax Year and for any other tax year whose financial data are relevant to compliance with the APA for such APA Tax Year; 5. A financial analysis that includes U.S. Taxpayer's calculations to apply the Covered Method(s) to the Covered Issue(s) for such APA Covered Year and supports those calculations with additional material that ties those calculations to the Financial Statements. The intent of this requirement is that the analysis submitted should provide a clear, complete, detailed, and self-contained means by which the IRS can verify compliance with the Covered Method(s). This requirement is further explained as follows: a. The additional material must support every numerical input to U.S. Taxpayer's calculations. b. The additional material could include, for example, consolidating financial statements, segmented financial data, and records from the general ledger. c. Where segmented data are used, U.S. Taxpayer must specify in detail how it accomplished the segmentation, including how it made allocations and apportionments, including (i) the definition and calculation of any apportionment keys used, and (ii) the calculations applying such keys. The inputs used for those various calculations must be tied to the Financial Statements. d. The additional material must be annotated sufficiently to let the IRS easily trace U.S. Taxpayer's entire calculations to objective, verifiable sources of data. e. Where needed for clarity, terms must be defined. 6. The financial results pertinent to the Covered Method(s), for such APA Covered Year and all prior years, entered along with data concerning the Covered Method(s) in an electronic results template available by contacting APMA. 7. [] _An organizational chart for Worldwide Group, revised annually to reflect all ownership or structural changes of the Covered Entities and any other entities that are relevant to the Covered Issue(s) or are otherwise relevant to the Covered Method(s). []* An organizational chart for a part of Worldwide Group that includes all Covered Entities and includes any other entities relevant to the Covered Issue(s) or Covered Method(s), revised annually to reflect all ownership or structural changes of entities that are involved in the Covered Issue(s) or are otherwise relevant to the Covered Issue(s) or Covered Method(s). 8. A valid IRS Form 2848 "Power of Attorney and Declaration of Representative" for any representative to receive notices under paragraph 16 of this APA. 9. A copy of the APA and any amendment. 10. A penalty of perjury statement, executed in accordance with Rev. Proc. 2015-41, sections 7.02(8) and (9). APPENDIX D APA ANNUAL REPORT SUMMARY FORM The APA Annual Report Summary on the next page is a required APA Record. APMA supplies some of the information requested on the form. U.S. Taxpayer is to supply the remaining information requested by the form and submit the form as part of its Annual Report. APA Information APA Annual Report Information: Date Annual Report Filed (to be filled in by APMA):

Private Letter Ruling Number: 202251008 Internal Revenue Service June 23, 2021 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Release Number: 202251008 Release Date: 12/23/2022 UIL CODE: 501.04-00 Date: June 23, 2021 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: CERTIFIED MAIL - RETURN RECEIPT REQUESTED Dear ******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(4), for the tax periods above. Your determination letter dated ******, is revoked. Our adverse determination as to your exempt status was made for the following reasons: You have failed to produce documents to establish that you are operated exclusively for exempt purposes within the meaning of IRC Section 501(c)(4), and that no part of your net earnings inure to the benefit of private shareholders or individuals. You failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures or activities as required by IRC Sections 6001, 6033(a)(1) and Rev.Rul. 59-95, 1959-1 C.B. 627. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit www.irs.gov. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims or 3) the United States District Court for the District of Columbia. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing an action for declaratory judgment by referring to the enclosed Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 U.S. Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 U.S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, DC 20001 Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.irs.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting www.irs.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. Keep the original letter for your records. Sincerely, Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: January 8, 2021 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(4). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(4) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Karen T. Hood for Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Publication 892 Publication 3498 Issue Whether ****** should be revoked for lack of response in not providing information regarding receipts, expenditures, activities; and not filing required forms for years ****** through ******; and quarterly forms ****** for tax periods ended ****** through ******. Facts ****** (******) formed ******, according to ****** Secretary of State office. Your full Articles of Incorporation is not viewable from the Secretary of State's website. You were granted exemption under Section 501(c)(4) of the Code ******. Your activities are described in Form ****** as providing ****** to ******, ****** and surrounding areas. Regulations 1.501(c)(4)-1(a)(2)(i) provides that an organization operates exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the community. Your organization was initially selected for a non-audit compliance check in ****** for failure to file forms ****** for tax periods ended ****** through ******. Three letters were issued requesting these non-filed returns: - Letter 4204 (Rev. 3-2018) with attachments were mailed to you ******, with a response date of ******. - Letter 3854 (Rev. 5-2015) with attachments were mailed to you ******, with a response date of ******. - Letter 4221 (Rev. 5-2014) was mailed to you ******, notifying you that your case was being forwarded for examination consideration because we had not heard from you. You were selected for audit to ensure examined organizational activities and operations align your approved exempt status. In addition, you were selected for audit to file required returns and to ensure compliance with federal tax requirements. You failed to respond to all Internal Revenue Service attempts to obtain information to perform an audit of Form ****** for tax period ending, ******, and to file all required tax returns. To-date, you have not filed forms ****** for years ****** through ******; and quarterly forms ****** for tax periods ended ****** through ******. We show Form ****** for year ending ******, is on extension through ******. - Correspondence for the audit was as follows: o Letter 3611 (Rev.8-2019) with attachments were mailed to you on ******, with a response date of ******, for mail-in response; and ******, at 9:00 am EST for a virtual conference telephone interview. o Letter 5798 (Rev.10-2016) with attachments were mailed to you on ******, with a response date of ******. o Letter 5077-D (9-2016) with attachments were mailed to you on ******, with a response date of ******. - Telephone contacts for the audit was as follows: o ******, Revenue Agent (RA) called the telephone number listed on form ****** return for year ending ******, for ****** who is listed on form ****** as board officer and chief. Left voicemail message. o ******, RA called ******. Left voice mail following up on recent letter issued to them, and to return call. o ******, RA called board officer, ******. Left voicemail following up on recent letter issued to them for info due today. Left message to return call today. o ******, RA called board officer-chief, ******, and board officer, ******. Left voicemail message to return the call. Reminded them of conference call scheduled for tomorrow, ******. o ******, RA called board officers ****** and ****** Spoke with ******, who stated ****** is not a board officer, and no board officer was there. ****** said ****** was not allowed to provide a board officer's direct telephone number. Per ******, on some days a board officer may come into the ****** disconnected the call when asked to confirm my office number provided to ******. I called back and no answer. Left voice mail message for board officers. o ******, RA called board officers ****** and ******. Left voice mail message for a board officers to return the call. o ******, RA called board officer ******. ****** voicemail didn't operate, so not able to leave a message. Called board officer ******. Left reminder message to send requested documents and to return the call. o ******, RA called board officers ****** and ****** for status of second request for documents. No voicemail operated to leave message at ****** telephone. Left voicemail message at ****** telephone to return the call including ******. o ******, RA called board officers ****** and ******. No answer and no voicemail operated for ******. ****** voicemail was full so unable to leave a message. o ******, No response. RA called ****** and no answer. RA called ****** and his voicemail box is full, so unable to leave a message. Law Internal Revenue Code (IRC) §1.61-1 of the regulations provides that Gross income means all income from whatever source derived, unless excluded by law. Gross income includes income realized in any form, whether in money, property, or services. Income may be realized, therefore, in the form of services, meals, accommodations, stock, or other property, as well as in cash. IRC §6001 of the Code provides that every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax under this title. IRC §1.6001-1(e) of the Code provides that the books or records required by this section shall be kept at all time available for inspection by authorized internal revenue officers or employees, and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law. IRC §6033(a)(1) of the Code provides, except as provided in section 6033(a)(2), every organization exempt from tax under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts and disbursements, and such other information for the purposes of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Section 1.6033.2(i)(2) of the Income Tax Regulations provides, in part, that every organization exempt from tax must submit information the IRS may inquire into its tax-exempt status. Failure to comply with our request for information could result in loss of your exempt status. Federal Tax Regulations (FTR) §1.6033-1(h)(2) of the regulations provides that every organization which has established its right to exemption from tax, whether or not it is required to file an annual return of information, shall submit such additional information as may be required by the district director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter F (section 501 and the following), chapter 1 of the Code and section 6033. Rev.Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The Service held that the failure or inability to file the required information return or otherwise to comply with the provisions of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status. IRC § 6652(c)(1) of the Code provides that in the case of a failure to file a return required under section 6033 on the date and in the manner prescribed therefore (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause there shall be paid (on notice and demand by the Secretary and in the same manner as tax) by the exempt organization or trust failure to file, $20 for each day during which such failure continues, but the maximum amount imposed hereunder on any organization for failure to file any one return shall not exceed the lesser of $10,000 or five (5) percent of-the gross receipts of the organization for the year. In the case of an organization having gross receipts exceeding $1,000,000 for any year, there is a $1,000 per day penalty for failure to file with a maximum penalty of $50,000. Taxpayer's Position ****** position is not known. Government's Position ****** failed to respond to all attempts to contact them. ****** is requested to provide comments and records to verify they comply with 501(c)(4) of the Code. ****** is requested to file all required forms ****** and quarterly forms ******. Under Section 1.6033-2(i)(2) of the Regulations, every organization exempt from tax, whether or not it is required to file an annual information return, shall submit additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status. During the examination, several requests for information were made, but you failed to supply the requested information. The organization has clearly failed to provide the requested information despite adequate notice as required by Section 1.6033-2(i)(2) of the Regulations. Revenue Ruling 59-95 states if an exempt organization fails to comply with the requirements of Section 6033 of the Code and its corresponding Regulations, the organization will no longer qualify for exempt status. As described in the previous paragraph, your organization has not complied with Section 1.6033-2(i)(2) of the Regulations since no reply to information document requests have been received. Per Revenue Ruling 59-95, you do not qualify for exempt status under Section 501(c)(3) of the Code since your organization has failed to provide the required information as prescribed by Regulations of Section 6033 of the Code. Conclusion: Based on the preceding reasons, you do not qualify for exemption under section 501(c)(4) and your tax-exempt status should be revoked. You failed to provide required information to our requests concerning your organizations' exempt status per Section 6033 of the Code; and our requests to file required returns. You failed to meet reporting requirements under sections 6001 and 6033 to be recognized as exempt from federal income tax under 501(c)(4) of the Internal Revenue Code. As described in Revenue Ruling 59-95, you do not qualify for exempt status under Section 501(c)(4) of the Code because you failed to comply with Regulations under Section 6033 of the Code. Accordingly, your exempt status is revoked effective ******. Form ****** returns should be filed for tax periods ending after ******.

Notice 2023-36 Internal Revenue Service 2023-21 I.R.B. 855 Public Recommendations Invited on Items to be Included on the 2023-2024 Priority Guidance Plan Notice 2023-36 The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) invite the public to submit recommendations for items to be included on the 2023-2024 Priority Guidance Plan. The Treasury Department's Office of Tax Policy and the IRS use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2023-2024 Priority Guidance Plan will identify guidance projects that the Treasury Department and the IRS intend to actively work on as priorities during the period from July 1, 2023, through June 30, 2024. The Treasury Department and the IRS recognize the importance of public input in formulating a Priority Guidance Plan that focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law. The published guidance process is most successful if the Treasury Department and the IRS have the benefit of the experience and knowledge of taxpayers and practitioners who must apply the rules implementing the tax laws. This solicitation reflects an emphasis on taxpayer engagement with the Treasury Department and the IRS through a variety of channels, consistent with the directive of the Taxpayer First Act, Pub. L. 116-25, 133 Stat. 981. In reviewing recommendations and selecting additional projects for inclusion on the 2023-2024 Priority Guidance Plan, the Treasury Department and the IRS will consider the following: 1. Whether the recommended guidance resolves significant issues relevant to a broad class of taxpayers; 2. Whether the recommended guidance reduces controversy and lessens the burden on taxpayers or the IRS; 3. Whether the recommended guidance relates to recently enacted legislation, such as the Inflation Reduction Act of 2022, Pub. L. No. 117-169 (August 16, 2022); 4. Whether the recommendation involves existing regulations or other guidance that is outdated, unnecessary, ineffective, insufficient, or unnecessarily burdensome and that should be modified, streamlined, expanded, replaced, or withdrawn; 5. Whether the recommended guidance promotes sound tax administration; 6. Whether the IRS can administer the recommended guidance on a uniform basis; and 7. Whether the recommended guidance can be drafted in a manner that will enable taxpayers to easily understand and apply the guidance. Please submit recommendations for guidance by Friday, June 9, 2023, for possible inclusion on the original 2023-2024 Priority Guidance Plan. Taxpayers may, however, submit recommendations for guidance at any time during the year. The Treasury Department and the IRS will update the 2023-2024 Priority Guidance Plan periodically to reflect additional guidance that the Treasury Department and the IRS intend to publish or have published during the plan year. The periodic updates allow the Treasury Department and the IRS to respond in a timely manner to the need for additional guidance that may arise during the plan year. Taxpayers are not required to submit recommendations for guidance in any particular format. Taxpayers should, however, briefly describe the recommended guidance and explain the need for the guidance. In addition, taxpayers may include an analysis of how the issue should be resolved. For recommendations to modify, streamline, or withdraw existing regulations or other guidance, taxpayers should explain how the changes would reduce taxpayer cost and/or burden or benefit tax administration. It would be helpful if taxpayers suggesting more than one guidance project prioritize the projects by order of importance. If a large number of projects are being suggested, it would be helpful if the projects were grouped by subject matter and then in terms of high, medium, or low priority. Requests for guidance in the form of petitions for rulemaking will be considered with other recommendations for guidance in accordance with the considerations described in this notice. Taxpayers are strongly encouraged to submit recommendations for guidance electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2023-0022 in the search field on the regulations.gov homepage to find this notice and submit recommendations). Taxpayers submitting recommendations by mail should send them to: Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2023-36) Room 5203 P.O. Box 7604 Ben Franklin Station Washington, D.C. 20044 All recommendations for guidance submitted by the public in response to this notice will be available for public inspection and copying in their entirety. For further information regarding this notice, contact Emily M. Lesniak of the Office of the Associate Chief Counsel (Procedure and Administration) at (202) 317-5409 (not a toll-free number).

Internal Revenue Service - Information Release IR-2022-45 Tax Time Guide: IRS reminds taxpayers to report gig economy income, virtual currency transactions, foreign source income and assets March 1, 2022 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 Tax Time Guide: IRS reminds taxpayers to report gig economy income, virtual currency transactions, foreign source income and assets IR-2022-45, March 1, 2022 WASHINGTON -- The Internal Revenue Service reminds taxpayers of their reporting and potential tax obligations from working in the gig economy, making virtual currency transactions, earning foreign-source income or holding certain foreign assets. Information available on IRS.gov and instructions on Form 1040 can help taxpayers in understanding and meeting these reporting and tax requirements. Gig economy earnings are taxable Generally, income earned from the gig economy is taxable and must be reported to the IRS. The gig economy is activity where people earn income providing on-demand work, services or goods. Often, it's through a digital platform like an app or website. Taxpayers must report income earned from the gig economy on a tax return, even if the income is: - From part-time, temporary or side work, - Not reported on an information return form - like a Form 1099-K, 1099-MISC, W-2 or other income statement or - Paid in any form, including cash, property, goods or virtual currency. For more information on the gig economy, visit the gig economy tax center. Understand virtual currency reporting and tax requirements The IRS reminds taxpayers that once again there is a question at the top of Form 1040 and Form 1040-SR asking about virtual currency transactions. All taxpayers filing these forms must check the box indicating either "yes" or "no." A transaction involving virtual currency includes, but is not limited to: - The receipt of virtual currency as payment for goods or services provided; - The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift; - The receipt of new virtual currency as a result of mining and staking activities; - The receipt of virtual currency as a result of a hard fork; - An exchange of virtual currency for property, goods or services; - An exchange/trade of virtual currency for another virtual currency; - A sale of virtual currency; and - Any other disposition of a financial interest in virtual currency. If an individual disposed of any virtual currency that was held as a capital asset through a sale, exchange or transfer, they should check "Yes" and use Form 8949 to figure their capital gain or loss and report it on Schedule D (Form 1040). If they received any virtual currency as compensation for services or disposed of any virtual currency they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1, or inventory or services from Schedule C on Schedule 1). More information on virtual currency can be found in the instructions for Form 1040 and on the Virtual Currencies page on IRS.gov. Report Foreign Source Income A U.S. citizen or resident alien's worldwide income is generally subject to U.S. income tax, regardless of where they live. They're also subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States. U.S. citizens and resident aliens must report unearned income, such as interest, dividends, and pensions, from sources outside the United States unless exempt by law or a tax treaty. They must also report earned income, such as wages and tips, from sources outside the United States. An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return. A taxpayer is allowed an automatic 2-month extension to June 15 if both their tax home and abode are outside the United States and Puerto Rico. Even if allowed an extension, a taxpayer will have to pay interest on any tax not paid by the regular due date of April 18, 2022. Those serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return also qualify for the extension to June 15. IRS recommends attaching a statement if one of these two situations apply. More information can be found in the instructions for Form 1040 and 1040-SR PDF, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad and Publication 519, U.S. Tax Guide for Aliens. Reporting required for foreign accounts and assets Federal law requires U.S. citizens and resident aliens to report their worldwide income, including income from foreign trusts and foreign bank and other financial accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located. In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details. Further, separate from reporting specified foreign financial assets on their tax return, taxpayers with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2020, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-filing System website. The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is the same as that of Form 1040. FinCEN grants filers who missed the original deadline an automatic extension until October 15, 2022, to file the FBAR. There is no need to request this extension. This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.

Internal Revenue Service - Information Release IR-2020-117 IRS reminder: Deadline postponed to July 15 for those who pay estimated taxes June 9, 2020 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS reminder: Deadline postponed to July 15 for those who pay estimated taxes IR-2020-117, June 9, 2020 WASHINGTON -- The Internal Revenue Service reminds taxpayers that estimated tax payments for tax year 2020, originally due April 15 and June 15, are now due July 15. This means that any individual or corporation that has a quarterly estimated tax payment due has until July 15 to make that payment without penalty. In response to the COVID-19 outbreak, the Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses. This relief applies to federal income tax returns and tax payments (including tax on self-employment income) otherwise due April 15, 2020. This relief does not apply to state tax payments or deposits or payments of any other type of federal tax. Who needs to pay quarterly? Most often, self-employed people, including many involved in the sharing economy, need to pay quarterly installments of estimated tax. Similarly, investors, retirees and others often need to make these payments. That's because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. Taxpayers can avoid an underpayment penalty by owing less than $1,000 at tax time or by paying most of their taxes during the year. Generally, for 2020 that means making payments of at least 90% of the tax expected on their 2020 return. Taxes are pay-as-you-go This means taxpayers need to pay most of their taxes owed during the year as income is received. There are two ways to do that: - Withholding from pay, pension or certain government payments such as Social Security; and/or - Making quarterly estimated tax payments during the year. Tax Withholding Estimator If a taxpayer receives salaries and wages, they can avoid having to pay estimated tax by asking their employer to withhold more tax from their earnings. To do this, they would file a new Form W-4. If a taxpayer receives a paycheck, the new and improved Tax Withholding Estimator can help them make sure they have the right amount of tax withheld from their pay. The tool is now more mobile friendly and replaces the Withholding Calculator on IRS.gov. The Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals and other taxpayers a clear, step-by-step method for effectively checking their withholding to protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. How to pay estimated taxes Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. IRS offers two free electronic payment options where taxpayers can schedule their estimated federal tax payments up to 30 days in advance with Direct Pay or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS). IRS.gov assistance 24/7 Tax help is available 24/7 on IRS.gov. The IRS website offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics, Frequently Asked Questions, and Tax Trails to get answers to common questions. More COVID-19 information The IRS will post frequently asked questions on IRS.gov/coronavirus and will provide updates as soon as they are available.

Private Letter Ruling Number: 202149002 Internal Revenue Service September 10, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202149002 Release Date: 12/10/2021 Index Number: 2010.04-00, 9100.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:4 PLR-106179-21 Date: September 10, 2021 Dear *******: This letter responds to a letter dated March 15, 2021, submitted on behalf of Decedent's estate, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make an election. Decedent's estate is requesting to make an election under § 2010(c)(5)(A) of the Internal Revenue Code (a "portability" election) to allow a decedent's surviving spouse to take into account that decedent's deceased spousal unused exclusion (DSUE) amount. The information submitted for consideration is summarized below. Decedent died on Date, survived by Spouse. It is represented that based on the value of Decedent's gross estate and taking into account any taxable gifts, Decedent's estate is not required under § 6018(a) to file an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return). It is further represented that there is an unused portion of Decedent's applicable exclusion amount and that a portability election is required to allow Spouse to take into account that amount (the "DSUE" amount)). A portability election is made upon the timely filing of a complete and properly prepared estate tax return, unless the requirements for opting out are satisfied. See § 20.2010-2(a)(2) of the Estate Tax Regulations. For various reasons, an estate tax return was not timely filed and a portability election was not made. After discovery of this, Decedent's estate submitted this request for an extension of time under § 301.9100-3 to make a portability election. LAW AND ANALYSIS Section 2001(a) imposes a tax on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States. Section 2010(a) provides that a credit of the applicable credit amount shall be allowed to the estate of every decedent against the tax imposed by § 2001. Section 2010(c)(1) provides that the applicable credit amount is the amount of the tentative tax that would be determined under § 2001(c) if the amount with respect to which such tentative tax is to be computed were equal to the applicable exclusion amount. On December 17, 2010, Congress amended § 2010(c), effective for estates of decedents dying and gifts made after December 31, 2010, to allow portability of a decedent's unused applicable exclusion amount between spouses. Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, § 303, 124 Stat. 3296, 3302 (2010). Section 2010(c)(2) provides that the applicable exclusion amount is the sum of the basic exclusion amount, and, in the case of a surviving spouse, the DSUE amount. Section 2010(c)(3) provides the basic exclusion amount available to the estate of every decedent, an amount to be adjusted for inflation annually after calendar year 2011. Section 2010(c)(4) defines the DSUE amount to mean the lesser of (A) the basic exclusion amount, or (B) the excess of -- (i) the applicable exclusion amount of the last deceased spouse of the surviving spouse, over (ii) the amount with respect to which the tentative tax is determined under § 2001(b)(1) on the estate of such deceased spouse. Section 2010(c)(5)(A) provides that a DSUE amount may not be taken into account by a surviving spouse under § 2010(c)(2) unless the executor of the estate of the deceased spouse files an estate tax return on which such amount is computed and makes an election on such return that such amount may be so taken into account. The election, once made, shall be irrevocable. No election may be made if such return is filed after the time prescribed by law (including extensions) for filing such return. Section 20.2010-2(a)(1) provides that the due date of an estate tax return required to elect portability is nine months after the decedent's date of death or the last day of the period covered by an extension (if an extension of time for filing has been obtained). Under § 20.2010-2(a)(1), an extension of time under § 301.9100-3 to make a portability election may be granted in the case of an estate that is not required to file an estate tax return under § 6018(a), as determined solely based on the value of the gross estate and any adjusted taxable gifts (and without regard to § 20.2010-2(a)). Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I. Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time to make an election whose due date is prescribed by a regulation (and not expressly provided by statute). Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. In this case, based on the representation as to the value of the gross estate and any adjusted taxable gifts, the time for filing the portability election is fixed by the regulations. Therefore, the Commissioner has discretionary authority under § 301.9100-3 to grant an extension of time for Decedent's estate to elect portability, provided Decedent's estate establishes it acted reasonably and in good faith, the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the interests of the government. Information, affidavits, and representations submitted on behalf of Decedent's estate explain the circumstances that resulted in the failure to timely file a valid election. Based solely on the information submitted and the representations made, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Therefore, we grant an extension of time of 120 days from the date of this letter in which to make the portability election. The election should be made by filing a complete and properly prepared Form 706 and a copy of this letter, within 120 days from the date of this letter, at the following address: Department of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999. For purposes of electing portability, a Form 706 filed by Decedent's estate within 120 days from the date of this letter will be considered to be timely filed. If it is later determined that, based on the value of the gross estate and taking into account any taxable gifts, Decedent's estate is required to file an estate tax return pursuant to § 6018(a), the Commissioner is without authority under § 301.9100-3 to grant an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void. See § 20.2010-2(a)(1). We neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. In particular, we express no opinion as to the DSUE amount to be potentially taken into account by Spouse. Any claimed DSUE amount will be included in the applicable exclusion amount of Spouse only to the extent that Spouse can substantiate such amount and will be subject to determination by the Director's office upon audit of relevant Federal gift or estate tax returns. See § 20.2010-3(c)(1) and (d). The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. Sincerely, Associate Chief Counsel (Passthroughs and Special Industries) Leslie H. Finlow _____________________________ By: Leslie H. Finlow Senior Technician Reviewer, Branch 4 Office of the Associate Chief Counsel (Passthroughs and Special Industries) Enclosure Copy for § 6110 purposes cc:

Revenue Procedure 2024-9 Internal Revenue Service 2024-5 I.R.B. 628 26 CFR 601.204: Changes in accounting periods and in methods of accounting. (Also, Part 1,§§ 174, 446, 460, 1.446-1.) Rev. Proc. 2024-9 SECTION 1. PURPOSE This revenue procedure modifies sections 7 and 19 of Rev. Proc. 2023-24, 2023-28 I.R.B. 1207, to provide procedures under§ 446 of the Internal Revenue Code (Code) 1 and§ 1.446-1(e) for obtaining automatic consent of the Commissioner of Internal Revenue (Commissioner) to change methods of accounting for expenditures paid or incurred in taxable years beginning after December 31, 2021, in reliance on interim guidance under§§ 174 and 460 provided in Notice 2023-63, 2023-39 I.R.B. 919, as modified by Notice 2024-12, this Bulletin. This revenue procedure also clarifies section 9 of Rev. Proc. 2023-24 to provide that section 5 of Rev. Proc. 2000-50 is obsoleted for costs of developing computer software paid or incurred in any taxable year beginning after December 31, 2021, and continues to apply to costs of developing computer software paid or incurred in any taxable year beginning on or before December 31, 2021. References in this revenue procedure to "former§ 174" refer to that section as in effect for research or experimental expenditures paid or incurred in taxable years beginning before January 1, 2022, that is, prior to the effective date of the amendments made to§ 174 by§ 13206(a) of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA). References to "§ 174" in this revenue procedure refer to§ 174 as amended by the TCJA. ******** 1 Unless otherwise specified, all "section" or "§" references are to sections of the Code or the Income Tax Regulations (26 CFR part 1). ******** SECTION 2. BACKGROUND.01 Treatment of research and experimental expenditures under former§ 174. Former§ 174 allowed taxpayers to elect to deduct research or experimental expenditures paid or incurred in connection with a trade or business as current expenses, to capitalize and amortize such expenditures over a period of not less than 60 months, or to charge such expenditures to capital account..02 Treatment of SRE expenditures under§ 174. (1) Section 13206(a) of the TCJA amended former§ 174 for amounts paid or incurred in taxable years beginning after December 31, 2021. For amounts paid or incurred in taxable years beginning after December 31, 2021, that meet the definition of specified research or experimental (SRE) expenditures under§ 174(b),§ 174(a)(1) disallows deductions for such amounts, except as provided in§ 174(a)(2). Section 174(a)(2) requires taxpayers to charge SRE expenditures to capital account and allows amortization deductions of such capitalized expenditures ratably over the applicable§ 174 amortization period, beginning with the midpoint of the taxable year in which such expenditures are paid or incurred. As used in this revenue procedure, the term "applicable§ 174 amortization period" refers to a 5-year period in the case of SRE expenditures attributable to domestic research, or a 15-year period in the case of SRE expenditures attributable to foreign research. Section 13206(a) of the TCJA also made other amendments to former§ 174, including amendments to treat any cost to develop computer software as an SRE expenditure and to prevent the accelerated recovery of unamortized SRE expenditures on account of the disposition, retirement, or abandonment of property with respect to which such expenditures were paid or incurred. For additional background on former§ 174 and the TCJA amendments to former§ 174, see section 2 of Notice 2023-63. (2) Section 13206(b) of the TCJA requires taxpayers to treat the amendments made by section 13206(a) of the TCJA as a change in method of accounting for purposes of§ 481 that is (i) initiated by the taxpayer, (ii) made with the consent of the Secretary of the Treasury or her delegate, and (iii) applied on a cut-off basis to SRE expenditures paid or incurred in taxable years beginning after December 31, 2021. Thus, no adjustments under§ 481(a) are required or permitted with respect to research or experimental expenditures paid or incurred in taxable years beginning before January 1, 2022..03 Treatment of SRE expenditures under§ 460. Section 460(a) generally requires use of the percentage-of-completion method (PCM) to account for taxable income from a long-term contract. Section 1.460-4(b)(2)(i) provides that under the PCM, the portion of the contract price a taxpayer must report in a taxable year corresponds to the ratio of incurred allocable contract costs to total estimated allocable contract costs. This ratio represents the portion of a contract considered completed for purposes of the PCM. Under the PCM, a taxpayer generally deducts allocable contract costs as they are incurred. Thus, under§ 1.460-4(b)(2)(iv), an increase in the percentage of the contract price to be reported is generally matched by deduction of the incurred costs that cause the increase. Under the current§ 460 regulations in§ 1.460-5(b)(2)(vi), allocable contract costs include research or experimental expenses, other than independent research and development expenses. Thus, when these expenses are incurred, they increase the portion of a contract considered completed and the percentage of the contract price required to be reported. The current§ 460 regulations were drafted with respect to taxable years in which a taxpayer could currently deduct research or experimental expenses under former§ 174. Section 174(a) requires that SRE expenditures be charged to capital account and deducted over the applicable§ 174 amortization period. As a result, under the current§ 460 regulations, incurred SRE expenditures increase the percentage of the contract price required to be reported, although§ 174(a) prevents a corresponding current deduction of those incurred SRE expenditures..04 Procedural guidance under Rev. Proc. 2023-11. (1) On December 29, 2022, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) issued Rev. Proc. 2023-11, 2023-3 I.R.B. 417, modifying and superseding Rev. Proc. 2023-8, 2023-3 I.R.B. 407, to provide procedures to obtain automatic consent to change methods of accounting for SRE expenditures to comply with§ 174. The change in method of accounting provided by Rev. Proc. 2023-11 was subsequently included in section 7.02 of Rev. Proc. 2023-24. (2) Section 7.02(4)(a) of Rev. Proc. 2023-24 implements the requirement imposed by§ 13206(b) of the TCJA that a taxpayer must make a change in method of accounting to comply with§ 174 on a cut-off basis if the change is made for the taxpayer's first taxable year beginning after December 31, 2021. Section 7.02(4)(a) of Rev. Proc. 2023-24 also provides that the requirement of§ 1.446-1(e)(3)(i) to file a Form 3115, Application for Change in Accounting Method, is waived, and a statement in lieu of a Form 3115 is authorized for the change in method of accounting for which the year of change is the first taxable year beginning after December 31, 2021. However, section 7.02(4)(b) of Rev. Proc. 2023-24 provides that a taxpayer making the change for a taxable year subsequent to the taxpayer's first taxable year beginning after December 31, 2021, is required to make that change with a modified§ 481(a) adjustment that takes into account only SRE expenditures paid or incurred in taxable years beginning after December 31, 2021, and is required to file a Form 3115. (3) Section 7.02(6) of Rev. Proc. 2023-24 waives the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 (regarding changes made in the previous 5 years for the same item) for changes to comply with§ 174 for the taxpayer's first taxable year beginning after December 31, 2021. (4) Section 7.02(7) of Rev. Proc. 2023-24 provides that a taxpayer that changes its method of accounting for SRE expenditures under Rev. Proc. 2023-24 will receive limited audit protection. Specifically, audit protection will not apply for expenditures paid or incurred in taxable years beginning on or before December 31, 2021. Audit protection also will not apply for expenditures paid or incurred in taxable years beginning after December 31, 2021, if a change in method of accounting is made for the taxable year immediately subsequent to the first taxable year beginning after December 31, 2021..05 Interim guidance under Notice 2023-63. (1) Notice 2023-63 was issued on September 8, 2023, to announce that the Treasury Department and the IRS intend to issue proposed regulations addressing (1) the capitalization and amortization of SRE expenditures under§ 174, (2) the treatment of SRE expenditures under§ 460, and (3) the application of§ 482 to cost sharing arrangements involving SRE expenditures. Sections 3 through 9 of Notice 2023-63 provide interim guidance regarding issues intended to be addressed by forthcoming proposed regulations. Section 3 of Notice 2023-63 provides interim guidance regarding the requirement to capitalize and amortize SRE expenditures, SRE expenditures attributable to foreign research, and the determination of the midpoint of a taxable year (including a short taxable year). Section 4 of Notice 2023-63 provides interim guidance regarding the definition of SRE expenditures and SRE activities, the types of expenditures that are SRE expenditures, the allocation of such expenditures to SRE activities, and the consistent treatment of SRE expenditures under other provisions of the Code. Section 5 of Notice 2023-63 provides interim guidance regarding activities that constitute software development, expenditures in connection with which are SRE expenditures. Section 6 of Notice 2023-63 provides interim guidance regarding the treatment of expenditures for research performed under a contract. Section 7 of Notice 2023-63 provides interim guidance regarding the treatment of unamortized SRE expenditures if the property with respect to which such expenditures were paid or incurred is disposed of, retired, or abandoned. Section 8 of Notice 2023-63 provides interim guidance regarding the application of the PCM under§ 460 if allocable contract costs include SRE expenditures and allows taxpayers to treat only the amortization of incurred SRE expenditures as increasing the percentage of the contract price required to be reported. Section 9 of Notice 2023-63 provides interim guidance regarding the treatment under§1.482-7 of cost sharing transaction payments in certain cost sharing arrangements that involve SRE activities. (2) Section 10.01 of Notice 2023-63, as modified by Notice 2024-12, provides that taxpayers may rely on the rules in sections 3 through 9 of Notice 2023-63 prior to the publication date of the forthcoming proposed regulations in the Federal Register for expenditures paid or incurred in taxable years beginning after December 31, 2021. However, taxpayers may not rely on the rules in section 7 of the notice regarding the treatment of SRE expenditures paid or incurred with respect to property that is contributed to, distributed from, or transferred from a partnership. (3) Section 10.02 of Notice 2023-63 provides that the Treasury Department and the IRS intend to issue guidance to provide procedures for taxpayers to obtain automatic consent to change methods of accounting to rely on the notice. Notice 2023-63 provides that taxpayers may rely on section 7.02 of Rev. Proc. 2023-24 to change their methods of accounting under§ 174 to rely on Notice 2023-63 until the issuance of such procedural guidance. This revenue procedure provides such procedural guidance. (4) Section 12 of Notice 2023-63, as clarified by Notice 2024-12, provides that for amounts paid or incurred in taxable years beginning after December 31, 2021, section 5 of Rev. Proc. 2000-50 is removed as obsolete. Section 5 of Rev. Proc. 2000-50 continues to apply to amounts paid or incurred in taxable years beginning on or before December 31, 2021. Section 3 of this revenue procedure clarifies section 9.01 of Rev. Proc. 2023-24 to provide that section 5 of Rev. Proc. 2000-50 is obsolete for costs of developing computer software paid or incurred in any taxable year beginning after December 31, 2021, and continues to apply to costs of developing computer software paid or incurred in any taxable year beginning on or before December 31, 2021..06 Changing methods of accounting under section 446(e). (1) Except as otherwise expressly provided in the Code and the regulations thereunder,§ 446(e) and§ 1.446-1(e)(2) require a taxpayer to secure the consent of the Commissioner before changing a method of accounting for Federal income tax purposes. Section 1.446-1(e)(3)(i) states, in part, that except as otherwise provided under the authority of§ 1.446-1(e)(3)(ii), to secure the Commissioner's consent to a taxpayer's change in method of accounting the taxpayer generally must file a Form 3115, Application for Change in Accounting Method, with the Commissioner during the taxable year in which the taxpayer desires to make the change in method of accounting. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures under which taxpayers will be permitted to change their method of accounting. The administrative procedures will prescribe those terms and conditions necessary to obtain the Commissioner's consent to effect the change and to prevent amounts from being duplicated or omitted. (2) Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, and as modified by Rev. Proc. 2021-34, 2021-35 I.R.B. 337, Rev. Proc. 2021-26, 2021-22 I.R.B. 1163, Rev. Proc. 2017-59, 2017-48 I.R.B. 543, and section 17.02(b) and (c) of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, sets forth the general administrative procedures by which a taxpayer may obtain the automatic consent of the Commissioner to change a method of accounting described in the List of Automatic Changes. Rev. Proc. 2023-24 contains the current List of Automatic Changes. (3) A change in a taxpayer's treatment of expenditures paid or incurred in taxable years beginning after December 31, 2021, to rely on the interim guidance in sections 3 through 7 of Notice 2023-63 is generally a change in method of accounting to which§§ 446(e) and 481, and the corresponding regulations, apply. Further, a change to rely on the interim guidance in section 8 of Notice 2023-63 in determining income from a long-term contract under the PCM is generally a change in method of accounting to which§§ 446(e) and 481, and the corresponding regulations, apply. A taxpayer that changes its method of accounting to rely on the interim guidance in sections 3 through 8 of Notice 2023-63 must use the accounting method change procedures in Rev. Proc. 2015-13 or its successor. Section 3 of this revenue procedure modifies Rev. Proc. 2023-24 to, among other things, allow taxpayers to obtain automatic consent to change their method of accounting to rely on the interim guidance provided in sections 3 through 8 of Notice 2023-63 for taxable years beginning after December 31, 2021. (4) Pursuant to section 2.07 of Rev. Proc. 2015-13, if a change in method of accounting is made without a§ 481(a) adjustment (for example, on a cut-off basis), in general, only the items subject to the method change arising on or after the beginning of the year of change, or other operative date, are accounted for under the method of accounting for which consent is granted. Any items arising before the year of change, or other operative date, continue to be accounted for under the taxpayer's former method of accounting. If a change in method of accounting is made on a cut-off basis, no amounts are duplicated or omitted, and therefore, a§ 481(a) adjustment is not necessary or permitted. (5) In accordance with§ 13206(b) of the TCJA, a change in a taxpayer's method of accounting to comply with§ 174, including a change to rely on the interim guidance in sections 3 through 7 of Notice 2023-63, for the first taxable year that the amendments made by§ 13206(a) of the TCJA are effective, must be made on a cut-off basis. The procedures in section 3 of this revenue procedure provide that an automatic change in method of accounting to comply with§ 174, including a change in method of accounting to rely on the interim guidance in sections 3 through 7 of Notice 2023-63, may be made by filing a statement with the taxpayer's original Federal income tax return for the first taxable year in which§ 174 becomes effective, in lieu of a Form 3115. If a change in method of accounting to comply with§ 174, including a change in method of accounting to rely on the interim gudiance in sections 3 through 7 of Notice 2023-63, is made for a taxable year subsequent to the taxable year of the taxpayer in which§ 174 becomes effective, the change is made by filing a Form 3115, with a modified§ 481(a) adjustment that takes into account only expenditures paid or incurred in taxable years beginning after December 31, 2021. (6) Under§ 1.460-5(g), a change in a taxpayer's method of allocating costs to its long-term contracts must be made on a cut-off basis, with the change applying only to contracts entered into on or after the year of change. The Treasury Department and the IRS, however, intend to amend the regulation to permit changes made to rely on section 8 of Notice 2023-63 to be made on the same cut-off basis or modified cut-off basis, as applicable, as changes made to rely on sections 3 through 7 of the notice (that is, changes applicable to allocable contract costs paid or incurred in taxable years beginning after December 31, 2021). (7) A taxpayer that changes its method of accounting under section 7.02 of Rev. Proc. 2023-24, as modified by section 3 of this revenue procedure, will receive limited audit protection under section 8.01 of Rev. Proc. 2015-13. Consistent with current section 7.02(7) of Rev. Proc. 2023-24, audit protection will not apply for expenditures paid or incurred in taxable years beginning on or before December 31, 2021. Audit protection also will not apply for expenditures paid or incurred in the taxpayer's first taxable year beginning after December 31, 2021, if a change in method of accounting to comply with§ 174, including a change in method of accounting to rely on the interim gudiance in sections 3 through 7 of Notice 2023-63, is made for the taxpayer's taxable year immediately subsequent to such taxable year and the taxpayer did not make a change in method of accounting for such expenditures for its first taxable year beginning after December 31, 2021. (8) A taxpayer that changes its method of accounting under section 19.02 of Rev. Proc. 2023-24, as added by section 3 of this revenue procedure, to change its method of accounting under§ 460 to rely on the interim guidance provided in section 8 of Notice 2023-63 will receive limited audit protection under section 8.01 of Rev. Proc. 2015-13. Consistent with section 7.02(7) of Rev. Proc. 2023-24, audit protection will not apply for expenditures paid or incurred in taxable years beginning on or before December 31, 2021. SECTION 3. MODIFICATIONS TO REV. PROC. 2023-24.01 Modification of section 7 of Rev. Proc. 2023-24. Section 7.02 of Rev. Proc. 2023-24, is modified to read as follows:.02 Change in Method of Accounting for SRE Expenditures. (1) Description of change. (a) In general. This change applies to a taxpayer that wants to change its method of accounting for expenditures paid or incurred in taxable years beginning after December 31, 2021, to: (i) comply with§ 174, as amended by§ 13206(a) of the TCJA; or (ii) rely on interim guidance provided in sections 3, 4, 5, 6, or 7 of Notice 2023-63, 2023-39 I.R.B. 919, as modified by Notice 2024-12, 2024-5 I.R.B. 616. (b) References to§ 174. Unless otherwise stated, references to "§ 174" in this section 7.02 refer to§ 174 as amended by§ 13206(a) of the TCJA. Section 13206(e) of the TCJA provides that the amendments made by§ 13206 of the TCJA apply to amounts paid or incurred in taxable years beginning after December 31, 2021. (c) Changes included in section 7.02(1)(a) of this revenue procedure. The changes described in section 7.02(1)(a) of this revenue procedure include, among other changes, a change: (i) from capitalizing specified research or experimental (SRE) expenditures, as defined in§ 174(b) and section 4.02(2) of Notice 2023-63, as applicable, to inventoriable property or depreciable property and recovering such expenditures through cost of goods sold or depreciation, respectively, to capitalizing and amortizing such expenditures under§ 174(a) or section 3.02 of Notice 2023-63, as applicable; and (ii) from treating an expenditure that does not meet the definition of an SRE expenditure as an SRE expenditure subject to capitalization and amortization under§ 174(a) or section 3.02 of Notice 2023-63, as applicable, to treating that expenditure under the appropriate provision of the Code. (2) Inapplicability. The change described in section 7.02(1)(a) of this revenue procedure does not apply to: (a) a change in the treatment of acquired, leased, or licensed computer software under Rev. Proc. 2000-50, 2000-2 C.B. 601, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358 (see section 9.01 of this revenue procedure); (b) a change in the treatment of research or experimental expenditures under former§ 174 (that is,§ 174 as in effect prior to the amendments made by§ 13206(a) of the TCJA), or software development expenditures, paid or incurred in taxable years beginning before January 1, 2022 (see sections 7.01 and 9.01 of this revenue procedure, respectively); or (c) a change from treating SRE expenditures paid or incurred by a taxpayer that transfers related property (that is, property with respect to which such SRE expenditures were paid or incurred) in a§ 351 exchange as amortizable by the transferee corporation following such exchange to treating such SRE expenditures as amortizable by the transferor following such exchange (as such a change is not a change in method of accounting). (3) Manner of making change. (a) Year of change is the first taxable year beginning after December 31, 2021. (i) Cut-off basis. A change under section 7.02(1)(a) of this revenue procedure for the taxpayer's first taxable year beginning after December 31, 2021, is implemented on a cut-off basis. (ii) Statement in lieu of a Form 3115 for first taxable year beginning after December 31, 2021. The requirement of§ 1.446-1(e)(3)(i) to file a Form 3115, Application for Change in Accounting Method, is waived, and a statement in lieu of a Form 3115 is authorized for the change in method of accounting under section 7.02(1)(a) of this revenue procedure for which the year of change is the taxpayer's first taxable year beginning after December 31, 2021. Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, the statement in lieu of a Form 3115 that is permitted under this section 7.02(3)(a)(ii) is considered a Form 3115 for purposes of the automatic change procedures of Rev. Proc. 2015-13. The requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13, is waived. The statement must include the following information for each applicant: (A) the name and employer identification number or social security number, as applicable, of the applicant that has paid or incurred expenditures after December 31, 2021; (B) the beginning and ending dates of the first taxable year in which the change described in section 7.02(1)(a) takes effect for the applicant (year of change); (C) the designated automatic accounting method change number for this change (see section 7.02(7) of this revenue procedure); (D) a general description of the type of expenditures included as SRE expenditures; (E) the amount of SRE expenditures paid or incurred by the applicant during the year of change; and (F) a declaration that the applicant is changing its method of accounting to capitalize SRE expenditures to a SRE capital account, and amortize the capitalized amount over either a 5-year period for domestic research or a 15-year period for foreign research (as applicable), beginning with the mid-point of the taxable year in which such expenditures are paid or incurred in accordance with§ 174 or sections 3 through 7 of Notice 2023-63, as applicable. Also, the declaration must state that the applicant is making the change on a cut-off basis. (b) Year of change later than the first taxable year beginning after December 31, 2021. (i) Modified§ 481(a) adjustment and cut-off. (A) In general. Except as provided in section 7.02(3)(b)(i)(B) of this revenue procedure, the change under section 7.02(1)(a) of this revenue procedure for a year of change later than the first taxable year beginning after December 31, 2021, is made with a modified§ 481(a) adjustment that takes into account only expenditures paid or incurred in taxable years beginning after December 31, 2021. (B) Exception for negative modified§ 481(a) adjustment. If a change described in section 7.02(3)(b)(i)(A) of this revenue procedure results in a modified§ 481(a) adjustment that is negative, the taxpayer may instead choose to implement the change on a cut-off basis. (ii) Form 3115 and required statement. In completing a Form 3115, Application for Change in Accounting Method, to make the change in method of accounting under section 7.02(1)(a) of this revenue procedure for a year of change later than the first taxable year beginning after December 31, 2021, a taxpayer must include on an attachment to the Form 3115: (A) a general description of the type of expenditures included as SRE expenditures; (B) the taxable year(s) in which the expenditures subject to the change were paid or incurred by the applicant; and (C) a declaration that provides the reason for which the applicant is changing its method of accounting under section 7.02(1)(a) of this revenue procedure. The declaration must also state whether the applicant is making the change on a cut-off basis under section 7.02(3)(b)(i)(B) of this revenue procedure or with a modified§ 481(a) adjustment that takes into account only expenditures paid or incurred in taxable years beginning after December 31, 2021, under section 7.02(3)(b)(i)(A) of this revenue procedure. (4) Transition rule. A taxpayer who filed a Federal tax return on or before January 17, 2023, for a taxable year beginning after December 31, 2021, is deemed to have complied with the§ 446 method change procedures and section 7.02 of this revenue procedure to change its method of accounting for expenditures paid or incurred in the first taxable year beginning after December 31, 2021, to comply with§ 174 if the taxpayer: (a) reported the amount of SRE expenditures paid or incurred for such taxable year on Part VI of Form 4562, Depreciation and Amortization, filed with the Federal tax return, and (b) properly capitalized and amortized such SRE expenditures in accordance with§ 174 for such taxable year. (5) Certain eligibility rule inapplicable. (a) In general. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to a change described in section 7.02(1)(a) of this revenue procedure for the taxpayer's first or second taxable year beginning after December 31, 2021. (b) Changes made in successive taxable years. A taxpayer may make a change described in section 7.02(1)(a) of this revenue procedure for its second taxable year beginning after December 31, 2021, regardless of whether the taxpayer made, or purported to make, a change for the same item for its first taxable year beginning after December 31, 2021. (6) Limited audit protection. A taxpayer does not receive audit protection under section 8.01 of Rev. Proc. 2015-13 for a change under section 7.02(1)(a) of this revenue procedure with respect to expenditures paid or incurred in taxable years beginning on or before December 31, 2021. Additionally, a taxpayer does not receive audit protection under section 8.01 of Rev. Proc. 2015-13 for a change under section 7.02(1)(a) of this revenue procedure in the second taxable year beginning after December 31, 2021, with respect to expenditures paid or incurred in the first taxable year beginning after December 31, 2021, if the taxpayer did not make, or attempt to make, a change described in section 7.02(1)(a) for the first taxable year beginning after December 31, 2021. See section 8.02(2) of Rev. Proc. 2015-13. (7) Designated automatic accounting method change number. The designated automatic accounting method change number for a change under section 7.02(1)(a)(i) of this revenue procedure is "265." The designated automatic accounting method change number for a change under section 7.02(1)(a)(ii) of this revenue procedure is "270." (8) No inference relating to expenditures paid or incurred in taxable years prior to the first taxable year in which§ 174 becomes effective. No inference may be drawn from section 7.02 of this revenue procedure regarding the treatment of expenditures paid or incurred in, and changes in methods of accounting for, taxable years in which former§ 174 was in effect, including issues relating to the application of§§ 1.174-1, 1.174-2, 1.174-3, and 1.174-4 for taxable years in which former§ 174 was in effect. (9) No ruling on method used. The consent granted under section 9 of Rev. Proc. 2015-13 for a change made under section 7.02(1)(a)(i) of this revenue procedure is not a determination by the Commissioner that the new method of accounting is a permissible method of accounting, nor does it create any presumption that the new method of accounting is a permissible method of accounting. The director will ascertain whether the new method of accounting is a permissible method of accounting. (10) Contact information. For further information regarding a change under this section, contact Bruce Chang at (202) 317-7005 (not a toll-free number)..02 Clarification of section 9 of Rev. Proc. 2023-24. Section 9.01 of Rev. Proc. 2023-24 is clarified to provide that section 5 of Rev. Proc. 2000-50 (costs of developing computer software) applies to costs of developing computer software paid or incurred in any taxable year beginning on or before December 31, 2021. (1) Section 9.01(1) of Rev. Proc. 2023-24 is clarified to read as follows: (1) Description of change. This change applies to a taxpayer that wants to change its method of accounting for the costs of computer software to a method described in Rev. Proc. 2000-50, 2000-2 C.B. 601, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358. Section 5 of Rev. Proc. 2000-50 describes the methods applicable to the costs of developing computer software. Section 6 of Rev. Proc. 2000-50 describes the method applicable to the costs of acquired computer software. Section 7 of Rev. Proc. 2000-50 describes the method applicable to leased or licensed computer software. Section 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA), amended§ 174 to treat the costs of software development as research or experimental expenditures, effective for amounts paid or incurred in taxable years beginning after December 31, 2021. Section 12 of Notice 2023-63, 2023-39 I.R.B. 919, as modified by Notice 2024-12, provides that, as a result of the TCJA amendments to§ 174 and the rules in sections 3 through 5 of Notice 2023-63, section 5 of Rev. Proc. 2000-50 is obsolete for costs of developing software paid or incurred in taxable years beginning after December 31, 2021. Accordingly, section 5 of Rev. Proc. 2000-50 (costs of developing computer software) applies only to costs of developing computer software paid or incurred in any taxable year beginning on or before December 31, 2021. (2) Section 9.01(3) of Rev. Proc. 2023-24 is clarified to read as follows: (3) Inapplicability. This change does not apply to costs of developing computer software that are paid or incurred in taxable years beginning after December 31, 2021..03 Modification of section 19 of Rev. Proc. 2023-24. Section 19 of Rev. Proc. 2023-24 is modified to add new section 19.02 to read as follows:.02 Change to rely on the interim guidance provided in section 8 of Notice 2023-63, 2023-39 I.R.B. 919. (1) Description of change. This change applies to a taxpayer that wants to change its method of accounting under§ 460 to rely on the interim guidance provided in section 8 of Notice 2023-63, 2023-39 I.R.B. 919, so that the costs allocable to a long-term contract accounted for using the PCM include amortization deductions of specified research or experimental (SRE) expenditures, as defined in§ 174(b) and section 4.02(2) of Notice 2023-63, as applicable, under§ 174(a)(2)(B), rather than the capitalized amount of such expenditures, and the amortization deductions of such expenditures is treated as incurred for purposes of determining the percentage of contract completion in the taxable year the amortization is deducted. For purposes of determining the percentage of contract completion, estimated total allocable contract costs include either (1) all amortization of SRE expenditures that directly benefit or are incurred by reason of the performance of the long-term contract, or (2) only that portion of such amortization expected to be incurred and deducted during the term of the contract. A taxpayer using the first alternative is required to report any portion of the contract price not previously reported by the taxable year following the taxable year in which the contract is completed, notwithstanding that some portion of the SRE expenditures remain unamortized. See§ 460(b)(1). (2) Inapplicability. This change does not apply to: (a) A change in method of accounting under§ 460 with respect to expenditures capitalized under§ 59(e)(2)(B), or under§ 174(b) prior to its amendment by§ 13206(a) of the TCJA. (b) A change in method of accounting for independent research and development expenditures, as defined in§ 460(c)(5), which are not allocable contract costs. (c) Any contract not accounted for under the PCM, as described in§ 460(b)(1) and§ 1.460-4(b)(2), as of the beginning of the year of change. (3) Manner of making change. (a) Cut-off basis. A change under section 19.02(1) of this revenue procedure for the taxpayer's first taxable year beginning after December 31, 2021, applies to the§ 460 treatment of SRE expenditures paid or incurred in taxable years beginning after December 31, 2021. Accordingly, such change is made on a cut-off basis, and applies to all long-term contracts for which an SRE expenditure is an allocable contract cost, including long-term contracts entered into before the beginning of the year of change. A taxpayer making this change does not recompute its taxable income under§ 1.460-4(b) for any taxable year beginning on or before December 31, 2021. (b) Modified§ 481(a) adjustment or cut-off basis. (i) In general. Except as provided in section 19.02(3)(b)(ii) of this revenue procedure, a change under section 19.02(1) of this revenue procedure for a year of change later than the first taxable year beginning after December 31, 2021, is made with a modified§ 481(a) adjustment that takes into account the§ 460 treatment of SRE expenditures paid or incurred in taxable years beginning after December 31, 2021. Such change applies to all long-term contracts for which an SRE expenditure is an allocable contract cost, including long-term contracts entered into before the beginning of the year of change. (ii) Exception for negative modified§ 481(a) adjustment. If a change described in section 19.02(3)(b)(i) of this revenue procedure results in a modified§ 481(a) adjustment that is negative, the taxpayer may instead choose to implement the change on a cut-off basis. (4) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to a change described in section 19.02(1) of this revenue procedure for the taxpayer's first or second taxable year beginning after December 31, 2021. (5) Limited audit protection. A taxpayer does not receive audit protection under section 8.01 of Rev. Proc. 2015-13 for a change under section 19.02(1) of this revenue procedure with respect to the§ 460 treatment of expenditures paid or incurred in taxable years beginning on or before December 31, 2021. (6) Designated automatic accounting method change number. The designated automatic accounting method change number for a change under section 19.02 of this revenue procedure is "271." (7) Contact information. For further information regarding a change under section 19.02 of this revenue procedure, contact John Aramburu at (202) 317-7006 (not a toll-free number). SECTION 4. EFFECT ON OTHER DOCUMENTS This revenue procedure modifies sections 7 and 19, and clarifies section 9, of Rev. Proc. 2023-24. SECTION 5. EFFECTIVE DATE This revenue procedure is effective for Forms 3115 filed on or after December 22, 2023. SECTION 6. PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget under OMB control numbers 1545-0074 for individual filers and 1545-0123 for business filers, in accordance with the Paperwork Reduction Act (44 U.S.C.§ 3507(d)). 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, which adds section 7.02(3)(a)(ii) and (3)(b)(ii) to Rev. Proc. 2023-24. This information is necessary and will be used to determine whether the taxpayer properly changed to a permitted method of accounting. The collections of information are required for a taxpayer to obtain consent to change its method of accounting. SECTION 7. DRAFTING INFORMATION The principal author of this revenue procedure is Bruce Chang of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, please contact Mr. Chang at (202) 317-7005 (not a toll-free number).

Private Letter Ruling Number: 202138010 Internal Revenue Service June 28, 2021 Department of the Treasury Internal Revenue Service Independent Office of Appeals Number: 202138010 Release Date 9/24/2021 Date: JUN 28 2021 Person to contact: Name: Employee ID number: Telephone: Fax: Hours: Employer ID number: Uniform Issue List (UIL): 501.03-20 504.02-00 501.35-00 Certified Mail Dear ******: This is a final adverse determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (the "Code") Section 501(a) as an organization described in Section 501(c)(3) of the Code. We made the adverse determination for the following reasons: You are not organized and operated exclusively for exempt purposes. Your activities are illegal under federal law and violate public policy. You are also not a church or a convention or association of churches within the meaning of section 170(b)(1)(A)(i) of the code. You're required to file federal income tax returns on Form 1120, U.S. Corporation income Tax Return. Mail your form to the appropriate Internal Revenue Service Center per the form's instructions. You can get forms and instructions by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). We'll make this letter and the proposed adverse determination letter available for public inspection under Section 6110 of the Code after deleting certain identifying information. We provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437. We will return the administrative file when possible. If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. Contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment. You can write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 US Court of Federal Claims 717 Madison Place, NW Washington, DC 20005 US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 Note: We will not delay processing income tax returns and assessing any taxes due even if you file a petition for declaratory judgment under Section 7428 of the Code. You also have the right to contact the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify fur TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. TAS assistance is not a substitute for established IRS procedures, such as the formal appeals process. TAS cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States Court. If you have questions, contact the person at the top of this letter. Sincerely Enclosures: cc: Department of the Treasury Internal Revenue Service Date: JUN 28 2021 Employer ID number: Contact person/ID number: Contact telephone number: Contact fax number: UIL: 501.03-20 504.02-00 501.35-00 Dear ******: We considered your application for recognition of exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a). We determined that you don't qualify for exemption under IRC Section 501(c)(3). This letter explains the reasons for our conclusion. Please keep it for your records. Issues Do you qualify for exemption under IRC Section 501(c)(3)? No, for the reasons stated below. Facts You were formed on B, in the state of C. Your Articles of Incorporation state that your purposes include offering the public access to spiritual growth, development and healing through the sacred sacrament of D provided under the guidelines of ****** traditions and cultural values. In addition, you provide education, guidance and support to ceremony participants. Finally, you provide access to various healing modalities such as group meditation and Reiki. Your articles also contain a dissolution clause ensuring that your assets will be distributed for Section 501(c)(3) purposes if you dissolve. Your Form 1023 states that your mission is to inspire individuals to seek and embrace authentic, self-realized healing of the mind, body and spirit using the sacred, indigenous plant-medicine D. You will also provide veterans the opportunity to access healing programs unique to their recovery for free and/or a reduced cost. You will accomplish your purposes in a variety of ways including the operation of a spiritual church that conducts regular worship services, the operation of adult integration and communion meetings, various educational and mission groups and outreach designed to provide relief services to veterans. Future plans include assessing the needs of local and global communities paying attention to ****** and ****** populations. You will have locations in C and E. Membership is open to all individuals who have the sincere intention to become a part of a spiritually directed community in which all members live by a code of ******. Members must have a ****** character and a willingness to ****** that is self-evident as witnessed by all church members, officers, elders and spiritual leaders. Church leaders and board members have the right to assess, discuss, vote and if necessary, terminate the membership and involvement of any individual who disregards the church's doctrine and the universal laws of ******. Prospective members must pay a one-time membership fee of f dollars, which may be waived under certain circumstances. Membership does not qualify an individual to have access to sacred medicinal ceremonies where the sacrament of D is used. To partake in the sacrament an individual must be 18 years-of-age or older and successfully pass all pre-qualification requirements including a medical assessment. You plan to offer public access workshops providing education on sacred indigenous culture and tribal practices including the use of D as a healing medicine and spiritual tool. Sunday church services and programs will include group integration and communion. Members will commune through song, music, reflection and readings from the D manifesto. Spiritual experiences with the sacrament will also be shared and integration provided by mental health counselors, ministers, facilitators and spiritual coaches. Your goal is to offer members the opportunity for spiritual growth and healing with the sacrament of D through sacred ceremonies. Members will be offered various ceremony options with skilled facilitators and healers including one-on-one, small group or large group ceremonies. Typically, ceremonies will occur on Friday, Saturday and Sunday consisting of two evening ceremonies and the option for a daytime one. D is the only substance used in the ceremonies, the use or consumption of any other substances is prohibited. Members undergo thorough medical and psychological evaluation prior to participating in a ceremony. Drug testing along with a routine search of bags/belongings are also conducted to ensure a safe and sacred environment. Medical professionals are present during ceremonies along with healers, facilitators and ministers. Relevant mental, emotional and spiritual integration is provided to each participant. Group integration and communion is offered the morning following and evening ceremony. Private, one-on-one spiritual coaching or counseling is offered to those who seek further guidance and integration on a more ongoing basis. D is consumed in ******. The plant ingredients naturally contain a hallucinogenic alkaloid DMT. DMT is a Schedule 1 drug under the Controlled Substances Act (CSA). The CSA contains a provision authorizing the US Attorney General to waive the requirement for DEA registration of certain manufacturers, distributors and dispenser of controlled substances. You have applied for the exemption, but it has not yet been approved. The DEA provides guidance regarding petitions for religions exemptions from CSA under the RFRA. The guidance states in #7 that the petitioner may not engage in any activity prohibited under the CSA or its regulations unless the petition has been granted and the petitioner has applied for and received a DEA Certificate of Registration. You have not asserted that your religious exercise has been burdened in violation of 42 U.S.C. Section 2000bb-1(a) as a claim or defense in a judicial proceeding in any federal or state court. Your Board of Directors currently consists of five voting members, three of whom are also officers. G is your President and Treasurer, and a Director. He is also one of the Healers. You will enter into an employment agreement with him and his salary will be based on similarly situated employees in the area. Two of your other board members will also be hired as Healers, medicine men, or family therapists, with compensation based on local area analysis. Each healer has the training and experience to hold his position, G, your founder, is a "designated director", serving as a director until his resignation or this position is terminated. He also serves as the primary Healer conducting and leading all sacramental ceremonies and one-on-one healings. Your Bylaws provide in Article V for reservation of rights and powers of the founder. Reserved rights and powers include approval of any name change; approval and adoption of any strategic or long-term plans including financial/capital plans; and approval of the development, significant modification, termination or sponsorship of any religious or educational programs. Article VI provides the approval procedure used by the founder. The founder may designate a successor in the event of his incapacity or inability to act during his lifetime. He cannot be removed from his position unless the Bylaws are amended, however, under Article X he would have to approve any amendments. Your financial data indicates that over 90% of your revenues will be derived from fees paid by church members for participating in your weekend ceremonies. You expect to charge each member j dollars to attend and participate in your Sacramental ceremonies in your first year of operations with a 10% increase the next year and a 15% increase the following year. Veterans will he permitted to attend at a reduced rate or no charge. In addition to ceremony fees charged to members you expect to receive donations and membership fees. Your expected expenses include compensation, occupancy costs, and materials for the ceremonies. You requested classification as a church under IRC Sections 509(a)(1) and 170(b)(1)(A)(i). Your form of worship includes the sacrament of D, sacred ceremonies, prayer, reflection, singing/medicine songs, traditional Icarus, worship with musical instruments, reiki and energy healing, readings from the D manifesto and group communion/integration. You follow the Universal Law of Respect which is derived from the D Manifesto. You stated that you offer regularly scheduled religious services every Sunday afternoon, which are open to members and the public. You do not have a permanent facility. Currently you have K members and have plans to increase your membership. We requested additional information regarding your activities. Your activities consist of weekend ceremonies and services (40%); spiritual medication, prayer and preparation for weekend ceremonies and services (10%); prospective members paperwork/correspondence (20%); spiritual coaching and integration of members via phone or in person (15%); cleaning/maintenance/shopping/travel/meal preparation (10%); and recordkeeping (5%). You have not yet begun to present seminars or other public programming. You do not have a permanent facility, you are currently holding ceremonies in E on private property owned by one of your directors. You initially planned to establish your primary location in C, however, upon advice of legal counsel you have not done so. Your legal counsel is of the opinion that C law is unsettled with regard to the legality of the use of D in religious ceremonies. E, on the other hand, has a state-level version of the federal Religious Freedom Restoration Act of 1993 (RFRA). You have held ceremonies twice a month for the last year or so. Members pay m dollars per ceremony for a total of n dollars if he or she participates in all three over a weekend. The fee includes indoor accommodations, beds, showers, cleaning, healthy meals, hands-on energy healing, spiritual services and coaching, integration and follow-up. You may offer reduced rates to those experiencing financial hardship. Only formal members are permitted to participate in weekend ceremonies. Your Sunday afternoon services are pan of the weekend ceremonies. The weekend consists of sacred ceremonies on Friday and Saturday as well as post ceremonial integration services Sunday morning through afternoon. All members not participating in the sacramental ceremonies are welcome at the Sunday services via phone or video call. Average attendance is four to five members and two healers. Most members that attend Sunday services have participated in the sacramental ceremonies on Friday and Saturday. You have conducted five ceremonies over three weekends. Each ceremony involved three or four members. Four of your K members have attended multiple retreats. You have waived your membership and ceremony fees multiple times. D ******* was used during each of your weekend ceremonies, although your CSA exemption has not been granted. Securing the federal exemption will offer you protection against any charges related to the CSA. The protections afforded under the RFRA only apply to federal laws and does not extend to state laws governing controlled substances. You determine whether a member is ready to participate in the ceremonies using ******* after he or she arrives for a weekend ceremony. New members arc given a copy of the Rules and Regulations for Participating in the Sacrament of D. The member is interviewed to ensure that the rules and regulations have been followed. A medical history/condition worksheet is also completed. If deemed ready, the member is given ******* and is carefully monitored by one of the healers. In the future medical professionals will be present and drug tests will be performed. Prospective members must fill out a membership application arid pay a f dollars fee (unless waived or reduced). The application is reviewed by the President and Vice President. The review takes into consideration whether the individual displays sincerity of thought and spiritual reflection. The applicant's personal need for spiritual healing and willingness to explore new avenues of evolution is also considered. Formal written membership applications were received from your current members. Your K members live in multiple states and countries. Members do not participate on a weekly or other scheduled basis but remain in contact with your healers via phone and email. You maintain a website. The site contains information about your activities, beliefs and doctrines, and the use of D in religious ceremonies/retreats. Information regarding your weekend ceremonies is provided, but pricing information is not available. Law IRC Section 501(c)(3) provides for the exemption from federal income tax of corporations organized and operated exclusively for charitable or educational purposes, provided no part of the net earnings inures to the benefit of any private shareholder or individual. Treasury Regulation Section 1.501(c)(3)-1(a)(1) that, in order to be exempt as an organization described in Section 501(c)(3), an organization must be both organized and operated exclusively for one or more exempt purposes. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Treas.Reg. Section.501(c)(3)-1(b)(1)(i) provides that an organization is organized exclusively for one or more exempt purposes only if its articles of organization limit its purposes to one or more exempt purposes and do not expressly empower it to engage, otherwise than as an insubstantial part, in activities which in themselves are not in furtherance of one or more exempt purposes. Treas.Reg. Section 1.501(c)(3)-1(c)(1) provides that an organization operates exclusively for exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified in Section 501(c)(3) of the Code. An organization will not be operated exclusively for exempt purposes if more than an insubstantial part of its activities are not in furtherance of an exempt purpose. 21 U.S.C. Section 812(c), Sch. I(c)(5) lists dimethyltryptamine (DMT) as a hallucinogenic substance and includes it on schedule I of the Schedules of Controlled Substances. A schedule I substance is a substance that (1) has a high potential for abuse; (2) has no currently accepted medical use in treatment in the United States; and (3) there is a lack of accepted safety for use of the drug under medical supervision. 21 U.S.C. Section 841(a), known as The Controlled Substances Act, states that it is illegal for anyone to knowingly or intentionally manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense a controlled substance. 42 U.S.C. Section 2000bb-1, known as the Religious Freedom Relief Act (RFRA), states that (a) In general. Government shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability, except as provided in subsection (b). (b) Exception. Government may substantially burden a person's exercise of religion only if it demonstrates that application of the burden to the person-- (1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest. (c) Judicial relief. A person whose religious exercise has been burdened in violation of this section may assert that violation as a claim or defense in a judicial proceeding and obtain appropriate relief against a government. Standing to assert a claim or defense under this section shall be governed by the general rules of standing under article III of the Constitution. Article VI, Clause 2 of the United States Constitution states that federal laws prevail over conflicting or inconsistent state laws. Revenue Ruling 71-447, 1971-2 C.B. 230, states that under common law, the term "charity" encompasses all three major categories of religious, educational, and charitable purposes. All charitable trusts, educational or otherwise, including religious trusts, are subject to the requirement that the purpose of the trust may not be illegal or contrary to public policy. Citing Restatement (Second), Trusts, (1959) Sec. 377, Comment c: "A Trust for a purpose the accomplishment of which is contrary to public policy, although not forbidden by law, is invalid." Restatement (Second), of Trusts, Section 377 states that a charitable trust cannot be created for a purpose which is illegal. The first comment illustrates the rule, indicating that where the trust estate is to be used for a criminal purpose, the trust is invalid. Thus, "a trust for the promotion of polygamy...is invalid." Rev.Rul. 75-384, 1975-2 C.B. 204, holds that a nonprofit organization, whose purpose was to promote world peace, disarmament, and nonviolent direct action, did not qualify for exemption under IRC Section 501(c)(3) or (c)(4). The organization's primary activity was to sponsor antiwar protest demonstrations in which demonstrators were urged to violate local ordinances and commit acts of civil disobedience. Citing the law of trusts, the ruling stated that all charitable organizations are subject to the requirement that their purposes cannot be illegal or contrary to public policy. In Better Business Bureau of Washington, D.C., Inc. v. United States, 326 U.S. 279 (1945), the Supreme Court held that the "presence of a single... [nonexempt] purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of truly... [exempt] purposes." In Harding Hospital, Inc. v United States, 505 F.2d 1068, 1071 (6th Cir. 1974), the court held that an organization has the burden of proving that it satisfies the requirements of the particular exemption statute. The court noted that whether an organization has satisfied the operational test is a question of fact. In American Guidance Foundation, Inc. v. United States, 490 F.Supp. 304 (D.D.C. 1980), the court held that a religious organization exempt under IRC Section 501(c)(3) was not a church described in Section 170(b)(1)(A)(i). Throughout its existence, the membership consisted of the founder and members of his immediate family. The organization made no real effort to convert others or to extend its membership beyond the immediate mediate founder's family. Worship services were conducted in the founder's apartment, which was used primarily for non-religious purposes. The organization's "organized ministry" consisted of a single self-appointed clergyman. Recorded religious messages were distributed by telephone tape and religious instruction consisted of a father preaching to his son. The court discussed the following "14 criteria" developed by the Service to aid in the evaluation of applications for church foundation status: (1) a distinct legal existence; (2) a recognized creed and form of worship; (3) a definite and distinct ecclesiastical government; (4) a formal code of doctrine and discipline; (5) a distinct religious history; (6) a membership not associated with any other church or denomination; (7) an organization of ordained ministers/a complete organization of ordained ministers ministering to their congregations; (8) ordained ministers selected after completing prescribed courses of study; (9) literature of its own; (10) established places of worship; (11) regular congregations; (12) regular religious services; (13) Sunday schools for the religious instruction of the young; and (14) schools for the preparation of its ministers. No single factor was controlling and all fourteen might not be relevant to a given determination. However, the court further explained that at a minimum, a church includes a body of believers or communicants that assembles regularly in order to worship. Unless the organization is reasonably available to the public in its conduct of worship, its educational instruction, and its promulgation of doctrine, it cannot fulfill this associational role. It is not enough that a corporation believes and declares itself to be a Church. Nor is it sufficient that the applicant prepares superficially responsive documentation for each of the established IRC criteria. To hold otherwise would encourage sham representations to the IRS and result in adverse tax consequences to the public at large. In this instance, AGF does not employ recognized, accessible channels of instruction and worship. There is little if any evidence that it seeks to reach or serve a congregation. Private religious beliefs, practiced in the solitude of a family living room, cannot transform a man's home into a church. In Church of Eternal Life and Liberty, Inc. v. Commissioner, 86 T.C. 916, 924 (1986), the Tax Court concluded that the organization was not a church. The organization seemed to have intentionally pursued a policy that discouraged membership that the court believed served the private purposes of its founder. The court also stated that although fundamental to determining whether an organization is a church, religious purposes alone do not serve to establish it as a church. Equally important are the means by which its religious purposes are accomplished...A church is a coherent group of individuals and families that join together to accomplish the religious purposes of mutually held beliefs. In other words, a church's principal means of accomplishing its religious purposes must be to assemble regularly a group of individuals related by common worship and faith... In First Church of In Theo v. Commissioner, T.C. Memo 1989-16, the principal activities of the organization included the writing of books and booklets, the publication and distribution of religious literature, organizing training materials, and working in the local Christian community. It disseminated its beliefs and practices by mailing releases to a group of 71 preachers, Christian workers and interested individuals. The organization was a "self-described non-membership organization" whose religious purposes were accomplished through the writing, publishing, and distribution of religious literature rather than through the regular assembly of a group of believers to worship together. The extent to which the organization brought people together to worship was incidental to its main function which consisted of a dissemination of its religious message through radio and inter-net broadcasts, coupled with written publications. "When bringing people together for worship is only an incidental part of the activities of a religious organization, those limited activities are insufficient to label the entire organization a church." The court concluded that the organization "fail[ed] to satisfy the threshold criteria of communal activity necessary for a church." In Spiritual Outreach Society v. Commissioner, 927 F. 2d 335 (1991), the organization maintained an outdoor amphitheater on its grounds at which the organization held bimonthly musical programs. The organization held a total of twenty gatherings during the two years at issue in the case. The musical programs always included congregational singing and opened and closed with a prayer facilitated by a minister. Also, during the two years at issue, the organization held several retreats on the church grounds "wherein followers of different religions met for the purpose of meditation study and spiritual advancement." A total of five wedding ceremonies were conducted in the organization's chapel by ministers from guest churches. The Tax Court was unpersuaded that "musical festivals and revivals...and gatherings for individual meditation and prayer by persons who don't regularly come together as a congregation for such purposes" was sufficient to satisfy the "cohesiveness factor which...is an essential ingredient of a 'church.'" The Tax Court held that the organization failed to satisfy the associational test. The Court stated that some of the 14 criteria are of central importance. While the organization did meet some of the criteria, it did not meet enough. They failed to show they had an established congregation even though large numbers of people attended musical events on their property, nothing indicated that the participants considered it their church. Nor did they show a sufficient ministry to satisfy the organized ministry criteria because every minister who was involved in a function was a guest minister from another church. Finally, they didn't have a provision for the religious education of the young. SOS's claim that impecunious churches cannot afford religious instruction of its youth is misguided. In Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal, 546 U.S. 418, 126 S.Ct. 1211 (2006) Members of the church received communion by drinking hoasca, a tea brewed from plants unique to the Amazon Rainforest that contained a hallucinogen regulated under Schedule I of the Controlled Substances Act (CSA), 21 U.S.C.S. Section 812(c), (Sched. 1(c)). The Government conceded that the challenged application would substantially burden a sincere exercise of religion, but argued that this burden did not violate RFRA because applying the CSA was the least restrictive means of advancing three compelling governmental interests: protecting the church members' health and safety, preventing the diversion of hoasca from the church to recreational users, and complying with a 1971 United Nations Convention on Psychotropic Substances. The Court held that the church had effectively demonstrated that its sincere exercise of religion was substantially burdened, but that the Government failed to demonstrate that the application of the burden to the church would, more likely than not, be justified by the asserted compelling interests. Congress' placement of dimethyltryptamine (DMI) under Schedule I simply did not relieve the Government of the obligation to shoulder its burden under RFRA. In Foundation of Human Understanding v. United States, 88 Fed.Cl. 203 (2009), the court found an organization that promoted spirituality through a particular form of meditation was not a church. The court referred to the 14 church characteristics published by the Service in the course of its factual findings, but ultimately decided the case by applying the associational test. The court stated that "plaintiff hasn't provided evidence as to the regularity, if any, with which its followers come together to practice. There is no evidence contained within the letters, emails, declarations, or, for example, in the form of records of attendance, that show a group of followers that regularly congregates in any form-whether virtually or in one another's physical presence... Moreover, there is evidence in the record that Foundation's religious practice neither requires nor promotes associational worship." The court found the organization didn't provide regular religious services to an established congregation and concluded that "[t]he extent to which [the] Foundation brings people together to worship is incidental to its main function" of spreading its message through publication and broadcasting. Relying on case law that treated publishing activities as insufficient to confer church status and denied church status to entities whose associational activities were merely incidental to their publishing and broadcasting activities, the court held that the organization didn't qualify as a church. In Mysteryboy, Inc. v. Commissioner, T.C. Memo 2010-13 (2010), the Tax Court held that the organization failed the operational test partly because the organization proposed to promote illegal activities. Application of law You are not organized and operated exclusively for exempt purposes under IRC Section 501(c)(3). An organization can be recognized as exempt under Section 501(c)(3) only if it shows that it is both organized and operated exclusively for charitable, educational, or other exempt purposes. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Treas.Reg. Section 1.501(c)(3)-1(a)(1). You do not satisfy the organizational test of Treas.Reg. Section 1.501(c)(3)-1(b)(1)(i). You are not organized exclusively for one or more exempt purposes, since your articles of organization do not limit your purposes to exempt purposes and expressly empower you to engage, otherwise than as an insubstantial part, in activities which in themselves are not in furtherance of one or more exempt purposes. You were formed, in part, to offer "the public access to spiritual growth, development and healing through the sacred sacrament of D." Under federal law, DMT distribution and use is illegal. The D ******* used in the sacrament of D contains DMT. One of the purposes for which you have been formed is an illegal purpose, to wit, the distribution of a controlled substance to individuals who are engaged in an illegal activity. Furthermore, your articles of incorporation expressly empower you to engage, otherwise than as an insubstantial part, in the distribution of D, an activity which in itself is not in furtherance of one or more exempt purposes. Rev.Rul. 71-447 and Rev.Rul. 75-384 state that all charitable organizations are subject to the requirement that their purposes cannot be illegal or contrary to public policy. See also Restatement (Second) of Trusts, Section 377, and Mysteryboy, Inc. You do not satisfy the operational test of Treas.Reg. Section 1.501(c)(3)-1(c)(1). More than an insubstantial part of your activities is not in furtherance of an exempt purpose. Your primary activity is to conduct religious ceremonies using D. As noted above, the distribution of D is illegal. Federal law does not recognize any health or other benefits of D and classifies it as a controlled substance. 21 U.S.C. Section 812. Federal law prohibits the manufacture, distribution, possession, or dispensing of t controlled substance. 21 U.S.C. Suction 841(a). (The fact that a state has legalized the use of D for religious purposes is not determinative because under federal law, the use of DMT is illegal. Federal law always prevails over conflicting or inconsistent state law. See U.S. Const. art. VI, cl. 2.) By advocating and engaging in activities that contravene federal law, and by enabling individuals to engage in an activity illegal under federal law, you serve a substantial nonexempt purpose. Like Better Business Bureau of Washington, D.C. regardless of the number or importance of your truly exempt purposes, the presence of a single nonexempt purpose, substantial in nature, has destroyed your exemption. You have failed to carry your burden of proving that these activities are in furtherance of an exempt purpose, or else are insubstantial. See Harding Hospital. You have applied to the US Attorney General to waive in your case the requirement for DEA registration of certain manufacturers, distributors and dispensers of controlled substances as provided by the Controlled Substances Act, on the grounds that enforcing the prohibition of your use of D in your religious ceremonies will burden your free exercise of religion, as defined in the Religious Freedom Restoration Act (RFRA). A decision on your application is still pending. You have cited Gonzales v. O Centro Espirita Beneticente Uniao do Vegetal, an organization with activities strikingly similar to your own, in support of your exemption. Vegetal's position, however, is distinguishable from yours. Instead of applying for an exemption as you have done, Vegetal, after U.S. Customs seized a D shipment to it and threatened prosecution, filed a suit for declaratory and injunctive relief under 42 U.S.C. Section 2000bb-1(c) and won it, convincing the Supreme Court that applying the Controlled Substances Act to the UDV's sacramental D use violates RFRA. In short, your current position is that having obtained neither exemption from CSA through your petition, nor relief from a federal court, you have nevertheless engaged in activities in violation of the CSA, and consequently have failed to meet the operational test. There is a high degree of consensus among courts that what carries most weight in distinguishing a church from other religious organizations is its associational role. Your members reside in various states and countries. Members do not come to your weekend D ceremonies on a regular basis. Their domiciles are widely scattered. The D sacrament is administered to only a handful of members on any weekend. Afterwards they disperse to their homes, and may not return for weeks, months, or not at all. Rather than relying for support on offerings of the faithful, you charge a small fee for membership, and a stiff fee every time someone receives the sacrament. Your activities resemble spiritual retreats, rather than worship services. The experience of those receiving the sacrament is intensely private, rather than communal, resembling meditation. You emphasize the healing properties of the sacrament along with its spiritual properties. To be classified as a church, it is not sufficient that you declare yourself to be a church or that you conduct a few weekend retreats that members attend on an intermittent basis. As the court articulated in American Guidance Foundation, Inc., "Private religious beliefs, practiced in the solitude of a family living room, cannot transform a man's home into a church." You have not established that you have a body of believers or communicants that assembles regularly to worship. You have provided little evidence that you serve a regular congregation or conduct regular worship services. You have not fulfilled the associational role to be a church. In Church of Eternal Life and Liberty, Inc. the court indicated that "A church is a coherent group of individuals and families that join together to accomplish the religious purposes of mutually held beliefs. In other words, a church's principal means of accomplishing its religious purposes must be to assemble regularly a group of individuals related by common worship and faith." You have not demonstrated that the principal means of accomplishing your religious purpose is to assemble regularly a group of individuals related by common faith and worship. Therefore, you have not fulfilled the associational role to be a church. You are similar to the organizations in First Church of In Theo and Spiritual Outreach Society, where the extent to which the organizations brought people together to worship was incidental to its main function. In First Church of In Theo the court stated, "When bringing people together for worship is only an incidental part of the activities of a religious organization, those limited activities are insufficient to label the entire organization a church." The court concluded that the organization "fail[ed] to satisfy the threshold criteria of communal activity necessary for a church." In Spiritual Outreach Society, the Tax Court was unpersuaded that "musical festivals and revivals...and gatherings for individual meditation and prayer by persons who don't regularly come together as a congregation for such purposes" was sufficient to satisfy the "cohesiveness factor which...is an essential ingredient of a 'church.'" The Tax Court held that the organization failed to satisfy the associational test. The Tax Court decision was affirmed by the 8th Circuit. The Court stated that some of the 14 criteria are of central importance. While the organization did meet some of the criteria, it did not meet enough. They failed to show they had an established congregation even though large numbers of people attended musical events on their property, nothing indicated that the participants considered it their church. See Spiritual Outreach Society. Finally, in Foundation of Human Understanding the court found an organization that promoted spirituality through a particular form of meditation was not a church. The court referred to the 14 church characteristics published by the Service in the course of its factual findings, but ultimately decided the case by applying the associational test. The court stated that there was no evidence that the followers came together regularly to practice nor was there evidence that Foundation's religious practice required or promoted associational worship. Similarly, your members do not came together regularly to practice your religion. Three to four members at a time gathering for weekend ceremonies does not meet the associational test. Your position You did not receive any formal guidance from the DEA regarding your petition for the exemption to the CSA. The only guidance you received from the DOJ was the mailing address for the religious exemption and the regulations regarding the request. The exemption is still under review by the agency. Your position is that the guidance provided on the DEA website is an interim measure intended to provide guidance to potential applicants and does not carry the force of law. The prohibition is not found in either the United States Code or the Code of Federal Regulations. Relying on Gonzales v. O Centro Espirita Beneficente Uniao de Vegetal, you also believe that are not required to wait for the exemption to be granted to conduct religious activities using D. Our response to your position The DEA provides a procedure whereby an organization can obtain a religious exemption to the CSA. The guidance provided to applicants on the DEA's website states that the use of the substance is prohibited until the exemption is granted. The procedure would be meaningless if the applicant could simply use D without the exemption. The court held in Gonzales that an organization does not have to apply for the exemption prior to seeking relief in the courts. You have not sought relief in the courts, nor have you received the exemption to the CSA, therefore, your use of D is illegal under federal law. Conclusion Based on the facts and information submitted, you are neither organized nor operated exclusively for exempt purposes. Your primary purpose of conducting activities utilizing D violates federal law and furthers a substantial nonexempt purpose. Therefore, you ale not described in IRC Section 501(c)(3). Additionally, you do not meet the requirements for classification under Sections 509(a)(1) and 170(b)(1)(A)(i) as a "church" because you do not meet the associational test. If you agree If you agree with our proposed adverse determination, you don't need to do anything. If we don't hear from you within 30 days, we'll issue a final adverse determination letter. That letter will provide information on your income tax filing requirements. If you don't agree You have a right to protest if you don't agree with our proposed adverse determination. To do so, send us a protest within 30 days of the date of this letter. You must include: - Your name, address, employer identification number (EIN), and a daytime phone number - A statement of the facts, law, and arguments supporting your position - A statement indicating whether you are requesting an Appeals Office conference - The signature of an officer, director, trustee, or other official who is authorized to sign for the organization or your authorized representative - The following declaration: For an officer, director, trustee, or other official who is authorized to sign fur the organization: Under penalties of perjury, I declare that I have examined this request, or this modification to the request, including accompanying documents, and to the best of my knowledge and belief, the request or the modification contains all relevant facts relating to the request, and such facts are true, correct, and complete. Your representative (attorney, certified public accountant, or other individual enrolled to practice before the IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us if they haven't already done so. You can find more information about representation in Publication 947, Practice Before the IRS and Power of Attorney. We'll review your protest statement and decide if you gave us a basis to reconsider our determination. If so, we'll continue to process your case considering the information you provided. If you haven't given us a basis for reconsideration, we'll send your case to the Appeals Office and notify you. You can find more information in Publication 892, How to Appeal an IRS Decision on Tax-Exempt Status. If you don't file a protest within 30 days, you can't seek a declaratory judgment in court later because the law requires that you use the IRC administrative process first (IRC Section 7428(b)(2)). Where to send your protest Send your protest Form 2848, if applicable, and any supporting documents to the applicable address: U.S. mail: Internal Revenue Service EO Determinations Quality Assurance Mail Stop 6403 P.O. Box 2508 Cincinnati, OH 45201 Street address for delivery service: Internal Revenue Service EO Determinations Quality Assurance 550 Main Street, Mail Stop 6403 Cincinnati, OH 45202 You can also fax your protest and supporting documents to the fax number listed at the top of this letter. If you fax your statement, please contact the person listed at the top of this letter to confirm that they received it. You can get the forms arid publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person listed at the top of this letter. Contacting the 'taxpayer Advocate Service The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or if you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. We sent a copy of this letter to your representative as indicated in your power of attorney. Sincerely, cc:

Internal Revenue Service - Fact Sheet FS-2022-36 IRS updates frequently asked questions for states and local governments on taxability and reporting of payments from Coronavirus State and Local Fiscal Recovery Funds September 2022 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS updates frequently asked questions for states and local governments on taxability and reporting of payments from Coronavirus State and Local Fiscal Recovery Funds FS-2022-36, September 2022 This Fact Sheet updates frequently asked questions (FAQs) related to the Coronavirus State and Local Fiscal Recovery Funds established under the American Rescue Plan Act (SLFR Funds) ( FS-2021-16 ). These funds give eligible state and local governments a substantial infusion of resources to meet pandemic response needs. This update adds new frequently asked questions 15 through 17. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer's specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer's case, the law will control the taxpayer's tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so. More information about reliance is available. These FAQs were announced in IR-2022-165. The Coronavirus State and Local Fiscal Recovery Funds (SLFR Funds) provide eligible state and local governments with a substantial infusion of funds to meet pandemic response needs and rebuild a stronger and more equitable economy as the country recovers. The SLFR Funds provide substantial flexibility for each government to meet local needs--including support for households and individuals hardest hit by the crisis. More information about the uses of SLFR Funds may be found in the Interim Final Rule PDF. Some uses of SLFR Funds may trigger tax consequences. In general, individuals must include in gross income any payment or accession to wealth from any source unless an exclusion applies. One exclusion is for qualified disaster relief payments under section 139 of the Internal Revenue Code (Code). Under section 139 of the Code, certain payments made by a state or local government to individuals in connection with the COVID-19 pandemic may be qualified disaster relief payments that are excluded from the recipient's gross income. A payment by a state or local government generally will be treated as a qualified disaster relief payment under section 139 if the payment is made to or "for the benefit of" an individual to (1) reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster, or (2) promote the general welfare in connection with a qualified disaster. See section 139(b)(1) and (4). As a federally declared disaster, the COVID-19 pandemic is considered a qualified disaster for purposes of section 139. See section 139(c). However, payments are not treated as qualified disaster relief payments if the payments are in the nature of compensation for services performed by the individual. Additionally, payments made to or for the benefit of an individual are not treated as qualified disaster relief payments to the extent the expense of the individual compensated by such payment is otherwise compensated for by insurance or otherwise. See section 139(b). Q1: My state/local government is offering premium pay for the work I perform as an eligible worker during the COVID-19 pandemic. Premium pay is an amount up to $13 per hour in addition to the wages or remuneration a worker otherwise receives and in an aggregate amount not to exceed $25,000 per eligible worker. If I receive such a payment, must I include the amount in my gross income? (added November 17, 2021) A1: Yes, you must include the payment in gross income as compensation for services. Section 139 of the Code excludes qualified disaster relief payments from an individual's gross income, but payments in the nature of compensation for services are not treated as qualified disaster relief payments. Premium pay is in the nature of compensation for services and therefore is not excludable as a qualified disaster relief payment. If you are performing services as an employee, whether as an employee of the state/local government or another entity, the premium pay is also generally considered wages and is subject to withholding of applicable taxes. Q2: My employer received a grant from my state/local government to be used to provide premium pay to eligible workers during the COVID-19 pandemic. If I receive such a payment from my employer, must I include the amount in my gross income? (added November 17, 2021) A2: Yes, you must include the payment in gross income as compensation for services. Regardless of whether an amount is paid to you by your state/local government, or by your employer, a payment that is in the nature of compensation for services is not excludable as a qualified disaster relief payment under section 139 of the Code. If you are performing services as an employee, the premium pay is also generally considered wages and is subject to withholding of applicable taxes. Q3: I am an employer who received a grant from my state/local government to be used to provide premium pay to eligible workers during the COVID-19 pandemic. If I make such a payment to my employees, must I withhold income and employment taxes on that payment? (added November 17, 2021) A3: Yes. Premium pay amounts paid to employees are considered wages. Employers generally must withhold federal income tax as well as social security tax and Medicare tax from employees' wages. (Employers also may have to pay federal unemployment tax on the wages.) More information on withholding federal income tax, social security tax, and Medicare tax can be found in Publication 15, Employer's Tax Guide. Premium pay that is paid at a regular hourly rate for the current payroll period is considered a regular wage for purposes of federal income tax withholding. This means that, in determining the amount of federal income tax to withhold from wages, the employer should apply the entries on the employee's Form W-4 according to the procedures detailed in Publication 15-T, Federal Income Tax Withholding Methods, to determine the amount of federal income tax to withhold from premium pay. Q4: My state/local government is offering a one-time payment to individuals receiving unemployment compensation who accept an offer of employment within the particular state or local jurisdiction, in any industry, and discontinue claiming unemployment benefits. The payment is meant to encourage individuals to return to work after state/local COVID-19 restrictions lapse. The payment is available to an eligible individual after he or she completes four weeks of paid employment. If I receive such a payment, must I include the amount in my gross income? (added November 17, 2021) A4: Yes, you must include the payment in gross income as compensation for services. A payment that is in the nature of compensation for services, even a one-time payment, is not excludable as a qualified disaster relief payment under section 139 of the Code. Further, even though the payment is made in connection with discontinuing your unemployment benefits, the payment is not unemployment compensation. Rather, the payment is taxable as compensation income. Q5: My employer received a grant from my state/local government to be used to pay new employees a cash bonus. If my employer pays me such a cash bonus, must I include the amount in my gross income? (added November 17, 2021) A5: Yes, you must include the payment in gross income. Regardless of whether it is paid to you by your state/local government, or by your employer, payment of a cash bonus to new employees is in the nature of compensation for services and thus is not a qualified disaster relief payment under section 139 of the Code. Rather, the payment is compensation for services and is also generally considered wages, subject to withholding of applicable taxes. Q6: I am an employer who received a grant from my state/local government to be used to pay new employees a cash bonus. If I pay such a cash bonus to my employees, must I withhold income and employment taxes on that payment? (added November 17, 2021) A6: Yes. Cash bonuses paid to new employees are wages. Employers generally must withhold federal income tax as well as social security tax and Medicare tax from employees' wages. (Employers may also have to pay federal unemployment tax on the wages.) More information on withholding federal income tax, social security tax, and Medicare tax can be found in Publication 15. Cash bonuses typically are supplemental wages for purposes of federal income tax withholding. In determining the amount of federal income tax to withhold from employees' wages, the employer should review the procedures in section 7 of Publication 15 to determine the amount of federal income tax to withhold from cash bonuses. Q7: My state/local government is using SLFR Funds to provide a direct cash transfer to families. The payment is intended to assist with childcare costs resulting from the COVID-19 pandemic. To qualify for the payment, a family must only show that it has a child under 18. Each qualifying family receives a flat amount under the program. If I receive a payment under this program, must I include it in my gross income? (added November 17, 2021) A7: No, this payment is not included in gross income. These payments are made by a state/local government and are intended to pay for family expenses resulting from the COVID-19 pandemic, a qualified disaster. As such, they are considered qualified disaster relief payments under section 139 of the Code and are excluded from gross income. However, no deduction or credit is allowed for the childcare expenses, to the extent of such payment. Additionally, payments made to or for the benefit of an individual are not treated as qualified disaster relief payments to the extent the expense of the individual compensated by such payment is otherwise compensated for by insurance or otherwise. See section 139(b). Q8: We are a state/local government that uses SLFR Funds to provide a direct cash transfer to families. The payment is intended to assist with childcare costs resulting from the COVID-19 pandemic. To qualify for the payment, a family must only show that it has a child under 18. Each qualifying family receives a flat amount under the program. Do we have an obligation to file a Form 1099 or other information return with respect to the payment? (added November 17, 2021) A8: No. A Form 1099-MISC reporting the payment would be required if the payment constituted income to the recipient. In this case, because the payment is not income, no Form 1099-MISC or other information return is required to be filed with the IRS or furnished to the recipient. Q9: My state/local government is using SLFR Funds to provide a direct cash transfer to individuals for use in paying their utility bills. If I receive such a payment under this program, must I include it in my gross income? (added November 17, 2021) A9: No, this payment is not included in gross income. These payments are made by a state/local government to individuals and are intended to pay for personal expenses incurred during the COVID-19 pandemic, a qualified disaster. As such, they are considered qualified disaster relief payments under section 139 of the Code and are excluded from gross income. However, payments made to or for the benefit of an individual are not treated as qualified disaster relief payments to the extent the expense of the individual compensated by such payment is otherwise compensated for by insurance or otherwise. See section 139(b). Q10: We are a state/local government that uses SLFR Funds to provide a direct cash transfer to individuals for use in paying their utility bills. Do we have an obligation to file a Form 1099 or other information return with respect to the payment? (added November 17, 2021) A10: No. A Form 1099-MISC reporting the payment would be required if the payment constituted income to the recipient. In this case, because the payment is not income, no Form 1099-MISC or other information return is required to be filed with the IRS or furnished to the recipient. Q11: I am an individual and my state/local government is using SLFR Funds to pay utility bills on behalf of individuals in the state or local jurisdiction. If the state/local government makes a payment directly to a utility company on my behalf, must I include the amount of the payment in my gross income? (added November 17, 2021) A11: No, this payment is not included in gross income. These payments are made by a state/local government on behalf of individuals to pay for personal expenses incurred during the COVID-19 pandemic, a qualified disaster. As such, they are considered qualified disaster relief payments under section 139 of the Code and are excluded from gross income. However, payments made to of for the benefit of an individual are not treated as qualified disaster relief payments to the extent the expense of the individual compensated by such payment is otherwise compensated for by insurance or otherwise. See section 139(b). Q12: We are a state/local government that uses SLFR Funds to pay utility bills on behalf of individuals. Do we have an obligation to file a Form 1099 or other information return with respect to the payment? (added November 17, 2021) A12: No. A Form 1099-MISC reporting the payment would be required if the payment constituted income to the beneficiary. In this case, because the payment is not income, no Form 1099-MISC or other information return is required to be filed with the IRS or furnished to the beneficiary. Q13: I am an individual and SLFR Funds are being used to pay my overdue utility balance with my utility company. Must I include the amount of the payment in my gross income? (added November 17, 2021) A13: No, this payment is not included in gross income. These payments are made by a state/local government on behalf of individuals to pay for personal expenses incurred during the COVID-19 pandemic, a qualified disaster. As such, they are considered qualified disaster relief payments under section 139 of the Code and are excluded from gross income. However, payments made to or for the benefit of an individual are not treated as qualified disaster relief payments to the extent the expense of the individual compensated by such payment is otherwise compensated for by insurance or otherwise. See section 139(b). Q14: We are a utility company that uses SLFR Funds to pay overdue utility balances on behalf of individuals. Do we have an obligation to file a Form 1099 or other information return with respect to the payment? (added November 17, 2021) A14: No. A Form 1099-MISC reporting the payment would be required if the payment constituted income to the beneficiary. In this case, because the payment is not income, no Form 1099-MISC or other information return is required to be filed with the IRS or furnished to the beneficiary. Q15: I am an individual and my state/local government is using SLFR Funds to pay some or all of the down payment and closing costs associated with my purchase of a home under a program to support those negatively impacted by the COVID-19 pandemic. If I receive such assistance under this program, must I include it in my gross income? (added September 28, 2022) A15: No, the amount of this assistance is not included in gross income. These payments using SLFR Funds are made by a state/local government to individuals to promote the general welfare of qualifying individuals who are negatively impacted by the COVID-19 pandemic, a qualified disaster. As such, they are considered qualified disaster relief payments under section 139 of the Code and are excluded from gross income. However, payments made to or for the benefit of an individual are not treated as qualified disaster relief payments to the extent the expense of the individual compensated by such payment is otherwise compensated for by insurance or otherwise. See section 139(b). Q16: I am an individual and my state/local government is using SLFR Funds to pay some or all of the premium mortgage insurance (PMI) with my purchase of a home. If I receive such assistance under this program, can I deduct the PMI costs paid through this program? (added September 28, 2022) A16: No, the PMI costs are not deductible for the individual. An individual cannot take a deduction or credit for expenses that are excluded under section 139. See section 139(h). Q17: We are a state/local government using SLFR Funds to pay some or all of the down payment and closing costs associated with individuals' purchases of homes. Do we have an obligation to file a Form 1099 or other information return with respect to these payments? (added September 28, 2022) A17: No. A Form 1099-MISC reporting the payment would be required if the payment constituted income to the recipient. In this case, because the payment is not income, no Form 1099-MISC or other information return is required to be filed with the IRS or furnished to the recipient. IRS-FAQ Current and prior updates to FAQs - FS-2022-36, September 2022 - FS-2021-16, November 2021

Private Letter Ruling Number: 202419022 Internal Revenue Service February 8, 2024 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Release Number 202419022 Release Date: 5/10/2024 UIL Code: 501.03-00 Date: 02/08/2024 Taxpayer ID number (last 4 digits): Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with United States Tax Court: CERTIFIED MAIL - Return Receipt Requested Dear ******: This is a final determination regarding your foundation classification This modifies our letter dated ******, in which we 1etermined that you were an organization described in Internal Revenue Code (IRC) Section 509(a)(3). This letter modifies your foundation status to a private non-operating foundation section 509(a) effective ******. Your tax-exempt status under IRC Section 501(c)(3) is not affected, Grantors and contributors may rely on this determination unless the Internal Revenue Service publishes a notice to the contrary. Because this letter could help resolve any questions about your private foundation status, please keep it with your permanent records. We previously provided you a report of examination explaining the proposed modification of your tax-exempt status. At that time, we informed you of your right to contact the Taxpayer Advocate, as well as your appeal rights. On ******, you signed Form 6018, Consent to Proposed Action, in which you agreed to the modification of your foundation classification to a private non-operating foundation. This is a final determination letter with regards to your federal tax-exempt status under Section 509(a). Because you are a private foundation, you are required to file Form 990-PF, Return of Private Foundation. If you have not already filed these returns and you have not received instructions for filing substitute Forms 990-PF, you should file these returns with the appropriate Service Center for the tax year ending December 31, ******, and for all tax years thereafter in accordance with the instructions of the return. If you are subject to the tax on unrelated business income under IRC Section 511, you must also file an income tax return on Form 990-T, Exempt Organization Business Income Tax Return. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file action for declaratory judgement If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims, or 3) the United States District Court for the District of Columbia. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment by referring to the enclosed Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov US Court of Federal Claims 717 Madison Place, NW Washington, DC 20005 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov You may also be eligible for help from the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. Taxpayer Advocate assistance can't be used as substitute for established IRS procedures, formal appeals processes, etc. The Taxpayer Advocate is not able to reverse legal or technically correct tax determination, nor extend the time fixed by law that you have to file a petition in Court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling. You can get any of the forms or publications mentioned in this letter by calling 800-TAX-FORM (800-829-3676) or visiting our website at www.irs.gov/forms-pubs. If you have any questions about this letter, please contact the person whose name and telephone number are shown in the heading of this letter. Sincerely, Lynn A. Brinkley Director, Exempt Organizations Examinations ISSUE: 1.) Does ****** qualify as a Type III functionally integrated supporting organization under IRC Section 509(a)(3)? 2.) Does ****** qualify as a publicly supported organization defined under IRC Section 509(a)(2)? 3.) Does ****** qualify as a publicly supported organization defined under IRC Sections 509(a)(1) and 170(b)(1)(A)(vi)? FACTS: ****** (******) was established on ******, ******, as an ****** for the benefit of ******, an organization exempt under section 501(c)(3) of the Internal Revenue Code. The named ****** of the ****** are ****** and ******. The ****** was granted exemption under IRC Section 501(c)(3) pursuant to a ruling dated ******, ******. It was determined that the ****** was not a ****** because it met the definition of a ****** under IRC section 509(a)( ). Since its initial determination, the ****** has not received a determination classifying it as a Type, I, II or III supporting organization. On its filed Form ****** for year ending ******, ******, the ****** states that it was not a private foundation because it met the requirements of a Type III functionally integrated supporting organization as defined in IRC section 509(a)(3). Under the Pension Protection Act of 2006 (PPA), supporting organizations are classified as Type I, Type II, or Type III supporting organizations. Treas.Reg § 1.509(a)-4(i) sets forth the requirements for an organization to qualify as a section 509(a)(3) supporting organization that is "operated in connection with" one or more publicly supported organizations. Type III supporting organizations are required to meet a "responsiveness test" and an "integral part" test. Before enactment of the PPA, there were two alternative ways for a Type III supporting organization to meet the responsiveness test: the significant voice test and the ****** test. Under the charitable ****** test, Treas.Reg. § 1.509(a)-4(i)(2)(iii), required that (1) the supporting organization be a ****** under state law, (2) each publicly supported organization that the ****** supports be named as a beneficiary under the ****** governing instrument, and (3) each ****** organization have the power to enforce the ****** and compel an accounting under State law. The ****** method of satisfying the responsiveness test was effectively removed when section 1241(c) of the PPA eliminated the ****** test, effective ******, ******. Consequently, as of ******, ******, a ****** can no longer qualify as a Type III supporting organization unless it meets the significant voice test. The ****** agreement requires that after payment of all administrative expenses, *** percent of income shall be accumulated, and the remaining *** percent shall be distributed to ****** split equally between ****** and ******. The ****** agreement states that in the event that ****** ceases to qualify as an exempt organization, a ****** will be selected which meets the exemption qualification and is an ****** open to ******, ******. In addition, in the event of ******, any remaining assets shall be distributed to the ****** or any ****** or ****** that is exempt under IRC section 501(c)(3) of the Code. The ****** agreement states that ****** is created and shall be operated exclusively for charitable, religious or educational purposes; that no part of ****** shall inure to the benefit of any private individual; and that no part of the activities of ****** shall consist of carrying on propaganda or otherwise attempting to influence legislation or of participating in, intervening in (including the publication or distribution of statements), any political campaign on behalf of any candidate for public office. On its filed Form ****** for year ending ******, ******, ******listed ****** as the ****** organization. ****** is a ****** described in section 170(b)(1)( )( ). For the year ending ******, ******, ****** reported total revenue of $ ******, comprising $ ****** in ****** income and $ ****** in ****** netted against $ ****** in ****** loss. ****** uses a ****** year as its tax year. Although it receives occasional ****** from the ******, it relies mostly on ****** income. The table below summarizes the information reported on the ****** Form ****** for years ****** used for the Public Support percentage computation: In response to Information Document Request 1 and during conversations with the ****** and ****** the following information was communicated regarding the relationship with ******: - There is no overlap in the governing body of ****** and ******. - ****** does not appoint ****** or ****** and does not exert any influence or control over ******. - ****** has no authority with respect to the administration and operation of ******. ****** is completely independent in the manner it ****** assets, in setting ****** policy and asset allocation, in selecting securities to buy and sell and in the timing of ****** decisions. ****** can make no demands on how ****** operates, ****** and manages assets held or how and when ****** makes distributions. - The ****** forwards an accounting statement of the ****** and transactions at the beginning of ****** to the ****** at ******. No other information is included; no other statements are sent during the year and no ******, transaction or asset allocation or performance reviews are conducted. - The ****** calculates the amount of distributable funds and makes annual distributions to ****** before the end of ******. - The ****** main point of contact at ****** is ******, the ******. - The ****** made a distribution of $ ****** to ****** on ******, ******, based on the ****** available ****** income. As an exempt organization, ****** returns are widely available for public inspection. Based on the latest publicly available information, ****** total expenses for the year ending ******, ******, were $ ******. The organization's total assets for that period totaled $ ******. The ****** distribution to ****** was less than *** % of ******. LAW: IRC Section 501(c)(3) requires tax exempt entities be organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, to foster national and amateur sports competition and prevention of cruelty to children or animals. Treas.Reg. 1.501(c)(3)-1(a)(1) provides that in order to be exempt as an organization described under section 501(c)(3) of the Code, an organization must be both organized and operated exclusively for one or more purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Treas.Reg. 1.501(c)(3)-1(c)(1) provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. IRC Section 509(a) defines the term "private foundation" to mean any domestic or foreign organization described in section 501(c)(3) other than an organization described in section 509(a)(1), (2), (3) or (4). Organizations which fall into the categories excluded from the definition of "private foundation" are generally those which either have broad public support or actively function in a supporting relationship to such organizations. Organizations which test for public safety are also excluded. Organizations described in IRC Section 501(c)(3) that meet the requirements of IRC Section 509(a)(3) are commonly referred to as "supporting organizations." IRC Section 509(a)(3) provides that certain "supporting organizations" (in general, organizations that provide support to another section 501(c)(3) organization that is not a private foundation) are classified as public charities rather than private foundations. To qualify as a supporting organization, an organization must meet all three of the following tests: (A) It must be organized and always operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more "publicly supported organizations." In general, supported organizations of a supporting organization must be publicly supported charities described in sections 509(a)(1) or (a)(2) (the " organizational and operational tests " - Treasury Regulation 1.509(a)-4(b)); (B) it must not be controlled directly or indirectly by one or more disqualified persons (as defined in section 4946) other than foundation managers and other than one or more publicly supported organizations (the " control test " - Treasury Regulation 1.509(a)-4(j)). (C) it must be operated, supervised, or controlled by or in connection with one or more publicly supported organizations (the " relationship test " - Treasury Regulation 1.509(a)-4(f); Organizational Test: Treas.Reg. 1.509(a)-4(b)(1) provides that a supporting organization must be organized exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more specified supported organizations. Treas.Reg. 1.509(a)-4(c)(1), provides that to qualify for classification under IRC Section 509(a)(3), a supporting organization's governing instrument must meet the following requirements: 1. The first requirement limits the organization's purposes to supporting one or more supported organizations and may not contain any provisions inconsistent with these purposes. 2. Treas.Reg. Section 1.509(a)-4(c)(1) states that the organization must not empower itself to engage in activities that are not in furtherance of the authorized purposes. 3. The third requirement calls for the supporting organization to specify the publicly supported organization they are supporting. 4. Treas.Reg. 509(a)-4(c)(1)(iv) states an organization must not be empowered to support or benefit any organization other than the specified publicly supported organizations. Operational Test: Treas.Reg. 1.509(a)-4(e)(1) provides that a supporting organization will be regarded as operated exclusively to support one or more specified publicly supported organizations only if it engages solely in activities which may include making payments to or for the use of, or providing services or facilities for, individual members of the charitable class benefited by the specified publicly supported organization. Treas.Reg. 1.509(a)-4(e)(2) provides that a supporting organization may also satisfy the operational test by using its income to carry on an independent activity or program, which supports or benefits the specified publicly supported organization(s) which is called permissible activities. Treas.Reg. 1.509(a)-4(e)(3) states that the supporting organization may carry on its own programs designed to support or benefit the specified publicly supported organization. Supporting organizations may also engage in fund raising activities, such as fund-raising dinners and unrelated trade or business to raise funds for the supported organization or their permissible beneficiaries. Control Test: To qualify for IRC Section 509(a)(3) classification, Treas.Reg. 1.509(a)-4(j) requires the organization to satisfy the control test. It's designed to prevent the supporting organization's being controlled, directly or indirectly, by disqualified persons as defined in IRC Section 4946, except for Section 509(a)(1) or (2) organizations and a manager of the supporting organization who is not a disqualified person for another reason. If a person is a disqualified person with respect to a supporting organization, he or she will continue to be a disqualified person even if a supported organization appoints or elects that person to be a director, trustee, or officer of the supporting organization. Disqualified persons include the following: - Substantial contributor - Certain 20 percent owners - Family members - Corporations, partnerships, etc. Relationship Test: Treas.Reg. 1.509(a)-4(f)(2) provides that, to satisfy the relationship test, a supporting organization must hold one of three statutorily described close relationships with the supported organization. The organization must be: (i) operated, supervised, or controlled by a publicly supported organization (commonly referred to as "Type I" supporting organizations). A Type [ supporting organization must be operated, supervised or controlled by its supported organization(s), typically by giving the supported organization(s) the power to regularly appoint or elect a majority of the directors or trustees of the supporting organization. The relationship between the supported organization(s) and the supporting organization is sometimes described as a parent-subsidiary relationship. Treas.Reg. 1.509(a)-4(g)(1)(i) states that the "operated, supervised, or controlled by" relationship is established if the majority of the officers, directors, or trustees of the supporting organization are appointed or elected by the governing body, members of the governing body, officers acting in their official capacity, or the membership of one or more publicly supported organizations. (ii) supervised or controlled in connection with a publicly supported organization (commonly referred to as "Type II" supporting organizations) Treas.Reg. Section 1.509(a)-4(h) states the distinguishing feature of the "supervised or controlled in connection with" relationship is the presence of common supervision or control among the governing bodies of the supporting and supported organizations. This is often described as a "brother-sister" relationship, as distinguished from the "parent-subsidiary" relationship required for Type I, "operated, supervised, or controlled by" organizations. Type II is also distinguished from the Type III, "operated in connection with," relationship. The common supervision or control provided in the Type II relationship ensures that the supporting organization will be responsive to the needs of the supported organization. (iii) Operated in connection with, one or more publicly supported organizations (commonly referred to as "Type III" supporting organizations). A Type II supporting organization must be operated in connection with one or more publicly supported organizations. All supporting organizations must be responsive to the needs and demands of and must constitute an integral part of or maintain significant involvement in, their supported organizations. Type I and Type II supporting organizations are deemed to accomplish these responsiveness and integral part requirements by virtue of their control relationships. However, a Type III supporting organization is not subject to the same level of control by its supported organization(s). Therefore, in addition to a notification requirement, Type III supporting organizations must pass separate responsiveness and integral part tests. The third relationship type was revised by the Pension Protection Act (PPA) of 2006, which made significant changes in Type III requirements to ensure that supporting organizations are responsive to the needs and demands of and must constitute an integral part of or maintain significant involvement in, their supported organizations. Notification Requirement Type III supporting organizations has a notification requirement that applies to both FISOs and non-FISOs. Treas.Reg. 1.509(a)-4(i)(2) states that for each taxable year, a type III supporting organization must provide the following documents to each of its supported organizations: - A written notice addressed to a principal officer of the supported organization describing the type and amount of all of the support the supporting organization provided to the supported organization during the supporting organization's taxable year immediately before the taxable year in which the written notice is provided (and during any other taxable year of the supporting ending after December 28, 2012, for which such support information has not previously been provided); - A copy of the supporting organization's most recently filed Form 990, "Return of Organization Exempt from Income Tax," or other annual information return required to be filed under section 6033; and - A copy of the supporting organization's governing documents in effect on the date of the notification is provided, including its articles of organization and bylaws (if any) and any amendments to those documents, unless the documents have been previously provided and not subsequently amended. Responsiveness Test The responsiveness test requires that the Type III supporting organization be responsive to the needs or demands of the publicly supported organizations. In order to meet this test, Treas.Reg. 1.509(a)-4(i)(3)(ii) states that a supporting organization must demonstrate that: a. one or more officers, directors, or trustees of the supporting organization are elected or appointed by the board members of the supported organization, or; b. one or more board members of the governing body of the supported organization are also officers, directors, or trustees of, or hold other important officers in the supporting organization, or; c. the supporting organization's officers, directors, or trustees maintain a close and continuous working relationship with the officers, directors, or trustees of the supported organization. In addition, the supported organization must demonstrate a significant voice in the supporting organization's investment policies, the timing of grants, the manner of making grants, and the selection of grant recipients by such supporting organization, and in otherwise directing the use of the income or assets of the supporting organization. Treas.Reg. 1.509(a)-4(i)(3)(iv) provides examples of responsiveness test. Example 2. Y is an organization described in section 501(c)(3) and is a trust under State law. The trustee of Y (Trustee) is a bank. Y supports charities P, Q, and R, each an organization described in section 509(a)(1). Y makes annual cash payments to P, Q, and R. Once a year, Trustee sends to P, Q, and R the cash payment, the information required under paragraph (i)(2) of this section, and an accounting statement. Trustee has no other communication with P, Q, or R. Y does not meet the responsiveness test of this paragraph (i)(3). In Rev.Rul. 75-437, 1975-2 C.B. 218 it was held that an exempt charitable trust, established solely to provide college scholarships to county high school graduates, that is trusteed by an independent bank trustee, is a private foundation and not a supporting organization within the meaning of section 509(a)(3) of the Code. It was further held that the responsiveness test was not satisfied because the publicly supported organizations do not have a significant voice in the investment policies of the trust or the timing and making of grants. Integral Part Test Treas.Regs. 1.509(a)-4(i)(1)(iii) provides that, the integral part test requires the Type III supporting organization maintain significant involvement in the operations of one or more publicly supported organizations, and that such publicly supported organizations are in turn dependent upon the supporting organization for the type of support which it provides. There are two alternative methods for satisfying the integral part test: " functionally integrated " or " non-functionally integrated ". Both the notification requirement and the responsiveness test are the same for Functionally integrated type III supporting organization (FISOs) and Non-functionally Integrated type III supporting organization (Non-FISOs), the integral part test is different for FISOs and non-FISOs. Functionally Integrated (FISO) requirements: Treas.Regs. 1.509(a)-4(i)(4) states that a supporting organization will be considered functionally integrated if it engages in activities substantially all of which directly further the exempt purposes of one or more supported organization. The supporting organization must engage in the activities of or carry out the purposes of the supported organization. The activities are those which the supported organization would have otherwise performed. The supporting organization must satisfy one of these three tests for functionally integrated: - Activities test - Parent of supported organizations - Supporting a governmental entity 1. Activities Test (Treas.Reg. (§1.509(a)-4(i)(4)(i)(A)) Treas.Reg.(§1.509(a)-4(i)(4)(i)(A)) states for an organization to satisfy the integral part test for a functionally integrated Type III supporting organization is to engage in activities substantially all of which directly further the exempt purposes of one or more supported organizations to which the supporting organization is responsive and which, but for the involvement of the supporting organization, would normally be engaged in by the supported organization(s). - Direct furtherance prong (Treas.Reg. Section (§1.509(a)-4(i)(4)(ii) Substantially all of the supporting organization's activities must be direct furtherance activities. Direct furtherance activities are conducted by the supporting organization itself, rather than by a supported organization. Fundraising, managing non-exempt-use assets, grant-making to organizations, and grant-making to individuals (unless it meets certain requirements) are not direct furtherance activities. - But for prong: Treas.Reg. Section §1.509(a)-4(i)(4)(ii)(A)(2) In addition, substantially all of such activities must be activities in which, but for the supporting organization's involvement, the supported organization would normally be involved. 2. Parent of Supported Organizations (Treas.Reg. (§1.509(a)-4(i)(4)(i)(B)) - Governance: The supporting organization must have the power to appoint a majority of the officers, directors or trustees of each of its supported organizations. - Substantial degree of direction. In addition, the supporting organization must perform "parent-like" activities by exercising a substantial degree of direction over the policies, programs and activities of the supported organizations. 3. Supporting a Governmental Entity (Treas.Reg. §1.509(a)-4(i)(4)(i)(C)) Notice 2014-4, 2014-2 IRB 274) provides that a Type III Supporting organization will be treated as meeting the requirements of Treas.Reg. §1.509(a)-4(i)(4), and hence will be treated as functionally integrated, if it: - Supports at least one supported organization that is a governmental entity to which the supporting organization is responsive within the meaning of §1.509(a)-4(i)(3); and - Engages in activities for or on behalf of the governmental supported organization that perform the functions of, or carry out the purpose of, that governmental supported organization and that, but for the involvement of the supporting organization, would normally be engaged in by the governmental supported organization itself. Non-Functionally Integrated (non-FISO) requirements: The integral part test for a non-FISO is in Treas.Reg. Section 1.509(a)-4(i)(5). In general, a non-FISO must satisfy both a distribution requirement (Treas.Reg. Section 1.509(a)-4(i)(5)(ii)), and an attentiveness requirement (Treas.Reg. Section 1.509(a)-4(i)(5)(iii)). - The supporting organization must pay substantially all of its income to or for the use of the publicly supported organization(s). - The amount of support received by the supported organization(s) must be sufficient to ensure the attentiveness (attentiveness requirement) of such organizations to the operations of the supporting organization. - A substantial amount of total support of the supporting organization must go to those publicly supported organizations that meet the attentiveness requirement. Rev.Rul. 76-208, 1976-1 C.B. 161 defines "substantially all" for purposes of the integral part test as at least 85 percent and prohibits counting accumulating income even if it must be paid to the supported organization. Distribution Requirement A Type III Non-FISO must distribute its "distributable amount" each taxable year to or for the use of one or more supported organizations. The distributable amount for a taxable year is an amount equal to or the greater of either: a) Eighty-five percent of the supporting organization's adjusted net income for its prior taxable year, reduced by the amount of taxes imposed on the supporting organization under subtitle A of the Internal Revenue Code during the immediately preceding taxable year, or b) The "minimum asset amount" (as defined in Treas.Reg. Section 1.509(a)-4(i)(5)(ii)(C)), which equals 3.5 percent of the excess of the aggregate fair market value of the supporting organization's non-exempt-use assets in the taxable year immediately before the taxable year of the required distribution, over the acquisition indebtedness for the non-exempt-use assets, with certain adjustments. Attentiveness Requirement Each taxable year, a non-FISO must distribute one-third or more of its distributable amount to one or more supported organizations that are attentive to the operations of the supporting organization and to which the supporting organization is responsive as stated in Treas.Reg. Section 1.509(a)-4(i)(5)(iii)(A). A supported organization is attentive to the operations of the supporting organization during a taxable year if at least one of the following requirements is satisfied: (1) The supporting organization distributes to the supported organization amounts equaling or exceeding 10% of the supported organization's total support for the prior taxable year. (Treas.Reg. Section 1.509(a)-4(i)(5)(iii)(B)(1)); or (2) The amount of support received from the supporting organization is necessary to avoid interruption of a function or activity of the supported organization. The support is considered necessary if it is earmarked for a particular program or activity, as long as the program is a substantial one. (Treas.Reg. Section 1.509(a)-4(i)(5)(iii)(B)(2)); or (3) Based on all facts and circumstances, the amount of support received is a sufficient part of a supported organization's total support to ensure attentiveness. Pertinent factors include the number of supported organizations, the length and nature of relationships, and the purpose to which funds are applied. (Treas.Reg. Section 1.509(a)-4(i)(5)(iii)(B)(3)). IRC Section 509(a)(2) provides that in order for an organization to be recognized as a public charity organization described under this section, it must satisfy both of the following tests: - The One-Third Support Test described in Section 509(a)(2)(A) must normally receive more than one-third of its support from any combination of gifts, grants, contributions, membership fees, and gross receipts from permitted sources, and - The Not-More-Than-One Third Support Test described in Section 509(a)(2)(B) must normally receive not more than one-third of its support from gross investment income and the excess of the amount of unrelated business taxable income over the amount of taxes imposed by Section 511. These two tests are designed to ensure that an organization excluded from classification as a private foundation under Section 509(a)(2) is responsive to the general public rather than to a limited number of donors or other persons. IRC Section 170(b)(1)(A)(vi) describes an organization "which normally receives a substantial part of its support from a governmental unit...or from direct or indirect contributions from the general public." Treasury Regulation section 1.170A-9(f)(2) states that an organization is publicly supported if at least 33 1/3 percent of its support is received from grants from governmental units, and direct or indirect support from the general public. Private Foundation Requirements and Chapter 42 Excise Taxes (in part) IRC Section 508(e)(1) states, a private foundation shall not be exempt from taxation under section 501(a) unless its governing instrument includes provisions the effects of which are - (A) to require its income for each taxable year to be distributed at such time and in such manner as not to subject the foundation to tax under section 4942, and (B) to prohibit the foundation from engaging in any act of self-dealing (as defined in section 4941(d)), from retaining any excess business holdings (as defined in section 4943(c)), from making any investments in such manner as to subject the foundation to tax under section 4944, and from making any taxable expenditures (as defined in section 4945(d)). Taxes on Net Investment Income IRC Section 4940(a) imposes a tax equaled to 1.39 percent of the net investment income of a private foundation for the taxable year, with respect to the carrying on of its activities. IRC Section 4940(c)(1) defines net investment income, for purposes of exempt private non-operating foundations, as the sum of the gross investment income and the capital gain net income that exceeds the deductions allowed by this section, except to the extent inconsistent with the provisions of this section. IRC Section 4940(c)(2) defines gross investment income, for purposes of paragraph (1), as the gross amount of income from interest, dividends, rents, payments with respect to securities loans (as defined in IRC Section 512(a)(5)), and royalties. Taxes on Failure to Distribute Income Initial Taxes on Private Foundation IRC Section 4942(a) imposes a tax equaled to 30 percent on the undistributed income of a private foundation for any taxable year, which has not been distributed before the first day of the second taxable year following such taxable year. IRC Section 4942(c) defines undistributed Income as the amount by which the distributable amount for such taxable year, exceeds the qualifying distributions made before such time out of such distributable amount. IRC Section 4942(d) defines distributable amount as an amount equal to the sum of the minimum investment return plus the amount described in subsection (f)(2)(C), reduced by the sum of the taxes imposed on such private foundation for the taxable year under subtitle A and section 4940. IRC Section 4942(e) defines minimum investment return is 5 percent of the excess of the aggregate fair market value of all assets of the foundation other than those which are used (or held for use) directly in carrying out the foundation's exempt purpose, over the acquisition indebtedness with respect to such assets (determined under section 514(c)(1) without regard to the taxable year in which the indebtedness was incurred). IRC Section 4942(g)(1) defines qualifying distribution as any amount (including the portion of reasonable and necessary administrative expenses) paid to accomplish one or more purposes described in section 170(c)(2)(B), other than any contribution to an organization controlled by the private foundation or one or more disqualified persons, or to a private foundation which is not an operating foundation. Taxes on Taxable Expenditures Initial Taxes on Private Foundation IRC Section 4945(a)(1) imposes on each taxable expenditure (as defined in IRC Section 4945(d)) an initial tax equal to 20 percent of the amount thereof. The tax imposed by this paragraph shall be paid by the private foundation. IRC Section 4945(d)(4) states in part, for purposes of this Section, the term "taxable expenditure" means any amount paid or incurred by a private foundation for as a grant to an organization unless (A) such organization (i) is described in paragraph (1) or (2) of section 509(a), (ii) is an organization described in section 509(c)(3), or (iii) is an exempt operating foundation. (B) the private foundation exercises expenditure responsibility with respect to such grant in accordance with section 4945(h). IRC Section 4945(d)(5) states in part, for purposes of this Section, the term "taxable expenditure" means any amount paid or incurred by a private foundation for any purpose other than one specified in IRC Section 170(c)(2)(B). IRC Section 170(c)(2)(B) lists the following purposes: religious, charitable, scientific, literary, educational, to foster national or international amateur sports competition..., or for the prevention of cruelty to children or animals. Filing Form 4720 Treas.Regs. 53.6011-1(b) states, in part, that every person (including a governmental entity) liable for tax imposed by IRC Sections 4941(a), 4942(a), 4943(a), 4944(a), [or] 4945(a)... and every private foundation... which has engaged in an act of self-dealing (as defined in IRC Section 4941(d)) (other than an act giving rise to no tax under IRC Section 4941(a)) shall file an annual return on Form 4720,"Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code," and shall include therein the information required by such form and the instructions issued with respect thereto..... In the case of any tax imposed by IRC Section 4942(a), the annual return shall be filed with respect to each act (or failure to act) for each year (or part thereof) in the taxable period...In the case of a tax imposed by IRC Section 4945(a),... the annual return shall be filed with respect to each act for the year in which such act giving rise to liability occurred. Treas.Regs. 1.6033-2(a)(2)(ii)(J) states in the case of a private foundation liable for tax imposed under chapter 42, such information as is required by Form 4720. TAXPAYER'S POSITION: Taxpayer's position has not been provided. GOVERNMENT'S POSITION - ISSUE 1 The ****** does not meet the definition of a supporting organization in Treas.Reg. 1.509(a)-4. There are three types of supporting organization: - Type I - operated, supervised, or controlled by, - Type II - supervised or controlled in connection with, and - Type III - operated in connection with, one or more publicly supported organizations. A supported organization is expected to have a say in the operation of the supporting organization as to the investment policies and how the grants are made, to whom, and at what amounts. A Type I supporting organization is defined in Treas.Reg. 1.509(a)-4(g). The relationship required under any one of these terms is comparable to that of a parent and subsidiary, where the subsidiary is under the direction of, and accountable or responsible to, the parent organization. This relationship is established by the fact that a majority of the officers, directors, or trustees of the supporting organization are appointed or elected by the governing body, members of the governing body, officers acting in their official capacity, or the members of one or more publicly supported organization. A Type II supporting organization is defined in Treas.Reg. 1.509(a)-4(h). It requires common supervision or control by the persons supervising or controlling both the supporting organization and the publicly supported organization. The last sentence of paragraph (h)(1) states: "Therefore, in order to meet such requirement, the control or management of the supporting organization must be vested in the same persons that control or manage the publicly supported organizations". A Type III supporting organization is defined in Treas.Reg. 1.509(a)-4(i). The regulation requires that it meet the notification requirement, the responsiveness test, and the integral part test. The first step to determine if an organization qualifies under IRC Section 509(a)(3) is to see if it meets the definition of type I, II, or III. To qualify as a Type I supporting organization, the officers, directors, or trustees of the supporting organization are appointed or elected by the governing body, members of the governing body, officers acting in their official capacity, or the membership of one or more publicly supported organizations. The Trust does not have board members which are on the board of the supported organization. Because the sole trustee in this case is a bank, the Trust is neither operated, supervised, or controlled by, nor supervised or controlled in connection with the publicly supported church. The ****** does not meet the definition of a Type I supporting organization. To qualify as a Type II supporting organization the supported and supporting organizations must be controlled or managed by the same persons. Treas.Reg. 1.509(a)-4(h)(1) specifically states that in order to meet the requirements of "supervised or controlled in connection with" the control or management of the supporting organization must be vested in the same persons that control or manage the publicly supported organizations. In the case of a Type I or Type II supporting organization, the supported organization(s) are in control of the supporting organization. For Type I because the supporting organization is a subsidiary of the supported; For Type II because the same persons control or manage the supporting and the supported organizations. By being in control, the supported organizations are determining the investment policies and the amounts given and to whom given to; therefore, the supporting organization can't decide to give to a different organization unless the supported organization allows it. This section does not mean that if an organization gives to more than one organization that it meets the definition of a type II. To be a type II supporting organization there must be common supervision and/or control of both the supported and the supporting organizations. Because the ****** in this case is a ******, the ****** is neither operated, supervised, or controlled by, nor supervised or controlled in connection with the publicly supported organization. The ****** does not have common supervision or control with the supported organizations; therefore, it does not meet the definition of a Type II supporting organization. On its Form ****** the ****** made a selection on Schedule *** indicating that it is a Type III non-functionally integrated supporting organization. Type III supporting organizations as defined in Treas.Reg. 1.509(a)(4)(i) require that the supported organizations have a significant voice in the investment policy, grants made, recipients, amounts, and when the grants are paid. To meet the definition of a Type III supporting organization, an organization must meet the notification requirement, the responsiveness test, and the integral part test. The responsiveness test has two parts: relationship of the officers and significant voice. The relationship test requires that one or more officers, directors, or trustees of the supporting organization are elected or appointed by the supported organization or one or more of the governing body of the supported organization also hold important offices in the supporting organization; or the board of the supporting organization maintains a close and continuous working relationship with the board of the supported organization, and the supported organization must have a significant voice in the investment policies of the supporting organization, the timing of grants, the manner of making grants, and the selection of grant recipients, and in otherwise directing the use of the income or assets of the supporting organization. As established above, the ****** does not have ****** or ****** with the ******. The ****** makes an annual distribution and forwards a copy of the ****** account statement ****** to point-person at the supporting organization but maintains no other contact with ******. The ****** has complete autonomy and independence over the ******, asset allocation and ****** decisions. The ****** is similar to the organization in Rev.Rul. 75-437, acting independently with the supported organization not having a significant voice in the investment policies of the ****** or the timing and ******. The exempt trust in Rev.Rul. 75-437 failed the responsiveness test, and it was held that it is a ****** and not a ****** within the meaning of section 509(a)(3) of the Code. To meet the notification requirement the supporting organization must provide a written notice to a principal officer of the supporting organization describing the type and amount of all support it provided during the preceding year, a copy of the Form ****** for the ******, and a copy of the most recent governing documents. The ****** provides a copy of an ****** to the supported organization but does not provide to a ****** of the ****** the required written notice, copies of the ****** and ******. The ****** does not meet the responsiveness test or the notification requirement. Therefore, it does not meet the definition of a Type III organization. The ****** has failed the required tests with respect to its relationships with a supported organization. It does not meet the requirements of IRC 509(a)(3). GOVERNMENT POSITION - ISSUE 2 The ****** does not meet the requirements of IRC 509(a)(2). To be recognized as a public charity described under IRC 509(a)(2), an organization must satisfy both the One-Third Support Test and the Not-More-Than-One Third Support Test. The ****** meets ******. Most of the ****** contributions over the ****** have come from one of the ******, ******. ****** is a Disqualified Person and, as such, ****** are not included when computing the Public Support Percentage. The total contributions received from non-disqualified persons total only $ ****** over ****** or *** % of total support, while ****** represents *** % of the total (see Appendix I). The ****** is organized as an income-generating ****** vehicle relying solely on its ****** for ******. Although it may receive contributions from time to time, ****** comprises the bulk of its support. GOVERNMENT POSITION - ISSUE 3 The ****** does not meet the requirements of IRC Section 170(b)(1)(A)(vi) as a publicly supported organization with a foundation status described in Section 509(a)(1). The ****** does not seek any ****** and does not maintain any ****** in order to attract support from ******. The ****** percentage for ****** is *** %. This calculation includes all ****** received over the last ****** minus ****** exceeding the *** % limitation, as described in Appendix II. Therefore, the ****** does not meet the one-third public support test. Moreover, as a ****** with no ****** and ****** and no ******, it also does not exhibit any of the required factors and, therefore, does not meet the Facts and Circumstance Test. The ****** occasionally receives ****** from the ******; however, it relies almost exclusively on its ****** for making ****** to the ******. CONCLUSION The ****** does not meet the requirements of IRC Section 509(a)(3) therefore, it is a ******. It needs to file Forms ****** and pay the tax on its net ****** beginning with the year ending ******, ****** and thereafter. In the case of a ****** liable for tax imposed under chapter 42, such information is required by Form ******, ****** and ****** of the Internal Revenue Code. The ****** tax-exempt status under IRC Section 501(c)(3) remains in effect. The effective date of this reclassification is ******, ******. If you agree to this conclusion, please sign and return the attached Form 6018. If you disagree, please submit a statement of your position. APPENDIX I APPENDIX II An organization's support is defined in IRC 509(d) to include amounts received from Gifts, Grants, Gross Receipts from Related activities, Investment income and Unrelated Business Income (UBI). Contributions and membership fees from the general public are included in full except to the extent that the contribution or fee exceeds 2 percent of the organization's total support. Two Percent Limitation If a ****** exceeds *** percent of an organization's total support, the excess is excluded from the numerator of the public support fraction and included (entire amount of the contribution) in the denominator (Treas.Reg. 1.170A-9(f)(6)(i)). The *** percent limitation also applies to any person(s) or entity related to ****** as described in IRC 4946(a)(1)(C) through (G) as if made by ******. For example, a ****** and ****** are treated as ****** person for the *** percent limitation. The table below shows the calculations for the *** percent limitation that is applicable in each ****** and the amount that is excluded ****** in calculating the total public support percentage.

Private Letter Ruling Number: 202343014 Internal Revenue Service July 27, 2023 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202343014 Release Date: 10/27/2023 Index Number: 2501.00-00, 2601.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:04 PLR-102055-23 Date: July 27, 2023 Dear ******: This letter responds to your authorized representative's letter dated December 27, 2022, and subsequent correspondence, requesting rulings concerning the federal gift and generation-skipping transfer tax consequences of a court-approved settlement agreement. FACTS The facts submitted and representations made are as follows. Settlor died testate on Date 1, a date prior to September 25, 1985. Settlor's Will consists of the original instrument dated Date 2, a first codicil dated Date 3, a second codicil dated Date 4, a third codicil dated Date 5, and a fourth codicil dated Date 6 (collectively, Settlor's Will). At his death, Article Fourth of Settlor's Will created separate trusts for the benefit of his three children, Child 1, Child 2, and Child 3 (collectively, Children), their spouses, and their descendants: Trust A for the benefit of Child 1; Trust B for the benefit of Child 2; and Trust C for the benefit of Child 3. In addition to the trusts for the primary benefit of Children, Article Third of Settlor's Will created a marital trust for Settlor's wife, Spouse, which granted Spouse a testamentary general power of appointment over any trust property remaining in the marital trust at the time of her death. Spouse exercised her power of appointment under Article VII of Spouse's Will, dated Date 7, with a first codicil dated Date 8 (collectively, Spouse's Will). Pursuant to Spouse's Will, upon Spouse's death on Date 9, the remaining property of the marital trust was divided into three separate trusts for the benefit of Children, their spouses, and their descendants: Trust D for the benefit of Child 1; Trust E for the benefit of Child 2; and Trust F for the benefit of Child 3. Section 8 of Article VI of Spouse's Will provides that to the extent not specifically stated otherwise, all trusts created by Spouse's Will would be governed by the provisions of Settlor's Will. Child 3 died on Date 10, leaving no surviving spouse or descendants. Upon Child 3's death, the property held in Trust C was divided into two equal shares and each share distributed to Trust A and Trust B. Similarly, the property of Trust F was divided into two equal shares and each share distributed to Trust D and Trust E. On Date 11, pursuant to a State Court order, Trust D for the primary benefit of Child 1 was divided into six separate trusts for the benefit of Child 1's six children and their respective descendants, as well as Child 1 and Child 1's spouse: Trust D1 for the benefit of Grandchild 1; Trust D2 for the benefit of Grandchild 2; Trust D3 for the benefit of Grandchild 3; Trust D4 for the benefit of Grandchild 4; Trust D5 for the benefit of Grandchild 5; and Trust D6 for the benefit of Grandchild 6. On Date 12, pursuant to a State Court order, Trust A for the primary benefit of Child 1 was divided into six separate trusts for the benefit of Child 1's six children and their respective descendants, as well as Child 1 and Child 1's spouse: Trust A1 for the benefit of Grandchild 1; Trust A2 for the benefit of Grandchild 2; Trust A3 for the benefit of Grandchild 3; Trust A4 for the benefit of Grandchild 4; Trust A5 for the benefit of Grandchild 5; and Trust A6 for the benefit of Grandchild 6. In a companion State Court order on the same date, Trust B for the primary benefit of Child 2 and Trust E for the primary benefit of Child 2, were divided into two separate trusts for the benefit of Child 2's two children, Grandchild 7 and Grandchild 8 and their respective descendants, as well as Child 2 and Child 2's spouse. The divided trusts were subsequently merged into two trusts known as Trust BE1 for the benefit of Grandchild 7 and Trust BE2 for the benefit of Grandchild 8. Article Fourth of Settlor's Will governs the distribution provisions of Trust A, Trust B, Trust D, Trust E, Trusts A1 through A6, Trusts D1 through D6, and Trusts BE1 and BE2 (collectively, the Family Trusts). Until a trust for whom a grandchild is named terminates, the Trustee has discretion to make distributions of income from such trust to the grandchild. The portion of income not distributed may be accumulated or may be distributed to the grandchild's spouse, the surviving parents of the grandchild, and the descendants of grandchild, in whole or in part, in the discretion of the Trustee. Trustee has unfettered discretion to make distributions of principal to a grandchild for whom a trust is established. A trust for whom a grandchild is named shall terminate upon the later to occur of the death of the grandchild or the grandchild's spouse, if any, and at such time the share for such grandchild shall be distributed to the descendants of such grandchild, per stirpes. Section 4 of Article Fifth of Settlor's Will provides that any trust established pursuant to Settlor's Will shall cease and terminate upon the expiration of twenty-one years after the death of the last surviving of Settlor's descendants who were in being at the time of Settlor's death, and if at the expiration of this period any property is still held in trust, such property shall immediately be distributed to and among the persons receiving or entitled to have the benefit of the income therefrom in equal shares. Pursuant to Article Fourth of Settlor's Will, if a grandchild of Settlor dies without a living spouse or descendants, the trust principal of such grandchild's trust will be distributed to Settlor's other descendants. Section 3 of Article Fifth of Settlor's Will provides as follows: The words "children" and "descendants" shall be deemed to refer to issue of the body born in lawful wedlock and to children adopted by legal proceedings of public record and to their children and descendants so defined. Of Settlor's eight grandchildren, Grandchild 5 and Grandchild 7 currently have biological descendants. Grandchild 2 adopted Adoptee 1 and Grandchild 3 adopted Adoptee 2 and Adoptee 3. Each adopted individual was adopted after reaching the age of majority (collectively, Adult Adoptees). The Trustee of each Family Trust is Trust Company. On Date 13, Trustee filed a petition with the State Court requesting an order construing the terms "children" and "descendants" under Section 3 of Article Fifth of Settlor's Will to determine whether individuals adopted as adults qualify as "descendants" under Settlor's Will. A controversy exists among the descendants of Settlor as to whether the Adult Adoptees are "descendants" of Settlor under Settlor's Will. If the Adult Adoptees are considered descendants of Settlor, the number of potential remainder beneficiaries increases and affects the per stirpital shares at the time of final distribution of the Family Trusts. On Date 14, State Court issued a memorandum opinion and order for evidentiary hearing to determine whether Grandchild 2 and/or Grandchild 3 functioned as parents to the Adult Adoptees before they reached age 18, based on State Law 1, which was enacted after Settlor's date of death. Grandchild 1, joined by other family members, filed a motion for summary judgment and amendment of the Date 14 order in objection to the State Court's application of State Law 1 rather than the law at the time of Settlor's date of death. State Law 1 provides that in construing a dispositive provision of a transferor who is not the adoptive parent, an adoptee is not considered the child of the adoptive parent unless the adoptive parent functioned as a parent of the adoptee before the adoptee reached 18 years of age. State Law 2 provides that the effective date of the title of State Law 1 is Date 15, a date that is after Settlor's date of death, and applies to any proceedings in court then pending or thereafter commenced regardless of the time of the death of decedent except to the extent that in the opinion of the court the former procedure should be made applicable in a particular case in the interest of justice or because of infeasibility of application of the procedure of the title. Over several years, the interested parties engaged in substantial litigation and other proceedings in preparation for trial, including filing cross motions for summary judgment, extensive discovery, and voluntary mediation. Based on the issue before State Court, the outcome of the litigation would be that the Adult Adoptees are determined to be or not be descendants of Settlor. After several attempts to resolve the contested issues, on Date 16 the parties entered into a Settlement Agreement resolving the litigation regarding the status of the Adult Adoptees as descendants of Settlor. The Settlement Agreement was revised on Date 17 (Revised Settlement Agreement). Both the Settlement Agreement and the Revised Settlement Agreement were approved by order of State Court and contingent upon receipt of a favorable private letter ruling from the Internal Revenue Service (IRS). All parties to the agreement were represented by legal counsel. The Revised Settlement Agreement provides for certain payments to and for the benefit of Adoptee 1. It provides that the amount of $a will be distributed outright and in cash to Adoptee 1 from Trusts A1 through A6 and Trusts D1 through D6 (each trust distributing $b). In addition, the amount of $a will be distributed outright and in cash to Grandchild 2 (adoptive parent of Adoptee 1) from Trust A2 and Trust D2 (each trust for the primary benefit of Grandchild 2 and each distributing $c), whereupon Grandchild 2, as settlor and transferor, will immediately establish (and contribute the $a in cash to) a special needs trust for the primary benefit of Adoptee 1. Finally, the amount of $d will be distributed outright and in cash to Adoptee 1 from Trust A2 and Trust D2 (each trust distributing $e). Upon receipt of cash in the amounts of $a and $d, Adoptee 1, as settlor and transferor, will immediately establish (and contribute the sum of $a and $d in cash to) a revocable trust for his primary benefit. The Revised Settlement Agreement provides for certain payments to and for the benefit of Adoptee 2 and Adoptee 3. It provides that the amount of $a will be distributed outright and in cash to each of Adoptee 2 and Adoptee 3 from Trusts A1 through A6 and Trusts D1 through D6 (each distributing $b). Further, after the cash distributions to Adoptee 2 and Adoptee 3 are made, the assets then making up Trust A3 and Trust D3 (collectively referred to going forward as the Grandchild 3 Settlement Trusts), each for the primary benefit of Grandchild 3 (adoptive parent of Adoptee 2 and Adoptee 3), will be kept separate and segregated from the assets of any other Family Trust. No further additions shall be made to the Grandchild 3 Settlement Trusts from any other Family Trust by reason of the death of any beneficiary of those other Family Trusts. Except for certain excluded property related to agricultural land and business interests in entities whose primary holding is agricultural land (Excluded Property), Adoptee 2 and Adoptee 3 are the named beneficiaries of the Grandchild 3 Settlement Trusts. Upon the death of the survivor of Child 1's spouse, Grandchild 3, and Grandchild 3's spouse, the remaining assets of the Grandchild 3 Settlement Trusts, less the Excluded Property, will be distributed in equal shares to Adoptee 2 and Adoptee 3, or all to the survivor. Adoptee 2 and Adoptee 3 have a testamentary power to appoint such individual's respective share of the Grandchild 3 Settlement Trusts to or for the benefit of such individual's spouse or descendants. If Adoptee 2 or Adoptee 3 does not exercise such power of appointment but has living descendants, the Trustee shall distribute such individual's respective share to such descendants, per stirpes. Any asset appointed under the terms of the Revised Settlement Agreement (including the assets of the Grandchild 3 Settlement Trusts) may not extend the time for vesting of that asset beyond a period of twenty-one years after the death of the last surviving descendant of Settlor who was in being on Date 18. Any remaining assets of the Grandchild 3 Settlement Trusts not otherwise distributed (including the Excluded Property) shall be distributed according to Settlor's Will without regard to any surviving Adult Adoptees or their descendants. Under the Revised Settlement Agreement, all claims by the Adult Adoptees with regard to Settlor and Settlor's Spouse's trusts and estates are resolved and, after obtaining a favorable private letter ruling from the IRS, Trustee will agree to dismiss the petition filed in State Court with prejudice and all parties will agree that State Court can enter the dismissal without awarding costs to any party and without further notice. It is represented that each Family Trust was irrevocable on September 25, 1985, and that there were no additions, constructive or actual, after that date. You have requested the following rulings: 1. The Revised Settlement Agreement, the State Court order approving the Revised Settlement Agreement, and the implementation and distributions made in accordance with the Revised Settlement Agreement, will not cause any of the Family Trusts to lose their status as trusts exempt from GST tax for purposes of chapter 13 of the Code. 2. Entering into the Revised Settlement Agreement will not cause any party to the Settlement Agreement to be treated as having made a gift to any other individual for purposes of chapter 12 of the Code. LAW AND ANALYSIS Ruling 1 Section 2601 imposes a tax on every generation-skipping transfer (GST), which is defined under § 2611 as a taxable distribution, a taxable termination, and a direct skip. Under § 1433(a) of the Tax Reform Act of 1986 (Act) and § 26.2601-1(a) of the Generation-Skipping Transfer Tax Regulations, the GST tax is generally applicable to GSTs made after October 22, 1986. However, under § 1433(b)(2)(A) of the Act and § 26.2601-1(b)(1)(i), the tax does not apply to a transfer under a trust (as defined in § 2652(b)) that was irrevocable on September 25, 1985, but only to the extent that such transfer is not made out of corpus added to the trust after September 25, 1985 (or out of income attributable to corpus so added). Section 26.2601-1(b)(4) provides rules for determining when a modification, judicial construction, settlement agreement, or trustee action with respect to a trust that is exempt from the GST tax under § 26.2601-1(b)(1), (b)(2), or (b)(3) will not cause the trust to lose its exempt status. The rules of § 26.2601-1(b)(4) are applicable only for purposes of determining whether an exempt trust retains its exempt status for GST tax purposes. They do not apply in determining, for example, whether the transaction results in a gift subject to gift tax, or may cause the trust to be included in the gross estate of a beneficiary, or may result in the realization of capital gain for purposes of § 1001. Section 26.2601-1(b)(4)(i)(B) provides that a court-approved settlement of a bona fide issue regarding the administration of a trust or the construction of terms of the governing instrument will not cause an exempt trust to be subject to the provisions of chapter 13, if -- ( 1 ) The settlement is the product of arm's length negotiations; and ( 2 ) The settlement is within the range of reasonable outcomes under the governing instrument and applicable state law addressing the issues resolved by the settlement. A settlement that results in a compromise between the positions of the litigating parties and reflects the parties' assessments of the relative strengths of their positions is a settlement that is within the range of reasonable outcomes. In the present case, each Family Trust was created and was irrevocable before September 25, 1985. It is represented that no additions, constructive or actual, have been made to any of the Family Trusts on or after September 25, 1985. Consequently, each Family Trust is currently exempt from GST tax. In this case, each party was represented by separate legal counsel. The prospective beneficiaries had distinct and adverse economic and administrative interests. The parties were involved in protracted and substantial litigation to resolve the issue of the identity of Settlor's descendants under Settlor's Will. Settlement negotiations were carried out over several years until the Revised Settlement Agreement was reached. The parties have obtained State Court approval of the Revised Settlement Agr eement pending the issuance of this private letter ruling. We conclude that the Revised Settlement Agreement constitutes a settlement of a bona fide issue regarding construction of the terms "children" and "descendants" in Settlor's Will. We further conclude that the terms of the Revised Settlement Agreement are the product of arm's length negotiations. Finally, we conclude that the Revised Settlement Agreement represents a compromise between the positions of the interested parties and reflects the assessments of the relative strengths of their positions; therefore, we additionally conclude that the Revised Settlement Agreement is within the range of reasonable outcomes under the governing instrument and the applicable State law addressing the issues resolved by the Revised Settlement Agreement. Accordingly, based on the facts submitted and the representations made, we rule that the Revised Settlement Agreement, the State Court order approving the Revised Settlement Agreement, and the implementation and distributions made in accordance with the Revised Settlement Agreement, will not cause any of the Family Trusts to lose their status as trusts exempt from GST tax for purposes of chapter 13 of the Code. Ruling 2 Section 2501 imposes a tax for each calendar year on the transfer of property by gift during such calendar year by any individual. Section 2511 provides that the tax imposed by § 2501 applies whether the transfer is in trust or otherwise, direct or indirect, and whether the property transferred is real or personal, tangible or intangible. Section 25.2511-1(c)(1) of the Gift Tax Regulations provides that any transaction in which an interest in property is gratuitously passed or conferred upon another, regardless of the means or device employed, constitutes a gift subject to tax. Whether an agreement settling a dispute is effective for gift tax purposes depends on whether the settlement is based on a valid enforceable claim asserted by the parties and, to the extent feasible, produces an economically fair result. See Ahmanson Foundation v. United States, 674 F.2d 761, 774-775 (9 th Cir. 1981). Thus, state law must be examined to ascertain the legitimacy of each party's claim. A settlement that fairly reflects the relative merits and economic values of the various claims asserted by the parties and reaches a settlement that is within a range of reasonable settlements will not result in a transfer for gift tax purposes. As discussed above, the Revised Settlement Agreement represents the resolution of a bona fide controversy among the family members as beneficiaries of Settlor's Will. All interested parties have been represented in the proceedings that culminated in the Court Order approving the Revised Settlement Agreement. Further, based on the facts as presented, the terms of the Revised Settlement Agreement are the product of arm's length negotiations among all the interested parties. We conclude that the Revised Settlement Agreement reflects the rights of the parties under the applicable law of State that would be applied by the highest court of State. Accordingly, based on the facts submitted and representations made, we rule that implementation of the Revised Settlement Agreement will not result in a gift under § 2501 by the parties to the Revised Settlement Agreement. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. Sincerely, Karlene M. Lesho Karlene M. Lesho Chief, Branch 4 Office of Associate Chief Counsel (Passthroughs and Special Industries) Enclosures Copy for § 6110 purposes cc:

Revenue Procedure 2022-23 Internal Revenue Service 2022-18 I.R.B. 1052 26 CFR 1.181-2: Election to deduct production costs. (Also Part I,§§ 168, 181, 446; 1.181, 1.446-1) Rev. Proc. 2022-23 SECTION 1. PURPOSE This revenue procedure provides guidance allowing a taxpayer to make late elections under§§ 168(j)(8) and 168(l)(3)(D) of the Internal Revenue Code (Code) for the taxpayer's taxable year ending in 2018 or in 2019 for certain property placed in service by the taxpayer after December 31, 2017. This revenue procedure also provides guidance allowing a taxpayer to make a late election under§ 181(a)(1) of the Code for the taxpayer's taxable year ending in 2018 or in 2019 for certain film, television, or live theatrical productions commenced by the taxpayer after December 31, 2017. SECTION 2. BACKGROUND.01 Amendments to§§ 168(j), 168(l), and 181. (1) Section 168(j). Section 168(j)(1) provides that for purposes of§ 168(a), the applicable recovery period for qualified Indian reservation property, as defined in§ 168(j)(4), is determined in accordance with the table contained in§ 168(j)(2), instead of the table contained in§ 168(c). Prior to amendment by§ 116 of the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (2019 Act), enacted as Division Q of the Further Consolidated Appropriations Act, 2020, Pub. L. No. 116-94, 133 Stat. 2534, 3229 (December 20, 2019),§ 168(j)(9) provided that§ 168(j) did not apply to property placed in service after December 31, 2017. Section 116(a) of the 2019 Act amended§ 168(j)(9) to provide that§ 168(j) does not apply to property placed in service after December 31, 2020, which made§ 168(j) applicable to property placed in service after December 31, 2017, and on or before December 31, 2020. Subsequent legislation further amended§ 168(j)(9) to provide that§ 168(j) does not apply to property placed in service after December 31, 2021, which made§ 168(j) applicable to property placed in service after December 31, 2020, and on or before December 31, 2021. See§ 138 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (2020 Act), enacted as Division EE of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182, 3054 (December 27, 2020). (2) Section 168(l). Section 168(l)(1) allows a 50-percent additional first year depreciation deduction (also sometimes referred to as a "special depreciation allowance") for qualified second generation biofuel plant property, as defined in§ 168(l)(2) and (3), for the taxable year in which the qualified second generation biofuel plant property is placed in service by the taxpayer. Prior to amendment by§ 130 of the 2019 Act,§ 168(l)(2)(D) defined qualified second generation biofuel plant property, in part, as property placed in service by the taxpayer before January 1, 2018. Section 130(a) of the 2019 Act amended§ 168(l)(2)(D) by inserting "January 1, 2021" in place of "January 1, 2018," which made§ 168(l)(1) applicable to property placed in service after December 31, 2017, and before January 1, 2021. (3) Section 181. Section 181(a)(1) allows a taxpayer to elect to treat the cost of any qualified film, television, or live theatrical production, subject to the dollar limitations in§ 181(a)(2), as an expense that is not chargeable to capital account (§ 181 election). Prior to amendment by§ 117 of the 2019 Act,§ 181(g) provided that§ 181 did not apply to qualified film, television, or live theatrical productions commencing after December 31, 2017. Section 117(a) of the 2019 Act amended§ 181(g) to provide that§ 181 does not apply to qualified film, television, or live theatrical productions commencing after December 31, 2020, which made§ 181 applicable to qualified film, television, or live theatrical productions commencing after December 31, 2017, and on or before December 31, 2020. Subsequent legislation further amended§ 181(g) to provide that§ 181 does not apply to qualified film, television, or live theatrical productions commencing after December 31, 2025, which made§ 181 applicable to qualified film, television, or live theatrical productions commencing after December 31, 2020, and on or before December 31, 2025. See§ 116 of the 2020 Act. (4) In sum, the 2019 Act retroactively extended the application of§§ 168(j) and 168(l) to certain property placed in service by the taxpayer after December 31, 2017, and before January 1, 2021, and§ 181 to a qualified film, television, or live theatrical production commencing after December 31, 2017, and before January 1, 2021. Unless otherwise provided, all references hereinafter in this revenue procedure to§§ 168(j), 168(l), and 181 are references to§§ 168(j), 168(l), and 181 as in effect on the day before the enactment date of the 2020 Act..02 Elections. (1) Section 168(j)(8) election. Section 168(j)(8) allows a taxpayer to make an election not to apply§ 168(j) for all property that is in the same class of property and placed in service by the taxpayer in the same taxable year (§ 168(j)(8) election). For purposes of§ 168(j), the term "class of property" means each class of property described in the table contained in§ 168(j)(2) (for example, 3-year property). As set forth in Rev. Proc. 2017-33, 2017-19 I.R.B. 1236, the§ 168(j)(8) election generally must be made by the due date, including extensions, of the Federal tax return for the taxable year in which the taxpayer places in service the qualified Indian reservation property. Rev. Proc. 2017-33 further provides that the§ 168(j)(8) election generally must be made in the manner prescribed in the instructions for Form 4562, Depreciation and Amortization. The instructions for Form 4562 for the 2018 taxable year and the 2019 taxable year provide that the§ 168(j)(8) election is made by attaching a statement to the taxpayer's timely filed tax return, including extensions, indicating the class of property for which the taxpayer is making the§ 168(j)(8) election and, for such class, that the taxpayer is electing not to apply§ 168(j). (2) Section 168(l)(3)(D) election. Section 168(l)(3)(D) allows a taxpayer to elect not to apply§ 168(l) for all property that is in the same class of property and placed in service in the same taxable year (§ 168(l)(3)(D) election). The procedures for making the§ 168(l)(3)(D) election are provided in the instructions for Form 4562. The instructions for Form 4562 for the 2018 taxable year and the 2019 taxable year provide that any election not to deduct the additional first year depreciation for any class of property, which includes the§ 168(l)(3)(D) election, is made by attaching a statement to the taxpayer's timely filed tax return, including extensions, indicating the class of property for which the taxpayer is making the§ 168(l)(3)(D) election and, for such class, that the taxpayer is not claiming the additional first year depreciation. (3) Section 181 election. Section 181(c)(1) provides that the§ 181 election for any qualified film, television, or live theatrical production is made in such manner as prescribed by the Secretary of the Treasury or her delegate and by the due date, including extensions, for filing the taxpayer's return of tax under chapter 1 of the Code for the taxable year in which costs of the production are first incurred. (a) Last updated in 2012, the rules and procedures concerning a§ 181 election for qualified film and television productions are set forth in§ 1.181-0 through§ 1.181-6 (§ 181 regulations). Congress added "qualified live theatrical production" to§ 181 of the Code in 2015. As of the date of issuance of this revenue procedure, the§ 181 regulations have not been updated to incorporate rules and procedures for qualified live theatrical productions. (b) Section 1.181-2(a) provides that an owner, as defined in§ 1.181-1(a)(2), generally makes the§ 181 election to deduct production costs, as defined in§ 1.181-1(a)(3), of a production only if that owner has not deducted in a previous taxable year any production costs for that production under any provision of the Code other than§ 181. Pursuant to§ 1.181-2(b)(1), the§ 181 election generally must be made by the due date, including any extension, for filing the owner's Federal income tax return for the first taxable year in which (i) any aggregate production costs, as defined in§ 1.181-1(a)(4), have been paid or incurred, and (ii) the owner reasonably expects, based on all of the facts and circumstances, that the production will be set for production and will, upon completion, be a qualified production. Pursuant to§ 1.181-2(c)(1), an owner must make the§ 181 election separately for each production. Further, for each production to which the§ 181 election applies,§ 1.181-2(c)(2)(i) provides that the owner must attach a statement to the owner's Federal income tax return for the taxable year of the§ 181 election stating that the owner is making the§ 181 election and providing the information specified in§ 1.181-2(c)(2)(i)(A) through (H). If the owner pays or incurs additional production costs in any taxable year subsequent to the taxable year for which production costs are first deducted under§ 181,§ 1.181-2(c)(2)(ii) provides that the owner must attach a statement to the owner's Federal income tax return for that subsequent taxable year providing the information specified in§ 1.181-2(c)(2)(ii)(A) through (H)..03 Method of accounting. (1) Section 446(e) of the Code and§ 1.446-1(e)(2) of the Income Tax Regulations require a taxpayer to secure the consent of the Commissioner of Internal Revenue (Commissioner) before changing a method of accounting for Federal income tax purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions necessary to permit a taxpayer to obtain consent to change a method of accounting. (2) Section 1.446-1(e)(2)(ii)( d )( 3 )( iii ) provides that the making of a late depreciation election or the revocation of a timely valid depreciation election is not a change in method of accounting, except as otherwise expressly provided by the Code, the regulations under the Code, or other guidance published in the Internal Revenue Bulletin. Section 1.446-1(e)(2)(ii)( d )( 5 )( iii ) provides that except as otherwise expressly provided by the Code, the regulations under the Code, or other guidance published in the Internal Revenue Bulletin, no§ 481 adjustment is required or permitted for a change from one permissible method of computing depreciation to another permissible method of computing depreciation. (3) Because of the retroactive extension of the application of§§ 168(j), 168(l), and 181, guidance is needed for taxpayers that want to make late elections under§§ 168(j)(8), 168(l)(3)(D), and 181(a)(1). The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have determined it appropriate to treat the making of late elections under§§ 168(j)(8), 168(l)(3)(D), and 181(a)(1) for certain property and certain film, television, or live theatrical productions as a change in method of accounting with a§ 481(a) adjustment for a limited period of time. Accordingly, this revenue procedure permits taxpayers to make these late elections by filing an amended return or an administrative adjustment request under§ 6227 of the Code (AAR), as applicable, or a Form 3115, Application for Change in Accounting Method. See sections 4 and 6 of this revenue procedure for the procedures to make these late elections. SECTION 3. SCOPE.01 This revenue procedure applies to a taxpayer that: (1) Placed in service (a) qualified Indian reservation property after December 31, 2017, during the taxpayer's taxable year ending in 2018 (2018 taxable year) or in 2019 (2019 taxable year), or (b) qualified second generation biofuel plant property after December 31, 2017, during the taxpayer's 2018 taxable year or 2019 taxable year; (2) Timely filed the taxpayer's Federal income tax return or Form 1065, U.S. Return of Partnership, for the placed-in-service year of such property; and (3) Wants to make a (a) late§ 168(j)(8) election to not apply§ 168(j) for the placed-in-service year for one or more classes of qualified Indian reservation property, or (b) late§ 168(l)(3)(D) election not to apply§ 168(l) for the placed-in-service year for one or more classes of qualified second generation biofuel plant property..02 This revenue procedure also applies to a taxpayer that: (1) Is the owner, as defined in§ 1.181-1(a)(2), of a qualified film, television, or live theatrical production commencing after December 31, 2017; (2) Wants to make a late§ 181 election for the production costs of such qualified film, television, or live theatrical production for the taxpayer's 2018 taxable year or 2019 taxable year, as applicable; and (3) Timely filed the taxpayer's Federal income tax return or Form 1065 for the taxpayer's 2018 taxable year or 2019 taxable year, as applicable. SECTION 4. AUTOMATIC EXTENSION OF TIME TO FILE ELECTIONS UNDER SECTIONS 168(j)(8), 168(l)(3)(D), and 181(a)(1).01 Time and manner of making a late§ 168(j)(8) election or late§ 168(l)(3)(D) election. A taxpayer within the scope of section 3.01 of this revenue procedure may make a late§ 168(j)(8) election or late§ 168(l)(3)(D) election by filing either: (1) An amended Federal income tax return or amended Form 1065 for the placed-in-service year of the property on or before December 31, 2022, but in no event later than the applicable period of limitations on assessment for the taxable year for which the amended return is being filed. A partnership subject to the centralized partnership audit regime enacted as part of the Bipartisan Budget Act of 2015 (BBA partnership) may file an AAR for the placed-in-service year of the property on or before December 31, 2022, but in no event later than the applicable period of limitations on making adjustments under§ 6235 of the Code for the reviewed year as defined in§ 301.6241-1(a)(8) of the Procedure and Administration Regulations. This amended return or AAR must include the adjustment to taxable income for the late election and any collateral adjustments to taxable income or to tax liability. Such collateral adjustments also must be made on original or amended Federal returns or AARs for any affected succeeding taxable years; or (2) A Form 3115 with the taxpayer's first or second timely filed original Federal income tax return or Form 1065 that is filed after April 19, 2022. A late§ 168(j)(8) election or late§ 168(l)(3)(D) election made pursuant to this section 4.01(2) will be treated as a change in method of accounting with a§ 481(a) adjustment. The procedures for making this change in method of accounting are described in section 6 of this revenue procedure..02 Time and manner of making a late§ 181 election. A taxpayer within the scope of section 3.02 of this revenue procedure may make the late§ 181 election by filing either: (1) An amended Federal income tax return or amended Form 1065 for the taxpayer's 2018 taxable year or 2019 taxable year, as applicable, on or before December 31, 2022, but in no event later than the applicable period of limitations on assessment for the taxable year for which the amended return is being filed. A BBA partnership may file an AAR for the taxpayer's 2018 taxable year or 2019 taxable year, as applicable, on or before December 31, 2022, but in no event later than the applicable period of limitations on making adjustments under§ 6235 for the reviewed year as defined in§ 301.6241-1(a)(8). This amended return or AAR must include the adjustment to taxable income for the late election, any collateral adjustments to taxable income or to tax liability, and the statement required under§ 1.181-2(c)(2)(i). Such collateral adjustments also must be made on, and the statement required under§ 1.181-2(c)(2)(ii) must be included with, original or amended Federal returns or AARs for any affected succeeding taxable years; or (2) A Form 3115 with the taxpayer's first or second timely filed original Federal income tax return or Form 1065 that is filed after April 19, 2022. A late§ 181 election made pursuant to this section 4.02(2) will be treated as a change in method of accounting with a§ 481(a) adjustment. The procedures for making this change in method of accounting are described in section 6 of this revenue procedure. SECTION 5. APPLICATION OF THE§ 181 REGULATIONS TO QUALIFIED LIVE THEATRICAL PRODUCTIONS FOR 2018 AND 2019 A taxpayer within the scope of this revenue procedure may treat the§ 181 regulations (as described in section 2.02(3) of this revenue procedure) as if such regulations were amended to apply to the production costs of qualified live theatrical productions for purposes of making the late§ 181 election under section 4.02 of this revenue procedure for the taxpayer's 2018 taxable year or 2019 taxable year. SECTION 6. CHANGE IN METHOD OF ACCOUNTING.01 In general. The making of a late election under section 4.01(2) or 4.02(2) of this revenue procedure is treated as a change in method of accounting to which§§ 446(e) and 481, and the corresponding regulations, apply. A taxpayer that wants to make a late election under section 4.01(2) or 4.02(2) of this revenue procedure must use the automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, or its successor..02 New automatic change. Rev. Proc. 2022-14, 2022-7 I.R.B. 502, is modified to add new section 6.23 to read as follows: 6.23 Late elections under§ 168(j)(8),§ 168(l)(3)(D), and§ 181(a)(1). (1) Description of Change. (a) Applicability. This change applies to: (i) A taxpayer within the scope of section 3.01 of Rev. Proc. 2022-23, 2022-18 I.R.B. XXX, that wants to make the late election provided in section 4.01(2) of Rev. Proc. 2022-23 under§ 168(j)(8) or§ 168(l)(3)(D); or (ii) A taxpayer within the scope of section 3.02 of Rev. Proc. 2022-23 that wants to make the late election provided in section 4.02(2) of Rev. Proc. 2022-23 under§ 181(a)(1). (b) Inapplicability. The IRS will treat the making of a late election provided in section 4 of Rev. Proc. 2022-23 under§§ 168(j)(8), 168(l)(3)(D), and 181(a)(1) as a change in method of accounting with a§ 481(a) adjustment only for the taxable years specified in section 6.23(2) of this revenue procedure. This treatment does not apply to a taxpayer that makes these late elections before or after the time specified in section 6.23(2) of this revenue procedure, and any such late election is not a change in method of accounting. (2) Time for making the change. The change under section 6.23(1)(a)(i) or (ii) of this revenue procedure must be made with the taxpayer's first or second timely filed original Federal income tax return or Form 1065, as applicable, that is filed after April 19, 2022. (3) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)(d) and (f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to a change under section 6.23(1)(a)(i) or (ii) of this revenue procedure. (4) Certain audit protection exception temporarily inapplicable. Sections 8.02(1) and (7) of Rev. Proc. 2015-13 do not apply to a change in method of accounting made under section 6.23(1)(a)(i) or (ii) of this revenue procedure. However, sections 8.02(1) and (7) of Rev. Proc. 2015-13 continue to apply for purposes of determining the§ 481(a) adjustment period provided in section 7.03(3)(b) of Rev. Proc. 2015-13. (5) Short Form 3115. (a) A taxpayer making a change under section 6.23(1)(a)(i) of this revenue procedure is required to complete only the following information on Form 3115 (Rev. December 2018): (i) The identification section of page 1 (above Part I); (ii) The signature section at the bottom of page 1; (iii) Part I; (iv) Part II, lines 6, 7, 8, 9, 14, and 18; (v) Part IV, all lines except line 25; and (vi) Schedule E, all lines except lines 1, 4b, 5, and 6. (b) A taxpayer making the change under section 6.23(1)(a)(ii) of this revenue procedure is required to attach to the taxpayer's Form 3115 the statement required under§ 1.181-2(c)(2)(i) and, if applicable, the statement required under§ 1.181-2(c)(2)(ii), and to complete only the following information on Form 3115 (Rev. December 2018): (i) The identification section of page 1 (above Part I); (ii) The signature section at the bottom of page 1; (iii) Part I; (iv) Part II, lines 6, 7, 8, 9, 14, and 18; and (v) Part IV, all lines except line 25. (6) Concurrent automatic change. A taxpayer making one or more late elections under section 4.01(2) or 4.02(2) of Rev. Proc. 2022-23 for the same year of change should file a single Form 3115 for all such changes. The single Form 3115 must provide a single net§ 481(a) adjustment for all such changes. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes. (7) Designated automatic accounting method change number. The designated automatic accounting method change number for a change to the method of accounting under this section 6.23 is "264." (8) Contact information. For further information regarding a change under this section 6.23, contact James Liechty at (202) 317-7005 (not a toll-free number). SECTION 7. EFFECT ON OTHER DOCUMENTS Section 6 of Rev. Proc. 2022-14 is modified to include the accounting method change provided in section 6.02 of this revenue procedure. SECTION 8. EFFECTIVE DATE This revenue procedure is effective April 19, 2022. SECTION 9. DRAFTING INFORMATION The principal authors of this revenue procedure are Kathleen Reed and James Liechty of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Liechty at (202) 317-7005 (not a toll-free number).

Private Letter Ruling Number: 202021018 Internal Revenue Service February 13, 2020 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202021018 Release Date: 5/22/2020 Index Number: 263.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:B01 PLR-125631-17 Date: February 13, 2018 Dear *******: This letter responds to your letter dated August 18, 2017, and supplemental correspondence, submitted on behalf of Taxpayer and three disregarded entities that are owned directly or indirectly by Taxpayer (hereinafter, collectively referred to as "Taxpayer's Group"), requesting a ruling concerning the federal income tax treatment of consideration paid pursuant to a termination agreement. Specifically, you requested a ruling as to whether D's payment to terminate a sub-license agreement with H is required to be capitalized by Taxpayer for its taxable year ended Date1 under the provisions in section 1.263(a)-4(d)(6)(iii) of the Income Tax Regulations. FACTS Taxpayer is a A limited liability company that is treated as a partnership for federal income tax purposes. Taxpayer was formed in Date2 in connection with a restructuring arrangement. Taxpayer uses an overall accrual method of accounting and uses a calendar year end taxable year. Taxpayer, through its various affiliates, is engaged in the production and marketing of S and related products for T. Taxpayer is owned by three partners: I, J, and K. The other members of Taxpayer's Group are B, C, and D. B is a A limited liability company that is disregarded entity for federal income tax purposes. B is wholly owned by Taxpayer and was created in connection with the formation of Taxpayer. C is a A limited liability company that is a disregarded entity for federal income tax purposes. C is wholly owned by B. D is a E limited liability company that is a disregarded for federal income tax purposes. D is wholly owned by C. The intellectual property that is at issue is the name of, F, an individual and the trademarks, image, recognition, and goodwill that are associated with the F name (hereinafter, referred to as the "F name brand"). Ownership or an exclusive license in the F name brand was held by G, a limited liability company that is wholly owned by F. G entered into a licensing agreement with H conveying to H an exclusive sub-license in the rights of the F name brand that were owned by or licensed to G. H is an S corporation that is owned by F and by F's spouse. F and F's spouse have filed joint federal income tax returns for all taxable years in issue. On Date3, H entered into a development and sub-license agreement (hereinafter, referred to as the "Date3 Sub-License") providing D with certain rights relating to the F name brand and permitting the development of certain S products under the F name brand. D was and is not related to H, G, or F. D manufactures S and related products for T. At the time that the Date3 Sub-License was entered into, D was a partnership that was owned N1 percent by U and N2 percent by V. U was the same entity, prior to a change in its name, that is currently named I. Subsequent to entering into the Date3 Sub-License, I transferred its ownership interest in D to C. V was a partnership in which C held a majority interest. The Date3 Sub-License covered H's rights, as sub-licensee, to use the F name brand in connection with the manufacture, marketing, distribution, and sale of S food and products for T. In consideration for the grant of the Date3 Sub-License to D, D agreed to pay two separate royalties to H. The first royalty that was payable under the terms of the Date3 Sub-License was an annual amount equal to N3 percent of D's net sales revenue from sales of products covered by the Date3 Sub-License ("sales royalty"). The second royalty that was payable under the terms of the Date3 Sub-License was an annual amount equal to N4 percent of D's net profits derived from D's sales of products covered by the Date3 Sub-License ("profit royalty"). Also, under the Date3 Sub-License, W agreed that F would participate in a designated number of key promotional events each year, subject to reimbursement of F's out-of-pocket expenses associated with such promotion. In addition, D agreed to donate to W designated by H an aggregate annual amount of N5. The term of the Date3 Sub-License was to expire N6 years after the date of the initial commercial launch of the products covered by the Date3 Sub-License. If, during this initial term, H received at least N7 in aggregate royalties under the Date3 Sub-License, D would be entitled to renew the agreement for an additional N6 years. If, during the initial renewal term, H received at least N8 in aggregate royalties under the Date3 Sub-License, D would be entitled to renew the agreement for an additional N6 years following the end of the initial renewal term. If the royalties paid to H fell short of the minimum required to renew the agreement, D had the option to pay H the shortfall in order to renew the agreement. The Date3 Sub-License in its original form remained in effect under D's Date4 taxable year. During D's Date4 taxable year, the Date3 Sub-License was amended on two separate occasions. The first amendment to the Date3 Sub-License was entered on Date5 and amended the Date3 Sub-License in several ways. First, the original renewal options were eliminated, and the term of the Date3 Sub-License extended to Date14, with the possibility of renewal. Second, the intellectual property rights were defined in a more precise manner. Third, the royalty provisions in the Date3 Sub-License were amended so that the N4 percent profit royalty payable to H would be converted into an additional N9 percent sales royalty on D's net sales revenue from products covered by the Date3 Sub-License. Fourth, the N3 percent sales royalty that was payable to H would be payable to a different entity, A1, another limited liability company wholly owned by F and treated as an S-corporation for federal income tax purposes. Finally, D was given the option to discontinue producing and selling products using the F name brand, effective Date15, subject to a transition period. A second amendment to the Date3 Sub-License was entered on Date6. Under this second amendment, in the event that H licensed a third party to sell any X and Y bearing F's name or image or bearing any of the trademarks subject to the amended Date3 Sub-License in exchange for a royalty, H agreed to pay D N4 percent of any such royalty received by H. On Date7, following the amendments to the Date3 Sub-License, K acquired an interest in C from I. In Date8, the ownership structures of D and C were modified. As a result, D became wholly owned by C and consequently also became a disregarded entity for federal income tax purposes. In Date2, the partners in C contributed their ownership interests in C to Taxpayer, a newly formed entity treated as a partnership for federal income tax purposes, in exchange for interests in Taxpayer. In turn, Taxpayer contributed the ownership interests in C to B, a newly formed entity that is a disregarded entity for federal income tax purposes. As a result of the contribution of the interests in C to Taxpayer, C became a disregarded entity for federal income tax purposes, and it retained this status after the contribution of these interests by Taxpayer to B. Taxpayer is treated as a continuation of the C partnership for tax purposes. On Date9, F and F's spouse, formed a foundation called L, which is described in section 501(c)(3) of the Internal Revenue Code (the Code). The by-laws of L were adopted on Date10. L filed an application with the Internal Revenue Service ("IRS") for recognition of exemption under Section 501(c)(3) of the Code. On Date16, L received a favorable determination letter from the Internal Revenue Service recognizing L as a tax-exempt entity under section 501(c)(3) from its date of organization. To implement its goals of increasing its charitable giving and to have a dedicated revenue source for L, F desired to have L, rather than H, become the licensor of the F name brand. Also, the owners of Taxpayer had become concerned that the amended terms of the Date3 Sub-License between H and D, which called for an additional N9 percent sales royalty on certain D product sales and that would become effective Date11, would be a burdensome financial obligation in future years. Accordingly, Taxpayer and representatives of F entered into negotiations to terminate the amended Date3 Sub-License. The Date3 Sub-License did not contain any express provisions governing the termination of the agreement. However, in light of expectations as to the amount of royalties that would be owed by D under the agreement starting Date11, Taxpayer was willing to pay a substantial sum to terminate the Date3 Sub-License with H and enter into a new agreement with L. These negotiations resulted in an agreement ("Termination Agreement"), dated Date10, to terminate the Date3 Sub-License between D and H. In exchange for the termination of the Sub-License, D agreed to pay H a termination fee of N13. The Termination Agreement does not provide that entry into a new agreement with L is a prerequisite to the termination of the Date3 Sub-License. Taxpayer assumes that subsequent to the termination of the Date3 Sub-License, G's sub-license of the rights to the F name brand to H was terminated as well. Also subsequent to the termination of the Date3 Sub-License, F assigned some portion of the rights to the F name brand to M, a A limited liability company that was, at the time of assignment, wholly owned by F. On Date10, G and M entered into trademark license agreements with L for no consideration. These trademark license agreements granted L sublicenses in trademarks bearing the names F, N, O, and P, F's image or likeness, and any other trademarks that G or M might thereafter authorize, with respect to S products. The initial terms of these trademark license agreements will expire on Date12. At the expiration of the initial terms of the agreements, the agreements will be automatically renewed annually, unless notice is given by L to terminate the agreements. On Date10, immediately after the termination of the Date3 Sub-License between H and D, C entered into a new sub-licensing agreement (hereinafter, referred to as the "License and Product Agreement") with L to sub-license the F name, trademarks incorporating the words N, O, P, and other trademarks developed in the future, and F's image for use in connection with the manufacture and sale of certain S products. The License and Product Agreement permits C to sub-license its rights to D. As consideration for these rights, C agreed to pay an annual royalty to L equal to N3 percent of L's and/or D's net sales of licensed products. The term of the License and Product Agreement will expire on Date13. However, C may terminate the License and Product Agreement at any time after Date14, after giving N4 days' notice to L. In addition, C may at any time, upon giving written notice to L, elect to terminate the use of the licensed property. On Date10, C entered into an appearance and promotion agreement (hereinafter, referred to as the "Appearance and Promotion Agreement") with Q (an organization owned by F), under which Q undertook to cause F to perform promotional services, such as appearing in television commercials or photographic opportunities or participating in other promotional-type events, and giving C the right to use various licensed materials, with respect to the products licensed under the License and Product Agreement between C and L. The consideration for these services was the issuance to Q of a profits interest represented by Class B units in Taxpayer. The term of the Appearance and Promotion Agreement is N10 years for promotional services to be performed by F. The term of C's right to use licensed materials created as a result of the Appearance and Promotion Agreement is coterminous with the term of the License and Product Agreement. However, C has the right to terminate the agreement upon giving N11 days' written notice to Q. In addition, on Date10, H and C entered into a separate license and fee agreement (hereinafter, referred to as the "License and Fee Agreement") under which H granted C a license to use the trademark R with respect to products licensed under the License and Product Agreement, for purposes of publicizing the charitable aspects of the arrangement between L and C. In addition, if during the term of the License and Fee Agreement, H enters into a license with a third party to produce and sell certain licensed accessories, such as X, Y, and supplies for T (but not Z for T) bearing the trademarks covered by the License and Product Agreement, H agreed to pay C consideration in the amount of N12 percent of H's gross royalties collected from any sales of accessories covered by the agreement. This License and Fee Agreement replaced a similar provision in the Date5 amendment to the Date3 Sub-License that was terminated in Date8. That earlier agreement called for the payment by H of a N4 percent royalty with respect to such third-party sales, but the royalty rate on this category of sales was reduced to N12 percent in this License and Fee Agreement. The term of the License and Fee Agreement lasts until such time as C or D discontinues sales of products that are subject to the royalty provided in the License and Product Agreement between L and C. LAW Section 263(a) of the Code provides generally that no deduction is allowed for any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate or any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made. Section 1.263(a)-1(d) provides examples of expenditures that are capitalized under section 263, including amounts paid to acquire or create intangibles. See section 1.263(a)-1(d)(3). Section 1.263(a)-4 provides rules for applying § 263 to amounts paid to acquire or create intangibles. Section 1.263(a)-4(b)(1) provides that except as otherwise provided in section 1.263(a)-4, a taxpayer must capitalize an amount paid to (i) acquire an intangible (see section 1.263(a)-4(c)); (ii) create an intangible described in section 1.263(a)-4(d); (iii) create or enhance a separate and distinct intangible asset within the meaning of section 1.263(a)-4(b)(3); (iv) create or enhance a future benefit identified in the Federal Register or the Internal Revenue Bulletin as an intangible for which capitalization is required; and (v) facilitate (as defined in section 1.263(a)-4(e)(1)) the acquisition or creation of an intangible. Neither sections 1.263(a)-4(b)(1)(i),(iii), nor (iv) apply to the N3 payment made by D to H under the Termination Agreement. First, D's payment is not an amount paid to H to acquire an intangible from H in a purchase or similar transaction as described in section 1.263(a)-4(c). The payment was made primarily to terminate the Date3 Sub-License agreement, and was not made to H in a purchase or similar transaction. Second, as of the date of this letter, this payment does not create or enhance a future benefit identified in published guidance. Third, the payment by D to H is not an amount paid to create or enhance a separate and distinct intangible asset as defined in section 1.263(a)-4(b)(3). Section 1.263(a)-4(b)(3)(ii) specifically provides that amounts paid to another party to terminate (or facilitate the termination of) an agreement with that party are treated as amounts that do not create a separate and distinct intangible asset within the meaning of section 1.263(a)-4(b)(i). However, section 1.263(a)-4(b)(3)(ii) provides a cross-reference to sections 1.263(a)-4(d)(2), (6), and (7), which have rules that specifically require capitalization of amounts paid to terminate to create certain new agreements. Section 1.263(a)-4(d)(1) provides a general rule that a taxpayer must capitalize amounts paid to create an intangible described in section 1.263(a)-4(d). Section 1.263(a)-4(d)(2)(i) provides that a taxpayer must capitalize amounts paid to another party to create, originate, enter into, renew or renegotiate with that party any of the financial interests enumerated in section 1.263(a)-4(d)(2)(i). Taxpayer does not need to capitalize under section 1.263(a)-4(d)(2)(i) the amounts paid under the Termination Agreement because Taxpayer's Group did not create, originate, enter into, renew, or renegotiate financial interests in connection with the Termination Agreement. Section 1.263(a)-4(d)(7)(i) provides that a taxpayer must capitalize amounts paid to another party to terminate: (i) a lease of real or tangible personal property between the taxpayer (as lessor) and the other party (as lessee); (ii) an agreement that grants that party the exclusive right to acquire or use the taxpayer's property or services or to conduct the taxpayer's business; or (iii) an agreement that prohibits the taxpayer from competing with that party or from acquiring property or services from a competitor of that party. Taxpayer is not required to capitalize the payments made under the Termination Agreement under this subparagraph because the parties did not terminate an agreement that is listed in section 1.263(a)-4(d)(7)(i). Section 1.263(a)-4(d)(6) provides rules for capitalization of a payment made by a taxpayer to another party to create, originate, enter into, renew, or renegotiate with that party certain enumerated agreements or covenants. Under sections 1.263(a)-4(d)(6)(i)(A) and (B), these agreements include, in part, an agreement providing the taxpayer the right to use tangible or intangible property or an agreement providing the taxpayer the right to receive services. Section 1.263(a)-4(d)(6)(iii) provides that a taxpayer is treated as renegotiating an agreement specified under 1.263(a)-4(d)(6)(i) if the terms of the agreement are modified. Section 1.263(a)-4(d)(6)(iii) provides that a taxpayer is also treated as renegotiating an agreement if: (i) the taxpayer enters a new agreement with the same party (or substantially the same parties) to a terminated agreement, (ii) the taxpayer could not cancel the terminated agreement without the consent of the other party or parties, and (iii) the other party or parties would not have consented to the cancellation unless the taxpayer entered into the new agreement. Thus, for purposes of section 1.263(a)-4(d)(6)(iii), a termination payment must be treated as an amount paid renegotiate an agreement, and therefore capitalized, if taxpayer enters a new agreement of a type specified in section 1.263(a)-4(d)(i) and the three requirements are satisfied. Or, in other words, if one of the above requirements is not satisfied, then the termination payment is not required to be capitalized under section 1.263(a)-4(d)(2). Accordingly, each of Taxpayer's new agreements must be analyzed to determine whether they meet each of the criteria under section 1.263(a)-4(d)(6)(iii). If they meet all three of these criteria, the new contract is treated as a renegotiation, and any termination costs allocable to the new contract must be capitalized under section 1.263(a)-4(d)(6) as an amount paid to renegotiating a contract. As discussed in the facts, C entered into three different agreements immediately following the termination of the Date3 Sub-License between H and D: (1) the License and Product Agreement; (2) the Appearance and Promotion Agreement; and (3) the License and Fee Agreement. Taxpayer acknowledges, and this office agrees, that each of these agreements as well as the terminated agreement involve agreements providing the taxpayer with the contracts rights defined under section 1.263(a)-4(d)(6)(i). Specifically, these agreements provide taxpayer with the right to use intangible property, and/or the right to receive services under sections 1.263(a)-4(d)(6)(i)(A) and (B). In regards to (1) the License and Product Agreement, Taxpayer argues that the first requirement of section 1.263(a)-4(d)(6)(iii) is not met, and as a result, the termination payment would not be considered an amount paid to renegotiate the License and Product Agreement. Specifically, with regard to this agreement, Taxpayer argues that it is not entering a new agreement with the same party or substantially the same parties to the terminated agreement. The License and Product Agreement covers the same subject matter as the terminated Date3 Sub-License as they both relate to the right to use the F name brand by a member of Taxpayer's Group in connection with the manufacture and sale of S products. However, the Date3 Sub-License was entered into with H, whereas the License and Product Agreement was entered into with L. H is a for-profit S-corporation wholly owned by F and F's spouse, whereas L is a tax-exempt entity. As noted, L received a favorable determination letter from the IRS recognizing L as a tax-exempt entity under section 501(c)(3) from its date of organization, a date before the parties entered the new agreement. In general, an organization described in section 501(c)(3) is not substantially the same as an unrelated for-profit entity because the organization must be organized and operated exclusively for exempt purposes and no part of the net earnings of the organization may inure to the benefit of any private shareholder or individual. See sections 1.501(c)(3)-1(a) - (c). As noted above, L received a determination letter from the IRS recognizing L as a tax-exempt entity under section 501(c)(3), effective prior to the termination of the Date3 Sub-License and prior to L's entrance into the License and Product Agreement with C. Accordingly, for the sole purpose of interpreting the language, "the same party or (substantially the same party)" under section 1.263(a)-4(d)(2)(iii) under these facts, L and H will not be treated as the same or substantially the same party. Therefore, the first criteria of section 1.263(a)-4(d)(6)(iii) is not met, and the License and Product Agreement will not be treated as a renegotiation of the Date3 Sub-License. As such, no portion of the N13 termination payment by C to H is allocable to the License and Product Agreement as a cost of creating or entering into that contract under section 1.263(a)-4(d)(2). In addition, section 1.263(a)-4(b)(v) provides that a taxpayer must capitalize an amount paid to facilitate (as defined in section 1.263(a)-4(e)(1)) the acquisition or creation of an intangible. Section 1.263(a)-4(e)(1)(i) specifically provides that an amount is paid to facilitate the acquisition or creation of an intangible if the amount is paid in the process of investigating or otherwise pursuing the transaction. Section 1.263(a)-4(e)(1)(ii) provides that an amount paid to terminate (or facilitate the termination) of an existing agreement does not facilitate the acquisition of another agreement under this section, except as provided in section 1.263(a)-4(d)(6)(iii). As discussed above, section 1.263(a)-4(d)(6)(iii) does not apply to the License and Product Agreement. As a result, the termination payment is also not considered an amount paid to facilitate the creation of the License and Product Agreement under section 1.263(a)-4(e). In regards to (2) the Appearance and Promotion Agreement and (3) the License and Fee Agreement, Taxpayer acknowledges that C has entered into these new agreements with the same, or substantially the same, parties as the Date3 Sub-License ( i.e., Q and H, both entities wholly owned by F, and/or its spouse). Thus, the first requirement of section 1.263(a)-4(d)(6)(iii) is met with respect to these agreements. Taxpayer also acknowledges that the second requirement of this section was met for each of these agreements because, under the terms of the Date3 Sub-License, Taxpayer could not cancel the terminated agreement without the consent of H and F. However, for the each of these two contracts, we cannot ascertain whether the third requirement of section 1.263(a)-4(d)(6)(iii), is met. Specifically, under the facts provided, we cannot determine whether the other parties, H or F (on behalf of H), would not have consented to the cancellation of the Date3 Sub-License unless C or any other member of Taxpayer's Group entered into these new agreements. Moreover, because it is a factual determination, we are unable to ascertain what portion, if any, of the N13 termination payment is properly allocable to the Appearance and Promotion Agreement or the License and Fee Agreement. Accordingly, we are unable to rule on these agreements. CONCLUSION Based solely on the facts and representations submitted, we conclude that D's payment to H of N13 to terminate the Date3 Sub-License is not an amount paid for creating or entering the License and Product Agreement between C and L because the new contract is not treated as a renegotiation of the Date3 Sub-License under section 1.263(a)-4(d)(6)(iii). Accordingly, no portion of the N13 termination payment made by D to H is required to be capitalized under the provisions in section 1.263(a)-4(d)(6)(iii) by reason of C's entry into the new License and Product Agreement with L. Further, we express no opinion as to whether any portion of the N13 termination payment by D to H is an amount paid to create the License and Fee Agreement with H and/or the Appearance and Promotion Agreement with Q under section 1.263(a)-4(d)(6) or whether either of the those agreements represent a renegotiation of the Date3 Sub-License under the provisions of section 1.263(a)-4(d)(6)(iii). As discussed above, we believe that with respect to these contracts, these issues must be resolved on the basis of facts that cannot be determined or sufficiently verified in the context of this letter ruling request. Section 6.02 of Rev. Proc. 2018-1, 2018-1 I.R.B. 1, 18, provides that the Service ordinarily does not issue letter rulings or determination letters in certain areas because of the factual nature of the matter involved or for other reasons. Rev. Proc. 2018-3 and Rev. Proc. 2018-7 provide a list of these areas. Section 4.02(1) of Rev. Proc. 2018-3, I.R.B.130, 141, provides that the Service ordinarily does not issue letter rulings or determination letters in any matter in which the determination requested is primarily one of fact. The rulings contained in this letter are based upon information and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. A copy of this ruling should be attached to Taxpayer's federal tax returns for the tax year(s) affected. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. In accordance with the provisions of the power of attorney currently on file with this office, a copy of this letter is being sent to your authorized representatives. Sincerely, Charlotte Chyr Charlotte Chyr Acting Branch Chief, Branch 1 Office of Associate Chief Counsel (Income Tax & Accounting) cc:

Revenue Procedure 2023-7 Internal Revenue Service 2023-1 I.R.B. 305 26 CFR § 601.201: Rulings and determination letters Areas in which rulings will not be issued, Associate Chief Counsel (International). Rev. Proc. 2023-7 SECTION 1. PURPOSE.01 Purpose This revenue procedure updates Rev. Proc. 2022-7, 2022-1 I.R.B. 297, by providing a current list of those areas of the Internal Revenue Code under the jurisdiction of the Associate Chief Counsel (International) (hereinafter "the Office") relating to matters on which the Internal Revenue Service will not issue letter rulings or determination letters..02 Changes Section 4.01(1) adds whether a transferee foreign corporation, or any qualified subsidiary or any qualified partnership, is engaged in an active trade or business, under § 1.367(a)-3(c)(3)(i)(A), outside of the United States to the list of areas for which letter rulings and determination letters ordinarily will not be issued. SECTION 2. BACKGROUND AND SCOPE OF APPLICATION.01 Background In the interest of sound tax administra­tion, the Service answers inquiries from individuals and organizations regarding their status for tax purposes and the tax effects of their acts or transactions before the filing of returns or reports that are required by the Internal Revenue Code. There are, however, areas where the Service will not issue letter rulings or determination letters, either because the issues are inherently factual or for other reasons. These areas are set forth in sections 3 and 4 of this revenue procedure. Section 3 lists areas in which letter rul­ings and determination letters will not be issued under any circumstances. Section 4 lists areas in which letter rulings and determination letters ordinarily will not be issued; in these areas, unique and compelling reasons may justify issuing a letter ruling or determination letter. A taxpayer who plans to request a letter ruling or determination letter in an area described in Section 4 should first contact the Office by telephone or in writing to discuss the unique and compelling reasons that the taxpayer believes justify issuing the letter ruling or determination letter. Although not required, a written submission is encouraged because it will enable Office personnel to arrive more quickly at an understanding of the unique facts of each case. A taxpayer who contacts the Office by telephone may be requested to provide a written submission. The Service may provide a general information letter in response to inquiries in areas on either the Section 3 or Section 4 list. These lists are not all-inclusive. Future revenue procedures may add or delete items. The Service may also decline to rule on an individual case for reasons peculiar to that case, and the decision will not be announced in the Internal Revenue Bulletin. See Rev. Proc. 2023-1, Section 6.02..02 Scope of Application This revenue procedure does not preclude the submission of requests for technical advice to the Office from other offices of the Service. SECTION 3. AREAS IN WHICH LETTER RULINGS OR DETERMINATION LETTERS WILL NOT BE ISSUED.01 Specific Questions and Problems (1) Section 861.--Income from Sources Within the United States.--A method for determining the source of a pension payment to a nonresident alien individual from a trust under a defined benefit plan that is qualified under § 401(a) if the proposed method is inconsistent with §§ 4.01, 4.02, and 4.03 of Rev. Proc. 2004-37, 2004-1 C.B. 1099. (2) Section 862.--Income from Sources Without the United States.--A method for determining the source of a pension payment to a nonresident alien individual from a trust under a defined benefit plan that is qualified under § 401(a) if the proposed method is inconsistent with §§ 4.01, 4.02, and 4.03 of Rev. Proc. 2004-37, 2004-1 C.B. 1099. (3) Section 871(g).--Special Rules for Original Issue Discount--Whether a debt instrument having original issue discount within the meaning of § 1273 is not an original issue discount obligation within the meaning of § 871(g)(1)(B)(i) when the instrument is payable 183 days or less from the date of original issue (without regard to the period held by the taxpayer). (4) Section 894.--Income Affected by Treaty.--Whether a person that is a resident of a foreign country is entitled to benefits under the United States income tax treaty with that foreign country pursuant to the limitation on benefits article. However, the Service may rule regarding the legal interpretation of a particular provision within the relevant limitation on benefits article. (5) Section 954.--Foreign Base Company Income.--The effective rate of tax that a foreign country will impose on income. (6) Section 954.--Foreign Base Com­pany Income.--Whether the facts and circumstances show that a controlled foreign corporation makes a substantial contribution through the activities of its employ­ees to the manufacture, production, or construction of the personal property sold within the meaning of § 1.954-3(a)(4)(iv). (7) Sections 7701(b) and 894.--Definition of Resident Alien and Nonresident Alien.--Whether an alien individual, whether or not a dual resident alien, is a nonresident of the United States, including whether the individual has met the requirements of the substantial presence test or exceptions thereto, or whether the alien is solely a nonresident under a United States income tax treaty. However, the Service may rule regarding the legal interpretation of a particular provision of § 7701(b) or the regulations thereunder..02 General Areas. (1) The prospective application of the estate tax to the property or the estate of a living person, except that rulings may be issued on any international issues in a ruling request accepted pursuant to § 5.06 of Rev. Proc. 2023-1, in this Bulletin. (2) Whether reasonable cause exists under Subtitle F (Procedure and Administration) of the Code. (3) Whether a proposed transaction would subject a taxpayer to criminal penalties. (4) Any area where the ruling request does not comply with the requirements of Rev. Proc. 2023-1. (5) Any area where the same issue is the subject of the taxpayer's pending request for competent authority assistance under a United States income tax treaty. (6) A "comfort" ruling will not be issued with respect to an issue that is clearly and adequately addressed by statute, regulations, decisions of a court, tax treaties, revenue rulings, or revenue procedures absent extraordinary circumstances (e.g., a request for a ruling required by a governmental regulatory authority in order to effectuate the transaction). (7) Any frivolous issue, as that term is defined in § 6.10 of Rev. Proc. 2023-1. SECTION 4. AREAS IN WHICH LETTER RULINGS OR DETERMINATION LETTERS WILL NOT ORDINARILY BE ISSUED.01 Specific Questions and Problems (1) Section 367(a).--Transfers of Property from the United States.-- Whether the transferee foreign corporation, or any qualified subsidiary or any qualified partnership, is engaged in an active trade or business outside the United States for purposes of § 1.367(a)-3(c)(3)(i)(A). (2) Section 367(a).--Transfers of Property from the United States.-- Whether a transferred corporation subject to a gain recognition agreement under § 1.367(a)-8 has disposed of substantially all of its assets. (3) Section 367(b).--Other Transfers.--Whether and the extent to which regulations under § 367(b) apply to an exchange involving foreign corporations, unless the ruling request presents a significant legal issue or subchapter C rulings are requested in the context of the exchange. (4) Section 864.--Definitions and Special Rules.--Whether a taxpayer is engaged in a trade or business within the United States, and whether income is effectively connected with the conduct of a trade or business within the United States; whether an instrument is a security as defined in § 1.864-2(c)(2); whether a taxpayer effects transactions in the United States in stocks or securities under § 1.864-2(c)(2); whether an instrument or item is a commodity for purposes of § 1.864-2(d)(3); and for purposes of § 1.864-2(d)(1) and (2), whether a commodity is of a kind customarily dealt in on an organized commodity exchange, and whether a transaction is of a kind customarily consummated at such place. (5) Section 871(h).--Repeal of Tax on Interest of Nonresident Alien Individuals Received from Certain Portfolio Debt Investments.--Whether a payment constitutes portfolio interest under § 871(h); whether an obligation qualifies for any of the components of portfolio interest such as being in registered form; and whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by §§ 72(s) and 7702(a) is portfolio interest as defined in § 871(h). (6) Section 881(c);--Repeal of Tax on Interest of Foreign Corporations Received from Certain Portfolio Debt Investments.-- Whether a payment con­stitutes portfolio interest under § 881(c); whether an obligation qualifies for any of the components of portfolio interest such as being in registered form; and whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by §§ 72(s) and 7702(a) is portfolio interest as defined in § 881(c). (7) Section 892.--Income of Foreign Governments and oflnternational Organizations.--Whether income derived by foreign governments and international organizations is excluded from gross income and exempt from taxation and any underlying issue related to that determination. (8) Section 893.--Compensation of Employees of Foreign Governments and International Organizations.--Whether wages, fees, or salary of an employee of a foreign government or of an international organization received as compensation for official services to such government or international organization is excluded from gross income and exempt from taxation and any underlying issue related to that determination. (9) Section 894.--Income Affected by Treaty.--Whether the income received by an individual in respect of services rendered to a foreign government or a political subdivision or a local authority thereof is exempt from federal income tax or withholding under any of the United States income tax treaties that contain provisions applicable to such individuals. (10) Section 894.--Income Affected by Treaty.--Whether a taxpayer has a permanent establishment in the United States for purposes of any United States income tax treaty and whether income is attributable to a permanent establishment in the United States. (11) Section 894.--Income Affected by Treaty.--Whether certain persons will be considered liable to tax under the laws of a foreign country for purposes of determining if such persons are residents within the meaning of any United States income tax treaty, including pursuant to Rev. Rul. 2000-59, 2000-2 C.B. 593. (12) Section 894.--Income Affected by Treaty.--Whether the income received by a nonresident alien student or trainee for services performed for a university or other educational institution is exempt from federal income tax or withholding under any of the United States income tax treaties that contain provisions applicable to such nonresident alien students or trainees. (13) Section 894.--Income Affected by Treaty.--Whether the income received by a nonresident alien performing research or teaching as personal services for a university, hospital or other research institution is exempt from federal income tax or withholding under any of the United States income tax treaties that contain provisions applicable to such nonresident alien teachers or researchers. (14) Section 894.--Income Affected by Treaty.--Whether a recipient of a payment is the beneficial owner for purposes of any United States income tax treaty. (15) Section 894.--Income Affected by Treaty.--Whether an entity is treated as fiscally transparent by a foreign jurisdiction for purposes of § 894(c) and the regulations thereunder or pursuant to any United States income tax treaty. (16) Section 895.--Income derived by a foreign central bank of issue from obligations of the United States or from bank deposits.--Whether income derived by a foreign central bank of issue is excluded from gross income and exempt from taxation and any underlying issue related to that determination. (17) Section 901.--Taxes of Foreign Countries and of Possessions of United States.--Whether a foreign levy meets the requirements of a creditable tax under § 901. (18) Section 901.--Taxes of Foreign Countries and of Possessions of United States.--Whether a person claiming a credit has established, based on all of the relevant facts and circumstances, the amount (if any) paid by a dual capacity taxpayer under a qualifying levy that is not paid in exchange for a specific economic benefit. See § 1.901-2A(c)(2). (19) Section 903.--Credit for Taxes in Lieu of Income, Etc., Taxes.-- Whether a foreign levy meets the requirements of a creditable tax under § 903. (20) Section 937.--Definition of Bona Fide Resident--Whether an individual is a bona fide resident of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands. However, the Service may rule regarding the legal interpretation of a particular provision of § 937(a) or the regulations thereunder. (21) Sections 954(d), 993(c).--Manufactured Product--Whether a product is manufactured or produced for purposes of §§ 954(d) and 993(c). (22) Section 956.--Investment of Earnings in United States Property.--Whether a pledge of the stock of a con­trolled foreign corporation is an indirect pledge of the assets of that corporation. See § l.956-2(c)(2). (23) Section 985.--Functional Currency.--Whether a currency is the functional currency of a qualified business unit. (24) Section 989(a).--Qualified Business Unit--Whether a unit of the taxpayer's trade or business is a qualified business unit. (25) Section 1058.--Transfers of Securities Under Certain Agreements.--Whether the amount of any payment described in § 1058(b)(2) or the amount of any other payment made in connection with a transfer of securities described in § 1058 is from sources within or without the United States; the character of such amounts; and whether the amounts constitute a particular kind of income for purposes of any United States incpme tax treaty. (26) Section 1059A.--Limitation on Taxpayer's Basis or Inventory Cost in Property Imported from Related Persons.--Whether a taxpayer's cost or inventory basis in property imported from a foreign affiliate will not be limited by § 1059A due to differences between customs valuation and tax valuation. (27) Sections 1471, 1472, 1473, and 1474.--Taxes to Enforce Reporting on Certain Foreign Accounts.--Whether a taxpayer, withholding agent, or intermediary has properly applied the requirements of chapter 4 of the Internal Revenue Code (§§ 1471 through 1474, also known as "FATCA") or of an applicable intergovernmental agreement to implement FATCA. (28) Section 1503(d).--Dual Consolidated Loss.--Whether the income tax laws of a foreign country would deny any opportunity for the foreign use of a dual consolidated loss in the year in which the dual consolidated loss is incurred under § 1.1503(d)-3(e)(1); whether no possibility of foreign use exists under § 1.1503(d)-6(c)(1); whether an event presumptively constitutes a triggering event under § 1.1503(d)-6(e)(1)(i)-(ix); whether the presumption of a triggering event is rebutted under § 1.1503(d)-6(e)(2); and whether a domestic use agreement terminates under § 1.1503(d)-6(j)(1). (29) Section 2501.--Imposition of Tax.--Whether a partnership interest is intangible property for purposes of § 2501(a)(2) (dealing with transfers of intangible property by a nonresident not a citizen of the United States). (30) Section 7701.--Definitions.--Whether an estate or trust is a foreign estate or trust for federal income tax purposes. (31) Section 7701.--Definitions.--Whether an intermediate entity is a conduit entity under§ 1.881-3(a)(4); whether a transaction is a financing arrangement under § 1.881-3(a)(4)(ii); whether the participation of an intermediate entity in a financing arrangement is pursuant to a tax avoidance plan under § 1.881-3(b); whether an intermediate entity performs significant financing activities under § 1.881-3(b)(3)(ii); whether an unrelated intermediate entity would not have participated in a financing arrangement on substantially the same terms under § 1.881-3(c). (32) Section 7874.--Expatriated Entities and Their Foreign Parents.-- Whether, after the acquisition, the expanded affiliated group has substantial business activities in the foreign country in which, or under the law of which, the foreign entity is created or organized, when compared to the total business activities of the expanded affiliated group. (33) Section 7874.--Expatriated Entities and Their Foreign Parents.-- Whether a foreign corporation completes the direct or indirect acquisition of substantially all of the properties held directly or indirectly by a domestic corporation or substantially all of the properties constituting a trade or business of a domestic partnership..02 General Areas (1) Whether a taxpayer has a business purpose for a transaction or arrangement. (2) Whether a taxpayer uses a correct North American Industry Classification System (NAICS) code or Standard Industrial Classification (SIC) code. (3) Any transaction, or series of transactions, that is designed to achieve a different tax consequence or classification under U.S. tax law (including tax treaties) and the tax law of a foreign jurisdiction, where the results of that different tax consequence or classification are inconsistent with the purposes of U.S. tax law (including tax treaties). (4)(a) Situations where a taxpayer or a related party is domiciled or organized in a foreign jurisdiction with which the United States does not have an effective mechanism for obtaining tax information with respect to civil tax examinations and criminal tax investigations, which would preclude the Service from obtaining information located in such jurisdiction that is relevant to the analysis or examination of the tax issues involved in the ruling request. (b) The provisions of subsection 4.02(4)(a) above shall not apply if the taxpayer or affected related party (i) consents to the disclosure of all relevant information requested by the Service in processing the ruling request or in the course of an examination to verify the accuracy of the representations made and to otherwise analyze or examine the tax issues involved in the ruling request, and (ii) waives all claims to protection of bank or commercial secrecy laws in the foreign jurisdiction with respect to the information requested by the Service. In the event the taxpayer's or related party's consent to disclose relevant information or to waive protection of bank or commercial secrecy is determined by the Service to be ineffective or of no force and effect, then the Service may retroactively rescind any ruling rendered in reliance on such consent. (5) The federal tax consequences of proposed federal, state, local, municipal, or foreign legislation. (6)(a) Situations involving the inter­pretation of foreign law or foreign documents. The interpretation of a foreign law or foreign document means making a judgment about the import or effect of the foreign law or document that goes beyond its plain meaning. (b) The Service, at its discretion, may consider ruling requests that involve the interpretation of foreign laws or foreign documents. In these cases, the Service may request information in addition to that listed in § 7.01(2) and (6) of Rev. Proc. 2023-1, including a discussion of the implications of any authority believed to interpret the foreign law or foreign document, such as pending legislation, treaties, court decisions, notices, or administrative decisions. (7) The treatment or effects of hook equity, as described in section 4.02(11) of Rev. Proc. 2023-3, in this Bulletin. SECTION 5. EFFECT ON OTHER REVENUE PROCEDURES Rev. Proc. 2022-7 is superseded. SECTION 6. EFFECTIVE DATE This revenue procedure is effective January 3, 2023. SECTION 7. DRAFTING INFORMATION This revenue procedure was compiled by Nancy M. Galib of the Office of Associate Chief Counsel (International). For further information regarding this revenue procedure contact Ms. Galib at (202) 317-3800 (not a toll-free number).

Revenue Procedure 2024-1 Internal Revenue Service 2024-1 I.R.B. 1 26 CFR§ 601.201: Rulings and determination letters. Rev. Proc. 2024-1 SECTION 1. WHAT IS This revenue procedure explains how the Service provides advice to taxpayers on issues THE PURPOSE OF THIS under the jurisdiction of the Associate Chief Counsel (Corporate), the Associate Chief Counsel REVENUE PROCEDURE? (Employee Benefits, Exempt Organizations, and Employment Taxes), the Associate Chief Counsel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (International), the Associate Chief Counsel (Passthroughs and Special Industries), and the Associate Chief Counsel (Procedure and Administration). It explains the forms of advice and the manner in which advice is requested by taxpayers and provided by the Service. A sample format for a letter ruling request is provided in Appendix B. See section 4 of this revenue procedure for information on certain issues outside the scope of this revenue procedure on which advice may be requested under a different revenue procedure. Description of terms used in.01 For purposes of this revenue procedure-- this revenue procedure (1) the term "Service" includes the four operating divisions of the Internal Revenue Service and the Associate offices. The four operating divisions are: (a) Large Business & International Division (LB&I), which generally serves corporations, S corporations, and partnerships, with assets in excess of $10 million. It also serves U.S. citizens and residents with offshore activities and non-residents with U.S. activities. (b) Small Business/Self-Employed Division (SB/SE), which generally serves corporations, including S corporations, and partnerships, with assets less than or equal to $10 million; filers of gift, estate, excise, employment and fiduciary returns; individuals filing an individual Federal income tax return with accompanying Schedule C (Profit or Loss From Business (Sole Proprietorship)), Schedule E (Supplemental Income and Loss), Schedule F (Profit or Loss From Farming), or Form 2106, Employee Business Expenses; (c) Wage and Investment Division (W&I), which generally serves individuals with wage and investment income only (and with no international tax returns) filing an individual Federal income tax return without accompanying Schedule C, E, or F, or Form 2106; and (d) Tax Exempt and Government Entities Division (TE/GE), which serves three distinct taxpayer segments: employee plans (including IRAs), exempt organizations, and government entities. (2) the term "Associate office" refers to the Office of Associate Chief Counsel (Corporate), the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), the Office of Associate Chief Counsel (Financial Institutions and Products), the Office of Associate Chief Counsel (Income Tax and Accounting), the Office of Associate Chief Counsel (International), the Office of Associate Chief Counsel (Passthroughs and Special Industries), or the Office of Associate Chief Counsel (Procedure and Administration), as appropriate. (3) the term "Director" refers to the Practice Area Director, LB&I; Director, Field Operations, LB&I; Area Director, Field Examination, SB/SE; Director, Specialty Examination Policy, SB/SE; Program Manager, Estate & Gift Tax Policy, SB/SE; Program Manager, Employment Tax Policy, SB/SE; Program Manager, Excise Tax Policy, SB/SE; Director, Return Integrity & Compliance Services, W&I; Director, Employee Plans; Director, Employee Plans, Rulings and Agreements; Director, Employee Plans Examinations; Director, Exempt Organizations; Director, Exempt Organizations, Rulings and Agreements; Director, Exempt Organizations Examinations; Director, Government Entities, as appropriate. (4) the term "field office" refers to the respective offices of the Directors, as appropriate. (5) the term "taxpayer" includes all persons subject to any provision of the Internal Revenue Code and, when appropriate, their representatives. More specifically, the term includes tax-exempt organizations, as well as issuers of tax-exempt obligations, mortgage credit certificates, and tax credit bonds. (6) the terms "Appeals" and "Appeals office" refer to the Internal Revenue Service Independent Office of Appeals. Updated annually.02 This revenue procedure is updated annually as the first revenue procedure of the year, but it may be modified, amplified or clarified during the year. SECTION 2. WHAT The Service provides advice in the form of letter rulings, closing agreements, determination ARE THE FORMS IN letters, information letters, and oral advice. WHICH THE SERVICE PROVIDES ADVICE TO TAXPAYERS? Letter ruling.01 A "letter ruling" is a written determination issued to a taxpayer by an Associate office in response to the taxpayer's written inquiry, filed prior to the filing of returns or reports that are required by the tax laws, about its status for tax purposes or the tax effects of its acts or transactions. A letter ruling interprets the tax laws and applies them to the taxpayer's specific set of facts. A letter ruling is issued when appropriate in the interest of sound tax administration. One type of letter ruling is an Associate office's response granting or denying a request for a change in a taxpayer's method of accounting or accounting period. Once issued, a letter ruling may be revoked or modified for a number of reasons. See section 11 of this revenue procedure. A letter ruling may be issued with a closing agreement, however, and a closing agreement is final unless fraud, malfeasance, or misrepresentation of a material fact can be shown. See section 2.02 of this revenue procedure. Letter rulings are subject to exchange of information under U.S. tax treaties or tax information exchange agreements in accordance with the terms of such treaties and agreements (including terms regarding relevancy, confidentiality, and the protection of trade secrets). Closing agreement.02 A "closing agreement" is a final agreement between the Service and a taxpayer on a specific issue or liability. It is entered into under the authority in§ 7121, and it is final unless fraud, malfeasance, or misrepresentation of a material fact can be shown. A closing agreement may be entered into when it is advantageous to have a matter permanently and conclusively closed or when a taxpayer can show that there are good reasons for an agreement and that making the agreement will not prejudice the interests of the Government. A taxpayer may request a closing agreement with a letter ruling or in lieu of a letter ruling, with respect to a transaction that would be eligible for a letter ruling. If the Service agrees that a closing agreement is appropriate, the Associate Chief Counsel with subject matter jurisdiction signs the closing agreement on behalf of the Service. In appropriate cases, the Service may ask a taxpayer to enter into a closing agreement as a condition for the issuance of a letter ruling or in lieu of issuing a letter ruling. If, in a single case, a closing agreement is requested for each person or entity in a class of taxpayers, separate agreements are entered into only if the class consists of 25 or fewer taxpayers. If the issue and holding are identical for the class and there are more than 25 taxpayers in the class, a "mass closing agreement" will be entered into with the taxpayer who is authorized by the others to represent the class. Determination letter.03 A "determination letter" is a written determination issued by a Director that applies the principles and precedents previously announced by the Service to a specific set of facts. It is issued only when a determination can be made based on clearly established rules in a statute, a tax treaty, the regulations, a conclusion in a revenue ruling, or an opinion or court decision that represents the position of the Service. Information letter.04 An "information letter" is a statement issued by an Associate office or Director that calls attention to a well-established interpretation or principle of tax law (including a tax treaty) without applying it to a specific set of facts. An information letter may be issued if the taxpayer's inquiry indicates a need for general information or if the taxpayer's request does not meet the requirements of this revenue procedure and the Service concludes that general information will help the taxpayer. An information letter is advisory only and has no binding effect on the Service. If the Associate office issues an information letter in response to a request for a letter ruling that does not meet the requirements of this revenue procedure, the information letter is not a substitute for a letter ruling. The taxpayer should provide a daytime telephone number with the taxpayer's request for an information letter. Information letters that are issued by the Associate offices to members of the public are made available to the public. Information letters that are issued by the field offices are generally not made available to the public. Because information letters do not constitute written determinations as defined in§ 6110, they are not subject to public inspection under§ 6110. The Service makes the information letters available to the public under the Freedom of Information Act (the "FOIA"). Before any information letter is made available to the public, an Associate office will redact any information exempt from disclosure under the FOIA. See, e.g., 5 U.S.C.§ 552(b)(6) (exemption for information the disclosure of which would constitute a clearly unwarranted invasion of personal privacy); 5 U.S.C.§ 552(b)(3) in conjunction with§ 6103 (exemption for returns and return information as defined in§ 6103(b)). The following documents also will not be available for public inspection as part of this process: (1) transmittal letters in which the Service furnishes publications or other publicly available material to taxpayers, without any significant legal discussion; (2) responses to taxpayer or third party contacts that are inquiries with respect to a pending request for a letter ruling, technical advice memorandum, or Chief Counsel Advice (which are subject to public inspection under§ 6110 after their issuance); and (3) responses to taxpayer or third party communications with respect to any investigation, audit, litigation, or other enforcement action. Oral Advice.05 (1) No oral rulings and no written rulings in response to oral requests. The Service does not orally issue letter rulings or determination letters, nor does it issue letter rulings or determination letters in response to oral requests from taxpayers. Service employees ordinarily will discuss with taxpayers or their representatives inquiries about whether the Service will rule on particular issues and about procedural matters regarding the submission of requests for letter rulings or determination letters for a particular case. (2) Discussion possible on substantive issues. At the discretion of the Service and as time permits, Service employees may also discuss substantive issues with taxpayers or their representatives. Such a discussion will not bind the Service or the Office of Chief Counsel, and it cannot be relied upon as a basis for obtaining retroactive relief under the provisions of§ 7805(b). Service employees who are not directly involved in the examination, appeal, or litigation of particular substantive tax issues will not discuss those issues with taxpayers or their representatives unless the discussion is coordinated with Service employees who are directly involved. The taxpayer or the taxpayer's representative ordinarily will be asked whether an oral request for advice or information relates to a matter pending before another office of the Service or before a Federal court. If a tax issue is not under examination, in Appeals, or in litigation, the tax issue may be discussed even though the issue is affected by a nontax issue pending in litigation. A taxpayer may seek oral technical guidance from a taxpayer service representative in a field office or Service Center when preparing a return or report. The Service does not respond to letters seeking to confirm the substance of oral discussions, and the absence of a response to such a letter is not a confirmation. (3) Oral guidance is advisory only, and the Service is not bound by it. Oral guidance is advisory only, and the Service is not bound by it, for example, when examining the taxpayer's return. SECTION 3. ON Taxpayers may request letter rulings, information letters, and closing agreements under WHAT ISSUES MAY this revenue procedure on issues within the jurisdiction of the Associate offices. Taxpayers TAXPAYERS REQUEST uncertain as to whether an Associate office has jurisdiction with regard to a specific factual WRITTEN ADVICE situation may call the telephone number for the Associate office listed in section 10.07(1) of UNDER THIS REVENUE this revenue procedure. PROCEDURE? Except as provided in section 6.14 of this revenue procedure, taxpayers also may request determination letters from the Director in the appropriate operating division. See sections 7 and 12 of this revenue procedure. For determination letters from TE/GE, see Rev. Proc. 2024-4 and Rev. Proc. 2024-5, this Bulletin. Issues under the.01 Issues under the jurisdiction of the Associate Chief Counsel (Corporate) include those that jurisdiction of the Associate involve consolidated returns, corporate acquisitions, reorganizations, liquidations, redemptions, Chief Counsel (Corporate) spinoffs, transfers to controlled corporations, distributions to shareholders, corporate bankruptcies, the effect of certain ownership changes on net operating loss carryovers and other tax attributes, debt vs. equity determinations, allocation of income and deductions among taxpayers, acquisitions made to evade or avoid income tax, certain earnings and profits questions, and the excise tax on repurchases of corporate stock under§ 4501. For information on letter rulings under§ 355 involving businesses in certain development (R&D) and other activities that have not collected income, see IRS Statements issued on May 6, 2019 and September 25, 2018. See the IRS Statement issued on October 13, 2017 for information regarding letter rulings involving retention of stock, drop-spin liquidate transactions, and transfers of a portion of a subsidiary's assets to its corporate shareholder in transactions not qualifying under§ 332 or§ 355 but that are intended to qualify as tax-free. These IRS Statements are available at https://www.irs.gov/newsroom/statements-from-office-of-the-chief-counsel. For the procedures to obtain fast-track processing of certain requests for letter rulings solely or primarily under the jurisdiction of the Associate Chief Counsel (Corporate), see Rev. Proc. 2023- 26, 2023-33 I.R.B. 486. Issues under the.02 Issues under the jurisdiction of the Associate Chief Counsel (Employee Benefits, jurisdiction of the Exempt Organizations, and Employment Taxes) include those that involve the application of Associate Chief Counsel employment taxes and taxes on self-employment income, exemption requirements for tax-exempt (Employee Benefits, organizations, tax treatment (including application of the unrelated business income tax) of tax- Exempt Organizations, and exempt organizations (including federal, state, local, and Indian tribal governments), political Employment Taxes) organizations described in§ 527, qualified tuition programs described in§ 529, qualified ABLE programs described in§ 529A, trusts described in§ 4947(a), certain excise taxes, disclosure obligations and information return requirements of tax-exempt organizations, employee benefit programs (including executive compensation arrangements, qualified retirement plans, deferred compensation plans, and health and welfare benefit programs) and IRAs, issues integrally related to employee benefit programs and IRAs (such as, for example, the sale of stock to employee stock ownership plans or eligible worker-owned cooperatives under§ 1042), and changes in method of accounting associated with employee benefit programs. Note that certain issues involving exempt organizations, employee plans, and government entities fall under the jurisdiction of the Commissioner, TE/GE, of the Internal Revenue Service. See Rev. Proc. 2024-4 and Rev. Proc. 2024-5, this Bulletin. Issues under the.03 Issues under the jurisdiction of the Associate Chief Counsel (Financial Institutions and jurisdiction of the Associate Products) include those that involve income taxes and changes in method of accounting of Chief Counsel (Financial banks, savings and loan associations, real estate investment trusts (REITs), regulated investment Institutions and Products) companies (RICs), real estate mortgage investment conduits (REMICs), insurance companies and products, tax-exempt obligations, mortgage credit certificates, tax credit bonds (including specified tax credit bonds), build America bonds, and financial products. For the procedures to obtain letter rulings involving tax-exempt state and local obligations, see Rev. Proc. 96-16, 1996-1 C.B. 630. Issues under the.04 Issues under the jurisdiction of the Associate Chief Counsel (Income Tax and Accounting) jurisdiction of the Associate include those that involve recognition and timing of income and deductions of individuals and Chief Counsel (Income Tax corporations, sales and exchanges, capital gains and losses, installment sales, equipment leasing, and Accounting) long-term contracts, inventories, amortization, depreciation, the alternative minimum tax, net operating losses generally, including changes in method of accounting for these issues, and accounting periods. (Note that certain issues involving individual retirement accounts (IRAs) are under the jurisdiction of the Commissioner, TE/GE. See section 4.02 of this revenue procedure). Issues under the.05 Issues under the jurisdiction of the Associate Chief Counsel (International) include the tax jurisdiction of the treatment of nonresident aliens and foreign corporations, withholding of tax on nonresident aliens Associate Chief Counsel and foreign corporations, foreign tax credit, determination of sources of income, income from (International) sources outside the United States, subpart F questions, domestic international sales corporations (DISCs), foreign sales corporations (FSCs), exclusions under§ 114 for extraterritorial income (ETI), international boycott determinations, treatment of certain passive foreign investment companies, income affected by treaty, U.S. possessions, and other matters relating to the activities of non-U.S. persons within the United States or U.S.-related persons outside the United States, and changes in method of accounting for these persons. For the procedures to obtain advance pricing agreements under§ 482, see Rev. Proc. 2015-41, 2015-35 I.R.B. 263. For competent authority procedures related to bilateral and multilateral advance pricing agreements, see Rev. Proc. 2015-40, 2015-35 I.R.B. 236. Issues under the.06 Issues under the jurisdiction of the Associate Chief Counsel (Passthroughs and Special jurisdiction of the Industries) include those that involve income taxes of S corporations (except accounting Associate Chief Counsel periods and methods) and certain noncorporate taxpayers (including partnerships, common (Passthroughs and Special trust funds, and trusts), entity classification, estate (excluding§ 6166), gift, generation-skipping Industries) transfer, and certain excise taxes, depletion, and other engineering issues, cooperative housing corporations, farmers' cooperatives under§ 521, the low-income housing credit under§ 42, the New Markets Tax Credit under§ 45D, the rehabilitation credit under§ 47, disabled access credit, qualified electric vehicle credits, research and experimental expenditures, shipowners' protection and indemnity associations under§ 526, and certain homeowners associations under§ 528. Issues under the.07 Issues under the jurisdiction of the Associate Chief Counsel (Procedure and Administration) jurisdiction of the Associate include those that involve Federal tax procedure and administration, disclosure and privacy law, Chief Counsel (Procedure reporting and paying taxes (including payment of taxes under§ 6166), assessing and collecting and Administration) taxes (including interest and penalties), abating, crediting, or refunding overassessments or overpayments of tax, and filing information returns. SECTION 4. ON WHAT ISSUES MUST WRITTEN ADVICE BE REQUESTED UNDER DIFFERENT PROCEDURES? Issues involving alcohol,.01 The procedures for obtaining letter rulings, closing agreements, determination letters, tobacco, and firearms taxes information letters, and oral advice that apply to Federal alcohol, tobacco, and firearms taxes under subtitle E of the Code are under the jurisdiction of the Alcohol and Tobacco Tax and Trade Bureau of the Department of the Treasury. Certain issues involving.02 The procedures for obtaining certain letter rulings, closing agreements, determination qualified retirement plans, letters, information letters, and oral advice on qualified retirement plans and IRAs that are under individual retirement the jurisdiction of the Commissioner, TE/GE, are provided in Rev. Proc. 2024-4, this Bulletin. accounts (IRAs), and Rev. Proc. 2024-4 also includes the procedures for issuing determination letters on the qualified exempt organizations status of pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans under§§ 401, 403(a), 409, and 4975(e)(7), and the status for exemption of any related trusts or custodial accounts under§ 501(a). See also Rev. Proc. 2024-5, this Bulletin, for the procedures for issuing determination letters on the tax-exempt status of organizations under§ 501 and§ 521, the foundation status of organizations described in§ 501(c)(3) and the foundation status of nonexempt charitable trusts described in§ 4947(a)(1). For the user fee requirements applicable to requests under the jurisdiction of the Commissioner, TE/GE, see Section 30 of Rev. Proc. 2024-4, and Section 14 of Rev. Proc. 2024-5. SECTION 5. UNDER WHAT CIRCUMSTANCES DO THE ASSOCIATE OFFICES ISSUE LETTER RULINGS? In income and gift tax.01 In income and gift tax matters, an Associate office generally issues a letter ruling on a matters proposed transaction or on a completed transaction if the letter ruling request is submitted before a return containing a tax position on the completed transaction is filed. An Associate office will not ordinarily issue a letter ruling on a completed transaction if the letter ruling request is submitted after a return containing a tax position on the completed transaction is filed. "Not ordinarily" means that unique and compelling reasons must be demonstrated to justify the issuance of a letter ruling submitted after the return is filed for the year in which the transaction is completed. The taxpayer must contact the field office having audit jurisdiction over their return and obtain the field's consent to the issuance of such a letter ruling. See section 7.05(2) of this revenue procedure. Special relief for late S.02 In lieu of requesting a letter ruling under this revenue procedure, a taxpayer may obtain corporation and related relief for certain late S corporation and related elections by following the procedure in Rev. Proc. elections in lieu of letter 2013-30, 2013-36 I.R.B. 173. This procedure is in lieu of the letter ruling process and does not ruling process require payment of any user fee. See section 3.01 of Rev. Proc. 2013-30, and section 15.03(3) of this revenue procedure. A§ 301.9100 request.03 An Associate office will consider a request for an extension of time for making an election or for extension of time for other application for relief under§ 301.9100-3 of the Treasury Regulations, even if submitted after making an election or for the return covering the issue presented in the§ 301.9100 request has been filed, an examination other relief of the return has begun, the issues in the return are being considered by Appeals or a Federal court, or the liability reflected on the return has been assessed and subject to collection. Except for certain requests pertaining to applications for recognition of tax exemption under the jurisdiction of the Commissioner, TE/GE, a§ 301.9100 request is a letter ruling request. Therefore, the§ 301.9100 request should be submitted pursuant to this revenue procedure. However, a§ 301.9100 request involving recharacterization of an IRA ( see§ 1.408A-5, Q&A-6) should be submitted pursuant to Rev. Proc. 2024-4, this Bulletin. An election made pursuant to§ 301.9100- 2 for an automatic extension of time is not a letter ruling request and does not require payment of any user fee. See§ 301.9100-2(d) and section 15.03(1) of this revenue procedure. (1) Format of request. A§ 301.9100 request (other than an election made pursuant to§ 301.9100-2 and certain requests pertaining to applications for recognition of tax exemption under the jurisdiction of the Commissioner, TE/GE which are addressed in Rev. Proc. 2024-5) must be in the general form of, and meet the general requirements for, a letter ruling request. These requirements are given in section 7 of this revenue procedure. A§ 301.9100 request must include an affidavit and declaration from the taxpayer and other parties having knowledge or information about the events that led to the failure to make a valid regulatory election and to the discovery of the failure. See§ 301.9100-3(e)(2) and (e)(3). In addition, a§ 301.9100 request must include the information required by§ 301.9100-3(e)(4). (2) Period of limitation. The filing of a request for relief under§ 301.9100 does not suspend the running of any applicable period of limitation. See§ 301.9100-3(d)(2). The Associate office ordinarily will not issue a§ 301.9100 ruling if the period of limitation on assessment under§ 6501(a) for the taxable year in which an election should have been made, or for any taxable years that would have been affected by the election had it been timely made, will expire before receipt of a§ 301.9100 letter ruling. See§ 301.9100-3(c)(1)(ii). If, however, the taxpayer consents to extend the period of limitation on assessment under§ 6501(c)(4) for the taxable year in which the election should have been made and for any taxable years that would have been affected by the election had it been timely made, the Associate office may issue the letter ruling. See§ 301.9100-3(d)(2). Note that the filing of a claim for refund under§ 6511 does not extend the period of limitation on assessment. If§ 301.9100-3 relief is granted, the Associate office may require the taxpayer to consent to an extension of the period of limitation on assessment. See§ 301.9100-3(d)(2). (3) Taxpayer must notify the Associate office if examination of its return begins while the request is pending. The taxpayer must notify the Associate office if the Service begins an examination of the taxpayer's return for the taxable year in which an election should have been made, or for any taxable years that would have been affected by the election had it been timely made, while a§ 301.9100-3 request is pending. This notification must include the name and telephone number of the examining agent. See§ 301.9100-3(e)(4)(i) and section 7.05(1)(b) of this revenue procedure. (4) Associate office will notify examination agent, Appeals officer, or attorney of a§ 301.9100 request if the taxpayer's return is being examined by a field office or is being considered by an Appeals office or a Federal court. If the taxpayer's return for the taxable year in which an election should have been made, or for any taxable years that would have been affected by the election had it been timely made, is being examined by a field office or considered by an Appeals office or a Federal court, the Associate office will notify the appropriate examination agent, Appeals officer, or attorney that a§ 301.9100 request has been submitted to the Associate office. The examination agent, Appeals officer, or attorney is not authorized to deny consideration of a§ 301.9100 request. The letter ruling will be mailed to the taxpayer and a copy will be sent to the Appeals officer, attorney, or appropriate Service official in the operating division that has examination jurisdiction over the taxpayer's tax return. (5) Inclusion of statement required by section 4.04 of Rev. Proc. 2009-41. Eligible entities requesting a letter ruling because they do not meet all of the eligibility requirements of section 4.01 of Rev. Proc. 2009-41, 2009-39 I.R.B. 439, must include either the following representation as part of the entity's request for a letter ruling or an explanation regarding why they do not qualify to do so: "All required U.S. tax and information returns of the entity (or, if the entity was not required to file any such returns under the desired classification, then all required U.S. tax and information returns of each affected person as defined in Section 4.02 of Rev. Proc. 2009-41) were filed timely or within 6 months of the due date of the respective return (excluding extensions) as if the entity classification election had been in effect on the requested date. No U.S. tax or information returns were filed inconsistently with those described in the prior sentence." (6) Relief for late classification election. In lieu of requesting a letter ruling under§ 301.9100- 1 through§ 301.9100-3 and this revenue procedure, entities that satisfy the requirements set forth in section 4.01 of Rev. Proc. 2009-41, 2009-39 I.R.B. 439, may apply for late classification election relief under Rev. Proc. 2009-41. Requests for such relief are not subject to user fees. See section 3.01 of Rev. Proc. 2009-41 and section 15.03(2) of this revenue procedure. Determinations under.04 As provided in Rev. Proc. 77-9, 1977-1 C.B. 542, the Associate Chief Counsel§ 999(d) (International) issues determinations under§ 999(d) that a particular operation of a person, or of a member of a controlled group (within the meaning of§ 993(a)(3)) that includes that person, or a foreign corporation of which a member of the controlled group is a U.S. shareholder, constitutes participation in or cooperation with an international boycott. The effect of that determination is to deny certain benefits of the foreign tax credit and the deferral of earnings of foreign subsidiaries and domestic international sales corporations (DISCs) to that person. The same principles shall apply with respect to exclusions under§ 114 for exterritorial income (ETI). Requests for determinations under Rev. Proc. 77-9 are letter ruling requests and should be submitted to the Associate office pursuant to this revenue procedure. In matters involving§ 367.05 Unless the issue is covered by section 6 of this revenue procedure, the Associate Chief Counsel (International) may issue a letter ruling under§ 367 even if the taxpayer does not request a letter ruling as to the characterization of the transaction under the reorganization provisions of the Code. The Associate office will determine the§ 367 consequences of a transaction but may indicate in the letter ruling that it expresses no opinion as to the characterization of the transaction under the reorganization. The Associate office may decline to issue a§ 367 ruling in situations in which the taxpayer inappropriately characterizes the transaction under the reorganization provisions. In estate tax matters.06 In general, the Associate Chief Counsel (Passthroughs and Special Industries) issues letter rulings on transactions affecting the estate tax on the prospective estate of a living person. The Associate office will not issue letter rulings for prospective estates on computations of tax, actuarial factors, or factual matters. With respect to the transactions affecting the estate tax of the decedent's estate, generally the Associate office issues letter rulings before the decedent's estate tax return is filed. If the taxpayer is requesting a letter ruling regarding a decedent's estate tax and the estate tax return is due to be filed before the letter ruling is expected to be issued, the taxpayer should obtain an extension of time for filing the return and should notify the Associate office branch considering the letter ruling request that an extension has been obtained. If the return is filed before the letter ruling is received from the Associate office, the taxpayer must disclose on the return that a letter ruling has been requested, attach a copy of the pending letter ruling request to the return, and notify the Associate office that the return has been filed. See section 7.05(2) of this revenue procedure. The Associate office will make every effort to issue the letter ruling within 3 months of the date the return was filed. If the taxpayer requests a letter ruling after the return is filed, but before the return is examined, the taxpayer must notify the field office having jurisdiction over the return that a letter ruling has been requested, attach a copy of the pending letter ruling request, and notify the Associate office that a return has been filed. See section 7.05(2) of this revenue procedure. The Associate office will make every effort to issue the letter ruling within 3 months of the date the return has been filed. If the letter ruling cannot be issued within that 3-month period, the Associate office will notify the field office having jurisdiction over the return, which may, by memorandum to the Associate office, grant an additional period for the issuance of the letter ruling. In matters involving.07 In matters involving additional estate tax under§ 2032A(c), the Associate Chief Counsel additional estate tax under (Passthroughs and Special Industries) issues letter rulings on proposed transactions and on§ 2032A(c) completed transactions that occurred before the return is filed. In matters involving.08 In matters involving qualified domestic trusts under§ 2056A, the Associate Chief Counsel qualified domestic trusts (Passthroughs and Special Industries) issues letter rulings on proposed transactions and on under§ 2056A completed transactions that occurred before the return is filed. In generation-skipping.09 In general, the Associate Chief Counsel (Passthroughs and Special Industries) issues letter transfer tax matters rulings on proposed transactions that affect the generation-skipping transfer tax and on completed transactions that occurred before the return is filed. In the case of a generation-skipping trust or trust equivalent, letter rulings are issued either before or after the trust or trust equivalent has been established. In employment and excise.10 In employment and excise tax matters, the Associate offices issue letter rulings on proposed tax matters transactions and on completed transactions, if the letter ruling request is submitted before the return is filed for the year in which the transaction is completed. Letter ruling requests regarding employment status (employer/employee relationship) from Federal agencies and instrumentalities or their workers must be submitted to the Internal Revenue Service as set forth in the current instructions for Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. If the Federal agency or instrumentality service recipient (the firm) makes the request, the firm will receive any issued letter ruling. A copy will also be sent to any identified workers. If the worker makes the request and the firm has been contacted for information, both the worker and the firm will receive any issued letter ruling. The letter ruling will apply to any individuals engaged by the firm under substantially similar circumstances. See section 12.04 of this revenue procedure for requests regarding employment status made by taxpayers other than Federal agencies and instrumentalities or their workers. In procedural and.11 The Associate Chief Counsel (Procedure and Administration) issues letter rulings on matters administrative matters arising under the Code and related statutes and regulations that involve the time, place, manner, and procedures for reporting and paying taxes; or the filing of information returns. In Indian tribal government.12 Pursuant to Rev. Proc. 84-37, 1984-1 C.B. 513, as modified by Rev. Proc. 86-17, 1986-1 matters C.B. 550, and this revenue procedure, the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) issues determinations recognizing a tribal entity as an Indian tribal government within the meaning of§ 7701(a)(40) or as a political subdivision of an Indian tribal government under§ 7871(d) if it determines, after consultation with the Secretary of the Interior, that the entity satisfies the statutory definition of an Indian tribal government or has been delegated governmental functions of an Indian tribal government. Requests for determinations under Rev. Proc. 84-37 are letter ruling requests, and, therefore, should be submitted to the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) pursuant to this revenue procedure. (1) Definition of Indian tribal government. The term "Indian tribal government" is defined under§ 7701(a)(40) to mean the governing body of any tribe, band, community, village, or group of Indians, or (if applicable) Alaska Natives, which is determined by the Secretary of the Treasury, after consultation with the Secretary of the Interior, to exercise governmental functions. Section 7871(d) provides that, for purposes of§ 7871(a), a subdivision of an Indian tribal government shall be treated as a political subdivision of a state if the Secretary of the Treasury determines, after consultation with the Secretary of the Interior, that the subdivision has been delegated the right to exercise one or more of the substantial governmental functions of the Indian tribal government. (2) Inclusion in list of tribal governments. Rev. Proc. 2008-55, 2008-2 C.B. 768, designates the Indian tribal entities that appear on the current or future lists of federally recognized Indian tribes published annually by the Department of the Interior, Bureau of Indian Affairs, as Indian tribal governments that are treated similarly to states for certain Federal tax purposes. Rev. Proc. 84-36, 1984-1 C.B. 510, as modified by Rev. Proc. 86-17, 1986-1 C.B. 550, provides a list of political subdivisions of Indian tribal governments that are treated as political subdivisions of states for certain Federal tax purposes. Under Rev. Proc. 84-37, as modified by Rev. Proc. 86-17, tribal governments or subdivisions recognized under§ 7701(a)(40) or§ 7871(d) will be included in the list of recognized tribal government entities in future lists of federally recognized Indian tribes published annually by the Department of the Interior, Bureau of Indian Affairs, or revised versions of Rev. Proc. 84-36. On constructive sales.13 The Associate Chief Counsel (Passthroughs and Special Industries) will issue letter rulings price under§ 4216(b) or in all cases on the determination of a constructive sales price under§ 4216(b) or§ 4218(c) and§ 4218(c) in all other cases on prospective transactions if the law or regulations require a determination of the effect of a proposed transaction for Federal tax purposes. See section 6.14(5) of this revenue procedure. In exempt organizations.14 In exempt organizations matters, the Associate Chief Counsel (Employee Benefits, Exempt matters Organizations, and Employment Taxes) generally issues letter rulings on proposed transactions or on completed transactions if the letter ruling request is submitted before the return is filed for the year in which the transaction is completed. The Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) will not ordinarily issue a letter ruling on a completed transaction if the letter ruling request is submitted after the return is filed for the year in which the transaction is completed. "Not ordinarily" means that unique and compelling reasons must be demonstrated to justify the issuance of a letter ruling submitted after the return is filed for the year in which the transaction is completed. The taxpayer must contact the field office having audit jurisdiction over their return and obtain the field's consent to the issuance of such a letter ruling. See Rev. Proc. 2024-5, this Bulletin, for the procedures for issuing determination letters on issues under the jurisdiction of the Director Exempt Organizations Rulings and Agreements, including determination letters on the tax-exempt status of organizations under§ 501 and§ 521, the foundation status of organizations described in§ 501(c)(3), and the foundation status of nonexempt charitable trusts described in§ 4947(a)(1). In qualified retirement plan.15 In qualified retirement plan and IRA matters (other than those listed in Rev. Proc. 2024- and IRA matters 4, this Bulletin), the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) will generally issue letter rulings on proposed transactions and on completed transactions, if the letter ruling request is submitted before the return is filed for the year in which the transaction is completed, including those involving: (1)§§ 72 (other than the computation of the exclusion ratio), 219, 381(c)(11), 402, 403(b) (except with respect to whether the form of a plan satisfies the requirements of§ 403(b) as provided in Rev. Proc. 2024-4), 404, 408, 408A, 412, 414(e) and (h), 511 through 514, 4971(b) and (g), 4972, 4973, 4974 (other than requests for a waiver under§ 4974(d)), 4978, 4979, and 4980; (2) Waiver of the minimum funding standard ( see Rev. Proc. 2004-15, 2004-1 C.B. 490, section 3.04 of which is modified by Rev. Proc. 2024-4); (3) Whether a plan amendment is reasonable and provides for only de minimis increases in plan liabilities in accordance with§§ 401(a)(33) and 412(c)(7)(B)(i) of the Code ( see Rev. Proc. 79-62, 1979-2 C.B. 576); (4) With respect to employee stock ownership plans and tax credit employee stock ownership plans,§§ 409, 1042, 4975(d)(3) and 4975(e)(7). Qualification issues arising under these sections (as well as under§§ 401-420 generally) are generally within the jurisdiction of Employee Plans Determinations. However, see Rev. Proc. 2024-3, this Bulletin, section 4.02(12); (5) Abatement of first tier excise taxes under§ 4962; (6) Relief under§ 301.9100-1 that is not related to Roth IRA recharacterizations; and (7) Grants of extensions of time other than pursuant to§ 301.9100-1. A request to revoke an.16 If a taxpayer is required to file a letter ruling request to obtain consent to revoke an election election made on a return, an Associate office will consider the request, even if an examination of the return has begun or the issues in the return are being considered by Appeals or a Federal court. The procedures in this revenue procedure applicable to a§ 301.9100 request apply to a letter ruling request to revoke an election. For the applicable user fee, see generally section 15 of this revenue procedure. Under some circumstances.17 In general, the Service will not issue a letter ruling or determination letter on an issue that before the issuance of it cannot readily resolve before the promulgation of a regulation or other published guidance. See a regulation or other section 6.09 of this revenue procedure. published guidance However, an Associate office may issue letter rulings under the following conditions: (1) Answer is clear or is reasonably certain. If the letter ruling request presents an issue for which the answer seems clear by applying the statute, regulations, and applicable case law to the facts or for which the answer seems reasonably certain but not entirely free from doubt. (2) Answer is not reasonably certain. If the letter ruling request presents an issue for which the answer does not seem reasonably certain, the Associate office may issue the letter ruling, using its best efforts to arrive at a determination, if it is in the best interest of tax administration. SECTION 6. UNDER WHAT CIRCUMSTANCES DOES THE SERVICE NOT ISSUE LETTER RULINGS OR DETERMINATION LETTERS? Ordinarily not if the.01 The Service ordinarily does not issue a letter ruling or a determination letter if, at the time request involves an of the request, the identical issue is involved in the taxpayer's return for an earlier period and that issue under examination issue-- or consideration or in litigation (1) is being examined by a field office; (2) is being considered by Appeals; (3) is pending in litigation in a case involving the taxpayer or a related party; (4) has been examined by a field office or considered by Appeals and the statutory period of limitations on assessment or on filing a claim for refund or credit of tax has not expired; or (5) has been examined by a field office or considered by Appeals and a closing agreement covering the issue or liability has not been entered into by a field office or by Appeals. If a return dealing with an issue for a particular year is filed while a request for a letter ruling on that issue is pending, an Associate office will issue the letter ruling unless it is notified by the taxpayer or otherwise learns that an examination of that issue or the identical issue on an earlier year's return has been started by a field office. See section 7.05 of this revenue procedure. In income and gift tax matters, as well as in qualified retirement plan, IRA, and exempt organizations matters, even if an examination has begun, an Associate office ordinarily will issue the letter ruling if the field office agrees by memorandum to the issuance of the letter ruling. Ordinarily not in certain.02 The Service ordinarily does not issue letter rulings or determination letters in certain areas areas because of factual because of the factual nature of the matter involved or for other reasons. Rev. Proc. 2024-3 and nature of the problem or for Rev. Proc. 2024-7, this Bulletin, provide a list of these areas. This list is not all-inclusive because other reasons the Service may decline to issue a letter ruling or a determination letter when appropriate in the interest of sound tax administration, including due to resource constraints, or on other grounds whenever warranted by the facts or circumstances of a particular case. Instead of issuing a letter ruling or determination letter, the Service may, when it is considered appropriate and in the interest of sound tax administration, issue an information letter calling attention to well-established principles of tax law. If the Service determines that it is not in the interest of sound tax administration to issue a letter ruling or determination letter due to resource constraints, it will adopt a consistent approach with respect to taxpayers that request a ruling on the same issue. The Service will also consider adding the issue to the no rule list at the first opportunity. See sections 2.01 and 3.02 of Rev. Proc. 2024-3. Ordinarily not on part of.03 An Associate office ordinarily will not issue a letter ruling on only part of an integrated an integrated transaction transaction. If a part of a transaction falls under a no-rule area, a letter ruling on other parts of the transaction may be issued. Before preparing the letter ruling request, a taxpayer should call a branch having jurisdiction for the matters on which the taxpayer is seeking a letter ruling to discuss whether the Associate office will issue a letter ruling on part of the transaction. Ordinarily not on which of.04 The Service ordinarily does not issue a letter ruling or a determination letter on which of two two entities is a common entities, under common law rules applicable in determining the employer-employee relationship, law employer is the employer, when one entity is treating the worker as an employee. Ordinarily not to business.05 The Service ordinarily does not issue letter rulings or determination letters to business, associations or groups trade, or industrial associations or to similar groups concerning the application of the tax laws to members of the group. Groups and associations, however, may submit suggestions of generic issues that could be appropriately addressed in revenue rulings. See Rev. Proc. 89-14, 1989-1 C.B. 814, which states the objectives of, and standards for, the publication of revenue rulings and revenue procedures in the Internal Revenue Bulletin. See also Rev. Proc. 2016-19, 2016-13 I.R.B. 497, which describes procedures for taxpayers and other entities to submit issues for consideration under the Service's Industry Issue Resolution (IIR) Program. The Service may issue letter rulings or determination letters to groups or associations on their own tax status or liability if the request meets the requirements of this revenue procedure. Ordinarily not where the.06 The Service ordinarily does not issue letter rulings or determination letters regarding the request does not address tax consequences of a transaction for taxpayers who are not directly involved in the request if the tax status, liability, or the requested letter ruling or determination letter would not address the tax status, liability, or reporting obligations of the reporting obligations of the requester. For example, a taxpayer may not request a letter ruling requester relating to the tax consequences of a transaction to a customer or client, if the tax status, liability, or reporting obligations of the taxpayer would not be addressed in the ruling, because the customer or client is not directly involved in the letter ruling request. The tax liability of each shareholder is, however, directly involved in a letter ruling on the reorganization of a corporation. Accordingly, a corporate taxpayer could request a letter ruling that solely addressed the tax consequences to its shareholders of a proposed reorganization. Rev. Proc. 96-16, 1996-1 C.B. 630, sets forth rules for letter ruling requests involving tax- exempt state and local government obligations. Ordinarily not to foreign.07 The Service ordinarily does not issue letter rulings or determination letters to foreign governments governments or their political subdivisions about the U.S. tax effects of their laws. The Associate offices also do not issue letter rulings on the effect of a tax treaty on the tax laws of a treaty country for purposes of determining the tax of the treaty country. See section 13.02 of Rev. Proc. 2015- 40, 2015-35 I.R.B. 236. Treaty partners can continue to address matters such as these under the provisions of the applicable tax treaty. In addition, the Associate offices may issue letter rulings to foreign governments or their political subdivisions on their own tax status or liability under U.S. law if the request meets the requirements of this revenue procedure. Ordinarily not on Federal.08 The Associate offices ordinarily do not issue letter rulings on a matter involving the Federal tax consequences of tax consequences of any proposed Federal, state, local, municipal, or foreign legislation. The proposed legislation Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) may issue letter rulings regarding the effect of proposed state, local, or municipal legislation upon an eligible deferred compensation plan under§ 457(b) provided that the letter ruling request relating to the plan complies with the other requirements of this revenue procedure. The Associate offices also may provide general information in response to an inquiry. Ordinarily not before.09 Generally, the Service will not issue a letter ruling or a determination letter if the request issuance of a regulation or presents an issue that cannot be readily resolved before a regulation or any other published other published guidance guidance is issued. When the Service has closed a regulation project or any other published guidance project that might have answered the issue or decided not to open a regulation project or any other published guidance project, the Associate offices may consider all letter ruling requests unless the issue is covered by section 6 of this revenue procedure, Rev. Proc. 2024-3 or Rev. Proc. 2024-7, this Bulletin. Not on frivolous issues.10 The Service will not issue a letter ruling or a determination letter on frivolous issues. A "frivolous issue" is one without basis in factor law or one that asserts a position that courts have held frivolous or groundless. Examples of frivolous or groundless issues include, but are not limited to: (1) frivolous "constitutional" claims, such as claims that the requirement to file tax returns and pay taxes constitutes an unreasonable search barred by the Fourth Amendment, violates Fifth and Fourteenth Amendment protections of due process, violates Thirteenth Amendment protections against involuntary servitude, or is unenforceable because the Sixteenth Amendment does not authorize nonapportioned direct taxes or was never ratified; (2) claims that income taxes are voluntary, that the term "income" is not defined in the Internal Revenue Code, or that preparation and filing of Federal income tax returns violates the Paperwork Reduction Act; (3) claims that tax may be imposed only on coins minted under a gold or silver standard or that receipt of Federal Reserve Notes does not cause an accretion to wealth; (4) claims that a person's income is not taxable because he or she falls within a class entitled to "reparation claims" or an extra-statutory class of individuals exempt from tax, e.g., "free-born" individuals; (5) claims that a taxpayer can refuse to pay taxes on the basis of opposition to certain Governmental expenditures; (6) claims that taxes apply only to Federal employees; only to residents of Puerto Rico, Guam, the U.S. Virgin Islands, the District of Columbia, or "Federal enclaves;" or that§§ 861 through 865 or any other provision of the Code imposes taxes on U.S. citizens and residents only on income derived from foreign based activities; (7) claims that wages or personal service income are "not income," are "nontaxable receipts," or are a "nontaxable exchange for labor;" (8) claims that income tax withholding by an employer on wages is optional; or (9) other claims that the courts have characterized as frivolous or groundless. Additional examples of frivolous or groundless issues may be found in IRS publications and other guidance (including, but not limited to, Notice 2010-33, Frivolous Positions, and I.R.M. Exhibit 25.25.10-1, Frivolous Arguments). No "comfort" letter rulings.11 Except with respect to issues under§§ 332, 351, 355, 368, 1036, and related operative provisions, a letter ruling will not be issued with respect to an issue that is clearly and adequately addressed by a statute, regulation, or decision of a court, revenue rulings, revenue procedures, notice, or other authority published in the Internal Revenue Bulletin (Comfort Ruling). However, an Associate Office may, in its discretion, issue a Comfort Ruling if the Associate office is otherwise issuing a letter ruling to the taxpayer on another issue arising in the same transaction. Not on alternative plans or.12 The Service will not issue a letter ruling or a determination letter on alternative plans of hypothetical situations proposed transactions or on hypothetical situations. Not on property conversion.13 An Associate office will not issue a letter ruling on the replacement of involuntarily after return filed converted property, whether or not the property has been replaced, if the taxpayer has already filed a Federal tax return for the first taxable year in which any of the gain was realized from the converted property. A Director may issue a determination letter in this case. See section 12.01 of this revenue procedure. Circumstances under which.14 A Director will not issue a determination letter if-- determination letters are not issued by a Director (1) the taxpayer has directed a similar inquiry to an Associate office; (2) the same issue, involving the same taxpayer or a related party, is pending in a case in litigation or before Appeals; (3) the request involves an industry-wide problem; (4) the specific employment tax question at issue in the request has been, or is being, considered by the Central Office of the Social Security Administration or the Railroad Retirement Board for the same taxpayer or a related party; or (5) the request is for a determination of constructive sales price under§ 4216(b) or§ 4218(c), which deal with special provisions applicable to the manufacturers excise tax. The Associate Chief Counsel (Passthroughs and Special Industries) will, in certain circumstances, issue letter rulings in this area. See section 5.13 of this revenue procedure. SECTION 7. WHAT This section provides the general instructions for requesting letter rulings and determination ARE THE GENERAL letters. See section 9 of this revenue procedure for the specific and additional procedures for INSTRUCTIONS requesting a change in method of accounting. FOR REQUESTING LETTER RULINGS AND DETERMINATION Requests for letter rulings, closing agreements, and determination letters require the payment of LETTERS? the applicable user fee listed in Appendix A of this revenue procedure. Certain changes in method of accounting under the automatic change request procedures ( see section 9.01(1) of this revenue procedure) and certain changes in accounting periods made under automatic change request procedures do not require payment of a user fee ( see Appendix F of this revenue procedure). For additional user fee requirements, see section 15 of this revenue procedure. Specific and additional instructions also apply to requests for letter rulings and determination letters on certain matters. Those matters are listed in Appendix F of this revenue procedure with a reference (usually to another revenue procedure) where more information can be obtained. Documents and information.01 required in all requests Facts (1) Complete statement of facts and other information. Each request for a letter ruling or a determination letter must contain a complete statement of all facts relating to the transaction. These facts include-- (a) names, taxpayer identification numbers, addresses, telephone numbers, and other contact information as appropriate (such as fax numbers or email addresses of any party requesting to communicate with the Service in such a form, see section 7.02(5) of this revenue procedure) of all interested parties (the term "all interested parties" does not include all shareholders of a widely held corporation requesting a letter ruling relating to a reorganization or all employees where a large number may be involved); (b) the annual accounting period, and the overall method of accounting (cash or accrual) for maintaining the accounting books and filing the Federal income tax return, of all interested parties; (c) a description of the taxpayer's business operations; (d) a complete statement of the business reasons for the transaction; (e) a detailed description of the transaction; and (f) all other facts relating to the transaction or to the taxpayer's requested tax treatment thereof. Documents and foreign (2) Copies of all contracts, wills, deeds, agreements, instruments, other documents laws pertinent to the transaction, and foreign laws. (a) Documents. True copies of all contracts, wills, deeds, agreements, instruments, trust documents, proposed disclaimers, and other documents pertinent to the transactions must be submitted with the request. But see section 3.02 of Rev. Proc. 2017-52, 2017-41 I.R.B. 283 (amplified and modified by Rev. Proc. 2018-53, 2018-43 I.R.B. 667), for requirements relating to ruling requests under§ 355, and section 3.04 of Rev. Proc. 2018-53, 2018-43 I.R.B. 667, for requirements relating to ruling requests involving assumption or satisfaction of the distributing corporation's debt in connection with§ 355 distributions. If the request concerns a corporate distribution, reorganization, or similar transaction, the corporate balance sheet and profit and loss statement should also be submitted. But see section 3.02 of Rev. Proc. 2017-52 for requirements relating to ruling requests under§ 355. If the request relates to a prospective transaction, the most recent balance sheet and profit and loss statement should be submitted. But see sections 3.02 of Rev. Proc. 2017-52 (amplified and modified by Rev. Proc. 2018-53) for requirements relating to ruling requests under§ 355. If any document, including any balance sheet and profit and loss statement, is in a language other than English, the taxpayer must also submit a certified English translation of the document, along with a true copy of the document. For guidelines on the acceptability of such documents, see paragraph (c) of this section 7.01(2). Each document other than the request should be labeled and attached to the request in alphabetical sequence. Original documents such as contracts, wills, etc., should not be submitted because they become part of the Service's file and will not be returned. (b) Foreign laws. The taxpayer must submit with the request a copy of the relevant parts of all foreign laws, including statutes, regulations, administrative pronouncements, and any other relevant legal authority. The documents submitted must be in the official language of the country involved and must be copied from an official publication of the foreign government or another widely available and generally accepted publication. If English is not the official language of the country involved, the taxpayer must also submit a copy of an English language version of the relevant parts of all foreign laws. This translation must be: (i) from an official publication of the foreign government or another widely available, generally accepted publication; or (ii) a certified English translation submitted in accordance with paragraph (c) of this section 7.01(2). The taxpayer must identify the title and date of publication, including updates, of any widely available and generally accepted publication that the taxpayer (or the taxpayer's qualified translator) uses as a source for the relevant parts of the foreign law. (c) Standards for acceptability of submissions of documents in a language other than English and certified English translations of documents and laws in a language other than English. The taxpayer must submit with the request an accurate and complete certified English translation of the relevant parts of all contracts, wills, deeds, agreements, instruments, trust documents, proposed disclaimers, and other documents pertinent to the transaction that are in a language other than English. If the taxpayer chooses to submit certified English translations of foreign laws, those translations must be based on an official publication of the foreign government or another widely available and generally accepted publication. In either case, the translation must be that of a qualified translator and must be attested to by the translator. The attestation must contain: (i) a statement that the translation submitted is a true and accurate translation of the foreign language document or law; (ii) a statement as to the attestant's qualifications as a translator and as to that attestant's qualifications and knowledge regarding tax matters or foreign law if the law is not a tax law; and (iii) the attestant's name and address. Analysis of material facts (3) Analysis of material facts. The request must be accompanied by an analysis of facts and their bearing on the issue or issues. If documents attached to a request contain material facts, they must be included in the taxpayer's analysis of facts in the request rather than merely incorporated by reference. Same issue in any return (4) Statement regarding whether same issue is presented in any return and additional and whether return is information required for§ 301.9100 requests. The request must state whether, to the best of under examination, before the knowledge of both the taxpayer and the taxpayer's representatives, the same issue is presented Appeals, before a Federal in any return of the taxpayer, a related party within the meaning of§ 267(b) or§ 707(b)(1), or court, or being considered a member of an affiliated group of which the taxpayer is also a member within the meaning of by the Pension Benefit§ 1504, or of any predecessor. Guaranty Corporation, by the Department of Labor, or by the Department of The request must also state whether, to the best of the knowledge of both the taxpayer and the Health and Human Services taxpayer's representatives, any return on which the same issue is presented- (a) is currently under examination, before Appeals, or before a Federal court; (b) was previously under examination, before Appeals, or before a Federal court; (c) in qualified retirement plan matters, is being considered by the Pension Benefit Guaranty Corporation or the Department of Labor; or (d) in health care matters, is being considered by the Department of Labor or the Department of Health and Human Services. That the same issue is merely presented in a return does not preclude the Service from issuing a ruling, but the Service will not ordinarily issue a ruling if, at the time of the request, the identical issue is under examination or consideration or in litigation. See section 6.01 of this revenue procedure. A limited exception to the above rule is made for a§ 301.9100 request. See section 5.03 of this revenue procedure. If a§ 301.9100 request involves a tax year that is currently under examination, before Appeals, or before a Federal court, the taxpayer must notify the Service, as outlined above. This notification must include the name and telephone number of the examining agent or Appeals officer. Same or similar issue (5) Statement regarding whether same or similar issue was previously ruled on or whether in a request previously a request involving it was submitted or is currently pending. The request must state whether, submitted or currently to the best of the knowledge of both the taxpayer and the taxpayer's representatives-- pending (a) the Service previously ruled on the same or a similar issue for the taxpayer, a related party within the meaning of§ 267 or§ 707(b)(1), or a member of an affiliated group of which the taxpayer is also a member within the meaning of§ 1504, or for a predecessor; (b) the taxpayer, a related party, a predecessor, or any of their representatives previously submitted a request (including an application for change in method of accounting) involving the same or a similar issue but no letter ruling or determination letter was issued; (c) the taxpayer, a related party, or a predecessor previously submitted a request (including an application for change in method of accounting) involving the same or a similar issue that is currently pending with the Service; (d) at the same time as this request, the taxpayer or a related party is presently submitting another request (including an application for change in method of accounting) involving the same or a similar issue; or (e) the taxpayer or a related party had, or has scheduled, a pre-submission conference involving the same or a similar issue. If the statement is affirmative for (a), (b), (c), (d), or (e) of this section 7.01(5), the statement must give the date the request was submitted, the date the request was withdrawn or ruled on, if applicable, and other details of the Service's consideration of the issue. Interpretation of a (6) Statement regarding interpretation of a substantive provision of an income or estate substantive provision of an tax treaty. If the request involves the interpretation of a substantive provision of an income or income or estate tax treaty estate tax treaty, the request must state whether-- (a) the tax authority of the treaty jurisdiction has issued a ruling on the same or similar issue for the taxpayer, a related party within the meaning of§ 267 or§ 707(b)(1), or a member of an affiliated group of which the taxpayer is also a member within the meaning of§ 1504, or for any predecessor; (b) the same or similar issue for the taxpayer, a related party, or any predecessor is being examined or has been settled by the tax authority of the treaty jurisdiction or is otherwise the subject of a closing agreement in that jurisdiction; and (c) the same or similar issue for the taxpayer, a related party, or any predecessor is being considered by the competent authority of the treaty jurisdiction. Interpretation of a (7) Statement regarding involvement of a transactional party located in a foreign country. transaction involving a If the request involves a transaction between a taxpayer and a related party and either the taxpayer party in a foreign country or the related party is located in a foreign country, the request must state whether the ruling potentially relates to any one of these categories-- (a) Preferential Regime, defined as one that meets the following three requirements: (1) the regime relates to business taxation of income from geographically mobile activities (such as, financial and other service activities, including the provision of intangibles); (2) the regime offers a form of tax preference, such as, a reduction in the rate of tax or tax base compared to general principles of U.S. taxation; and (3) the regime imposes no or low effective tax rates on income from geographically mobile, financial, and other service activities; (b) Transfer Pricing, meaning the letter ruling covers transfer pricing or the application of transfer pricing principles under§ 482 and the regulations thereunder; (c) Downward Adjustment, meaning the letter ruling provides for a downward adjustment to the taxpayer's taxable profit that is not directly reflected in its financial accounts. Examples include excess profits rulings or informal capital rulings that provide an adjustment that reduces taxable profits; (d) Treaty Permanent Establishment, meaning the letter ruling determines the existence or absence of a permanent establishment under an income tax treaty or provides how much profit will be attributed to a permanent establishment; (e) Related Party Conduit, meaning the letter ruling covers the cross-border flow of funds or income through a U.S. entity that is a conduit under common law principles or Treas. Reg.§ 1.881-3, whether those funds or income flow to another country directly or indirectly. Letter from Bureau of (8) Letter from Bureau of Indian Affairs relating to a letter ruling request for recognition Indian Affairs relating of Indian tribal government status or status as a political subdivision of an Indian tribal to certain letter ruling government. To facilitate prompt action on a letter ruling request for recognition of Indian tribal requests government status or status as a political subdivision of an Indian tribal government, the taxpayer must submit with the letter ruling request a letter from the Department of the Interior, Bureau of Indian Affairs (BIA), verifying that the tribe is recognized by BIA as an Indian tribe and that the tribal government exercises governmental functions or that the political subdivision of the Indian tribal government has been delegated substantial governmental functions. A letter ruling request that does not contain this letter from BIA cannot be resolved until the Service obtains a letter from BIA regarding the tribe's status. The taxpayer should send a request to verify tribal status to the following address: Branch of General Indian Legal Activity Division of Indian Affairs Office of the Solicitor U.S. Department of the Interior 1849 C Street, NW Washington, DC 20240 Statement of authorities (9) Statement of supporting authorities. If the taxpayer advocates a particular conclusion, supporting taxpayer's views the taxpayer must include an explanation of the grounds for that conclusion and the relevant authorities to support it. Even if the taxpayer is not advocating a particular tax treatment of a proposed transaction, the taxpayer must furnish views on the tax results of the proposed transaction and a statement of relevant authorities to support those views. In all events, the request must include a statement of whether the law in connection with the request is uncertain and whether the issue is adequately addressed by relevant authorities. Statement of authorities (10) Statement of contrary authorities. To avoid a delay in the ruling process, contrary contrary to taxpayer's authorities should be brought to the attention of the Service at the earliest possible opportunity. If views there are significant contrary authorities, it is usually helpful to discuss them in a pre-submission conference prior to submitting the ruling request. See section 10.07 of this revenue procedure regarding pre-submission conferences. The taxpayer is strongly encouraged to inform the Service about, and discuss the implications of, any authority believed to be contrary to the position advanced, such as statutes, tax treaties, court decisions, regulations, notices, revenue rulings, revenue procedures, or announcements. If the taxpayer determines that there are no contrary authorities, a statement in the request to this effect should be included. If the taxpayer does not furnish either contrary authorities or a statement that none exist, the Service in complex cases or those presenting difficult or novel issues may request submission of contrary authorities or a statement that none exist. Failure to comply with this request may result in the Service's refusal to issue a letter ruling or determination letter. The taxpayer's identification of and discussion of contrary authorities will generally enable Service personnel to more quickly understand the issue and relevant authorities. Having this information should make research more efficient and lead to earlier action by the Service. If the taxpayer does not disclose and distinguish significant contrary authorities, the Service may need to request additional information, which will delay action on the request. Statement identifying (11) Statement identifying pending legislation. When filing the request, the taxpayer must pending legislation identify any pending legislation that may affect the proposed transaction. In addition, the taxpayer must notify the Service if any such legislation is introduced after the request is filed but before a letter ruling or determination letter is issued. Deletion statement required (12) Statement identifying information to be deleted from the public inspection copy of by§ 6110 letter ruling or determination letter. The text of letter rulings and determination letters is open to public inspection under§ 6110. The Service makes deletions from the text before it is made available for inspection. To help the Service make the deletions required by§ 6110(c), a request for a letter ruling or determination letter must be accompanied by a statement indicating the deletions desired, except where a letter ruling or determination letter is open to public inspection under§ 6104. If the deletion statement is not submitted with the request, the Service will notify the taxpayer that the request will be closed if the Service does not receive the deletion statement within 21 calendar days. See section 8.05 of this revenue procedure. Section 6110(l)(1) provides that§ 6110 disclosure provisions do not apply to any matter to which§ 6104 applies. Therefore, letter rulings, determination letters, technical advice memoranda, and related background file documents dealing with the following matters (covered by§ 6104) are not subject to§ 6110 disclosure provisions-- (i) An approved application for exemption under§ 501(a) as an organization described in§ 501(c) or (d), or notice of status as a political organization under§ 527, together with any papers submitted in support of such application or notice; (ii) An application for exemption under§ 501(a) with respect to the qualification of a pension, profit sharing or stock bonus plan, or an individual retirement account described in§ 408 or§ 408A, or any application for exemption under§ 501(a) by an organization forming part of such a plan or account; (iii) Any document issued by the Internal Revenue Service in which the qualification or exempt status of a plan or account is granted, denied, or revoked or the portion of any document in which technical advice with respect thereto is given; (iv) Any application filed and any document issued by the Internal Revenue Service with respect to the qualification or status of master and prototype retirement plans; and (v) The portion of any document issued by the Internal Revenue Service with respect to the qualification or exempt status of a retirement plan or account of a proposed transaction by such plan or account. (a) Format of deletion statement. A taxpayer who wants only names, addresses, and identifying numbers to be deleted should state this in the deletion statement. If the taxpayer wants more information deleted, the deletion statement must be accompanied by a copy of the request and supporting documents on which the taxpayer should bracket the material to be deleted. The deletion statement must include the statutory basis under§ 6110(c) for each proposed deletion. If the taxpayer decides to ask for additional deletions before the letter ruling or determination letter is issued, the taxpayer may submit additional deletion statements. (b) Location of deletion statement. The deletion statement must be made in a separate document from the request for a letter ruling or determination letter and must be placed on top of the request. (c) Signature. The deletion statement must be signed and dated by the taxpayer or the taxpayer's authorized representative. See section 7.01(13) of this revenue procedure for signature requirements. (d) Additional information. The taxpayer should follow the same procedures of this section 7.01(12) to propose deletions from any additional information submitted after the initial request. An additional deletion statement is not required with each submission of additional information if the taxpayer's initial deletion statement requests that only names, addresses, and identifying numbers are to be deleted and the taxpayer wants only the same information deleted from the additional information. (e) Taxpayer may protest deletions not made. After receiving from the Service the notice under§ 6110(f)(1) of intention to disclose the letter ruling or determination letter (including a copy of the version proposed to be open to public inspection and notation of third-party communications under§ 6110(d)), the taxpayer may protest the disclosure of certain information in the letter ruling or determination letter. The taxpayer must send a written statement to the Service office indicated on the notice of intention to disclose, within 20 calendar days of the date the notice of intention to disclose is mailed to the taxpayer. The statement must identify those deletions that the Service has not made and that the taxpayer believes should have been made. The taxpayer must also submit a copy of the version of the letter ruling or determination letter and bracket the proposed deletions that have not been made by the Service. Generally, the Service will not consider deleting any material that the taxpayer did not propose to be deleted before the letter ruling or determination letter was issued. Within 20 calendar days after the Service receives the response to the notice under§ 6110(f) (1), the Service will mail to the taxpayer its final administrative conclusion regarding the deletions to be made. The taxpayer does not have the right to a conference to resolve any disagreements concerning material to be deleted from the text of the letter ruling or determination letter. These matters may, however, be taken up at any conference that is otherwise scheduled regarding the request. (f) Taxpayer may request delay of public inspection. After receiving the notice of intention to disclose under§ 6110(f)(1), but no later than 60 calendar days after the date of the notice, the taxpayer may send a written request for delay of public inspection under either§ 6110(g)(3) or (4). The request for delay must be sent to the Service office indicated on the notice of intention to disclose. A request for delay under§ 6110(g)(3) must contain the date on which it is expected that the underlying transaction will be completed. The request for delay under§ 6110(g)(4) must contain a statement from which the Commissioner of Internal Revenue may determine whether there are good reasons for the continued delay. Signature on request (13) Signature by taxpayer or authorized representative. The request for a letter ruling or determination letter must be signed and dated by the taxpayer or the taxpayer's authorized representative. (a) Paper submissions. The original of a request for a letter ruling or determination letter submitted on paper should generally include a wet-ink signature. If it is not possible to physically sign the request, the Service will accept an image of a signature or digital signature transmitted separately according to the electronic submission procedures for such a request. (b) Electronic submissions. A request for a letter ruling or determination letter submitted electronically must include an image of a signature (scanned or photographed) or a digital signature that uses encryption techniques to provide proof of original and unmodified documentation. The Service will accept electronic signatures in one of the following formats: tiff, jpg, jpeg, pdf, Microsoft Office suite, or Zip. See section 7.04 of this revenue procedure for submission procedures. Authorized representatives (14) Authorized representatives. (a) To sign the request or to appear before the Service in connection with the request, the taxpayer's authorized representative must be one of the following (for rules on who may practice before the Service, see Treasury Department Circular No. 230, 31 C.F.R. part 10): (i) An attorney who is a member in good standing of the bar of the highest court of any state, possession, territory, commonwealth, or the District of Columbia and who is not currently under suspension or disbarment from practice before the Service. He or she must file a written as an attorney and current authorization declaration with the Service showing current qualification to represent the taxpayer; (ii) A certified public accountant who is duly qualified to practice in any state, possession, territory, commonwealth, or the District of Columbia and who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration with the Service showing current qualification as a certified public accountant and current authorization to represent the taxpayer; (iii) An enrolled agent (a person who is currently enrolled as an agent to practice before the Service) who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration with the Service showing current enrollment and authorization to represent the taxpayer. The enrollment number must be included in the declaration; (iv) An enrolled actuary (an individual currently enrolled as an actuary by the Joint Board for the Enrollment of Actuaries pursuant to 29 U.S.C.§ 1242) who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration with the Service showing current qualification as an enrolled actuary and current authorization to represent the taxpayer. Practice before the Service as an enrolled actuary is limited to representation with respect to issues involving§§ 401, 403(a), 404, 405, 412, 413, 414, 419, 419A, 420, 4971, 4972, 4976, 4980, 6057, 6058, 6059, 6652(d), 6652(e), 6692, and 7805(b); former§ 405; and 29 U.S.C.§ 1083; (v) An enrolled retirement plan agent (an individual currently enrolled as a retirement plan agent) who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration as an enrolled retirement plan agent and current authorization to represent the taxpayer. Practice before the Service as an enrolled retirement plan agent is limited to representation with respect to issues involving the following programs: Employee Plans Determination Letter program; Employee Plans Compliance Resolution System; and Employee Plans Pre-approved program. Enrolled retirement plan agents also are generally permitted to represent taxpayers with respect to IRS forms under the 5300 and 5500 series, which are filed by retirement plans and plans sponsors, but not with respect to actuarial forms and schedules; or (vi) Any other person, including a foreign representative, who has received a "Letter of Authorization" from the Director of the Office of Professional Responsibility under section 10.7(d) of Treasury Department Circular No. 230. A person may make a written request for a "Letter of Authorization" to: Office of Professional Responsibility, SE:OPR, Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC 20224. Section 10.7(d) of Circular No. 230 authorizes the Commissioner to allow an individual who is not otherwise eligible to practice before the Service to represent another person in a particular matter. (b) A regular full-time employee representing his or her employer; a general partner representing his or her partnership; a bona fide officer representing his or her corporation, association, or organized group; a trustee, receiver, guardian, personal representative, administrator, executor, or regular full-time employee representing a trust, receivership, guardianship, or estate; or an individual representing an immediate family member may sign the request or appear before the Service in connection with the request if the individual provides current authorization to represent the taxpayer. See section 7.01(15) of this revenue procedure. A taxpayer may be required to file a Form 8821, Tax Information Authorization, for certain employees not authorized to represent the taxpayer to receive taxpayer information from the Service. (c) Tax return preparers that are not described in subsections (a) and (b) of this section may not sign the request, appear before the Service, or represent a taxpayer in connection with a request for a letter ruling or a determination letter. See section 10.3(f)(3) of Treasury Department Circular No. 230. (d) A foreign representative, other than a person referred to in subsections (a) and (b) of this section, is not authorized to practice before the Service within the United States and must withdraw from representing a taxpayer in a request for a letter ruling or a determination letter. In this situation, the nonresident alien or foreign entity must submit the request for a letter ruling or a determination letter on the individual's or the entity's own behalf or through a person referred to in subsections (a) and (b) of this section. Power of Attorney (15) Power of Attorney and Declaration of Representative. Form 2848, Power of Attorney and Declaration of and Declaration of Representative, should be used to provide the representative's authority (Part Representative I of Form 2848, Power of Attorney ) and the representative's qualification (Part II of Form 2848, Declaration of Representative ). The name of the person signing Part I of Form 2848 should be typed or printed on this form. A Form 2848 executed for the purpose of a request for a letter ruling or determination letter should reflect that it is for a "specific use" that is not recorded on the Centralized Authorization File (CAF) and should only be submitted in conjunction with such a request as provided in this revenue procedure (that is, it should not be submitted to the Service by any other method listed in the Instructions for Form 2848). A Form 2848 must be signed by both the taxpayer (or the person signing on the taxpayer's behalf) and the representative in a manner consistent with section 7.01(13) of this revenue procedure. If the Form 2848 is remotely signed by the taxpayer (or the person signing on the taxpayer's behalf) using a permissible electronic or digital method, the representative should follow the necessary steps to verify the taxpayer's identity provided in the Electronic Signatures section of the Instructions for Form 2848, but are not required to provide a separate attestation unless requested by the Service. If the Form 2848 is signed by the taxpayer (or the person signing on the taxpayer's behalf) using a physical, wet-ink signature, a submission may include a copy or scanned version of the Form 2848 as long as its authenticity is not reasonably disputed. For additional information regarding the power of attorney form, see section 7.02(2) of this revenue procedure. The taxpayer's authorized representative, whether or not enrolled, must comply with Treasury Department Circular No. 230, which provides the rules for practice before the Service. In situations where the Service believes that the taxpayer's representative is not in compliance with Circular 230, the Service will bring the matter to the attention of the Office of Professional Responsibility. Penalties of perjury (16) Penalties of perjury statement. statement (a) Format of penalties of perjury statement. A request for a letter ruling or determination letter and any change in the request submitted at a later time must be accompanied by the following declaration: "Under penalties of perjury, I declare that I have examined [Insert, as appropriate: this request or this modification to the request], including accompanying documents, and, to the best of my knowledge and belief, [Insert, as appropriate: the request or the modification] contains all the relevant facts relating to the request, and such facts are true, correct, and complete." See section 8.05(4) of this revenue procedure for the penalties of perjury statement applicable for submissions of additional information. (b) Signature by taxpayer. The declaration must be signed and dated by the taxpayer, not the taxpayer's representative, in a manner consistent with section 7.01(13) of this revenue procedure. The person who signs for a corporate taxpayer must be an officer of the corporate taxpayer who has personal knowledge of the facts and whose duties are not limited to obtaining a letter ruling or determination letter from the Service. If the corporate taxpayer is a member of an affiliated group filing consolidated returns, a penalties of perjury statement must also be signed and submitted by an officer of the common parent of the group. The person signing for a trust, a state law partnership, or a limited liability company must be, respectively, a trustee, general partner, or member-manager who has personal knowledge of the facts. Sample format for a letter (17) Sample format for a letter ruling request. To assist a taxpayer or the taxpayer's ruling request representative in preparing a letter ruling request, a sample format for a letter ruling request is provided in Appendix B of this revenue procedure. This format is not required to be used. Checklist (18) Checklist for letter ruling requests. An Associate office will be able to respond more quickly to a taxpayer's letter ruling request if the request is carefully prepared and complete. The checklist in Appendix C of this revenue procedure is designed to assist taxpayers in preparing a request by reminding them of the essential information and documents to be furnished with the request. The checklist in Appendix C must be completed to the extent required by the instructions in the checklist, signed and dated by the taxpayer or the taxpayer's representative, and placed on top of the letter ruling request. If the checklist in Appendix C is not received, a branch representative will ask the taxpayer or the taxpayer's representative to submit the checklist; this may delay action on the letter ruling request. For letter ruling requests on certain matters, specific checklists supplement the checklist in Appendix C. These checklists are in Appendix D, Appendix E, or are listed in section 1 of Appendix F of this revenue procedure and must also be completed and placed on top of the letter ruling request along with the checklist in Appendix C. Taxpayers can obtain copies of the checklists by accessing this revenue procedure in Internal Revenue Bulletin 2024-1, available at www.irs.gov/irb. A copy of this checklist may be used. Additional procedural.02 information required with request Multiple issues (1) To request separate letter rulings for multiple issues in a single situation. If more than one issue is presented in a request for a letter ruling, the Associate office generally will issue a single letter ruling covering all the issues. If the taxpayer requests separate letter rulings on any of the issues (because, for example, one letter ruling is needed sooner than another), the Associate office usually will comply with the request unless doing so is not feasible or not in the best interest of the Service. A taxpayer who wants separate letter rulings on multiple issues should make this clear in the request and if submitting the request on paper, submit the original and at least two copies of the request, with one additional copy for each additional separate letter ruling requested. See section 15.06(3) of this revenue procedure regarding whether a single user fee will be charged. In issuing each letter ruling, the Associate office will state that it has issued separate letter rulings or that requests for other letter rulings are pending. Power of attorney used to (2) Power of attorney used to indicate recipient or recipients of a copy or copies of a letter indicate recipient of a copy ruling or a determination letter Once the Service signs the letter ruling or determination letter, or copies of a letter ruling the Service has the discretion to determine the form in which it will provide the letter ruling or or a determination letter determination letter to the taxpayer, but will generally comply with a taxpayer's request for a particular form. See section 7.02(5) of this revenue procedure. If providing the ruling on paper, the Service will send the original to the taxpayer, not the taxpayer's representative. At the taxpayer's request, the Service will send one copy of the letter ruling or determination letter to up to two authorized representatives. At the discretion of the Service, the Service may provide a copy of the letter ruling or determination letter to up to two authorized representatives, even though the taxpayer did not request that the Service send a copy of notices and communications to the taxpayer's representatives. Taxpayers that use Form 2848, Power of Attorney and Declaration of Representative, to designate representatives, may request that copies of notices and communications be sent to the representatives listed at Line 2 by checking the corresponding box on Line 2. Taxpayers may use Line 5 of Form 2848 to advise the Service that a copy of the letter ruling or determination letter should not be sent to the taxpayer's representative(s). If no box is checked on Line 2 and the taxpayer does not indicate otherwise on Line 5, the Service may in its discretion provide a copy of the letter ruling or determination letter to up to two authorized representatives. "Two-part" letter ruling (3) To request a particular conclusion on a proposed transaction. A taxpayer who requests requests a particular conclusion on a proposed transaction may make the request for a letter ruling in two parts. This type of request is referred to as a "two-part" letter ruling request. The first part must include the complete statement of facts and related documents described in section 7.01 of this revenue procedure. The second part must include a summary statement of the facts the taxpayer believes to be controlling in reaching the conclusion requested. If the Associate office accepts the taxpayer's statement of controlling facts, it will base its letter ruling on these facts. Ordinarily, this statement will be incorporated into the letter ruling. The Associate office reserves the right to rule on the basis of a more complete statement of the facts and to seek more information in developing the facts and restating them. A taxpayer who chooses this two-part procedure has all the rights and responsibilities provided in this revenue procedure. Taxpayers may not use the two-part procedure if it is inconsistent with other procedures, such as those dealing with requests for permission to change accounting methods or periods, applications for recognition of exempt status under§ 501(a) or§ 521, or requests for rulings on employment tax status. After the Associate office has resolved the issues presented by a letter ruling request, the Associate office representative may request that the taxpayer submit a proposed draft of the letter ruling to expedite the issuance of the ruling. See section 8.07 of this revenue procedure. Expedited handling (4) To request expedited handling. The Service ordinarily processes requests for letter rulings and determination letters in order of the date received. Expedited handling means that a request is processed ahead of requests received before it. Expedited handling is granted only in rare and unusual cases, both out of fairness to other taxpayers and because the Service seeks to process all requests as expeditiously as possible and to give appropriate deference to normal business exigencies in all cases not involving expedited handling. Expedited handling under this section 7.02(4) is not available as to a request for a letter ruling solely or primarily under the jurisdiction of the Associate Chief Counsel (Corporate) (other than a§ 301.9100 request described in section 5.03 of this revenue procedure for an extension of time for making an election or other relief, or a request that includes a closing agreement with respect to an issue under the jurisdiction of the Associate Chief Counsel (Corporate) or another Associate office). For guidance on fast-track processing of such a letter ruling request, see Rev. Proc. 2023-26, 2023-33 I.R.B. 486. A taxpayer with a compelling need to have a request processed ahead of requests received before it may request expedited handling. This request must explain in detail the need for expedited handling. The request for expedited handling must be made in writing, preferably in a separate letter included with the request for the letter ruling or determination letter or provided soon after its filing. If the request for expedited handling is contained in the letter requesting the letter ruling or determination letter, the letter should state at the top of the first page "Expedited Handling Is Requested. See page ___ of this letter." A request for expedited handling will not be forwarded to a branch for action until the user fee has been paid. Whether a request for expedited handling will be granted is within the Service's discretion. The Service may grant the request when a factor outside a taxpayer's control creates a real business need to obtain a letter ruling or determination letter before a certain date to avoid serious business consequences. Examples include situations in which a court or governmental agency has imposed a specific deadline for the completion of a transaction, or where a transaction must be completed expeditiously to avoid an imminent business emergency (such as the hostile takeover of a corporate taxpayer), provided that the taxpayer can demonstrate that the deadline or business emergency, and the need for expedited handling, resulted from circumstances that could not reasonably have been anticipated or controlled by the taxpayer. To qualify for expedited handling in such situations, the taxpayer must also demonstrate that the taxpayer submitted the request as promptly as possible after becoming aware of the deadline or emergency. The extent to which the letter ruling or determination letter request complies with all of the applicable requirements of this revenue procedure, and fully and clearly presents the issues, is a factor in determining whether expedited treatment will be granted. When the Service agrees to process a request out of order, it cannot give assurance that any letter ruling or determination letter will be processed by the date requested. The scheduling of a closing date for a transaction or a meeting of the board of directors or shareholders of a corporation, without regard for the time it may take to obtain a letter ruling or determination letter, will not be considered a sufficient reason to process a request ahead of its regular order. Also, the possible effect of fluctuation in the market price of stocks on a transaction will not be considered a sufficient reason to process a request out of order. Because most requests for letter rulings and determination letters cannot be processed out of order, the Service urges all taxpayers to submit their requests well in advance of the contemplated transaction. In addition, to facilitate prompt action on letter ruling requests, taxpayers are encouraged to ensure that their initial submissions comply with all of the requirements of this revenue procedure (including the requirements of other applicable guidelines set forth in Appendix F of this revenue procedure), to prepare "two-part" requests described in section 7.02(3) of this revenue procedure when possible, and to promptly provide any additional information requested by the Service. Requesting form of any (5) To request the receipt of any document related to letter ruling request by fax, document related to letter electronic facsimile, or encrypted email attachment. If the taxpayer so requests, the Associate ruling request provided office may provide by fax, electronic facsimile, or encrypted email attachment to the taxpayer or to taxpayer or taxpayer's the taxpayer's authorized representative a copy of any document related to the letter ruling request authorized representative (for example, the letter ruling itself or a request for additional information). The Service has the discretion to determine the form in which it will correspond with the taxpayer, but will generally comply with a taxpayer's request for a particular form. The taxpayer must make such a request in writing, preferably as part of the original request for the letter ruling. The request may be submitted at a later date, but such a request will only be respected prospectively with respect to documents generated after it is received, and must be received prior to the signing of the letter ruling. If the taxpayer requests documents by fax or electronic facsimile, the request must contain the fax number of the taxpayer or the taxpayer's authorized representative to whom the document is to be provided. A document other than the letter ruling will be faxed by a branch representative. A copy of the letter ruling may be faxed by either a branch representative or the Disclosure and Litigation Support Branch of the Legal Processing Division of the Office of Associate Chief Counsel (Procedure and Administration) (CC:PA:LPD:DS). For purposes of§ 301.6110-2(h), however, a letter ruling is not issued until the ruling is mailed. If the taxpayer requests documents by encrypted email attachment, the request must specify which email encryption method is to be used and, if the taxpayer has not already provided the appropriate memorandums of understanding (MOUs) to use encrypted email attachments, must include those MOUs. See section 7.04(3) of this revenue procedure for acceptable email encryption methods and procedures. Requesting a conference (6) To request a conference. A taxpayer who wants to have a conference on the issues involved in a request for a letter ruling should indicate this in writing when filing the request or soon thereafter. See sections 10.01, 10.02, and 11.11(2) of this revenue procedure. Letter ruling requests.03 If a letter ruling is sought on the tax consequences to both the welfare benefit fund and an involving welfare benefit employer that contributed to the fund, each taxpayer (the fund and each contributing employer) funds (including voluntary must submit a separate letter ruling request and pay the applicable user fee listed in Appendix A employees' beneficiary of this revenue procedure. associations (VEBAs)) Submitting request.04 Requests for letter rulings under the jurisdiction of an Associate Office may be submitted for letter ruling or by mail, by electronic facsimile, or by encrypted email attachment. determination letter Requests for determination letters under the jurisdiction of LB&I may be submitted only by electronic facsimile or by encrypted email attachment. Requests for determination letters under the jurisdiction of SBSE or W&I may be submitted only by electronic facsimile. For requests for determination letters under the jurisdiction of TE/GE, see Rev. Proc. 2024-4 and Rev. Proc. 2024-5, this Bulletin. Submission by mail (1) A taxpayer submitting a request on paper generally needs to submit the original and one copy of the request. However, if the taxpayer identifies multiple Associate offices in the request with jurisdiction over issues presented by the request, the taxpayer must submit an additional copy of the request for each additional Associate office. If the request is under the jurisdiction of a single Associate office but presents multiple issues likely to require review by multiple branches of that office, the taxpayer is encouraged, but not required to submit additional copies of the request. Further, the taxpayer must submit the original and two copies of the request if the taxpayer is requesting separate letter rulings or determination letters on multiple issues as explained in section 7.02(1) of this revenue procedure; the taxpayer is requesting deletions other than names, addresses, and identifying numbers, as explained in section 7.01(12)(a) of this revenue procedure (one copy is the request for the letter ruling or determination letter and the second copy is the deleted version of such request); or the taxpayer is requesting a closing agreement (as defined in section 2.02 of this revenue procedure) on the issue presented. To use the paper method, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www.pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. (a) Addresses for request for letter ruling. Envelopes or packages containing letter ruling requests should be marked RULING REQUEST SUBMISSION. If a private delivery service is not used, requests for letter rulings should be sent to the following address: Internal Revenue Service Attn: CC:PA:LPD:TSS P.O. Box 7604 Benjamin Franklin Station Washington, DC 20044 If a private delivery service is used, the address is: Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Ave., NW Washington, DC 20224 Requests for letter rulings may also be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. to the courier's desk at 1111 Constitution Avenue, NW, Washington, DC. A receipt will be given at the courier's desk. The package should be addressed to: Courier's Desk Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Ave., NW Washington, DC 20224 Submission by electronic (2) Taxpayers and their representatives are encouraged to use a secure electronic facsimile facsimile service for transmitting requests for advice. To use the secure electronic facsimile method, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www. pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. When compiling the request package, provide clear titles for the documents and distinguish files containing administrative forms and receipts from files that contain the request itself and from supplemental materials. If the submission is over 10 MB or over 50 pages, break it into smaller components and number the components sequentially with the total number (such as "1 of 4", "2 of 4", "3 of 4", and "4 of 4"). Transmit the full package, along with a cover sheet, to the secure electronic facsimile lines below. For requests under the jurisdiction of an Associate office: (877) 773-4950 For determination letter requests under the jurisdiction of LB&I: (844) 249-6231 For determination letter requests under the jurisdiction of SB/SE (with regards to income taxes): (877) 477-9193 For determination letter requests under the jurisdiction of W&I: (855) 836-8342 Submission by encrypted (3) There are more risks associated with email than with electronic facsimile, such as the email attachment possibility that sensitive taxpayer information could be intercepted. Accordingly, the Service encourages taxpayers to use a secure electronic facsimile service for transmitting requests for advice. As an alternative, this section provides procedures for using encrypted email attachments for transmitting a request for advice under the jurisdiction of an Associate office or LB&I. Taxpayers using encrypted email attachments may choose to use a compression utility compatible with SecureZIP (note that many open-source utilities are not compatible with SecureZIP), Adobe Acrobat Pro password encryption, or Microsoft Office 2016/365 Protect Document to encrypt and send password-protected files. Because these programs do not encrypt the subject line or body of an email or the file name of the attachment, all sensitive taxpayer information, including the name of the taxpayer, should be included only in the encrypted attachment. These programs require that a sender create a password for the recipient to use to decrypt the attachments. The password should never be sent in the same email as the encrypted attachment. Instead, it should be provided to the Service in a separate email with a subject line that makes it easy to connect the password to the encrypted email. To use encrypted email attachments, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www.pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. A request transmitted through email must be accompanied by two MOUs: the MOU in Appendix G of this revenue procedure, acknowledging the risks of using email to transmit sensitive taxpayer information, and the appropriate MOU in Appendix H, agreeing to the terms for using the chosen method of encryption to receive sensitive taxpayer information. These MOUs must be signed by the taxpayer, not the taxpayer's representative, in a manner consistent with section 7.01(13) of this revenue procedure. A Counsel representative will countersign and return the second MOU to the requester prior to transmitting any other information by encrypted email attachments. When compiling the request package, provide clear titles for the documents and distinguish files containing administrative forms and receipts from files that contain the request itself and from supplemental materials. Encrypt the files or enable the encryption utility on the email system before generating the email. If the submission is over 5 MB or over 50 pages, break it into smaller components that do not exceed 5 MB each, and number the components sequentially with the total number (such as "1 of 4", "2 of 4", "3 of 4", and "4 of 4"). Transmit the full package to the email addresses below. For requests under the jurisdiction of an Associate office: Userfee@irscounsel.treas.gov For determination letter requests under the jurisdiction of LB&I: lbi.irt.info@irs.gov Taxpayer representatives that have the technical ability to exchange email encrypted with Secure/Multipurpose Internet Mail Extensions (S/MIME) certificates may also elect to use LB&I's Secure Email Message System (SEMS). Representatives seeking to use SEMS should contact the LB&I Office of the Assistant Deputy Commissioner, Compliance Integration at the phone number listed at the end of this document. Pending letter ruling.05 requests Circumstances under which (1) Circumstances under which the taxpayer with a pending letter ruling request must the taxpayer with a pending notify the Associate office. The taxpayer must notify the Associate office if, after the letter ruling letter ruling request must request is filed but before a letter ruling is issued, the taxpayer knows that-- notify the Associate office (a) a field office has started an examination of the issue or the identical issue on an earlier year's return; (b) in the case of a§ 301.9100 request, a field office has started an examination of the return for the taxable year in which an election should have been made or any taxable year that would have been affected by the election had it been timely made. See§ 301.9100-3(e)(4)(i) and section 5.03(3) of this revenue procedure; (c) legislation that may affect the transaction has been introduced. See section 7.01(11) of this revenue procedure; (d) another letter ruling request (including an application for change in method of accounting), involving the same or similar issue as that pending with the Service, has been submitted by the taxpayer, a related party within the meaning of§ 267 or§ 707(b)(1), or a member of an affiliated group of which the taxpayer is also a member within the meaning of§ 1504; (e) in qualified retirement plan matters, the issue is being considered by the Pension Benefit Guaranty Corporation or the Department of Labor; or (f) in health care matters, the issue is being considered by the Department of Labor or the Department of Health and Human Services. Taxpayer must notify the (2) Taxpayer must notify the Associate office if a return is filed and must attach the request Associate office if a return to the return. If the taxpayer files a return before a letter ruling is received from the Associate is filed and must attach the office concerning an issue in the return, the taxpayer must notify the Associate office that the request to the return return has been filed. The taxpayer must also attach a copy of the letter ruling request (Form 3115, if for a non-automatic change in method of accounting) to the return to alert the field office and avoid premature field action on the issue. Taxpayers filing their returns electronically may satisfy this requirement by attaching to their return a statement providing the date of the letter ruling request and the control number of the letter ruling. If, under the limited circumstances permitted in section 5 of this revenue procedure, the taxpayer requests a letter ruling after the return is filed, but before the return is examined, the taxpayer must also notify the field office having jurisdiction over the return and attach a copy of the letter ruling request to the notification to alert the field office and avoid premature field action on the issue. This section 7.05 also applies to pending requests for a closing agreement on a transaction for which a letter ruling is not requested or issued. For purposes of this section 7.05, the term "return" includes an original return, amended return, or claim for refund. When to attach letter ruling.06 A taxpayer who, before filing a return, receives a letter ruling or determination letter about or determination letter to any transaction that has been consummated and that is relevant to the return being filed must return attach to the return a copy of the letter ruling or determination letter. Taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling or determination letter. For purposes of this section 7.06, the term "return" includes an original return, amended return, or claim for refund. How to check on status of.07 The taxpayer or the taxpayer's authorized representative may obtain information regarding request for letter ruling or the status of a request for a letter ruling or determination letter by calling the person whose name determination letter and telephone number are shown on the acknowledgment of receipt of the request or, in the case of a request for a letter ruling, the appropriate branch representative who contacts the taxpayer as explained in section 8.02 of this revenue procedure. Request for letter ruling or.08 determination letter may be withdrawn or Associate office may decline to issue letter ruling In general (1) In general. A taxpayer may withdraw a request for a letter ruling or determination letter at any time before the letter ruling or determination letter is signed by the Service. Correspondence and exhibits related to a request that is withdrawn or related to a letter ruling request for which an Associate office declines to issue a letter ruling will not be returned to the taxpayer. See section 7.01(2)(a) of this revenue procedure. In appropriate cases, an Associate office may publish its conclusions in a revenue ruling or revenue procedure. Notification of appropriate (2) Notification of appropriate Service official. Service official (a) Letter ruling requests. If a taxpayer withdraws a letter ruling request or if the Associate office declines to issue a letter ruling, the Associate office generally will notify, by memorandum, the appropriate Service official in the operating division that has examination jurisdiction of the taxpayer's tax return. For taxpayers under the jurisdiction of the Division Counsel (LB&I), the Associate office will also send a copy of the memorandum to the Assistant Deputy Commissioner, Compliance Integration. In doing so, the Associate office may give its views on the issues in the request for consideration in any later examination of the return. This section 7.08(2)(a) generally does not apply if the taxpayer withdraws the letter ruling request and submits a written statement that the transaction has been, or is being, abandoned and if the Associate office has not already formed an adverse opinion. (b) Notification of Service official may constitute Chief Counsel Advice. If the memorandum referred to in paragraph (a) of this section 7.08(2) provides more than the fact that the request was withdrawn and that the Associate office was tentatively adverse, or more than the fact that the Associate office declined to issue a letter ruling, the memorandum may constitute Chief Counsel Advice, as defined in§ 6110(i)(1), and may be subject to disclosure under§ 6110. SECTION 8. HOW The Associate offices will issue letter rulings on the matters and under the circumstances DO THE ASSOCIATE explained in sections 3 and 5 of this revenue procedure and in the manner explained in this section OFFICES HANDLE and section 11 of this revenue procedure. See section 9 of this revenue procedure for procedures LETTER RULING for change in method of accounting requests. REQUESTS? Technical Services Support.01 All requests for letter rulings will be received and initially controlled by the Technical Branch receives, initially Services Support Branch of the Legal Processing Division of the Associate Chief Counsel controls, and refers the (Procedure and Administration) (CC:PA:LPD:TSS). That office will process the incoming request to the appropriate documents and the user fee, and it will forward the file to the appropriate Associate office for Associate office assignment to a branch that has jurisdiction over the specific issue involved in the request. Branch representative of.02 the Associate office contacts taxpayer within 21 calendar days (1) Within 21 calendar days after a letter ruling request has been received in the branch of the Associate office that has jurisdiction over the issue, a representative of the branch will contact the taxpayer or, if the request includes a properly executed power of attorney, the authorized representative, unless the power of attorney provides otherwise. During such contact, the branch representative will discuss the procedural issues in the letter ruling request. If the case is complex or a number of issues are involved, it may not be possible for the branch representative to discuss the substantive issues during this initial contact. When possible, for each issue within the branch's jurisdiction, the branch representative will tell the taxpayer (a) whether the branch representative will recommend that the Associate office rule as the taxpayer requested, rule adversely on the matter, or not rule; (b) whether the taxpayer should submit additional information to enable the Associate office to rule on the matter; (c) whether the letter ruling complies with all of the provisions of this revenue procedure, and if not, which requirements have not been met; or (d) whether, because of the nature of the transaction or the issue presented, a tentative conclusion on the issue cannot be reached. (2) If the letter ruling request involves matters within the jurisdiction of more than one branch or Associate office, a representative of the branch that received the original request will tell the taxpayer within the initial 21 calendar days-- (a) that the matters within the jurisdiction of another branch or Associate office have been referred to that branch or Associate office for consideration, and the date the referral was made, and (b) that a representative of that branch or Associate office will contact the taxpayer within 21 calendar days after receiving the referral to discuss informally the procedural and, to the extent possible, the substantive issues in the request. This section 8.02 applies to all matters except for cases within the jurisdiction of the Associate Chief Counsel (Financial Institutions and Products) concerning insurance issues requiring actuarial computations. For special rules and procedures that apply to letter ruling requests under the jurisdiction of the Associate Chief Counsel (Corporate) for which fast-track processing is requested, see section 5.05(1) of Rev. Proc. 2023-26, 2023-33 I.R.B. 486. Determines if transaction.03 If less than a fully favorable letter ruling is anticipated, the branch representative will tell can be modified to obtain the taxpayer whether minor changes in the transaction or adherence to certain published positions favorable letter ruling would bring about a favorable ruling. The branch representative may also tell the taxpayer the facts that must be furnished in a document to comply with Service requirements. The branch representative will not suggest precise changes that would materially alter the form of the proposed transaction or materially alter a taxpayer's proposed accounting period. If, at the end of this discussion, the branch representative determines that a meeting in the Associate office would be more helpful to develop or exchange information, a meeting will be offered and an early meeting date arranged. When offered, this meeting is in addition to the taxpayer's conference of right that is described in section 10.02 of this revenue procedure. Not bound by informal.04 The Service will not be bound by the informal opinion expressed by the branch representative opinion expressed or any other Service representative, and such an opinion cannot be relied upon as a basis for obtaining retroactive relief under the provisions of§ 7805(b). May request additional.05 information Must be submitted within (1) Additional information must be submitted within 21 calendar days. If the request 21 calendar days lacks essential information, which may include additional information needed to satisfy the procedural requirements of this revenue procedure as well as substantive changes to transactions or documents needed from the taxpayer, the branch representative will request such information during the initial or subsequent contacts with the taxpayer or its authorized representative. The branch representative will inform the taxpayer or its authorized representative that the request will be closed if the Associate office does not receive the requested information within 21 calendar days from the date of the request unless an extension of time is granted. To facilitate prompt action on letter ruling requests, taxpayers may request that the Associate office request additional information by fax, electronic facsimile, or encrypted email attachment. See section 7.02(5) of this revenue procedure. Special rules and procedures apply to letter ruling requests under the jurisdiction of the Associate Chief Counsel (Corporate) for which fast-track processing is requested. See Rev. Proc. 2023-26, section 5.07, 2023-33 I.R.B. 486. Material facts furnished to the Associate office by telephone or orally at a conference must be promptly confirmed in writing by mail, fax, or email to the Associate office. This confirmation, and any additional information requested by the Associate office that is not part of the information requested during the initial contact, must be furnished within 21 calendar days from the date the Associate office makes the request. Extension of reply period if (2) Extension of reply period if justified and approved. The Service will grant an extension justified and approved of the 21-day period for providing additional information only if the extension is justified in writing by the taxpayer and approved by the branch reviewer. A request for an extension should be submitted before the end of the 21-day period. If unusual circumstances close to the end of the 21-day period make a written request impractical, the taxpayer should notify the Associate office within the 21-day period that there is a problem and that the written request for extension will be provided shortly. The taxpayer will be told promptly of the approval or denial of the requested extension. If the extension request is denied, there is no right of appeal. Letter ruling request (3) Letter ruling request closed if the taxpayer does not submit additional information. If closed if the taxpayer does the taxpayer does not submit the information requested during the initial or subsequent contacts not submit additional within the time provided, the letter ruling request will be closed and the taxpayer will be notified information in writing. If the information is received after the request is closed, the request will be reopened and treated as a new request as of the date the information is received. The taxpayer must pay another user fee before the case can be reopened. Penalties of perjury (4) Penalties of perjury statement. Additional information submitted to the Service must statement for additional be accompanied by the following declaration: "Under penalties of perjury, I declare that I information have examined this information, including accompanying documents, and, to the best of my knowledge and belief, the information contains all the relevant facts relating to the request for the information, and such facts are true, correct, and complete." This declaration must be signed in accordance with the requirements in section 7.01(16)(b) of this revenue procedure. Transmitting request and (5) Transmitting request and submitting additional information by fax, electronic submitting additional facsimile, or encrypted email attachment. To facilitate prompt action on letter ruling requests, information by fax, taxpayers may request that the Associate office request additional information by fax, electronic electronic facsimile, or facsimile, or encrypted email attachment. See section 7.02(5) of this revenue procedure. encrypted email attachment Taxpayers may also submit additional information by fax, electronic facsimile, or encrypted email attachment as soon as the information is available. The Associate office representative who requests additional information can provide a fax or electronic facsimile number or email address to which the information can be sent. Submitting additional (6) Submitting additional information by mail. information by mail (a) If a private delivery service is not used, the additional information should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] P.O. Box 7604 Benjamin Franklin Station Washington, DC 20044 For cases involving a request for change in method of accounting or period, see section 9.08 of this revenue procedure for the address to which to send additional information. (b) If a private delivery service is used, the additional information for all cases should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] 1111 Constitution Ave., NW Washington, DC 20224 (c) A taxpayer submitting additional information by mail only needs to submit one copy of the additional information unless the Associate office requests additional copies. Identifying information (7) Identifying information. For all cases, the additional information should include the included in additional taxpayer's name, the case control number and the name, office symbols, and room number of the information Associate office representative who requested the information. The Associate office representative can provide the latter information to the taxpayer. Near the completion of the.06 Generally, after the conference of right is held but before the letter ruling is issued, the ruling process, advises the branch representative will orally notify the taxpayer or the taxpayer's representative of the taxpayer of conclusions Associate office's conclusions. See section 10 of this revenue procedure for a discussion of and, if the Associate conferences of right. If the Associate office is going to rule adversely, the taxpayer will be offered office will rule adversely, the opportunity to withdraw the letter ruling request. If, within ten calendar days of the notification offers the taxpayer the by the branch representative, the taxpayer or the taxpayer's representative does not notify the opportunity to withdraw branch representative that the taxpayer wishes to withdraw the ruling request, the adverse letter the letter ruling request ruling will be issued unless an extension is granted. See section 15.10 of this revenue procedure for information regarding refunds of user fees. May request that taxpayer.07 To accelerate the issuance of letter rulings, in appropriate cases near the completion submit draft proposed of the ruling process, the Associate office representative may request that the taxpayer or the letter ruling near the taxpayer's representative submit a proposed draft of the letter ruling. Such draft would be based completion of the ruling on the discussions of the issues between the representative and the taxpayer or the taxpayer's process representative. The format of the submission should be discussed with the Associate office representative who requests the draft letter ruling. The representative usually can provide a sample format of a letter ruling and will discuss with the taxpayer or the taxpayer's representative the facts, analysis, and letter ruling language to be included. The taxpayer should submit the draft in the same manner as any other additional information and should include in the transmittal the information that should be included with any other additional information (for example, a penalties of perjury statement is required). See section 8.05(5) and (6) of this revenue procedure. The taxpayer is not required to prepare a draft letter ruling to receive a letter ruling. But see section 5.03(5) of Rev. Proc. 2023-26, 2023-33 I.R.B. 486, for requirement that the taxpayer or the taxpayer's representative must submit a proposed draft of the letter ruling when requesting fast-track processing of certain requests for letter rulings solely or primarily under the jurisdiction of the Associate Chief Counsel (Corporate). Issues separate letter.08 rulings for substantially identical letter rulings, but generally issues a single letter ruling for related§ 301.9100 letter rulings Substantially identical (1) Substantially identical letter rulings. For letter ruling requests qualifying for the user letter rulings fee provided in paragraph (A)(5)(a) of Appendix A of this revenue procedure for substantially identical letter rulings, a separate letter ruling will generally be issued for each requester or entity as the Associate office deems necessary. Related§ 301.9100 letter (2) Related§ 301.9100 letter rulings. rulings (a) For a§ 301.9100 letter ruling request for an extension of time to file a Form 3115 qualifying under section 15.07(4) for the user fee provided in paragraph (A)(5)(d) of Appendix A of this revenue procedure for an identical change in method of accounting, the Associate office generally will issue a single letter on behalf of all applicants on Form 3115 that are the subject of the request. (b) For a§ 301.9100-3 letter ruling request for an extension of time to file an entity classification election for multiple entities qualifying under section 15.07(2) for the user fee provided in paragraph (A)(5)(a) of Appendix A of this revenue procedure, the Associate office generally will issue a single letter on behalf of all entities that are the subject of the request. The taxpayer may request that separate letters be issued to each entity that is the subject of the request. See generally section 5.03 of this revenue procedure. Sends a copy of the letter.09 The Associate office will send a copy of the letter ruling, whether favorable or adverse, to ruling to appropriate the appropriate Service official in the operating division that has examination jurisdiction of the Service official taxpayer's tax return. SECTION 9. WHAT This section provides the specific and additional procedures applicable to a request for a change ARE THE SPECIFIC in method of accounting under Rev. Proc. 2015-13, 2015-5 I.R.B. 419 (or any successor), as AND ADDITIONAL clarified and modified by Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, as modified by Section 17-02 PROCEDURES FOR of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, as modified by Rev. Proc. 2017-59, 2017-48 I.R.B. 543, A REQUEST FOR A as modified by Rev. Proc. 2021-26, 2021-22 I.R.B. 543, and as modified by Rev. Proc. 2021-34, CHANGE IN METHOD 2021-35 I.R.B. 337, or other automatic change request procedures. OF ACCOUNTING FROM THE ASSOCIATE OFFICES? A request for a change in method of accounting under Rev. Proc. 2015-13 (or any successor) or other automatic change request procedures is a type of request for a letter ruling. See section 2.01 of this revenue procedure. Automatic and non-.01 automatic change in method of accounting requests Automatic change in (1) Automatic change in method of accounting. Certain changes in methods of accounting method of accounting must be made under automatic change request procedures. A change in method of accounting under Rev. Proc. 2015-13 provided for in an automatic change request procedure must be made using that procedure if the (or any successor), or other taxpayer requesting the change is within the scope of the procedure, the change is an automatic automatic change request change for the requested year of the change, and the taxpayer is eligible to make the change. The procedures Commissioner's consent to an otherwise qualifying automatic change in method of accounting is granted only if the taxpayer timely complies with the applicable automatic change request procedures. But see section 9.19 of this revenue procedure concerning review by an Associate office and a field office. In general, a taxpayer requests an automatic change by filing a current Form 3115, Application for Change in Method of Accounting. An application filed under the automatic change procedures in Rev. Proc. 2015-13 (or any successor) or other automatic change request procedure, and this revenue procedure, is hereinafter referred to as an "automatic change request." See section 9.22 of this revenue procedure for a list of automatic change request procedures. See section 9.23 for a list of the sections and Appendices of this revenue procedure in addition to this section 9 that apply to an automatic change request. No user fee is required for a change made under an automatic change request procedure. Non-automatic change in (2) Non-automatic change in method of accounting. If a change in method of accounting method of accounting may not be made under an automatic change request procedure, the taxpayer may request a non- automatic letter ruling by filing a current Form 3115, Application for Change in Accounting Method, under the non-automatic change procedures in Rev. Proc. 2015-13 (or any successor), and this revenue procedure. A Form 3115 filed under Rev. Proc. 2015-13 (or any successor) and this revenue procedure for a non-automatic change request is hereinafter referred to as a "non- automatic Form 3115." A taxpayer filing a non-automatic Form 3115 must submit the required user fee with the completed Form 3115. See section 15 and Appendix A of this revenue procedure for information about user fees. See section 9.23 for a list of the sections and Appendices of this revenue procedure in addition to this section 9 that apply to a non-automatic Form 3115. Ordinarily only one change.02 Ordinarily, a taxpayer may request only one change in method of accounting on a Form in method of accounting on 3115, Application for Change in Accounting Method. If the taxpayer wants to request a change in a Form 3115, Application method of accounting for more than one unrelated item or submethod of accounting, the taxpayer for Change in Accounting must submit a separate Form 3115 for each unrelated item or submethod, except in certain Method, and a separate situations in which the Service specifically permits certain unrelated changes to be included on a Form 3115 for each single Form 3115. For an example of such a situation, see section 15.01(3) of Rev. Proc. 2023-24, taxpayer and for each 2023-28 I.R.B. 1207 (or its successor). separate and distinct trade or business A separate Form 3115 (and, therefore, a separate user fee pursuant to section 15 and Appendix A of this revenue procedure) must be submitted for each taxpayer and each separate trade or business of a taxpayer, including a qualified subchapter S subsidiary (QSub) or a single-member limited liability company (single-member LLC), requesting a change in method of accounting, except as specifically permitted or required in guidance published by the Service. See, e.g., section 15.07(4) of this revenue procedure. Information required with.03 a Form 3115 Facts and other information (1) Facts and other information requested on Form 3115 and in applicable revenue procedures. In general, a taxpayer requesting a change in method of accounting must file a current Form 3115, unless the procedures applicable to the specific type of change in method of accounting do not require a Form 3115 to be submitted. To be eligible for approval of the requested change in method of accounting, the taxpayer must provide all information requested on the Form 3115 and in its instructions and in Rev. Proc. 2015- 13 (or any successor), and, if applicable, the automatic change request procedure. In addition, the taxpayer must provide all information requested in the applicable sections of this revenue procedure, including a detailed and complete description of the item being changed and of the taxpayer's trade(s) or business(es), the taxpayer's present and proposed method for the item being changed, information regarding whether the taxpayer has claimed any federal tax credit relating to the cost being changed, information regarding whether the taxpayer is under examination, or before Appeals or a Federal court, and a summary of the computation of the net§ 481(a) adjustment, along with an explanation of the methodology used to determine the adjustment, sufficient to demonstrate that the net§ 481(a) adjustment is computed correctly. For a non-automatic Form 3115 or an automatic change request specified in the instructions for line 16 of the Form 3115, the taxpayer must also include a full explanation of the legal basis and relevant authorities supporting the proposed method, and a detailed and complete description of the facts and explanation of how the law applies to the taxpayer's situation. For a non-automatic Form 3115, the taxpayer must also include a statement of the applicant's reasons for the proposed change, copies of all documents related to the proposed change, and a discussion of whether the law related to the request is uncertain or inadequately addresses the issue. The taxpayer must provide the requested information to be eligible for approval of the requested change in method of accounting. The taxpayer may be required to provide information specific to the requested change in method of accounting, such as an attached statement. The taxpayer must provide all information relevant to the requested change in method of accounting, even if not specifically requested, including an explanation of all material facts relevant to the requested change in method of accounting. See also sections 7.01(1) and 7.01(9) of this revenue procedure. Statement of authorities (2) Statement of contrary authorities. For a non-automatic Form 3115, the taxpayer is contrary to taxpayer's encouraged to inform the Associate office about, and discuss the implications of, any authority views believed to be contrary to the proposed change in method of accounting, including statutes, court decisions, regulations, notices, revenue rulings, revenue procedures, or announcements. If the taxpayer does not furnish either contrary authorities or a statement that none exist, the Associate office may request submission of contrary authorities or a statement that none exist. Failure to comply with this request may result in the Associate office's refusal to issue a change in method of accounting letter ruling. Documents (3) Copies of all contracts, agreements, and other documents. True copies of all contracts, agreements, and other documents relevant to the requested change in method of accounting must be submitted with a non-automatic Form 3115. Original documents should not be submitted because they become part of the Associate office's file and will not be returned. Analysis of material facts (4) Analysis of material facts. When submitting any document with a Form 3115 or in a supplemental letter, the taxpayer must explain and provide an analysis of all material facts in the document. The taxpayer may not merely incorporate the document by reference. The analysis of the facts must include their bearing on the requested change in method of accounting and must specify the provisions that apply. Same issue in an earlier (5) Information regarding whether same issue is in an earlier return under examination. return under examination A Form 3115 must state whether, to the best of the knowledge of both the taxpayer and the taxpayer's representatives, any earlier return of the taxpayer (or any return of a current or former consolidated group in which the taxpayer is or was a member) in which the taxpayer used the method of accounting being changed is under examination, before Appeals, or before a Federal court. See Rev. Proc. 2015-13 (or any successor). Issue previously submitted (6) Statement regarding prior requests for a change in method of accounting and other or currently pending pending requests. (a) Other requests for a change in method of accounting within the past five years. A Form 3115 must state, to the best of the knowledge of both the taxpayer and the taxpayer's representatives, whether the taxpayer, a related party within the meaning of§ 267 or§ 707(b) (1), or a member of a current or former affiliated group of which the taxpayer is or was a member within the meaning of§ 1504, or a predecessor requested or made within the past five years (including the year of the requested change), or is currently filing, any request for a change in method of accounting. If the statement is affirmative, for each separate and distinct trade or business, the Form 3115 must give a description of each request and the year of change and whether consent was obtained. If any application was withdrawn, not perfected, or denied, or if a Consent Agreement was sent to the taxpayer but was not signed and returned to the Associate office, or if the change was not made in the requested year of change, the Form 3115 must give an explanation. (b) Any other pending request(s). A Form 3115 must state, to the best of the knowledge of both the taxpayer and the taxpayer's representatives, whether the taxpayer, a related party within the meaning of§ 267 or§ 707(b)(1), or a member of a current or former affiliated group of which the taxpayer is or was a member within the meaning of§ 1504, or a predecessor currently have pending any request (including any concurrently filed request) for a letter ruling, a change in method of accounting, or technical advice. If the statement is affirmative, the Form 3115 must give the name(s) of the taxpayer, identification number(s), the type of request (letter ruling, request for change in method of accounting, or request for technical advice), and the specific issues in each such request. Statement identifying (7) Statement identifying pending legislation. At the time the taxpayer files a non-automatic pending legislation Form 3115, the taxpayer must identify any pending legislation that may affect the proposed change in method of accounting. The taxpayer also must notify the Associate office if any such legislation is introduced after the request is filed but before a change in method of accounting letter ruling is issued. Authorized representatives (8) Authorized representatives. To appear before the Service in connection with a request for a change in method of accounting, the taxpayer's authorized representative must be an attorney, a certified public accountant, an enrolled agent, an enrolled actuary, a person with a "Letter of Authorization," an employee, general partner, bona fide officer, administrator, trustee, etc., as described in section 7.01(14) of this revenue procedure. Power of Attorney (9) Power of Attorney and Declaration of Representative. Any authorized representative, and Declaration of whether or not enrolled to practice, must comply with Treasury Department Circular No. Representative 230, which provides the rules for practice before the Service, and the conference and practice requirements of the Statement of Procedural Rules, which provide the rules for representing a taxpayer before the Service. See section 7.01(15) of this revenue procedure. A taxpayer should use Form 2848, Power of Attorney and Declaration of Representative, to provide the representative's authority. Tax Information (10) Tax Information Authorization. A taxpayer may use Form 8821, Tax Information Authorization Authorization, to authorize an individual to receive a copy of the taxpayer's change in method of accounting letter ruling and other related correspondence. If the taxpayer wishes to authorize a corporation, firm, organization, or partnership to receive the correspondence, an individual, identified by either name or title, must be specified on the Form 8821. A Form 8821 does not authorize the taxpayer's appointee to advocate the taxpayer's position or to otherwise represent the taxpayer before the Service. Penalties of perjury (11) Penalties of perjury statement. statement (a) Format of penalties of perjury statement. A Form 3115, and any change to a Form 3115 submitted at a later time, must be accompanied by the following declaration: "Under penalties of perjury, I declare that I have examined this application, including accompanying schedules and statements, and to the best of my knowledge and belief, the application contains all the relevant facts relating to the application, and it is true, correct, and complete. " See section 9.08(3) of this revenue procedure for the penalties of perjury statement required for submissions of additional information. (b) Signature by taxpayer. A Form 3115 must be signed in a manner consistent with section 7.01(13) of this revenue procedure by, or on behalf of, the taxpayer requesting the change by an individual who has personal knowledge of the facts of, and authority to bind the taxpayer in, such matters. For example, an officer must sign on behalf of a corporation, a general partner on behalf of a state law partnership, a member-manager on behalf of a limited liability company, a trustee on behalf of a trust, or an individual taxpayer on behalf of a sole proprietorship. If the taxpayer is a member of a consolidated group, a Form 3115 should be submitted on behalf of the taxpayer by the common parent and must be signed by a duly authorized officer of the common parent. Refer to the signature requirements set forth in the instructions for the current Form 3115 regarding those who are to sign. See also section 6.02(8) of Rev. Proc. 2015-13 (or any successor). (c) Signature by preparer. If a Form 3115 is prepared by an individual other than the taxpayer, the preparer must also sign the Form 3115 in a manner consistent with section 7.01(13) of this revenue procedure. A declaration of preparer (other than the taxpayer) is based on all information of which the preparer has any knowledge. Additional procedural.04 information required in certain circumstances Recipients of original and (1) Recipients of original and copy of change in method of accounting correspondence. copy of correspondence The Service will send the signed original of the change in method of accounting letter ruling and other related correspondence to the taxpayer, and copies to the taxpayer's representative, if so instructed on Form 2848. See section 7.02(2) of this revenue procedure for how to designate alternative routing of the copies of the letter ruling and other correspondence. Expedited handling (2) To request expedited handling. The Associate offices ordinarily process non-automatic Forms 3115 in order of the date received. A taxpayer with a compelling need to have a non- automatic Form 3115 processed on an expedited basis may request expedited handling. See section 7.02(4) of this revenue procedure for procedures regarding expedited handling. Requesting form of any (3) To request the receipt of the change in method of accounting letter ruling or any other document related to Form correspondence related to a Form 3115 by fax, electronic facsimile, or encrypted email 3115 provided to taxpayer attachment. If the taxpayer wants a copy of the change in method of accounting letter ruling or any or taxpayer's authorized other correspondence related to a Form 3115, such as a request for additional information, to be provided representative to the taxpayer or the taxpayer's authorized representative by fax, electronic facsimile, or encrypted email attachment, the taxpayer must submit a written request, preferably as part of the Form 3115. The request may be submitted at a later date, but it must be received prior to the mailing of correspondence other than the letter ruling and prior to the signing of the change in method of accounting letter ruling. The Service has the discretion to determine the form in which it will correspond with the taxpayer, but will generally comply with a taxpayer's request for a particular form. If the taxpayer requests to have correspondence relating to the Form 3115 provided by fax or electronic facsimile to the taxpayer or taxpayer's authorized representative, the request must contain the fax number of the taxpayer or the taxpayer's authorized representative to whom the correspondence is to be provided. A document other than the change in method of accounting letter ruling will be faxed by a branch representative. A change in method of accounting letter ruling may be faxed by either a branch representative or the Disclosure and Litigation Support Branch of the Legal Processing Division of the Office of Associate Chief Counsel (Procedure and Administration) (CC:PA:LPD:DS). If the taxpayer requests documents by encrypted email attachment, the request must specify which email encryption method is to be used and, if the taxpayer has not already provided the appropriate memorandums of understanding (MOUs) to use encrypted email attachments, must include those MOUs. See section 9.05(3) of this revenue procedure for acceptable email encryption methods and procedures. For purposes of§ 301.6110-2(h), a change in method of accounting letter ruling is not issued until the change in method of accounting letter ruling is mailed. Requesting a conference (4) To request a conference. The taxpayer must complete the appropriate line on the Form 3115 to request a conference, or must request a conference in a later written communication, if an adverse response is contemplated by the Associate office. See section 11.03(1) of Rev. Proc. 2015-13 (or any successor), and sections 10.01 and 10.02 of this revenue procedure. Submitting non-automatic.05 Non-automatic Forms 3115 may be submitted by mail, by electronic facsimile, or by Forms 3115 encrypted email attachment. (1) Submission by mail. A taxpayer submitting a non-automatic Form 3115 by mail should submit the original to the appropriate address below. To use the paper method, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www.pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. If a private delivery service is not used, a taxpayer, including an exempt organization, must send the original completed Form 3115 to: Internal Revenue Service Attn: CC:PA:LPD:TSS P.O. Box 7604 Benjamin Franklin Station Washington, DC 20044 If a private delivery service is used, a taxpayer, including an exempt organization, must send the original completed Form 3115 to: Internal Revenue Service Attn: CC:PA:LPD:TSS Room 5336 1111 Constitution Ave., NW Washington, DC 20224 For taxpayers, including an exempt organization, the original completed Form 3115 may be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. to the courier's desk at 1111 Constitution Ave., NW, Washington, DC. A receipt will be given at the courier's desk. The package should be addressed to: Courier's Desk Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Ave., NW Washington, DC 20224 (2) Submission by electronic facsimile. Taxpayers and their representatives are encouraged to use a secure electronic facsimile service for transmitting requests for advice. To use the secure electronic facsimile method, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www.pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. Transmit the Form 3115, along with a cover sheet, to the secure electronic facsimile line: (877) 773-4950 (3) Submission by encrypted email attachment. There are more risks associated with email than with electronic facsimile, such as the possibility that sensitive taxpayer information could be intercepted. Accordingly, the Service encourages taxpayers to use a secure electronic facsimile service for transmitting requests for advice. As an alternative, this section provides procedures for using encrypted email attachments for transmitting a non-automatic Form 3115. Taxpayers using encrypted email attachments may choose to use a compression utility compatible with SecureZIP (note that many open-source utilities are not compatible with SecureZIP), Adobe Acrobat Pro password encryption, or Microsoft Office 365 Protect Document to encrypt and send password-protected files. Because these programs do not encrypt the subject line or body of an email or the file name of the attachment, all sensitive taxpayer information, including the name of the taxpayer, should be included only in the encrypted attachment. These programs require that a sender create a password for the recipient to use to decrypt the attachments. The password should never be sent in the same email as the encrypted attachment. Instead, it should be provided to the Service in a separate email with a subject line that makes it easy to connect the password to the encrypted email. To use encrypted email attachments, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www.pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. A Form 3115 transmitted through email must be accompanied by two MOUs: the MOU in Appendix G of this revenue procedure, acknowledging the risks of using email to transmit sensitive taxpayer information, and the appropriate MOU in Appendix H, agreeing to the terms for using the chosen method of encryption to receive sensitive taxpayer information. These MOUs must be signed by the taxpayer, not the taxpayer's representative, in a manner consistent with section 7.01(13) of this revenue procedure. A Counsel representative will countersign and return the second MOU to the requester prior to transmitting any other information by encrypted email attachments. Transmit the Form 3115 to the following email address: Userfee@irscounsel.treas.gov Submitting automatic.06 Automatic change request. The duplicate copy of an automatic Form 3115 generally is Forms 3115 submitted by mail. A taxpayer that is filing an automatic Form 3115 under the provisions of Rev. Proc. 2015-13 (or any successor) may alternatively submit the duplicate copy of the Form 3115 by fax. (1) Submission by mail. If the automatic change request procedure requires a taxpayer to file a duplicate copy of the completed Form 3115 for an automatic change request, and if a private delivery service is not used, send the duplicate copy of the automatic change request Form 3115 to: Internal Revenue Service Ogden, UT 84201 M/S 6111 If a private delivery service is used, send the duplicate copy of the automatic change request Form 3115 to: Internal Revenue Service 1973 N. Rulon White Blvd. Ogden, UT 84201 Attn: M/S 6111 (2) Submission by fax. Taxpayers submitting the duplicate copy of an automatic Form 3115 by fax should do so to the following fax number: (844) 249-8134 The submission should include a cover sheet with the following information: (a) Subject: "Form 3115" (b) Sender's name, title, phone number, and address (c) Taxpayer's name (d) Date (e) Number of pages faxed (inclusive of cover sheet) A taxpayer should not include sensitive information on the cover sheet, such as the taxpayer's Employer Identification Number or Social Security Number. Technical Services Support.07 A non-automatic Form 3115 is received and controlled by the Technical Services Support Branch receives, initially Branch, Legal Processing Division of the Associate Chief Counsel (Procedure and Administration) controls, and refers (CC:PA:LPD:TSS) if the required user fee is submitted with the Form 3115. Once controlled, the the Form 3115 to the Form 3115 is forwarded to the appropriate Associate office for assignment and processing. appropriate Associate office Additional information.08 Reply period (1) Reply period. (a) Non-automatic Form 3115 - 21-day rule. In general, for a non-automatic Form 3115, additional information requested by the Associate office and additional information furnished to the Associate office by telephone must be furnished in writing by mail, fax, or email within 21 calendar days from the date of the information request. The Associate office may impose a shorter reply period for a request for additional information made after an initial request. See section 10.06 of this revenue procedure for the 21-day rule for submitting information after any conference. (b) Automatic change request - 30-day rule. In general, for an automatic change request, additional information requested by the Associate office, and additional information furnished to the Associate office by telephone must be furnished in writing by mail, fax, or email within 30 calendar days from the date of the information request. The Associate office may impose a shorter reply period for a request for additional information made after an initial request. See section 10.06 of this revenue procedure for the 21-day rule for submitting information after any conference with the Associate office. Extension of reply period (2) Request for extension of reply period. (a) Non-automatic Form 3115. For a non-automatic Form 3115, an additional period, not to exceed 15 calendar days, to furnish information may be granted to a taxpayer. Any request for an extension of time must be made in writing and submitted before the end of the original 21-day period. If unusual circumstances close to the end of the 21-day period make a written request impractical, the taxpayer should notify the Associate office within the 21-day period that there is a problem and that the written request for extension will be provided shortly. An extension of the 21-day period will be granted only if approved by a branch reviewer. An extension of the 21-day period ordinarily will not be granted to furnish information requested on Form 3115. The taxpayer will be told promptly, and later in writing, of the approval or denial of the requested extension. If the extension request is denied, there is no right of appeal. (b) Automatic change request. For an automatic change request, an additional period, not to exceed 30 calendar days, to furnish information may be granted to a taxpayer. Any request for an extension of time must be made in writing and submitted before the end of the original 30-day period. If unusual circumstances close to the end of the 30-day period make a written request impractical, the taxpayer should notify the Associate office within the 30-day period that there is a problem and that the written request for extension will be coming soon. An extension of the 30-day period will be granted only if approved by a branch reviewer. An extension of the 30-day period ordinarily will not be granted to furnish information requested on Form 3115. The taxpayer will be told promptly of the approval or denial of the requested extension. If the extension request is denied, there is no right of appeal. Penalties of perjury (3) Penalties of perjury statement for additional information. Additional information statement for additional submitted to the Associate office must be accompanied by the following declaration: " Under information penalties of perjury, I declare that I have examined this information, including accompanying documents, and, to the best of my knowledge and belief, the information contains all the relevant facts relating to the request for the information, and such facts are true, correct, and complete. " This declaration must be signed in accordance with the requirements in section 9.03(11)(b) of this revenue procedure. Identifying information (4) Identifying information included in additional information. The additional information included in additional should also include the taxpayer's name, the case control number, and the name, office symbols, information and room number of the Associate office representative who requested the information. The Associate office representative can provide the latter information to the taxpayer. Transmitting request and (5) Transmitting request and submitting additional information by fax, electronic facsimile, submitting additional or encrypted email attachment. To facilitate prompt action on a change in method of accounting information by fax, ruling request, taxpayers may request that the Associate office request additional information by fax, electronic facsimile, or electronic facsimile, or encrypted email attachment. See section 9.04(3) of this revenue procedure. encrypted email attachment Taxpayers may also submit additional information by fax, electronic facsimile, or encrypted email attachment as soon as the information is available. The Associate office representative who requests additional information can provide a fax or electronic facsimile number or email address to which the information can be faxed. Submitting additional (6) Submitting additional information by mail. information by mail (a) Address if private delivery service is not used. For a request for change in method of accounting under the jurisdiction of the Associate Chief Counsel (Income Tax and Accounting), if a private delivery service is not used, the additional information should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] P.O. Box 14095 Benjamin Franklin Station Washington, DC 20044 For any other request for change in method of accounting, if a private delivery service is not used, the additional information should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] P.O. Box 7604 Benjamin Franklin Station Washington, DC 20044 (b) Address if private delivery service is used. For a request for a change in method of accounting, if a private delivery service is used, the additional information should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] 1111 Constitution Ave., NW Washington, DC 20224 Failure to timely submit (7) Failure to timely submit additional information to the Associate office additional information to the Associate office (a) Non-automatic Form 3115. In the case of a non-automatic Form 3115, if the required information is not furnished to the Associate office within the reply period, the Form 3115 will not be processed and the case will be closed. The taxpayer or authorized representative will be so notified in writing. (b) Automatic change request. In the case of an automatic change request, if the required information is not furnished to the Associate office within the reply period, the request does not qualify for the automatic change request procedure. In such a case, the Associate office will notify the taxpayer that consent to make the change in method of accounting is not granted. (c) Submitting the additional information at a later date. If the taxpayer wants to submit the additional information at a later date, the taxpayer must submit it with a new completed Form 3115 (and user fee, if applicable) for a year of change for which such new Form 3115 is timely filed under the applicable change in method of accounting procedure. Circumstances in which the.09 For a non-automatic Form 3115, the taxpayer must promptly notify the Associate office if, taxpayer must notify the after the Form 3115 is filed but before a change in method of accounting letter ruling is issued, Associate office the taxpayer knows that-- (1) a field office has started an examination of the present or proposed accounting; (2) a field office has started an examination of the proposed year of change; (3) legislation that may affect the change in method of accounting has been introduced, see section 9.03(7) of this revenue procedure; or (4) another letter ruling request (including another Form 3115) has been submitted by the taxpayer, a related party within the meaning of§ 267 or§ 707(b)(1), or a member of an affiliated group of which the taxpayer is a member within the meaning of§ 1504. Determines if proposed.10 For a non-automatic Form 3115, if a less than fully favorable change in method of method of accounting accounting letter ruling is indicated, the branch representative will tell the taxpayer whether minor can be modified to obtain changes in the proposed method of accounting would bring about a favorable ruling. The branch favorable letter ruling representative will not suggest precise changes that materially alter a taxpayer's proposed method of accounting. Near the completion of.11 Generally, after a conference is held (or offered, in the event no conference is held) and processing the Form 3115, before issuing any change in method of accounting letter ruling that is adverse to the requested advises the taxpayer if the change in method of accounting, the taxpayer will be offered the opportunity to withdraw the Associate office will rule Form 3115. See sections 9.12 and 10 of this revenue procedure. If, within 10 calendar days of the adversely and offers the notification by the branch representative, the taxpayer or the taxpayer's representative does not taxpayer the opportunity to notify the branch representative of a decision to withdraw the Form 3115, the adverse change in withdraw Form 3115 method of accounting letter ruling will be issued unless an extension is granted. See section 15.10 for information regarding refunds of user fees. Non-automatic Form 3115.12 may be withdrawn or Associate office may decline to issue a change in method of accounting letter ruling In general (1) In general. A taxpayer may withdraw a non-automatic Form 3115 at any time before the change in method of accounting letter ruling is signed by the Associate office. The Form 3115, correspondence, and any documents relating to the Form 3115 that is withdrawn or for which the Associate office declines to issue a letter ruling will not be returned to the taxpayer. See section 9.03(3) of this revenue procedure. In appropriate cases, the Service may publish its conclusions in a revenue ruling or revenue procedure. Notification of appropriate (2) Notification of appropriate Service official. If a taxpayer withdraws, or the Associate Service official office declines to grant (for any reason), a request to change a method of accounting, the Associate office will notify, in writing, the appropriate Service official in the operating division that has examination jurisdiction of the taxpayer's tax return and the Manager of the Methods of Accounting and Timing Practice Network, and may give its views on the issues in the request to the Service official to consider in any later examination of the return. If the written notification to the Service official provides more than the fact that the request was withdrawn and the Associate office was tentatively adverse, or that the Associate office declines to grant a change in method of accounting, the memorandum may constitute Chief Counsel Advice, as defined in§ 6110(i)(1), and may be subject to disclosure under§ 6110. How to check status of a.13 The taxpayer or the taxpayer's authorized representative may obtain information regarding pending non-automatic the status of a non-automatic Form 3115 by calling the person whose name and telephone number Form 3115 are shown on the acknowledgement of receipt of the Form 3115. Service is not bound by.14 The Service will not be bound by any informal opinion expressed by the branch representative informal opinion or any other Service representative, and such an opinion cannot be relied upon as a basis for obtaining retroactive relief under the provisions of§ 7805(b). Single letter ruling issued to.15 For a non-automatic Form 3115 qualifying under section 15.07(4) for the user fee provided a taxpayer or consolidated in paragraph (A)(5)(b) of Appendix A of this revenue procedure for identical changes in method group for qualifying of accounting, the Associate office generally will issue a single letter ruling on behalf of all identical change in method applicants on the Form 3115 that are the subject of the request. of accounting Letter ruling ordinarily.16 If two or more items or submethods of accounting are interrelated, the Associate office not issued for one of two or ordinarily will not issue a letter ruling on a change in method of accounting involving only one of more interrelated items or the items or submethods. submethods Consent Agreement.17 Ordinarily, for a non-automatic Form 3115, the Commissioner's permission to change a taxpayer's method of accounting is set forth in a letter ruling (original and a Consent Agreement copy). If transmitting electronically, the issuing office may sign the letter ruling and the Consent Agreement copy electronically. See section 9.04(3) of this revenue procedure. If the taxpayer agrees to the terms and conditions contained in the change in method of accounting letter ruling, the taxpayer must sign and date the Consent Agreement copy of the letter ruling in the appropriate space. The Consent Agreement copy must be signed in a manner consistent with section 7.01(13) of this revenue procedure by an individual with authority to bind the taxpayer in such matters. The Consent Agreement copy must not be signed by the taxpayer's representative. The signed copy of the letter ruling will constitute an agreement (Consent Agreement) within the meaning of Treas. Reg.§ 1.481-4(b). The signed Consent Agreement copy of the letter ruling must be returned to the Associate office within 45 calendar days of the date of the letter ruling. The signed Consent Agreement copy may be submitted under the procedures set forth above for submission of additional information. See section 9.04(3) and 9.08(5) of this revenue procedure. In addition, a copy of the signed Consent Agreement generally must be attached to the taxpayer's income tax return for the year of change. See section 11.03(2)(a) of Rev. Proc. 2015-13 (or any successor). A taxpayer filing its return electronically should attach the Consent Agreement as a PDF file named "Form3115Consent." If the taxpayer has filed its income tax return for the year of change before the letter ruling has been received and the Consent Agreement has been signed and returned, the copy of the signed Consent Agreement should be attached to the amended return for the year of change that the taxpayer files to implement the change in method of accounting. A taxpayer must secure the consent of the Commissioner before changing a method of accounting for Federal income tax purposes. See Treas. Reg.§ 1.446-1(e)(2)(i). For a change in method of accounting requested on a non-automatic Form 3115, a taxpayer has secured the consent of the Commissioner when the taxpayer timely signs and returns the Consent Agreement copy of the letter ruling from the Associate office granting permission to make the change in method of accounting and otherwise complies with Rev. Proc. 2015-13 (or any successor). A taxpayer that timely files a non-automatic Form 3115 and takes the requested change in method of accounting into account in its federal income tax return for the year of change (and any subsequent taxable year) prior to receiving a letter ruling granting consent for that change has made a change in method of accounting without obtaining the consent of the Commissioner as required by§ 446(e) (an "unauthorized change"). As provided in section 12.02 of Rev. Proc. 2015- 13 (or any successor), the Director may determine when a change is not made in compliance with all applicable provisions of Rev. Proc. 2015-13 (or any successor) and may deny the unauthorized change. However, the Commissioner's consent, issued subsequent to the requested year of change, applies back to the year of change (and any subsequent taxable year) as of the date of the letter ruling granting consent for that change if the taxpayer timely signs and returns the Consent Agreement copy and implements the change in accordance with all applicable provisions of Rev. Proc. 2015-13 (or any successor) and section 11 of this revenue procedure. If the Commissioner does not grant consent under Rev. Proc. 2015-13 (or any successor) for the change in method of accounting taken into account by the taxpayer, the taxpayer is subject to any interest, penalties, or other adjustments resulting from improper implementation of the change. See§ 446(f). A taxpayer who timely files a non-automatic Form 3115 and takes the requested change into account in the taxpayer's Federal income tax return for the year of change (and any subsequent taxable year), prior to receiving the letter ruling granting permission for the requested change, may nevertheless rely on the letter ruling received from the Associate office after it is received, as provided in section 9.19 of this revenue procedure. If, however, the requested change is modified or is withdrawn, denied, or similarly closed without the Associate office having granted consent, taxpayers are not relieved of any interest, penalties, or other adjustments resulting from improper implementation of the change. A copy of the change in.18 The Associate office will send a copy of each change in method of accounting letter ruling, method of accounting letter whether favorable or adverse, to the appropriate Service official in the operating division that ruling is sent to appropriate has examination jurisdiction of the taxpayer's tax return and the Manager of the Methods of Service officials Accounting and Timing Practice Network. Consent to change a.19 A taxpayer may rely on a change in method of accounting letter ruling received from the method of accounting may Associate office, subject to certain conditions and limitations. See sections 7, 8, 10, 11, and 12 of be relied on subject to Rev. Proc. 2015-13 (or any successor). limitations A qualifying taxpayer complying timely with an automatic change request procedure may rely on the consent of the Commissioner as provided in the automatic change request procedure to change the taxpayer's method of accounting, subject to certain conditions and limitations. See generally sections 7, 8, 10, 11, and 12 of Rev. Proc. 2015-13 (or any successor). An Associate office may review a Form 3115 filed under an automatic change request procedure and will notify the taxpayer if additional information is needed or if consent is not granted to the taxpayer for the requested change. See section 11 of Rev. Proc. 2015-13 (or any successor). Further, the field office that has jurisdiction over the taxpayer's return may review the Form 3115. See section 12 of Rev. Proc. 2015-13 (or any successor). Change in method of.20 A taxpayer may not rely on a change in method of accounting letter ruling issued to another accounting letter ruling taxpayer. See§ 6110(k)(3). does not apply to another taxpayer Associate office discretion.21 The Associate office reserves the right to decline to process any non-automatic Form 3115 to permit requested change in situations in which it would not be in the best interest of sound tax administration to permit in method of accounting the requested change or it would not clearly reflect income. In this regard, the Associate office will consider whether the change in method of accounting would clearly and directly frustrate compliance efforts of the Service in administering the income tax laws. See section 11.02 of Rev. Proc. 2015-13 (or any successor). List of automatic change 22 For procedures regarding requests for an automatic change in method of accounting, refer. in method of accounting to the following published automatic change request procedures. The Commissioner's consent to request procedures an otherwise qualifying automatic change in method of accounting is granted only if the taxpayer complies timely with the applicable automatic change request procedure. The automatic change request procedures for obtaining a change in method of accounting include: (1) Rev. Proc. 2015-13 (or any successor). Rev. Proc. 2015-13 applies to the changes in method of accounting described in Rev. Proc. 2023-24, 2023-28 I.R.B. 1207 (or its successor). (2) The following automatic change request procedures, which require a completed Form 3115, provide both the procedures under which a change may be made automatically and the procedures under which such change must be made: Treas. Reg.§ 1.166-2(d)(3) (bank conformity for bad debts); Treas. Reg.§ 1.458-1 and -2 (exclusion for certain returned magazines, paperbacks, or records); Rev. Proc. 97-43, 1997-2 C.B. 494 (§ 475 - electing out of certain exemptions from securities dealer status); and Rev. Proc. 91-51, 1991-2 C.B. 779 (§ 1286 - certain taxpayers under examination that sell mortgages and retain rights to service the mortgages). (3) The following automatic change request procedures, which do not require a completed Form 3115, provide the type of change in method of accounting that may be made automatically and also provide the procedures under which such change must be made: Notice 96-30, 1996-1 C.B. 378 (§ 446 - change to comply with Statement of Financial Accounting Standards No. 116); Rev. Proc. 92-29, 1992-1 C.B. 748 (§ 461 - change in real estate developer's method for including costs of common improvements in the basis of property sold); Rev. Proc. 98-58, 1998-2 C.B. 712 (certain taxpayers seeking to change to the installment method of accounting under§ 453 for alternative minimum tax purposes for certain deferred payment sales contracts relating to property used or produced in the trade or business of farming); Treas. Reg.§ 1.472-2 (taxpayers changing to the last-in, first-out (LIFO) inventory method); Section 585(c) and Treas. Reg.§§ 1.585-6 and 1.585-7 (large bank changing from the reserve method of§ 585); and Rev. Proc. 92-67, 1992-2 C.B. 429 (election under§ 1278(b) to include market discount in income currently or election under§ 1276(b) to use constant interest rate to determine accrued market discount). (4) See Appendix F for the list of revenue procedures for automatic changes in accounting period. Other sections of this.23 In addition to this section 9, the following sections of this revenue procedure apply to revenue procedure that are automatic change requests and non-automatic change requests: applicable to Form 3115 1 (purpose of this revenue procedure); 2.01 (definition of "letter ruling"); 2.02 (definition of "closing agreement"); 2.05 (oral guidance); 3.01 (issues under the jurisdiction of the Associate Chief Counsel (Corporate)); 3.02 (issues under the jurisdiction of the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes)); 3.03 (issues under the jurisdiction of the Associate Chief Counsel (Financial Institutions and Products)); 3.04 (issues under the jurisdiction of the Associate Chief Counsel (Income Tax and Accounting)); 3.05 (issues under the jurisdiction of the Associate Chief Counsel (International)); 3.06 (issues under the jurisdiction of the Associate Chief Counsel (Passthroughs and Special Industries)); 5.03(2) (period of limitation when filing a request for extensions of time for making an election or for other relief under§ 301.9100); 6.02 (letter rulings ordinarily not issued in certain areas because of the factual nature of the problem); 6.05 (letter rulings ordinarily not issued to business associations or groups); 6.06 (letter rulings ordinarily not issued where the request does not address the tax status, liability, or reporting obligations of the requester); 6.08 (letter rulings ordinarily not issued on Federal tax consequences of proposed legislation); 6.10 (letter rulings not issued on frivolous issues); 6.12 (letter rulings not issued on alternative plans or hypothetical situation); 7.01(1) (statement of facts and other information); 7.01(10) (statement of supporting authorities); 7.01(14) (authorized representatives); 7.01(15) (Power of Attorney and Declaration of Representative); 7.02(2) (power of attorney used to indicate recipient of a copy or copies of a letter ruling or a determination letter); 7.02(4) (expedited handling); 7.05(2) (notify Associate office if a return, amended return, or claim for refund is filed while request is pending and attach request to the return); 8.01 (receipt and control of the request, and referral to the appropriate Associate office); 8.02 (contact taxpayer within 21 calendar days); 8.04 (not bound by informal opinion expressed); 10 (scheduling conferences); 15 (user fees); 16 (significant changes to prior revenue procedure); 17 (effect of this revenue procedure on other documents); 18 (effective date of this revenue procedure); Appendix A (schedule of user fees); and Appendix F (revenue procedures and notices regarding letter ruling requests relating to specific Code sections and subject matters). SECTION 10. HOW ARE CONFERENCES FOR LETTER RULINGS SCHEDULED? Schedules a conference if.01 A taxpayer may request a conference regarding a letter ruling request. Normally, a requested by taxpayer conference is scheduled only when the Associate office considers it to be helpful in deciding the case or when an adverse decision is indicated. If conferences are being arranged for more than one request for a letter ruling involving the same taxpayer, they will be scheduled so as to cause the least inconvenience to the taxpayer. As stated in sections 7.02(6) and 9.04(4) of this revenue procedure, a taxpayer who wants to have a conference on the issue or issues involved should indicate this in writing when, or soon after, filing the request. If a conference has been requested, the taxpayer or the taxpayer's representative will be notified by telephone, if possible, of the time and place of the conference, which must then be held within 21 calendar days after this contact. Instructions for requesting an extension of the 21-day period and notifying the taxpayer or the taxpayer's representative of the Associate office's approval or denial of the request for extension are the same as those explained in section 8.05(2) (or section 9.08(2)(a) for a change in method of accounting request) of this revenue procedure regarding providing additional information. Permits taxpayer one 02 A taxpayer is entitled, as a matter of right, to only one conference in the Associate office, conference of right except as explained under section 10.05 of this revenue procedure. This conference is normally held at the branch level and is attended by a person who has the authority to sign the letter ruling in his or her own name or for the branch chief. When more than one branch has taken an adverse position on an issue in a letter ruling request or when the position ultimately adopted by one branch will affect that adopted by another, a representative from each branch with the authority to sign in his or her own name or for the branch chief will attend the conference. If more than one subject is to be discussed at the conference, the discussion will constitute a conference on each subject. To have a thorough and informed discussion of the issues, the conference usually will be held after the branch has had an opportunity to study the case. At the request of the taxpayer, the conference of right may be held earlier. No taxpayer has a right to appeal the action of a branch to an Associate Chief Counsel or to any other official of the Service. But see section 10.05 of this revenue procedure for situations in which the Associate office may offer additional conferences. In employment tax matters, if the service recipient (the firm) requests the letter ruling, the firm is entitled to a conference. If the worker requests the letter ruling, both the worker and the firm are entitled to a conference. See section 5.10 of this revenue procedure. Disallows verbatim.03 Because conference procedures are informal, no tape, stenographic, or other verbatim recording of conferences recording of a conference may be made by any party. Makes tentative.04 The senior Associate office representative present at the conference ensures that the recommendations on taxpayer has the opportunity to present views on all the issues in question. An Associate office substantive issues representative explains the Associate office's tentative decision on the substantive issues and the reasons for that decision. If the taxpayer asks the Associate office to limit the retroactive effect of any letter ruling or limit the revocation or modification of a prior letter ruling, an Associate office representative will discuss the recommendation concerning this issue and the reasons for the recommendation. The Associate office representatives will not make a commitment regarding the conclusion that the Associate office will finally adopt. May offer additional.05 The Associate office will offer the taxpayer an additional conference if, after the conference conferences of right, an adverse holding is proposed on a new issue or on the same issue but on different grounds from those discussed at the first conference. There is no right to another conference when a proposed holding is reversed at a higher level with a result less favorable to the taxpayer, if the grounds or arguments on which the reversal is based were discussed at the conference of right. The limit on the number of conferences to which a taxpayer is entitled does not prevent the Associate office from offering additional conferences, including conferences with an official higher than the branch level, if the Associate office decides they are needed. These conferences are not offered as a matter of course simply because the branch has reached an adverse decision. In general, conferences with higher level officials are offered only if the Associate office determines that the case presents significant issues of tax policy or tax administration and that the consideration of these issues would be enhanced by additional conferences with the taxpayer. Requires written.06 The taxpayer should furnish to the Associate office any additional data, reasoning, precedents, confirmation of information etc., that were proposed by the taxpayer and discussed at the conference but not previously or presented at conference adequately presented in writing. The taxpayer must furnish the additional information within 21 calendar days from the date of the conference. If the additional information is not received within that time, a letter ruling will be issued on the basis of the information on hand or, if appropriate, no ruling will be issued. See section 8.05 of this revenue procedure for instructions on submission of additional information for a letter ruling request other than a change in method of accounting request. See section 9.08 of this revenue procedure for instructions on submitting additional information for a change in method of accounting request. May schedule a pre-.07 Sometimes it will be advantageous to both the Associate office and the taxpayer to submission conference hold a conference before the taxpayer submits the letter ruling request to discuss substantive or procedural issues relating to a proposed transaction. These conferences are held only if the identity of the taxpayer is provided to the Associate office, only if the taxpayer actually intends to make a request, only if the request involves a matter on which a letter ruling is ordinarily issued, and only at the discretion of the Associate office and as time permits. For example, a pre- submission conference will not be held on an income tax issue if, at the time the pre-submission conference is requested, the identical issue is involved in the taxpayer's return for an earlier period and that issue is being examined by a field office. See section 6.01(1) of this revenue procedure. A letter ruling request submitted following a pre-submission conference will not necessarily be assigned to the branch that held the pre-submission conference. Also, when a letter ruling request is not submitted following a pre-submission conference, the Associate office may notify, by memorandum, the appropriate Service officials in the operating division that has examination jurisdiction of the taxpayer's tax return and may give its views on the issues raised during the pre-submission conference. For LB&I taxpayers, a copy of the memorandum will be sent to the Assistant Deputy Commissioner, Compliance Integration. This memorandum may constitute Chief Counsel Advice, as defined in§ 6110(i), and may be subject to disclosure under§ 6110. (1) Taxpayer may request a pre-submission conference in writing or by telephone. A taxpayer or the taxpayer's representative may request a pre-submission conference in writing or by telephone. If the taxpayer's representative is requesting the pre-submission conference, a power of attorney is required. A taxpayer should use Form 2848, Power of Attorney and Declaration of Representative, to provide the representative's authority. If multiple taxpayers and/or their authorized representatives will attend or participate in the pre-submission conference, cross powers of attorney (or, as appropriate, tax information authorizations) are required. If the taxpayer's representative is requesting the pre-submission conference by telephone, the Associate office's representative ( see list of phone numbers below) will provide the fax number to send the power of attorney (or, as appropriate, tax information authorizations) and any other necessary information prior to scheduling the pre-submission conference. The request must identify the taxpayer and briefly explain the primary issue so it can be assigned to the appropriate branch. If submitted in writing, the request should also identify the Associate office expected to have jurisdiction over the request for a letter ruling. A written request for a pre-submission conference should be sent to the appropriate address listed in section 7.04 of this revenue procedure. To request a pre-submission conference by telephone, call: (a) (202) 317-3181 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Corporate); (b) (202) 317-6000 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes); (c) (202) 317-3900 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Financial Institutions and Products); (d) (202) 317-7002 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Income Tax and Accounting); (e) (202) 317-3800 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (International); (f) (202) 317-3100 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Passthroughs and Special Industries); or (g) (202) 317-3400 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Procedure and Administration). (2) Pre-submission conferences held in person or by telephone. Depending on the circumstances, pre-submission conferences may be held in person at the Associate office or may be conducted by telephone. (3) Certain information required to be submitted to the Associate office prior to the pre- submission conference. Generally, the taxpayer will be asked to provide a statement of whether the issue is an issue on which a letter ruling is ordinarily issued and a draft of the letter ruling request or other detailed written statement explaining the proposed transaction, issue, and legal analysis, before scheduling the pre-submission conference. The Associate office will allow taxpayers to submit a statement after the conference is scheduled at its discretion. If the taxpayer's authorized representative will attend or participate in the pre-submission conference, a power of attorney is required. (4) Discussion of substantive issues is not binding on the Service. Any discussion of substantive issues at a pre-submission conference is advisory only, is not binding on the Service in general or on the Office of Chief Counsel in particular, and cannot be relied upon as a basis for obtaining retroactive relief under the provisions of§ 7805(b). May schedule a conference.08 Depending on the circumstances, conferences, including conferences of right and pre- to be held by telephone submission conferences, may be held by telephone. This may occur, for example, when a taxpayer wants a conference of right but believes that the issue involved does not warrant incurring the expense of traveling to Washington, DC, or if it is believed that scheduling an in-person conference of right will substantially delay the ruling process. If a taxpayer makes such a request, the branch reviewer will decide if it is appropriate in the particular case to hold a conference by telephone. If the request is approved, the taxpayer will be advised when to call the Associate office representatives (not a toll-free call). Pre-submission conferences.09 Special rules and procedures apply to letter ruling requests solely or primarily under the under Rev. Proc. 2023-26 jurisdiction of the Associate Chief Counsel (Corporate) for which fast-track processing has been requested. For more information, see section 5.02 of Rev. Proc. 2023-26, 2023-33 I.R.B. 486. SECTION 11. WHAT EFFECT WILL A LETTER RULING HAVE? May be relied on subject to.01 A taxpayer ordinarily may rely on a letter ruling received from the Associate office subject limitations to the conditions and limitations described in this section. Will not apply to another.02 A taxpayer may not rely on a letter ruling issued to another taxpayer. See§ 6110(k)(3). However, taxpayer shareholders and security holders of a corporation may rely on a letter ruling issued to the corporation for the limited purpose of determining the proper treatment of directly related tax items. For example, a letter ruling issued to a corporation with respect to the reorganization of that corporation may be relied upon by the corporation's shareholders in determining their basis in the stock of the corporation following the reorganization. See also section 11.06(3) of this revenue procedure. Will be used by a field office.03 When determining a taxpayer's liability, the field office must ascertain whether-- in examining the taxpayer's return (1) the conclusions stated in the letter ruling are properly reflected in the return; (2) the representations upon which the letter ruling was based reflect an accurate statement of the controlling facts; (3) the transaction was carried out substantially as proposed; and (4) there has been any change in the law that applies to the period during which the transaction or continuing series of transactions were consummated. If, when determining the liability, the field office finds that a letter ruling should be revoked or modified, the findings and recommendations of the field office will be forwarded through the appropriate Director to the Associate office for consideration before further action is taken by the field office. Such a referral to the Associate office will be treated as a request for technical advice and the provisions of Rev. Proc. 2024-2, this Bulletin, relating to requests for technical advice will be followed. See section 13.02 of Rev. Proc. 2024-2. Otherwise, the field office should apply the letter ruling in determining the taxpayer's liability. If a field office having jurisdiction over a return or other matter proposes to reach a conclusion contrary to a letter ruling previously issued to the taxpayer, it should coordinate the matter with the Associate office. May be revoked or modified.04 Unless it was part of a closing agreement as described in section 2.02 of this revenue if found to be in error or procedure, a letter ruling found to be in error or not in accord with the current views of the Service there has been a change in may be revoked or modified. If a letter ruling is revoked or modified, the revocation or modification law applies to all years open under the period of limitation unless the Service uses its discretionary authority under§ 7805(b) to limit the retroactive effect of the revocation or modification. A letter ruling may be revoked or modified by-- (1) a letter giving notice of revocation or modification to the taxpayer to whom the letter ruling was issued; (2) the enactment of legislation or ratification of a tax treaty; (3) a decision of the United States Supreme Court; (4) the issuance of temporary or final regulations; or (5) the issuance of a revenue ruling, revenue procedure, notice, or other statement published in the Internal Revenue Bulletin. Consistent with these provisions, if a letter ruling relates to a continuing action or a series of actions, it ordinarily will be applied until any one of the events described above occurs. Publication of a notice of proposed rulemaking will not affect the application of any letter ruling issued under this revenue procedure. Where a letter ruling is revoked or modified by a letter to the taxpayer, the letter will state whether the revocation or modification is retroactive. Where a letter ruling is revoked or modified by the issuance of final or temporary regulations or by the publication of a revenue ruling, revenue procedure, notice, or other statement in the Internal Revenue Bulletin, the document may contain a statement as to its retroactive effect on letter rulings. A letter ruling may be revoked even if the subject of the letter ruling is a matter that the Service currently does not issue rulings on. Letter ruling revoked or.05 An Associate office will revoke or modify a letter ruling and apply the revocation modified based on material retroactively to the taxpayer for whom the letter ruling was issued or to a taxpayer whose tax change in facts applied liability was directly involved in the letter ruling if-- retroactively (1) there has been a misstatement or omission of controlling facts; (2) the facts at the time of the transaction are materially different from the controlling facts on which the letter ruling was based; or (3) the transaction involves a continuing action or series of actions and the controlling facts change during the course of the transaction. Not otherwise generally.06 Where the revocation or modification of a letter ruling is for reasons other than a change revoked or modified in facts as described in section 11.05 of this revenue procedure, it will generally not be applied retroactively retroactively to the taxpayer for whom the letter ruling was issued or to a taxpayer whose tax liability was directly involved in the letter ruling provided that-- (1) there has been no change in the applicable law; (2) the letter ruling was originally issued for a proposed transaction; and (3) the taxpayer directly involved in the letter ruling acted in good faith in relying on the letter ruling, and revoking or modifying the letter ruling retroactively would be to the taxpayer's detriment. For example, the tax liability of each shareholder is directly involved in a letter ruling on the reorganization of a corporation. Depending on all facts and circumstances, the shareholders' reliance on the letter ruling may be in good faith. The tax liability of a member of an industry, however, is not directly involved in a letter ruling issued to another member of the same industry. Therefore, a nonretroactive revocation or modification of a letter ruling to one member of an industry will not extend to other members of the industry who have not received letter rulings. By the same reasoning, a tax practitioner may not extend to one client the non-retroactive application of a revocation or modification of a letter ruling previously issued to another client. If a letter ruling is revoked or modified by a letter to the taxpayer with retroactive effect, the letter to the taxpayer will, except in fraud cases, state the grounds on which the letter ruling is being revoked or modified and explain the reasons why it is being revoked or modified retroactively. Retroactive effect of.07 A letter ruling issued on a particular transaction represents a holding of the Service on revocation or modification that transaction only. It will not apply to a similar transaction in the same year or any other year. applied to a particular Except in unusual circumstances, the application of that letter ruling to the transaction will not be transaction affected by the later issuance of regulations (either temporary or final) if conditions (1) through (3) in section 11.06 of this revenue procedure are met. Retroactive effect of.08 If a letter ruling is issued covering a continuing action or series of actions and the letter revocation or modification ruling is later found to be in error or no longer in accord with the position of the Service, the applied to a continuing appropriate Associate Chief Counsel ordinarily will limit the retroactive effect of the revocation action or series of actions or modification to a date that is not earlier than that on which the letter ruling is revoked or modified. For example, the retroactive effect of the revocation or modification of a letter ruling covering a continuing action or series of actions ordinarily would be limited in the following situations when the letter ruling is in error or no longer in accord with the position of the Service: (1) A taxpayer received a letter ruling that certain payments are excludable from gross income for Federal income tax purposes. The taxpayer ordinarily would be protected only for the payment received after the letter ruling was issued and before the revocation or modification of the letter ruling. (2) A taxpayer rendered a service or provided a facility that is subject to the excise tax on services or facilities and, in relying on a letter ruling received, it did not pass the tax on to the user of the service or the facility. (3) An employer incurred liability under the Federal Insurance Contributions Act but, in relying on a letter ruling received, neither collected the employee tax nor paid the employee and employer taxes under the Federal Insurance Contributions Act. The retroactive effect would be limited for both the employer and employee tax. The limitation would be conditioned on the employer furnishing wage data, as may be required by§ 31.6011(a)-1 of the Treasury Regulations. Generally not retroactively.09 A letter ruling holding that the sale or lease of a particular article is subject to the revoked or modified if manufacturer's excise tax or the retailer's excise tax may not retroactively revoke or modify an related to sale or lease earlier letter ruling holding that the sale or lease of such an article was not taxable if the taxpayer subject to excise tax to whom the letter ruling was issued, in relying on the earlier letter ruling, gave up possession or ownership of the article without passing the tax on to the customer. See§ 1108(b), Revenue Act of 1926. May be retroactively.10 A taxpayer is not protected against retroactive revocation or modification of a letter ruling revoked or modified when involving a transaction completed before the issuance of the letter ruling or involving a continuing transaction is entered into action or series of actions occurring before the issuance of the letter ruling, because the taxpayer before the issuance of the did not enter into the transaction relying on a letter ruling. letter ruling Taxpayer may request.11 Under§ 7805(b), the Service may prescribe any extent to which a revocation or modification that retroactive effect of of a letter ruling will be applied without retroactive effect. revocation or modification be limited A taxpayer to whom a letter ruling has been issued may request that the appropriate Deputy Associate Chief Counsel limit the retroactive effect of any revocation or modification of the letter ruling. For letter rulings governed by Rev. Proc. 2024-4, this Bulletin, a taxpayer to whom a letter ruling has been issued by the Commissioner, Tax Exempt and Government Entities, may request limiting the retroactive effect of any revocation or modification of the letter ruling pursuant to the procedures set forth in section 29 of Rev. Proc. 2024-4. Format of request (1) Request for relief under§ 7805(b) must be made in required format. A request to limit the retroactive effect of the revocation or modification of a letter ruling must be in the general form of, and meet the general requirements for, a letter ruling request, as set forth in section 7 of this revenue procedure. Specifically, the request must also (a) state that it is being made under§ 7805(b); (b) state the relief sought; (c) explain the reasons and arguments in support of the relief requested (including a discussion of section 11.05 of this revenue procedure, the three items listed in section 11.06 of this revenue procedure, and any other factors as they relate to the taxpayer's particular situation); and (d) include any documents bearing on the request. A request that the Service limit the retroactive effect of a revocation or modification of a letter ruling may be made in the form of a separate request for a letter ruling when, for example, a revenue ruling has the effect of modifying or revoking a letter ruling previously issued to the taxpayer or when the Service notifies the taxpayer of a change in position that will have the effect of revoking or modifying the letter ruling. When notice is given by the field office, during an examination of the taxpayer's return, or by Appeals, during consideration of the taxpayer's return before Appeals, a request to limit retroactive effect must be made in the form of a request for technical advice as explained in section 14.02 of Rev. Proc. 2024-2, this Bulletin. When germane to a pending letter ruling request, a request to limit the retroactive effect of a revocation or modification of a letter ruling may be made as part of the request for the letter ruling, either initially or at any time before the letter ruling is issued. When a letter ruling that concerns a continuing transaction is revoked or modified by, for example, a subsequent revenue ruling, a request to limit retroactive effect must be made before the examination of the return that contains the transaction that is the subject of the letter ruling request. Request for conference (2) Taxpayer may request a conference on application of§ 7805(b). A taxpayer who requests the application of§ 7805(b) in a separate letter ruling request has the right to a conference in the Associate office as explained in sections 10.02, 10.04, and 10.05 of this revenue procedure. If the request is made initially as part of a pending letter ruling request or is made before the conference of right is held on the substantive issues, the§ 7805(b) issue will be discussed at the taxpayer's one conference of right as explained in section 10.02 of this revenue procedure. If the request for the application of§ 7805(b) relief is made as part of a pending letter ruling request after a conference has been held on the substantive issue and the Associate office determines that there is justification for having delayed the request, the taxpayer is entitled to one conference of right concerning the application of§ 7805(b), with the conference limited to discussion of this issue only. SECTION 12. Directors issue determination letters only if the question presented is specifically answered UNDERWHAT by a statute, tax treaty, regulation, a conclusion stated in a revenue ruling, or an opinion or court CIRCUMSTANCES DO decision that represents the position of the Service. DIRECTORS ISSUE DETERMINATION LETTERS? Under no circumstances will a Director issue a determination letter unless it is clearly shown that the request concerns a return that has been filed or is required to be filed and over which the Director has, or will have, examination jurisdiction. See generally section 6 of this revenue procedure for areas in which the Service will not issue determination letters. A determination letter does not include assistance provided by the U.S. competent authority pursuant to the mutual agreement procedure in tax treaties as set forth in Rev. Proc. 2015-40, 2015-35 I.R.B. 236. In income and gift tax.01 In income and gift tax matters, Directors issue determination letters in response to taxpayers' matters written requests on completed transactions that affect returns over which they have examination jurisdiction. A determination letter usually is not issued for a question concerning a return to be filed by the taxpayer if the same question is involved in a return already filed. Normally, Directors do not issue determination letters on the tax consequences of proposed transactions. A Director may issue a determination letter on the replacement of involuntarily converted property under§ 1033, even if the replacement has not yet been made, if the taxpayer has filed an income tax return for the first taxable year in which any of the gain was realized from the converted property. In estate tax matters.02 In estate tax matters, Directors issue determination letters in response to written requests affecting the estate tax returns over which they have examination jurisdiction. They do not issue determination letters on matters concerning the application of the estate tax to the prospective estate of a living person. In generation-skipping.03 In generation-skipping transfer tax matters, Directors issue determination letters in response transfer tax matters to written requests affecting the generation-skipping transfer tax returns over which they have examination jurisdiction. They do not issue determination letters on matters concerning the application of the generation-skipping transfer tax before the distribution or termination takes place. In employment and excise.04 In employment and excise tax matters, Directors issue determination letters in response tax matters to taxpayers' written requests on completed transactions over which they have examination jurisdiction. All determination letter requests regarding employment status (employer/employee relationship) made by taxpayers that are not Federal agencies and instrumentalities or their workers, must be submitted to the Internal Revenue Service as set forth in the current instructions for Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. If the service recipient (the firm) requests the determination regarding employment status, the firm will receive any determination letter issued. A copy will also be sent to any workers identified in the request. If the worker makes the request and the firm has been contacted for information, both the worker and the firm will receive any issued determination letter. The determination letter will apply to any individuals engaged by the firm under substantially similar circumstances. See section 5.10 of this revenue procedure for requests regarding employment status made by Federal agencies and instrumentalities or their workers. In tax-exempt matters.05 In tax-exempt matters, Directors issue determination letters in response to applications for recognition of tax exemption under the jurisdiction of the Commissioner, TE/GE as set forth in Rev. Proc. 2024-5. Requests concerning.06 A request received by a Director on a question concerning an income, estate, or gift tax income, estate, or gift tax return already filed generally will be considered in connection with the examination of the return. returns If a response is made to the request before the return is examined, it will be considered a tentative finding in any later examination of that return. Review of determination.07 Determination letters issued under sections 12.01 through 12.04 of this revenue procedure letters are not reviewed by the Associate offices before they are issued. If a taxpayer believes that a determination letter of this type is in error, the taxpayer may ask the Director to reconsider the matter or to request technical advice from an Associate office as explained in Rev. Proc. 2024-2, this Bulletin. The preceding sentence does not apply to SS-8 requests under section 12.04. If a taxpayer disagrees with a determination of employment status made in response to an SS-8 request, the taxpayer may request that the SS-8 Program reconsider the determination letter if the taxpayer has additional information concerning the relationship that was not part of the original submission or the taxpayer can identify facts that were part of the original submission that the taxpayer thinks were not fully considered. SECTION 13. WHAT EFFECT WILL A DETERMINATION LETTER HAVE? Has same effect as a letter.01 A determination letter issued by a Director has the same effect as a letter ruling issued to a ruling taxpayer under section 11 of this revenue procedure. If a field office proposes to reach a conclusion contrary to that expressed in a determination letter, that office need not refer the matter to the Associate office as is required for a letter ruling found to be in error. The field office must, however, refer the matter to the Associate office through the appropriate Director if it desires to have the revocation or modification of the determination letter limited under§ 7805(b), except if the determination letter has been issued by the Commissioner, Tax Exempt and Government Entities. See Rev. Proc. 2024-4 and Rev. Proc. 2024-5, this Bulletin. Taxpayer may request.02 Under§ 7805(b), the Service may prescribe the extent to which a revocation or modification that retroactive effect of of a determination letter will be applied without retroactive effect. For determination letters that revocation or modification are not issued by the Commissioner, Tax Exempt Government Entities, a Director does not have be limited authority under§ 7805(b) to limit the revocation or modification of the determination letter. Therefore, if the field office proposes to revoke or modify a determination letter, the taxpayer may request limitation of the retroactive effect of the revocation or modification by asking the Director that issued the determination letter to seek technical advice from the Associate office. See section 14.02 of Rev. Proc. 2024-2, this Bulletin. A taxpayer to whom a determination letter has been issued by the Commissioner, Tax Exempt and Government Entities, may request limiting the retroactive effect of any revocation or modification of the determination letter pursuant to the procedures set forth in section 23 of Rev. Proc. 2024-4, or section 12.04 of Rev. Proc. 2024-5, this Bulletin. Format of request (1) Request for relief under§ 7805(b) must be made in required format. A taxpayer's request to limit the retroactive effect of the revocation or modification of the determination letter must be in the form of, and meet the general requirements for, a technical advice request. See section 14.02 of Rev. Proc. 2024-2, this Bulletin. The request must also-- (a) state that it is being made under§ 7805(b); (b) state the relief sought; (c) explain the reasons and arguments in support of the relief sought (including a discussion of section 11.05 of this revenue procedure, the three items listed in section 11.06 of this revenue procedure, and any other factors as they relate to the taxpayer's particular situation); and (d) include any documents bearing on the request. Request for conference (2) Taxpayer may request a conference on application of§ 7805(b). When technical advice is requested regarding the application of§ 7805(b), the taxpayer has the right to a conference with the Associate office to the same extent as does any taxpayer who is the subject of a technical advice request. See section 14.04 of Rev. Proc. 2024-2, this Bulletin. SECTION 14. UNDER WHAT CIRCUMSTANCES ARE MATTERS REFERRED BETWEEN A DIRECTOR AND AN ASSOCIATE OFFICE? Requests for determination.01 If a Director receives a request for a determination letter but may not issue one under the letters provisions of this revenue procedure, the Director will forward the request to the appropriate Associate office for reply. The field office will notify the taxpayer that the matter has been referred. Directors will also refer to the appropriate Associate office any request for a determination letter that in their judgment should have the attention of the Associate office. The field office will notify the taxpayer that the matter has been referred. No-rule areas.02 If the request involves an issue on which the Service will not issue a letter ruling or determination letter, the request will not be forwarded to an Associate office. The Director will notify the taxpayer that the Service will not issue a letter ruling or a determination letter on the issue. See section 6 of this revenue procedure for a description of no-rule areas. Requests for letter rulings.03 If an Associate office receives a request for a letter ruling that it may not act upon under section 6 of this revenue procedure, the Associate office may, in its discretion, forward the request to the field office that has examination jurisdiction over the taxpayer's return. The taxpayer will be notified of this action. If the request is on an issue or in an area of the type discussed in section 6 of this revenue procedure and the Service decides not to issue a letter ruling or a determination letter, the Associate office will notify the taxpayer and will then forward the request to the appropriate field office for association with the related return. Letter ruling request.04 If a request for a letter ruling is mistakenly sent to a Director, the Director will return it to mistakenly sent to a the taxpayer so that the taxpayer can send it to an Associate office. Director SECTION 15. WHAT ARE THE USER FEE REQUIREMENTS FOR REQUESTS FOR LETTER RULINGS AND DETERMINATION LETTERS? Legislation authorizing user.01 Section 7528 was added to the Internal Revenue Code by section 202 of the Extension of the fees Temporary Assistance for Needy Families Block Grant Program, Pub. L. No. 108-89, amended by section 891(a) of the American Jobs Creation Act of 2004, Pub. L. 108-357, and was made permanent by section 8244 of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, Pub. L. No. 110-28. Section 7528 provides that the Secretary of the Treasury or delegate (the "Secretary") shall establish a program requiring the payment of user fees for requests to the Service for letter rulings, opinion letters, determination letters, and other similar requests. The fees charged under the program are to: (1) vary according to categories or subcategories established by the Secretary; (2) be determined after taking into account the average time for, and difficulty of, complying with requests in each category or subcategory; and (3) be payable in advance. The Secretary is to provide for exemptions and reduced fees under the program as the Secretary determines to be appropriate, but the average fee applicable to each category or subcategory must not be less than the amount specified in§ 7528(b)(3). Requests to which a user fee.02 In general, user fees apply to all requests for-- applies (1) letter rulings (including non-automatic Forms 3115, Application for Change in Accounting Method ), determination letters, and advance pricing agreements; (2) closing agreements described in paragraph (A)(3)(d) of Appendix A of this revenue procedure and pre-filing agreements described in Rev. Proc. 2016-30, 2016-21 I.R.B. 981 (or its successor); (3) renewal of advance pricing agreements; (4) reconsideration of letter rulings or determination letters; and (5) supplemental letter rulings, determination letters, etc., to correct mistakes in original letter rulings, determination letters, etc. Requests to which a user fee applies must be accompanied by the appropriate fee as determined from the fee schedule provided in Appendix A of this revenue procedure. The fee may be refunded as provided in section 15.10 of this revenue procedure. Requests to which a user fee.03 User fees do not apply to-- does not apply (1) elections made pursuant to§ 301.9100-2, pertaining to automatic extensions of time ( see section 5.03 of this revenue procedure); (2) late classification elections made pursuant to Rev. Proc. 2009-41, 2009-2 C.B. 439 ( see section 5.03(6) of this revenue procedure); (3) late S corporation and related elections made pursuant to Rev. Proc. 2013-30, 2013-36 I.R.B. 173 ( see section 5.02 of this revenue procedure); (4) requests for a change in accounting period or method of accounting permitted to be made by a published automatic change request revenue procedure ( see section 9.01(1) of this revenue procedure); (5) requests for harassment campaign letter rulings under§ 6104(d)(4); (6) request for Neighborhood Land Use Rule letter rulings under§ 514(b)(3); (7) information letters; or (8) late elections under§ 338 that qualify under the automatic provisions in sections 3, 4, and 5 of Rev. Proc. 2003-33, 2003-1 C.B. 803. Exemptions from the user.04 The user fee requirements do not apply to-- fee requirements (1) departments, agencies, or instrumentalities of the United States if they certify that they are seeking a letter ruling or determination letter on behalf of a program or activity funded by Federal appropriations. The fact that a user fee is not charged does not have any bearing on whether an applicant is treated as an agency or instrumentality of the United States for purposes of any provision of the Code; or (2) requests as to whether a worker is an employee for Federal employment taxes and income tax withholding purposes (Subtitle C of the Code) submitted on Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, or its equivalent. Fee schedule.05 The schedule of user fees is provided in Appendix A of this revenue procedure. For the user fee requirements applicable to-- (1) requests for advance pricing agreements or renewals of advance pricing agreements, see section 3.05 of Rev. Proc. 2015-41, 2015-35 I.R.B. 263; or (2) requests for letter rulings, determination letters, etc., under the jurisdiction of the Commissioner, TE/GE (which no longer include changes in method of accounting), see Rev. Proc. 2024-4 and Rev. Proc. 2024-5, this Bulletin. Applicable user fee for a.06 request involving multiple offices, fee categories, issues, transactions, or (1) Requests involving several offices. If a request dealing with only one transaction involves more entities than one office within the Service (for example, one issue is under the jurisdiction of the Associate Chief Counsel (Passthroughs and Special Industries) and another issue is under the jurisdiction of the Commissioner, TE/GE), only one fee applies, namely the highest fee that otherwise would apply to each of the offices involved. See Rev. Proc. 2024-4 and Rev. Proc. 2024-5, this Bulletin, for the user fees applicable to issues under the jurisdiction of the Commissioner, TE/GE. However, if an additional request is submitted after the original ruling is issued, regardless of whether it relates to the same transaction or facts at issue in the earlier request, a new user fee applies. (2) Requests involving several fee categories. If a request dealing with only one transaction involves more than one fee category, only one fee applies: the highest fee that otherwise would apply to each of the categories involved. (3) Requests involving several issues. If a request dealing with only one transaction involves several issues, a request for a change in method of accounting dealing with only one item or submethod of accounting involves several issues, or a request for a change in accounting period dealing with only one item involves several issues, the request is treated as one request. Therefore, only one fee applies, i.e., the fee that applies to the particular category or subcategory involved. The addition of a new issue relating to the same transaction, item, or submethod will not result in an additional fee unless the issue places the transaction, item, or submethod in a higher fee category. So long as the issues all relate to a single transaction, a request that the Service address one or more of the issues in a separate ruling will not result in an additional fee. (4) Requests involving several unrelated transactions. If a request involves several unrelated transactions, a request for a change in method of accounting involves several unrelated items or submethods of accounting, or a request for a change in accounting period involves several unrelated items, each transaction or item is treated as a separate request. As a result, a separate fee will apply for each unrelated transaction, item, or submethod. An additional fee will apply if the request is changed by the addition of an unrelated transaction, item, or submethod not contained in the initial request. An example of a request involving unrelated transactions is a request involving relief under§ 301.9100-3 and the underlying issue. (5) Requests involving several entities. Each entity involved in a transaction (for example, a reorganization) that desires a separate letter ruling in its own name must pay a separate fee regardless of whether the transaction or transactions may be viewed as related. But see section 15.07 of this revenue procedure (providing a reduced user fee for substantially identical letter rulings or substantially identical changes in method of accounting). (6) Requests made by married taxpayers who file jointly. A married couple filing a joint return may jointly request a single letter ruling and pay a single user fee if the issues arise from a joint activity or if the spouses would otherwise qualify for substantially identical letter rulings. See section 15.07 of this revenue procedure. If a spouse desires a ruling to be individually issued to him or her, a separate fee must be paid for each individual request. Applicable user fee for.07 requests for substantially identical letter rulings or closing agreements, or (1) In general. The user fees provided in paragraph (A)(5) of Appendix A of this revenue identical changes in method procedure apply to the situations described in sections 15.07(2) and 15.07(4) of this revenue of accounting procedure. To assist in the processing of these user fee requests, all letter ruling requests submitted under this section 15.07 should-- (a) except for non-automatic Forms 3115, include the following typed or printed language at the top of the letter ruling request: "REQUEST FOR USER FEE UNDER SECTION 15.07 OF REV. PROC. 2024-1"; (b) list on the first page of the submission all taxpayers and entities, and separate and distinct trades or businesses, including QSubs or single-member LLCs, requesting a letter ruling (including the taxpayer identification number and the amount of user fee submitted for each taxpayer, entity, or separate and distinct trade or business); and (c) make one payment to cover all user fees. If the Service determines that the letter ruling requests do not qualify for the user fee provided in paragraph (A)(5) of Appendix A of this revenue procedure, the Service will request the proper fee. See section 15.09 of this revenue procedure. (2) Substantially identical letter rulings and closing agreements. The user fee provided in paragraph (A)(5)(a) of Appendix A of this revenue procedure applies to a taxpayer or taxpayers requesting substantially identical letter rulings (including accounting period, method of accounting, and earnings and profits requests other than those submitted on Form 1128, Application to Adopt, Change, or Retain a Tax Year, Form 2553, Election by a Small Business Corporation, Form 3115, Application for Change in Accounting Method, and Form 5452, Corporate Report of Nondividend Distributions ) in the following situations: (a) The taxpayers to whom the letter rulings will be issued are multiple entities with a common member, sponsor, or parent, or multiple members of a common entity or consolidated group; or (b) The taxpayers to whom the letter rulings will be issued are parties engaged together in the same transaction affecting all requesting taxpayers. To qualify for this reduced user fee, all information and underlying documents must be substantially identical and all letter ruling requests must be submitted at the same time in a single submission. In addition, the taxpayer(s) must state that the letter ruling requests and all information and underlying documents are substantially identical, and must specifically identify the extent to which the letter ruling requests, information, and underlying documents are not identical. If a taxpayer or taxpayers requesting reduced user fees pursuant to this section 15.07(2) also request a pre-submission conference pursuant to section 10.07, the taxpayer(s) should notify the Associate office at or before the pre-submission conference that the taxpayer(s) intend to request reduced user fees pursuant to this paragraph. At the pre-submission conference, the taxpayer(s) should discuss with the Associate office how the letter ruling requests will satisfy the requirements of this paragraph. The reduced fee for substantially identical letter rulings is applicable to taxpayers requesting closing agreements as described in section 2.02 of this revenue procedure, assuming they meet the requirements described above for letter rulings. (3) Substantially identical plans under§ 25(c)(2)(B). The user fee provided in paragraph (A)(5)(c) of Appendix A of this revenue procedure shall apply to a taxpayer who submits substantially identical plans for administering the 95-percent requirement of§ 143(d)(1) following the submission and approval of an initial plan for administering the requirement. The request for subsequent approvals of substantially identical plans must (1) state that a prior plan was submitted and approved and include a copy of the prior plan and approval; (2) state that the subsequent plan is substantially identical to the approved plan; and (3) describe any differences between the approved plan and the subsequent plan. (4) Identical changes in method of accounting and related§ 301.9100 letter rulings. A common sponsor of multiple entities, common parent of a consolidated group, or other taxpayer, is eligible for the user fees provided in paragraphs (A)(5)(b) and (d) of Appendix A of this revenue procedure when requesting an identical change in method of accounting on a single Form 3115, Application for Change in Accounting Method, or an extension of time to file Form 3115 under§ 301.9100-3 for the identical change in method of accounting, for two or more of the following in any combination-- (a) entities with a common sponsor; (b) members of that consolidated group; (c) separate and distinct trades or businesses (for purposes of§ 1.446-1(d)) of that taxpayer or member(s) of that consolidated group. Separate and distinct trades or businesses include QSubs and single-member LLCs; (d) partnerships that are wholly-owned within that consolidated group; or (e) controlled foreign corporations (CFCs) and noncontrolled 10-percent owned foreign corporations that do not engage in a trade or business within the United States where (i) all controlling U.S. shareholders of the CFCs and all majority domestic corporate shareholders of the noncontrolled 10-percent owned foreign corporations, as applicable, are members of that consolidated group; or (ii) the taxpayer is the sole controlling U.S. shareholder of the CFCs or the sole domestic corporate shareholder of that noncontrolled 10-percent owned foreign corporation. To qualify as an identical change in method of accounting, the multiple entities with a common sponsor, the multiple entities wholly owned or controlled by a consolidated group or other taxpayer, or separate and distinct trades or businesses (that is, the applicants) must request to change from an identical present method of accounting to an identical proposed method of accounting. All aspects of the requested change in method of accounting must be identical, including the year of change, the present and proposed methods, the underlying facts and the authority for the request, except for the§ 481(a) adjustments. If the Associate office determines that the requested changes in method of accounting are not identical, additional user fees will be required before any letter ruling is issued. The taxpayer, common sponsor, or common parent must, for each applicant for which the change in method of accounting is being requested, attach to the Form 3115 a schedule providing the name, employer identification number (where applicable), and§ 481(a) adjustment. If the request is on behalf of eligible CFCs or noncontrolled 10-percent owned foreign corporations, the taxpayer or common parent must attach a statement that "[a]ll controlling U.S. shareholders (as defined in§ 1.964-1(c)(5)(i)) of all the CFCs to which the request relates are members of the common parent's consolidated group," that "[a]ll majority domestic corporate shareholders (as defined in§ 1.964-1(c)(5)(ii)) of all the noncontrolled 10-percent owned foreign corporations to which the request relates are members of the common parent's consolidated group," that "[t] he taxpayer filing the request is the sole controlling U.S. shareholder (as defined in§ 1.964-1(c) (5)) of the CFCs to which the request relates," or that "[t]he taxpayer filing the request is the sole domestic corporate shareholder (as defined in§ 1.964-1(c)(5)) of the noncontrolled 10-percent owned foreign corporations to which the request relates," as applicable. If the request is on behalf of eligible partnerships, the common parent must attach a statement that "[a]ll partnerships to which the request relates are wholly-owned by members of the common parent's consolidated group." In the case of a§ 301.9100 request for an extension of time to file a Form 3115 requesting an identical change in method of accounting for multiple entities with a common sponsor, multiple members of a consolidated group and/or multiple separate and distinct trades or businesses of a taxpayer or member(s) of the consolidated group, or multiple eligible CFCs or noncontrolled 10-percent owned foreign corporations (applicants), the taxpayer, common sponsor, or common parent must submit the information required in the preceding paragraph in addition to the information required by section 5.03 of this revenue procedure. Method of payment.08 Each request to the Service that is subject to a user fee under this revenue procedure must be accompanied by full payment. The user fees for all requests must be paid through www.pay.gov. Foreign entities that wish to submit payment from a foreign bank may submit their payment by check. To locate the appropriate form on www.pay.gov, search for "Counsel Rulings User Fees" or navigate directly tohttps://www.pay.gov/public/form/start/106105509 (as of January 3, 2022). Effect of nonpayment.09 If a request is not matched with full payment, the office within the Service that is responsible or payment of incorrect for issuing the letter ruling, determination letter, advance pricing agreement, closing agreement, amount or reconsideration of a letter ruling or determination letter generally will exercise discretion in deciding whether to immediately return the request. If a request is not immediately returned, the taxpayer will be contacted and given a reasonable amount of time to submit the proper fee. If the proper fee is not received within a reasonable amount of time, the request will then be returned. The Service will usually defer substantive consideration of a request until proper payment has been received. The return of a request to the taxpayer may adversely affect substantive rights if the request is not perfected and resubmitted to the Service within 30 calendar days of the date of the cover letter returning the request. If a payment is made for more than the correct amount, the request will be accepted and the amount of the excess payment will be refunded to the taxpayer. If a ruling is issued and because of the ruling the taxpayer's gross income is reduced such that the taxpayer would have qualified for a reduced user fee in Appendix A, paragraph (A)(4), the amount of user fee paid in excess of the reduced fee will be refunded to the taxpayer. Refunds of user fee.10 In general, user fees will not be refunded. User fees, however, will be refunded in the following situations. (1) A user fee paid with a request to correct a mistake or omission in a prior issued letter ruling, determination letter, etc., will be refunded if the Service determines that the Service was responsible for the mistake or omission. (2) A user fee paid with a request for relief under§ 7805(b) in connection with the revocation in whole or in part, of a previously issued letter ruling, determination letter, etc., will be refunded if the relief is granted. (The user fee paid for the letter ruling, determination letter, etc., that was revoked is never refunded.) (3) A user fee paid with a request for reconsideration of the Service's decision not to rule on an issue will be refunded if the Service agrees to rule on the issue and the user fee paid with the initial request was not refunded. (4) If the requested ruling, determination letter, etc., is not issued for any reason, and the Service determines that a refund is appropriate after taking into account all the facts and circumstances, including the amount of the Service's time and resources spent on the request, the user fee will be refunded. Request for reconsideration.11 A taxpayer who believes the user fee charged by the Service for its request for a letter ruling, of user fee determination letter, advance pricing agreement, or closing agreement is either inapplicable or incorrect and wishes to receive a refund of all or part of the amount paid ( see section 15.10 of this revenue procedure) may request reconsideration and, if desired, the opportunity for an oral discussion by sending a letter to the Service at the appropriate address given in section 7.04 in this revenue procedure. Both the incoming envelope and the letter requesting such reconsideration should be prominently marked "USER FEE RECONSIDERATION REQUEST." No user fee is required for these requests. The request should be marked for the attention of: If the matter involves Mark for the attention of: primarily: Associate Chief Counsel Associate Chief Counsel (Corporate) (Corporate) letter ruling requests Associate Chief Counsel Deputy Associate Chief Counsel ( ) (Employee Benefits, (Complete parenthetical by using the applicable designation "Employee Benefits" or "Exempt Exempt Organizations, and Organizations and Employment Taxes") Employment Taxes) letter ruling requests Associate Chief Counsel Associate Chief Counsel (Financial Institutions and Products) (Financial Institutions and Products) letter ruling requests Associate Chief Counsel Associate Chief Counsel (Income Tax and Accounting) (Income Tax and Accounting) letter ruling requests Associate Chief Counsel Associate Chief Counsel (International) (International) letter ruling requests Associate Chief Counsel Associate Chief Counsel (Passthroughs and Special Industries) (Passthroughs and Special Industries) letter ruling requests Associate Chief Counsel Associate Chief Counsel (Procedure and Administration) (Procedure and Administration) letter ruling requests Determination letter Assistant Deputy Commissioner, Compliance Integration requests submitted pursuant to this revenue procedure by taxpayers under the jurisdiction of LB&I Determination letter Director, SB/SE Exam, Specialty Policy requests submitted pursuant to this revenue procedure by taxpayers under the jurisdiction of SB/SE (with regards to estate and gift taxes, employment taxes, and excise taxes) Determination letter SB/SE Examination Field Exam Area Director requests submitted pursuant to this revenue procedure by taxpayers under the jurisdiction of SB/SE (with respect to income taxes) Determination letter Director, Return Integrity and Compliance Services, W&I requests submitted pursuant to this revenue procedure by taxpayers under the jurisdiction of W&I Determination letter Director, Employee Plans Examinations requests submitted Director, Exempt Organizations Examinations pursuant to this revenue Director, Government Entities procedure by taxpayers under the jurisdiction of (Add name of field office handling the request) TE/GE SECTION 16. WHAT Section 3.01 has been amended to include the excise tax on repurchases of corporate stock SIGNIFICANT CHANGES under§ 4501 as an issue under the jurisdiction of the Associate Chief Counsel (Corporate). HAVE BEEN MADE TO REV. PROC. 2023-1? Section 3.01 has been further amended to direct users to Rev. Proc. 2023-26, 2023-33 I.R.B. 486 for procedures for fast-track processing of certain requests for letter rulings solely or primarily under the jurisdiction of the Associate Chief Counsel (Corporate). Section 6.03(2) has been deleted to reflect the elimination by Associate Chief Counsel (Corporate) of the significant issue practice. Section 6.11 has been amended to permit issuance of a 'comfort letter' relating to certain issues under§§ 332, 351, 355, 368, 1036, and related operative provisions, of the Tax Code. Section 7.02(4) has been amended to clarify that, except for a§ 301.9100 request described in section 5.03 of this revenue procedure or for a request that includes a closing agreement with respect to an issue under the jurisdiction of the Associate Chief Counsel (Corporate) or another Associate Office, expedited handling under this section is not available for a letter ruling request that is solely or primarily under the jurisdiction of the Associate Chief Counsel (Corporate). Section 7.04 has been amended to provide that request for determination letter under the jurisdiction of SB/SE or W&I may be submitted only by electronic facsimile. Section 7.04(1)(b) has been deleted as users may no longer mail in requests for determination letters to SB/SE (with regards to estate and gift taxes, employment taxes, and excise taxes) or to W&I. Section 8.02(2)(b) has been updated to direct users to section 5.05(1) of Rev. Proc. 2023-26, 2023-33 I.R.B. 486 for special rules and procedures applying to letter ruling requests under the jurisdiction of the Associate Chief Counsel (Corporate). Section 8.05(1) has been updated to direct users to section 5.05(1) of Rev. Proc. 2023-26, 2023-33 I.R.B. 486 for special rules and procedures applying to letter ruling requests under the jurisdiction of the Associate Chief Counsel (Corporate). Section 8.07 has been amended to clarify that a taxpayer submitting a fast-track processing of certain letter rulings that are solely or primarily under the jurisdiction of the Associate Chief Counsel (Corporate) must submit a proposed draft of the letter ruling at the time of the request pursuant to section 5.03(5) of Rev. Proc. 2023-26, 2023-33 I.R.B. 486. Section 10.09 has been added to inform users that special rules and procedures apply to letter rulings requests that are primarily or solely under the jurisdiction of the Associate Chief Counsel (Corporate). Section 15.08 has been amended to require the payment of the user fees described in that section through Pay.gov. Appendix A(2) has been amended to reflect updated fees for Advance Pricing Agreement requests. Appendix A(3)(e) has been amended to reflect an updated fee for requests for Foreign Insurance Excise Tax Waiver Agreements. Appendix A(8) has been amended to reflect an updated fee for requests for tax treaty limitation of benefits determinations. Editorial and clarifying changes have been made throughout. SECTION 17. WHAT Rev. Proc. 2023-1, 2023-1 I.R.B. 1, is superseded. IS THE EFFECT OF THIS REVENUE PROCEDURE ON OTHER DOCUMENTS? SECTION 18. WHAT IS This revenue procedure is effective for all requests received on or after January 2, 2024. Rev. THE EFFECTIVE DATE Proc. 2023-1 governs requests received prior to January 2, 2024 and after January 2, 2023. OF THIS REVENUE PROCEDURE? SECTION 19. The collections of information contained in this revenue procedure have been reviewed and PAPERWORK approved by the Office of Management and Budget in accordance with the Paperwork Reduction REDUCTION ACT Act (44 U.S.C.§ 3507) under control number 1545-1522. 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 control number. The collections of information in this revenue procedure are in sections 5.06, 6.03, 7.01, 7.02, 7.03, 7.04, 7.05, 7.07, 7.08, 8.02. 8.05, 8.07, 10.01, 10.06, 10.07, 11.11, 13.02, 15.02, 15.07, 15.08, 15.09, 15.11, paragraph (B)(1) of Appendix A, Appendix C, Appendix D, Appendix E, and Appendix F (subject matter rate orders; regulatory agency; normalization). This information is required to evaluate and process the request for a letter ruling or determination letter. In addition, this information will be used to help the Service delete certain information from the text of the letter ruling or determination letter before it is made available for public inspection as required by§ 6110. The collections of information are required to obtain a letter ruling or determination letter. The likely respondents are businesses or other for-profit institutions and tax-exempt organizations. The estimated total annual reporting and/or recordkeeping burden is 316,020 hours. The estimated annual burden per respondent/recordkeeper varies from 1 to 200 hours, depending on individual circumstances, with an estimated average burden of 80 hours. The estimated number of respondents and/or recordkeepers is 3,956. The estimated annual frequency of responses 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§ 6103. DRAFTING The principal author of this revenue procedure is David Villagrana of the Office of Associate INFORMATION Chief Counsel (Procedure and Administration). For further information regarding this revenue procedure for matters under the jurisdiction of-- (1) the Associate Chief Counsel (Corporate), contact T. Ian Russell or Jordan Proffitt at (202) 317-3181 (not a toll-free call), (2) the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), contact Melissa L. Duce at (202) 317-6000 (not a toll-free call), (3) the Associate Chief Counsel (Financial Institutions and Products), contact K. Scott Brown at (202) 317-6945 (not a toll-free call), (4) the Associate Chief Counsel (Income Tax and Accounting), contact R. Matthew Kelley at (202) 317-7002 (not a toll-free call), (5) the Associate Chief Counsel (International), contact Shane McCarrick at (202) 317-3800 (not a toll-free call), (6) the Associate Chief Counsel (Passthroughs and Special Industries), contact Bradford Poston at (202) 317-4137 (not a toll-free call), or (7) the Associate Chief Counsel (Procedure and Administration), contact Stephanie Chernoff at (202) 317-3400 (not a toll-free call). For further information regarding user fees, contact the Technical Services Support Branch at (202) 317-6828 (not a toll-free call). For further information regarding determination letters: LB&I taxpayers should contact Adrian Hirmiz in the LB&I Policy Office by e-mail at lbi.irt. info@irs.gov, or by e-fax at (844) 249-6231; SB/SE taxpayers, for questions regarding determination letters involving estate and gift taxes, employment taxes, or excise taxes, should contact Jesse Walker in SB/SE Specialty Exam Policy by electronic facsimile at (855) 509-8687; SB/SE taxpayers, for questions regarding determination letters involving income taxes, should submit either their question or a request to speak to someone in SB/SE Examination Field Exam Area Director by electronic facsimile to (877) 477-9193. If the request involves a pending request for a determination letter, please provide the taxpayer's taxpayer identification number, phone number, and address as reflected in the request for a determination letter; W&I taxpayers should submit either their question or a request to speak to someone in Return Integrity and Compliance Services, W&I, by electronic facsimile to (855) 863-8342. If the request involves a pending request for a determination letter, please provide the taxpayer's taxpayer identification number, phone number, and address as reflected in the request for a determination letter; and TE/GE taxpayers should also refer to Revenue Procedures 2024-4 and 2024-5, this Bulletin. APPENDIX A SCHEDULE OF USER FEES NOTE: Payment must be in U.S. dollars and made through www.pay.gov for all requests. See sections 15.08 and 15.09 of this revenue procedure. (A) FEE SCHEDULE CATEGORY USER FEE FOR USER FEE FOR REQUESTS REQUESTS RECEIVED PRIOR TO RECEIVED AFTER FEBRUARY 2, 2024 FEBRUARY 1, 2024 (1) User fee for a request for a determination letter from a Director. The $275 $275 user fee for each determination letter request governed by Rev. Proc. 2024-1, this revenue procedure. (2) User fee for an advance pricing agreement (APA) request. (a) Type of APA (i) Original APA $113,500 $121,600 (ii) Renewal APA $62,000 $65,900 (iii) Small Case APA $54,000 $57,500 (iv) APA Amendment $23,000 $24,600 (3) User fee for a request for a letter ruling or closing agreement. Except for the user fees for advance pricing agreements and renewals, the reduced fees provided in paragraph (A)(4) of this appendix, the user fees provided in paragraph (A)(5) of this appendix, and the exemptions provided in section 15.04 of this revenue procedure, the user fee for each request for a letter rul- ing or closing agreement under the jurisdiction of the Associate Chief Coun- sel (Corporate), the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), the Associate Chief Counsel (Finan- cial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (International), the Associate Chief Counsel (Passthroughs and Special Industries), or the Associate Chief Counsel (Procedure and Administration) is as follows: (a) Accounting periods (i) Form 1128, Application to Adopt, Change, or Retain a Tax Year, $5,000 $5,000 (except as provided in paragraph (A)(4)(a) of this appendix) (ii) Requests made on Part II of Form 2553, Election by a Small Busi- $5,000 $5,000 ness Corporation, to use a fiscal year based on a business purpose (except as provided in paragraph (A)(4)(a) of this appendix) (iii) Letter ruling requests for extensions of time to file Form 1128, $5,300 $5,300 Application to Adopt, Change, or Retain a Tax Year, Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, or Part II of Form 2553 under§ 301.9100-3 (except as provided in paragraph (A)(4)(a) of this appendix) (b) Changes in Methods of Accounting (i) Non-automatic Form 3115, Application for Change in Account- $11,500 $11,500 ing Method (except as provided in paragraph (A)(4)(a) or (b), or (5)(b) of this appendix) (ii) Letter ruling requests for extensions of time to file Form 3115, Ap- $12,500 $12,500 plication for Change in Accounting Method, under§ 301.9100-3 (except as provided in paragraph (A)(4)(a) or (b), or (5)(d) of this appendix) No user fee is required if the change in accounting period or method of account- ing is permitted to be made pursuant to a published automatic change request procedure. See section 9.22 and Appendix F of this revenue procedure, for the list of automatic change request procedures published and/or in effect as of December 31, 2023. (c) (i) Letter ruling requests for relief under§ 301.9100-3 or§ 1362(b) $12,600 $12,600 (5) (except as provided in paragraph (A)(4)(a) or (b), or (5)(a) of this appendix) (ii) All other letter ruling requests (including accounting period and $38,000 $38,000 method of accounting requests other than those properly submit- ted on Form 1128, Application to Adopt, Change, or Retain a Tax Year, Part II of Form 2553, Election by a Small Business Cor- poration, or Form 3115, Application for Change in Accounting Method ) (except as provided in paragraph (A)(4)(a) or (b), or (5) (a) of this appendix) (c) (i) Letter ruling requests for relief under§ 301.9100-3 or§ 1362(b)(5) (except as provided in paragraph (A)(4)(a) or (b), or (5)(a) of this appendix) (d) Requests for closing agreements on a proposed transaction or on a $38,000 $38,000 completed transaction before a return for the transaction has been filed in which a letter ruling on that transaction is not requested or issued (except as provided in paragraph (A)(4)(a) or (b), and in paragraph (A)(5), of this appendix) (e) A request for a Foreign Insurance Excise Tax Waiver Agreement $8,000 $12,000 NOTE: A taxpayer who receives relief under§ 301.9100-3 (for example, an ex- tension of time to file Form 3115, Application for Change in Accounting Method ) will be charged a separate user fee for the letter ruling request on the underlying issue (for example, the accounting period or method of accounting application). (4) Reduced user fee for a request for a letter ruling, method or period change, or closing agreement. A reduced user fee for a request involving a personal, exempt organization, governmental entity, or business tax issue is provided in the following situations if the person provides the certification de- scribed in paragraph (B)(1) of this appendix: (a) Request involves a tax issue from a person with gross income (as de- $3,000 $3,000 termined under paragraphs (B)(2), (3), (4), and (5) of this appendix) of less than $250,000 (b) Request involves a tax issue from a person with gross income (as de- $8,500 $8,500 termined under paragraphs (B)(2), (3), (4), and (5) of this appendix) of less than $1 million and $250,000 or more (5) User fee for substantially identical letter ruling requests or closing agree- ments, identical changes in method of accounting, or plans from issuing au- thorities under§ 25(c)(2)(B). If the requirements of section 15.07 of this reve- nue procedure are satisfied, the user fee for the following situations is as follows: (a) Substantially identical letter rulings and closing agreements requested $3,800 $3,800 (other than changes in methods of accounting requested on Form 3115) Requests for substantially identical letter rulings or closing agree- ments for multiple entities with a common member, sponsor, or parent, or for multiple members of a common entity or consolidated group, or for parties engaged together in the same transaction affecting all requesting taxpayers, for each additional letter ruling request after the $30,000 fee or reduced fee, as applicable, has been paid for the first letter ruling request. These requests may include, but are not limited to, requests for substantially identical letter rulings for two or more identical trusts, multiple beneficiaries of a trust, a trust divided into identical subtrusts, spouses making split gifts, or series funds within a single trust or series organization. NOTE: Each entity or member that is entitled to the user fee under paragraph (A)(5)(a) of this appendix that receives relief under§ 301.9100-3 (for example, an extension of time to file an election) will be charged a separate user fee for the letter ruling request on the underlying issue. NOTE: The fee charged for the first letter ruling is the highest fee applicable to any of the entities. NOTE: Where the requests for the letter rulings are submitted by a private foundation described in§ 509 and one or more disqualified persons described in§ 4946, the fee charged for the first letter ruling to a disqualified person is the highest fee applicable to any of the taxpayers. (b) Identical change in method of accounting requested on a single Form $245 $245 3115, Application for Change in Accounting Method, as provided in section 15.07(4) (fee for each additional applicant seeking the identi- cal change in method of accounting on the same Form 3115 after the $10,800 fee or reduced fee, as applicable, has been paid for the first applicant) (c) Substantially identical plans under§ 25(c)(2)(B) (situations where an $1,500 $1,500 issuing authority under§ 25 submits substantially identical plans for administering the 95-percent requirement of§ 143(d)(1) following the submission of an initial plan that was approved) NOTE: The fee charged for the first letter ruling is the highest fee applicable to any of the entities. (d) Extension of time requested to file Form 3115, Application for $245 $245 Change in Accounting Method, for an identical change in method of accounting as provided in section 15.07(4) (fee for each addi- tional or each additional applicant seeking the identical extension of time under§ 301.9100-3 to file a single Form 3115 for the identical change in method of accounting after the $11,800 fee or reduced fee, as applicable, has been paid for the first applicant) NOTE: When an extension of time to file Form 3115, Application for Change in Accounting Method, is granted under§ 301.9100-3 for multiple applicants, a separate user fee will be charged for the change in method of accounting application, Form 3115. (6) User fee for information letter requests. $0 $0 (7) User fee for pre-filing agreements. $181,500 $181,500 (8) Tax treaty limitation of benefits. See Rev. Proc. 2015-40, 2015-35 I.R.B. $37,000 $51,900 236 for procedures for requesting competent authority assistance under tax treaties. (9) Statement of Value. See Rev. Proc. 96-15 for procedures for requesting a statement of value. (A) User fee for a case with 1-3 items $7,500 $7,500 (B) Cost per each additional item beyond 3 $400 $400 (B) PROCEDURAL MATTERS (1) Required certification. A person seeking a reduced user fee under paragraph (A)(4) of this Appendix must provide the following certification in order to obtain the reduced user fee: (a) If a person is seeking a reduced user fee under paragraph (A)(4)(a) of this appendix, the person must certify in the request that his, her, or its gross income, as defined under paragraphs (B)(2), (3), (4), and (5) of this appendix, as applicable, is less than $250,000 as reported on their last Federal income tax return (as amended) filed for a full (12 months) taxable year ending before the date the request is filed. (b) If a person is seeking a reduced user fee under paragraph (A)(4)(b) of this appendix, the person must certify in the request that his, her, or its gross income, as defined under paragraphs (B)(2), (3), (4), and (5) of this appendix, as applicable, is less than $1 million and more than $250,000 as reported on their last Federal income tax return (as amended) filed for a full (12 months) taxable year ending before the date the request is filed. The certification must be attached as part of the ruling request. (2) Gross income for a request involving a personal tax issue. For purposes of the reduced user fees provided in paragraphs (A)(4)(a) and (b) of this Appendix for-- (a) U.S. citizens and resident alien individuals, domestic trusts, and domestic estates, "gross income" is equal to "total income" as reported on their last Federal income tax return (as amended) filed for a full (12-month) taxable year ending before the date the request is filed, plus any interest income not subject to tax under§ 103 (interest on state and local bonds) for that period. "Total income" is a line item on Federal tax returns. For example, if the 2020 Form 1040, U.S. Individual Income Tax Return, is the most recent 12-month taxable year return filed by a U.S. citizen, "total income" on the Form 1040 is the amount entered on line 9. In the case of a request for a letter ruling or closing agreement from a domestic estate or trust that, at the time the request is filed, has not filed a Federal income tax return for a full taxable year, the reduced user fee in paragraph (A)(4)(a) of this Appendix will apply if the decedent's or (in the case of an individual grantor) the grantor's total income as reported on the last Federal income tax return filed for a full taxable year ending before the date of death or the date of the transfer, taking into account any additions required to be made to total income described in paragraph (B)(2)(a), is less than $250,000 (or less than $1,000,000 for the paragraph (A)(4)(b) fee to apply). In this case, the executor or administrator of the decedent's estate or the grantor must provide the certification required under paragraph (B)(1) of this appendix. (b) Nonresident alien individuals, foreign trusts, and foreign estates, "gross income" is equal to "total effectively connected income" as reported on their last Federal income tax return (as amended) filed for a full (12 months) taxable year ending before the date the request is filed, plus any income for the period from United States or foreign sources that is not taxable by the United States, whether by reason of§ 103, an income tax treaty,§ 871(h) (regarding portfolio interest), or otherwise, plus the total amount of any fixed or determinable annual or periodical income from United States sources, the United States tax liability for which is satisfied by withholding at the source. "Total effectively connected income" is a line item on Federal tax returns. For example, if the 2020 Form 1040-NR, U.S. Nonresident Alien Income Tax Return, is the most recent 12-month taxable year return filed by a nonresident alien individual, "total effectively connected income" on the Form 1040-NR is the amount entered on line 9. In the case of a request for a letter ruling or closing agreement from a foreign estate or trust that, at the time the request is filed, has not filed a Federal income tax return for a full taxable year, the reduced user fee in paragraph (A)(4)(a) of this Appendix will apply if the decedent's or (in the case of an individual grantor) the grantor's total income or total effectively connected income, as relevant, as reported on the last Federal income tax return filed for a full taxable year ending before the date of death or the date of the transfer, taking into account any additions required to be made to total income or total effectively connected income described respectively in paragraph (B)(2)(a) of this Appendix or in this paragraph (B)(2)(b), is less than $250,000 (or less than $1,000,000 for the paragraph (A)(4)(b) fee to apply). In this case, the executor or administrator of the decedent's estate or the grantor must provide the certification required under paragraph (B)(1) of this Appendix. (3) Gross income for a request involving a business-related tax issue. For purposes of the reduced user fees provided in paragraphs (A)(4)(a) and (b) of this Appendix of-- (a) U.S. citizens and resident alien individuals, domestic trusts, and domestic estates, "gross income" is equal to gross income as defined under paragraph (B)(2)(a) of this Appendix, plus "cost of goods sold" as reported on the same Federal income tax return. (b) Nonresident alien individuals, foreign trusts, and foreign estates, "gross income" is equal to gross income as defined under paragraph (B)(2)(b) of this Appendix, plus "cost of goods sold" as reported on the same Federal income tax return. (c) Partnerships with a Form 1065 filing requirement and corporations (foreign and domestic), "gross income" is equal to "total income" as reported on their last Federal tax return (as amended) filed for a full (12 months) taxable year ending before the date the request is filed, plus "cost of goods sold" as reported on the same Federal tax return, plus any interest income not subject to tax under§ 103 (interest on state and local bonds) for that period. Partnerships with a Form 1065 filing requirement should also include "gross rents" reported on Form 8825 at line 2, as well as the income amounts reported on Schedule K Form 1065 at lines 3a, 5, 6a, 7, 8, 9a, 10, and 11 from the same Federal tax return described in the preceding sentence to calculate "gross income" for the purpose of applying the reduced user fee in paragraph (A)(4) of this Appendix. S Corporations with a Form 1120S filing requirement should also include "gross rents" reported on Form 8825 at line 2, as well as the income amounts reported on Schedule K Form 1120S at lines 3a, 4, 5a, 6, 7, 8a, 9, and 10 from the same Federal tax return described in the first sentence of this paragraph to calculate "gross income" for the purpose of applying the reduced user fee in paragraph (A)(4) of this Appendix. If a partnership or S Corporation is not required to file or a C corporation is not subject to tax, "total income" and "cost of goods sold" are the amounts that the partnership or corporation would have reported on the Federal tax return if the partnership or S Corporation had been required to file or the C corporation had been subject to tax. "Cost of goods sold" and "total income" are line items on Federal tax returns. For example, if the 2020 Form 1065, U.S. Return of Partnership Income, is the most recent 12-month taxable year return filed by a partnership, "cost of goods sold" and "total income" on the Form 1065 are the amounts entered on lines 2 and 8, respectively; if the 2020 Form 1120, U.S. Corporation Income Tax Return, is the most recent 12-month taxable year return filed by a domestic corporation, "cost of goods sold" and "total income" on the Form 1120 are the amounts entered on lines 2 and 11, respectively; and if the 2020 Form 1120S, U.S. Income Tax Return for an S Corporation, is the most recent 12-month taxable year return filed by an S corporation, "cost of goods sold" and "total income" on the Form 1120S are the amounts entered on lines 2 and 6, respectively. If, at the time the request is filed, a partnership or S corporation required to file or a C corporation subject to tax has not filed a Federal tax return for a full taxable year, the reduced user fee in paragraph (A)(4)(a) or (b) of this Appendix will apply if, in the aggregate, the partners' or the shareholders' gross income (as defined in paragraph (B)(3)(a), (b), or (c), of this Appendix, as applicable) is less than $250,000 for purposes of paragraph (A)(4)(a) or $1 million for purposes of paragraph (A)(4)(b) for the last full (12 months) taxable year ending before the date the request is filed. In this case, the partners or the shareholders must provide the certification required under paragraph (B)(1) of this Appendix. (4) Gross income for a request involving an exempt organization or governmental entity. For purposes of the reduced user fees provided in paragraphs (A)(4)(a) and (b) of this Appendix of-- (a) Organizations exempt from income tax under "Subchapter F-Exempt Organizations" of the Code, "gross income" is equal to the amount of gross receipts for the last full (12 months) taxable year ending before the date the request for a letter ruling or closing agreement is filed. (b) State, local, and Indian tribal government entities, "gross income" is equal to the annual operating revenue of the government requesting the ruling for its last fiscal year ending before the date of the ruling request. The annual operating revenue is to be determined at the government level and not at the level of the government entity or agency making the request. (5) Special rules for determining gross income. For purposes of paragraphs (B)(2), (3) and (4) of this Appendix, the following rules apply for determining gross income. (a) Gross income of individuals, trusts, and estates. (1) In the case of a request from a married individual, the gross incomes (as defined in paragraph (B)(2) or (3) of this Appendix, as applicable) of the applicant and the applicant's spouse must be combined. This rule does not apply to an individual: (i) who is legally separated from his or her spouse and (ii) who did not file a joint income tax return; and (2) If there are two or more applicants filing the request, the gross incomes (as defined in paragraph (B)(2) or (3) of this Appendix, as applicable) of the applicants must be combined. (b) Gross income of domestic partnerships and corporations. (1) In the case of a request from a domestic C corporation, the gross income (as defined in paragraph (B)(3) of this Appendix) of (i) all members of the applicant's controlled group (as defined in§ 1563(a)), and (ii) any taxpayer who is involved in the transaction on which the letter ruling or closing agreement is requested, must be combined; and (2) In the case of a request from a domestic partnership, the gross income (as defined in paragraph (B)(3) of this Appendix) of (i) the partnership, and (ii) any partner who owns, directly or indirectly, 50 percent or more of the capital interest or profits interest in the partnership, must be combined. (3) In the case of a request from an S corporation, the gross income (as defined in paragraph (B)(3) of this Appendix) of (i) the S corporation, and (ii) any shareholder who owns 50 percent or more of the S corporation, must be combined. (c) Gross income of exempt organizations. If there are two or more organizations exempt from income tax under Subchapter F filing the request, the gross receipts (as defined in paragraph (B)(4)(a) of this Appendix) of the applicants must be combined. (6) When gross income depends on a favorable ruling. If a taxpayer's qualification for a reduced user fee under paragraphs (A)(4)(a) and (b) of this Appendix depends on the receipt of a favorable ruling, the taxpayer must pay the higher fee with the request and cannot assume that the Service will rule favorably. If a favorable ruling is issued, and as a result of the ruling the taxpayer's gross income is reduced such that the taxpayer would qualify for a reduced user fee, the amount that the taxpayer paid in excess of the reduced user fee will be returned to the taxpayer. See section 15.09. APPENDIX B SAMPLE FORMAT FOR A LETTER RULING REQUEST INSTRUCTIONS To assist you in preparing a letter ruling request, the Service is providing this sample format. You are not required to use this sample format. If your request is not identical or similar to the sample format, the different format will not affect consideration of your request. ( Insert the date of request ) Internal Revenue Service Insert either: Associate Chief Counsel (insert one of the following: Corporate; Financial Institutions and Products; Income Tax and Accounting; International; Passthroughs and Special Industries; or Procedure and Administration) or Deputy Associate Chief Counsel (insert either Employee Benefits or Exempt Organizations and Employment Taxes) Attn: CC:PA:LPD:TSS P.O. Box 7604 Benjamin Franklin Station Washington, DC 20044 Dear Sir or Madam: ( Insert the name of the taxpayer ) requests a ruling on the proper treatment of ( insert the subject matter of the letter ruling request ) under section ( insert the number ) of the Internal Revenue Code. [If the taxpayer is requesting expedited handling, a statement to that effect must be attached to, or contained in, the letter ruling request. The statement must explain the need for expedited handling. See section 7.02(4) of Rev. Proc. 2024-1, this revenue procedure. Hereafter, all references are to this revenue procedure unless otherwise noted.] A. STATEMENT OF FACTS 1. Taxpayer Information [Provide the statements required by sections 7.01(1)(a) and (b).] 2. Description of Taxpayer's Business Operations [Provide the statement required by section 7.01(1)(c).] 3. Facts Relating to Transaction [The ruling request must contain a complete statement of the facts relating to the transaction that is the subject of the letter ruling request. This statement must include a detailed description of the transaction, including material facts in any accompanying documents, and the business reasons for the transaction. See sections 7.01(1)(d), 7.01(1)(e), and 7.01(2).] B. RULING REQUESTED [The ruling request should contain a concise statement of the ruling requested by the taxpayer. The Service prefers that the language of the requested ruling be exactly the same as the language the taxpayer wishes to receive.] C. STATEMENT OF LAW [The ruling request must contain a statement of the law in support of the taxpayer's views or conclusion and identify any pending legislation that may affect the proposed transaction. The taxpayer also is strongly encouraged to identify and discuss any authorities believed to be contrary to the position advanced in the ruling request. See sections 7.01(6), 7.01(10), 7.01(10), and 7.01(11).] D. ANALYSIS [The ruling request must contain a discussion of the facts and an analysis of the law. The taxpayer also is strongly encouraged to identify and discuss any authorities believed to be contrary to the position advanced in the ruling request. See sections 7.01(3), 7.01(6), 7.01(9), 7.01(10), and 7.01(11).] E. CONCLUSION [The ruling request should contain a statement of the taxpayer's conclusion on the ruling requested.] F. PROCEDURAL MATTERS 1. Revenue Procedure 2024-1 Statements a. [Provide the statement required by section 7.01(4) regarding whether any return of the taxpayer, a related party within the meaning of§ 267 or§ 707(b)(1), or a member of an affiliated group of which the taxpayer is also a member within the meaning of§ 1504, or any predecessor would be affected by the requested letter ruling or determination letter, and whether any such return is currently under examination, before Appeals, or before a Federal court, or was previously under examination, before Appeals, or before a Federal court.] b. [Provide the statement required by section 7.01(5)(a) regarding whether the Service previously ruled on the same or similar issue for the taxpayer, a related party, or a predecessor. Please further note that if a reduced user fee is being submitted, a certification of eligibility for the reduced fee must be included with the ruling request.] c. [Provide the statement required by section 7.01(5)(b) regarding whether the taxpayer, a related party, a predecessor, or any representatives previously submitted a request (including an application for change in method of accounting) involving the same or similar issue but withdrew the request before a letter ruling or determination letter was issued.] d. [Provide the statement required by section 7.01(5)(c) regarding whether the taxpayer, a related party, or a predecessor previously submitted a request (including an application for change in method of accounting) involving the same or a similar issue that is currently pending with the Service.] e. [Provide the statement required by section 7.01(5)(d) regarding whether, at the same time as this request, the taxpayer or a related party is presently submitting another request (including an application for change in method of accounting) involving the same or similar issue to the Service.] f. [Provide the statement required by section 7.01(5)(e) regarding whether the taxpayer or a related party had, or has scheduled, a pre-submission conference involving the same or a similar issue.] g. [If the letter ruling request involves the interpretation of a substantive provision of an income or estate tax treaty, provide the statement required by section 7.01(6) regarding whether the tax authority of the treaty jurisdiction has issued a ruling on the same or similar issue for the taxpayer, a related party, or a predecessor; whether the same or similar issue is being examined, or has been settled, by the tax authority of the treaty jurisdiction or is otherwise the subject of a closing agreement in that jurisdiction; and whether the same or similar issue is being considered by the competent authority of the treaty jurisdiction.] h. [If the letter ruling request involves a transaction between a taxpayer and a related party and either the taxpayer or the related party is located in a foreign country, provide the statement required by section 7.01(7) regarding whether this letter ruling potentially relates to any one of these categories (include all that apply): Preferential Regime; Transfer Pricing; Downward Adjustment; Treaty Permanent Establishment; Related Party Conduit.] i. [Provide the statement required by section 7.01(9) regarding whether the law in connection with the letter ruling request is uncertain and whether the issue is adequately addressed by relevant authorities.] j. [If the taxpayer determines that there are no contrary authorities, a statement in the request to this effect should be included. See section 7.01(10).] k. [If the taxpayer wants to have a conference on the issues involved in the letter ruling request, the ruling request should contain a statement to that effect. See section 7.02(6).] l. [If the taxpayer is requesting a copy of any document related to the letter ruling request to be sent by fax, electronic facsimile, or encrypted email attachment, the ruling request should contain a statement to that effect. See section 7.02(5).] m. [If the taxpayer is requesting separate letter rulings on multiple issues, the letter ruling request should contain a statement to that effect. See section 7.02(1).] n. [If the taxpayer is seeking to obtain the user fee provided in paragraph (A)(5)(a) of Appendix A for substantially identical letter rulings, the letter ruling request must contain the statements required by section 15.07.] 2. Administrative a. [The ruling request should state: "The deletion statement and checklist required by Rev. Proc. 2024-1 are enclosed." See sections 7.01(12) and 7.01(18).] b. [The ruling request should state: "The required user fee of $ ( Insert the amount of the fee ) has been paid through www.pay.gov" See section 15.09 and Appendix A.] c. [If the taxpayer's authorized representative is to sign the letter ruling request or is to appear before the Service in connection with the request, the ruling request should state: "A Power of Attorney is enclosed." See sections 7.01(14), 7.01(15), and 7.02(2).] Sincerely yours, ( Insert the name of the taxpayer or the taxpayer's authorized representative ) By: Signature Date Typed or printed name of person signing request DECLARATION: [ See section 7.01(16).] Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete. ( Insert the name of the taxpayer ) By: _____________ Signature Title Date ( must be signed by taxpayer, not by taxpayer's representative, see section 7.01(16)(b) of this revenue procedure ) Typed or printed name of person signing declaration [If the taxpayer is a corporation that is a member of an affiliated group filing consolidated returns, the above declaration must also be signed and dated by an officer of the common parent of the group. See section 7.01(16).] APPENDIX C CHECKLIST IS YOUR LETTER RULING REQUEST COMPLETE? INSTRUCTIONS The Service will be able to respond more quickly to your letter ruling request if it is carefully prepared and complete. Use this checklist to ensure that your request is in order. Complete the four items of information requested before the checklist. Answer each question by circling "Yes," "No," or "N/A." When a question contains a place for a page number, insert the page number (or numbers) of the request that gives the information called for by a "Yes" answer to a question. Sign and date the checklist (as taxpayer or authorized representative) and place it on top of your request. If you are an authorized representative submitting a request for a taxpayer, you must include a completed checklist with the request or the request will either be returned to you or substantive consideration of it will be deferred until a completed checklist is submitted. If you are a taxpayer preparing your own request without professional assistance, an incomplete checklist will not cause the return of your request or defer substantive consideration of your request. You should still complete as much of the checklist as possible and submit it with your request. TAXPAYER'S NAME TAXPAYER'S I.D. NO. ATTORNEY/P.O.A. PRIMARY CODE SECTION CIRCLE ONE ITEM Yes No 1. Does your request involve an issue under the jurisdiction of the Associate Chief Counsel (Corporate), the Associ- ate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), the Associate Chief Coun- sel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (International), the Associate Chief Counsel (Passthroughs and Special Industries), or the Associate Chief Counsel (Procedure and Administration)? See section 3 of Rev. Proc. 2024-1, this revenue procedure. For issues under the jurisdiction of other offices, see section 4 of this revenue procedure. (Hereafter, all references are to this revenue procedure unless otherwise noted.) Yes No 2. Have you read Rev. Proc. 2024-1, Rev. Proc. 2024-3, and Rev. Proc. 2024-7, this Bulletin, to see if part or all of the request involves a matter on which letter rulings are not issued or are ordinarily not issued? Yes No N/A 3. If your request involves a matter on which letter rulings are not ordinarily issued, have you given compelling reasons to justify the issuance of a letter ruling? Before preparing your request, you may want to call the branch in the Office of Associate Chief Counsel (Corporate), the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), the Office of Associate Chief Counsel (Financial Institutions and Products), the Office of Associate Chief Counsel (Income Tax and Accounting), the Office of Associate Chief Counsel (International), the Office of Associate Chief Counsel (Passthroughs and Special Industries), or the Of- fice of Associate Chief Counsel (Procedure and Administration) responsible for substantive interpretations of the principal Internal Revenue Code section on which you are seeking a letter ruling to discuss the likelihood of an exception. For matters under the jurisdiction of-- (a) the Office of Associate Chief Counsel (Corporate), the Office of Associate Chief Counsel (Employee Bene- fits, Exempt Organizations, and Employment Taxes), the Office of Associate Chief Counsel (Financial Institutions and Products), the Office of Associate Chief Counsel (Income Tax and Accounting), the Office of Associate Chief Counsel (Passthroughs and Special Industries), or the Office of the Associate Chief Counsel (Procedure and Ad- ministration), the appropriate branch to call may be obtained by calling (202) 317-5221 (not a toll-free call); (b) the Office of the Associate Chief Counsel (International), the appropriate branch to call may be obtained by calling (202) 317-3800 (not a toll-free call). Yes No N/A 4. If the request involves a retirement plan qualification matter relating to§ 401(a),§ 409, or§ 4975(e)(7), have you Page ___ demonstrated that the request satisfies section 4.02(12) of Rev. Proc. 2024-3, this Bulletin, for a ruling? Yes No N/A 5. If the request deals with a completed transaction, have you filed a return containing a tax position on the completed Page ___ transaction? See section 5.01. Yes No 6. Are you requesting the letter ruling on a hypothetical situation or question? See section 6.12. Yes No 7. Are you requesting the letter ruling on alternative plans of a proposed transaction? See section 6.12. Yes No 8. Are you requesting the letter ruling for only part of an integrated transaction? Yes No 9. Are you requesting the letter ruling for a business, trade, industrial association, or similar group concerning the application of tax law to its members? See section 6.05. Yes No 10. Are you requesting the letter ruling for a foreign government or its political subdivision? See section 6.07. Yes No 11. Have you included a complete statement of all the facts relevant to the transaction? See section 7.01(1). Page ___ Yes No N/A 12. Have you submitted with the request true copies of all wills, deeds, and other documents relevant to the trans- action, and labeled and attached them in alphabetical sequence? See section 7.01(2). Yes No N/A 13. Have you submitted with the request a copy of all applicable foreign laws, and certified English translations of documents that are in a language other than English or of foreign laws in cases where English is not the official language of the foreign country involved? See section 7.01(2). Yes No 14. Have you included an analysis of facts and their bearing on the issues? Have you included, rather than merely incorporated by reference, all material facts from the documents in the request? See section 7.01(3). Yes No 15. Have you included the required statement regarding whether any return of the taxpayer (or any related party Page ___ within the meaning of§ 267 or§ 707(b)(1), or any member of an affiliated group of which the taxpayer is also a member within the meaning of§ 1504, or any predecessor) would be affected by the requested letter ruling or determination letter and whether any such return is currently or was previously under examination, before Appeals, or before a Federal court? See section 7.01(4). Yes No 16. Have you included the required statement regarding whether the Service previously ruled on the same or similar Page ___ issue for the taxpayer, a related party, or a predecessor? See section 7.01(5)(a). Yes No 17. Have you included the required statement regarding whether the taxpayer, a related party, a predecessor, or Page ___ any representatives previously submitted a request (including an application for change in method of accounting) involving the same or similar issue but withdrew the request before the letter ruling or determination letter was issued? See section 7.01(5)(b). Yes No 18. Have you included the required statement regarding whether the taxpayer, a related party, or a predecessor Page ___ previously submitted a request (including an application for change in method of accounting) involving the same or similar issue that is currently pending with the Service? See section 7.01(5)(c). Yes No 19. Have you included the required statement regarding whether, at the same time as this request, the taxpayer or a Page ___ related party is presently submitting another request (including an application for change in method of accounting) involving the same or similar issue to the Service? See section 7.01(5)(d). Yes No 20. Have you included the required statement regarding whether the taxpayer or a related party had, or has scheduled, Page ___ a pre-submission conference involving the same or a similar issue? See section 7.01(5)(e). Yes No N/A 21. If your request involves the interpretation of a substantive provision of an income or estate tax treaty, have you Page ___ included the required statement regarding whether the tax authority of the treaty jurisdiction has issued a ruling on the same or similar issue for the taxpayer, a related party, or a predecessor; whether the same or similar issue is being examined, or has been settled, by the tax authority of the treaty jurisdiction or is otherwise the subject of a closing agreement in that jurisdiction; and whether the same or similar issue is being considered by the competent authority of the treaty jurisdiction? See section 7.01(6). Yes No N/A 22. If your request involves a transaction between a taxpayer and a related party and either the taxpayer or the Page ___ related party is located in a foreign country, have you included the required statement regarding whether the letter ruling relates to any one of these categories (include all that apply: Preferential Regime; Transfer Pricing; Down- ward Adjustment; Treaty Permanent Establishment; Related Party Conduit? See section 7.01(7). Yes No N/A 23. If your request is for recognition of Indian tribal government status or status as a political subdivision of an Page ___ Indian tribal government, does your request contain a letter from the Bureau of Indian Affairs regarding the tribe's status? See section 7.01(8), which states that taxpayers are encouraged to submit this letter with the request and provides the address for the Bureau of Indian Affairs. Yes No 24. Have you included the required statement of relevant authorities in support of your views? See section 7.01(9). Page ___ Yes No 25. Have you included the required statement regarding whether the law in connection with the request is uncertain Page ___ and whether the issue is adequately addressed by relevant authorities? See section 7.01(9). Yes No 26. Does your request discuss the implications of any legislation, tax treaties, court decisions, regulations, notices, Page ___ revenue rulings, or revenue procedures that you determined to be contrary to the position advanced? See section 7.01(10), which states that taxpayers are encouraged to inform the Service of such authorities. Yes No N/A 27. If you determined that there are no contrary authorities, have you included a statement to this effect in your Page __ request? See section 7.01(10). Yes No N/A 28. Have you included in your request a statement identifying any pending legislation that may affect the proposed Page ___ transaction? See section 7.01(11). Yes No 29. Have you included the deletion statement required by§ 6110 and placed it on the top of the letter ruling request as required by section 7.01(12)(b)? Yes No 30. Have you (or your authorized representative) signed and dated the request or separately transmitted a signature Page ___ in an acceptable electronic form? See section 7.01(13). Yes No N/A 31. If the request is signed by your representative or if your representative will appear before the Service in con- nection with the request, is the request accompanied by a properly prepared and signed power of attorney with the signatory's name typed or printed? See section 7.01(15). Yes No 32. Have you signed, dated, and included the penalties of perjury statement in the format required by section 7.01(16)? Page ___ Yes No N/A 33. If you are requesting separate letter rulings on different issues involving one factual situation, have you included Page ___ a statement to that effect in each request? See section 7.02(1). Yes No N/A 34. If you want copies of the letter ruling sent to a representative, does the power of attorney contain a statement to that effect? See section 7.02(2). Yes No N/A 35. If you do not want a copy of the letter ruling to be sent to any representative, does the power of attorney contain a statement to that effect? See section 7.02(2). Yes No N/A 36. If you are making a two-part letter ruling request, have you included a summary statement of the facts you believe to be controlling? See section 7.02(3). Yes No N/A 37. If you want your letter ruling request to be processed ahead of the regular order or by a specific date, have you Page ___ requested expedited handling in the manner required by section 7.02(4) and stated a compelling need for such ac- tion in the request? See section 7.02(4). Yes No N/A 38. If you are requesting a copy of any document related to the letter ruling request to be sent by fax or electronic Page ___ facsimile, have you included a statement to that effect? See section 7.02(5). Yes No N/A 39. If you are requesting a copy of any document related to the letter ruling request to be sent by encrypted email attachment, have you specified an acceptable encryption method to be used and included the appropriate MOUs from Appendices G and H, signed and dated by the taxpayer? See section 7.02(5) and 7.04(3). Yes No N/A 40. If you want to have a conference on the issues involved in the request, have you included a request for conference Page ___ in the letter ruling request? See section 7.02(6). Yes No N/A 41. If you are submitting your request on paper, are you submitting additional copies if necessary? See section 7.04(1). Yes No N/A 42. If you are submitting your request by electronic facsimile or encrypted email attachment, have you provided clear titles for documents and files, and broken up the request into smaller components for transmission if neces- sary? See section 7.04(2) and (3). Yes No N/A 43. If you are submitting your request by encrypted email attachment, have you used an acceptable file format and included the appropriate MOUs from Appendices G and H, signed and dated by the taxpayer? See section 7.04(3). Yes No 44. Have you paid the correct user fee through www.pay.gov? See section 15 and Appendix A to determine the correct amount. Yes No N/A 45. If you qualify for a reduced user fee because your gross income is less than $250,000, have you included the Page ___ required certification? See paragraphs (A)(4)(a) and (B)(1) of Appendix A. Yes No N/A 46. If you qualify for a reduced user fee because your gross income is less than $1 million, have you included the Page ___ required certification? See paragraphs (A)(4)(b) and (B)(1) of Appendix A. Yes No N/A 47. If you qualify for the user fee for substantially identical letter rulings, have you included the required information? Page ___ See section 15.07(2) and paragraph (A)(5)(a) of Appendix A. Yes No N/A 48. If you qualify for the user fee for a§ 301.9100 request to extend the time for filing an identical change in method Page ___ of accounting on a single Form 3115, Application for Change in Accounting Method, have you included the re- quired information? See section 15.07(4) and paragraph (A)(5)(d) of Appendix A. Yes No N/A 49. If your request is covered by any of the checklists, guideline revenue procedures, notices, safe harbor revenue Rev. Proc. procedures, or other special requirements listed in Appendix F, have you complied with all of the requirements of ________ the applicable revenue procedure or notice? ________ List other applicable revenue procedures or notices, including checklists, used or relied upon in the preparation of ________ this letter ruling request (Cumulative Bulletin or Internal Revenue Bulletin citation not required). Yes No N/A 50. If you are requesting relief under§ 7805(b) (regarding retroactive effect), have you complied with all of the Page ___ requirements in section 11.11? Yes No N/A 51. If you are requesting relief under§ 301.9100 for a late entity classification election, have you included a Page ___ statement that complies with section 4.04 of Rev. Proc. 2009-41, 2009-39 I.R.B. 439? See section 5.03(5) of this revenue procedure. Yes No N/A 52. If you are requesting relief under§ 301.9100, and your request involves a year that is currently under Page ___ examination or with Appeals, have you included the required notification, which also provides the name and tele- phone number of the examining agent or Appeals officer? See section 7.01(4). Yes No 53. If you are requesting relief under§ 301.9100, have you included the affidavit(s) and declaration(s) required by§ 301.9100-3(e)? See section 5.03(1). Yes No N/A 54. If you are requesting relief under§ 301.9100 3, and the period of limitations on assessment under§ 6501(a) will expire for any year affected by the requested relief before the anticipated receipt of a letter ruling, have you secured consent under§ 6501(c)(4) to extend the period of limitations on assessment for the year(s) at issue? See section 5.03(2). Yes No 55. Have you addressed your request to the attention of the Associate Chief Counsel (Corporate), the Associate Chief Counsel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (International), the Associate Chief Counsel (Passthroughs and Special Industries), the Associate Chief Counsel (Procedure and Administration), the Deputy Associate Chief Counsel (Employee Bene- fits), or the Deputy Associate Chief Counsel (Exempt Organizations and Employment Taxes), as appropriate? The mailing address for packages submitted on paper is: Internal Revenue Service Attn: CC:PA:LPD:TSS P.O. Box 7604 Ben Franklin Station Washington, DC 20044 If a private delivery service is used, the address is: Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Ave., NW Washington, DC 20224 Packages submitted on paper should be marked RULING REQUEST SUBMISSION. Improperly addressed re- quests may be delayed (sometimes for over a week) in reaching CC:PA:LPD:TSS for initial processing. _______________________ Signature Title or Authority Date Typed or printed name of person signing checklist APPENDIX D ADDITIONAL CHECKLIST FOR GOVERNMENT PICK-UP PLAN RULING REQUESTS In order to assist Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) in processing a ruling request involving government pick-up plans, in addition to the items in Appendix C please check the following list. Yes No N/A 1. Is the plan qualified under§ 401(a) of the Code? (Evidence of qualification or representation that the plan is Page ___ qualified.) Yes No N/A 2. Is the organization that established the plan a State or political subdivision thereof, or any agency or instrumen- Page ___ tality of the foregoing? An example of this would be a representation that the organization that has established the plan is a political subdivision or municipality of the State. Yes No N/A 3. Is there specific information regarding who are the eligible participants? Page ___ Yes No N/A 4. Are the contributions that are the subject of the ruling request mandatory employee contributions? These contribu- Page ___ tions must be for a specified dollar amount or a specific percentage of the participant's compensation and the dollar amount or percentage of compensation cannot be subject to change. Yes No N/A 5. Does the plan provide that the participants do not have the election to opt in and/or out of the plan? Page ___ Yes No N/A 6. Are copies of the enacting legislation providing that the contributions although designated as employee contribu- Page ___ tions are being paid by the employer in lieu of contributions by the employee included? Yes No N/A 7. Are copies of the specific enabling authorization that provides the employee must not have the option of choosing Page ___ to receive the contributed amounts directly instead of having them paid by the employer to the plan included? For example, a resolution, ordinance, plan provision, or collective bargaining agreement could specify this information. APPENDIX E ADDITIONAL CHECKLIST FOR CHURCH PLAN RULING REQUESTS In order to assist Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) in processing a church plan ruling request, in addition to the items in Appendix C, please check the following list. Yes No N/A 1. Is there specific information showing that the submission is on behalf of a plan established by a named church or Page ___ convention or association of churches? The information must show how the sponsoring organization, if not a church or convention or association of churches, is controlled by, or associated with, the named church or convention or association of churches. For example, the board of directors of the sponsoring organization may be made up of members of the named church, or the sponsoring organization might be listed in the church's official directory of related organizations whose mission is to further the objectives of the church. In order to be considered associated with a church or convention or association of churches, the organization must share common religious bonds and convictions with that church or convention or association of churches. Yes No N/A 2. Is there specific information showing that the organization that has established the plan is a tax-exempt organiza- Page ___ tion as described in§ 501 of the Code? Yes No N/A 3. Is there a representation that the plan for which the ruling is being requested is qualified under§ 401(a) of the Page ___ Code or meets the requirements of§ 403(b) of the Code? Yes No N/A 4. Does the ruling request clearly state who are the eligible participants and the name of the employer of these eli- Page ___ gible participants? Yes No N/A 5. Is there a representation that none of the eligible participants are or can be considered employed in connection Page ___ with one or more unrelated trades or businesses within the meaning of§ 513 of the Code? Yes No N/A 6. Is there a representation that all of the eligible participants are or will be employed by the named church or con- Page ___ vention or association of churches, and will not include employees of for-profit entities? An example of an eligible employee includes a duly ordained, commissioned, or licensed minister of a church in the exercise of his or her ministry. Yes No N/A 7. Is there specific information showing an existing plan committee whose principal purpose or function is the ad- Page ___ ministration or funding of the plan? This committee must be controlled by or associated with the named church or convention or association of churches. Yes No N/A 8. Is the composition of the committee stated? Page ___ Yes No N/A 9. Did the plan sponsor provide a written notice to interested persons that a letter ruling under§ 414(e) of the Code Page ___ on behalf of a church plan will be submitted to the IRS? ( see Rev. Proc. 2011-44). Yes No N/A 10. Does the ruling request include a copy of the notice? Page ___ Yes No N/A 11. Is there a representation as to whether an election has ever been made under§ 1.410(d)-1 of the Federal Income Page ___ Tax Regulations to apply certain provisions of the Code and ERISA to the plan? APPENDIX F CHECKLISTS, GUIDELINE REVENUE PROCEDURES, NOTICES, SAFE HARBOR REVENUE PROCEDURES, AND AUTOMATIC CHANGE REVENUE PROCEDURES Specific revenue procedures and notices supplement the general instructions for requests ex- plained in section 7 of this revenue procedure and apply to requests for letter rulings or determi- nation letters regarding the Code sections and matters listed in this section. Checklists, guideline reve-.01 For requests relating to the following Code sections and subject matters, refer to the following nue procedures, and notices checklists, guideline revenue procedures, and notices. CODE OR REGULATION REVENUE PROCEDURE AND NOTICE SECTION 103, 141 - 150, 1394, Rev. Proc. 96-16, 1996-1 C.B. 630 (for a reviewable ruling under§ 7478 and a nonreviewable 1400L(d), 1400N(a), 1400U- ruling); Rev. Proc. 88-31, 1988-1 C.B. 832 (for approval of areas of chronic economic distress); 1, 1400U-3, 7478, and 7871 and Rev. Proc. 82-26, 1982-1 C.B. 476 (for "on behalf of" and similar issuers). For approval of Issuance of state or local areas of chronic economic distress, Rev. Proc. 88-31 explains how this request for approval must obligations be submitted to the Assistant Secretary for Housing/Federal Housing Commissioner of the De- partment of Housing and Urban Development. 1.166-2(d)(3) Rev. Proc. 92-84, 1992-2 C.B. 489. Uniform express determina- tion letter for making election Subchapter C-Corporate Rev. Proc. 77-37, 1977-2 C.B. 568, as amplified by Rev. Proc. 77-41, 1977-2 C.B. 574, Rev. Proc. Distributions, Adjustments, 83-81, 1983-2 C.B. 598, and as modified by Rev. Proc. 89-30, 1989-1 C.B. 895 ( see also Rev. Transfers, and Reorganiza- Proc. 2024-3, this Bulletin); Rev. Proc. 84-42, 1984-1 C.B. 521; Rev. Proc. 86-42, 1986-2 C.B. tions 722; Rev. Proc. 89-50, 1989-2 C.B. 631; Rev. Proc. 2017-52, 2017-41 I.R.B. 283; and Rev. Proc. 2018-53, 2018-43 I.R.B. 667. 301 Rev. Proc. 87-22, 1987-1 C.B. 718. Nonapplicability on sales of stock of employer to defined contribution plan 302, 311 Rev. Proc. 86-18, 1986-1 C.B. 551; and Rev. Proc. 77-41, 1977-2 C.B. 574. Checklist questionnaire 302(b)(4) Rev. Proc. 81-42, 1981-2 C.B. 611. Checklist questionnaire 311 Rev. Proc. 86-16, 1986-1 C.B. 546. Checklist questionnaire 332 Rev. Proc. 90-52, 1990-2 C.B. 626. Checklist questionnaire 338 Rev. Proc. 2003-33, 2003-1 C.B. 803, provides guidance as to how an automatic extension of time Extension of time to make under§ 301.9100-3 of the Treasury Regulations may be obtained to file elections under§ 338. elections Rev. Proc. 2003-33 also informs taxpayers who do not qualify for the automatic extension of the information necessary to obtain a letter ruling. 351 Rev. Proc. 83-59, 1983-2 C.B. 575 Checklist questionnaire 355 Rev. Proc. 2017-52, 2017-41 I.R.B. 283, and Rev. Proc. 2018-53, 2018-43 I.R.B. 667. Checklist questionnaire 368(a)(1)(E) Rev. Proc. 81-60, 1981-2 C.B. 680. Checklist questionnaire 412, 4971(b) Rev. Proc. 81-44, 1981-2 C.B. 618, provides guidance for requesting a waiver of the 100 percent Additional tax (on failure tax imposed under§ 4971(b) on a pension plan that fails to meet the minimum funding standards to meet minimum funding of§ 412. standards) 412(c) Rev. Proc. 2004-15, 2004-1 C.B. 490, provides guidance for requesting a waiver of the minimum Minimum funding standards funding standards. 412(c)(7)(B) Rev. Proc. 79-62, 1979-2 C.B. 576 provides guidance for requesting a determination that a plan Minimum funding standards amendment is reasonable and provides for only de minimis increases in plan liabilities in accor- - restrictions on plan amend- dance with former§ 412(f)(2)(A) (now§ 412(c)(7)(B)(i)). ments 412(d)(2) Rev. Proc. 94-42, 1994-1 C.B. 717, as modified by Rev. Proc. 2024-4, this Bulletin, sets forth Minimum funding standards procedures under which a plan sponsor may file notice with and obtain approval for a retroactive - certain retroactive plan amendment described in§ 412(d)(2) (formerly§ 412(c)(8)) and§ 302(d)(2) of the Employee Re- amendments tirement Income Security Act of 1974 (ERISA) that reduces prior accrued benefits. 414(e) Rev. Proc. 2011-44, 2011-39 I.R.B. 445 provides supplemental procedures for requesting a ruling Church plans relating to church plans under section 414(e). Rev. Proc. 2011-44 provides that plan participants and other interested persons must receive a notice when a letter ruling is requested and a copy of the notice must be submitted as part of the ruling request. Rev. Proc. 2011-44 also provides pro- cedures for the Service to receive and consider comments about the ruling request from interested persons. See Appendix E of this revenue procedure. 414(r) Rev. Proc. 93-41, 1993-2 C.B. 536, sets forth procedures relating to the issuance of an administra- Qualified separate lines of tive scrutiny determination, which is a determination by the Service as to whether a separate line business administrative of business satisfies the requirement of administrative scrutiny, within the meaning of§ 1.414(r)- scrutiny 6, for the testing year. 461(h) Rev. Proc. 92-29, 1992-1 C.B. 748. Alternative method for the in- clusion of common improve- ment costs in basis 482 Rev. Proc. 2015-40, 2015-35 I.R.B. 236, and Rev. Proc. 2015-41, 2015-35 I.R.B. 263. Advance pricing agreements 521 Rev. Proc. 2024-5, this Bulletin. Appeal procedure with regard to adverse determination letters and revocation or modification of exemption letter rulings and determina- tion letters 817(h) Rev. Proc. 2008-41, 2008-2 C.B. 155. Closing agreement for inad- vertent failures of variable contracts 860 Rev. Proc. 2009-28, 2009-20 I.R.B. 1011. Self Determination of Defi- ciency Dividend 877, 2107, and 2501(a)(3) Notice 97-19, 1997-1 C.B. 394, as modified by Notice 98-34, 1998-2 C.B. 29, and as obsoleted in Individuals who lose U.S. cit- part by Notice 2005-36, 2005-1 C.B. 1007. izenship or cease to be taxed as long-term U.S. residents with a principal purpose to avoid U.S. taxes 1059(c)(4) Rev. Proc. 86-33, 1987-29 C.B. 402, provides guidance to corporate taxpayers on how to make Fair market value of stock the election under section 1059(c)(4) and establish the fair market value of stock for purposes for purposes of election of that election. It provides an automatic procedure to value publicly traded stock and valuation procedures for other stock. 1362(b)(5) and 1362(f) Rev. Proc. 2013-30, 2013-36 I.R.B. 173. Relief for late S corporation and related elections under certain circumstances 1362(b)(5) and 301.7701-3 Rev. Proc. 2013-30, 2013-36 I.R.B. 173. Automatic extensions of time for late S corporation election and late corporate entity classification 1.1502-13(e)(3) Rev. Proc. 2009-31, 2009-27 I.R.B. 107. Consent to treat intercompa- ny transactions on a separate entity basis and revocation of this consent 1.1502-75(b) Rev. Proc. 2014-24, 2014-13 I.R.B. 879, provides a determination that certain subsidiary cor- Consent to Be Included in porations are treated as if they had filed a Form 1122, Authorization and Consent of Subsidiary a Consolidated Income Tax Corporation To Be Included in a Consolidated Income Tax Return, even though they failed to do Return so. Rev. Proc. 2014-24 also informs taxpayers who do not qualify for the automatic determination of the procedure for requesting such determination. 1.1502-76(a)(1) Rev. Proc. 89-56, 1989-2 C.B. 643, as modified by Rev. Proc. 2006-21, 2006-1 C.B. 1050. Consent to file a consolidated return where member(s) of the affiliated group use a 52- 53 week taxable year 1504(a)(3)(A) and (B) Rev. Proc. 2002-32, 2002-1 C.B. 959, as modified by Rev. Proc. 2006-21, 2006-1 C.B. 1050. Waiver of application of§ 1504(a)(3)(A) for certain corporations 1552 Rev. Proc. 90-39, 1990-2 C.B. 365, as clarified by Rev. Proc. 90-39A, 1990-2 C.B. 367, and as Consent to elect or change modified by Rev. Proc. 2006-21, 2006-1 C.B. 1050. method of allocating affil- iated group's consolidated Federal income tax liability 2642 Rev. Proc. 2004-46, 2004-2 C.B. 142, provides an alternative method for requesting relief to Allocations of genera- make a late allocation of the generation-skipping transfer tax exemption. Rev. Proc. 2004-46 also tion-skipping transfer tax informs taxpayers who are denied relief or who are outside the scope of the revenue procedure of exemption the information necessary for obtaining a letter ruling. 2652(a)(3) Rev. Proc. 2004-47, 2004-2, C.B. 169, provides an alternative method for certain taxpayers to Reverse qualified terminable obtain an extension of time to make a late reverse qualified terminable interest property election interest property elections under§ 2652(a)(3). Rev. Proc. 2004-47 also informs taxpayers who are denied relief or who are outside the scope of the revenue procedure of the information necessary to obtain a letter ruling. 4980B Rev. Proc. 87-28, 1987-1 C.B. 770 (treating references to former§ 162(k) as if they were refer- Failure to satisfy continuation ences to§ 4980B). coverage requirements of group health plans 7701 Rev. Proc. 2009-41, 2009-39 I.R.B. 439. Relief for a late classification election for a newly formed entity 7701(a)(40) and 7871(d) Rev. Proc. 84-37, 1984-1 C.B. 513, as modified by Rev. Proc. 86-17, 1986-1 C.B. 550, and this Indian tribal governments revenue procedure (provides guidelines for obtaining letter rulings recognizing Indian tribal and subdivision of Indian government or tribal government subdivision status; also provides for inclusion in list of fed- tribal governments erally recognized Indian tribes published annually by the Department of the Interior, Bureau of Indian Affairs, or in list of recognized subdivisions of Indian tribal governments in revised versions of Rev. Proc. 84-36, 1984-1 C.B. 510, as modified and made permanent by Rev. Proc. 86-17). 301.7701-2(a) Rev. Proc. 2002-22, 2002-1 C.B. 733 (specifies the conditions under which the Service will con- Classification of undivided sider a letter ruling request that an undivided fractional interest in rental real property (other than fractional interests in rental a mineral property as defined in§ 614) is not an interest in a business entity). real estate 301.7701-3 Rev. Proc. 2013-30, 2013-36 I.R.B. 173. Automatic extensions of time for late S corporation election and late corporate entity classification 301.9100-3 Rev. Proc. 2009-41, 2009-39 I.R.B. 439. Extension of time to make entity classification election 7702 Rev. Proc. 2008-38, 2008-2 C.B. 139. Closing agreement for failure to account for charges for qualified additional benefits 7702 Rev. Proc. 2008-40, 2008-2 C.B. 151. Closing agreement for failed life insurance contracts 7702A Rev. Proc. 2008-39, 2008-2 C.B. 143. Closing agreement for inad- vertent non-egregious failure to comply with modified en- dowment contract rules 7704(g) Notice 98-3, 1998-1 C.B. 333. Revocation of election SUBJECT MATTERS REVENUE PROCEDURE Accounting periods; changes Rev. Proc. 2002-39, 2002-1 C.B. 1046, as clarified and modified by Notice 2002-72, 2002-2 C.B. in period 843, as modified by Rev. Proc. 2003-34, 2003-1 C.B. 856, and modified by Rev. Proc. 2003- 79, 2003-2 C.B. 1036; and this revenue procedure, for which sections 1, 2.01, 2.02, 2.05, 3.04, 5.02, 6.03, 6.05, 6.07, 6.11, 7.01(1), 7.01(2), 7.01(3), 7.01(4), 7.01(5), 7.01(6), 7.01(9), 7.01(10), 7.01(11), 7.01(14), 7.01(15), 7.01(16), 7.02(2), 7.02(4), 7.02(5), 7.02(6), 7.04, 7.05, 7.06, 7.08, 8.01, 8.03, 8.04, 8.05, 8.06, 10, 11, 15, 17, 18, Appendix A, and Appendix F are applicable. Classification of liquidating Rev. Proc. 82-58, 1982-2 C.B. 847, as modified and amplified by Rev. Proc. 94-45, 1994-2 C.B. trusts 684, and as amplified by Rev. Proc. 91-15, 1991-1 C.B. 484 (checklist questionnaire), as modified and amplified by Rev. Proc. 94-45. Earnings and profits determi- Rev. Proc. 75-17, 1975-1 C.B. 677; this revenue procedure, sections 2.05, 3.04, 7, 8, and 10.05; nations and Rev. Proc. 2024-3, this Bulletin, section 3.01. Estate, gift, and genera- Rev. Proc. 91-14, 1991-1 C.B. 482 (checklist questionnaire). tion-skipping transfer tax issues Fast-track processing of letter Rev. Proc. 2023-26, 2023-33 I.R.B. 486. ruling requests solely or primarily under the jurisdic- tion of the Associate Chief Counsel (Corporate) Intercompany transactions; Rev. Proc. 2009-31, 2009-27 I.R.B. 107. election not to defer gain or loss Leveraged leasing Rev. Proc. 2001-28, 2001-1 C.B. 1156, and Rev. Proc. 2001-29, 2001-1 C.B. 1160. Rate orders; regulatory agen- A letter ruling request that involves a question of whether a rate order that is proposed or issued cy; normalization by a regulatory agency will meet the normalization requirements of§ 168(f)(2) (pre-Tax Reform Act of 1986,§ 168(e)(3)) and former§§ 46(f) and 167(l) ordinarily will not be considered unless the taxpayer states in the letter ruling request whether-- (1) the regulatory authority responsible for establishing or approving the taxpayer's rates has re- viewed the request and believes that the request is adequate and complete; and (2) the taxpayer will permit the regulatory authority to participate in any Associate office confer- ence concerning the request. If the taxpayer or the regulatory authority informs a consumer advocate of the request for a letter ruling and the advocate wishes to communicate with the Service regarding the request, any such communication should be sent to: Internal Revenue Service, Associate Chief Counsel (Procedure and Administration), Attn: CC:PA:LPD:TSS, P.O. Box 7604, Benjamin Franklin Station, Wash- ington, DC 20044 (or, if a private delivery service is used: Internal Revenue Service, Associate Chief Counsel (Procedure and Administration), Attn: CC:PA:LPD:TSS, Room 5336, 1111 Con- stitution Ave., NW, Washington, DC 20224). These communications will be treated as third party contacts for purposes of§ 6110. Unfunded deferred compen- Rev. Proc. 71-19, 1971-1 C.B. 698, as amplified by Rev. Proc. 92-65, 1992-2 C.B. 428. See Rev. sation Proc. 92-64, 1992-2 C.B. 422, as modified by Notice 2000-56, 2000-2 C.B. 393, for the model trust for use in Rabbi Trust Arrangements. Safe harbor revenue proce-.02For requests relating to the following Code sections and subject matters, refer to the following dures safe harbor revenue procedures. CODE OR REGULATION REVENUE PROCEDURE SECTION 23 and 36C Rev. Proc. 2010-31, 2010-40 I.R.B. 413. Adoption credit for foreign adoptions 103 and 141-150 Rev. Proc. 2017-13, 2017-6 I.R.B. 787 (management contracts); and Rev. Proc. 2007-47, 2007-2 Issuance of state or local C.B. 108 (research agreements). obligations 61 Rev. Proc. 2005-62, 2005-2 C.B. 507. Utility Cost Recovery Securi- tization Transactions 137 Rev. Proc. 2010-31, 2010-40 I.R.B. 413. Exclusion for Employer Reimbursements 162 Rev. Proc. 2002-12, 2002-1 C.B. 374. Restaurant Small Wares Costs 165 Rev. Proc. 2010-36, 2010-42 I.R.B. 439. Losses from corrosive dry- wall 165 Rev. Proc. 2009-20, 2009-14 I.R.B. 749, as modified by Rev. Proc. 2011-58, 2011-50 I.R.B. 849. Theft losses from fraudulent investment arrangements 167 and 168 Section 9 of Rev. Proc. 2015-12, 2015-2 I.R.B. 266. Primary use of certain cable network assets described in asset class 48.42 of Rev. Proc. 87-56, 1987-2 C.B. 674 168 Rev. Proc. 2002-27, 2002-1 C.B. 802. Depreciation of original and replacement tires for certain vehicles 168 Section 8 of Rev. Proc. 2015-12, 2015-2 I.R.B. 266. Depreciation of fiber optic node and trunk line of a cable system operator 168 Rev. Proc. 2011-22, 2011-18 I.R.B. 737 Recovery periods of cer- tain tangible assets used by wireless telecommunication carriers 263, 471 Rev. Proc. 2007-48, 2007-2 C.B. 110 Treatment of rotable spare parts as inventory or depre- ciable property 263 Rev. Proc. 2002-65, 2002-2 C.B. 700; Rev. Proc. 2001-46, 2001-2 C.B. 263. Safe harbor methods for track structure expenditures 263 Rev. Proc. 2011-27, 2011-18 I.R.B. 740. Determination whether expenditures to maintain, replace or improve wireline network assets must be cap- italized 263 Rev. Proc. 2011-28, 2011-18 I.R.B. 743. Determination whether expenditures to maintain, replace or improve wireless network assets must be cap- italized 263 Rev. Proc. 2011-29, 2011-18 I.R.B. 746. Allocating success-based fees paid in business acquisitions or reorganizations 263 Rev. Proc. 2011-43, 2011-37 I.R.B. 326. Electric trade and distribution property assets 263A Rev. Proc. 2010-44, 2010-49 I.R.B. 811. Safe harbor methods for cer- tain motor vehicle dealerships 280A Rev. Proc. 2013-13, 2013-6 I.R.B. 478. Safe harbor method to deter- mine the amount of deduct- ible expenses attributable to certain business use of a residence 280B Rev. Proc. 95-27, 1995-1 C.B. 704. Certain structural modifica- tions to a building not treated as a demolition 446 Rev. Proc. 2004-36, 2004-1 C.B. 1063. Film producer's treatment of certain creative property costs 446 Rev. Proc. 2007-33, 2007-1 C.B. 1289. Bank's treatment of uncol- lected interest 448 Rev. Proc. 2011-46, 2011-42 I.R.B. 518. Nonaccrual-experience meth- od - book safe harbor method 451 Rev. Proc. 2002-36, 2002-1 C.B. 993. Safe harbor for capital cost reduction payments 451 Rev. Proc. 2011-17, 2011-5 I.R.B. 441. Treatment of gift cards issued to customers in exchange for returned merchandise 451 Rev. Proc. 2011-56, 2011-49 I.R.B. 834. Safe harbor for certain mi- nors' trusts established under the Indian Gaming Regulato- ry Act (U.S.C.§§ 2701-2721) 461 Rev. Proc. 2008-25, 2008-1 C.B. 686. Safe harbor method for pay- roll tax liabilities for compen- sation 471 Rev. Proc. 98-29, 1998-1 C.B. 857. Estimating inventory shrink- age 471 Rev. Proc. 2002-17, 2002-1 C.B. 676. Valuation of automobile deal- er vehicle parts inventory 471 Rev. Proc. 2003-20, 2003-1 C.B. 445. Valuation of remanufactured cores 471 Valuation of heavy Rev. Proc. 2006-14, 2006-1 C.B. 350. equipment dealer parts inventory 471 Rev. Proc. 2008-43, 2008-2 C.B. 186. Rolling-average method of accounting for inventories 475 Rev. Proc. 2007-41, 2007-1 C.B. 1492. Eligible positions 584(a) Rev. Proc. 92-51, 1992-1 C.B. 988. Qualification of a proposed common trust fund plan 642(c)(5) Rev. Proc. 88-53, 1988-2 C.B. 712. Qualification of trusts as pooled income funds 664 Rev. Proc. 2005-24, 2005-1 C.B. 909, as modified by Notice 2006-15, 2006-1 C.B. 501. Charitable remainder trusts 664(d)(1) Rev. Proc. 2003-53, 2003-2 C.B. 230; Rev. Proc. 2003-54, 2003-2 C.B. 236; Rev. Proc. 2003-55, Qualification of trusts as 2003-2 C.B. 242; Rev. Proc. 2003-56, 2003-2 C.B. 249; Rev. Proc. 2003-57, 2003-2 C.B. 257; charitable remainder annuity Rev. Proc. 2003-58, 2003-2 C.B. 262; Rev. Proc. 2003-59, 2003-2 C.B. 268; Rev. Proc. 2003-60, trusts 2003-2 C.B. 274. 664(d)(2) and (3) Rev. Proc. 2005-52, 2005-2 C.B. 326; Rev. Proc. 2005-53, 2005-2 C.B. 339; Rev. Proc. 2005-54, Qualification of trusts as 2005-2 C.B. 353; Rev. Proc. 2005-55, 2005-2 C.B. 367; Rev. Proc. 2005-56, 2005-2 C.B. 383; charitable remainder unitrusts Rev. Proc. 2005-57, 2005-2 C.B. 392; Rev. Proc. 2005-58, 2005-2 C.B. 402; Rev. Proc. 2005-59, 2005-2 C.B. 412. 832 Rev. Proc. 2002-46, 2002-2 C.B. 105. Insurance company premium acquisition expenses 856(c) Rev. Proc. 2003-65, 2003-2 C.B. 336. Certain loans treated as real estate assets 1031(a) Rev. Proc. 2000-37, 2000-2 C.B. 308, as modified by Rev. Proc. 2004-51, 2004-2 C.B. 294. Qualification as a qualified exchange accommodation arrangement 1031 Rev. Proc. 2008-16, 2008-1 C.B. 547. Safe harbor with respect to exchanges of residential real property 1031 Rev. Proc. 2010-14, 2010-12 I.R.B. 456. Safe harbor for reporting gain or loss on failed exchanges 1272(a)(6) Rev. Proc. 2013-26, 2013-22 I.R.B. 1160. Proportional method of accounting for original issue discount on pools of credit card receivables 1286 Rev. Proc. 91-50, 1991-2 C.B. 778. Determination of reasonable compensation under mort- gage servicing contracts 1362(f) Rev. Proc. 2013-30, 2013-36 I.R.B. 173. Automatic inadvertent termination relief to certain corporations 2056A Rev. Proc. 96-54, 1996-2 C.B. 386. Qualified Domestic Trust 2702(a)(3)(A) and 25.2702- Rev. Proc. 2003-42, 2003-1 C.B. 993. 5(c) Qualified Personal Residence Trust 4051(a)(2) Rev. Proc. 2005-19, 2005-1 C.B. 832. Imposition of tax on heavy trucks and trailers sold at retail 1.7704-2(d) Rev. Proc. 92-101, 1992-2 C.B. 579. New business activity of existing partnership is closely related to pre-existing busi- ness SUBJECT MATTERS REVENUE PROCEDURE Certain rent-to-own contracts Rev. Proc. 95-38, 1995-2 C.B. 397. treated as leases Automatic change in.03 For requests for an automatic change in accounting period, refer to the following automatic accounting period revenue change revenue procedures. procedures Rev. Proc. 2006-45, 2006-2 C.B. 851, as clarified and modified by Rev. Proc. 2007-64, 2007-2 C.B. 818 (certain corporations); Rev. Proc. 2006-46, 2006-2 C.B. 859 (certain partnerships, sub- chapter S corporations, personal service corporations, and trusts); and Rev. Proc. 2003-62, 2003-2 C.B. 299 (individuals seeking a calendar year). The Commissioner's consent to an otherwise qualifying automatic change in accounting period is granted only if the taxpayer timely complies with the applicable automatic change revenue procedure. APPENDIX G MEMORANDUM OF UNDERSTANDING ACKNOWLEDGING RISK WITH EMAIL I acknowledge that there are risks associated with email, such as the possibility that sensitive taxpayer information could be intercepted and viewed by unauthorized persons. I understand the importance of securing email using appropriate encryption, particularly when transmitting sensitive or confidential tax-related information. I understand that encryption programs only encrypt the email attachment and not the subject line or the body of the email itself, and that confidential information should not be included in the subject line, the body of the email itself, or the file name of the attachment. By signing this agreement, I understand that sensitive or confidential information should be sent only by encrypted email attachments in communicating with the IRS. Even with encryption it is possible electronic communications could be intercepted. I acknowledge that the United States Government does not guarantee the security of data transmitted electronically by email and accepts no liability, regardless of fault, for any loss or damage sustained without negligence of United States Government employees. (Name of Taxpayer) (Title of Individual Signing Agreement) SIGNATURE: _______________________________ DATE: ______________________________ APPENDIX H MEMORANDUMS OF UNDERSTANDING AGREEING TO USE ENCRYPTED EMAIL ATTACHMENTS Agreement to use encrypted email attachments.01 For requesters choosing to use encrypted email attachments in com- (compressed Zip format) pressed Zip format, submit the following MOU: Agreement to use encrypted email attachments (compressed Zip format).01 For requesters choosing to use encrypted email attachments in com-pressed Zip format, submit the following MOU: Agreement to Use Encrypted Email Attachments (Compressed Zip format) Generally, the Office of Chief Counsel, Internal Revenue Service (Chief Counsel) communicates with taxpayers or their representatives by sending documents through the mail or via facsimile, or by telephone. In many cases communication by email is more convenient for both the taxpayer and Chief Counsel. There are risks associated with email, such as the possibility sensitive taxpayer information could be intercepted. If an email is intercepted, any personal information in the email could be viewed by unauthorized persons. It is important to secure email using appropriate encryption, particularly when transmitting sensitive or confidential tax-related information. This agreement is intended to enhance the process of securely exchanging taxpayer data and other tax-related information and increase efficiency of interaction between Chief Counsel and taxpayers or their representatives. 1. Communications In order to communicate in a formal, efficient manner for tax issues, written communication is essential. Email is one form of written communication; however, in order to protect sensitive information, additional safeguards are necessary for email communications which are not generally required for paper documents. Chief Counsel and the taxpayer, by this agreement, consent to written communications being transmitted via encrypted email attachments. In order to limit access to this information, Chief Counsel and the taxpayer agree to designate participants and provide the list of participants in an addendum to this agreement. Only individuals designated as participants by Chief Counsel and the taxpayer on that list will be included in these communications. The taxpayer will be responsible for providing an updated list when there are changes to their designated participants. 2. Encrypted Email Attachments Chief Counsel uses SecureZIP(R), a commercial program, to compress and encrypt email attachments that contain sensitive information. The recipient of encrypted email attachments created using this utility may decrypt and view them by entering a password. The recipient must first install a compatible "zip" software utility. In addition to SecureZIP(R), compatible utilities include PKZIP(R), and ZIP Reader(R) by PKWARE(R), which is a free Windows utility that enables users to process compressed and/or AES passphrase-encrypted files created by SecureZIP(R), PKZIP(R) and other products that support these capabilities. SecureZIP and compatible utilities only encrypt the email attachment and not the subject line nor the body of the email itself. To prevent interception and viewing of sensitive or other confidential tax-related information by unauthorized persons, such information must not be included in the email body or subject line. 3. Security Both parties agree to work together to ensure the joint security of the information contained in the encrypted email attachment. Pursuant to this MOU, Chief Counsel certifies that its system used to transmit, store, or process data is designed, managed, and operated in a secure manner in compliance with relevant laws, regulations, and policies. The taxpayer should also undertake steps to ensure proper security protections are employed to transmit, receive, and store this information. By signing this agreement, the taxpayer understands that sensitive or confidential information should be sent only by encrypted email attachment in communicating with the IRS. Even with encryption it is possible electronic communications could be intercepted. By signing this agreement, the taxpayer acknowledges that the United States Government does not guarantee the security of data transmitted electronically by email and accepts no liability, regardless of fault, for any loss or damage sustained without negligence of United States Government employees. 4. Costs Both parties agree to bear all of their own costs on a nonreimbursable basis in complying with this agreement. 5. Timeline This agreement is effective upon the signatures of both parties and will remain in effect for the duration of the matter in Chief Counsel, including, but not limited to such time as the matter is on appeal or pending before other United States Government agencies such as the Department of the Treasury or Department of Justice. As a new participant is added to the MOU, they are added to the addendum and both the MOU and the addendum remain part of the case or administrative file. If either the taxpayer or Chief Counsel wishes to terminate this agreement before it expires, it may be done upon thirty (30) days' advance notice. In the event of a security incident, Chief Counsel may immediately terminate the agreement. 6 Additional Terms Nothing in this agreement shall be construed as a waiver of any sovereign immunity of the United States Government. This agreement is not intended to contravene in any way, the precedence or applicability of Federal law and shall be governed by and construed under Federal law of the United States of America. (Name of Taxpayer) (Title of Individual Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Office of Chief Counsel, Internal Revenue Service, United States of America (Name of Counsel Employee) (Title of Counsel Employee Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Addendum: Individuals and Email Addresses Authorized Pursuant to this Memorandum of Understanding Agreement to use encrypted email attachments.02 For requesters choosing to use encrypted email attachments with Ado- (Adobe Acrobat Pro password encryption) be Acrobat Pro password encryption, submit the following MOU: Agreement to Use Encrypted Email Attachments (Adobe Acrobat Pro Password Encryption) Generally, the Office of Chief Counsel, Internal Revenue Service (Chief Counsel) communicates with taxpayers or their representatives by sending documents through the mail or via facsimile, or by telephone. In many cases communication by email is more convenient for both the taxpayer and Chief Counsel. There are risks associated with email, such as the possibility sensitive taxpayer information could be intercepted. If an email is intercepted, any personal information in the email could be viewed by unauthorized persons. It is important to secure email using appropriate encryption, particularly when transmitting sensitive or confidential tax-related information. This agreement is intended to enhance the process of securely exchanging taxpayer data and other tax-related information and increase efficiency of interaction between Chief Counsel and taxpayers or their representatives. 1. Communications In order to communicate in a formal, efficient manner for tax issues, written communication is essential. Email is one form of written communication; however, in order to protect sensitive information, additional safeguards are necessary for email communications which are not generally required for paper documents. Chief Counsel and the taxpayer, by this agreement, consent to written communications being transmitted via encrypted email attachments. In order to limit access to this information, Chief Counsel and the taxpayer agree to designate participants and provide the list of participants in an addendum to this agreement. Only individuals designated as participants by Chief Counsel and the taxpayer on that list will be included in these communications. The taxpayer will be responsible for providing an updated list when there are changes to their designated participants. 2. Encrypted Email Attachments Chief Counsel uses Adobe Acrobat Pro(R), a commercial program, to compress and encrypt email attachments in Adobe Portable Document Format (.pdf) that contain sensitive information. The recipient of encrypted email attachments created using this utility may decrypt and view them by entering a password. The recipient must first install a compatible.pdf software reader with password decryption capability. In addition to Adobe Acrobat Pro(R), the Adobe Acrobat DC Reader(R) is a free Windows utility that enables users to decrypt and open AES passphrase-encrypted files created by Adobe Acrobat Pro. Other compatible.pdf decryption utilities may exist. Acrobat Pro(R) only encrypts the email attachment and not the subject line nor the body of the email itself. To prevent interception and viewing of sensitive or other confidential tax-related information by unauthorized persons, such information must not be included in the email body or subject line. Further information about how to encrypt email attachments with Adobe Acrobat products may be found on Adobe's web site or at this link: https://home.treasury.gov/how-to-encryptpassword-protect-microsoft-office-and-adobe-acrobat-pdf-documents. 3. Security Both parties agree to work together to ensure the joint security of the information contained in the encrypted email attachment. Pursuant to this MOU, Chief Counsel certifies that its system used to transmit, store, or process data is designed, managed, and operated in a secure manner in compliance with relevant laws, regulations, and policies. The taxpayer should also undertake steps to ensure proper security protections are employed to transmit, receive, and store this information. By signing this agreement, the taxpayer understands that sensitive or confidential information should be sent only by encrypted email attachment in communicating with the IRS. Even with encryption it is possible electronic communications could be intercepted. By signing this agreement, the taxpayer acknowledges that the United States Government does not guarantee the security of data transmitted electronically by email and accepts no liability, regardless of fault, for any loss or damage sustained without negligence of United States Government employees. 4. Costs Both parties agree to bear all of their own costs on a nonreimbursable basis in complying with this agreement. 5. Timeline This agreement is effective upon the signatures of both parties and will remain in effect for the duration of the matter in Chief Counsel, including, but not limited to such time as the matter is on appeal or pending before other United States Government agencies such as the Department of the Treasury or Department of Justice. As a new participant is added to the MOU, they are added to the addendum and both the MOU and the addendum remain part of the case or administrative file. If either the taxpayer or Chief Counsel wishes to terminate this agreement before it expires, it may be done upon thirty (30) days' advance notice. In the event of a security incident, Chief Counsel may immediately terminate the agreement. 6 Additional Terms Nothing in this agreement shall be construed as a waiver of any sovereign immunity of the United States Government. This agreement is not intended to contravene in any way, the precedence or applicability of Federal law and shall be governed by and construed under Federal law of the United States of America. (Name of Taxpayer) (Title of Individual Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Office of Chief Counsel, Internal Revenue Service, United States of America (Name of Counsel Employee) (Title of Counsel Employee Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Addendum: Individuals and Email Addresses Authorized Pursuant to this Memorandum of Understanding Agreement to use encrypted email attachments.03 For requesters choosing to use encrypted email attachments with Mi- (Microsoft Office 2016/365 password crosoft Office 2016/365 password encryption, submit the following MOU: encryption) Agreement to Use Encrypted Email Attachments (Microsoft Office 2016/365 Password Encryption) Generally, the Office of Chief Counsel, Internal Revenue Service (Chief Counsel) communicates with taxpayers or their representatives by sending documents through the mail or via facsimile, or by telephone. In many cases communication by email is more convenient for both the taxpayer and Chief Counsel. There are risks associated with email, such as the possibility sensitive taxpayer information could be intercepted. If an email is intercepted, any personal information in the email could be viewed by unauthorized persons. It is important to secure email using appropriate encryption, particularly when transmitting sensitive or confidential tax-related information. This agreement is intended to enhance the process of securely exchanging taxpayer data and other tax-related information and increase efficiency of interaction between Chief Counsel and taxpayers or their representatives. 1. Communications In order to communicate in a formal, efficient manner for tax issues, written communication is essential. Email is one form of written communication; however, in order to protect sensitive information, additional safeguards are necessary for email communications which are not generally required for paper documents. Chief Counsel and the taxpayer, by this agreement, consent to written communications being transmitted via encrypted email attachments. In order to limit access to this information, Chief Counsel and the taxpayer agree to designate participants and provide the list of participants in an addendum to this agreement. Only individuals designated as participants by Chief Counsel and the taxpayer on that list will be included in these communications. The taxpayer will be responsible for providing an updated list when there are changes to their designated participants. 2. Encrypted Email Attachments Chief Counsel uses Microsoft Office 365(R), a commercial program, to compress and encrypt email attachments in Microsoft Office formats, including Word, Excel or PowerPoint, that contain sensitive information. The recipient of encrypted email attachments created using this program may decrypt and view them by entering a password. The recipient should use Microsoft 2016(R) or Microsoft Office 365(R) to decrypt and open encrypted Office files sent by Chief Counsel as email attachments. Older versions of Microsoft Office may not successfully decrypt these attachments. Microsoft Office 365 only encrypts the email attachment and not the subject line nor the body of the email itself. To prevent interception and viewing of sensitive or other confidential tax-related information by unauthorized persons, such information must not be included in the email body or subject line. Further information about how to encrypt email attachments with Microsoft Office products may be found on Microsoft's web site or at this link: https://home.treasury.gov/how-to-encryptpassword-protect-microsoft-office-and-adobe-acrobat-pdf-documents. 3. Security Both parties agree to work together to ensure the joint security of the information contained in the encrypted email attachment. Pursuant to this MOU, Chief Counsel certifies that its system used to transmit, store, or process data is designed, managed, and operated in a secure manner in compliance with relevant laws, regulations, and policies. The taxpayer should also undertake steps to ensure proper security protections are employed to transmit, receive, and store this information. By signing this agreement, the taxpayer understands that sensitive or confidential information should be sent only by encrypted email attachment in communicating with the IRS. Even with encryption it is possible electronic communications could be intercepted. By signing this agreement, the taxpayer acknowledges that the United States Government does not guarantee the security of data transmitted electronically by email and accepts no liability, regardless of fault, for any loss or damage sustained without negligence of United States Government employees. 4. Costs Both parties agree to bear all of their own costs on a nonreimbursable basis in complying with this agreement. 5. Timeline This agreement is effective upon the signatures of both parties and will remain in effect for the duration of the matter in Chief Counsel, including, but not limited to such time as the matter is on appeal or pending before other United States Government agencies such as the Department of the Treasury or Department of Justice. As a new participant is added to the MOU, they are added to the addendum and both the MOU and the addendum remain part of the case or administrative file. If either the taxpayer or Chief Counsel wishes to terminate this agreement before it expires, it may be done upon thirty (30) days' advance notice. In the event of a security incident, Chief Counsel may immediately terminate the agreement. 6 Additional Terms Nothing in this agreement shall be construed as a waiver of any sovereign immunity of the United States Government. This agreement is not intended to contravene in any way, the precedence or applicability of Federal law and shall be governed by and construed under Federal law of the United States of America. (Name of Taxpayer) (Title of Individual Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Office of Chief Counsel, Internal Revenue Service, United States of America (Name of Counsel Employee) (Title of Counsel Employee Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Addendum: Individuals and Email Addresses Authorized Pursuant to this Memorandum of Understanding

Private Letter Ruling Number: 202216021 Internal Revenue Service March 3, 2021 DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE 1100 Commerce Street, MC 4020DAL Dallas, TX 75242 TAX EXEMPT AND GOVERNMENT ENTITIES DIVISION Number: 202216021 Release Date: 4/22/2022 Date: March 3, 2021 Taxpayer ID Number: Form: For Tax Period(s) Ending: Person to Contact: Identification Number: Telephone Number: UIL: 501.07-00 CERTIFIED MAIL -- Return Receipt Requested LAST DAY FOR FILING A PETITION WITH THE TAX COURT: Dear ******: This is a final determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(7) for the tax period(s) above. Your determination letter dated May 19 **** is revoked. Our adverse determination as to your exempt status was made for the following reasons: You have not established that you are operated substantially for pleasure and recreation of your members or other non-profitable purposes and no part of the earnings inures to the benefit of private shareholder within the meaning of IRC Section 501(c)(7). You have made your recreational and social facilities available to the general public. You have exceeded the non-member income test for tax year ending April 30, 2018. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms, and information please visit www.irs.gov. If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims, or 3) the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed within 90 days from the date this determination was mailed to you. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment by referring to the enclosed Publication 892. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 U.S. Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 U.S. District Court for the District of Columbia 333 Constitution Ave, N W Washington, DC 20001 Processing of Income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. You may be eligible for help from the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocateirs.gov or call 1-877-777-4778. Taxpayer Advocate assistance can't be used as substitute for established IRS procedures, formal appeals processes, etc. The Taxpayer Advocate is not able to reverse legal or technically correct tax determination, nor extend the time fixed by law that you have to file a petition in Court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling. You can get any of the forms or publications mentioned in this letter by calling 800-TAX-FORM (800-829-3676) or visiting our website at www.irs.gov/forms-pubs. If you have questions, you can with-let the person listed at the top of this letter. Sincerely, Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: August 3, 2020 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Hours: Manager's contact information: Name: ID number: Telephone: Response due dale: CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(7). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(7) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Publication 892 Publication 3498 ISSUE Whether the organization continues to qualify for exemption under Internal Revenue Code section 501(c)(7) if its investment income is greater than 35% of its gross receipts? FACTS Organizational Structure The organization, ****** (******), was incorporated on May 24, ****** in the state of ****** The Certificate of Incorporation states that the purpose of the organization is to own, operate, and maintain a membership club, clubhouses, club rooms, recreation centers, and reception and assembly rooms for the purpose of providing for the members' entertainment, sport, recreation, and amusement of all kinds; to furnish, equip, decorate, and fit up such clubs and club rooms; to promote social and friendly intercourse among the members of such club or among their guests; to provide and supply any and all appurtenances that may be necessary, useful or convenient for the carrying on of sports, recreations and diversions of all kinds and description for the entertainment, welfare and convenience of the members and their guests and friends. To promote friendship among its members; to inculcate in them a high sense of loyalty to each other; to stimulate their intellectual advancement and to hold meetings and social gatherings for the better realization of such purposes. Form 990-EZ and Form 990-T The ****** was examined for the tax year ending April 30, 20**. The name of the organization listed on Form 990-EZ is: The ****** reported $ ****** in total gross receipts for the year ending April 30, 20**. The following is a breakdown of revenues reported in Part I, Revenue, Expenses, and Changes in Net Assets or Fund Balances, of the Form 990-EZ: The organization's primary exempt purpose stated in Part Ill, Statement of Program Service Accomplishments, is "Fraternal Organization." The ****** Form 990-T was viewed but not examined for the year ending April 30, 20**. The ****** reported Unrelated Trade or Business Income on Form 990-T as $ ****** in Part 1, Unrelated Trade or Business Income, as follows: Initial Contact Revenue Agent was first contacted by ******, the power of attorney (POA), for the ******. The POA indicated that the organization no longer coducts any activities and all the Income received is derived from a ******-year note receivable for the sale of the ****** clubhouse in 20**. Initial Appointment A field examination was not scheduled as the POA stated the ****** sold its clubhouse in ****** and since stopped conducting any operations. The examination was conducted through correspondence. Membership The Club did not receive any income other than investment income as verified on the bank statements provided. Facility As explained by the POA over the phone, the ****** clubhouse has been sold on July 15 ****** to an unrelated entity. Revenue Agent received a signed statement by the POA stating that the entity that bought the clubhouse was not related and are not former members of the ******. Social and Recreational Activities The POA stated that the ****** no longer conducts any social and recreational activities and will move forward to dissolving the ******. LAW Internal Revenue Code (IRC) IRC §501(d)(7) provides exemption from income taxes for clubs organized for pleasure, recreation, and other nonprofitable purposes, substantially all of the activities of which are for such purposes and no part of the net earnings of which inures to the benefit of any private shareholder. Treasury Regulation Treasury Regulation §1.501(c)(7)-1(a) further provides that in general, this exemption extends to social and recreation clubs which are supported solely by membership fees, dues, and assessments. However, a club otherwise entitled to exemption will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. Prior to its amendment in 1976, IRC §501(c)(7) required that social clubs be operated exclusively for pleasure, recreation and other nonprofitable purposes. Public Law 94-568 amended the "exclusive" provision to read "substantially" in order to allow an IRC §501(c)(7) organization to receive up to 35 percent of its gross receipts, including investment income, from sources outside its membership without losing its tax-exempt status. The Committee Reports for Public Law 94-568 (Senate Report No 94-1318 2d Session, 1976-2 C.B. 597) further states; (a) Within the 35 percent amount, not more than 15 percent of the gross receipts should be derived from the use of a social club's facilities or services by the general public. This means that an exempt social club may receive up to 35 percent of its gross receipts from a combination of investment income and receipts from non-members, so long as the latter do not represent more than 15 percent of total receipts. (b) Thus, a social club may receive investment income up to the full 35 percent of its gross receipts if no income is derived from non-members' use of club facilities. (c) In addition, the Committee Report states that where a club receives unusual amounts of income, such as from the sale of its clubhouse or similar facilities, that income is not to be included in the 35 percent formula. Revenue Ruling Revenue Ruling 66-149 holds a social club as not exempt as an organization described in IRC §501(c)(7) where it derives a substantial part of its income from non-member sources, for example, dividends and interest on investment it owns. TAXPAYER'S POSITION Revenue Agent discussed the proposed revocation with ****** POA, explained the requirements of an organization exempt under IRC section 501(c)(7), and why the ****** no longer meets those requirements. The POA stated that he agrees with the proposed revocation. GOVERNMENT'S POSITION As a result of the examination, the ****** fails to establish that it is a social and recreational club that qualifies for exemption from federal income tax under section 501(c)(7) of the IRC and section 1.501(c)(7)-1 of the Treasury Regulations because its investment income exceeds the allowable 35% investment income limitation. Furthermore, the ******* is no longer conducting any social and recreational activities. The ****** received ** % of its income for tax year ending April 30, ****** from investment income, calculated in the following table: The ****** investment income exceeds the 35% threshold permissible for an organization tax-exempt under section 501(c)(7) of the IRC. Public Law 94-568 provides that social clubs are permitted to receive up to 35% of their gross receipts from sources outside of their membership without losing their tax-exempt status, and that within that 35%, not more than 15% of gross receipts should be derived from the use of a social club's facilities or services by the general public. The ****** is like the organization in Revenue Ruling 66-149, in that the ****** derives a substantial part of its income from non-member sources; ** % of the ****** income is investment income. CONCLUSION As a result of the examination, the ****** is not a club organized for pleasure, recreation, and other nonprofitable purposes because its investment income exceeds the allowable 35% investment income for organizations under section 501(c)(7) of the IRC. Moreover, the ****** no longer conducts any social and recreational activities. The ****** should no longer be tax-exempt under section 501(c)(7) of the IRC. Therefore, it is proposed that the ****** tax exempt status under section 501(c)(7) of the IRC be revoked effective May 1, 20**. The organization will be required to file Form 1120 for all tax periods subsequent to the revocation of their exempt status. If you agree with this conclusion, please sign the attached forms. If you disagree, please submit a statement of your position.

Private Letter Ruling Number: 202243014 Internal Revenue Service December 7, 2021 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Release Number: 202243014 Release Date: 10/28/2022 UIL Code: 501.07-00 Date: December 7, 2021 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: CERTIFIED MAIL - RETURN RECEIPT REQUESTED Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(7), for the tax periods above. Your determination letter dated ******, is revoked. Our adverse determination as to your exempt status was made for the following reasons: You have not established that you are operated substantially for pleasure, recreation, and other nonprofitable purposes and no part of the net earnings inures to the benefit of any private shareholder within the meaning of IRC Section 501(c)(7). You no longer qualify for exemption under IRC Section 501(c)(7), as your non-member income has exceeded the 35% non-member income limit set by Public Law 94-568. Also, in response to your request for consideration of relief under IRC Section 7805(b), which was granted by Director, Exempt Organizations Examinations on ******, the revocation of your tax-exempt status is effective ******. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit www.irs.gov. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims or 3) the United States District Court for the District of Columbia. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing an action for declaratory judgment by referring to the enclosed Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 U.S. Court pf Federal Claims 717 Madison Place, NW Washington, DC 20439 U.S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, DC 20001 Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.irs.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting www.irs.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. Keep the original letter for your records. Sincerely, Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: November 9, 2020 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: December 9, 2020 CERTIFIED MAIL -- Return Receipt Requested Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(7). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(7) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Publications 892 & 3498 REVISED TO REFLECT RELIEF UNDER SECTION 7805(b) ISSUE Should ****** (hereafter EO) continue to qualify as an organization described in Section 501(c)(7) of the Internal Revenue Code? FACTS ****** was incorporated in the ****** of ****** on ******. It submitted Form ******, Application for Recognition of Exemption under Section 501(a), and received exemption under section 501(c)(7) with effective date ******. In article 3 of the EO's Articles of Incorporation and on Form ****** its stated purpose is "******". The EO's ****** response to Information Document Request (IDR) #1, regarding membership information states that there exists "only one class of members, all being living descendants of ******". This currently comprises ****** individuals across ******. There is no member handbook and there is no mention of any organized activity or commingling in the organization's By-Laws or newsletter. In addition, there is no schedule of membership dues listed in the EO's By-Laws. The EO does not list a website on its ****** return, its By-Laws or its newsletter. In addition, no other web or related social media accounts are mentioned. A simple online search does not yield any results that suggest that the organization maintains an online presence. Note ****** of the EO's Financial Statements submitted with Form ******, states: "Revenues are comprised primarily of Member Dues and occasional Member Contributions. Member dues are meant to approximate ****** and ****** taxes assessed annually. Member Contributions are made periodically for maintenance and other purposes". According to the EO's By-Laws, "Expenses" section, items and state: "to the extent that ****** has adequate funds, all expenses will be paid using such funds. To the extent that ****** does not have adequate funds, all expenses having to do with the property are to be shared equally between the families involved." In response to IDR #1 issued during the audit seeking complete details for member activities in the year under audit, the EO stated: "Various ****** and ****** activities. Exact dates and participants are not maintained". No member dues were reported on the organization's return for years ****** and ******. The EO's response to IDR #1 regarding member dues states: "no member dues were collected in ******. ****** In previous years, member dues were paid to cover expenses of the property such as taxes and maintenance". The EO entered into a **-year mineral Lease Agreement with ****** on ******. It received a Bonus Consideration and rental payment of $ ****** in ****** which the EO reported on Part I, Line 4 (******) of its ****** return and Part I, Line ****** (******) on its ****** return. The EO did not report on Schedule ****** of Form ****** any income as a set aside. In ******, the EO also reported other investment income of $ ****** from ****** for a total of $ ******. Inspection of the EO's ****** return shows total investment income of $ ****** comprising Other Investment Income from ******. Section ******, Payments to Lessor, of the Lease Agreement with ******, stipulates that additional rental and royalty payments will be made to the EO according to certain conditions. The EO's ****** newsletter which was included with EO's response to IDR#1, ****** acknowledges that the EO has received a letter from ****** describing their activity and states: "******". The table below summarizes the income reported in years ****** (year under audit) and (inspected return). LAW Section 501(a) of the Internal Revenue Code exempts from taxation organizations described at subsection 501(c)(7) as clubs organized for pleasure, recreation, and other non-profitable purposes, substantially all of the activities of which are for such pleasure, recreation, and other non-profitable purposes and no part of the net earnings of which inures to the benefit of any private shareholder. Section 1.501(c)(7)-1 of the Income Tax Regulations states in pertinent part, that: (a) The exemption provided by § 501(c)(7) of the Code applies only to clubs which are organized and operated exclusively for pleasure, recreation, and other non-profitable purposes, but does not apply to any club if any part of its net earnings inures to the benefit of any private shareholder. In general, this exemption extends to social and recreation clubs that are supported solely by membership fees, dues, and assessments. However, a club otherwise entitled to exemption will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. (b) A club, which engages in business, such as making its social and recreational facilities available to the general public or by selling real estate, timber, or their products, is not organized and operated exclusively for pleasure, recreation, or social purposes. Prior to its amendment in 1976, IRC § 501(c)(7) required that social clubs be operated exclusively for pleasure, recreation and other nonprofitable purposes. Public Law 94-568 amended the "exclusive" provision to read "substantially' in order to allow an IRC § 501(c)(7) organization to receive up to 35 percent of its gross receipts, including investment income, from sources outside its membership without losing its tax-exempt status. The Committee Reports for Public Law 94-568 (Senate Report No. 94-1318 2d Session, 1976-2 C.B. 597) further states: (a) Within the 35 percent amount, not more than 15 percent of the gross receipts should be derived from the use of a social club's facilities or services by the general public. This means that an exempt social club may receive up to 35 percent of its gross receipts from a combination of investment income and receipts from non-members, so long as the latter do not represent more than 15 percent of total receipts. (b) Thus, a social club may receive investment income up to the full 35 percent of its gross receipts if no income is derived from non-members' use of club facilities. (c) In addition, the Committee Report states that where a club receives unusual amounts of income, such as from the sale of its clubhouse or similar facilities, that income is not to be included in the 35 percent formula. Revenue Ruling 66-149; 1966-1 C.B., holds a social club as not exempt from Federal income tax as an organization described in IRC § 501(c)(7) of the Internal Revenue Code of 1954 where it derives a substantial part of its income from non-member sources such as, for example, dividends and interest on investments which it owns. Rev.Rul. 69-220, 1969-1 C.B. 154., describes a social club that receives a substantial portion of its income from the rental of property and uses such income to defray operating expenses and to improve and expand its facilities is not exempt under Code section 501(c)(7). The organization was precluded from exemption because it regularly engaged in a business ordinarily carried on for profit and because its net income from this activity inured to its membership in the form of improved and expanded facilities. Internal Revenue Code Section 512(a)(3)(B) states that for purposes of subparagraph (A), the term "exempt function income" means the gross income from dues, fees, charges, or similar amounts paid by members of the organization as consideration for providing such members or their dependents or guests goods, facilities, or services in furtherance of the purposes constituting the basis for the exemption of the organization to which such income is paid. Such term also means all income (other than an amount equal to the gross income derived from any unrelated trade or business regularly carried on by such organization computed as if the organization were subject to paragraph (1)), which is set aside for a purpose specified in section 170(c)(4). The sale of mineral rights or income derived from gas or oil extractions will result in unrelated business taxable income to a social club. Such income is not exempt function income as defined in section 512(a)(3)(B). The special non-recognition provisions of section 512(a)(3)(D) would not apply. Further, if a social club were to lease mineral rights and were to receive royalty income from such lease, the modification under section 512(b)(2) to exclude such income from tax is not available to a social club. TAXPAYER'S POSITION The taxpayer did not omit or misstate material information in the application for exemption or operate in a manner materially different from that originally represented in their application for recognition of exemption. The taxpayer clearly noted the organization had entered into an ****** lease with ******, disclosed the $ ****** signing bonus, and included a copy of the lease with their application for exemption. The IRS approved the exemption application with the knowledge the taxpayer would receive the one-time bonus, well in excess of the ** % investment income threshold. The taxpayer relied on the determination letter in filing its ****** and ****** tax returns and believes that it would be inequitable to retroactively revoke the taxpayer's information. The taxpayer requests relief from retroactive revocation of its tax-exempt status. GOVERNMENT'S POSITION An organization exempt from federal income taxes as described in IRC section 501(c)(7) must meet the gross receipts test in order to maintain its exemption. In order to meet the gross receipts test, an organization can receive up to ****** percent (** %) of its gross receipts, including investment income, from sources outside its membership without losing its tax-exempt status. Within this ** % amount, not more than fifteen percent (** %) of the gross receipts should be derived from the use of a social club's facilities or services by non-members. Based on the examination, the organization does not qualify for exemption as a social club described in IRC §501(c)(7) and Treas.Reg. §1.501(c)(7) which provides that in general, this exemption extends to social and recreation clubs which are supported solely by membership fees, dues, and assessments. Rev.Rul. 66-149 support this position stating that a social club is not exempt under Code section 501(c)(7) if it regularly derives a substantial part of its income from nonmember sources, such as investment income. Per Treas.Reg. Section 1.501(c)(7)-1(a), substantially all of the organization's activities are not for pleasure, recreation, or other nonprofit purposes. All of its income is derived from non-member sources, and as a result, income from non-member sources is used to defray membership costs resulting in inurement to members. Rev.Rul. 69-220 held a social club that receives a substantial portion of its income from the rental of property and uses such income to defray operating expenses is not exempt under Section 501(c)(7) of the Code. The organization entered into a ****** lease agreement with the purpose to generate income, decreasing the amounts needed to be contributed by its members. This income is supporting its operations, and as it is decreasing the obligations of funds required to be paid by members, it is inuring to their benefit. The organization reported investment income that composed ** % of their gross income in ******. Inspection of the organization's ****** return shows that investment income was, again, ** % of its gross income. The organization exceeded the ** % non-member threshold as outlined ill Public Law 94-568. Moreover, the investment income defrays the ongoing operating cost and inures to the benefit of members. Accordingly, it is proposed that the organization's tax-exempt status be revoked. CONCLUSION ****** no longer qualifies for exemption under § 501(c)(7) of the Code as your nonmember income has exceeded the *** % investment income threshold on a continuing basis. Accordingly, ****** is not entitled to tax exemption under 501(c)(7) of the Code and its tax-exempt status should be revoked. The request for relief under IRC Section 7805(b) has been granted and, therefore, the effective date of revocation is ******. Form ******, U.S. Corporation Income Tax, should be filed for tax year ending ****** and thereafter. As a reminder, you have the right to file a protest if you disagree with this determination. If you agree with this conclusion, please sign and return the enclosed Form 6018 by the indicated response due date.

Internal Revenue Service - Information Release IR-2022-199 IRS reminds taxpayers IRS Free File remains open until Nov. 17 November 15, 2022 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS reminds taxpayers IRS Free File remains open until Nov. 17 IR-2022-199, November 15, 2022 WASHINGTON -- The Internal Revenue Service today reminded those who still need to file their 2021 tax returns that IRS Free File remains open until November 17 and can help those who qualify claim the Child Tax Credit, Recovery Rebate Credit or Earned Income Tax Credit. These and other tax benefits were expanded under last year's American Rescue Plan Act and other recent legislation. The only way to get these valuable benefits, however, is to file a 2021 tax return. Last month, the Internal Revenue Service sent letters to more than 9 million individuals and families who appeared to qualify for a variety of key tax benefits but had not yet claimed them by filing a 2021 federal income tax return. Many in this group may be eligible to claim some or all of the 2021 Recovery Rebate Credit, the Child Tax Credit, the Earned Income Tax Credit and other tax credits, depending on their personal and family situation. The letter, printed in both English and Spanish, provided a brief overview of each of these credits. Often, individuals and families can get these expanded tax benefits, even if they have little or no income from a job, business or other source. This means that many people who don't normally need to file a tax return should do so this year, even if they haven't been required to file in recent years. There's no penalty for a refund claimed on a tax return filed after the regular April 2022 tax deadline. The fastest and easiest way to get a refund is to file an accurate return electronically and choose direct deposit. To help people claim these benefits without charge, IRS Free File will remain open this year, until November 17, 2022. Available only at IRS.gov/freefile, IRS Free File lets people whose incomes are $73,000 or less to file a return online for free using brand-name software. IRS Free File is sponsored by the Free File Alliance, a partnership between the IRS and the tax software industry, a public-private partnership that provides their brand-name products for free. IRS Free File provides two ways for taxpayers to prepare and file their 2021 federal income tax return online for free: - IRS Partner Sites. Traditional IRS Free File provides free online tax preparation and filing options on IRS partner sites. Individual taxpayers whose adjusted gross income (AGI) is $73,000 or less qualify for any IRS Free File partner offers. Free File lets individuals electronically prepare and file their federal income tax online using guided tax preparation. - Free Fillable Forms. For taxpayers whose AGI is greater than $73,000, there's the Free File Fillable Forms option. It provides electronic federal tax forms that can be filled out and filed online for free. To use this option, taxpayers should know how to prepare their own tax return. Always start at IRS.gov: - From the homepage, select File Your Taxes for Free. - Use the IRS Free File Lookup Tool to narrow the list of providers or the Browse All Offers page to see a full list of providers. - Follow the link to the chosen IRS Free File provider's website. Prior year returns can be filed electronically only by registered tax preparers for the two previous tax years. Otherwise, taxpayers must print, sign and mail prior year returns. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications lists qualified local preparers.

Private Letter Ruling Number: 202325005 Internal Revenue Service March 28, 2023 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202325005 Release Date: 6/23/2023 Index Number: 1400Z.02-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:B04 PLR-118821-22 Date: March 28, 2023 Dear ******: This letter responds to Taxpayer's request, dated Date 3, seeking a private letter ruling granting relief to make a late regulatory election pursuant to sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations. Specifically, Taxpayer requests an extension of time to file Form 8996, Qualified Opportunity Fund, for purposes of making the election, under section 1.1400Z2(d)-1(a)(2)(i) of the Income Tax Regulations, to be certified as a qualified opportunity fund (QOF), as defined in section 1400Z-2(d) of the Internal Revenue Code 1, and (2) to be treated as a QOF, effective as of the month Taxpayer was formed, as provided under section 1400Z-2(d) and section 1.1400Z2(d)-1(a). ******** 1 Unless otherwise specified, all "section" references are to sections of the Internal Revenue Code or the Treasury Regulations (26 CFR Part 1) or (26 CFR Part 301). ******** This letter is being issued electronically in accordance with Rev.Proc. 2022-1, 2022-1 I.R.B. 1. A paper copy will not be mailed to Taxpayer. FACTS Taxpayer has represented that the facts are as follows. Taxpayer was organized as a limited partnership under the laws of State on Date 1 and is classified as a partnership for U.S. federal income tax purposes. Taxpayer was organized for the purpose of being a QOF and investing in qualified opportunity zone business property as defined in section1400Z-2(d)(2) of the Code. During Years 1 and 2, GP, the sole general partner of Taxpayer, managed Taxpayer and served as Taxpayer's designated partnership representative for Federal tax matters. LLC held an interest in GP and provided investment advisory and management services to Taxpayer. Managing Director of LLC engaged Accounting Firm on Taxpayer's behalf to prepare Taxpayer's tax filings for Year 1, including any forms and elections to self-certify Taxpayer as a QOF. Taxpayer did not receive its initial funding until around Date 2 and did not engage in any other business activity during Year 1. Due to this lack of business activity, Accounting Firm mistakenly believed that Taxpayer did not need to file Form 1065, U.S. Return of Partnership Income for Year 1. As such, Taxpayer failed to file a Form 8996 and did not self-certify as a QOF by the due date. In Month 2 of Year 3, Manager became aware of Taxpayer's failure to self-certify as a QOF for Year 1 and contacted Accounting Firm. Taxpayer promptly directed Accounting Firm to prepare a request for a private letter ruling. LAW AND ANALYSIS Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations for rules for the certification of QOFs. Section 1.1400Z2(d)-1(a)(2)(i) provides that the self-certification of a QOF must be timely-filed and effectuated annually in such form and manner as may be prescribed by the Commissioner of Internal Revenue in the Internal Revenue Service forms or instructions, or in publications or guidance published in the Internal Revenue Bulletin. To self-certify as a QOF, a taxpayer must file Form 8996, Qualified Opportunity Fund, with its tax return for the year to which the certification applies. The Form 8996 must be filed by the due date of the tax return (including extensions). The information provided indicates that Taxpayer did not file its Form 8996 by the due date of its Year 1 income tax return because of the incorrect assumptions made by Accounting Firm. Section 1.1400Z2(d)-1(a)(2)(i) sets forth the manner and timing for an entity to self-certify as a QOF. As such, these elections are regulatory elections, as defined in section 301.9100-1(b). Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections (other than automatic extensions covered in section 301.9100-2) will be granted when the taxpayer provides evidence (including affidavits) to establish that the taxpayer acted reasonably and in good faith and the grant of relief will not prejudice the interests of the Government. Section 301.9100-3(b)(1) provides that a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer-- (i) requests relief before the failure to make the regulatory election is discovered by the Service; (ii) failed to make the election because of intervening events beyond the taxpayer's control; (iii) failed to make the election because, after exercising reasonable diligence, the taxpayer was unaware of the necessity for the election; (iv) reasonably relied on the written advice of the Service; or (v) reasonably relied on a qualified tax professional, and the professional failed to make, or advise the taxpayer to make, the election. Under section 301.9100-3(b)(2), a taxpayer will not be considered to have reasonably relied on a qualified tax professional if the taxpayer knew or should have known that the professional was not -- (i) competent to render advice on the regulatory election; or (ii) Aware of all relevant facts. In addition, section 301.9100-3(b)(3) provides that a taxpayer is deemed not to have acted reasonably and in good faith if the taxpayer-- (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under § 6662 at the time the taxpayer requests relief, and the new position requires or permits a regulatory election for which relief is requested; (ii) was fully informed in all material respects of the required election and related tax consequences but chose not to make the election; or (iii) uses hindsight in requesting relief. If specific facts have changed since the original deadline that make the election advantageous to a taxpayer, the Service will not ordinarily grant relief. Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. CONCLUSION Based on the facts and information submitted in connection with this request, we conclude Taxpayer has acted reasonably and in good faith, and that the granting of relief would not prejudice the interests of the Government. Accordingly, based solely on the facts and information submitted, and the representations made in the ruling request, Taxpayer is granted 60 days from the date of this letter to file a Form 8996 to make the election to self-certify as a QOF under section 1400Z-2 and section 1.1400Z2(d)-1(a)(2)(i) as of Month 1 of Year 1, the month in which Taxpayer was formed. The election must be made on a completed Form 8996 and attached to Taxpayer's tax return for Year 1. This ruling is based upon facts and representations submitted by Taxpayer and accompanied by penalty of perjury statements executed by the appropriate parties. This office has not verified any of the material submitted in support of the request for a ruling. However, as part of an examination process, the Service may verify the factual information, representations, and other data submitted. This ruling addresses the granting of section 301.9100-3 relief as applied to the election to self-certify Taxpayer as a QOF by filing Form 8996 for Year 1. Except as expressly provided herein, no opinion is either expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we have no opinion, either express or implied, concerning whether any investments made into Taxpayer are qualifying investments as defined in section 1.1400Z2(a)-1(b)(34) or whether Taxpayer meets the requirements and structure under section 1400Z-2 and the regulations thereunder to be a QOF. In addition, we also express no opinion on whether any interest owned in any entity by Taxpayer qualifies as qualified opportunity zone property, as defined in section 1400Z-2(d)(2), or whether such entity would be treated as a qualified opportunity zone business, as defined in section 1400Z-2(d)(3). We express no opinion regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction. A copy of this letter must be attached to any tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent. Enclosed is a copy of the letter ruling showing the deletions proposed to be made when it is disclosed under section 6110. Pursuant to the Form 2848, Power of Attorney and Declaration of Representation, on file, we are sending a copy of this letter to Taxpayer's authorized representative. Sincerely, Alexa T. Dubert Senior Technician Reviewer Branch 4 Office of Chief Counsel (Income Tax & Accounting) Cc:

Private Letter Ruling Number: 202024015 Internal Revenue Service March 17, 2020 Department of the Treasury Internal Revenue Service Appeals Office 4330 Watt Avenue SA 7890 Sacramento, CA 95821-7012 Date: MAR 17 2020 Number: 202024015 Release Date: 6/12/2020 Employer Identification Number: Person to Contact: Employee ID No: Tel: Fax: UIL: 0501.0-00 Certified Mail Dear ********: This is a final adverse determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (the "Code") section 501(a) as an organization described in Section 501(c)(3) of the Code. It is determined that you do not qualify as exempt from Federal income tax under section 501(c)(3) of the Code, effective October 1, 20**. We made the adverse determination for the following reason(s): Organizations described in section 501(c)(3) of the Internal Revenue Code and exempt from tax under section 501(a) must be both organized and operated exclusively for exempt purposes. You have failed to produce documents or otherwise establish that you are operating for exempt purposes. Moreover, to satisfy the operational test an organization must engage primarily in activities which accomplish one or more of the exempt purposes specified in section 501(c)(3) of the Code. You are not operated exclusively for charitable or other exempt purposes as required by section 501(c)(3) of the Code. Contributions to your organization are not deductible under section 170 of the Code. You're required to file Federal income tax returns on Forms 1120, U.S. Corporation Income Tax Return. Mail your form to the appropriate Internal Revenue Service Center per the form's instructions. You can get forms and instructions by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). We'll make this letter and the proposed adverse determination letter available for public inspection under Code section 6110 after deleting certain identifying information. We have provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437. If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in either: - United States Tax Court, - The United States Court of Federal Claims, - The United States District Court for the District of Columbia. You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. Contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment. You can write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 US Court of Federal Claims 717 Madison Place, NW Washington, DC 20005 U.S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, DC 20001 Note: We will not delay processing income tax returns and assessing any taxes due even if you file petition for declaratory judgment under section 7428 of the Code. Please refer to the enclosed Publication 892, How to Appeals an IRS Determination on Tax -Exempt Status, for more information about the Appeals process. You also have the right to contact the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. Advocate assistance, please contact the Taxpayer Advocate for the IRS office that issued this letter. You If you qualify for TAS assistance, which is always free. TAX will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. TAS assistance is not a substitute for established IRS procedures, such as the formal appeals process. TAS cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States Court. If you have any questions, contact the person at the top of this letter. Sincerely, Appeals Team Manager Enclosure: Publication 892 cc: Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Exempt Organizations Examinations Date: June 14, 2019 Taxpayer Identification Number: Form: Tax Year(s) Ended: Person to Contact: Manager's Contact Information: Response Due Date: July 15, 2019 CERTIFIED MAIL -- Return Receipt Requested Dear *******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Maria Hooke Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Issue: Whether the *******, (hereafter EO) should be revoked for failure to meet the operational test under I.R.C. 501(c)(3) due to inactivity, no concrete plans to operate and no reasonable steps or acts to begin operations. Facts: The EO was incorporated as a not far profit corporation under the laws of the State of ******* and was organized to promote unity and patriotism and *******. The EO was recognized as an I.R.C. § 501(c)(3) organization and classified as a non-private foundation under section 509(a)(2) per Letter 1045 dated February 5, 20XX. The Internal Revenue Service, (hereafter Service) conducted a correspondence audit commencing with the mailing of Letter 3606 and Information Document Request, (hereafter IDR) 01 on March 19, 20XX. On IDR 01, the Service requested from the EO explanations and details regarding its current exempt activity. The Service also requested on IDR 01 the loan approval process used by the EO and the board of directors' involvement in obtaining these loans; as well as the loan contracts, copies of cancelled checks, receipts or other documentation to verify the total monies provided to the EO. Per the last item requested on IDR 01, the Service requested an explanation of why the 20XX Form 990EZ balance sheet and Schedule O recorded the loaned monies as $0 from the directors and details about the Schedule L which stated ******* (hereafter T/P 1) was the person who loaned the funds to the EO in the amount of $0. The Service conducted a phone conversation on May 9, 20XX, with *******, (hereafter POA). The Service learned from the POA that the EO conducted a kick-off campaign in *******, ******* on Labor Day 20XX. The kick off event was introduced by ******* who was the EO's guest of honor. ******* explained the idea and introduced the ******* to those in attendance. ******* even started the event countdown clock, which was set to expire at 9:00 pm EST, on July 4, 20XX. The *******, which is the waving of the *******, was going to be conducted for 0 minutes on July 4, 20XX commencing at 9:00 pm EST. The concept for the event was to bring the nation together, showing unity, by having people ******* at a precise time on a designated day. The POA also stated to the Service in that phone conversation that the event did not take place on July 4, 20XX. The POA did not provide any additional details to the Service as to why the event was not conducted. The Service reviewed their filed Form 1023 and the attached supplemental documents, which were received by the Service on October 2, 20XX, The EO detailed that it had obtained a trademark for the ******* and for the *******. The supplemental document stated that royalty fees would be charged on an item by item basis involving use of the trademarked ******* and *******. The EO further stated, that promotional items could also raise funds through royalty fees. The Service confirmed this intangible asset (valued at $0) during the review of its filed Form 990EZ for 20XX. The balance sheet recorded the intangible asset as "other assets" in the amount of $0. The Schedule O filed with the 20XX return, stated that these assets consisted of a patent and copyrights. The supplemental document attached to its original Form 1023 application, stated that the EO intended to purchase promotional items from a closely related corporation. The supplemental document detailed the related parties as T/P 1 and *******, (hereafter T/P 2). The supplemental document stated that the EO would be able to purchase these promotional items at competitive prices. The supplemental document further stated that no promotional items had been purchased at that time. The EO also contracted with a marketing company to attract sponsorships for the event. The marketing company is an independent contractor that had no relationship to the EO. The EO sent a letter dated January 29, 20XX to the Service in which it stated that it needed a quick exemption approval because sponsorships and contributors were available only once the EO had exempt status. The POA stated to the Service on May 9, 20XX, that the EO had not conducted the ******* event. Due to this statement the Service reviewed the EO's prior filed Form 990 returns to determine if the EO conducted any exempt activity since receiving its exempt determination letter dated February 5, 20XX. The filed 20XX Form 990, Part I, reported that the EO received $0 from fundraising and $0 from direct public support. The EO reported $0 as direct expenses related to its fundraising activities in 20XX. The total deficit to the CO for the 20XX year is ($0). The balance sheet from the 20XX Form 990 return stated $0 cash and $0 patents and copyrights as the end of year asset balance. The 20XX Form 990 return listed a detailed explanation of CO's special events and activities which included the *******. The filed 20XX Form 990 return stated gross receipts $0, less contributions $0, gross revenue $0, less direct fundraising expenses of $0 for a net loss of ($0). The 20XX Form 990 end of year balance showing its liabilities stated loans from officers, directors, trustees and key employees in the amount of $0. Included with the filed return the EO listed 0 individuals who loaned monies to the organization. T/P 1 who is the director of the organization provided ******* $0 to the organization. *******, (hereafter T/P 3) (no title is listed for him) provided $0 to the organization. ******* (hereafter T/P 4) (no title for them is listed) provided $0 to the organization. *******, (hereafter T/P 5) (no title is listed for him) provided $0 to the organization. T/P 2 (no title is listed for him) provided $0 to the organization. *******, (hereafter T/P 6) (no title is listed for him) provided $0 to the organization. The EO did not file a return for tax year ending 20XX. This was the year the ******* event was scheduled to be conducted. The filed 20XX Form 990, Part I, shows that no revenues were reported as being received by the EO for that year. The return did report a ($0) cost of goods sold as well as $0 in expenses for the organization. The total deficit to the EO for the 20XX year is ($0). The balance sheet from the filed 20XX Form 990EZ return stated $0 cash and $0 patents and copyrights as the EO's end of year asset balance. The end of year balance for its liabilities stated notes payable to the directors in the amount of $0. The loan from the directors increased $0 from the amount stated on the Form 990 20XX. No explanation was provided on the 20XX Form 990EZ for this loan increase. The 20XX Form 990EZ return stated, "Notes payable directors". The return shows no contributions or fundraising funds were received in the 20XX-tax year. Since no additional monies was received by the EO in this year, the $0 had to have been received in the 20XX-tax year, which no Form 990 return was filed. The filed 20XX Form 990EZ, Part I, shows that no revenues were reported being received by the EO for that year. The return did report a $0 printing, publications, postage and shipping expense. The filed 20XX, 20XX, 20XX and 20XX Form 990, Part I, lists no revenues or expenses recorded for the EO. The balance sheets from the filed 20XX, 20XX, 20XX, 20XX and 20XX Form 990EZ returns, record $0 cash and $0 for patents and copyrights as the EO's end of year asset balances for each respective year. Under the liabilities section, it was reported that the total liabilities were $0 for each respective year. The Schedule O provided the explanation of Notes payable -- directors. The Service does not have a record of the EO filing a return for tax year ending 20XX. The Service received three separate responses to IDR 01 from the EO. The first response was received on June 7, 20XX, which provided 16 copies of promissory notes issued to T/P 1, 8 copies of promissory notes issued to T/P 5, 6 copies of promissory notes issued to T/P 4, 2 copies of promissory notes issued to T/P 3, 1 promissory note issued to T/P 6 and 1 promissory note issued to T/P 2. These promissory notes stated amounts received by the EO. The promissory notes had no designated interest rate or established repayment date. Furthermore, some of the copies of the promissory notes provided with response to IDR 01 had "Paid, date and amount" hand written on them. It appears that the EO tried to repay some of the promissory notes, but since the EO did not include any copies of bank statements, copies of bank deposits or copies of canceled checks, to confirm that any monies were received by or repaid to the appropriate individual referenced on the promissory notes. The second response to IDR 01 was received on June 28, 20XX. This response included an activity log and annual meeting minute notes. The activity log started with dates from July 12, 20XX through to June 6, 20XX. There were 0 annual meeting minutes notes included in this response. The activity log discloses activity that was conducted by the officers for the EO either in person or by phone. The meeting minutes were from June 19, 20XX, February 11, 20XX, December 17, 20XX, December 18, 20XX, November 17, 20XX, December 17, 20XX, November 30, 20XX, December 18, 20XX and February 12, 20XX. The first meeting on June 20XX was attended by T/P 1, T/P 6 and POA. All other meetings were attended by T/P 1 and POA. Seven of the annual meetings lasted 15 minutes, 1 annual meeting lasted 0 minutes and 0 annual meeting lasted 0 minutes. The full detail of the activity log can be found in spreadsheet exhibit 1 under meeting tab. The third response to IDR 01 was received on September 4, 20XX. In this response the EO provided better copies of specific dated promissory notes that were illegible in the June 7, 20XX response. The EO also provided projections for revenues and outside organizations that the EO contacted. The outside organizations are listed in the spreadsheet exhibit 1 under contact tab. The Service created three individually tab excel spreadsheets within exhibit 1 for the promissory note detail, meeting detail and outside contact that the Service reviewed. The Service used this spreadsheet detail to analyze the loan issue during the audit process, time applied to EO's exempt activity and who was contacted regarding its exempt activity. The table below is a snapshot of the promissory notes totals and the balance from the liabilities balance sheet for the year under audit. The filed 20XX Form 990 return disclosed loans from six individuals totaling $0. In 20XX, the Service was provided 5 promissory notes from T/P 5 who loaned the EO $0. The Service does not have a record of the EO filing a return for tax year 20XX. The EO did file 20XX Form 990EZ return, recording loans from directors totaling $0. The EO did not provide any promissory notes detailing the additional loaned funds for that year. The filed 20XX Form 990EZ return had a beginning loan balance of $0 and an ending loan balance of $0. Again, no promissory notes were provided to the Service to detail these additional funds received by the EO in 20XX. All filed returns from 20XX through to 20XX state "Notes Payable Directors" on the Other Liabilities Schedule filed with each return. The balance sheet liabilities loan balance recorded on the EO's filed Form 990 returns from 20XX through to 20XX carried forward the outstanding loan balance in the amount of $0. Starting with the 20XX-tax year the EO started filing a Form 990N postcard return. The Service has confirmed Form 990N filings for tax years 20XX and 20XX. No return has been filed for the 20XX-tax year. The 1DR 01 documents received on June 28, 20XX from the EO included meeting minutes of its annual director's meeting and, an activity log from 20XX through 20XX. The Service reviewed the activity log which started on 7/12/20XX detailing length of time for discussion and participants who were present at these meetings. The Service totaled the contacts recorded for each year: For a quick snapshot the Service has consolidated the time conducted by the directors over the past 0 year. The Service has calculated the total meetings per year. That snapshot detail is below: 20XX -- 0 meetings -- duration of meetings between 0 minutes to 0 hours 0 minutes; 20XX -- 0 meetings -- duration of meetings between 0 minutes to 0 hours 0 minutes; 20XX -- 0 meetings -- duration of meetings between 0 minutes and 0 hours; 20XX -- 0 meeting -- duration of meeting 0 hours 0 minutes; 20XX -- 0 meetings duration of meetings between 0 minutes to 0 hours; 20XX -- 0 meetings -- duration of meetings between 0 minutes to 0 hour 0 minutes; 20XX -- 0 meetings -- duration of meetings between 0 minutes to 0 hours 0 minutes; 20XX -- 0 meetings -- duration of meetings between 0 minutes to 0 hour; 20XX-- 0 meetings -- duration of meeting between 0 minutes to 0 hour 0 minutes; 20XX -- 0 meetings -- duration of meetings between 0 minutes to 0 hour 0 minutes; 20XX -- 2 meetings -- duration of meetings between 0 minutes to 0 hour 0 minutes; 20XX -- 1 meeting -- duration of meeting 0 hour 0 minutes; 20XX -- 0 meetings -- duration of meetings between 0 minutes to 0 hour 0 minutes. The Service reviewed the minutes from the EO's annual meetings. The snapshot below shows the annual meeting dates and who attended. June 19, 20XX -- attendees T/P 1, ******* (hereafter T/P 7) and POA February 11, 20XX -- attendees T/P 1 and CPA December 17, 20XX -- attendees T/P 1 and CPA December 18, 20XX -- attendees T/P 1 and CPA November 17, 20XX -- attendees T/P 1 and CPA December 17, 20XX-- attendees T/P 1 and CPA November 30, 20XX -- attendees T/P 1 and CPA December 18, 20XX -- attendees T/P 1 and CPA February 12, 20XX -- attendees T/P 1 and CPA From the documents provided for the annual meeting minutes, the Service learned that each annual meeting lasted 0 minutes except two meetings, one of which lasted 0 minutes and the other 0 minutes. The EO provided the Service with the names of organizations and persons it contacted through the years seeking support in its attempts to conduct exempt activities. The contact information listed each entity contacted; type of contact made either by sending a letter and towel, an email or phone conservation, as well as the date contact was made and person the EO contacted. The Service included this contact information from the EO on the spreadsheet detail of exhibit 1 under tab Contact. The Service issued IDR 02 on March 18, 20XX. This IDR requested supporting detail to substantiate the loaned amount of $0, which is reported on the EO's balance sheet. The Service also requested in IDR 02, a response to IDR 01 questions that were not answered previously by the EO. In these unanswered questions the Service was trying to verify if the EO conducted activities in furtherance of its exempt purpose. The Service sought to establish whether the board members were aware of the loans being made to the EO and to determine if there were any established loan agreements secured to confirm that these loaned monies were received by the organization. The EO had a response date for IDR 02 of 4-1-20XX, which it did not meet. The Service issued a second request for IDR 02 on 4-8-20XX. The response date to provide the documents to the Service was 4-19-20XX. Again, the EO did not answer any of the question nor did the EO provide any supporting documentation requested in IDR 02. Law: Section 501(c)(3) of the Internal Revenue Code (Code) exempts from Federal income tax organizations that are organized and operated exclusively for religious, charitable, scientific, or educational purposes. No part of the net earnings may inure to the benefit of any private shareholder or individual. Further, no substantial part of an organization's activities may consist of carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and it is prohibited from participating in, or intervening in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. Treasury Regulation § 1.501(c)(3)-1(a)(1) provides that to be exempt as an organization described in section 501(c)(3) of the Code, the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section. These purposes include religious, charitable, scientific, testing for public safety, literary, educational, or prevention of cruelty to children or animals. Treas. Reg § 1.501(c)(3)-1(d)(1). Treasury Regulations § 1.501(c)(3)-1(c)(1) provides that, an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. In the case of Community Education Foundation v. Commissioner, T.C. Memo 2016-223, it was determined that petitioner, Community Education Foundation, no longer qualified for exemption from Federal income tax under section 501(a) because it did not meet the operational test requirements for a section 501(c)(3) organization. Specifically, the organization in that case over time did not meaningfully organize or allocate resources to any of its activities. Community Education Foundation admitted to a significant period of inactivity and failed to demonstrate that it engaged in activities furthering exempt purposes described in section 501(c)(3). Internal Revenue Code 6001 provides that every person liable for any tax imposed by the Code, or for the collection thereof, shall keep adequate records as the Secretary of the Treasury or his delegate may from time to time prescribe. Treasury Regulation § 1.6001-1(c) states that in addition to such permanent books and records as are required by paragraph (a) of this section with respect to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under section 501(a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 6033 and §§1.6033-1 through -3. Treasury Regulations § 1.6001-1(e) states that the books or records required by this section shall always be kept available for inspection by authorized Internal Revenue Service officers or employees and shall be retained if the contents thereof may be material in the administration of any Internal Revenue law. Internal Revenue Code 6033(a)(1) in general, except as provided in Internal Revenue Code 6033(a)(2), every organization exempt from taxation under section 501(a) shall file an annual return, stating specifically the items or gross income, receipts and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. In accordance with the above cited provisions of the Code and Regulations under IRC § 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status. Taxpayer Position: The EO admitted that it has not conducted any exempt purpose activity as described in its organizing documents. The EO stated that it has tried to organize and conduct events by assisting other tax-exempt organizations achieve their exempt purpose. The EO has stated that it has held meetings and discussions with various organizations. Government Position: The Service previously determined that the EO qualified as a tax-exempt organization. The EO was recognized as an organization described in section 501(c)(3) and was exempt from tax under section 501(a) but was not a private foundation as defined by section 509(a). The EO has failed to demonstrate that it was actively conducting exempt activities from 20XX to present. Its organizing documents state that its exempt purpose is to "Nationally promote patriotism and unity in all 50 states and US territories and possessions". The Service reviewed its activity log and noted that conducting brief meetings throughout the years and holding one annual meeting per year is not enough to meet the operational test. The EO had stated that it has held meetings and discussions with various other organizations. The Service had requested that the EO provide supporting documents detailing how helping these various organizations enabled the organization to conduct carry out its exempt purpose. The EO has provided only a brief statement referencing who it contacted, how the contact was made either by phone or mail but no further follow up or follow through with information showing an exempt purpose activity. The EO has failed to demonstrate that it meets the operational test of section 501(c)(3) for the year under examination or any prior or subsequent year To meet the operational test, it must show that it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). The Form 990 returns filed for tax year ended September 30, 20XX through September 30, 20XX by the EO evidences its failure to operate for exempt purposes. The Service found only one tax year, taxable year 20XX, where contributions were received, and fundraising activities were conducted. Furthermore, the filed returns confirm that no exempt purpose activities were conducted by the EO. Per their filed returns, from tax year ending 20XX to 20XX, the only change to its returns has been an increase in the loans from officers. The organization has failed to provide records as is required by Code 6033(a)(1) to substantiate that it meets the operational test by operating for exempt purposes. Conclusion: To continue to be qualified as a I.R.C. 501(c)(3) organization, the EO must meet the organizational and operational test. The EO received its exempt status in 20XX per Letter 1045 dated February 5, 20XX. The EO has not conducted any exempt activity during the period 20XX through 20XX. Furthermore, by not supplying the pertinent information required by Internal Revenue Code section 6001 and 6033 the Service is unable to determine whether the EO operated for exempt purposes. The EO has not demonstrated that they have a concrete plan to conduct any exempt activity. The EO has shown no reasonable acts or steps to begin operations resulting in conducting any exempt activity. EO is like the organization in the Community Education Foundation v Commissioner case wherein the court concluded that revocation was appropriate due to the organization's inactivity. The Service proposes to revoke this 501(c)(3) organization as of October 1, 20XX due to its failure to meet the operational test.

Internal Revenue Service - Information Release IR-2023-94 IRS: Florida storm victims qualify for tax relief; April 18 deadline, other dates extended to Aug. 15 May 2, 2023 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS: Florida storm victims qualify for tax relief; April 18 deadline, other dates extended to Aug. 15 IR-2023-94, May 2, 2023 WASHINGTON -- Florida storm victims now have until Aug. 15, 2023, to file various federal individual and business tax returns and make tax payments, the Internal Revenue Service announced today. The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) as a result of tornadoes, severe storms and flooding that occurred from April 12 to 14. This means that individuals and households that reside or have a business in Broward County qualify for tax relief. Other areas added later to the disaster area will also qualify for the same relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. The tax relief postpones various tax filing and payment deadlines that occurred starting on April 12, 2023, and is based on an April 27 FEMA disaster declaration. As a result, affected individuals and businesses will have until Aug. 15, 2023, to file returns and pay any taxes that were originally due during this period. This means that taxpayers will have until Aug. 15 to file any 2022 individual income tax returns and various business returns that were originally due on April 18. They will also have until Aug. 15 to pay any tax originally due on these returns. Taxpayers will get the extra time, even if they failed to request a tax-filing extension by April 18. Among other things, this also means that eligible taxpayers will have until Aug. 15 to make 2022 contributions to their IRAs and health savings accounts. The Aug. 15 deadline also applies to the quarterly estimated tax payments, normally due on April 18 and June 15. The Aug. 15 deadline also applies to the quarterly payroll and excise tax returns normally due on May 1 and July 31, 2023. In addition, penalties on payroll and excise tax deposits due on or after April 12 and before April 27, will be abated as long as the tax deposits were made by April 27, 2023. The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time. Affected individual taxpayers who need more time to file, beyond the Aug. 15 deadline, must file their extension requests on paper using Form 4868. That's because e-file options for requesting an extension are not available after April 18. By filing this form, disaster-area taxpayers will have until Oct. 16 to file, though tax payments are still due by Aug. 15. Visit IRS.gov/extensions for details. The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated. In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2023 return normally filed in early 2024), or the return for the prior year (that is, the 2022 return normally filed in 2023). Be sure to write the FEMA declaration number - 4709-DR on any return claiming a loss. See Publication 547 for details. The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit DisasterAssistance.gov.

Private Letter Ruling Number: 202205002 Internal Revenue Service October 20, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202205002 Release Date: 2/4/2022 Index Number: 167.22-01 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:B06 PLR-109384-21 Date: October 20, 2021 Dear *******: This letter responds to your request dated April, 20, 2021, for a ruling regarding the application of § 168(i)(10) and the normalization rules of § 168 and former § 46(f) of the Internal Revenue Code with regards to the facts described below. FACTS: Taxpayer is a utility located and incorporated in State A. Taxpayer is wholly owned by Parent. Taxpayer is included in Parent's consolidated tax return, filed on a calendar year basis. Taxpayer uses the accrual method of accounting. Parent is incorporated in State B. Taxpayer is an integrated utility that is primarily engaged in generating, transmitting, distributing and selling electric energy to retail customers in State A. Taxpayer is subject to the jurisdiction of Commission A and Commission B. Taxpayer is one of many transmission system owner-members in RTO, a regional transmission organization. RTO operates on a merit order dispatch, considering transmission constraints and other reliability issues to meet the total demand in the RTO region. Taxpayer offers electricity in the RTO day-ahead and real-time markets. Taxpayer created LLC1, a wholly-owned limited liability company treated as a corporation for federal income tax purposes, with a capital contribution of cash. LLC1 and an unrelated power generation development company (Developer) executed a membership interest purchase, project development, and construction management agreement to acquire ProjectCo, the owner of Facility, a solar electric production facility currently being developed. The Facility is expected to qualify for the Investment Tax Credit (ITC). Upon obtaining Commission A approval, LLC1 will acquire all of ProjectCo from Developer. After acquisition, ProjectCo will be a disregarded entity for tax purposes and treated as part of Taxpayer. Taxpayer will then create a subsidiary and join with that subsidiary to form LLC2. LLC2 will join with one or more unrelated parties (Partner) to form Partnership. Partnership will be treated as a partnership for federal income tax purposes. LLC1 will sell its membership interest in ProjectCo to Partnership. ProjectCo will be disregarded for tax purposes and be treated as a part of Partnership for federal tax purposes. After Partner achieves its targeted after-tax yield (expected to occur seven or eight years after the commercial operations begin), Taxpayer will have the option to buy out Partner's interest in Partnership at a mutually agreed-upon price (fair market value) determined at that time. Facility will be self-certified as an exempt wholesale generator under guidelines administered by Commission B. Partnership also expects to obtain permission from Commission B for market-based rate authority, that is, the authority to sell Facility's electricity at market-based wholesale rates, rather than at cost-based rates with a regulated rate of return. Partnership will sell electricity directly to the wholesale electricity markets administered by regional transmission organization (RTO). Partnership will not sell energy to Taxpayer and there will be no power purchase agreement between Partnership and Taxpayer. Rather, Taxpayer will purchase electricity, as needed, on the wholesale markets at prices administered by RTO for its customers. The economic value of electricity produced by Facility is greater than the mere value of the energy itself since Facility's production of solar energy will also yield renewable energy certificates (REC) and RTO zonal resource credits (ZRC). Taxpayer will enter into an agreement with Partnership under which Taxpayer will pay to Partnership a fixed price tied to a notional amount of power (corresponding to actual power generated by Facility) and the expected values of the RECs' and the ZRCs' resulting from operation of Facility. The RECs and ZRCs generated by Facility are assigned to Taxpayer under the agreement. In return, Partnership will pay to Taxpayer a market-based amount related to the same amount of power. To the extent the amount of these payments differ, the agreement provides for a net settlement payment to equalize the cash flows between Taxpayer and Partnership. The net settlement payment (if any) is not determined by or related to, any aspect of cost of service, rate of return ratemaking, but operates as a hedge for both parties against energy price fluctuations, volumetric fluctuations, and other market-related risks. The facts above are contingent on Taxpayer and Partnership obtaining approval for the various parts of the transaction from Commission A and Commission B. RULINGS REQUESTED: 1. Whether the Facility owned by Partnership is public utility property under § 168(i)(10) and former § 46(f)(5) and therefore subject to the normalization rules of § 168(i)(9) or former § 46(f)? 2. Whether Taxpayer or Partner are subject to the deferred tax normalization rules of § 168(i)(9) as a result of their investments in Partnership or the transactions between Taxpayer and Partnership? 3. Whether Taxpayer or Partner are subject to the ITC tax normalization rules of former § 46(f) as a result of their investments in Partnership or the transactions between Taxpayer and Partnership? LAW AND ANALYSIS: Section 168(f)(2) provides that the depreciation deduction determined under § 168 shall not apply to any public utility property (within the meaning of § 168(i)(10)) if the taxpayer does not use a normalization method of accounting. Section 168(i)(10) defines, in part, public utility property as property used predominantly in the trade or business of the furnishing or sale of electrical energy if the rates for such furnishing or sale, as the case may be, have been established or approved by a state or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any state or political subdivision thereof. Prior to the Revenue Reconciliation Act of 1990, § 168(i)(10) defined public utility property by means of a cross reference to § 167(l)(3)(A). Section 167(l)(3)(A) as then in effect contained the same definition of public utility property that is currently in § 168(i)(10). Section 1.167(l)-1(b) provides that under § 167(l)(3)(A), property is public utility property during any period in which it is used predominantly in a § 167(l) public utility activity. The term "section 167(l) public utility activity" means, in part, the trade or business of the furnishing or sale of electrical energy if the rates for such furnishing or sale, as the case may be, are regulated, i.e., have been established or approved by a regulatory body described in § 167(l)(3)(A). The term "regulatory body described in section 167(l)(3)(A)" means a state (including the District of Columbia) or political subdivision thereof, any agency or instrumentality of the United States, or a public service or public utility commission or other body of any state or political subdivision thereof similar to such a commission. The term "established or approved" includes the filing of a schedule of rates with a regulatory body which has the power to approve such rates, even though such body has taken no action on the filed schedule or generally leaves undisturbed rates filed by the taxpayer. The definitions of public utility property contained in § 168(i)(10) and former § 46(f)(5) are essentially the same. Pursuant to § 50(d)(2), rules similar to the rules of former § 46(f), as in effect on November 5, 1990, continue to determine whether an asset is public utility property for purposes of the investment tax credit normalization rules. As in effect at that time, former § 46(f)(5) defined public utility property by reference to former § 46(c)(3)(B). The regulations under former § 46 (of continuing applicability by virtue of § 50(d)(2)) contain an expanded definition of regulated rates in § 1.46-3(g)(2)(iii). This expanded definition embodies the notion of rates established or approved on a rate-of-return basis, where rate of return includes a fair return on the taxpayer's investment in providing such goods and services. Furthermore, rates are not "regulated" if they are established or approved on the basis of maintaining competition within an industry, insuring adequate service to customers of an industry, or charging "reasonable" rates within an industry. In addition to the definition in the § 46 regulations, there is an expressed reference to rate of return in § 1.167(l)-1(h)(6)(i). The operative rules for normalizing timing differences relating to use of different methods and periods of depreciation are only logical in the context of rate-of-return regulation. The normalization method, which must be used for public utility property to be eligible for the depreciation allowance available under § 168, is defined in terms of the method the taxpayer uses in computing its tax expense for purposes of establishing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account. Therefore, for purposes of the application of the normalization rules, the definition of public utility property is the same for purposes of the investment tax credit and depreciation. Thus, under both the depreciation and the investment tax credit normalization rule definitions, a facility must meet three requirements to be considered public utility property: 1. It must be used predominantly in the trade or business of the furnishing or sale of, inter alia, electrical energy; 2. The rates for such furnishing or sale must be established or approved by a state or political subdivision thereof, any agency or instrumentality of the United States, or by a public service or public utility commission or similar body of any state or political subdivision thereof; and 3. The rates so established or approved must be determined on a rate-of-return basis. The Facility will meet the first requirement as it will be used predominantly in the trade or business of the furnishing or sale of electrical energy. The Facility will also meet the second requirement as it will be subject to the jurisdiction of Commission B. The Facility will not meet the third requirement because Partnership will use the Facility to sell the energy the Facility generates at rates established on a market basis (and not on a rate-of-return or cost basis), under market-based rate authority from Commission B. Nor will the agreement between Taxpayer and Partnership involve the sale of electricity at rates established at a rate-of-return or cost basis. Thus, to the extent power is sold from the Facility under the agreement, the Facility will not be public utility property under § 168(i)(10), and therefore, related depreciation deductions and investment tax credits will not be subject to the normalization rules of § 168 or former § 46(f). Based on the forgoing we conclude that: 1. Facility owned by Partnership is not public utility property and therefore is not subject to the normalization rules of § 168(i)(9) or former § 46(f). 2. Neither Taxpayer nor Partner are subject to the deferred tax normalization rules of § 168(i)(9) as a result of their investments in Partnership or the related transactions between Taxpayer and Partnership described herein. 3. Neither Taxpayer nor Partner are subject to the ITC tax normalization rules of former § 46(f) as a result of their investments in Partnership or the related transactions between Taxpayer and Partnership described herein. Except as specifically set forth above, no opinion is expressed or implied concerning the federal income tax consequences of the above-described facts under any other provision of the Code or regulations. Specifically, nothing in this letter should be construed as endorsing that the Partnership will be respected for federal tax purposes. In addition, no opinion is expressed concerning whether Partnership is eligible to elect out of partnership treatment under § 761. Finally, the conclusions reached above are dependent on approvals of various parts of the described transactions by Commission A and Commission B. This ruling is directed only to the taxpayer requesting it. We note that, while we have concluded that "Partner" is not subject to either the deferred tax or ITC normalization rules under the facts described above, no person may legally rely on a ruling not issued to that person. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. This ruling is based upon information and representations submitted by Taxpayer and accompanied by penalty of perjury statements executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. In accordance with the power of attorney on file with this office, a copy of this letter is being sent to your authorized representatives. Sincerely, /s/ Patrick S. Kirwan Chief, Branch 6 Office of Associate Chief Counsel (Passthroughs & Special Industries) cc:

Private Letter Ruling Number: 202401018 Internal Revenue Service October 12, 2023 Department of the Treasury Internal Revenue Service Independent Office of Appeals Release Number: 202401018 Release Date: 1/5/2024 Date: OCT 12 2023 Person to contact: Name: Employee ID Number: Phone: Fax: Employer ID number: Uniform issue list (UIL): 501.07-05 Certified Mail Dear ******: This is a final adverse determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(7). We have hereby revoked the favorable determination letter to you dated ****** and you are no longer exempt under IRC Section 501(a) effective 01/01/2023. We made the adverse determination for the following reasons: You are not organized for pleasure, recreation, and other nonprofitable purposes because a substantial amount of your activities (gas leasing) is not in furtherance of exempt purpose under IRC section 501(c)(7), regulations, and applicable revenue rulings, and may have caused inurement. You're required to file federal income tax returns on Forms 1120, U.S. Corporation Income Tax Return. Mail your form to the appropriate Internal Revenue Service Center per the form's instructions. You can get forms and instructions by visiting our website at IRS.gov/forms or by calling 800-TAX-FORM (800-829-3676). We'll make this letter and the proposed adverse determination letter available for public inspection under IRC Section 6110 after deleting certain identifying information. We provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437. If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of IRC Section 7428 in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint from and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: U.S. Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov U.S. District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Note: We will not delay processing income tax retains and assessing any taxes due even if you file a petition for declaratory judgment under IRC Section 7428. Taxpayer rights and sources for assistance The Internal Revenue Code (IRC) gives taxpayers specific rights. The Taxpayer Bill of Rights groups these into 10 fundamental rights. See IRC Section 7803(a)(3). IRS employees are responsible for being familiar with and following these rights. For additional information about your taxpayer rights, please see the enclosed Publication 1, Your Rights as a Taxpayer, or visit IRS.gov/taxpayer-bill-of-rights. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayers' rights. TAS can offer you help if your tax problem is causing a financial difficulty, you've tried but been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure isn't working as it should. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. To learn more, visit taxpayeradvocate.IRS.gov or call 877-777-4778. Tax professionals who are independent from the IRS may be able to help you. Low Income Taxpayer Clinics (LITCs) can represent low-income persons before the IRS or in court. LITCs can also help persons who speak English as a second language. Any services provided by an LITC must be for free or a small fee. To find an LITC near you: - Go to taxpayeradvocate.IRS.gov/litcmap; - Download IRS Publication 4134, Low Income Taxpayer Clinic List, available at IRS.gov/forms; or - Call the IRS toll-free at 800-829-3676 and ask for a copy of Publication 4134. State bar associations, state or local societies of accountants or enrolled agents, or other nonprofit tax professional organizations may also be able to provide referrals. TAS assistance is not a substitute for established IRS procedures, such as the formal appeals process. TAS cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States Court. If you have questions, contact the person at the top of this letter. Sincerely, Doug O'Donnell Acting Commissioner By Appeals Team Manager Enclosures: Publication 1 IRS Appeals Survey cc: Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: October 27, 2021 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact Information: Name: ID number: Telephone: Response due date: November 12, 2021 CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(7). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(7) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help lf your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpaveradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, For: Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Issue: ****** has failed to meet the eligibility requirements under Internal Revenue Code Section 501(c)(7) as the organization's investment income has exceeded the limit of non-member income imposed by the Code. Because the organization has consistently exceeded the 35-percent non-member income limit; should the organization retain its tax-exempt status under the Internal Revenue Code 501(c)(7)? Facts: ****** was organized under ****** State Law on ******. ****** filed form 1024 for exemption under IRC 501(c)(7) on ******. ****** received Determination Letter 948 (DO/CG) on ******, granting the organization tax exempt status under IRC Section 501(c)(7). ****** primary purpose is promoting the conservation of forests, fields and streams of the State of ******, promoting better fishing and hunting in the State. ****** maintains a property in ******, in ******, ******. The organization's members meet and conduct the club's activities on this property. ****** had approximately ****** members during the year under examination. ****** has filed a ****** for the tax years ending ****** through ******. ****** has filed a ****** for the tax years ending ****** through tax year ending ******. The Service has reviewed the ****** and ****** reporting period starting ****** and ending ******. In ******, the organization entered into an agreement to sell their gas / mineral rights. The income received from the promissory note has been reported on their ****** and ****** for the period of ****** through ******. Facts (Continued): The organization has reported the following amounts for Investment Income and Royalties (Non-Member sourced Income) on their books and records and on their and returns for the Tax Year Ending: ******, Non-member Income of $ ****** which is ***-percent of the total income of $ ******. ******, Non-member Income of $ ****** which is ***-percent of the total income of $ ******. ******, Non-member Income of $ ****** which is ***-percent of the total income of $ ******. Law: Internal Revenue Code § 501(c(7) -- Social Clubs Clubs organized for pleasure, recreation, and other nonprofitable purposes, substantially all of the activities of which are for such purposes and no part of the net earnings of which inures to the benefit of any private shareholder. Treasury Regulation 1.501(c)(7)-1 Social Clubs (a) The exemption provided by section 501(a) for organizations described in section 501(c)(7) applies only to clubs which are organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, but does not apply to any club if any part of its net earnings inures to the benefit of any private shareholder. In general, this exemption extends to social and recreation clubs which are supported solely by membership fees, dues, and assessments. However, a club otherwise entitled to exemption will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. (b) A club which engages in business, such as making its social and recreational facilities available to the general public or by selling real estate, timber, or other products, is not organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, and is not exempt under section 501(a). Solicitation by advertisement or otherwise for public patronage of its facilities is prima facie evidence that the club is engaging in business and is not being operated exclusively for pleasure, recreation, or social purposes. However, an incidental sale of property will not deprive a club of its exemption. P.L. 94-568 Before 1976, IRC Section 501(c)(7) required a tax-exempt club to be organized and operated "exclusively" for pleasure, recreation, and other nonprofitable purposes. P.L. 94-568 amended IRC Section 501(c)(7) to require that "substantially all" of a tax-exempt club's activities are dedicated for pleasure, recreation, and other nonprofitable purposes. The amendment was intended to allow IRC Section 501(c)(7) organizations to receive up to 35 percent of their gross receipts, including investment income, from sources outside their membership without losing their exempt status. See S. Rep. No. 94-1318 (1976). Within the 35 percent, no more than 15 percent of gross receipts should come from the general public's use of the social club's facilities or services. If an organization has outside income over the 35-percent or 15-percent limit, the organization is in jeopardy of losing their tax-exempt status. Law (Continued): Revenue Ruling 66-149 Rev.Rul. 66-149 holds a social club as not exempt as an organization described in IRC § 501(c)(7) where it derives a substantial part of its income from non-member sources. Adirondack League Club, Petitioner v. C.I.R. Respondent Petitioner is a nonprofit New York membership corporation organized and operated for: (1) The preservation and conservation of the Adirondack forests and the proper protection of game and fish in the Adirondack Region. (2) The establishment and promotion of an improved system of forestry. (3) The maintenance of an ample preserve for the benefit of its members for the purpose of hunting, fishing, rest, and recreation. Petitioner lost its tax-exempt status as of 1943 upon respondent's determination that petitioner received a substantial amount of income from timber operations conducted on its property. Aside from its timber income, petitioner collected membership dues and charged fees for the facilities and services used by members and their guests. The expenses incurred in maintaining and providing the facilities and services exceeded the membership dues and fees charged for them and petitioner offset the excess expenses against the timber income with the result that petitioner reported no taxable income during the years in issue. Held, to the extent the expenses incurred in maintaining and providing facilities and services for members exceeded the income received therefrom, they are not deductible under sec. 162(a), since they did not arise from the 'carrying on of any trade or business' within the intendment of that section. Coastal Club, Inc., 43 T.C. 783 (1965) By transactions entered into for profit petitioner, a corporation, organized as a duck hunting club, repeatedly leased its property for the exploration for and production of oil and gas. During the years in issue the oil and gas income predominantly exceeded the amounts received from its members in the form of dues, and service and guest charges, and supplied from in excess of two-thirds to as much as four-fifths of the amounts required and expended for operations, repairs, maintenance, and improvements. And not only that but through such income plus the interest from U.S. Government bonds in which the oil and gas income remaining after payment of club costs had been invested, petitioner built its accumulated surplus. It was held, that respondent did not err in his determination that petitioner, during the taxable years, was not exempt from tax. under section 501(c)(7) of the Internal Revenue Code. It was further held, that respondent did not abuse his discretion in revoking his prior ruling of exemption. West Side Tennis Club v. Commissioner (111 F.2d 6) The court determined that more than an insubstantial amount of income received from non-members would jeopardize the tax-exempt status of an organization described in IRC § 501(c)(7). Taxpayer Position: The taxpayer has not provided a position at this time. Government Position: ****** investment income has consistently exceeded the 35-percent non-member income limit imposed by the Code. The organization entered into an agreement to sell their gas / mineral rights. The organization has been reporting the investment income on their ****** and ******. The organization has consistently exceeded the 35-percent limit imposed under the Code. The Service has provided the information reported on the organization's returns for the periods starting on ****** and ending on ******. Below are the calculations of the Percentage of Total Revenue for all income sources for ******. Using the information obtained from the organization's records and the information previously reported on ****** filed returns, the Investment Income and Royalties as a percentage of Total Revenue, the organization has consistently exceeded the 35-percent non-member income limit imposed by the Internal Revenue Code. Social clubs are permitted to receive income from non-member sources, but when that income exceeds 35-percent, the organization's exemption is in jeopardy of being revoked. As the organization has consistently exceeded the limits imposed by the Internal Revenue Code, the Treasury Regulations, and further specified in Public Law 94-568. Also, as per the terms of the agreement, the organization's investment income and royalties will continue to exceed the Code limits for the foreseeable future. As the organization has egregiously exceeded the non-member limits imposed by the code there is no way that the organization can retain its tax-exempt status. The organization has reported non-member income that has averaged approximately ***-percent of their total income during the period examined. Conclusion: The ****** action of entering into an agreement to sell their gas and mineral rights has led to the generation of non-member investment income and royalties. The income generated on the sale of the drilling rights, as evidenced on the in the agreement, made by the organization, has caused the organization to consistently exceed the 35-percent non-member income limit imposed by the Internal Revenue Code. This has led to the determination that the organization is no longer qualified under Internal Revenue Code Section 501(c)(7), and the organization's tax-exempt status must be revoked.

Treasury Decision 9964 Internal Revenue Service 2022-35 I.R.B. 172 26 CFR§ 301.6104(c)-1 T.D. 9964 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 301 Disclosure of Information to State Officials Regarding Tax-Exempt Organizations AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: These final regulations provide guidance to states regarding the process by which they may obtain or inspect certain returns and return information (including information about final and proposed denials and revocations of tax-exempt status) for the purpose of administering State laws governing certain tax-exempt organizations and their activities. The final regulations amend existing regulations to reflect changes to the Internal Revenue Code (Code) made by the Pension Protection Act of 2006 (PPA). The final regulations will affect the states choosing to obtain information from the IRS under these rules, as well as the organizations and taxable persons whose tax information is disclosed. DATES: Effective date: August 16, 2022. Applicability date: For the date of applicability, see§301.6104(c)-1(k). FOR FURTHER INFORMATION CONTACT: Seth Groman, (202) 317-5640 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background 1. Overview This document contains amendments to 26 CFR part 301 under section 6104(c), which replace current§301.6104(c)-1, which was issued in 1971, amended in 1973 and 1981, and redesignated in 1982, in its entirety. Section 6104(c) was added to the Code by section 101(e) of the Tax Reform Act of 1969 (Pub. L. 91-172, 83 Stat. 523) and amended by section 1224(a) of the PPA of 2006 (Pub. L. 109-280, 120 Stat. 1091). Section 6104(c), as amended by the PPA, governs the circumstances under which the IRS may disclose to State officials certain information about organizations described in section 501(c)(3) of the Code, including private foundations (charitable organizations), organizations that have applied for recognition as organizations described in section 501(c)(3) (applicants), certain other exempt organizations, and taxable persons. On March 15, 2011, the Department of the Treasury (Treasury Department) and the IRS published a notice of proposed rulemaking (NPRM) (REG-140108-08) in the Federal Register (76 FR 13932). No public hearing was requested or held. One comment letter on the NPRM was received. This Treasury decision adopts the NPRM with certain changes explained in the Summary of Comments and Explanation of Provisions. 2. PPA Amendments to Section 6104(c) Prior to the passage of the PPA, the IRS was authorized to share certain information with appropriate State officers (ASOs). Section 6104(c)(1), which is unchanged by the PPA, directs the IRS to notify the ASO of (1) a refusal to recognize an entity as a charitable organization; (2) the operation of a charitable organization in a manner not meeting, or no longer meeting, the requirements of its exemption; and (3) the mailing of a notice of deficiency for any tax imposed under section 507 or chapter 41 or 42 of the Code. The directive to notify the ASO of an organization no longer meeting the requirements for exemption under section 501(c)(3) includes not only providing the ASO notice of a revocation of exemption, but also notice (when the IRS is so informed) that a charitable organization is terminating or has dissolved in accordance with its governing documents. In addition, an ASO, upon request, may inspect and copy the returns, filed statements, records, reports, and other information relating to a final determination as are relevant to any determination under State law. The PPA added section 6104(c)(2) through (6) of the Code, which expanded the IRS's ability to disclose information to an ASO. With respect to charitable organizations and applicants, the IRS now is authorized under section 6104(c)(2) to disclose information about certain proposed revocations and proposed denials before an administrative appeal has been made and a final revocation or denial has been issued. Specifically, section 6104(c)(2)(A)(i) and (ii) provides that the IRS may disclose to an ASO proposed refusals to recognize organizations as charitable organizations, proposed revocations of such recognition, and notices of proposed deficiency of excise taxes imposed by section 507 or chapter 41 or 42 of the Code relating to charitable organizations. Previously, only final determinations of these kinds (denials of recognition, revocations, and notices of deficiency) could be disclosed under section 6104(c). Section 6104(c)(2)(A)(iii) provides that the IRS may disclose to an ASO the names, addresses, and taxpayer identification numbers of applicants. Previously, information on applicants, other than information relating to a final denial of recognition, could not be disclosed under section 6104(c). Section 6104(c)(2)(B) provides that the IRS may disclose to an ASO the returns and return information of organizations with respect to which information is disclosed under section 6104(c)(2)(A) (proposed determinations and applicant identifying information). Prior law allowed for disclosure under section 6104(c) only of returns and return information of organizations related to their receipt of final determinations. Section 6104(c)(2)(C) provides that proposed determinations, applicant identifying information, and the related returns and return information with respect to charitable organizations and applicants under sections 6104(c)(2)(A) or (B) may be disclosed to an ASO only upon the ASO's written request and only as necessary to administer State laws regulating charitable organizations. Prior law provided for automatic disclosure - with no requirement for a disclosure request - but only of final determinations. Under section 6104(c)(2)(D), the IRS may disclose to an ASO, on its own initiative and without a written request, returns and return information with respect to charitable organizations and applicants if the IRS determines that this information may constitute evidence of noncompliance with the laws under the jurisdiction of the ASO. Thus, if the IRS determines these conditions to be met, it may, for example, disclose to an ASO a proposed revocation of exemption for a charitable organization that does not have a determination letter. There was no such provision under section 6104(c) previously. Section 6104(c)(3) provides that the IRS may disclose returns and return information of organizations described in section 501(c), other than those described in section 501(c)(1) or (3) (such as section 501(c)(4) social welfare organizations, section 501(c)(5) labor organizations, and section 501(c)(6) business leagues), to an ASO upon the ASO's written request, but only for the purpose of, and to the extent necessary in, administering State laws regulating the solicitation or administration of charitable funds or charitable assets of such organizations. Previously, only information relating to charitable organizations or applicants was disclosed under section 6104(c). Section 6104(c)(4) generally provides that returns and return information of organizations and taxable persons disclosed under section 6104(c) may be disclosed in civil administrative and civil judicial proceedings pertaining to the enforcement of State laws regulating such organizations, under procedures prescribed by the IRS similar to those under section 6103(h)(4). There was no such provision under section 6104(c) previously. Section 6104(c)(5) generally provides that no return or return information may be disclosed under section 6104(c) to the extent the IRS determines that such disclosure would seriously impair Federal tax administration. This disclosure prohibition, though new in the Code, was provided previously by regulation. See former§301.6104(c)-1(b)(3)(ii) (replaced by these final regulations). Sections 6104(c)(2)(C) (flush language) and (c)(3) provide that the IRS may disclose returns and return information under section 6104(c) to a State officer or employee designated by the ASO to receive such information on the ASO's behalf. Prior law did not provide for IRS disclosures to persons other than ASOs. Section 6104(c)(6)(B) defines an ASO as the State attorney general, the State tax officer, any State official charged with overseeing charitable organizations (in the case of charitable organizations and applicants), and the head of the State agency designated by the State attorney general as having the primary responsibility for overseeing the solicitation of funds for charitable purposes (in the case of section 501(c) organizations other than Federal instrumentalities and charitable organizations). Before its amendment by the PPA, section 6104(c)(2) defined ASO as the State attorney general, the State tax officer, or any State official charged with overseeing organizations of the type described in section 501(c)(3). 3. PPA Amendments to Related Code Provisions The PPA also amended section 6103 to make section 6104(c), in its entirety, subject to its confidentiality and disclosure provisions. Section 6103(a)(2) provides the general rule that returns and return information are confidential and that an officer or employee of a State who receives returns or return information from the IRS under section 6104(c) must not disclose such information, except as authorized by Title 26 of the United States Code. Section 6103(p)(3) requires the IRS to maintain permanent standardized records of all requests for inspection or disclosure of returns or return information under section 6104(c) and of all such information inspected or disclosed pursuant to those requests. Section 6103(p)(4) requires an ASO, as a condition for receiving returns or return information under section 6104(c), to establish and maintain certain safeguards, such as keeping permanent standardized records of all requests and disclosures, maintaining a secure information storage area, restricting access to the information, and providing whatever other safeguards the IRS deems necessary to protect the confidentiality of the information. See§301.6103(p)(4)-1 and IRS Publication 1075, "Tax Information Security Guidelines for Federal, State and Local Agencies". Publication 1075 is available at http://www.irs.gov/formspubs. The PPA also amended sections 7213, 7213A, and 7431 to impose civil and criminal penalties for the unauthorized disclosure or inspection of section 6104(c) information. 4. IRS Disclosure Procedures Under section 6103(p)(4)(E), before a Federal or State agency may receive returns and return information from the IRS under section 6103 or section 6104, it must file with the IRS a report detailing the physical, administrative, and technical safeguards implemented by the agency to protect this information from unauthorized inspection or disclosure. Only upon approval of these safeguards by the IRS, as well as satisfaction of any other statutory requirements (such as submission of a written request), may an agency receive the information to which it is entitled under the Code, and then only for the use specified by the relevant statute. Under various disclosure programs, the IRS and other Federal and State agencies often execute disclosure agreements detailing the responsibilities of the parties and the terms and parameters of the disclosure arrangement. For example, under section 6103(d), the IRS executes a disclosure agreement with each State tax agency to which it discloses information. This agreement, which serves as the written request required by section 6103(d), has been the foundation of the State tax disclosure program under this provision since the Tax Reform Act of 1976. After the enactment of the PPA, the IRS revised its disclosure procedures under section 6104(c), as set forth in the Internal Revenue Manual, to model them after the section 6103(d) program. Accordingly, the section 6104(c) program uses a disclosure agreement patterned after the section 6103(d) agreement but tailored to the specific requirements and restrictions of section 6104(c). Summary of Comments and Explanation of Provisions As noted in the Background, one commenter submitted a letter commenting on the NPRM. After considering the comments in the letter, the NPRM is adopted by this Treasury decision with one clarifying substantive change to§301.6104(c)-1(h) of the proposed regulations (proposed§301.6104(c)-1(h)) and various non-substantive clarifying changes. 1. Security, Confidentiality, and Use Restrictions The commenter's primary concern is the requirement that all disclosures under section 6104(c) must be made pursuant to an agreement committing the ASO to the security, confidentiality, and use restrictions of section 6103(p)(4), which the commenter characterizes as onerous. The commenter acknowledges, however, that the changes it seeks require legislative action by Congress. The Treasury Department and the IRS agree that the proposed regulations implement the statutory regime enacted by Congress. Thus, these final regulations adopt the safeguard requirements as proposed. As a threshold matter, the commenter asserts that only a few states have entered into disclosure agreements due to what the commenter characterizes as the cumbersome nature of the safeguard requirements of section 6103(p) and the resources needed to adhere to them. In the commenter's view, the reluctance of states to commit themselves to the safeguard requirements of section 6103 means that the PPA actually decreased the disclosure of information to the states because non-participating states no longer receive the pre-PPA notifications of final denials, revocations, and notices of tax deficiencies. The Treasury Department and the IRS do not agree with the proposition that few states are willing to participate in IRS information-sharing programs because of the safeguard requirements. As noted in the Background, the section 6104(c) agreement, under which the IRS discloses certain information to the ASO who is charged with the administration of the State's laws regulating charitable organizations or the solicitation or administration of charitable funds or assets, is based on the section 6103(d) agreement, under which the IRS discloses certain information to the State office charged with the responsibility for administering the State's tax laws. Under both section 6104(c) and section 6103(d), the receipt of information from the IRS is conditioned on the recipient agency or official implementing and adhering to the applicable provisions of section 6103(p), as amended by the PPA, to protect the information from unauthorized inspection or disclosure. The IRS currently has a section 6103(d) agreement in each of the 50 states and the District of Columbia with the agency or official responsible for administering that jurisdiction's tax laws. In addition, the IRS currently has section 6104(c) agreements with 9 ASOs, all of whom are State tax officers responsible for administering State tax laws. For sample disclosure agreements, see Internal Revenue Manual Exhibit 7.28.2-2 (Sample Disclosure Agreement under section 6104(c) for State Tax Officer) and Exhibit 7.28.2-1 (Sample Disclosure Agreement under section 6104(c) for Attorney General's Office). In view of the current participation in the section 6104(c) disclosure program, and considering the potential for increased participation by other ASOs, the Treasury Department and the IRS consider the publication of these final regulations important in fulfilling the mandate under section 6104(c) to facilitate the enforcement of State law regarding exempt organizations consistent with statutory requirements. 2. Information Shared Without a Disclosure Agreement The commenter, citing proposed§301.6104(c)-1(b), which provides that the IRS may require an ASO to execute a disclosure agreement or similar document, states that it is not clear what, if any information - other than that available to the general public - would be disclosed to ASOs without an agreement. Under section 6104(c) before its amendment by the PPA, the IRS was required to disclose to ASOs certain final determinations, with no requirement that the ASO request such disclosure in writing. The PPA changed this procedure, making all of section 6104(c) subject to the confidentiality provisions of section 6103. These final regulations provide that the IRS may not disclose information under section 6104(c) unless the State receiving the information follows the applicable disclosure, recordkeeping, and safeguard procedures of section 6103(p)(4). To give effect to the confidentiality restrictions mandated by Congress, the IRS's disclosure program requires an ASO to enter into a disclosure agreement with the IRS stipulating the procedures for disclosure under section 6104(c), as well as the restrictions on use and redisclosure. Because of these statutory requirements, without such an agreement, an ASO may receive only information otherwise available to the public. 3. Use of Disclosed Information The commenter objects to proposed§301.6104(c)-1(h)(1), which requires an ASO intending to use any disclosed information in a State administrative or judicial proceeding to notify the IRS of this intention before such use. Under this provision, an ASO may use the information as intended only in accordance with any conditions the IRS might impose, and only to the extent that the IRS determines that the disclosure would not seriously impair Federal tax administration. The commenter states that by disclosing taxpayer information initially to an ASO, the IRS already has determined under proposed§301.6104(c)-1(e) that this information will not seriously impair Federal tax administration and that requiring the same determination again after the initial disclosure would place an ASO at risk of spending time and resources on developing a State law case, only to be told by the IRS that the ASO cannot proceed. The commenter asserts that, in an environment of scarce resources, this restriction is likely to discourage ASOs from taking that risk. Section 6104(c)(5) prohibits the disclosure under section 6104(c)(1) through (3) of returns and return information to an ASO, or redisclosure of such information by an ASO in a State proceeding described in section 6104(c)(4), if the IRS determines that such disclosure or redisclosure would seriously impair Federal tax administration. Section 6104(c)(5) addresses two separate actions or events, requiring in most circumstances two separate determinations by the IRS. Because the facts and circumstances surrounding a particular administrative or judicial proceeding typically would not be known to the IRS at the time of the initial disclosure of taxpayer information to an ASO, it would not be possible during the initial disclosure to the ASO for the IRS to determine whether the use of that information in a subsequent State proceeding would seriously impair Federal tax administration (such as identifying a confidential informant or compromising a civil or criminal tax investigation). It is possible that the IRS could determine that the disclosure to an ASO would not seriously impair Federal tax administration but that disclosure by an ASO in a State proceeding would. To fulfill its statutory duties, the IRS must evaluate the effect of the use of disclosed information in a State proceeding before authorizing any such redisclosure. 4. Restrictions on Redisclosure The commenter states that the prohibition in proposed§301.6104(c)-1(h)(2) on the redisclosure of return information to an ASO's agent or contractor appears to include persons such as expert witnesses, court reporters, and other litigation support service providers often necessary to conduct civil and judicial proceedings within the ambit of proposed§301.6104(c)-1(g)(2), as limited by proposed§301.6104(c)-1(h)(1), which is discussed in the prior section of this Summary of Comments and Explanation of Provisions. The commenter contends that this restriction is "simply untenable" and serves to "further undercut any rational basis" for ASOs to obtain returns and return information under section 6104(c). The requirement in proposed§301.6104(c)-1(h)(1) that an ASO notify the IRS before using any disclosed information in a State proceeding is a limit on the authority of the ASO under proposed§301.6104(c)-1(g)(2) to make such use of disclosed information under rules similar to those in section 6103(h)(4), as provided in section 6104(c)(4). With respect to section 6103(h)(4), the IRS construes "disclosure in judicial and administrative proceedings" to include the disclosure of returns and return information in court during a trial (whether or not some of those present might be considered an agent or contractor, such as a court reporter or expert witness); in formal or informal discovery, including depositions; in settlement negotiations; and in mediation or arbitration proceedings. Disclosure of returns and return information is permitted to participants in, or parties to, a judicial or administrative proceeding (including expert witnesses) under practices and procedures generally applicable to the proceeding, and subject to rules governing the proceeding. The prohibition in proposed§301.6104(c)-1(h)(2) on the redisclosure of return information to an ASO's agent or contractor was not intended to hinder a State's ability to conduct investigations or civil litigation under its statutory authority. In considering this comment regarding the interaction of the two redisclosure limitations of proposed§301.6104(c)-1(h), however, it became apparent that, by identifying the agent-contractor disclosure prohibition as one of two limitations on the redisclosure of returns and return information by an ASO, proposed§301.6104(c)-1(h)(2) might be read as limiting the application of such a restriction solely to redisclosures. The prohibition on disclosing to agents and contractors, however, is a broader rule, applying both to initial disclosures by the IRS as well as to subsequent redisclosures by an ASO. With respect to disclosures by the IRS, proposed§301.6104(c)-1(f)(1)(ii) provides that the IRS may disclose return information to someone other than the ASO only if that person is a State officer or employee designated by the ASO. With respect to redisclosures by an ASO, proposed§301.6104(c)-1(g)(1) provides that an ASO who receives information from the IRS under section 6104(c) may redisclose that information for certain purposes to another State officer or employee. The legislative history of section 6104(c) provides that the term "officer or employee" does not include agents and contractors, and the final regulations apply this agent-contractor disclosure prohibition equally to the IRS and the ASO. Consequently, these final regulations clarify the proper application of the prohibition against disclosure to agents and contractors by eliminating proposed§301.6104(c)-1(h)(2) and adding definitional clauses to proposed§301.6104(c)-1(f)(1)(ii) and (g)(1) and (2) emphasizing that the agent-contractor disclosure prohibition applies both to IRS disclosures and to ASO redisclosures. 5. Application of Document Retention and Freedom-of-Information Laws The commenter notes that many states have document retention and freedom-of-information laws that might be implicated whenever an ASO receives or acts upon tax return information acquired from the IRS. According to the commenter, nothing in the PPA or regulations addresses what portions of tax return information may become a part of the ASO's own records or work product. This issue, however, is addressed by section 6103, made applicable to section 6104(c) by the PPA. Among the disclosure, recordkeeping, and safeguard provisions of section 6103, section 6103(p)(4) requires an ASO, as a condition for receiving returns or return information under section 6104(c), to establish and maintain certain safeguards, such as keeping permanent standardized records of all requests and disclosures, maintaining a secure information storage area, restricting access to the information, and providing whatever other safeguards the IRS deems necessary to protect the confidentiality of the information. Upon completion of the ASO's use of the returns or return information it receives under section 6104(c), section 6103(p)(4)(F) requires the ASO to return the information, along with any copies, to the IRS, or to render it undisclosable and report to the IRS how it was so rendered. Rendering returns and return information undisclosable requires the ASO to physically destroy the information. Thus, after its use, any information an ASO receives from the IRS under section 6104(c) should no longer be in the ASO's possession and, so, will not become part of the ASO's own records or work product. 6. Designation by Attorney General Referring to the definition of an ASO in section 6104(c)(6)(B)(iv) (in the case of tax-exempt entities other than charitable organizations or Federal instrumentalities), the commenter states that it is not clear in what circumstances an attorney general would designate the agency responsible for overseeing charitable solicitation. If, for example, the authority to designate the head of the agency responsible for overseeing charitable solicitation is vested in the secretary of state, the agency head referred to in the statute and the regulations would not be able to meet the definition of an ASO in proposed§301.6104(c)-1(i)(1)(iv). In light of the variations in State laws, it is doubtful that Congress used the term "designate" in section 6104(c)(6)(B)(iv) to mean a delegation of legal authority (and there is no indication in the legislative history of the PPA that such a meaning was intended). In contrast to how the term is used in section 6104(c)(2)(C) (dealing with the procedures for disclosure), where it does mean to delegate authority, the term "designate" in section 6104(c)(6)(B)(iv) is a generic one, meaning the ability to specify, identify, or acknowledge the head of the agency in a particular State who is responsible for overseeing charitable solicitation. The attorney general, as an ASO under§301.6104(c)-1(i)(1)(i), should be able to identify such an agency head, whether or not the attorney general is able to confer the requisite authority on any particular State official. Special Analyses This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Department of the Treasury and the Office of Management and Budget regarding review of tax regulations. Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6), it is hereby certified that these final regulations will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act. The analysis requirements of the RFA do not apply because states are not considered small entities for purposes of the RFA. Therefore, a regulatory flexibility analysis is not required. Accordingly, the Secretary of the Treasury's delegate certifies that these regulations will not have a significant economic impact on a substantial number of small entities. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these final regulations was submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business. No comments were received from the Chief Counsel for the Office of Advocacy of the Small Business Administration. Drafting Information The principal author of these regulations is Seth Groman of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), though other persons in the Treasury Department and the IRS participated in their development. List of Subjects in 26 CFR Part 301 Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR part 301 is amended as follows: PART 301--PROCEDURE AND ADMINISTRATION Paragraph 1. The authority citation for part 301 is amended by adding an entry for§301.6104(c)-1 in numerical order to read in part as follows: Authority: 26 U.S.C. 7805 * * * Section 301.6104(c)-1 also issued under 26 U.S.C. 6104(c). Par. 2. Section 301.6104(c)-1 is revised to read as follows:§ 301.6104(c)-1 Disclosure of certain information to State officials. (a) In general --(1) Charitable organizations and applicants. Subject to the disclosure, recordkeeping, and safeguard provisions of section 6103 of the Internal Revenue Code (Code), and only as necessary to administer State laws regulating charitable organizations, upon written request by an appropriate State officer (ASO, as defined in paragraph (i)(1) of this section), the Internal Revenue Service (IRS) may, under section 6104(c)(1) and (2), disclose or make available to the ASO (or to a person designated by the ASO as provided in paragraph (f)(1)(ii) of this section) the returns and return information described in paragraph (c) of this section with respect to-- (i) Any organization described or formerly described in section 501(c)(3) and exempt or formerly exempt from taxation under section 501(a) (a charitable organization); or (ii) Any organization that has applied for recognition as an organization described in section 501(c)(3) (an applicant). (2) Section 501(c) organizations not described in section 501(c)(1) or (3). Subject to the disclosure, recordkeeping, and safeguard provisions of section 6103, and upon written request by an ASO, the IRS may disclose or make available to the ASO (or to a person designated by the ASO as provided in paragraph (f)(1)(ii) of this section) under section 6104(c)(3) returns and return information regarding any organization described or formerly described in section 501(c) other than section 501(c)(1) or (3). Such information will be disclosed or made available only as necessary to administer State laws regulating the solicitation or administration of the charitable funds or charitable assets of these organizations. (b) Disclosure agreement. The IRS may require an ASO to execute a disclosure agreement or similar document specifying the procedures, terms, and conditions for the disclosure or inspection of information under section 6104(c), including compliance with the safeguards prescribed by section 6103(p)(4), as well as specifying the information to be disclosed. Such an agreement or similar document constitutes the request for disclosure required by section 6104(c)(1)(C), as well as the written request required by section 6104(c)(2)(C)(i) and (c)(3). (c) Disclosures regarding charitable organizations and applicants --(1) In general. With respect to any organization described in paragraph (d) of this section, the IRS may disclose or make available for inspection under section 6104(c)(1) and (2) and paragraph (a)(1) of this section to an ASO the following returns and return information with respect to a charitable organization or applicant: (i) A refusal or proposed refusal to recognize an organization's exemption as a charitable organization (a final or proposed denial letter). (ii) Return information regarding a grant of exemption following a proposed denial. (iii) A revocation of exemption as a charitable organization (a final revocation letter), including a notice of termination or dissolution. (iv) A proposed revocation of recognition of exemption as a charitable organization (a proposed revocation letter). (v) Return information regarding the final disposition of a proposed revocation of recognition other than by final revocation. (vi) A notice of deficiency or proposed notice of deficiency of tax imposed under section 507 or chapter 41 or 42 of the Code on the organization or on a taxable person (as described in paragraph (i)(4) of this section). (vii) Returns and return information regarding the final disposition of a proposed notice of deficiency of tax imposed under section 507 or chapter 41 or 42 of the Code on the organization other than by issuance of a notice of deficiency. (viii) The names, addresses, and taxpayer identification numbers of applicants for charitable status, provided on an applicant-by-applicant basis or by periodic lists of applicants. Under this paragraph (c)(1)(viii), the IRS may respond to inquiries from an ASO as to whether a particular organization has applied for recognition of exemption as a charitable organization. (ix) Return information regarding the final disposition of an application for recognition of exemption where no proposed denial letter is issued, including whether the application was withdrawn or whether the applicant failed to establish its exemption. (x) Returns and return information relating to the return information described in paragraph (c)(1) of this section, except for returns and return information relating to proposed notices of deficiency described in paragraph (c)(1)(vi) of this section with respect to taxable persons. (2) Disclosure of evidence of noncompliance with certain State laws. With respect to any organization described in paragraph (d) of this section, the IRS may disclose to the ASO or make available for the ASO's inspection under section 6104(c)(1) and (2) and paragraph (a)(1) of this section the returns and return information of a charitable organization or applicant, as listed in paragraph (c)(1) of this section, if the IRS determines that such information might constitute evidence of noncompliance with the laws under the jurisdiction of the ASO regulating charitable organizations and applicants. Such information may be disclosed on the IRS's own initiative, subject to the disclosure, recordkeeping, and safeguard provisions of section 6103. Disclosures under this paragraph (c)(2) may be made before the IRS issues a proposed determination (denial of recognition, revocation, or notice of deficiency) or any other action by the IRS described in this section. (d) Organizations to which disclosure applies. Regarding the information described in paragraphs (a)(1) and (2) of this section, the IRS will disclose or make available for inspection to an ASO such information only with respect to-- (1) An organization formed under the laws of the ASO's State; (2) An organization, the principal office of which is located in the ASO's State; (3) An organization that, as determined by the IRS, is or might be subject to the laws of the ASO's State regulating charitable organizations or the solicitation or administration of charitable funds or charitable assets; or (4) A private foundation required by§1.6033-2(a)(iv) of this chapter to list the ASO's State on any of the foundation's returns filed for its last five taxable years. (e) Disclosure limitations. Notwithstanding any other provision of this section, the IRS will not disclose or make available for inspection under section 6104(c) any information, the disclosure of which it determines would seriously impair Federal tax administration, including, but not limited to-- (1) Identification of a confidential informant or interference with a civil or criminal tax investigation; and (2) Information obtained pursuant to a tax convention, as defined in section 6105(c)(2), between the United States and a foreign government. (f) Disclosure recipients --(1) In general. The IRS may disclose returns and return information under section 6104(c) to, or make it available for inspection by-- (i) An ASO, as defined in paragraph (i)(1) of this section, or (ii) A person other than an ASO, but only if that person is a State officer or employee (which excludes an agent or contractor) designated by the ASO to receive information under section 6104(c) on behalf of the ASO, as specified in paragraph (f)(2) of this section. (2) Designation by ASO. An ASO may designate State officers or employees to receive information under section 6104(c) on the ASO's behalf by specifying in writing each person's name and job title, and the name and address of the person's office. The ASO must promptly notify the IRS in writing of any additions, deletions, or other changes to the list of designated persons. (g) Redisclosure --(1) In general. An ASO to whom a return or return information has been disclosed may thereafter disclose such information to another State officer or employee (which excludes an agent or contractor) only as necessary to administer State laws governing charitable organizations or State laws regulating the solicitation or administration of charitable funds or charitable assets of noncharitable exempt organizations. (2) Civil administrative or judicial proceedings. Except as provided in paragraph (h) of this section, an ASO to whom a return or return information has been disclosed may thereafter disclose such information to another State officer or employee (which excludes an agent or contractor) who is personally and directly preparing for a civil proceeding before a State administrative body or court in a matter involving the enforcement of State laws regulating organizations with respect to which information can be disclosed under this section, solely for use in such a proceeding, but only if-- (i) The organization or a taxable person is a party to the proceeding, or the proceeding arose out of, or in connection with, determining the civil liability of the organization or a taxable person, or collecting such civil liability, under State laws governing organizations with respect to which information can be disclosed under this subsection; (ii) The treatment of an item reflected on such a return is directly related to the resolution of an issue in the proceeding; or (iii) The return or return information directly relates to a transactional relationship between the organization or a taxable person and a person who is a party to the proceeding that directly affects the resolution of an issue in the proceeding. (h) Redisclosure limitation. Before disclosing any return or return information received under section 6104(c) in a proceeding described in paragraph (g)(2) of this section, the ASO must notify the IRS of the intention to make such a disclosure. No State officer or employee may make such a disclosure except in accordance with any conditions the IRS might impose in response to the ASO's notice of intent. No such disclosure may be made if the IRS determines that the disclosure would seriously impair Federal tax administration. (i) Definitions. For purposes of section 6104(c) and this section-- (1) Appropriate State officer or ASO means-- (i) The State attorney general; (ii) The State tax officer; (iii) With respect to a charitable organization or applicant, any State officer other than the attorney general or tax officer charged with overseeing charitable organizations, provided that the officer shows the IRS that the officer is an ASO by presenting a letter from the State attorney general describing the functions and authority of the officer under State law, with sufficient facts for the IRS to determine that the officer is an ASO; and (iv) With respect to a section 501(c) organization that is not described in section 501(c)(1) or (c)(3), the head of the agency designated by the State attorney general as having primary responsibility for overseeing the solicitation of funds for charitable purposes, provided that the officer shows the IRS that the officer is an ASO by presenting a letter from the State attorney general describing the functions and authority of the officer under State law, with sufficient facts for the IRS to determine that the officer is an ASO. (2) Return has the same meaning as in section 6103(b)(1). (3) Return information has the same meaning as in section 6103(b)(2). (4) Taxable person means any person who is liable or potentially liable for excise taxes under chapter 41 or 42 of the Code. Such a person includes-- (i) A disqualified person described in section 4946(a)(1), 4951(e)(4), or 4958(f); (ii) A foundation manager described in section 4946(b); (iii) An organization manager described in section 4955(f)(2) or 4958(f)(2); (iv) A person described in section 4958(c)(3)(B); (v) An entity manager described in section 4965(d); and (vi) A fund manager described in section 4966(d)(3). (j) Failure to comply. Upon a determination that an ASO has failed to comply with the requirements of section 6103(p)(4), the IRS may take the actions it deems necessary to ensure compliance, including the refusal to disclose any further returns or return information to the ASO until the IRS determines that the requirements of section 6103(p)(4) have been met. For procedures for the administrative review of a determination that an authorized recipient has failed to safeguard returns or return information, see§301.6103(p)(7)-1. (k) Applicability date. The rules of this section apply on and after August 16, 2022. Douglas W. O'Donnell, Deputy Commissioner for Services and Enforcement. Approved: June 7, 2022. Lily Batchelder, Assistant Secretary of the Treasury (Tax Policy). (Filed by the Office of the Federal Register on August 15, 2022, 8:45 a.m., and published in the issue of the Federal Register for August 16, 2022, 87 F.R. 50240)

Internal Revenue Service - Information Release IR-2022-143 Security Summit warns tax pros of evolving email and cloud-based schemes to steal taxpayer data July 26, 2022 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 Security Summit warns tax pros of evolving email and cloud-based schemes to steal taxpayer data IR-2022-143, July 26, 2022 WASHINGTON -- As part of a special Security Summit series, the Internal Revenue Service, state tax agencies and nation's tax industry warn tax professionals to beware of evolving scams designed to steal client data. The Security Summit partners continue to see instances where tax professionals have been vulnerable to identity theft phishing emails that pose as potential clients. The criminals then trick practitioners into opening email links or attachments that infect computer systems with the potential to steal client information. The Summit also warns tax professionals using cloud-based systems to store and prepare tax returns and information to make sure they use multi-factor authentication in light of recent attacks. Specifically, the Summit partners urge people using cloud-based platforms to use multi-factor options like phone, text or tokens. This can avoid potential vulnerabilities with authentication done just through email, which is easier for identity thieves to access. Avoiding these schemes is the second in a five-part series from the IRS, state tax agencies and the nation's tax community - working together as the Security Summit that highlight critical steps tax professionals can take to protect client data. The focus of the Security Summit series - part of the Protect Your Clients, Protect Yourself campaign - is to urge tax professionals to work to strengthen their systems and protect client data. "Identity theft scammers continually try new schemes to steal client personal and financial information from tax professionals. We continue to see a barrage of emails aimed at tax professionals trying to trick them into providing valuable access to identity thieves," said IRS Commissioner Chuck Rettig. "And we continue to urge people to use multi-factor authentication, including those using cloud-based services. Constant vigilance is necessary, not just during tax season but year-round. We urge tax pros, both large operations and smaller ones, to consider these invaluable recommendations to help protect their clients and themselves." Phishing emails or SMS/texts (known as "smishing") attempt to trick the recipient into disclosing personal information such as passwords, bank account numbers, credit card numbers or Social Security numbers. Tax pros are a common target. Scams may differ in themes, but they generally have two traits: - They appear to come from a known or trusted source, such as a colleague, bank, credit card company, cloud storage provider, tax software provider or even the IRS and other government agencies. - They create a false narrative, often with an urgent tone, to trick the receiver into opening a link or attachment. A specific kind of phishing email is called spear phishing. Rather than the scattershot nature of general phishing emails, scammers take time to identify their victim and craft a more enticing phishing email known as a lure. Scammers often use spear phishing to target tax professionals. In a reoccurring and very successful scam, criminals posed as potential clients, exchanging several emails with tax professionals before following up with an attachment that they claimed was their tax information. This scam gained energy as many tax professionals worked remotely and communicated with clients over email versus in-person or over the telephone because of the pandemic. Once the tax pro clicks on the embedded URL and/or opens the attachment, malware secretly downloads onto their computers, giving thieves access to passwords to client accounts or remote access to the computers themselves. Thieves then use this malware known as a remote access trojan (RAT) to take over the tax professional's office computer systems, identify pending tax returns, complete them and e-file them, changing only the bank account information to steal the refund. In the past, criminals have used ransomware attacks to shut down a variety of companies. Criminals can use similar, smaller scale tactics against tax pros. When the unsuspecting tax professional opens a link or attachment, malware attacks the tax pro's computer system to encrypt files and the thieves hold the data for ransom. Another emerging scheme the IRS has seen involves weak security from tax professionals using cloud-based systems to store client data. While many cloud-based systems are secure, tax professionals using these should ensure they're using strong multi-factor authentication on these to avoid thieves accessing their sensitive information. The IRS has observed multiple instances - frequently involving smaller tax professionals or businesses - where individual accounts on cloud-based platforms have been compromised. Identity thieves' access these and then use existing data from taxpayer returns to file new tax returns seeking refunds, frequently by mail. These cloud-based accounts are more vulnerable when tax pros do not use strong multi-factor authentication to validate who is using the platform. Summit partners urge using authentication methods besides email, which can be easier for thieves to access and allow entry into tax professional accounts. Using text, phone calls or tokens are safer options. These scams highlight the importance of the basic security steps recommended by the Security Summit to protect data: - Using the two-factor (2FA) or the multi-factor authentication (MFA) option offered by tax preparation providers or storage providers would protect client accounts even if passwords were inadvertently disclosed. - Keeping anti-virus software automatically updated also helps prevent scams that target software vulnerabilities. - Using drive encryption and regularly backing up files helps stop theft and ransomware attacks. For tax professionals, securing their network to protect taxpayer data is their responsibility as a tax preparer. To help tax professionals guard against phishing scams and better protect taxpayer information, the IRS Publication 4557, Safeguarding Taxpayer Data PDF. This IRS publication contains some of the latest suggestions such as using the multi-factor authentication option offered by tax software products and helping clients get an Identity Protection Pin. Additional resources In addition to reviewing IRS Publication 4557, Safeguarding Taxpayer Data PDF, tax professionals can also get help with security recommendations by reviewing Small Business Information Security: The Fundamentals PDF by the National Institute of Standards and Technology. The IRS Identity Theft Central pages for tax pros, individuals and businesses have important details as well. Publication 5293, Data Security Resource Guide for Tax Professionals PDF, provides a compilation of data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media. For more information, go to IRS.gov.

Private Letter Ruling Number 202424021 Internal Revenue Service March 19, 2024 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Release Number: 202424021 Release Date: 6/14/2024 UIL Code: 501.03-00 Date: March 19, 2024 Taxpayer ID number (last 4 digits): Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with United States Tax Court: Monday, June 17, 2024 CERTIFIED MAIL - Return Receipt Requested Dear ******: Why we are sending you this letter This is a final determination that you don't quality for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective ****** Your determination letter dated ******, is revoked. Our adverse determination as to your exempt status was made for the following reasons: You are in violation of Sections 6001 and 6033(a) of the Code because you did not provide records after the IRS's repeated requests. Failure to comply with Section 6033 of the Code and the applicable regulations may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of an exempt status. See Rev.Rul. 59-95. Here, the Organization's failure to respond to the IRS's repeated, reasonable requests for information in connection with the examination constitutes a failure on the part of the Organization to demonstrate continued compliance with the requirements in Section 501(c)(3) of the Code. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov. Contributions to your organization are no longer deductible under IRC Section 170. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: US Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3). Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. You may fax your documents to the fax number shown above, using either a fax machine or online fax service. Protect yourself when sending digital data by understanding the fax service's privacy and security policies. Keep the original letter for your records. Sincerely, Lynn A. Brinkley Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: December 28, 2022 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: January 27, 2023 CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, For Lynn Brinkley Acting Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Issues: Does ****** continue to qualify as an organization exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code? Facts: ****** (******) was granted exemption within the meaning of Section 501(c)(3) with an effective date for exemption as of ******. The ****** was classified as a public charity within the meaning of Section 509(a)(2) of the Internal Revenue Code. The Form 990 for tax year ending ******, filed by ****** was selected for examination to ensure that the examined organization's activities and operations remain in compliance with Section 501(c)(3). A correspondence examination for tax year ending ******, was opened, and ****** was sent Letter 6031 with Form 4564 Information Document Request, Publication 1 and Notice 609 on ******, with a response due date of ******. The correspondence requested specific details on activities conducted by the organization; particularly the operation of conventions held by the organization, copies of organizational documents, meeting minutes, contracts and leases, financial data to reconcile the 990 Return to the organization's books, and copies of employment tax records and other miscellaneous filings. No response to Letter 6031 was received and a telephone call was made to ****** the ****** (as listed on Form 990) on ******. The outgoing message indicates that ****** screens all calls. The call was returned on ******. ****** indicated that she had not received the letter sent on ******. She confirmed that the address used on the correspondence is correct. Another copy of the Letter 6031 and attachments was mailed on ******, with a response due ******. A telephone call was made to ****** on ******. A voicemail was left, no return call was received. On ******, a duplicate copy of Letter 6031 and attachments was again mailed to ******. On ******, a voicemail was left for ******. A return call was received ******. ****** indicated she had not received any of the letters. She ****** verified that the address was correct. On ******, another copy Letter 6031 and attachments was sent by ****** with ****** to ****** The Domestic Return Receipt has not been received. On ******, Letter 5077-B and Form 4564 were sent to ****** by ******. The ****** has not been received. On ******, a ****** letter and proposed revocation package was mailed to the taxpayer. Packet returned by ******. On ******, a copy of the Letter 6031 and attachments was sent to ****** called on ******, indicating she had received the correspondence and would mail what documentation she could. ****** indicated that the ****** had moved and taken all the financial records with her. ******, a response to the ****** Form 4564 was received. The incomplete response included none of the financial information needed to conduct the examination. ******, a Letter 5464 and Form 4564 was prepared requesting financial information including bank statements and employment tax forms and information. ******, a call was placed to ****** and a voicemail left. ****** returned the call and left a voice mail indicating the requested information was placed in the mail on ******. A response to Form 4564 was received on ******. Response indicates that there are no paid employees, compensation entered on Form 990 was an error. ****** provided ****** checking account statements but no supporting documentation needed to substantiate the income and expenses. ******, a Letter 5464 and fourth Form 4564 was mailed requesting financial information and Forms 1099. A response was received on ******, indicating that ****** were located ****** were held in ******. ****** did provide copies of Forms W-9. ****** did not keep copies of any 1099s issued, and she has indicated that she has been unable to obtain copies of bank statements from ******. ******, a voice mail was left for ******. A final call was placed to ****** on ******. ****** was asked if she had been able to retrieve the books and records from the ****** or the bank statements from ******. She indicated that the ****** has moved out of state and destroyed the books and records. ****** was asked about the copies of the Forms 1099, and ****** told the agent to get them from our records, as ****** didn't keep copies. Agent indicated that without adequate books and records she is unable to determine if ****** meets the organizational and operational tests of Internal Revenue Code Section 501(c)(3) and would be preparing a Revenue Agent Report proposing revocation of exempt status. ****** said, "do what had to be done." Law: IRC §501(c)(3) of the Code provides that an organization organized and operated exclusively for charitable or educational purposes is exempt from Federal income tax, provided no part of its net earnings inures to the benefit of any private shareholder or individual. Treasury Regulation 1.501(c)(3)-1(a)(1) provides "In order to be exempt as an organization described §501(c)(3) of the Code, the organization must be one that is both organized and operated exclusively for one or more of the purposes ******ified in that section." Treasury Regulation 1.501(c)(3)-1(b) states, in part, that an organization is organized exclusively for one or more exempt purposes only if its articles limit the purposes to one or more such exempt purposes and do not expressly empower the organization to engage, other than as an insubstantial part of its activities, in activities which in themselves are not in furtherance of exempt purposes. Articles which expressly empower the organization to engage in other than exempt activities, and other than as an insubstantial part of the activities is not organized exclusively for exempt purposes even if the Articles stated the organization is created for charitable or educational or other exempt purposes. Treasury Regulation 1.501(c)(3)-1(b)(1)(i) provides that an organization is organized exclusively for one or more exempt purposes only if its articles of organization limit its purposes to one or more exempt purposes and do not expressly empower it to engage, otherwise than as an insubstantial part, in activities which in themselves are not in furtherance of one or more exempt purposes. Treasury Regulation 1.501(c)(3)-1(c)1 of the Income Tax Regulations states that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which further one or more of such exempt purposes ******ified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. IRC §6001 of the Code provides that every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax under this title. IRC §1.6001-1(c) of the Code provides that such permanent books and records as are required by paragraph (a) of this section with re******t to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under section 501(a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 6033 and §§ 1.6033-1 through 1.6033-3. IRC §1.6001-1(e) of the Code provides that the books or records required by this section shall be kept at all times available for in******tion by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law. IRC §6033(a)(1) of the Code provides, except as provided in section 6033(a)(2), every organization exempt from tax under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts and disbursements, and such other information for the purposes of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Federal Tax Regulations (FTR) §1.6033-1(h)(2) of the regulations provides that every organization which has established its right to exemption from tax, whether or not it is required to file an annual return of information, shall submit such additional information as may be required by the district director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter F (section 501 and the following), chapter 1 of the Code and section 6033. Rev.Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The Service held that the failure or inability to file the required information return or otherwise to comply with the provisions of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status. In Better Business Bureau v. United States, 326 U.S. 279-283, (1945), the court held that the existence of a single non-exempt purpose, if substantial in nature, will destroy exemption under section 501(c)(3) regardless of the number or importance of truly exempt purposes. To qualify for exemption under section 501(c)(3), the applicant organization must show (1) that it is organized and operated exclusively for religious, or charitable purposes, (2) that no part of the net earnings inures to the benefit of a private individual or shareholder, and (3) that no substantial part of its activities consists of the dissemination of propaganda or otherwise attempting to influence legislation or engaging in political activity. In Harding Hospital, Inc. v, United States, 505 F.2 nd 1068, 1071 (6 th Cir. 1974), the court held that an organization has the burden of proof that it satisfies the requirements of the particular exemption statute. The court noted that whether an organization has satisfied the operational test is a question of fact. Taxpayer's Position ****** has struggled to provide sufficient financial information needed to conduct an examination of Form 990 for tax year ******. ****** has stated that the ****** of ****** had possession of the books and records belonging to ****** and has since moved out of ****** and has indicated that the records have been destroyed. ****** has not been able to obtain copies of bank statements from ****** after repeated attempts to obtain them electronically. ****** has not provided copies of Forms 1099 issued by ****** as she did not keep copies. She stated that she was not aware that she needed to keep copies and the Revenue Agent should be able to obtain them. Government's Position In accordance with the above-cited provisions of the Code and regulations under sections 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated business income tax. Section 1.6033-1(h)(2) of the regulations specifically state that exempt organizations shall submit additional information for the purpose on enabling the Internal Revenue Service to inquire further into its exempt status. ****** has not provided sufficient books and records to conduct an examination as requested by multiple attempts to secure specific details on its activities or financial data for the year under examination, to enable the Service to determine whether the organization's exemption under Section 501(c)(3) should remain in effect. Following the rationale established in Harding Hospital, Inc. v. United States, and Better Business Bureau v. United States, without the requested information and cooperation of ******, it is not possible to conduct the examination process favorably for the taxpayer. The burden of proof lies with ******, who has not provided the requested information to complete the examination of its tax return. Using the rationale that was developed in Revenue Ruling 59-95, the ******'s failure to maintain adequate books and records should result in the revocation of its exempt status. It is the government's position that the organization should be revoked as it has not proved that it is organized or operated for exclusively charitable, educational or religious purposes within the meaning of Section 501(c)(3). Conclusion: Based on the foregoing reasons, revocation of ****** exempt status is proposed effective ******, because of the organization's failure to provide adequate information substantiating its continued qualification for exempt status within the meaning of Section 501(c)(3) of the Internal Revenue Code. Form 1120 returns should be filed for the tax periods effective ******.

Revenue Ruling 2022-23 Internal Revenue Service 2022-51 I.R.B. 532 Section 6621.--Determination of Rate of Interest 26 CFR 301.6621-1: Interest rate. Rev. Rul. 2022-23 Section 6621 of the Internal Revenue Code establishes the interest rates on overpayments and underpayments of tax. 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 corporation), except the rate for the portion of a corporate overpayment of tax exceeding $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 purposes of interest payable under section 6601 on any large corporate underpayment, 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 Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable 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 calendar quarter beginning after that month. Section 6621(b)(3) provides that the federal 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 nearest full percent (or, if a multiple of 1/2 of 1 percent, the rate is increased to the next highest full percent). Notice 88-59, 1988-1 C.B. 546, announced 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 October 2022 is the rate published in Revenue Ruling 2022-20, 2022-44 IRB 407, to take effect beginning November 1, 2022. The federal short-term rate, rounded to the nearest full percent, based on daily compounding determined during the month of October 2022 is 4 percent. Accordingly, an overpayment rate of 7 percent (6 percent in the case of a corporation) and an underpayment rate of 7 percent are established for the calendar quarter beginning January 1, 2023. The overpayment rate for the portion of a corporate overpayment exceeding $10,000 for the calendar quarter beginning January 1, 2023, is 4.5 percent. The underpayment rate for large corporate underpayments for the calendar quarter beginning January 1, 2023, is 9 percent. These rates apply to amounts bearing interest during that calendar quarter. Sections 6654(a)(1) and 6655(a)(1) provide that the underpayment rate established under section 6621 applies in determining the addition to tax under sections 6654 and 6655 for failure to pay estimated tax for any taxable year. Thus, the 7 percent rate also applies to estimated tax underpayments for the first calendar quarter beginning January 1, 2023. Pursuant to section 6621(b)(2)(B), in determining the addition to tax under section 6654 for any taxable year for an individual, the federal short-term rate that applies during the third month following the taxable year also applies during the first 15 days of the fourth month following the taxable year. In addition, pursuant to section 6603(d)(4), the rate of interest on section 6603 deposits is 4 percent for the first calendar quarter in 2023. Interest factors for daily compound interest for annual rates of 4.5 percent, 6 percent, 7 percent and 9 percent are published in Tables 14, 17, 19 and 23 of Rev. Proc. 95-17, 1995-1 C.B. 568, 571, 573, and 577. 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 ruling is Casey R. Conrad of the Office of the Associate Chief Counsel (Procedure and Administration). For further information regarding this revenue ruling, contact Mr. Conrad at (202) 317-6844 (not a toll-free number).

Notice 2022-33 Internal Revenue Service 2022-34 I.R.B. 147 Notice 2022-33 I. PURPOSE This notice extends the deadlines for amending a retirement plan or individual retirement arrangement (IRA) to reflect certain provisions of Division O of the Further Consolidated Appropriations Act, 2020, Pub. L. 116-94, 133 Stat. 2534 (2019), known as the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and section 104 of Division M of the Further Consolidated Appropriations Act, 2020, known as the Bipartisan American Miners Act of 2019 (Miners Act), by modifying Notice 2020-68, 2020-38 IRB 567, and Notice 2020-86, 2020-53 IRB 1786. In addition, this notice extends the deadline for amending a retirement plan to reflect the provisions of section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Pub. L. 116-136, 134 Stat. 281 (2020). Under this notice, the extended amendment deadline for (1) a qualified retirement plan or section 403(b) plan (including an applicable collectively bargained plan) that is not a governmental plan or (2) an IRA is December 31, 2025. Later deadlines apply with respect to governmental retirement plans (including governmental plans under section 457(b) of the Internal Revenue Code (Code)). Pursuant to these modifications, with respect to an amendment made to reflect provisions of the SECURE Act, the period during which the amendment is eligible, if applicable, for relief from the anti-cutback requirements of section 411(d)(6) of the Code or section 204(g) of the Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 88 Stat. 829, as amended (ERISA), is extended to the applicable extended plan amendment deadline. 1 ******** 1 With respect to pre-approved plans, the extended plan amendment deadlines apply to both interim and discretionary amendments. It is anticipated that the cumulative list for the fourth remedial amendment cycle for pre-approved defined contribution plans (pre-approved plans for which the opinion letter application submission window falls between February 1, 2024, and January 31, 2025) will include provisions of the SECURE Act, Miners Act, and CARES Act. Accordingly, it is anticipated that the pre - approved defined contribution plans submitted for that cycle will need to include provisions that reflect provisions of the SECURE Act, Miners Act, and CARES Act. ******** II. BACKGROUND A. In General 1. Section 401(b) of the Code Section 401(b) of the Code provides a remedial amendment period during which a plan may be amended retroactively to comply with the Code's qualification requirements. Section 1.401(b)-1 of the Income Tax Regulations describes the disqualifying provisions that may be amended retroactively and the remedial amendment period during which retroactive amendments may be adopted. The regulations also grant the Commissioner of Internal Revenue (Commissioner) the discretion to designate certain plan provisions as disqualifying provisions and to extend the remedial amendment period. Section 1.401(b)-1 provides that a plan that fails to satisfy the requirements of section 401(a) solely as a result of a disqualifying provision defined under § 1.401(b)-1(b) need not be amended to comply with those requirements until the last day of the remedial amendment period with respect to the disqualifying provision, provided the amendment is made retroactively effective to the beginning of the remedial amendment period. Under § 1.401(b)-1(b)(3), a disqualifying provision includes a plan provision designated, at the Commissioner's discretion, as a disqualifying provision that either (1) results in the failure of the plan to satisfy the qualification requirements of the Code by reason of a change in those requirements or (2) is integral to a qualification requirement of the Code that has been changed. Section 1.401(b)-1(c)(1) provides that a disqualifying provision under § 1.401(b)-1(b)(3) includes a provision integral to the applicable change in the qualification requirements of the Code, if the plan was in effect on the date the change in those requirements became effective with respect to the plan. For a disqualifying provision described in § 1.401(b)-1(b)(3), § 1.401(b)-1(d)(1)(iv) and (v) provides that the remedial amendment period begins on the date on which the change becomes effective with respect to the plan or, in the case of a provision that is integral to a qualification requirement that has been changed, the first day on which the plan is operated in accordance with the provision as amended. In the case of a plan maintained by one employer, § 1.401(b)-1(d)(2)(i) and (ii) provides that the remedial amendment period for a disqualifying provision described in § 1.401(b)-1(b)(3) ends on the later of: (1) the due date (including extensions) for filing the income tax return for the employer's taxable year that includes the date on which the remedial amendment period begins or (2) the last day of the plan year that includes the date on which the remedial amendment period begins. In the case of a plan maintained by more than one employer, § 1.401(b)-1(d)(2)(iii) provides that the remedial amendment period ends on the last day of the tenth month following the last day of the plan year in which the remedial amendment period begins. 2. Rev.Proc. 2016-37 and Rev.Proc. 2019-39 Rev.Proc. 2016-37, 2016-29 IRB 136, 2 sets forth plan amendment deadlines for qualified plans that apply except as otherwise provided by statute or in regulations or other guidance published in the Internal Revenue Bulletin. For example, for an individually designed qualified plan that is not a governmental plan (within the meaning of section 414(d) of the Code), the plan amendment deadline for a disqualifying provision with respect to a change in qualification requirements is the last day of the second calendar year that begins after the issuance of the Required Amendments List (RA List) in which the change in qualification requirements appears, and the plan amendment deadline for a discretionary amendment is the end of the plan year in which the plan amendment is operationally put into effect. Rev.Proc. 2019-39, 2019-42 IRB 945, 3 sets forth similar plan amendment deadlines for section 403(b) plan form defects first occurring after June 30, 2020, and for discretionary amendments made to section 403(b) plans with respect to plan years beginning on or after January 1, 2020. Although these revenue procedures provide plan amendment deadlines, they do not provide relief from the anti - cutback requirements of section 411(d)(6) of the Code or section 204(g) of ERISA, if applicable, for amendments adopted by those deadlines. ******** 2 For purposes of this notice, references to Rev.Proc. 2016-37 are to Rev.Proc. 2016-37, as modified by Rev.Proc. 2017-41, 2017-29 IRB 92, Rev.Proc. 2019-20, 2019-20 IRB 1182, Rev.Proc. 2020-40, 2020-38 IRB 575, and Rev. Proc. 2021-38, 2021-38 IRB 425. 3 For purposes of this notice, references to Rev.Proc. 2019-39 are to Rev.Proc. 2019-39, as modified by Notice 2020-35, 2020-25 IRB 948, Rev.Proc. 2020-40, and Rev.Proc. 2021-37, 2021-38 IRB 385. ******** B. SECURE Act and Miners Act 1. Section 601 of the SECURE Act Section 601 of the SECURE Act provides, in general, that a retirement plan or annuity contract will be treated as being operated in accordance with the terms of the plan during the period described in clause (3) of this section II.B.1 and, except as provided by the Secretary of the Treasury (Secretary), or the Secretary's delegate, a retirement plan will not fail to satisfy the anti-cutback requirements of section 411(d)(6) of the Code or section 204(g) of ERISA, 4 as a result of a plan amendment made pursuant to a provision of the SECURE Act or the regulations thereunder, provided that: ******** 4 Section 411(d)(6) provides, generally, that a plan will not satisfy section 401(a) if an amendment to the plan decreases a participant's accrued benefit. For this purpose, a plan amendment that has the effect of eliminating or reducing an early retirement benefit or a retirement-type subsidy or eliminating an optional form of benefit with respect to benefits attributable to service before the amendment is treated as reducing accrued benefits. Section 204(g) of ERISA provides parallel rules to the rules of section 411(d)(6) of the Code. The Internal Revenue Service (IRS) has interpretive authority over section 204(g) of ERISA pursuant to Reorganization Plan No. 4 of 1978, 5 U.S.C. App. ******** (1) the amendment is adopted no later than the last day of the first plan year beginning on or after January 1, 2022, or, for an applicable collectively bargained plan (a plan maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers ratified before December 20, 2019) in the case of section 401 of the SECURE Act, or for a section 414(d) governmental plan, the last day of the first plan year beginning on or after January 1, 2024, or such later date as the Secretary may prescribe (the section 601 date); (2) the amendment applies retroactively to the effective date of the SECURE Act provision or the regulations thereunder (or, in the case of an amendment not required by a provision of the SECURE Act or the regulations thereunder, the effective date specified by the plan); and (3) the plan or contract is operated as if the amendment were in effect during the period beginning on the effective date of the SECURE Act provision or the regulations thereunder (or, in the case of an amendment not required by a provision of the SECURE Act or the regulations thereunder, the effective date specified by the plan or contract) and ending on the section 601 date or, if earlier, the date the amendment is adopted. 2. Section 104 of the Miners Act Section 104(a) of the Miners Act amends section 401(a)(36) of the Code to lower the minimum age for allowable in-service distributions from a qualified pension plan from age 62 to age 591⁄2. Section 104(b) of the Miners Act amends the distribution requirements of section 457(d)(1)(A)(i) of the Code to provide that, in the case of a governmental plan under section 457(b) of the Code, amounts under the plan may be made available to a participant as early as the calendar year in which the participant attains age 591⁄2. 3. Notice 2020-68 Q&A G-1 of Notice 2020-68 sets forth deadlines for adopting retirement plan amendments relating to certain provisions of the SECURE Act, the regulations thereunder, and section 104 of the Miners Act. Q&A G-1(a) of Notice 2020-68 provides, in part, that, in general, for a qualified plan that is not a governmental plan within the meaning of section 414(d), or an applicable collectively bargained plan, the deadline to amend a plan for provisions of the SECURE Act, the regulations thereunder, or section 104 of the Miners Act is the last day of the first plan year beginning on or after January 1, 2022. The plan amendment deadline for a governmental plan within the meaning of section 414(d) of the Code, or for an applicable collectively bargained plan is the last day of the first plan year beginning on or after January 1, 2024. Q&A G-1(b) of Notice 2020-68 provides, in part, that, in general, the deadline for a section 403(b) plan that is not maintained by a public school, as described in section 403(b)(1)(A)(ii), to amend a plan for provisions of the SECURE Act or the regulations thereunder is the last day of the first plan year beginning on or after January 1, 2022. The plan amendment deadline for a section 403(b) plan that is maintained by a public school, as described in section 403(b)(1)(A)(ii), is the last day of the first plan year beginning on or after January 1, 2024. Q&A G-1(c) of Notice 2020-68 provides that the deadline to amend a governmental plan under section 457(b) for provisions of the SECURE Act, the regulations thereunder, or section 104 of the Miners Act is the later of (i) the last day of the first plan year beginning on or after January 1, 2024, or (ii) if applicable, the first day of the first plan year beginning more than 180 days after the date of notification by the Secretary that the plan was administered in a manner that is inconsistent with the requirements of section 457(b) of the Code. Q&A G-1(d) of Notice 2020-68 provides, in part, that the deadline to amend the trust governing an IRA that is an individual retirement account or the contract issued by an insurance company with respect to an IRA that is an individual retirement annuity for provisions of the SECURE Act or the regulations thereunder is December 31, 2022, or such later date as the Secretary prescribes in guidance. 4. Notice 2020-86 Notice 2020-86 provides guidance in the form of questions and answers with respect to sections 102 and 103 of the SECURE Act, including guidance relating to plan amendments. For example, Q&A-2 of Notice 2020-86 generally provides that if a plan incorporates by reference the automatic contribution maximum qualified percentage of section 401(k)(13)(C)(iii) of the Code and the plan continues to apply the maximum qualified percentage of 10 percent that applied before section 401(k)(13)(C)(iii) was amended by section 102(a) of the SECURE Act, then the plan would need to be amended on or before the plan amendment deadline determined under section 601(b) of the SECURE Act, as described in Q&A G-1 of Notice 2020-68. The amendment would need to provide explicitly that the plan's maximum qualified percentage is 10 percent, retroactive to the first day of the first plan year beginning after December 31, 2019. Q&A-3 of Notice 2020-86 provides that, in general, the plan amendment timing provisions of section 601 of the SECURE Act, as described in Q&A G-1 of Notice 2020-68, apply to a plan amendment adopted under section 102 of the SECURE Act. Q&A - 3 of Notice 2020 - 86 also provides that a plan may be amended to reflect section 102 of the SECURE Act after the applicable plan amendment deadline under section 601 of the SECURE Act, in accordance with the general discretionary amendment deadlines set forth in Rev.Proc. 2016-37. Q&A-13 of Notice 2020-86 provides that, in general, the plan amendment timing provisions of section 601 of the SECURE Act, as described in Q&A G-1 of Notice 2020-68, apply to a plan amendment adopted under section 103(b) or (c) of the SECURE Act (even if the applicable plan amendment deadline under section 601 of the SECURE Act is later than the deadline under section 103(b) or (c) of the SECURE Act). Q&A-13 of Notice 2020-86 also provides that a plan may be amended after the applicable plan amendment deadline under section 601 of the SECURE Act, in accordance with the plan amendment provisions of section 103(b) or (c) of the SECURE Act (which provide an exception to the general discretionary amendment deadlines set forth in Rev.Proc. 2016-37). C. CARES Act Section 2203(a) of the CARES Act added section 401(a)(9)(I) to the Code, which provides for a waiver of required minimum distributions for defined contribution plans and IRAs for 2020. Section 2203(c) of the CARES Act provides that a plan or contract may operate in accordance with an expected plan or contract amendment relating to the changes made by section 2203, provided the plan or contract amendment is adopted no later than the last day of the first plan year beginning in 2022 (or, in the case of a governmental plan, 2024). Section 2203(c) of the CARES Act also provides that a plan or contract will not fail to satisfy section 411(d)(6) of the Code by reason of such an amendment, except as provided by the Secretary. 5 ******** 5 Notice 2020-51, 2020-29 IRB 73, which sets forth guidance relating to a waiver of 2020 required minimum distributions under section 2203 of the CARES Act, provides that an IRA does not have to be amended to reflect the waiver and provides a sample amendment for defined contribution plans that plan sponsors may adopt to implement section 401(a)(9)(I) of the Code. The notice provides that, although employers may adopt amendments pursuant to section 2203 of the CARES Act other than those provided in the sample amendment, the Department of the Treasury and the IRS are exercising their authority under section 2203(c) of the CARES Act to deny Code section 411(d)(6) relief for a plan amendment that eliminates an optional form of benefit. ******** III. EXTENSION OF PLAN AMENDMENT DEADLINE; ANTI-CUTBACK RELIEF 6 ******** 6 It is anticipated that certain guidance issued under the SECURE Act will appear on the 2023 RA List. The extended deadlines set forth in this section III are consistent with the deadlines that would apply if the general amendment timing principles set forth in Rev. Proc. 2016-37 and Rev. Proc. 2019-39 were applied to that SECURE Act guidance. Accordingly, it is anticipated that sponsors will be able to adopt all SECURE Act, Miners Act, and CARES Act amendments described in this notice on a single date. ******** A. SECURE Act and Miners Act Pursuant to the authority of the Secretary under section 601 of the SECURE Act, the deadlines for amending a retirement plan or IRA to reflect the provisions of the SECURE Act, the regulations thereunder, or section 104 of the Miners Act, as set forth in Notice 2020-68 and Notice 2020-86, are hereby extended as follows: (1) The first paragraph under Q&A G-1(a) of Notice 2020-68 is revised to read as follows: "In general, for a qualified plan (including an applicable collectively bargained plan) that is not a governmental plan within the meaning of section 414(d) of the Code, the deadline to amend a plan for provisions of the SECURE Act, the regulations thereunder, or section 104 of the Miners Act is December 31, 2025. The plan amendment deadline for a qualified governmental plan, within the meaning of section 414(d), is 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023." (2) The first paragraph under Q&A G-1(b) of Notice 2020-68 is revised to read as follows: "In general, the deadline for a section 403(b) plan (including an applicable collectively bargained plan) that is not maintained by a public school, as described in section 403(b)(1)(A)(ii), to amend a plan for provisions of the SECURE Act or the regulations thereunder is December 31, 2025. The plan amendment deadline for a section 403(b) plan that is maintained by a public school, as described in section 403(b)(1)(A)(ii), is 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023." (3) Q&A G-1(c) is revised to read as follows: "The deadline to amend a governmental plan under section 457(b) of the Code for provisions of the SECURE Act, the regulations thereunder, or section 104 of the Miners Act is the later of (i) 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023, or (ii) if applicable, the first day of the first plan year beginning more than 180 days after the date of notification by the Secretary that the plan was administered in a manner that is inconsistent with the requirements of section 457(b) of the Code." (4) The first paragraph under Q&A G-1(d) of Notice 2020-68 is revised to read as follows: "The deadline to amend the trust governing an IRA that is an individual retirement account or the contract issued by an insurance company with respect to an IRA that is an individual retirement annuity for provisions of the SECURE Act or the regulations thereunder is December 31, 2025, or such later date as the Secretary prescribes in guidance." (5) Q&A-2, Q&A-3, and Q&A-13 of Notice 2020-86 are modified by replacing all references to "Q&A G-1 of Notice 2020-68" with "Q&A G-1 of Notice 2020-68, as modified by Notice 2022-33". In addition, amendments to a retirement plan to reflect a provision of the SECURE Act or the regulations thereunder that are made on or before the dates as extended under this section III.A will not cause the retirement plan to fail to satisfy the anti-cutback requirements of section 411(d)(6) of the Code or section 204(g) of ERISA by reason of such amendments. B. CARES Act Pursuant to the authority of the Commissioner under section 1.401(b)-1(f), the deadlines for amending a retirement plan to reflect the provisions of section 2203 of the CARES Act are hereby extended as follows: (1) the deadline for amending a retirement plan that is not a governmental plan is December 31, 2025; and (2) the deadline for amending a retirement plan that is a governmental plan is 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023, or, if later, with respect to a governmental plan under section 457(b) of the Code, the first day of the first plan year beginning more than 180 days after the date of notification by the Secretary that the plan was administered in a manner that is inconsistent with the requirements of section 457(b). IV. EFFECT ON OTHER DOCUMENTS Part G of Notice 2020-68 is modified. Q&A - 2, Q&A - 3, and Q&A-13 of Notice 2020-86 are modified. V. DRAFTING INFORMATION The principal author of this notice is Angelique Carrington of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). For further information regarding this notice, contact Ms. Carrington at (202) 317-4148 (not a toll-free number).

Internal Revenue Service - Information Release IR-2024-98 Dirty Dozen: Taking tax advice on social media can be bad news for taxpayers; inaccurate or misleading tax information circulating April 8, 2024 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 Dirty Dozen: Taking tax advice on social media can be bad news for taxpayers; inaccurate or misleading tax information circulating IR-2024-98, April 8, 2024 WASHINGTON -- On day eight of the Dirty Dozen tax scam series, the Internal Revenue Service today warned about bad tax information on social media that can lure honest taxpayers with bad advice, potentially leading to identity theft and tax problems. Social media can routinely circulate inaccurate or misleading tax information, where people on TikTok and other social media platforms share wildly inaccurate tax advice. Some involve urging people to misuse common tax documents like Form W-2, or more obscure ones like Form 8944 involving a technical e-file form not commonly used by taxpayers. Both schemes encourage people to submit false, inaccurate information in hopes of getting a refund. The IRS warns people not to fall for these scams. Taxpayers who knowingly file fraudulent tax returns potentially face significant civil and criminal penalties. "Social media is an easy way for scammers and others to try encouraging people to pursue some really bad ideas, and that includes ways to magically increase your tax refund," said IRS Commissioner Danny Werfel. "There are many ways to get good tax information, including @irsnews on social media and from trusted tax professionals. But people should be careful with who they're following on social media for tax advice. Unlike hacks to fix a leaky kitchen sink or creative makeup tips, people shouldn't rely on made-up ways on social media to patch up their tax return and boost their refund." Warnings against bad advice on social media is day eight of the 2024 IRS annual Dirty Dozen campaign - a list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more. Started in 2002, the Dirty Dozen is not a legal document or a formal listing of agency enforcement priorities, but the education effort is designed to raise awareness and protect taxpayers and tax pros from common tax scams and schemes, including bad social media advice. As a member of the Security Summit, the IRS has worked with state tax agencies and the nation's tax industry for nine years to cooperatively implement a variety of internal security measures to protect taxpayers. The collaborative effort by the Summit partners also has focused on educating taxpayers about scams and fraudulent schemes throughout the year, which can lead to tax-related identity theft. Through initiatives like the Dirty Dozen and the Security Summit initiative, the IRS strives to protect taxpayers, businesses and the tax system from cyber criminals and deceptive activities that seek to extract information and money, including bad advice on social media. Social media: Not the ideal place for solid tax advice Social media can connect people and information from all over the globe. Unfortunately, sometimes people provide bad advice that can lure good taxpayers into trouble. The IRS warns taxpayers to be wary of trusting internet advice, whether it's a fraudulent tactic promoted by scammers or it's a patently false tax-related scheme trending across popular social media platforms. While some producers of misleading content are driven by criminal profit motive, others are simply trying to gain attention and clicks. They will post anything, no matter how wrong or outlandish, if it garners more attention. The IRS is aware of various filing season hashtags and social media topics leading to inaccurate and potentially fraudulent information. The central theme of these examples involves people trying to use legitimate tax forms for the wrong reason. Here are just two of the recent schemes circulating online: Fraudulent advice on Form W-2 This scheme, circulating on social media, encourages people to use tax software to manually fill out Form W-2, Wage and Tax Statement, and include false income information. In this W-2 scheme, scam artists suggest people make up large income and withholding figures, as well as the employer its coming from. Scam artists then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund - sometimes as much as five figures - due to the large amount of withholding. There are two other variations of the W-2 scheme. Both involve misusing Form W-2 wage information in hopes of generating a larger refund: - Fraudulent Form 7202: This scheme involves encouraging people to use Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on income earned as an employee and not as a self-employed individual. These credits were available for self-employed individuals for 2020 and 2021 during the pandemic; they are not available for 2023 tax returns. - Fraudulent Schedule H: Another scheme encourages people to invent fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid. The IRS, along with the Security Summit partners in the tax industry and the states, are actively watching for this scheme. In addition, the IRS works with payroll companies and large employers - as well as the Social Security Administration - to verify W-2 information. Form 8944 scheme Another example of bad advice circulating on social media involves Form 8944, Preparer e-file Hardship Waiver Request. Wildly inaccurate claims made about this form include its use by taxpayers to receive a refund from the IRS, even if the taxpayer has a balance due. This is false information. Form 8944 is for tax professional use only. While Form 8944 is a legitimate IRS tax form, it is intended for tax return preparers who are requesting a waiver so they can file tax returns on paper instead of electronically. It is not a form the average taxpayer can use to avoid tax bills. Taxpayers who intentionally file forms with false or fraudulent information can face serious consequences, including potentially civil and criminal penalties, like criminal prosecution for filing a false tax return and a frivolous return penalty of $5,000. How taxpayers can verify information The best place for taxpayers to learn how to properly use tax forms, and to accurately follow social media channels related to taxes, is to go to IRS.gov. - IRS.gov has a forms repository with legitimate and detailed instructions for taxpayers on how to fill out the forms properly. - Use IRS.gov to find the official IRS social media accounts, or other government sites, to fact check information. Report fraud As part of the Dirty Dozen awareness effort, the IRS encourages people to report individuals who promote improper and abusive tax schemes, as well as tax return preparers who deliberately prepare improper returns. To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242 - Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed Form 14242 PDF and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations. Center in the Office of Promoter Investigations. Mail: Internal Revenue Service Lead Development Center Stop MS5040 24000 Avila Road Laguna Niguel, CA 92677-3405 Fax: 877-477-9135 Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary award. For more information, see Abusive Tax Schemes and Abusive Tax Return Preparers.

Internal Revenue Service - Information Release IR-2024-87 Dirty Dozen: IRS warns taxpayers to stay away from "helpful" scammers offering to set up an Online Account April 1, 2024 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 Dirty Dozen: IRS warns taxpayers to stay away from "helpful" scammers offering to set up an Online Account IR-2024-87, April 1, 2024 WASHINGTON -- The Internal Revenue Service today continues its Dirty Dozen scam series warning taxpayers to watch out for scammers attempting to sell or offer help setting up an Online Account on IRS.gov. The goal for these criminals is getting personal tax and financial information that can be used to commit identity theft. The IRS Online Account is a tool that provides convenient access to an individual's tax information. The information is also valuable to identity thieves who use it to submit fraudulent tax returns in a victim's name to get a big refund. These third-party online account scams are day three of the IRS annual Dirty Dozen tax scam campaign. "As the IRS and the Security Summit partners strengthen our internal defenses, scammers evolve to come up with new ways to try to steal valuable information from taxpayers," said IRS Commissioner Danny Werfel. "An Online Account at IRS.gov can help taxpayers view important details about their tax situation. But scammers have realized the sensitive information there is valuable to them, so they're now focusing on tricking people that they need help setting up an account." "This is just an elaborate scam designed to obtain valuable and sensitive tax information that scammers will use to try to steal a refund," Werfel added. "This is another reminder that people should be wary of unexpected reach-outs from the IRS and other financial institutions. Taxpayers should avoid sharing sensitive personal data over the phone, email or social media to protect themselves and avoid getting caught up in these scams." This marks the third day of the special Dirty Dozen series. Started in 2002, the IRS' annual Dirty Dozen campaign lists 12 scams and schemes that put taxpayers, businesses and the tax professional community at risk of losing money, personal information, data and more. While the Dirty Dozen is not a legal document or a formal listing of agency enforcement priorities, the education effort is designed to raise awareness and protect taxpayers and tax pros from common tax scams and schemes. As a member of the Security Summit, the IRS has worked with state tax agencies and the nation's tax industry for nine years to cooperatively implement a variety of internal security measures to protect taxpayers. The collaborative effort by the Summit partners also has focused on educating taxpayers about scams and fraudulent schemes throughout the year, which can lead to tax-related identity theft. Through initiatives like the Dirty Dozen and the Security Summit program, the IRS strives to protect taxpayers, businesses and the tax system from cyber criminals and deceptive activities that seek to extract information and money, including this Online Account scheme. IRS Online Account: Steer clear of help from third-party scammers An IRS Online Account allows taxpayers access to the information about their tax account. They can log in and get the latest on their payment history, current balance, see copies of select IRS notices and more. It is a useful and easy to use tool that scammers target. The third-party helper scam begins with swindlers posing as a "helpful" third party who offers to help create a taxpayer's IRS Online Account at IRS.gov. Third parties make these offers to steal a taxpayer's personal information. While they may make it seem like a complicated task needing their assistance, taxpayers can and should establish their own Online Account through IRS.gov. These scammers often ask for the taxpayer's personal information including address, Social Security number or Individual Taxpayer Identification number (ITIN) and photo identification. They can sell the information or use the sensitive details to file fraudulent tax returns, obtain loans and open credit accounts. The IRS encourages people to watch out for these scams. The only place individuals should go to create an IRS Online Account is IRS.gov. People should not use third-party assistance, other than the approved IRS authentication process through IRS.gov, to create their own IRS Online Account. Report fraud As part of the Dirty Dozen awareness effort, the IRS encourages people to report individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns. To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242 - Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed Form 14242 PDF and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations. Mail: Internal Revenue Service Lead Development Center Stop MS5040 24000 Avila Road Laguna Niguel, California 92677-3405 Fax: 877-477-9135 Alternatively, taxpayers and tax professionals may send the information to the IRS Whistleblower Office for possible monetary award. For more information, see Abusive tax schemes and abusive tax return preparers.

Internal Revenue Service - Information Release IR-2022-160 IRS selects eight new members for the Electronic Tax Administration Advisory Committee September 20, 2022 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS selects eight new members for the Electronic Tax Administration Advisory Committee IR-2022-160, September 20, 2022 WASHINGTON -- The Internal Revenue Service has selected eight new members for the Electronic Tax Administration Advisory Committee (ETAAC). "These eight new members bring diverse and important perspectives to a committee focused on the electronic side of tax administration," said IRS Commissioner Chuck Rettig. "Their recommendations will inform IRS decision makers as they address critical issues like identify theft and refund fraud and further map out our digital strategy." Established by statute in 1998, the ETAAC is a public forum for the discussion of issues in electronic tax administration. The committee's primary goal is to promote paperless filing of tax and information returns. ETAAC members work closely with the Security Summit, a joint effort of the IRS, state tax administrators and the nation's tax industry to fight identity theft and refund fraud. Committee members include state tax officials, consumer advocates, cybersecurity and information security specialists, tax preparers, tax software developers and representatives of the payroll and financial communities. The following individuals have been appointed to serve three-year terms on the committee beginning in September 2022: - Austin Emeagwai, CPA, Ph.D., Collierville, Tennessee - Dr. Emeagwai is an Associate Professor of Accounting at LeMoyne-Owen College, Memphis. He is the president of ABC Accounting and Tax Services, P.C., a full-service CPA firm. His research interests include small business and community development by Historically Black Colleges and Universities (HBCUs). Dr. Emeagwai is a member of the American Institute of Certified Public Accountants, Tennessee Society of Certified Public Accountants, National Society of Accountants, and is a Volunteer Income Tax Assistance (VITA) volunteer. - Jerry Gaddis, EA, MBA, Winter Haven, Florida - Gaddis is the founder and Chief Executive Officer of Tropical Tax Solutions, a boutique firm headquartered in Florida providing tax consultation, preparation and representation solutions for individuals and small businesses. He began his 20-year tax career at the VITA/Tax Counseling for the Elderly clinic in the Key Largo public library. He is a former H&R Block Franchisee, a former Dave Ramsey ELP and a graduate of the National Tax Practice Institute. Gaddis served on the board of directors for the National Association of Enrolled Agents for seven years including three years as an officer and one year as President/CEO. He is an Enrolled Agent. - Nikia Gainey, Orlando, Florida - Gainey founded Carriers Choice Logistics, LLC in central Florida this year. Carriers Choice Logistics helps the low-income community by providing advice on how to start a business, provides financial literacy assistance, offers first time home buyers program information, aids with applying for Supplemental Nutrition Assistance Program (SNAP) benefits (also known as food stamps) and offers free notary services for the surrounding community. - Robert Gettemy, Marion, Iowa - Gettemy is a full-time instructor at the University of Iowa where he teaches both undergraduate and graduate courses in entrepreneurship. In addition, he consults in the tax software industry. Prior to teaching, Gettemy spent seven years at TaxAct where he was Chief Operating Officer. During his tenure at TaxAct, Gettemy was responsible for all back-office operations, government relations and competitive intelligence. While at TaxAct, he served as Vice Chair of the American Coalition of Taxpayer Rights, was on the board of directors for the Council of Electronic Revenue Communication Advancement and was an industry co-lead in the IRS Security Summit initiative which was formed to combat stolen identity refund fraud. Gettemy was also active in IRS Free File. - Argi O'Leary, Voorheesville, New York - O'Leary is a Principal in the Advocacy Practice at Ryan, LLC in New York, where she provides tax strategy and audit assistance, including tax issue negotiations and resolution, policy advice and advocacy for all tax types. Before joining Ryan, O'Leary was a Deputy Commissioner with the New York State Department of Taxation and Finance, leading the Department's Civil Enforcement Division and Office of Professional Responsibility, and also served as an Assistant Deputy Commissioner, leading the Department's litigation strategy in tax controversy matters. - Hallie Parchman, Austin, Texas - Parchman is currently Amazon's Senior Manager of Product Management within the Corporate Tax function focusing on the end-to-end customer experience as it relates to tax information reporting and withholding, including tax operations, tax compliance and product delivery and design. Before joining Amazon, Parchman was a Tax Analyst at Apple Inc. focused on information reporting and a Federal Tax Associate at KPMG. She is a licensed CPA in Texas. - RaeAnn Pilarski, Tucson, Arizona - Pilarski is Senior Manager at Code for America, where she scales and supports VITA partners that participate in the GetYourRefund program. Before joining Code for America, she oversaw the VITA program at the United Way of Tucson and Southern Arizona. During her tenure there, she worked closely with Code for America as one of the original partners in the GetYourRefund pilot and led the development of Valet VITA, a model that allowed clients' documents to be scanned and securely uploaded to a system through which volunteers would access the information needed to prepare the return. - Keith Richardson, Philadelphia, Pennsylvania - Richardson has over 15 years of tax administration experience. He is Deputy Chief Financial Officer and Tax Commissioner for the District of Columbia. As the Deputy CFO, he contributed to the development of its new modernized tax system, including working with IDTTRF-ISAC and establishing strategic plans for its customer service for taxpayers. Richardson previously worked for the Commonwealth of Pennsylvania as the Bureau of Compliance Director and was responsible for tax compliance initiatives, clearances and creating the Gaming Control Clearance Division to oversee all tax clearances for owners, vendors, employees and winners. He has also served as Revenue Commissioner for the City of Philadelphia. Committee Leadership for 2022 - 2023 - Jared Ballew, Government/Industry Liaison with Drake Software, will serve as chair of the ETAAC. - Vernon Barnett, Commissioner of the Alabama Department of Revenue, will serve as co-vice chair of the ETAAC. - Timur Taluy, CEO and co-owner of FileYourTaxes.com, will serve as co-vice chair of the ETAAC.

Proposed Regulation REG-120080-22 Internal Revenue Service 2023-16 I.R.B. 746 Notice of Proposed Rulemaking Section 30D New Clean Vehicle Credit REG-120080-22 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: This document contains proposed regulations regarding the Federal income tax credit under the Inflation Reduction Act of 2022 for the purchase of qualifying new clean vehicles, including new plug-in electric vehicles powered by an electric battery meeting certain requirements and new qualified fuel cell vehicles. These proposed regulations would affect eligible taxpayers who purchase new vehicles that qualify for the credit. DATES: Comments and Requests for a Public Hearing: Written or electronic comments and requests for a public hearing must be received by June 16, 2023. Requests for a public hearing must be submitted as prescribed in the "Comments and Requests for a Public Hearing" section. Applicability Date of New Critical Mineral and Battery Component Requirements: See section III.D of the "Background" section for a discussion of the applicability date of the new critical mineral and battery component requirements. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically. Submit electronic submissions via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-120080-22) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted, whether electronically or on paper, to the IRS's public docket. Send paper submissions to: CC:PA:LPD:PR (REG-120080-22), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, the Office of Associate Chief Counsel (Passthroughs & Special Industries) at (202) 317-6853 (not a toll-free number); concerning submissions of comments and requests for a public hearing, Vivian Hayes at (202) 317-5306 (not a toll-free number) or by email to publichearings@irs.gov (preferred). SUPPLEMENTARY INFORMATION: Background I. Overview Section 30D(a) of the Internal Revenue Code (Code) provides a credit (section 30D credit) against the tax imposed by chapter 1 of the Code (chapter 1) with respect to each new clean vehicle that a taxpayer purchases and places in service. The credit is determined and allowable with respect to the taxable year in which the taxpayer places the new clean vehicle in service. This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 30D of the Code (proposed regulations). To date, no regulations have been proposed pursuant to section 30D. Section 30D was originally enacted by section 205(a) of the Energy Improvement and Extension Act of 2008, Division B of Public Law 110-343, 122 Stat. 3765, 3835 (October 3, 2008), to provide a credit for the purchase and placing in service of new qualified plug-in electric drive motor vehicles. Section 30D has been amended several times since its enactment, most recently by section 13401 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). The amount of the section 30D credit is treated as a personal credit or a general business credit depending on the character of the vehicle. In general, the section 30D credit is treated as a personal credit allowable under subpart A of the Code. Section 30D(c)(2). However, the amount of the section 30D credit that is attributable to property that is of a character subject to an allowance for depreciation is treated as a current year business credit under section 38(b) instead of being allowed under section 30D(a). Section 30D(c)(1). Section 38(b)(30) lists as a current year business credit the portion of the section 30D credit to which section 30D(c)(1) applies. The IRA did not amend section 30D(c)(1) or (2). II. IRA Amendments to Section 30D The IRA made a number of amendments to section 30D. In general, the purpose of these amendments is to promote the purchase and use of new clean vehicles by lower and middle-income Americans, to promote resilient supply chains and domestic manufacturing, to strengthen supply chains with trusted trading partners, to protect against improper credit claims, and to achieve significant carbon emissions reductions. These amendments are specifically described in the following subsections. A. Credit amount and critical mineral and battery component requirements The IRA amends the rules for determining the amount of the section 30D credit. Prior to the amendments to section 30D made by section 13401(a) and (e) of the IRA becoming applicable, the amount of the section 30D credit is calculated based on the vehicle's battery capacity. The base amount is $2,500, plus $417 for a battery with a capacity of at least 5 kilowatt hours, and an additional $417 for each kilowatt hour of capacity in excess of 5 kilowatt hours, up to a maximum credit of $7,500 per vehicle. Section 13401(a) of the IRA amends section 30D(b) of the Code to provide a maximum credit of $7,500 per vehicle, consisting of $3,750 in the case of a vehicle that meets certain requirements relating to critical minerals and $3,750 in the case of a vehicle that meets certain requirements relating to battery components. The amendments made by section 13401(a) of the IRA apply to vehicles placed in service after the date on which the Secretary of the Treasury or her delegate (Secretary) issues proposed guidance described in new section 30D(e)(3)(B) of the Code relating to the new critical minerals requirements described in new section 30D(e)(1)(A) (Critical Minerals Requirement) and the new battery components requirements described in new section 30D(e)(2)(A) (Battery Components Requirement). See section 13401(k)(3) of the IRA. New section 30D(e)(1)(A) provides that the Critical Minerals Requirement with respect to the battery from which the electric motor of a vehicle draws electricity is satisfied if the percentage of the value of the applicable critical minerals (as defined in section 45X(c)(6)) contained in such battery that were (i) extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or (ii) recycled in North America, is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary). The applicable percentage for the Critical Minerals Requirement is set forth in section 30D(e)(1)(B)(i) through (v) of the Code and varies based on when the vehicle is placed in service. In the case of a vehicle placed in service after the date of issuance of the proposed guidance described in new section 30D(e)(3)(B) of the Code and before January 1, 2024, the applicable percentage is 40 percent. In the case of a vehicle placed in service during calendar year 2024, 2025, and 2026, the applicable percentage is 50 percent, 60 percent, and 70 percent, respectively. In the case of a vehicle placed in service after December 31, 2026, the applicable percentage is 80 percent. New section 30D(e)(2)(A) provides that the Battery Components Requirement with respect to the battery from which the electric motor of a vehicle draws electricity is satisfied if the percentage of the value of the components contained in such battery that were manufactured or assembled in North America is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary). The applicable percentage for the Battery Components Requirement is set forth in section 30D(e)(2)(B)(i) through (vi) of the Code and varies based on when the vehicle is placed in service. In the case of a vehicle placed in service after the date of issuance of the proposed guidance described in new section 30D(e)(3)(B) of the Code and before January 1, 2024, the applicable percentage is 50 percent. In the case of a vehicle placed in service during calendar year 2024 or 2025, the applicable percentage is 60 percent. In the case of a vehicle placed in service during calendar year 2026, 2027, and 2028, the applicable percentage is 70 percent, 80 percent, and 90 percent, respectively. In the case of a vehicle placed in service after December 31, 2028, the applicable percentage is 100 percent. B. New clean vehicle definition The IRA amends the definition of the vehicles that may qualify for the section 30D credit. Section 13401(c) of the IRA amends section 30D(d) of the Code by making the credit applicable to "new clean vehicles," instead of "new qualified plug-in electric drive motor vehicles," applicable to vehicles placed in service after December 31, 2022. As amended by section 13401(c) and (g)(2) of the IRA, section 30D(d)(1) of the Code defines a "new clean vehicle" as a motor vehicle that satisfies the eight requirements set forth in section 30D(d)(1)(A) through (H) of the Code: the original use of the motor vehicle must commence with the taxpayer; the motor vehicle must be acquired for use or lease by the taxpayer and not for resale; the motor vehicle must be made by a qualified manufacturer; the motor vehicle must be treated as a motor vehicle for purposes of title II of the Clean Air Act; the motor vehicle must have a gross vehicle weight rating of less than 14,000 pounds; the motor vehicle must be propelled to a significant extent by an electric motor which draws electricity from a battery that has a capacity of not less than 7 kilowatt hours, and is capable of being recharged from an external source of electricity; the final assembly of the motor vehicle must occur within North America; and the person who sells any vehicle to the taxpayer must furnish a report to the taxpayer and to the Secretary, at such time and in such manner as the Secretary provides, containing specifically enumerated items. With respect to the requirement that the motor vehicle must be made by a qualified manufacturer, the IRA creates new requirements for manufacturers of vehicles eligible for the section 30D credit applicable to vehicles placed in service after December 31, 2022. As amended by section 13401(c) the IRA, section 30D(d)(3) of the Code defines a "qualified manufacturer" as any manufacturer (within the meaning of the regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.)) that enters into a written agreement with the Secretary under which such manufacturer agrees to make periodic written reports to the Secretary (at such times and in such manner as the Secretary may provide) providing vehicle identification numbers and such other information related to each vehicle manufactured by such manufacturer as the Secretary may require. The IRA provides that certain fuel cell vehicles may qualify for the section 30D credit. Section 13401(c) of the IRA adds new section 30D(d)(6) to the Code, which includes in the definition of the term "new clean vehicle" applicable to vehicles placed in service after December 31, 2022, any "new qualified fuel cell motor vehicle" (as defined in section 30B(b)(3)) that meets the requirements under section 30D(d)(1)(G) and (H) (North American final assembly and seller reporting requirements). The IRA disqualifies certain vehicles from the section 30D credit if the battery of the vehicle contains critical minerals or battery components from a foreign entity of concern. As amended by section 13401(e) of the IRA, section 30D(d)(7) of the Code excludes, after certain specified dates, vehicles placed in service with batteries containing certain critical minerals or battery components from a foreign entity of concern from the definition of the term "new clean vehicle." In particular, amended section 30D(d)(7) provides that the term "new clean vehicle" does not include (A) any vehicle placed in service after December 31, 2024, with respect to which any of the applicable critical minerals contained in the battery of such vehicle (as described in section 30D(e)(1)(A)) were extracted, processed, or recycled by a foreign entity of concern (as defined in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5))), or (B) any vehicle placed in service after December 31, 2023, with respect to which any of the components contained in the battery of such vehicle (as described in section 30D(e)(2)(A)) were manufactured or assembled by a foreign entity of concern (as so defined). These rules will be addressed in future guidance. C. Final assembly requirement As described in section II.B of the Background section of this preamble, the IRA requires new clean vehicles to undergo final assembly in North America to be eligible for the section 30D credit. This requirement is applicable to vehicles sold after August 16, 2022. See section 13401(k)(2) of the IRA. New section 30D(d)(5) defines "final assembly" as the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle. D. Elimination of phaseout The IRA eliminates the phaseout of the section 30D credit for vehicles made by manufacturers that have sold at least 200,000 vehicles eligible for the credit for use in the United States after December 31, 2009. Pursuant to section 13401(d) of the IRA this limitation does not apply to vehicles sold after December 31, 2022. See section 13401(k)(5) of the IRA. E. Special rules The IRA adds four new special rules under section 30D(f) applicable to vehicles placed in service after December 31, 2022. First, section 30D(f)(8) permits only one section 30D credit to be claimed for each vehicle identification number (VIN). Second, section 30D(f)(9) requires taxpayers to include on the taxpayer's return for the taxable year the VIN of the vehicle for which the section 30D credit is claimed. Third, section 30D(f)(10) denies the section 30D credit to certain high-income taxpayers. More specifically, section 30D(f)(10)(A) provides that no credit is allowed for any taxable year if (i) the lesser of (I) the modified adjusted gross income of the taxpayer for such taxable year, or (II) the modified adjusted gross income of the taxpayer for the preceding taxable year, exceeds (ii) the threshold amount (Modified AGI Limitation). New section 30D(f)(10)(B) provides that the threshold amount is (i) in the case of a joint return or a surviving spouse (as defined in section 2(a) of the Code), $300,000, (ii) in the case of a head of household (as defined in section 2(b) of the Code), $225,000, and (iii) in the case of any other taxpayer, $150,000. New section 30D(f)(10)(C) defines "modified adjusted gross income" as adjusted gross income (AGI) increased by any amount excluded from gross income under sections 911, 931, or 933. Fourth, section 30D(f)(11) excludes from the section 30D credit vehicles that exceed certain manufacturer's suggested retail price thresholds. New section 30D(f)(11)(A) provides that no credit is allowed for a vehicle with a manufacturer's suggested retail price in excess of the applicable limitation. New section 30D(f)(11)(B) provides that the applicable limitation for each vehicle classification is as follows: in the case of a van, $80,000; in the case of a sport utility vehicle, $80,000; in the case of a pickup truck, $80,000; and in the case of any other vehicle, $55,000. New section 30D(f)(11)(C) authorizes the Secretary to prescribe such regulations or other guidance as the Secretary determines necessary to determine vehicle classifications using criteria similar to that employed by the Environmental Protection Agency and the Department of the Energy to determine size and class of vehicles. Section 13401(i)(4) of the IRA amended section 6213(g)(2) to provide the IRS with math error authority for the omission of a correct VIN included on the return as required under section 30D(f)(9). Amended section 30D(g) provides rules for transfer of the credit from the taxpayer to certain registered dealers applicable to vehicles placed in service after December 31, 2023. Those rules will be addressed in future guidance. Amended section 30D(h) provides that no credit is allowed with respect to any vehicle placed in service after December 31, 2032. F. IRA applicability dates Section 13401(k) of the IRA specifies various applicability dates for its amendments to section 30D. As noted previously, except as provided in section 13401(k)(2) through (5) of the IRA, the amendments made by section 13401 of the IRA apply to vehicles placed in service after December 31, 2022. Section 13401(k)(2) of the IRA provides that the amendments made by section 13401(b) of the IRA relating to final assembly apply to vehicles sold after the date of enactment of the IRA (August 16, 2022). Section 13401(k)(3) of the IRA provides that the amendments made by section 13401(a) and (e) of the IRA relating to the per vehicle credit amount dollar limitation and Critical Minerals and Battery Components Requirements apply to vehicles placed in service after the date on which the proposed guidance described in new section 30D(e)(3)(B) is issued by the Secretary. Section 13401(k)(4) of the IRA provides that the amendments made by section 13401(g) of the IRA relating to transfers of the section 30D credit apply to vehicles placed in service after December 31, 2023. Section 13401(k)(5) of the IRA provides that the amendment made by section 13401(d) of the IRA eliminating the manufacturer limitation applies to vehicles sold after December 31, 2022. Section 13401(l) of the IRA provides a transition rule for a taxpayer who purchased or entered into a written binding contract to purchase a new qualified plug-in electric drive motor vehicle (as defined in section 30D(d)(1) of the Code, as in effect on the day before the date of enactment of the IRA (August 15, 2022)) after December 31, 2021, and before the date of enactment of the IRA (August 16, 2022), and placed such vehicle in service on or after the date of enactment of the IRA. The transition rule provides that such a taxpayer may elect (at such time, and in such form and manner as the Secretary may prescribe) to treat such vehicle as having been placed in service on the day before the date of enactment of the IRA. III. Prior Guidance, Request for Comments, and Other Documents Relating to the New Clean Vehicle Credit A. Notice 2022-46 On October 5, 2022, the Treasury Department and the IRS published Notice 2022-46, 2022-43 I.R.B. 302. The notice requested general comments on issues arising under section 30D, as well as specific comments concerning: (1) definitions; (2) critical minerals; (3) battery components; (4) applicable values; (5) foreign entities of concern; (6) recordkeeping and reporting; (7) tax-exempt entities; (8) registered dealers and eligible entities; (9) the final assembly requirement; (10) vehicle classifications; (11) elections to transfer and advance payments; and (12) recapture. The Treasury Department and the IRS received 884 comments from industry participants, environmental groups, individual consumers, and other stakeholders. The Treasury Department and the IRS appreciate the commenters' interest and engagement on these issues. These comments have been carefully considered in the preparation of the proposed regulations. B. Revenue Procedure 2022-42 On December 12, 2022, the Treasury Department and the IRS published Revenue Procedure 2022-42, 2022-52 I.R.B. 565, providing guidance for qualified manufacturers to enter into written agreements with the IRS, as required in sections 30D, 25E, and 45W of the Code, and to report certain information regarding vehicles produced by such manufacturers that may be eligible for these credits. Information required to be reported includes certifications regarding the Critical Minerals and Battery Components Requirements, as required in sections 30D(e)(1)(A) and (e)(2)(A), once those requirements are applicable. In addition, Revenue Procedure 2022-42 provides the procedures for sellers of new clean vehicles or previously-owned clean vehicles to report certain information to the IRS and the purchasers of such clean vehicles. C. Notices 2023-1 and 2023-16 and 30D White Paper On December 29, 2022, the Treasury Department and the IRS published Notice 2023-1, 2023-3 I.R.B. 373, which describes definitions for certain terms in section 30D that the Treasury Department and the IRS intended to include in proposed regulations. The Treasury Department also released a white paper on the anticipated direction, as of December 29, 2022, of the proposed guidance on the Critical Minerals and Battery Components Requirements and the process for deter-mining whether vehicles qualify under these requirements (30D White Paper). See "Anticipated Direction of Forthcoming Proposed Guidance on Critical Mineral and Battery Component Value Calculations for the New Clean Vehicle Credit," Dec. 29, 2022, https://home.treasury.gov/system/files/136/30DWhite-Paper.pdf (last accessed March 28, 2023). On February 3, 2023, the Treasury Department and the IRS published Notice 2023-16, 2023-8 I.R.B. 479, which modifies Notice 2023-1 by revising the vehicle classification standard that the Treasury Department and the IRS intend to provide in proposed regulations. D. Proposed guidance described in section 30D(e)(3)(B) The publication of these proposed regulations in the Federal Register is the issuance of the proposed guidance described in section 30D(e)(3)(B) (as added by section 13401(e) of the IRA). Pursuant to section 13401(a), (e), and (k)(3) of the IRA, the critical minerals and battery components requirements of section 13401(a) and (e) of the IRA amend section 30D with respect to vehicles placed in service after the date on which these proposed regulations are published in the Federal Register. Accordingly, the Critical Minerals and Battery Components Requirements apply to vehicles placed in service after April 17, 2023, the date of publication in the Federal Register. Explanation of Provisions I. General Rules Section 30D(a) and proposed §1.30D-1(a) provide that there is allowed as a credit against the tax imposed by chapter 1 for the taxable year an amount equal to the sum of the credit amounts determined under section 30D(b) with respect to each new clean vehicle placed in service by the taxpayer during the taxable year. Section 30D(c) and proposed §1.30D-1(b) provide that the section 30D credit may be allowed as a general business credit or a personal credit depending on whether the property is of a character subject to an allowance for depreciation (depreciable vehicle). Section 30D(c)(1) and proposed §1.30D-1(b)(1) provide that so much of the credit that would be allowed to a taxpayer under section 30D(a) for any taxable year with respect to all new clean vehicles placed in service by the taxpayer during the taxable year (determined with-out regard to section 30D(c) and proposed §1.30D-1(b)(1)) that is attributable to one or more depreciable vehicles will be treated as a current year general business credit under section 38 of the Code that is listed in section 38(b)(30) for such tax-able year (and not allowed under section 30D(a)). Depreciable vehicles may also be eligible for the credit for qualified commercial clean vehicles under section 45W. However, under section 45W(d)(3), no credit is allowed under section 45W for a vehicle for which a section 30D credit was allowed to any taxpayer for any taxable year. In addition, proposed §1.30D-1(b)(2) would require the apportionment of any section 30D credit with respect to a depreciable vehicle the business use of which is less than 50 percent of a taxpayer's total use of the vehicle for the taxable year in which the vehicle is placed in service. The portion of the section 30D credit corresponding to the percentage of the taxpayer's business use of the depreciable vehicle would be treated as a general business credit under section 30D(c)(1) and proposed §1.30D-1(b)(1), and the portion of the section 30D credit corresponding to the percentage of the taxpayer's personal use of such vehicle would be treated as a section 30D credit allowed under section 30D(a) pursuant to section 30D(c)(2) and proposed §1.30D-1(b)(3). Section 30D(c)(2) and proposed §1.30D-1(b)(3) provide that the section 30D credit allowed for any taxable year (determined after application of section 30D(c)(1) and proposed §1.30D-1(b)(1)) is treated as a nonrefundable personal credit allowable under subpart A of part IV of subchapter A of chapter 1 (subpart A) for such taxable year. Section 26 of the Code limits the aggregate amount of credits allowed to a taxpayer by subpart A based on the taxpayer's tax liability. Under section 26(a), the aggregate amount of credits allowed to a taxpayer by subpart A cannot exceed the sum of (i) the taxpayer's regular tax liability (as defined in section 26(b)) for the taxable year reduced by the foreign tax credit allowable under section 27 of the Code, and (ii) the alternative minimum tax imposed by section 55(a) for the taxable year. II. Definitions Proposed §1.30D-2 clarifies the definitions of certain terms related to the statutory requirements of the section 30D credit. The definitions contained in proposed §1.30D-2 were substantially described in Notice 2023-1, as modified by Notice 2023-16. A. Final assembly Under section 30D(d)(1)(G) and section 13401(k)(2) of the IRA, any vehicle sold after August 16, 2022, must undergo its final assembly in North America to be eligible for the section 30D credit. Section 30D(d)(5) defines "final assembly" as the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle. Proposed §1.30D-2(b) would provide that, for purposes of section 30D(d)(5) of the Code, "final assembly" means the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle. To establish where final assembly of a new clean vehicle occurred, the taxpayer could rely on the following information: (1) the vehicle's plant of manufacture as reported in the vehicle identification number (VIN) pursuant to 49 CFR 565; or (2) the final assembly point reported on the label affixed to the vehicle as described in 49 CFR 583.5(a)(3). The vehicle's plant of manufacture as reported in the VIN means the plant where the manufacturer affixes the VIN. See 49 CFR 565.12. The plant of manufacture is reported in the VIN pursuant to 49 CFR 565.15(d)(2). The Department of Energy, Alternative Fuels Data Center (AFDC), and the Department of Transportation, National Highway Traffic Safety Administration (NHSTA), each provide a VIN decoder to the public, which can be used to identify a vehicle's plant of manufacture. AFDC, VIN Decoder, https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit (last accessed March 28, 2023); NHTSA, VIN Decoder, https://www.nhtsa.gov/vin-decoder (last accessed March 28, 2023). Labeling requirements in 49 CFR 583.5 require the final assembly point to be reported on the label affixed to a passenger motor vehicle. Final assembly point means the plant, factory, or other place, which is a building or series of buildings in close proximity, where a new passenger motor vehicle is produced or assembled from passenger motor vehicle equipment and from which such vehicle is delivered to a dealer or importer in such a condition that all component parts necessary to the mechanical operation of such automobile are included with such vehicle whether or not such component parts are permanently installed in or on such vehicle. For multi-stage vehicles, the final assembly point is the location where the first stage vehicle is assembled. 49 CFR 583.4(b)(5). B. North America Proposed §1.30D-2(d) would provide that for purposes of section 30D(d)(1)(G), "North America" means the territory of the United States, Canada, and Mexico as defined in 19 CFR part 182, Appendix A, § 1(1). The territory described in 19 CFR part 182, Appendix A, §1(1), which provides rules of origin regulations for the United States-Mexico-Canada Agreement, is defined as (a) for Canada, the following zones or waters as determined by its domestic law and consistent with international law: (i) The land territory, air space, internal waters, and territorial sea of Canada, (ii) the exclusive economic zone of Canada, and (iii) the continental shelf of Canada; (b) for Mexico, (i) the land territory, including the states of the Federation and Mexico City, (ii) the air space, and (iii) the internal waters, territorial sea, and any areas beyond the territorial seas of Mexico within which Mexico may exercise sovereign rights and jurisdiction, as determined by its domestic law, consistent with the United Nations Convention on the Law of the Sea, done at Montego Bay on December 10, 1982; and (c) for the United States, (i) the customs territory of the United States, which includes the 50 states, the District of Columbia, and Puerto Rico, (ii) the foreign trade zones located in the United States and Puerto Rico, and (iii) the territorial sea and air space of the United States and any area beyond the territorial sea within which, in accordance with customary international law as reflected in the United Nations Convention on the Law of the Sea, the United States may exercise sovereign rights or jurisdiction. C. Manufacturer's suggested retail price (MSRP) Section 30D(f)(11)(A) provides that no section 30D credit is allowed for a vehicle with an MSRP in excess of the applicable limitation. Section 30D(f)(11)(B) provides that the "applicable limitation" for each vehicle classification is as follows: in the case of a van, $80,000; in the case of a sport utility vehicle, $80,000; in the case of a pickup truck, $80,000; and in the case of any other vehicle, $55,000. Proposed §1.30D-2(c) would provide that for purposes of section 30D(f)(11)(A), "manufacturer's suggested retail price" means the sum of: (A) the retail price of the automobile suggested by the manufacturer as described in 15 U.S.C. 1232(f)(1); and (B) the retail delivered price suggested by the manufacturer for each accessory or item of optional equipment, physically attached to such automobile at the time of its delivery to the dealer, which is not included within the price of such automobile as stated pursuant to 15 U.S.C. 1232(f)(1), as described in 15 U.S.C. 1232(f)(2). This price information is reported on the label that is affixed to the windshield or side window of the vehicle, as described in 15 U.S.C. 1232. D. Vehicle classifications For purposes of applying the MSRP limitation under section 30D(f)(11)(A), section 30D(f)(11)(C) authorizes the Secretary to prescribe such regulations or other guidance as the Secretary determines necessary to determine vehicle classifications using criteria similar to that employed by the Environmental Protection Agency (EPA) and the Department of Energy to determine size and class of vehicles. The Treasury Department and the IRS originally announced an intent to propose use of the vehicle classification standards in 40 CFR 600.002 in Notice 2023-1; however, in Notice 2023-16, the Treasury Department and the IRS modified the expected vehicle classification standard set forth in Notice 2023-1 to instead provide that a vehicle's vehicle classification is expected to be determined consistent with the fuel economy labeling regime described in 40 CFR 600.315-08. Although the EPA vehicle classification standards in both regimes are similar, the fuel economy labeling regime provides for EPA discretion to assign so-called "crossover" vehicles to a class on a case-by-case basis, taking into account consumer perspective and the marketing segment targeted by the manufacturer. EPA, "Fuel Economy Labeling of Motor Vehicles: Revisions to Improve Calculation of Fuel Economy Estimates," 71 Fed.Reg. 77872, 77913 (Dec. 27, 2006). In addition, the proposed adoption of the fuel economy labeling regime would align the vehicle classification standards for purposes of the section 30D credit with the classification displayed on the vehicle label and on the consumer-facing website FuelEconomy.gov, making it easier for consumers to know which vehicles qualify under the applicable MSRP limitation. Proposed §1.30D-2(g) would provide that for purposes of section 30D(f)(11)(B), a vehicle's vehicle classification is to be determined consistent with the rules and definitions provided in 40 CFR 600.315-08 for vans, sport utility vehicles, pickup trucks, and other vehicles. Specifically, "van" means a vehicle classified as a van or minivan under 40 CFR 600.315-08(a)(2)(iii) and (iv), or otherwise so classified by the Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii); "sport utility vehicle" means a vehicle classified as a small sport utility vehicle or standard sport utility vehicle under 40 CFR 600.315-08(a)(2)(v) and (vi), or otherwise so classified by the Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii); "pickup truck" means a vehicle classified as a small pickup truck or standard pickup truck under 40 CFR 600.315-08(a)(2)(i) and (ii), or otherwise so classified by the Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii); and "other vehicle" means any vehicle classified in one of the classes of passenger automobiles listed in 40 CFR 600.315-08(a)(1), or otherwise so classified by the Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii). E. Placed in service Proposed §1.30D-2(e) would pro-vide that for purposes of the section 30D credit, a new clean vehicle is considered to be placed in service on the date the taxpayer takes possession of the vehicle. This proposed definition is consistent with the meaning of "placed in service" for purposes of other provisions of the Code under which property is considered to be "placed in service" when the property is "placed in a condition or state of readiness and availability for a specifically assigned function" and as "the date on which the owner of the vehicle took actual possession of the vehicle." See §§1.46-3(d)(1)(ii) and (4)(i), 1.179-4(e) and 145.4051-1(c)(2); see also §1.1250-4(b)(2); Consumers Power Co. v. Commissioner, 89 T.C. 710 (1987); Noell v. Commissioner, 66 T.C. 718, 728-729 (1976). III. The Critical Minerals and Battery Components Requirements Section 30D(e) of the Code provides requirements for critical minerals and battery components with respect to the battery from which the electric motor of a new clean vehicle draws electricity. The Critical Mineral and Battery Component Requirements apply to applicable critical minerals and battery components, respectively, contained in a battery as defined in proposed § 1.30D-3(c)(3). A. Critical Minerals Requirement Proposed §1.30D-3(a) would provide the rules for determining compliance with the Critical Minerals Requirement. In general, proposed §1.30D-3(a) is consistent with the framework for the Critical Minerals Requirement that was described in the 30D White Paper. Proposed §1.30D-3(a) would provide a three-step process for determining the percentage of the value of the applicable critical minerals in a battery that contribute toward meeting the Critical Minerals Requirement. i. Step 1: Determine procurement chains In the first step for determining compliance with the Critical Minerals Requirement, the manufacturer would need to determine the procurement chain or chains for each applicable critical mineral. Proposed §1.30D-3(c)(14) would define a "procurement chain" as a common sequence of extraction, processing, or recycling activities that occur in a common set of locations, concluding in the production of constituent materials. Proposed §1.30D-3(c)(14) would further clarify that sources of a single applicable critical mineral may have multiple procurement chains if, for example, one source of the applicable critical mineral undergoes the same extraction, processing, or recycling process in different locations. Each applicable critical mineral procurement chain would need to be evaluated separately pursuant to proposed §1.30D-3(a)(3)(ii). ii. Step 2: Identify qualifying critical minerals In the second step for determining compliance with the Critical Minerals Requirement, each applicable critical mineral procurement chain in the battery would need to be evaluated to determine whether critical minerals procured from the chain have been (1) extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or (2) recycled in North America. Applicable critical minerals that satisfy this requirement are considered qualifying critical minerals. Proposed §1.30D-3(c)(17) would define "qualifying critical mineral" as an applicable critical mineral that is extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or recycled in North America. Proposed §1.30D-3(c)(17) would use a "50% of value added test" to determine whether this definition is satisfied. Thus, an applicable critical mineral would be treated as extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, if: (1) 50 percent or more of the value added to the applicable critical mineral by extraction is derived from extraction that occurred in the United States or in any country with which the United States has a free trade agreement in effect; or (2) 50 percent or more of the value added to the applicable critical mineral by processing is derived from processing that occurred in the United States or in any country with which the United States has a free trade agreement in effect. An applicable critical mineral would be treated as recycled in North America if 50 percent or more of the value added to the applicable critical mineral by recycling is derived from recycling that occurred in North America. The 30D White Paper explained the likely need for transition rules that would provide manufacturers time to develop the necessary capability to certify compliance with the Critical Minerals Requirement throughout their supply chains--especially given the complexity of battery supply chains and the detailed tracking that would be required--while moving towards more secure and resilient critical mineral supply chains. The proposed 50% of value added test would serve that purpose for vehicles placed in service in 2023 and 2024. For later years, however, the Treasury Department and the IRS anticipate moving to a more stringent test for determining if an applicable critical mineral was extracted or processed in the United States or in any country with which the United States has a free trade agreement in effect, or whether an applicable critical mineral was recycled in North America. This more stringent test would reflect the potential for more detailed tracking throughout manufacturers' supply chains, which may be necessary to certify compliance with the foreign entity of concern requirements described in section 30D(d)(7)(A) (applicable for vehicles placed in service after December 31, 2024). The Treasury Department and the IRS specifically request comment on the 50% of value added test, and the best approach for adopting a more stringent test for vehicles placed in service in 2025 and later years. For example, under one approach, the standard of 50 percent or more of the value added to the applicable critical mineral for extraction, processing, or recycling in the definition of qualifying critical mineral, could increase incrementally over time (similar to the incremental increase in the applicable critical minerals percentages in section 30D(e)(1)(B) and proposed § 1.30D-3(a)(2)). Notably, the 50% of value added test would need to be applied separately for each procurement chain of an applicable critical mineral pursuant to proposed §1.30D-3(a)(3)(ii). For example, lithium that undergoes initial processing activities in a plant in Country A and then is transferred to a plant in Country B to undergo final processing activities, culminating in the lithium being incorporated into a constituent material, would be analyzed under this step together with other lithium moving through the same procurement chain. However, if some of the lithium in the prior example instead undergoes final processing activities in a plant in Country C instead of Country B, then there would be two procurement chains for lithium: (1) Country A to Country B and (2) Country A to Country C. Proposed §1.30D-3(c)(8) would define "extraction" as the activities performed to extract or harvest minerals or natural resources from the ground or a body of water, including, but not limited to, by operating equipment to extract minerals or natural resources from mines and wells, or to extract or harvest minerals or natural resources from the waste or residue of prior extraction. Extraction would conclude when activities are performed to convert raw mined or harvested products or raw well effluent to substances that can be readily transported or stored for direct use in applicable critical mineral processing. Extraction would include the beneficiation or other physical processes that allow the extracted materials, including ores, clays, and brines, to become transportable. Extraction would include the physical processes involved in refining. Extraction would not include the chemical and thermal processes involved in refining. Proposed §1.30D-3(c)(13) would define "processing" as the non-physical processes involved in refining of non-recycled substances or materials, including the treating, baking, and coating processes used to convert such substances and materials into constituent materials. Processing would begin when chemical or thermal processes, or the combination of them, are used on extracted minerals or natural resources or manmade minerals or resources to create a new product that, through subsequent steps in the applicable critical minerals supply chain, will be processed into a final constituent material. Processing would include the chemical or thermal processes involved in refining. Processing would not include the physical processes involved in refining. Proposed §1.30D-3(c)(6) would define "constituent materials" as materials that contain applicable critical minerals and are employed directly in the manufacturing of battery components. Constituent materials could include, but would not be limited to, powders of cathode active materials, powders of anode active materials, foils, metals for solid electrodes, binders, electrolyte salts, and electrolyte additives, as required for a battery cell. The definition of constituent materials describes the materials that distinguish the steps of extraction, processing, and recycling of critical minerals from the subsequent steps of manufacturing and assembly of battery components. Constituent materials would be the final products relevant for calculating the value of the applicable critical minerals in the battery. Constituent materials would mark the end of processing as the point at which no further chemical, physical, or thermal processes are needed to create the final product that is then used in battery component manufacturing. Constituent materials would similarly mark the end of recycling as the point at which no further transformations are needed to create the final product that is then used in battery component manufacturing. All constituent materials contain applicable critical minerals. Once the final constituent material is created, it then is used as an input to a battery component. Some battery components could be made entirely of inputs that do not contain constituent materials. Inputs used to manufacture battery components that do not contain any applicable critical minerals (for example, solvents, conductive additives, etc.) would not be considered to be constituent materials. Proposed §1.30D-3(c)(19) would define "recycling" as the series of activities during which recyclable materials containing applicable critical minerals are transformed into specification-grade commodities and consumed in lieu of virgin materials to create new constituent materials; such activities result in new constituent materials contained in the battery from which the electric motor of a new clean vehicle draws electricity. All physical, chemical, and thermal treatments or modifications that convert recycled feedstocks to specification grade constituent materials would be included in recycling. This definition would align with the current methods of direct, hydrometallurgical, or pyrometallurgical recycling that are utilized commercially for reuse of materials for battery applications. Proposed §1.30D-3(c)(24) would define "value," with respect to property, as the arm's-length price that was paid or would be paid for the property by an unrelated purchaser determined in accordance with the principles of section 482 of the Code and regulations thereunder. Proposed §1.30D-3(c)(25) would define "value added," with respect to recycling, extraction, or processing of an applicable critical mineral as the increase in the value of the applicable critical mineral attributable to the relevant activity. Proposed §1.30D-3(c)(11) would define "North America" as the territory of the United States, Canada, and Mexico as defined in 19 CFR. part 182, Appendix A, § 1(1). Proposed §1.30D-3(c)(7) would define the term "country with which the United States has a free trade agreement in effect" and list the countries with which the United States has a "free trade agreement in effect." The term free trade agreement is not defined in the IRA or in the Code. The proposed definition takes into account the term's meaning, use and context in the statute. The IRA's amendments to section 30D expand the incentives for taxpayers to purchase new clean vehicles and for vehicle manufacturers to increase their reliance on supply chains in the United States and in countries with which the United States has reliable and trusted economic relationships. The Treasury Department and the IRS recognize that more secure and resilient supply chains are essential for our national security, our economic security, and our technological leadership. The Treasury Department and the IRS propose to identify the countries with which the United States has free trade agreements in effect for purposes of section 30D consistent with the statute's purposes of promoting reliance on such supply chains and of providing eligible consumers with access to tax credits for the purchase of new clean vehicles. Based on these considerations, the Treasury Department and the IRS propose criteria the Secretary would consider in identifying these countries. As set forth in proposed §1.30D-3(c)(7)(i), those criteria would include whether an agreement between the United States and another country, as to the critical minerals contained in electric vehicle batteries or more generally, and in the context of the overall commercial and economic relationship between that country and the United States: (A) reduces or eliminates trade barriers on a preferential basis, (B) commits the parties to refrain from imposing new trade barriers, (C) establishes high-standard disciplines in key areas affecting trade (such as core labor and environmental protections), and/or (D) reduces or eliminates restrictions on exports or commits the parties to refrain from imposing such restrictions on exports. Applying those factors, the proposed regulations include countries with which the United States has comprehensive free trade agreements (that is, agreements covering substantially all trade in goods and services between the parties, including trade in critical minerals). These are Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore. In addition, the Treasury Department and the IRS also propose to include additional countries that the Secretary identifies after considering the factors listed in proposed §1.30D-3(c)(7)(i). One example of such a country is Japan, with which the United States recently concluded a Critical Minerals Agreement (CMA) 1 containing robust obligations to help ensure free trade in critical minerals, including a commitment to refrain from imposing duties on exports of critical minerals that are currently essential to the electric vehicle battery supply chain, a commitment for the United States and Japan to confer on investments in this sector that may affect national security, and detailed undertakings related to the enforcement of labor and environmental laws related to trade in those critical minerals. The CMA was concluded in the context of an earlier trade agreement the United States concluded with Japan in 2019, 2 a related 2019 agreement on digital trade, 3 and the U.S.-Japan Partnership on Trade announced in November 2021. 4 The Treasury Department and the IRS have consulted with the U.S. Trade Representative in applying the proposed factors here. ******** 1 Agreement Between the Government of the United States of America and the Government of Japan on Strengthening Critical Minerals Supply Chains, concluded March 28, 2023, https://ustr.gov/sites/default/files/2023-03/US%20Japan%20Critical%20Minerals%20Agreement%202023%2003%2028.pdf. 2 Trade Agreement Between the United States of America and Japan, concluded October 7, 2019, https://ustr.gov/sites/default/files/files/agreements/japan/Trade_Agreement_between_the.pdf. 3 Agreement Between the United States of America and Japan Concerning Digital Trade, concluded October 7, 2019, https://ustr.gov/sites/default/files/files/agreements/japan/Agreement_between_the_Unite.pdf. 4 Office of United States Trade Representative, United States and Japan Announce the Formation of the U.S.-Japan Partnership on Trade, Nov. 17, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/november/united-states-and-japan-announce-formation-us-japan- partnership-trade-0. ******** Based on an evaluation of the criteria in proposed §1.30D-3(c)(7)(i), the Treasury Department and the IRS would make any necessary amendments to the list in proposed §1.30D-3(c)(7)(ii), including adding any additional countries as any new qualifying international agreements enter into force and the Secretary determines that the factors have been met. The Treasury Department and the IRS would similarly make any necessary amendments based on the modification, termination, or expiration of any previously identified free trade agreements. Proposed § 1.30D-3(c)(7)(iii) would provide that the list of countries in proposed § 1.30D-3(c)(7)(ii) may be revised and updated through appropriate publication in the Federal Register or in the Internal Revenue Bulletin. The treatment of any given country under this overall approach is independent from the inclusion or exclusion of any other. 5 ******** 5 This independent treatment is consistent with proposed §1.30D-3(c)(e). ******** The Treasury Department and the IRS seek comment on the proposed criteria for identifying countries with which the United States has free trade agreements in effect, other potential approaches for identifying those countries, and the list of countries set forth in proposed §1.30D-3(c)(7)(ii). iii. Step 3: Calculate qualifying critical mineral content The third step for determining compliance with the Critical Minerals Requirement would involve the calculation of the percentage of the value of qualifying critical minerals contained in a battery. The proposed regulations refer to this percentage as the "qualifying critical mineral content" and define that term under proposed §1.30D-3(c)(18) as the percentage of the value of the applicable critical minerals contained in the battery from which the electric motor of a new clean vehicle draws electricity that were extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or were recycled in North America. Under proposed §1.30D-3(a)(3)(i), qualifying critical mineral content would be calculated as the percentage that results from dividing the total value of qualifying critical minerals by the total value of critical minerals. Proposed §1.30D-3(c)(23) would define "total value of qualifying critical minerals" as the sum of the values of all the qualifying critical minerals contained in a battery described in proposed §1.30D-3(a)(1). Proposed §1.30D-3(c)(22) would define "total value of critical minerals" as the sum of the values of all applicable critical minerals contained in a battery described in proposed §1.30D-3(a)(1). Proposed §1.30D-3(a)(3)(iii) would require qualified manufacturers to select a date for determining the values associated with the total value of qualifying critical minerals (determined separately for each procurement chain) and the total value of critical minerals. Such date would need to be after the final processing or recycling step for the applicable critical minerals relevant to the certification described in section 30D(e)(1)(A) of the Code. This date would need to be uniformly applied for all applicable critical minerals contained in the battery. Proposed §1.30D-3(a)(15) would define a qualified manufacturer as a manufacturer described in section 30D(d)(3) of the Code. Proposed §1.30D-3(a)(3)(iv) would provide that a qualified manufacturer may determine qualifying critical mineral content based on the value of the applicable critical minerals actually contained in the battery of a specific vehicle. Alternatively, for purposes of calculating the qualifying critical mineral content for batteries in a group of vehicles, a qualified manufacturer could average the qualifying critical mineral content calculation over a limited period of time (for example, a year, quarter, or month) with respect to vehicles from the same model line, plant, class, or some combination of thereof, with final assembly (as defined in section 30D(d)(5) of the Code and proposed §1.30D-2(b)) within North America. The Treasury Department and the IRS seek comment on whether to include any more specific conditions or limitations on this ability to average these calculations The percentage of qualifying critical minerals content that is calculated in Step 3 would ultimately be compared with the relevant applicable critical minerals percentage provided in proposed §1.30D-3(a)(2) to determine whether a vehicle satisfies the Critical Minerals Requirement described in section 30D(e)(1)(A) of the Code. B. Battery Components Requirement Proposed §1.30D-3(b) would provide the rules for determining compliance with the Battery Components Requirement. In general, proposed §1.30D-3(b) is consistent with the framework for the Battery Components Requirement that was described in the 30D White Paper. Proposed §1.30D-3(b) would provide a four-step process for determining the percentage of the value of the battery components in a battery that contribute toward meeting the Battery Components Requirement. i. Step 1: Identify components that are manufactured or assembled in North America In the first step for determining compliance with the Battery Components Requirement, qualified manufacturers would need to determine whether each battery component in a battery was manufactured or assembled in North America. Such components are referred to in the proposed regulations as "North American battery components" and are defined in proposed §1.30D-3(c)(12) as a battery component substantially all of the manufacturing or assembly of which occurs in North America, without regard to the location of the manufacturing or assembly activities of the components that make up the particular battery component. Proposed §1.30D-3(c)(3) would define "battery," for purposes of a new clean vehicle, as a collection of one or more battery modules, each of which has two or more electrically configured battery cells in series or parallel, to create voltage or current. The term "battery" would not include items such as thermal management systems or other parts of a battery cell or module that do not directly contribute to the electrochemical storage of energy within the battery, such as battery cell cases, cans, or pouches. This definition of battery is consistent with the statute because battery modules and cells are the sources "from which the electric motor of such vehicle draws electricity." Sections 30D(e)(1)(A) and (2)(A). The battery module is the end point for the purpose of calculating the value of battery components. Proposed §1.30D-3(c)(4) would define "battery cell" as a combination of battery components (other than battery cells) capable of electrochemically storing energy from which the electric motor of a new clean vehicle draws electricity. This definition of battery cell would encompass the smallest combination of battery components necessary for the function of energy storage. Proposed §1.30D-3(c)(5) would define "battery component" as a component that forms part of a battery and which is manufactured or assembled from one or more components or constituent materials that are combined through industrial, chemical, and physical assembly steps. Battery components would include, but not be limited to, a cathode electrode, anode electrode, solid metal electrode, separator, liquid electrolyte, solid state electrolyte, battery cell, and battery module. Constituent materials would not be considered a type of battery component, although constituent materials could be manufactured or assembled into battery components. Some battery components could be made entirely of inputs that do not contain constituent materials. Battery components would include any piece of the assembled battery cell that contribute to electrochemical energy storage. Proposed §1.30D-3(c)(10) would define "manufacturing," with respect to a battery component, as the industrial and chemical steps taken to produce a battery component. Manufacturing would use industrial and chemical steps starting with constituent materials and other battery components that do not contain constituent materials to create a new battery component. Proposed §1.30D-3(c)(2) would define "assembly," with respect to battery components, as the process of combining battery components into battery cells and battery modules. ii. Step 2: Determine the incremental value of each battery component and North American battery components In the second step for determining compliance with the Battery Components Requirement, qualified manufacturers would need to determine the incremental value for each battery component. The resulting incremental value for a battery component would be attributable to North America if the battery component is a "North American battery component" as defined in proposed §1.30D-3(c)(12). Proposed §1.30D-3(c)(9) would define "incremental value," with respect to a battery component, as the value (as defined in proposed §1.30D-3(c)(24)) determined by subtracting from the value of that battery component the value of the manufactured or assembled battery components, if any, that are contained in that battery component. Proposed §1.30D-3(c)(20) would define "total incremental value of North American battery components" as the sum of the incremental values of each North American battery component contained in a battery described in proposed §1.30D-3(b)(1). iii. Step 3: Determine the total incremental value of battery components In the third step for determining compliance with the Battery Components Requirement, qualified manufacturers would need to total the incremental value of battery components. Proposed §1.30D-3(c)(21) would define "total incremental value of battery components" as the sum of the incremental values of each battery component contained in a battery described in proposed §1.30D-3(b)(1). The total incremental value of battery components could also be calculated by totaling the value of each battery module in the battery. iv. Step 4: Calculate the qualifying battery component content In the fourth step for determining compliance with the Battery Components Requirement, qualified manufacturers would need to determine the qualifying battery component content. Proposed §1.30D-3(c)(16) would define "qualifying battery component content" as the percentage of the value of the battery components contained in the battery from which the electric motor of a new clean vehicle draws electricity that were manufactured or assembled in North America. Proposed §1.30D-3(b)(3)(i) would provide that the qualifying battery component content is the percentage that results from dividing the total incremental value of North American battery components (determined in step 2) by the total incremental value of battery components (determined in step 3). Proposed §1.30D-3(b)(3)(ii) would require qualified manufacturers to select a date for determining the values associated with the total incremental value of North American battery components and the total incremental value of battery components. Such date would need to be after the last manufacturing or assembly step for the battery components relevant to the certification described in section 30D(e)(2)(A) of the Code. This date must be uniformly applied for all battery components contained in the battery. Proposed §1.30D-3(b)(3)(iii) would provide that a qualified manufacturer may determine qualifying battery component content based on the incremental values of the battery components actually contained in the battery of a specific vehicle. Alternatively, for purposes of calculating the qualifying battery component content for batteries in a group of vehicles, a qualified manufacturer could average the qualifying battery component content calculation over a limited period of time (for example, a year, quarter, or month) with respect to vehicles from the same model line, plant, class, or some combination of thereof, with final assembly (as defined in section 30D(d)(5) of the Code and proposed §1.30D-2(a)) within North America. The Treasury Department and the IRS seek comment on whether to include any more specific conditions or limitations on this ability to average these calculations. The percentage of qualifying battery component content that would be calculated in Step 4 would ultimately be compared with the relevant applicable battery components percentage provided in proposed §1.30D-3(b)(2) to determine whether a vehicle satisfies the Battery Components Requirement described in section 30D(e)(2)(A) of the Code. The Treasury Department and the IRS request comments on the Critical Mineral and Battery Component Requirements as they would be implemented in proposed §1.30D-3, including the distinction between processing of applicable critical minerals and manufacturing and assembly of battery components, and related definitions. C. Excluded entities Section 30D(d)(7) of the Code excludes from the definition of "new clean vehicle" any vehicle placed in service after December 31, 2024, with respect to which any of the applicable critical minerals contained in the battery of such vehicle (as described in section 30D(e)(1)(A)) were extracted, processed, or recycled by a foreign entity of concern (as defined in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5))), or any vehicle placed in service after December 31, 2023, with respect to which any of the components contained in the battery of such vehicle (as described in section 30D(e)(2)(A)) were manufactured or assembled by a foreign entity of concern (as so defined). The Treasury Department and the IRS intend to issue guidance with respect to section 30D(d)(7) at a later date. IV. Special Rules Proposed §1.30D-4 would provide special rules with respect to the section 30D credit. A. No Double Benefit Section 30D(f)(2) and proposed §1.30D-4(a)(1) would provide that the amount of any deduction or other credit allowable under chapter 1 for a vehicle for which a section 30D credit is allow-able must be reduced by the amount of the section 30D credit allowed under section 30D(a) for such vehicle determined with-out regard to section 30D(c), which may treat all or a portion of the aggregate credit allowed under section 30D(a) as a current year general business credit under section 38(b). Proposed §1.30D-4(a)(2) would pro-vide that a section 30D credit that has been allowed with respect to a vehicle in a taxable year before the taxable year in which a credit under section 25E is allowable for that vehicle does not reduce the amount of the allowable section 25E credit. Accordingly, a taxpayer who otherwise satisfies the requirements of section 25E would be eligible to claim the section 25E credit for a vehicle for which another taxpayer previously claimed the section 30D credit. Proposed §1.30D-4(a)(3) would provide that no credit is allowed under section 45W with respect to any vehicle for which a credit was allowed under section 30D. This rule, which is based on section 45W(d)(3), precludes both the section 30D credit and the section 45W credit from being allowed for the same vehicle, whether in the same or different taxable years. B. Limitation based on modified adjusted gross income Section 30D(f)(10) and proposed §1.30D-4(b) would provide that no section 30D(a) credit is allowed for any taxable year if (i) the lesser of (I) the modified AGI of the taxpayer for such taxable year or (II) the modified AGI of the taxpayer for the preceding taxable year exceeds (ii) the threshold amount (Modified AGI Limitation). The threshold amount is $300,000 in the case of a joint return or a surviving spouse (as defined in section 2(a) of the Code), $225,000 in the case of a head of household (as defined in section 2(b) of the Code), and $150,000 for all other taxpayers. "Modified adjusted gross income" is defined in section 30D(f)(10)(C) as the taxpayer's AGI increased by any amount excluded from gross income under sections 911, 931, or 933 of the Code. Proposed §1.30D-4(b)(4) provides that if the taxpayer's filing status changes (for example, from single to head of household) in this two-year period, the taxpayer satisfies the Modified AGI Limitation if the taxpayer's modified AGI does not exceed the threshold amount in either taxable year based on the applicable filing status for that taxable year. Proposed §1.30D-4(b)(5)(i) would provide that, except as provided in proposed §1.30D-4(b)(5)(ii), in the case of a new clean vehicle that is placed in service by a corporation or other taxpayer that is not an individual for whom AGI is computed under section 62, the Modified AGI Limitation does not apply. Corporations and such other taxpayers do not have AGI computed under section 62, so the special rule in section 30D(f)(10) establishing a Modified AGI Limitation does not apply to these taxpayers. Proposed §1.30D-4(b)(5)(ii) would provide that in the event that the new clean vehicle is placed in service by a partnership or an S corporation, and the section 30D credit is claimed by individuals who are direct or indirect partners of that partnership or shareholders of that S corporation, the Modified AGI Limitation will apply to those partners or shareholders. The Treasury Department and the IRS request comments on whether a similar rule should be provided for trusts or other types of entities that place in service a new clean vehicle. C. Multiple owners and passthrough entity ownership of a single vehicle In certain instances, multiple taxpayers may purchase, place in service, and be titled as owners of a single vehicle. For example, a married couple that files separate tax returns may jointly purchase and take possession of a new clean vehicle that qualifies for the section 30D credit and both spouses may be titled as owners of the vehicle. However, the structure of section 30D provides for one taxpayer to claim the section 30D credit per vehicle placed in service. See generally section 30D(a), (b), (f)(8), (f)(9) and section 6213(g)(2)(T) of the Code. Section 30D does not contain rules for allocation or proration of the section 30D credit with respect to a single vehicle to multiple taxpayers placing that vehicle in service, and such an allocation or proration would present challenges from a tax administration perspective. Proposed §1.30D-4(c)(1) would provide that, except as provided in proposed §1.30D-4(c)(2), the amount of the section 30D credit attributable to a new clean vehicle may be claimed on only one tax return. In the event multiple owners place in service a new clean vehicle, no allocation or proration of the credit would be available. Proposed §1.30D-4(c)(3)(i) would provide that the name and taxpayer identification number of the owner claiming the credit under section 30D(a) should be listed on the seller's report pursuant to section 30D(d)(1)(H). Accordingly, multiple owners of a new clean vehicle would inform the seller which owner will claim the section 30D credit so that the seller can identify that taxpayer on the seller's report. The credit would be allowed only on the tax return of the owner listed in the seller's report. Proposed §1.30D-4(c)(2) would provide that in the case of a new clean vehicle placed in service by a partnership or S corporation, while the partnership or S corporation is the vehicle owner, the section 30D credit is allocated among the partners of the partnership under §1.704-1(b)(4)(ii) or among the shareholders of the S corporation under sections 1366(a) and 1377(a) of the Code and claimed on the tax returns of the partners or shareholder(s). Proposed §1.30D-4(c)(3)(i) would provide that in the case of a new clean vehicle placed in service by a partnership or S corporation, the name and tax identification number of the partnership or S corporation that placed the new clean vehicle in service should be listed on the seller's report pursuant to section 30D(d)(1)(H). V. Severability If any provision in this proposed rulemaking is held to be invalid or unenforceable facially, or as applied to any person or circumstance, it shall be severable from the remainder of this rulemaking, and shall not affect the remainder thereof, or the application of the provision to other persons not similarly situated or to other dissimilar circumstances. Effect on Other Documents This proposed rulemaking hereby makes IRS Notices 2023-1, 2023-3 I.R.B. 373 and 2023-16, 2023-8 I.R.B. 479 obsolete. Proposed Applicability Dates Proposed §1.30D-1 is proposed to apply to new clean vehicles placed in service after the date of publication of the Treasury Decision adopting these rules as final rules in the Federal Register. Proposed § 1.30D-2 is proposed to apply to new clean vehicles placed in service on or after January 1, 2023, for taxable years ending after April 17, 2023. The amendments made to section 30D by the IRA generally apply to vehicles placed in service after December 31, 2022, with certain exceptions. The definitions in proposed § 1.30D-2 were substantially described in Notice 2023-1, which was released on December 29, 2022. 6 The definitions in proposed § 1.30D-2 generally relate to statutory rules applicable to vehicles placed in service on or after January 1, 2023. These proposed regulations are proposed to apply to vehicles placed in service on or after January 1, 2023, for taxable years ending after the date these proposed regulations are published in the Federal Register to improve certainty for taxpayers and to provide clear rules for tax administration. ******** 6 Notice 2023-16, released February 3, 2023, modified Notice 2023-1, regarding the vehicle classification standard set forth in Notice 2023-1 in a manner that allowed additional new clean vehicles to be eligible for the section 30D credit. Notice 2023-16 provided that taxpayers could rely on these modified expected definitions for new clean vehicles placed in service on or after January 1, 2023. ******** Proposed §1.30D-3 is proposed to apply to new clean vehicles placed in service after April 17, 2023 for taxable years ending after April 17, 2023. Pursuant to section 13401(a), (e), and (k)(3) of the IRA, the critical minerals and battery components requirements of section 13401(a) and (e) of the IRA amend section 30D with respect to vehicles placed in service after the date on which these proposed regulations are published in the Federal Register. Accordingly, the Critical Minerals and Battery Components Requirements in proposed § 1.30D-3 are proposed to apply to vehicles placed in service after the date of publication of these proposed regulations for taxable years ending after the date of publication of these proposed regulations. Proposed § 1.30D-4 is proposed to apply to new clean vehicles placed in service after the date of publication of the Treasury Decision adopting these rules as final rules in the Federal Register. Taxpayers may rely on these proposed regulations for vehicles placed in service prior to the date final regulations are published in the Federal Register, provided the taxpayer follows the proposed regulations in their entirety, and in a consistent manner. Statement of Availability for IRS Documents For copies of recently issued Revenue Procedures, Revenue Rulings, Notices, and other guidance published in the Internal Revenue Bulletin, please visit the IRS website at https://www.irs.gov. Special Analyses I. Regulatory Planning and Review - Economic Analysis Executive Orders 13563 and 12866 direct agencies to assess costs and benefits 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. These proposed regulations have been designated by the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) as subject to review under Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget (OMB) regarding review of tax regulations. OIRA has determined that the proposed rulemaking is significant and subject to review under Executive Order 12866 and section 1(b) of the Memorandum of Agreement. Accordingly, the proposed regulations have been reviewed by OMB. II. Paperwork Reduction Act Any collection burden associated with rules described in these proposed regulations is previously accounted for in OMB Control Number 1545-2137. These proposed regulations do not alter previously accounted for information collection requirements and do not create new collection requirements. OMB Control Number 1545-2137 covers Form 8936 and Form 8936-A regarding electric vehicle credits, including the new requirement in section 30D(f)(9) to include on the taxpayer's return for the taxable year the VIN of the vehicle for which the section 30D credit is claimed. Revenue Procedure 2022-42 describes the procedural requirements for qualified manufacturers to make periodic written reports to the Secretary to provide information related to each vehicle manufactured by such manufacturer that is eligible for the section 30D credit as required in section 30D(d)(3), including the critical mineral and battery component certification requirements in sections 30D(e)(1)(A) and (e)(2)(A). In addition, Revenue Procedure 2022-42 also provides the procedures for sellers of new clean vehicles to report information required by section 30D(d)(1)(H) for vehicles to be eligible for the section 30D credit. The collections of information contained in Revenue Procedure 2022-42 are described in that document and were submitted to the Office of Management and Budget in accordance with the Paperwork Reduction Act under control number 1545-2137. The requirement to determine the final assembly location in proposed §1.30D-2(b) by relying on (1) the vehicle's plant of manufacture as reported in the vehicle identification number (VIN) pursuant to 49 CFR 565 or (2) the final assembly point reported on the label affixed to the vehicle as described in 49 CFR 583.5(a)(3) is accounted for by the Department of Transportation in OMB Control Numbers 2127-0510 and 2127-0573. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget. III. Regulatory Flexibility Act Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), the Secretary hereby certifies that these proposed regulations will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act. Pursuant to section 7805(f), this notice of proposed rulemaking has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on their impact on small business. The proposed regulations affect two types of business entities: (1) qualified manufacturers that must trace and report on their critical minerals and battery components in order to certify that their new clean vehicles qualify for the section 30D credit, and (2) businesses that may earn the section 30D credit when purchasing and placing in service a new clean vehicle. While the tracking and reporting of critical minerals and battery components is likely to involve significant administrative costs, according to public filings, all qualified manufacturers had total revenues above $1B in 2022. There are a total of 21 qualified manufacturers that have indicated that they manufacture vehicles currently eligible for the section 30D credit. 7 Pursuant to Revenue Procedure 2022-42 and following the publication of these proposed regulations, qualified manufacturers will also have to certify that their vehicles qualify under the Critical Minerals and Battery Components Requirements. The proposed regulations provide definitions and general rules for the section 30D credit, including rules for qualified manufacturers to comply with the Critical Mineral and Battery Component Requirements. Accordingly, the Treasury Department and the IRS intend that the proposed rules provide clarity for qualified manufacturers for consistent application of critical minerals and battery components calculations and for taxpayers purchasing new clean vehicles that qualify for the section 30D credit. The Treasury Department and the IRS have determined that qualified manufacturers do not meet the applicable definition of small entity. ******** 7 The list of manufacturers is available at the following IRS website: https://www.irs.gov/credits-deductions/manufacturers-and-models-for-new-qualified-clean-vehicles-purchased-in-2023-or- after#:~:text=If%20you%20bought%20and%20placed,Internal%20Revenue%20Code%20Section%2030D. ******** Business purchasers of clean vehicles who take the section 30D credit must satisfy reporting requirements that are largely the same as those faced by individuals accessing the section 30D credit to purchase clean vehicles. Taxpayers will continue to file Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit, to claim the section 30D credit. As was the case for the section 30D credit prior to amendments made by the IRA, taxpayers can rely on qualified manufacturers to determine if the vehicle being purchased qualifies for the section 30D credit and the credit amount. The estimated burden for individual and business taxpayers filing this form is approved under OMB control number 1545-0074 and 1545-0123. To make it easier for a taxpayer to determine the potential section 30D credit available for a specific vehicle, the proposed regulations provide business entities with tools and definitions to ascertain whether any vehicles purchased would be eligible for the credit. The VIN reporting required by section 30D(f)(9) and described in the proposed regulations was included in prior section 30D reporting. Accordingly, the Secretary certifies that these proposed regulations will not have a significant economic impact on a substantial number of small entities. The Treasury Department and the IRS request comments that provide data, other evidence, or models that provide insight on this issue. IV. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2023, that threshold is approximately $198 million. This rule does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold. V. Executive Order 13132: Federalism Executive Order 13132 (Federalism) prohibits an agency (to the extent practicable and permitted by law) from promulgating any regulation that has federalism implications, unless the agency meets the consultation and funding requirements of section 6 of the Executive order, if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order. Comments and Requests for a Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed regulations, including their economic impact and any alternative approaches that should be considered during the rulemaking process. In addition, the Treasury Department and the IRS request comments on the specific issues noted in the previous sections of this preamble. Any comments submitted, whether electronically or on paper, will be made available at https://www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person who timely submits electronic or written comments as prescribed in this preamble under the "DATES" heading. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register. Announcement 2020-4, 2020-17 IRB 1, provides that until further notice, public hearings conducted by the IRS will be held telephonically. Any telephonic hearing will be made accessible to people with disabilities. Drafting Information The principal author of the proposed regulations is the Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the Treasury Department and the IRS participated in the development of the proposed regulations. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 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 is amended by adding entries in numerical order to read in part as follows: Authority: 26 U.S.C. 7805 * * * Section 1.30D-1 also issued under 26 U.S.C. 30D. Section 1.30D-2 also issued under 26 U.S.C. 30D. Section 1.30D-3 also issued under 26 U.S.C. 30D. Section 1.30D-4 also issued under 26 U.S.C. 30D and 26 U.S.C. 45W(d)(3). Par 2. Sections 1.30D-0, 1.30D-1, 1.30D-2, 1.30D-3, and 1.30D-4 are added to read as follows: Sec. * * * * * 1.30D-0 Table of contents. 1.30D-1 Credit for new clean vehicles. 1.30D-2 Definitions for purposes of section 30D. 1.30D-3 Critical mineral and battery component requirements. 1.30D-4 Special rules. * * * * * §1.30D-0 Table of contents. This section lists the captions contained in §§1.30D-1 through 1.30D-4. §1.30D-1 Credit for new clean vehicles. (a) In general. (b) Treatment of credit. (1) Business credit treated as part of general business credit. (2) Apportionment of section 30D credit. (3) Personal credit limited based on tax liability. (c) Severability. (d) Applicability date. §1.30D-2 Definitions for purposes of section 30D. (a) In general. (b) Final assembly. (c) Manufacturer's suggested retail price. (d) North America. (e) Placed in service. (f) Section 30D regulations. (g) Vehicle classifications. (i) Van. (ii) Sport utility vehicle. (iii) Pickup truck. (iv) Other vehicle. (h) Severability. (i) Applicability date. §1.30D-3 Critical mineral and battery component requirements. (a) Critical minerals requirement. (1) In general. (2) Applicable critical minerals percentage. (3) Determining qualifying critical mineral content. (i) In general. (ii) Separate determinations required for each procurement chain. (iii) Time for determining value. (iv) Application of qualifying critical mineral content to vehicles. (b) Battery components requirement. (1) In general. (2) Applicable battery components percentage. (3) Determining qualifying battery component content. (i) In general. (ii) Time for determining value. (iii) Application of qualifying battery component content to vehicles. (c) Definitions. (1) Applicable critical mineral. (2) Assembly. (3) Battery. (4) Battery cell. (5) Battery component. (6) Constituent materials. (7) Country with which the United States has a free trade agreement in effect. (8) Extraction. (9) Incremental value. (10) Manufacturing. (11) North America. (12) North American battery component. (13) Processing (14) Procurement chain. (15) Qualified manufacturer. (16) Qualifying battery component content. (17) Qualifying critical mineral. (18) Qualifying critical mineral content. (19) Recycling. (20) Total incremental value of North American battery components. (21) Total incremental value of battery components. (22) Total value of critical minerals. (23) Total value of qualifying critical minerals. (24) Value. (25) Value added. (d) Excluded entities. (e) Severability. (f) Applicability date. §1.30D-4 Special rules (a) No double benefit. (1) In general. (2) Application to credit for previously-owned clean vehicles under section 25E. (3) Application to credit for qualified clean vehicles under section 45W. (b) Limitation based on modified adjusted gross income. (1) In general. (2) Threshold amount. (3) Modified adjusted gross income. (4) Special rule for change in filing status. (5) Application to taxpayers other than individuals. (i) In general. (ii) Application to passthrough entities. (c) Multiple owners and passthrough entity ownership of a single vehicle. (1) In general. (2) Passthrough entities. (3) Seller Reporting. (i) In general. (ii) Passthrough entities. (4) Example. (d) Severability. (e) Applicability date. §1.30D-1 Credit for new clean vehicles. (a) In general. Section 30D(a) of the Internal Revenue Code (Code) allows as a credit against the tax imposed by chapter 1 of the Code (chapter 1) for the taxable year of a taxpayer an amount equal to the sum of the credit amounts determined under section 30D(b) with respect to each new clean vehicle purchased by the taxpayer that the taxpayer places in service during the taxable year. For purposes of the section 30D regulations (as defined in §1.30D-2(f)), the term section 30D credit means the credit allowable to a taxpayer for a taxable year under section 30D(a) and the section 30D regulations with respect to all vehicles placed in service by the taxpayer during the taxable year. Section 1.30D-2 provides definitions that apply for purposes of section 30D and the section 30D regulations. Section 1.30D-3 provides rules regarding the critical mineral and battery component requirements of section 30D(e). Section 1.30D-4 provides guidance regarding the limitations and special rules in section 30D(f). (b) Application with other credits --(1) Business credit treated as part of general business credit --(i) In general. Section30D(c)(1) requires that so much of the section 30D credit that would be allowed under section 30D(a) for any taxable year (determined without regard to section30D(c) and this paragraph (b)) that is attributable to a depreciable vehicle must be treated as a general business credit under section 38 of the Code that is listed in section 38(b)(30) for such taxable year (and not allowed under section 30D(a)). In the case of a depreciable vehicle the use of which is 50 percent or more business use in the taxable year such vehicle is placed in service, the section 30D credit that would be allowed under section 30D(a) for that taxable year (determined without regard to section 30D(c) and this paragraph (b)) that is attributable to such depreciable vehicle must be treated as a general business credit under section 38 of the Code that is listed in section 38(b)(30) for such taxable year (and not allowed under section 30D(a)). See paragraph (b)(2) of this section for rules applicable in the case of a depreciable vehicle the use of which is less than 50 percent business use in the taxable year such vehicle is placed in ser-vice. See paragraph (b)(3) of this section for rules applicable to a section 30D credit allowed under section 30D(a) pursuant to section 30D(c)(2) or paragraphs (b)(2)(ii) or (b)(3) of this section. (ii) Depreciable vehicle. For purposes of this paragraph (b), a depreciable vehicle is a vehicle of a character subject to an allowance for depreciation. (2) Apportionment of section 30D credit. In the case of a depreciable vehicle the business use of which is less than 50 percent of a taxpayer's total use of the vehicle for the taxable year in which the vehicle is placed in service, the taxpayer's section 30D credit for that taxable year with respect to that vehicle must be apportioned as follows: (i) The portion of the section 30D credit corresponding to the percentage of the taxpayer's business use of the vehicle is treated as a general business credit under section 30D(c)(1) and paragraph (b)(1) of this section (and not allowed under section 30D(a) or paragraph (b)(3) of this section). (ii) The portion of the section 30D credit corresponding to the percentage of the taxpayer's personal use of the vehicle is treated as a section 30D credit allowed under section 30D(a) pursuant to section 30D(c)(2) and paragraph (b)(3) of this section. (3) Personal credit limited based on tax liability. Section 26 of the Code limits the aggregate amount of credits allowed to a taxpayer by subpart A of part IV of subchapter A of chapter 1 (subpart A) based on the taxpayer's tax liability. Under section 26(a), the aggregate amount of credits allowed to a taxpayer by subpart A cannot exceed the sum of the taxpayer's regular tax liability (as defined in section 26(b)) for the taxable year reduced by the foreign tax credit allowable under section 27 of the Code, and the alternative minimum tax imposed by section 55(a) for the taxable year. Section 30D(c)(2) provides that the section 30D credit allowed under section 30D(a) for any taxable year (determined after application of section 30D(c)(1) and paragraphs (b)(1) and (2) of this section) is treated as a credit allowable under subpart A for such taxable year, and the section 30D credit allowed under section 30D(a) is therefore subject to the limitation imposed by section 26. (c) Severability. The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agencies' intention that the remaining provisions shall continue in effect. (d) Applicability date. This section applies to new clean vehicles placed in service after [DATE OF PUBLICATION OF FINAL RULE]. §1.30D-2 Definitions for purposes of section 30D. (a) In general. The definitions in paragraphs (b) through (g) of this section apply for purposes of section 30D of the Internal Revenue Code (Code) and the section 30D regulations. (b) Final assembly means the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle. To establish where final assembly of a new clean vehicle occurred for purposes of the requirement in section 30D(d)(1)(G) that final assembly of a new clean vehicle occur within North America, the taxpayer may rely on the following information: (1) The vehicle's plant of manufacture as reported in the vehicle identification number pursuant to 49 CFR 565; or (2) The final assembly point reported on the label affixed to the vehicle as described in 49 CFR 583.5(a)(3). (c) Manufacturer's suggested retail price means the sum of the prices described in paragraphs (c)(1) and (2) of this section as reported on the label that is affixed to the windshield or side window of the vehicle, as described in 15 U.S.C. 1232. (1) The retail price of the automobile suggested by the manufacturer as described in 15 U.S.C. 1232(f)(1). (2) The retail delivered price suggested by the manufacturer for each accessory or item of optional equipment, physically attached to such automobile at the time of its delivery to the dealer, which is not included within the price of such automobile as stated pursuant to 15 U.S.C. 1232(f)(1), as described in 15 U.S.C. 1232(f)(2). (d) North America means the territory of the United States, Canada, and Mexico as defined in 19 CFR part 182, appendix A, section 1(1). (e) Placed in service. A new clean vehicle is considered to be placed in service on the date the taxpayer takes possession of the vehicle. (f) Section 30D regulations means §1.30D-1, this section, and §§1.30D-3 and 1.30D-4. (g) Vehicle classifications --(1) In general. The vehicle classification of a new clean vehicle is to be determined consistent with the rules and definitions provided in 40 CFR 600.315-08 and this paragraph (g) for vans, sport utility vehicles, and pickup trucks, and other vehicles. (2) Van means a vehicle classified as a van or minivan under 40 CFR 600.315-08(a)(2)(iii) and (iv), or otherwise so classified by the Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii). (3) Sport utility vehicle means a vehicle classified as a small sport utility vehicle or standard sport utility vehicle under 40 CFR 600.315-08(a)(2)(v) and (vi), or otherwise so classified by the Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii). (4) Pickup truck means a vehicle classified as a small pickup truck or standard pickup truck under 40 CFR 600.315-08(a)(2)(i) and (ii), or otherwise so classified by the Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii). (5) Other vehicle means any vehicle classified in one of the classes of passenger automobiles listed in 40 CFR 600.315-08(a)(1), or otherwise so classified by the Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii). (h) Severability. The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agencies' intention that the remaining provisions shall continue in effect. (i) Applicability date. This section applies to new clean vehicles placed in service on or after January 1, 2023, for taxable years ending after April 17, 2023. §1.30D-3 Critical mineral and battery component requirements. (a) Critical minerals requirement --(1) In general. The critical minerals requirement described in section 30D(e)(1)(A) of the Internal Revenue Code (Code), with respect to the battery from which the electric motor of a new clean vehicle draws electricity, is met if the qualifying critical mineral content of such battery is equal to or greater than the applicable critical minerals percentage (as defined in paragraph (a)(2) of this section), as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary of the Treasury or her delegate (Secretary). (2) Applicable critical minerals percentage. For purposes of paragraph (a)(1) of this section, section 30D(e)(1)(B) provides the applicable critical minerals percentage, which is based on the year in which a vehicle is placed in service by the taxpayer and set forth in paragraphs (a)(2)(i) through (v) of this section. (i) In the case of a vehicle placed in service after April 17, 2023, and before January 1, 2024, the applicable critical minerals percentage is 40 percent. (ii) In the case of a vehicle placed in service during calendar year 2024, the applicable critical minerals percentage is 50 percent. (iii) In the case of a vehicle placed in service during calendar year 2025, the applicable critical minerals percentage is 60 percent. (iv) In the case of a vehicle placed in service during calendar year 2026, the applicable critical minerals percentage is 70 percent. (v) In the case of a vehicle placed in service after December 31, 2026, the applicable critical minerals percentage is 80 percent. (3) Determining qualifying critical mineral content --(i) In general. Qualifying critical mineral content with respect to a battery described in paragraph (a)(1) of this section is calculated as the percentage that results from dividing: (A) The total value of qualifying critical minerals, by (B) The total value of critical minerals. (ii) Separate determinations required for each procurement chain. The portion of an applicable critical mineral that is a qualifying critical mineral must be determined separately for each procurement chain. (iii) Time for determining value. A qualified manufacturer must select a date for determining the values described in paragraphs (a)(3)(i)(A) and (B) of this section. Such date must be after the final processing or recycling step for the applicable critical minerals relevant to the certification described in section 30D(e)(1)(A). (iv) Application of qualifying critical mineral content to vehicles. A qualified manufacturer may determine qualifying critical mineral content based on the value of the applicable critical minerals actually contained in the battery of a specific vehicle. Alternatively, for purposes of calculating the qualifying critical mineral content for batteries in a group of vehicles, a qualified manufacturer may average the qualifying critical mineral content calculation over a period of time (for example, a year, quarter, or month) with respect to vehicles from the same model line, plant, class, or some combination of thereof, with final assembly (as defined in section 30D(d)(5) of the Code and §1.30D-2(b)) within North America. (b) Battery components requirement --(1) In general. The battery components requirement described in section 30D(e)(2)(A) of the Code, with respect to the battery from which the electric motor of a new clean vehicle draws electricity, is met if the qualifying battery component content of such battery is equal to or greater than the applicable battery components percentage (as defined in paragraph (b)(2) of this section), as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary. (2) Applicable battery components percentage. For purposes of paragraph (b)(1) of this section, section 30D(e)(2)(B) provides the applicable battery components percentage, which is based on the year in which a vehicle is placed in service by the taxpayer as set forth in paragraphs (b)(2)(i) through (vi) of this section. (i) In the case of a vehicle placed in service after April 17, 2023, and before January 1, 2024, the applicable battery components percentage is 50 percent. (ii) In the case of a vehicle placed in service during calendar year 2024 or 2025, the applicable battery components percentage is 60 percent. (iii) In the case of a vehicle placed in service during calendar year 2026, the applicable battery components percentage is 70 percent. (iv) In the case of a vehicle placed in service during calendar year 2027, the applicable battery components percentage is 80 percent. (v) In the case of a vehicle placed in service during calendar year 2028, the applicable battery components percentage is 90 percent. (vi) In the case of a vehicle placed in service after December 31, 2028, the applicable battery components percentage is 100 percent. (3) Determining qualifying battery component content --(i) In general. Qualifying battery component content with respect to a battery described in paragraph (b)(1) of this section is calculated as the percentage that results from dividing-- (A) The total incremental value of North American battery components, by (B) The total incremental value of battery components. (ii) Time for determining value. A qualified manufacturer must select a date for determining the incremental values described in paragraphs (b)(3)(i)(A) and (B) of this section. Such date must be after the last manufacturing or assembly step for the battery components relevant to the certification described in section 30D(e)(2)(A) of the Code. (iii) Application of qualifying battery component content to vehicles. A qualified manufacturer may determine qualifying battery component content based on the incremental values of the battery components actually contained in the battery of a specific vehicle. Alternatively, for purposes of calculating the qualifying battery component content for batteries in a group of vehicles, a qualified manufacturer may average the qualifying battery component content calculation over a period of time (for example, a year, quarter, or month) with respect to vehicles from the same model line, plant, class, or some combination of thereof, with final assembly (as defined in section 30D(d)(5) of the Code and §1.30D-2(b)) within North America. (c) Definitions. The following definitions apply for purposes of this section: (1) Applicable critical mineral means an applicable critical mineral as defined in section 45X(c)(6) of the Code. (2) Assembly, with respect to battery components, means the process of combining battery components into battery cells and battery modules. (3) Battery, for purposes of a new clean vehicle, means a collection of one or more battery modules, each of which has two or more electrically configured battery cells in series or parallel, to create voltage or current. The term battery does not include items such as thermal management systems or other parts of a battery cell or module that do not directly contribute to the electrochemical storage of energy within the battery, such as battery cell cases, cans, or pouches. (4) Battery cell means a combination of battery components (other than battery cells) capable of electrochemically storing energy from which the electric motor of a new clean vehicle draws electricity. (5) Battery component means a component that forms part of a battery and which is manufactured or assembled from one or more components or constituent materials that are combined through industrial, chemical, and physical assembly steps. Battery components may include, but are not limited to, a cathode electrode, anode electrode, solid metal electrode, separator, liquid electrolyte, solid state electrolyte, battery cell, and battery module. Constituent materials are not considered a type of battery component, although constituent materials may be manufactured or assembled into battery components. Some battery components may be made entirely of inputs that do not contain constituent materials. (6) Constituent materials means materials that contain applicable critical minerals and are employed directly in the manufacturing of battery components. Constituent materials may include, but are not limited to, powders of cathode active materials, powders of anode active materials, foils, metals for solid electrodes, binders, electrolyte salts, and electrolyte additives, as required for a battery cell. (7) Country with which the United States has a free trade agreement in effect --(i) In general. The term "country with which the United States has a free trade agreement in effect" means any of those countries identified in paragraph (c)(7)(ii) of this section or that the Secretary may identify in the future. The criteria the Secretary will consider in determining whether to identify a country under this paragraph (c)(7) include whether an agreement between the United States and that country, as to the critical minerals contained in electric vehicle batteries or more generally, and in the context of the overall commercial and economic relationship between that country and the United States: (A) Reduces or eliminates trade barriers on a preferential basis; (B) Commits the parties to refrain from imposing new trade barriers; (C) Establishes high-standard disciplines in key areas affecting trade (such as core labor and environmental protections); and/or (D) Reduces or eliminates restrictions on exports or commits the parties to refrain from imposing such restrictions. (ii) Free trade agreements in effect. The countries with which the United States currently has a free trade agreement in effect are: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Japan, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore. (iii) Updates. The list of countries in paragraph (c)(7)(ii) may be revised and updated through appropriate guidance published in the Federal Register or in the Internal Revenue Bulletin (see §601.601(d) of this chapter). (8) Extraction means the activities performed to extract or harvest minerals or natural resources from the ground or a body of water, including, but not limited to, by operating equipment to extract or harvest minerals or natural resources from mines and wells, or to extract minerals or natural resources from the waste or residue of prior extraction. Extraction concludes when activities are performed to convert raw mined or harvested products or raw well effluent to substances that can be readily transported or stored for direct use in critical mineral processing. Extraction includes the physical processes involved in refining. Extraction does not include the chemical and thermal processes involved in refining. (9) Incremental value, with respect to a battery component, means the value determined by subtracting from the value of that battery component the value of the manufactured or assembled battery components, if any, that are contained in that battery component. (10) Manufacturing, with respect to a battery component, means the industrial and chemical steps taken to produce a battery component. (11) North America means the territory of the United States, Canada, and Mexico as defined in 19 CFR part 182, appendix A, section 1(1). (12) North American battery component means a battery component substantially all of the manufacturing or assembly of which occurs in North America, without regard to the location of the manufacturing or assembly activities of any components that make up the particular battery component. (13) Processing means the non-physical processes involved in the refining of non-recycled substances or materials, including the treating, baking, and coating processes used to convert such substances and materials into constituent materials. Processing includes the chemical or thermal processes involved in refining. Processing does not include the physical processes involved in refining. (14) Procurement chain means a common sequence of extraction, processing, or recycling activities that occur in a common set of locations with respect to an applicable critical mineral, concluding in the production of constituent materials. Sources of a single applicable critical mineral may have multiple procurement chains if, for example, one source of the applicable critical mineral undergoes the same extraction, processing, or recycling process in different locations. (15) Qualified manufacturer means a manufacturer described in section 30D(d)(3) of the Code. (16) Qualifying battery component content means the percentage of the value of the battery components contained in the battery from which the electric motor of a new clean vehicle draws electricity that were manufactured or assembled in North America. (17) Qualifying critical mineral means an applicable critical mineral that is extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or recycled in North America. (i) An applicable critical mineral is extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, if: (A) Fifty (50) percent or more of the value added to the applicable critical mineral by extraction is derived from extraction that occurred in the United States or in any country with which the United States has a free trade agreement in effect; or (B) Fifty (50) percent or more of the value added to the applicable critical mineral by processing is derived from processing that occurred in the United States or in any country with which the United States has a free trade agreement in effect. (ii) An applicable critical mineral is recycled in North America if 50 percent or more of the value added to the applicable critical mineral by recycling is derived from recycling that occurred in North America. (18) Qualifying critical mineral content means the percentage of the value of the applicable critical minerals contained in the battery from which the electric motor of a new clean vehicle draws electricity that were extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or recycled in North America. (19) Recycling means the series of activities during which recyclable materials containing critical minerals are transformed into specification-grade commodities and consumed in lieu of virgin materials to create new constituent materials; such activities result in new constituent materials contained in the battery from which the electric motor of a new clean vehicle draws electricity. (20) Total incremental value of North American battery components means the sum of the incremental values of each North American battery component contained in a battery described in paragraph (b)(1) of this section. (21) Total incremental value of battery components means the sum of the incremental values of each battery component contained in a battery described in paragraph (b)(1) of this section. (22) Total value of critical minerals means the sum of the values of all applicable critical minerals contained in a battery described in paragraph (a)(1) of this section. (23) Total value of qualifying critical minerals means the sum of the values of all the qualifying critical minerals contained in a battery described in paragraph (a)(1) of this section. (24) Value, with respect to property, means the arm's-length price that was paid or would be paid for the property by an unrelated purchaser determined in accordance with the principles of section 482 of the Code and regulations thereunder. (25) Value added, with respect to recycling, extraction, or processing of an applicable critical mineral, means the increase in the value of the applicable critical mineral attributable to the relevant activity. (d) Excluded entities. [IRS will address excluded entities in the final rule.] (e) Severability. The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agencies' intention that the remaining provisions shall continue in effect. (f) Applicability date. This section applies to new clean vehicles placed in service after April 17, 2023, for taxable years ending after April 17, 2023. §1.30D-4 Special rules. (a) No double benefit --(1) In general. Under section 30D(f)(2) of the Internal Revenue Code (Code), the amount of any deduction or other credit allowable under chapter 1 of the Code for a vehicle for which a credit is allowable under section 30D(a) must be reduced by the amount of the section 30D credit allowed for such vehicle (determined without regard to section 30D(c)). (2) Application to credit for previously-owned clean vehicles under section 25E. A section 30D credit that has been allowed with respect to a vehicle in a taxable year before the year in which a credit under section 25E of the Code is allowable for that vehicle does not reduce the amount allowable under section 25E. (3) Application to credit for qualified clean vehicles under section 45W. Pursuant to section 45W(d)(3) of the Code, no credit is allowed under section 45W with respect to any vehicle for which a credit was allowed under section 30D. (b) Limitation based on modified adjusted gross income --(1) In general. No credit is allowed under section 30D(a) for any taxable year if-- (i) The lesser of -- (A) The modified adjusted gross income of the taxpayer for such taxable year, or (B) The modified adjusted gross income of the taxpayer for the preceding taxable year, exceeds (ii) The threshold amount. (2) Threshold amount. For purposes of paragraph (b)(1) of this section, the threshold amount applies to individual taxpayers based on the return filing status for the taxable year, as set forth in paragraphs (b)(2)(i) through (iii) of this section. (i) In the case of a joint return or a surviving spouse (as defined in section 2(a) of the Code), the threshold amount is $300,000, (ii) In the case of a head of household (as defined in section 2(b) of the Code), the threshold amount is $225,000. (iii) In the case of a taxpayer not described in paragraph (b)(2)(i) or (ii) of this section, the threshold amount is $150,000. (3) Modified adjusted gross income. For purposes of section 30D(f)(10) and this paragraph (b), the term modified adjusted gross income means adjusted gross income (as defined in section 62 of the Code) increased by any amount excluded from gross income under section 911, 931, or 933 of the Code. (4) Special rule for change in filing status. If the taxpayer's filing status for the taxable year differs from the taxpayer's filing status in the preceding taxable year, the taxpayer satisfies the limitation described in paragraph (b)(1) of this section if the taxpayer's modified AGI does not exceed the threshold amount in either year based on the applicable filing status for that taxable year. (5) Application to taxpayers other than individuals --(i) In general. Except as provided in paragraph (b)(4)(ii) of this section, the modified adjusted gross income limitation of this paragraph (b) does not apply in the case of a new clean vehicle placed in service by a corporation or other taxpayer that is not an individual for whom adjusted gross income is computed under section 62. (ii) Application to passthrough entities. In the case of a new clean vehicle placed in service by a partnership or S corporation, where the section 30D credit is claimed by individuals who are direct or indirect partners of that partnership or shareholders of that S corporation, the modified adjusted gross income limitation of this paragraph (b) will apply to those partners or shareholders. (c) Multiple owners and passthrough entity ownership of a single vehicle --(1) In general. Except as provided in paragraph (c)(2) of this section, the amount of the section 30D credit attributable to a new clean vehicle may be claimed on only one tax return. In the event a new clean vehicle is placed in service by multiple owners, no allocation or proration of the section 30D credit is available. ( 2 ) Passthrough entities. In the case of a new clean vehicle placed in service by a partnership or S corporation, while the partnership or S corporation is the vehicle owner, the section 30D credit is allocated among the partners of the partnership under §1.704-1(b)(4)(ii) or among the shareholders of the S corporation under sections 1366(a) and 1377(a) of the Code and claimed on the tax returns of the ultimate partners' or of the S corporation shareholder(s). (3) Seller reporting --(i) In general. The name and taxpayer identification number of the vehicle owner claiming the section 30D credit must be listed on the seller's report pursuant to section 30D(d)(1)(H). The credit will be allowed only on the tax return of the owner listed in the seller's report. (ii) Passthrough entities. In the case of a new clean vehicle placed in service by a partnership or S corporation, the name and tax identification number of the partnership or S corporation that placed the new clean vehicle in service must be listed on the seller's report pursuant to section 30D(d)(1)(H). (4) Example. A married couple jointly purchases and places in service a new clean vehicle that qualifies for the section 30D credit and puts both of their names on the title. When the couple prepares to file their Federal income tax return, they choose to file using the married filing separately filing status. The section 30D credit may only be claimed by one of the spouses on that spouse's tax return, and the other spouse may not claim any amount of the section 30D credit with respect to that new clean vehicle. The spouse that claims the section 30D credit must be the same spouse listed on the seller report received pursuant to section 30D(d)(1)(H). (d) Severability. The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agencies' intention that the remaining provisions shall continue in effect. (e) Applicability date. This section applies to new clean vehicles placed in service after [DATE OF PUBLICATION OF FINAL RULE]. Douglas W. O'Donnell, Deputy Commissioner for Services and Enforcement. (Filed by the Office of the Federal Register March 31, 2023, 8:45 a.m., and published in the issue of the Federal Register for April 17, 2023, TBD FR TBD)

Private Letter Ruling Number: 202401019 Internal Revenue Service October 11, 2023 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Release Number: 202401019 Release Date: 1/5/2024 UIL Code: 501.03-00 Date: October 11 2023 Taxpayer ID number (last 4 digits): Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with United States Tax Court: January 9, 2024 CERTIFIED MAIL - Return Receipt Requested Dear ******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective ******. Your determination letter dated ******, is revoked. Our adverse determination as to your exempt status was made for the following reasons: Organizations exempt from Federal income tax under section 501(c)(3) of the Code are required to operate exclusively for charitable, educational, or other exempt purposes. Organizations are not operated exclusively for exempt purposes if the net earnings of the organization inure in whole or in part to the benefit of private shareholders or individuals of the organization. See Treas.Reg. § 1.501(c)(3)-1(c)(2). You have failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by sections 6001 and 6033(a)(1) of the IRC and Rev.Rul. 59-95, 1959-1 C.B. 627. Section 1.6033-2(i)(2) of the Income Tax Regulations provides, in part, that every organization which is exempt from tax, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status. Since you have not provided the requested information, you have failed to establish that you are operated exclusively for exempt purposes within the meaning of IRC Section 501(c)(3) and that no part of your net earnings inure to the benefit of private shareholders or individuals. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov. Contributions to your organization are no longer deductible under IRC Section 170. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: US Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3). Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: ****** Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more Information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. You may fax your documents to the fax number shown above, using either a fax machine or online fax service. Protect yourself when sending digital data by understanding the fax service's privacy and security policies. Keep the original letter for your records. Sincerely, Lynn A. Brinkley Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: June 5, 2023 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax Address: Manager s contact information: Name: ID number: Telephone: Response due date: July 7th, 2023 CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office Is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely. for Lynn Brinkley Director, Exempt Organizations Examinations Enclosures: Form 4621-A Form 886-A Form 6018 Publication 892 Publication 3498 ISSUES 1. Whether ****** (the Taxpayer) provided information verifying its continued qualification for exempt status under Section 501(c)(3) of the Internal Revenue Code (IRC). 2. Whether the Taxpayer engaged in nonexempt activities prohibited by IRC Section 501(c)(3). 3. Whether the Taxpayer's exempt status should be revoked for engaging in nonexempt activities and failing to provide information verifying its continued qualification for exempt status for the tax period ending ******. FACTS The Taxpayer was incorporated in the State of ****** on ******, as a domestic non-profit corporation. Article 10(a) of its Articles of Incorporation state its purpose is to ******. The Taxpayer is currently active with the State of ******. Its address is registered as ****** On ******, the Internal Revenue Service (IRS) received ******, from the Taxpayer. The principal officer for the Taxpayer is listed as ******. The Taxpayer listed its address as ******. On ******, the IRS granted tax-exemption to the Taxpayer under IRC Section 501(c)(3), and further classified it as a public charity described in IRC Sections 509(a)(1) and 170(b)(1)(A)(vi), effective ******. On ******, the Taxpayer registered in the State of ****** as a foreign public benefit corporation incorporated in the State of ******. The Taxpayer is currently inactive with the State of ****** due to ******. Its last mailing address was registered as ******. In ******, the assigned agent began an examination of the Taxpayer's ****** for tax year ended ******. On ******, the assigned agent mailed the initial contact letter and Information Document Request (IDR) 1 to the Taxpayer at the address ******, which is the current mailing address per IRS records and ****** Secretary of State registration. On ******, this letter was returned to sender, stating "recipient is not at this address." On ******, the assigned agent reissued the initial contact and IDR 1 to the address ******, which is the previous known address per IRS records and Secretary of State registration. No response was received by the assigned agent. On ******, the assigned agent reissued the initial contact and IDR 1 to the address ******, which is the last known mailing address per Secretary of State registration. On ******, this letter was returned to sender, stating "not deliverable as addressed, unable to forward." On ******, the assigned agent reissued the initial contact and IDR 1 to the address ******, which is the previous known address for the Taxpayer's principal officers per IRS records. On ******, this letter was returned to sender, stating "no such number, unable to forward." On ******, the assigned agent received an email from ******, the preparer of the Taxpayer's ****** and ******. ****** stated that the Taxpayer has never been operational to her knowledge, and that the principal officer is deceased. On ******, ****** told the assigned agent via telephone that she is not in contact with any of the current officers of the Taxpayer, and files the ****** on behalf of the Taxpayer at the request ******, who is not an officer of the Taxpayer. On ******, ****** emailed the assigned agent the Taxpayer's ****** for reporting year ******, Bylaws, and filed Articles of Incorporation The assigned agent obtained bank statements for the Taxpayer's primary checking account with ******. The ****** statement shows a check for $ ****** written on ******, to ******: Figure I: Image of cancelled check dated ****** for $ ****** written from the Taxpayer's checking account to ******. IRS records indicate ****** and proprietor of ******. On ******, the assigned agent issued IDR 2 to the Taxpayer requesting supporting documentation for the $ ****** payment to the address ******. On ******, this letter was returned to sender, stating "addressee no longer at this address" On ******, the assigned agent reissued IDR 2 to the Taxpayer at the address ******, per the Taxpayer's original application for tax exemption. On ******, this letter was returned to the sender, stating "not deliverable as addressed, unable to forward." On ******, the assigned agent made final attempt to reach the Taxpayer by reissuing IDR 2 to the address ******, response due ******. No response was received by the assigned agent. On ******, the assigned agent made final attempt to reach the Taxpayer by reissuing IDR 2 to the address ******, which is the previous known address for the Taxpayer's principal officers per IRS records, response due ******. No response was received by the assigned agent. LAW IRC Section 501(c)(3) provides in part tax-exemption to corporations organized and operated exclusively for religious, charitable, or similar purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual. IRC Section 6033(a)(1) provides in part that every organization exempt from taxation under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Treasury Regulations Section (Treas.Reg.) 1.501(a)-1(c) defines "private shareholder or individual" as referring to persons having a personal and private interest in the activities of the organization. Treas.Reg. 1.501(c)(3)-1(c)(2) states that an organization is not operated exclusively for charitable purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Treas.Reg. 1.501(c)(3)-1(d)(1)(ii) states in part that an organization is not organization exclusively for exempt purposes unless it serves public, rather than private, interests. Thus, it is necessary for the organization to establish that it is not organization or operated for the benefit of private interests such as designated individuals, the creator or their family, shareholders of the organization, or persons controlled, directly or indirectly, by such interests. Treas.Reg 1.6001-1(a) provides in part that any person subject to tax under Subtitle A of the Code, or any person required to file a return of information with respect to income, shall keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits or other matters required to be shown by such person in any return of such tax or information Treas.Reg. 1.6001-1(c) provides in part that every organization exempt from tax under section 501(a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. Treas.Reg. 1.6001-1(d) provides in part that the district director may require any person, by notice served upon him, to make such returns, render such statements, or keep such specific records as will enable the district director to determine whether or not such person is liable for tax under Subtitle A of the Code. Treas.Reg. 1.6001-1(e) provides in part that the books or records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained so long as the contents thereof may become material in the administration of any internal revenue law. Treas.Reg. 1.6033-2(i)(2) provides in part that every organization which is exempt from tax shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of Subchapter F, Chapter 1 of Subtitle A of the Code, section 6033, and Chapter 42 of Subtitle D of the Code. Revenue Ruling 59-95, 1959-1 C.B. 627 held that failure or inability to file the required information return or otherwise to comply with the provision of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of an exempt status. TAXPAYER'S POSITION The Taxpayer has not provided a position. GOVERNMENT'S POSITION Issue #1: Whether the Taxpayer provided information verifying its continued qualification for exempt status under Section 501(c)(3) of the Internal Revenue Code (IRC). IRC Section 6033(a)(1) requires exempt organizations to file annual information returns (Form 990, Form 990 EZ, or Form 990 PF) with an exception for organizations with annual gross receipts not normally more than $5,000. IRC Section 6033(a)(1) and Treas.Reg. 1.6001-1 require exempt organizations to keep permanent books of account or records to substantiate the information report on the annual information returns, and to provide such records upon request from an authorized internal revenue agent. No response has been received from the Taxpayer, via telephone, mail, nor electronic mail, to substantiate its qualification for tax-exempt status as indicated on its ******, nor has any requests for extensions of time to provide such information been received. The assigned agent made multiple attempts to contact the Taxpayer via phone and mail, with no response. ******, the return preparer, is not an authorized individual of the Taxpayer and therefore does not have the authority to receive confidential tax information concerning the Taxpayer, represent the Taxpayer at conferences with the IRS, or sign agreements on behalf of the Taxpayer. The return preparer stated that the Taxpayer is not and has never been operational, the principal officer is deceased, and she does not have the contact information of any current officer or authorized individual. The requests to file the ****** on behalf of the Taxpayer originate from ******, who is not an officer or authorized individual himself. The Taxpayer has not provided information or testimony to assert its qualification for tax exemption under IRC Section 501(c)(3) Issue #2: Whether the Taxpayer engaged in nonexempt activities prohibited by IRC Section 501(c)(3). Treas.Reg. 1.501(c)(3)-1(c)(2) provides that an organization is not operated exclusively for exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Treas.Reg. 1.501(c)(3)-1(d)(1)(ii) provides in part that an organization must establish it is not organized or operated for the benefit of private interests such as the creator or their family. The bank statements for the Taxpayer's checking account show a $ ****** payment made to an entity controlled by ******, ******. There is no evidence in the case file to indicate this payment furthered the Taxpayer's exempt purpose, and the Taxpayer has not provided documentation or explanation to show as much. It is concluded that the expenditure served private, rather than public, interests in the absence of evidence on the contrary, which is prohibited for organizations exempt from tax under IRC Section 501(c)(3). As such, the Taxpayer has engaged in nonexempt activities barring continued qualification for tax exemption under IRC Section 501(c)(3). Issue #3: Whether the Taxpayer's exempt status should be revoked for engaging in nonexempt activities and failing to provide information verifying its continued qualification for exempt status for the tax period ending ******. The Taxpayer has engaged in nonexempt activities and failed to provide documentation or testimony to support its exempt status and therefore does not qualify for exempt status under IRC Section 501(c)(3). The Taxpayer fails to qualify for tax exemption effective the first day of the tax year in which the prohibited transaction occurred, or ******. CONCLUSION The Taxpayer has engaged in nonexempt activities and failed to provide information verifying its continued qualification for exempt status under IRC Section 501(c)(3) and should have its status revoked for the tax period ending ******, effective ******.

Internal Revenue Service - Fact Sheet FS-2020-1 How to qualify for the Earned Income Tax Credit January 2020 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 How to qualify for the Earned Income Tax Credit FS-2020-01, January 2020 The Earned Income Tax Credit (EITC) is a financial boost for families with low- or moderate- incomes. Millions of workers may qualify for the first time this year due to changes in their marital, parental or financial status. The EITC is a refundable tax credit. This means workers may get money back, even if they owe no tax. Last year, around 25 million taxpayers received about $61 billion in EITC. The IRS urges workers who earned $55,952 or less in 2019 to see if they qualify. This includes people who work for someone else and those who have their own business or farm. One way they can see if they qualify is to use the EITC Assistant on IRS.gov. Using the EITC Assistant helps taxpayers because EITC is complex and many special rules apply. To get it right, the IRS encourages workers to do their taxes using the IRS Free File program, by choosing a trusted tax professional, or at a local free tax preparation site. Credit Limits for Tax-Year 2019 The amount of EITC varies based on income, filing status and family size. Those who qualify can get a credit up to: - $529 with no qualifying children - $3,526 with one qualifying child - $5,828 with two qualifying children - $6,557 with three or more qualifying children Last year, the average amount of EITC was $2,504. Qualifying for EITC To qualify, workers must have earned income and adjusted gross income within certain limits and meet certain basic rules. Then, the worker must meet the rules for those without a qualifying child or have a child who meets all the qualifying child rules. Only one person can claim the same qualifying child If a child meets the rules to be a qualifying child for more than one person, only one person can use that child to claim the EITC. Also, if the child qualifies for both a parent and a non-parent, the non-parent can only get the credit if he or she has a higher AGI than either of the child's parents. After applying the tie-breaker rules, the person who does not claim the qualifying child may claim the EITC without a qualifying child, as long as all other requirements are met. Combat pay normally exempt from tax, not included in AGI Under a special rule, those who receive combat pay can choose to count it as taxable income for figuring the amount of EITC. This may or may not increase the amount of the EITC. Normally, combat pay is exempt from tax. The IRS encourages those receiving combat pay to figure their taxes both ways to make sure they get the most benefit. There are also special rules for those with certain types of disability income and members of the clergy. To learn more, go to IRS.gov/eitc for the Who Qualifies section or use the EITC Assistant. Social Security numbers required for everyone The IRS reminds taxpayers to be sure they have a valid SSN for themselves, their spouse if filing a joint return, and each qualifying child before they file their return. For most people, the due date of the return is April 15, 2020. Most taxpayers can extend the due date for their 2019 tax return to October 15, 2020, by filing an automatic extension request with the IRS by the April 15 deadline. There are special rules for those in the military or for those out of the country. Refund timing for EITC and ACTC filers By law the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund -- even the portion not associated with EITC or ACTC. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud. Where's My Refund? on IRS.gov and the IRS2Go app will be updated with projected deposit dates for most early EITC/ACTC refund filers by February 22. So EITC/ACTC filers will not see an update to their refund status for several days after February 15. The IRS expects most EITC or ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return. Check Where's My Refund for your personalized refund date. Avoid errors Taxpayers are always responsible for the accuracy of their own return, even when someone else prepares the return. Because the EITC is complex, many people claiming it make mistakes. Workers should get help if they are not sure if they qualify. Common errors include: - Claiming a child who does not meet all four tests for a qualifying child: age, residency in the U.S., relationship and joint return. - Filing as single or head of household when married. - Reporting incorrect income or expense amounts. - Missing or incorrect SSN for self, spouse or qualifying children. Claiming the EITC in error can have lasting impact Filing a tax return with an error on the EITC claim can: - Delay the EITC part of the refund until the IRS corrects the error. The delay can take several months. - Cause the IRS to deny all or part of the EITC. If this happens, the taxpayer: o Must pay back the amount of EITC paid in error plus interest. o May need to file the Form 8862, Information To Claim Certain Credits After Disallowance, to claim the EITC again. o May be banned from claiming EITC for the next two years if the error is because of reckless or intentional disregard of the rules. o May be banned from claiming EITC for the next ten years if the error is because of fraud. Workers should help their preparers file a return correctly When a taxpayer pays someone to prepare their return, the preparer and the firm he or she works for have additional responsibilities to make sure the return is correct. Expect any preparer, whether paid or not, to ask many questions. Help your preparer by answering all questions and by bringing all the documents the preparer needs to get the return correct. Find out what documents to bring by visiting IRS.gov/eitc. How to claim the EITC To claim the EITC, taxpayers need to file a Form 1040. If the taxpayer is claiming the EITC with a qualifying child, they must also complete and attach the Schedule EIC to the tax return. Schedule EIC provides the IRS with information about a qualifying child or children, including their names, ages, SSNs, relationship to the taxpayer and the amount of time they lived with the taxpayer during the year. Letter from the IRS In some cases, a taxpayer may receive a letter from the IRS requesting additional information. To avoid further refund delay, they should respond promptly. If more time is needed for a complete response, or if the taxpayer needs help, it is important they call the phone number on the letter. For further tips on responding to these letters, go to IRS.gov/eitc for the section on Received a Notice. How to get free tax help Taxpayers can see if they qualify for EITC by using the EITC Assistant tool on IRS.gov. Find information on who qualifies, how to claim, and more at IRS.gov/eitc. Those who may qualify for EITC should consider free tax preparation services. Many organizations provide free tax return preparation at thousands of volunteer sites nationwide for those with income below $56,000 and for senior or disabled taxpayers. The Volunteer Income Tax Assistance (VITA) program offers free tax preparation for low- to moderate-income taxpayers. To find a nearby VITA site, taxpayers can use the VITA/TCE Locator Tool at IRS.gov/vita. Tax Counseling for the Elderly (TCE) offers priority assistance to people who are 60 years of age and older. To find a TCE site, taxpayers can visit the AARP locator webpage. Active duty military members and their families can receive free tax preparation assistance at VITA sites within their installations. The volunteers can address military-specific tax issues. EITC-eligible workers can also use the free tax preparation and electronic filing program, IRS Free File, available only at IRS.gov/freefile. Free File is a public-private partnership that provides a free way to do a federal tax return either by using brand-name software or online fillable forms. Free File software is available now to millions of individuals and families that earn $69,000 or less. Some Free File partners also offer free state tax return filing. Outside of IRS Free File, many other e-file software providers and tax professionals also provide free services for low-income taxpayers. EITC and other benefit programs Refunds received from the EITC, or any other tax credit, are not used to determine eligibility for any federal or federally funded public benefit program such as Medicaid, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (food stamps), low-income housing or most Temporary Assistance for Needy Families (TANF) payments. Those who save their tax credit for more than 30 days should contact their state, tribal or local government benefit coordinator to find out if their benefits count as assets. Unemployment benefits are not earned income and can't be used to claim the EITC. But they are taxable income and may affect the amount of EITC a person may get. Qualify for EITC? See what other tax credits may be available. Related items: - EITC webpage - IRSvideos, available on YouTube, provide information about credits, deductions and tax law changes. The IRS also has videos in Spanish and American Sign Language. - IRS audio files, informal tax messages in English and Spanish, can be used for podcasts or to play on a portable device. - Publication 596, Earned Income Credit, offers a detailed overview of the EITC, the eligibility rules and instructions on how to claim it. - @IRSnews and @IRSenEspanol, the IRS Twitter news feeds, provide the latest federal tax news and information for taxpayers in English and Spanish.

Internal Revenue Service - Information Release IR-2022-125 IRS wraps up 2022 "Dirty Dozen" scams list; agency urges taxpayers to watch out for tax avoidance strategies June 10, 2022 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS wraps up 2022 "Dirty Dozen" scams list; agency urges taxpayers to watch out for tax avoidance strategies Cryptocurrency, non-filing, abusive syndicated conservation easement, abusive micro-captive deals make list IR-2022-125, June 10, 2022 WASHINGTON -- The Internal Revenue Service today wrapped up its annual "Dirty Dozen" scams list for the 2022 filing season, with a warning to taxpayers to avoid being misled into using bogus tax avoidance strategies. The IRS warned taxpayers to watch out for promoters peddling these schemes. As part of its mission, the IRS is focused on high-income taxpayers who engage in various types of tax violations, ranging from the most basic, failing to file returns up to sophisticated transactions involving abusive syndicated conservation easement deals and abusive domestic micro-captive insurance arrangements. "These tax avoidance strategies are promoted to unsuspecting folks with too-good-to-be-true promises of reducing taxes or avoiding taxes altogether," said IRS Commissioner Chuck Rettig. "Taxpayers should not kid themselves into believing they can hide income from the IRS. The agency continues to focus on these deals, and people who engage in them face steep civil penalties or criminal charges." The IRS publishes the Dirty Dozen as part of a broad ranging effort to inform taxpayers. People should be careful not to get conned into using well-worn abusive arrangements with high fees as well as the other Dirty Dozen schemes. The IRS has stepped up efforts on abusive schemes in recent years. As part of this wider effort, the IRS Office of Chief Counsel announced earlier this year it would hire up to 200 additional attorneys to help the agency combat abusive syndicated conservation easements and micro-captive transactions as well as other abusive schemes. ( IRS Chief Counsel looking for 200 experienced attorneys to focus on abusive tax deals; job openings posted ). Last week, the IRS kicked off the 2022 Dirty Dozen list covering four heavily promoted abusive deals that taxpayers need to avoid. The IRS followed this up with a number of common scams that can target average taxpayers. These consumer-focused scams can prey on any individual or organization, steal sensitive financial information or money, and in some cases leave the taxpayer to clean up the legal mess. For today's conclusion of the Dirty Dozen, the IRS highlights four other schemes that typically target high-net-worth individuals who are looking for ways to avoid paying taxes. Solicitations for investment in these schemes are generally more targeted than solicitations for widespread scams, such as email scams, that can hit anyone. Hiding assets in what the taxpayer hopes is an anonymous account or simply not filing a return in the hopes of staying off the grid are tax avoidance scams that have been around for decades. The IRS remains committed to stopping these methods of cheating that short-change taxpayers who reliably pay their fair share of taxes every year. The IRS warns anyone thinking about using one of these schemes - or similar ones - that the agency continues to improve work in these areas thanks to new and evolving data analytic tools and enhanced document matching. These Dirty Dozen schemes cover: Concealing Assets in Offshore Accounts and Improper Reporting of Digital Assets: The IRS remains focused on stopping tax avoidance by those who hide assets in offshore accounts and in accounts holding cryptocurrency or other digital assets. International tax compliance is a top priority of the IRS. New patterns and trends emerging in complex international tax avoidance schemes and cross-border transactions have heightened concerns regarding the lack of tax compliance by individuals and entities with an international footprint. As international tax and money laundering crimes have increased, the IRS continues to protect the integrity of the U.S. tax system by helping American taxpayers to understand and meet their tax responsibilities and by enforcing the law with integrity and fairness, worldwide. Over the years, numerous individuals have been identified as evading U.S. taxes by attempting to hide income in offshore banks, brokerage accounts or nominee entities. They then access the funds using debit cards, credit cards, wire transfers or other arrangements. Some individuals have used foreign trusts, employee-leasing schemes, private annuities and structured transactions attempting to conceal the true owner of accounts or insurance plans. U.S. persons are taxed on worldwide income. The mere fact that money is placed in an offshore account does not put it out of reach of the U.S. tax system. U.S. persons are required, under penalty of perjury, to report income from offshore funds and other foreign holdings. The IRS uses a variety of sources to identify promoters who encourage others to hide their assets overseas. Digital assets are being adopted by mainstream financial organizations along with many other parts of the economy. The proliferation of digital assets across the world in the last decade or so has created tax administration challenges regarding digital assets, in part because there is an incorrect perception that digital asset accounts are undetectable by tax authorities. Unscrupulous promoters continue to perpetuate this myth and make assertions that taxpayers can easily conceal their digital asset holdings. The IRS urges taxpayers to not be misled into believing this storyline about digital assets and possibly exposing themselves to civil fraud penalties and criminal charges that could result from failure to report transactions involving digital assets. "The IRS is able to identify and track otherwise anonymous transactions of international accounts as well as digital assets during the enforcement of our nation's tax laws," Rettig said. "We urge everyone to come into compliance with their filing and reporting responsibilities and avoid compromising themselves in schemes that will ultimately go badly for them." High-income individuals who don't file tax returns: The IRS continues to focus on people who choose to ignore the law and not file a tax return, especially those individuals earning more than $100,000 a year. Taxpayers who exercise their best efforts to file their tax returns and pay their taxes, or enter into agreements to pay their taxes, deserve to know that the IRS is pursuing others who have failed to satisfy their filing and payment obligations. The good news is most people file on time and pay their fair share of tax. Those who choose not to file a return even when they have a legal filing requirement, and especially those earning more than $100,000 per year who don't file, represent a compliance problem that continues to be a top priority of the IRS. Here's a key reminder for taxpayers who may be wrongly persuaded that not filing their return is a smart move. The Failure to File Penalty is initially much higher than the Failure to Pay Penalty. It is more advantageous to file an accurate return on time and set up a payment plan if needed than to not file. The Failure to File Penalty is generally 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty generally will not exceed 25% of unpaid taxes. The Failure to Pay Penalty is generally 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty will not exceed 25% of unpaid taxes. If a person's failure to file is deemed fraudulent, the penalty generally increases from 5 percent per month to 15 percent for each month or part of a month the return is late, with the maximum penalty generally increasing from 25 percent to 75 percent. Abusive Syndicated Conservation Easements: In syndicated conservation easements, promoters take a provision of the tax law allowing for conservation easements and twist it by using inflated appraisals of undeveloped land (or, for a few specialized ones, the facades of historic buildings), and by using partnership arrangements devoid of a legitimate business purpose. These abusive arrangements do nothing more than game the tax system with grossly inflated tax deductions and generate high fees for promoters. The IRS urges taxpayers to avoid becoming ensnared in these deals sold by unscrupulous promoters. If something sounds too good to be true, then it probably is. People can risk severe monetary penalties for engaging in questionable deals such as abusive syndicated conservation easements. In the last five years, the IRS has examined many hundreds of syndicated conservation easement deals where tens of billions of dollars of deductions were improperly claimed. It is an agency-wide effort using a significant number of resources and thousands of staff hours. The IRS examines 100 percent of these deals and plans to continue doing so for the foreseeable future. Hundreds of these deals have gone to court and hundreds more will likely end up in court in the future. "We are devoting a lot of resources to combating abusive conservation easements because it is important for fairness in tax administration," Commissioner Rettig stated. "It is not fair that wage-earners pay their fair share year after year but high-net-worth individuals can, under the guise of a real estate investment, avoid millions of dollars in tax through overvalued conservation easement contributions." Abusive Micro-Captive Insurance Arrangements: In abusive "micro-captive" structures, promoters, accountants, or wealth planners persuade owners of closely held entities to participate in schemes that lack many of the attributes of insurance. For example, coverages may "insure" implausible risks, fail to match genuine business needs or duplicate the taxpayer's commercial coverages. The "premiums" paid under these arrangements are often excessive and are used to skirt the tax law. Recently, the IRS has stepped up enforcement against a variation using potentially abusive offshore captive insurance companies. Abusive micro-captive transactions continue to be a high-priority area of focus. The IRS has conducted thousands of participant examination and promoter investigations, assessed hundreds of millions of dollars in additional taxes and penalties owed, and launched a successful settlement initiative. Additional information regarding the settlement initiative can be found in IRS takes next step on abusive micro-captive transactions; nearly 80 percent accept settlement, 12 new audit teams established. The IRS's activities have been sustained by the Independent Office of Appeals, and the IRS has won all micro-captive Tax Court and appellate court cases, decided on their merits, since 2017.

Notice 2024-07 Internal Revenue Service 2024-2 I.R.B. 355 Relief from Additions to Tax for Certain Taxpayers' Failure to Timely Pay Income Tax for Taxable Years 2020 and 2021 Notice 2024-7 SECTION I. PURPOSE This notice provides relief for certain taxpayers from additions to tax for the failure to pay income tax with respect to certain income tax returns for taxable years 2020 and 2021. These additions to tax for the failure to pay income tax will be waived or, to the extent previously assessed or paid, will be abated, refunded, or credited to other outstanding tax liabilities, as described in section III of this notice. Section III.D of this notice describes situations in which the relief provided in this notice does not apply. SECTION II. BACKGROUND Section 6651(a)(2) of the Internal Revenue Code (Code) 1 generally imposes an addition to the tax owed by a taxpayer for the failure to pay the amount shown as tax on a return required to be filed by the taxpayer, on or before the date prescribed for payment of such tax, including any extension of time for payment. Section 6651(a)(3) generally imposes an addition to the tax owed by the taxpayer for the failure to pay the amount required to be shown on a return that is not so shown within 21 calendar days from the date of notice and demand or 10 business days if the amount in the notice and demand is $100,000 or greater. Sections 6651(a)(2) and 6651(a)(3) apply to returns required to be filed under the authority of any provision of subchapter A of chapter 61 of the Code, (for example, §§ 6012 through 6017 requiring the filing of income tax returns) and do not apply to information returns required to be filed or furnished under part III of such subchapter (that is, §§ 6031 through 6056 of the Code). Sections 6651(a)(2) and 6651(a)(3) do not apply if the taxpayer can show that the failure to pay the tax shown or required to be shown on the return is due to reasonable cause and not due to willful neglect. ******** 1 Unless otherwise specified, all "Section" or "§" references are to sections of the Code. ******** When a taxpayer does not fully pay a tax liability, the Internal Revenue Service (IRS) sends an initial balance due notice, which includes Notices CP14 and CP161. 2 An initial balance due notice informs the taxpayer of the amount of tax owed and instructs the taxpayer how to pay the tax liability. If the taxpayer does not pay the tax liability after receiving the initial notice, the IRS normally sends the taxpayer certain automated reminder notices. ******** 2 Notice CP14, Notice of Tax Due and Demand for Payment, Balance Due $5 or More, No Math Error, is issued to a taxpayer who owes money on unpaid taxes, states the amount of tax owed, including interest and penalties, and requests payment within 21 days. Notice CP161, Balance Due - Request for Payment or Notice of Unpaid Balance, is issued to a taxpayer who has an unpaid balance due, and explains how the IRS calculated the amount due, and states the taxpayer should contact the IRS within 10 days if the taxpayer believes the IRS has made a mistake or to contact the IRS to make a payment arrangement. ******** On March 13, 2020, the President of the United States declared a national emergency in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic. 3 The same day, the President also issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq. (Emergency Declaration). 4 The Emergency Declaration instructed the Secretary of the Treasury "to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a)." In response, the Department of the Treasury (Treasury Department) and the IRS issued a series of notices and other guidance to provide relief to affected taxpayers. ******** 3 Proclamation 9994, 85 F.R. 15337 (March 18, 2020). 4 March 13, 2020, letter from the President to Secretaries of the Departments of Homeland Security, the Treasury, and Health and Human Services and the Administrator of the Federal Emergency Management Agency, available at https://trumpwhitehouse.archives.gov/briefings-statements/letter-president-donald-j-trump-emergency-determination-stafford-act/. ******** On February 9, 2022, the IRS announced in IRS News Release IR-2022-31 (IR-2022-31) the temporary suspension of the mailing of certain automated reminder notices. The IRS did not suspend the mailing of initial balance due notices. The additions to tax for the failure to pay taxes owed under §§ 6651(a)(2) and 6651(a)(3) continued to accrue for taxpayers who did not fully pay their balance due. The IRS will fully resume issuing automated reminder notices in calendar year 2024 for balances due for taxable years 2021 and earlier, thereby resuming the normal notice process for these taxable years. The Treasury Department and the IRS have determined that the relief described in section III of this notice will help certain taxpayers, who were not sent reminder notices during the temporary suspension of certain automated reminder notices, meet their Federal tax obligations. SECTION III. GRANT OF RELIEF Taxpayers described in section III.A of this notice (eligible taxpayers) who have filed tax returns specified in section III.B of this notice (eligible returns) will have the accrual of additions to tax for the failure to pay taxes owed for taxable year 2020 or 2021 waived for the relief period described in section III.C (relief period) or, to the extent previously assessed or paid, will have such additions to tax automatically abated, refunded, or credited to other outstanding tax liabilities, as appropriate, for the relief period. There is no need for taxpayers to request this relief. The IRS will issue a notice to each eligible taxpayer that reflects the updated amount owed and any refund or credit resulting from the automatic abatement. The relief granted in this notice applies to additions to tax under §§ 6651(a)(2) and 6651(a)(3) for the failure to pay taxes owed, but does not apply to any amount of interest that accrues as a result of any underpayment. A. Eligible Taxpayers The relief granted in this notice is available only to eligible taxpayers for accruals of additions to tax under §§ 6651(a)(2) and 6651(a)(3) for the failure to pay during the relief period. An "eligible taxpayer" is any taxpayer: - Whose assessed income tax for taxable year 2020 or 2021, as of December 7, 2023, is less than $100,000, excluding any applicable additions to tax, penalties, or interest; - Who was issued an initial balance due notice (including, but not limited to Notice CP14 or Notice CP161) on or before December 7, 2023, for taxable year 2020 or 2021; and - Who is otherwise liable during the relief period for accruals of additions to tax for the failure to pay under § 6651(a)(2) or 6651(a)(3) with respect to an eligible return for taxable year 2020 or 2021. B. Eligible Returns The relief granted in this notice is available only to eligible taxpayers who have filed an eligible return. An "eligible return" is one of the following income tax returns: 1. Income Tax Returns of Individuals: - Form 1040, U.S. Individual Income Tax Return - Form 1040-C, U.S. Departing Alien Income Tax Return - Form 1040-NR, U.S. Nonresident Alien Income Tax Return - Form 1040-PR, Declaración de la Contribución Federal sobre el Trabajo por Cuenta Propia - Form 1040-SR, U.S. Tax Return for Seniors - Form 1040-SS, U.S. Self-Employment Tax Return 2. Income Tax Returns of Trusts, Estates, Certain Taxable Corporations, and Certain Tax-Exempt Organizations: - Form 1120, U.S. Corporation Income Tax Return - Form 1120-C, U.S. Income Tax Return for Cooperative Associations - Form 1120-F, U.S. Income Tax Return of a Foreign Corporation - Form 1120-FSC, U.S. Income Tax Return of Foreign Sales Corporation - Form 1120-H, U.S. Income Tax Return for Homeowners Associations - Form 1120-L, U.S. Life Insurance Company Income Tax Return - Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons - Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return - Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations - Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts - Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies - Form 1120-S, U.S. Income Tax Return for an S Corporation - Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B) - Form 1041, U.S. Income Tax Return for Estates and Trusts - Form 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts - Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts - Form 990-T, Exempt Organization Business Income Tax Return C. Relief Period For purposes of the relief granted in this notice, the "relief period" is the period that begins on the date the IRS issued an initial balance due notice to the eligible taxpayer, or February 5, 2022, whichever is later, and ends on March 31, 2024. Eligible taxpayers will remain liable for any addition to tax for the failure to pay tax that accrued before or after the relief period. Eligible taxpayers will also remain liable for interest that accrues during the relief period as a result of any underpayment of tax for taxable year 2020 or 2021. D. Exceptions to Relief The relief described in this notice does not apply to any addition to tax, penalty, or interest that is not specifically listed in the grant of relief under section III of this notice. In addition, the relief described in section III of this notice is not available with respect to any return for which the penalty for fraudulent failure to file under § 6651(f) or the penalty for fraud under § 6663 applies. The relief described in section III of this notice also does not apply to any addition to tax for the failure to pay in an offer in compromise under § 7122 that is accepted by the IRS because acceptance of the offer conclusively settles all of the liabilities in the offer under § 301.7122-1(e)(5) of the Procedure and Administration Regulations (26 CFR part 301). Finally, the relief described in section III of this notice does not apply to any addition to tax for the failure to pay that is settled in a closing agreement under § 7121 or finally determined in a judicial proceeding. SECTION IV. DRAFTING INFORMATION The principal author of this notice is Jamie Song of the Office of the Associate Chief Counsel (Procedure and Administration). For further information regarding this notice, contact Jamie Song at (202) 317-6845 (not a toll-free number).

Internal Revenue Service - Fact Sheet FS-2022-12 IRS updates several frequently asked questions to assist those claiming the 2021 Recovery Rebate Credit February 2022 Internal Revenue Service Media Relations Office Washington, D.C. Media Contact: 202.317.4000 Public Contact: 800.829.1040 www.irs.gov/newsroom IRS updates several frequently asked questions to assist those claiming the 2021 Recovery Rebate Credit FS-2022-12, February 2022 This Fact Sheet updates frequently asked questions (FAQs) for the 2021 Recovery Rebate Credit. Individuals who did not qualify for, or did not receive, the full amount of the third Economic Impact Payment may be eligible to claim the 2021 Recovery Rebate Credit based on their 2021 tax year information. These FAQs revisions are as follows: - 2021 Recovery Rebate Credit -- Topic A: General Information: Q3, Q6 - 2021 Recovery Rebate Credit -- Topic B: Claiming the Recovery Rebate Credit if you aren't required to file a 2021 tax return: Q5 - 2021 Recovery Rebate Credit -- Topic D: Claiming the 2021 Recovery Rebate Credit: Q6 - 2021 Recovery Rebate Credit -- Topic E: Calculating the 2021 Recovery Rebate Credit: Q7, Q18 - 2021 Recovery Rebate Credit -- Topic G: Finding the Third Economic Impact Payment Amount to Calculate the 2021 Recovery Rebate Credit: Q2, Q7, Q8 These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer's specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer's case, the law will control the taxpayer's tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so. More information about reliance is available. These FAQs were announced in IR-2022-40. 2021 Recovery Rebate Credit Questions and Answers Background If you didn't get the full amount of the third Economic Impact Payment, you may be eligible to claim the 2021 Recovery Rebate Credit and must file a 2021 tax return - even if you don't usually file taxes - to claim it. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File P rogram. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited i nto your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. If you didn't get the full amounts of the first and second Economic Impact Payments, you may be eligible to claim the 2020 Recovery Rebate Credit a nd must file a 2020 tax return - even if you don't usually file taxes - to claim it. DO NOT include any information regarding the first and second Economic Impact Payments or the 2020 Recovery Rebate Credit on your 2021 return. Below are frequently asked questions about the 2021 Recovery Rebate Credit, separated by topic. Please do not call the IRS. - Topic A: General Information - Topic B: Claiming the Recovery Rebate Credit if you aren't required to file a 2021 tax return - Topic C: Eligibility for claiming a Recovery Rebate Credit on a 2021 tax return - Topic D: Claiming the 2021 Recovery Rebate Credit - Topic E: Calculating the 2021 Recovery Rebate Credit - Topic F: Receiving the Credit on a 2021 tax return - Topic G: Finding the third Economic Impact Payment Amounts to calculate the 2021 Recovery Rebate Credit - Topic H: Correcting issues after the 2021 tax return is filed 2021 Recovery Rebate Credit -- Topic A: General Information Q A1. How does the 2021 Recovery Rebate Credit differ from the 2020 Recovery Rebate Credit? (added January 13, 2022) A1. 2020 Recovery Rebate Credit: The first two rounds of Economic Impact Payments were advance payments of 2020 Recovery Rebate Credits claimed on a 2020 tax return. The IRS issued the first and second rounds of Economic Impact Payments in 2020 and in early 2021. See 2020 Recovery Rebate Credit Questions and Answers. 2021 Recovery Rebate Credit: The third round of Economic Impact Payments, including the plus-up payments, were advance payments of the 2021 Recovery Rebate Credit claimed on a 2021 tax return. The IRS began issuing the third round of Economic Impact Payments in March 2021 and continued through December 2021. In addition, the third payments differ from the earlier payments in several respects: - Payment amounts are different. The maximum credit is $1,400 per person, including all qualifying dependents claimed on a tax return. Typically, this means a single person with no dependents will have a maximum credit of $1,400, while married taxpayers who file a joint return that claims two qualifying dependents will have a maximum credit of $5,600. - Qualifying dependents expanded. Unlike the 2020 Recovery Rebate Credits and first two rounds of Economic Impact Payments, the 2021 Recovery Rebate Credit and third round of Economic Impact Payments include additional amounts for all dependents, not just children under 17. Eligible individuals will get up to $1,400 for each qualifying dependent claimed on their return, including older relatives like college students, adults with disabilities, parents, and grandparents. - Income thresholds changed. The credit amount begins to be reduced at the same income thresholds as the 2020 Recovery Rebate Credits, for example with adjusted gross income of more than $75,000 if filing as single or $150,000 if filing as married filing jointly. However, the 2021 Recovery Rebate Credit amount is fully reduced to $0 more quickly. For example, individuals can't claim any credit with adjusted gross income of $80,000 or more if filing as single or $160,000 or more for if filing as married filing jointly. Due to these new income limitations, some individuals won't be eligible to claim the 2021 Recovery Rebate Credit even if they received a 2020 stimulus payment. Q A2. What were Plus-Up Payments? (added January 13, 2022) A2. Some eligible individuals received more than one third Economic Impact Payment. The IRS sent additional or plus-up payments to people who: - Received a third Economic Impact Payment based on a 2019 tax return or information received from the Social Security Administration, Railroad Retirement Board, or the Department of Veterans Affairs, and - Filed a 2020 tax return which allowed a greater third Economic Impact Payment but only if the 2020 return was processed by Dec 1, 2021. For example, you may have gotten a plus-up payment if your income was less in 2020 compared to 2019 or you added a dependent on your 2020 return. We automatically evaluated your eligibility for plus-up payments after we processed your 2020 return. We sent plus-up payments separately from your 2020 tax refund and previous Economic Impact Payments. We issued weekly plus-up payments to eligible taxpayers until December 31, 2021, the deadline set by law to make Economic Impact Payments. Individuals who did not receive the full amount of the third Economic Impact Payment, including the plus-up payments, may be eligible to claim the 2021 Recovery Rebate Credit on their 2021 tax return. Q A3. Will the IRS send me a letter or notice about the third Economic Impact Payment? (updated February 17, 2022) A3. Yes, the IRS mailed Notice 1444-C, Your Third Economic Impact Payment, to the address we had on file for you. The IRS sent separate letters to people who received a plus-up payment. Through March 2022, the IRS will send Letter 6475, Your 2021 Economic Impact Payment(s), to confirm the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021. If you received joint payments with your spouse, the letter shows the total amount of your half of the payment. Each spouse may receive their letter at different times. If filing a joint return in 2021, include both amounts when calculating the 2021 Recovery Rebate Credit. If you file separate 2021 tax returns, each of you must enter your half of the amount of the payment, which is shown on your own Letter 6475, when calculating any 2021 Recovery Rebate Credit you may be eligible to claim on your own return. Please keep any IRS notices/letters you receive related to the third round of Economic Impact Payments with your tax records and refer to it when you file your 2021 tax return. Individuals can also view the total amount of their third Economic Impact Payments through their individual Online Account. I f you and your spouse received joint payments, each of you will need to sign into your own account to retrieve your separate amounts. Q A4. Returning a Payment: What should I do to return an Economic Impact Payment that was received as a direct deposit or a paper check? (added January 13, 2022) A4. You should return the payment as described below. If the payment was a paper check: 1. Write "Void" in the endorsement section on the back of the check. 2. Mail the voided Treasury check immediately to the appropriate IRS location listed below. 3. Don't staple, bend, or paper clip the check. 4. Include a brief explanation stating the reason for returning the check. If the payment was a paper check and you have cashed it, or if the payment was a direct deposit: 1. Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below. 2. Make the check/money order made payable to "U.S. Treasury" 3. Write Third EIP, and the Social Security Number (or individual taxpayer identification number) of the recipient of the check. 4. Include a brief explanation of the reason for returning the EIP. Q A5. How do I return an Economic Impact Payment (EIP) that was received as an EIP Card (debit card) if I don't want the payment re-issued? (added January 13, 2022) A5. If you received your EIP as a debit card and want to return the money to the IRS and NOT have the payment reissued, send the card along with a brief explanation stating you don't want the payment and do not want the payment re-issued to: Money Network Cardholder Services 2900 Westside Parkway Alpharetta, GA 30004 Q A6 My address has changed or is incorrect. How can I update it to get my 2021 Recovery Rebate Credit? (added February 17, 2022) A6. The easiest way to update your address with the IRS is to file your 2021 tax return with your current address. The best way to file a complete and accurate 2021 tax return is to file electronically. If you did not receive your third Economic Impact Payment in 2021, or received less than the full amount, you may be eligible to claim the Recovery Rebate Credit when you file your 2021 return. The safest and fastest way to get a tax refund (which would include your Recovery Rebate Credit) is to combine electronic filing with direct deposit. For other ways to update your address with the IRS, see How do I notify the IRS my address has changed? 2021 Recovery Rebate Credit -- Topic B: Claiming the 2021 Recovery Rebate Credit if you aren't required to file a tax return Q B1. I used the Non-Filers tool last year and don't usually file a tax return. What should I do to claim a 2021 Recovery Rebate Credit? (added January 13, 2022) A1. If you're eligible - and either didn't qualify for a third Economic Impact Payment or got less than the full amount -you'll need to file a 2021 tax return to claim the Recovery Rebate Credit even if you otherwise are not required to file a tax return. The best way to file a complete and accurate 2021 tax return is to file electronically. The tax preparation software will ask you questions about your income, credits and deductions and will help you figure your 2021 Recovery Rebate Credit. If your income is $73,000 or less, you can use brand-name software to prepare and file your Federal tax return electronically for free with IRS Free File. IRS Free File is a great option for people who are only filing a tax return - even if you don't usually file taxes - to claim the 2021 Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms or finding a trusted tax professional. The safest and fastest way to get a tax refund (which would include your Recovery Rebate Credit) is to combine electronic filing with direct deposit. Q B2. I do not have a filing requirement, but I think I qualify for more than I received for the third Economic Impact Payment. How can I file for the Recovery Rebate Credit? (added January 13, 2022) A2. If you're eligible - and either didn't receive the full amount of the third Economic Impact Payment or if you think you qualify for a Recovery Rebate Credit that is more than the amount of the third Economic Impact Payment you received -you'll need to file a 2021 tax return to claim the Recovery Rebate Credit even if you otherwise are not required to file a tax return. The best way to file a complete and accurate 2021 tax return is to file electronically in 2022. The tax preparation software will ask you questions about your income, credits and deductions and will help you figure your 2021 Recovery Rebate Credit. If your income is $73,000 or less, you can use brand-name software to prepare and file your Federal tax return electronically for free with IRS Free File. IRS Free File is a great option for people who are only filing a tax return - even if you don't usually file taxes - to claim the Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms or finding a trusted tax professional. The safest and fastest way to get a tax refund (which would include your Recovery Rebate Credit) is to combine electronic filing with direct deposit. Q B3. What information do I need to provide to claim the 2021 Recovery Rebate Credit? (added January 13, 2022) A3. If you file electronically, the tax preparation software will ask you for specific information. No matter how you file, you will need to do the following to claim the 2021 Recovery Rebate Credit: - Compute the 2021 Recovery Rebate Credit amount using tax preparation software, or the line 30 worksheet found in 2021 Form 1040 and Form 1040-SR Instructions. - Enter the computed amount from the worksheet onto line 30, Recovery Rebate Credit, of your 2021 Form 1040 or Form 1040-SR. Reminder: Complete direct deposit information on line 35b-35d or check the box on line 35a and complete Form 8888 if you want to split your refund for deposit into more than one account or buy a U.S. Savings Bond. Direct deposit is the safest and fastest way to receive your refund. If you don't choose direct deposit, a paper check will be mailed to you. See FAQ B7. How can I get a direct deposit if I don't have a bank account? Free tax return preparation is also available for those who qualify. Q B4. Should I include income on the return even if I am not usually required to file? (added January 13, 2022) A4. Yes, you may be eligible to claim additional tax credits if you have earned income and include all your income with the information about a spouse or any dependents on your tax return. Filing your 2021 tax return electronically is the fastest and most accurate way for you to file. If your income is $73,000 or less, you can use brand-name software to prepare and file your Federal tax return electronically for free with IRS Free File. You can also file electronically with commercial tax preparation software. The tax preparation software will ask you questions about your income, credits and deductions and will help you figure your 2021 Recovery Rebate Credit and any other credits that may apply to you. Q B5. I am filing electronically, and the software asks me to enter my prior year Adjusted Gross Income (AGI) to submit my return. Where do I find this information? (updated February 17, 2022) A5. When preparing your taxes and filing electronically, you must sign and validate your electronic tax return by entering your prior-year Adjusted Gross Income (AGI) or your prior-year Self-Select PIN. - If you successfully used the Non-Filers tool last year to register for an advance Child Tax Credit payment or claim a 2020 Recovery Rebate Credit, enter "$1" as the prior year AGI verification. - If you did not use the Non-Filers tool last year and you did not file an electronic or a paper 2020 Form 1040 or Form 1040-SR, you should enter "$0" as the prior year AGI verification. - If you filed an electronic or a paper 2020 Form 1040 or Form 1040-SR, enter the AGI amount from line 11 of the submitted 2020 Form 1040 or Form 1040-SR as the prior year AGI verification. To find the AGI amount, you can also view or create your online account a nd access Tax Records. Q B6. Can I use IRS Free File to file a tax return - even if I don't usually file taxes - to claim a 2021 Recovery Rebate Credit? (added January 13, 2022) A6. Yes. IRS Free File online is especially valuable for people who do not have a tax filing obligation. These are people whose taxable income is below certain income levels. For example, single people with income below $12,550, the amount of the standard deduction, would have no filing obligation if they had no other special tax issues. Eligible individuals who did not get a third Economic Impact Payment or got less than the full amount, must file a 2021 tax return - even if they do not usually file a tax return - to claim the 2021 Recovery Rebate Credit. Even if you don't have a computer, you can access IRS Free File and file your tax return on your smart phone. Here's how it works if you do not have a 2021 tax filing requirement and file in 2022: 1. Go to IRS.gov/freefile. 2. Select "Choose an IRS Free File Offer" blue button. 3. Select "Browse all offers" and look for a product that has no minimum income requirement. 4. Select the product that best meets your needs, and you will be automatically redirected to the company's website. 5. Answer the tax product questions to complete your tax return, accurately report your taxable income, if any. 6. If you have no taxable income, simply answer the questions including those requesting information needed to compute the 2021 Recovery Rebate Credit. 7. Complete the information for your refund, sign the tax return electronically and file the tax return electronically. Individuals who do not have a tax filing obligation who use IRS Free File may find they are eligible for additional tax benefits such as the Earned Income Tax Credit, or EITC. Free File uses easy interview-based software products to walk you through the tax filing process step-by-step to help ensure you get all the tax benefits you are due. Q B7. How can I get a direct deposit if I don't have a bank account? (added January 13, 2022) A7. Filing electronically and having your refund sent via direct deposit is the fastest and safest way to receive your money. If you don't have a bank account, visit the FDIC website o r the National Credit Union Association using their Credit Union Locator Tool f or information on where to find a bank or credit union that can open an account online and how to choose the right account for you. If you are a veteran, see the Veterans Benefits Banking Program (VBBP) fo r access to financial services at participating banks. If you have a prepaid debit card, you may be able to have your refund applied to the card. Many reloadable prepaid cards or mobile payment apps have account and routing numbers that you could provide to the IRS. You would need to check with the financial institution to ensure your card can be used and to obtain the routing number and account number, which may be different from the card number. Note: Any previously issued Economic Impact Payment debit card is not a reloadable card. Q B8. I don't usually file a tax return and used the new Child Tax Credit Non-filer Sign-up Tool in 2021. Am I also eligible to claim a 2021 Recovery Rebate Credit? (added January 13, 2022) A8. Most eligible people already received their 2021 Recovery Rebate Credit in advance as third Economic Impact Payments, including those who successfully used the Non-Filers tool. We used the information you entered in the Child Tax Credit Non-Filer Sign-up Tool to calculate and send to eligible people the Third Economic Impact Payment. If you didn't qualify for a third Economic Impact Payment or got less than the full amount and would like to know if you're eligible for the 2021 Recovery Rebate Credit, see FAQ Eligibility Requirements: What are the eligibility requirements for the credit ? Q B9. I'm not sure how much of the 2021 Recovery Rebate Credit I'm eligible for. If I enter the wrong amount, what will happen? (added January 13, 2022) A9. When you file your 2021 tax return, your tax preparation software or the line 30 worksheet found in the 2021 Form 1040 and Form 1040-SR Instructions can help you figure your Recovery Rebate Credit amount. You will need to know the amount of your third Economic Impact Payment and any plus-up payments. Log into your Online Account to look up these amount(s) or you may also refer to the Notice 1444-C, Your Third Economic Impact Payment. In early 2022, we'll send Letter 6475 confirming the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021. If you figure your 2021 Recovery Rebate Credit incorrectly, the IRS will calculate the credit for you only if you do not enter $0 or leave line 30 of your 2021 Form 1040 or Form 1040-SR blank. Otherwise, we'll make the correction to your tax return and continue processing your return. The IRS will not contact you before making this correction, and you will not be required to provide any additional information. If we need to correct your return, it may take longer to process, which may also slow your tax refund. We will send you a notice explaining any change made to your return. See Topic H: Correcting issues after the 2021 tax return is filed for more information. DO NOT file an amended tax return. Q B10. What will happen if I enter $0 for the credit and that amount is incorrect or I leave line 30 of 2021 Form 1040 or Form 1040-SR blank? (added January 13, 2022) A10. The IRS will not calculate and correct your entry if you enter $0 or leave the line blank for the Recovery Rebate Credit. Instead, the IRS will treat your entry of $0 or blank as your decision not to claim the Recovery Rebate Credit. See Topic H: Correcting issues after the 2021 tax return is filed for more information. 2021 Recovery Rebate Credit -- Topic C: Eligibility for claiming a Recovery Rebate Credit on a 2021 tax return QC1. Eligibility Requirements: What are the eligibility requirements for the credit? (added January 13, 2022) A1. The eligibility requirements for the 2021 Recovery Rebate Credit are the same as they were for the third Economic Impact Payments, except that the credit eligibility and amount are based on your 2021 tax year information. Third Economic Impact Payments were based on your 2019 or 2020 tax year information. If you didn't qualify for third Economic Impact Payment or did not receive the full amount, may be eligible to claim the 2021 Recovery Rebate Credit based on your 2021 tax information. If you received the full amount for the third Economic Impact Payment, you won't need to include any information about it when you file your 2021 tax return. You received the full amount of your third Economic Impact Payment if the total amount was: - $1,400 for an eligible individual who has a valid Social Security number (SSN) ($2,800 for married couples filing a joint return if both spouses have a valid SSN or if one spouse has a valid SSN and one spouse was an active member of the U.S. Armed Forces at any time during the taxable year) plus - $1,400 for each qualifying dependent who has a valid SSN or Adoption Taxpayer Identification Number (ATIN) issued by the IRS Generally, if you were a U.S. citizen or U.S. resident alien in 2021, you were not a dependent of another taxpayer, and you either have a valid SSN or claim a dependent who has a valid SSN or ATIN, you are eligible to claim the 2021 Recovery Rebate Credit. You may also be eligible if you file a joint return with your spouse, you or your spouse were a U.S. citizen or U.S. resident alien in 2021, and either you, your spouse, or both of you, have a valid SSN or you claim a dependent who has a valid SSN or ATIN. Your credit amount will be reduced by the amount of your third Economic Impact Payment. It is then reduced if the adjusted gross income (AGI) amount on line 11 of your 2021 Form 1040 or Form 1040-SR is more than: - $150,000 if married and filing a joint return or filing as a qualifying widow or widower - $ 112,500 if filing as head of household or - $ 75,000 for all others. No credit is allowed when AGI is at least the following amount: - $ 160,000 if married and filing a joint return or if filing as a qualifying widow or widower - $ 120,000 if filing as head of household or - $80,000 for all others. For example, a single person with no dependents and an AGI of $77,500 will have a maximum credit of $700 (half the full amount). Married taxpayers who file a joint return that claims two qualifying dependents and an AGI of $155,000 will have a maximum credit $2,800 (again, half the full amount). You aren't eligible to claim the 2021 Recovery Rebate Credit if any of the following apply: - You could be claimed as a dependent on another taxpayer's 2021 tax return - You're a nonresident alien. - You don't have a valid SSN issued to you by the due date of your tax return and you don't claim a dependent who has a valid SSN or ATIN. Also, estates, trusts, and individuals who died before January 1, 2021 do not qualify for the 2021 Recovery Rebate Credit. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File Program. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q C2. Not Eligible for Third Economic Impact Payments: If I wasn't eligible for a third Economic Impact Payment, am I not eligible to claim the 2021 Recovery Rebate Credit? (added January 13, 2022) A2. If you were not eligible for the full third Economic Impact Payment, you may be eligible to claim the 2021 Recovery Rebate Credit since it's based on your 2021 tax return information. Third Economic Impact Payments were based on your 2019 or 2020 tax information. Factors that may affect eligibility for the 2021 Recovery Rebate Credit include: Income change: Some people may have received less than the full third Economic Impact Payment because their adjusted gross income was too high. Lower income in 2021 could make you eligible to claim the 2021 Recovery Rebate Credit. Qualifying dependent: If an individual became your dependent in 2021, including by birth or adoption, you may be eligible to claim the 2021 Recovery Rebate Credit for the dependent on your 2021 tax return that you file in 2022. No longer a dependent: Individuals who were claimed or could be claimed as a dependent on someone else's tax return for 2019 or 2020 may now be eligible if they can't be claimed as a dependent on someone else's tax return for 2021. Social Security number: Individuals who did not have a Social Security number in 2021 but are issued one by the due date of their 2021 tax return (including an extension if the extension was requested by the due date) may now be eligible. You'll claim the 2021 Recovery Rebate Credit when you file your 2021 tax return. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File Program. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q C3. Change in Eligibility: If I received a third Economic Impact Payments and, based on my 2021 tax return, I'm no longer eligible, do I need to pay that money back? (added January 13, 2022) A3. No, if you qualified for a third payment based on your 2019 or 2020 tax return, the law doesn't require you to pay back all or part of the payment you received based on the information reported on your 2021 tax return. Q C4. Social Security Number Requirement: Do I need to have an SSN to claim the credit? (added January 13, 2022) A4. Generally, yes. One eligibility requirement for the 2021 Recovery Rebate Credit is that you must have a valid SSN or claim a dependent who has a valid SSN or Adoption Taxpayer Identification Number issued by the IRS. A valid SSN for the 2021 Recovery Rebate Credit is one that is issued by the Social Security Administration by the due date of your 2021 tax return (including an extension if you requested the extension by the due date). If you file jointly with your spouse and only one individual has a valid SSN, you can claim up to $1,400 for the spouse who has a valid SSN and up to $1,400 for each qualifying dependent claimed on the tax return. If neither spouse has a valid SSN, you can claim only up to $1,400 for each qualifying dependent claimed on the tax return. Active Military: If either spouse is an active member of the U.S. Armed Forces at any time during the taxable year, only one spouse needs to have a valid SSN for the couple to receive up to $2,800 for themselves, plus up to $1,400 for each qualifying dependent. Q C5. Social Security Number Spouses Filing Jointly: My spouse has an SSN and I have an ITIN. Are we eligible to claim the credit? (added January 13, 2022) A5. If you file jointly with your spouse and only one individual has a valid SSN, you can claim up to $1,400 for the spouse who has a valid SSN and up to $1,400 for each qualifying dependent claimed on the tax return. If neither spouse has a valid SSN, you can claim only up to $1,400 for each qualifying dependent claimed on the tax return. A valid SSN for the credit is one that is issued by the Social Security Administration by the due date of your tax return (including an extension if you request the extension by the due date). Active Military: If either spouse is an active member of the U.S. Armed Forces at any time during the taxable year, only one spouse needs to have a valid SSN for the couple to receive up to $2,800 for themselves, plus up to $1,400 for each qualifying dependent. Q C6. Social Security number Spouses Filing Jointly if one spouse is a member of the military: My spouse has an SSN and I have an ITIN. Are we eligible for the credit? (added January 13, 2022) A6. If either spouse is an active member of the U.S. Armed Forces at any time during the taxable year, only one spouse needs to have a valid SSN for the couple to claim up to $2,800 for themselves, plus up to $1,400 for each qualifying dependent. If spouses file separately, the spouse who has an SSN may claim the 2021 Recovery Rebate Credit; the other spouse without a valid SSN will not qualify unless claiming a qualifying dependent on the tax return. Q C7. Dependents: Who's considered a qualifying dependent for the 2021 Recovery Rebate Credit? (added January 13, 2022) A7. If you can be claimed as a dependent on someone else's 2021 tax return, then you cannot claim a dependent on your tax return. You also can't claim the 2021 Recovery Rebate Credit. The 2021 Recovery Rebate Credit includes up to an additional $1,400 for each qualifying dependent you claim on your 2021 tax return. A qualifying dependent is a dependent who has a valid Social Security number (SSN) or Adoption Taxpayer Identification Number issued by the IRS. A valid SSN for the 2021 Recovery Rebate Credit is one that is issued by the Social Security Administration by the due date of your 2021 tax return (including an extension if you requested the extension by the due date). To claim a person as a dependent on your tax return, that person must be your qualifying child or qualifying relative. A child is your qualifying child if the following conditions are met: - Relationship to you: The child is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, grandchild, niece, or nephew). - Age: The child was: o under age 19 at the end of the tax year and younger than you, o under age 24 at the end of the tax year, a student, and younger than you, or o any age and permanently and totally disabled. - Citizenship: The child's a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico. - Residency: The child lived with you for more than half of the tax year. For exceptions to this requirement, see Residency Test i n Publication 501, Dependents, Standard Deduction, and Filing Information. - Support: The child didn't provide over half of his or her own support for the tax year. - Tax return: The child doesn't file a joint return for the year (or files it only to claim a refund of withheld income tax or estimated tax paid). A person is your qualifying relative if the following conditions are met: - The person can't be your qualifying child or the qualifying child of any other taxpayer. - The person either is related to you in one of several ways or lived with you all year as a member of your household (and your relationship must not violate local law). - The person is a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico. - The person's gross income for the year must be less than $4,300. (Exceptions exist if the person is disabled.) - You must provide more than half of the person's total support for the year. (Exceptions exist for multiple support agreements, children of divorced or separated parents, and parents who live apart.) - The person doesn't file a joint return for the year (or files it only to claim a refund of withheld income tax or estimated tax paid). To claim a person as a dependent on your tax return, that person must be your qualifying child or qualifying relative. See Whom May I Claim as a Dependent? t o determine if you can claim someone as a dependent. Q C8. Dependents: Is a child born, adopted, or placed into my foster care in 2021 a qualifying dependent for the 2021 Recovery Rebate Credit? (added January 13, 2022) A8. Yes. The third Economic Impact Payment in 2021 did not include payments for these children because it was based on information from your 2020 or 2019 tax return, but you may claim a 2021 Recovery Rebate Credit for them if they are a qualifying dependent and you're eligible for the credit. You may claim a 2021 Recovery Rebate Credit for the qualifying dependent, if you're eligible, on your 2021 tax return that you will file in 2022. To claim a person as a dependent on your tax return, that person must be your qualifying child or qualifying relative. See Whom May I Claim as a Dependent? t o determine if you can claim someone as a dependent. Q C9. Dependents: I didn't receive the Economic Impact Payment because I was claimed as a dependent on someone else's 2020 return. Can I claim the Recovery Rebate Credit if I'm not a dependent in 2021? (added January 13, 2022) A9. Maybe. If you were claimed as a dependent on someone else's tax return for 2020, you were not eligible for the third Economic Impact Payment. If no one can claim you as a dependent for 2021 and you are otherwise eligible, you can claim the 2021 Recovery Rebate Credit on your 2021 tax return. Married persons who didn't receive the third Economic Impact Payment should determine their eligibility for the Recovery Rebate Credit when filing their 2021 tax return. You and your spouse can't be claimed as a dependent on someone else's return for the 2021 tax year if you claim the 2021 Recovery Rebate Credit on a joint tax return that you and your spouse file together. See Joint Return Test under Dependents in Publication 501, Dependents, Standard Deduction, and Filing Information. If you file electronically, the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing f or details about IRS Free File, Free File Fillable Forms, free VITA or TCE tax preparation sites in your community or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions c an also help calculate the credit. QC10. Incarcerated Individuals: Can I claim the credit if I was incarcerated in 2021? (added January 13, 2022) A10. Yes. Individuals will not be denied the 2021 Recovery Rebate Credit solely because they are incarcerated. An incarcerated individual may claim a 2021 Recovery Rebate Credit if all eligibility requirements are met and the individual files a 2021 tax return - even if not required to file - to claim the credit. Q C11. Deceased Individuals: Are individuals who died during 2021 eligible for the 2021 Recovery Rebate Credit? (added January 13, 2022) A11. An individual who died in 2021 or in 2022 and did not receive the full amount of the third Economic Impact Payment may be eligible for the 2021 Recovery Rebate Credit if the individual met the eligibility requirements while alive. An individual who died prior to January 1, 2021 does not qualify for the 2021 Recovery Rebate Credit. Q C12. Social Security Number (SSN) Dependents: I don't have a valid SSN, but I have a dependent who does. May I claim a 2021 Recovery Rebate Credit for my dependent? (added January 13,2022) A12. A dependent who has a valid SSN is a qualifying dependent. You can claim up to $1,400 for each qualifying dependent claimed on your tax return, even if you do not have a valid SSN, but you must meet all other eligibility and income requirements. For example, if you file as head of household and your adjusted gross income is $120,000 or more you would not qualify for any credit for you or your qualifying dependent. If your income was under $120,000, you are a U.S. resident alien and not a dependent on another taxpayer's 2021 return, you can't claim $1,400 for yourself, but you may still claim up to $1,400 for each dependent you claimed on your return who has a valid SSN. You can claim the 2021 Recovery Rebate Credit for your qualifying dependent by filing a 2021 tax return. If you file electronically, the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing f or details about IRS Free File, Free File Fillable Forms, free VITA or TCE tax preparation sites in your community or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help calculate the credit. Q C13. U.S. Territory Residents: Can I claim a 2021 Recovery Rebate Credit if I was a bona fide resident of a U.S. territory in 2021? (added January 13, 2022) A13. No, you may not claim the credit from the IRS. Instead, tax authorities in U.S. territories will provide the Recovery Rebate Credit to eligible residents. Individuals who were territory residents in 2021 should direct questions about the third Economic Impact Payments received or the 2021 Recovery Rebate Credit to the tax authorities in the territories where they reside. 2021 Recovery Rebate Credit -- Topic D: Claiming the 2021 Recovery Rebate Credit Q D1. How to Claim: How do I claim the 2021 Recovery Rebate Credit? (updated February 8, 2022) A1. You must file a 2021 tax return to claim a Recovery Rebate Credit, even if you are otherwise not required to file a tax return. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. File electronically and tax preparation software will help you figure your Recovery Rebate Credit. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions c an also help determine if you are eligible for the credit. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File Program. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q D2. The IRS hasn't finished processing my 2020 tax return. Can I file my 2021 tax return - even if I don't usually file taxes - to claim the 2021 Recovery Rebate Credit if I did not get my full amount of the third Economic Impact Payment? (updated February 8, 2022) A2. Yes. If you did not receive the full amount of the third Economic Impact Payment and you are eligible for the 2021 Recovery Rebate Credit, you can file your 2021 tax return - even if you don't usually file taxes - to claim the credit even if your 2020 tax return hasn't finished processing. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. NOTE: By law, the IRS cannot issue third Economic Impact Payments after December 31, 2021. Avoid processing delays that can slow your refund by filing a complete and accurate tax return. You will need the total amount of your third Economic Impact payment and any plus-up payments to claim the 2021 Recovery Rebate Credit. You can find this amount in your Online Account. You may also refer to Notice 1444-C, Your Third Economic Impact Payment, which shows the amount of the third payment. Through March 2022, we'll send Letter 6475 confirming the total amount of the third Economic Impact Payment and any plus-up payments you received in 2021. Any third Economic Impact Payments you received will reduce the amount of the Recovery Rebate Credit you claim on your tax return. File your 2021 tax return electronically a nd the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Your Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund, and can be direct deposited i nto your financial account. You can use a bank account, prepaid debit card or alternative financial products for your direct deposit. You will need to provide routing and account numbers. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions c an also help calculate the credit. See the special instructions to Validate Your 2021 Electronic Tax Return if you need help. Q D3. I'm not required to file a return for 2021, and I received my third Economic Impact Payment based on my 2021 federal benefits, but it did not include amounts for my spouse or qualifying dependents. Should I file a 2021 tax return - even if I don't usually file taxes - to get an additional amount? (added January 13, 2022) A3. Yes. If you did not receive the full amount of the third Economic Impact Payment, you must file a 2021 tax return to claim a 2021 Recovery Rebate Credit even if you are otherwise not required to file. This includes amounts for your spouse, if eligible, and qualifying dependents reported on your 2021 tax return for whom you did not receive a third payment. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File Program. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited i nto your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q D4. What is the quickest way to get the 2021 Recovery Rebate Credit? (added January 13, 2022) A4. You must file a 2021 tax return - to claim a 2021 Recovery Rebate Credit, even if you are otherwise not required to file a tax return. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. The fastest and most accurate way for you is to file is electronically where the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing f or details about IRS Free File, Free File Fillable Forms o r finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions c an also help determine if you are eligible to claim the credit. The fastest way to get your tax refund is to file electronically a nd have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q D5. Where can I get help completing my 2021 tax return for the 2021 Recovery Rebate Credit if I can't do it myself? (added January 13, 2022) A5. If you are unable to or choose not to use the IRS Free File or Free File Fillable Forms to file your 2021 tax return -even if you don't usually file taxes - to claim the 2021 Recovery Rebate Credit, there are various types of tax return preparers, including certified public accountants, enrolled agents, attorneys and others who can assist you in filing your return. See Need someone to prepare your tax return? For information on how to choose the right preparer for you. Q D6. Where can I find the amount of my Third Economic Impact Payment? (updated February 17, 2022) A6. To find the amount of your Economic Impact Payments, check: Your Online Account: This is an online IRS application that allows you to securely access your individual account information. The amount of your third Economic Impact Payment is shown on the Tax Records tab/page under the section "Economic Impact Payment Information." If you and your spouse received joint payments, each of you will need to sign into your own account to retrieve your separate amounts. IRS letters: We mailed Notice 1444-C that shows the third Economic Impact Payment to the address we have on file. If you received a joint payment with your spouse, the letter shows the total amount of payments. If you file separate 2021 tax returns, each of you must enter half of the amount of the payment. Letter 6475: Through March 2022, we'll send this letter confirming the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021. If you and your spouse received joint payments, each of you will receive your own letter showing half of the third payment. Each spouse may receive their letter at different times. If filing a joint return in 2021, include both amounts when calculating the 2021 Recovery Rebate Credit. If you file separate 2021 tax returns, each of you must enter your half of the payment amount, which is shown on your own Letter 6475, when calculating any 2021 Recovery Rebate Credit you may be eligible to claim on your own return. Your 2021 account transcript: You can request this online or by mail using Get Transcript. You may also call us at 800-908-9946 to have one sent by mail or you can submit Form 4506-T. If you received joint payments with your spouse, the transcript shows the total amount of each payment under the primary taxpayer. If you file separate 2021 tax returns, each of you must enter half of the amount of the payment. 2021 Recovery Rebate Credit -- Topic E: Calculating the 2021 Recovery Rebate Credit Q E1. How do I figure the credit? (added January 13, 2022) A1. You must file a 2021 tax return to claim a 2021 Recovery Rebate Credit, even if you usually don't file a tax return. See the 2021 Recovery Rebate Credit FAQs -- Topic B: Claiming the Recovery Rebate Credit if you aren't required to file a tax return. To figure the credit on your tax return, you will need to know the amount of any third Economic Impact Payments you received. This includes any plus-up payments. Log into your online account t o find your Economic Impact Payment amounts. You can also refer to IRS Notice 1444-C mailed to your address of record. In January 2022, we'll send Letter 6475 confirming the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021. See: Where can I find the amount of my Third Economic Impact Payment? The fastest and most accurate way for you is to file is electronically where the tax preparation software will help you figure your 2021 Recovery Rebate Credit. You can also use the Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions t o help determine if you are eligible for the credit. Q E2. Errors: Will the IRS figure the credit for me on my 2021 tax return? What happens if I claim an incorrect amount? (added January 13, 2022) A2. If you're eligible, you'll need to file a 2021 tax return to claim the 2021 Recovery Rebate Credit even if you aren't required to file a tax return. Line 30 on 2021 Form 1040 and Form 1040-SR is used to claim the Recovery Rebate Credit. File a complete and accurate return - even if you don't usually file taxes - to avoid processing delays that slow your tax refund. The IRS will not calculate the Recovery Rebate Credit for you or correct your entry if you enter $0 or leave the line blank for the credit. If you make a mistake on the Line 30 amount ($1 or more), we will calculate the correct amount of the Recovery Rebate Credit, correct your tax return, and continue processing it. This will delay the processing of your return. We will send you a notice explaining any changes we make. To calculate and claim the Recovery Rebate Credit, you'll need the amounts of any third Economic Impact Payments, including plus-up payments that you received. Log into your online account t o find your third Economic Impact Payment amounts. You can also refer to IRS Notice 1444-C mailed to your address of record. In early 2022, we'll send Letter 6475 confirming the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021. See: Where can I find the amount of my Third Economic Impact Payment? File electronically a nd the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms o r finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the2021 Form 1040 and Form 1040-SR instructions can also help determine if you are eligible to claim the credit and the amount to enter on line 30. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q E3. Worksheet: Am I required to complete the 2021 Recovery Rebate Credit Worksheet? (added January 13, 2022) A3. There is no need to claim the 2021 Recovery Rebate Credit or complete the worksheet if you received the full amount of the third Economic Impact Payment. If you didn't receive the full amount of the third Economic Impact Payment, then the 2021 Recovery Rebate Credit Worksheet will help you find out how much of the credit you qualify for when filing your 2021 tax return. Completing the worksheet is not required, but it may be helpful for you to use it and keep it for your records. To calculate and claim the 2021 Recovery Rebate Credit, you'll need to know the amounts of any third Economic Impact Payments you received. This includes any plus-up payments. Log into your online account to find your third Economic Impact Payment amounts. You can also refer to IRS Notice 1444-C mailed to your address of record. In early 2022, we'll send Letter 6475 confirming the total amount of the third Economic Impact Payment and any plus-up payments you received in 2021. See: Where can I find the amount of my Third Economic Impact Payment? Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File P rogram. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited i nto your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q E4. Deadline: Will I still be able to claim the credit if I file my tax return after the filing deadline? (added January 13, 2022) A4. Your 2021 tax refund will include your 2021 Recovery Rebate Credit. To claim any refund, you generally must file your tax return within 3 years from the date the return was due (including extensions if you requested the extension by the due date) to get that refund. This includes any amount of the 2021 Recovery Rebate Credit included in your refund. Q E5. Not Required to File a Return: How do I claim the credit if I'm not required to file a 2021 tax return? (added January 13, 2022) A5. The only way to get a Recovery Rebate Credit is to file a 2021 tax return, even if you are otherwise not required to file a tax return. The fastest and most accurate way for you is to file is electronically where the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing f or details about IRS Free File, Free File Fillable Forms o r finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help determine if you are eligible to claim the credit. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited i nto your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. See the Claiming the Recovery Rebate Credit if you aren't required to file a tax return FAQ section. Q E6. Joint Return Deceased Spouse: How do I complete the 2021 Recovery Rebate Credit Worksheet if I received joint Economic Impact Payments with my spouse who died before January 1, 2021? (added January 13, 2022) A6. If your spouse died before January 1, 2021, and you received third Economic Impact Payments that included an amount for your deceased spouse, return the decedent's portion of the payment as described in Does someone who died qualify for the payment? If you did not get the full amount for the third Economic Impact Payment, you may be eligible to claim the 2021 Recovery Rebate Credit. Do not include your deceased spouse's portion of the Economic Impact Payment (no more than $1,400) on the worksheet when filing your 2021 tax return. You should only include your portion of the payment and the amount for any qualifying children on the worksheet. If your 2021 tax return has been processed and you didn't claim the credit on your return but are eligible for it, you must file an amended return to claim the credit. See the 2021 Recovery Rebate Credit FAQs -- Topic G: Correcting issues after the 2021 tax return is filed. Q E7. Joint Return Deceased Spouse: How do I complete the 2021 Recovery Rebate Credit Worksheet if my spouse died in 2021? (updated February 17, 2022) A7. If you are filing your 2021 return with your deceased spouse as married filing jointly, you should enter $2,800 on line 6 of the worksheet (if you answered "Yes" to question 2 or 3 in the worksheet). Also include the amount of any third Economic Impact Payments you both received on line 13 of the worksheet. Please refer to the 2021 Form 1040 and Form 1040-SR instructions for more information. Q E8. Joint Return: What if I'm filing a joint return with my spouse this year and my spouse received a third Economic Impact Payment, but I did not? (added January 13, 2022) A8. If you did not receive the full amount for the third Economic Impact Payment and you and your spouse meet all the eligibility requirements based on your 2021 tax return, you may claim the 2021 Recovery Rebate Credit. The only way to get a 2021 Recovery Rebate Credit is to file a 2021 tax return, even if you are otherwise not required to file a tax return. When you answer the tax preparation software questions or complete the 2021 Recovery Rebate Credit Worksheet for a joint tax return with your spouse, enter the combined third Economic Impact Payment amounts you and your spouse received. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File Program. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q E9. Federal Benefits Recipients: I'm a federal benefits recipient who didn't receive a third Economic Impact Payment and who is not required to file a 2021 tax return. How do I claim the credit? (added January 13, 2022) A9. The only way to get a 2021 Recovery Rebate Credit is to file a 2021 tax return, even if you are otherwise not required to file a tax return. The fastest and most accurate way for you is to file is electronically where the tax preparation software will help you figure your Recovery Rebate Credit. Visit IRS.gov/filing f or details about IRS Free File, Free File Fillable Forms o r finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions c an also help determine if you are eligible to claim the credit. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. The fastest way to get your tax refund is to file electronically a nd have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q E10. Third Economic Impact Payment Reporting: Do I have to report my third Economic Impact Payment as income on my 2021 tax return? (added January 13, 2022) A10. No, the third payment is not includible in your 2021 gross income. You should not include the payments as income on your Federal income tax return or pay income tax on them. They will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs. Q E11. Joint Economic Impact Payments: What if my spouse and I received a joint third Economic Impact Payment and we are not filing a joint 2021 tax return? (added January 13, 2022) A11. When third Economic Impact Payments were jointly issued to two spouses, each spouse must claim half the payment when calculating the 2021 Recovery Rebate Credit if they are not filing their 2021 tax return jointly. Each spouse must enter half the payment in the tax preparation software or on the 2021 Recovery Rebate Credit Worksheet. If filing a joint return, you will include the total amount of the third payment issued to you and your spouse. The fastest and most accurate way for you is to file is electronically where the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help determine if you are eligible for the credit. Log into your online account t o view the amounts of your third Economic Impact Payments. You can also refer to your Notice 1444-C, Your Third Economic Impact Payment, which shows the amount of the third payment. In early 2022, we'll send Letter 6475 confirming the total amount of the third Economic Impact Payment and any plus-up payments you received in 2021. See: Where can I find the amount of my Third Economic Impact Payment? Q E12. Joint Economic Impact Payments: What if my Economic Impact Payment was sent to my ex-spouse and I never received my half? (added January 13, 2022) A12. When a third Economic Impact Payment was issued jointly to two spouses, each spouse is treated as receiving half the payment. When determining any 2021 Recovery Rebate Credit, each spouse must enter half the payment in the tax preparation software or on the 2021 Recovery Rebate Credit Worksheet. NOTE: If the third Economic Impact Payment was based on a return was filed without your consent, refer to Missing Economic Impact Payment: If I didn't receive the third Economic Impact Payments because a 2019 or 2020 joint return was filed in my name without my consent, can I claim the 2021 Recovery Rebate Credit? The fastest and most accurate way to file is electronically where the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions c a n also help determine if you are eligible for the credit. Log into your online account to view the amounts of your third Economic Impact Payments. You can also refer to your Notice 1444-C, Your Third Economic Impact Payment, which shows the amount of the third payment. In early 2022, we'll send Letter 6475 confirming the total amount of the third Economic Impact Payment and any plus-up payments you received in 2021. See: Where can I find the amount of my Third Economic Impact Payment? Q E13. EIP Card Not Activated: I received an EIP card for my third Economic Impact Payment but didn't activate it to use the funds. Can I claim the full amount of the credit? (added January 13, 2022) A13. No, you must reduce your 2021 Recovery Rebate Credit amount by the amount of third Economic Impact Payments that were loaded on the EIP cards. Whether you have activated your card is not relevant to the requirement that your 2021 Recovery Rebate Credit amount be reduced by the amount of the third Economic Impact Payment. Your EIP card will continue to be available for use once you properly activate it. If not activated, no action will be taken on the card until it expires. The funds will remain valid on the card and accessible once you activate the card. The funds will not be returned to the IRS, unless you return the card to MetaBank(R). If your card is lost or destroyed, you can request a replacement by contacting MetaBank(R), N.A., at 800-240-8100 (option 2 from the main menu). For more information, visit EIPcard.com. Q E14. Filing Status Change: My filing status in 2021 is different from that in 2020. Does this affect the amount of the credit I can claim? (added January 13, 2022) A14. Maybe. When a third Economic Impact Payment was issued jointly to two spouses, each spouse is treated as receiving half the payment. If your filing status for 2021 changed to or from Married Filing Jointly or if you remarried in 2021, each spouse should include their half of the third Economic Impact Payment when entering information into the tax preparation software or completing the worksheet to determine the amount of the 2021 Recovery Rebate Credit. Q E15. Dependents: Can my 2021 Recovery Rebate Credit include an amount for a qualifying dependent if the dependent received the third Economic Impact Payment or someone else received the third Economic Impact Payment for the dependent? (added January 13, 2022) A15. Yes, if you meet the eligibility requirements to claim the 2021 Recovery Rebate Credit. The amount of your credit may include up to $1,400 for a qualifying dependent you are claiming on your 2021 return. Note: Qualifying dependents expanded for 2021 Recovery Rebate Credit. Unlike the 2020 Recovery Rebate Credit, the 2021 credit includes additional amounts for all dependents, not just children under 17. Eligible individuals can claim the 2021 credit based on all of their qualifying dependents claimed on their return, including older relatives like college students, adults with disabilities, parents, and grandparents. When you answer the tax preparation software questions or complete the 2021 Recovery Rebate Credit Worksheet, include only the third Economic Impact Payment amounts issued to you (and your spouse, if filing a 2021 joint return). Do not include third Economic Impact Payment amounts issued to anyone else, even if their payments included amounts for an individual who is your qualifying dependent for 2021. See: Where can I find the amount of my Third Economic Impact Payment? Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File P rogram. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q E16. Who's a qualifying dependent for the Recovery Rebate Credit? (added January 13, 2022) A16. The 2021 Recovery Rebate Credit includes up to an additional $1,400 for each qualifying dependent you claim on your 2021 tax return. A qualifying dependent is a dependent who has a valid Social Security number (SSN) or Adoption Taxpayer Identification Number issued by the IRS. A valid SSN for the 2021 Recovery Rebate Credit is one that is issued by the Social Security Administration by the due date of your 2021 tax return (including an extension if you requested the extension by the due date). To claim a person as a dependent on your tax return, that person must be your qualifying child or qualifying relative. If you can be claimed as a dependent on someone else's 2021 tax return, then you cannot claim a dependent on your tax return. You also can't claim the 2021 Recovery Rebate Credit. See Topic C: Eligibility for claiming a Recovery Rebate Credit on a 2021 tax return for more information. Q E17. Dependents: My third Economic Impact Payments included an amount for a dependent who was not my dependent in 2021. I have another qualifying dependent, born in 2021 to claim on my 2021 tax return who wasn't my qualifying dependent for the third Economic Impact Payment. Will I receive a 2021 Recovery Rebate Credit for the qualifying dependent born in 2021 who I will claim as a dependent for 2021? (added January 13, 2022) A17. The third Economic Impact Payment was an advance payment of the 2021 Recovery Rebate Credit. To issue the Economic Impact Payments as quickly as possible, applicable laws allowed the IRS to use your 2020 tax information. If your 2020 tax return was not on file, the IRS used your 2019 tax return information. Generally, if you had the same number of qualifying dependents on your 2020 tax return that you'll have on your 2021 tax return - even if they are not the same dependents - it's likely we already issued you the full amount of the 2021 Recovery Rebate Credit as the third Economic Impact Payment. If you were issued the full amount of the third Economic Impact Payment, you won't be eligible to claim the 2021 Recovery Rebate Credit for your dependent born in 2021 even though that child is a qualifying dependent for the credit. You were issued the full amount of the Recovery Rebate Credit if the third Economic Impact Payment was $1,400 ($2,800 if married filing jointly for 2021) plus $1,400 for the number of qualifying dependents you had in 2021. If you didn't receive the full amount of the third Economic Impact Payment and you meet all the eligibility requirements based on your 2021 tax return, you may claim the 2021 Recovery Rebate Credit. Q E18. Why have I received a letter indicating I haven't activated a debit card for my Economic Impact Payment? (added February 17, 2022) A18. If your Economic Impact Payment was sent on an EIP Card but you had not activated your card as of February 1, 2022, a letter was sent reminding you to activate your card or to request a replacement if you threw the debit card away. The EIP cards were originally mailed in 2021 to some people who were eligible for an Economic Impact Payment and would have otherwise received a check. The EIP Card was sent in a white envelope with a return address of "Economic Impact Payment Card," and displays the U.S. Department of the Treasury Seal. The card has the Visa name on the front and the issuing bank, MetaBank(R), N.A. on the back. Information included with the EIP card explains that this is your Economic Impact Payment. Once the card is activated, people can transfer the funds to a bank account, get cash surcharge-free at an In-Network ATM or request a Money Network(R) Balance Refund Check. This is a check from MetaBank(R) for the amount on your card. For more information, visit EIPcard.com or call MetaBank Customer Service at 800-240-8100 (24 hours a day, 7 days a week). Additional information, including answers to frequently asked questions and other resources, is available at IRS.gov/coronavirus. For more information about claiming the 2021 Recovery Rebate Credit see Q E13. EIP Card Not Activated: I received an EIP card for my third Economic Impact Payment but didn't activate it to use the funds. Can I claim the full amount of the credit? 2021 Recovery Rebate Credit -- Topic F: Receiving the Credit on a 2021 Tax Return Q F1. Credit Delivery: How and when can I expect to get my 2021 credit? (added January 13, 2022) A1. If you didn't qualify for the third Economic Impact Payment or did not receive the full amount, you may be eligible to claim the 2021 Recovery Rebate Credit based on your 2021 tax information. If you are eligible for the 2021 Recovery Rebate Credit, the credit amount will reduce the amount of tax you owe for 2021. If more than the tax you owe, it will be included as part of your 2021 tax refund. It will not be issued separately. You will receive your 2021 Recovery Rebate Credit included in your refund after your 2021 tax return is processed. If your income is $73,000 or less, you can file your federal tax return electronically for free through the IRS Free File Program. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. You can check the status of your refund under Where's My Refund? Generally, you will receive your refund within 3 weeks if you file electronically or 8 weeks if you mail your return. If the IRS identifies an error in your calculation for this (or anything else reported on your return), it could cause a delay while we make any necessary corrections. Q F2. Back Taxes: Will the credit be applied to back taxes I owe? (added January 13, 2022) A2. The 2021 Recovery Rebate Credit amount will not be applied to past due federal income tax debts. Generally, tax refunds are applied to tax you owe on your return or your outstanding federal income tax liability. If you claim a 2021 Recovery Rebate Credit, and your return reflects a tax refund - the refund amount associated with the 2021 Recovery Rebate Credit will not be applied to a federal income tax liability. Q F3. Government Debts: Will the credit offset debts I owe to other government agencies? (added January 13, 2022) A3. Yes, the 2021 Recovery Rebate Credit can be reduced to pay debts owed to other Federal government agencies (separate from federal income tax debt) as well as to state agencies. Keep in mind that the credit is part of your tax refund and your tax refund is subject to any offset. Q F4. Refunds or Tax Owed: How does the credit affect my tax refund or amount owed? (added January 13, 2022) A4. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. The most accurate way for you is to file is electronically where the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing f or details about IRS Free File, Free File Fillable Forms o r finding a trusted tax professional. The 2021 Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help determine if you are eligible for the credit. The fastest way to get your tax refund is to file electronically and have it direct deposited, contactless and free, into your financial account. You can have your refund direct deposited into your bank account, prepaid debit card or mobile app and will need to provide routing and account numbers. Q F5. Tax Return Processing: Will it take longer to process my 2021 tax return if I claim the credit? (added January 13, 2022) A5. Claiming the 2021 Recovery Rebate Credit on your tax return will not delay the processing of your tax return. However, it is important that you claim the correct amount. Any errors in the credit amount on your tax return will be corrected, unless you entered $0 or left the line blank for the Recovery Rebate Credit. If you are due a refund it may be delayed while we make any necessary corrections. To figure the credit amount, you will need to know the amount(s) of any third Economic Impact Payments you received. Log into your online account t o find your third Economic Impact Payment amounts. You may also refer to Notice 1444-C, Your Third Economic Impact Payment, which shows the amount of the third payment. In early 2022, we'll send Letter 6475 confirming the total amount of the third Economic Impact Payment and any plus-up payments you received in 2021. See: Where can I find the amount of my Third Economic Impact Payment? The fastest and most accurate way for you is to file is electronically where the tax preparation software will help you figure your Recovery Rebate Credit. Visit IRS.gov/filing f or details about IRS Free File, Free File Fillable Forms, free VITA or TCE tax preparation sites in your community or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help determine if you are eligible for the credit. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. Q F6. Missing Economic Impact Payment: If I didn't receive the third Economic Impact Payments because a 2019 or 2020 joint return was filed in my name without my consent, can I claim the 2021 Recovery Rebate Credit? (added January 13, 2022) A6. You may be able to claim the Recovery Rebate Credit if you can establish in writing that the return was signed under duress, your signature was forged, the return was filed without your consent, or you were not legally married at the end of the year on which the third payment was based. We issued the third payments based on information from your 2020 tax return, or, if that wasn't available, your 2019 return. To show that you could not resist your spouse's demands and signed under duress, you can provide written documentation to support your claim that the joint election was invalid. You may submit a separate return for the prior year if you had a filing requirement or provide a statement signed and sworn under penalties of perjury that you didn't need to file a tax return for the prior year or that the return was filed without your consent. Q F7. Repayment: I received a third Economic Impact Payment. Do I need to pay back all or some of the payments if, based on the information reported on my 2021 tax return, I don't qualify for the amount that I already received? (added January 13, 2022) A7. No, if you qualified for a third payment based on your 2019 or 2020 tax return, the law doesn't require you to pay back all or part of the payment you received based on the information reported on your 2021 tax return. Q F8. Missing Economic Impact Payment: I received my third payment by check, but it was lost, stolen, or destroyed. How do I get a new one? (updated February 8, 2022) A8. If you received your third payment by check and it was lost, stolen or destroyed, you should request a payment trace so the IRS can determine if your payment was cashed. See How do I request a payment trace to track my third Economic Impact Payment? If a trace is initiated and the IRS determines that the check wasn't cashed, the IRS will credit your account for that payment, but the IRS cannot reissue your payment. Instead, you will need to claim the 2021 Recovery Rebate Credit on your 2021 tax return if eligible. Note: If you are filing your 2021 tax return before your trace is complete, do not include the payment amount on the Recovery Rebate Credit Worksheet. If you do, you may receive a notice saying your 2021 Recovery Rebate Credit was changed, but an adjustment will be made after the trace is complete and it is determined your payment has not been cashed. You will not need to take any additional action to receive the credit. If you do not request a trace on your payment, you may receive an error when claiming the 2021 Recovery Rebate Credit on your 2021 tax return. Since the payment was issued to you, you may not be eligible for any credit. Q F9. Missing Economic Impact Payment: How do I request a payment trace to track my third Economic Impact Payments? (updated Feburary 8, 2022) A9. If your payment was issued as a direct deposit, your first step is to check with your bank and make sure they didn't receive a deposit. You should only request a payment trace to track your payment if a payment was issued to you and you have not received it within the timeframes below. IRS assistors cannot initiate a payment trace unless it has been: - 5 days since the deposit date and the bank says it hasn't received the payment - 4 weeks since the payment was mailed by check to a standard address - 6 weeks since the payment was mailed, and you have a forwarding address on file with the local post office - 9 weeks since the payment was mailed, and you have a foreign address Note: If you have a foreign address, there may be international service disruptions at the United States Postal Service (USPS) or the foreign country you are in due to the COVID-19 pandemic. See the USPS Service Alerts p age and check with your local consulate for more information. Do not request a payment trace to determine if you were eligible for a payment or to confirm the amount of payment you should have received. How we process your claim We'll process your claim for a missing payment in one of two ways: - If a trace is initiated and the IRS determines that the check wasn't cashed, the IRS will credit your account for that payment, but the IRS cannot reissue your payment. Instead, you will need to claim the 2021 Recovery Rebate Credit on your 2021 tax return if eligible. Note: If you are filing your 2021 tax return before your trace is complete, do not include the payment amount on the Recovery Rebate Credit Worksheet. If you do, you may receive a notice saying your 2021 Recovery Rebate Credit was changed, but an adjustment will be made after the trace is complete and it is determined your payment has not been cashed. You will not need to take any additional action to receive the credit. If you do not request a trace on your payment, you may receive an error when claiming the 2021 Recovery Rebate Credit on your 2021 tax return. Since the payment was issued to you, you may not be eligible for any credit. - If the check was cashed, the Treasury Department's Bureau of the Fiscal Service will send you a claim package that includes a copy of the cashed check. Follow the instructions. The Treasury Department's Bureau of the Fiscal Service will review your claim and the signature on the canceled check before determining whether the payment can be reversed and your Recovery Rebate adjusted. To start a payment trace: - Call us at 800-919-9835 - Mail or fax a completed Form 3911, Taxpayer Statement Regarding Refund PDF. Reminder: DO NOT request a trace prior to the timeframes above. IRS assistors cannot start a trace prior to those timeframes. To complete the Form 3911: - Write "EIP3" on the top of the form to identify the payment you want to trace. - Complete the form answering all refund questions as they relate to your Economic Impact Payment. - When completing item 7 under Section 1: o Check the box for "Individual" as the Type of return o Enter "2021" as the Tax Period o Do not write anything for the Date Filed - Sign the form. If you file married filing joint, both spouses must sign the form. You will generally receive a response 6 weeks after we receive your request for a payment trace, but there may be delays due to limited staffing. Get up-to-date status on affected IRS operations and services. Do not mail or fax Form 3911 if you have already requested a trace by phone. - If you mail or fax the form prior to the timeframes above, your request will not be processed until those timeframes are met. Mail or fax the form to: 2021 Recovery Rebate Credit -- Topic G: Finding the Third Economic Impact Payment Amount to Calculate the 2021 Recovery Rebate Credit Q G1. Who needs to know their third Economic Impact Payment amount when they file their 2021 tax return? (added January 13, 2022) A1. If you didn't qualify for a third Economic Impact Payment or got less than the full amount, you may be eligible to claim the 2021 Recovery Rebate Credit based on your 2021 tax year information. If you're eligible, you'll need to file a 2021 tax return even if you don't usually file a tax return. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund. Anyone eligible to claim the 2021 Recovery Rebate Credit needs to know their third Economic Impact Payment amount, including any plus-up payments, to correctly calculate the credit. Spouses filing a joint return for 2021 need to know the payment amounts for both spouses in order to claim the credit. You don't need to claim the Recovery Rebate Credit on your 2021 tax return if you were issued the full amount of that credit through the third round of Economic Impact Payments. You were issued the full amount of the Recovery Rebate Credit if your third Economic Impact Payment was $1,400 ($2,800 if married filing jointly for 2021) plus $1,400 for each qualifying dependent reported on your 2021 tax return. If filing your return electronically, the tax preparation software will help you accurately figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms, free VITA or TCE tax preparation sites in your community or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help determine if you are eligible to claim the credit. Q G2. Where can I find the amount of my third Economic Impact Payments to help me calculate the 2021 Recovery Rebate Credit? (updated February 17, 2022) A2. You can find the amount of the third Economic Impact Payments in one of the following ways: - Your online account. It's an online IRS application that allows you to securely access your individual account information. The amounts of your third Economic Impact Payments are shown on the Tax Records tab/page under the section "Economic Impact Payment Information". If you and your spouse received joint payments, each of you will need to sign into your own online account to retrieve your separate amounts. - Your Notice 1444-C, Your Third Economic Impact Payment, which shows the amount of the third payment. If you received joint payments with your spouse, the letters show the total amount of each payment. If you file separate 2021 tax returns, each of you must enter half of the amount of the payment shown on Notice 1444-C. Individuals who received plus-up payments received a separate Notice 1444-C after each payment was issued. - Letter 6475, Your 2021 Economic Impact Payment(s). Through March 2022, we'll send this letter confirming the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021. If you and your spouse received joint payments, each of you will receive your own letter showing half of the third payment. Each spouse may receive their letter at different times. If filing a joint return in 2021, include both amounts when calculating the 2021 Recovery Rebate Credit. If you file separate 2021 tax returns, each of you must enter your half of the payment, which is shown on your own Letter 6475, when calculating any 2021 Recovery Rebate Credit you may be eligible to claim on your own return. - Your 2021 account transcript, which you can request online or by mail using Get Transcript. You may also call our automated phone transcript service at 800-908-9946 for it be sent by mail or you can submit Form 4506-T. If you received joint payments with your spouse, the transcript shows the total amount of each payment under the primary taxpayer. If you file separate 2021 tax returns, each of you must enter half of amount of the payment. Q G3. What if my online account or letter shows I was issued a payment, but I never received one? (added January 13, 2022) A3. There are several possibilities for why your account shows you were issued a third Economic Impact Payment even though you did not receive one. - You were issued an EIP Card and inadvertently discarded it not realizing it was your Economic Impact Payment. You may request a free replacement through MetaBank(R) Customer Service by calling 800-240-8100 and following the prompts for a lost or discarded card. Please see the Economic Impact Payment Information Center-- Topic E: EIP Cards for more information. - Your payment was made to a bank account or address you shared with a spouse. See How do I request a Payment Trace to track my third Economic Impact Payment? - If your payment was returned by the post office or financial institution and hasn't been credited back to your account yet. - If none of the scenarios above apply and you never received your payment even though your online account or letter show it was issued to you Q G4. How do I access my online account? (added January 13, 2022) A4. You can access your online account through a secure login at IRS.gov/account. You can also find the online account application by going to the IRS.gov homepage and clicking on "Sign in to your Account". Q G5. I received joint Economic Impact Payments with my spouse. Does my online account include my spouse's amount? (added January 13, 2022) A5. No, your account online will show only your portion of the payments. Your spouse will need to sign into their own account to retrieve their portion of the payments. Q G6. Does my online account show whether I received more than one third Economic Impact Payment? (added January 13, 2022) A6. The 2021 Tax Records tab will show the total amount of the third payments you received including any plus-up payments. Any plus up payment will not be shown separately. Q G7. Why can't I access Get My Payment? (added February 17, 2022) A7. The IRS has issued all first, second and third Economic Impact Payments. Therefore, you can no longer use the Get My Payment application to check your payment status. To find the amounts of your Economic Impact Payments, log into your Online Account and go to the Tax Records page. You can also refer to Letter 6475, Your 2021 Economic Impact Payment(s), or notices the IRS mailed after the payments were issued. - The first and second payment amounts can help you accurately calculate any 2020 Recovery Rebate Credit you may be eligible to claim on your 2020 tax return. - The third payment amount can help you accurately calculate any 2021 Recovery Rebate Credit you may be eligible to claim on your 2021 tax return. For additional information regarding the credit, see Recovery Rebate Credit. Q G8. Does Where's My Refund provide my Economic Impact Payment information? (added February 17, 2022) AG8. Where's My Refund does not provide the status or amount of your Economic Impact Payments. It does provide the status of your tax refund, which may include any 2021 Recovery Rebate Credit you claimed on your 2021 tax return. To find the amounts of your Economic Impact Payments, log into your Online Account and go to the Tax Records page. You can also refer to Letter 6475, Your 2021 Economic Impact Payment(s), or notices the IRS mailed after the payments were issued. - The first and second payment amounts can help you accurately calculate any 2020 Recovery Rebate Credit you may be eligible to claim on your 2020 tax return. - The third payment amount can help you accurately calculate any 2021 Recovery Rebate Credit you may be eligible to claim on your 2021 tax return. For additional information regarding the credit, see Recovery Rebate Credit. 2021 Recovery Rebate Credit -- Topic H: Correcting issues after the 2021 tax return is filed Q H1. I'm eligible for a 2021 Recovery Rebate Credit but did not claim it on my 2021 tax return. Do I need to amend my 2021 tax return? (added January 13, 2022) A1. Yes, if you didn't claim the credit on your original tax return you will need to file an Amended U.S. Individual Income Tax Return, Form 1040-X, to claim it. The IRS will not calculate the 2021 Recovery Rebate Credit for you if you did not enter any amount on your original tax return, or you entered $0. Use the Interactive Tax Assistant, Should I File an Amended Return?, to help determine if you should amend your original tax return. If you need to file an amended return - even if you don't usually file taxes - to claim the 2021 Recovery Rebate Credit, use the worksheet in the 2021 instructions for Form 1040 and 1040-SR to determine the amount of your credit. Enter the amount on the Refundable Credits section of the 1040-X and include "Recovery Rebate Credit" in the Explanation of Changes section. If you filed your 2021 return electronically and need to file an amended return, you may be able to file Form 1040-X electronically. If you did not file your 2021 return electronically, you will need to submit a paper version of the Form 1040-X and should follow the instructions for preparing and mailing the paper form. Use the Where's My Amended Return? online tool to check the status of your amended return. The tool works for paper and electronic amended returns. DO NOT file an amended tax return if you entered an incorrect amount for the 2021 Recovery Rebate Credit on your tax return. If you entered an amount other than $0 on line 30 but made a mistake in calculating the amount, the IRS will calculate the correct amount of the 2021 Recovery Rebate Credit, make the correction to your tax return, and continue processing your return. If a correction is needed, there may be a delay in processing your return and the IRS will send you a notice explaining any change made. To check the status of your refund from your original return, check Where's My Refund? Q H2. I received a notice indicating I made an error when calculating the 2021 Recover Rebate Credit on my return. How do I respond? (added January 13, 2022) A2. DO NOT file an amended tax return with the IRS. If you entered an amount other than $0 on line 30 but made a mistake in calculating the amount, the IRS will calculate the correct amount of the 2021 Recovery Rebate Credit, make the correction to your tax return, and continue processing your return. If a correction is needed, there may be a delay in processing your return and the IRS will send you a notice explaining any change made. If you agree with the changes we made, no response or action is required. If you disagree, you can call us at the toll-free number listed on the top right corner of your notice. If the IRS agrees to make a change to the amount of Recovery Rebate Credit you are owed and it results in a refund, you may check the status of your refund from your original return using Where's My Refund? If you did not enter an amount on line 30 of your 2021 Form 1040 or Form 1040-SR or entered $0, see I'm eligible for a 2021 Recovery Rebate Credit but did not claim it on my 2021 tax return. Do I need to amend my 2021 tax return? Q H3. I filed my 2021 return electronically, but made a mistake calculating my 2021 Recovery Rebate Credit. Will my return be rejected? (added January 13, 2022) A3. No, the IRS will not reject your tax return if you made an error in calculating your 2021 Recovery Rebate Credit. DO NOT file an amended tax return with the IRS. If you entered an amount greater than $0 on line 30 and made a mistake on the amount, the IRS will calculate the correct amount of the Recovery Rebate Credit, make the correction to your tax return and continue processing your return. If a correction is needed, there may be a delay in processing your return and the IRS will send you a notice explaining any change made. If the IRS agrees to make a change to the amount of Recovery Rebate Credit you are owed and it results in a refund, you may check the status of your refund from your original return using Where's My Refund? Q H4. I received a Notice CP10, CP11, CP12, CP13, CP16, CP23, CP24 or CP25 saying there was an issue with my 2021 Recovery Rebate Credit. What do I need to do? (added January 13, 2022) A4. If you agree with the changes we made, no response is required. If you disagree, you can call us at the toll-free number listed on the top right corner of your notice. Q H5. I received a notice saying that my 2021 Recovery Rebate Credit was changed because I was claimed as a dependent on another taxpayer's 2021 return. What do I need to do? (added January 13, 2022) A5. If you filed a 2021 return and checked the box stating you can be claimed as a dependent by another taxpayer, you do not qualify for the 2021 Recovery Rebate Credit. To claim the 2021 Recovery Rebate Credit, you cannot be a dependent of another person. If you agree with the changes we made, no response or action is required. The notice is informing you that the IRS already adjusted your return and disallowed the 2021 Recovery Rebate Credit. If you disagree, you can call us at the toll-free number listed on the top right corner of your notice. Q H6. I received a notice saying my 2021 Recovery Rebate Credit was changed because there was an issue with my (or my spouse's or qualifying dependent's) Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN). What do I need to do? (added January 13, 2022) A6. If you, your spouse, and qualifying children have a valid Social Security number and entered it on your return, compare the number and name entered with what is on the Social Security card. If this information does not match or it was left blank on your 2021 return, the amount associated with that identification number would be denied. If you agree with the changes we made, no response or action is required. If you disagree, read the following to help determine if any action is needed: - If you identify an error in the tax return entry, contact the IRS at the number provided on your notice and have a copy of the Social Security card(s) available. - If the information entered on the 2021 tax return matches the Social Security card or you have recently changed your name and did not update it with the Social Security Administration (SSA), please contact the SSA to confirm the information they have on file is accurate. If one spouse has not been issued a Social Security number by the due date of your return (including extensions) and you file a joint return, your 2021 Recovery Rebate Credit should not include the portion for the spouse who does not have the required Social Security number, unless one of you was an active member of the U.S. Armed Forces in 2021. If one of you was an active member of the U.S. Armed Forces in 2021 and you were denied the 2021 Recovery Rebate Credit for the spouse without the required Social Security number, contact the IRS and have a copy of your 2021 military Form W-2, Wage and Tax Statement, available for further verification. A contact phone number for assistance is on the top right corner of your letter or notice. You are allowed up to $1,400 for a qualifying dependent claimed on your return, even if neither you nor your spouse (if married) has a Social Security number. If your dependent does not have a valid SSN or an Adoption Taxpayer Identification Number (ATIN) issued by the IRS, you are not allowed any 2021 Recovery Rebate Credit for the dependent. However, if an SSN or ATIN is issued to your dependent, contact the IRS with their SSN or ATIN to have the 2021 additional credit issued. A contact phone number for assistance is on the top right corner of your letter or notice. Q H7. I received a notice saying my 2021 Recovery Rebate Credit was changed because I forgot to include a Social Security number for a dependent. What do I need to do? (added January 13, 2022) A7. If your dependent has a valid Social Security number or an Adoption Taxpayer Identification Number issued by the IRS and you forgot to enter it on your return, call us at the phone number on the top right corner of your letter or notice. Have a copy of the Social Security cards or ATIN available. If you agree with the changes we made, no response or action is required. Q H8. I received a notice saying my 2021 Recovery Rebate Credit was changed because there was an issue with my qualifying dependent's last name. What do I need to do? (added January 13, 2022) A8. Compare the information you entered on your 2021 return for your dependent against the Social Security card. If the name and number entered on the return does not match what is on the card, the credit will be denied for that dependent. If you agree with the changes we made, no response or action is required. If you identify an error in the tax return entry and therefore disagree with the changes, contact the IRS at the number provided on your notice and have a copy of the Social Security card(s) available. If the information entered on the tax return matches the Social Security card or you have recently changed your dependent's last name and did not update it with the Social Security Administration (SSA), please contact the SSA prior to contacting the IRS to confirm that the information they have on file is accurate. Q H9. I received a notice saying my 2021 Recovery Rebate Credit was changed because my qualifying dependent did not meet the requirements. What do I need to do? (added January 13, 2022) A9. If your dependent does not meet the qualifying dependent requirements for a 2021 Recovery Rebate Credit, you do not need to take any action or call the IRS. The IRS has already adjusted your credit and notice is to inform you of the change. If you disagree, you can call us at the toll-free number listed on the top right corner of your notice. For additional eligibility information, see Eligibility Requirements: Who's considered a qualifying dependent for the 2021 Recovery Rebate Credit? Q H10. I received a notice saying my 2021 Recovery Rebate Credit was changed because my adjusted gross income was too high. What do I need to do? (added January 13, 2022) A10. The 2021 Recovery Rebate Credit has the same income limitations as the third Economic Impact Payments. No credit is allowed if the adjusted gross income (AGI) amount on line 11 of your 2021 Form 1040 or Form 1040-SR is at least: - $160,000 if married and filing a joint return or if filing as a qualifying widow or widower - $120,000 if filing as head of household or - $ 80,000 for all others. Your 2021 Recovery Rebate Credit amount will be reduced if the adjusted gross income (AGI) amount is less than these amounts above but is more than: - $ 150,000 if married and filing a joint return or filing as a qualifying widow(er) - $ 112,500 if filing as head of household or - $ 75,000 for all others. You do not need to take any action; the IRS has already adjusted your credit. The notice was to inform you of the change. No further action or calls are necessary. If you disagree, you can call us at the toll-free number listed on the top right corner of your notice. IRS-FAQ

Proposed Regulation REG-108761-22 Internal Revenue Service 2024-16 I.R.B. 933 Charitable Remainder Annuity Trust Listed Transaction REG-108761-22 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking and public hearing. SUMMARY: This document contains proposed regulations that would identify certain charitable remainder annuity trust (CRAT) transactions and substantially similar transactions as listed transactions, a type of reportable transaction. Material advisors and certain participants in these listed transactions would be required to file disclosures with the IRS and would be subject to penalties for failure to disclose. The proposed regulations would affect participants in these transactions as well as material advisors but provide that certain organizations whose only role or interest in the transaction is as a charitable remainderman will not be treated as participants in the transaction or as parties to a prohibited tax shelter transaction subject to excise taxes and disclosure requirements. Finally, this document provides notice of a public hearing on the proposed regulations. DATES: Comments: Electronic or written comments must be received by May 24, 2024. Public Hearing: A public hearing on the proposed regulation is scheduled for July 11, 2024, at 10 a.m. ET. Requests to speak and outlines of topics to be discussed at the public hearing must be received by May 24, 2024. If no outlines are received by May 24, 2024, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5 p.m. on July 9, 2024. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at https://regulations.gov (indicate IRS and REG-108761-22) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the "Comments and Requests for a Public Hearing" section. Once submitted to the Federal eRulemaking Portal comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish availability any comments submitted to the IRS's public docket. Send paper submission to CC:PA:01:PR (REG-108761-22) room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Charles D. Wien of the Office of Associate Chief Counsel (Passthroughs & Special Industries), (202) 317-5279; concerning submissions of comments and requests for hearing, Vivian Hayes at (202) 317-6901 (not toll-free numbers) or by sending an email to publichearings@irs.gov (preferred). SUPPLEMENTARY INFORMATION: Background This document contains proposed additions to 26 CFR part 1 (Income Tax Regulations) under section 6011 of the Internal Revenue Code (Code). The additions identify certain transactions as "listed transactions" for purposes of section 6011. I. Disclosure of Reportable Transactions by Participants and Penalties for Failure to Disclose Section 6011(a) generally provides that, when required by regulations prescribed by the Secretary of the Treasury or her delegate (Secretary), "any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and regulations prescribed by the Secretary. Every person required to make a return or statement shall include therein the information required by such forms or regulations." Section 1.6011-4(a) provides that every taxpayer that has participated in a reportable transaction within the meaning of §1.6011-4(b) and who is required to file a tax return must file a disclosure statement within the time prescribed in §1.6011-4(e). Reportable transactions are identified in §1.6011-4 and include listed transactions, confidential transactions, transactions with contractual protection, loss transactions, and transactions of interest. See §1.6011-4(b)(2) through (6). Section 1.6011-4(b)(2) defines a listed transaction as a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction. Section 1.6011-4(c)(4) provides that a transaction is "substantially similar" if it is expected to obtain the same or similar types of tax consequences and is either factually similar or based on the same or similar tax strategy. Receipt of an opinion regarding the tax consequences of the transaction is not relevant to the determination of whether the transaction is the same as or substantially similar to another transaction. Further, the term substantially similar must be broadly construed in favor of disclosure. For example, a transaction may be substantially similar to a listed transaction even though it may involve different entities or use different Code provisions. Section 1.6011-4(c)(3)(i)(A) provides that a taxpayer has participated in a listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described in the published guidance that lists the transaction under §1.6011-4(b)(2). Published guidance may identify other types or classes of persons that will be treated as participants in a listed transaction. Published guidance also may identify types or classes of persons that will not be treated as participants in a listed transaction. Section 1.6011-4(d) and (e) provide that the disclosure statement Form 8886, Reportable Transaction Disclosure Statement (or successor form), must be attached to the taxpayer's tax return for each taxable year for which a taxpayer participates in a reportable transaction. A copy of the disclosure statement must be sent to the IRS's Office of Tax Shelter Analysis (OTSA) at the same time that any disclosure statement is first filed by the taxpayer pertaining to a particular reportable transaction. Section 1.6011-4(e)(2)(i) provides that, if a transaction becomes a listed transaction after the filing of a taxpayer's tax return reflecting the taxpayer's participation in the listed transaction and before the end of the period of limitations for assessment for any taxable year in which the taxpayer participated in the listed transaction, then a disclosure statement must be filed with OTSA within 90 calendar days after the date on which the transaction becomes a listed transaction. This requirement extends to an amended return and exists regardless of whether the taxpayer participated in the transaction in the year the transaction became a listed transaction. The Commissioner of Internal Revenue (Commissioner) also may determine the time for disclosure of listed transactions in the published guidance identifying the transaction. Participants required to disclose these transactions under §1.6011-4 who fail to do so are subject to penalties under section 6707A of the Code. Section 6707A(b) provides that the amount of the penalty is 75 percent of the decrease in tax shown on the return as a result of the reportable transaction (or which would have resulted from such transaction if such transaction were respected for Federal tax purposes), subject to minimum and maximum penalty amounts. The minimum penalty amount is $5,000 in the case of a natural person and $10,000 in any other case. For a listed transaction, the maximum penalty amount is $100,000 in the case of a natural person and $200,000 in any other case. Additional penalties also may apply. In general, section 6662A of the Code imposes a 20 percent accuracy-related penalty on any understatement (as defined in section 6662A(b)(1)) attributable to an adequately disclosed reportable transaction. If the taxpayer had a requirement to disclose participation in the reportable transaction but did not adequately disclose the transaction in accordance with the regulations under section 6011, the taxpayer is subject to an increased penalty rate equal to 30 percent of the understatement. See section 6662A(c). Section 6662A(b)(2) provides that section 6662A applies to any item that is attributable to any listed transaction and any reportable transaction (other than a listed transaction) if a significant purpose of such transaction is the avoidance or evasion of Federal income tax. Participants required to disclose listed transactions who fail to do so also are subject to an extended period of limitations under section 6501(c)(10) of the Code. That section provides that the time for assessment of any tax with respect to the transaction shall not expire before the date that is one year after the earlier of the date the participant discloses the transaction or the date a material advisor discloses the participation pursuant to a written request under section 6112(b)(1)(A) of the Code. II. Disclosure of Reportable Transactions by Material Advisors and Penalties for Failure to Disclose Section 6111(a) provides that each material advisor with respect to any reportable transaction shall make a return setting forth: (1) information identifying and describing the transaction, (2) information describing any potential tax benefits expected to result from the transaction, and (3) such other information as the Secretary may prescribe. Such return shall be filed not later than the date specified by the Secretary. Section 301.6111-3(a) of the Procedure and Administration Regulations provides that each material advisor with respect to any reportable transaction, as defined in §1.6011-4(b), must file a return as described in §301.6111-3(d) by the date described in §301.6111-3(e). Section 301.6111-3(b)(1) provides that a person is a material advisor with respect to a transaction if the person provides any material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and directly or indirectly derives gross income in excess of the threshold amount as defined in §301.6111-3(b)(3) for the material aid, assistance, or advice. Under §301.6111-3(b)(2)(i) and (ii), a person provides material aid, assistance, or advice if the person provides a tax statement, which is any statement (including another person's statement), oral or written, that relates to a tax aspect of a transaction that causes the transaction to be a reportable transaction as defined in §1.6011-4(b)(2) through (7). Material advisors must disclose transactions on Form 8918, Material Advisor Disclosure Statement (or successor form), as provided in §301.6111-3(d) and (e). Section 301.6111-3(e) provides that the material advisor's disclosure statement for a reportable transaction must be filed with the OTSA by the last day of the month that follows the end of the calendar quarter in which the advisor becomes a material advisor with respect to a reportable transaction or in which the circumstances necessitating an amended disclosure statement occur. The disclosure statement must be sent to the OTSA at the address provided in the instructions for Form 8918 (or successor form). Section 301.6111-3(d)(2) provides that the IRS will issue to a material advisor a reportable transaction number with respect to the disclosed reportable transaction. Receipt of a reportable transaction number does not indicate that the disclosure statement is complete, nor does it indicate that the transaction has been reviewed, examined, or approved by the IRS. Material advisors must provide the reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor as defined in §301.6111-3(b). The reportable transaction number must be provided at the time the transaction is entered into, or, if the transaction is entered into prior to the material advisor's receipt of the reportable transaction number, within 60 calendar days from the date the reportable transaction number is mailed to the material advisor. Section 6707(a) of the Code provides that a material advisor who fails to file a timely disclosure, or files an incomplete or false disclosure statement, is subject to a penalty. Pursuant to section 6707(b)(2), for listed transactions, the penalty is the greater of (A) $200,000, or (B) 50 percent of the gross income derived by such person with respect to aid, assistance, or advice that is provided with respect to the listed transaction before the date the return is filed under section 6111. Additionally, section 6112(a) provides that each material advisor with respect to any reportable transaction shall (whether or not required to file a return under section 6111 with respect to such transaction) maintain a list (1) identifying each person with respect to whom such advisor acted as a material advisor with respect to such transaction and (2) containing such other information as the Secretary may by regulations require. Material advisors must furnish such lists to the IRS in accordance with §301.6112-1(e). A material advisor may be subject to a penalty under section 6708 of the Code for failing to maintain a list under section 6112(a) and failing to make the list available upon written request to the Secretary in accordance with section 6112(b) within 20 business days after the date of such request. Section 6708(a) provides that the penalty is $10,000 per day for each day of the failure after the 20th day. However, no penalty will be imposed with respect to the failure on any day if such failure is due to reasonable cause. III. Tax-Exempt Entities as Parties to Prohibited Tax Shelter Transactions Section 4965 of the Code is intended to deter certain "tax-exempt entities" (as defined in section 4965(c)) from facilitating "prohibited tax shelter transactions," which include listed transactions. Section 4965(a)(1), in part, imposes an excise tax on a tax-exempt entity for the taxable year in which the tax-exempt entity becomes a party to a transaction that is a "prohibited tax shelter transaction" at the time it becomes a party to the transaction, and for any subsequent taxable year, in the amount determined under section 4965(b)(1) (section 4965 tax). Tax-exempt entities subject to the section 4965 tax are listed in section 4965(c)(1) through (3) and include, among others, entities and governmental units described in sections 501(c) and 170(c) of the Code (other than the United States). A tax-exempt entity that is a party to a prohibited tax shelter transaction generally also is subject to various reporting and disclosure obligations. Additionally, section 4965(a)(2) imposes an excise tax on an "entity manager" if the manager approves the tax-exempt entity as a party (or otherwise causes the tax-exempt entity to be a party) to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. The amount of this excise tax is determined under section 4965(b)(2) (entity manager tax). A. The section 4965 tax The amount of the section 4965 tax owed by a tax-exempt entity depends on whether the tax-exempt entity knows, or has reason to know, that a transaction is a prohibited tax shelter transaction at the time the entity becomes a party to the transaction. A tax-exempt entity is treated as knowing or having reason to know that a transaction is a prohibited tax shelter transaction if one or more of its entity managers knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time the entity manager(s) approved the tax-exempt entity as (or otherwise caused the entity to be) a party to the transaction. 1 The tax-exempt entity also is attributed the knowledge or reason to know of certain entity managers--those persons with authority or responsibility similar to that exercised by an officer, director, or trustee of an organization--even if the entity manager does not approve the entity as (or otherwise cause the entity to be) a party to the transaction. ******** 1 Section 53.4965-6 of the Foundation and Similar Excise Tax Regulations (26 CFR part 53) provides factors to be considered in determining whether an entity manager knows or has reason to know that a transaction is a prohibited tax shelter transaction. ******** Section 53.4965-4(a)(1) provides that a tax-exempt entity is a "party" to a prohibited tax shelter transaction if it facilitates a prohibited tax shelter transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status. In addition, under §53.4965-4(a)(2) and (b), the Secretary may issue published guidance to identify tax-exempt entities by type, class, or role that will or will not be treated as parties to a prohibited tax shelter transaction. If the tax-exempt entity unknowingly becomes a party to a prohibited tax shelter transaction, the section 4965 tax generally equals the greater of (1) the product of the highest rate of tax under section 11 of the Code (currently 21 percent) and the tax-exempt entity's net income attributable to the prohibited tax shelter transaction, or (2) the product of the highest rate of tax under section 11 and 75 percent of the proceeds received by the tax-exempt entity that are attributable to the prohibited tax shelter transaction. If the tax-exempt entity knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time the tax-exempt entity became a party to the transaction, the section 4965 tax increases to the greater of (1) 100 percent of the tax-exempt entity's net income attributable to the prohibited tax shelter transaction, or (2) 75 percent of the tax-exempt entity's proceeds attributable to the prohibited tax shelter transaction. The terms "net income" and "proceeds" are defined in §53.4965-8. In general, a tax-exempt entity's net income attributable to a prohibited tax shelter transaction is its gross income derived from the transaction, reduced by those deductions that are attributable to the transaction and that would be allowed by chapter 1 of the Code (chapter 1) if the tax-exempt entity were treated as a taxable entity for this purpose, and further reduced by the taxes imposed by subtitle D of the Code (other than the section 4965 tax) with respect to the transaction. In the case of a tax-exempt entity that is a party to the transaction by reason of facilitating a prohibited tax shelter transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status, the term "proceeds," solely for purposes of section 4965, means the gross amount of the tax-exempt entity's consideration for facilitating the transaction, not reduced for any costs or expenses attributable to the transaction. Published guidance with respect to a particular prohibited tax shelter transaction may designate additional amounts as proceeds from the transaction for purposes of section 4965. In addition, for all tax-exempt entities that are parties to a prohibited tax shelter transaction, any amount that is a gift or a contribution to a tax-exempt entity and that is attributable to a prohibited tax shelter transaction is treated as proceeds for purposes of section 4965, unreduced by any associated expenses. B. Entity manager tax The amount of the entity manager tax determined under section 4965(b)(2) on an entity manager (as defined in section 4965(d)) equals $20,000 for each instance that the manager approves the tax-exempt entity as (or otherwise causes such entity to be) a party to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. This liability is not joint and several. C. Disclosures Section 53.6011-1 requires that a tax-exempt entity subject to the section 4965 excise tax must file Form 4720, Return of Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, to report the liability and pay the tax due under section 4965(a)(1). Under §1.6033-5, a tax-exempt entity that is a party to a prohibited tax shelter transaction must file Form 8886-T, Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction, to disclose that it is a party to a prohibited tax shelter transaction, the identity of any other party (whether taxable or tax-exempt) to such transaction that is known to the tax-exempt entity, and certain other information. Under §1.6033-2, if the tax-exempt entity is required to file Form 990, Return of Organization Exempt From Income Tax, it must disclose on that form that it is a party to a prohibited tax shelter transaction, whether any taxable party notified the tax-exempt entity that it was or is a party to a prohibited tax shelter transaction, and whether the tax-exempt entity filed Form 8886-T. Section 6011(g) and §301.6011(g)-1 provide that any taxable party to a prohibited tax shelter transaction must disclose to each tax-exempt entity that the taxable party knows or has reason to know is a party to such transaction that the transaction is a prohibited tax shelter transaction. IV. Charitable Remainder Annuity Trusts (CRATs) For purposes of section 664 of the Code, section 664(d)(1) provides that a charitable remainder annuity trust (CRAT) is a trust: (A) From which a sum certain (which is not less than 5 percent nor more than 50 percent of the initial fair market value (FMV) of all property placed in trust) is to be paid, not less often than annually, to one or more persons (at least one of which is not an organization described in section 170(c), and, in the case of individuals, only to an individual who is living at the time of the creation of the trust) for a term of years (not in excess of 20 years) or for the life or lives of such individual or individuals; (B) From which no amount other than the payments described in section 664(d)(1)(A) and other qualified gratuitous transfers described in section 664(d)(1)(C) may be paid to or for the use of any person other than an organization described in section 170(c); (C) Whose remainder interest, following the termination of the payments described in section 664(d)(1)(A), is to be transferred to, or for the use of, an organization described in section 170(c) or is to be retained by the trust for such a use or, to the extent the remainder interest is in qualified employment securities (as defined by section 664(g)(4)), all or part of such securities are to be transferred to an employee stock ownership plan (as defined in section 4975(e)(7) of the Code) in a qualified gratuitous transfer (as defined by 664(g)); and (D) Whose remainder interest has a value (determined under section 7520) of at least 10 percent of the initial net FMV of all property placed in the trust. Section 664(b) provides, in part, that amounts distributed by a CRAT are considered as having the following characteristics in the hands of a beneficiary to whom the annuity described in section 664(d)(1)(A) is paid: (1) First, as amounts of income (other than gains, and amounts treated as gains, from the sale or other disposition of capital assets) includible in gross income to the extent of such income of the trust for the year and such undistributed income of the trust for prior years; (2) Second, as a capital gain to the extent of the capital gain of the trust for the year and the undistributed capital gain of the trust for prior years; (3) Third, as other income to the extent of such income of the trust for the year and such undistributed income of the trust for prior years; and (4) Fourth, as a distribution of trust corpus. Under section 664(c)(1), a CRAT is not subject to any tax imposed by subtitle A of the Code. Section 664(c)(2), in part, imposes an excise tax on a CRAT that has unrelated business taxable income (within the meaning of section 512, determined as if part III of subchapter F of chapter 1 applies to such trust) for a taxable year. That excise tax is equal to the amount of such unrelated business taxable income. V. Tax Avoidance Transactions using a CRAT The Treasury Department and the IRS are aware of transactions in which taxpayers attempt to use a CRAT and a single premium immediate annuity (SPIA) to permanently avoid recognition of ordinary income and/or capital gain. Taxpayers engaging in these transactions claim that distributions from the trust are not taxable to the beneficiaries as ordinary income or capital gain under section 664(b) because the distributions constitute the trust's unrecovered investment in the SPIA, thus claiming that a significant portion of the distributions is excluded from gross income under section 72(b)(2) of the Code. Taxpayers also claim that the trust qualifies as a CRAT and thus is not subject to tax on the trust's realized ordinary income or capital gain under section 664(c)(1), even though the trust may not meet all of the requirements of section 664(d)(1). In these transactions, a grantor creates a trust purporting to qualify as a CRAT under section 664. Generally, the grantor funds the trust with property having a FMV in excess of its basis (appreciated property) such as interests in a closely-held business, and/or assets used or produced in a trade or business. The trust then sells the appreciated property and uses some or all of the proceeds from the sale of the contributed property to purchase an annuity. On a Federal income tax return, the beneficiary of the trust treats the annuity amount payable from the trust as if it were, in whole or in part, an annuity payment subject to section 72 2, instead of as carrying out to the beneficiary amounts in the ordinary income and capital gain tiers of the trust in accordance with section 664(b). ******** 2 Section 72 governs the tax treatment of payments received as an annuity, and generally causes only the portion of each payment in excess of the investment in the contract (basis) to be included in the recipient's gross income. ******** As result of treating section 72 as applying to the amounts received (typically paid by an insurance company) as part of the annuity amount, the beneficiary reports as income only a small portion of the amount the beneficiary received from the SPIA. The beneficiary treats the balance of the annuity amount as an excluded portion representing a return of investment. 3 The beneficiary thus claims that the beneficiary is taxed as if the beneficiary were the owner of the SPIA, rather than the SPIA being an asset owned by the CRAT, which the trustee purchased to fund the annuity amount payable from the trust. Under the beneficiary's theory, until the entire investment in the SPIA has been recovered, the only portion of the annuity amount includable in the beneficiary's income is that portion of the SPIA annuity required to be included in income under section 72. The beneficiary also maintains that the distribution is not subject to section 664(b), which would treat a substantial portion of the annuity amount as gain attributable to the sale of the appreciated property contributed to the CRAT. ******** 3 The beneficiary also claims that section 72(u) does not apply because the SPIA is an "immediate annuity" under section 72(u)(3)(E). ******** The trustee also might take the position that the transfer of the appreciated property to the purported CRAT gives those assets a step-up in basis to FMV as if they had been sold to the trust. The transfer of property to a CRAT, however, does not give those assets a step-up in basis to FMV, as if they had been sold to the trust, giving the trust a cost basis under section 1012 of the Code. Instead, the transfer to the CRAT is a gift for Federal tax purposes. When a grantor transfers appreciated property to a CRAT, the CRAT's basis in the assets is determined under section 1015 of the Code. Under section 1015(a) and (d), property transferred by gift (whether or not in trust) retains its basis in the hands of the donor, increased (but not above FMV) by any gift tax paid on the transfer. The claimed application of sections 664 and 72 to the transaction is incorrect. Proper application of the rules of sections 664 and 72 to the transaction results in annual ordinary income from the annuity payments from the SPIA being added to the section 664(b)(1) (ordinary income) tier of the CRAT's income each year, and a one-time amount being added to the section 664(b)(2) (capital gains) tier at the time of the sale of the property by the CRAT (assuming the asset is of a kind to produce capital gain). Assuming no other activity in the CRAT, under section 664(b), the beneficiary of the CRAT must treat the annuity amount each year as first consisting of the ordinary income portion of the annuity payments from the SPIA. The balance of the annuity amount must be treated as consisting of any accumulated ordinary income of the CRAT, then accumulated capital gain, and then other income of the CRAT, only reaching non-taxable corpus to the extent these three accounts have been exhausted. In addition, certain features of the trust may cause the trust to fail to meet all of the requirements of section 664(d)(1). While the trust instrument generally resembles one of the eight sample CRAT forms provided in Rev. Proc. 2003-53, 2003-2 C.B. 230; Rev. Proc. 2003-54, 2003-2 C.B. 236; Rev. Proc, 2003-55, 2003-2 C.B. 242; Rev. Proc. 2003-56, 2003-2 C.B. 249; Rev. Proc. 2003-57, 2003-2 C.B. 257; Rev. Proc. 2003-58, 2003-2 C.B. 262; Rev. Proc. 2003-59, 2003-2 C.B 268; and Rev. Proc. 2003-60, 2003-2 C.B. 274 (Sample CRAT Revenue Procedures), it might have one or more significant modifications. For example, the trust instrument might provide that, in each taxable year of the trust, the trustee must pay to the beneficiary during the annuity period, an annuity amount equal to the greater of (1) an amount which meets the requirements of section 664(d)(1)(A) or (2) the payments received by the trustee from one or more SPIAs purchased by the trustee. The trust instrument also might provide for a current payment to an organization described in section 170(c) (Charitable Remainderman) in lieu of the payment of the remainder interest described in section 664(d)(1)(C). For example, the trust instrument might state that, in lieu of transferring the remainder amount required pursuant to section 664(d)(1)(C) (Remainder Interest) to the Charitable Remainderman, the trustee, upon the availability of adequate funding, currently may pay to the Charitable Remainderman a cash sum equal to at least 10 percent of the initial FMV of the trust property plus a nominal amount of cash. The trust agreement also might provide that the trustee cannot make a distribution in kind to satisfy this cash distribution. This payment, equal to at least 10 percent of the initial FMV of the trust property, would be the only payment to the Charitable Remainderman. The governing instrument of a CRAT may provide for an amount other than the annuity amount described in §1.664-2(a)(1) to be paid (or to be paid in the discretion of the trustee) to an organization described in §170(c) provided that, in the case of distributions in kind, the adjusted basis of the property distributed is fairly representative of the adjusted basis of the property available for payment on the date of payment. See §1.664-2(a)(4). However, nowhere in section 664(d)(1)(D) does it permit a current payment, determined based on the value of the trust at its funding, to be made in lieu of, and as a substitute for, the required payment of the remainder interest (that is, the entire corpus of the trust at termination of the annuity period) described in section 664(d)(1)(C) to the Charitable Remainderman. The significant modifications identified in the prior paragraphs deviate from the Sample CRAT Revenue Procedures in ways that prevent the qualification of the trust as a valid CRAT under section 664, regardless of the actual administration of the CRAT. These modifications are made in these transactions in order to effectuate the structure. Specifically, a provision authorizing the payment of an annuity amount in excess of the amount described in section 664(d)(1)(A), and a provision authorizing a current payment in lieu of the payment of the remainder interest described in section 664(d)(1)(C), violate mandatory requirements of a valid CRAT. VI. Purpose of Proposed Regulations On March 3, 2022, the Sixth Circuit issued an order in Mann Construction v. United States, 27 F.4th 1138, 1147 (6th Cir. 2022), holding that Notice 2007-83, 2007-2 C.B. 960, which identified certain trust arrangements claiming to be welfare benefit funds and involving cash value life insurance policies as listed transactions, violated the Administrative Procedure Act (APA), 5 U.S.C. 551-559, because the notice was issued without following the notice-and-comment procedures required by section 553 of the APA. The Sixth Circuit reversed the decision of the district court, which held that Congress had authorized the IRS to identify listed transactions without notice and comment. See Mann Construction, Inc. v. United States, 539 F.Supp.3d 745, 763 (E.D. Mich. 2021). Relying on the Sixth Circuit's analysis in Mann Construction, three district courts and the Tax Court have concluded that IRS notices identifying listed transactions were improperly issued because they were issued without following the APA's notice and comment procedures. See Green Rock, LLC v. IRS, 2023 WL 1478444 (N.D. AL., February 2, 2023) (Notice 2017-10); GBX Associates, LLC, v. United States, 1:22cv401 (N.D. Ohio, Nov. 14, 2022) (same); Green Valley Investors, LLC, et al. v. Commissioner, 159 T.C. No. 5 (Nov. 9, 2022) (same); see also CIC Services, LLC v. IRS, 2022 WL 985619 (E.D. Tenn. March 21, 2022), as modified by 2022 WL 2078036 (E.D. Tenn. June 2, 2022) (Notice 2016-66, identifying a transaction of interest). The Treasury Department and the IRS disagree with the Sixth Circuit's decision in Mann Construction and the subsequent decisions that have applied that reasoning to find other IRS notices invalid and are continuing to defend the validity of notices identifying transactions as listed transactions in circuits other than the Sixth Circuit. At the same time, however, to avoid any confusion and to ensure consistent enforcement of the tax laws throughout the nation, the Treasury Department and the IRS are issuing these proposed regulations to identify certain charitable remainder trust transactions as listed transactions for purposes of all relevant provisions of the Code and Treasury Regulations. These proposed regulations propose to identify the charitable remainder trust transactions described in proposed §1.6011-15(b), and substantially similar transactions, as listed transactions for purposes of §1.6011-4(b)(2) and sections 6111 and 6112. In addition, they inform taxpayers that participate in these transactions, and persons who act as material advisors with respect to these transactions, that they would need to disclose the transaction in accordance with the final regulations and the regulations issued under sections 6011 and 6111. Material advisors must also maintain lists as required by section 6112. Explanation of Provisions I. Charitable Remainder Annuity Trust Transaction Proposed §1.6011-15(a) would identify a transaction that is the same as, or substantially similar to, the transaction described in proposed §1.6011-15(b) as a listed transaction for purposes of §1.6011-4(b)(2). "Substantially similar" is defined in §1.6011-4(c)(4) to include any transaction that is expected to obtain the same or similar types of tax consequences and that is either factually similar or based on the same or a similar tax strategy. A transaction is described in proposed §1.6011-15(b) if it includes the following elements: (i) The grantor creates a trust purporting to qualify as a CRAT under section 664; (ii) The grantor funds the trust with property having a FMV in excess of its basis (contributed property); (iii) The trustee sells the contributed property; (iv) The trustee uses some or all of the proceeds from the sale of the contributed property to purchase an annuity; and (v) On a Federal income tax return, the beneficiary of the trust (Beneficiary) treats the amount payable from the trust as if it were, in whole or in part, an annuity payment subject to section 72, instead of as carrying out to the Beneficiary amounts in the ordinary income and capital gain tiers of the trust in accordance with section 664(b). II. Participants Whether a taxpayer has participated in the listed transaction described in proposed §1.6011-15(b) is determined under §1.6011-4(c)(3)(i)(A). Participants include any person whose tax return reflects tax consequences or a tax strategy described in proposed §1.6011-15(b). These tax consequences include those tax consequences described in proposed §1.6011-15(b) that would affect any gift tax return, whether or not such gift tax return was filed. See §25.6011-4. A taxpayer also has participated in a transaction described in proposed §1.6011-15(b) if the taxpayer knows or has reason to know that the taxpayer's tax benefits are derived directly or indirectly from tax consequences, or a tax strategy, described in proposed §1.6011-15(b). III. Material Advisors Material advisors who make a tax statement with respect to transactions identified as listed transactions in proposed §1.6011-15(b) would have disclosure and list maintenance obligations under sections 6111 and 6112. See §§301.6111-3 and 301.6112-1. One of the requirements to be a material advisor under section 6111(b)(1) is that the person must directly or indirectly derive gross income in excess of the threshold amount provided in 6111(b)(1)(B) for providing material aid, assistance, or advice with respect to the listed transaction. That threshold in the case of a listed transaction is reduced to $10,000 if substantially all of the tax benefits are provided to natural persons (looking through any partnerships, S corporations, or trusts), or to $25,000 for any other transaction. See §301.6111-3(b)(3)(i)(B). The regulations under section 6111 provide that gross income includes all fees for a tax strategy, for services for advice (whether or not tax advice), and for the implementation of a reportable transaction. See §301.6111-3(b)(2)(ii). However, a fee does not include amounts paid to a person, including an advisor, in that person's capacity as a party to the transaction. See §301.6111-3(b)(3)(ii). IV. Effect of Participating in Listed Transaction Described in Proposed §1.6011-15(b) Participants required to disclose these transactions under §1.6011-4 who fail to do so will be subject to penalties under section 6707A. Such disclosure also must include any gift tax consequences. See §25.6011-4. Participants required to disclose these transactions under §1.6011-4 who fail to do so also are subject to an extended period of limitations under section 6501(c)(10). Material advisors required to disclose these transactions under section 6111 who fail to do so are subject to penalties under section 6707. Material advisors required to maintain lists of investors under section 6112 who fail to do so (or who fail to provide such lists when requested by the IRS) are subject to penalties under section 6708(a). In addition, the IRS may impose other penalties on persons involved in these transactions or substantially similar transactions, including accuracy-related penalties under section 6662 or section 6662A, the penalty under section 6694 for understatements of a taxpayer's liability by a tax return preparer, the penalty under section 6700 for promoting abusive tax shelters, and the penalty under section 6701 for aiding and abetting understatement of tax liability. In addition, material advisors have disclosure requirements with regard to transactions occurring in prior years. However, notwithstanding §301.6111-3(b)(4)(i) and (iii), material advisors are required to disclose only if they have made a tax statement on or after [ DATE 6 YEARS BEFORE DATE OF PUBLICATION OF FINAL RULE]. Because the IRS will take the position that taxpayers are not entitled to the purported tax benefits of the listed transactions described in the proposed regulations, taxpayers who have filed tax returns taking the position that they were entitled to the purported tax benefits should consider filing amended returns or otherwise ensure that their transactions are disclosed properly. V. Role of Charitable Remainderman in the Transaction As stated in section 1 of this Explanation of Provisions, the transaction described in proposed §1.6011-15(b) attempts to use a CRAT under section 664 to permanently avoid recognition of ordinary income and/or capital gain on the sale of contributed property having a FMV in excess of its basis. Under the mandatory requirements of section 664(d), a trust does not qualify as a CRAT unless, following the termination of the annuity payments described in section 664(d)(1)(A), the Remainder Interest is to be transferred to or for the use of an organization described in section 170(c). A. Charitable Remainderman as a Party to a Transaction under Section 4965 As stated in section III of the Background, section 4965 provides, in part, that, if a transaction is a prohibited tax shelter transaction at the time a tax-exempt entity (which includes an organization described in section 170(c), other than the United States) becomes a party to the transaction, the entity must pay the section 4965 tax for the taxable year and any subsequent taxable year as determined under section 4965(b)(1). Section 4965(e)(1) provides in part that the term "prohibited tax shelter transaction" means any listed transaction (within the meaning of section 6707A(c)(2)). A tax-exempt entity that is a party to a prohibited tax shelter transaction generally is subject to various reporting and disclosure obligations. Additionally, an entity manager is subject to the entity manager tax imposed by section 4965(a)(2) if the entity manager approves the tax-exempt entity as a party (or otherwise causes the entity to be a party) to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. Section 53.4965-4(a) provides in part that a tax-exempt entity is a "party" to a prohibited tax shelter transaction if it facilitates a prohibited tax shelter transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status. The trust used in a transaction identified as a listed transaction in proposed §1.6011-15(a) would not qualify as a CRAT unless the entire Remainder Interest is required to be transferred to or for the use of a Charitable Remainderman. Thus, the tax-exempt entity that the CRAT designates for the Remainder Interest facilitates the transaction by reason of its tax-exempt status because, absent that status, the CRAT would not satisfy the mandatory requirement of section 664(d)(1)(C). Accordingly, that designated tax-exempt entity would meet the definition of a party to a prohibited tax shelter transaction in §53.4965-4(a)(1). However, notwithstanding the general rule in §53.4965-4(a), §53.4965-4(b) provides that published guidance may identify, by type, class, or role, which tax-exempt entities will or will not be treated as parties to a prohibited tax shelter transaction. The Treasury Department and the IRS understand that, in a transaction described in proposed §1.6011-15(b), an organization described in section 170(c) that is designated as the Charitable Remainderman might not become aware of its Remainder Interest in the purported CRAT until it receives a distribution from the trust. In that situation, it may be difficult for the organization described in section 170(c) to determine when section 4965 excise taxes and related reporting requirements apply. For this reason, these proposed regulations would provide that an organization described in section 170(c) that the purported CRAT designates as the recipient of the Remainder Interest will not be treated as a party under section 4965 to the listed transaction described in proposed §1.6011-15 solely by reason of its status as a Charitable Remainderman. B. Participation by a Charitable Remainderman As stated in section II of the Background, a taxpayer has participated in a listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described in this proposed regulation. See §1.6011-4(c)(3)(i)(A). Published guidance may identify other types or classes of persons that will be treated as participants in a listed transaction. Published guidance also may identify types or classes of persons that will not be treated as participants in a listed transaction. In general, the Treasury Department and the IRS do not expect that an organization described in section 170(c), whose only role or interest in the transaction described in these proposed regulations is as a Charitable Remainderman, would meet the definition of a participant under §1.6011-4(c)(3)(i)(A). Nevertheless, to avoid potential uncertainty, the proposed regulations provide that an organization described in section 170(c) that the purported CRAT designates as the recipient of the Remainder Interest is not treated as a participant in the listed transaction described in these proposed regulations solely by reason of its status as a Charitable Remainderman. C. Charitable Remainderman as a Material Advisor As stated in section III of the Background, a person is a material advisor with respect to a transaction if the person provides any material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and directly or indirectly derives gross income in excess of the threshold amount for the material aid, assistance, or advice. See section 6111(b)(1)(A). The regulations provide that gross income includes all fees for a tax strategy, for services or advice (whether or not tax advice), and for the implementation of a reportable transaction. However, a fee does not include amounts paid to a person, including an advisor, in that person's capacity as a party to the transaction. See §301.6111-3(b)(3)(ii)). The Treasury Department and the IRS request comments on whether the Charitable Remainderman ever provides material aid, assistance, or advice with respect to transactions described in proposed §1.6011-15(b) and the nature of the services being provided. The Treasury Department and the IRS also request comments on what fees the Charitable Remainderman receives, either directly or indirectly, for providing such material aid, assistance or advice. Comments and Public Hearing Before these proposed amendments to the regulations are adopted as final regulations, consideration will be given to comments regarding the notice of proposed rulemaking that are submitted timely to the IRS as prescribed under the ADDRESSES section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. All comments will be made available at https://www.regulations. gov. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. A public hearing has been scheduled for July 11, 2024, beginning at 10 a.m. ET, in the Auditorium at the Internal Revenue Service Building, 1111 Constitution Avenue, NW. Washington, DC. Due to the building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. Participants alternatively may attend the public hearing by telephone. The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present comments at the hearing must submit an outline of the topics to be discussed and the time to be devoted to each topic by May 24, 2024. A period of 10 minutes will be allocated to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be free of charge at the hearing. If no outline of topics to be discussed at the hearing is received by May 24, 2024, the public hearing will be cancelled. If the public hearing is cancelled, a notice of cancellation of the public hearing will be published in the Federal Register. Individuals who want to testify in person at the public hearing must send an email to publichearings@irs.gov to have your name added to the building access list. The subject line of the email must contain the regulation number (REG-108761-22) and the language "TESTIFY In Person". For example, the subject line may say: Request to TESTIFY In Person at Hearing for REG-108761-22. Individuals who want to testify by telephone at the public hearing must send an email to publichearings@irs.gov to receive the telephone number and access code for the hearing. The subject line of the email must contain the regulation number REG-108761-22 and the language "TESTIFY Telephonically". For example, the subject line may say: Request to TESTIFY Telephonically at Hearing for REG-108761-22. Individuals who want to attend the public hearing in person without testifying also must send an email to publichearings@irs.gov to have their names added to the building access list. The subject line of the email must contain the regulation number REG-108761-22 and the language "ATTEND in Person". For example, the subject line may say: Request to ATTEND Hearing In Person REG-108761-22. Requests to attend the public hearing must be received by 5 p.m. ET on July 9, 2024. Individuals who want to attend the public hearing by telephone without testifying also must send an email to publichearings@irs.gov to receive the telephone number and access code for the hearing. The subject line of email must contain the regulation number (REG-108761-22 and the language "ATTEND Hearing Telephonically". For example, the subject line may say: Request to ATTEND Hearing Telephonically for REG-108761-22. Requests to attend the public hearing must be received by 5 p.m. ET on July 9, 2024. Hearings will be made accessible to people with disabilities. To request special assistance during a hearing, please contact the Publication and Regulations Section of the Office of Associate Chief Counsel (Procedure and Administration) by sending an email to publichearings@irs.gov (preferred) or by telephone at (202) 317-6901 (not a toll-free number) at least July 8, 2024. Applicability Date Proposed §1.6011-15 would identify charitable remainder annuity trust transactions described in proposed §1.6011-15(b), and transactions that are substantially similar to those transactions, as listed transactions, effective as of the date the final regulations are published in the Federal Register. Special Analyses I. Paperwork Reduction Act The estimated number of taxpayers impacted by these proposed regulations is between 50 to 100 per year. No burden on these taxpayers is imposed by these proposed regulations. Instead, the collection of information contained in these proposed regulations is reflected in the collection of information for Forms 8886 and 8918 that have been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act (44 U.S.C. 3507(c)) under control numbers 1545-1800 and 1545-0865. To the extent there is a change in burden as a result of these regulations, the change in burden will be reflected in the updated burden estimates for Forms 8886 and 8918. The requirement to maintain records to substantiate information on Forms 8886 and 8918 already is contained in the burden associated with the control number for the forms and remains unchanged. 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. II. Regulatory Flexibility Act When an agency issues a proposed rulemaking, the Regulatory Flexibility Act (5 U.S.C. chapter 6) (Act) requires the agency to "prepare and make available for public comment an initial regulatory flexibility analysis" that "describe[s] the impact of the proposed rule on small entities." 5 U.S.C. 603(a). The term "small entities" is defined in 5 U.S.C. 601 to mean "small business," "small organization," and "small governmental jurisdiction," which are also defined in 5 U.S.C. 601. Small business size standards define whether a business is "small" and have been established for types of economic activities, or industry, generally under the North American Industry Classification System (NAICS). See Title 13, Part 121 of the Code of Federal Regulations (titled "Small Business Size Regulations"). The size standards look at various factors, including annual receipts, number of employees, and amount of assets, to determine whether the business is small. See Title 13, Part 121.201 of the Code of Federal Regulations for the Small Business Size Standards by NAICS Industry. Section 605 of the Act provides an exception to the requirement to prepare an initial regulatory flexibility analysis if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities. The Treasury Department and the IRS hereby certify that these proposed regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the majority of the effect of the proposed regulations falls on trusts. Further, the Treasury Department and the IRS expect that the reporting burden is low; the information sought is necessary for regular annual return preparation and ordinary recordkeeping. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business. III. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million (updated annually for inflation). This proposed rule does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold. IV. Executive Order 13132: Federalism Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order. V. Regulatory Planning and Review Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required. Statement of Availability of IRS Documents Guidance cited in this preamble is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov. Drafting Information The principal author of these proposed regulations is Charles D. Wien, Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the IRS and the Treasury Department participated in the development of these regulations. List of Subjects in 26 CFR Part 1 Income Taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 1 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 * * * * * * * * Section 1.6011-15 also issued under 26 U.S.C. 6001 and 26 U.S.C. 6011 * * * * * * * * Par. 2. Section 1.6011-15 is added to read as follows: §1.6011-15 Charitable Remainder Annuity Trust Listed Transaction. (a) In general. Transactions that are the same as, or substantially similar to, a transaction described in paragraph (b) of this section are identified as listed transactions for purposes of §1.6011-4(b)(2). (b) Charitable remainder annuity trusts. A transaction is described in this paragraph (b) if: (1) The grantor creates a trust purporting to qualify as a charitable remainder annuity trust under section 664(d)(1) of the Internal Revenue Code (Code); (2) The grantor funds the trust with property having a fair market value in excess of its basis (contributed property); (3) The trustee sells the contributed property; (4) The trustee uses some or all of the proceeds from the sale of the contributed property to purchase an annuity; and (5) On a Federal income tax return, the beneficiary of the trust treats the annuity amount payable from the trust as if it were, in whole or in part, an annuity payment subject to section 72 of the Code, instead of as carrying out to the beneficiary amounts in the ordinary income and capital gain tiers of the trust in accordance with section 664(b). (c) Participation --(1) In general. A taxpayer has participated in a transaction identified as a listed transaction in paragraph (a) of this section if the taxpayer's tax return reflects tax consequences or a tax strategy described in this section as provided under §1.6011-4(c)(3)(i)(A). These tax consequences include those tax consequences that would affect any gift tax return, whether or not such gift tax return was filed. See §25.6011-4 of this chapter. (2) Treatment of charitable remainderman. An organization described in section 170(c) of the Code that the purported Charitable Remainder Annuity Trust designates as a recipient of the remainder interest described in section 664(d)(1) is not treated as a participant under §1.6011-4(c)(3)(i)(A) in the transaction described in this section solely by reason of its status as a recipient of the remainder interest described in section 664(d)(1). (d) Treatment of charitable remainderman under section 4965. A tax-exempt entity (as defined in section 4965 of the Code) that is an organization described in section 170(c) and that the purported Charitable Remainder Annuity Trust designates as a recipient of the remainder interest described in section 664(d)(1) is not treated as a party to the transaction described in this section for purposes of section 4965 solely by reason of its status as a recipient of the remainder interest described in section 664(d)(1). (e) Applicability date. This section's identification of transactions that are the same as, or substantially similar to, the transaction described in paragraph (b) of this section as listed transactions for purposes of §1.6011-4(b)(2) is effective on [date of publication of final regulations in the Federal Register ]. Douglas W. O'Donnell, Deputy Commissioner for Services and Enforcement (Filed by the Office of the Federal Register March 5, 2024, 8:45 a.m., and published in the issue of the Federal Register for March 11, 2024, 89 FR 17613)

Private Letter Ruling Number: 202303009 Internal Revenue Service October 18, 2022 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202303009 Release Date: 1/20/2023 Index Number: 1001.00-00, 1015.00-00, 1015.03-00, 1015.03-01, 1223.00-00, 2036.00-00, 2036.01-00, 2038.00-00, 2038.01-00, 2038.01-01, 2501.00-00, 2501.01-00, 2601.00-00, 2601.01-00, 61.00-00, 661.00-00, 662.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:4 PLR-110422-22 Date: October 18, 2022 Dear *******: This letter responds to your authorized representatives' letter of May 19, 2022, and subsequent correspondence, requesting rulings regarding the income, estate, gift, and generation-skipping transfer (GST) tax consequences of the proposed division of Trust 1. The facts and representations submitted are as follows: Grandparent died on Date 1, leaving the residue of Grandparent's probate estate in equal shares to Trust 1 and Trust 2, testamentary trusts established under Will. Trust 1 is held for the benefit of Grandchild 1 and Grandchild 1's descendants, and Trust 2 is held for the benefit of Grandchild 2 and Grandchild 2's descendants. Grandchild 1 has five children, Great-Grandchild 1, Great-Grandchild 2, Great-Grandchild 3, Great-Grandchild 4, and Great-Grandchild 5. Grandchild 2 has one child, Great-Grandchild 6. Neither Grandchild 1 nor Grandchild 2 has any deceased children. Trustees serve as trustees of Trust 1. Trust 1 is the subject of this ruling request. Section 9(a) of Trust 1 provides that Trustees may distribute the net income of Trust 1 to or for the benefit of Grandchild 1 and Grandchild 1's descendants in such proportions and at such times as Trustees determine is desirable or necessary, considering their needs, best interests, and other sources of income, or may annually accumulate and add all or part of the net income to the principal of Trust 1. Section 9(b) of Trust 1 provides that Trustees may distribute the principal of Trust 1 to or for the benefit of Grandchild 1 and Grandchild 1's descendants in such proportions and at such times as Trustees determine is desirable or necessary for their medical care, comfortable maintenance, education, or general support and welfare, considering their other resources. Section 9(c) of Trust 1 provides that Trust 1 will terminate 21 years after the death of the survivor of Grandchild 1 and Grandchild 2, and the principal of Trust 1 will be distributed to Grandchild 1's descendants, per stirpes. If, however, Grandchild 1 and Grandchild 1's descendants all die before that date, Trust 1 will terminate early, and the principal of Trust 1 will be distributed to Trust 2. Grandchild 1's descendants have differing personal and financial situations and, consequently, Trustees, propose to divide Trust 1 along family lines into five separate shares (Resulting Trusts), one for the benefit of each of Grandchild 1's children and their respective descendants plus Grandchild 1, and to fund each Resulting Trust with one-fifth of each asset of Trust 1 (Proposed Division). Any distribution to Grandchild 1 from a Resulting Trust will be made pro rata from each Resulting Trust. The provisions of each Resulting Trust otherwise will be identical and unchanged from the provisions of Trust 1. In accordance with Trust 1, each Resulting Trust will terminate 21 years after the death of the survivor of Grandchild 1 and Grandchild 2, and the principal will be distributed to the child of Grandchild 1 for whom Resulting Trust was created or, if such child is deceased, to the child's descendants, per stirpes. If, however, Grandchild 1, the child of Grandchild 1 for whom Resulting Trust was created, and such child's descendants all die before that date, Resulting Trust will terminate early, and the principal will be distributed equally among the other Resulting Trusts. If Grandchild 1 and Grandchild 1's descendants all die before that date, the principal instead will be distributed to Trust 2. Under the authority of Statutes, Court issued Order on Date 2 and Amended Order on Date 3 authorizing the Proposed Division upon receipt of a favorable private letter ruling from the Internal Revenue Service. Trust 1 was irrevocable prior to September 25, 1985, and no additions, actual or constructive, have been made to Trust 1. You request the following rulings: 1. Proposed Division will not cause Trust 1 or any Resulting Trust to lose grandfathered status for purposes of the GST tax, or otherwise become subject to GST tax. 2. Proposed Division will not be treated as a distribution and cause any Resulting Trust to recognize income, gain or loss from a sale or other disposition of property under § 61, § 661, § 662, or § 1001. 3. The adjusted basis and holding period of each of the Resulting Trust assets will be the same as the adjusted basis and holding periods of the Trust 1 assets under § 1015 and § 1223(2). 4. Proposed Division will not cause such assets to be includable in the gross estate of any of the beneficiaries under § 2036, § 2037, or § 2038. 5. Proposed Division will not constitute a transfer subject to federal gift tax under § 2501. Ruling 1 Section 2601 imposes a tax on every GST, which is defined under § 2611 as a taxable distribution, a taxable termination, and a direct skip. Under § 1433(a) of the Tax Reform Act of 1986 (Act) and § 26.2601-1(a) of the Generation-Skipping Transfer Tax Regulations, the GST tax is generally applicable to generation-skipping transfers made after October 22, 1986. However, under § 1433(b)(2)(A) of the Act and § 26.2601-1(b)(1)(i), the tax does not apply to a transfer under a trust that was irrevocable on September 25, 1985, but only to the extent that such transfer is not made out of corpus added to the trust after September 25, 1985 (or out of income attributable to corpus so added). Section 26.2601-1(b)(4)(i) provides rules for determining when a modification, judicial construction, settlement agreement, or trustee action with respect to a trust that is exempt from the GST tax will not cause the trust to lose its exempt status. In general, unless specifically provided otherwise, the rules contained in this paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for GST tax purposes. Thus (unless specifically noted), the rules do not apply in determining, for example, whether the transaction results in a gift subject to gift tax, or may cause the trust to be included in the gross estate of a beneficiary, or may result in the realization of gain for purposes of § 1001. Section 26.2601-1(b)(4)(i)(D) provides that a modification of the governing instrument of an exempt trust (including a trustee distribution, settlement, or construction that does not satisfy § 26.2601-1(b)(4)(i)(A), (B), or (C)) by judicial reformation, or nonjudicial reformation that is valid under applicable state law, will not cause an exempt trust to be subject to the provisions of chapter 13, if the modification does not shift a beneficial interest in the trust to any beneficiary who occupies a lower generation (as defined in § 2651) than the person or persons who held the beneficial interest prior to the modification, and the modification does not extend the time for vesting of any beneficial interest in the trust beyond the period provided for in the original trust. A modification of an exempt trust will result in a shift in beneficial interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a GST or the creation of a new GST. Section 26.2601-1(b)(4)(i)(E), Example 5, provides as follows. In 1980, Trustor established an irrevocable trust for the benefit of his two children, A and B, and their issue. Under the terms of the trust, the trustee has the discretion to distribute income and principal to A, B, and their issue in such amounts as the trustee deems appropriate. On the death of the last to die of A and B, the trust principal is to be distributed to the living issue of A and B, per stirpes. In 2002, the appropriate local court approved the division of the trust into two equal trusts, one for the benefit of A and A's issue and one for the benefit of B and B's issue. The trust for A and A's issue provides that the trustee has the discretion to distribute trust income and principal to A and A's issue in such amounts as the trustee deems appropriate. On A's death, the trust principal is to be distributed equally to A's issue, per stirpes. If A dies with no living descendants, the principal will be added to the trust for B and B's issue. The trust for B and B's issue is identical (except for the beneficiaries), and terminates at B's death at which time the trust principal is to be distributed equally to B's issue, per stirpes. If B dies with no living descendants, principal will be added to the trust for A and A's issue. The division of the trust into two trusts does not shift any beneficial interest in the trust to a beneficiary who occupies a lower generation (as defined in § 2651) than the person or persons who held the beneficial interest prior to the division. In addition, the division does not extend the time for vesting of any beneficial interest in the trust beyond the period provided for in the original trust. Therefore, the two partitioned trusts resulting from the division will not be subject to the provisions of chapter 13. In the present case, Trust 1 was irrevocable on September 25, 1985. It is represented that no additions, actual or constructive, have been made to Trust 1 after that date. Proposed Division is substantially similar to the situation described in § 26.2601-1(b)(4)(i)(E), Example 5. Under Proposed Division, Resulting Trusts will, except as described above, be administered under the original provisions of Trust 1. Based on the facts submitted and the representations made, we conclude that Proposed Division will not shift any beneficial interest in Trust 1 to a person who occupies a lower generation than the persons holding the beneficial interest prior to Proposed Division. In addition, Proposed Division will not extend the time for vesting of any beneficial interest beyond the period provided for in Trust 1. Accordingly, Proposed Division will not cause Trust 1 or any Resulting Trust to lose grandfathered status for purposes of the GST tax, or otherwise become subject to GST tax. Ruling 2 Section 61(a)(3) and (15) provides that gross income includes gains derived from dealings in property and income from an interest in a trust. Section 661(a) provides that in any taxable year a deduction is allowed in computing the taxable income of a trust (other than a trust to which subpart B applies), for the sum of (1) the amount of income for such taxable year required to be distributed currently; and (2) any other amounts properly paid or credited or required to be distributed for such taxable year. Section 1.661(a)-2(f) of the Income Tax Regulations provides that gain or loss is realized by the trust or estate (or the other beneficiaries) by reason of a distribution of property in kind if the distribution is in satisfaction of a right to receive a distribution of a specific dollar amount, of specific property other than that distributed, or of income as defined under § 643(b) and the applicable regulations, if income is required to be distributed currently. Section 662 provides that there shall be included in the gross income of a beneficiary to whom an amount specified in § 661(a) is paid, credited, or required to be distributed (by an estate or trust described in § 661), the sum of the following amounts: (1) the amount of income for the taxable year required to be distributed currently to such beneficiary, whether distributed or not; and (2) all other amounts properly paid, credited, or required to be distributed to such beneficiary for the taxable year. Section 1001(a) provides that the gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in § 1011 for determining gain, and the loss shall be the excess of the adjusted basis provided in § 1011 for determining loss over the amount realized. Section 1001(b) states that the amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. Under § 1001(c), except as otherwise provided in subtitle A, the entire amount of gain or loss, determined under § 1001, on the sale or exchange of property shall be recognized. Section 1.1001-1(a) provides that the gain or loss realized from the conversion of property into cash, or from the exchange of property for other property differing materially either in kind or in extent, is treated as income or loss sustained. A partition of jointly owned property is not a sale or other disposition of property where the co-owners of the joint property sever their joint interests, but do not acquire a new or additional interest as a result thereof. Thus, neither gain nor loss is realized on a partition. See Rev.Rul. 56-437, 1956-2 C.B. 507 (conversion of a joint tenancy in stock to a tenancy in common in order to eliminate the survivorship feature and the partition of a joint tenancy in stock are not sales or exchanges). Similarly, divisions of trusts are also not sales or exchanges of trust interests where each asset is divided pro rata among the new trusts. See Rev.Rul. 69-486, 1969-2 C.B. 159 ( pro rata distribution of trust assets not a sale or exchange). In the present case, the legal entitlements, as well as the rights and powers, of the beneficiaries will remain the same in kind and extent after Proposed Division. Accordingly, based on the facts submitted and representations made, Proposed Division will not result in the realization of gain or loss under § 61 and § 1001. Moreover, based solely on the facts submitted and representations made, we conclude that Proposed Division is not a distribution under § 661 or § 1.661(a)-2(f). We further conclude that Proposed Division will not cause Trust 1, Resulting Trusts, or the beneficiaries of Trust 1 or any Resulting Trust to recognize any income under § 662. Ruling 3 Section 1015(b) provides that if property is acquired after December 31, 1920, by a transfer in trust (other than a transfer in trust by a gift, bequest, or devise), the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer. Section 1.1015-2(a)(1) provides that in the case of property acquired after December 31, 1920, by transfer in trust (other than by transfer in trust by gift, bequest, or devise), the basis of property so acquired is the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer was made. If the taxpayer acquired the property by transfer in trust, this basis applies whether the property is in the hands of the trustee or the beneficiary, and whether acquired prior to termination of the trust and distribution of the property, or thereafter. Section 1223(2) provides that in determining the period for which the taxpayer has held property, however it is acquired, there shall be included the period for which the property was held by any other person, if under this chapter such property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as it would have in the hands of the other person. Based on the facts submitted and the representations made, we conclude that because § 1001 does not apply to Proposed Division, under § 1015 the basis of the assets received by Resulting Trusts will be the same as the respective basis of the assets held by Trust 1. We further conclude that under § 1223(2) the holding periods of the assets received by Resulting Trusts will be the same as the holding periods of the assets in Trust 1. Ruling 4 Section 2001(a) imposes a tax on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States. Section 2033 provides that the value of the gross estate includes the value of all property to the extent of the interest therein of the decedent at the time of death. Section 2036(a) provides that the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom. Section 2037(a) provides that the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, if (1) possession or enjoyment of the property can, through ownership of such interest, be obtained only by surviving the decedent, and (2) the decedent has retained a reversionary interest in the property, and the value of such reversionary interest immediately before the death of the decedent exceeds 5 percent of the value of such property. Section 2038(a)(1) provides that the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, where the enjoyment thereof was subject at the date of decedent's death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, revoke, or terminate, or where the decedent relinquished any such power during the 3-year period ending on the date of the decedent's death. In order for § 2036 through § 2038 to apply, the decedent must have made a transfer of property or any interest therein (except in the case of a bona fide sale for an adequate and full consideration in money or money's worth) under which the decedent retained an interest in, or power over, the income or corpus of the transferred property. In the present case, the beneficiaries of Resulting Trusts will have the same interests after Proposed Division that they had as beneficiaries under Trust 1. The distribution, management, and termination provisions of each Resulting Trust will be substantially similar to the current distribution, management, and distribution provisions of Trust 1. Accordingly, based on the facts submitted and the representations made, we conclude that Proposed Division will not cause any portion of the assets of Resulting Trusts to be includible in the gross estate of any of the beneficiaries of Resulting Trusts under § 2036, § 2037, or § 2038. Ruling 5 Section 2501 imposes a tax for each calendar year on the transfer of property by gift during such calendar year by any individual, resident or nonresident. Section 2511 provides that, subject to certain limitations, the gift tax applies whether the transfer is in trust or otherwise, direct or indirect, and whether the property transferred is real or personal, tangible or intangible. Section 2512(a) provides that if the gift is made in property, the value thereof at the date of the gift is considered the amount of the gift. Section 2512(b) provides that where property is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the value of the property exceeded the value of the consideration is deemed a gift that is included in computing the amount of gifts made during the calendar year. In the present case, the beneficial interests, rights, and expectancies of the beneficiaries will be substantially the same, both before and after Proposed Division. Thus, no transfer of property will be deemed to occur as a result of Proposed Division. Accordingly, based on the facts submitted and representations made, we conclude that Proposed Division will not result in a transfer by any beneficiary of Trust 1 that is subject to the gift tax under § 2501. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives. Sincerely, Associate Chief Counsel (Passthroughs & Special Industries) By: Melissa C. Liquerman Melissa C. Liquerman Senior Counsel, Branch 4 Office of the Associate Chief Counsel (Passthroughs & Special Industries) Enclosure Copy for § 6110 purposes cc:

Private Letter Ruling Number: 202336020 Internal Revenue Service March 28, 2023 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Number: 202336020 Release Date: 9/8/2023 Date: 03/28/2023 Taxpayer ID number (last 4 digits): Form: Tax period ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with the United States Tax Court UIL: 501.03-00 CERTIFIED MAIL - Return Receipt Requested Dear ******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective ****** Your determination letter dated ****** is revoked. Our adverse determination as to your exempt status was made for the following reasons: Organizations described in IRC Section 501(c)(3) and exempt under IRC Section 501(a) must be both organized and operated exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 501(c)(3). You have not demonstrated that you are operated exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 501(c)(3) and that no part of your net earnings inure to the benefit of private shareholders or individuals. You failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by IRC sections 6001, 6033(a)(1) and Rev.Rul. 59-95, 1959-1 C.B. 627. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov. Contributions to your organization are no longer deductible under IRC Section 170. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a finable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: US Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3). Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. You may fax your documents to the fax number shown above, using either a fax machine or online fax service. Protect yourself when sending digital data by understanding the fax service's privacy and security policies. Keep the original letter for your records. Sincerely, ****** for Lynn A. Brinkley Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Exempt Organizations Examinations Date: May 17, 2022 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, ****** for Lynn A. Brinkley Acting Director Exempt Organizations Examinations Enclosures: Form 886-A and Attachments Form 6018 Issue: Whether ****** (****** continues to qualify for exemption from Federal income tax under section 501(a) of the Internal Revenue Code (Code) as a charitable organization described in Code section 501(c)(3). Facts: ****** was incorporated in the ****** on ******, under the state's ****** law. ****** Articles of Incorporation contains a section titled "******" which states that the organization is organized exclusively for charitable, religious, educational, and scientific purposes under section 501(c)(3) of the Code. This section also provides for a dissolution clause intended to allow ****** to satisfy the organizational requirements for Federal exemption. ****** Articles of Incorporation identifies the incorporator as ****** is also identified as the registered agent for ****** with an address of ****** - ****** There are ****** directors listed in ****** organizing document. ****** is designated as the Managing Director of ****** The ****** directors are designated as officers, ****** reside in ******. In ******, ****** filed Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, with the Internal Revenue Service (IRS). The Form 1023 application is signed by ****** according to the declaration on page ****** of the Form 1023 application, ****** is ****** of ****** individuals listed as directors in Part V of Form 1023, which requires applicant organizations to list the names, titles and mailing addresses of all officers, directors, and trustees. Similar to ****** Articles of Incorporation, the ****** directors have a mailing address located in ****** The mailing address for ****** the organization and ****** are the same - ****** The Form 1023 application is accompanied by a conformed copy of ****** Articles of Incorporation and several attachments providing narrative responses to certain questions in Form 1023. According to the attachment providing a narrative description of past, present, and planned activities as requested in Part IV of Form 1023, ****** states the following: Based on the Form 1023 application and accompanying records filed by ****** the IRS issued a favorable determination letter dated ******, granting ****** recognition of exemption under section 501(c)(3) of the Code. ****** was classified as a public charity under sections 509(a)(1) and 170(b)(1)(A)(vi) of the Code based on its planned fundraising programs and projected financial support. IRS records show that ****** filed Form 990-N, Electronic Notice (e-Postcard), beginning with the 2017 ****** filed Form 990-N in lieu of a Form 990 or Form 990-EZ return. The organization indicated on Form 990-N that its gross receipts are normally $50,000 or less. The address for ****** as reported on Forms 990-N filed for 2017 and ****** is the same address reported on the Form 1023 application - ****** The address furnished by ****** in ****** corresponds to a ****** (****** retail store which offers ****** services. A copy of the pertinent website content posted by or on behalf of the ****** store is appended as Exhibit A. As described in Exhibit A, the following ****** services are ****** at its ****** located at ******: - Package and mail receipt notifications - Mail holding and forwarding - Call-in mail check In ****** the Tax Exempt and Governmental Entities (TE/GE) division of the IRS selected for examination of its books and records covering the ****** The notice of examination package, which is dated ******, consists of IRS letter #6031, Form 4564, Information Document Request (IDR), Publication 1, Your Rights as a Taxpayer, Notice 609, Privacy Act Notice, and Publication 3498-A, The Examination Process (Audits by Mail). The notice of examination package was mailed to ****** at the last known address on file for the organization which is as follows: ****** changed its address from the one based in ****** to the current address in ****** when it filed its ****** Form 990-N with the IRS. The ****** address furnished by ****** also corresponds to a ****** retail store which offers ****** services described above. A copy of the pertinent website content posted by or on behalf of the ****** store located in ****** is appended as Exhibit B. As noted on ****** of the ****** IDR issued with the examination notice, the examination of ****** books and records is intended to verify that the organization: 1. Operates in accordance with section 501(c)(3) of the Code 2. Is eligible to file Form 990-N based on gross receipts, and 3. Filed all required returns including information returns. As part of standard audit procedures, the ****** requested that ****** furnish certain records and information needed to determine whether the organization is operating in furtherance of charitable and other exempt purposes described in section 501(c)(3) of the Code. IDR issued to ****** on ****** requests copies of the following records and information covering the ****** under examination: - Chart of accounts - General ledger - Adjusted trial balance - Cash disbursements journal. - Monthly bank statements for ****** primary operating (checking) account together with canceled checks or check images furnished by the bank. - Monthly statements for all credit cards that may have been issued to ****** - Minutes of meetings held by ****** Board of Directors and committees of the Board. - Internal policies and procedures regarding the handling and recording of cash donations. - Lease agreements and other information relating to any office or other facility used by ****** to conduct activities. - Contracts and other arrangements with individuals and/or organizations which solicit and raise funds for ****** including, but not limited to, professional fundraising organizations. - The organization's website address, if any, and the identity of the party that hosts the website. - Information regarding the accounting software used by ****** for preparation of its books and records. Due to the Covid-19 pandemic, ****** was given additional time to compile and furnish the records and information requested by the ****** The response due date on the IDR was ****** On ****** the ****** received a telephone call from an officer of ****** With ****** consent, the ****** conferenced in the ****** assigned to the case. ****** acknowledged receipt of the IRS notice of examination package for ****** but did not discuss the finances or activities of the organization. Instead, he described circumstances that he believed warranted an extension of time to compile records and respond to the initial IDR. The ****** granted an extension to ****** ****** did not respond to the IDR or otherwise contact the ****** or the ****** by the extended due date. In early ****** the ****** attempted to contact ****** by telephone using the contact telephone numbers that he provided. ****** did not answer the phone and the ****** did not subsequently receive a return call. Neither the ****** nor the ****** subsequently received any of the requested records and information from ****** or any other officer or director of ******. In accordance with established IRS procedures, a follow-up "Delinquency Notice" letter was issued to ****** with a copy of IDR ****** on ****** The delinquency notice states, in part, that if the organization does not fully respond to the IDR by the response due date, the IRS will propose revocation of ****** exempt status. ****** did not respond to the delinquency notice or otherwise contact the ****** The delinquency notice was not returned by the post office as undeliverable. A search of the ****** corporate database, which provides information on the status of entities incorporated under state law, shows that ****** corporate charter was administratively dissolved effective ****** for failure to file its annual registration and/or failure to maintain a registered agent or registered office in the state. See Exhibit C attached which includes a letter dated ****** addressed to ****** providing notice of the state's intent to administratively dissolve the ****** entity. Despite its name, there is no evidence that ****** is an ****** of the ****** that operate within the United States. The ****** a website which allows users to search for ****** is not among the ****** listed. ****** did not identify any website associated with the organization on any Form 990-N filed with the IRS. Applicable Law: Section 501(c)(3) of the Code provides that an organization organized and operated exclusively for charitable or educational purposes is exempt from Federal income tax, provided no part of its net earnings inures to the benefit of any private shareholder or individual. Section 1.501(c)(3)-1(a)(1) of the Treasury Regulations states that to be exempt as an organization described in section 501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section - charitable, religious, educational, scientific, literary, testing for public safety, or for the prevention of cruelty to children or animals. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Section 1.501(c)((3)-1(c) of the regulations describes the operational test requirements for 501(c)(3) exemption. The operational test focuses on how the organization is actually operated, regardless of whether it is properly organized for tax-exempt purposes. Section 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. This is referred to as the "primary activities" test. Section 1.501(c)(3)-1(c)(2) of the regulations provides that an organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Section 511 of the Code imposes a tax at corporate rates under section 11 on the unrelated business taxable income of certain tax-exempt organizations. Section 6001 of the Code provides, in part, that every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax under this title. Section 1.6001-1(c) of the regulations provides that in addition to such permanent books and records as are required by paragraph (a) of this section with respect to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under section 501(a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 6033 and regulations sections 1.6033-1 through 1.6033-3. Section1.6001-1(e) of the regulations provides that the books or records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and, shall be retained as long as the contents thereof may be material in the administration of any internal revenue law. Section 6033 of the Code provides, in general, that every organization exempt under IRC 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the Internal Revenue laws as the Secretary may by forms of regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Section 6033 of the Code provides an exception to the annual filing requirement in the case of an organization described in section 501(c) (other than a private foundation or a supporting organization described in section 509(a)(3)) the gross receipts of which in each taxable year are normally not more than $50,000. See section 1.6033-2(g)(1)(iii) of the regulations. Section 1.6033-2(g)(5) of the regulations provide that an organization that is not required to file an annual return by virtue of the gross receipts exception must submit an annual electronic notice notification as described in section 6033(i) of the Code. Section 1.6033-2(i)(2) of the regulations provides that every organization which is exempt from tax, whether or not it is required to file an annual information return, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of subchapter F (section 501 and following), chapter 1 of subtitle A of the Code and section 6033. Rev.Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The Service held that the failure or inability to file the required information return or otherwise to comply with the provisions of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status. Organization's Position: Taxpayer's position is unknown at this time. Government's Position: Analysis The facts indicate that ****** received recognition of exemption under section 501(c)(3) of the Code in ****** based on information presented in its Form 1023 application and accompanying attachments. The TE/GE division of the IRS maintains an examination program for exempt organizations to determine whether they are complying with statutory requirements regarding their tax-exempt status, the proper filing of returns, and other tax reporting matters. ****** filed Form 990-N, an electronic notice, with the IRS for the ****** was selected for audit to ensure that the organization's activities and operations align with their approved exempt status and to verify that the filing of Form 990-N was proper based on the organization's gross receipts. Section 6001 of the Code and the regulations thereunder impose requirements on exempt organizations to keep books and records to substantiate information required under section 6033 of the Code. Although ****** filed an electronic notice in lieu of a return, the organization is nevertheless required to produce records and other information requested by the IRS to verify that it operates in furtherance of its exempt purpose. See regulations section 1.6033-2(i)(2). ****** failed to respond to repeated reasonable requests to allow the IRS to examine its books and records including its receipts, disbursements, and other items required to be kept and maintained pursuant to sections 6001 and 6033(a)(1) of the Code. Accordingly, ****** has failed to meet the requirements of section 501(c)(3) of the Code and sections 1.501(c)(3)-1(a) and 1.501(c)(3)-1(c) of the regulations, in that the organization has not established that it is operated exclusively for exempt purposes and that no part of its net earnings inures to the benefit of private shareholders or individuals. See also Rev.Rul. 59-95. 1959-1 C.B. 627. Conclusion: For the reasons stated above, the IRS has determined that ****** is no longer exempt from Federal income tax under section 501(a) of the Code as an organization described in Code section 501(c)(3). The IRS is proposing to revoke ****** 501(c)(3) tax-exempt status effective ****** the ****** of the ****** under examination. Please note that this Form 886-A, Explanation of Items, which is also known as the revenue agent report (RAR), constitutes an integral part of the attached 30-day letter #3618. Please refer to the attached letter #3618 for additional information including appeal rights and other options available to the organization and, the instructions for how to respond.

Internal Revenue Service - Information Release IR-2021-122 IRS reminds taxpayers living and working abroad of June 15 deadline June 2, 2021 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS reminds taxpayers living and working abroad of June 15 deadline IR-2021-122, June 2, 2021 WASHINGTON - The Internal Revenue Service today reminded taxpayers living and working outside of the United States that they must file their 2020 federal income tax return by Tuesday, June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship. Just as most taxpayers in the United States are required to timely file their tax returns with the IRS, those living and working in another country are also required to file. An automatic two-month deadline extension is normally granted for those overseas and in 2021 that date is still June 15 even though the normal income tax filing deadline was extended a month from April 15 to May 17. Benefits and qualifications An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return. A taxpayer qualifies for the special June 15 filing deadline if both their tax home and abode are outside the United States and Puerto Rico. Those serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return also qualify for the extension to June 15. IRS recommends attaching a statement if one of these two situations apply. Reporting required for foreign accounts and assets Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located. In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details. Foreign accounts reporting deadline Separate from reporting specified foreign financial assets on their tax return, taxpayers with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2020, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-filing System website. The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) was April 15, 2021, but FinCEN is granting filers who missed the original deadline an automatic extension until October 15, 2021, to file the FBAR. There is no need to request this extension. Report in U.S. dollars Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars. Both FINCEN Form 114 and IRS Form 8938 require the use of a December 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates. Expatriate reporting Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2020 must file a dual-status alien tax return, and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with Internal Revenue Service, 3651 S IH35 MS 4301AUSC, Austin, TX 78741, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85 PDF, Guidance for Expatriates Under Section 877A, for further details. More time is available Extra time is available for those who cannot meet the June 15 date. Individual taxpayers who need additional time to file can request a filing extension to Oct. 15 by printing and mailing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. The IRS can't process extension requests filed electronically after May 17, 2021. Find out where to mail the form. Businesses that need additional time to file income tax returns must file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. Combat zone extension Members of the military qualify for an additional extension of at least 180 days to file and pay taxes if either of the following situations apply: - They serve in a combat zone or they have qualifying service outside of a combat zone or - They serve on deployment outside the United States away from their permanent duty station while participating in a contingency operation. This is a military operation that is designated by the Secretary of Defense or results in calling members of the uniformed services to active duty (or retains them on active duty) during a war or a national emergency declared by the President or Congress. Deadlines are also extended for individuals serving in a combat zone or a contingency operation in support of the Armed Forces. This applies to Red Cross personnel, accredited correspondents and civilian personnel acting under the direction of the Armed Forces in support of those forces. Spouses of individuals who served in a combat zone or contingency operation are generally entitled to the same deadline extensions with some exceptions. Extension details and more military tax information is available in IRS Publication 3, Armed Forces' Tax Guide. Visit IRS.gov for tax information Tax help and filing information is available anytime on IRS.gov. The IRS website offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics and Frequently Asked Questions to get answers to common questions. IRS.gov/payments provides information on electronic payment options. Other resources: - About Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad - About Publication 519, U.S. Tax Guide for Aliens

Private Letter Ruling Number: 202417028 Internal Revenue Service January 30, 2024 Department of the Treasury Internal Revenue Service Independent Office of Appeals Release Number: 202417028 Release Date: 4/26/2024 Date: JAN 30 2024 Person to contact: Name: Employee ID number: Telephone: Hours: Employer ID number: Uniform issue list (UIL): 501.03-15 Certified Mail Dear ******: This is a final adverse determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3). We made the adverse determination for the following reasons: You have failed to demonstrate that you are operated exclusively for a charitable purpose, and that no part of your net earnings inures to the benefit of private individuals, as required by section 501(c)(3) of the Code. In addition, your activities more than insubstantially further non-exempt purposes, and your operate primarily for the private benefit of for-profit entities, controlled by a disqualified individual. You're required to file federal income tax returns on Forms. Mail your form to the appropriate Internal Revenue Service Center per the form's instructions. You can get forms and instructions by visiting our website at IRS.gov/forms or by calling 800-TAX-FORM (800-829-3676). We'll make this letter and the proposed adverse determination letter available for public inspection under IRC Section 6110 after deleting certain identifying information. We provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437. If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of IRC Section 7428 in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: U.S. Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov U.S. District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Note: We will not delay processing income tax returns and assessing any taxes due even if you file a petition for declaratory judgment under IRC Section 7428. Taxpayer rights and sources for assistance The Internal Revenue Code (IRC) gives taxpayers specific rights. The Taxpayer Bill of Rights groups these into 10 fundamental rights. See IRC Section 7803(a)(3). IRS employees are responsible for being familiar with and following these rights. For additional information about your taxpayer rights, please see the enclosed Publication 1, Your Rights as a Taxpayer, or visit IRS.gov/taxpayer-bill-of-rights. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayers' rights. TAS can offer you help if your tax problem is causing a financial difficulty, you've tried but been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure isn't working as it should. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. To learn more, visit taxpayeradvocate.IRS.gov or call 877-777-4778. Tax professionals who are independent from the IRS may be able to help you. Low Income Taxpayer Clinics (LITCs) can represent low-income persons before the IRS or in court. LITCs can also help persons who speak English as a second language. Any services provided by an LITC must be for free or a small fee. To find an LITC near you: - Go to taxpayeradvocate.IRS.gov/litcmap; - Download IRS Publication 4134, Low Income Taxpayer Clinic List, available at IRS.gov/forms; or - Call the IRS toll-free at 800-829-3676 and ask for a copy of Publication 4134. State bar associations, state or local societies of accountants or enrolled agents, or other nonprofit tax professional organizations may also be able to provide referrals. TAS assistance is not a substitute for established IRS procedures, such as the formal appeals process. TAS cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States Court. If you have questions, contact the person at the top of this letter. Sincerely, Danny Werfel Commissioner By Valeria B Farr Appeals Team Manager Enclosures: Publication 1 IRS Appeals Survey cc: Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: 03/25/2022 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: 04/24/2022 CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. Additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, for Lynn A. Brinkley Acting Director, Exempt Organizations Examinations Enclosures: Forms 6018, 4621-A and 886-A Pub 892 and 3498 ISSUE: Whether ****** exempt status under Internal Revenue Code (IRC) Section (Sec.) 501(c)(3) should be revoked for failing to demonstrate it operates primarily for an exempt purpose and that no part of its net earnings inures to the benefit of an individual. FACTS: About the Organization's History ****** (Organization) Articles of Incorporation state, the Organization was incorporated on ******, in the State of ****** with the legal name of the corporation as ****** The Organization was granted exemption from ****** income tax under IRC Sec. 501(c)(3) and recognized as a publicly supported organization under IRC Sec. 509(a)(1) and IRC Sec. 170(b)(1)(A)(vi). The Articles of Incorporation state that the Organization is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for public and charitable purposes. The specific function of this nonprofit corporation was to be charitable legal services. The Organization's exemption was automatically revoked on ****** as a result of not having filed a Form 990, Return of Organization Exempt From Income Tax, or equivalent return for ****** consecutive years. On ******, the Organization submitted Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, and requested retroactive reinstatement of their exempt status. The Organization's application for retroactive reinstatement was approved under Revenue Procedure 2014-11 and the effective date of the exemption was retroactive to the date of revocation On ******, the Organization's Articles of Incorporation were amended to change the specific functions from ****** to ******. On ******, the Organization's Articles of Incorporation were amended to change the Organization's legal name from ****** to ****** In response to the initial examination report, the Organization provided a document titled, ORGANIZATION INFORMATION. The document lays out the Organization's plans to provide ****** About the Organization's Activities The Organization's ****** activity is collecting money from individuals and in turn provide grants to ****** for-profit entities in the ****** field. The ****** for-profit entities are ****** and ****** According to an article published in the ****** on ****** the Organization had agreed to accept donations on behalf of ****** the article and the Organization's power of attorney, ******, ****** explained that individuals make donations to the Organization with the understanding that the funds will be used to help ****** make their ****** more readily available to purchase by individuals that cannot afford them. On ****** stated that the Organization provides grants to ****** in order for patients that were unable to pay for the ****** to receive a ****** discount on products. However, in response to the initial examination report, the Organization explained that ****** products are not sold at a ****** discount but that ****** to ****** of all their ****** for sale will be made available for free to the entire underserved category of the population. During ****** and ****** the Organization provided $ ****** in grants to ****** and ****** The Organization does not maintain control and discretion as to the use of the funds and does not maintain records to show that the funds were used for IRC Sec. 501(c)(3) purposes. The Organization does not select or screen individuals that will receive a discount or free product from the for-profit entities. The Organization does not have documentation that verifies the grants went to members of a charitable class or furthered an exempt purpose. About the Organization's Financial Records The table on the top of page ****** shows the Organization's revenues and expenses for ****** and ******. The table below shows the companies and amounts the Organization provided grants to during ****** and ****** During ****** the Organization paid $ ****** in grants to ****** which was *** % of the grants paid out by the Organization for ****** in response to the initial examination report, the Organization explained that ****** provided ****** to the underserved population of ****** However, their records were disrupted by the ****** and therefore they do not have documentation to show the recipients. About the Organization's Insiders The Organization's board of directors consisted of ****** members during ****** and ****** and ****** are related as ****** and ****** The Organization had ****** board of director during ****** President, according to the Form 990 for ****** The board of director meeting minutes for a meeting held on ****** listed ****** and ****** as Directors. The Organization paid $ ****** in ****** and $ ****** in ****** and paid $ ****** to ****** in ****** During a prior examination, for the tax period ended ******, the Organization was issued an advisory for failure to have adequate internal control procedures in place as a result of having ****** individual board member, ****** who controlled most of the financial transactions of the Organization. The Organization provided copies of their board of director meeting minutes for meetings held in ****** per an Information Document Request (IDR) for a prior examination. The minutes from a board of director meeting held on ******, state that ****** was appointed as the Organization's Secretary/Treasurer and that the checking account signers were ****** and ****** In a subsequent meeting held on ******, the board removed ****** and added ****** as a checking account signer. During a board of director meeting held on ******, the board accepted the resignation of ****** and removed him as a checking account signer. The Form 1023, filed on ******, shows ****** as the primary contact (officer, director, trustee, or authorized representative). ****** website lists ****** as President and Chief Executive Officer. An IDR issued to the Organization for the ****** examination, asked the following question, ******. About the Organization's relationships with ****** and ****** The Organization's power of attorney, ****** is listed as an officer for ****** according to its website, and ****** according to their Form D, Notice of Exempt Offering of Securities, filed with the Securities and Exchange Commission on ******. In response to the initial examination report, the Organization stated that ****** is only the Form 1120, U.S. Corporation Income Tax Return, preparer and not an officer or an employee of ****** However, the meeting minutes for a ****** board meeting held on ****** list "Treasurer ******" in attendance at the meeting. ****** Form 1120, U.S. Corporation Income Tax Return, Schedule G, Information on Certain Persons Owning the Corporation's Voting Stock, for the tax period ended ****** indicates ****** owns *** % of the corporation's voting stock. ****** Form 1120, Schedule G, for the tax period ended ****** indicates ****** owns *** % of the corporation's voting stock. In response to the initial examination report, the Organization provided a letter from ****** In the letter, ****** stated that their goal was to ****** Furthermore, to show where the grant funds received were spent, ****** provided shipping records for pallets of ****** products that were donated and shipped to the Organization. However, the delivery location is different than the Organization's address and there is no explanation as to how the pallets of ****** product were used to further the Organization's exempt purpose. The Organization provided a letter from ****** that explained they have been striving to accommodate the Service's request for documentation that shows where grant moneys were spent, however, their computers were taken by ****** during a ****** in ****** and ****** of ****** and some of their file folders were damaged or lost. The flowchart on the next page shows the interrelated network of directors, stockholders, officers, and employees between the Organization, ****** and ****** Contact with Donors ****** contacts were made during the examination to individuals who had made monetary donations to the Organization during ****** The purpose of the contacts was to find out the purpose of the donations and if the donors received any products or services in exchange for their donation. ****** donor explained that they had contacted ****** (aka ****** with ****** about purchasing some of their product. ****** asked that the individual send their payment for ****** products to the Organization. When the individual asked why the payment for the ****** was being sent to a charity, ****** explained it was so the individual could then take a charitable deduction on their taxes for the purchase. A different ****** contact who had donated to the Organization during ****** explained that they were told by ****** that they had a partnership with the Organization and that the individual could pay for ****** with a donation to the Organization. ****** donor explained that ****** had made ****** separate donations to the Organization during ****** The first donation was for $ ******, and ****** received ****** of ****** products named ****** and ****** donation was for $ ****** and ****** received ****** of ****** and ****** for ****** donation. LAW: Internal Revenue Code (IRC) IRC Sec. 501(c)(3) provides for exemption from Income Tax for corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. IRC Sec. 4958(c) defines the term "excess benefit transaction" as any transaction in which an economic benefit is provided by an applicable tax-exempt organization directly or indirectly to or for the use of any disqualified person if the value of the economic benefit provided exceeds the value of the consideration (including the performance of services) received for providing such benefit. For purposes of the preceding sentence, an economic benefit shall not be treated as consideration for performance of services unless such organization clearly indicated its intent to so treat such benefit. IRC Sec. 4958(e) defines "applicable tax-exempt organization" as an organization described in either IRC Sec. 501(c)(3) or IRC Sec. 501(c)(4) or an organization which was so described at any time during the five-year period ending on the date of the excess benefit transaction. IRC Sec. 4958(f)(1) defines a "disqualified person" as (A) any person who was, at any time during the five-year period ending on the date of such transaction, in a position to exercise substantial influence over the affairs of the organization, (B) a member of the family of a disqualified person, and (C) a 35% controlled entity. Treasury Regulations (Treas.Reg.) Treas.Reg. 1.501(c)(3)-1(a)(1) provides that, in order to be exempt as an organization described in IRC Sec. 501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Treas.Reg. 1.501(c)(3)-1(c)(2) provides that an organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or part to the benefit of private shareholders or individuals. Treas.Reg. 1.501(c)(3)-1(f)(2)(ii) provides that, in determining whether to continue to recognize the tax-exempt status of an applicable tax-exempt organization (as defined in IRC Sec. 4958(e) and Treas.Reg. 53.4958-2) described in IRC Sec. 501(c)(3) that engages in one or more excess benefit transactions that violate the prohibition on inurement under IRC Sec. 501(c)(3), the Commissioner will consider all relevant facts and circumstances, including, but not limited to, the following - A. The size and scope of the organization's regular and ongoing activities that further exempt purposes before and after the excess benefit transaction or transactions occurred; B. The size and scope of the excess benefit transaction or transactions (collectively, if more than one) in relation to the size and scope of the organization's regular and ongoing activities that further exempt purposes; C. Whether the organization has been involved in multiple excess benefit transactions with one or more persons; D. Whether the organization has implemented safeguards that are reasonably calculated to prevent excess benefit transactions; and E. Whether the excess benefit transaction has been corrected (within the meaning of IRC Sec. and Treas.Reg. 53.4958-7), or the organization has made good faith efforts to seek correction from the disqualified person(s) who benefited from the excess benefit transaction. Treas.Reg. 53.4958-1(b) defines excess benefit as the amount by which the value of the economic benefit provided by an applicable tax-exempt organization directly or indirectly to or for the use of any disqualified person exceeds the value of the consideration (including the performance of services) received for providing such benefit. Treas.Reg. 53.4958-1(c) states that if more than one disqualified person is liable for the tax imposed by IRC Section 4958, all such persons are jointly and severally liable for that tax. Treas.Regs. 53.4958-3(c), (b), (d), & (e) provide that family members, 35% controlled entities, voting members of the governing body, presidents, chief executive officers, chief operating officers, or the person who founded the organization are among persons who are in a position to exercise substantial influence over the affairs of the organization. Treas.Reg. 53.4958-4(a)(1) provides that to determine whether an excess benefit transaction has occurred, all consideration and benefits exchanged between a disqualified person and the applicable tax-exempt organization and all entities it controls are taken into account. Treas.Reg. 53.4958-4(a)(2)(iii) provides that an applicable tax-exempt organization may provide an excess benefit indirectly through an intermediary. An intermediary is any person who participates in a transaction with one or more disqualified persons of an applicable tax-exempt organization. Court Cases In International Postgraduate Medical Foundation v. Commissioner, 56 T.C.M. 1140 (1989), the court ruled as non-exempt under section 501(c)(3) of the Code an organization formed to sponsor medical seminars and symposia that was founded and run by an individual who was a shareholder and officer in a for-profit travel agency that provided travel arrangement services to the nonprofit. Finding that the nonprofit was formed to obtain customers for the for-profit's business, the court concluded that the nonprofit had, as a substantial purpose, increasing the for-profit's income. When a for-profit organization benefits substantially from the manner in which the activities of a related nonprofit organization are carried on, the court reasoned, the nonprofit organization is not operated exclusively for exempt purposes within the meaning of section 501(c)(3), even if the nonprofit furthers other exempt purposes. In Est. of Hawaii v. Commissioner, 71 T.C. 1067 (1979), the Tax Court held that compensation need not be unreasonable or exceed fair market value to be private benefit, stating "[n]or can we agree with petitioner that the critical inquiry is whether the payments made to International were reasonable or excessive. Regardless of whether the payments made by petitioner to International were excessive, International and EST, Inc., benefited substantially from the operation of petitioner." In Better Business Bureau of Washington, D.C., Inc. v. United States, 326 U.S. 279 (1945), the Court held that the presence of a single non-exempt purpose, if substantial in nature, will destroy an organization's tax-exempt status regardless of the organization's other charitable purposes or activities. In Church in Boston v. Commissioner, 71 T.C. 102 (1978), the Court upheld the denial of exemption on an organization that made grants to individuals. The organization asserted that its grants were made in furtherance of a charitable purpose: to assist the poor. The organization was unable to furnish any documented criteria which would demonstrate the selection process of a deserving recipient, the reason for specific amounts given, or the purpose of the grant. The only documentation contained in the administrative record was a list of grants made during one of the three years in question which included the name of the recipient, the amount of the grant, and the "reason" for the grant. The court held that this information was insufficient in determining whether the grants were made in furtherance of an exempt purpose. Revenue Rulings (Rev.Rul.) Rev.Rul. 56-304, 1956-2 C.B. 306 states that an organization which otherwise meets the requirements for exemption from Federal income tax are not precluded from making distributions of their funds to individuals, provided such distributions are made on a true charitable basis in furtherance of the purposes for which they are organized. However, organizations of this character which make such distributions should maintain adequate records and case histories to show the name and address of each recipient of aid; the amount distributed to each; the purpose for which the aid was given; the manner in which the recipient was selected and the relationship, if any, between the recipient and (1) members, officers, or trustees of the organization, (2) a grantor or substantial contributor to the organization or a member of the family of either, and (3) a corporation controlled by a grantor or substantial contributor, in order that any or all distributions made to individuals can be substantiated upon request by the Internal Revenue Service. Rev.Rul. 68-489, 1968-2 C.B. 210 holds than organization will not jeopardize its exemption under IRC Sec. 501(c)(3), even though it distributes funds to nonexempt organizations, provided it retains control and discretion over use of the funds for IRC Sec. 501(c)(3) purposes. In this ruling, an organization exempt from Federal income tax under IRC Sec. 501(c)(3) distributed part of its funds to organizations not themselves exempt under IRC Sec. 501(c)(3). The exempt organization ensures use of the funds for IRC Sec. 501(c)(3) purposes by limiting distributions to specific projects that are in furtherance of its own exempt purposes. It retains control and discretion as to the use of the funds and maintains records establishing that the funds were used for IRC Sec. 501(c)(3) purposes. TAXPAYER'S POSITION: Whether the Organization's exempt status under IRC Sec. 501(c)(3) should be revoked for failing to demonstrate it operates primarily for an exempt purpose and that no part of its net earnings inures to the benefit of an individual. It is the taxpayer's position that the Organization's exempt status under IRC Sec. 501(c)(3) should not be revoked. The Organization believes that they have acted entirely for public benefit but acknowledge that they did not have proper procedures and monitoring criteria during the years under examination. GOVERNMENT'S POSITION: Whether the Organization's exempt status under IRC Sec. 501(c)(3) should be revoked for failing to demonstrate it operates primarily for an exempt purpose and that no part of its net earnings inures to the benefit of an individual. It is the Government's position that the Organization does not qualify as an organization described in IRC Sec. 501(c)(3) because it is not operated exclusively for an exempt purpose; the Organization substantially benefits private interests, and its net earnings inure to the benefit of private shareholders and individuals. Non-Exempt Purpose To be exempt under IRC Sec. 501(c)(3), an organization must be organized and operated for ****** exempt purposes specified in the section. The presence of a single, nonexempt purpose, if substantial, will preclude exemption regardless of the number or importance of exempt purposes. See Better Business Bureau of Washington D.C. v. United States, 326 U.S. 279 (1945). Here, the Organization's sole activity is collecting money from individuals and in turn paying the funds to *** non-charitable organizations, *** of which are owned by a former officer of the Organization. The Organization collected funds from individuals for the purchase of ****** and ****** products and from individuals who had the understanding the funds would be used to make distributions to the *** non-charitable organizations to make their ****** more readily available to the public. The Organization made distributions to non-charitable organizations - ****** and ****** during ****** and ****** The Organization is operated in a manner that substantially benefits commercial entities by providing related commercial entities with revenue. Therefore, the Organization is not operated for an exempt purpose. See International Postgraduate Medical Foundation v. Commissioner, 56 T.C.M. 1140, 1989-36 and Est. of Hawaii v. Commissioner, 71 T.C. 1067 (1979). The Organization is unlike the organization described in Rev.Rul. 68-489. In this ruling, an exempt organization showed that they would "ensure" use of the funds it disbursed for permitted purposes by retaining control and discretion as to the use of the funds and maintaining records limiting distributions to specific projects that further its own purposes. Here, the Organization did not maintain adequate records for the distributions that it made and did not have adequate control and discretion to ensure the furtherance of charitable purposes, rather than private interests. The records and financial materials provided for ****** and ****** by the Organization show that they do not maintain sufficient records and controls to detail the activities and financial transactions and, therefore, are unable to show that they exclusively further IRC Sec. 501(c)(3) exempt activities. See Church in Boston v. Commissioner, 71 T.C. 102 (1978) and Rev.Rul. 56-304, 1956-2 C.B. 306. In response to the ****** exam report, the Organization provided a letter from ****** and ****** that stated their records were during ****** by ****** and when returned, some of their files were damaged or lost, preventing them from timely responding to the Service's request to the Organization for records to substantiate their distributions. Rev.Rul. 68-489 held that distributions made by an IRC Sec. 501(c)(3) organization to non-exempt organization would not jeopardize the IRC Sec. 501(c)(3) organization's exemption if it retains control and discretion as to the use of the funds and maintains records establishing that the funds were used for IRC Sec. 501(c)(3) purposes. Here, the Organization had ****** months from the end of ****** until ****** to receive records as to how their funds were used by ****** and ****** This timeframe and lack of records demonstrates that the Organization did not maintain the records required by Rev.Rul. 68-489 and Rev.Rul. 56-304 in order to not jeopardize their exempt status. Therefore, it is the Government's position that the Organization is no longer operated exclusively for charitable, religious, or educational purposes; the Organization substantially benefits private interests, and its net earnings inure to the benefit of private shareholders and individuals. The Organization does not qualify for exemption under IRC Sec. 501(c)(3). Interaction with IRC Sec. 4958, Excess Benefit Transactions Applicable Tax-Exempt Organization In order for an excess benefit transaction to have occurred, the organization involved must be an "applicable tax-exempt organization". IRC Sec. 4958(e) defines an applicable tax-exempt organization as any IRC Sec. 501(c)(3) public charity or any organization exempt under IRC Sec. 501(c)(4) or 501(c)(29), and any organization which was described under the above listed subsections at any time during the 5-year period ending on the date of the transaction. Here, the Organization was granted exemption under IRC Sec. 501(c)(3) and has been exempt under IRC Sec. 501(c)(3) continuously during the 5-year period prior to the transactions in question. Therefore, the Organization is an applicable tax-exempt organization under IRC Sec. 4958(e). Disqualified Persons IRC Sec. 4958(f)(1) defines "disqualified person" as including any person who was, at any time during the five-year period ending on the date of a transaction, in a position to exercise substantial influence over the affairs of the organization. Treas.Regs. 53.4958-3(c) & (e) provide that voting members of the governing body, presidents, chief executive officers, chief operating officers, or the person who founded the organization are persons who are in a position to exercise substantial influence over the affairs of the organization. Treas.Reg. 53.4958-3(b) provides that a corporation is also a disqualified person if a "disqualified person" owns more than *** percent of the combined voting power. Here, ****** was the Organization's Secretary and Treasurer from ******, through ****** owned *** % of the voting stock of both ****** and ****** during ****** Therefore, ****** and ****** are all "disqualified persons" of the Organization during ****** under the 5-year lookback period. IRC Sec. 4958 Excise Tax The excise taxes imposed by IRC Sec. 4958 apply to each excess benefit transaction between a disqualified person and an applicable tax-exempt organization. An excess benefit is defined as the amount by which the value of the economic benefit provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of any disqualified person exceeds the value of the consideration (including the performance of services) received for providing such benefits. See Treas.Regs. 53.4958-1(b) and 53.4958-4(a)(1). Here, the Organization made disbursements during ****** for $ ****** to ****** and $ ****** to ****** The Organization received no performance of services or any other economic benefit in return. The expenditures did not further the Organization's exempt purposes. ****** and ****** directly benefited from the disbursements. ****** indirectly benefited from the disbursements by being the ****** stockholder and officer for ****** and ****** See Treas.Reg. 53.4958-4(a)(2)(iii). The taxes imposed under IRC Sec. 4958 are payable by any disqualified person who received an excess benefit from a particular excess benefit transaction. In addition, with respect to any excess benefit transaction, if more than one disqualified person is liable for any of the section 4958 excise taxes, all such persons are jointly and severally liable for that tax. See Treas.Reg. 53.4958-1(c). "****** Tier /****** Taxes": "****** Tier/****** Tax": Application of the ****** from Treas.Reg. 1.501(c)(3)-1(f)(2)(ii) Treas.Reg. 1.501(c)(3)-1(f)(2)(ii) states that in determining whether to continue to recognize the tax-exempt status of an applicable tax-exempt organization that engages in one or more excess benefit transactions (as defined in IRC Sec. 4958(c) and Treas.Reg. 53.4958-2) that violate the prohibition of inurement under IRC Sec. 501(c)(3), the Commissioner will consider all relevant facts and circumstances, including, but not limited to, the following: 1. The size and scope of the organization's regular and ongoing activities that further exempt purposes before and after the excess benefit transaction(s) occurred. Here, the Organization has not substantiated that it conducts exempt activity. The activities of the Organization, collecting donations on behalf of for-profit entities, to make their ****** available at a ****** price, serve the private interest of the for-profit entities and do not benefit a charitable class. Therefore, the Organization's has no regular and ongoing activities that further exempt purposes. 2. The size and scope of the excess benefit transaction or transactions (collectively, if more than one) in relation to the size and scope of the organization's regular and ongoing activities that further exempt purposes. Here, substantially more than half of the Organization's expenditures during ****** were excess benefit transactions at ****** of total expenditures. 3. Whether the organization has been involved in multiple excess benefit transactions with ****** persons. Here, there were ****** excess benefit transactions with ****** disqualified persons. The excess benefit transactions were ongoing during the periods under examination. 4. Whether the organization has implemented safeguards that are reasonably calculated to prevent excess benefit transactions. There is no indication that safeguards have been implemented that would prevent further excess benefit transactions. During a prior examination, for the tax period ended ******, the Organization was issued an advisory for failure to have adequate internal control procedures in place as a result of having ****** individual board member, ****** control most of the transactions of the Organization. Currently, ****** still controls the financial transactions of the Organization. The Organization's Board consists of ****** and ****** who are related as ****** and ****** and ****** is employed by ****** 5. Whether the excess benefit transaction has been corrected, or the organization has made good faith efforts to seek correction from the disqualified person(s) who benefited from the excess benefit transaction. No corrections have been made. There is no indication that the Organization has made efforts to seek correction from the disqualified persons who benefited from the transactions. Based on the ****** analysis from Treas.Reg. 1.501(c)(3)-1(f)(2)(ii) above, the size and scope of the inurement issues revealed by the examination show the Organization is not operated exclusively for exempt purposes and, therefore, revocation of the Organization's tax-exempt status is warranted. CONCLUSION: It has been determined that the Organization does not qualify as an organization described under IRC Sec. 501(c)(3) because it is not operated for an exclusive exempt purpose; the Organization substantially benefits private interests, and its net earnings inure to the benefit of private shareholders and individuals. Application of the ****** analysis provided by Treas.Reg. 1.501(c)(3)-1(f)(2)(ii), to determine whether to continue to recognize the tax-exempt status of a tax-exempt organization that has engaged in ****** excess benefit transactions, weighed heavily in favor of revocation. The Organization no longer meets the requirements to qualify as exempt from ****** income tax under IRC Sec. 501(c)(3). Therefore, its exempt status under IRC Sec. 501(c)(3) will be revoked effective ****** The organization should file Forms 1120 for the years ****** and any years for which it is not exempt from ****** income tax.

Proposed Regulation REG-106013-19 Internal Revenue Service 2020-18 I.R.B. 757 Notice of Proposed Rulemaking Guidance Involving Hybrid Arrangements and the Allocation of Deductions Attributable to Certain Disqualified Payments under Section 951A (Global Intangible Low-Taxed Income) REG-106013-19 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: This document contains proposed regulations that adjust hybrid deduction accounts to take into account earnings and profits of a controlled foreign corporation that are included in income by a United States shareholder. This document also contains proposed regulations that address, for purposes of the conduit financing rules, arrangements involving equity interests that give rise to deductions (or similar benefits) under foreign law. Further, this document contains proposed regulations relating to the treatment of certain payments under the global intangible low-taxed income (GILTI) provisions. The proposed regulations affect United States shareholders of foreign corporations and persons that make payments in connection with certain hybrid arrangements. DATES: Written or electronic comments and requests for a public hearing must be received by June 8, 2020. ADDRESSES: Submit electronic submissions via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG-106013-19) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comment received to its public docket, whether submitted electronically or in hard copy. Send hard copy submissions to: CC:PA:LPD:PR (REG-106013-19), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations under section 951A, Jorge M. Oben at (202) 317-6934; concerning all other proposed regulations, Richard F. Owens at (202) 317-6501; concerning submissions of comments or requests for a public hearing, Regina L. Johnson at (202) 317-6901 (not toll free numbers). SUPPLEMENTARY INFORMATION: Background I. Section 245A(e) - Hybrid Dividends Section 245A(e) was added to the Internal Revenue Code ("Code") by the Tax Cuts and Jobs Act, Pub. L. No. 115-97 (2017) (the "Act"), which was enacted on December 22, 2017. Section 245A(e) and the final regulations under section 245A(e), which are published in the Rules and Regulations section of this issue of the Federal Register (the "section 245A(e) final regulations"), neutralize the double non-taxation effects of a hybrid dividend or tiered hybrid dividend through either denying the section 245A(a) dividends received deduction with respect to the dividend or requiring an inclusion under section 951(a)(1)(A) with respect to the dividend, depending on whether the dividend is received by a domestic corporation or a controlled foreign corporation ("CFC"). The section 245A(e) final regulations require that certain shareholders of a CFC maintain a hybrid deduction account with respect to each share of stock of the CFC that the shareholder owns, and provide that a dividend received by the shareholder from the CFC is a hybrid dividend or tiered hybrid dividend to the extent of the sum of those accounts. A hybrid deduction account with respect to a share of stock of a CFC reflects the amount of hybrid deductions of the CFC that have been allocated to the share, reduced by the amount of hybrid deductions that gave rise to a hybrid dividend or tiered hybrid dividend. II. Section 1.881-3 - Conduit Financing Arrangements A. In general Section 7701(l) of the Code authorizes the Secretary to prescribe regulations recharacterizing any multiple-party financing transaction as a transaction directly among any two or more of such parties where the Secretary determines that such recharacterization is appropriate to prevent the avoidance of any tax imposed by the Code. In prescribing such regulations, the legislative history to section 7701(l) states that "it would be within the proper scope of the provision for the Secretary to issue regulations dealing with multi-party financing transactions involving... equity investments." H.R. Conf. Rep. No. 103-213, at 655 (1993). On August 11, 1995, the Treasury Department and the IRS published in the Federal Register final regulations (TD 8611, 60 FR 40997) that allow the IRS to disregard the participation of one or more intermediate entities in a financing arrangement where such entities are acting as conduit entities, and to recharacterize the financing arrangement as a transaction directly between the remaining parties to the financing arrangement for purposes of imposing tax under sections 871, 881, 1441 and 1442. B. Limited treatment of equity interests as financing transactions Section 1.881-3(a)(2)(i)(A) defines a financing arrangement to mean a series of transactions by which one person (the "financing entity") advances money or other property, or grants rights to use property, and another person (the "financed entity") receives money or other property, or rights to use property, if the advance and receipt are effected through one or more other persons ("intermediate entities"). Except in cases in which §1.881-3(a)(2)(i)(B) applies (special rule to treat two or more related persons as a single intermediate entity in the absence of a financing transaction between the related persons), the regulations apply only if "financing transactions," as defined in §1.881-3(a)(2)(ii), link the financing entity, each of the intermediate entities, and the financed entity. Section 1.881-3(a)(2)(ii)(A) and (B) limit the definition of financing transaction in the case of equity investments to stock in a corporation (or a similar interest in a partnership, trust, or other person) that is subject to certain redemption, acquisition, or payment rights or requirements ("redeemable equity"). If it is determined that an intermediate entity is participating as a conduit entity in a conduit financing arrangement, the financing arrangement may be recharacterized as a transaction directly between the remaining parties (in most cases, the financing entity and the financed entity). See §1.881-3(a)(3)(ii)(A). The portion of the financed entity's payments subject to this recharacterization is determined under §1.881-3(d)(1)(i). Under §1.881-3(d)(1)(i), if the aggregate principal amount of the financing transactions to which the financed entity is a party exceeds the aggregate principal amount linking any of the parties to the financing arrangement, then the recharacterized portion is determined by multiplying the payment by a fraction the numerator of which is the lowest aggregate principal amount of the financing transactions linking any of the parties to the financing transaction and the denominator of which is the aggregate principal amounts linking the financed entity to the financing arrangement. Conversely, if the aggregate principal amount of the financing transactions to which the financed entity is a party is less than or equal to the aggregate principal amount of the financing transactions linking any of the parties to the financing arrangement, the entire amount of the payment is recharacterized. C. Hybrid instruments On December 22, 2008, the Treasury Department and the IRS published in the Federal Register (73 FR 78252) a notice of proposed rulemaking (REG-113462-08) ("2008 proposed regulations") that proposed adding §1.881-3(a)(2)(i)(C) to the conduit financing regulations to treat an entity disregarded as an entity separate from its owner for U.S. tax purposes as a person for purposes of determining whether a conduit financing arrangement exists. The preamble to the 2008 proposed regulations provides that the Treasury Department and the IRS are also studying transactions where a financing entity advances cash or other property to an intermediate entity in exchange for a hybrid instrument (that is, an instrument treated as debt under the tax laws of the foreign country in which the intermediary is resident and equity for U.S. tax purposes), and states that they may issue separate guidance to address the treatment under §1.881-3 of certain hybrid instruments. The preamble to the 2008 proposed regulations presents two possible approaches to hybrid instruments and requests comments on those and other possible approaches and factors that should be considered. The first approach would treat all transactions involving hybrid instruments between a financing entity and an intermediate entity as per se financing transactions under §1.881-3(a)(2)(ii)(A). The second approach would treat only certain hybrid instruments as financing transactions based on specific factors or criteria. Only one comment was received. The comment suggested that the Treasury Department and the IRS take a more targeted approach in identifying specific transactions where there is evidence of limited taxation in the intermediary jurisdiction as a direct consequence of the hybrid instrument. On December 9, 2011, the Treasury Department and the IRS published in the Federal Register final regulations (TD 9562, 76 FR 76895) that adopted the 2008 proposed regulations' treatment of disregarded entities under §1.881-3 without substantive changes. The preamble to the final regulations states that the Treasury Department and the IRS would continue to study the treatment of hybrid instruments in financing transactions. III. Section 951A - Global Intangible Low-Taxed Income Section 951A, added to the Code by the Act, requires a United States shareholder of any CFC for any taxable year to include in gross income the shareholder's global intangible low-taxed income (''GILTI inclusion amount") for such taxable year. On October 10, 2018, the Treasury Department and the IRS published in the Federal Register proposed regulations (REG-104390-18, 83 FR 51072) implementing section 951A. On June 21, 2019, the Treasury Department and the IRS published in the Federal Register final regulations ("GILTI final regulations") (TD 9866, 84 FR 29288) that adopted the proposed regulations, with revisions. The GILTI final regulations include a rule that provides that a deduction or loss attributable to basis created by reason of a transfer of property from a CFC to a related CFC during the period after December 31, 2017, the final date for measuring earnings and profits ("E&P") for purposes of section 965, and before the date on which section 951A first applies with respect to the transferor CFC's income (for example, December 1, 2018, for a CFC with a taxable year ending November 30) (the "disqualified period," and such basis, "disqualified basis"), is allocated and apportioned solely to residual CFC gross income. See §1.951A-2(c)(5)(i). Residual CFC gross income is gross income other than gross tested income, subpart F income, or income effectively connected with a trade or business in the United States. See §1.951A-2(c)(5)(iii)(B). The rule also provides that any depreciation, amortization, or cost recovery allowances attributable to disqualified basis are not properly allocable to property produced or acquired for resale under section 263, 263A, or 471. See §1.951A-2(c)(5)(i). The purpose of the rule is to ensure that taxpayers cannot take advantage of the disqualified period to engage in transactions that allowed taxpayers to enhance their tax attributes, including by reducing their tested income or increasing their tested loss over time, without resulting in any current tax cost. See 84 FR 29299. Explanation of Provisions I. Rules Under Section 245A(e) to Reduce Hybrid Deduction Accounts A. In general As discussed in part II.C.2 of the Summary of Comments and Explanation of Revisions of the section 245A(e) final regulations, the Treasury Department and the IRS have determined that hybrid deduction accounts with respect to stock of a CFC should be reduced in certain cases. In particular, the accounts should generally be reduced to the extent that earnings and profits of the CFC that have not been subject to foreign tax as a result of certain hybrid arrangements are, by reason of certain provisions (not including section 245A(e)), "included in income" in the United States (that is, taken into account in income and not offset by, for example, a deduction or credit particular to the inclusion). By adjusting the accounts in this manner, section 245A(e) neutralizes the double non-taxation effects of certain hybrid arrangements in a manner consistent with the results that would arise were the sheltered earnings and profits (that is, the earnings and profits that were not subject to foreign tax as a result of the arrangement) distributed as a dividend for which the section 245A(a) deduction is not allowed. In such a case, the dividend consisting of the sheltered earnings and profits would generally be taken into account in a United States shareholder's gross income, and the United States shareholder would generally be taxed at the U.S. corporate statutory rate and allowed neither a dividends received deduction for the dividend nor other relief particular to the dividend (such as foreign tax credits). The proposed regulations thus provide a new rule that, as part of the end-of-the-year adjustments to a hybrid deduction account, reduces the account by three categories of amounts included in the gross income of a domestic corporation with respect to the share. See proposed §1.245A(e)-1(d)(4)(i)(B). The first category relates to an inclusion under section 951(a)(1)(A) ("subpart F inclusion") with respect to the share, and the second relates to a GILTI inclusion amount with respect to the share. See proposed §1.245A(e)-1(d)(4)(i)(B)( 1 ) and ( 2 ). The third category is for inclusions under sections 951(a)(1)(B) and 956 with respect to the share, to the extent the inclusion occurs by reason of the application of section 245A(e) to the hypothetical distribution described in §1.956-1(a)(2). See proposed §1.245A(e)-1(d)(4)(i)(B)( 3 ). An amount in the third category provides a dollar-for-dollar reduction of the account because, due to the lack of an availability of deductions or credits particular to the amount (including foreign tax credits) to offset or reduce such amount, the entirety of such amount is assumed to be included in income in the United States. See, for example, §1.960-2(b)(1) (no foreign income taxes are deemed paid under section 960(a) with respect to an inclusion under section 951(a)(1)(B)). As discussed in part I.B of this Explanation of Provisions, the entirety of an amount in the first or second category may not be included in income in the United States and, as a result, such an amount does not provide a dollar-for-dollar reduction of the account. In addition, the reduction of the account for these amounts cannot exceed the hybrid deductions allocated to the share for the taxable year multiplied by the ratio of the subpart F income or tested income, as applicable, of the CFC for the taxable year to the CFC's taxable income. See proposed §1.245A(e)-1(d)(4)(i)(B)( 1 )( ii ) and (d)(4)(i)(B)( 2 )( ii ); see also proposed §1.245A(e)-1(d)(4)(i)(B)( 1 )( iii ) and (d)(4)(i)(B)( 2 )( iii ) (in certain cases, excess amounts are allocated to other hybrid deduction accounts and reduce those accounts). This limitation is, for example, intended to prevent a subpart F inclusion for a taxable year from removing from the account hybrid deductions incurred in a prior taxable year, because such hybrid deductions generally represent an amount of prior year earnings that were not subject to foreign tax as a result of a hybrid arrangement, and the subpart F inclusion in the current year does not subject such earnings to U.S. tax (but rather, subjects certain current year earnings to U.S. tax). In addition, because hybrid deductions incurred in the current taxable year may ratably shelter from foreign tax each type of earnings of a CFC (as opposed to, for example, only sheltering from foreign tax earnings of a type that the United States views as attributable to subpart F income), the limitation is generally intended to ensure that, for example, a subpart F inclusion does not remove from the account hybrid deductions that sheltered from foreign tax current year earnings of a type that the United States views as attributable to income other than subpart F income. B. Adjusted subpart F and GILTI inclusions The proposed regulations generally reduce a hybrid deduction account with respect to a share of stock of a CFC by an "adjusted subpart F inclusion" or an "adjusted GILTI inclusion" (or both) with respect to the share. See proposed §1.245A(e)-1(d)(4)(i)(B)( 1 ) and ( 2 ). An adjusted subpart F inclusion or an adjusted GILTI inclusion is intended to measure, in an administrable manner, the extent to which a domestic corporation's subpart F inclusion or GILTI inclusion amount is likely included in income in the United States, taking into account foreign tax credits associated with the inclusion and, in the case of a GILTI inclusion amount, the deduction under section 250(a)(1)(B). The starting point in determining an adjusted subpart F inclusion with respect to a share of stock of a CFC is identifying a domestic corporation's pro rata share of the CFC's subpart F income, and then attributing such inclusion to particular shares of stock of the CFC. See proposed §1.245A(e)-1(d)(4)(ii)(A). For purposes of attributing the inclusion, the proposed regulations provide that the principles of section 951(a)(2) and §1.951-1(b) and (e) apply. Once the amount of the subpart F inclusion attributable to the share is determined, the "associated foreign income taxes" with respect to the amount must be determined. See proposed §1.245A(e)-1(d)(4)(ii)(A) and (D). The term associated foreign income taxes means the amount of current year tax allocated and apportioned to the subpart F income groups of the CFC, to the extent allocated to the share. See proposed §1.245A(e)-1(d)(4)(ii)(D)( 1 ) and (d)(4)(ii)(E). The computation of associated foreign income taxes does not take into account any limitations on foreign tax credits, such as under section 904, because doing so would involve considerable complexity. These rules are intended to approximate, in an administrable manner, deemed paid credits resulting from the application of section 960(a) that are eligible to be claimed with respect to the subpart F inclusion attributable to the share. The final step is to adjust, pursuant to a two-step process, the subpart F inclusion attributable to the share, to approximate the tax effect of the associated foreign income taxes. See proposed §1.245A(e)-1(d)(4)(ii)(A). First, the associated foreign income taxes are added to the subpart F inclusion, to reflect that when a domestic corporation claims section 960 credits it includes in gross income under section 78 an amount equal to such credits. See proposed §1.245A(e)-1(d)(4)(ii)(A)( 1 ). Second, an amount equal to the amount of income offset by the associated foreign income taxes - calculated as the associated foreign tax credits divided by the corporate tax rate - is subtracted from the sum of the amounts described in the previous sentence. See proposed §1.245A(e)-1(d)(4)(ii)(A)( 2 ). The difference of the amounts is the adjusted subpart F inclusion with respect to the share. 1 ********* 1 Thus, for example, in a case in which the subpart F inclusion attributable to a share is $94.75x and the associated foreign income taxes with respect to such is $5.25x, the adjusted subpart F inclusion with respect to the share would be $75x, calculated as $100x ($94.75x + $5.25x) less $25x ($5.25x / 21%). ********* Similar rules apply for purposes of determining an adjusted GILTI inclusion with respect to a share of stock of a CFC. However, special rules account for the fact that the computation of foreign tax credits under section 960(d) takes into account a domestic corporation's inclusion percentage (as described in §1.960-2(c)(2)) and the 80 percent limit in section 960(d)(1). See proposed §1.245A(e)-1(d)(4)(ii)(B)( 3 ) and (d)(4)(ii)(D)( 2 ). In addition, a special rule accounts for the effect of a section 250 deduction that a domestic corporation may claim related to GILTI. See proposed §1.245A(e)-1(d)(4)(ii)(B)( 2 ). C. Applicability date The proposed rules relating to hybrid deduction accounts are proposed to apply to taxable years ending on or after the date that final regulations are published in the Federal Register. For taxable years before taxable years covered by such final regulations, a taxpayer may apply the rules set forth in the final regulations, provided that it consistently applies the rules to those taxable years. See section 7805(b)(7). In addition, a taxpayer may rely on the proposed rules with respect to any period before the date that the proposed regulations are published as final regulations in the Federal Register, provided that it consistently does so. II. Conduit Regulations under §1.881-3 to Address Equity Interests that Give Rise to Deductions or other Benefits under Foreign Law A. Overview Under the current conduit financing regulations, an instrument that is treated as equity for U.S. tax purposes (and is not redeemable equity described in §1.881-3(a)(2)(ii)(B)) generally will not be characterized as a financing transaction, even though the instrument gives rise to a deduction or other benefit under the tax laws of the issuer's jurisdiction. For example, an instrument that is treated as stock (that is not redeemable equity) for U.S. tax purposes, but as indebtedness under the laws of the issuer's jurisdiction, would not be characterized as a financing transaction under the current regulations. The Treasury Department and the IRS have determined that these types of instruments can be used to inappropriately avoid the application of the conduit financing regulations and, therefore, the proposed regulations expand the definition of equity interests treated as a financing transaction by taking into account the tax treatment of the instrument under the tax law of the relevant foreign country, which is generally the country where the equity issuer resides. The Treasury Department and the IRS have determined that, while these types of instruments are characterized as equity for U.S. tax purposes, they still raise conduit financing concerns if they are either indebtedness under the issuer's tax law or provide benefits similar to indebtedness under the issuer's tax law. For example, a financing company may have an incentive to form a corporation in a country that allows a tax benefit, such as a notional interest deduction with respect to equity, that encourages the routing of income through the intermediary issuer in functionally the same manner as when an intermediate entity issues a debt instrument that is treated as a financing transaction under the current regulations. Similarly, a financing entity may form an intermediate corporation in a country to take advantage of the country's purported integration regime that provides a substantial refund of the issuer's corporate tax paid upon a distribution to a related shareholder, and the shareholder is not taxable on that distribution under the laws of the intermediate country. The Treasury Department and IRS have concluded that these structures raise concerns similar to those Congress intended to address when it enacted sections 267A and 245A(e) regarding arrangements that "exploit differences in the treatment of a transaction or entity under the laws of two or more tax jurisdictions " See S. Comm. on the Budget, Reconciliation Recommendations Pursuant to H. Con. Res. 71, S. Print No. 115-20, at 389 (2017). The Treasury Department and the IRS have determined that the conduit regulations should apply in these cases generally based on benefits that are associated with an equity interest, rather than targeting only particular transactions based on specific factors or criteria as recommended by a comment, because these arrangements are often deliberately structured and a more limited approach could be easily circumvented or difficult to administer. However, even if the equity interests of an intermediate entity are treated as a financing transaction under the proposed regulations, the intermediate entity will not be a conduit entity if, for example, its participation in the financing arrangement is not pursuant to a tax avoidance plan. See §1.881-3(b). B. Treatment of equity interests that give rise to deductions or other benefits under foreign law The proposed regulations expand the types of equity interests treated as a financing transaction to include stock or a similar interest if under the tax laws of a foreign country where the issuer is a resident, the issuer is allowed a deduction or another tax benefit for an amount paid, accrued or distributed with respect to the stock or similar interest. Similarly, if the issuer maintains a taxable presence, referred to as a permanent establishment ("PE") under the laws of many foreign countries without regard to a treaty, and such country allows a deduction (including a notional deduction) for an amount paid, accrued or distributed with respect to the deemed equity or capital of the PE, the amount of the deemed equity or capital will be treated as a financing transaction. See proposed §1.881-3(a)(2)(ii)(B)( 1 )( iv ). The proposed regulations also treat stock or a similar interest as a financing transaction if a person related to the issuer, generally a shareholder or other interest holder in an entity, is entitled to a refund (including a credit) or similar tax benefit for taxes paid by the issuer to its country of residence, without regard to the person's tax liability with respect to the payment, accrual or distribution under the laws of the issuer. See proposed §1.881-3(a)(2)(ii)(B)( 1 )( v ). An equity interest treated as a financing transaction under the proposed regulations would include, for example, stock that gives rise to a notional interest deduction under the tax laws of the foreign country in which the issuer is a tax resident or the tax laws of the country in which the issuer maintains a permanent establishment to which a financing payment is attributable. However, if an equity interest constitutes a financing transaction because the issuer is allowed a notional interest deduction and is one of the financing transactions that links a party to the financing arrangement, the proposed regulations limit the portion of the financed entity's payment that is recharacterized under §1.881-3(d)(1)(i) to the financing transaction's principal amount as determined under §1.881-3(d)(1)(ii), multiplied by the applicable rate used to compute the issuer's notional interest deduction in the year of the financed entity's payment. See proposed § 1.881-3(d)(1)(iii). This limitation is intended to recharacterize only the portion of the payment that can be traced to the notional interest deduction on the principal amount of the equity on which the notational deduction is based. Notional interest deductions may also accrue with respect to equity composed of retained earnings, not related to the financing transaction, and therefore are not taken into account under this rule. The proposed regulations also make conforming changes to reflect the application of these rules in the context of Chapter 4 withholding (sections 1471 and 1472). C. Interaction with section 267A While the proposed conduit regulations may apply to many of the same instruments identified in the final regulations under section 267A issued in the Rules and Regulations section of this issue of the Federal Register (the "section 267A final regulations"), in some respects the proposed conduit regulations have a broader scope than those rules in order to prevent the use of conduit entities from inappropriately obtaining the benefits of an applicable U.S. income tax treaty. For example, the imported mismatch rules in the section 267A final regulations, in determining whether a deduction for an interest or royalty payment is disallowed by reason of the income attributable to the payment being offset by an offshore deduction, only take into account offshore deductions that produce a deduction/no inclusion ("D/NI") outcome as a result of hybridity. A D/NI outcome is not a result of hybridity if, for example, the no-inclusion occurs because the foreign tax law does not impose a corporate income tax. The existing conduit regulations, in contrast, already apply whether or not there is a D/NI outcome with respect to an offshore financing transaction. The proposed regulations will now also cover, without regard to how the transaction is treated for U.S. tax purposes (as debt or equity), any financing transaction where the intermediate entity is allowed a deduction or other tax benefit similar to those described in the section 267A final regulations and applicable in the imported mismatch context. D. Applicability date The proposed rules relating to conduit transactions are proposed to apply to payments made on or after the date that final regulations are published in the Federal Register. III. Rules under Section 951A to Address Certain Disqualified Payments Made During the Disqualified Period A. In general As discussed in part III of the Background of this preamble, the GILTI final regulations provide that (i) a deduction or loss attributable to disqualified basis created by reason of a transfer from a CFC to a related CFC during the disqualified period is allocated and apportioned solely to residual CFC gross income, and (ii) any depreciation, amortization, or cost recovery allowances attributable to disqualified basis are not properly allocable to property produced or acquired for resale under section 263, 263A, or 471. See §1.951A-2(c)(5)(i). The Treasury Department and the IRS understand that, in addition to the transactions circumscribed by the rules in §1.951A-2(c)(5), taxpayers also may have entered into transactions in which, for example, a CFC that licensed property to a related CFC received pre-payments of royalties due under the license from the related CFC, which did not constitute subpart F income. Although the recipient of the pre-payments ("related recipient CFC") would generally have been required to include the royalties in income upon payment during the disqualified period, when they would not have affected amounts included under section 965 with respect to the related recipient CFC and also would not have given rise to gross tested income under section 951A, the related CFC that made the pre-payment would generally only be allowed to deduct the payment over time as economic performance occurred. See section 461. Accordingly, the related CFC that made the pre-payment would claim deductions that reduce tested income (or increase tested loss) during taxable years to which section 951A applies, even though the corresponding income would not have been subject to tax under section 951 (including as a result of section 965) or section 951A. The Treasury Department and the IRS have determined that the deductions attributable to pre-payments (including, but not limited to, deductions attributable to prepaid rents and royalties) should be subject to similar treatment as the final GILTI regulations' treatment of deductions or loss attributable to disqualified basis. Accordingly, proposed §1.951A-2(c)(6) treats a deduction by a CFC related to a deductible payment to a related recipient CFC during the disqualified period as allocated and apportioned solely to residual CFC gross income, as defined in §1.951A-2(c)(5)(iii)(B), and provides that any deduction related to such a payment is not properly allocable to property produced or acquired for resale under section 263, 263A, or 471, consistent with §1.951A-2(c)(5)(i) and the authority therefor described in the preamble to the final GILTI regulations. See 84 FR 29298-29300. This rule applies only to the extent the payments would constitute income described in section 951A(c)(2)(A)(i) and §1.951A-2(c)(1), without regard to whether section 951A applies. See proposed §1.951A-2(c)(6)(ii)(A). B. Applicability date The proposed rules relating to section 951A are proposed to apply to taxable years of foreign corporations ending on or after April 7, 2020, and to taxable years of United States shareholders in which or with which such taxable years end. See section 7805(b)(1)(B). Given the applicability date, these rules would effectively be limited to payments made during the disqualified period that give rise to deductions or loss in taxable years of foreign corporations ending on or after April 7, 2020 and would not, for example, affect payments made during the disqualified period for which the associated deduction or loss is taken into account in the year paid. Special Analyses I. Regulatory Planning and Review Executive Orders 13771, 13563, and 12866 direct agencies to assess costs and benefits 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, reducing costs, harmonizing rules, and promoting flexibility. The preliminary Executive Order 13771 designation for this proposed rulemaking is regulatory. The proposed regulations have been designated by the Office of Management and Budget's Office of Information and Regulatory Affairs as significant under Executive Order 12866 pursuant to section 1(b) the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget regarding review of tax regulations. A. Background The Act introduced two new provisions, sections 245A(e) and 267A, that affect the treatment of hybrid arrangements and a new section, 951A, which imposes tax on United States shareholders with respect to certain earnings of their CFCs. 2 The Treasury Department and the IRS previously issued proposed regulations under sections 245A(e) and 267A and are issuing final regulations simultaneously with these current proposed regulations. The Treasury Department and IRS have also previously issued final regulations (REG-104390-18, 83 FR 51072), which provided additional rules implementing section 951A. In addition to these rules, the Treasury Department and the IRS previously provided guidance regarding conduit financing arrangements under sections 881 and 7701(l). See TD 8611, 60 FR 40997 and TD 9562, 76 FR 76895. ********* 2 Hybrid arrangements are tax-avoidance tools used by certain multinational corporations (MNCs) that have operations both in the U.S. and a foreign country. These hybrid arrangements use differences in tax treatment by the U.S. and a foreign country to reduce taxes in one or both jurisdictions. Hybrid arrangements can be "hybrid entities," in which a taxpayer is treated as a flow-through or disregarded entity in one country but as a corporation in another, or "hybrid instruments," which are financial transactions that are treated as debt in one country and as equity in another. ********* Section 245A(e) disallows the dividends received deduction (DRD) for any dividend received by a U.S. shareholder from a CFC if the dividend is a hybrid dividend. In addition, section 245A(e) treats hybrid dividends between CFCs with a common U.S. shareholder as subpart F income. The statute defines a hybrid dividend as an amount received from a CFC for which a deduction would be allowed under section 245A(a) and for which the CFC received a deduction or other tax benefit in a foreign country. This disallowance of the DRD for hybrid dividends and the treatment of hybrid dividends as subpart F income neutralizes the double non-taxation that these dividends might otherwise be produced by these dividends. 3 The section 245A(e) final regulations require that taxpayers maintain "hybrid deduction accounts" to track a CFC's (or a person related to a CFC's) hybrid deductions allowed in foreign jurisdictions across sources and years. The section 245A(e) final regulations then provide that a dividend received by a U.S. shareholder from the CFC is a hybrid dividend to the extent of the sum of those accounts. ********* 3 The tax treatment under which certain payments are deductible in one jurisdiction and not included in income in a second jurisdiction is referred to as a deduction/no-inclusion outcome ("D/NI outcome".) ********* These proposed regulations also include rules regarding conduit financing arrangements. 4 Under the current conduit financing regulations, a "financing arrangement" means a series of transactions by which one entity (the financing entity) advances money or other property to another entity (the financed entity) through one or more intermediaries. If the IRS determines that a principal purpose of such an arrangement is to avoid U.S. tax, the IRS may disregard the participation of intermediate entities. As a result, U.S.-source payments from the financed entity are, for U.S. withholding tax purposes, treated as being made directly to the financing entity. ********* 4 On December 22, 2008, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-113462-08) ("2008 proposed regulations") that proposed adding §1.881-3(a)(2)(i)(C) to the conduit financing regulations. The preamble to the 2008 proposed regulations provides that the Treasury Department and the IRS are also studying transactions where a financing entity advances cash or other property to an intermediate entity in exchange for a hybrid instrument (that is, an instrument treated as debt under the tax laws of the foreign country in which the intermediary is resident and equity for U.S. tax purposes), and states that they may issue separate guidance to address the treatment under §1.881-3 of certain hybrid instruments. ********* For example, consider a foreign entity that is seeking to finance its U.S. subsidiary but is not entitled to U.S. tax treaty benefits; thus, U.S.-source payments made to this entity are not entitled to reduced withholding tax rates. Instead of lending money directly to the U.S. subsidiary, the foreign entity might loan money to an affiliate residing in a treaty jurisdiction and have the affiliate lend on to the U.S. subsidiary in order to access U.S. tax treaty benefits. Under the current conduit financing regulations, if the IRS determines that a principal purpose of such an arrangement is to avoid U.S. tax, the IRS may disregard the participation of the affiliate. As a result, U.S.-source interest payments from the U.S. subsidiary are, for U.S. withholding tax purposes, treated as being made directly to the foreign entity. In general, the current conduit financing regulations apply only if "financing transactions," as defined under the regulations, link the financing entity, the intermediate entities, and the financed entity. Under the current conduit financing regulations, an instrument that is equity for U.S. tax purposes generally will not be treated as a "financing transaction" unless it provides the holder significant redemption rights. This is the case even if the instrument gives rise to a deduction under the laws of the foreign jurisdiction (e.g., perpetual debt). As a result, the current conduit financing regulations would not apply, and the U.S.-source payment might be entitled to a lower rate of U.S. withholding tax. The proposed regulations also implement items in section 951A of the Act. Section 951A provides for the taxation of global intangible low-taxed income (GILTI), effective beginning with the first taxable year of a CFC that begins after December 31. 2017. The GILTI final regulations address the treatment of a deduction or loss attributable to basis created by certain transfers of property from one CFC to a related CFC after December 31, 2017, but before the date on which section 951A first applies to the transferring CFC's income. Those regulations state that such a deduction or loss is allocated to residual CFC gross income; that is, income that is not attributable to tested income, subpart F income, or income effectively connected with a trade or business in the United States. B. Overview of proposed regulations These proposed regulations address three main issues: (i) adjustments to hybrid deduction accounts under section 245A(e) and the final regulations; (ii) conduit financing arrangements that use certain equity interests that allow the issuer a deduction or other tax benefit under foreign tax law; and (iii) certain payments between related CFCs during a disqualified period under section 951A and the GILTI final regulations. First, the proposed regulations address adjustments to hybrid deduction accounts under section 245A(e) and the final regulations. The section 245A(e) final regulations stipulate that hybrid deduction accounts should generally be reduced to the extent that earnings and profits of the CFC that have not been subject to foreign tax as a result of certain hybrid arrangements are included in income in the United States by some provision other than section 245A(e). The proposed regulations provide new rules for reducing hybrid deduction accounts by reason of income inclusions attributable to subpart F, GILTI, and sections 951(a)(1)(B) and 956. An inclusion due to subpart F or GILTI reduces a hybrid deduction account only to the extent that the inclusion is not offset by a deduction or credit, such as a foreign tax credit, that likely will be afforded to the inclusion. Because deductions and credits are typically not available to offset income inclusions under section 951(a)(1)(B) and 956, these inclusions reduce a hybrid deduction account dollar-for-dollar. Second, the proposed regulations address conduit financing arrangements under §1.881-3 by expanding the types of transactions classified as financing transactions. The proposed rules state that if the issuer of a financial instrument is allowed a deduction or tax benefit for an amount paid, accrued, or distributed with respect to a stock or similar interest under the tax law of the foreign jurisdiction where the issuer is a resident, then it may now be characterized as a financing transaction even though the instrument is equity for U.S. tax purposes. Accordingly, the conduit financing regulations would apply to multiple-party financing arrangements using these types of instruments, which include certain types of hybrid instruments. This change essentially aligns the conduit regulations with the policy of section 267A by discouraging the exploitation of differences in treatment of financial instruments across jurisdictions. While section 267A and the final regulations apply only if the D/NI outcome is a result of the use of a hybrid entity or instrument, the conduit financing regulations apply regardless of causation and instead look to whether there is a tax avoidance plan. Thus, this new rule will address economically similar transactions that section 267A and the section 267A final regulations do not cover. Finally, the proposed regulations address certain payments made after December 31, 2017, but before the date of the start of the first fiscal year for the transferor CFC for which 951A applies (the "disqualified period") in which payments, such as pre-payments of royalties, create income during the disqualified period and a corresponding deduction or loss claimed in taxable years after the disqualified period. Absent the proposed regulations, those deductions or losses could have been used to reduce tested income or increase tested losses, among other benefits. However, under the proposed regulations, these deductions will no longer provide such a tax benefit, and will instead be allocated to residual CFC income, similar to deductions or losses from certain property transfers in the disqualified period under the GILTI final regulations. C. Need for the proposed regulations A failure to reduce hybrid deduction accounts by certain earnings of a CFC that are indirectly included in the income of a U.S. shareholder may result in double taxation for some taxpayers--for example, those which have subpart F or GILTI income inclusions. Failure to address certain equity interests under the conduit financing regulations may allow some MNCs to avoid U.S. tax by shifting additional income towards conduit financing arrangements that use financial instruments treated as equity for U.S. tax purposes but as debt in a foreign jurisdiction. These arrangements are economically similar to the hybrid arrangements that are addressed by the Act and by the section 267A final regulations and to other arrangements covered by the conduit financing regulations, but they have not yet been addressed themselves. The Treasury Department and IRS are aware that certain transactions that accelerate income, but do not give rise to a disposition of property (e.g., prepayments of royalties from a related CFC) fall outside the purview of the GILTI final regulations. In order for the Code to treat similar transactions similarly, these types of transactions need to be addressed by regulation. D. Economic analysis 1. Baseline The Treasury Department and the IRS have assessed the benefits and costs of the proposed regulations relative to a no-action baseline reflecting anticipated federal income tax-related behavior in the absence of these regulations. 2. Economic Analysis of Specific Provisions and Alternatives Considered i. Section 245A(e) - Adjustment of hybrid deduction account Under the final regulations, taxpayers must maintain hybrid deduction accounts to track income of a CFC that was sheltered from foreign tax due to hybrid arrangements, so that it may be included in U.S. income under section 245A(e) when paid as a dividend. The proposed regulations address how hybrid deduction accounts should be adjusted to account for earnings and profits of a CFC included in U.S. income due to certain provisions other than section 245A(e). The proposed regulations provide rules reducing a hybrid deduction account for three categories of inclusions: subpart F inclusions, GILTI inclusions, and inclusions under sections 951(a)(1)(B) and 956. One option for addressing the treatment of earnings and profits included in U.S. income due to provisions other than section 245A(e) would be to not issue additional guidance beyond current tax rules and thus not to adjust hybrid deduction accounts to account for such inclusions. This would be the simplest approach among those considered, but under this approach, some income could be subject to double taxation in the United States. For example, if no adjustment is made, to the extent that a CFC's earnings and profits were sheltered from foreign tax as a result of certain hybrid arrangements, the section 245A DRD would be disallowed for an amount of dividends equal to the amount of the sheltered earnings and profits, even if some of the sheltered earnings and profits were included in the income of a U.S. shareholder under the subpart F rules. The U.S. shareholder would be subject to tax on both the dividends and on the subpart F inclusion. Owing to this double taxation, this approach is not proposed by the Treasury Department and the IRS. A second option would be to reduce hybrid deduction accounts by amounts included in gross income under the three categories; that is, without regard to deductions or credits that may offset the inclusion. While this option is also relatively simple, it could lead to double non-taxation and thus would give rise to results not intended by the statute. Subpart F and GILTI inclusions may be offset by - and thus may not be fully taxed in the United States as a result of - foreign tax credits and, in the case of GILTI, the section 250 deduction. 5 Therefore, this option for reducing hybrid deduction accounts may result in some income that was sheltered from foreign tax due to hybrid arrangements also escaping full U.S. taxation. This double non-taxation is economically inefficient because otherwise similar activities are taxed differently, incentivizing wasteful avoidance activities. ********* 5 Typically, deductions or credits are not available to offset income inclusions under sections 951(a)(1)(B) and 956, the third category addressed by the proposed regulations. ********* A third option, which is the option proposed by the Treasury Department and the IRS, is to reduce hybrid deduction accounts by the amount of the inclusions from the three categories, but only to the extent that the inclusions are likely not offset by foreign tax credits or, in the case of GILTI, the section 250 deduction. For subpart F and GILTI inclusions, the proposed regulations stipulate adjustments to be made to account for the foreign tax credits and the section 250 deduction available to GILTI income. These adjustments are intended to provide a precise, administrable manner for measuring the extent to which a subpart F or GILTI inclusion is included in U.S. income and not shielded by foreign tax credits or deductions. This option results in an outcome aligned with statutory intent, as it generally ensures that the section 245A DRD is disallowed (and thus a dividend is included in U.S. income without any regard for foreign tax credits) only for amounts that were sheltered from foreign tax by reason of a hybrid arrangement but that have not yet been subject to U.S. tax. Relative to a no-action baseline, the proposed regulations provide taxpayers with new instruction regarding how to adjust hybrid deduction accounts to account for earnings and profits that are included in U.S. income by reason of certain provisions other than section 245A(e). This new instruction avoids possible double taxation. Double taxation is inconsistent with the intent and purpose of the statute and is economically inefficient because it may result in otherwise similar income streams facing different tax treatment, incentivizing taxpayers to finance operations with specific income streams and activities that may not be the most economically productive. The Treasury Department and IRS estimate that this provision will impact an upper bound of approximately 2,000 taxpayers. This estimate is based on the top 10 percent of taxpayers (by gross receipts) that filed a domestic corporate income tax return for tax year 2017 with a Form 5471 attached, because only domestic corporations that are U.S. shareholders of CFCs are potentially affected by section 245A(e). 6 ********* 6 Because of the complexities involved, primarily only large taxpayers engage in hybrid arrangements. The estimate that the top 10 percent of otherwise-relevant taxpayers (by gross receipts) are likely to engage in hybrid arrangements is based on the judgment of the Treasury Department and IRS. ********* This estimate is an upper bound on the number of large corporations affected because it is based on all transactions, even though only a portion of such transactions involve hybrid arrangements. The tax data do not report whether these reported dividends were part of a hybrid arrangement because such information was not relevant for calculating tax prior to the Act. In addition, this estimate is an upper bound because the Treasury Department and the IRS anticipate that fewer taxpayers would engage in hybrid arrangements going forward as the statute and §1.245A(e)-1 would make such arrangements less beneficial to taxpayers. ii. Conduit financing regulations to address equity interests that give rise to deductions or other benefits under foreign law The conduit financing regulations allow the IRS to disregard intermediate entities in a multiple-party financing arrangement for the purposes of determining withholding tax rates if the instruments used in the arrangement are considered "financing transactions." Financing transactions generally exclude instruments that are treated as equity for U.S. tax purposes unless they have significant redemption features. Thus, in the absence of further guidance, the conduit financing regulations would not apply to certain arrangements using certain hybrid instruments or other instruments that are eligible for deductions in the jurisdiction of the issuer but treated as equity under U.S. law. This would allow payments made under these arrangements to continue to be eligible for reduced withholding tax rates through a conduit structure. One option for addressing the current disparate treatment would be to not change the conduit financing regulations, which currently treat equity as a financing transaction only if it has specific redemption features; this is the no-action baseline. This option is not proposed by the Treasury Department and the IRS, since it is inconsistent with the Treasury Department's and the IRS's ongoing efforts to address financing transactions that use hybrid instruments, as discussed in the 2008 proposed regulations. A second option considered would be to treat as a financing transaction an instrument that is equity for U.S. tax purposes but debt for purposes of the issuer's jurisdiction of residence. This approach would prevent taxpayers from using this type of hybrid instrument to engage in treaty shopping through a conduit jurisdiction. However, this approach would not cover certain cases, such as if a jurisdiction offers a tax benefit to non-debt instruments (e.g., a notional interest deduction with respect to equity). A third option, which is adopted in these proposed regulations, is to treat as a financing transaction any instrument that is equity for U.S. tax purposes and which entitles its issuer or its shareholder a deduction or similar tax benefit in the issuer's resident jurisdiction or in the jurisdiction where the resident has a permanent establishment. This rule is broader than the second option. It covers all instruments that give rise to deductions or similar tax benefits, such as credits, rather than only those instruments that are treated as debt. This rule also covers instruments where a financing payment is attributable to a permanent establishment of the issuer, and the tax laws of the permanent establishment's jurisdiction allow a deduction or similar treatment for the instrument. This will prevent issuers from routing transactions through their permanent establishments to avoid the anti-conduit rules. The Treasury Department and the IRS adopted this third option since it will most efficiently, and in a manner that is clear and administrable, prevent inappropriate avoidance of the conduit financing regulations. The Treasury Department and the IRS project that this third option will ensure that similar financing arrangements are treated similarly by the tax system. Relative to a no-action baseline, the proposed regulations are likely to incentivize some taxpayers to shift away from conduit financing arrangements and hybrid arrangements. The Treasury Department and the IRS project little to no overall economic loss, or even an economic gain, from this shift because conduit arrangements are generally not economically productive arrangements and are typically pursued only for tax-related reasons. The Treasury Department and the IRS recognize, however, that as a result of these provisions, some taxpayers may face a higher effective tax rate, which may lower their economic activity. The Treasury Department and the IRS have not undertaken more precise quantitative estimates of either of these economic effects because we do not have readily available data or models to estimate with reasonable precision: (i) the types or volume of conduit arrangements that taxpayers would likely use under the proposed regulations or under the no-action baseline; or (ii) the effects of those arrangements on businesses' overall economic performance, including possible differences in compliance costs. In the absence of such quantitative estimates, the Treasury Department and the IRS project that the proposed regulations will best enhance U.S. economic performance relative to the no-action baseline and relative to other alternative regulatory approaches and because they most comprehensively ensure that similar financing arrangements are treated similarly by the tax system. The Treasury Department and the IRS estimate that the number of taxpayers potentially affected by the proposed conduit financing regulations will be an upper bound of approximately 7,000 taxpayers. This estimate is based on the top 10 percent of taxpayers (by gross receipts) that filed a domestic corporate income tax return with a Form 5472, "Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business," attached because primarily foreign entities that advance money or other property to a related U.S. entity through one or more foreign intermediaries are potentially affected by the conduit financing regulations. 7 ********* 7 Because of the complexities involved, primarily only large taxpayers engage in conduit financing arrangements. The estimate that the top 10 percent of otherwise-relevant taxpayers (by gross receipts) are likely to engage in conduit financing arrangements is based on the judgment of the Treasury Department and IRS. ********* This estimate is an upper bound on the number of large corporations affected because it is based on all domestic corporate arrangements involving foreign related parties, even though only a portion of such arrangements are conduit financing arrangements that use hybrid instruments. The tax data do not report whether these arrangements were part of a conduit financing arrangement because such information is not provided on tax forms. In addition, this estimate is an upper bound because the Treasury Department and the IRS anticipate that fewer taxpayers would engage in conduit financing arrangements that use hybrid instruments going forward as the proposed conduit financing regulations would make such arrangements less beneficial to taxpayers. iii. Rules under section 951A to address certain disqualified payments made during the disqualified period The final 951A regulations include a rule that addresses certain transactions involving asset transfers between related CFCs during the disqualified period that may have the effect of reducing GILTI inclusions due to timing differences between when a transaction occurs and when resulting deductions are claimed. The disqualified period of a CFC is the period between December 31, 2017, which is the last earnings and profits measurement date under section 965, and the beginning of the CFC's first taxable year that begins after December 31, 2017, which is the first taxable year with respect to which section 951A is effective. The proposed regulations refine this rule to extend its applicability to other transactions for which similar timing differences can arise. For example, suppose that a CFC licensed property to a related CFC for ten years and received pre-payments of royalties during the disqualified period from the related CFC. Since these prepayments were received by the licensor CFC during the disqualified period, they would not have affected amounts included under section 965 nor given rise to GILTI tested income. However, the licensee CFC that made the payments would not have claimed the total of the corresponding deductions during the disqualified period, since the timing of deductions are generally tied to economic performance over the period of use. The licensee CFC would claim deductions over the ten years of the contract, and since these deductions would be claimed during taxable years when section 951A is in effect, these deductions would reduce GILTI tested income or increase GILTI tested loss. Thus, this type of transaction could lower overall income inclusions for the U.S. shareholder of these CFCs in a manner that does not accurately reflect the earnings of the CFCs over time. The Treasury Department and the IRS propose that all deductions attributable to payments to a related CFC during the disqualified period should be allocated and apportioned to residual CFC gross income. These deductions will not thereby reduce tested, subpart F or effectively connected income. This rule provides similar treatment to transactions involving prepayments as the rule in the GILTI final regulations provides to asset transfers between related CFCs during the disqualified period. Relative to a no-action baseline, the proposed regulations harmonize the treatment of similar transactions. Since this rule applies to deductions resulting from transactions that occurred during the disqualified period and not to any new transactions, the Treasury Department and the IRS do not expect changes in taxpayer behavior under the proposed regulations, relative to the no-action baseline. The Treasury Department and the IRS estimate that the number of taxpayers potentially affected by these proposed regulations will be an upper bound of approximately 25,000 to 35,000 taxpayers. This estimate is based on filers of income tax returns with a Form 5471 attached because only filers that are U.S. shareholders of CFCs or that have at least a 10 percent ownership in a foreign corporation would be subject to section 951A. This estimate is an upper bound because it is based on all filers subject to section 951A, even though only a portion of such taxpayers may have engaged in the pre-payment transactions during the disqualified period described in the proposed regulations. Therefore, the Treasury Department and the IRS estimate that the number of taxpayers potentially affected by these proposed regulations will be substantially less than 25,000 to 35,000 taxpayers. II. Paperwork Reduction Act Pursuant to §1.6038-2(f)(14), certain U.S. shareholders of a CFC must provide information relating to the CFC and the rules of section 245A(e) on Form 5471, "Information Return of U.S. Persons With Respect to Certain Foreign Corporations," (OMB control number 1545-0123), as the form or other guidance may prescribe. The proposed regulations do not impose any additional information collection requirements relating to section 245A(e). However, the proposed regulations provide guidance regarding certain computations required under section 245A(e), and such could affect the information required to be reported on Form 5471. For purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) ("PRA"), the reporting burden associated with §1.6038-2(f)(14) is reflected in the PRA submission for Form 5471. See the chart at the end of this part II of this Special Analyses section for the status of the PRA submission for Form 5471. As described in the Special Analyses section the preamble to the section 245A(e) final regulations, and as set forth in the chart below, the IRS estimates the number of affected filers to be 2,000. Pursuant to §1.6038-5, certain U.S. shareholders of a CFC must provide information relating to the CFC and the U.S. shareholder's GILTI inclusion under section 951A on new Form 8992, "U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI)," (OMB control number 1545-0123), as the form or other guidance may prescribe. The proposed regulations do not impose any additional information collection requirements relating to section 951A. However, the proposed regulations provide guidance regarding computations required under section 951A for taxpayers who engaged in certain transactions during the disqualified period, and such guidance could affect the information required to be reported by these taxpayers on Form 8992. For purposes of the PRA, the reporting burden associated with the collection of information under §1.6038-5 is reflected in the PRA submission for Form 8992. See the chart at the end of this part II of this Special Analyses section for the status of the PRA submission for Form 8992. As discussed in the Special Analyses section of the preamble to the proposed regulations under section 951A (REG-104390-18, 83 FR 51072), and as set forth in the chart below, the IRS estimates the number of filers subject to §1.6038-5 to be 25,000 to 35,000. Since the proposed regulations only apply to taxpayers who engaged in certain transactions during the disqualified period, the IRS estimates that the number of filers affected by the proposed regulations and subject to the collection of information in §1.6038-5 will be significantly less than 25,000 to 35,000. There is no existing collection of information relating to conduit financing arrangements, and the proposed regulations do not impose any new information collection requirements relating to conduit financing arrangements. Therefore, a PRA analysis is not required with respect to the proposed regulations relating to conduit financing arrangements. As a result, the IRS estimates the number of filers affected by these proposed regulations to be the following. Source: IRS data (MeF, DCS, and Compliance Data Warehouse) The current status of the PRA submissions related to the tax forms associated with the information collections in §§1.6038-2(f)(14) and 1.6038-5 is provided in the accompanying table. The reporting burdens associated with the information collections in §§1.6038-2(f)(14) and 1.6038-5 are included in the aggregated burden estimates for OMB control number 1545-0123, which represents a total estimated burden time for all forms and schedules for corporations of 3.157 billion hours and total estimated monetized costs of $58.148 billion ($2017). The overall burden estimates provided in 1545-0123 are aggregate amounts that relate to the entire package of forms associated with the OMB control number, and are therefore not accurate for future calculations needed to assess the burden specific to certain regulations, such as the information collections under §1.6038-2(f)(14) or §1.6038-5. No burden estimates specific to the proposed regulations are currently available. The Treasury Department and the IRS have not identified any burden estimates, including those for new information collections, related to the requirements under the proposed regulations. The Treasury Department and the IRS estimate PRA burdens on a taxpayer-type basis rather than a provision-specific basis. Changes in those estimates will capture both changes made by the Act and those that arise out of discretionary authority exercised in the proposed regulations. The Treasury Department and the IRS request comments on all aspects of information collection burdens related to the proposed regulations, including estimates for how much time it would take to comply with the paperwork burdens related to the forms described and ways for the IRS to minimize the paperwork burden. Proposed revisions (if any) to these forms that reflect the information collections related to the proposed regulations will be made available for public comment at https://apps.irs.gov/app/picklist/list/draftTaxForms.html and will not be finalized until after these forms have been approved by OMB under the PRA. III. Regulatory Flexibility Act It is hereby certified that this notice of proposed rulemaking will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act (5 U.S.C. chapter 6). These proposed regulations, if finalized, would amend certain computations required under section 245A(e) or section 951A. As discussed in the Special Analyses accompanying the preambles to the section 245A(e) final regulations and the proposed regulations under section 951A (REG-104390-18, 83 FR 51072), as well as in this part III of the Special Analyses, the Treasury Department and the IRS project that a substantial number of domestic small business entities will not be subject to sections 245A(e) and 951A, and therefore, the existing requirements in §§1.6038-2(f)(14) and 1.6038-5 will not have a significant economic impact on a substantial number of small entities. The small entities that are subject to section 245A(e) and §1.6038-2(f)(14) are controlling U.S. shareholders of a CFC that engage in a hybrid arrangement, and the small entities that are subject to section 951A and §1.6038-5 are U.S. shareholders of a CFC. A CFC is a foreign corporation in which more than 50 percent of its stock is owned by U.S. shareholders, measured either by value or voting power. A U.S. shareholder is any U.S. person that owns 10 percent or more of a foreign corporation's stock, measured either by value or voting power, and a controlling U.S. shareholder of a CFC is a U.S. person that owns more than 50 percent of the CFC's stock. The Treasury Department and the IRS estimate that there are only a small number of taxpayers having gross receipts below either $25 million (or $41.5 million for financial entities) who would potentially be affected by these regulations. 8 Our estimate of those entities who could potentially be affected is based on our review of those taxpayers who filed a domestic corporate income tax return in 2016 with gross receipts below either $25 million (or $41.5 million for financial institutions) who also reported dividends on a Form 5471. The Treasury Department and the IRS estimate that the number of small entities potentially affected by these regulations will be between 1 and 6 percent of all affected entities regardless of size. ********* 8 This estimate is limited to those taxpayers who report gross receipts above $0. ********* The Treasury Department and the IRS cannot readily identify from these data amounts that are received pursuant to hybrid arrangements because those amounts are not separately reported on tax forms. Thus, dividends received as reported on Form 5471 are an upper bound on the amount of hybrid arrangements by these taxpayers. The Treasury Department and the IRS estimated the upper bound of the relative cost of the statutory and regulatory hybrids provisions, as a percentage of revenue, for these taxpayers as (i) the statutory tax rate of 21 percent multiplied by dividends received as reported on Form 5471, divided by (ii) the taxpayer's gross receipts. Based on this calculation, the Treasury Department and the IRS estimate that the upper bound of the relative cost of these statutory and regulatory provisions is above 3 percent for more than half of the small entities described in the preceding paragraph. Because this estimate is an upper bound, a smaller subset of these taxpayers (including potentially zero taxpayers) is likely to have a cost above three percent of gross receipts. Notwithstanding this certification, the Treasury Department and IRS invite comments about the impact this proposal may have on small entities. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Comments and Requests for Public Hearing Before the proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the "ADDRESSES" heading. The Treasury Department and the IRS request comments on all aspects of the proposed rules. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, then notice of the date, time, and place for the public hearing will be published in the Federal Register. Drafting Information The principal authors of these regulations are Shane M. McCarrick and Richard F. Owens of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 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 1.245A(e)-1 is amended by: 1. Adding paragraphs (d)(4)(i)(B) and (d)(4)(ii). 2. Adding a sentence at the end of the introductory text of paragraph (g). 3. Adding paragraphs (g)(1)(v) and (h)(2). The additions read as follows: §1.245A(e)-1 Special rules for hybrid dividends. (d) * * * (4) * * * (i) * * * (B) Second, the account is decreased (but not below zero) pursuant to the rules of paragraphs (d)(4)(i)(B)( 1 ) through ( 3 ) of this section, in the order set forth in this paragraph (d)(4)(i)(B). ( 1 ) Adjusted subpart F inclusions --( i ) In general. Subject to the limitation in paragraph (d)(4)(i)(B)( 1 )( ii ) of this section, the account is reduced by an adjusted subpart F inclusion with respect to the share for the taxable year, as determined pursuant to the rules of paragraph (d)(4)(ii) of this section. ( ii ) Limitation. The reduction pursuant to paragraph (d)(4)(i)(B)( 1 )( i ) of this section cannot exceed the hybrid deductions of the CFC allocated to the share for the taxable year multiplied by a fraction, the numerator of which is the subpart F income of the CFC for the taxable year and the denominator of which is the taxable income (as determined under §1.952-2(b)) of the CFC for the taxable year. However, if the denominator of the fraction would be zero or less, then the fraction is considered to be zero. ( iii ) Special rule allocating reductions across accounts in certain cases. This paragraph (d)(4)(i)(B)( 1 )( iii ) applies after each of the specified owner's hybrid deduction accounts with respect to its shares of stock of the CFC are adjusted pursuant to paragraph (d)(4)(i)(B)( 1 )( i ) of this section but before the accounts are adjusted pursuant to paragraph (d)(4)(i)(B)( 2 ) of this section, to the extent that one or more of the hybrid deduction accounts would have been reduced by an amount pursuant to paragraph (d)(4)(i)(B)( 1 )( i ) of this section but for the limitation in paragraph (d)(4)(i)(B)( 1 )( ii ) of this section (the aggregate of the amounts that would have been reduced but for the limitation, the excess amount, and the accounts that would have been reduced by the excess amount, the excess amount accounts ). When this paragraph (d)(4)(i)(B)( 1 )( iii ) applies, the specified owner's hybrid deduction accounts other than the excess amount accounts (if any) are ratably reduced by the lesser of the excess amount and the difference of the following two amounts: the hybrid deductions of the CFC allocated to the specified owner's shares of stock of the CFC for the taxable year multiplied by the fraction described in paragraph (d)(4)(i)(B)( 1 )( ii ) of this section; and the reductions pursuant to paragraph (d)(4)(i)(B)( 1 )( i ) of this section with respect to the specified owner's shares of stock of the CFC. ( 2 ) Adjusted GILTI inclusions --( i ) In general. Subject to the limitation in paragraph (d)(4)(i)(B)( 2 )( ii ) of this section, the account is reduced by an adjusted GILTI inclusion with respect to the share for the taxable year, as determined pursuant to the rules of paragraph (d)(4)(ii) of this section. ( ii ) Limitation. The reduction pursuant to paragraph (d)(4)(i)(B)( 2 )( i ) of this section cannot exceed the hybrid deductions of the CFC allocated to the share for the taxable year multiplied by a fraction, the numerator of which is the tested income of the CFC for the taxable year and the denominator of which is the taxable income (as determined under §1.952-2(b)) of the CFC for the taxable year. However, if the denominator of the fraction would be zero or less, then the fraction is considered to be zero. ( iii ) Special rule allocating reductions across accounts in certain cases. This paragraph (d)(4)(i)(B)( 2 )( iii ) applies after each of the specified owner's hybrid deduction accounts with respect to its shares of stock of the CFC are adjusted pursuant to paragraph (d)(4)(i)(B)( 2 )( i ) of this section but before the accounts are adjusted pursuant to paragraph (d)(4)(i)(B)( 3 ) of this section, to the extent that one or more of the hybrid deduction accounts would have been reduced by an amount pursuant to paragraph (d)(4)(i)(B)( 2 )( i ) of this section but for the limitation in paragraph (d)(4)(i)(B)( 2 )( ii ) of this section (the aggregate of the amounts that would have been reduced but for the limitation, the excess amount, and the accounts that would have been reduced by the excess amount, the excess amount accounts ). When this paragraph (d)(4)(i)(B)( 2 )( iii ) applies, the specified owner's hybrid deduction accounts other than the excess amount accounts (if any) are ratably reduced by the lesser of the excess amount and the difference of the following two amounts: the hybrid deductions of the CFC allocated to the specified owner's shares of stock of the CFC for the taxable year multiplied by the fraction described in paragraph (d)(4)(i)(B)( 2 )( ii ) of this section; and the reductions pursuant to paragraph (d)(4)(i)(B)( 2 )( i ) of this section with respect to the specified owner's shares of stock of the CFC. ( 3 ) Certain section 956 inclusions. The account is reduced by an amount included in the gross income of a domestic corporation under sections 951(a)(1)(B) and 956 with respect to the share for the taxable year of the domestic corporation in which or with which the CFC's taxable year ends, to the extent so included by reason of the application of section 245A(e) and this section to the hypothetical distribution described in §1.956-1(a)(2). (ii) Rules regarding adjusted subpart F and GILTI inclusions. (A) The term adjusted subpart F inclusion means, with respect to a share of stock of a CFC for a taxable year of the CFC, a domestic corporation's pro rata share of the CFC's subpart F income included in gross income under section 951(a)(1)(A) for the taxable year of the domestic corporation in which or with which the CFC's taxable year ends, to the extent attributable to the share (as determined under the principles of section 951(a)(2) and §1.951-1(b) and (e)), adjusted by-- ( 1 ) Adding to the amount the associated foreign income taxes with respect to the amount; and ( 2 ) Subtracting from such sum the quotient of the associated foreign income taxes divided by the percentage described in section 11(b). (B) The term adjusted GILTI inclusion means, with respect to a share of stock of a CFC for a taxable year of the CFC, a domestic corporation's GILTI inclusion amount (within the meaning of §1.951A-1(c)(1)) for the U.S. shareholder inclusion year (within the meaning of §1.951A-1(f)(7)), to the extent attributable to the share (as determined under paragraph (d)(4)(ii)(C) of this section), adjusted by-- ( 1 ) Adding to the amount the associated foreign income taxes with respect to the amount; ( 2 ) Multiplying such sum by the difference of 100 percent and the percentage described in section 250(a)(1)(B); and ( 3 ) Subtracting from such product the quotient of 80 percent of the associated foreign income taxes divided by the percentage described in section 11(b). (C) A domestic corporation's GILTI inclusion amount for a U.S. shareholder inclusion year is attributable to a share of stock of the CFC based on a fraction-- ( 1 ) The numerator of which is the domestic corporation's pro rata share of the tested income of the CFC for the U.S. shareholder inclusion year, to the extent attributable to the share (as determined under the principles of §1.951A-1(d)(2)); and ( 2 ) The denominator of which is the aggregate of the domestic corporation's pro rata share of the tested income of each tested income CFC (as defined in §1.951A-2(b)(1)) for the U.S. shareholder inclusion year. (D) The term associated foreign income taxes means-- ( 1 ) With respect to a domestic corporation's pro rata share of the subpart F income of the CFC included in gross income under section 951(a)(1)(A) and attributable to a share of stock of a CFC for a taxable year of the CFC, current year tax (as described in §1.960-1(b)(4)) allocated and apportioned under §1.960-1(d)(3)(ii) to the subpart F income groups (as described in §1.960-1(b)(30)) of the CFC for the taxable year, to the extent allocated to the share under paragraph (d)(4)(ii)(E) of this section; and ( 2 ) With respect to a domestic corporation's GILTI inclusion amount under section 951A attributable to a share of stock of a CFC for a taxable year of the CFC, current year tax (as described in §1.960-1(b)(4)) allocated and apportioned under §1.960-1(d)(3)(ii) to the tested income groups (as described in §1.960-1(b)(33)) of the CFC for the taxable year, to the extent allocated to the share under paragraph (d)(4)(ii)(F) of this section, multiplied by the domestic corporation's inclusion percentage (as described in §1.960-2(c)(2)). (E) Current year tax allocated and apportioned to a subpart F income group of a CFC for a taxable year is allocated to a share of stock of the CFC by multiplying the foreign income tax by a fraction-- ( 1 ) The numerator of which is the domestic corporation's pro rata share of the subpart F income of the CFC for the taxable year, to the extent attributable to the share (as determined under the principles of section 951(a)(2) and §1.951-1(b) and (e)); and ( 2 ) The denominator of which is the subpart F income of the CFC for the taxable year. (F) Current year tax allocated and apportioned to a tested income group of a CFC for a taxable year is allocated to a share of stock of the CFC by multiplying the foreign income tax by a fraction-- ( 1 ) The numerator of which is the domestic corporation's pro rata share of tested income of the CFC for the taxable year, to the extent attributable to the share (as determined under the principles §1.951A-1(d)(2)); and ( 2 ) The denominator of which is the tested income of the CFC for the taxable year. (g) * * * No amounts are included in the gross income of US1 under sections 951(a)(1)(A), 951A(a), or 951(a)(1)(B) and 956. (1) * * * (v) Alternative facts - account reduced by adjusted GILTI inclusion. The facts are the same as in paragraph (g)(1)(i) of this section, except that for taxable year 1 FX has $130x of gross tested income and $10.5x of current year tax (as described in §1.960-1(b)(4)) that is allocated and apportioned under §1.960-1(d)(3)(ii) to the tested income groups of FX. In addition, FX has $119.5x of tested income ($130x of gross tested income, less the $10.5x of current year tax deductions properly allocable to the gross tested income). Further, of US1's pro rata share of the tested income ($119.5x), $80x is attributable to Share A and $39.5x is attributable to Share B (as determined under the principles of §1.951A-1(d)(2)). Moreover, US1's net deemed tangible income return (as defined in §1.951A-1(c)(3)) for taxable year 1 is $71.7x, and US1 does not own any stock of a CFC other than its stock of FX. Thus, US1's GILTI inclusion amount (within the meaning of §1.951A-1(c)(1)) for taxable year 1, the U.S. shareholder inclusion year, is $47.8x (net CFC tested income of $119.5x, less net deemed tangible income return of $71.7x) and US1's inclusion percentage (as described in §1.960-2(c)(2)) is 40 ($47.8x/$119.5x). At the end of year 1, US1's hybrid deduction account with respect to Share A is: first, increased by $80x (the amount of hybrid deductions allocated to Share A); and second, decreased by $10x (the sum of the adjusted GILTI inclusion with respect to Share A, and the adjusted GILTI inclusion with respect to Share B that is allocated to the hybrid deduction account with respect to Share A) to $70x. See paragraphs (d)(4)(i)(A) and (B) of this section. In year 2, the entire $30x of each dividend received by US1 from FX during year 2 is a hybrid dividend, because the sum of US1's hybrid deduction accounts with respect to each of its shares of FX stock at the end of year 2 ($70x) is at least equal to the amount of the dividends ($60x). See paragraph (b)(2) of this section. At the end of year 1, US1's hybrid deduction account with respect to Share A is decreased by $60x (the amount of the hybrid deductions in the account that give rise to a hybrid dividend or tiered hybrid dividend during year 1) to $10x. See paragraph (d)(4)(i)(C) of this section. Paragraphs (g)(1)(v)(A) through (C) of this section describe the computations pursuant to paragraph (d)(4)(i)(B)( 2 ) of this section. (A) To determine the adjusted GILTI inclusion with respect to Share A for taxable year 1, it must be determined to what extent US1's $47.8x GILTI inclusion amount is attributable to Share A. See paragraph (d)(4)(ii)(B) of this section. Here, $32x of the inclusion is attributable to Share A, calculated as $47.8x multiplied by a fraction, the numerator of which is $80x (US1's pro rata share of the tested income of FX attributable to Share A) and denominator of which is $119.5x (US1's pro rata share of the tested income of FX, its only CFC). See paragraph (d)(4)(ii)(C) of this section. Next, the associated foreign income taxes with respect to the $32x GILTI inclusion amount attributable to Share A must be determined. See paragraphs (d)(4)(ii)(B) and (D) of this section. Such associated foreign income taxes are $2.8x, calculated as $10.5x (the current year tax allocated and apportioned to the tested income groups of FX) multiplied by a fraction, the numerator of which is $80x (US1's pro rata share of the tested income of FX attributable to Share A) and the denominator of which is $119.5x (the tested income of FX), multiplied by 40% (US1's inclusion percentage). See paragraphs (d)(4)(ii)(D) and (F) of this section. Thus, pursuant to paragraph (d)(4)(ii)(B) of this section, the adjusted GILTI inclusion with respect to Share A is $6.7x, computed by-- ( 1 ) Adding $2.8x (the associated foreign income taxes with respect to the $32x GILTI inclusion attributable to Share A) to $32x, which is $34.8x; ( 2 ) Multiplying $34.8x (the sum of the amounts in paragraph (g)(1)(v)(A)( 1 ) of this section) by 50% (the difference of 100 percent and the percentage described in section 250(a)(1)(B)), which is $17.4x; and ( 3 ) Subtracting $10.7x (calculated as $2.24x (80% of the $2.8x of associated foreign income taxes) divided by.21 (the percentage described in section 11(b)) from $17.4x (the product of the amounts in paragraph (g)(1)(v)(A)( 2 ) of this section), which is $6.7x. (B) Pursuant to computations similar to those discussed in paragraph (g)(1)(v)(A) of this section, the adjusted GILTI inclusion with respect to Share B is $3.3x. However, the hybrid deduction account with respect to Share B is not reduced by such $3.3x, because of the limitation in paragraph (d)(4)(i)(B)( 2 )( ii ) of this section, which, with respect to Share B, limits the reduction pursuant to paragraph (d)(4)(i)(B)( 2 )( i ) of this section to $0 (calculated as $0, the hybrid deductions allocated to the share for the taxable year, multiplied by 1, the fraction described in paragraph (d)(4)(i)(B)( 2 )( ii ) of this section (computed as the $119.5x of tested income divided by the $119.5x of taxable income)). See paragraphs (d)(4)(i)(B)( 2 )( i ) and ( ii ) of this section. (C) US1's hybrid deduction account with respect to Share A is reduced by the entire $6.7x adjusted GILTI inclusion with respect to the share, as such $6.7x does not exceed the limit in paragraph (d)(4)(i)(B)( 2 )( ii ) of this section ($80x, calculated as $80x, the hybrid deductions allocated to the share for the taxable year, multiplied by 1, the fraction described in paragraph (d)(4)(i)(B)( 2 )( ii ) of this section). See paragraphs (d)(4)(i)(B)( 2 )( i ) and ( ii ) of this section. In addition, the hybrid deduction account is reduced by another $3.3x, the amount of the adjusted GILTI inclusion with respect to Share B that is allocated to the hybrid deduction account with respect to Share A. See paragraph (d)(4)(i)(B)( 2 )( iii ) of this section. As a result, pursuant to paragraph (d)(4)(i)(B)( 2 ) of this section, US1's hybrid deduction account with respect to Share A is reduced by $10x ($6.7x plus $3.3x). (h) * * * (2) Special rules. Paragraphs (d)(4)(i)(B) and (d)(4)(ii) of this section (decrease of hybrid deduction accounts; rules regarding adjusted subpart F and GILTI inclusions) apply to taxable years ending on or after [date of publication of the final regulations in the Federal Register]. However, a taxpayer may apply those paragraphs to taxable years ending before that date, so long as the taxpayer consistently applies paragraphs (d)(4)(i)(B) and (d)(4)(ii) to those taxable years. Par. 3. Section 1.881-3 is amended by: 1.Adding a sentence at the end of paragraph (a)(1). 2.Revising paragraph (a)(2)(i)(C). 3.In paragraph (a)(2)(ii)(B)( 1 ) introductory text, removing "one of the following" and adding "one or more of the following" in its place. 4.In paragraph (a)(2)(ii)(B)( 1 )( ii ), removing the word "or" at the end of the paragraph. 5. In paragraph (a)(2)(ii)(B)( 1 )( iii ), removing the period at the end and adding a semicolon in its place. 6. Adding paragraphs (a)(2)(ii)(B)( 1 )( iv ) and ( v ) and (d)(1)(iii). 7. Adding a sentence at the end of paragraph (e) introductory text. 8. In paragraph (e), designating Examples 1 through 26 as paragraphs (e)(1) through (26), respectively. 9. In newly designated paragraph (e)(3), removing " Example 2 " and "§301.7701-3" and adding "paragraph (e)(2) of this section (the facts in Example 2 )" and "§301.7701-3 of this chapter" in their places, respectively. 10. Redesignating newly designated paragraphs (e)(4) through (26) as paragraphs (e)(6) through (28), respectively. 11. Adding new paragraphs (e)(4) and (5); 12. In newly redesignated paragraph (e)(9)(ii), removing "(a)(4)(i)" and adding "(a)(4)(i) of this section" in its place. 13. In newly redesignated paragraph (e)(23)(i), removing " Example 20 " and adding "paragraph (e)(22) of this section (the facts in Example 22 )" in its place. 14. In newly redesignated paragraph (e)(23)(ii), removing " Example 19 " and "paragraph (i) of this Example 21 " and adding "paragraph (e)(21) of this section ( Example 21 )" and "paragraph (e)(23)(i) of this section (this Example 23 )" in their places, respectively. 15. In newly redesignated paragraph (e)(25)(i), removing "Example 22" and adding "paragraph (e)(24) of this section (the facts in Example 24 )" in its place. 16. In newly redesignated paragraph (e)(26)(i), removing " Example 22 " and adding in its place "paragraph (e)(24) of this section (the facts in Example 24 )". 17. Adding paragraph (e)(29). 18. In paragraph (f): i. Revising the paragraph heading. ii. Removing "Paragraph (a)(2)(i)(C) and Example 3 of paragraph (e) of this section" and adding "Paragraphs (a)(2)(i)(C) and (e)(3) of this section" in its place. iii. Adding a sentence at the end of the paragraph. The additions and revision read as follows: §1.881-3 Conduit financing arrangements. (a) * * * (1) * * * See §1.1471-3(f)(5) for the application of a conduit transaction for purposes of sections 1471 and 1472. See also §§1.267A-1 and 1.267A-4 (disallowing a deduction for certain interest or royalty payments to the extent the income attributable to the payment is offset by a deduction with respect to equity). (2) * * * (i) * * * (C) Treatment of disregarded entities. For purposes of this section, the term person includes a business entity that is disregarded as an entity separate from its single member owner under §§301.7701-1 through 301.7701-3 of this chapter and therefore such entity may be treated as a party to a financing transaction with its owner. (ii) * * * (B) * * * ( 1 ) * * * ( iv ) The issuer is allowed a deduction or another tax benefit (such as an exemption, exclusion, credit, or a notional deduction determined with respect to the stock or similar interest) for amounts paid, accrued, or distributed (deemed or otherwise) with respect to the stock or similar interest, either under the laws of the issuer's country of residence or a country in which the issuer has a taxable presence, such as a permanent establishment, to which a payment on a financing transaction is attributable; or ( v ) A person related to the issuer is, under the tax laws of the issuer's country of residence, allowed a refund (including through a credit), or similar tax benefit for taxes paid by the issuer to its country of residence on amounts paid, accrued, or distributed (deemed or otherwise) with respect to the stock or similar interest, without regard to any related person's tax liability under the laws of the issuer's country of residence. (d) * * * (1) * * * (iii) Limitation for certain types of stock. If a financing transaction linking one of the parties to the financing arrangement is stock (or a similar interest in a partnership, trust, or other person) described in paragraph (a)(2)(ii)(B)( 1 )( iv ) of this section, and the issuer is allowed a notional interest deduction with respect to its stock or similar interest (under the laws of its country of residence or another country in which it has a place of business or permanent establishment), the portion of the payment made by the financed entity that is recharacterized under paragraph (d)(1)(i) of this section attributable to such financing transaction will not exceed the financing transaction's principal amount as determined under paragraph (d)(1)(ii) of this section multiplied by the rate used to compute the issuer's notional interest deduction for the taxable year in which the payment is made. (e) Examples. * * * For purposes of these examples, unless otherwise indicated, it is assumed that no stock is of the types described in paragraph (a)(2)(ii)(B)( 1 )( iv ) or ( v ) of this section. (4) Example 4. Hybrid instrument as financing arrangement. The facts are the same as in paragraph (e)(2) of this section (the facts in Example 2 ), except that FP assigns the DS note to FS in exchange for stock issued by FS. The stock issued by FS is in form convertible debt with a 49-year term that is treated as debt under the tax laws of Country T. The FS stock is not subject to any of the redemption, acquisition, or payment rights or requirements specified in paragraphs (a)(2)(ii)(B)( 1 )( i ) through ( iii ) of this section. Because the FS stock gives rise to a deduction under the tax laws of Country T, the FS stock is a financing transaction under paragraph (a)(2)(ii)(B)( 1 )( iv ) of this section. Therefore, the DS note held by FS and the FS stock held by FP are financing transactions within the meaning of paragraphs (a)(2)(ii)(A)( 1 ) and ( 2 ) of this section, respectively, and together constitute a financing arrangement within the meaning of paragraph (a)(2)(i) of this section. See also §1.267A-4 for rules applicable to disqualified imported mismatch amounts. (5) Example 5. Refundable tax credit treated as financing transaction. FS lends $1,000,000 to DS in exchange for a note issued by DS. Additionally, Country T has a regime whereby FP, as the sole shareholder of FS, is allowed a refund with respect to distributions of earnings by FS that is equal to 90% of the Country T taxes paid by FS associated with any such distributed earnings. FP is not itself subject to Country T tax on distributions from FS. The loan from FS to DS is a financing transaction within the meaning of paragraph (a)(2)(ii)(A)( 1 ) of this section. FP's stock in FS constitutes a financing transaction within the meaning of paragraph (a)(2)(ii)(B)( 1 )( v ) of this section because FP, a person related to FS, is allowed a refund of FS's Country T taxes even though FP is not subject to Country T tax on such payments. Together, the FS stock held by FP and the DS note held by FS constitute a financing arrangement within the meaning of paragraph (a)(2)(i) of this section. * * * * * (29) Example 29. Amount of payment subject to recharacterization. (i) FP lends $10,000,000 to FS in exchange for a ten-year note with a stated interest rate of 6%. FP also contributes $5,000,000 to FS in exchange for FS stock. Pursuant to Country T tax law, FS is entitled to a notional interest deduction with respect to the stock equal to the prevailing Country T government bond rate multiplied by the taxpayer's net equity for the previous taxable year. FS, pursuant to a tax avoidance plan, lends $20,000,000 to DS in exchange for a note that pays 8% interest annually. DS makes its first $1,600,000 payment on this note in year X, when the prevailing Country T bond rate is 1%. (ii) Both the note and the stock issued by FS to FP are financing transactions. The note is an advance of money under paragraph (a)(2)(i)(A) of this section. The stock is described in paragraph (a)(2)(ii)(A)( 2 ) of this section, by reason of paragraph (a)(2)(ii)(B)( 1 )( iv ) of this section, because Country T law entitles FS to a notional interest deduction with respect to its stock. The note issued by DS is also financing transaction by reason of paragraph (a)(2)(ii)(A)( 1 ) of this section. Accordingly, FP is advancing money and DS receives money, effected through FS an intermediary entity, and the receipt and advance are effected through financing transactions (that is, the FS note, FS stock, and the DS note linking all three entities). As such, the arrangement may be treated as a financing arrangement. See paragraph (a)(2)(i)(A) of this section. FP is the financing entity, FS is the intermediate entity, and DS is the financed entity. The aggregate principal amount of financing transactions linking DS to the financing arrangement ($20,000,000) is greater than the aggregate principal amount of the financing transactions linking FP to the financing arrangement ($15,000,000). Therefore, under paragraph (d)(1)(i) of this section, the amount of DS's payment recharacterized as a payment directly between DS and FP would be $1,200,000 ($1,600,000 x $15,000,000 / $20,000,000) prior to the application of paragraph (d)(1)(iii) of this section. However, of the $1,200,000 subject to re-characterization, $400,000 ($1,200,000 x $5,000,000 / $15,000,000) is attributable to NID stock and thus subject to the limitation in paragraph (d)(1)(iii) of this section. Thus, only $50,000 ($5,000,000 x 1%) of the $400,000 may be recharacterized as a transaction between DS and FP. The remaining $800,000 is not subject to the limitation in paragraph (d)(1)(iii) of this section because it is not attributable to stock that entitles the issuer to a notional interest deduction. Accordingly, only $850,000 of DS's payment is recharacterized as going directly from DS to FP. See also §1.267A-4 for rules applicable to disqualified imported mismatch amounts. (f) Applicability date. * * * Paragraphs (a)(2)(ii)(B)( 1 )( iv ) and ( v ) and (d)(1)(iii) of this section apply to payments made on or after [date of publication of the final regulations in the Federal Register]. Par. 4. Section 1.951A-0, as proposed to be amended at 84 FR 29114 (June 21, 2019), is further amended by adding entries for §1.951A-2(c)(6), (c)(6)(i) and (ii), (c)(6)(ii)(A) through (C), (c)(6)(iii), (c)(6)(iv), (c)(6)(iv)(A), (c)(6)(iv)(A)( 1 ) and ( 2 ), (c)(6)(iv)(B), (c)(6)(iv)(B)( 1 ) and ( 2 ), (c)(7), (c)(7)(i) and (ii), (c)(7)(ii)(A), (c)(7)(ii)(A)( 1 ) and ( 2 ), (c)(7)(ii)(B), (c)(7)(iii) through (v), (c)(7)(v)(A) through (D), (c)(7)(v)(D)( 1 ) and ( 2 ), (c)(7)(v)(D)( 2 )( i ) and ( ii ), (c)(7)(v)(E), (c)(7)(v)(E)( 1 ) and ( 2 ), (c)(7)(vi), (c)(7)(vi)(A), (c)(7)(vi)(A)( 1 ) and ( 2 ), and (c)(7)(vi)(B) and §1.951A-7(d) to read as follows: §1.951A-0 Outline of section 951A regulations. §1.951A-2 Tested income and tested loss. (c) * * * (6) Allocation of deductions attributable to certain disqualified payments. (i) In general. (ii) Definitions related to disqualified payment. (A) Disqualified payment. (B) Disqualified period. (C) Related recipient CFC. (iii) Treatment of partnerships. (iv) Examples. (A) Example 1: Deduction related directly to disqualified payment to related recipient CFC. ( 1 ) Facts. ( 2 ) Analysis. (B) Example 2: Deduction related indirectly to disqualified payment to partnership in which related recipient CFC is a partner. ( 1 ) Facts. ( 2 ) Analysis. (7) Election for application of high tax exception of section 954(b)(4). (i) In general. (ii) Definitions. (A) Tentative gross tested income item. ( 1 ) In general. ( 2 ) Income attributable to a QBU. (B) Tentative net tested income item. (iii) Effective rate at which taxes are imposed. (iv) Taxes paid or accrued with respect to a tentative net tested income item. (v) Rules regarding the election. (A) Manner of making election. (B) Scope of election. (C) Duration of election. (D) Revocation of election. ( 1 ) In general. ( 2 ) Limitations by reason of revocation. ( i ) In general. ( ii ) Exception for change of control. (E) Rules applicable to controlling domestic shareholder groups. ( 1 ) In general. ( 2 ) Definition of controlling domestic shareholder group. (vi) Example. (A) Example: Effect of disregarded payments between QBUs. ( 1 ) Facts. ( 2 ) Analysis. (B) [Reserved] §1.951A-7 Applicability dates. (d) Deduction for certain disqualified payments. Par. 5. Section 1.951A-2, as proposed to be amended at 84 FR 29114 (June 21, 2019), is further amended by redesignating paragraph (c)(6) as paragraph (c)(7) and adding a new paragraph (c)(6) and a reserved paragraph (c)(7)(vi)(B) to read as follows: §1.951A-2 Tested income and tested loss. (c) * * * (6) Allocation of deductions attributable to certain disqualified payments --(i) In general. A deduction related directly or indirectly to a disqualified payment is allocated or apportioned solely to residual CFC gross income, and any deduction related to a disqualified payment is not properly allocable to property produced or acquired for resale under section 263, section 263A, or section 471. (ii) Definitions related to disqualified payment. The following definitions apply for purposes of this paragraph (c)(6). (A) Disqualified payment. The term disqualified payment means a payment made by a person to a related recipient CFC during the disqualified period with respect to the related recipient CFC, to the extent the payment would constitute income described in section 951A(c)(2)(A)(i) and paragraph (c)(1) of this section without regard to whether section 951A applies. (B) Disqualified period. The term disqualified period has the meaning provided in §1.951A-3(h)(2)(ii)(C)( 1 ), substituting "related recipient CFC" for "transferor CFC." (C) Related recipient CFC. The term related recipient CFC means, with respect to a payment by a person, a recipient of the payment that is a controlled foreign corporation that bears a relationship to the payor described in section 267(b) or 707(b) immediately before or after the payment. (iii) Treatment of partnerships. For purposes of determining whether a payment is made by a person to a related recipient CFC for purposes of paragraph (c)(6)(ii)(A) of this section, a payment by or to a partnership is treated as made proportionately by or to its partners, as applicable. (iv) Examples. The following examples illustrate the application of this paragraph (c)(6). (A) Example 1: Deduction related directly to disqualified payment to related recipient CFC --( 1 ) Facts. USP, a domestic corporation, owns all of the stock in CFC1 and CFC2, each a controlled foreign corporation. Both USP and CFC2 use the calendar year as their taxable year. CFC1 uses a taxable year ending November 30. On October 15, 2018, before the start of its first CFC inclusion year, CFC1 receives and accrues a payment from CFC2 of $100x of prepaid royalties with respect to a license. The $100x payment is excluded from subpart F income pursuant to section 954(c)(6) and would constitute income described in section 951A(c)(2)(A)(i) and paragraph (c)(1) of this section without regard to whether section 951A applies. ( 2 ) Analysis. CFC1 is a related recipient CFC (within the meaning of paragraph (c)(6)(ii)(C) of this section) with respect to the royalty prepayment by CFC2 because it is related to CFC2 within the meaning of section 267(b). The royalty prepayment is received by CFC1 during its disqualified period (within the meaning of paragraph (c)(6)(ii)(B) of this section) because it is received during the period beginning January 1, 2018, and ending November 30, 2018. Because it would constitute income described in section 951A(c)(2)(A)(i) and paragraph (c)(1) of this section without regard to whether section 951A applies, the payment is a disqualified payment. Accordingly, CFC2's deductions related to such payment accrued during taxable years ending on or after April 7, 2020 are allocated or apportioned solely to residual CFC gross income under paragraph (c)(6)(i) of this section. (B) Example 2: Deduction related indirectly to disqualified payment to partnership in which related recipient CFC is a partner --( 1 ) Facts. The facts are the same as in paragraph (c)(6)(iv)(A)( 1 ) of this section (the facts in Example 1 ), except that CFC1 and USP own 99% and 1%, respectively of FPS, a foreign partnership, which has a taxable year ending November 30. USP receives a prepayment of $110x from CFC2 for the performance of future services. USP subcontracts the performance of these future services to FPS for which FPS receives and accrues a $100x prepayment from USP. The services will be performed in the same country under the laws of which CFC1 and FPS are created or organized, and the $100x prepayment is not foreign base company services income under section 954(e) and §1.954-4(a). The $100x prepayment would constitute income described in section 951A(c)(2)(A)(i) and paragraph (c)(1) of this section without regard to whether section 951A applies. ( 2 ) Analysis. CFC1 is a related recipient CFC (within the meaning of paragraph (c)(6)(ii)(C) of this section) with respect to the services prepayment by USP because, under paragraph (c)(6)(iii) of this section, it is treated as receiving $99x (99% of $100x) of the services prepayment from USP, and it is related to USP within the meaning of section 267(b). The services prepayment is received by CFC1 during its disqualified period (within the meaning of paragraph (c)(6)(ii)(B) of this section) because it is received during the period beginning January 1, 2018, and ending November 30, 2018. Because it would constitute income described in section 951A(c)(2)(A)(i) and paragraph (c)(1) of this section without regard to whether section 951A applies, the prepayment is a disqualified payment. CFC2's deductions related to its prepayment to USP are indirectly related to the disqualified payment by USP. Accordingly, CFC2's deductions related to such payment accrued during taxable years ending on or after April 7, 2020 are allocated or apportioned solely to residual CFC gross income under paragraph (c)(6)(i) of this section. Par. 6. Section 1.951A-7, as proposed to be amended at 84 FR 29114 (June 21, 2019), is further amended by adding paragraph (d) to read as follows: §1.951A-7 Applicability dates. (d) Deduction for certain disqualified payments. Section §1.951A-2(c)(6) applies to taxable years of foreign corporations ending on or after April 7, 2020, and to taxable years of United States shareholders in which or with which such taxable years end. Sunita Lough, Deputy Commissioner for Services and Enforcement. (Filed by the Office of the Federal Register on April 7, 2020, 8:45 a.m., and published in the issue of the Federal Register for April 8, 2020, 85 F.R. 19858)

Proposed Regulation REG-121010-17 Internal Revenue Service 2024-5 I.R.B. 636 Notice of Proposed Rulemaking Bad Debt Deductions for Regulated Financial Companies and Members of Regulated Financial Groups REG-121010-17 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: This document contains proposed regulations that would provide guidance regarding whether a debt instrument is worthless for Federal income tax purposes. The proposed regulations are necessary to update the standard for determining when a debt instrument held by a regulated financial company or a member of a regulated financial group will be conclusively presumed to be worthless. The proposed regulations will affect regulated financial companies and members of regulated financial groups that hold debt instruments. DATES: Written or electronic comments and requests for a public hearing must be received by February 26, 2024. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-121010-17) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the "Comments and Requests for a Public Hearing" section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-121010-17), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Stephanie D. Floyd at (202) 317-7053; concerning submissions of comments and requesting a hearing, Vivian Hayes at (202) 317-6901 (not toll-free numbers) or by email to publichearings@irs.gov (preferred). SUPPLEMENTARY INFORMATION: Background This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 166 of the Internal Revenue Code (Code). These proposed amendments (proposed regulations) would update the standard in the current regulations under §1.166-2 (existing regulations) for determining when a debt instrument held by a regulated financial company or a member of a regulated financial group will be conclusively presumed to be worthless. 1. Existing Rules Section 166(a)(1) provides that a deduction is allowed for any debt that becomes worthless within the taxable year. Section 166(a)(2) permits the Secretary of the Treasury or her delegate (Secretary) to allow a taxpayer to deduct a portion of a partially worthless debt that does not exceed the amount charged-off within the taxable year. The existing regulations do not define "worthless." In determining whether a debt is worthless in whole or in part, the IRS considers all pertinent evidence, including the value of any collateral securing the debt and the financial condition of the debtor. See §1.166-2(a). The existing regulations provide further that, when the surrounding circumstances indicate that a debt is worthless and uncollectible and that legal action to enforce payment would in all probability not result in the satisfaction of execution on a judgment, legal action is not required in order to determine that the debt is worthless. See §1.166-2(b). The existing regulations provide two alternative conclusive presumptions of worthlessness for bad debt. First, §1.166-2(d)(1) generally provides that if a bank or other corporation subject to supervision by Federal authorities, or by State authorities maintaining substantially equivalent standards, charges off a debt in whole or in part, either (1) in obedience to the specific orders of such authorities, or (2) in accordance with the established policies of such authorities, and such authorities at the first audit subsequent to the charge-off confirm in writing that the charge-off would have been subject to specific orders, then the debt is conclusively presumed to have become worthless, in whole or in part, to the extent charged off during the taxable year. Second, §1.166-2(d)(3) generally provides that a bank (but not other corporations) subject to supervision by Federal authorities, or by State authorities maintaining substantially equivalent standards, may elect to use a method of accounting that establishes a conclusive presumption of worthlessness for debts, provided the bank's supervisory authority has made an express determination that the bank maintains and applies loan loss classification standards that are consistent with the regulatory standards of that supervisory authority. Section 1.166-2(d)(1) and (3) are collectively referred to as the "Conclusive Presumption Regulations." 2. Generally Accepted Accounting Principles Prior to the Current Expected Credit Loss Revisions For financial reporting purposes, financial institutions in the United States follow the U.S. Generally Accepted Accounting Principles (GAAP) issued by the Financial Accounting Standards Board (FASB). The long-standing GAAP model for recognizing credit losses is referred to as the "incurred loss model" because it delays recognition of credit losses until it is probable that a loss has been incurred. Under the incurred loss model, an entity considers only past events and current conditions in measuring the incurred credit loss. This method does not require or allow the incorporation of economic forecasts, or consideration of industry cycles. The incurred loss model permits institutions to use various methods to estimate credit losses, including historical loss methods, roll-rate methods, and discounted cash flow methods. The GAAP accounting for credit losses has been revised with the introduction of the current expected credit loss methodology for estimating allowance for credit losses, as further described in section 3 of this Background. Under the GAAP incurred loss model, an institution must first assess whether a decline in fair value of a debt security below the amortized cost of the security is a temporary impairment or other than temporary impairment (OTTI). If an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, OTTI will be recognized in earnings equal to the difference between the investment's amortized cost basis and its fair value at the balance sheet date. In assessing whether the entity more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit losses, an entity considers various factors such as the payment structure of the debt security, adverse conditions related to the security, or the length of time and the extent to which the fair value has been less than the amortized cost basis. By contrast, if an entity determines OTTI exists but does not intend to sell the debt security or it is more likely than not that the entity will not be required to sell the debt security prior to its anticipated recovery, the impairment is separated into two parts: the portion of OTTI related to credit loss on a debt security (Credit-Only OTTI) and the portion of OTTI related to other factors but not credit (Non-Credit OTTI). Credit-Only OTTI will be recognized in earnings on the income statement, but Non-Credit OTTI will be reported on the balance sheet as Other Comprehensive Income. FASB Staff Positions, FSP FAS 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (later codified as part of ASC 320). 3. The Current Expected Credit Loss Standard On June 16, 2016, FASB introduced a new standard, the Accounting Standards Update (ASU) No. 2016-13, Financial Instruments--Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Update). The Update, which replaces the incurred loss model in GAAP, became effective for many entities for fiscal years beginning after December 15, 2019, and became generally effective for all entities for fiscal years beginning after December 15, 2022. The Update was in response to concerns by regulators that the incurred loss model under GAAP restricted the ability to record credit losses that are expected but that do not yet meet the probable threshold. The Update is based on a current expected credit loss model (CECL Model), which generally requires the recognition of expected credit loss (ECL) in the allowance for credit losses upon initial recognition of a financial asset, with the addition to the allowance recorded as an offset to current earnings. Subsequently, the ECL must be assessed each reporting period, and both negative and positive changes to the ECL must be recognized through an adjustment to the allowance and to earnings. ASC 326-20-30-1; ASC 326-20-35-1. In estimating the ECL under the CECL Model, institutions must consider information about past events, current conditions, and reasonable and supportable forecasts relevant to assessing the collectability of the cash flow of financial assets. The CECL Model does not prescribe the use of specific estimation methods for measuring the ECL. However, an entity will need to make adjustments to provide an estimate of the ECL over the remaining contractual life of an asset and to incorporate reasonable and supportable forecasts about future economic conditions in the calculations. A charge-off of a financial asset, which may be full or partial, is taken out of the allowance in the period in which a financial asset is deemed uncollectible. ASC 326-20-35-8. At that time the carrying value of the financial asset is also written down. See ASC 326-20-55-52. The ECL recognized under the CECL Model cannot be used to determine bad debt deductions under section 166 because the ECL recognized under the CECL Model would be a current deduction for estimated future losses. 4. Insurance Company Financial Accounting Publicly traded insurance companies report their financial transactions and losses to the Securities and Exchange Commission in accordance with GAAP. Privately held insurance companies may also report their financial transactions and losses in accordance with GAAP. However, in the United States, all insurance companies, whether publicly traded or privately held, are regulated by State governments in the States in which they are licensed to do business and are required by State law to prepare financial statements in accordance with statutory accounting principles (Statements of Statutory Accounting Principles, known as SSAPs or SAPs). SSAPs serve as a basis for preparing financial statements for insurance companies in accordance with statutes or regulations promulgated by various States. SSAPs establish guidelines that must be followed when an asset is impaired. SSAPs are detailed in the National Association of Insurance Commissioner's (NAIC's) Accounting Practices and Procedures Manual. Generally, the NAIC's guidelines require the carrying value of an asset to be written down if the loss of principal is OTTI. The OTTI standard is found in several different statutory accounting provisions, including SSAP 43R (loan-backed and structured securities) and SSAP 26 (bonds, excluding loan-backed and structured securities). 5. IRS Directives In 2012, in response to comments regarding the significant burden on both insurance companies and the IRS's Large Business and International Division (LB&I) in dealing with audits relating to the accounting of loss assets, the IRS issued an insurance industry directive to its LB&I examiners. See I.R.C. §166: LB&I Directive Related to Partial Worthlessness Deduction for Eligible Securities Reported by Insurance Companies, LB&I 04-0712-009 ( July 30, 2012) (Insurance Directive). The Insurance Directive states that LB&I examiners would not challenge an insurance company's partial worthlessness deduction under section 166(a)(2) for the amount of the SSAP 43R - Revised Loan-Backed and Structured Securities (September 14, 2009) credit-related impairment charge-offs of "eligible securities" as reported according to SSAP 43R on its annual statement if the company follows the procedure set forth in that directive. The definition of "eligible securities" in the Insurance Directive covers investments in loan-backed and structured securities within the scope of SSAP 43R, subject to section 166 and not subject to section 165(g)(2)(C) of the Code, including real estate mortgage investment conduit regular interests. Thus, the Insurance Directive allowed insurance companies to use the financial accounting standard for tax purposes in limited circumstances regardless of whether the regulatory standard is precisely the same as the tax standard for worthlessness under section 166. In 2014, the IRS issued another industry directive to LB&I examiners regarding bad debt deductions claimed under section 166 by a bank or bank subsidiary. See LB&I Directive Related to § 166 Deductions for Eligible Debt and Eligible Debt Securities, LB&I-04-1014-008 (October 24, 2014) (Bank Directive). Unlike insurance companies, banks generally determine loss deductions for partial and wholly worthless debts in the same manner for GAAP and regulatory purposes. The Bank Directive generally allowed for loss deductions for partial and wholly worthless debts to follow those reported for GAAP and regulatory purposes. 6. Summary of Comments Received in Response to Notice 2013-35 In 2013, the IRS issued Notice 2013-35, 2013-24 I.R.B. 1240, requesting comments on the Conclusive Presumption Regulations. The Treasury Department and the IRS noted that since the adoption of the Conclusive Presumption Regulations, there have been significant changes made to the regulatory standards relevant for loan charge-offs. In light of those changes, Notice 2013-35 sought comments on whether (1) changes that have occurred in bank regulatory standards and processes since adoption of the Conclusive Presumption Regulations require amendment of those regulations, and (2) application of the Conclusive Presumption Regulations continues to be consistent with the principles of section 166. Comments were also sought on the types of entities that are permitted, or should be permitted, to apply a conclusive presumption of worthlessness. Commenters responded that the Conclusive Presumption Regulations are outdated and contain requirements for a bad debt deduction that taxpayers can no longer satisfy. For example, one commenter noted that §1.166-2(d)(1) is unusable by community banks because banking regulators will not issue written correspondence confirming that a charge-off is being made for either of the reasons set forth in §1.166-2(d)(1). A commenter similarly noted that regulators generally no longer provide specific orders on a loan-by-loan basis and may never confirm the appropriateness of a charge-off in writing. Another commenter noted that for certain banks the election under §1.166-2(d)(3) was automatically revoked under §1.166-2(d)(3)(iv)(C) during the 2008 financial crisis because bank examiners ordered greater charge-offs than those initially taken by the banks, and then could not provide the required express determination letter stating that the banks maintained and applied loan loss classification standards consistent with the regulatory standards of the supervisory authority. Commenters noted the advantages of retaining a conclusive presumption of worthlessness. One commenter stated that a conclusive presumption helps to avoid costly factual disputes between the IRS and taxpayers. Another commenter stated that it is in the best interests of all stakeholders to ensure that duplicative efforts by Federal and State bank regulators and the IRS do not occur. A commenter suggested that the IRS follow determinations made by regulators that routinely and thoroughly examine the financial and accounting records and processes of financial institutions such as banks, bank holding companies, and their non-bank subsidiaries. Another commenter noted that for decades virtually all community banks have conformed their losses on loans for income tax purposes to losses recorded for regulatory reporting purposes. Several commenters recommended that §1.166-2(d)(1) and (3) should be replaced with a single conclusive presumption rule. Commenters requested that the Conclusive Presumption Regulations be revised to apply to any institution that is subject to consolidated supervision by the Board of Governors of the Federal Reserve System (Federal Reserve), including systemically important financial institutions (SIFIs) and subsidiaries and affiliates of SIFIs, because these institutions are required to follow a strict process for determining the amounts of the allowance for credit losses under GAAP for financial reporting purposes and the Federal Reserve's examination will focus on the consistent application and adherence to this process. Another commenter suggested that the election under §1.166-2(d)(3) should be extended to bank holding companies and their nonbank subsidiaries, and potentially to other regulated financial institutions that are examined by the same primary supervisory authority or regulator. Commenters stated that the GAAP loss standard and the accounting standards used by insurance companies for determining whether a debt is worthless are sufficiently similar to the tax standards for worthlessness under section 166 and, therefore, should be used in formulating a revised conclusive presumption rule. Commenters argued that in most cases, any divergence between the various standards will not be significant enough to result in a material acceleration of loss recognition for Federal income tax purposes. Commenters specifically requested that the Conclusive Presumption Regulations be revised to include all insurance company debts, not just the eligible securities covered in the Insurance Directive. Commenters noted that, in applying the OTTI standard set forth in the SSAPs, insurers consider similar factors to the ones examined under the tax rules such as the adequacy of the collateral or the income stream in determining whether a debt is worthless for purposes of section 166. Commenters stated that a critical condition for coverage under the existing regulations is whether Federal or State regulators have the authority to compel the charge-off on the financial statements of the company. Commenters said that State insurance regulators have this authority since they can mandate a charge-off if an insurance company has not complied with the State law accounting requirement that requires the charge-off. Commenters varied in their recommendations of what process the IRS should require in revised conclusive presumption regulations to verify that the regulated entity applied appropriate regulatory standards in taking a charge-off. Some commenters recommended that the IRS require an attestation from the taxpayer that the taxpayer has reported worthless debts consistently for tax and regulatory reporting purposes similar to the taxpayer self-certification statement required under the Insurance Directive. Commenters stated that a new self-certification requirement adopted by the IRS could replace the requirement in the existing regulations to obtain written confirmation from regulators. Another commenter suggested that a taxpayer claiming the benefit of the conclusive presumption should file a signed statement with its tax return listing the taxpayer's Federal and State regulators and stating that, for each bad debt deducted under section 166 on the tax return, the taxpayer has charged off the same amount on its financial statements. Explanation of Provisions 1. Rationale for the Proposed Amendments to §1.166-2(d) Regulated financial companies and members of regulated financial groups are generally subject to capital requirements, leverage requirements, or both. A tension exists between the incentives of regulated entities and the incentives of their regulators. An entity that is subject to regulatory capital requirements has an incentive not to charge-off debt assets prematurely, in order to preserve the amount of its capital. Conversely, a regulator that relies on capital or leverage requirements is concerned with ensuring that capital is not overstated, and therefore has an incentive to ensure that regulated entities do not defer charge-offs of losses on loans and other debt instruments. Regulators have provided guidance to those financial companies to ensure they charge off debt losses appropriately. 1 This tension results in a balance with respect to the timing of charge-offs. ******** 1 See, for example, Interagency Policy Statement on Allowances for Credit Losses, 85 FR 32991 (June 1, 2020) (providing guidance to financial institutions from the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the National Credit Union Administration on allowances for credit losses in response to changes to GAAP); Regulatory Capital Rule: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations, 84 FR 4222 (2019) (adopting final rule to address changes to credit loss accounting under GAAP, including banking organizations' implementation of the CECL Model). ******** The Treasury Department and the IRS believe that regulated financial companies and members of regulated financial groups described in the proposed regulations are subject to regulatory and accounting standards for charge-offs that are sufficiently similar to the Federal income tax standards for determining worthlessness under section 166. Both GAAP and the SSAPs use a facts and circumstance analysis that takes into account all available information related to the collectability of the debt. The analysis considers the value of any collateral securing the debt and the financial condition of the debtor, which are factors that are also evaluated under the tax rules for determining worthlessness under section 166. As described in part 5 of the Background, the IRS previously has recognized the significant administrative burden for taxpayers and the IRS to independently determine worthlessness amounts under section 166(a)(2) and has accepted charge-off amounts reported for the incurred loss model previously used by GAAP and for regulatory purposes, as well as in accordance with the SSAPs, as evidence of worthlessness. In the Bank Directive, the IRS accepted charge-off amounts reported by banks and bank subsidiaries for the incurred loss model previously used by GAAP and for regulatory purposes as sufficient evidence of worthlessness. Similarly, in the Insurance Directive, the IRS permitted the use of the insurance company's SSAP 43R credit-related impairment charge-offs for the same securities as reported on its annual statement regardless of whether the regulatory standard is precisely the same as the definition of worthlessness under section 166. Thus, the IRS previously has recognized that the present values of timing differences in taxable income that arise from applying the regulatory standards instead of the tax standards to determine worthlessness are likely to be minor and therefore do not outweigh the costs of having two different standards for book and tax purposes. Based on the foregoing, the Treasury Department and the IRS believe it is appropriate to provide conclusive presumption rules for regulated financial companies and members of regulated financial groups. Recently, Congress has directed insurance companies to follow their financial statements prepared in accordance with GAAP in certain circumstances. See sections 451(b)(3) and 56A(b) of the Code. Section 451 provides the general rule for the taxable year of inclusion of gross income. Section 451(b) and (c) were amended by section 13221 of Public Law 115-97 (131 Stat. 2054), commonly referred to as the Tax Cuts and Jobs Act. For taxpayers using an accrual method of accounting, section 451(b) requires the recognition of income at the earliest of when the all events test is met or when any item of income is taken into account as revenue in the taxpayer's applicable financial statement (AFS). Section 451(b)(3) defines AFS. Section 451(b)(3) and §1.451-3(a)(5) list in descending priority the financial statements that can be considered an AFS for purposes of income inclusion under section 451(b) and §1.451-1(a). Highest priority is given to a financial statement that is certified as being prepared in accordance with GAAP, and lowest priority is assigned to, among other things, non-GAAP financial statements filed with a State government or State agency or a self-regulatory organization including, for example, a financial statement filed with a State agency that regulates insurance companies or the Financial Industry Regulatory Authority. Section 10101 of Public Law 117-169, 136 Stat. 1818, 1818-1828 (August 16, 2022), commonly referred to as the Inflation Reduction Act of 2022, amended section 55 of the Code to impose a new corporate alternative minimum tax (CAMT) based on the "adjusted financial statement income" (AFSI) of an applicable corporation for taxable years beginning after December 31, 2022. For purposes of sections 55 through 59 of the Code, the term AFSI means, with respect to any corporation for any taxable year, the net income or loss of the taxpayer set forth on the taxpayer's AFS of such taxable year, adjusted as provided in section 56A. See section 56A(a). Section 56A(b) defines "applicable financial statement" by reference to section 451(b)(3) for purposes of determining the adjusted financial statement income on which applicable corporations base their tentative minimum tax under section 55(b). For purposes of section 56A, the term AFS means, with respect to any taxable year, an AFS as defined in section 451(b)(3) or as specified by the Secretary in regulations or other guidance that covers such taxable year. See section 56A(b). The Treasury Department and the IRS believe that, consistent with recent legislation enacted and regulations promulgated in other contexts, for purposes of determining whether a debt instrument is worthless for Federal income tax purposes, insurance companies should first rely on GAAP financial statements that are prioritized in these proposed regulations and then, in the absence of such a GAAP financial statement, should rely on their annual statement. 2. Description of Proposed Amendments to §1.166-2(d) These proposed regulations would revise §1.166-2(d) to permit "regulated financial companies," as defined in proposed §1.166-2(d)(4)(ii), and members of "regulated financial groups," as defined in proposed §1.166-2(d)(4)(iii), to use a method of accounting under which amounts charged off from the allowance for credit losses, or pursuant to SSAP standards, would be conclusively presumed to be worthless for Federal income tax purposes (Allowance Charge-off Method). Proposed §1.166-2(d)(1) would allow these taxpayers to conclusively presume that charge-offs from the allowance for credit losses of debt instruments subject to section 166 or, in the case of insurance companies that do not produce GAAP financial statements for substantive non-tax purposes, charge-offs pursuant to SSAP standards, satisfy the requirements for a bad debt deduction under section 166. The proposed regulations do not address when a debt instrument qualifies as a security within the meaning of section 165(g)(2)(C) and therefore would not change the scope of debt instruments to which section 166 applies. The definition of a "regulated financial company" in proposed §1.166-2(d)(4)(ii) includes entities that are regulated by insurance regulators and various Federal regulators including the Federal Housing Finance Agency (FHFA) and the Farm Credit Administration (FCA). The Housing and Economic Recovery Act of 2008 established the FHFA as an independent agency responsible for regulating the safety and soundness of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (Government-Sponsored Enterprises, or GSEs). The FHFA has a statutory responsibility to ensure that the GSEs operate in a safe and sound manner, which the FHFA accomplishes through supervision and regulation, including the supervision and regulation of accounting and disclosure and capital adequacy. Further, the FHFA may order the GSEs to classify and charge-off loans, with loan classification generally following bank regulatory standards. The definition of a "regulated financial company" in proposed §1.166-2(d)(4)(ii) also includes Farm Credit System (FCS) institutions subject to the provisions of the Farm Credit Act of 1971. The FCA, an independent Federal agency, is the Federal regulator that examines the safety and soundness of all FCS institutions through regulatory oversight. Including FCS institutions in the definition of regulated financial company is consistent with the existing regulations, which define "banks" to include institutions that are subject to the supervision of the FCA. See §1.166-2(d)(4)(i). The definition of a "regulated financial company" in proposed §1.166-2(d)(4)(ii) does not include credit unions or U.S. branches of foreign banks. The proposed regulations do not address how credit unions or U.S. branches of foreign banks determine charge-offs since the IRS did not receive any comments on this topic in response to Notice 2013-35. Moreover, many credit unions are not subject to Federal income tax. However, the Treasury Department and the IRS request comments regarding whether and, if so, how the proposed regulations should be modified to apply to credit unions or U.S. branches of foreign banks. The definition of a "regulated financial company" in proposed §1.166-2(d)(4)(ii) also does not include non-bank SIFIs. Treasury and the IRS would need to understand the extent to which prudential or other regulators of non-bank SIFIs apply regulatory standards for worthlessness that are sufficiently close to tax standards before determining whether the rules provided in the proposed regulations should apply to those SIFIs. The definition of "regulated insurance company" in proposed §1.166-2(d)(4)(vii) does not include corporations that, although licensed, authorized, or regulated by one or more States to sell insurance, reinsurance, or annuity contracts to persons other than related persons (within the meaning of section 954(d)(3) of the Code) in such States, are not engaged in regular issuances of (or subject to ongoing liability with respect to) insurance, reinsurance, or annuity contracts with persons that are not related persons (within the meaning of section 954(d)(3)). The Treasury Department and the IRS request comments regarding whether and how the proposed regulations should be modified to include a reinsurance entity that regularly issues reinsurance contracts only to related persons, provided the risks reinsured are regularly those of persons other than related persons. The term "financial statement" is defined in proposed §1.166-2(d)(4)(ix) broadly to include a financial statement provided to a bank regulator, along with any amendments or supplements to that financial statement. The Treasury Department and the IRS note that many insurance companies prepare GAAP financial statements. Therefore, the term "financial statement" includes a financial statement based on GAAP that is prepared contemporaneously with a financial statement prepared in accordance with the standards set out by the NAIC and given to creditors for purposes of making lending decisions. However, the Treasury Department and the IRS also understand that there are insurance companies that do not prepare GAAP financial statements but, for substantive non-tax purposes, use the SSAP financial statements discussed above, which may not have the functional equivalent of an allowance from which charge-offs are made. In order to extend conformity to insurance company taxpayers that do not prepare GAAP financial statements for substantive non-tax purposes, the Treasury Department and the IRS propose to allow these taxpayers to use their SSAP financial statements for purposes of determining the amount of bad debt deduction under, and in the manner prescribed in, the proposed regulations. Thus, the proposed regulations would direct insurance companies to first rely on a financial statement certified as prepared in accordance with GAAP that is a Form 10-K or an annual statement to shareholders. If no such financial statement exists, the proposed regulations would direct insurance companies to next rely on a financial statement that is based on GAAP that is (1) given to creditors for purposes of making lending decisions, (2) given to equity holders for purposes of evaluating their investments in the regulated financial company or member of a regulated financial group, or (3) provided for other substantial non-tax purposes that also meet certain criteria set forth in these proposed regulations. If an insurance company does not have either of these two types of financial statements based on GAAP, the insurance company would then rely on a financial statement prepared in accordance with the standards set forth by the NAIC and filed with the insurance regulatory authorities of a State that is the principal insurance regulator of the insurance company. Accordingly, the term "financial statement" would be defined in the insurance industry context under proposed §1.166-2(d)(4)(ix)(D) to include a financial statement that is prepared in accordance with standards set out by the NAIC and filed with State insurance regulatory authorities. The Treasury Department and the IRS request comments regarding whether these financial statements should be assigned different levels of priority and on this definition generally. The term "charge-off" is defined in proposed §1.166-2(d)(4)(i) to mean an accounting entry or set of accounting entries for a taxable year that reduces the basis of the debt when the debt is recorded in whole or in part as a loss asset on the applicable financial statement of the regulated financial company or the member of a regulated financial group for that year. For a regulated financial company that is a regulated insurance company that has as its applicable financial statement a financial statement described in proposed §1.166-2(d)(4)(ix)(D), the term charge-off is defined in the proposed regulations to mean an accounting entry or set of accounting entries that reduces the debt's carrying value and results in a realized loss or a charge to the statement of operations (as opposed to recognition of unrealized loss) that is recorded on the regulated insurance company's annual statement. Certain of the commenters suggested that the proposed regulations should extend to GAAP post-impairment accounting for recoveries. Extending tax conformity to GAAP post-impairment accounting for recoveries raises, among other issues, questions about whether GAAP recoveries qualify as tax recoveries, both with regard to amount and timing, and whether GAAP's treatment of recoveries is consistent with the tax recovery payment ordering rules. See, for example, section 111, §§1.111-1(a)(2), 1.446-2(e), 1.1275-2(a), Rev. Rul. 2007-32, 2007-1 C.B. 1278, and Hillsboro National Bank v. Commissioner, 460 U.S. 370 (1983). In view of the foregoing, the Treasury Department and the IRS, while welcoming comments on the topic, do not propose extending tax conformity to GAAP post-impairment recovery accounting at this time. Under the proposed regulations, the Allowance Charge-off Method would be a method of accounting because it would determine the timing of the bad debt deduction. Accordingly, proposed §1.166-2(d)(2) provides that a change to the Allowance Charge-off Method is a change in method of accounting requiring consent of the Commissioner under section 446(e). When the proposed regulations are finalized, those regulated financial companies or members of regulated financial groups that do not presently use or change to the Allowance Charge-off Method would not be entitled to a conclusive presumption of worthlessness and would in most cases be required to use the specific charge-off method for deducting bad debts under section 166(a) and §1.166-1(a)(1). 3. Proposed Applicability Dates and Reliance on the Proposed Regulations A. Proposed applicability dates of the final regulations Under the proposed applicability date in proposed §1.166-2(d)(5), the final regulations would apply to charge-offs made by a regulated financial company or a member of a regulated financial group on its applicable financial statement that occur in taxable years ending on or after the date of publication of a Treasury decision adopting those rules as final regulations in the Federal Register. However, under proposed §1.166-2(d)(5), a regulated financial company or a member of a regulated financial group may choose to apply the final regulations, once published in the Federal Register, to charge-offs made on its applicable financial statement that occur in taxable years ending on or after December 28, 2023, and before the date of publication of a Treasury decision adopting those rules as final regulations in the Federal Register. See section 7805(b)(7) of the Code. B. Reliance on the proposed regulations A regulated financial company or a member of a regulated financial group may rely on proposed §1.166-2(d) for charge-offs made on its applicable financial statement that occur in taxable years ending on or after December 28, 2023, and before the date of publication of final regulations in the Federal Register. Special Analyses I. Regulatory Planning and Review Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required. II. Paperwork Reduction Act These proposed regulations do not impose any additional information collection requirements in the form of reporting, recordkeeping requirements, or third-party disclosure statements. The Allowance Charge-off Method is a method of accounting under the proposed regulations, and therefore taxpayers would be required to request the consent of the Commissioner for a change in method of accounting under section 446(e) to change to that method. The IRS expects that these taxpayers would request this consent by filing Form 3115, Application for Change in Accounting Method. Filing of Form 3115 and any statements attached thereto is the sole collection of information requirement imposed by the statute and the proposed regulations. For purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(c)) (PRA), the reporting burden associated with the collection of information for the Form 3115 will be reflected in the PRA submission associated with the income tax returns under the OMB control number 1545-0123. To the extent there is a change in burden because of these proposed regulations, the change in burden will be reflected in the updated burden estimates for Form 3115. The requirement to maintain records to substantiate information on Form 3115 is already contained in the burden associated with the control number for the form and remains unchanged. The proposed regulations also would remove the requirement in §1.166-2(d)(3)(iii)(B) for a new bank to attach a statement to its income tax return, and thereby reduce the burden estimates for OMB control number 1545-0123. The overall burden estimates associated with the OMB control number are aggregate amounts related to the entire package of forms associated with the applicable OMB control number and will include, but not isolate, the estimated burden of the tax forms that will be created, revised, or reduced as a result of the information collection in these proposed regulations. These numbers are therefore not specific to the burden imposed by these proposed regulations. No burden estimates specific to the forms affected by the proposed regulations are currently available. For the OMB control number discussed in this section, the Treasury Department and the IRS estimate PRA burdens on a taxpayer-type basis rather than a provision-specific basis. Those estimates capture both changes made by the proposed regulations (when final) and other regulations that affect the compliance burden for that form. The Treasury Department and IRS request comment on all aspects of the information collection burden related to the proposed regulations, including estimates for how much time it would take to comply with the paperwork burden described above for the relevant form and ways for the IRS to minimize paperwork burden. In addition, when available, drafts of IRS forms are posted at https://www.irs.gov/draft-tax-forms, and comments may be submitted at https://www.irs.gov/forms-pubs/comment-on-tax-forms-and-publications. Final IRS forms are available at https://www.irs.gov/forms-instructions. Forms will not be finalized until after they have been approved by OMB under the PRA. III. Regulatory Flexibility Act It is hereby certified that these regulations would not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act (5 U.S.C. chapter 6). These proposed regulations would affect only those business entities that qualify as regulated financial companies and members of regulated financial groups, as defined in the proposed regulations. These entities are expected to consist of insurance companies and financial institutions with annual receipts in excess of the amounts set forth in 13 CFR §121.201, Sector 52 (finance and insurance). Therefore, these proposed regulations will not affect a substantial number of small entities. Although the burden falls primarily on larger entities, some small entities with annual receipts not in excess of the amounts set forth in 13 CFR §121.201, Sector 52 (finance and insurance), may be affected. However, these proposed regulations are unlikely to present a significant economic burden on any small entities affected. The costs to comply with these proposed regulations are not significant. Taxpayers needing to make method changes pursuant to the proposed regulations would be required to file a Form 3115. For those entities that would make a method change, the cost to determine or track the information needed is minimal. The insurance companies and financial institutions affected by the proposed regulations prepare financial statements in accordance with SSAPs or GAAP. The Allowance Charge-off Method is a method of accounting under which these entities would be permitted to use these financial statements to obtain a conclusive presumption of worthlessness for purposes of claiming bad debt deductions under section 166. Accordingly, the affected entities already possess the information needed. The cost in time to fill out a Form 3115 would be minimal. Notwithstanding this certification, the Treasury Department and IRS invite comments from the public about the impact of these proposed regulations on small entities. Pursuant to section 7805(f), these regulations will be submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on their impact on small business. IV. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. This proposed rule does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector, in excess of that threshold. V. Executive Order 13132: Federalism Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These proposed regulations do not have federalism implications and do not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order. Comments and Requests for a Public Hearing Before these proposed amendments to the final regulations are adopted as final regulations, consideration will be given to comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed regulations, including how best to transition from the existing regulations to the proposed regulations. Any comments submitted will be made available at https://www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person who timely submits electronic or written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register. Drafting Information The principal authors of these regulations are Stephanie D. Floyd and Jason D. Kristall of the Office of Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the Treasury Department and the IRS participated in their development. Statement of Availability of IRS Documents The IRS Notices, Revenue Procedures, and Revenue Rulings cited in this preamble are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 1 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 1.166-2 is amended by revising paragraph (d) to read as follows: § 1.166-2 Evidence of worthlessness. * * * * * (d) Regulated financial companies and members of regulated financial groups -- (1) Worthlessness presumed in year of charge-off. Debt held by a regulated financial company (as defined in paragraph (d)(4)(ii) of this section) or a member of a regulated financial group (as defined in paragraph (d)(4)(iii) of this section) that uses the charge-off method described in paragraph (d)(1) of this section (Allowance Charge-off Method) is conclusively presumed to have become worthless, in whole or in part, to the extent that the amount of any charge-off (as defined in paragraph (d)(4)(i) of this section) under paragraph (d)(1)(i) or (ii) of this section is claimed as a deduction under section 166 of the Internal Revenue Code (Code) by the regulated financial company or the member of a regulated financial group on the relevant Federal income tax return for the taxable year in which the charge-off takes place. (i) Allowance Charge-off Method generally. The debt is charged off from the allowance for credit losses in accordance with the United States Generally Accepted Accounting Principles and recorded in the period in which the debt is deemed uncollectible on the applicable financial statement (as defined in paragraph (d)(4)(viii) of this section) of the regulated financial company or the member of a regulated financial group. (ii) Certain regulated insurance companies. In the case of a regulated financial company that is a regulated insurance company (as defined in paragraph (d)(4)(vii) of this section) that prepares an applicable financial statement pursuant to paragraphs (d)(4)(viii) and (d)(4)(ix)(D) of this section, the debt is charged off pursuant to an accounting entry or set of accounting entries that reduce the debt's carrying value and result in a realized loss or a charge to the statement of operations (as opposed to recognition of an unrealized loss) that, in either case, is recorded on the regulated insurance company's annual statement. (2) Methods of accounting --(i) In general. A taxpayer may change a method of accounting only with the consent of the Commissioner as required under section 446(e) of the Code and the corresponding regulations. A change to the Allowance Charge-off Method under this paragraph (d) constitutes a change in method of accounting. Accordingly, a regulated financial company or member of a regulated financial group that changes its method of accounting to the Allowance Charge-Off Method is required to secure consent of the Commissioner before using this method for Federal income tax purposes. A change to the Allowance Charge-off Method must be made on an entity-by-entity basis. (ii) General rule for changes in method of accounting. A taxpayer that makes a change in method of accounting to the Allowance Charge-Off Method is treated as making a change in method initiated by the taxpayer for purposes of section 481 of the Code. A taxpayer obtains the consent of the Commissioner to make a change in method of accounting by using the applicable administrative procedures that govern changes in method of accounting under section 446(e). See § 1.446-1(e)(3). (3) Worthlessness in later taxable year. If a regulated financial company or member of a regulated financial group does not claim a deduction under section 166 for a totally or partially worthless debt on its Federal income tax return for the taxable year in which the charge-off takes place, but claims the deduction for a later taxable year, then the charge-off in the prior taxable year is deemed to have been involuntary and the deduction under section 166 is allowed for the taxable year for which claimed. (4) Definitions. The following definitions apply for purposes of paragraph (d) of this section: (i) Charge-off. The term charge-off means an accounting entry or set of accounting entries for a taxable year that reduces the basis of the debt when the debt is recorded in whole or in part as a loss asset on the applicable financial statement (as defined in paragraph (d)(4)(viii) of this section) of the regulated financial company or the member of a regulated financial group for that year. For a regulated financial company that is a regulated insurance company (as defined in paragraph (d)(4)(vii) of this section) that has as its applicable financial statement a financial statement described in paragraph (d)(4)(ix)(D) of this section, the term charge-off means an accounting entry or set of accounting entries that reduce the debt's carrying value and results in a realized loss or a charge to the statement of operations (as opposed to recognition of unrealized loss) that is recorded on the regulated insurance company's annual statement. (ii) Regulated financial company. The term regulated financial company means-- (A) A bank holding company, as defined in 12 U.S.C. 1841, that is a domestic corporation; (B) A covered savings and loan holding company, as defined in 12 C.F.R. 217.2; (C) A national bank; (D) A bank that is a member of the Federal Reserve System and is incorporated by special law of any State, or organized under the general laws of any State, or of the United States, or other incorporated banking institution engaged in a similar business; (E) An insured depository institution, as defined in 12 U.S.C. 1813(c)(2); (F) A U.S. intermediate holding company formed by a foreign banking organization in compliance with 12 C.F.R. 252.153; (G) An Edge Act corporation organized under section 25A of the Federal Reserve Act (12 U.S.C. 611-631); (H) A corporation having an agreement or undertaking with the Board of Governors of the Federal Reserve System under section 25 of the Federal Reserve Act (12 U.S.C. 601-604a); (I) A Federal Home Loan Bank, as defined in 12 U.S.C. 1422(1)(A); (J) A Farm Credit System Institution chartered and subject to the provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.); (K) A regulated insurance company, as defined in paragraph (d)(4)(vii) of this section; (L) The Federal National Mortgage Association; (M) The Federal Home Loan Mortgage Corporation; and (N) Any additional entities that may be provided in guidance published in the Internal Revenue Bulletin ( see § 601.601(d)(2)(ii)(a) of this chapter). (iii) Regulated financial group. The term regulated financial group means one or more chains of corporations connected through stock ownership with a common parent corporation that is not described in section 1504(b)(4) of the Code and is a regulated financial company described in paragraphs (d)(4)(ii)(A) through (N) of this section (regulated financial group parent) that is not owned, directly or indirectly (as set out in paragraph (d)(4)(v) of this section), by another regulated financial company, but only if-- (A) The regulated financial group parent owns directly or indirectly stock meeting the requirements of section 1504(a)(2) in at least one of the other corporations; and (B) Stock meeting the requirements of section 1504(a)(2) in each of the other corporations (except the regulated financial group parent) is owned directly or indirectly by one or more of the other corporations. (iv) Stock. The term stock has the same meaning as stock in section 1504 (without regard to § 1.1504-4), and all shares of stock within a single class are considered to have the same value. Thus, control premiums and minority and blockage discounts within a single class are not taken into account. (v) Indirect stock ownership. Indirect stock ownership is determined by applying the constructive ownership rules of section 318(a) of the Code. (vi) Member of a regulated financial group. A member of a regulated financial group is any corporation in the chain of corporations of a regulated financial group described in paragraph (d)(4)(iii) of this section. A corporation, however, is not a member of a regulated financial group if it is held by a regulated financial company pursuant to 12 U.S.C. 1843(k)(1)(B), 12 U.S.C. 1843(k)(4)(H), or 12 U.S.C. 1843(o), or if it is a Regulated Investment Company under section 851 of the Code, or a Real Estate Investment Trust under section 856 of the Code. (vii) Regulated insurance company. The term regulated insurance company means a corporation that is-- (A) Subject to tax under subchapter L of chapter 1 of the Code; (B) Domiciled or organized under the laws of one of the 50 States or the District of Columbia (State); (C) Licensed, authorized, or regulated by one or more States to sell insurance, reinsurance, or annuity contracts to persons other than related persons (within the meaning of section 954(d)(3) of the Code) in such States, but in no case will a corporation satisfy the requirements of this paragraph (d)(4)(vii)(C) if a principal purpose for obtaining such license, authorization, or regulation was to qualify the issuer as a regulated insurance company; and (D) Engaged in regular issuances of (or subject to ongoing liability with respect to) insurance, reinsurance, or annuity contracts with persons that are not related persons (within the meaning of section 954(d)(3)). (viii) Applicable financial statement. The term applicable financial statement means a financial statement that is described in paragraph (d)(4)(ix) of this section of a regulated financial company or any member of a regulated financial group. The financial statement may be a separate company financial statement of any member of a regulated financial group, if prepared in the ordinary course of business; otherwise, it is the consolidated financial statement that includes the assets, portion of the assets, or annual total revenue of any member of a regulated financial group. (ix) Financial statement. The term financial statement means the taxpayer's financial statement listed in paragraphs (d)(4)(ix)(A) through (D) of this section that has the highest priority. A financial statement includes any supplement or amendment to that financial statement. The financial statements are, in order of descending priority: (A) A financial statement certified as being prepared in accordance with Generally Accepted Accounting Principles that is a Form 10-K (or successor form), or annual statement to shareholders, required to be filed with the United States Securities and Exchange Commission; (B) A financial statement that is required to be provided to a bank regulator; (C) In the case of an insurance company, a financial statement based on Generally Accepted Accounting Principles that is given to creditors for purposes of making lending decisions, given to equity holders for purposes of evaluating their investments in the regulated financial company or member of a regulated financial group, or provided for other substantial non-tax purposes, and that the regulated financial company or member of a regulated financial group reasonably anticipates will be directly relied on for the purposes for which it was given or provided and that is prepared contemporaneously with a financial statement prepared in accordance with the standards set out by the National Association of Insurance Commissioners and filed with the insurance regulatory authorities of a State that is the principal insurance regulator of the insurance company; and (D) In the case of an insurance company, a financial statement that is prepared in accordance with the standards set out by the National Association of Insurance Commissioners and filed with the insurance regulatory authorities of a State that is the principal insurance regulator of the insurance company. (x) Bank regulator. The term bank regulator means the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and any Federal Reserve Bank, the Federal Deposit Insurance Corporation, the Farm Credit Administration, the Federal Housing Finance Authority, any successor to any of the foregoing entities, or State banking authorities maintaining substantially equivalent standards as these Federal regulatory authorities. Additional entities included in this paragraph (d)(4)(x) may be provided in guidance published in the Internal Revenue Bulletin ( see § 601.601(d)(2)(ii)(a) of this chapter). (5) Applicability date. Paragraph (d) of this section applies to charge-offs made by a regulated financial company or a member of a regulated financial group on its applicable financial statement that occur in taxable years ending on or after [DATE OF FINAL RULE]. A regulated financial company or a member of a regulated financial group may choose to apply paragraph (d) of this section to charge-offs on its applicable financial statement that occur in taxable years ending on or after December 28, 2023. Douglas W. O'Donnell, Deputy Commissioner for Services and Enforcement. (Filed by the Office of the Federal Register December 27, 2023, 8:45 a.m., and published in the issue of the Federal Register for December 28, 2023, 88 FR 89636).

Notice 2020-23 Internal Revenue Service 2020-18 I.R.B. 742 Update to Notice 2020-18, Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic Notice 2020-23 I. PURPOSE On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (Emergency Declaration). The Emergency Declaration instructed the Secretary of the Treasury "to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a)." Pursuant to the Emergency Declaration, this notice provides relief under section 7508A(a) of the Internal Revenue Code (Code) for the persons described in section III.A of this notice that the Secretary of the Treasury has determined to be affected by the COVID-19 emergency. This notice amplifies Notice 2020-18, 2020-15 IRB 590 (April 6, 2020), and Notice 2020-20, 2020-16 IRB 660 (April 13, 2020). II. BACKGROUND Section 7508A of the Code provides the Secretary of the Treasury or his delegate (Secretary) with authority to postpone the time for performing certain acts under the internal revenue laws for a taxpayer determined by the Secretary to be affected by a Federally declared disaster as defined in section 165(i)(5)(A). Pursuant to section 7508A(a), a period of up to one year may be disregarded in determining whether the performance of certain acts is timely under the internal revenue laws. On March 18, 2020, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) issued Notice 2020-17 providing relief under section 7508A(a), which postponed the due date for certain Federal income tax payments from April 15, 2020, until July 15, 2020. On March 20, 2020, the Treasury Department and the IRS issued Notice 2020-18, which superseded Notice 2020-17 and provided expanded relief, postponing the due date from April 15, 2020, until July 15, 2020, for filing Federal income tax returns and making Federal income tax payments due April 15, 2020. On March 27, 2020, the Treasury Department and the IRS issued Notice 2020-20, which amplified Notice 2020-18 and provided additional relief, postponing certain Federal gift (and generation-skipping transfer) tax return filings and payments. This notice further amplifies the relief provided in Notice 2020-18 and Notice 2020-20, providing additional relief to affected taxpayers as described in section III. In addition, section III.D of this notice postpones due dates with respect to certain government acts, and section III.E of this notice postpones the application date to participate in the Annual Filing Season Program. The relief provided under section 7508A in this notice, Notice 2020-18, and Notice 2020-20, is limited to the relief explicitly provided in these notices and does not apply with respect to any other type of Federal tax, any other type of Federal tax return, or any other time-sensitive act. For information about additional relief that may be available in connection with the COVID-19 emergency, including relief provided to employers that allows them to delay the deposit of certain employment taxes, go to IRS.gov/Coronavirus. III. GRANT OF RELIEF A. Taxpayers Affected by COVID-19 Emergency The Secretary of the Treasury has determined that any person (as defined in section 7701(a)(1) of the Code) with a Federal tax payment obligation specified in this section III.A (Specified Payment), or a Federal tax return or other form filing obligation specified in this section III.A (Specified Form), which is due to be performed (originally or pursuant to a valid extension) on or after April 1, 2020, and before July 15, 2020, is affected by the COVID-19 emergency for purposes of the relief described in this section III (Affected Taxpayer). The payment obligations and filing obligations specified in this section III.A (Specified Filing and Payment Obligations) are as follows: - Individual income tax payments and return filings on Form 1040, U.S. Individual Income Tax Return, 1040-SR, U.S. Tax Return for Seniors, 1040-NR, U.S. Nonresident Alien Income Tax Return, 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents, 1040-PR, Self-Employment Tax Return - Puerto Rico, and 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico); - Calendar year or fiscal year corporate income tax payments and return filings on Form 1120, U.S. Corporation Income Tax Return, 1120-C, U.S. Income Tax Return for Cooperative Associations, 1120-F, U.S. Income Tax Return of a Foreign Corporation, 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation, 1120-H, U.S. Income Tax Return for Homeowners Associations, 1120-L, U.S. Life Insurance Company Income Tax Return, 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons, 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return, 1120-POL, U.S. Income Tax Return for Certain Political Organizations, 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts, 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies, 1120-S, U.S. Income Tax Return for an S Corporation, and 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B); - Calendar year or fiscal year partnership return filings on Form 1065, U.S. Return of Partnership Income, and Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return; - Estate and trust income tax payments and return filings on Form 1041, U.S. Income Tax Return for Estates and Trusts, 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts, and 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts; - Estate and generation-skipping transfer tax payments and return filings on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, 706-A, United States Additional Estate Tax Return, 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts, 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations, 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions, and 706-GS(D-1), Notification of Distribution from a Generation-Skipping Trust (including the due date for providing such form to a beneficiary); - Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, filed pursuant to Revenue Procedure 2017-34; - Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent and any supplemental Form 8971, including all requirements contained in section 6035(a) of the Code; - Gift and generation-skipping transfer tax payments and return filings on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return that are due on the date an estate is required to file Form 706 or Form 706-NA; - Estate tax payments of principal or interest due as a result of an election made under sections 6166, 6161, or 6163 and annual recertification requirements under section 6166 of the Code; - Exempt organization business income tax and other payments and return filings on Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e) of the Code); - Excise tax payments on investment income and return filings on Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation, and excise tax payments and return filings on Form 4720, Return of Certain Excise Taxes under Chapters 41 and 42 of the Internal Revenue Code; and - Quarterly estimated income tax payments calculated on or submitted with Form 990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations, 1040-ES, Estimated Tax for Individuals, 1040-ES (NR), U.S. Estimated Tax for Nonresident Alien Individuals, 1040-ES (PR), Estimated Federal Tax on Self Employment Income and on Household Employees (Residents of Puerto Rico), 1041-ES, Estimated Income Tax for Estates and Trusts, and 1120-W, Estimated Tax for Corporations. The Secretary of the Treasury has also determined that any person performing a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) - (vi) of the Procedure and Administration Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 (December 10, 2018), which is due to be performed on or after April 1, 2020, and before July 15, 2020 (Specified Time-Sensitive Action), is an Affected Taxpayer. For purposes of this notice, the term Specified Time-Sensitive Action also includes an investment at the election of a taxpayer due to be made during the 180-day period described in section 1400Z-2(a)(1)(A) of the Code. B. Postponement of Due Dates with Respect to Certain Federal Tax Returns and Federal Tax Payments For an Affected Taxpayer with respect to Specified Filing and Payment Obligations, the due date for filing Specified Forms and making Specified Payments is automatically postponed to July 15, 2020. This relief is automatic; Affected Taxpayers do not have to call the IRS or file any extension forms, or send letters or other documents to receive this relief. However, Affected Taxpayers who need additional time to file may choose to file the appropriate extension form by July 15, 2020, to obtain an extension to file their return, but the extension date may not go beyond the original statutory or regulatory extension date. For example, a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, may be filed by July 15, 2020, to extend the time to file an individual income tax return, but that extension will only be to October 15, 2020. That extension will not extend the time to pay federal income tax beyond July 15, 2020. This relief includes not just the filing of Specified Forms, but also all schedules, returns, and other forms that are filed as attachments to Specified Forms or are required to be filed by the due date of Specified Forms, including, for example, Schedule H and Schedule SE, as well as Forms 3520, 5471, 5472, 8621, 8858, 8865, and 8938. This relief also includes any installment payments under section 965(h) due on or after April 1, 2020, and before July 15, 2020. Finally, elections that are made or required to be made on a timely filed Specified Form (or attachment to a Specified Form) shall be timely made if filed on such Specified Form or attachment, as appropriate, on or before July 15, 2020. As a result of the postponement of the due date for filing Specified Forms and making Specified Payments, the period beginning on April 1, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the Specified Forms or to pay the Specified Payments postponed by this notice. Interest, penalties, and additions to tax with respect to such postponed Specified Filing and Payment Obligations will begin to accrue on July 16, 2020. C. Relief With Respect to Specified Time-Sensitive Actions Affected Taxpayers also have until July 15, 2020, to perform all Specified Time-Sensitive Actions, that are due to be performed on or after April 1, 2020, and before July 15, 2020. This relief includes the time for filing all petitions with the Tax Court, or for review of a decision rendered by the Tax Court, filing a claim for credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax. This notice does not provide relief for the time period for filing a petition with the Tax Court, or for filing a claim or bringing a suit for credit or refund if that period expired before April 1, 2020. D. Postponement of Due Dates with Respect to Certain Government Acts This notice also provides the IRS with additional time to perform the time-sensitive actions described in § 301.7508A-1(c)(2) as provided in this section III.D (Time-Sensitive IRS Action). Due to the COVID-19 emergency, IRS employees, taxpayers, and other persons may be unable to access documents, systems, or other resources necessary to perform certain time-sensitive actions due to office closures or state and local government executive orders restricting activities. The lack of access to those documents, systems, or resources will materially interfere with the IRS's ability to timely administer the Code. As a result, IRS employees will require additional time to perform time-sensitive actions. Accordingly, the following persons (as defined in section 7701(a)(1) of the Code) are "Affected Taxpayers" for the limited purpose of this section III.D: - persons who are currently under examination (including an investigation to determine liability for an assessable penalty under subchapter B of Chapter 68); - persons whose cases are with the Independent Office of Appeals; and - persons who, during the period beginning on or after April 6, 2020 and ending before July 15, 2020, file written documents described in section 6501(c)(7) of the Code (amended returns) or submit payments with respect to a tax for which the time for assessment would otherwise expire during this period. With respect to those Affected Taxpayers, a 30-day postponement is granted for Time-Sensitive IRS Actions if the last date for performance of the action is on or after April 6, 2020, and before July 15, 2020. As a result of the postponement of the time to perform Time-Sensitive IRS Actions, the 30-day period following the last date for the performance of Time-Sensitive IRS Actions will be disregarded in determining whether the performance of those actions is timely. This section III.D is subject to review and further postponement, as appropriate. E. Extension of Time to Participate in the Annual Filing Season Program Revenue Procedure 2014-42, 2014-29 IRB 192, created a voluntary Annual Filing Season Program to encourage tax return preparers who do not have credentials as practitioners under Treasury Department Circular No. 230 ( Regulations Governing Practice before the Internal Revenue Service ) to complete continuing education courses for the purpose of increasing their knowledge of the law relevant to federal tax returns. Tax return preparers who complete the requirements in Rev. Proc. 2014-42 receive an annual Record of Completion. Under Rev. Proc. 2014-42, applications to participate in the Annual Filing Season Program for the 2020 calendar year must be received by April 15, 2020. The 2020 calendar year application deadline is postponed to July 15, 2020. IV. EFFECT ON OTHER DOCUMENTS Notice 2020-18 and Notice 2020-20 are amplified. Rev. Proc. 2014-42 is modified, applicable for calendar year 2020. V. DRAFTING INFORMATION The principal author of this notice is Jennifer Auchterlonie of the Office of Associate Chief Counsel, Procedure and Administration. For further information regarding this notice, you may call the COVID-19 Disaster Relief Hotline at (202) 317-5436 (not a toll-free number). For further information regarding estate, gift, trust, and generation-skipping transfer tax issues related to this notice, please contact Daniel Gespass, of CC:PSI: Br. 4 at (202) 317-6859 (not a toll-free number).

Private Letter Ruling Number: 202238014 Internal Revenue Service May 5, 2021 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entitles Number: 202238014 Release Date: 9/23/2022 May 5, 2021 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: UIL: 501.03-00 CERTIFIED MAIL - RETURN RECEIPT REQUESTED Dear ******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(e)(3), effective ****** Your determination letter dated ******, is revoked. Our adverse determination as to your exempt status was made for the following reasons: Organizations described in IRC Section 501(c)(3) and exempt under IRC Section 501(a) must be both organized and operated exclusively for exempt purposes You have not demonstrated that you are operated exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit www.irs.gov. Contributions to your organization are no longer deductible under IRC Section 170. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims or 3) the United States District Court for the District of Columbia. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing an action for declaratory judgment by referring to the enclosed Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 U.S. Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 U.S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, DC 20001 Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3). Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.irs.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting www.irs.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. Keep the original letter for your records. Sincerely, Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Data: 10/29/2020 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number. Telephone: Fax: Address: Managers contact information: Name ID number. Telephone Response due date: CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. Additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, for Sean O'Reilly Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Pub 3498 ISSUE Whether ****** located in ******, ****** continues to qualify for exemption under Section 501(c)(3) of the Internal Revenue Code? FACTS EO's name was ******, changed its name to ****** on ******. EO's President, ****** and Secretary, ****** signed this amendment. EO was granted tax-exempt status as a §501(c)(3) organization in ******. The organization conducted its operations out of ******, ******. According to its Articles of Incorporation the purpose of this corporation shall be charitable in nature and shall be fully engaged to wind down the affairs and business matters of the not-for-profit ****** business operations sold effective as of ******. Additionally, and without limitation, the corporation shall seek to accomplish its Mission Statement, as maybe amended from time to time, and which, at the time here of is as follows: "Our Mission is to provide general community based and educationally based and related charitable works and efforts in generally and such other communities and populations in order to spread the impact of the funds held and recovered by this organization." EO director provided a written statement explaining the history of the ****** summarized as follows: ****** -- EO purchased ****** for $ ****** from a for-profit entity, ******. ****** -- EO's could not sustain their operations and the insolvency began. ****** -- The ****** were valued at $ ****** and $ ****** respectively. ****** -- EO sold ****** for $ ******. ****** -- EO sold the ****** to ******, a for-profit organization. ****** to present -- EO "continued to exist for purposes of winding up it's A/R and payables and handling ****** audits and fiscal ****** adjustments (insurance billings) as well as coordination ongoing defense of a handful of ****** cases. The normal "wind-up" for a decent size ****** (that had more than ****** active employees and ****** is between ****** and ****** years. ****** also had Pension Plan audits that dragged on and finally resolved. Note also that none of the A/R or A/P was transferred to the Buyer (******) because it would have triggered certain effects in the bond financing that would have cause the $ ****** of bonds to be due by the State of ******." EO listed ****** wholly owned entities with no activities on its ******. They are: 1. ******-- filed its final Form ****** for the year ended ******. It was under the care of an investment company. 2. ******-- filed its final Form ****** tax return for the year ended ******. On ******, the IRS commenced an examination for the period ended ****** by issuing a customized cover letter and Information Document Requests (IDRs) to the EO address on file in ******, ******. IDR-3 dated ****** requested the following Information from EO: You explained to me that you don't have any charitable activities. Your continual existence has been to winddown matters related to the ******. You mentioned submitting reports for the ****** but could not say when was the last time you did this. I need to fully understand who did what, when and for what purposes. Please provide the following: A. The Forms ****** you filed, after the ****** were sold, indicated most of the receivables and payables were gone in the year ended ******. All of them were gone during the year ended ******. You then reported $ ****** revenue for litigation settlement in the year ended ******. Please provide all documentations regarding this litigation to substantiate winding-down matters: court filings, settlement agreements, and records linking to your receivables. B. Actions taken by your director, ******: You provided ****** bills from ******. Each of them stated, "Professional services rendered in connection with ****** affairs and matters attendant to wind-down and compliance issues; coordinate of legal matters and cost reports and audits of fiscal ****** matters; ****** matters; ****** issues; file review and destruction" for ****** services. Each bill also stated total hours worked, hourly rate, extended amount, courtesy adjustments, and final amount due. The following table summarized the amounts billed: ****** worked ****** hours for the year ended ******, nearly a ******. These bills are not sufficient to substantiate what ****** did for the payments you made to him. Please provide copies all documents related to the work ****** did, including but not limited to the following: 1. Cost Reports 2. Court filings and related documents for legal matters 3. Audit reports 4. Records related to fiscal ****** matters, ****** matters and ****** issues 5. Descriptions and time frame of file reviewed and destroyed 6. The template ****** maintained for services ****** did for you 7. For meals ****** charged on the credit cards, including out-of-state and out-of-country charges, provide explanation for who ****** met, why ****** needed to meet this/these individual(s) and how did each meeting relate to your matter(s). 8. For all other expenses ****** charged on the credit cards, including out-of-state and out-of-country charges, describe purposes of charges and how they were related to your matters. C. Consulting service by ******: You provided ****** bills from him, all containing the statement "as former CEO of ****** and ******; COO of ****** for ******: support for all wind-down; employee related issues; interface with ****** as to certain records; collection of A/R; rationalization of cost reports and updates and audits; factual assistance for malpractice defense; advise of ****** issues." You paid him $ ******/month for "retainer for ****** on-call services." Please answer/provide the following: 1. Records substantiating each time you consulted ******, and resulting recommendation/assistance you received from him 2. The minutes dated ****** and ******, ****** identified ****** as the Secretary and ****** signed these minutes with this title. Was ****** your director? If no, explain why ****** was identified as your director and the Secretary. 3. Explain why you continue to pay retainer fees to him when the winding down process was substantially completed a few years before. D. Actions taken by ******: You hired ****** in ******, and compensated ****** $ ******, $ ****** and $ ****** in the years ended ****** through ****** respectively. Since the bulk of your winding down work appeared to be completed within the ****** years, I need to understand why ****** was hired, and why did ****** receive significant salary increases. Please provide the following: 1. Detail description of what ****** did for you and when did ****** do them (****** job description you provided on ****** didn't have sufficient detail) 2. For meals ****** charged on the credit cards, including out-of-state and out-of-country charges, provide explanation for who ****** met, why ****** needed to meet this/these individual(s) and how did each meeting relate to your matter. 3. For all other expenses ****** charged on the credit cards, including out-of-state and out-of-country charges, describe purposes of charges and how they were related to your matters. E. Services provided by ******, ******: I need clarifications for the ****** bills from ******. Describe in detail what ****** did for each of the following items and provide copies of records prepared on your behalf: 1. Fiscal intermediary billings ****** adjustments 2. Cost T adjustments 3. Negotiations and research of ****** and ****** (******) 4. Correlation of prior appeals and adjustments 5. Open daily rate and license modification result on ****** 6. Open audit issues and related services F. You have ****** related entities on your Forms ******: ****** and ******. Please answer/provide the following: 1. Describe in detail each entity's purposes and activities. 2. Names of individuals who have control over these entities 3. If they no longer exist, explain in detail what happened to assets within these entities and when. EO's response to IDR-3: As I indicated to you when we spoke, in trying to obtain additional information and documentation, ******, who is ******, has been limited by significant memory issues for which ****** is seeking ****** treatment and for misplacing ****** documentation over the years as ****** has moved locations. While ****** will continue a diligent search for additional documentation, ****** does not have any of the additional documentation requested at this time. More specifically, with respect to the items requested in IDR 3, ****** on behalf of ****** responds as follows: A. ****** no longer has any of ****** files regarding the litigation that resulted in the settlement during the year ended ******. This litigation represented a settlement of the last cost report filing adjustment. Cost reports were the ****** filings with the fiscal intermediary for recovery of fees and expenses for patient services. The reports used then existing rates and charges and the ****** got paid regularly by the fiscal intermediary for the billings subject to adjustments for reviews and credits. This settlement was for the final open cost report whose adjustment led to the recovery. B. ****** prepared the invoices for the work ****** performed that were based approximately on the work ****** was performing on a monthly basis for ******. ****** generally billed ****** at approximately a ** % discount to ****** normal rate. To the extent any charges were made on ****** credit cards, ****** would determine which, if any, charges were personal in nature and pay those expenses directly; business expense-related charges would be paid by ******. ****** has no further documentation or detailed information. C. ****** does not have any further documentation regarding the time consulted with ****** and the matters they discussed. They would generally meet several times a month and speak on the telephone periodically concerning various ****** matters. ****** was the CEO of ****** both before and after the bankruptcy and up to the sale. At ****** annual salary was approximately $ ****** plus bonus, and he knew more about ****** than anyone else. Note that at the closure/sale and even with the one ****** there were more than ****** employees and dozens of ****** and ****** groups and ****** years of open cost reporting and billing issues to work through. ****** went to work for the buyer of the ****** (******) for several years before ****** started helping with ******. After ****** left ******, there were several years where the bulk of the ****** administrative files were at ******'s offices in total disarray. ****** started collecting those in around ****** and through ****** took away around approximately ****** file boxes that were unmarked and unindexed. ****** helped ****** determine what was in some of the boxes that was useful in collecting future funds for ******. ****** and ****** also spent time discussing ****** and the several community-based ****** programs that ****** was either not supporting properly or trying to shut down. They also worked with the ******, which was the successor entity to the one that had been supported by ****** and then to some extent by ******, by working on their outreach matters to ****** all the way until mid-****** does not recall why ****** was identified as a director of ****** because, to ****** knowledge, ****** was not. D. ****** hired ****** in ******. In supplement to the work description previously provided, ****** workload consisted over time of trying to organize unindexed and unmarked files in over ****** boxes that ****** received from ****** in ****** in order to determine how best to collect funds owed to ******. ****** had to categorize thousands of files as to employee related files, personnel type files, contract files and/or construction files, licensing files, legal files, billing files, cost reporting matters, and the like. At some point in mid-******, ****** received even more boxes from ****** whose files ****** reviewed and categorized so they could be either dealt with or destroyed. Some of the files in ****** were set aside to be reviewed by ****** to see if they could advise for any further adjustments that could result in any recoveries. E. ****** was run by ******, who was a prior director of ******. ****** business had been a ****** billing and service company; ****** was also previously in the ****** (durable ****** equipment) business. ****** had significant ****** and fiscal intermediary experience. Starting in approximately ******, ****** asked him to go through reports from ****** files to determine whether the file held a potential for recovery or the file could be destroyed. The issue of which files could be destroyed was important since by about ******, the storage bills for the boxes of files were around $ ******/month at ****** and ****** had another ****** or so file boxes at its offices that they required ****** to take. ****** combed through those files essentially looking for issues that might either need to be dealt with for adjustment against ****** or in the hope that there might be some obvious way to collect more for ******. ****** has no further documentation concerning ****** nor is ****** able at this point to provide further clarification concerning the ****** bills. F. ****** or ******. ("****** Management") were both ****** that provided space and operations to physicians so that they would choose to have their offices near the ******. ****** was formed in ****** and suspended for lack of filing in ******. Its wind-up of activities was within the ****** years after the sale to ******. ****** Management was formed by ****** (the former for-profit predecessor to ******) in ****** also to bring ****** to the ******. Its name was changed to ****** (rather than ******) in ******. Filings were done for both entities showing ****** as CEO and ****** as COO and ****** as CFO (these were the key operations persons all the way through the sale. ****** and ****** went to work for ******. ****** is not aware of precisely where the assets of either entity went after they ceased to exist. LAW IRC § 501(c)(3) exempts from federal income tax corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office. IRC § 6001 provides that every person liable for any tax imposed by the IRC, or for the collection thereof, shall keep adequate records as the Secretary of the Treasury or his delegate may from time to time prescribe. IRC § 6033(a)(1) provides, except as provided in IRC § 6033(a)(2), every organization exempt from tax under § 501(a) shall file an annual return, stating specifically the items of gross income, receipts and disbursements, and such other information for the purposes of carrying out the internal revenue laws. The Secretary may also prescribe by forms or regulations the requirement of every organization to keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. IRC § 6043(b) provides that every organization which for any of its last 5 taxable years preceding its liquidation, dissolution, termination, or substantial contraction was exempt from taxation under § 501(a) shall file such return and other information with respect to such liquidation, dissolution, termination, or substantial contraction as the Secretary shall by forms or regulations prescribe; except that -- 6043(b)(1) no return shall be required under this subsection from churches, their integrated auxiliaries, conventions or associations of churches, or any organization which is not a private foundation (as defined in § 509(a)) and the gross receipts of which in each taxable year are normally not more than $5,000, and 6043(b)(2) the Secretary may relieve any organization from such filing where ****** determines that such filing is not necessary to the efficient administration of the internal revenue laws or, with respect to an organization described in § 401(a), where the employer who established such organization files such a return. Treasury Regulations (Treas.Reg.) § 1.503(c)(3)-1(c) Operational Test (1) Primary activities. --An organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. (2) Distribution of earnings. --An organization is not operated exclusively for one or more exempt purposes of its net earnings inure in whole or in part to the benefit of private shareholders or individuals. For the definition of the words "private shareholder or individual", see paragraph (c) of §1.501(a)-1. Treas.Reg. § 1.6001-1(c) states that in addition to such permanent books and records as are required by paragraph (a) of this section with respect to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under section 501(a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 6033 and §§1.6033-1 through -3. Treas.Reg. § 1.6001-1(e) states that the books or records required by this section shall be kept at all times available for inspection by authorized Internal Revenue Service officers or employees, and shall be retained as long as the contents thereof may be material in the administration of any Internal Revenue law. Treas.Reg. § 1.6033-1(h)(2) provides that every organization that has established its right to exemption from tax, whether or not it is required to file an annual return of information, shall submit such additional information as may be required by the District Director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter F (section 501 and the following), chapter 1 of the Code and IRC § 6033. Revenue Ruling 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The IRS held that the failure or inability to file the required information return or otherwise to comply with the provisions of IRC § 6033 and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status. In accordance with the above cited provisions of the Code and Regulations under IRC § 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status. TAXPAYER'S POSITION The taxpayer agreed to the IRS's proposal to revoke its exempt status under § 501(c)(3). beginning ******. GOVERNMENT'S POSITION EO has failed to show that they meet the operational test for a § 501(c)(3) organization for the year under examination. In order to meet the operational test, they must show that they engage primarily in activities which accomplish one or more of such exempt purposes specified in § 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. Further, an organization is not operated exclusively for one or more exempt purposes of its net earnings inure in whole or in part to the benefit of private shareholders or individuals. The organization has demonstrated from that they did not operate for charitable purposes for the year under examination and in the year prior. Net earnings inured to the benefit of directors, which precludes the organization from being operated exclusively for exempt purposes. Without any operations, their main activities were divesting the assets, which is not an exempt purpose of a §501(c)(3) organization. EO has failed to provide information about its exempt status, as required by the Code and Regulations. (IRC §6033(a)(1) and Treas.Reg. § 1.6033-1(h)(2)). By not complying with the Code and Regulations, the organization has jeopardized its exempt status. The government proposes revocation of EO's exempt status beginning ******. CONCLUSION During the examination, EO failed to provide records, as required by IRC §6033(a)(1). They have jeopardized their exempt status by failing to comply with record keeping requirements. Further, they have operated in a manner inconsistent with their exempt status in the distribution of their assets. As a result of the examination, the IRS has determined that EO has failed to operate for exempt purposes as a §501(c)(3) organization. Accordingly, since the organization failed to operate primarily for exempt purposes their exempt status is revoked effective ******.

Revenue Procedure 2023-34 Internal Revenue Service 2023-48 I.R.B. 1287 26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also: Part I, §§ 6011, 6662, 6662A, 6707A; 1-6011-4.) Rev. Proc. 2023-34 ******** 1 Unless otherwise specified, all references to "section" or "§" references are to provisions of the Internal Revenue Code (Code). ******** SECTION 1. PURPOSE This revenue procedure sets forth inflation-adjusted items for 2024 for various Code provisions as in effect on November 9, 2023. The inflation adjusted items for the Code sections set forth in section 3 of this revenue procedure are generally determined by reference to § 1(f). To the extent amendments to the Code are enacted for 2024 after November 9, 2023, taxpayers should consult additional guidance to determine whether these adjustments remain applicable for 2024. SECTION 2. CHANGES.01 For calendar years beginning on or after January 1, 2023, § 13601(a)(2) of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), reinstates the Hazardous Substance Superfund financing rate for crude oil received at a United States refinery and petroleum products entered into the United States for consumption, use, or warehousing under § 4611. The rate of tax imposed by § 4611 is the sum of the Hazardous Substance Superfund rate and the Oil Spill Liability Trust Fund financing rate. In the case of crude oil or petroleum products entered after December 31, 2016, for calendar years beginning in 2023, the rate of tax imposed by § 4611(a) is $0.254 cents a barrel..02 The Hazardous Substance Superfund financing rate described in section 2.01 of this revenue procedure is adjusted for inflation for calendar years beginning in 2024. SECTION 3. 2024 ADJUSTED ITEMS.01 Tax Rate Tables. For taxable years beginning in 2024, the tax rate tables under § 1 are as follows: TABLE 1 - Section 1(j)(2)(A) - Married Individuals Filing Joint Returns and Surviving Spouses TABLE 2 - Section 1(j)(2)(B) - Heads of Households TABLE 3 - Section 1(j)(2)(C) - Unmarried Individuals (other than Surviving Spouses and Heads of Households) TABLE 4 - Section 1(j)(2)(D) - Married Individuals Filing Separate Returns TABLE 5 - Section 1(j)(2)(E) - Estates and Trusts.02 Unearned Income of Minor Children Subject to the "Kiddie Tax". For taxable years beginning in 2024, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $1,300. This $1,300 amount is the same as the amount provided in § 63(c)(5)(A), as adjusted for inflation. The same $1,300 amount is used for purposes of § 1(g)(7) to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie tax." For example, one of the requirements for the parental election is that a child's gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child's gross income for 2024 must be more than $1,300 but less than $13,000..03 Maximum Capital Gains Rate (§1(h), §1(j)(5)). For taxable years beginning in 2024, the maximum zero rate amounts and maximum 15 percent rate amounts under § 1(j)(5)(B), as adjusted for inflation, are as follows:.04 Adoption Credit. For taxable years beginning in 2024, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $16,810. For taxable years beginning in 2024, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $16,810. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $252,150 and is completely phased out for taxpayers with modified adjusted gross income of $292,150 or more. See section 3.19 of this revenue procedure for the adjusted items relating to adoption assistance programs..05 Child Tax Credit. For taxable years beginning in 2024, the amount used in § 24(d)(1)(A) to determine the amount of credit under § 24 that may be refundable is $1,700..06 Earned Income Credit. (1) In general. For taxable years beginning in 2024, the following amounts are used to determine the earned income credit under § 32(b). The "earned income amount" is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The "threshold phaseout amount" is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The "completed phaseout amount" is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for married taxpayers filing a joint return include the increase provided in § 32(b)(2)(B), as adjusted for inflation for taxable years beginning in 2024. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for taxpayers with all other filing statuses also apply to married taxpayers who are not filing a joint return and satisfy the special rules for separated spouses in § 32(d). The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer. (2) Excessive Investment Income. For taxable years beginning in 2024, the earned income tax credit is not allowed under § 32(i) if the aggregate amount of certain investment income exceeds $11,600..07 Refundable Credit for Coverage Under a Qualified Health Plan. For taxable years beginning in 2024, the limitation on tax imposed under § 36B(f)(2)(B) for excess advance credit payments is determined using the following table:.08 Rehabilitation Expenditures Treated as Separate New Building. For calendar year 2024, the per low-income unit qualified basis amount under § 42(e)(3)(A)(ii)(II) is $8,300..09 Low-Income Housing Credit. For calendar year 2024, the amount used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing credit is the greater of (1) $2.90 multiplied by the State population, or (2) $3,360,000..10 Employee Health Insurance Expense of Small Employers. For taxable years beginning in 2024, the dollar amount in effect under § 45R(d)(3)(B) is $32,400. This amount is used under § 45R(c) for limiting the small employer health insurance credit and under § 45R(d)(1)(B) for determining who is an eligible small employer for purposes of the credit..11 Exemption Amounts for Alternative Minimum Tax. For taxable years beginning in 2024, the exemption amounts under § 55(d)(1) are: For taxable years beginning in 2024, under § 55(b)(1), the excess taxable income above which the 28 percent tax rate applies is: For taxable years beginning in 2024, the amounts used under § 55(d)(2) to determine the phaseout of the exemption amounts are:.12 Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax." For taxable years beginning in 2024, for a child to whom the § 1(g) "kiddie tax" applies, the exemption amount under §§ 55(d) and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child's earned income for the taxable year, plus (2) $9,250..13 Certain Expenses of Elementary and Secondary School Teachers. For taxable years beginning in 2024, under § 62(a)(2)(D) the amount of the deduction allowed under § 162 that consists of expenses paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom is $300..14 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees Under Accountable Plans. For calendar year 2024, an eligible employer may pay certain welders and heavy equipment mechanics an amount up to $22 per hour for rig-related expenses that are deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002-41, 2002-1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses, an amount up to $13 per hour is deemed substantiated if paid under Rev. Proc. 2002-41..15 Standard Deduction. (1) In general. For taxable years beginning in 2024, the standard deduction amounts under § 63(c)(2) are as follows: (2) Dependent. For taxable years beginning in 2024, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,300, or (2) the sum of $450 and the individual's earned income. (3) Aged or blind. For taxable years beginning in 2024, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,550. The additional standard deduction amount is increased to $1,950 if the individual is also unmarried and not a surviving spouse..16 Cafeteria Plans. For taxable years beginning in 2024, the dollar limitation under § 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,200. If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $640..17 Qualified Transportation Fringe Benefit. For taxable years beginning in 2024, the monthly limitation under § 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $315. The monthly limitation under § 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $315..18 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses. For taxable years beginning in 2024, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $145,200 for joint returns and $96,800 for all other returns. The exclusion is completely phased out for modified adjusted gross income of $175,200 or more for joint returns and $111,800 or more for all other returns..19 Adoption Assistance Programs. For taxable years beginning in 2024, under § 137(a)(2), the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $16,810. For taxable years beginning in 2024, under § 137(b)(1) the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for adoptions by the employee is $16,810. The amount excludable from an employee's gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $252,150 and is completely phased out for taxpayers with modified adjusted gross income of $292,150 or more. (See section 3.04 of this revenue procedure for the adjusted items relating to the adoption credit.).20 Private Activity Bonds Volume Cap. For calendar year 2024, the amounts used under § 146(d) to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $125 multiplied by the State population, or (2) $378,230,000..21 Loan Limits on Agricultural Bonds. For calendar year 2024, the loan limit amount on agricultural bonds under § 147(c)(2)(A) for first-time farmers is $649,400..22 General Arbitrage Rebate Rules. For bond years ending in 2024, the amount of the computation credit determined under § 1.148-3(d)(4) of the Income Tax Regulations is $2,070..23 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow. For calendar year 2024, under § 1.148-5(e)(2)(iii)(B)(1) of the Income Tax Regulations, a broker's commission or similar fee for the acquisition of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $49,000, and (B) 0.2 percent of the computational base (as defined in § 1.148-5(e)(2)(iii)(B)( 2 )) or, if more, $5,000; and (2) for any issue, the issuer does not treat more than $138,000 in brokers' commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue..24 Gross Income Limitation for a Qualifying Relative. For taxable years beginning in 2024, the exemption amount referenced in § 152(d)(1)(B) is $5,050..25 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2024, under § 179(b)(1), the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $1,220,000 and under § 179(b)(5)(A), the cost of any sport utility vehicle that may be taken into account under § 179 cannot exceed $30,500. Under § 179(b)(2), the $1,220,000 limitation under § 179(b)(1) is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2024 taxable year exceeds $3,050,000..26 Energy Efficient Commercial Building Deduction. For taxable years beginning in 2024, the applicable dollar value used to determine the maxi-mum allowance of the deduction under § 179D(b)(2) is $0.57 increased (but not above $1.13) by $0.02 for each percentage point by which the total annual energy and power costs for the buildings are certified to be reduced by a percentage greater than 25 percent. For taxable years beginning in 2024, the applicable dollar value used to determine the increased deduction amount for certain property under § 179D(b)(3) is $2.83 increased (but not above $5.65) by $0.11 for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25 percent..27 Qualified Business Income. For tax-able years beginning in 2024, the threshold amounts under § 199A(e)(2) and phase-in range amounts under § 199A(b)(3)(B) and § 199A(d)(3)(A) are:.28 Eligible Long-Term Care Premiums. For taxable years beginning in 2024, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term "medical care", as adjusted for inflation, are as follows:.29 Medical Savings Accounts. (1) Self-only coverage. For taxable years beginning in 2024, the term "high deductible health plan" as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,800 and not more than $4,150, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $5,550. (2) Family coverage. For taxable years beginning in 2024, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $5,550 and not more than $8,350, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $10,200..30 Interest on Education Loans. For taxable years beginning in 2024, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B), as adjusted for inflation, for taxpayers with modified adjusted gross income in excess of $80,000 ($165,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $95,000 or more ($195,000 or more for joint returns)..31 Limitation on Use of Cash Method of Accounting. For taxable years beginning in 2024, a corporation or partnership meets the gross receipts test of § 448(c) for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $30,000,000..32 Threshold for Excess Business Loss. For taxable years beginning in 2024, in determining a taxpayer's excess business loss, the amount under § 461(l)(3)(A)(ii)(II) is $305,000 ($610,000 for joint returns)..33 Treatment of Dues Paid to Agricultural or Horticultural Organizations. For taxable years beginning in 2024, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $201..34 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns. (1) Low cost article. For taxable years beginning in 2024, for purposes of defining the term "unrelated trade or business" for certain exempt organizations under § 513(h)(2), "low cost articles" are articles costing $13.20 or less. (2) Other insubstantial benefits. For taxable years beginning in 2024, under § 170, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as amplified by Rev. Proc. 92-49, 1992-1 C.B. 987, and modified by Rev. Proc. 92-102, 1992-2 C.B. 579), for the value of insubstantial benefits that may be received by a donor in return for a contribution, without causing the contribution to fail to be fully deductible, are $13.20, $66.00 and $132.00, respectively..35 Special Rules for Credits and Deductions. For taxable years beginning in 2024, the amount of the deduction under § 642(b)(2)(C)(i) is $5,000..36 Tax on Insurance Companies Other than Life Insurance Companies. For taxable years beginning in 2024, under § 831(b)(2)(A)(i) the amount of the limit on net written premiums or direct writ-ten premiums (whichever is greater) is $2,800,000 to elect the alternative tax for certain small companies under § 831(b)(1) to be taxed only on taxable investment income..37 Expatriation to Avoid Tax. For calendar year 2024, under § 877A(g)(1)(A), unless an exception under § 877A(g)(1)(B) applies, an individual is a covered expatriate if the individual's "average annual net income tax" under § 877(a)(2)(A) for the five taxable years ending before the expatriation date is more than $201,000..38 Tax Responsibilities of Expatriation. For taxable years beginning in 2024, the amount that would be includible in the gross income of a covered expatriate by reason of § 877A(a)(1) is reduced (but not below zero) by $866,000 pursuant to § 877A(a)(3)..39 Foreign Earned Income Exclusion. For taxable years beginning in 2024, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $126,500..40 Debt Instruments Arising Out of Sales or Exchanges. For calendar year 2024, a qualified debt instrument under § 1274A(b) has stated principal that does not exceed $7,098,600, and a cash method debt instrument under § 1274A(c)(2) has stated principal that does not exceed $5,070,500..41 Unified Credit Against Estate Tax. For an estate of any decedent dying in calendar year 2024, the basic exclusion amount is $13,610,000 for determining the amount of the unified credit against estate tax under § 2010..42 Valuation of Qualified Real Property in Decedent's Gross Estate. For an estate of a decedent dying in calendar year 2024, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A for purposes of the estate tax cannot exceed $1,390,000..43 Annual Exclusion for Gifts. (1) For calendar year 2024, the first $18,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year. (2) For calendar year 2024, the first $185,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year..44 Tax on Arrow Shafts. For calendar year 2024, the tax imposed under § 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft of a type used in the manufacture of certain arrows is $0.62 per shaft..45 Passenger Air Transportation Excise Tax. For calendar year 2024, the tax under § 4261(b)(1) on the amount paid for each domestic segment of taxable air transportation is $5.00. For calendar year 2024, the tax under § 4261(c)(1) on any amount paid (whether within or without the United States) for any international air transportation, if the transportation begins or ends in the United States, generally is $22.20. Under § 4261(c)(3), however, a lower rate of tax applies under § 4261(c)(1) to a domestic segment beginning or ending in Alaska or Hawaii, and the tax applies only to departures. For calendar year 2024, the rate of tax is $11.10..46 Tax on Certain Uses of Crude Oil and Petroleum Products. For calendar year 2024, the tax imposed under § 4611(a) on crude oil received at a United States refinery and petroleum products entered into the United States for consumption, use, or warehousing is $0.26 cents per barrel..47 Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures. For taxable years beginning in 2024, the annual per person, family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3) (and section 5.05 of Rev. Proc. 98-19, 1998-1 C.B. 547), regarding certain exempt organizations with nondeductible lobbying expenditures, is $140 or less..48 Notice of Large Gifts Received from Foreign Persons. For taxable years beginning in 2024, § 6039F authorizes the Secretary of the Treasury or her delegate to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $19,570..49 Persons Against Whom a Federal Tax Lien Is Not Valid. For calendar year 2024, a federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) who purchased personal property in a casual sale for less than $1,900, or (2) a mechanic's lienor under § 6323(b)(7) who repaired or improved certain residential property if the contract price with the owner is not more than $9,520..50 Property Exempt from Levy. For calendar year 2024, the value of property exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) cannot exceed $11,390. The value of property exempt from levy under § 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) cannot exceed $5,700..51 Exempt Amount of Wages, Salary, or Other Income. For taxable years beginning in 2024, the dollar amount used to calculate the amount determined under § 6334(d)(4)(B) is $5,000..52 Interest on a Certain Portion of the Estate Tax Payable in Installments. For an estate of a decedent dying in calendar year 2024, the dollar amount used to determine the "2-percent portion" (for purposes of calculating interest under § 6601(j)) of the estate tax extended as provided in § 6166 is $1,850,000..53 Failure to File Tax Return. In the case of any return required to be filed in 2025, the amount of the addition to tax under § 6651(a) for failure to file an income tax return within 60 days of the due date of such return (determined with regard to any extensions of time for filing) will not be less than the lesser of $510 or 100 percent of the amount required to be shown as tax on such return..54 Failure to File Certain Information Returns, Registration Statements, etc. For returns required to be filed in 2025, the penalty amounts under § 6652(c) are: (1) for failure to file a return required under § 6033(a)(1) (relating to returns by exempt organization) or § 6012(a)(6) (relating to returns by exempt organizations): (2) for failure to file a return required under § 6034 (relating to returns by certain trusts) or § 6043(b) (relating to terminations, etc., of exempt organizations): (3) for failure to file a disclosure required under § 6033(a)(2):.55 Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons. In the case of any failure relating to a return or claim for refund filed in 2025, the penalty amounts under § 6695 are:.56 Failure to File Partnership Return. In the case of any return required to be filed in 2025, the dollar amount used to determine the amount of the penalty under § 6698(b)(1) is $245..57 Failure to File S Corporation Return. In the case of any return required to be filed in 2025, the dollar amount used to determine the amount of the penalty under § 6699(b)(1) is $245..58 Failure to File Correct Information Returns. In the case of any failure relating to a return required to be filed in 2025, the penalty amounts under § 6721 are: (1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to file correct information returns: (2) for persons with average annual gross receipts for the most recent three taxable years of $5,000,000 or less, for failure to file correct information returns: (3) for failure to file correct information returns due to intentional disregard of the filing requirement (or the correct information reporting requirement):.59 Failure to Furnish Correct Payee Statements. In the case of any failure relating to a statement required to be furnished in 2025, the penalty amounts under § 6722 are: (1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to furnish correct payee statements: (2) for persons with average annual gross receipts for the most recent 3 taxable years of $5,000,000 or less, for failure to furnish correct payee statements: (3) for failure to furnish correct payee statements due to intentional disregard of the requirement to furnish a payee statement (or the correct information reporting requirement):.60 Revocation or Denial of Passport in Case of Certain Tax Delinquencies. For calendar year 2024, the amount of a serious delinquent tax debt under § 7345 is $62,000..61 Attorney Fee Awards. For fees incurred in calendar year 2024, the attorney fee award limitation under § 7430(c)(1)(B)(iii) is $240 per hour..62 Periodic Payments Received Under Qualified Long-Term Care Insurance Contracts or Under Certain Life Insurance Contracts. For calendar year 2024, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $410..63 Qualified Small Employer Health Reimbursement Arrangement. For taxable years beginning in 2024, to qualify as a qualified small employer health reimbursement arrangement under § 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $6,150 ($12,450 for family coverage). SECTION 4. EFFECTIVE DATE.01 General Rule. Except as provided in section 4.02 of this revenue procedure, this revenue procedure applies to taxable years beginning in 2024..02 Calendar Year Rule. This revenue procedure applies to transactions or events occurring in calendar year 2024 for purposes of sections 3.08 (rehabilitation expenditures treated as separate new building), 3.09 (low-income housing credit), 3.14 (transportation mainline pipeline construction industry optional expense substantiation rules for payments to employees under accountable plans), 3.20 (private activity bonds volume cap), 3.21 (loan limits on agricultural bonds), 3.22 (general arbitrage rebate rules), 3.23 (safe harbor rules for broker commissions on guaranteed investment contracts or investments purchased for a yield restricted defeasance escrow), 3.37 (expatriation to avoid taxes), 3.40 (debt instruments arising out of sales or exchanges), 3.41 (unified credit against estate tax), 3.42 (valuation of qualified real property in decedent's gross estate), 3.43 (annual exclusion for gifts), 3.44 (tax on arrow shafts), 3.45 (passenger air transportation excise tax), 3.46 (tax on certain uses of crude oil and petroleum products), 3.49 (persons against whom a federal tax lien is not valid), 3.50 (property exempt from levy), 3.52 (interest on a certain portion of the estate tax payable in installments), 3.60 (revocation or denial of passport in case of certain tax delinquencies), 3.61 (attorney fee awards), and 3.62 (periodic payments received under qualified long-term care insurance contracts or under certain life insurance contracts) of this revenue procedure. SECTION 5. DRAFTING INFORMATION The principal author of this revenue procedure is Kyle Walker of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Walker at (202) 317-4718 (not a toll-free number).

Revenue Procedure 2022-1 Internal Revenue Service 2022-1 I.R.B. 1 26 CFR § 601.201: Rulings and determination letters. Rev. Proc. 2022-1 SECTION 1. WHAT IS This revenue procedure explains how the Service provides advice to taxpayers on issues THE PURPOSE OF THIS under the jurisdiction of the Associate Chief Counsel (Corporate), the Associate Chief Counsel REVENUE PROCEDURE? (Employee Benefits, Exempt Organizations, and Employment Taxes), the Associate Chief Counsel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (International), the Associate Chief Counsel (Passthroughs and Special Industries), and the Associate Chief Counsel (Procedure and Administration). It explains the forms of advice and the manner in which advice is requested by taxpayers and provided by the Service. A sample format for a letter ruling request is provided in Appendix B. See section 4 of this revenue procedure for information on certain issues outside the scope of this revenue procedure on which advice may be requested under a different revenue procedure. Description of terms used in.01 For purposes of this revenue procedure-- this revenue procedure (1) the term "Service" includes the four operating divisions of the Internal Revenue Service and the Associate offices. The four operating divisions are: (a) Large Business & International Division (LB&I), which generally serves corporations, S corporations, and partnerships, with assets in excess of $10 million. It also serves U.S. citizens and residents with offshore activities and non-residents with U.S. activities. (b) Small Business/Self-Employed Division (SB/SE), which generally serves corporations, including S corporations, and partnerships, with assets less than or equal to $10 million; filers of gift, estate, excise, employment and fiduciary returns; individuals filing an individual Federal income tax return with accompanying Schedule C (Profit or Loss From Business (Sole Proprietorship)), Schedule E (Supplemental Income and Loss), Schedule F (Profit or Loss From Farming), or Form 2106, Employee Business Expenses; (c) Wage and Investment Division (W &I), which generally serves individuals with wage and investment income only (and with no international tax returns) filing an individual Federal income tax return without accompanying Schedule C, E, or F, or Form 2106; and (d) Tax Exempt and Government Entities Division (TE/GE), which serves three distinct taxpayer segments: employee plans (including IRAs), exempt organizations, and government entities. (2) the term "Associate office" refers to the Office of Associate Chief Counsel (Corporate), the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), the Office of Associate Chief Counsel (Financial Institutions and Products), the Office of Associate Chief Counsel (Income Tax and Accounting), the Office of Associate Chief Counsel (International), the Office of Associate Chief Counsel (Passthroughs and Special Industries), or the Office of Associate Chief Counsel (Procedure and Administration), as appropriate. (3) the term "Director" refers to the Practice Area Director, LB&I; Director, Field Operations, LB&I; Area Director, Field Examination, SB/SE; Director, Specialty Examination Policy, SB/SE; Program Manager, Estate & Gift Tax Policy, SB/SE; Program Manager, Employment Tax Policy, SB/SE; Program Manager, Excise Tax Policy, SB/SE; Director, Return Integrity & Compliance Services, W &I; Director, Employee Plans; Director, Employee Plans, Rulings and Agreements; Director, Employee Plans Examinations; Director, Exempt Organizations; Director, Exempt Organizations, Rulings and Agreements; Director, Exempt Organizations Examinations; Director, Government Entities, as appropriate. (4) the term "field office" refers to the respective offices of the Directors, as appropriate. (5) the term "taxpayer" includes all persons subject to any provision of the Internal Revenue Code and, when appropriate, their representatives. More specifically, the term includes tax-exempt organizations, as well as issuers of tax-exempt obligations, mortgage credit certificates, and tax credit bonds. (6) the terms "Appeals" and "Appeals office" refer to the Internal Revenue Service Independent Office of Appeals. Updated annually.02 This revenue procedure is updated annually as the first revenue procedure of the year, but it may be modified, amplified or clarified during the year. SECTION 2. WHAT The Service provides advice in the form of letter rulings, closing agreements, determination ARE THE FORMS IN letters, information letters, and oral advice. WHICH THE SERVICE PROVIDES ADVICE TO TAXPAYERS? Letter ruling.01 A "letter ruling" is a written determination issued to a taxpayer by an Associate office in response to the taxpayer's written inquiry, filed prior to the filing of returns or reports that are required by the tax laws, about its status for tax purposes or the tax effects of its acts or transactions. A letter ruling interprets the tax laws and applies them to the taxpayer's specific set of facts. A letter ruling is issued when appropriate in the interest of sound tax administration. One type of letter ruling is an Associate office's response granting or denying a request for a change in a taxpayer's method of accounting or accounting period. Once issued, a letter ruling may be revoked or modified for a number of reasons. See section 11 of this revenue procedure. A letter ruling may be issued with a closing agreement, however, and a closing agreement is final unless fraud, malfeasance, or misrepresentation of a material fact can be shown. See section 2.02 of this revenue procedure. Letter rulings are subject to exchange of information under U.S. tax treaties or tax information exchange agreements in accordance with the terms of such treaties and agreements (including terms regarding relevancy, confidentiality, and the protection of trade secrets). Closing agreement.02 A "closing agreement" is a final agreement between the Service and a taxpayer on a specific issue or liability. It is entered into under the authority in § 7121, and it is final unless fraud, malfeasance, or misrepresentation of a material fact can be shown. A closing agreement may be entered into when it is advantageous to have a matter permanently and conclusively closed or when a taxpayer can show that there are good reasons for an agreement and that making the agreement will not prejudice the interests of the Government. A taxpayer may request a closing agreement with a letter ruling or in lieu of a letter ruling, with respect to a transaction that would be eligible for a letter ruling. If the Service agrees that a closing agreement is appropriate, the Associate Chief Counsel with subject matter jurisdiction signs the closing agreement on behalf of the Service. In appropriate cases, the Service may ask a taxpayer to enter into a closing agreement as a condition for the issuance of a letter ruling or in lieu of issuing a letter ruling. If, in a single case, a closing agreement is requested for each person or entity in a class of taxpayers, separate agreements are entered into only if the class consists of 25 or fewer taxpayers. If the issue and holding are identical for the class and there are more than 25 taxpayers in the class, a "mass closing agreement" will be entered into with the taxpayer who is authorized by the others to represent the class. Determination letter.03 A "determination letter" is a written determination issued by a Director that applies the principles and precedents previously announced by the Service to a specific set of facts. It is issued only when a determination can be made based on clearly established rules in a statute, a tax treaty, the regulations, a conclusion in a revenue ruling, or an opinion or court decision that represents the position of the Service. Information letter.04 An "information letter" is a statement issued by an Associate office or Director that calls attention to a well-established interpretation or principle of tax law (including a tax treaty) without applying it to a specific set of facts. An information letter may be issued if the taxpayer's inquiry indicates a need for general information or if the taxpayer's request does not meet the requirements of this revenue procedure and the Service concludes that general information will help the taxpayer. An information letter is advisory only and has no binding effect on the Service. If the Associate office issues an information letter in response to a request for a letter ruling that does not meet the requirements of this revenue procedure, the information letter is not a substitute for a letter ruling. The taxpayer should provide a daytime telephone number with the taxpayer's request for an information letter. Information letters that are issued by the Associate offices to members of the public are made available to the public. Information letters that are issued by the field offices are generally not made available to the public. Because information letters do not constitute written determinations as defined in § 6110, they are not subject to public inspection under § 6110. The Service makes the information letters available to the public under the Freedom of Information Act (the "FOIA"). Before any information letter is made available to the public, an Associate office will redact any information exempt from disclosure under the FOIA. See, e.g., 5 U.S.C. § 552(b)(6) (exemption for information the disclosure of which would constitute a clearly unwarranted invasion of personal privacy); 5 U.S.C. § 552(b)(3) in conjunction with § 6103 (exemption for returns and return information as defined in§ 6103(b)). The following documents also will not be available for public inspection as part of this process: (1) transmittal letters in which the Service furnishes publications or other publicly available material to taxpayers, without any significant legal discussion; (2) responses to taxpayer or third party contacts that are inquiries with respect to a pending request for a letter ruling, technical advice memorandum, or Chief Counsel Advice (which are subject to public inspection under§ 6110 after their issuance); and (3) responses to taxpayer or third party communications with respect to any investigation, audit, litigation, or other enforcement action. Oral Advice.05 (1) No oral rulings and no written rulings in response to oral requests. The Service does not orally issue letter rulings or determination letters, nor does it issue letter rulings or determination letters in response to oral requests from taxpayers. Service employees ordinarily will discuss with taxpayers or their representatives inquiries about whether the Service will rule on particular issues and about procedural matters regarding the submission of requests for letter rulings or determination letters for a particular case. (2) Discussion possible on substantive issues. At the discretion of the Service and as time permits, Service employees may also discuss substantive issues with taxpayers or their representatives. Such a discussion will not bind the Service or the Office of Chief Counsel, and it cannot be relied upon as a basis for obtaining retroactive relief under the provisions of § 7805(b). Service employees who are not directly involved in the examination, appeal, or litigation of particular substantive tax issues will not discuss those issues with taxpayers or their representatives unless the discussion is coordinated with Service employees who are directly involved. The taxpayer or the taxpayer's representative ordinarily will be asked whether an oral request for advice or information relates to a matter pending before another office of the Service or before a Federal court. If a tax issue is not under examination, in Appeals, or in litigation, the tax issue may be discussed even though the issue is affected by a nontax issue pending in litigation. A taxpayer may seek oral technical guidance from a taxpayer service representative in a field office or Service Center when preparing a return or report. The Service does not respond to letters seeking to confirm the substance of oral discussions, and the absence of a response to such a letter is not a confirmation. (3) Oral guidance is advisory only, and the Service is not bound by it. Oral guidance is advisory only, and the Service is not bound by it, for example, when examining the taxpayer's return. SECTION 3. ON Taxpayers may request letter rulings, information letters, and closing agreements under this WHAT ISSUES MAY revenue procedure on issues within the jurisdiction of the Associate offices. Taxpayers uncertain TAXPAYERS REQUEST as to whether an Associate office has jurisdiction with regard to a specific factual situation may call WRITTEN ADVICE the telephone number for the Associate office listed in section 10.07(1) of this revenue procedure. UNDER THIS REVENUE PROCEDURE? Except as provided in section 6.14 of this revenue procedure, taxpayers also may request determination letters from the Director in the appropriate operating division. See sections 7 and 12 of this revenue procedure. For determination letters from TE/GE, see Rev. Proc. 2022-4 and Rev. Proc. 2022-5, this Bulletin. Issues under the.01 Issues under the jurisdiction of the Associate Chief Counsel (Corporate) include those that jurisdiction of the Associate involve consolidated returns, corporate acquisitions, reorganizations, liquidations, redemptions, Chief Counsel (Corporate) spinoffs, transfers to controlled corporations, distributions to shareholders, corporate bankruptcies, the effect of certain ownership changes on net operating loss carryovers and other tax attributes, debt vs. equity determinations, allocation of income and deductions among taxpayers, acquisitions made to evade or avoid income tax, and certain earnings and profits questions. For information on letter rulings under section 355 involving businesses in certain development (R&D) and other activities that have not collected income see IRS Statements issued on May 6, 2019 and September 25, 2018. For information on obtaining transactional rulings under section 355 see the IRS Statement issued on March 12, 2019 that indefinitely extends the pilot program in Rev. Proc. 2017-52, 2017-411.R.B. 283 (amplified and modified by Rev. Proc. 2018-53, 2018-43 I.R.B. 667). See the IRS Statement issued on October 13, 2017 for information regarding letter rulings involving retention of stock, drop-spin liquidate transactions, and transfers of a portion of a subsidiary's assets to its corporate shareholder in transactions not qualifying under section 332 or 355 but that are intended to qualify as tax-free. These IRS Statements are available at https:// www.irs.gov/newsroom/statements-from-office-of-the-chief-counsel. Issues under the.02 Issues under the jurisdiction of the Associate Chief Counsel (Employee Benefits, jurisdiction of the Exempt Organizations, and Employment Taxes) include those that involve the application of Associate Chief Counsel employment taxes and taxes on self-employment income, exemption requirements for tax-exempt (Employee Benefits, organizations, tax treatment (including application of the unrelated business income tax) of tax- Exempt Organizations, and exempt organizations (including federal, state, local, and Indian tribal governments), political Employment Taxes) organizations described in § 527, qualified tuition programs described in § 529, qualified ABLE programs described in § 529A, trusts described in § 4947(a), certain excise taxes, disclosure obligations and information return requirements of tax-exempt organizations, employee benefit programs (including executive compensation arrangements, qualified retirement plans, deferred compensation plans, and health and welfare benefit programs) and IRAs, issues integrally related to employee benefit programs and IRAs (such as, for example, the sale of stock to employee stock ownership plans or eligible worker-owned cooperatives under § 1042), and changes in method of accounting associated with employee benefit programs. Note that certain issues involving exempt organizations, employee plans, and government entities fall under the jurisdiction of the Commissioner, TE/GE, of the Internal Revenue Service. See Rev. Proc. 2022-4 and Rev. Proc. 2022-5, this Bulletin. Issues under the.03 Issues under the jurisdiction of the Associate Chief Counsel (Financial Institutions and jurisdiction of the Associate Products) include those that involve income taxes and changes in method of accounting of Chief Counsel (Financial banks, savings and loan associations, real estate investment trusts (REITs), regulated investment Institutions and Products) companies (RICs), real estate mortgage investment conduits (REMICs), insurance companies and products, tax-exempt obligations, mortgage credit certificates, tax credit bonds (including specified tax credit bonds), build America bonds, and financial products. For the procedures to obtain letter rulings involving tax-exempt state and local obligations, see Rev. Proc. 96-16, 1996-1 C.B. 630. Issues under the.04 Issues under the jurisdiction of the Associate Chief Counsel (Income Tax and Accounting) jurisdiction of the Associate include those that involve recognition and timing of income and deductions of individuals and Chief Counsel (Income Tax corporations, sales and exchanges, capital gains and losses, installment sales, equipment leasing, and Accounting) long-term contracts, inventories, amortization, depreciation, the alternative minimum tax, net operating losses generally, including changes in method of accounting for these issues, and accounting periods. (Note that certain issues involving individual retirement accounts (IRAs) are under the jurisdiction of the Commissioner, TE/GE. See section 4.02 of this revenue procedure). Issues under the.05 Issues under the jurisdiction of the Associate Chief Counsel (International) include the tax jurisdiction of the treatment of nonresident aliens and foreign corporations, withholding of tax on nonresident aliens Associate Chief Counsel and foreign corporations, foreign tax credit, determination of sources of income, income from (International) sources outside the United States, subpart F questions, domestic international sales corporations (DISCs), foreign sales corporations (FSCs), exclusions under § 114 for extraterritorial income (ETI), international boycott determinations, treatment of certain passive foreign investment companies, income affected by treaty, U.S. possessions, and other matters relating to the activities of non-U.S. persons within the United States or U.S.-related persons outside the United States, and changes in method of accounting for these persons. For the procedures to obtain advance pricing agreements under § 482, see Rev. Proc. 2015-41, 2015-35I.RB. 263. For competent authority procedures related to bilateral and multilateral advance pricing agreements, see Rev. Proc. 2015-40, 2015-35 I.RB. 236. Issues under the.06 Issues under the jurisdiction of the Associate Chief Counsel (Passthroughs and Special jurisdiction of the Industries) include those that involve income taxes of S corporations (except accounting periods Associate Chief Counsel and methods) and certain noncorporate taxpayers (including partnerships, common trust funds, (Passthroughs and Special and trusts), entity classification, estate (excluding § 6166), gift, generation-skipping transfer, and Industries) certain excise taxes, depletion, and other engineering issues, cooperative housing corporations, farmers' cooperatives under § 521, the low-income housing credit under § 42, the New Markets Tax Credit under § 45D, the rehabilitation credit under § 47, disabled access credit, qualified electric vehicle credits, research and experimental expenditures, shipowners' protection and indemnity associations under § 526, and certain homeowners associations under § 528. Issues under the.07 Issues under the jurisdiction of the Associate Chief Counsel (Procedure and Administration) jurisdiction of the Associate include those that involve Federal tax procedure and administration, disclosure and privacy law, Chief Counsel (Procedure reporting and paying taxes (including payment of taxes under§ 6166), assessing and collecting and Administration) taxes (including interest and penalties), abating, crediting, or refunding overassessments or overpayments of tax, and filing information returns. SECTION 4. ON WHAT ISSUES MUST WRITTEN ADVICE BE REQUESTED UNDER DIFFERENT PROCEDURES? Issues involving alcohol,.01 The procedures for obtaining letter rulings, closing agreements, determination letters, tobacco, and firearms taxes information letters, and oral advice that apply to Federal alcohol, tobacco, and firearms taxes under subtitle E of the Code are under the jurisdiction of the Alcohol and Tobacco Tax and Trade Bureau of the Department of the Treasury. Certain issues involving.02 The procedures for obtaining certain letter rulings, closing agreements, determination qualified retirement plans, letters, information letters, and oral advice on qualified retirement plans and IRAs that are under individual retirement the jurisdiction of the Commissioner, TE/GE, are provided in Rev. Proc. 2022-4, this Bulletin. accounts (IRAs), and Rev. Proc. 2022-4 also includes the procedures for issuing determination letters on the qualified exempt organizations status of pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans under §§ 401, 403(a), 409, and 4975(e)(7), and the status for exemption of any related trusts or custodial accounts under§ 501(a). See also Rev. Proc. 2022-5, this Bulletin, for the procedures for issuing determination letters on the tax-exempt status of organizations under § 501 and§ 521, the foundation status of organizations described in § 501(c)(3) and the foundation status of nonexempt charitable trusts described in § 4947(a)(1). For the user fee requirements applicable to requests under the jurisdiction of the Commissioner, TE/GE, see Section 30 of Rev. Proc. 2022-4, and Section 14 of Rev. Proc. 2022-5. SECTION 5. UNDER WHAT CIRCUMSTANCES DO THE ASSOCIATE OFFICES ISSUE LETTER RULINGS? In income and gift tax.01 In income and gift tax matters, an Associate office generally issues a letter ruling on a matters proposed transaction or on a completed transaction if the letter ruling request is submitted before the return is filed for the year in which the transaction is completed. An Associate office will not ordinarily issue a letter ruling on a completed transaction if the letter ruling request is submitted after the return is filed for the year in which the transaction is completed. "Not ordinarily" means that unique and compelling reasons must be demonstrated to justify the issuance of a letter ruling submitted after the return is filed for the year in which the transaction is completed. The taxpayer must contact the field office having audit jurisdiction over their return and obtain the field's consent to the issuance of such a letter ruling. See section 7.05(2) of this revenue procedure. Special relief for late S.02 In lieu of requesting a letter ruling under this revenue procedure, a taxpayer may obtain corporation and related relief for certain late S corporation and related elections by following the procedure in Rev. Proc. elections in lieu of letter 2013-30, 2013-36 I.R.B. 173. This procedure is in lieu of the letter ruling process and does not ruling process require payment of any user fee. See section 3.01 of Rev. Proc. 2013-30, and section 15.03(3) of this revenue procedure. A § 301.9100 request.03 An Associate office will consider a request for an extension of time for making an election or for extension of time for other application for relief under § 301.9100-3 of the Treasury Regulations, even if submitted after making an election or for the return covering the issue presented in the § 301.9100 request has been filed, an examination of other relief the return has begun, the issues in the return are being considered by Appeals or a Federal court, or the liability reflected on the return has been assessed and subject to collection. Except for certain requests pertaining to applications for recognition of tax exemption under the jurisdiction of the Commissioner, TE/GE, a § 301.9100 request is a letter ruling request. Therefore, the § 301.9100 request should be submitted pursuant to this revenue procedure. However, a § 301.9100 request involving recharacterization of an IRA ( see § 1.408A-5, Q&A-6) should be submitted pursuant to Rev. Proc. 2022-4, this Bulletin. An election made pursuant to § 301.9100-2 for an automatic extension of time is not a letter ruling request and does not require·payment of any user fee. See § 301.9100-2(d) and section 15.03(1) of this revenue procedure. (1) Format of request. A § 301.9100 request (other than an election made pursuant to § 301.9100-2 and certain requests pertaining to applications for recognition of tax exemption under the jurisdiction of the Commissioner, TE/GE) must be in the general form of, and meet the general requirements for, a letter ruling request. These requirements are given in section 7 of this revenue procedure. A § 301.9100 request must include an affidavit and declaration from the taxpayer and other parties having knowledge or information about the events that led to the failure to make a valid regulatory election and to the discovery of the failure. See § 301.9100-3(e)(2) and (e)(3). In addition, a § 301.9100 request must include the information required by § 301.9100-3(e) (4). (2) Period of limitation. The filing of a request for relief under § 301.9100 does not suspend the running of any applicable period of limitation. See § 301.9100-3(d)(2). The Associate office ordinarily will not issue a § 301.9100 ruling if the period of limitation on assessment under § 6501(a) for the taxable year in which an election should have been made, or for any taxable years that would have been affected by the election had it been timely made, will expire before receipt of a § 301.9100 letter ruling. See § 301.9100-3(c)(1)(ii). If, however, the taxpayer consents to extend the period of limitation on assessment under § 6501(c)(4) for the taxable year in which the election should have been made and for any taxable years that would have been affected by the election had it been timely made, the Associate office may issue the letter ruling. See § 301.9100-3(d)(2). Note that the filing of a claim for refund under § 6511 does not extend the period of limitation on assessment. If § 301.9100-3 relief is granted, the Associate office may require the taxpayer to consent to an extension of the period of limitation on assessment. See § 301.9100-3(d)(2). (3) Taxpayer must notify the Associate office if examination of its return begins while the request is pending. The taxpayer must notify the Associate office if the Service begins an examination of the taxpayer's return for the taxable year in which an election should have been made, or for any taxable years that would have been affected by the election had it been timely made, while a § 301.9100-3 request is pending. This notification must include the name and telephone number of the examining agent. See § 301.9100-3(e)(4)(i) and section 7.05(1)(b) of this revenue procedure. (4) Associate office will notify examination agent, Appeals officer, or attorney of a § 301.9100 request if the taxpayer's return is being examined by a field office or is being considered by an Appeals office or a Federal court. If the taxpayer's return for the taxable year in which an election should have been made, or for any taxable years that would have been affected by the election had it been timely made; is being examined by a field office or considered by an Appeals office or a Federal court, the Associate office will notify the appropriate examination agent, Appeals officer, or attorney that a § 301.9100 request has been submitted to the Associate office. The examination agent, Appeals officer, or attorney is not authorized to deny consideration of a § 301.9100 request. The letter ruling will be mailed to the taxpayer and a copy will be sent to the Appeals officer, attorney, or appropriate Service official in the operating division that has examination jurisdiction over the taxpayer's tax return. (5) Inclusion of statement required by section 4.04 of Rev. Proc. 2009-41. Eligible entities requesting a letter ruling because they do not meet all of the eligibility requirements of section 4.01 of Rev. Proc. 2009-41, 2009-39 I.R.B. 439, must include either the following representation as part of the entity's request for a letter ruling or an explanation regarding why they do not qualify to do so: "All required U.S. tax and information returns of the entity (or, if the entity was not required to file any such returns under the desired classification, then all required U.S. tax and information returns of each affected person as defined in Section 4.02 of Rev. Proc. 2009-41) were filed timely or within 6 months of the due date of the respective return (excluding extensions) as if the entity classification election had been in effect on the requested date. No U.S. tax or information returns were filed inconsistently with those described in the prior sentence." (6) Relief for late classification election. In lieu of requesting a letter ruling under§ 301.9100- 1 through § 301.9100-3 and this revenue procedure, entities that satisfy the requirements set forth in section 4.01 of Rev. Proc. 2009-41, 2009-391.R.B. 439, may apply for late classification election relief under Rev. Proc. 2009-41. Requests for such relief are not subject to user fees. See section 3.01of Rev. Proc. 2009-41 and section 15.03(2) of this revenue procedure. Determinations under.04 As provided in Rev. Proc. 77-9, 1977-1 C.B. 542, the Associate Chief Counsel (International) § 999(d) issues determinations under § 999( d) that a particular operation of a person, or of a member of a controlled group (within the meaning of § 993(a)(3)) that includes that person, or a foreign corporation of which a member of the controlled group is a U.S. shareholder, constitutes participation in or cooperation with an international boycott. The effect of that determination is to deny certain benefits of the foreign tax credit and the deferral of earnings of foreign subsidiaries and domestic international sales corporations (DISCs) to that person. The same principles shall apply with respect to exclusions under § 114 for exterritorial income (ETI). Requests for determinations under Rev. Proc. 77-9 are letter ruling requests and should be submitted to the Associate office pursuant to this revenue procedure. In matters involving § 367.05 Unless the issue is covered by section 6 of this revenue procedure, the Associate Chief Counsel (International) may issue a letter ruling under § 367 even if the taxpayer does not request a letter ruling as to the characterization of the transaction under the reorganization provisions of the Code. The Associate office will determine the § 367 consequences of a transaction but may indicate in the letter ruling that it expresses no opinion as to the characterization of the transaction under the reorganization. The Associate office may decline to issue a § 367 ruling in situations in which the taxpayer inappropriately characterizes the transaction under the reorganization provisions. In estate tax matters.06 In general, the Associate Chief Counsel (Passthroughs and Special Industries) issues letter rulings on transactions affecting the estate tax on the prospective estate of a living person. The Associate office will not issue letter rulings for prospective estates on computations of tax, actuarial factors, or factual matters. With respect to the transactions affecting the estate tax of the decedent's estate, generally the Associate office issues letter rulings before the decedent's estate tax return is filed. If the taxpayer is requesting a letter ruling regarding a decedent's estate tax and the estate tax return is due to be filed before the letter ruling is expected to be issued, the taxpayer should obtain an extension of time for filing the return and should notify the Associate office branch considering the letter ruling request that an extension has been obtained. If the return is filed before the letter ruling is received from the Associate office, the taxpayer must disclose on the return that a letter ruling has been requested, attach a copy of the pending letter ruling request to the return, and notify the Associate office that the return has been filed. See section 7.05(2) of this revenue procedure. The Associate office will make every effort to issue the letter ruling within 3 months of the date the return was filed. If the taxpayer requests a letter ruling after the return is filed, but before the return is examined, the taxpayer must notify the field office having jurisdiction over the return that a letter ruling has been requested, attach a copy of the pending letter ruling request, and notify the Associate office that a return has been filed. See section 7.05(2) of this revenue procedure. The Associate office will make every effort to issue the letter ruling within 3 months of the date the return has been filed. If the letter ruling cannot be issued within that 3-month period, the Associate office will notify the field office having jurisdiction over the return, which may, by memorandum to the Associate office, grant an additional period for the issuance of the letter ruling. In matters involving.07 In matters involving additional estate tax under § 2032A(c), the Associate Chief Counsel additional estate tax under (Passthroughs and Special Industries) issues letter rulings on proposed transactions and on § 2032A(c) completed transactions that occurred before the return is filed. In matters involving.08 In matters involving qualified domestic trusts under § 2056A, the Associate Chief Counsel qualified domestic trusts (Passthroughs and Special Industries) issues letter rulings on proposed transactions and on under § 2056A completed transactions that occurred before the return is filed. In generation-skipping.09 In general, the Associate Chief Counsel (Passthroughs and Special Industries) issues letter transfer tax matters rulings on proposed transactions that affect the generation-skipping transfer tax and on completed transactions that occurred before the return is filed. In the case of a generation-skipping trust or trust equivalent, letter rulings are issued either before or after the trust or trust equivalent has been established. In employment and excise.10 In employment and excise tax matters, the Associate offices issue letter rulings on proposed tax matters transactions and on completed transactions, if the letter ruling request is submitted before the return is filed for the year in which the transaction is completed. Letter ruling requests regarding employment status (employer/employee relationship) from Federal agencies and instrumentalities or their workers must be submitted to the Internal Revenue Service at the address set forth on the current Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. If the Federal agency or instrumentality service recipient (the firm) makes the request, the firm will receive any issued letter ruling. A copy will also be sent to any identified workers. If the worker makes the request and the firm has been contacted for information, both the worker and the firm will receive any issued letter ruling. The letter ruling will apply to any individuals engaged by the firm under substantially similar circumstances. See section 12.04 of this revenue procedure for requests regarding employment status made by taxpayers other than Federal agencies and instrumentalities or their workers. In procedural and.11 The Associate Chief Counsel (Procedure and Administration) issues letter rulings on matters administrative matters arising under the Code and related statutes and regulations that involve the time, place, manner, and procedures for reporting and paying taxes; or the filing of information returns. In Indian tribal government.12 Pursuant to Rev. Proc. 84-37, 1984-1 C.B. 513, as modified by Rev. Proc. 86-17, 1986-1 matters C.B. 550, and this revenue procedure, the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) issues determinations recognizing a tribal entity as an Indian tribal government within the meaning of § 7701(a)(40) or as a political subdivision of an Indian tribal government under § 7871(d) if it determines, after consultation with the Secretary of the Interior, that the entity satisfies the statutory definition of an Indian tribal government or has been delegated governmental functions of an Indian tribal government. Requests for determinations under Rev. Proc. 84-37 are letter ruling requests, and, therefore, should be submitted to the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) pursuant to this revenue procedure. (1) Definition of Indian tribal government. The term "Indian tribal government" is defined under § 7701(a)(40) to mean the governing body of any tribe, band, community, village, or group of Indians, or (if applicable) Alaska Natives, which is determined by the Secretary of the Treasury, after consultation with the Secretary of the Interior, to exercise governmental functions. Section 7871(d) provides that, for purposes of § 7871(a), a subdivision of an Indian tribal government shall be treated as a political subdivision of a state if the Secretary of the Treasury determines, after consultation with the Secretary of the Interior, that the subdivision has been delegated the right to exercise one or more of the substantial governmental functions of the Indian tribal government. (2) Inclusion in list of tribal governments. Rev. Proc. 2008-55, 2008-2 C.B. 768, designates the Indian tribal entities that appear on the current or future lists of federally recognized Indian tribes published annually by the Department of the Interior, Bureau of Indian Affairs, as Indian tribal governments that are treated similarly to states for certain Federal tax purposes. Rev. Proc. 84-36, 1984-1 C.B. 510, as modified by Rev. Proc. 86-17, 1986-1 C.B. 550, provides a list of political subdivisions of Indian tribal governments that are treated as political subdivisions of states for certain Federal tax purposes. Under Rev. Proc. 84-37, as modified by Rev. Proc. 86-17, tribal governments or subdivisions recognized under § 7701(a)(40) or § 7871(d) will be included in the list of recognized tribal government entities in future lists of federally recognized Indian tribes published annually by the Department of the Interior, Bureau of Indian Affairs, or revised versions of Rev. Proc. 84-36. On constructive sales.13 The Associate Chief Counsel (Passthroughs and Special Industries) will issue letter rulings price under § 4216{b) or in all cases on the determination of a constructive sales price under § 4216(b) or § 4218(c) and § 4218(c) in all other cases on prospective transactions if the law or regulations require a determination of the effect of a proposed transaction for Federal tax purposes. See section 6.14(5) of this revenue procedure. In exempt organizations.14 In exempt organizations matters, the Associate Chief Counsel (Employee Benefits, Exempt matters Organizations, and Employment Taxes) generally issues letter rulings on proposed transactions or on completed transactions if the letter ruling request is submitted before the return is filed for the year in which the transaction is completed. The Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) will not ordinarily issue a letter ruling on a completed transaction if the letter ruling request is submitted after the return is filed for the year in which the transaction is completed. "Not ordinarily" means that unique and compelling reasons must be demonstrated to justify the issuance of a letter ruling submitted after the return is filed for the year in which the transaction is completed. The taxpayer must contact the field office having audit jurisdiction over their return and obtain the field's consent to the issuance of such a letter ruling. See Rev. Proc. 2022-5, this Bulletin, for the procedures for issuing determination letters on issues under the jurisdiction of the Director Exempt Organizations Rulings and Agreements, including determination letters on the tax-exempt status of organizations under § 501 and § 521, the foundation status of organizations described in § 501(c)(3), and the foundation status of nonexempt charitable trusts described in § 4947(a)(1). In qualified retirement plan.15 In qualified retirement plan and IRA matters (other than those listed in Rev. Proc. 2022- and IRA matters 4, this Bulletin), the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) will generally issue letter rulings on proposed transactions and on completed transactions, if the letter ruling request is submitted before the return is filed for the year in which the transaction is completed, including those involving: (1) §§ 72 (other than the computation of the exclusion ratio), 219, 381(c)(11), 402, 403(b) (except with respect to whether the form of a plan satisfies the requirements of § 403(b) as provided in Rev. Proc. 2022-4), 404, 408, 408A, 412, 414(e) and (h), 511 through 514, 4971(b) and (g), 4972, 4973, 4974 (other than requests for a waiver under § 4974(d)), 4978, 4979, and 4980; (2) Waiver of the minimum funding standard ( see Rev. Proc. 2004-15, 2004-1 C.B. 490, section 3.04 of which is modified by Rev. Proc. 2022-4); (3) Whether a plan amendment is reasonable and provides for only de minimis increases in plan liabilities in accordance with §§ 401(a)(33) and 412(c)(7)(B)(i) of the Code ( see Rev. Proc. 79-62, 1979-2 C.B. 576); (4) With respect to employee stock ownership plans and tax credit employee stock ownership plans, §§ 409, 1042, 4975(d)(3) and 4975(e)(7). Qualification issues arising under these sections (as well as under §§ 401-420 generally) are generally within the jurisdiction of Employee Plans Determinations. However, see Rev. Proc. 2022-3, this Bulletin, section 4.02(12); (5) Abatement of first tier excise taxes under § 4962; (6) Relief under § 301.9100-1 that is not related to Roth IRA recharacterizations; and (7) Grants of extensions of time other than pursuant to § 301.9100-1. A request to revoke an.16 If a taxpayer is required to file a letter ruling request to obtain consent to revoke an election election made on a return, an Associate office will consider the request, even if an examination of the return has begun or the issues in the return are being considered by Appeals or a Federal court. The procedures in this revenue procedure applicable to a § 301.9100 request (including the user fee requirements for such a request, see generally section 15 of this revenue procedure) apply to a letter ruling request to revoke the election. Under some circumstances.17 In general, the Service will not issue a letter ruling or determination letter on an issue that before the issuance of it cannot readily resolve before the promulgation of a regulation or other published guidance. See a regulation or other section 6.09 of this revenue procedure. published guidance However, an Associate office may issue letter rulings under the following conditions: (1) Answer is clear or is reasonably certain. If the letter ruling request presents an issue for which the answer seems clear by applying the statute, regulations, and applicable case law to the facts or for which the answer seems reasonably certain but not entirely free from doubt. (2) Answer is not reasonably certain. If the letter ruling request presents an issue for which the answer does not seem reasonably certain, the Associate office may issue the letter ruling, using its best efforts to arrive at a determination, if it is in the best interest of tax administration. SECTION 6. UNDER WHAT CIRCUMSTANCES DOES THE SERVICE NOT ISSUE LETTER RULINGS OR DETERMINATION LETTERS? Ordinarily not if the.01 The Service ordinarily does not issue a letter ruling or a determination letter if, at the time request involves an of the request, the identical issue is involved in the taxpayer's return for an earlier period and that issue under examination issue-- or consideration or in (1) is being examined by a field office; (2) is being considered by Appeals; (3) is pending in litigation in a case involving the taxpayer or a related party; (4) has been examined by a field office or considered by Appeals and the statutory period of limitations on assessment or on filing a claim for refund or credit of tax has not expired; or (5) has been examined by a field office or considered by Appeals and a closing agreement covering the issue or liability has not been entered into by a field office or by Appeals. If a return dealing with an issue for a particular year is filed while a request for a letter ruling on that issue is pending, an Associate office will issue the letter ruling unless it is notified by the taxpayer or otherwise learns that an examination of that issue or the identical issue on an earlier year's return has been started by a field office. See section 7.05 of this revenue procedure. In income and gift tax matters, as well as in qualified retirement plan, IRA, and exempt organizations matters, even if an examination has begun, an Associate office ordinarily will issue the letter ruling if the field office agrees by memorandum to the issuance of the letter ruling. Ordinarily not in certain.02 The Service ordinarily does not issue letter rulings or determination letters in certain areas areas because of factual because of the factual nature of the matter involved or for other reasons. Rev. Proc. 2022-3 and nature of the problem or for Rev. Proc. 2022-7, this Bulletin, provide a list of these areas. This list is not all-inclusive because other reasons the Service may decline to issue a letter ruling or a determination letter when appropriate in the interest of sound tax administration, including due to resource constraints, or on other grounds whenever warranted by the facts or circumstances of a particular case. Instead of issuing a letter ruling or determination letter, the Service may, when it is considered appropriate and in the interest of sound tax administration, issue an information letter calling attention to well-established principles of tax law. If the Service determines that it is not in the interest of sound tax administration to issue a letter ruling or determination letter due to resource constraints, it will adopt a consistent approach with respect to taxpayers that request a ruling on the same issue. The Service will also consider adding the issue to the no rule list at the first opportunity. See sections 2.01 and 3.02 of Rev. Proc. 2022-3. Ordinarily not on part of.03 (1) General rule. An Associate office ordinarily will not issue a letter ruling on only part an integrated transaction of an integrated transaction. If a part of a transaction falls under a no-rule area, a letter ruling on other parts of the transaction may be issued. Before preparing the letter ruling request, a taxpayer should call a branch having jurisdiction for the matters on which the taxpayer is seeking a letter ruling to discuss whether the Associate office will issue a letter ruling on part of the transaction. (2) Significant issue ruling. (a) No rule areas. The Service will not rule on the qualification of any transaction under § 332, § 351, or § 1036, or (except as provided in paragraph (b) of this section 6.03(2)) on whether a transaction constitutes a reorganization within the meaning of § 368 (other than under either § 368(a)(1)(D) and § 355 or § 368(a)(1)(G) and § 355), regardless of whether such transaction is part of an integrated transaction ( see section 3.01(60) of Rev. Proc. 2022-3, this Bulletin). Instead, the Associate Chief Counsel (Corporate) will only issue a letter ruling on significant issues (within the meaning of section 3.01(60) of Rev. Proc. 2022-3) presented in a transaction described in § 332, § 351, § 368 (other than under § 368(a)(1)(D) and § 355 or § 368(a)(1)(D) and § 355), or § 1036. For example, the Service may rule on significant issues under § 1.368-1(d) ( continuity of business enterprise) and § 1.368-1(e) ( continuity of interest). Letter rulings requested under this section 6.03(2)(a) are subject to the no-rule policies of Rev. Proc. 2022-3. (b) Section 355 distributions and related transactions. Pursuant to section 4 of Rev. Proc. 2017-52, 2017-41 I.RB. 283 (amplified and modified by Rev. Proc. 2018-53, 2018-43 I.R.B. 667), in lieu of requesting a Transactional Ruling regarding a Covered Transaction, a taxpayer may request a Significant Issue Ruling. Letter rulings requested under this section 6.03(2)(b) are subject to the policies of Rev. Proc. 2022-3. However, the Service will not rule on any aspect of a Covered Transaction, including any significant issue, if section 5.01(3) of Rev. Proc. 2022-3 applies, and the Service will ordinarily not rule on any aspect of a Covered Transaction, including any significant issue, if section 4.01(30) of Rev. Proc. 2022-3 applies. (3) Submission requirements. Before preparing a letter ruling request under section 6.03(2) of this revenue procedure involving significant issues presented in a transaction described in § 332, § 351, § 355, § 368, or § 1036, the taxpayer is encouraged to call the Office of Associate Chief Counsel (Corporate) at the telephone number provided in section 10.07(1)(a) of this revenue procedure to discuss whether the Service will entertain a letter ruling request under section 6.03(2). The Service reserves the right to rule on any other aspect of the transaction (including ruling adversely) to the extent the Service believes it is in the best interests of tax administration. Cf. section 2.01 of Rev. Proc. 2022-3. The taxpayer may request rulings on one or more significant issues in a single letter ruling request. Letter ruling requests under section 6.03(2) must include the following for each significant issue: (a) A narrative description of the transaction that puts the issue in context; (b) A statement identifying the issue; (c) An analysis of the relevant law, which should set forth the authorities most closely related to the issue and explain why these authorities do not resolve the issue, and an explanation concerning why the issue is significant within the meaning of section 3.01(60) of Rev. Proc. 2022-3; and (d) The precise ruling(s) requested. The taxpayer should consult other published authorities ( see, for example, Appendix F of this revenue procedure, which identifies certain checklist and guideline revenue procedures including Rev. Proc. 2017-52, 2017-41 I.R.B.283, and Rev. Proc. 2018-53, 2018-43 I.R.B. 667, to identify representations, information, and analysis that may be required.) If the Service issues a letter ruling on a significant issue under section 6.03(2), then the letter ruling will state that no opinion is expressed as to any issue or step not specifically addressed by the letter. In addition, letter rulings issued under section 6.03(2) will contain the following (or similar) language: This letter is issued pursuant to section 6.03(2) of Rev. Proc. 2022-1, 2022-1 I.R.B. 1, regarding one or more significant issues under § 332, § 351, § 355, § 368, or § 1036. The ruling[s] contained in this letter only address[es] one or more significant issues involved in the transaction. This Office expresses no opinion as to the overall tax consequences of the transactions described in this letter or as to any issue not specifically addressed by the ruling[s] below. Ordinarily not on which of.04 The Service ordinarily does not issue a letter ruling or a determination letter on which of two two entities is a common entities, under common law rules applicable in determining the employer-employee relationship, law employer is the employer, when one entity is treating the worker as an employee. Ordinarily not to business.05 The Service ordinarily does not issue letter rulings or determination letters to business, associations or groups trade, or industrial associations or to similar groups concerning the application of the tax laws to members of the group. Groups and associations, however, may submit suggestions of generic issues that could be appropriately addressed in revenue rulings. See Rev. Proc. 89-14, 1989-1 C.B. 814, which states the objectives of, and standards for, the publication of revenue rulings and revenue procedures in the Internal Revenue Bulletin. See also Rev. Proc. 2016-19, 2016-13 I.R.B. 497, which describes procedures for taxpayers and other entities to submit issues for consideration under the Service's Industry Issue Resolution (IIR) Program. The Service may issue letter rulings or determination letters to groups or associations on their own tax status or liability if the request meets the requirements of this revenue procedure. Ordinarily not where the request does not address the tax status, liability, or.06 The Service ordinarily does not issue letter rulings or determination letters regarding the reporting obligations of the tax consequences of a transaction for taxpayers who are not directly involved in the request if requester the requested letter ruling or determination letter would not address the tax status, liability, or reporting obligations of the requester. For example, a taxpayer may not request a letter ruling relating to the tax consequences of a transaction to a customer or client, if the tax status, liability, or reporting obligations of the taxpayer would not be addressed in the ruling, because the customer or client is not directly involved in the letter ruling request. The tax liability of each shareholder is, however, directly involved in a letter ruling on the reorganization of a corporation. Accordingly, a corporate taxpayer could request a letter ruling that solely addressed the tax consequences to its shareholders of a proposed reorganization. Rev. Proc. 96-16, 1996-1 C.B. 630, sets forth rules for letter ruling requests involving tax- exempt state and local government obligations. Ordinarily not to foreign.07 The Service ordinarily does not issue letter rulings or determination letters to foreign governments governments or their political subdivisions about the U.S. tax effects of their laws. The Associate offices also do not issue letter rulings on the effect of a tax treaty on the tax laws of a treaty country for purposes of determining the tax of the treaty country. See section 13.02 of Rev. Proc. 2015- 40, 2015-35 I.R.B. 236. Treaty partners can continue to address matters such as these under the provisions of the applicable tax treaty. In addition, the Associate offices may issue letter rulings to foreign governments or their political subdivisions on their own tax status or liability under U.S. law if the request meets the requirements of this revenue procedure. Ordinarily not on Federal.08 The Associate offices ordinarily do not issue letter rulings on a matter involving the Federal tax consequences of tax consequences of any proposed Federal, state, local, municipal, or foreign legislation. The proposed legislation Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) may issue letter rulings regarding the effect of proposed state, local, or municipal legislation upon an eligible deferred compensation plan under § 457(b) provided that the letter ruling request relating to the plan complies with the other requirements of this revenue procedure. The Associate offices also may provide general information in response to an inquiry. Ordinarily not before.09 Generally, the Service will not issue a letter ruling or a determination letter if the request issuance of a regulation or presents an issue that cannot be readily resolved before a regulation or any other published other published guidance guidance is issued. When the Service has closed a regulation project or any other published guidance project that might have answered the issue or decided not to open a regulation project or any other published guidance project, the Associate offices may consider all letter ruling requests unless the issue is covered by section 6 of this revenue procedure, Rev. Proc. 2022-3 or Rev. Proc. 2022-7, this Bulletin. Not on frivolous issues.10 The Service will not issue a letter ruling or a determination letter on frivolous issues. A "frivolous issue" is one without basis in fact or law or one that asserts a position that courts have held frivolous or groundless. Examples of frivolous or groundless issues include, but are not limited to: (1) frivolous "constitutional" claims, such as claims that the requirement to file tax returns and pay taxes constitutes an unreasonable search barred by the Fourth Amendment, violates Fifth and Fourteenth Amendment protections of due process, violates Thirteenth Amendment protections against involuntary servitude, or is unenforceable because the Sixteenth Amendment does not authorize nonapportioned direct taxes or was never ratified; (2) claims that income taxes are voluntary, that the term "income" is not defined in the Internal Revenue Code, or that preparation and filing of Federal income tax returns violates the Paperwork Reduction Act; (3) claims that tax may be imposed only on coins minted under a gold or silver standard or that receipt of Federal Reserve Notes does not cause an accretion to wealth; (4) claims that a person's income is not taxable because he or she falls within a class entitled to "reparation claims" or an extra-statutory class of individuals exempt from tax, e.g., "free-born" individuals; (5) claims that a taxpayer can refuse to pay taxes on the basis of opposition to certain Governmental expenditures; (6) claims that taxes apply only to Federal employees; only to residents of Puerto Rico, Guam, the U.S. Virgin Islands, the District of Columbia, or "Federal enclaves;" or that §§ 861 through 865 or any other provision of the Code imposes taxes on U.S. citizens and residents only on income derived from foreign based activities; (7) claims that wages or personal service income are "not income," are "nontaxable receipts," or are a "nontaxable exchange for labor;" (8) claims that income tax withholding by an employer on wages is optional; or (9) other claims that the courts have characterized as frivolous or groundless. Additional examples of frivolous or groundless issues may be found in IRS publications and other guidance (including, but not limited to, Notice 2010-33, Frivolous Positions, and I.R.M. Exhibit 25.25.10-1, Frivolous Arguments). No "comfort" letter rulings.11 Except with respect to a Covered Transaction within the meaning of Rev. Proc. 2017-52, 2017-41 I.R.B. 283 (amplified and modified by Rev. Proc. 2018-53, 2018-43 I.R.B. 667), a letter ruling will not be issued with respect to an issue that is clearly and adequately addressed by a statute, regulation, or court decision; or revenue rulings, revenue procedures, notices, or other authorities published in the Internal Revenue Bulletin (Comfort Ruling). However, except with respect to issues under § 332, § 351, § 368, or § 1036 and the tax consequences resulting from the application of such Code sections ( see generally section 6.03(2) of this revenue procedure), the Associate office may, in its discretion, decide to issue a Comfort Ruling if an Associate office is otherwise issuing a letter ruling to the taxpayer on another issue arising in the same transaction. Not on alternative plans or.12 The Service will not issue a letter ruling or a determination letter on alternative plans of hypothetical situations proposed transactions or on hypothetical situations. Not on property conversion.13 An Associate office will not issue a letter ruling on the replacement of involuntarily after return filed converted property, whether or not the property has been replaced, if the taxpayer has already filed a Federal tax return for the first taxable year in which any of the gain was realized from the converted property. A Director may issue a determination letter in this case. See section 12.01 of this revenue procedure. Circumstances under which.14 A Director will not issue a determination letter if-- determination letters are not issued by a Director (1) the taxpayer has directed a similar inquiry to an Associate office; (2) the same issue, involving the same taxpayer or a related party, is pending in a case in litigation or before Appeals; (3) the request involves an industry-wide problem; (4) the specific employment tax question at issue in the request has been, or is being, considered by the Central Office of the Social Security Administration or the Railroad Retirement Board for the same taxpayer or a related party; or (5) the request is for a determination of constructive sales price under § 4216(b) or § 4218(c), which deal with special provisions applicable to the manufacturers excise tax. The Associate Chief Counsel (Passthroughs and Special Industries) will, in certain circumstances, issue letter rulings in this area. See section 5.13 of this revenue procedure. SECTION 7.WHAT This section provides the general instructions for requesting letter rulings and determination ARE THE GENERAL letters. See section 9 of this revenue procedure for the specific and additional procedures for INSTRUCTIONS requesting a change in method of accounting. FOR REQUESTING LETTER RULINGS Requests for letter rulings, closing agreements, and determination letters require the payment of AND DETERMINATION the applicable user fee listed in Appendix A of this revenue procedure. Certain changes in method LETTERS? of accounting under the automatic change request procedures ( see section 9.01(1) of this revenue procedure) and certain changes in accounting periods made under automatic change request procedures do not require payment of a user fee ( see Appendix F of this revenue procedure). For additional user fee requirements, see section 15 of this revenue procedure. Specific and additional instructions also apply to requests for letter rulings and determination letters on certain matters. Those matters are listed in Appendix F of this revenue procedure with a reference (usually to another revenue procedure) where more information can be obtained. Documents and information.01 required in all requests Facts (1) Complete statement of facts and other information. Each request for a letter ruling or a determination letter must contain a complete statement of all facts relating to the transaction. These facts include-- (a) names, taxpayer identification numbers, addresses, telephone numbers, and other contact information as appropriate (such as fax numbers or email addresses of any party requesting to communicate with the Service in such a form, see section 7.02(5) of this revenue procedure) of all interested parties (the term "all interested parties" does not include all shareholders of a widely held corporation requesting a letter ruling relating to a reorganization or all employees where a large number may be involved); (b) the annual accounting period, and the overall method of accounting (cash or accrual) for maintaining the accounting books and filing the Federal income tax return, of all interested parties; (c) a description of the taxpayer's business operations; (d) a complete statement of the business reasons for the transaction; (e) a detailed description of the transaction; and (f) all other facts relating to the transaction or to the taxpayer's requested tax treatment thereof. Documents and foreign (2) Copies of all contracts, wills, deeds, agreements, instruments, other documents laws pertinent to the transaction, and foreign laws. (a) Documents. True copies of all contracts, wills, deeds, agreements, instruments, trust documents, proposed disclaimers, and other documents pertinent to the transactions must be submitted with the request.. But see sections 3.02 and 4 of Rev. Proc. 2017-52, 2017-41 I.R.B. 283 (amplified and modified by Rev. Proc. 2018-53, 2018-43 I.R.B. 667), for requirements relating to ruling requests under § 355, and section 3.04 of Rev. Proc. 2018-53, 2018-43 I.R.B. 667, for requirements relating to ruling requests involving assumption or satisfaction of the distributing corporation's debt in connection with § 355 distributions. If the request concerns a corporate distribution, reorganization, or similar transaction, the corporate balance sheet and profit and loss statement should also be submitted. But see sections 3.02 and 4 of Rev. Proc. 2017-52 for requirements relating to ruling requests under § 355.If the request relates to a prospective transaction, the most recent balance sheet and profit and loss statement should be submitted. But see sections 3.02 and 4 of Rev. Proc. 2017-52 (amplified and modified by Rev. Proc. 2018-53) for requirements relating to ruling requests under § 355. If any document, including any balance sheet and profit and loss statement, is in a language other than English, the taxpayer must also submit a certified English translation of the document, along with a true copy of the document. For guidelines on the acceptability of such documents, see paragraph (c) of this section 7.01(2). Each document other than the request should be labeled and attached to the request in alphabetical sequence. Original documents such as contracts, wills, etc., should not be submitted because they become part of the Service's file and will not be returned. (b) Foreign laws. The taxpayer must submit with the request a copy of the relevant parts of all foreign laws, including statutes, regulations, administrative pronouncements, and any other relevant legal authority. The documents submitted must be in the official language of the country involved and must be copied from an official publication of the foreign government or another widely available and generally accepted publication. If English is not the official language of the country involved, the taxpayer must also submit a copy of an English language version of the relevant parts of all foreign laws. This translation must be: (i) from an official publication of the foreign government or another widely available, generally accepted publication; or (ii) a certified English translation submitted in accordance with paragraph (c) of this section 7.01(2). The taxpayer must identify the title and date of publication, including updates, of any widely available and generally accepted publication that the taxpayer (or the taxpayer's qualified translator) uses as a source for the relevant parts of the foreign law. (c) Standards for acceptability of submissions of documents in a language other than English and certified English translations of laws in a language other than English. The taxpayer must submit with the request an accurate and complete certified English translation of the relevant parts of all contracts, wills, deeds, agreements, instruments, trust documents, proposed disclaimers, and other documents pertinent to the transaction that are in a language other than English. If the taxpayer chooses to submit certified English translations of foreign laws, those translations must be based on an official publication of the foreign government or another widely available and generally accepted publication. In either case, the translation must be that of a qualified translator and must be attested to by the translator. The attestation must contain: (i) a statement that the translation submitted is a true and accurate translation of the foreign language document or law; (ii) a statement as to the attestant's qualifications as a translator and as to that attestant's qualifications and knowledge regarding tax matters or foreign law if the law is not a tax law; and (iii) the attestant's name and address. Analysis of material facts (3) Analysis of material facts. The request must be accompanied by an analysis of facts and their bearing on the issue or issues. If documents attached to a request contain material facts, they must be included in the taxpayer's analysis of facts in the request rather than merely incorporated by reference. Same issue in any return ( 4) Statement regarding whether same issue is presented in any return and additional and whether return is information required for § 301.9100 requests. The request must state whether, to the best of the under examination, before knowledge of both the taxpayer and the taxpayer's representatives, the same issue is presented Appeals, before a Federal in any return of the taxpayer, a related party within the meaning of § 267(b) or § 707(b)(l), or court, or being considered a member of an affiliated group of which the taxpayer is also a member within the meaning of by the Pension Benefit § 1504, or of any predecessor. Guaranty Corporation, by the Department of Labor, or by the Department of The request must also state whether, to the best of the knowledge of both the taxpayer and the Health and Human Services taxpayer's representatives, any return on which the same issue is presented- (a) is currently under examination, before Appeals, or before a Federal court; (b) was previously under examination, before Appeals, or before a Federal court; (c) in qualified retirement plan matters, is being considered by the Pension Benefit Guaranty Corporation or the Department of Labor; or (d) in health care matters, is being considered by the Department of Labor or the Department of Health and Human Services. That the same issue is merely presented in a return does not preclude the Service from issuing a ruling, but the Service will not ordinarily issue a ruling if, at the time of the request, the identical issue is under examination or consideration or in litigation. See section 6.01 of this revenue procedure. A limited exception to the above rule is made for a § 301.9100 request. See section 5.03 of this revenue procedure. If a § 301.9100 request involves a tax year that is currently under examination, before Appeals, or before a Federal court, the taxpayer must notify the Service, as outlined above. This notification must include the name and telephone number of the examining agent or Appeals officer. Same or similar issue (5) Statement regarding whether same or similar issue was previously ruled on or whether in a request previously a request involving it was submitted or is currently pending. The request must state whether, to submitted or currently the best of the knowledge of both the taxpayer and the taxpayer's representatives-- pending (a) the Service previously ruled on the same or a similar issue for the taxpayer, a related party within the meaning of § 267 or § 707(b)(1), or a member of an affiliated group of which the taxpayer is also a member within the meaning of § 1504, or for a predecessor; (b) the taxpayer, a related party, a predecessor, or any of their representatives previously submitted a request (including an application for change in method of accounting) involving the same or a similar issue but no letter ruling or determination letter was issued; (c) the taxpayer, a related party, or a predecessor previously submitted a request (including an application for change in method of accounting) involving the same or a similar issue that is currently pending with the Service; (d) at the same time as this request, the taxpayer or a related party is presently submitting another request (including an application for change in method of accounting) involving the same or a similar issue; or (e) the taxpayer or a related party had, or has scheduled, a pre-submission conference involving the same or a similar issue. If the statement is affirmative for (a), (b), (c), (d), or (e) of this section 7.01(5), the statement must give the date the request was submitted, the date the request was withdrawn or ruled on, if applicable, and other details of the Service's consideration of the issue. Interpretation of a (6) Statement regarding interpretation of a substantive provision of an income or estate substantive provision of an tax treaty. If the request involves the interpretation of a substantive provision of an income or income or estate tax treaty estate tax treaty, the request must state whether-- (a) the tax authority of the treaty jurisdiction has issued a ruling on the same or similar issue for the taxpayer, a related party within the meaning of § 267 or § 707(b)(1), or a member of an affiliated group of which the taxpayer is also a member within the meaning of § 1504, or for any predecessor; (b) the same or similar issue for the taxpayer, a related party, or any predecessor is being examined or has been settled by the tax authority of the treaty jurisdiction or is otherwise the subject of a closing agreement in that jurisdiction; and (c) the same or similar issue for the taxpayer, a related party, or any predecessor is being considered by the competent authority of the treaty jurisdiction. Interpretation of a (7) Statement regarding involvement of a transactional party located in a foreign country. transaction involving a If the request involves a transaction between a taxpayer and a related party and either the taxpayer party in a foreign country or the related party is located in a foreign country, the request must state whether the ruling potentially relates to any one of these categories -- (a) Preferential Regime, defined as one that meets the following three requirements: (1) the regime relates to business taxation of income from geographically mobile activities (such as, financial and other service activities, including the provision of intangibles); (2) the regime offers a form of tax preference, such as, a reduction in the rate of tax or tax base compared to general principles of U.S. taxation; and (3) the regime imposes no or low effective tax rates on income from geographically mobile, financial, and other service activities; (b) Transfer Pricing, meaning the letter ruling covers transfer pricing or the application of transfer pricing principles under section 482 and the regulations thereunder; (c) Downward Adjustment, meaning the letter ruling provides for a downward adjustment to the taxpayer's taxable profit that is not directly reflected in its financial accounts. Examples include excess profits rulings or informal capital rulings that provide an adjustment that reduces taxable profits; (d) Treaty Permanent Establishment, meaning the letter ruling determines the existence or absence of a permanent establishment under an income tax treaty or provides how much profit will be attributed to a permanent establishment; (e) Related Party Conduit, meaning the letter ruling covers the cross-border flow of funds or income through a U.S. entity that is a conduit under common law principles or Treas. Reg. § 1.881-3, whether those funds or income flow to another country directly or indirectly. Letter from Bureau of (8) Letter from Bureau of Indian Affairs relating to a letter ruling request for recognition Indian Affairs relating of Indian tribal government status or status as a political subdivision of an Indian tribal to certain letter ruling government. To facilitate prompt action on a letter ruling request for recognition of Indian tribal requests government status or status as a political subdivision of an Indian tribal government, the taxpayer must submit with the letter ruling request a letter from the Department of the Interior, Bureau of Indian Affairs (BIA), verifying that the tribe is recognized by BIA as an Indian tribe and that the tribal government exercises governmental:functions or that the political subdivision of the Indian tribal government has been delegated substantial governmental functions. A letter ruling request that does not contain this letter from BIA cannot be resolved until the Service obtains a letter from BIA regarding the tribe's status. The taxpayer should send a request to verify tribal status to the following address: Branch of General Indian Legal Activity Division of Indian Affairs Office of the Solicitor U.S. Department of the Interior 1849 C Street, NW Washington, DC 20240 Statement of authorities (9) Statement of supporting authorities. If the taxpayer advocates a particular conclusion, supporting taxpayer's views the taxpayer must include an explanation of the grounds for that conclusion and the relevant authorities to support it. Even if the taxpayer is not advocating a particular tax treatment of a proposed transaction, the taxpayer must furnish views on the tax results of the proposed transaction and a statement of relevant authorities to support those views. In all events, the request must include a statement of whether the law in connection with the request is uncertain and whether the issue is adequately addressed by relevant authorities. Statement of authorities (10) Statement of contrary authorities. To avoid a delay in the ruling process, contrary contrary to taxpayer's authorities should be brought to the attention of the Service at the earliest possible opportunity. If views there are significant contrary authorities, it is usually helpful to discuss them in a pre-submission conference prior to submitting the ruling request. See section 10.07 of this revenue procedure regarding pre-submission conferences. The taxpayer is strongly encouraged to inform the Service about, and discuss the implications of, any authority believed to be contrary to the position advanced, such as statutes, tax treaties, court decisions, regulations, notices, revenue rulings, revenue procedures, or announcements. If the taxpayer determines that there are no contrary authorities, a statement in the request to this effect should be included. If the taxpayer does not furnish either contrary authorities or a statement that none exist, the Service in complex cases or those presenting difficult or novel issues may request submission of contrary authorities or a statement that none exist. Failure to comply with this request may result in the Service's refusal to issue a letter ruling or determination letter. The taxpayer's identification of and discussion of contrary authorities will generally enable Service personnel to more quickly understand the issue and relevant authorities. Having this information should make research more efficient and lead to earlier action by the Service. If the taxpayer does not disclose and distinguish significant contrary authorities, the Service may need to request additional information, which will delay action on the request. Statement identifying (11) Statement identifying pending legislation. When filing the request, the taxpayer must pending legislation identify any pending legislation that may affect the proposed transaction. In addition, the taxpayer must notify the Service if any such legislation is introduced after the request is filed but before a letter ruling or determination letter is issued. Deletion statement required (12) Statement identifying information to be deleted from the public inspection copy of by § 6110 letter ruling or determination letter. The text of letter rulings and determination letters is open to public inspection under § 6110. The Service makes deletions from the text before it is made available for inspection. To help the Service make the deletions required by § 6110(c), a request for a letter ruling or determination letter must be accompanied by a statement indicating the deletions desired, except where a letter ruling or determination letter is open to public inspection under § 6104. If the deletion statement is not submitted with the request, the Service will notify the taxpayer that the request will be closed if the Service does not receive the deletion statement within 21 calendar days. See section 8.05 of this revenue procedure. Section 6110(l)(1) provides that § 6110 disclosure provisions do not apply to any matter to which § 6104 applies. Therefore, letter rulings, determination letters, technical advice memoranda, and related background file documents dealing with the following matters ( covered by § 6104) are not subject to § 6110 disclosure provisions-- (i) An approved application for exemption under § 501(a) as an organization described in § 501(c) or (d), or notice of status as a political organization under § 527, together with any papers submitted in support of such application or notice; (ii) An application for exemption under § 501(a) with respect to the qualification of a pension, profit sharing or stock bonus plan, or an individual retirement account described in § 408 or § 408A, or any application for exemption under § 501(a) by an organization forming part of such a plan or account; (iii) Any document issued by the Internal Revenue Service in which the qualification or exempt status of a plan or account is granted, denied, or revoked or the portion of any document in which technical advice with respect thereto is given; (iv) Any application filed and any document issued by the Internal Revenue Service with respect to the qualification or status of master and prototype retirement plans; and (v) The portion of any document issued by the Internal Revenue Service with respect to the qualification or exempt status of a retirement plan or account of a proposed transaction by such plan or account. (a) Format of deletion statement. A taxpayer who wants only names, addresses, and identifying numbers to be deleted should state this in the deletion statement.If the taxpayer wants more information deleted, the deletion statement must be accompanied by a copy of the request and supporting documents on which the taxpayer should bracket the material to be deleted. The deletion statement must include the statutory basis under § 6110(c) for each proposed deletion. If the taxpayer decides to ask for additional deletions before the letter ruling or determination letter is issued, the taxpayer may submit additional deletion statements. (b) Location of deletion statement. The deletion statement must be made in a separate document from the request for a letter ruling or determination letter and must be placed on top of the request. (c) Signature. The deletion statement must be signed and dated by the taxpayer or the taxpayer's authorized representative. See section 7.01(13) of this revenue procedure for signature requirements. (d) Additional information. The taxpayer should follow the same procedures of this section 7.01(12) to propose deletions from any additional information submitted after the initial request. An additional deletion statement is not required with each submission of additional information if the taxpayer's initial deletion statement requests that only names, addresses, and identifying numbers are to be deleted and the taxpayer wants only the same information deleted from the additional information. (e) Taxpayer may protest deletions not made. After receiving from the Service the notice under § 6110(f)(1) of intention to disclose the letter ruling or determination letter (including a copy of the version proposed to be open to public inspection and notation of third-party communications under § 6110(d)), the taxpayer may protest the disclosure of certain information in the letter ruling or determination letter. The taxpayer must send a written statement to the Service office indicated on the notice of intention to disclose, within 20 calendar days of the date the notice of intention to disclose is mailed to the taxpayer. The statement must identify those deletions that the Service has not made and that the taxpayer believes should have been made. The taxpayer must also submit a copy of the version of the letter ruling or determination letter and bracket the proposed deletions that have not been made by the Service. Generally, the Service will not consider deleting any material that the taxpayer did not propose to be deleted before the letter ruling or determination letter was issued. Within 20 calendar days after the Service receives the response to the notice under § 6110(f) (1), the Service will mail to the taxpayer its final administrative conclusion regarding the deletions to be made. The taxpayer does not have the right to a conference to resolve any disagreements concerning material to be deleted from the text of the letter ruling or determination letter. These matters may, however, be taken up at any conference that is otherwise scheduled regarding the request. (t) Taxpayer may request delay of public inspection. After receiving the notice of intention to disclose under § 6110(f)(1), but no later than 60 calendar days after the date of the notice, the taxpayer may send a written request for delay of public inspection under either § 6110(g)(3) or (4). The request for delay must be sent to the Service office indicated on the notice of intention to disclose. A request for delay under § 6110(g)(3) must contain the date on which it is expected that the underlying transaction will be completed. The request for delay under § 6110(g)(4) must contain a statement from which the Commissioner of Internal Revenue may determine whether there are good reasons for the continued delay. Signature on request (13) Signature by taxpayer or authorized representative. The request for a letter ruling or determination letter must be signed and dated by the taxpayer or the taxpayer's authorized representative. (a) Paper submissions. The original of a request for a letter ruling or determination letter submitted on paper should generally include a wet-ink signature. If it is not possible to physically sign the request, the Service will accept an image of a signature or digital signature transmitted separately according to the electronic submission procedures for such a request. (b) Electronic submissions. A request for a letter ruling or determination letter submitted electronically must include an image of a signature (scanned or photographed) or a digital signature that uses encryption techniques to provide proof of original and unmodified documentation. The Service will accept electronic signatures in one of the following formats: tiff, jpg, jpeg, pdf, Microsoft Office suite, or Zip. See section 7.04of this revenue procedure for submission procedures. Authorized representatives (14) Authorized representatives. (a) To sign the request or to appear before the Service in connection with the request, the taxpayer's authorized representative must be (for rules on who may practice before the Service, see Treasury Department Circular No. 230, 31 C.F.R. part 10): (1) An attorney who is a member in good standing of the bar of the highest court of any state, possession, territory, commonwealth, or the District of Columbia and who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration with the Service showing current qualification as an attorney and current authorization to represent the taxpayer; (2) A certified public accountant who is duly qualified to practice in any state, possession, territory, commonwealth, or the District of Columbia and who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration with the Service showing current qualification as a certified public accountant and current authorization to represent the taxpayer; (3) An enrolled agent is a person who is currently enrolled as an agent to practice before the Service and who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration with the Service showing current enrollment and authorization to represent the taxpayer. The enrollment number must be included in the declaration; (4) An enrolled actuary is an individual currently enrolled as an actuary by the Joint Board for the Enrollment of Actuaries pursuant to 29 U.S.C. § 1242 and who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration with the Service showing current qualification as an enrolled actuary and current authorization to represent the taxpayer. Practice before the Service as an enrolled actuary is limited to representation with respect to issues involving §§ 401, 403(a), 404, 405, 412, 413, 414, 419, 419A, 420, 4971, 4972, 4976, 4980, 6057, 6058, 6059, 6652(d), 6652(e), 6692, and 7805(b); former § 405; and 29 U.S.C. § 1083; (5) An enrolled retirement plan agent is an individual currently enrolled as a retirement plan agent who is not currently under suspension or disbarment from practice before the Service. He or she must file a written declaration as an enrolled retirement plan agent and current authorization to represent the taxpayer. Practice before the Service as an enrolled retirement plan agent is limited to representation with respect to issues involving the following programs: Employee Plans Determination Letter program; Employee Plans Compliance Resolution System; and Employee Plans Pre-approved program. Enrolled retirement plan agents also are generally permitted to represent taxpayers with respect to IRS forms under the 5300 and 5500 series, which are filed by retirement plans and plans sponsors, but not with respect to actuarial forms and schedules; or (6) Any other person, including a foreign representative, who has received a "Letter of Authorization" from the Director of the Office of Professional Responsibility under section 10.7(d) of Treasury Department Circular No. 230. A person may make a written request for a "Letter of Authorization" to: Office of Professional Responsibility, SE:OPR, Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC 20224. Section 10.7(d) of Circular No. 230 authorizes the Commissioner to allow an individual who is not otherwise eligible to practice before the Service to represent another person in a particular matter. (b) A regular full-time employee representing his or her employer; a general partner representing his or her partnership; a bona fide officer representing his or her corporation, association, or organized group; a trustee, receiver, guardian, personal representative, administrator, executor, or regular full-time employee representing a trust, receivership, guardianship, or estate; or an individual representing an immediate family member may sign the request or appear before the Service in connection with the request if the individual provides current authorization to represent the taxpayer. See section 7.01(15) of this revenue procedure. A taxpayer may be required to file a Form 8821, Tax Information Authorization, for certain employees not authorized to represent the taxpayer to receive taxpayer information from the Service. (c) Tax return preparers that are not described in subsections (a) and (b) of this section may not sign the request, appear before the Service, or represent a taxpayer in connection with a request for a letter ruling or a determination letter. See section 10.3(f)(3) of Treasury Department Circular No. 230. (d) A foreign representative, other than a person referred to in subsections (a) and (b) of this section, is not authorized to practice before the Service within the United States and must withdraw from representing a taxpayer in a request for a letter ruling or a determination letter. In this situation, the nonresident alien or foreign entity must submit the request for a letter ruling or a determination letter on the individual's or the entity's own behalf or through a person referred to in subsections (a) and (b) of this section. Power of attorney (15) Power of attorney and declaration of representative. Form 2848, Power of Attorney and declaration of and Declaration of Representative, should be used to provide the representative's authority (Part representative I of Form 2848, Power of Attorney ) and the representative's qualification (Part II of Form 2848, Declaration of Representative). The name of the person signing Part I of Form 2848 should be typed or printed on this form. A Form 2848 executed for the purpose of a request for a letter ruling or determination letter should reflect that it is for a "specific use" that is not recorded on the Centralized Authorization File (CAF) and should only be submitted in conjunction with such a request as provided in this revenue procedure (that is, it should not be submitted to the Service by any other method listed in the Instructions for Form 2848). A Form 2848 must be signed by both the taxpayer (or the person signing on the taxpayer's behalf) and the representative in a manner consistent with section 7.01(13) of this revenue procedure. If the Form 2848 is remotely signed by the taxpayer (or the person signing on the taxpayer's behalf) using a permissible electronic or digital method, the representative should follow the necessary steps to verify the taxpayer's identity provided in the Electronic Signatures section of the Instructions for Form 2848, but are not required to provide a separate attestation unless requested by the Service. If the Form 2848 is signed by the taxpayer (or the person signing on the taxpayer's behalf) using a physical, wet-ink signature, a submission may include a copy or scanned version of the Form 2848 as long as its authenticity is not reasonably disputed. For additional information regarding the power of attorney form, see section 7.02(2) of this revenue procedure. The taxpayer's authorized representative, whether or not enrolled, must comply with Treasury Department Circular No. 230, which provides the rules for practice before the Service. In situations where the Service believes that the taxpayer's representative is not in compliance with Circular 230, the Service will bring the matter to the attention of the Office of Professional Responsibility. Penalties of perjury (16) Penalties of perjury statement. statement (a) Format of penalties of perjury statement. A request for a letter ruling or determination letter and any change in the request submitted at a later time must be accompanied by the following declaration: "Under penalties of perjury, I declare that I have examined [Insert, as appropriate: this request or this modification to the request], including accompanying documents, and, to the best of my knowledge and belief, [Insert, as appropriate: the request or the modification] contains all the relevant facts relating to the request, and such facts are true, correct, and complete." See section 8.05(4) of this revenue procedure for the penalties of perjury statement applicable for submissions of additional information. (b) Signature by taxpayer. The declaration must be signed and dated by the taxpayer, not the taxpayer's representative, in a manner consistent with section 7.01(13)of this revenue procedure. The person who signs for a corporate taxpayer must bean officer of the corporate taxpayer who has personal knowledge of the facts and whose duties are not limited to obtaining a letter ruling or determination letter from the Service. If the corporate taxpayer is a member of an affiliated group filing consolidated returns, a penalties of perjury statement must also be signed and submitted by an officer of the common parent of the group. The person signing for a trust, a state law partnership, or a limited liability company must be, respectively, a trustee, general partner, or member-manager who has personal knowledge of the facts. Sample format for a letter (17) Sample format for a letter ruling request. To assist a taxpayer or the taxpayer's ruling request representative in preparing a letter ruling request, a sample format for a letter ruling request is provided in Appendix B of this revenue procedure. This format is not required to be used. Checklist (18) Checklist for letter ruling requests. An Associate office will be able to respond more quickly to a taxpayer's letter ruling request if the request is carefully prepared and complete. The checklist in Appendix C of this revenue procedure is designed to assist taxpayers in preparing a request by reminding them of the essential information and documents to be furnished with the request. The checklist in Appendix C must be completed to the extent required by the instructions in the checklist, signed and dated by the taxpayer or the taxpayer's representative, and placed on top of the letter ruling request. If the checklist in Appendix C is not received, a branch representative will ask the taxpayer or the taxpayer's representative to submit the checklist; this may delay action on the letter ruling request. For letter ruling requests on certain matters, specific checklists supplement the checklist in Appendix C. These checklists are in Appendix D, Appendix E, or are listed in section 1 of Appendix F of this revenue procedure and must also be completed and placed on top of the letter ruling request along with the checklist in Appendix C. Taxpayers can obtain copies of the checklists by accessing this revenue procedure in Internal Revenue Bulletin 2022-1, available at www.irs.gov/irb. A copy of this checklist may be used. Additional procedural information required with request Multiple issues (1) To request separate letter rulings for multiple issues in a single situation. If more than one issue is presented in a request for a letter ruling, the Associate office generally will issue a single letter ruling covering all the issues. If the taxpayer requests separate letter rulings on any of the issues (because, for example, one letter ruling is needed sooner than another), the Associate office usually will comply with the request unless doing so is not feasible or not in the best interest of the Service. A taxpayer who wants separate letter rulings on multiple issues should make this clear in the request and if submitting the request on paper, submit the original and at least two copies of the request, with one additional copy for each additional separate letter ruling requested. See section 15.06(3) of this revenue procedure regarding whether a single user fee will be charged. In issuing each letter ruling, the Associate office will state that it has issued separate letter rulings or that requests for other letter rulings are pending. Power of attorney used to (2) Power of attorney used to indicate recipient or recipients of a copy or copies of a letter indicate recipient of a copy ruling or a determination letter. Once the Service signs the letter ruling or determination letter, or copies of a letter ruling the Service has the discretion to determine the form in which it will provide the letter ruling or or a determination letter determination letter to the taxpayer, but will generally comply with a taxpayer's request for a particular form. See section 7.02(5) of this revenue procedure. If providing the ruling on paper, the Service will send the original to the taxpayer, not the taxpayer's representative. At the taxpayer's request, the Service will send one copy of the letter ruling or determination letter to up to two authorized representatives. At the discretion of the Service, the Service may provide a copy of the letter ruling or determination letter to up to two authorized representatives, even though the taxpayer did not request that the Service send a copy of notices and communications to the taxpayer's representatives. Taxpayers that use Form 2848, Power of Attorney and Declaration of Representative, to designate representatives, may request that copies of notices and communications be sent to the representatives listed at Line 2 by checking the corresponding box on Line 2. Taxpayers may use Line 5 of Form 2848 to advise the Service that a copy of the letter ruling or determination letter should not be sent to the taxpayer's representative(s). If no box is checked on Line 2 and the taxpayer does not indicate otherwise on Line5, the Service may in its discretion provide a copy of the letter ruling or determination letter to up to two authorized representatives. "Two-part" letter ruling (3) To request a particular conclusion on a proposed transaction. A taxpayer who requests requests a particular conclusion on a proposed transaction may make the request for a letter ruling in two parts. This type of request is referred to as a "two-part" letter ruling request. The first part must include the complete statement of facts and related documents described in section 7.01 of this revenue procedure. The second part must include a summary statement of the facts the taxpayer believes to be controlling in reaching the conclusion requested. If the Associate office accepts the taxpayer's statement of controlling facts, it will base its letter ruling on these facts. Ordinarily, this statement will be incorporated into the letter ruling. The Associate office reserves the right to rule on the basis of a more complete statement of the facts and to seek more information in developing the facts and restating them. A taxpayer who chooses this two-part procedure has all the rights and responsibilities provided in this revenue procedure. Taxpayers may not use the two-part procedure if it is inconsistent with other procedures, such as those dealing with requests for permission to change accounting methods or periods, applications for recognition of exempt status under § 501(a) or § 521, or requests for rulings on employment tax status. After the Associate office has resolved the issues presented by a letter ruling request, the Associate office representative may request that the taxpayer submit a proposed draft of the letter ruling to expedite the issuance of the ruling. See section 8.07 of this revenue procedure. Expedited handling (4) To request expedited handling, The Service ordinarily processes requests for letter rulings and determination letters in order of the date received. Expedited handling means that a request is processed ahead of requests received before it. Expedited handling is granted only in rare and unusual cases, both out of fairness to other taxpayers and because the Service seeks to process all requests as expeditiously as possible and to give appropriate deference to normal business exigencies in all cases not involving expedited handling. A taxpayer with a compelling need to have a request processed ahead of requests received before it may request expedited handling. This request must explain in detail the need for expedited handling. The request for expedited handling must be made in writing, preferably in a separate letter included with the request for the letter ruling or determination letter or provided soon after its filing. If the request for expedited handling is contained in the letter requesting the letter ruling or determination letter, the letter should state at the top of the first page "Expedited Handling Is Requested. See page___ of this letter." A request for expedited handling will not be forwarded to a branch for action until the user fee has been paid. Whether a request for expedited handling will be granted is within the Service's discretion. The Service may grant the request when a factor outside a taxpayer's control creates a real business need to obtain a letter ruling or determination letter before a certain date to avoid serious business consequences. Examples include situations in which a court or governmental agency has imposed a specific deadline for the completion of a transaction, or where a transaction must be completed expeditiously to avoid an imminent business emergency (such as the hostile takeover of a corporate taxpayer), provided that the taxpayer can demonstrate that the deadline or business emergency, and the need for expedited handling, resulted from circumstances that could not reasonably have been anticipated or controlled by the taxpayer. To qualify for expedited handling in such situations, the taxpayer must also demonstrate that the taxpayer submitted the request as promptly as possible after becoming aware of the deadline or emergency. The extent to which the letter ruling or determination letter request complies with all of the applicable requirements of this revenue procedure, and fully and clearly presents the issues, is a factor in determining whether expedited treatment will be granted. When the Service agrees to process a request out of order, it cannot give assurance that any letter ruling or determination letter will be processed by the date requested. The scheduling of a closing date for a transaction or a meeting of the board of directors or shareholders of a corporation, without regard for the time it may take to obtain a letter ruling or determination letter, will not be considered a sufficient reason to process a request ahead of its regular order. Also, the possible effect of fluctuation in the market price of stocks on a transaction will not be considered a sufficient reason to process a request out of order. Because most requests for letter rulings and determination letters cannot be processed out of order, the Service urges all taxpayers to submit their requests well in advance of the contemplated transaction. In addition, to facilitate prompt action on letter ruling requests, taxpayers are encouraged to ensure that their initial submissions comply with all of the requirements of this revenue procedure (including the requirements of other applicable guidelines set forth in Appendix F of this revenue procedure), to prepare "two-part" requests described in section 7.02(3) of this revenue procedure when possible, and to promptly provide any additional information requested by the Service. Requesting form of any (5) To request the receipt of any document related to letter ruling request by fax, electronic document related to letter facsimile, or encrypted email attachment. If the taxpayer so requests, the Associate office ruling request provided may provide by fax, electronic facsimile, or encrypted email attachment to the taxpayer or the to taxpayer or taxpayer's taxpayer's authorized representative a copy of any document related to the letter ruling request authorized representative (for example, the letter ruling itself or a request for additional information). The Service has the discretion to determine the form in which it will correspond with the taxpayer, but will generally comply with a taxpayer's request for a particular form. The taxpayer must make such a request in writing, preferably as part of the original request for the letter ruling. The request may be submitted at a later date, but such a request will only be respected prospectively with respect to documents generated after it is received, and must be received prior to the signing of the letter ruling. If the taxpayer requests documents by fax or electronic facsimile, the request must contain the fax number of the taxpayer or the taxpayer's authorized representative to whom the document is to be provided. A document other than the letter ruling will be faxed by a branch representative. A copy of the letter ruling may be faxed by either a branch representative or the Disclosure and Litigation Support Branch of the Legal Processing Division of the Office of Associate Chief Counsel (Procedure and Administration) (CC:PA:LPD:DS). For purposes of § 301.6110-2(h), however, a letter ruling is not issued until the ruling is mailed. If the taxpayer requests documents by encrypted email attachment, the request must specify which email encryption method is to be used and, if the taxpayer has not already provided the appropriate memorandums of understanding (MOUs) to use encrypted email attachments, must include those MOUs. See section 7.04(3) of this revenue procedure for acceptable email encryption methods and procedures. Requesting a conference (6) To request a conference. A taxpayer who wants to have a conference on the issues involved in a request for a letter ruling should indicate this in writing when filing the request or soon thereafter. See sections 10.01, 10.02, and 11.11(2) of this revenue procedure. Letter ruling requests.03 If a letter ruling is sought on the tax consequences to both the welfare benefit fund and an involving welfare benefit employer that contributed to the fund, each taxpayer (the fund and each contributing employer) funds (including voluntary must submit a separate letter ruling request and pay the applicable user fee listed in Appendix A employees' beneficiary of this revenue procedure. associations (VEBAs)) Submitting request.04 Requests for letter rulings under the jurisdiction of an Associate Office may be submitted by for letter ruling or mail, by electronic facsimile, or by encrypted email attachment. determination letter Requests for determination letters under the jurisdiction of LB&I may be submitted only by electronic facsimile or by encrypted email attachment. Requests for determination letters under the jurisdiction of SB/SE regarding income taxes (including requests from international taxpayers) may be submitted only by electronic facsimile. Requests for determination letters under the jurisdiction of SB/SE regarding estate and gift taxes, employment taxes, and excise taxes may be submitted only on paper. Requests for determination letters under the jurisdiction of W&I may be submitted only on paper. For requests for determination letters under the jurisdiction of TE/GE, see Rev. Proc. 2022-4 and Rev. Proc. 2022-5, this Bulletin. Submission by mail (1) A taxpayer submitting a request on paper generally needs to submit the original and one copy of the request. However, if the taxpayer identifies multiple Associate offices in the request with jurisdiction over issues presented by the request, the taxpayer must submit an additional copy of the request for each additional Associate office. If the request is under the jurisdiction of a single Associate office but presents multiple issues likely to require review by multiple branches of that office, the taxpayer is encouraged, but not required to submit additional copies of the request. Further, the taxpayer must submit the original and two copies of the request if the taxpayer is requesting separate letter rulings or determination letters on multiple issues as explained in section 7.02(1) of this revenue procedure; the taxpayer is requesting deletions other than names, addresses, and identifying numbers, as explained in section 7.01(12)(a) of this revenue procedure (one copy is the request for the letter ruling or determination letter and the second copy is the deleted version of such request); or the taxpayer is requesting a closing agreement (as defined in section 2.02 of this revenue procedure) on the issue presented. (a) Addresses for request for letter ruling. Envelopes or packages containing letter ruling requests should be marked RULING REQUEST SUBMISSION. If a private delivery service is not used, requests for letter rulings should be sent to the following address: Internal Revenue Service Attn: CC:PA:LPD:TSS P.O. Box 7604 Ben Franklin Station Washington, DC 20044 If a private delivery service is used, the address is: Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Ave., NW Washington, DC 20224 Requests for letter rulings may also be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. to the courier's desk at 1111 Constitution Avenue, NW, Washington, DC. A receipt will be given at the courier's desk. The package should be addressed to: Courier's Desk Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Ave., NW Washington, DC 20224 (b) SB/SE taxpayers (with regards to estate and gift taxes, employment taxes, and excise taxes) and W&I taxpayers should send requests for determination letters to the following address: Director SB/SE Exam, Specialty Policy Internal Revenue Service SE:S:E:HQ:SEP c/o Specialty Exam Policy, Tech Advisor 5000 Ellin Rd, Mail Stop C3-255 Office C2-156 Lanham, MD 20784 Submission by electronic (2) Taxpayers and their representatives are encouraged to use a secure electronic facsimile facsimile service for transmitting requests for advice. To use the secure electronic facsimile method, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www. pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. When compiling the request package, provide clear titles for the documents and distinguish files containing administrative forms and receipts from files that contain the request itself and from supplemental materials. If the submission is over 10 MB or over 50 pages, break it into smaller components and number the components sequentially with the total number (such as "1 of 4", "2 of 4", "3 of 4", and "4 of 4"). Transmit the full package, along with a cover sheet, to the secure electronic facsimile lines below. For requests under the jurisdiction of an Associate office: (877) 773-4950 For determination letter requests under the jurisdiction of LB&I: (844) 249-6231 For determination letter requests under the jurisdiction of SB/SE (with regards to income taxes (including requests from international taxpayers)): (877) 477-9193 Submission by encrypted (3) There are more risks associated with email than with electronic facsimile, such as the email attachment possibility that sensitive taxpayer information could be intercepted. Accordingly, the Service encourages taxpayers to use a secure electronic facsimile service for transmitting requests for advice. As an alternative, this section provides procedures for using encrypted email attachments for transmitting a request for advice under the jurisdiction of an Associate office or LB&I. Taxpayers using encrypted email attachments may choose to use a compression utility compatible with SecureZIP (note that many open-source utilities are not compatible with SecureZIP), Adobe Acrobat Pro password encryption, or Microsoft Office 2016/365 Protect Document to encrypt and send password-protected files. Because these programs do not encrypt the subject line or body of an email or the file name of the attachment, all sensitive taxpayer information, including the name of the taxpayer, should be included only in the encrypted attachment. These programs require that a sender create a password for the recipient to use to decrypt the attachments. The password should never be sent in the same email as the encrypted attachment. Instead, it should be provided to the Service in a separate email with a subject line that makes it easy to connect the password to the encrypted email. To use encrypted email attachments, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www.pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. A request transmitted through email must be accompanied by two MOUs: the MOU in Appendix G of this revenue procedure, acknowledging the risks of using email to transmit sensitive taxpayer information, and the appropriate MOU in Appendix H, agreeing to the terms for using the chosen method of encryption to receive sensitive taxpayer information. These MOUs must be signed by the taxpayer, not the taxpayer's representative, in a manner consistent with section 7.01(13) of this revenue procedure. A Counsel representative will countersign and return the second MOU to the requester prior to transmitting any other information by encrypted email attachments. When compiling the request package, provide clear titles for the documents and distinguish files containing administrative forms and receipts from files that contain the request itself and from supplemental materials. Encrypt the files or enable the encryption utility on the email system before generating the email. If the submission is over 5 MB or over 50 pages, break it into smaller components that do not exceed 5 MB each, and number the components sequentially with the total number (such as"1 of 4", "2 of 4", "3 of 4", and "4 of 4"). Transmit the full package to the email addresses below. For requests under the jurisdiction of an Associate office: Userfee@irscounsel.treas.gov For determination letter requests under the jurisdiction of LB&I: lbi.irt.info@irs.gov Taxpayer representatives that have the technical ability to exchange email encrypted with Secure/Multipurpose Internet Mail Extensions (S/MIME) certificates may also elect to use LB&I's Secure Email Message System (SEMS). Representatives seeking to use SEMS should contact the LB&I Office of the Assistant Deputy Commissioner, Compliance Integration at the phone number listed below. Pending letter ruling.05 requests Circumstances under which (1) Circumstances under which the taxpayer with a pending letter ruling request must the taxpayer with a pending notify the Associate office. The taxpayer must notify the Associate office if, after the letter ruling letter ruling request must request is filed but before a letter ruling is issued, the taxpayer knows that-- notify the Associate office (a) a field office has started an examination of the issue or the identical issue on an earlier year's return; (b) in the case of a § 301.9100 request, a field office has started an examination of the return for the taxable year in which an election should have been made or any taxable year that would have been affected by the election had it been timely made. See § 301.9100-3(e)(4)(i) and section 5.03(3) of this revenue procedure; (c) legislation that may affect the transaction has been introduced. See section 7.01(11) of this revenue procedure; (d) another letter ruling request (including an application for change in method of accounting), involving the same or similar issue as that pending with the Service, has been submitted by the taxpayer, a related party within the meaning of § 267 or § 707(b)(1), or a member of an affiliated group of which the taxpayer is also a member within the meaning of § 1504; (e) in qualified retirement plan matters, the issue is being considered by the Pension Benefit Guaranty Corporation or the Department of Labor; or (f) in health care matters, the issue is being considered by the Department of Labor or the Department of Health and Human Services. Taxpayer must notify the (2) Taxpayer must notify the Associate office if a return is filed and must attach the request Associate office if a return to the return. If the taxpayer files a return before a letter ruling is received from the Associate is filed and must attach the office concerning an issue in the return, the taxpayer must notify the Associate office that the request to the return return has been filed. The taxpayer must also attach a copy of the letter ruling request (Form 3115, if for a non-automatic change in method of accounting) to the return to alert the field office and avoid premature field action on the issue. Taxpayers filing their returns electronically may satisfy this requirement by attaching to their return a statement providing the date of the letter ruling request and the control number of the letter ruling. If, under the limited circumstances permitted in section 5 of this revenue procedure, the taxpayer requests a letter ruling after the return is filed, but before the return is examined, the taxpayer must also notify the field office having jurisdiction over the return and attach a copy of the letter ruling request to the notification to alert the field office and avoid premature field action on the issue. This section 7.05 also applies to pending requests for a closing agreement on a transaction for which a letter ruling is not requested or issued. For purposes of this section 7.05, the term "return" includes an original return, amended return, or claim for refund. When to attach letter ruling.06 A taxpayer who, before filing a return, receives a letter ruling or determination letter about or determination letter to any transaction that has been consummated and that is relevant to the return being filed must return attach to the return a copy of the letter ruling or determination letter. Taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling or determination letter. For purposes of this section 7.06, the term "return" includes an original return, amended return, or claim for refund. How to check on status of.07 The taxpayer or the taxpayer's authorized representative may obtain information regarding request for letter ruling or the status of a request for a letter ruling or determination letter by calling the person whose name determination letter and telephone number are shown on the acknowledgment of receipt of the request or, in the case of a request for a letter ruling, the appropriate branch representative who contacts the taxpayer as explained in section 8.02 of this revenue procedure. Request for letter ruling or.08 determination letter may be withdrawn or Associate office may decline to issue letter ruling In general (1) In general. A taxpayer may withdraw a request for a letter ruling or determination letter at any time before the letter ruling or determination letter is signed by the Service. Correspondence· and exhibits related to a request that is withdrawn or related to a letter ruling request for which an Associate office declines to issue a letter ruling will not be returned to the taxpayer. See section 7.01(2)(a) of this revenue procedure. In appropriate cases, an Associate office may publish its conclusions in a revenue ruling or revenue procedure. Notification of appropriate (2) Notification of appropriate Service official. Service official (a) Letter ruling requests. If a taxpayer withdraws a letter ruling request or if the Associate office declines to issue a letter ruling, the Associate office generally will notify, by memorandum, the appropriate Service official in the operating division that has examination jurisdiction of the taxpayer's tax return. For taxpayers under the jurisdiction of the Division Counsel (LB&I), the Associate office will also send a copy of the memorandum to the Assistant Deputy Commissioner, Compliance Integration. In doing so, the Associate office may give its views on the issues in the request for consideration in any later examination of the return. This section 7.08(2)(a) generally does not apply if the taxpayer withdraws the letter ruling request and submits a written statement that the transaction has been, or is being, abandoned and if the Associate office has not already formed an adverse opinion. (b) Notification of Service official may constitute Chief Counsel Advice. If the memorandum referred to in paragraph (a) of this section 7.08(2) provides more than the fact that the request was withdrawn and that the Associate office was tentatively adverse, or more than the fact that the Associate office declined to issue a letter ruling, the memorandum may constitute Chief Counsel Advice, as defined in § 6110(i)(1), and may be subject to disclosure under § 6110. SECTION 8. HOW The Associate offices will issue letter rulings on the matters and under the circumstances DO THE ASSOCIATE explained in sections 3 and 5 of this revenue procedure and in the manner explained in this section OFFICES HANDLE and section 11 of this revenue procedure. See section 9 of this revenue procedure for procedures LETTER RULING for change in method of accounting requests. REQUESTS? Technical Services Support.01 All requests for letter rulings will be received and initially controlled by the Technical Services Branch receives, initially Support Branch of the Legal Processing Division of the Associate Chief Counsel (Procedure and controls, and refers the Administration) (CC:PA:LPD:TSS). That office will process the incoming documents and the user request to the appropriate fee, and it will forward the file to the appropriate Associate office for assignment to a branch that Associate office has jurisdiction over the specific issue involved in the request. Branch representative of.02 Within 21 calendar days after a letter ruling request has been received in the branch of the the Associate office contacts Associate office that has jurisdiction over the issue, a representative of the branch will contact taxpayer within 21 calendar the taxpayer or, if the request includes a properly executed power of attorney, the authorized days representative, unless the power of attorney provides otherwise. During such contact, the branch representative will discuss the procedural issues in the letter ruling request. If the case is complex or a number of issues are involved, it may not be possible for the branch representative to discuss the substantive issues during this initial contact. When possible, for each issue within the branch's jurisdiction, the branch representative will tell the taxpayer-- (1) whether the branch representative will recommend that the Associate office rule as the taxpayer requested, rule adversely on the matter, or not rule; (2) whether the taxpayer should submit additional information to enable the Associate office to rule on the matter; (3) whether the letter ruling complies with all of the provisions of this revenue procedure, and if not, which requirements have not been met; or (4) whether, because of the nature of the transaction or the issue presented, a tentative conclusion on the issue cannot be reached. If the letter ruling request involves matters within the jurisdiction of more than one branch or Associate office, a representative of the branch that received the original request will tell the taxpayer within the initial 21 calendar days-- (1) that the matters within the jurisdiction of another branch or Associate office have been referred to that branch or Associate office for consideration, and the date the referral was made, and (2) that a representative of that branch or Associate office will contact the taxpayer within 21 calendar days after receiving the referral to discuss informally the procedural and, to the extent possible, the substantive issues in the request. This section 8.02 applies to all matters except for cases within the jurisdiction of the Associate Chief Counsel (Financial Institutions and Products) concerning insurance issues requiring actuarial computations. Determines if transaction.03 If Jess than a fully favorable letter ruling is anticipated, the branch representative will tell can be modified to obtain the taxpayer whether minor changes in the transaction or adherence to certain published positions favorable letter ruling would bring about a favorable ruling. The branch representative may also tell the taxpayer the facts that must be furnished in a document to comply with Service requirements. The branch representative will not suggest precise changes that would materially alter the form of the proposed transaction or materially alter a taxpayer's proposed accounting period. If, at the end of this discussion, the branch representative determines that a meeting in the Associate office would be more helpful to develop or exchange information, a meeting will be offered and an early meeting date arranged. When offered, this meeting is in addition to the taxpayer's conference of right that is described in section 10.02 of this revenue procedure. Not bound by informal.04 The Service will not be bound by the informal opinion expressed by the branch representative opinion expressed or any other Service representative, and such an opinion cannot be relied upon as a basis for obtaining retroactive relief under the provisions of § 7805(b). May request additional.05 information Must be submitted within (1) Additional information must be submitted within 21 calendar days. If the request 21 calendar days lacks essential information, which may include additional information needed to satisfy the procedural requirements of this revenue procedure as well as substantive changes to transactions or documents needed from the taxpayer, the branch representative will request such information during the initial or subsequent contacts with the taxpayer or its authorized representative. The branch representative will inform the taxpayer or its authorized representative that the request will be closed if the Associate office does riot receive the requested information within 21 calendar days from the date of the request unless an extension of time is granted. To facilitate prompt action on letter ruling requests, taxpayers may request that the Associate office request additional information by fax, electronic facsimile, or encrypted email attachment. See section 7.02(5) of this revenue procedure. Material facts furnished to the Associate office by telephone or orally at a conference must be promptly confirmed in writing by mail, fax, or email to the Associate office. This confirmation, and any additional information requested by the Associate office that is not part of the information requested during the initial contact, must be furnished within 21 calendar days from the date the Associate office makes the request. Extension of reply period if (2) Extension of reply period if justified and approved. The Service will grant an extension justified and approved of the 21-day period for providing additional information only if the extension is justified in writing by the taxpayer and approved by the branch reviewer. A request for an extension should be submitted before the end of the 21-day period. If unusual circumstances close to the end of the 21-day period make a written request impractical, the taxpayer should notify the Associate office within the 21-day period that there is a problem and that the written request for extension will be provided shortly. The taxpayer will be told promptly of the approval or denial of the requested extension. If the extension request is denied, there is no right of appeal. Letter ruling request (3) Letter ruling request closed if the taxpayer does not submit additional information. If closed if the taxpayer does the taxpayer does not submit the information requested during the initial or subsequent contacts not submit additional within the time provided, the letter ruling request will be closed and the taxpayer will be notified information in writing. If the information is received after the request is closed, the request will be reopened and treated as a new request as of the date the information is received. The taxpayer must pay another user fee before the case can be reopened. Penalties of perjury (4) Penalties of perjury statement. Additional information submitted to the Service must statement for additional be accompanied by the following declaration: "Under penalties of perjury, I declare that I information have examined this information, including accompanying documents, and, to the best of my knowledge and belief, the information contains all the relevant facts relating to the request for the information, and such facts are true, correct, and complete." This declaration must be signed in accordance with the requirements in section 7.01(16)(b) of this revenue procedure. Transmitting request and (5) Transmitting request and submitting additional information by fax, electronic submitting additional facsimile, or encrypted email attachment. To facilitate prompt action on letter ruling requests, information by fax, taxpayers may request that the Associate office request additional information by fax, electronic electronic facsimile, or facsimile, or encrypted email attachment. See section 7.02(5) of this revenue procedure. encrypted email attachment Taxpayers may also submit additional information by fax, electronic facsimile, or encrypted email attachment as soon as the information is available. The Associate office representative who requests additional information can provide a fax or electronic facsimile number to which the information can be sent. Submitting additional (6) Submitting additional information by mail. information by mail (a) If a private delivery service is not used, the additional information should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] P.O. Box 7604 Ben Franklin Station Washington, DC 20044 For cases involving a request for change in method of accounting or period, see section 9.08 of this revenue procedure for the address to which to send additional information. (b) If a private delivery service is used, the additional information for all cases should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] 1111 Constitution Ave., NW Washington, DC 20224 (c) A taxpayer submitting additional information by mail only needs to submit one copy of the additional information unless the Associate office requests additional copies. Identifying information (7) Identifying information. For all cases, the additional information should include the included in additional taxpayer's name and the case control number and the name, office symbols, and room number information of the Associate office representative who requested the information. The Associate office representative can provide the latter information to the taxpayer. Near the completion of the.06 Generally, after the conference of right is held but before the letter ruling is issued, the ruling process, advises the branch representative will orally notify the taxpayer or the taxpayer's representative of the taxpayer of conclusions Associate office's conclusions. See section 10 of this revenue procedure for a discussion of and, if the Associate conferences of right. If the Associate office is going to rule adversely, the taxpayer will be offered office will rule adversely, the opportunity to withdraw the letter ruling request. If, within ten calendar days of the notification offers the taxpayer the by the branch representative, the taxpayer or the taxpayer's representative does not notify the opportunity to withdraw branch representative that the taxpayer wishes to withdraw the ruling request, the adverse letter the letter ruling request ruling will be issued unless an extension is granted. See section 15.10 of this revenue procedure for information regarding refunds of user fees. May request that taxpayer.07 To accelerate the issuance of letter rulings, in appropriate cases near the completion submit draft proposed of the ruling process, the Associate office representative may request that the taxpayer or the letter ruling near the taxpayer's representative submit a proposed draft of the letter ruling. Such draft would be based completion of the ruling on the discussions of the issues between the representative and the taxpayer or the taxpayer's process representative. The taxpayer is not required to prepare a draft letter ruling to receive a letter ruling. The format of the submission should be discussed with the Associate office representative who requests the draft letter ruling. The representative usually can provide a sample format of a letter ruling and will discuss with the taxpayer or the taxpayer's representative the facts, analysis, and letter ruling language to be included. The taxpayer should submit the draft in the same manner as any other additional information and should contain in the transmittal the information that should be included with any other additional information (for example, a penalties of perjury statement is required). See section 8.05(5) and (6) of this revenue procedure. Issues separate letter.08 rulings for substantially identical letter rulings, but generally issues a single letter ruling for related § 301.9100 letter rulings Substantially identical (1) Substantially identical letter rulings. For letter ruling requests qualifying for the user letter rulings fee provided in paragraph (A)(5)(a) of Appendix A of this revenue procedure for substantially identical letter rulings, a separate letter ruling will generally be issued for each requester or entity as the Associate office deems necessary. Related § 301.9100 letter (2) Related § 301.9100 letter rulings. rulings (a) For a § 301.9100 letter ruling request for an extension of time to file a Form 3115 qualifying under section 15.07(4) for the user fee provided in paragraph (A)(5)(d) of Appendix A of this revenue procedure for an identical change in method of accounting, the Associate office generally will issue a single letter on behalf of all applicants on Form 3115 that are the subject of the request. (b) For a § 301.9100-3 letter ruling request for an extension of time to file an entity classification election for multiple entities qualifying under section 15.07(2) for the user fee provided in paragraph (A)(5)(a) of Appendix A of this revenue procedure, the Associate office generally will issue a single letter on behalf of all entities that are the subject of the request. The taxpayer may request that separate letters be issued to each entity that is the subject of the request. See generally section 5.03 of this revenue procedure. Sends a copy of the letter.09 The Associate office will send a copy of the letter ruling, whether favorable or adverse, to ruling to appropriate the appropriate Service official in the operating division that has examination jurisdiction of the Service official taxpayer's tax return. SECTION 9. WHAT This section provides the specific and additional procedures applicable to a request for a change ARE THE SPECIFIC in method of accounting under Rev. Proc. 2015-13, 2015-5 I.R.B. 419 (or any successor), as AND ADDITIONAL clarified and modified by Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, as modified by Section 17.02 PROCEDURES FOR of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, as modified by Rev. Proc. 2017-59, 2017-48 I.R.B. 543, A REQUEST FOR A as modified by Rev. Proc. 2021-26, 2021-22 I.R.B. 543, and as modified by Rev. Proc. 2021-34, CHANGE IN METHOD 2021-35 I.R.B. 337, or other automatic change request procedures. OF ACCOUNTING FROM THE ASSOCIATE OFFICES? A request for a change in method of accounting under Rev. Proc. 2015-13 (or any successor) or other automatic change request procedures is a type of request for a letter ruling. See section 2.01 of this revenue procedure. Automatic and non-.01 automatic change in method of accounting requests Automatic change in (1) Automatic change in method of accounting. Certain changes in methods of accounting· method of accounting must be made under automatic change request procedures. A change in method of accounting under Rev. Proc. 2015-13 provided for in an automatic change request procedure must be made using that procedure if the (or any successor), or other taxpayer requesting the change is within the scope of the procedure, the change is an automatic automatic change request change for the requested year of the change, and the taxpayer is eligible to make the change. The procedures Commissioner's consent to an otherwise qualifying automatic change in method of accounting is granted only if the taxpayer timely complies with the applicable automatic change request procedures. But see section 9.19 of this revenue procedure concerning review by an Associate office and a field office. In general, a taxpayer requests an automatic change by filing a current Form 3115, Application for Change in Method of Accounting. An application filed under the automatic change procedures in Rev. Proc. 2015-13 (or any successor) or other automatic change request procedure, and this revenue procedure, is hereinafter referred to as an "automatic change request." See section 9.22 of this revenue procedure for a list of automatic change request procedures. See section 9.23 for a list of the sections and Appendices of this revenue procedure in addition to this section 9 that apply to an automatic change request. No user fee is required for a change made under an automatic change request procedure. Non-automatic change in (2) Non-automatic change in method of accounting. If a change in method of accounting method of accounting may not be made under an automatic change request procedure, the taxpayer may request a non- automatic letter ruling by filing a current Form 3115, Application for Change in Accounting Method, under the non-automatic change procedures in Rev. Proc. 2015-13 (or any successor), and this revenue procedure. A Form 3115 filed under Rev. Proc. 2015-13 (or any successor) and this revenue procedure for a non-automatic change request is hereinafter referred to as a "non- automatic Form 3115." A taxpayer filing a non-automatic Form 3115 must submit the required user fee with the completed Form 3115. See section 15 and Appendix A of this revenue procedure for information about user fees. See section 9.23 for a list of the sections and Appendices of this revenue procedure in addition to this section 9 that apply to a non-automatic Form 3115. Ordinarily only one change.02 Ordinarily, a taxpayer may request only one change in method of accounting on a Form in method of accounting on 3115, Application for Change in Accounting Method. If the taxpayer wants to request a change in a Form 3115, Application method of accounting for more than one unrelated item or submethod of accounting, the taxpayer for Change in Accounting must submit a separate Form 3115 for each unrelated item or submethod, except in certain Method, and a separate situations in which the Service specifically permits certain unrelated changes to be included on a Form 3115 for each single Form 3115. For an example of such a situation, see section 15.03 of Rev. Proc. 2019-43, taxpayer and for each · 2019-48 I.R.B. 1107 (or its successor). separate and distinct trade or business A separate Form 3115 (and, therefore, a separate user fee pursuant to section15 and Appendix A of this revenue procedure) must -be submitted for each taxpayer and each separate trade or business of a taxpayer, including a qualified subchapter S subsidiary (QSub) or a single-member limited liability company (single-member LLC), requesting a change in method of accounting, except as specifically permitted or required in guidance published by the Service. See, e.g., section 15.07(4) of this revenue procedure. Information required with.03 a Form 3115 Facts and other information (1) Facts and other information requested on Form 3115 and in applicable revenue procedures. In general, a taxpayer requesting a change in method of accounting must file a current Form 3115, unless the procedures applicable to the specific type of change in method of accounting do not require a Form 3115 to be submitted. To be eligible for approval of the requested change in method of accounting, the taxpayer must provide all information requested on the Form 3115 and in its instructions and in Rev. Proc. 2015- 13 (or any successor), and, if applicable, the automatic change request procedure. In addition, the taxpayer must provide all information requested in the applicable sections of this revenue procedure, including a detailed and complete description of the item being changed and of the taxpayer's trade(s) or business(es), the taxpayer's present and proposed method for the item being changed, information regarding whether the taxpayer has claimed any federal tax credit relating to the cost being changed, information regarding whether the taxpayer is under examination, or before Appeals or a Federal court, and a summary of the computation of the net § 481(a) adjustment, along with an explanation of the methodology used to determine the adjustment, sufficient to demonstrate that the net § 481(a) adjustment is computed correctly. For a non-automatic Form 3115 or an automatic change request specified in the instructions for line 16 of the Form 3115, the taxpayer must also include a full explanation of the legal basis and relevant authorities supporting the proposed method, and a detailed and complete description of the facts and explanation of how the law applies to the taxpayer's situation. For a non-automatic Form 3115, the taxpayer must also include a statement of the applicant's reasons for the proposed change, copies of all documents related to the proposed change, and a discussion of whether the law related to the request is uncertain or inadequately addresses the issue. The taxpayer must provide the requested information to be eligible for approval of the requested change in method of accounting. The taxpayer may be required to provide information specific to the requested change in method of accounting, such as an attached statement. The taxpayer must provide all information relevant to the requested change in method of accounting, even if not specifically requested, including an explanation of all material facts relevant to the requested change in method of accounting. See also sections 7.01(1) and 7.01(9) of this revenue procedure. Statement of authorities (2) Statement of contrary authorities. For a non-automatic Form 3115, the taxpayer is contrary to taxpayer's encouraged to inform the Associate office about, and discuss the implications of, any authority views believed to be contrary to the proposed change in method of accounting, including statutes, court decisions, regulations, notices, revenue rulings, revenue procedures, or announcements. If the taxpayer does not furnish either contrary authorities or a statement that none exist, the Associate office may request submission of contrary authorities or a statement that none exist. Failure to comply with this request may result in the Associate office's refusal to issue a change in method of accounting letter ruling. Documents- (3) Copies of all contracts, agreements, and other documents. True copies of all contracts, agreements, and other documents relevant to the requested change in method of accounting must be submitted with a non-automatic Form 3115. Original documents should not be submitted because they become part of the Associate office's file and will not be returned. Analysis of material facts (4) Analysis of material facts. When submitting any document with a Form 3115 or in a supplemental letter, the taxpayer must explain and provide an analysis of all material facts in the document. The taxpayer may not merely incorporate the document by reference. The analysis of the facts must include their bearing on the requested change in method of accounting and must specify the provisions that apply. Same issue in an earlier (5) Information regarding whether same issue is in an earlier return under examination. return under examination A Form 3115 must state whether, to the best of the knowledge of both the taxpayer and the taxpayer's representatives, any earlier return of the taxpayer (or any return of a current or former consolidated group in which the taxpayer is or was a member) in which the taxpayer used the method of accounting being changed is under examination, before Appeals, or before a Federal court. See Rev. Proc. 2015-13 (or any successor). Issue previously submitted (6) Statement regarding prior requests for a change in method of accounting and other or currently pending pending requests. (a) Other requests for a change in method of accounting within the past five years. A Form 3115 must state, to the best of the knowledge of both the taxpayer' and the taxpayer's representatives, whether the taxpayer, a related party within the meaning of § 267 or § 707(b) (1), or a member of a current or former affiliated group of which the taxpayer is or was a member within the meaning of § 1504, or a predecessor requested or made within the past five years (including the year of the requested change), or is currently filing, any request for a change in method of accounting. If the statement is affirmative, for each separate and distinct trade or business, the Form 3115 must give a description of each request and the year of change and whether consent was obtained. If any application was withdrawn, not perfected, or denied, or if a Consent Agreement was sent to the taxpayer but was not signed and returned to the Associate office, or if the change was not made in the requested year of change, the Form 3115 must give an explanation. (b) Any other pending request(s). A Form 3115 must state, to the best of the knowledge of both the taxpayer and the taxpayer's representatives, whether the taxpayer, a related party within the meaning of § 267 or § 707(b)(1), or a member of a current or former affiliated group of which the taxpayer is or was a member within the meaning of § 1504, or a predecessor currently have pending any request (including any concurrently filed request) for a letter ruling, a change in method of accounting, or technical advice. If the statement is affirmative, the Form 3115 must give the name(s) of the taxpayer, identification number(s), the type of request (letter ruling, request for change in method of accounting, or request for technical advice), and the specific issues in each such request. Statement identifying (7) Statement identifying pending legislation. At the time the taxpayer files a non-automatic pending legislation Form 3115, the taxpayer must identify any pending legislation that may affect the proposed change in method of accounting. The taxpayer also must notify the Associate office if any such legislation is introduced after the request is filed but before a change in method of accounting letter ruling is issued. Authorized representatives (8) Authorized representatives. To appear before the Service in connection with a request for a change in method of accounting, the taxpayer's authorized representative must be an attorney, a certified public accountant, an enrolled agent, an enrolled actuary, a person with a "Letter of Authorization," an employee, general partner, bona fide officer, administrator, trustee, etc., as described in section 7.01(14) of this revenue procedure. Power of attorney (9) Power of attorney and declaration of representative. Any authorized representative, and declaration of whether or not enrolled to practice, must comply with Treasury Department Circular No. 230, which representative provides the rules for practice before the Service, and the conference and practice requirements of the Statement of Procedural Rules, which provide the rules for representing a taxpayer before the Service. See section 7.01(15) of this revenue procedure. A taxpayer should use Form 2848, Power of Attorney and Declaration of Representative, to provide the representative's authority. Tax Information (10) Tax Information Authorization. A taxpayer may use Form 8821, Tax Information Authorization Authorization, to authorize an individual to receive a copy of the taxpayer's change in method of accounting letter ruling and other related correspondence. If the taxpayer wishes to authorize a corporation, firm, organization, or partnership to receive the correspondence, an individual, identified by either name or title, must be specified on the Form 8821. A Form 8821 does not authorize the taxpayer's appointee to advocate the taxpayer's position or to otherwise represent the taxpayer before the Service. Penalties of perjury (11) Penalties of perjury statement statement " (a) Format of penalties of perjury statement. A Form 3115, and any change to a Form 3115 submitted at a later time, must be accompanied by the following declaration: "Under penalties of perjury, I declare that I have examined this application, including accompanying schedules and statements, and to the best of my knowledge and belief, the application contains all the relevant facts relating to the application, and it is true, correct, and complete." See section 9.08(3) of this revenue procedure for the penalties of perjury statement required for submissions of additional information. (b) Signature by taxpayer. A Form 3115 must be signed in a manner consistent with section 7.01(13) of this revenue procedure by, or on behalf of, the taxpayer requesting the change by an individual who has personal knowledge of the facts of, and authority to bind the taxpayer in, such matters. For example, an officer must sign on behalf of a corporation, a general partner on behalf of a state law partnership, a member-manager on behalf of a limited liability company, a trustee on behalf of a trust, or an individual taxpayer on behalf of a sole proprietorship. If the taxpayer is a member of a consolidated group, a Form 3115 should be submitted on behalf of the taxpayer by the common parent and must be signed by a duly authorized officer of the common parent. Refer to the signature requirements set forth in the instructions for the current Form 3115 regarding those who are to sign. See also section 6.02(8) of Rev. Proc. 2015-13 (or any successor). (c) Signature by preparer. If a Form 3115 is prepared by an individual other than the taxpayer, the preparer must also sign the Form 3115 in a manner consistent with section 7.01(13) of this revenue procedure. A declaration of preparer (other than the taxpayer) is based on all information of which the preparer has any knowledge. Additional procedural.04 information required in certain circumstances Recipients of original and (1) Recipients of original and copy of change in method of accounting correspondence. copy of correspondence The Service will send the signed original of the change in method of accounting letter ruling and other related correspondence to the taxpayer, and copies to the taxpayer's representative, if so instructed on Form 2848. See section 7.02(2) of this revenue procedure for how to designate alternative routing of the copies of the letter ruling and other correspondence. Expedited handling (2) To request expedited handling. The Associate offices ordinarily process non-automatic Forms 3115 in order of the date received. A taxpayer with a compelling need to have a non- automatic Form 3115 processed on an expedited basis may request expedited handling. See section 7.02(4) of this revenue procedure for procedures regarding expedited handling. Requesting form of any (3) To request the receipt of the change in method of accounting letter ruling or any other document related to Form correspondence related to a Form 3115 by fax, electronic facsimile, or encrypted email 3115 provided to taxpayer attachment. If the taxpayer wants a copy of the change in method of accounting letter ruling or or taxpayer's authorized any other correspondence related to a Form 3115, such as a request for additional information, representative to be provided to the taxpayer or the taxpayer's authorized representative by fax, electronic facsimile, or encrypted email attachment, the taxpayer must submit a written request, preferably as part of the Form 3115. The request may be submitted at a later date, but it must be received prior to the mailing of correspondence other than the letter ruling and prior to the signing of the change in method of accounting letter ruling. The Service has the discretion to determine the form in which it will correspond with the taxpayer, but will generally comply with a taxpayer's request for a particular form. If the taxpayer requests to have correspondence relating to the Form 3115 provided by fax or electronic facsimile to the taxpayer or taxpayer's authorized representative, the request must contain the fax number of the taxpayer or the taxpayer's authorized representative to whom the correspondence is to be provided. A document other than the change in method of accounting letter ruling will be faxed by a branch representative. A change in method of accounting letter ruling may be faxed by either a branch representative or the Disclosure and Litigation Support Branch of the Legal Processing Division of the Office of Associate Chief Counsel (Procedure and Administration) (CC:PA:LPD:DS). If the taxpayer requests documents by encrypted email attachment, the request must specify which email encryption method is to be used and, if the taxpayer has not already provided the appropriate memorandums of understanding (MOUs) to use encrypted email attachments, must include those MOUs. See section 9.05(3) of this revenue procedure for acceptable email encryption methods and procedures. For purposes of § 301.6110-2(h), a change in method of accounting letter ruling is not issued until the change in method of accounting letter ruling is mailed. Requesting a conference (4) To request a conference. The taxpayer must complete the appropriate line on the Form 3115 to request a conference, or must request a conference in a later written communication, if an adverse response is contemplated by the Associate office. See section 11.03(1) of Rev. Proc. 2015- 13 (or any successor), and sections 10.01 and 10.02 of this revenue procedure. Submitting non-automatic.05 Non-automatic Forms 3115 may be submitted by mail, by electronic facsimile, or by Forms3115 encrypted email attachment. (1) Submission by mail. A taxpayer submitting a non-automatic Form 3115 by mail should submit the original to the appropriate address below. If a private delivery service is not used, a taxpayer, including an exempt organization, must send the original completed Form 3115 and the required user fee to: Internal Revenue Service Attn: CC:PA:LPD:TSS P.O. Box 7604 Benjamin Franklin Station Washington, DC 20044 If a private delivery service is used, a taxpayer, including an exempt organization, must send the original completed Form 3115 and the required user fee to: Internal Revenue Service Attn: CC:PA:LPD:TSS Room 5336 1111Constitution Ave., NW Washington, DC 20224 For taxpayers, including an exempt organization, the original completed Form 3115 and the required user fee may be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. to the courier's desk at 1111 Constitution Ave., NW, Washington, DC. A receipt will be given at the courier's desk. The package should be addressed to: Courier's Desk Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Ave., NW Washington, DC 20224 (2) Submission by electronic facsimile. Taxpayers and their representatives are encouraged to use a secure electronic facsimile service for transmitting requests for advice. To use the secure electronic facsimile method, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www.pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. Transmit the Form 3115, along with a cover sheet, to the secure electronic facsimile line: (877) 773-4950 (3) Submission by encrypted email attachment. There are more risks associated with email than with electronic facsimile, such as the possibility that sensitive taxpayer information could be intercepted. Accordingly, the Service encourages taxpayers to use a secure electronic facsimile service for transmitting requests for advice. As an alternative, this section provides procedures for using encrypted email attachments for transmitting a non-automatic Form 3115. Taxpayers using encrypted email attachments may choose to use a compression utility compatible with SecureZIP (note that many open-source utilities are not compatible with SecureZIP), Adobe Acrobat Pro password encryption, or Microsoft Office 365 Protect Document to encrypt and send password-protected files. Because these programs do not encrypt the subject line or body of an email or the file name of the attachment, all sensitive taxpayer information, including the name of the taxpayer, should be included only in the encrypted attachment. These programs require that a sender create a password for the recipient to use to decrypt the attachments. The password should never be sent in the same email as the encrypted attachment. Instead, it should be provided to the Service in a separate email with a subject line that makes it easy to connect the password to the encrypted email. To use encrypted email attachments, first submit the full user fee payment set forth in Appendix A of this revenue procedure through www.pay.gov, and include a copy of the receipt for this payment with the request. See section 15.08 of this revenue procedure. A Form 3115 transmitted through email must be accompanied by two MOUs: the MOU in Appendix G of this revenue procedure, acknowledging the risks of using email to transmit sensitive taxpayer information, and the appropriate MOU in Appendix H, agreeing to the terms for using the chosen method of encryption to receive sensitive taxpayer information. These MOUs must be signed by the taxpayer, not the taxpayer's representative, in a manner consistent with section 7.01(13) of this revenue procedure. A Counsel representative will countersign and return the second MOU to the requester prior to transmitting any other information by encrypted email attachments. Transmit the Form 3115 to the following email address: Userfee@irscounsel.treas.gov Submitting automatic.06 Automatic change request. The duplicate copy of an automatic Form 3115 generally is Forms 3115 submitted by mail. A taxpayer that is filing an automatic Form 3115 under the provisions of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, may alternatively submit the duplicate copy of the Form 3115 by fax. (1) Submission by mail. If the automatic change request procedure requires a taxpayer to file a duplicate copy of the completed Form 3115 for an automatic change request, and if a private delivery service is not used, send the duplicate copy of the automatic change request Form 3115 to: Internal Revenue Service Ogden, UT 84201 M/S 6111 If a private delivery service is used, send the duplicate copy of the automatic change request Form 3115 to: Internal Revenue Service 1973 N. Rulon White Blvd. Ogden, UT 84201 Attn: M/S 6111 (2) Submission by fax. Taxpayers submitting the duplicate copy of an automatic Form 3115 by fax should do so to the following fax number: (844) 249-8134 The submission should include a cover sheet with the following information: (a) Subject: "Form 3115" (b) Sender's name, title, phone number, and address (c) Taxpayer's name (d) Date (e) Number of pages faxed (inclusive of cover sheet) A taxpayer should not include sensitive information on the cover sheet, such as the taxpayer's Employer Identification Number or Social Security Number. Technical Services Support.07 A non-automatic Form 3115 is received and controlled by the Technical Services Support Branch receives, initially Branch, Legal Processing Division of the Associate Chief Counsel (Procedure and Administration) controls, and refers (CC:PA:LPD:TSS) if the required user fee is submitted with the Form 3115. Once controlled, the the Form 3115 to the Form 3115 is forwarded to the appropriate Associate office for assignment and processing. appropriate Associate office Additional information.08 Reply period (1) Reply period. (a) Non-automatic Form 3115 - 21-day rule. In general, for a non-automatic Form 3115, additional information requested by the Associate office and additional information furnished to the Associate office by telephone must be furnished in writing by mail, fax, or email within 21 calendar days from the date of the information request. The Associate office may impose a shorter reply period for a request for additional information made after an initial request. See section 10.06 of this revenue procedure for the 21-day rule for submitting information after any conference. (b) Automatic change request - 30-day rule. In general, for an automatic change request, additional information requested by the Associate office, and additional information furnished to the Associate office by telephone must be furnished in writing by mail, fax, or email within 30 calendar days from the date of the information request. The Associate office may impose a shorter reply period for a request for additional information made after an initial request. See section 10.06 of this revenue procedure for the 21-day rule for submitting information after any conference with the Associate office. Extension of reply period (2) Request for extension of reply period. (a) Non-automatic Form 3115. For a non-automatic Form 3115, an additional period, not to exceed 15 calendar days, to furnish information may be granted to a taxpayer. Any request for an extension of time must be made in writing and submitted before the end of the original 21-day period. If unusual circumstances close to the end of the 21-day period make a written request impractical, the taxpayer should notify the Associate office within the 21-day period that there is a problem and that the written request for extension will be provided shortly. An extension of the 21-day period will be granted only if approved by a branch reviewer. An extension of the 21-day period ordinarily will not be granted to furnish information requested on Form 3115. The taxpayer will be told promptly, and later in writing, of the approval or denial of the requested extension. If the extension request is denied, there is no right of appeal. (b) Automatic change request. For an automatic change request, an additional period, not to exceed 30 calendar days, to furnish information may be granted to a taxpayer. Any request for an extension of time must be made in writing and submitted before the end of the original 30-day period. If unusual circumstances close to the end of the 30-day period make a written request impractical, the taxpayer should notify the Associate office within the 30-day period that there is a problem and that the written request for extension will be coming soon. An extension of the 30-day period will be granted only if approved by a branch reviewer. An extension of the 30-day period ordinarily will not be granted to furnish information requested on Form 3115. The taxpayer will be told promptly of the approval or denial of the requested extension. If the extension request is denied, there is no right of appeal. Penalties of perjury (3) Penalties of perjury statement for additional information. Additional information statement for additional submitted to the Associate office must be accompanied by the following declaration: "Under information penalties of perjury, I declare that I have examined this information, including accompanying documents, and, to the best of my knowledge and belief, the information contains all the relevant facts relating to the request for the information, and such facts are true, correct, and complete." This declaration must be signed in accordance with the requirements in section 9.03(11)(b) of this revenue procedure. Identifying information (4) Identifying information included in additional information. The additional information included in additional should also include the taxpayer's name and the case control number and the name, office information symbols, and room number of the Associate office representative who requested the information. The Associate office representative can provide the latter information to the taxpayer. Transmitting request and (5) Transmitting request and submitting additional information by fax, electronic submitting additional facsimile, or encrypted email attachment. To facilitate prompt action on a change in method information by fax, of accounting ruling request, taxpayers may request that the Associate office request additional electronic facsimile, or information by fax, electronic facsimile, or encrypted email attachment. See section 9.04(3) of this encrypted email attachment revenue procedure. Taxpayers may also submit additional information by fax, electronic facsimile, or encrypted email attachment as soon as the information is available. The Associate office representative who requests additional information can provide a fax or electronic facsimile number or email address to which the information can be faxed. Submitting additional (6) Submitting additional information by mail. information by mail (a) Address if private delivery service is not used. For a request for change in method of accounting under the jurisdiction of the Associate Chief Counsel (Income Tax and Accounting), if a private delivery service is not used, the additional information should be sent to: Internal Revenue Service ADDITIONAL INFORMATION· Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] P.O. Box 14095 Ben Franklin Station Washington, DC 20044 For any other request for change in method of accounting, if a private delivery service is not used, the additional information should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] P.O. Box 7604 Ben Franklin Station Washington, DC 20044 (b) Address if private delivery service is used. For a request for a change in method of accounting, if a private delivery service is used, the additional information should be sent to: Internal Revenue Service ADDITIONAL INFORMATION Attn: [Name, office symbols, and room number of the Associate office representative who requested the information] 1111 Constitution Ave., NW Washington, DC 20224 Failure to timely submit (7) Failure to timely submit additional information to the Associate office. additional information to the Associate office (a) Non-automatic Form 3115. In the case of a non-automatic Form 3115, if the required information is not furnished to the Associate office within the reply period, the Form 3115 will not be processed and the case will be closed. The taxpayer or authorized representative will be so notified in writing. (b) Automatic change request. In the case of an automatic change request, if the required information is not furnished to the Associate office within the reply period, the request does not qualify for the automatic change request procedure. In such a case, the Associate office will notify the taxpayer that consent to make the change in method of accounting is not granted. (c) Submitting the additional information at a later date. If the taxpayer wants to submit the additional information at a later date, the taxpayer must submit it with a new completed Form 3115 (and user fee, if applicable) for a year of change for which such new Form 3115 is timely filed under the applicable change in method of accounting procedure. Circumstances in which the.09 For a non-automatic Form 3115, the taxpayer must promptly notify the Associate office if, taxpayer must notify the after the Form 3115 is filed but before a change in method of accounting letter ruling is issued, the Associate office taxpayer knows that-- (1) a field office has started an examination of the present or proposed accounting; (2) a field office has started an examination of the proposed year of change; (3) legislation that may affect the change in method of accounting has been introduced, see section 9.03(7) of this revenue procedure; or (4) another letter ruling request (including another Form 3115) has been submitted by the taxpayer, a related party within the meaning of § 267 or § 707(b)(1), or a member of an affiliated group of which the taxpayer is a member within the meaning of § 1504. Determines if proposed.10 For a non-automatic Form 3115, if a less than fully favorable change in method of method of accounting accounting letter ruling is indicated, the branch representative will tell the taxpayer whether minor can be modified to obtain changes in the proposed method of accounting would bring about a favorable ruling. The branch favorable letter ruling representative will not suggest precise changes that materially alter a taxpayer's proposed method of accounting.· Near the completion of.11 Generally, after a conference is held ( or offered, in the event no conference is held) and processing the Form 3115, before issuing any change in method of accounting letter ruling that is adverse to the requested advises the taxpayer if the change in method of accounting, the taxpayer will be offered the opportunity to withdraw the Associate office will rule Form 3115. See sections 9.12 and 10 of this revenue procedure. If, within 10 calendar days of the adversely and offers the notification by the branch representative, the taxpayer or the taxpayer's representative does not taxpayer the opportunity to notify the branch representative of a decision to withdraw the Form 3115, the adverse change in withdraw Form 3115 method of accounting letter ruling will be issued unless an extension is granted. See section 15.10 for information regarding refunds of user fees. Non-automatic Form 3115.12 may be withdrawn or Associate office may decline to issue a change in method of accounting letter ruling In general (1) In general. A taxpayer may withdraw a non-automatic Form 3115 at any time before the change in method of accounting letter ruling is signed by the Associate office. The Form 3115, correspondence, and any documents relating to the Form 3115 that is withdrawn or for which the Associate office declines to issue a letter ruling will not be returned to the taxpayer. See section 9.03(3) of this revenue procedure. In appropriate cases, the Service may publish its conclusions in a revenue ruling or revenue procedure. Notification of appropriate (2) Notification of appropriate Service official. If a taxpayer withdraws, or the Associate Service official office declines to grant (for any reason), a request to change a method of accounting, the Associate office will notify, in writing, the appropriate Service official in the operating division that has examination jurisdiction of the taxpayer's tax return and the Manager of the Methods of Accounting and Timing Practice Network, and may give its views on the issues in the request to the Service official to consider in any later examination of the return. If the written notification to the Service official provides more than the fact that the request was withdrawn and the Associate office was tentatively adverse, or that the Associate office declines to grant a change in method of accounting, the memorandum may constitute Chief Counsel Advice, as defined in § 6110(i)(1), and may be subject to disclosure under § 6110. How to check status of a.13 The taxpayer or the taxpayer's authorized representative may obtain information regarding pending non-automatic the status of a non-automatic Form 3115 by calling the person whose name and telephone number Form 3115 are shown on the acknowledgement of receipt of the Form 3115. Service is not bound by.14 The Service will not be bound by any informal opinion expressed by the branch representative informal opinion or any other Service representative, and such an opinion cannot be relied upon as a basis for obtaining retroactive relief under the provisions of § 7805(b). Single letter ruling issued to.15 For a non-automatic Form 3115 qualifying under section 15.07(4) for the user fee provided a taxpayer or consolidated in paragraph (A)(5)(b) of Appendix A of this revenue procedure for identical changes in method of group for qualifying accounting, the Associate office generally will issue a single letter ruling on behalf of all applicants identical change in method on the Form 3115 that are the subject of the request. of accounting Letter ruling ordinarily.16 If two or more items or submethods of accounting are interrelated, the Associate office not issued for one of two or ordinarily will not issue a letter ruling on a change in method of accounting involving only one of more interrelated items or the items or submethods. submethods Consent Agreement.17 Ordinarily, for a non-automatic Form 3115, the Commissioner's permission to change a taxpayer's method of accounting is set forth in a letter ruling (original and a Consent Agreement copy). If transmitting electronically, the issuing office may sign the letter ruling and the Consent Agreement copy electronically. See section 9.04(3) of this revenue procedure. If the taxpayer agrees to the terms and conditions contained in the change in method of accounting letter ruling, the taxpayer must sign and date the Consent Agreement copy of the letter ruling in the appropriate space. The Consent Agreement copy must be signed in a manner consistent with section 7.01(13) of this revenue procedure by an individual with authority to bind the taxpayer in such matters. The Consent Agreement copy must not be signed by the taxpayer's representative. The signed copy of the letter ruling will constitute an agreement (Consent Agreement) within the meaning of Treas. Reg. § 1.481-4(b). The signed Consent Agreement copy of the letter ruling must be returned to the Associate office within 45 calendar days of the date of the letter ruling. The signed Consent Agreement copy may be submitted under the procedures set forth above for submission of additional information. See section 9.04(3) and 9.08(5) of this revenue procedure. In addition, a copy of the signed Consent Agreement generally must be attached to the taxpayer's income tax return for the year of change. See section 11.03(2)(a) of Rev. Proc. 2015-13 (or any successor). A taxpayer filing its return electronically should attach the Consent Agreement as a PDF file named "Form 3115 Consent." If the taxpayer has filed its income tax return for the year of change before the letter ruling has been received and the Consent Agreement has been signed and returned, the copy of the signed Consent Agreement should be attached to the amended return for the year of change that the taxpayer files to implement the change in method of accounting. A taxpayer must secure the consent of the Commissioner before changing a method of accounting for Federal income tax purposes. See Treas. Reg. § 1.446-1(e)(2)(i). For a change in method of accounting requested on a non-automatic Form 3115, a taxpayer has secured the consent of the Commissioner when the taxpayer timely signs and returns the Consent Agreement copy of the letter ruling from the Associate office granting permission to make the change in method of accounting and otherwise complies with Rev. Proc. 2015-13 (or any successor). A taxpayer that timely files a non-automatic Form 3115 and takes the requested change in method of accounting into account in its federal income tax return for the year of change (and any subsequent taxable year) prior to receiving a letter ruling granting consent for that change has made a change in method of accounting without obtaining the consent of the Commissioner as required by § 446(e) (an "unauthorized change"). As provided in section 12.02 of Rev. Proc. 2015- 13 (or any successor), the Director may determine when a change is not made in compliance with all applicable provisions of Rev. Proc. 2015-13 (or any successor) and may deny the unauthorized change. However, the Commissioner's consent, issued subsequent to the requested year of change, applies back to the year of change (and any subsequent taxable year) as of the date of the letter ruling granting consent for that change if the taxpayer timely signs and returns the Consent Agreement copy and implements the change in accordance with all applicable provisions of Rev. Proc. 2015-13 (or any successor) and section 11 of this revenue procedure. If the Commissioner does not grant consent under Rev. Proc. 2015-13 (or any successor) for the change in method of accounting taken into account by the taxpayer, the taxpayer is subject to any interest, penalties, or other adjustments resulting from improper implementation of the change. See § 446(f). A taxpayer who timely files a non-automatic Form 3115 and takes the requested change into account in the taxpayer's Federal income tax return for the year of change (and any subsequent taxable year), prior to receiving the letter ruling granting permission for the requested change, may nevertheless rely on the letter ruling received from the Associate office after it is received, as provided in section 9.19 of this revenue procedure. If, however, the requested change is modified or is withdrawn, denied, or similarly closed without the Associate office having granted consent, taxpayers are not relieved of any interest, penalties, or other adjustments resulting from improper implementation of the change. A copy of the change in.18 The Associate office will send a copy of each change in method of accounting letter ruling, method of accounting letter whether favorable or adverse, to the appropriate Service official in the operating division that ruling is sent to appropriate has examination jurisdiction of the taxpayer's tax return and the Manager of the Methods of Service officials Accounting and Timing Practice Network. Consent to change a.19 A taxpayer may rely on a change in method of accounting letter ruling received from the method of accounting may Associate office, subject to certain conditions and limitations. See sections 7, 8, 10, 11, and 12 of be relied on subject to Rev. Proc. 2015-13 (or any successor). limitations A qualifying taxpayer complying timely with an automatic change request procedure may rely on the consent of the Commissioner as provided in the automatic change request procedure to change the taxpayer's method of accounting, subject to certain conditions and limitations. See generally sections 7, 8, 10, 11, and 12 of Rev. Proc. 2015-13 (or any successor). An Associate office may review a Form 3115 filed under an automatic change request procedure and will notify the taxpayer if additional information is needed or if consent is not granted to the taxpayer for the requested change. See section 11 of Rev. Proc. 2015-13 (or any successor). Further, the field office that has jurisdiction over the taxpayer's return may review the Form 3115. See section 12 of Rev. Proc. 2015-13 (or any successor). Change in method of.20 A taxpayer may not rely on a change in method of accounting letter ruling issued to another accounting letter ruling taxpayer. See § 6110(k)(3). does not apply to another taxpayer Associate office discretion.21 The Associate office reserves the right to decline to process any non-automatic Form 3115 to permit requested change in situations in which it would not be in the best interest of sound tax administration to permit in method of accounting the requested change or it would not clearly reflect income. In this regard, the Associate office will consider whether the change in method of accounting would clearly and directly frustrate compliance efforts of the Service in administering the income tax laws. See section 11.02 of Rev. Proc. 2015-13 (or any successor). List of automatic change.22 For procedures regarding requests for an automatic change in method of accounting, refer in method of accounting to the following published automatic change request procedures. The Commissioner's consent to request procedures an otherwise qualifying automatic change in method of accounting is granted only if the taxpayer complies timely with the applicable automatic change request procedure. The automatic change request procedures for obtaining a change in method of accounting include: (1) Rev. Proc. 2015-13 (or any successor). Rev. Proc. 2015-13 applies to the changes in method of accounting described in Rev. Proc. 2019-43, 2019-48 I.R.B. 1107, as modified by Rev. Proc. 2020-13, 2020-11 I.R.B. 515 and Rev. Proc. 2020-25, 2020-19 I.R.B. 785 (or any successor). (2) The following automatic change request procedures, which require a completed Form 3115, provide both the procedures under which a change may be made automatically and the procedures under which such change must be made: Treas. Reg. § 1.166-2(d)(3) (bank conformity for bad debts); Treas. Reg. § 1.448-1 (to an overall accrual method for the taxpayer's first taxable year it is subject to § 448) (this change may also be subject to the procedures of Rev. Proc. 2015-13 (or any successor)); Treas. Reg. § 1.45 8-1 and -2 (exclusion for certain returned magazines, paperbacks, or records); Rev. Proc. 97-43, 1997-2 C.B. 494 (§ 475 - electing out of certain exemptions from securities dealer status); and Rev. Proc. 91-51, 1991-2 C.B. 779 (§ 1286 - certain taxpayers under examination that sell mortgages and retain rights to service the mortgages). (3) The following automatic change request procedures, which do not require a completed Form 3115, provide the type of change in method of accounting that may be made automatically and also provide the procedures under which such change must be made: Notice 96-30, 1996-1 C.B. 378 (§ 446 - change to comply with Statement of Financial Accounting Standards No. 116); Rev. Proc. 92-29, 1992-1 C.B. 748 (§ 461 - change in real estate developer's method for including costs of common improvements in the basis of property sold); Rev. Proc. 98-58, 1998-2 C.B. 712 (certain taxpayers seeking to change to the installment method of accounting under § 453 for alternative minimum tax purposes for certain deferred payment sales contracts relating to property used or produced in the trade or business of farming); Treas. Reg. § 1.472-2 (taxpayers changing to the last-in, first-out (LIFO) inventory method); Section 585(c) and Treas. Reg. §§ 1.585-6 and 1.585-7 (large bank changing from the reserve method of § 585); and Rev. Proc. 92-67, 1992-2 C.B. 429 (election under § 1278(b) to include market discount in income currently or election under § 1276(b) to use constant interest rate to determine accrued market discount). (4) See Appendix F for the list of revenue procedures for automatic changes in accounting period. Other sections of this.23 In addition to this section 9, the following sections of this revenue procedure apply to revenue procedure that are automatic change requests and non-automatic change requests: applicable to Form 3115 1 (purpose of this revenue procedure); 2.01 (definition of "letter ruling"); 2.02 (definition of "closing agreement"); 2.05 (oral guidance); 3.01 (issues under the jurisdiction of the Associate Chief Counsel (Corporate)); 3.02 (issues under the jurisdiction of the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes)); 3.03 (issues under the jurisdiction of the Associate Chief Counsel (Financial Institutions and Products)); 3.04 (issues under the jurisdiction of the Associate Chief Counsel (Income Tax and Accounting)); 3.05 (issues under the jurisdiction of the Associate Chief Counsel (International)); 3.06 (issues under the jurisdiction of the Associate Chief Counsel (Passthroughs and Special Industries)); 5.03(2) (period of limitation when filing a request for extensions of time for making an election or for other relief under § 301.9100); 6.02 (letter rulings ordinarily not issued in certain areas because of the factual nature of the problem); 6.05 (letter rulings ordinarily not issued to business associations or groups); 6.06 (letter rulings ordinarily not issued where the request does not address the tax status, liability, or reporting obligations of the requester); 6.08 (letter rulings ordinarily not issued on Federal tax consequences of proposed legislation); 6.10 (letter rulings not issued on frivolous issues); 6.12 (letter rulings not issued on alternative plans or hypothetical situation); 7.01(1) (statement of facts and other information); 7.01(10) (statement of supporting authorities); 7.01(14) (authorized representatives); 7.01(15) (power of attorney and declaration of representative); 7.02(2) (power of attorney used to indicate recipient of a copy or copies of a letter ruling or a determination letter); 7.02(4) (expedited handling); 7.05(2) (notify Associate office if a return, amended return, or claim for refund is filed while request is pending and attach request to the return); 8.01 (receipt and control of the request, and referral to the appropriate Associate office); 8.02 (contact taxpayer within 21 calendar days); 8.04 (not bound by informal opinion expressed); 10 (scheduling conferences); 15 (user fees); 16 (significant changes to prior revenue procedure); 17 (effect of this revenue procedure on other documents); 18 (effective date of this revenue procedure); Appendix A (schedule of user fees); and Appendix F (revenue procedures and notices regarding letter ruling requests relating to specific Code sections and subject matters). SECTION 10. HOW ARE CONFERENCESFOR LETTER RULINGS SCHEDULED? Schedules a conference if.01 A taxpayer may request a conference regarding a letter ruling request. Normally, a conference requested by taxpayer is scheduled only when the Associate office considers it to be helpful in deciding the case or when an adverse decision is indicated. If conferences are being arranged for more than one request for a letter ruling involving the same taxpayer, they will be scheduled so as to cause the least inconvenience to the taxpayer. As stated in sections 7.02(6) and 9.04(4) of this revenue procedure, a taxpayer who wants to have a conference on the issue or issues involved should indicate this in writing when, or soon after, filing the request. If a conference has been requested, the taxpayer or the taxpayer's representative will be notified by telephone, if possible, of the time and place of the conference, which must then be held within 21 calendar days after this contact. Instructions for requesting an extension of the 21-day period and notifying the taxpayer or the taxpayer's representative of the Associate office's approval or denial of the request for extension are the same as those explained in section 8.05(2) (or section 9.08(2)(a) for a change in method of accounting request) of this revenue procedure regarding providing additional information. Permits taxpayer one.02 A taxpayer is entitled, as a matter of right, to only one conference in the Associate office, conference of right except as explained under section 10.05 of this revenue procedure. This conference is normally held at the branch level and is attended by a person who has the authority to sign the letter ruling in his or her own name or for the branch chief. When more than one branch has taken an adverse position on an issue in a letter ruling request or when the position ultimately adopted by one branch will affect that adopted by another, a representative from each branch with the authority to sign in his or her own name or for the branch chief will attend the conference. If more than one subject is to be discussed at the conference, the discussion will constitute a conference on each subject. To have a thorough and informed discussion of the issues, the conference usually will be held after the branch has had an opportunity to study the case. At the request of the taxpayer, the conference of right may be held earlier. No taxpayer has a right to appeal the action of a branch to an Associate Chief Counsel or to any other official of the Service. But see section 10.05 of this revenue procedure for situations in which the Associate office may offer additional conferences. In employment tax matters, if the service recipient (the firm) requests the letter ruling, the film is entitled to a conference. If the worker requests the letter ruling, both the worker and the firm are entitled to a conference. See section 5.10 of this revenue procedure. Disallows verbatim.03 Because conference procedures are informal, no tape, stenographic, or other verbatim recording of conferences recording of a conference may be made by any party. Makes tentative.04 The senior Associate office representative present at the conference ensures that the recommendations on taxpayer has the opportunity to present views on all the issues in question. An Associate office substantive issues representative explains the Associate office's tentative decision on the substantive issues and the reasons for that decision. If the taxpayer asks the Associate office to limit the retroactive effect of any letter ruling or limit the revocation or modification of a prior letter ruling, an Associate office representative will discuss the recommendation concerning this issue and the reasons for the recommendation. The Associate office representatives will not make a commitment regarding the conclusion that the Associate office will finally adopt. May offer additional.05 The Associate office will offer the taxpayer an additional conference if, after the conference conferences of right, an adverse holding is proposed on a new issue or on the same issue but on different grounds from those discussed at the first conference. There is no right to another conference when a proposed holding is reversed at a higher level with a result less favorable to the taxpayer, if the grounds or arguments on which the reversal is based were discussed at the conference of right. The limit on the number of conferences to which a taxpayer is entitled does not prevent the Associate office from offering additional conferences, including conferences with an official higher than the branch level, if the Associate office decides they are needed. These conferences are not offered as a matter of course simply because the branch has reached an adverse decision. In general, conferences with higher level officials are offered only if the Associate office determines that the case presents significant issues of tax policy or tax administration and that the consideration of these issues would be enhanced by additional conferences with the taxpayer. Requires written.06 The taxpayer should furnish to the Associate office any additional data, reasoning, precedents, confirmation of information etc., that were proposed by the taxpayer and discussed at the conference but not previously or presented at conference adequately presented in writing. The taxpayer must furnish the additional information within21 calendar days from the date of the conference. If the additional information is not received within that time, a letter ruling will be issued on the basis of the information on hand or, if appropriate, no ruling will be issued. See section 8.05 of this revenue procedure for instructions on submission of additional information for a letter ruling request other than a change in method of accounting request. See section 9.08 of this revenue procedure for instructions on submitting additional information for a change in method of accounting request. May schedule a pre-.07 Sometimes it will be advantageous to both the Associate office and the taxpayer to hold a submission conference conference before the taxpayer submits the letter ruling request to discuss substantive or procedural issues relating to a proposed transaction. These conferences are held only if the identity of the taxpayer is provided to the Associate office, only if the taxpayer actually intends to make a request, only if the request involves a matter on which a letter ruling is ordinarily issued, and only at the discretion of the Associate office and as time permits. For example, a pre-submission conference will not be held on an income tax issue if, at the time the pre-submission conference is requested, the identical issue is involved in the taxpayer's return for an earlier period and that issue is being examined by a field office. See section 6.01(1) of this revenue procedure. A letter ruling request submitted following a pre-submission conference will not necessarily be assigned to the branch that held the pre-submission conference. Also, when a letter ruling request is not submitted following a pre-submission conference, the Associate office may notify, by memorandum, the appropriate Service officials in the operating division that has examination jurisdiction of the taxpayer's tax return and may give its views on the issues raised during the pre-submission conference. For LB&I taxpayers, a copyof the memorandum will be sent to the Assistant Deputy Commissioner, Compliance Integration. This memorandum may constitute Chief Counsel Advice, as defined in § 6110(i), and may be subject to disclosure under§ 6110. (1) Taxpayer may request a pre-submission conference in writing or by telephone. A taxpayer or the taxpayer's representative may request a pre-submission conference in writing or by telephone. If the taxpayer's representative is requesting the pre-submission conference, a power of attorney is required. A taxpayer should use Form 2848, Power of Attorney and Declaration of Representative, to provide the representative's authority. If multiple taxpayers and/ or their authorized representatives will attend or participate in the pre-submission conference, cross powers of attorney (or, as appropriate, tax information authorizations) are required. If the taxpayer's representative is requesting the pre-submission conference by telephone, the Associate office's representative ( see list of phone numbers below) will provide the fax number to send the power of attorney (or, as appropriate, tax information authorizations) and any other necessary information prior to scheduling the pre-submission conference. The request must identify the taxpayer and briefly explain the primary issue so it can be assigned to the appropriate branch. If submitted in writing, the request should also identify the Associate office expected to have jurisdiction over the request for a letter ruling. A written request for a pre-submission conference should be sent to the appropriate address listed in section 7.04 of this revenue procedure. To request a pre-submission conference by telephone, call: (a) (202) 317-3181 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Corporate); (b) (202) 317-6000 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes); (c) (202) 317-3900 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Financial Institutions and Products); (d) (202) 317-7002 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Income Tax and Accounting); (e) (202) 317-3800 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (International); (f) (202) 317-3100 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Passthroughs and Special Industries); or (g) (202) 317-3400 (not a toll-free call) for matters under the jurisdiction of the Office of Associate Chief Counsel (Procedure and Administration). (2) Pre-submission conferences held in person or by telephone. Depending on the circumstances, pre-submission conferences may be held in person at the Associate office or may be conducted by telephone. (3) Certain information required to be submitted to the Associate office prior to the pre- submission conference. Generally, the taxpayer will be asked to provide a statement of whether the issue is an issue on which a letter ruling is ordinarily issued and a draft of the letter ruling request or other detailed written statement explaining the proposed transaction, issue, and legal analysis, before scheduling the pre-submission conference. The Associate office will allow taxpayers to submit a statement after the conference is scheduled at its discretion. If the taxpayer's authorized representative will attend or participate in the pre-submission conference, a power of attorney is required. (4) Discussion of substantive issues is not binding on the Service. Any discussion of substantive issues at a pre-submission conference is advisory only, is not binding on the Service in general or on the Office of Chief Counsel in particular, and cannot be relied upon as a basis for obtaining retroactive relief under the provisions of § 7805(b). May schedule a conference.08 Depending on the circumstances, conferences, including conferences of right and pre- to be held by telephone submission conferences, may be held by telephone. This may occur, for example, when a taxpayer wants a conference of right but believes that the issue involved does not warrant incurring the expense of traveling to Washington, DC, or if it is believed that scheduling an in-person conference of right will substantially delay the ruling process. If a taxpayer makes such a request, the branch reviewer will decide if it is appropriate in the particular case to hold a conference by telephone. If the request is approved, the taxpayer will be advised when to call the Associate office representatives (not a toll-free call). SECTION 11. WHAT EFFECT WILL A LETTER RULING HAVE? May be relied on subject to.01 A taxpayer ordinarily may rely on a letter ruling received from the Associate office subject limitations to the conditions and limitations described in this section. Will not apply to another.02 A taxpayer may not rely on a letter ruling issued to another taxpayer. See § 6110(k)(3). taxpayer However, shareholders and security holders of a corporation may rely on a letter ruling issued to the corporation for the limited purpose of determining the proper treatment of directly related tax items. For example, a letter ruling issued to a corporation with respect to the reorganization of that corporation may be relied upon by the corporation's shareholders in determining their basis in the stock of the corporation following the reorganization. See also section 11.06(3) of this revenue procedure. Will be used by a field office.03 When determining a taxpayer's liability, the field office must ascertain whether-- in examining the taxpayer's return (1) the conclusions stated in the letter ruling are properly reflected in the return; (2) the representations upon which the letter ruling was based reflect an accurate statement of the controlling facts; (3) the transaction was carried out substantially as proposed; and (4) there has been any change in the law that applies to the period during which the transaction or continuing series of transactions were consummated. If, when determining the liability, the field office finds that a letter ruling should be revoked or modified, the findings and recommendations of the field office will be forwarded through the appropriate Director to the Associate office for consideration before further action is taken by the field office. Such a referral to the Associate office will be treated as a request for technical advice and the provisions of Rev. Proc. 2022-2, this Bulletin, relating to requests for technical advice will be followed. See section 13.02 of Rev. Proc. 2022-2. Otherwise, the field office should apply the letter ruling in determining the taxpayer's liability. If a field office having jurisdiction over a return or other matter proposes to reach a conclusion contrary to a letter ruling previously issued to the taxpayer, it should coordinate the matter with the Associate office. May be revoked or modified.04 Unless it was part of a closing agreement as described in section 2.02 of this revenue if found to be in error or procedure, a letter ruling found to be in error or not in accord with the current views of the Service there has been a change in maybe revoked or modified. If a letter ruling is revoked or modified, the revocation or modification law applies to all years open under the period of limitation unless the Service uses its discretionary authority under § 7805(b) to limit the retroactive effect of the revocation or modification. A letter ruling may be revoked or modified by-- (1) a letter giving notice of revocation or modification to the taxpayer to whom the letter ruling was issued; (2) the enactment of legislation or ratification of a tax treaty; (3) a decision of the United States Supreme Court; (4) the issuance of temporary or final regulations; or (5) the issuance of a revenue ruling, revenue procedure, notice, or other statement published in the Internal Revenue Bulletin. Consistent with these provisions, if a letter ruling relates to a continuing action or a series of actions, it ordinarily will be applied until any one of the events described above occurs. Publication of a notice of proposed rulemaking will not affect the application of any letter ruling issued under this revenue procedure. Where a letter ruling is revoked or modified by a letter to the taxpayer, the letter will state whether the revocation or modification is retroactive. Where a letter ruling is revoked or modified by the issuance of final or temporary regulations or by the publication of a revenue ruling, revenue procedure, notice, or other statement in the Internal Revenue Bulletin, the document may contain a statement as to its retroactive effect on letter rulings. A letter ruling may be revoked even if the subject of the letter ruling is a matter that the Service currently does not issue rulings on. Letter ruling revoked or.05 An Associate office will revoke or modify a letter ruling and apply the revocation modified based on material retroactively to the taxpayer for whom the letter ruling was issued or to a taxpayer whose tax change in facts applied liability was directly involved in the letter ruling if-- retroactively (1) there has been a misstatement or omission of controlling facts; (2) the facts at the time of the transaction are materially different from the controlling facts on which the letter ruling was based; or (3) the transaction involves a continuing action or series of actions and the controlling facts change during the course of the transaction. Not otherwise generally.06 Where the revocation or modification of a letter ruling is for reasons other than a change revoked or modified in facts as described in section 11.05 of this revenue procedure, it will generally not be applied retroactively retroactively to the taxpayer for whom the letter ruling was issued or to a taxpayer whose tax liability was directly involved in the letter ruling provided that-- (1) there has been no change in the applicable law; (2) the letter ruling was originally issued for a proposed transaction; and (3) the taxpayer directly involved in the letter ruling acted in good faith in relying on the letter ruling, and revoking or modifying the letter ruling retroactively would be to the taxpayer's detriment. For example, the tax liability of each shareholder is directly involved in a letter ruling on the reorganization of a corporation. Depending on all facts and circumstances, the shareholders' reliance on the letter ruling may be in good faith. The tax liability of a member of an industry, however, is not directly involved in a letter ruling issued to another member of the same industry. Therefore, a nonretroactive revocation or modification of a letter ruling to one member of an industry will not extend to other members of the industry who have not received letter rulings. By the same reasoning, a tax practitioner may not extend to one client the non-retroactive application of a revocation or modification of a letter ruling previously issued to another client. If a letter ruling is revoked or modified by a letter to the taxpayer with retroactive effect, the letter to the taxpayer will, except in fraud cases, state the grounds on which the letter ruling is being revoked or modified and explain the reasons why it is being revoked or modified retroactively. Retroactive effect of.07 A letter ruling issued on a particular transaction represents a holding of the Service on revocation or modification that transaction only. It will not apply to a similar transaction in the same year or any other year. applied to a particular Except in unusual circumstances, the application of that letter ruling to the transaction will not be transaction affected by the later issuance of regulations (either temporary or final) if conditions ( 1) through (3) in section 11.06 of this revenue procedure are met. Retroactive effect of.08 If a letter ruling is issued covering a continuing action or series of actions and the letter revocation or modification ruling is later found to be in error or no longer in accord with the position of the Service, the applied to a continuing appropriate Associate Chief Counsel ordinarily will limit the retroactive effect of the revocation or action or series of actions modification to a date that is not earlier than that on which the letter ruling is revoked or modified. For example, the retroactive effect of the revocation or modification of a letter ruling covering a continuing action or series of actions ordinarily would be limited in the following situations when the letter ruling is in error or no longer in accord with the position of the Service: (1) A taxpayer received a letter ruling that certain payments are excludable from gross income for Federal income tax purposes. The taxpayer ordinarily would be protected only for the payment received after the letter ruling was issued and before the revocation or modification of the letter ruling. (2) A taxpayer rendered a service or provided a facility that is subject to the excise tax on services or facilities and, in relying on a letter ruling received, it did not pass the tax on to the user of the service or the facility. (3) An employer incurred liability under the Federal Insurance Contributions Act but, in relying on a letter ruling received, neither collected the employee tax nor paid the employee and employer taxes under the Federal Insurance Contributions Act. The retroactive effect would be limited for both the employer and employee tax. The limitation would be conditioned on the employer furnishing wage data, as may be required by § 31.6011(a)-1 of the Treasury Regulations. Generally not retroactively.09 A letter ruling holding that the sale or lease of a particular article is subject to the revoked or modified if manufacturer's excise tax or the retailer's excise tax may not retroactively revoke or modify an related to sale or lease earlier letter ruling holding that the sale or lease of such an article was not taxable if the taxpayer subject to excise tax to whom the letter ruling was issued, in relying on the earlier letter ruling, gave up possession or ownership of the article without passing the tax on to the customer. See § 1108(b), Revenue Act of 1926. May be retroactively.10 A taxpayer is not protected against retroactive revocation or modification of a letter ruling revoked or modified when involving a transaction completed before the issuance of the letter ruling or involving a continuing transaction is entered into action or series of actions occurring before the issuance of the letter ruling, because the taxpayer before the issuance of the did not enter into the transaction relying on a letter ruling. letter ruling Taxpayer may request that.11 Under § 7805(b), the Service may prescribe any extent to which a revocation or modification retroactivity be limited of a letter ruling will be applied without retroactive effect. A taxpayer to whom a letter ruling has been issued may request that the appropriate Deputy Associate Chief Counsel limit the retroactive effect of any revocation or modification of the letter ruling. For letter rulings governed by Rev. Proc. 2022-4, this Bulletin, a taxpayer to whom a letter ruling has been issued by the Commissioner, Tax Exempt and Government Entities, may request limiting the retroactive effect of any revocation or modification of the letter ruling pursuant to the procedures set forth in section 29 of Rev. Proc. 2022-4. Format of request (1) Request for relief under § 7805(b) must be made in required format. A request to limit the retroactive effect of the revocation or modification of a letter ruling must be in the general form of, and meet the general requirements for, a letter ruling request, as set forth in section 7 of this revenue procedure. Specifically, the request must also (a) state that it is being made under § 7805(b); (b) state the relief sought; (c) explain the reasons and arguments in support of the relief requested (including a discussion of section 11.05 of this revenue procedure, the three items listed in section 11.06 of this revenue procedure, and any other factors as they relate to the taxpayer's particular situation); and (d) include any documents bearing on the request. A request that the Service limit the retroactive effect of a revocation or modification of a letter ruling may be made in the form of a separate request for a letter ruling when, for example, a revenue ruling has the effect of modifying or revoking a letter ruling previously issued to the taxpayer or when the Service notifies the taxpayer of a change in position that will have the effect of revoking or modifying the letter ruling. When notice is given by the field office, during an examination of the taxpayer's return, or by Appeals, during consideration of the taxpayer's return before Appeals, a request to limit retroactive effect must be made in the form of a request for technical advice as explained in section 14.02 of Rev. Proc. 2022-2, this Bulletin. When germane to a pending letter ruling request, a request to limit the retroactive effect of a revocation or modification of a letter ruling may be made as part of the request for the letter ruling, either initially or at any time before the letter ruling is issued. When a letter ruling that concerns a continuing transaction is revoked or modified by, for example, a subsequent revenue ruling, a request to limit retroactive effect must be made before the examination of the return that contains the transaction that is the subject of the letter ruling request. Request for conference (2) Taxpayer may request a conference on application of § 7805(b). A taxpayer who requests the application of § 7805(b) in a separate letter ruling request has the right to a conference in the Associate office as explained in sections 10.02, 10.04, and 10.05 of this revenue procedure. If the request is made initially as part of a pending letter ruling request or is made before the conference of right is held on the substantive issues, the§ 7805(b) issue will be discussed at the taxpayer's one conference of right as explained in section 10.02 of this revenue procedure. If the request for the application of § 7805(b) relief is made as part of a pending letter ruling request after a conference has been held on the substantive issue and the Associate office determines that there is justification for having delayed the request, the taxpayer is entitled to one conference of right concerning the application of § 7805(b), with the conference limited to discussion of this issue only. SECTION 12. Directors issue determination letters only if the question presented is specifically answered UNDER WHAT by a statute, tax treaty, regulation, a conclusion stated in a revenue ruling, or an opinion or court CIRCUMSTANCES DO decision that represents the position of the Service. DIRECTORS ISSUE DETERMINATION LETTERS? Under no circumstances will a Director issue a determination letter unless it is clearly shown that the request concerns a return that has been filed or is required to be filed and over which the Director has, or will have, examination jurisdiction. A determination letter does not include assistance provided by the U.S. competent authority pursuant to the mutual agreement procedure in tax treaties as set forth in Rev. Proc. 2015-40, 2015-35 I.RB. 236. In income and gift tax.01 In income and gift tax matters, Directors issue determination letters in response to taxpayers' matters written requests on completed transactions that affect returns over which they have examination jurisdiction. A determination letter usually is not issued for a question concerning a return to be filed by the taxpayer if the same question is involved in a return already filed. Normally, Directors do not issue determination letters on the tax consequences of proposed transactions. A Director may issue a determination letter on the replacement of involuntarily converted property under § 1033, even if the replacement has not yet been made, if the taxpayer has filed an income tax return for the first taxable year in which any of the gain was realized from the converted property. In estate tax matters.02 In estate tax matters, Directors issue determination letters in response to written requests affecting the estate tax returns over which they have examination jurisdiction. They do not issue determination letters on matters concerning the application of the estate tax to the prospective estate of a living person. In generation-skipping.03 In generation-skipping transfer tax matters, Directors issue determination letters in response transfer tax matters to written requests affecting the generation-skipping transfer tax returns over which they have ! examination jurisdiction. They do not issue determination letters on matters concerning the application of the generation-skipping transfer tax before the distribution or termination takes place. In employment and excise.04 In employment and excise tax matters, Directors issue determination letters in response tax matters to taxpayers' written requests on completed transactions over which they have examination jurisdiction. All determination letter requests regarding employment status (employer/employee relationship) made by taxpayers that are not Federal agencies and instrumentalities or their workers, must be submitted to the Internal Revenue Service at the address set forth on the current instructions for Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. If the service recipient (the firm) requests the determination regarding employment status, the firm will receive any determination letter issued. A copy will also be sent to any workers identified in the request. If the worker makes the request and the firm has been contacted for information, both the worker and the firm will receive any issued determination letter. The determination letter will apply to any individuals engaged by the firm under substantially similar circumstances. See section 5.10 of this revenue procedure for requests regarding employment status made by Federal agencies and instrumentalities or their workers. Requests concerning.05 A request received by a Director on a question concerning an income, estate, or gift tax income, estate, or gift tax return already filed generally will be considered in connection with the examination of the return. returns If a response is made to the request before the return is examined, it will be considered a tentative finding in any later examination of that return. Review of determination.06 Determination letters issued under sections 12.01 through 12.04 of this revenue procedure letters are not reviewed by the Associate offices before they are issued. If a taxpayer believes that a determination letter of this type is in error, the taxpayer may ask the Director to reconsider the matter or to request technical advice from an Associate office as explained in Rev. Proc. 2022-2, this Bulletin. The preceding sentence does not apply to SS-8 requests under section 12.04. If a taxpayer disagrees with a determination of employment status made in response to an SS-8 request, the taxpayer may request that the SS-8 Program reconsider the determination letter if the taxpayer has additional information concerning the relationship that was not part of the original submission or the taxpayer can identify facts that were part of the original submission that the taxpayer thinks were not fully considered. SECTION 13. WHAT EFFECT WILL A DETERMINATION LETTER HAVE? Has same effect as a letter.01 A determination letter issued by a Director has the same effect as a letter ruling issued to a ruling taxpayer under section 11 of this revenue procedure. If a field office proposes to reach a conclusion contrary to that expressed in a determination letter, that office need not refer the matter to the Associate office as is required for a letter ruling found to be in error. The field office must, however, refer the matter to the Associate office through the appropriate Direct or if it desires to have the revocation or modification of the determination letter limited under § 7805(b), except if the determination letter has been issued by the Commissioner, Tax Exempt and Government Entities. See Rev. Proc. 2022-4 and Rev. Proc. 2022-5, this Bulletin. Taxpayer may request.02 Under § 7805(b), the Service may prescribe the extent to which a revocation or modification that retroactive effect of of a determination letter will be applied without retroactive effect. For determination letters that revocation or modification are not issued by the Commissioner, Tax Exempt Government Entities, a Director does not have be limited authority under § 7805(b) to limit the revocation or modification of the determination letter. Therefore, if the field office proposes to revoke or modify a determination letter, the taxpayer may request limitation of the retroactive effect of the revocation or modification by asking the Director that issued the determination letter to seek technical advice from the Associate office. See section 14.02 of Rev. Proc. 2022-2, this Bulletin. A taxpayer to whom a determination letter has been issued by the Commissioner, Tax Exempt and Government Entities, may request limiting the retroactive effect of any revocation or modification of the determination letter pursuant to the procedures set forth in section 23 of Rev. Proc. 2022-4, or section 12.04 of Rev. Proc. 2022-5, this Bulletin. Format of request (1) Request for relief under § 7805(b) must be made in required format A taxpayer's request to limit the retroactive effect of the revocation or modification of the determination letter must be in the form of, and meet the general requirements for, a technical advice request. See section 14.02 of Rev. Proc. 2022-2, this Bulletin. The request must also-- (a) state that it is being made under § 7805(b); (b) state the relief sought; (c) explain the reasons and arguments in support of the relief sought (including a discussion of section 11.05 of this revenue procedure, the three items listed in section 11.06 of this revenue procedure, and any other factors as they relate to the taxpayer's particular situation); and (d) include any documents bearing on the request. Request for conference (2) Taxpayer may request a conference on application of § 7805(b). When technical advice is requested regarding the application of § 7805(b), the taxpayer has the right to a conference with the Associate office to the same extent as does any taxpayer who is the subject of a technical advice request. See section 14.04 of Rev. Proc. 2022-2, this Bulletin. SECTION 14. UNDER WHAT CIRCUMSTANCES ARE MATTERS REFERRED BETWEEN A DIRECTOR AND AN ASSOCIATE OFFICE? Requests for determination.01 If a Director receives a request for a determination letter but may not issue one under the letters provisions of this revenue procedure, the Director will forward the request to the appropriate Associate office for reply. The field office will notify the taxpayer that the matter has been referred. Directors will also refer to the appropriate Associate office any request for a determination letter that in their judgment should have the attention of the Associate office. The field office will notify the taxpayer that the matter has been referred. No-rule areas.02 If the request involves an issue on which the Service will not issue a letter ruling or determination letter, the request will not be forwarded to an Associate office. The Director will notify the taxpayer that the Service will not issue a letter ruling or a determination letter on the issue. See section 6 of this revenue procedure for a description of no-rule areas. Requests for letter rulings.03 If an Associate office receives a request for a letter ruling that it may not act upon under section 6of this revenue procedure, the Associate office may, in its discretion, forward the request to the field office that has examination jurisdiction over the taxpayer's return. The taxpayer will be notified of this action. If the request is on an issue or in an area of the type discussed in section 6 of this revenue procedure and the Service decides not to issue a letter ruling or a determination letter, the Associate office will notify the taxpayer and will then forward the request to the appropriate field office for association with the related return. Letter ruling request.04 If a request for a letter ruling is mistakenly sent to a Director, the Director will return it to mistakenly sent to a the taxpayer so that the taxpayer can send it to an Associate office. Director SECTION 15. WHAT ARE THE USER FEE REQUIREMENTS FOR REQUESTS FOR LETTER RULINGS AND DETERMINATION LETTERS? Legislation authorizing user.01 Section 7528 was added to the Internal Revenue Code by section 202 of the Extension of the fees Temporary Assistance for Needy Families Block Grant Program, Pub. L. No. 108-89, amended by section 891(a) of the American Jobs Creation Act of 2004, Pub. L. 108-357, and was made permanent by section 8244 of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, Pub. L. No. 110-28. Section 7528 provides that the Secretary of the Treasury or delegate (the "Secretary") shall establish a program requiring the payment of user fees for requests to the Service for letter rulings, opinion letters, determination letters, and other similar requests. The fees charged under the program are to: (1) vary according to categories or subcategories established by the Secretary; (2) be determined after taking into account the average time for, and difficulty of, complying with requests in each category or subcategory; and (3) be payable in advance. The Secretary is to provide for exemptions and reduced fees under the program as the Secretary determines to be appropriate, but the average fee applicable to each category or subcategory must not be less than the amount specified in § 7528(b)(3). Requests to which a user fee.02 In general, user fees apply to all requests for-- applies (1) letter rulings (including non-automatic Forms 3115, Application for Change in Accounting Method ), determination letters, and advance pricing agreements; (2) closing agreements described in paragraph (A)(3)(d) of Appendix A of this revenue procedure and pre-filing agreements described in Rev. Proc. 2016-30, 2016-21 I.R.B. 981 (or its successor); (3) renewal of advance pricing agreements; (4) reconsideration of letter rulings or determination letters; and (5) supplemental letter rulings, determination letters, etc., to correct mistakes in original letter rulings, determination letters, etc. Requests to which a user fee applies must be accompanied by the appropriate fee as determined from the fee schedule provided in Appendix A of this revenue procedure. The fee may be refunded as provided in section 15.10 of this revenue procedure. Requests to which a user fee.03 User fees do not apply to-- does not apply (1) elections made pursuant to § 301.9100-2, pertaining to automatic extensions of time ( see section 5.03 of this revenue procedure); (2) late classification elections made pursuant to Rev. Proc. 2009-41, 2009-2 C.B. 439 ( see section 5.03(6) of this revenue procedure); (3) late S corporation and related elections made pursuant to Rev. Proc. 2013-30, 2013-36 I.R.B. 173 ( see section 5.02 of this revenue procedure); (4) requests for a change in accounting period or method of accounting permitted to be made by a published automatic change request revenue procedure ( see section 9.01(1) of this revenue procedure); (5) requests for harassment campaign letter rulings under § 6104(d)(4); (6) request for Neighborhood Land Use Rule letter rulings under § 514(b)(3); (7) information letters; or (8) late elections under § 338 that qualify under the automatic provisions in sections 3, 4, and5 of Rev. Proc. 2003-33, 2003-1 C.B. 803. Exemptions from the user.04 The user fee requirements do not apply to-- fee requirements (1) departments, agencies, or instrumentalities of the United States if they certify that they are seeking a letter ruling or determination letter on behalf of a program or activity funded by Federal appropriations. The fact that a user fee is not charged does not have any bearing on whether an applicant is treated as an agency or instrumentality of the United States for purposes of any provision of the Code; or (2) requests as to whether a worker is an employee for Federal employment taxes and income tax withholding purposes (Subtitle C of the Code) submitted on Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, or its equivalent. Fee schedule.05 The schedule of user fees is provided in Appendix A of this revenue procedure. For the user fee requirements applicable to-- (1) requests for advance pricing agreements or renewals of advance pricing agreements, see section 3.05 of Rev. Proc. 2015-41, 2015-35 I.R.B. 263; or (2) requests for letter rulings, determination letters, etc., under the jurisdiction of the Commissioner, TE/GE (which no longer include changes in method of accounting), see Rev. Proc. 2022-4 and Rev. Proc. 2022-5, this Bulletin. Applicable user fee for a.06 request involving multiple offices, fee categories, issues, transactions, or (1) Requests involving several offices. If a request dealing with only one transaction involves entities more than one office within the Service (for example, one issue is under the jurisdiction of the Associate Chief Counsel (Passthroughs and Special Industries) and another issue is under the jurisdiction of the Commissioner, TE/GE), only one fee applies, namely the highest fee that otherwise would apply to each of the offices involved. See Rev. Proc. 2022-4 and Rev. Proc. 2022- 5, this Bulletin, for the user fees applicable to issues under the jurisdiction of the Commissioner, TE/GE. However, if an additional request is submitted after the original ruling is issued, regardless of whether it relates to the same transaction or facts at issue in the earlier request, a new user fee applies. (2) Requests involving several fee categories. If a request dealing with only one transaction involves more than one fee category, only one fee applies: the highest fee that otherwise would apply to each of the categories involved. (3) Requests involving several issues. If a request dealing with only one transaction involves several issues, a request for a change in method of accounting dealing with only one item or submethod of accounting involves several issues, or a request for a change in accounting period dealing with only one item involves several issues, the request is treated as one request. Therefore, only one fee applies, i.e., the fee that applies to the particular category or subcategory involved. The addition of a new issue relating to the same transaction, item, or submethod will not result in an additional fee unless the issue places the transaction, item, or submethod in a higher fee category. So long as the issues all relate to a single transaction, a request that the Service address one or more of the issues in a separate ruling will not result in an additional fee. (4) Requests involving several unrelated transactions. If a request involves several unrelated transactions, a request for a change in method of accounting involves several unrelated items or submethods of accounting, or a request for a change in accounting period involves several unrelated items, each transaction or item is treated as a separate request. As a result, a separate fee will apply for each unrelated transaction, item, or submethod. An additional fee will apply if the request is changed by the addition of an unrelated transaction, item, or submethod not contained in the initial request. An example of a request involving unrelated transactions is a request involving relief under § 301.9100-3 and the underlying issue. (5) Requests involving several entities. Each entity involved in a transaction (for example, a reorganization) that desires a separate letter ruling in its own name must pay a separate fee regardless of whether the transaction or transactions may be viewed as related. But see section 15.07 of this revenue procedure (providing a reduced user fee for substantially identical letter rulings or substantially identical changes in method of accounting). (6) Requests made by married taxpayers who file jointly. A married couple filing a joint return may jointly request a single letter ruling and pay a single user fee if the issues arise from a joint activity or if the spouses would otherwise qualify for substantially identical letter rulings. See section 15.07 of this revenue procedure. If a spouse desires a ruling to be individually issued to him or her, a separate fee must be paid for each individual request. Applicable user fee for.07 requests for substantially identical letter rulings or closing agreements, or (1) In general. The user fees provided in paragraph (A)(5) of Appendix A of this revenue identical changes in method procedure apply to the situations described in sections 15.07(2) and 15.07(4) of this revenue of accounting procedure. To assist in the processing of these user fee requests, all letter ruling requests submitted under this section 15.07 should-- (a) except for non-automatic Forms 3115, include the following typed or printed language at the top of the letter ruling request: "REQUEST FOR USER FEE UNDER SECTION 15.07 OF REV. PROC. 2022-1"; (b) list on the first page of the submission all taxpayers and entities, and separate and distinct trades or businesses, including QSubs or single-member LLCs, requesting a letter ruling (including the taxpayer identification number and the amount of user fee submitted for each taxpayer, entity, or separate and distinct trade or business); and (c) make one payment to cover all user fees. If the Service determines that the letter ruling requests do not qualify for the user fee provided in paragraph (A)(5) of Appendix A of this revenue procedure, the Service will request the proper fee. See section 15.09 of this revenue procedure. (2) Substantially identical letter rulings and closing agreements. The user fee provided in paragraph (A)(5)(a) of Appendix A of this revenue procedure applies to a taxpayer or taxpayers · requesting substantially identical letter rulings (including accounting period, method of accounting, and earnings and profits requests other than those submitted on Form 1128, Application to Adopt, Change, or Retain a Tax Year, Form 2553, Election by a Small Business Corporation, Form 3115, Application for Change in Accounting Method, and Form 5452, Corporate Report of Nondividend Distributions ) in the following situations: (a) The taxpayers to whom the letter rulings will be issued are multiple entities with a common member, sponsor, or parent, or multiple members of a common entity or consolidated group; or· (b) The taxpayers to whom the letter rulings will be issued are parties engaged together in the same transaction affecting all requesting taxpayers. To qualify for this reduced user fee, all information and underlying documents must be substantially identical and all letter ruling requests must be submitted at the same time in a single submission. In addition, the taxpayer(s) must state that the letter ruling requests and all information and underlying documents are substantially identical, and must specifically identify the extent to which the letter ruling requests, information, and underlying documents are not identical. If a taxpayer or taxpayers requesting reduced user fees pursuant to this section 15.07(2) also request a pre-submission conference pursuant to section 10.07, the taxpayer(s) should notify the Associate office at or before the pre-submission conference that the taxpayer(s) intend to request reduced user fees pursuant to this paragraph. At the pre-submission conference, the taxpayer(s) should discuss with the Associate office how the letter ruling requests will satisfy the requirements of this paragraph. The reduced fee for substantially identical letter rulings is applicable to taxpayers requesting closing agreements as described in section 2.02 of this revenue procedure, assuming they meet the requirements described above for letter rulings. (3) Substantially identical plans under § 25(c)(2)(B). The user fee provided in paragraph (A) (5)(c) of Appendix A of this revenue procedure shall apply to a taxpayer who submits substantially identical plans for administering the 95-percent requirement of § 143(d)(1) following the submission and approval of an initial plan for administering the requirement. The request for subsequent approvals of substantially identical plans must (1) state that a prior plan was submitted and approved and include a copy of the prior plan and approval; (2) state that the subsequent plan is substantially identical to the approved plan; and (3) describe any differences between the approved plan and the subsequent plan. (4) Identical changes in method of accounting and related § 301.9100 letter rulings. A common sponsor of multiple entities, common parent of a consolidated group, or other taxpayer, is eligible for the user fees provided in paragraphs (A)(5)(b) and (d) of Appendix A of this revenue procedure when requesting an identical change in method of accounting on a single Form 3115, Application for Change in Accounting Method, or an extension of time to file Form 3115 under § 301.9100-3 for the identical change in method of accounting, for two or more of the following in any combination-- (a) entities of that common sponsor; (b) members of that consolidated group; (c) separate and distinct trades or businesses (for purposes of § 1.446-(d)) of that taxpayer or member(s)of that consolidated group. Separate and distinct trades or businesses include QSubs and single-member LLCs;. (d) partnerships that are wholly-owned within that consolidated group; or (e) controlled foreign corporations (CFCs) and noncontrolled 10-percent owned foreign corporations that do not engage in a trade or business within the United States where (i) all controlling U.S. shareholders of the CFCs and all majority domestic corporate shareholders of the non controlled 10-percent owned foreign corporations, as applicable, are members of that consolidated group; or (ii) the taxpayer is the sole controlling U.S. shareholder of the CFCs or the sole domestic corporate shareholder of that noncontrolled 10-percent owned foreign corporation. To qualify as an identical change in method of accounting, the multiple entities with a common sponsor, the multiple entities wholly owned or controlled by a consolidated group or other taxpayer, or separate and distinct trades or businesses (that is, the applicants) must request to change from an identical present method of accounting to an identical proposed method of accounting. All aspects of the requested change in method of accounting must be identical, including the year of change, the present and proposed methods, the underlying facts and the authority for the request, except for the § 481(a) adjustments. If the Associate office determines that the requested changes in method of accounting are not identical, additional user fees will be required before any letter ruling is issued. The taxpayer, common sponsor, or common parent must, for each applicant for which the change in method of accounting is being requested, attach to the Form 3115 a schedule providing the name, employer identification number (where applicable), and § 481(a) adjustment. If the request is on behalf of eligible CFCs or non controlled 10-percent owned foreign corporations, the taxpayer or common parent must attach a statement that "[a]ll controlling U.S. shareholders (as defined in § l.964-1(c)(5)(i)) of all the CFCs to which the request relates are members of the common parent's consolidated group," that "[a]ll majority domestic corporate shareholders (as defined in § 1.964-1(c)(5)(ii)) of all the noncontrolled 10-percent owned foreign corporations to which the request relates are members of the common parent's consolidated group," that "[t] he taxpayer filing the request is the sole controlling U.S. shareholder (as defined in § 1.964-1(c) (5)) of the CFCs to which the request relates," or that "[t]he taxpayer filing the request is the sole domestic corporate shareholder (as defined in § 1.964-1(c)(5)) of the noncontrolled 10-percent owned foreign corporations to which the request relates," as applicable. If the request is on behalf of eligible partnerships, the common parent must attach a statement that "[a]ll partnerships to which the request relates are wholly-owned by members of the common parent's consolidated group." In the case of a § 301.9100 request for an extension of time to file a Form 3115 requesting an identical change in method of accounting for multiple entities with a common sponsor, multiple members of a consolidated group and/or multiple separate and distinct trades or businesses of a taxpayer or member(s) of the consolidated group, or multiple eligible CFCs or noncontrolled 10-percent owned foreign corporations (applicants), the taxpayer, common sponsor, or common parent must submit the information required in the preceding paragraph in addition to the information required by section 5.03 of this revenue procedure. Method of payment.08 Each request to the Service that is subject to a user fee under this revenue procedure must be accompanied by full payment. The user fees for all requests must be paid through www.pay.gov, except for requests for a determination letter from a Director (see paragraph (A)(1) of Appendix A), which are payable by check and mailed along with the request for determination letter. To locate the appropriate form on www.pay.gov, search for "Counsel Rulings User Fees" or navigate directly to https://www.pay.gov/public/form/start/106105509 (as of January 3, 2022). Effect of nonpayment.09 If a request is not matched with full payment, the office within the Service that is responsible or payment of incorrect for issuing the letter ruling, determination letter, advance pricing agreement, closing agreement, amount or reconsideration of a letter ruling or determination letter generally will exercise discretion in deciding whether to immediately return the request. If a request is not immediately returned, the taxpayer will be contacted and given a reasonable amount of time to submit the proper fee. If the proper fee is not received within a reasonable amount of time, the request will then be returned. The Service will usually defer substantive consideration of a request until proper payment has been received. The return of a request to the taxpayer may adversely affect substantive rights if the request is not perfected and resubmitted to the Service within 30 calendar days of the date of the cover letter returning the request. If a payment is made for more than the correct amount, the request will be accepted and the amount of the excess payment will be refunded to the taxpayer. If a ruling is issued and because of the ruling the taxpayer's gross income is reduced such that the taxpayer would have qualified for a reduced user fee in Appendix A, paragraph (A)(4), the amount of user fee paid in excess of the reduced fee will be refunded to the taxpayer. Refunds of user fee.10 In general, user fees will not be refunded. User fees, however, will be refunded in the following situations. (1) A user fee paid with a request to correct a mistake or omission in a prior issued letter ruling, determination letter, etc., will be refunded if the Service determines that the Service was responsible for the mistake or omission. (2) A user fee paid with a request for relief under § 7805(b) in connection with the revocation in whole or in part, of a previously issued letter ruling, determination letter, etc., will be refunded if the relief is granted. (The user fee paid for the letter ruling, determination letter, etc., that was revoked is never refunded.) (3) A user fee paid with a request for reconsideration of the Service's decision not to rule on an issue will be refunded if the Service agrees to rule on the issue and the user fee paid with the initial request was not refunded. (4) If the requested ruling, determination letter, etc., is not issued for any reason, and the Service determines that a refund is appropriate after taking into account all the facts and circumstances, including the amount of the Service's time and resources spent on the request, the user fee will be refunded. Request for reconsideration.11 A taxpayer who believes the user fee charged by the Service for its request for a letter ruling, of user fee determination letter, advance pricing agreement, or closing agreement is either inapplicable or incorrect and wishes to receive a refund of all or part of the amount paid ( see section 15.10 of this revenue procedure) may request reconsideration and, if desired, the opportunity for an oral discussion by sending a letter to the Service at the appropriate address given in section 7.04 in this revenue procedure. Both the incoming envelope and the letter requesting such reconsideration should be prominently marked "USER FEE RECONSIDERATION REQUEST." No user fee is required for these requests. The request should be marked for the attention of: If the matter involves Mark for the attention of: primarily: Associate Chief Counsel Associate Chief Counsel (Corporate) (Corporate) letter ruling requests Associate Chief Counsel Deputy Associate Chief Counsel ( ) (Employee Benefits, (Complete parenthetical by using the applicable designation "Employee Benefits" or "Exempt Exempt Organizations, and Organizations and Employment Taxes") Employment Taxes) letter ruling requests Associate Chief Counsel Associate Chief Counsel (Financial Institutions and Products) (Financial Institutions and Products) letter ruling requests Associate Chief Counsel Associate Chief Counsel (Income Tax and Accounting) (Income Tax and Accounting) letter ruling requests Associate Chief Counsel Associate Chief Counsel (International) (International) letter ruling requests Associate Chief Counsel Associate Chief Counsel (Passthroughs and Special Industries) (Passthroughs and Special Industries) letter ruling requests Associate Chief Counsel Associate Chief Counsel (Procedure and Administration) (Procedure and Administration) letter ruling requests Determination letter requests submitted Assistant Deputy Commissioner, Compliance Integration pursuant to this revenue procedure by taxpayers under the jurisdiction of LB&I Determination letter Director, SB/SE Exam, Specialty Policy requests submitted pursuant to this revenue procedure by taxpayers under the jurisdiction of SB/SE, W&I Determination letter Director, Employee Plans Examinations requests submitted Director, Exempt Organizations Examinations pursuant to this revenue Director, Government Entities procedure by taxpayers under the jurisdiction of TE/GE ______________________________________ (Add name of field office handling the request) SECTION 16. WHAT Section 7.01(1) has been amended to reflect that ruling requests must include taxpayer SIGNIFICANT CHANGES identification numbers and additional contact information as appropriate for all interested parties. HAVE BEEN MADE TO In particular, taxpayers or other parties requesting to communicate with the Service by fax, REV.PROC. 2021-1? electronic facsimile, or email must provide the necessary contact information to facilitate such communication. Section 7.01(15) has been amended to reflect that a Form 2848 may be signed electronically (or in another manner consistent with section 7.01(13) of this revenue procedure) and to clarify that a Form 2848 executed for the purpose of a request for a letter ruling or determination letter is for a "specific use" and should only be submitted in conjunction with such a request as provided in this revenue procedure (that is, it should not be submitted to the Service by any other method). Section 7.04 has been amended to reflect that requests for determination letters under the jurisdiction of SB/SE regarding income taxes (including requests from international taxpayers) may be submitted only by electronic facsimile. The number to which such requests must be transmitted is provided in section 7.04(2). Section 7.04(1)(b) has been amended to provide the address to which requests for determination letters under the jurisdiction of SB/SE regarding estate and gift taxes, employment taxes, and excise taxes, and requests for determination letters under the jurisdiction of W&I, which may be submitted only on paper, should be mailed. Because there is now only one address for such requests, the appendix in which multiple addresses for such requests were previously listed has been deleted and the subsequent appendices renumbered. Sections 9.03(11) and 9.17 have been amended to clarify that a Form 3115 and a Consent Agreement copy of a change in method of accounting letter ruling may be signed electronically (or in another manner consistent with section 7.01(13) of this revenue procedure). Appendix A (Schedule of User Fees), clause (A)(3)(c)(i), has been amended to reflect that requests under § 1362(b)(5) for an extension of time for making an S corporation election are now subject to the same user fee as requests for relief under § 301.9100-3. Additional editorial and clarifying changes have been made throughout. SECTION 17. WHAT.01 Rev. Proc. 2021-1, 2021-1 I.R.B. 1, is superseded. IS THE EFFECT OF THIS REVENUE PROCEDURE ON OTHER DOCUMENTS? SECTION 18. WHAT IS This revenue procedure is effective for all requests received on or after January 3, 2022. Rev. THE EFFECTIVE DATE Proc. 2021-1 governs requests received prior to January 3, 2021. OF THIS REVENUE PROCEDURE? SECTION 19. The collections of information contained in this revenue procedure have been reviewed and PAPERWORK approved by the Office of Management and Budget in accordance with the Paperwork Reduction REDUCTION ACT Act (44 U.S.C. § 3507) under control number 1545-1522. 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 control number. The collections of information in this revenue procedure are in sections 5.06, 6.03, 7.01, 7.02, 7.03, 7.04, 7.05, 7.07, 7.08, 8.02. 8.05, 8.07, 10.01, 10.06, 10.07, 11.11, 13.02, 15.02, 15.07, 15.08, 15.09, 15.11, paragraph (B)(1) of Appendix A, Appendix C, Appendix D, Appendix E, and Appendix F (subject matter-rate orders; regulatory agency; normalization). This information is required to evaluate and process the request for a letter ruling or determination letter. In addition, this information will be used to help the Service delete certain information from the text of the letter ruling or determination letter before it is made available for public inspection as required by § 6110. The collections of information are required to obtain a letter ruling or determination letter. The likely respondents are businesses or other for-profit institutions and tax-exempt organizations. The estimated total annual reporting and/or recordkeeping burden is 316,020 hours. The estimated annual burden per respondent/recordkeeper varies from 1 to 200 hours, depending on individual circumstances, with an estimated average burden of 80 hours. The estimated number of respondents and/or recordkeepers is 3,956. The estimated annual frequency of responses 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 § 6103. DRAFTING The principal author of this revenue procedure is Joshua Simmons of the Office of Associate INFORMATION Chief Counsel (Procedure and Administration). For further information regarding this revenue procedure for matters under the jurisdiction of-- (1) the Associate Chief Counsel (Corporate), contact T. Ian Russell or Jean R. Broderick at (202) 317-3181 (not a toll-free call), (2) the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), contact Michael B. Blumenfeld at (202) 317-6000 (not a toll-free call), (3) the Associate Chief Counsel (Financial Institutions and Products), contact K. Scott Brown at (202) 317-6945 (not a toll-free call), (4) the Associate Chief Counsel (Income Tax and Accounting), contact R. Matthew Kelley at (202) 317-7002 (not a toll-free call), (5) the Associate Chief Counsel (International), contact Nancy Galib at (202) 317-3800 (not a toll-free call), (6) the Associate Chief Counsel (Passthroughs and Special Industries), contact Anthony McQuillen at (202) 317-6850 (not a toll-free call), or (7) the Associate Chief Counsel (Procedure and Administration), contact Jennifer Auchterlonie at (202) 317-3400 (not a toll-free call). For further information regarding user fees, contact the Technical Services Support Branch at (202) 317-6828 (not a toll-free call). For further information regarding determination letters: LB&I taxpayers should contact Joanne Jewell in the Office of the Assistant Deputy Commissioner, Compliance Integration, LB&I, at (802) 859-1015 (not a toll-free call); SB/SE taxpayers, for questions regarding determination letters involving estate and gift taxes, employment taxes, or excise taxes, should contact Jesse Walker in SB/SE Specialty Exam Policy at (240) 613-6460 (not a toll-free call). SB/SE and W&I taxpayers, for questions regarding determination letters involving income taxes, should submit either their question or a request to speak to someone in Field Exam Technical Services by electronic facsimile to (877) 477-9193. If the request involves a pending request for a determination letter, please provide the taxpayer's taxpayer identification number, phone number, and address as reflected in the request for a determination letter; and TE/GE taxpayers should also refer to Revenue Procedures 2022-4 and 2022-5, this Bulletin. APPENDIXA SCHEDULE OF USER FEES NOTE: Payment must be in U.S. dollars and made through www.pay.gov for all requests other than requests for a determination letter from a Director (see paragraph (A)(1) of this appendix), which are payable by check and mailed along with the request for determi- nation letter. See sections 15.08 and 15.09 of this revenue procedure. (A) FEE SCHEDULE CATEGORY USER FEE FOR USER FEE FOR REQUESTS REQUESTS RECEIVED PRIORTO RECEIVED AFTER FEBRUARY 3, 2022 FEBRUARY 2, 2022 (1) User fee for a request for a determination letter from a Director. $275 $275 The user fee for each determination letter request governed by Rev. Proc. 2022-1, this revenue procedure. (2) User fee for a request for an advance pricing agreement or a See section 3.05of Rev. See section 3.05 of Rev. renewal of an advance pricing agreement. Proc. 2015-41, 2015-35 Proc. 2015-41, 2015-35 I.RB. 263. I.RB. 263. (3) User fee for a request for a letter ruling or closing agreement. Except for the user fees for advance pricing agreements and renewals, the reduced fees provided in paragraph (A)(4) of this appendix, the user fees provided in paragraph (A)(5) of this appendix, and the exemptions provided in section 15.04 of this revenue procedure, the user fee for each request for a letter ruling or closing agreement under the jurisdiction of the Associate Chief Counsel (Corporate), the Associate Chief Counsel (Employee Benefits, Ex- empt Organizations, and Employment Taxes), the Associate Chief Counsel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (International), the Asso- ciate Chief Counsel (Passthroughs and Special Industries), or the Associate Chief Counsel (Procedure and Administration) is as follows: (a) Accounting periods (i) Form1128, Application to Adopt, Change, or Retain a Tax Year, $5,000 $5,000 (except as provided in paragraph (A)(4)(a) of this appendix) (ii) Requests made on Part II of Form 2553, Election by a Small Business Corporation, to use a fiscal year based on a busi- $5,000 $5,000 ness purpose (except as provided in paragraph (A)(4)(a) of this appendix) (iii) Letter ruling requests for extensions of time to file Form 1128, Application to Adopt, Change, or Retain a Tax Year, $5,300 $5,300 Form 8716, Election To Have a Tax Year Other Than a Re- quired Tax Year, or Part II of Form 2553 under § 301.9100-3 (except as provided in paragraph (A)(4)(a) of this appendix) (b) Changes in Methods of Accounting (i) Non-automatic Form 3115, Application for Change in Ac- $11,500 $11,500 counting Method (except as provided in paragraph (A)(4)(a) or (b), or (5)(b)of this appendix) (ii) Letter ruling requests for extensions of time to file Form $12,500 $12,500 3115, Application for Change in Accounting Method, under § 301.9100-3 (except as provided in paragraph (A)(4)(a) or (b), or (5)(d)of this appendix) No user fee is required if the change in accounting period or method of accounting is permitted to be made pursuant to a published automat- ic change request procedure. See section 9.22 and Appendix F of this revenue procedure, for the list of automatic change request procedures published and/or in effect as of December 31, 2021. CATEGORY USER FEE FOR USER FEE FOR REQUESTS REQUESTS RECEIVED PRIOR TO RECEIVED AFTER FEBRUARY 3, 2022 FEBRUARY 2, 2022 (c) (i) Letter ruling requests for relief under § 301.9100-3 or $12,600 $12,600 § 1362(b)(5) (except as provided in paragraph (A)(4)(a) or (b), or (5)(a)of this appendix) (ii) All other letter ruling requests (including accounting period $38,000 $38,000 and method of accounting requests other than those properly submitted on Form 1128, Application to Adopt, Change, or Retain a Tax Year, Part II of Form 2553, Election by a Small Business Corporation, or Form 3115, Application for Change in Accounting Method ) (except as provided in para- graph (A)(4)(a) or (b), or (5)(a)of this appendix) (d) Requests for closing agreements on a proposed transaction or $38,000 $38,000 on a completed transaction before a return for the transaction has been filed in which a letter ruling on that transaction is not requested or issued (except as provided in paragraph (A)(4)(a) or (b), and in paragraph (A)(5),of this appendix) (e) A request for a Foreign Insurance Excise Tax Waiver Agreement $8,000 $8,000 NOTE: A taxpayer who receives relief under § 301.9100-3 (for example, an extension of time to file Form 3115, Application for Change in Ac- counting Method ) will be charged a separate user fee for the letter ruling request on the underlying issue (for example, the accounting period or method of accounting application). (4) Reduced user fee for a request for a letter ruling, method or period change, or closing agreement. A reduced user fee for a request involving. a personal, exempt organization, governmental entity, or business tax issue is provided in the following situations if the person provides the certifica- tion described in paragraph(B)(l) of this appendix: (a) Request involves a tax issue from a person with gross income $3,000 $3,000 (as determined under paragraphs (B)(2), (3), (4), and (5)of this appendix) of less than $250,000 (b) Request involves a tax issue from a person with gross income $8,500 $8,500 (as determined under paragraphs (B)(2), (3), (4), and (5)of this appendix) of less than $1 million and $250,000 or more (5) User fee for substantially identical letter ruling requests or closing agreements, identical changes in method of accounting, or plans from issuing authorities under § 25(c)(2)(B). If the requirements of section 15.07 of this revenue procedure are satisfied, the user fee for the following situations is as follows: (a) Substantially identical letter rulings and closing agreements re- $3,800 $3,800 quested ( other than changes in methods of accounting requested on Form 3115) Requests for substantially identical letter rulings or closing agree- ments for multiple entities with a common member, sponsor, or parent, or for multiple members of a common entity or consolidat- ed group, or for parties engaged together in the same transaction affecting all requesting taxpayers, for each additional letter ruling request after the $30,000 fee or reduced fee, as applicable, has been paid for the first letter ruling request. These requests may include, but are not limited to, requests for substantially identical letter rulings for two or more identical trusts, multiple beneficiaries of a trust, a trust divided into identical subtrusts, spouses making split gifts, or series funds within a single trust or series organization. CATEGORY USER FEE FOR USER FEE FOR REQUESTS REQUESTS RECEIVED PRIORTO RECEIVED AFTER FEBRUARY 3, 2022 FEBRUARY 2, 2022 NOTE: Each entity or member that is entitled to the user fee under para- graph (A)(5)(a)of this appendix that receives relief under § 301.9100-3 (for example, an extension of time to file an election) will be charged a separate user fee for the letter ruling request on the underlying issue. NOTE: The fee charged for the first letter ruling is the highest fee applica- ble to any of the entities. NOTE: Where the requests for the letter rulings are submitted by a private foundation described in § 509 and one or more disqualified persons de- scribed in § 4946, the fee charged for the first letter ruling to a disqualified person is the highest fee applicable to any of the taxpayers. (b) Identical change in method of accounting requested on a single $245 $245 Form 3115, Application for Change in Accounting Method, as provided in section 15.07(4). Fee for each additional applicant seeking the identical change in method of accounting on the same Form 3115 after the $ 10,800 fee or reduced fee, as applica- ble, has been paid for the first applicant. (c) Substantially identical plans under § 25(c)(2)(B) $1,500 $1,500 Situations where an issuing authority under § 25 submits substan- tially identical plans for administering the 95-percent require- ment of § 143(d)(1) following the submission of an initial plan that was approved. NOTE: The fee charged for the first letter ruling is the highest fee applica- ble to any of the entities. (d) Extension of time requested to file Form 3115, Application for $245 $245 Change in Accounting Method, for an identical change in method of accounting as provided in section 15.07(4). Fee for each addi- tional or each additional applicant seeking the identical extension of time under § 301.9100-3 to file a single Form 3115 for the identical change in method of accounting after the $ 11,800 fee or reduced fee, as applicable, has been paid for the first applicant. NOTE: When an extension of time to file Form 3115, Application for Change in Accounting Method, is granted under § 301.9100-3 for multiple applicants, a separate user fee will be charged for the change in method of accounting application, Form 3115. (6) User fee for information letter requests. $0 $0 (7) User fee for pre-filing agreements. $181,500 $181,500 (8) Tax treaty limitation of benefits. See Rev. Proc. 2015-40, 2015-35 $37,000 $37,000 I.R.B. 236 for procedures for requesting competent authority assistance under tax treaties. (9) Statement of Value. See Rev. Proc. 96-15 for procedures for request- ing a statement of value. (A) User fee for a case with1-3 items $7,500 $7,500 (B) Cost per each additional item beyond 3 $400 $400 (B) PROCEDURAL MATTERS (1) Required certification. A person seeking a reduced user fee under paragraph (A)(4) of this Appendix must provide the following certification in order to obtain the reduced user fee: (a) If a person is seeking a reduced user fee under paragraph (A)(4)(a) of this appendix, the person must certify in the request that his, her, or its gross income, as defined under paragraphs (B)(2), (3), (4), and (5) of this appendix, as applicable, is less than $250,000 as reported on their last Federal income tax return (as amended) filed for a full (12 months) taxable year ending before the date the request is filed. (b) If a person is seeking a reduced user fee under paragraph (A)(4)(b) of this appendix, the person must certify in the request that his, her, or its gross income, as defined under paragraphs (B)(2), (3), (4), and (5) of this appendix, as applicable, is less than $1 million and more than $250,000 as reported on their last Federal income tax return (as amended) filed for a full (12 months) taxable year ending before the date the request is filed. The certification must be attached as part of the ruling request. (2) Gross income for a request involving a personal tax issue. For purposes of the reduced user fees provided in paragraphs (A)(4)(a) and (b) of this Appendix for-- (a) U.S. citizens and resident alien individuals, domestic trusts, and domestic estates, "gross income" is equal to "total income" as reported on their last Federal income tax return (as amended) filed for a full (12-month) taxable year ending before the date the request is filed, plus any interest income not subject to tax under § 103 (interest on state and local bonds) for that period. "Total income" is a line item on Federal tax returns. For example, if the 2020 Form 1040, U.S. Individual Income Tax Return, is the most recent 12-month taxable year return filed by a U.S. citizen, "total income" on the Form 1040 is the amount entered on line 9. In the case of a request for a letter ruling or closing agreement from a domestic estate or trust that, at the time the request is filed, has not filed a Federal income tax return for a full taxable year, the reduced user fee in paragraph (A)(4)(a) of this Appendix will apply if the decedent's or (in the case of an individual grantor) the grantor's total income as reported on the last Federal income tax return filed for a full taxable year ending before the date of death or the date of the transfer, taking into account any additions required to be made to total income described in paragraph (B)(2)(a), is less than $250,000 (or less than $1,000,000 for the paragraph (A)(4)(b) fee to apply). In this case, the executor or administrator of the decedent's estate or the grantor must provide the certification required under paragraph (B)(1) of this appendix. (b) Nonresident alien individuals, foreign trusts, and foreign estates, "gross income" is equal to "total effectively connected income" as reported on their last Federal income tax return (as amended) filed for a full (12 months) taxable year ending before the date the request is filed, plus any income for the period from United States or foreign sources that is not taxable by the United States, whether by reason of § 103, an income tax treaty, § 871(h) (regarding portfolio interest), or otherwise, plus the total amount of any fixed or determinable annual or periodical income from United States sources, the United States tax liability for which is satisfied by withholding at the source. "Total effectively connected income" is a line item on Federal tax returns. For example, if the 2020 Form 1040-NR, U.S. Nonresident Alien Income Tax Return, is the most recent 12-month taxable year return filed by a nonresident alien individual, "total effectively connected income" on the Form 1040-NR is the amount entered on line 9. In the case of a request for a letter ruling or closing agreement from a foreign estate or trust that, at the time the request is filed, has not filed a Federal income tax return for a full taxable year, the reduced user fee in paragraph (A)(4)(a) of this Appendix will apply if the decedent's or (in the case of an individual grantor) the grantor's total income or total effectively connected income, as relevant, as reported on the last Federal income tax return filed for a full taxable year ending before the date of death or the date of the transfer, taking into account any additions required to be made to total income or total effectively connected income described respectively in paragraph (B)(2)(a) of this Appendix or in this paragraph (B)(2)(b), is less than $250,000 (or less than $1,000,000 for the paragraph (A)(4)(b) fee to apply). In this case, the executor or administrator of the decedent's estate or the grantor must provide the certification required under paragraph (B)(1) of this Appendix. (3) Gross income for a request involving a business-related tax issue. For purposes of the reduced user fees provided in paragraphs (A)(4)(a) and (b) of this Appendix of-- (a) U.S. citizens and resident alien individuals, domestic trusts, and domestic estates, "gross income" is equal to gross income as defined under paragraph (B)(2)(a) of this Appendix, plus "cost of goods sold" as reported on the same Federal income tax return. (b) Nonresident alien individuals, foreign trusts, and foreign estates, "gross income" is equal to gross income as defined under paragraph (B)(2)(b) of this Appendix, plus "cost of goods sold" as reported on the same Federal income tax return. (c) Partnerships with a Form 1065 filing requirement and corporations (foreign and domestic), "gross income" is equal to "total income" as reported on their last Federal tax return (as amended) filed for a full (12 months) taxable year ending before the date the request is filed, plus "cost of goods sold" as reported on the same Federal tax return, plus any interest income not subject to tax under § 103 (interest on state and local bonds) for that period. Partnerships with a Form 1065 filing requirement should also include "gross rents" reported on Form 8825 at line 2, as well as the income amounts reported on Schedule K Form 1065 at lines 3a, 5, 6a, 7, 8, 9a, 10, and 11 from the same Federal tax return described in the preceding sentence to calculate "gross income" for the purpose of applying the reduced user fee in paragraph (A)(4) of this Appendix. S Corporations with a Form 1120S filing requirement should also include "gross rents" reported on Form 8825 at line 2, as well as the income amounts reported on Schedule K Form 1120S at lines 3a, 4, 5a, 6, 7, 8a, 9, and 10 from the same Federal tax return described in the first sentence of this paragraph to calculate "gross income" for the purpose of applying the reduced user fee in paragraph (A)(4) of this Appendix. If a partnership or S Corporation is not required to file or a C corporation is not subject to tax, "total income" and "cost of goods sold" are the amounts that the partnership or corporation would have reported on the Federal tax return if the partnership or S Corporation had been required to file or the C corporation had been subject to tax. "Cost of goods sold" and "total income" are line items on Federal tax returns. For example, if the 2020 Form 1065, U.S. Return of Partnership Income, is the most recent 12-month taxable year return filed by a partnership, "cost of goods sold" and "total income" on the Form 1065 are the amounts entered on lines 2 and 8, respectively; if the 2020 Form 1120, U.S. Corporation Income Tax Return, is the most recent 12-month taxable year return filed by a domestic corporation, "cost of goods sold" and "total income" on the Form 1120 are the amounts entered on lines 2 and 11, respectively; and if the 2020 Form 1120S, U.S. Income Tax Return for an S Corporation, is the most recent 12-month taxable year return filed by an S corporation, "cost of goods sold" and "total income" on the Form 1120S are the amounts entered on lines 2 and 6, respectively. If, at the time the request is filed, a partnership or S corporation required to file or a C corporation subject to tax has not filed a Federal tax return for a full taxable year, the reduced user fee in paragraph (A)(4)(a) or (b) of this Appendix will apply if, in the aggregate, the partners' or the shareholders' gross income (as defined in paragraph (B)(3)(a), (b), or (c), of this Appendix, as applicable) is less than $250,000 for purposes of paragraph (A)(4)(a) or $1 million for purposes of paragraph (A)(4)(b) for the last full (12 months) taxable year ending before the date the request is filed. In this case, the partners or the shareholders must provide the certification required under paragraph (B)(1) of this Appendix. (4) Gross income for a request involving an exempt organization or governmental entity. For purposes of the reduced user fees provided in paragraphs (A)(4)(a) and (b) of this Appendix of-- (a) Organizations exempt from income tax under "Subchapter F-Exempt Organizations" of the Code, "gross income" is equal to the amount of gross receipts for the last full (12 months) taxable year ending before the date the request for a letter ruling or closing agreement is filed. (b) State, local, and Indian tribal government entities, "gross income" is equal to the annual operating revenue of the government requesting the ruling for its last fiscal year ending before the date of the ruling request. The annual operating revenue is to be determined at the government level and not at the level of the government entity or agency making the request. (5) Special rules for determining gross income. For purposes of paragraphs (B)(2), (3) and (4) of this Appendix, the following rules apply for determining gross income. (a) Gross income of individuals, trusts, and estates. (1) In the case of a request from a married individual, the gross incomes (as defined in paragraph (B)(2) or (3) of this Appendix, as applicable) of the applicant and the applicant's spouse must be combined. This rule does not apply to an individual: (i) who is legally separated from his or her spouse and (ii) who did not file a joint income tax return; and (2) If there are two or more applicants filing the request, the gross incomes (as defined in paragraph (B)(2) or (3) of this Appendix, as applicable) of the applicants must be combined. (b) Gross income of domestic partnerships and corporations. (1) In the case of a request from a domestic C corporation, the gross income (as defined in paragraph (B)(3) of this Appendix) of (i) all members of the applicant's controlled group (as defined in § 1563(a)), and (ii) any taxpayer who is involved in the transaction on which the letter ruling or closing agreement is requested, must be combined; and (2) In the case of a request from a domestic partnership, the gross income (as defined in paragraph (B)(3) of this Appendix) of (i) the partnership, and (ii) any partner who owns, directly or indirectly, 50 percent or more of the capital interest or profits interest in the partnership, must be combined. (3) In the case of a request from an S corporation, the gross income (as defined in paragraph (B)(3) of this Appendix) of (i) the S corporation, and (ii) any shareholder who owns 50 percent or more of the S corporation, must be combined. (c) Gross income of exempt organizations. If there are two or more organizations exempt from income tax under Subchapter F filing the request, the gross receipts (as defined in paragraph (B)(4)(a) of this Appendix) of the applicants must be combined. (6) When gross income depends on a favorable ruling. If a taxpayer's qualification for a reduced user fee under paragraphs (A)(4)(a) and (b) of this Appendix depends on the receipt of a favorable ruling, the taxpayer must pay the higher fee with the request and cannot assume that the Service will rule favorably. If a favorable ruling is issued, and as a result of the ruling the taxpayer's gross income is reduced such that the taxpayer would qualify for a reduced user fee, the amount that the taxpayer paid in excess of the reduced user fee will be returned to the taxpayer. See section 15.09. APPENDIX B SAMPLE FORMAT FOR A LETTER RULING REQUEST INSTRUCTIONS To assist you in preparing a letter ruling request, the Service is providing this sample format. You are not required to use this sample format. If your request is not identical or similar to the sample format, the different format will not affect consideration of your request. ( Insert the date of request ) Internal Revenue Service Insert either: Associate Chief Counsel (insert one of the following: Corporate; Financial Institutions and Products; Income Tax and Accounting; International; Passthroughs and Special Industries; or Procedure and Administration) or Deputy Associate Chief Counsel (insert either Employee Benefits or Exempt Organizations and Employment Taxes) Attn: CC:PA:LPD:TSS P.O. Box 7604 Ben Franklin Station Washington, DC 20044 Dear Sir or Madam: ( Insert the name of the taxpayer ) requests a ruling on the proper treatment of ( insert the subject matter of the letter ruling request ) under section ( insert the number ) of the Internal Revenue Code. [If the taxpayer is requesting expedited handling, a statement to that effect must be attached to, or contained in, the letter ruling request. The statement must explain the need for expedited handling. See section 7.02(4) of Rev. Proc. 2022-1, this revenue procedure. Hereafter, all references are to this revenue procedure unless otherwise noted.] A. STATEMENT OF FACTS 1. Taxpayer Information [Provide the statements required by sections 7.01(1)(a) and (b).] 2. Description of Taxpayer's Business Operations [Provide the statement required by section 7.01(1)(c).] 3. Facts Relating to Transaction [The ruling request must contain a complete statement of the facts relating to the transaction that is the subject of the letter ruling request. This statement must include a detailed description of the transaction, including material facts in any accompanying documents, and the business reasons for the transaction. See sections 7.01(1)(d), 7.01(1)(e), and 7.01(2).] B. RULING REQUESTED [The ruling request should contain a concise statement of the ruling requested by the taxpayer. The Service prefers that the language of the requested ruling be exactly the same as the language the taxpayer wishes to receive.] C. STATEMENT OF LAW [The ruling request must contain a statement of the law in support of the taxpayer's views or conclusion and identify any pending legislation that may affect the proposed transaction. The taxpayer also is strongly encouraged to identify and discuss any authorities believed to be contrary to the position advanced in the ruling request. See sections 7.01(6), 7.01(10), 7.01(10), and 7.01(11).] D. ANALYSIS [The ruling request must contain a discussion of the facts and an analysis of the law. The taxpayer also is strongly encouraged to identify and discuss any authorities believed to be contrary to the position advanced in the ruling request. See sections 7.01(3), 7.01(6), 7.01(9), 7.01(10), and 7.01(11).] E. CONCLUSION [The ruling request should contain a statement of the taxpayer's conclusion on the ruling requested.] F. PROCEDURAL MATTERS 1. Revenue Procedure 2022-1 Statements a. [Provide the statement required by section 7.01(4) regarding whether any return of the taxpayer, a related party within the meaning of § 267 or § 707(b)(1), or a member of an affiliated group of which the taxpayer is also a member within the meaning of § 1504, or any predecessor would be affected by the requested letter ruling or determination letter, and whether any such return is currently under examination, before Appeals, or before a Federal court, or was previously under examination, before Appeals, or before a Federal court.] b. [Provide the statement required by section 7.01(5)(a) regarding whether the Service previously ruled on the same or similar issue for the taxpayer, a related party, or a predecessor. Please further note that if a reduced user fee is being submitted, a certification of eligibility for the reduced fee must be included with the ruling request.] c. [Provide the statement required by section 7.01(5)(b) regarding whether the taxpayer, a related party, a predecessor, or any representatives previously submitted a request (including an application for change in method of accounting) involving the same or similar issue but withdrew the request before a letter ruling or determination letter was issued.] d. [Provide the statement required by section 7.01(5)(c) regarding whether the taxpayer, a related party, or a predecessor previously submitted a request (including an application for change in method of accounting) involving the same or a similar issue that is currently pending with the Service.] e. [Provide the statement required by section 7.01(5)(d) regarding whether, at the same time as this request, the taxpayer or a related party is presently submitting another request (including an application for change in method of accounting) involving the same or similar issue to the Service.] f. [Provide the statement required by section 7.01(5)(e) regarding whether the taxpayer or a related party had, or has scheduled, a pre-submission conference involving the same or a similar issue.] g. [If the letter ruling request involves the interpretation of a substantive provision of an income or estate tax treaty, provide the statement required by section 7.01(6) regarding whether the tax authority of the treaty jurisdiction has issued a ruling on the same or similar issue for the taxpayer, a related party, or a predecessor; whether the same or similar issue is being examined, or has been settled, by the tax authority of the treaty jurisdiction or is otherwise the subject of a closing agreement in that jurisdiction; and whether the same or similar issue is being considered by the competent authority of the treaty jurisdiction.] h. [If the letter ruling request involves a transaction between a taxpayer and a related party and either the taxpayer or the related party is located in a foreign country, provide the statement required by section 7. 01(7) regarding whether this letter ruling potentially relates to any one of these categories (include all that apply): Preferential Regime; Transfer Pricing; Downward Adjustment; Treaty Permanent Establishment; Related Party Conduit.] i. [Provide the statement required by section 7.01(9) regarding whether the law in connection with the letter ruling request is uncertain and whether the issue is adequately addressed by relevant authorities.] j. [If the taxpayer determines that there are no contrary authorities, a statement in the request to this effect should be included. See section 7.01(10).] k. [If the taxpayer wants to have a conference on the issues involved in the letter ruling request, the ruling request should contain a statement to that effect. See section 7.02(6).] l. [If the taxpayer is requesting a copy of any document related to the letter ruling request to be sent by fax, electronic facsimile, or encrypted email attachment, the ruling request should contain a statement to that effect. See section 7.02(5).] m. [If the taxpayer is requesting separate letter rulings on multiple issues, the letter ruling request should contain a statement to that effect. See section 7.02(1).] n. [If the taxpayer is seeking to obtain the user fee provided in paragraph (A)(5)(a) of Appendix A for substantially identical letter rulings, the letter ruling request must contain the statements required by section 15.07.] 2. Administrative a. [The ruling request should state: "The deletion statement and checklist required by Rev. Proc. 2022-1 are enclosed." See sections 7.01(12) and 7.01(18).] b. [The ruling request should state: "The required user fee of $ ( Insert the amount of the fee ) has been paid through www.pay.gov" See section 15.09 and Appendix A.] c. [If the taxpayer's authorized representative is to sign the letter ruling request or is to appear before the Service in connection with the request, the ruling request should state: "A Power of Attorney is enclosed." See sections 7.01(14), 7.01(15), and 7.02(2).] Sincerely yours, ( Insert the name of the taxpayer or the taxpayer's authorized representative ) By: Signature Date Typed or printed name of person signing request DECLARATION: [ See section 7.01(16).] Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete. ( Insert the name of the taxpayer ) By: _____________ Signature Title Date ( must be signed by taxpayer, not by taxpayer's representative, see section 7.01(16)(b) of this revenue procedure ) Typed or printed name of person signing declaration [If the taxpayer is a corporation that is a member of an affiliated group filing consolidated returns, the above declaration must also be signed and dated by an officer of the common parent of the group. See section 7.01(16).] APPENDIX C CHECKLISTIS YOUR LETTER RULING REQUEST COMPLETE? INSTRUCTIONS The Service will be able to respond more quickly to your letter ruling request if it is carefully prepared and complete. Use this checklist to ensure that your request is in order. Complete the four items of information requested before the checklist. Answer each question by circling "Yes," "No," or "N/A." When a question contains a place for a page number, insert the page number (or numbers) of the request that gives the information called for by a "Yes" answer to a question. Sign and date the checklist (as taxpayer or authorized representative) and place it on top of your request. If you are an authorized representative submitting a request for a taxpayer, you must include a completed checklist with the request or the request will either be returned to you or substantive consideration of it will be deferred until a completed checklist is submitted. If you are a taxpayer preparing your own request without professional assistance, an incomplete checklist will not cause the return of your request or defer substantive consideration of your request. You should still complete as much of the checklist as possible and submit it with your request. TAXPAYER'S NAME TAXPAYER'S I.D. NO. ATTORNEY/P.O.A. PRIMARY CODE SECTION CIRCLE ONE ITEM Yes No 1. Does your request involve an issue under the jurisdiction of the Associate Chief Counsel (Corporate), the Associ- ate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), the Associate Chief Coun- sel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (International), the Associate Chief Counsel (Passthroughs and Special Industries), or the Associate Chief Counsel (Procedure and Administration)? See section 3 of Rev. Proc. 2022-1, this revenue procedure. For issues under the jurisdiction of other offices, see section 4 of this revenue procedure. (Hereafter, all references are to this revenue procedure unless otherwise noted.) Yes No 2. Have you read Rev. Proc. 2022-1, Rev. Proc. 2022-3, and Rev. Proc. 2022-7, this Bulletin, to see if part or all of the request involves a matter on which letter rulings are not issued or are ordinarily not issued? Yes No N/A 3. If your request involves a matter on which letter rulings are not ordinarily issued, have you given compelling reasons to justify the issuance of a letter ruling? Before preparing your request, you may want to call the branch in the Office of Associate Chief Counsel (Corporate), the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), the Office of Associate Chief Counsel (Financial Institutions and Products), the Office of Associate Chief Counsel (Income Tax and Accounting), the Office of Associate Chief Counsel (International), the Office of Associate Chief Counsel (Passthroughs and Special Industries), or the Of- fice of Associate Chief Counsel (Procedure and Administration) responsible for substantive interpretations of the principal Internal Revenue Code section on which you are seeking a letter ruling to discuss the likelihood of an exception. For matters under the jurisdiction of-- (a) the Office of Associate Chief Counsel (Corporate), the Office of Associate Chief Counsel (Employee Bene- fits, Exempt Organizations, and Employment Taxes), the Office of Associate Chief Counsel (Financial Institutions and Products), the Office of Associate Chief Counsel (Income Tax and Accounting), the Office of Associate Chief Counsel (Passthroughs and Special Industries), or the Office of the Associate Chief Counsel (Procedure and Ad- ministration), the appropriate branch to call may be obtained by calling (202) 317-5221 (not a toll-free call); (b) the Office of the Associate Chief Counsel (International), the appropriate branch to call may be obtained by calling (202) 317-3800 (not a toll-free call). Yes No N/A 4. If the request involves a retirement plan qualification matter relating to § 401(a), § 409, or§ 4975(e)(7), have you Page ___ demonstrated that the request satisfies section 4.02(12) of Rev. Proc. 2022-3, this Bulletin, for a ruling? Yes No N/A 5. If the request deals with a completed transaction, have you filed the return for the year in which the transaction Page ___ was completed? See section 5.01. Yes No 6. Are you requesting the letter ruling on a hypothetical situation or question? See section 6.12. Yes No 7. Are you requesting the letter ruling on alternative plans of a proposed transaction? See section 6.12. Yes No 8. Are you requesting the letter ruling for only part of an integrated transaction? Yes No 9. Are you requesting a letter ruling under the jurisdiction of Associate Chief Counsel (Corporate) on a significant Page ___ issue (within the meaning of section 3.01(60) of Rev. Proc. 2022-3, this Bulletin) with respect to a transaction de- scribed in § 332, § 351, § 355, or § 1036 or a reorganization within the meaning of § 368? See section 6.03(2). Yes No 10. Are you requesting the letter ruling for a business, trade, industrial association, or similar group concerning the application of tax law to its members? See section 6.05. Yes No 11. Are you requesting the letter ruling for a foreign government or its political subdivision? See section 6.07. Yes No 12. Have you included a complete statement of all the facts relevant to the transaction? See section 7.01(1). Page ___ Yes No N/A 13. Have you submitted with the request true copies of all wills, deeds, and other documents relevant to the trans- action, and labeled and attached them in alphabetical sequence? See section 7.01(2). Yes No N/A 14. Have you submitted with the request a copy of all applicable foreign laws, and certified English translations of documents that are in a language other than English or of foreign laws in cases where English is not the official language of the foreign country involved? See section 7.01(2). Yes No 15. Have you included an analysis of facts and their bearing on the issues? Have you included, rather than merely incorporated by reference, all material facts from the documents in the request? See section 7.01(3). Yes No 16. Have you included the required statement regarding whether any return of the taxpayer (or any related party Page ___ within the meaning of § 267 or § 707(b)(1), or any member of an affiliated group of which the taxpayer is also a member within the meaning of § 1504, or any predecessor) would be affected by the requested letter ruling or determination letter and whether any such return is currently or was previously under examination, before Appeals, or before a Federal court? See section 7.01(4). · Yes No 17. Have you included the required statement regarding whether the Service previously ruled on the same or similar Page ___ issue for the taxpayer, a related party, or a predecessor? See section 7.01(5)(a). Yes No 18. Have you included the required statement regarding whether the taxpayer, a related party, a predecessor, or Page ___ any representatives previously submitted a request (including an application for change in method of accounting) involving the same or similar issue but withdrew the request before the letter ruling or determination letter was issued? See section 7.01(5)(b). Yes No 19. Have you included the required statement regarding whether the taxpayer, a related party, or a predecessor Page ___ previously submitted a request (including an application for change in method of accounting) involving the same or similar issue that is currently pending with the Service? See section 7.01(5)(c). Yes No 20. Have you included the required statement regarding whether, at the same time as this request, the taxpayer or a Page ___ related party is presently submitting another request (including an appl i cation for change in method of accounting) involving the same or similar issue to the Service? See section 7.01(5)(d). · Yes No 21. Have you included the required statement regarding whether the taxpayer or a related party had, or has scheduled, Page ___ a pre-submission conference involving the same or a similar issue? See section·7.01(5)(e). Yes No N/A 22. If your request involves the interpretation of a substantive provision of an income or estate tax treaty, have you Page ___ included the required statement regarding whether the tax authority of the treaty jurisdiction has issued a ruling on the same or similar issue for the taxpayer, a related party, or a predecessor; whether the same or similar issue is being examined, or has been settled, by the tax authority of the treaty jurisdiction or is otherwise the subject of a closing agreement in that jurisdiction; and whether the same or similar issue is being considered by the competent authority of the treaty jurisdiction ? See section 7.01(6). Yes No N/A 23. If your request involves a transaction between a taxpayer and a related party and either the taxpayer or the Page ___ related party is located in a foreign country, have you included the required statement regarding whether the letter ruling relates to any one of these categories (include all that apply: Preferential Regime; Transfer Pricing; Down- ward Adjustment; Treaty Permanent Establishment; Related Party Conduit? See section 7.01(7). Yes No N/A 24. If your request is for recognition of Indian tribal government status or status as a political subdivision of an Page ___ Indian tribal government, does your request contain a letter from the Bureau of Indian Affairs regarding the tribe's status? See section 7.01(8), which states that taxpayers are encouraged to submit this letter with the request and provides the address for the Bureau of Indian Affairs. Yes No 25. Have you included the required statement of relevant authorities in support of your views? See section 7.01(9). Page ___ Yes No 26. Have you included the required statement regarding whether the law in connection with the request is uncertain Page ___ and whether the issue is adequately addressed by relevant authorities? See section 7.01(9). Yes No 27. Does your request discuss the implications of any legislation, tax treaties, court decisions, regulations, notices, Pages ___ revenue rulings, or revenue procedures that you determined to be contrary to the position advanced? See section 7.01(10), which states that taxpayers are encouraged to inform the Service of such authorities. Yes No N/A 28. If you determined that there are no contrary authorities, have you included a statement to this effect in your Pages ___ request? See section 7.01(10). Yes No N/A 29. Have you included in your request a statement identifying any pending legislation that may affect the proposed Pages ___ transaction? See section 7.01(11). Yes No 30. Have you included the deletion statement required by § 6110 and placed it on the top of the letter ruling request as required by section 7.01(12)(b)? Yes No 31. Have you (or your authorized representative) signed and dated the request or separately transmitted a signature Pages ___ in an acceptable electronic form? See section 7.01(13). Yes No N/A 32. If the request is signed by your representative or if your representative will appear before the Service in con- nection with the request, is the request accompanied by a properly prepared and signed power of attorney with the signatory's name typed or printed? See section 7.01(15). Yes No 33. Have you signed, dated, and included the penalties of perjury statement in the format required by section 7.01(16)? Pages ___ Yes No N/A 34. If you are requesting separate letter rulings on different issues involving one factual situation, have you included Pages ___ a statement to that effect in each request? See section 7.02(1). Yes No N/A 35. If you want copies of the letter ruling sent to a representative, does the power of attorney contain a statement to that effect? See section 7.02(2). Yes No N/A 36. If you do not want a copy of the letter ruling to be sent to any representative, does the power of attorney contain a statement to that effect? See section 7.02(2). Yes No N/A 37. If you are making a two-part letter ruling request, have you included a summary statement of the facts you believe to be controlling? See section 7.02(3). Yes No N/A 38. If you want your letter ruling request to be processed ahead of the regular order or by a specific date, have you Pages ___ requested expedited handling in the manner required by section 7.02(4) and stated a compelling need for such ac- tion in the request? See section 7.02(4). Yes No N/A 39. If you are requesting a copy of any document related to the letter ruling request to be sent by fax or electronic Pages ___ facsimile, have you included a statement to that effect? See section 7.02(5). Yes No N/A 40. If you are requesting a copy of any document related to the letter ruling request to be sent by encrypted email attachment, have you specified an acceptable encryption method to be used and included the appropriate MOUs from Appendices G and H, signed and dated by the taxpayer? See section 7.02(5) and 7.04(3). Yes No N/A 41. If you want to have a conference on the issues involved in the request, have you included a request for conference Pages ___ in the letter ruling request? See section 7.02(6). Yes No N/A 42. If you are submitting your request on paper, are you submitting additional copies if necessary? See section 7.04(1). Yes No N/A 43. If you are submitting your request by electronic facsimile or encrypted email attachment, have you provided clear titles for documents and files, and broken up the request into smaller components for transmission if neces- sary? See section 7.04(2) and (3). Yes No N/A 44. If you are submitting your request by encrypted email attachment, have you used an acceptable file format and included the appropriate MOUs from Appendices G and H, signed and dated by the taxpayer? See section 7.04(3). Yes No 45. Have you paid the correct user fee through www.pay.gov? See section 15 and Appendix A to determine the correct amount. Yes No N/A 46. If you qualify for a reduced user fee because your gross income is less than $250,000, have you included the Page ___ required certification? See paragraphs (A)(4)(a) and (B)(1) of Appendix A. Yes No N/A 47. If you qualify for a reduced user fee because your gross income is less than $1 million, have you included the Page ___ required certification? See paragraphs (A)(4)(b) and (B)(1) of Appendix A. Yes No N/A 48. If you qualify for the user fee for substantially identical letter rulings, have you included the required information? Page ___ See section 15.07(2) and paragraph (A)(5)(a) of Appendix A. Yes No N/A 49. If you qualify for the user fee for a § 301.9100 request to extend the time for filing an identical change in method Page ___ of accounting on a single Form 3115, Application for Change in Accounting Method, have you included the re- quired information? See section 15.07(4) and paragraph (A)(5)(d) of Appendix A. Yes No N/A 50. If your request is covered by any of the checklists, guideline revenue procedures, notices, safe harbor revenue Rev. Proc. procedures, or other special requirements listed in Appendix F, have you complied with all of the requirements of __________ the applicable revenue procedure or notice? __________ List other applicable revenue procedures or notices, including checklists, used or relied upon in the preparation of __________ this letter ruling request (Cumulative Bulletin or Internal Revenue Bulletin citation not required). Yes No N/A 51. If you are requesting relief under § 7805(b) (regarding retroactive effect), have you complied with all of the Page ___ requirements in section 11.11? Yes No N/A 52. If you are requesting relief under § 301.9100 for a late entity classification election, have you included a Page ___ statement that complies with section 4.04 of Rev. Proc. 2009-41, 2009-39 1.R.B. 439? See section 5.03(5) of this revenue procedure. Yes No N/A 53. If you are requesting relief under § 301.9100, and your request involves a year that is currently under examination Page ___ or with Appeals, have you included the required notification, which also provides the name and telephone number of the examining agent or Appeals officer? See section 7.01(4). Yes No 54. If you are requesting relief under § 301.9100, have you included the affidavit(s) and declaration(s) required by § 301.9100-3(e)? See section 5.03(1). Yes No N/A 55. If you are requesting relief under§ 301.9100-3, and the period of limitations on assessment under§ 6501(a) will expire for any year affected by the requested relief before the anticipated receipt of a letter ruling, have you secured consent under § 6501(c)( 4) to extend the period of limitations on assessment for the year(s) at issue? See section 5.03(2). Yes No 56. Have you addressed your request to the attention of the Associate Chief Counsel· (Corporate), the Associate Chief Counsel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (International), the Associate Chief Counsel (Passthroughs and Special Industries), the Associate Chief Counsel (Procedure and Administration), the Deputy Associate Chief Counsel (Employee Bene- fits), or the Deputy Associate Chief Counsel (Exempt Organizations and Employment Taxes), as appropriate? The mailing address for packages submitted on paper is: Internal Revenue Service Attn: CC:PA:LPD:TSS P.O. Box 7604 Ben Franklin Station Washington, DC 20044 If a private delivery service is used, the address is: Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Ave., NW Washington, DC 20224 Packages submitted on paper should be marked RULING REQUEST SUBMISSION. Improperly addressed re- quests may be delayed (sometimes for over a week) in reaching CC:PA:LPD:TSS for initial processing. ________________ Signature Title or Authority Date Typed or printed name of person signing checklist APPENDIX D ADDITIONAL CHECKLIST FOR GOVERNMENT PICK-UP PLAN RULING REQUESTS In order to assist Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) in processing a ruling request involving government pick-up plans, in addition to the items in Appendix C please check the following list. Yes No N/A 1. Is the plan qualified under§ 401(a) of the Code? (Evidence of qualification or representation that the plan is Page ___ qualified.) Yes No N/A 2. Is the organization that established the plan a State or political subdivision thereof, or any agency or instrumen- Page ___ tality of the foregoing? An example of this would be a representation that the organization that has established the plan is a political subdivision or municipality of the State. Yes No N/A 3. Is there specific information regarding who are the eligible participants? Page ___ Yes No N/A 4. Are the contributions that are the subject of the ruling request mandatory employee contributions? These contribu- Page ___ tions must be for a specified dollar amount or a specific percentage of the participant's compensation and the dollar amount or percentage of compensation cannot be subject to change. Yes No N/A 5. Does the plan provide that the participants do not have the election to opt in and/or out of the plan? Page ___ Yes No N/A 6. Are copies of the enacting legislation providing that the contributions although designated as employee contribu- Page ___ tions are being paid by the employer in lieu of contributions by the employee included? Yes No N/A 7. Are copies of the specific enabling authorization that provides the employee must not have the option of choosing Page ___ to receive the contributed amounts directly instead of having them paid by the employer to the plan included? For example, a resolution, ordinance, plan provision, or collective bargaining agreement could specify this information. APPENDIX D ADDITIONAL CHECKLIST FOR GOVERNMENT PICK-UP PLAN RULING REQUESTS In order to assist Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) in processing a ruling request involving government pick-up plans, in addition to the items in Appendix C please check the following list. Yes No N/A 1. Is the plan qualified under§ 401(a) of the Code? (Evidence of qualification or representation that the plan is Page ___ qualified.) Yes No N/A 2. Is the organization that established the plan a State or political subdivision thereof, or any agency or instrumen- Page ___ tality of the foregoing? An example of this would be a representation that the organization that has established the plan is a political subdivision or municipality of the State. Yes No N/A 3. Is there specific information regarding who are the eligible participants? Page ___ Yes No N/A 4. Are the contributions that are the subject of the ruling request mandatory employee contributions? These contribu- Page ___ tions must be for a specified dollar amount or a specific percentage of the participant's compensation and the dollar amount or percentage of compensation cannot be subject to change. Yes No NIA 5. Does the plan provide that the participants do not have the election to opt in and/or out of the plan? Page ___ Yes No N/A 6. Are copies of the enacting legislation providing that the contributions although designated as employee contribu- Page_ tions are being paid by the employer in lieu of contributions by the employee included? Yes No N/A 7. Are copies of the specific enabling authorization that provides the employee must not have the option of choosing Page ___ to receive the contributed amounts directly instead of having them paid by the employer to the plan included? For example, a resolution, ordinance, plan provision, or collective bargaining agreement could specify this information. APPENDIX E ADDITIONAL CHECKLIST FOR CHURCH PLAN RULING REQUESTS In order to assist Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) in processing a church plan ruling request, in addition to the items in Appendix C, please check the following list. Yes No N/A 1. Is there specific information showing that the submission is on behalf of a plan established by a named church or Page ___ convention or association of churches? The information must show how the sponsoring organization, if not a church or convention or association of churches, is controlled by, or associated with, the named church or convention or association of churches. For example, the board of directors of the sponsoring organization may be made up of members of the named church, or the sponsoring organization might be listed in the church's official directory of related organizations whose mission is to further the objectives of the church. In order to be considered associated with a church or convention or association of churches, the organization must share common religious bonds and convictions with that church or convention or association of churches. Yes No N/A 2. Is there specific information showing that the organization that has established the plan is a tax-exempt organiza- Page ___ tion as described in § 501 of the Code? Yes No N/A 3. Is there a representation that the plan for which the ruling is being requested is qualified under§ 401(a) of the Page ___ Code or meets the requirements of § 403(b) of the Code? Yes No N/A 4. Does the ruling request clearly state who are the eligible participants and the name of the employer of these eli- Page ___ gible participants? Yes No N/A 5. Is there a representation that none of the eligible participants are or can be considered employed in connection Page ___ with one or more unrelated trades or businesses within the meaning of § 513 of the Code? Yes No N/A 6. Is there a representation that all of the eligible participants are or will be employed by the named church or con- Page_ vention or association of churches, and will not include employees of for-profit entities? An example of an eligible employee includes a duly ordained, commissioned, or licensed minister of a church in the exercise of his or her ministry. Yes No N/A 7. Is there specific information showing an existing plan committee whose principal purpose or function is the ad- Page ___ ministration or funding of the plan? This committee must be controlled by or associated with the named church or convention or association of churches. Yes No N/A 8. Is the composition of the committee stated? Page ___ Yes No N/A 9. Did the plan sponsor provide a written notice to interested persons that a letter ruling under § 414(e) of the Code Page ___ on behalf of a church plan will be submitted to the IRS? ( see Rev. Proc. 2011-44). Yes No N/A 10. Does the ruling request include a copy of the notice? Page ___ Yes No N/A 11. Is there a representation as to whether an election has ever been made under § 1.410(d)-1 of the Federal Income Page ___ Tax Regulations to apply certain provisions of the Code and ERISA to the plan? APPENDIX F CHECKLISTS, GUIDELINE REVENUE PROCEDURES, NOTICES, SAFE HARBOR REVENUE PROCEDURES, AND AUTOMATICCHANGE REVENUE PROCEDURES Specific revenue procedures and notices supplement the general instructions for requests ex- plained in section 7 of this revenue procedure and apply to requests for letter rulings or determi- nation letters regarding the Code sections and matters listed in this section. Checklists, guideline revenue.01 For requests relating to the following Code sections and subject matters, refer to the following procedures, and notices checklists, guideline revenue procedures, and notices. CODE OR REVENUE PROCEDURE AND NOTICE REGULATION SECTION 103, 141 - 150, 1394, Rev. Proc. 96-16, 1996-1 C.B. 630 (for a reviewable ruling under § 7478 and a nonreviewable 1400L(d), 1400N(a), 1400U- ruling); Rev. Proc. 88-31, 1988-1 C.B. 832 (for approval of areas of chronic economic distress); 1, 1400U-3, 7478, and 7871 and Rev. Proc. 82-26, 1982-1 C.B. 476 (for "on behalf of' and similar issuers). For approval of Issuance of state or local areas of chronic economic distress, Rev. Proc. 88-31 explains how this request for approval must obligations be submitted to the Assistant Secretary for Housing/Federal Housing Commissioner of the De- partment of Housing and Urban Development. 1.166-2(d)(3) Rev. Proc. 92-84, 1992-2 C.B. 489. Uniform express determina- tion letter for making election Subchapter C-Corporate Rev. Proc. 77-37, 1977-2 C.B. 568, as amplified by Rev. Proc. 77-41, 1977-2 C.B. 574, Rev. Distributions, Adjustments, Proc. 83-81, 1983-2 C.B. 598, and as modified by Rev. Proc. 89-30, 1989-1 C.B. 895 (see also Transfers, and Reorganiza- Rev. Proc. 2022-3, this Bulletin); Rev. Proc. 84-42, 1984-1 C.B. 521 (superseded, in part, as to tions no-rule areas by Rev. Proc. 2022-3); Rev. Proc. 86-42, 1986-2 C.B. 722; Rev. Proc. 89-50, 1989-2 C.B. 631; Rev. Proc. 2017-52, 2017-41I.RB. 283 (relating to Transactional Rulings for Covered Transactions); and Rev. Proc. 2018-53, 2018-43 I.R.B. 667. But see section 3.01(60) of Rev. Proc. 2022-3, which states that the Service will not issue a letter ruling as to whether a transaction constitutes a reorganization within the meaning of § 368 (except as provided in section 6.03(2)(b) of this revenue procedure). However, the Service will issue a letter ruling addressing significant issues (within the meaning of section 3.01(60) of Rev. Proc. 2022-3) presented in a reorganiza- tion within the meaning of § 368. See section 6.03(2) of this revenue procedure. In addition, the Service will issue a Transactional ruling for a Covered Transaction, as described in Rev. Proc. 2017-52 (amplified and modified by Rev. Proc. 2018-53). 301 Rev. Proc. 87-22, 1987-1 C.B. 718. Nonapplicability on sales of stock of employer to defined contribution plan 302, 311 Rev. Proc. 86-18, 1986-1 C.B. 551; and Rev. Proc. 77-41, 1977-2 C.B. 574. Checklist questionnaire 302(b)(4) Rev. Proc. 81-42, 1981-2 C.B. 611. Checklist questionnaire 311 Rev. Proc. 86-16, 1986-1 C.B. 546. Checklist questionnaire 332 See section 3.01 of Rev. Proc. 2022-3, this Bulletin, which states that the Service will not issue Checklist questionnaire a letter ruling on whether a corporate distribution qualifies for nonrecognition treatment under § 332. However, the Service will issue a letter ruling addressing significant issues (within the meaning of section 3.01 of Rev. Proc. 2022-3) presented in a transaction described in § 332. The information and representations described in Rev. Proc. 90-52, 1990-2 C.B. 626, should be includ- edin a letter ruling request only to the extent that they relate to the significant issues with respect to which the letter ruling is requested. See section 6.03(3) of this revenue procedure. 338 Rev. Proc. 2003-33, 2003-1 C.B. 803, provides guidance as to how an automatic extension of time Extension of time to make under § 301.9100-3 of the Treasury Regulations may be obtained to file elections under § 338. elections Rev. Proc. 2003-33 also informs taxpayers who do not qualify for the automatic extension of the information necessary to obtain a letter ruling. 351 See section 3.01 of Rev. Proc. 2022-3, this Bulletin, which states that the Service will not issue Checklist questionnaire a letter ruling on whether certain transfers to controlled corporations qualify for nonrecognition treatment under § 351. However, the Service will issue a letter ruling addressing significant issues (within the meaning of section 3.01 of Rev. Proc. 2022-3) presented in a transaction described in § 351. The information and representations described in Rev. Proc. 83-59, 1983-2 C.B. 575, should be included in a letter ruling request only to the extent that they relate to the significant issues with respect to which the letter ruling is requested. See section 6.03(3) of this revenue procedure. 355 Rev. Proc. 2017-52, 2017-41 I.R.B. 283, and Rev. Proc. 2018-53, 2018-43 I.R.B. 667. See also Checklist questionnaire section 6.03(2) of this revenue procedure. 368(a)(1)(E) See section 3.01 of Rev. Proc. 2022-3, this Bulletin, which states that the Service will not issue a Checklist questionnaire letter ruling as to whether a transaction constitutes a reorganization, including a recapitalization within the meaning of § 368(a)(1)(E) (or a transaction that qualifies under § 1036). However, the Service will issue a letter ruling addressing significant issues (within the meaning of section 3.01 of Rev. Proc. 2022-3) presented in a transaction described in § 368(a)(1)(E) (or in a transaction described in § 1036). The information and representations described in Rev. Proc. 81-60, 1981-2 C.B. 680, should be included in a letter ruling request only to the extent that they relate to the significant issues. See section 6.03(3) of this revenue procedure. 412, 4971(b) Rev. Proc. 81-44, 1981-2 C.B. 618, provides guidance for requesting a waiver of the 100 percent Additional tax (on failure tax imposed under § 4971(b) on a pension plan that fails to meet the minimum funding standards to meet minimum funding of § 412. standards) 412(c) Rev. Proc. 2004-15, 2004-1 C.B. 490, provides guidance for requesting a waiver of the minimum Minimum funding standards funding standards. 412(c)(7)(B) Rev. Proc. 79-62, 1979-2 C.B. 576 provides guidance for requesting a determination that a plan Minimum funding standards amendment is reasonable and provides for only de minimis increases in plan liabilities in accor- - restrictions on plan amend- dance with former § 412(f)(2)(A) (now § 412(c)(7)(B)(i)). ments 412(d)(2) Rev. Proc. 94-42, 1994-1 C.B. 717, as modified by Rev. Proc. 2022-4, this Bulletin, sets forth Minimum funding standards procedures under which a plan sponsor may file notice with and obtain approval for a retroactive - certain retroactive plan amendment described in § 412(d)(2) (formerly § 412(c)(8)) and § 302(d)(2) of the Employee Re- amendments tirement Income Security Act of 1974 (ERISA) that reduces prior accrued benefits. 414(e) Rev. Proc. 2011-44, 2011-39 I.R.B. 445 provides supplemental procedures for requesting a ruling Church plans relating to church plans under section 414(e). Rev. Proc. 2011-44 provides that plan participants and other interested persons must receive a notice when a letter ruling is requested and a copy of the notice must be submitted as part of the ruling request. Rev. Proc. 2011-44 also provides pro- cedures for the Service to receive and consider comments about the ruling request from interested persons. See Appendix E of this revenue procedure. 414(r) Rev. Proc. 93-41, 1993-2 C.B. 536, sets forth procedures relating to the issuance of an administra- Qualified separate lines of tive scrutiny determination, which is a determination by the Service as to whether a separate line business - administrative of business satisfies the requirement of administrative scrutiny, within the meaning of § 1.414(r)- scrutiny 6, for the testing year. 461(h) Rev. Proc. 92-29, 1992-1 C.B. 748. Alternative method for the in- clusion of common improve- ment costs in basis 482 Rev. Proc. 2015-40, 2015-35 I.R.B. 236, and Rev. Proc. 2015-41, 2015-35 I.R.B. 263. Advance pricing agreements 521 Rev. Proc. 2022-5, this Bulletin. Appeal procedure with regard to adverse determination letters and revocation or modification of exemption letter rulings and determina- tion letters 817(h) Rev. Proc. 2008-41, 2008-2 C.B. 155. Closing agreement for inad- vertent failures of variable contracts 860 Rev. Proc. 2009-28, 2009-20 I.R.B. 1011. Self Determination of Defi- ciency Dividend 877, 2107, and 2501(a)(3) Notice 97-19, 1997-1 C.B. 394,as modified by Notice 98-34, 1998-2 C.B. 29, and as obsoleted in Individuals who lose U.S. cit- part by Notice 2005-36, 2005-1 C.B. 1007. izenship or cease to be taxed as long-term U.S. residents with a principal purpose to avoid U.S. taxes 1059(c)(4) Rev. Proc. 86-33, 1987-29 C.B. 402, provides guidance to corporate taxpayers on how to make Fair market value of stock the election under section 1059(c)(4) and establish the fair market value of stock for purposes for purposes of election of that election. It provides an automatic procedure to value publicly traded stock and valuation procedures for other stock. 1362(b)(5) and 1362(f) Rev. Proc. 2013-30, 2013-36 I.R.B. 173. Relief for late S corporation and related elections under certain circumstances 1362(b)(5) and 301.7701-3 Rev. Proc. 2013-30, 2013-36 I.R.B. 173. Automatic extensions of time for late S corporation election and late corporate entity classification 1.1502-13(e)(3) Rev. Proc. 2009-31, 2009-27 I.R.B. 107. Consent to treat intercompa- ny transactions on a separate entity basis and revocation of this consent 1.1502-75(b) Rev. Proc. 2014-24, 2014-13 I.R.B. 879, provides a determination that certain subsidiary cor- Consent to Be Included in porations are treated as if they had filed a Form 1122, Authorization and Consent of Subsidiary a Consolidated Income Tax Corporation To Be Included in a Consolidated Income Tax Return, even though they failed to do Return so. Rev. Proc. 2014-24 also informs taxpayers who do not qualify for the automatic determination of the procedure for requesting such determination. 1.1502-76(a)(1) Rev. Proc. 89-56, 1989-2 C.B. 643, as modified by Rev. Proc. 2006-21, 2006-1 C.B. 1050. Consent to file a consolidated return where member(s) of the affiliated group use a 52- 53 week taxable year 1504(a)(3)(A) and (B) Rev. Proc. 2002-32, 2002-1 C.B. 959, as modified by Rev. Proc. 2006-21, 2006-1 C.B. 1050. Waiver of application of § 1504(a)(3)(A) for certain corporations 1552 Rev. Proc. 90-39, 1990-2 C.B. 365, as clarified by Rev. Proc. 90-39A, 1990-2 C.B. 367, and as Consent to elect or change modified by Rev. Proc. 2006-21, 2006-1 C.B. 1050. method of allocating affil- iated group's consolidated Federal income tax liability 2642 Rev. Proc. 2004-46, 2004-2 C.B. 142, provides an alternative method for requesting relief to Allocations of genera- make a late allocation of the generation-skipping transfer tax exemption. Rev. Proc. 2004-46 also tion-skipping transfer tax informs taxpayers who are denied relief or who are outside the scope of the revenue procedure of exemption the information necessary for obtaining a letter ruling. 2652(a)(3) Rev. Proc. 2004-47, 2004-2, C.B. 169, provides an alternative method for certain taxpayers to Reverse qualified terminable obtain an extension of time to make a late reverse qualified terminable interest property election interest property elections under § 2652(a)(3). Rev. Proc. 2004-47 also informs taxpayers who are denied relief or who are outside the scope of the revenue procedure of the information necessary to obtain a letter ruling. 4980B Rev. Proc. 87-28, 1987-1 C.B. 770 (treating references to former § 162(k) as if they were refer- Failure to satisfy continuation ences to § 4980B). coverage requirements of group health plans 7701 Rev. Proc. 2009-41, 2009-39 I.R.B. 439. Relief for a late classification election for a newly formed entity 7701(a)(40) and 7871(d) Rev. Proc. 84-37, 1984-1 C.B. 513, as modified by Rev. Proc. 86-17, 1986-1 C.B. 550, and this Indian tribal governments revenue procedure (provides guidelines for obtaining letter rulings recognizing Indian tribal gov- and subdivision of Indian ernment or tribal government subdivision status; also provides for inclusion in list of federally rec- tribal governments ognized Indian tribes published annually by the Department of the Interior, Bureau of Indian Af- fairs, or in list of recognized subdivisions of Indian tribal governments in revised versions of Rev. Proc. 84-36, 1984-1 C.B. 510, as modified and made permanent by Rev. Proc. 86-17). 301.7701-2(a) Rev. Proc. 2002-22, 2002-1 C.B. 733 (specifies the conditions under which the Service will con- Classification of undivided sider a letter ruling request that an undivided fractional interest in rental real property ( other than fractional interests in rental a mineral property as defined in § 614) is not an interest in a business entity). real estate 301.7701-3 Rev. Proc. 2013-30, 2013-36 I.R.B. 173. Automatic extensions of time for late S corporation election and late corporate entity classification 301.9100-3 Rev. Proc. 2009-41, 2009-39 I.R.B. 439. Extension of time to make entity classification election 7702 Rev. Proc. 2008-38, 2008-2 C.B. 139. Closing agreement for failure to account for charges for qualified additional benefits 7702 Rev. Proc. 2008-40, 2008-2 C.B. 151. Closing agreement for failed life insurance contracts 7702A Rev. Proc. 2008-39, 2008-2 C.B. 143. Closing agreement for inad- vertent non-egregious failure to comply with modified endowment contract rules 7704(g) Notice 98-3, 1998-1 C.B. 333. Revocation of election SUBJECT MATTERS REVENUE PROCEDURE Accounting periods; changes Rev. Proc. 2002-39, 2002-1 C.B. 1046, as clarified and modified by Notice 2002-72, 2002-2 C.B. in period 843, as modified by Rev. Proc. 2003-34, 2003-1 C.B. 856, and modified by Rev. Proc. 2003- 79, 2003-2 C.B. 1036; and this revenue procedure, for which sections 1, 2.01, 2.02, 2.05, 3.04, 5.02, 6.03, 6.05, 6.07, 6.11, 7.01(1), 7.01(2), 7.01(3), 7.01(4), 7.01(5), 7.01(6), 7.01(9), 7.01(10), 7.01(11), 7.01(14), 7.01(15), 7.01(16), 7.02(2), 7.02(4), 7.02(5), 7.02(6), 7.04, 7.05, 7.06, 7.08, 8.01, 8.03, 8.04, 8.05, 8.06, 10, 11, 15, 17, 18, Appendix A, and Appendix F are applicable. Classification of liquidating Rev. Proc. 82-58, 1982-2 C.B. 847, as modified and amplified by Rev. Proc. 94-45, 1994-2 C.B. trusts 684, and as amplified by Rev. Proc. 91-15, 1991-1 C.B. 484 (checklist questionnaire), as modified and amplified by Rev. Proc. 94-45. Earnings and profits determi- Rev. Proc. 75-17, 1975-1 C.B. 677; this revenue procedure, sections 2.05, 3.04, 7, 8, and 10.05; nations and Rev. Proc. 2022-3, this Bulletin, section 3.01. Estate, gift, and genera- Rev. Proc. 91-14, 1991-1 C.B. 482 (checklist questionnaire). tion-skipping transfer tax issues Intercompany transactions; Rev. Proc. 2009-31, 2009-27 I.R.B. 107. election not to defer gain or loss Leveraged leasing Rev. Proc. 2001-28, 2001-1 C.B. 1156, and Rev. Proc. 2001-29, 2001-1 C.B. 1160. Rate orders; regulatory agen- A letter ruling request that involves a question of whether a rate order that is proposed or issued cy; normalization by a regulatory agency will meet the normalization requirements of § 168(f)(2) (pre-Tax Reform Act of 1986, § 168(e)(3)) and former §§ 46(f) and 167(l) ordinarily will not be considered unless the taxpayer states in the letter ruling request whether-- (1) the regulatory authority responsible for establishing or approving the taxpayer's rates has reviewed the request and believes that the request is adequate and complete; and (2) the taxpayer will permit the regulatory authority to participate in any Associate office con- ference concerning the request. If the taxpayer or the regulatory authority informs a consumer advocate of the request for a letter ruling and the advocate wishes to communicate with the Service regarding the request, any such communication should be sent to: Internal Revenue Service, Associate Chief Counsel (Procedure and Administration), Attn: CC:PA:LPD:TSS, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044 (or, if a private delivery service is used: Internal Revenue Service, Asso- ciate Chief Counsel (Procedure and Administration), Attn: CC:PA:LPD:TSS, Room 5336, 1111 Constitution Ave., NW, Washington, DC 20224). These communications will be treated as third party contacts for purposes of § 6110. Unfunded deferred compen- Rev. Proc. 71-19, 1971-1 C.B. 698, as amplified by Rev. Proc. 92-65, 1992-2 C.B. 428. See Rev. sation Proc. 92-64, 1992-2 C.B. 422, as modified by Notice 2000-56, 2000-2 C.B. 393, for the model trust for use in Rabbi Trust Arrangements. Safe harbor revenue proce-.02 For requests relating to the following Code sections and subject matters, refer to the following dures safe harbor revenue procedures. CODE OR REGULATION REVENUE PROCEDURE SECTION 23 and 36C Rev. Proc. 2010-31, 2010-40 I.R.B. 413. Adoption credit for foreign adoptions 103 and 141-150 Rev. Proc. 2017-13, 2017-61.R.B. 787 (management contracts); and Rev. Proc. 2007-47, 2007-2 Issuance of state or local C.B. 108 (research agreements). obligations 61 Rev. Proc. 2005-62, 2005-2 C.B. 507. Utility Cost Recovery Securi- tization Transactions 137 Rev. Proc. 2010-31, 2010-40 I.R.B. 413. Exclusion for Employer Reimbursements 162 Rev. Proc. 2002-12, 2002-1 C.B. 374. Restaurant Small Wares Costs 165 Rev. Proc. 2010-36, 2010-42 I.R.B. 439. Losses from corrosive dry- wall 165 Rev. Proc. 2009-20, 2009-14 I.R.B. 749, as modified by Rev. Proc. 2011-58, 2011-50 I.R.B. 849; Theft losses from fraudulent investment arrangements 167 and 168 Section 9 of Rev. Proc. 2015-12, 2015-2 I.R.B. 266. Primary use of certain cable network assets described in asset class 48.42of Rev. Proc. 87-56, 1987-2 C.B. 674 168 Rev. Proc. 2002-27, 2002-1 C.B. 802. Depreciation of original and replacement tires for certain vehicles 168 Section 8 of Rev. Proc. 2015-12, 2015-2 I.R.B. 266. Depreciation of fiber optic node and trunk line of a cable system operator 168 Rev. Proc. 2011-22, 2011-18 I.R.B. 737 Recovery periods of cer- tain tangible assets used by wireless telecommunication carriers 263, 471 Rev. Proc. 2007-48, 2007-2 C.B. 110 Treatment of rotable spare parts as inventory or depre- ciable property 263 Rev. Proc. 2002-65, 2002-2 C.B. 700; Rev. Proc. 2001-46, 2001-2 C.B. 263. Safe harbor methods for track structure expenditures 263 Rev. Proc. 2011-27, 2011-18 I.R.B. 740. Determination whether expenditures to maintain, replace or improve wireline network assets must be cap- italized 263 Rev. Proc. 2011-28, 2011-18 I.R.B. 743. Determination whether expenditures to maintain, replace or improve wireless network assets must be cap- italized 263 Rev. Proc. 2011-29, 2011-18 I.R.B. 746. Allocating success-based fees paid in business acquisitions or reorganizations 263 Rev. Proc. 2011-43, 2011-37 I.R.B. 326. Electric trade and distribution property assets 263A Rev. Proc. 2010-44, 2010-49 I.R.B. 811. Safe harbor methods for cer- tain motor vehicle dealerships 280A Rev. Proc. 2013-13, 2013-6 I.R.B. 478. Safe harbor method to deter- mine the amount of deduct- ible expenses attributable to certain business use of a residence 280B Rev. Proc. 95-27, 1995-1 C.B. 704. Certain structural modifica- tions to a building not treated as a demolition 446 Rev. Proc. 2004-36, 2004-1 C.B. 1063. Film producer's treatment of certain creative property costs 446 Rev. Proc. 2007-33, 2007-1 C.B. 1289. Bank's treatment of uncol- lected interest 448 Rev. Proc. 2011-46, 2011-42 I.R.B. 518. Nonaccrual-experience meth- od - book safe harbor method 451 Rev. Proc. 2002-36, 2002-1 C.B. 993. Safe harbor for capital cost reduction payments 451 Rev. Proc. 2011-17, 2011-5 I.R.B. 441. Treatment of gift cards issued to customers in exchange for returned merchandise 451 Rev. Proc. 2011-56, 2011-49 I.R.B. 834. Safe harbor for certain mi- nors' trusts established under the Indian Gaming Regulato- ry Act (U.S.C. §§ 2701-2721) 461 Rev. Proc. 2008-25, 2008-1 C.B. 686. Safe harbor method for pay- roll tax liabilities:(or compen- sation 471 Rev. Proc. 98-29, 1998-1 C.B. 857. Estimating inventory shrink- age 471 Rev. Proc. 2002-17, 2002-1 C.B. 676. Valuation of automobile deal- er vehicle parts inventory 471 Rev. Proc. 2003-20, 2003-1 C.B. 445. Valuation of remanufactured cores 471 Valuation of heavy Rev. Proc. 2006-14, 2006-1 C.B. 350. equipment dealer parts inventory 471 Rev. Proc. 2008-43, 2008-2 C.B. 186. Rolling-average method of accounting for inventories 475 Rev. Proc. 2007-41, 2007-1 C.B. 1492. Eligible positions 584(a) Rev. Proc. 92-51, 1992-1 C.B. 988. Qualification of a proposed common trust fund plan 642(c)(5) Rev. Proc. 88-53, 1988-2 C.B. 712. Qualification of trusts as pooled income funds 664 Rev. Proc. 2005-24, 2005-1 C.B. 909, as modified by Notice 2006-15, 2006-1 C.B. 501. Charitable remainder trusts 664(d)(1) Rev. Proc. 2003-53, 2003-2 C.B. 230; Rev. Proc. 2003-54, 2003-2 C.B. 236; Rev. Proc. 2003-55, Qualification of trusts as 2003-2 C.B. 242; Rev. Proc. 2003-56, 2003-2 C.B. 249; Rev. Proc. 2003-57, 2003-2 C.B. 257; charitable remainder annuity Rev. Proc. 2003-58, 2003-2 C.B. 262; Rev. Proc. 2003-59, 2003-2 C.B. 268; Rev. Proc. 2003-60, trusts 2003-2 C.B. 274. 664(d)(2) and (3) Rev. Proc. 2005-52, 2005-2 C.B. 326; Rev. Proc. 2005-53, 2005-2 C.B. 339; Rev. Proc. 2005-54, Qualification of trusts as 2005-2 C.B. 353; Rev. Proc. 2005-55, 2005-2 C.B. 367; Rev. Proc. 2005-56, 2005-2 C.B. 383; charitable remainder unitrusts Rev. Proc. 2005-57, 2005-2 C.B. 392; Rev. Proc. 2005-58, 2005-2 C.B. 402; Rev. Proc. 2005-59, 2005-2 C.B. 412. 832 Rev. Proc. 2002-46, 2002-2 C.B. 105. Insurance company premium acquisition expenses 856(c) Rev. Proc. 2003-65, 2003-2 C.B. 336. Certain loans treated as real estate assets 1031(a) Rev. Proc. 2000-37, 2000-2 C.B. 308, as modified by Rev. Proc. 2004-51, 2004-2 C.B. 294. Qualification as a qualified exchange accommodation arrangement 1031 Rev. Proc. 2008-16, 2008-1 C.B. 547. Safe harbor with respect to exchanges of residential real property 1031 Rev. Proc. 2010-14, 2010-12 I.R.B. 456. Safe harbor for reporting gain or loss on failed exchanges 1272(a)(6) Rev. Proc. 2013-26, 2013-22 I.R.B. 1160. Proportional method of accounting for original issue discount on pools of credit card receivables 1286 Rev. Proc. 91-50, 1991-2 C.B. 778. Determination of reasonable compensation under mort- gage servicing contracts 1362(f) Rev. Proc. 2013-30, 2013-36 I.R.B. 173. Automatic inadvertent termination relief to certain corporations 2056A Rev. Proc. 96-54, 1996-2 C.B. 386. Qualified Domestic Trust 2702(a)(3)(A) and 25.2702- Rev. Proc. 2003-42, 2003-1 C.B. 993. 5(c) Qualified Personal Residence Trust 4051(a)(2) Rev. Proc. 2005-19, 2005-1 C.B. 832. Imposition of tax on heavy trucks and trailers sold at re- tail 1.7704-2(d) Rev. Proc. 92-101, 1992-2 C.B. 579. New business activity of ex- isting partnership is closely related to pre-existing busi- ness SUBJECT MATTERS REVENUE PROCEDURE Certain rent-to-own contracts Rev. Proc. 95-38, 1995-2 C.B. 397. treated as leases Automatic change in account-.03 For requests for an automatic change in accounting period, refer to the following automatic ing period revenue procedures change revenue procedures. Rev. Proc. 2006-45, 2006-2 C.B. 851, as clarified and modified by Rev. Proc. 2007-64, 2007-2 C.B. 818 (certain corporations); Rev. Proc. 2006-46, 2006-2 C.B. 859 (certain partnerships, sub- chapter S corporations, personal service corporations, and trusts); and Rev. Proc. 2003-62, 2003-2 C.B. 299 (individuals seeking a calendar year). The Commissioner's consent to an otherwise qualifying automatic change in accounting period is granted only if the taxpayer timely complies with the applicable automatic change revenue procedure. APPENDIX G MEMORANDUM OF UNDERSTANDING ACKNOWLEDGING RISK WITH EMAIL I acknowledge that there are risks associated with email, such as the possibility that sensitive taxpayer information could be intercepted and viewed by unauthorized persons. I understand the importance of securing email using appropriate encryption, particularly when transmitting sensitive or confidential tax-related information. I understand that encryption programs only encrypt the email attachment and not the subject line or the body of the email itself, and that confidential information should not be included in the subject line, the body of the email itself, or the file name of the attachment. By signing this agreement, I understand that sensitive or confidential information should be sent only by encrypted email attachments in communicating with the IRS. Even with encryption it is possible electronic communications could be intercepted. I acknowledge that the United States Government does not guarantee the security of data transmitted electronically by email and accepts no liability, regardless of fault, for any loss or damage sustained without negligence of United States Government employees. (Name of Taxpayer) (Title of Individual Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ APPENDIX H MEMORANDUMS OF UNDERSTANDING AGREEING TO USE ENCRYPTED EMAIL ATTACHMENTS Agreement to use encrypted email attachments.01 For requesters choosing to use encrypted email attachments in com- (compressed Zip format) pressed Zip format, submit the following MOU: Agreement to Use Encrypted Email Attachments (Compressed Zip format) Generally, the Office of Chief Counsel, Internal Revenue Service (Chief Counsel) communicates with taxpayers or their representatives by sending documents through the mail or via facsimile, or by telephone. In many cases communication by email is more convenient for both the taxpayer and Chief Counsel. There are risks associated with email, such as the possibility sensitive taxpayer information could be intercepted. If an email is intercepted, any personal information in the email could be viewed by unauthorized persons. It is important to secure email using appropriate encryption, particularly when transmitting sensitive or confidential tax-related information. This agreement is intended to enhance the process of securely exchanging taxpayer data and other tax-related information and increase efficiency of interaction between Chief Counsel and taxpayers or their representatives. 1. Communications In order to communicate in a formal, efficient manner for tax issues, written communication is essential. Email is one form of written communication; however, in order to protect sensitive information, additional safeguards are necessary for email communications which are not generally required for paper documents. Chief Counsel and the taxpayer, by this agreement, consent to written communications being transmitted via encrypted email attachments. In order to limit access to this information, Chief Counsel and the taxpayer agree to designate participants and provide the list of participants in an addendum to this agreement. Only individuals designated as participants by Chief Counsel and the taxpayer on that list will be included in these communications. The taxpayer will be responsible for providing an updated list when there are changes to their designated participants. 2. Encrypted Email Attachments Chief Counsel uses SecureZIP(R), a commercial program, to compress and encrypt email attachments that contain sensitive information. The recipient of encrypted email attachments created using this utility may decrypt and view them by entering a password. The recipient must first install a compatible "zip" software utility. In addition to SecureZIP(R), compatible utilities include PKZIP(R), and ZIP Reader(R) by PKWARE(R), which is a free Windows utility that enables users to process compressed and/or AES passphrase-encrypted files created by SecureZIP(R), PKZIP(R) and other products that support these capabilities. SecureZIP and compatible utilities only encrypt the email attachment and not the subject line nor the body of the email itself. To prevent interception and viewing of sensitive or other confidential tax-related information by unauthorized persons, such information must not be included in the email body or subject line. 3. Security Both parties agree to work together to ensure the joint security of the information contained in the encrypted email attachment. Pursuant to this MOU, Chief Counsel certifies that its system used to transmit, store, or process data is designed, managed, and operated in a secure manner in compliance with relevant laws, regulations, and policies. The taxpayer should also undertake steps to ensure proper security protections are employed to transmit, receive, and store this information. By signing this agreement, the taxpayer understands that sensitive or confidential information should be sent only by encrypted email attachment in communicating with the IRS. Even with encryption it is possible electronic communications could be intercepted. By signing this agreement, the taxpayer acknowledges that the United States Government does not guarantee the security of data transmitted electronically by email and accepts no liability, regardless of fault, for any loss or damage sustained without negligence of United States Government employees. 4. Costs Both parties agree to bear all of their own costs on a nonreimbursable basis in complying with this agreement. 5. Timeline This agreement is effective upon the signatures of both parties and will remain in effect for the duration of the matter in Chief Counsel, including, but not limited to such time as the matter is on appeal or pending before other United States Government agencies such as the Department of the Treasury or Department of Justice. As a new participant is added to the MOU, they are added to the addendum and both the MOU and the addendum remain part of the case or administrative file. If either the taxpayer or Chief Counsel wishes to terminate this agreement before it expires, it may be done upon thirty (30) days' advance notice. In the event of a security incident, Chief Counsel may immediately terminate the agreement. 6 Additional Terms Nothing in this agreement shall be construed as a waiver of any sovereign immunity of the United States Government. This agreement is not intended to contravene in any way, the precedence or applicability of Federal law and shall be governed by and construed under Federal law of the United States of America. (Name of Taxpayer) (Title of Individual Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Office of Chief Counsel, Internal Revenue Service, United States of America (Name of Counsel Employee) (Title of Counsel Employee Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Agreement to use encrypted email attachments.02 For requesters choosing to use encrypted email attachments with Ado- (Adobe Acrobat Pro password encryption) be Acrobat Pro password encryption, submit the following MOU: Agreement to Use Encrypted Email Attachments (Adobe Acrobat Pro Password Encryption) Generally, the Office of Chief Counsel, Internal Revenue Service (Chief Counsel) communicates with taxpayers or their representatives by sending documents through the mail or via facsimile, or by telephone. In many cases communication by email is more convenient for both the taxpayer and Chief Counsel. There are risks associated with email, such as the possibility sensitive taxpayer information could be intercepted. If an email is intercepted, any personal information in the email could be viewed by unauthorized persons. It is important to secure email using appropriate encryption, particularly when transmitting sensitive or confidential tax-related information. This agreement is intended to enhance the process of securely exchanging taxpayer data and other tax-related information and increase efficiency of interaction between Chief Counsel and taxpayers or their representatives. 1. Communications In order to communicate in a formal, efficient manner for tax issues, written communication is essential. Email is one form of written communication; however, in order to protect sensitive information, additional safeguards are necessary for email communications which are not generally required for paper documents. Chief Counsel and the taxpayer, by this agreement, consent to written communications being transmitted via encrypted email attachments. In order to limit access to this information, Chief Counsel and the taxpayer agree to designate participants and provide the list of participants in an addendum to this agreement. Only individuals designated as participants by Chief Counsel and the taxpayer on that list will be included in these communications. The taxpayer will be responsible for providing an updated list when there are changes to their designated participants. 2. Encrypted Email Attachments Chief Counsel uses Adobe Acrobat Pro(R), a commercial program, to compress and encrypt email attachments in Adobe Portable Document Format (. pdf) that contain sensitive information. The recipient of encrypted email attachments created using this utility may decrypt and view them by entering a password. The recipient must first install a compatible.pdf software reader with password decryption capability. In addition to Adobe Acrobat Pro(R), the Adobe Acrobat DC Reader(R) is a free Windows utility that enables users to decrypt and open AES passphrase-encrypted files created by Adobe Acrobat Pro. Other compatible.pdf decryption utilities may exist. Acrobat Pro(R) only encrypts the email attachment and not the subject line nor the body of the email itself. To prevent interception and viewing of sensitive or other confidential tax-related information by unauthorized persons, such information must not be included in the email body or subject line. Further information about how to encrypt email attachments with Adobe Acrobat products may be found on Adobe's web site or at this link: https://home.treasury.gov/how-to-encryptpassword-protect-microsoft-office-and-adobe-acrobat-pdf-documents. 3. Security Both parties agree to work together to ensure the joint security of the information contained in the encrypted email attachment. Pursuant to this MOU, Chief Counsel certifies that its system used to transmit, store, or process data is designed, managed, and operated in a secure manner in compliance with relevant laws, regulations, and policies. The taxpayer should also undertake steps to ensure proper security protections are employed to transmit, receive, and store this information. By signing this agreement, the taxpayer understands that sensitive or confidential information should be sent only by encrypted email attachment in communicating with the IRS. Even with encryption it is possible electronic communications could be intercepted. By signing this agreement, the taxpayer acknowledges that the United States Government does not guarantee the security of data transmitted electronically by email and accepts no liability, regardless of fault, for any loss or damage sustained without negligence of United States Government employees. 4. Costs Both parties agree to bear all of their own costs on a nonreimbursable basis in complying with this agreement. 5. Timeline This agreement is effective upon the signatures of both parties and will remain in effect for the duration of the matter in Chief Counsel, including, but not limited to such time as the matter is on appeal or pending before other United States Government agencies such as the Department of the Treasury or Department of Justice. As a new participant is added to the MOU, they are added to the addendum and both the MOU and the addendum remain part of the case or administrative file. If either the taxpayer or Chief Counsel wishes to terminate this agreement before it expires, it may be done upon thirty (30) days' advance notice. In the event of a security incident, Chief Counsel may immediately terminate the agreement. 6 Additional Terms Nothing in this agreement shall be construed as a waiver of any sovereign immunity of the United States Government. This agreement is not intended to contravene in any way, the precedence or applicability of Federal law and shall be governed by and construed under Federal law of the United States of America. (Name of Taxpayer) (Title of Individual Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Office of Chief Counsel, Internal Revenue Service, United States of America (Name of Counsel Employee) (Title of Counsel Employee Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Agreement to use encrypted email attachments.03 For requesters choosing to use encrypted email attachments with Mi- (Microsoft Office 2016/365 password encryp- crosoft Office 2016/365 password encryption, submit the following MOU: tion) Agreement to Use Encrypted Email Attachments (Microsoft Office 2016/365 Password Encryption) Generally, the Office of Chief Counsel, Internal Revenue Service (Chief Counsel) communicates with taxpayers or their representatives by sending documents through the mail or via facsimile, or by telephone. In many cases communication by email is more convenient for both the taxpayer and Chief Counsel. There are risks associated with email, such as the possibility sensitive taxpayer information could be intercepted. If an email is intercepted, any personal information in the email could be viewed by unauthorized persons. It is important to secure email using appropriate encryption, particularly when transmitting sensitive or confidential tax-related information. This agreement is intended to enhance the process of securely exchanging taxpayer data and other tax-related information and increase efficiency of interaction between Chief Counsel and taxpayers or their representatives. 1. Communications In order to communicate in a formal, efficient manner for tax issues, written communication is essential. Email is one form of written communication; however, in order to protect sensitive information, additional safeguards are necessary for email communications which are not generally required for paper documents. Chief Counsel and the taxpayer, by this agreement, consent to written communications being transmitted via encrypted email attachments. In order to limit access to this information, Chief Counsel and the taxpayer agree to designate participants and provide the list of participants in an addendum to this agreement. Only individuals designated as participants by Chief Counsel and the taxpayer on that list will be included in these communications. The taxpayer will be responsible for providing an updated list when there are changes to their designated participants. 2. Encrypted Email Attachments Chief Counsel uses Microsoft Office 365(R), a commercial program, to compress and encrypt email attachments in Microsoft Office formats, including Word, Excel or PowerPoint, that contain sensitive information. The recipient of encrypted email attachments created using this program may decrypt and view them by entering a password. The recipient should use Microsoft 2016(R) or Microsoft Office 365(R) to decrypt and open encrypted Office files sent by Chief Counsel as email attachments. Older versions of Microsoft Office may not successfully decrypt these attachments. Microsoft Office 365 only encrypts the email attachment and not the subject line nor the body of the email itself. To prevent interception and viewing of sensitive or other confidential tax-related information by unauthorized persons, such information must not be included in the email body or subject line. Further information about how to encrypt email attachments with Microsoft Office products may be found on Microsoft's web site or at this link: https://home.treasury.gov/how-to-encryptpassword-protect-microsoft-office-and-adobe-acrobat-pdf-documents. 3. Security Both parties agree to work together to ensure the joint security of the information contained in the encrypted email attachment. Pursuant to this MOU, Chief Counsel certifies that its system used to transmit, store, or process data is designed, managed, and operated in a secure manner in compliance with relevant laws, regulations, and policies. The taxpayer should also undertake steps to ensure proper security protections are employed to transmit, receive, and store this information. By signing this agreement, the taxpayer understands that sensitive or confidential information should be sent only by encrypted email attachment in communicating with the IRS. Even with encryption it is possible electronic communications could be intercepted. By signing this agreement, the taxpayer acknowledges that the United States Government does not guarantee the security of data transmitted electronically by email and accepts no liability, regardless of fault, for any loss or damage sustained without negligence of United States Government employees. 4. Costs Both parties agree to bear all of their own costs on a nonreimbursable basis in complying with this agreement. 5. Timeline This agreement is effective upon the signatures of both parties and will remain in effect for the duration of the matter in Chief Counsel, including, but not limited to such time as the matter is on appeal or pending before other United States Government agencies such as the Department of the Treasury or Department of Justice. As a new participant is added to the MOU, they are added to the addendum and both the MOU and the addendum remain part of the case or administrative file. If either the taxpayer or Chief Counsel wishes to terminate this agreement before it expires, it may be done upon thirty (30) days' advance notice. In the event of a security incident, Chief Counsel may immediately terminate the agreement. 6 Additional Terms Nothing in this agreement shall be construed as a waiver of any sovereign immunity of the United States Government. This agreement is not intended to contravene in any way, the precedence or applicability of Federal law and shall be governed by and construed under Federal law of the United States of America. (Name of Taxpayer) (Title of Individual Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________ Office of Chief Counsel, Internal Revenue Service, United States of America (Name of Counsel Employee) (Title of Counsel Employee Signing Agreement) SIGNATURE: _______________________________ DATE: _______________________________

Private Letter Ruling Number: 202324005 Internal Revenue Service March 21, 2023 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202324005 Release Date: 6/16/2023 Index Number: 1400Z.01-00, 9100.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:B05 PLR-118299-22 Date: March 21, 2023 Dear ******: This ruling responds to Taxpayer's request for a letter ruling requested on Submission Date. Taxpayer requests relief under section 301.9100-3 of the Procedure and Administration Regulations. Specifically, Taxpayer requests an extension of time to file a self-certifying election on Form 8996, Qualified Opportunity Fund, for Taxpayer to be treated as a qualified opportunity fund (QOF), as defined in section 1400Z-2(d) of the Internal Revenue Code and section 1.1400Z2(d)-1(a) of the Income Tax Regulations effective as of Date 1. FACTS Taxpayer was organized as a limited liability company under the laws of State Z on Date 1 in Year 1 and is treated as a partnership for Federal income tax purposes. Taxpayer was formed with contributions from its Members. The Members had eligible gain from Year 1 that they contributed to Taxpayer. Taxpayer's overall method of accounting is the cash receipts and disbursements method of accounting, and Taxpayer has a December 31 tax year end. Taxpayer was formed to meet the definition of section 1400Z-2(d) and to hold qualified opportunity zone partnership interests (within the meaning of section 1400Z-2(d)(2)(A)(ii)) in a qualified opportunity zone business (QZOB) as defined in section 1400Z-2(d)(3). The QZOB, classified as a partnership for Federal income tax purposes, was formed to acquire, develop, and lease real estate, and to invest in real estate in a designated opportunity zone in State Z. According to the affidavits and information provided to us, the Members engaged the services of Firm, a large public accounting firm, with the assistance in the formation of Taxpayer. Additionally, Firm was engaged to handle the tax filings for Taxpayer, including filing Taxpayer's first Form 1065, U.S. Return of Partnership Income, for the Year 1 tax year (due March 15, Year 2, unless on extension), along with the self-certification Form 8996, Qualified Opportunity Fund. Firm, despite agreeing to handle the tax filings of Taxpayer, failed to input Taxpayer into its internal system to track all tax return filings. As a result, Firm failed to timely file the Form 1065 by March 15 of Year 2 (and thus did not file Form 8996 by March 15 of Year 2). Firm also did not file timely a Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns. In April of Year 2, an accountant for an entity related to the Members reached out to Firm, inquiring about the status of Taxpayer's income tax returns. At this point, Firm realized that Taxpayer had expected it to file an extension. When Firm determined that it had failed to input Taxpayer into its internal system, it informed Taxpayer that the extension had not been filed (thus Firm had not filed Taxpayer's return by the original due date, either). With this discovery, Taxpayer asked Firm to file the delinquent returns (Form 1065 and Form 7004 asking for an extension of time to file, along with Form 8996), and to seek this letter ruling requesting relief under section 301.9100-3. Taxpayer has now filed all the required Year 1 tax forms, including Form 8996 and a Form 8275, Disclosure Statement, notifying the Service of the late filing and the private letter ruling request. Taxpayer represents that, other than the missed extension of time to file its return, it has otherwise and continues to meet all the rules under section 1400Z-2 and the regulations thereunder. Taxpayer represents that granting of the relief under section 301.9100-3 is proper, as it acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the government LAW AND ANALYSIS Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations for rules for the certification of QOFs. Section 1.1400Z2(d)-1(a)(2) provides the rules for an entity to self-certify as a QOF. Section 1.1400Z2(d)-1(a)(2)(i) provides that the entity electing to be certified as a QOF must do so on a timely filed return in such form and manner as may be prescribed by the Commissioner of Internal Revenue in the Internal Revenue Service forms or instructions, or in publications or guidance published in the Internal Revenue Bulletin. To self-certify as a QOF, a taxpayer must file Form 8996, Qualified Opportunity Fund, with its tax return for the year to which the certification applies. The Form 8996 must be filed by the due date of the tax return (including extensions). The information provided indicates that Firm did not file Taxpayer's Form 8996 due to the Firm's failure to input Taxpayer into its internal system, resulting in Firm's failure to file an extension of time to file the Form 1065 and the Form 8996. Because section 1.1400Z2(d)-1(a)(2)(i) sets forth the manner and timing for an entity to self-certify as a QOF, these elections are regulatory elections, as defined in section 301.9100-1(b). Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections (other than automatic extensions covered in section 301.9100-2) will be granted when the taxpayer provides evidence (including affidavits) to establish that the taxpayer acted reasonably and in good faith and the grant of relief will not prejudice the interests of the government. Under section 301.9100-3(b), a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer requests relief before the failure to make the regulatory election is discovered by the Service, or reasonably relied on a qualified tax professional, and the tax professional failed to make, or advise the taxpayer to make, the election. However, a taxpayer is not considered to have reasonably relied on a qualified tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or was not aware of all relevant facts. In addition, section 301.9100-3(b)(3) provides that a taxpayer is deemed not to have acted reasonably and in good faith if the taxpayer-- (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662 at the time the taxpayer requests relief, and the new position requires or permits a regulatory election for which relief is requested; (ii) was fully informed in all material respects of the required election and related tax consequences but chose not to make the election; or (iii) uses hindsight in requesting relief. If specific facts have changed since the original deadline that make the election advantageous to a taxpayer, the Service will not ordinarily grant relief. Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. Based on the facts and information submitted and the representations made, we conclude that Taxpayer has acted reasonably and in good faith, and that the granting of relief would not prejudice the interests of the government: Taxpayer has satisfied the requirements for the granting of relief under section 301.9100-3(b). Accordingly, based solely on the facts and information submitted, and the representations made in the ruling request, the Form 8996 attached to Taxpayer's return for Year 1 is considered timely filed, and Taxpayer has thereby made the election under section 1400Z-2 and section 1.1400Z2(d)-1(a)(2)(i) to self-certify as a QOF for Year 1 as of Date 1. Taxpayer should submit a copy of this letter ruling to the Service Center where Taxpayer files its returns along with a cover letter requesting the Service associate this ruling with the Year 1 return. This ruling is based upon facts and representations submitted on behalf of the Taxpayer by one of the Members and a partner in Firm and accompanied by a penalty of perjury statement executed by the appropriate parties. This office has not verified any of the material submitted in support of the request for a ruling. However, as part of an examination process, the Service may verify the information, representations, and other data submitted. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we express no opinion, either express or implied, concerning whether any investments made into Taxpayer are qualifying investments as defined in section 1.1400Z2 (a)-1(b)(34) or whether Taxpayer meets the requirements under section 1400Z-2 and the regulations thereunder to be a QOF. Further, we also express no opinion on whether any interest owned in any entity by Taxpayer qualifies as qualified opportunity zone property, as defined in section 1400Z-2(d)(2), or whether such entity would be treated as a qualified opportunity zone business, as defined in section 1400Z-2(d)(3). We express no opinion regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives. A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. Sincerely, Kyle C. Griffin Assistant to the Branch Chief, Branch 5 Office of Associate Chief Counsel (Income Tax & Accounting) cc:

Revenue Procedure 2023-2 Internal Revenue Service 2023-1 I.R.B. 120 26 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability. Rev. Proc. 2023-2 SECTION 1. PURPOSE AND AUTHORITY Description of purpose.01 Technical advice. This revenue procedure explains when and how an Associate office provides technical advice, conveyed in a technical advice memorandum (TAM). It also explains the rights that a taxpayer has when a field office requests a TAM regarding a tax matter. Rev. Proc. 2022-2 is superseded. Updated annually.02 This revenue procedure is updated annually as the second revenue procedure of the year, but it may be modified, amplified, or clarified during the year. SECTION 2. DEFINITIONS Operating division.01 The term "operating division" means (1) the Large Business & International Division (LB&I); (2) the Small Business/Self-Employed Division (SB/SE); (3) the Wage and Investment Division (W&I); and (4) the Tax Exempt and Government Entities Division (TE/GE). Director.02 The term "Director" means (1) the Practice Area Director or the Director, Field Operations (LB&I) for the taxpayer's practice area; (2) an Area Director, SB/SE; (3) the Director, Return Integrity & Compliance Services (W&I); (4) the Director, International Compliance, Strategy and Policy; (5) the Director, Employee Plans Examinations; (6) the Director, Employee Plans Rulings & Agreements; (7) the Director, Exempt Organizations Examinations; (8) the Director, Exempt Organizations Rulings & Agreements; (9) the Director, Government Entities; (10) the Appeals Area Director; (11) the Appeals Director, Technical Guidance; (12) the Appeals Director, International Operations; or (13) any official to whom the authority normally exercised by a Director has properly been delegated. Appeals.03 The terms "Appeals" and "Appeals office" refer to the Internal Revenue Service Independent Office of Appeals. Appeals officer.04 The term "Appeals officer" means the Appeals officer assigned to the taxpayer's case and can include an Appeals Team Case Leader or settlement officer. Taxpayer.05 The term "taxpayer" means any person subject to any provision of the Internal Revenue Code, including an issuer of obligations the interest on which is excluded from gross income under § 103, and issuers of other bonds that provide a tax subsidy. Associate office.06 The term "Associate office" means (1) the Office of Associate Chief Counsel (Corporate); (2) the Office of Associate Chief Counsel (Financial Institutions and Products); (3) the Office of Associate Chief Counsel (Income Tax and Accounting); (4) the Office of Associate Chief Counsel (International); (5) the Office of Associate Chief Counsel (Passthroughs and Special Industries); (6) the Office of Associate Chief Counsel (Procedure and Administration); or (7) the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). Field office.07 The term "field office" means personnel in any examination or Appeals office. For qualified retirement plan and exempt organizations matters, the term "field office" also means personnel in any Rulings & Agreements office. Field counsel.08 The term "field counsel" means any attorney assigned to the Division Counsel for an operating division who is not a member of Division Counsel Headquarters. SECTION 3.THE NATURE OF TECHNICAL ADVICE When advice furnished.01 Technical advice is advice furnished by an Associate office in a memorandum that responds to any request, submitted under this revenue procedure, for assistance on any technical or procedural question that develops during any proceeding before the Internal Revenue Service (Service). The field office may request a TAM when the application of the law to the facts involved is unclear. The question must be on the interpretation and proper application of any legal authority, including legislation, tax treaties, court decisions, regulations, notices, revenue rulings, revenue procedures, or announcements to a specific set of facts that concerns the treatment of an item in a tax period under examination or in Appeals. A TAM may not be requested for prospective or hypothetical transactions (except for certain TAMs in connection with a taxpayer's request for a determination letter on a matter within the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division, pursuant to Rev. Proc. 2023-4 or 2023-5). Proceedings before the Service include: (1) the examination of a taxpayer's return; (2) the consideration of a taxpayer's claim for credit or refund; (3) any matter under examination or in Appeals pertaining to tax-exempt bonds, tax credit bonds, or mortgage credit certificates; and (4) any other matter involving a specific taxpayer under the jurisdiction of a Director. Technical advice does not include any oral legal advice or any written legal advice furnished to the field office that is not submitted and processed under this revenue procedure. TAM may be requested.02 The field office may request a TAM on an issue in any tax period, even if a TAM was even if previous TAM on requested and furnished for the same or similar issue for another tax period. The field office may same matter was issued also request a TAM on an issue even if Appeals disposed of the same or similar issue for another tax period of the same taxpayer. Taxpayer participation.03 Taxpayers will be afforded an opportunity to participate in the technical advice process. Taxpayer participation is preferred but not required in order to process a TAM. A taxpayer's failure to participate in stages identified as "material," however, will constitute waiver of the taxpayer's right to the taxpayer conference described in section 9. Under no circumstances will a taxpayer be treated as having waived its right to see the issued TAM or having waived its rights regarding disclosure and deletions described in section 10. Areas of mandatory.04 Regarding qualified retirement plan matters, a request for a TAM is required in cases technical advice on concerning plans for which the Service is proposing to issue a revocation letter because of certain employee plans matters fiduciary actions that violate the exclusive benefit rule of § 401(a) of the Code and are subject to Part 4of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, 1974-3 C.B. 1, 43 as amended (ERISA). Basis for requests by.05 The circumstances in which Exempt Organizations Determinations should seek technical Exempt Organizations advice in the course of processing applications for tax exemption are described in Rev. Proc. 2023- Rulings & Agreements 5, this Bulletin, section 3.03. Technical advice may also be requested by Exempt Organizations Determinations in connection with requests for determination letters where no pending application for tax exemption is involved. A request for a TAM is not required if the Director, Exempt Organizations Examinations proposes to revoke or modify a letter recognizing tax-exempt status issued by the Service. SECTION 4. TYPES OF ISSUES NOT SUBJECT TO THIS PROCEDURE Alcohol, tobacco, and.01 The procedures for obtaining technical advice that apply to Federal alcohol, tobacco, and firearms taxes firearms taxes under subtitle E of the Code are under the jurisdiction of the Alcohol and Tobacco Tax and Trade Bureau of the Department of the Treasury. Employment status.02 Employment status determination letters issued pursuant to section 12.04 of Rev. Proc. determinations 2023-1, of this Bulletin, are not subject to technical advice procedures. Issues under § 301.9100.03 A request for an extension of time for making an election or other application for relief under § 301.9100-3 of the Procedure and Administration Regulations is not submitted as a request for technical advice. Instead, the request must be submitted as a request for a letter ruling, even if submitted after the examination of the taxpayer's return has begun or after the issues in the return are being considered in Appeals or a federal court. Therefore, a request under § 301.9100 should be submitted under Rev. Proc. 2023-1, of this Bulletin, and the payment of the applicable user fee is dete1mined under Appendix A of Rev. Proc. 2023-1. However, a request under § 301.9100 related to recharacterization of a Roth IRA should be submitted under Rev. Proc. 2023-4 of this Bulletin. Requests for relief pertaining to exemption application matters involving §§ 505(c) and 508 are considered in the determination letter process under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division. See Revenue Procedure 2023-5, this Bulletin. Frivolous issues.04 Associate offices will not issue a TAM on frivolous issues. The field office will deny a taxpayer's request that it consider requesting technical advice if the taxpayer's request involves frivolous issues. For purposes of this revenue procedure, a "frivolous issue" is one without basis in fact or law or one that asserts a position that courts have held frivolous or groundless. Examples of frivolous or groundless issues may be found in Service publications and other guidance (including, but not limited to, section 6.10 of Rev. Proc. 2023-1, Notice 2010-33, and Exhibit 25.25.10-1, Frivolous Arguments). Issues in a docketed case.05 Associate offices will not issue technical advice on an issue if the same issue of the same taxpayer ( or of a related taxpayer within the meaning of§ 267 or a member of an affiliated group of which the taxpayer is also a member within the meaning of§ 1504) is in a docketed case for any taxable year. If a case is docketed for an estate tax issue of a taxpayer while a request for technical advice on the same issue of the same taxpayer is pending, the Associate office may issue the TAM only if the appropriate Appeals officer and field counsel agree, by memorandum, to the issuance of the TAM. Collection issues.06 The Associate Chief Counsel (Procedure and Administration) will not issue technical advice on matters arising under the Internal Revenue Code and related statutes and regulations that involve the collection of taxes (including interest and penalties). With respect to such matters, the Associate Chief Counsel (Procedure and Administration) may issue alternative forms of advice. Request for relief under.07 Requests for relief under § 7805(b) relating to the revocation or modification of determination § 7805(b) relating to letters or letter rulings issued by TE/GE are handled in accordance with the procedures in sections matters handled by TE/GE 23 and 29 of Rev. Proc. 2023-4, and section 12 of Rev. Proc. 2023-5, this Bulletin. SECTION 5. INITIATING A REQUEST FOR TECHNICAL ADVICE Initiating a request for.01 Because technical advice is issued to assist field offices, it is the field office that determines technical advice whether to request it. In determining whether to request technical advice, the field office should consider whether other forms of guidance, e.g., published guidance, generic advice, or some other form of advice, would be more appropriate. Additionally, before requesting technical advice, the field office must request assistance and a recommendation from field counsel. If the field office disagrees with field counsel's recommendation, the field office must seek reconciliation with field counsel through their respective supervisors. A field office's request for technical advice must be approved in writing by a Director. If technical advice is requested from the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) for a case with either an unagreed prohibited transaction, as defined in§ 4975(c)(1) and ERISA § 406(a), or a violation of the exclusive benefit rule of § 40l(a)(2) or ERISA § 404(a)(l)(A), a Form 6212-B must be submitted to the Department of Labor prior to submitting the request for technical advice. Taxpayer may request.02 While a case is under the jurisdiction of a Director, a taxpayer may request that the field referral for technical advice office refer an issue to the Associate office for technical advice. The taxpayer's request may be oral or written and should be directed to the field office. If the field office decides that a taxpayer's request for referral of an issue to the Associate office for a TAM is unwarranted, the field office will notify the taxpayer. A taxpayer's request for referral of an issue for technical advice will not be denied merely because the Associate office has already provided legal advice other than a TAM to the field office on the matter. Appeal of field office denial.03 The taxpayer may appeal the field office's denial of the taxpayer's request for referral by of TAM referral request submitting to the field office, within 30 calendar days after notification that the request was denied, a written statement of the reasons why the matter should be referred to the Associate office. The statement should include a description of all pertinent facts (including any facts in dispute); a statement of the issue that the taxpayer would like to have addressed; a discussion of any relevant legal authority, including legislation, tax treaties, court decisions, regulations, notices, revenue rulings, revenue procedures, or announcements; and an explanation of the taxpayer's position and the need for technical advice. Any extensions of the 30-day period must be requested in writing and must be approved by the Director or the Tax Exempt Bonds Program Manager. Decisions on any extensions by the Director, the LB&I Territory Manager, or in the case of Tax Exempt Bonds, the Program Manager, are final and may not be appealed. Upon receipt, the field office will refer the taxpayer's written statement, along with the field office's statement of why the issue should not be referred to the Associate office for technical advice, to the Director or in the case of Tax Exempt Bonds, the Program Manager, for decision. The Director or in the case of Tax Exempt Bonds, the Program Manager, will determine whether the issue should be referred for technical advice on the basis of the statements of the field office and the taxpayer. No conference will be held with the taxpayer or the taxpayer's representative. If the Director, or in the case of Tax Exempt Bonds, the Program Manager, determines that a TAM is not warranted, the taxpayer will be informed in writing of the proposed denial of the request and the reasons for the denial (unless doing so would prejudice the Government's interests). The decision of the Director.04 The taxpayer may not appeal the decision of the Director, or in the case of Tax Exempt or the Tax Exempt Bonds Bonds, the Program Manager not to request a TAM. If the taxpayer does not agree with the Program Manager may be proposed denial, all data on the issue for which a TAM has been sought, including the taxpayer's reviewed but not appealed written request and statements, will be submitted for review to the Director, LB&I; the Director, Examination, SB/SE; the Director, Specialty Tax, SB/SE; the Director, Return Integrity & Compliance Services, W & I; the Director, Government Entities; the Appeals Director, Policy Planning Quality & Analysis; or the Commissioner, Tax Exempt and Government Entities Division (who will review the proposed denial through the Director, Employee Plans; the Director, Exempt Organizations; or, if appropriate, the Appeals Director, Policy Planning Quality & Analysis). Review of the proposed denial will be based solely on the written record. No conference will be held with the taxpayer or the taxpayer's representative. The person responsible for review may consult with the Associate office, if appropriate, and will notify the field office whether the proposed denial of the taxpayer's request is approved or denied within 45 days of receiving all information. The field office will then notify the taxpayer. While the matter is under review, the field office will suspend any final decision on the issue ( except when the delay would prejudice the Government's interests).If the request for technical advice has been denied because the issue is frivolous as described in section 4.04 of this revenue procedure, this review process is not available. SECTION 6. PRE-SUBMISSION CONFERENCES Purpose.01 A pre-submission conference helps the field office, field counsel, the taxpayer, and the Associate office agree on the appropriate scope of the request for technical advice and the factual information and documents that must be included in the request. A pre-submission conference is not an alternative procedure for addressing the merits of the substantive positions advanced by the field office or by the taxpayer. During the pre-submission conference, the parties should discuss the framing of the issues and the background information and documents that should be included in the formal submission of the request for technical advice. Pre-submission conferences.02 Pre-submission conferences are mandatory because they promote expeditious processing of are mandatory requests for technical advice. If a request for technical advice is submitted without first holding a pre-submission conference, the Associate office will return the request for advice. Pre-submission conferences include the taxpayer and representatives from the field office, field counsel, and the Associate office. Requests for technical advice can proceed, however, even if a taxpayer declines to participate in a pre-submission conference. Actions before a pre-.03 Before requesting a pre-submission conference, the field office and the taxpayer must submission conference exchange proposed statements of the pertinent facts and issues. The proposed statements should include any facts in dispute, the issues that the parties intend to discuss, any legal analysis and supporting authorities, and any other background information that the parties believe would facilitate the Associate office's understanding of the issues to be discussed during the conference. Prior to the scheduled pre-submission conference, the field office and the taxpayer must submit to the Associate office their respective statements of pertinent facts and issues. The legal analysis provided in the parties' statements should be sufficient to enable the Associate office to be reasonably informed about the subject matter. Failure of the taxpayer to provide a statement of pertinent issues and facts shall not be allowed to unduly delay the scheduling of the pre- submission conference. If it is not provided within a reasonable period of time, the conference may be scheduled without the taxpayer's statements. The field office or the taxpayer must ensure that the Associate office receives a copy of any required power of attorney. Form 2848, Power of Attorney and Declaration of Representative, should be used. Pre-submission materials include the field office and taxpayer's statements (discussed above) and any required power of attorney for the taxpayer. The assigned Associate office must receive the pre-submission materials at least10 business days before the conference is to be held. Initiating a pre-submission.04 A request for a pre-submission conference must be submitted in writing by the field office, conference with the assistance of field counsel. The request should identify the Associate office expected to have jurisdiction over the request for a TAM and should include a brief explanation of the primary issue so that an assignment within the appropriate Associate office can be made. If the request is submitted by Appeals, field counsel assignments will be subject to the ex parte rules set forth in section 1001(a)(4)of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, and Rev. Proc. 2012-18, 2012-10 I.R.B. 455.If the request involves an issue under the office of the Director of the Office of Promoter Investigations, the field office and field counsel should coordinate with SB/SE Division Counsel headquarters. If the request involves an issue under the Office of Tax Shelter Analysis (OTSA), LB&I, then the field office and field counsel should coordinate with LB&I Division Counsel headquarters. If the request is from Appeals and involves a coordinated issue or emerging issue under Appeals Technical Guidance or International Operations or Appeals Coordinated Issue (ACI) Program, the Appeals officer must coordinate with the Appeals Technical Guidance or International Operations Technical Specialist. Manner of transmitting.05 The request for a pre-submission conference and pre-submission materials should be pre-submission materials electronically transmitted by field counsel to the Technical Services Support Branch (TSS4510). TSS4510 will ensure delivery of the pre-submission materials to the appropriate Associate office. The TSS4510 email box cannot accept encrypted mail. If documents are not electronically available, or if documents cannot reasonably be transmitted electronically, the request for a pre-submission conference and pre-submission materials may be sent by fax to TSS4510 at 855-592-8976 or by express mail or private delivery service to the following address to avoid any delays in regular mail: Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution Avenue, NW Washington, DC 20224 Scheduling the.06 After the pre-submission materials have been received, the Associate office responsible pre-submission conference for conducting the pre-submission conference will contact the taxpayer, the field office, and field counsel to arrange a mutually convenient time for the parties to participate in the conference. The conference generally should be held within 15, but not more than 30, calendar days after the field office is contacted. Pre-submission conferences.07 Although pre-submission conferences are generally conducted by telephone, the parties may be conducted in person may choose to conduct the conference in person. Pre-submission conference.08 No tape, stenographic, or other verbatim recording of a conference may be made by any may not be taped party. Discussion of substantive.09 Any discussion of substantive issues at a pre-submission conference is advisory only, is not issues is not binding on the binding on the Service in general or on the Office of Chief Counsel in particular, and cannot be Service · relied upon as a basis for obtaining retroactive relief under the provisions of § 7805(b). New issues may be raised at.10 During the pre-submission conference, the Associate office may raise new issues in addition pre-submission conference to those submitted by the field office and the taxpayer. Power of attorney.11 Form 2848, Power of Attorney and Declaration of Representative, should be used to provide the representative's authority (Part I of Form 2848, Power of Attorney ) and the representative's qualification (Part II of Form 2848, Declaration of Representative ). The name of the person signing Part I of Form 2848 should be typed or printed on this form. A Form 2848 executed for the purpose of a pre-submission conference should reflect that it is for a "specific use" that is not recorded on the Centralized Authorization File (CAF) and should only be submitted as provided in this revenue procedure (that is, it should not be submitted to the Service by any other method listed in the Instructions for Form 2848). A Form 2848 must be signed by both the taxpayer (or the person signing on the taxpayer's behalf) and the representative in a manner consistent with section 7.01(13) of Rev. Proc. 2023-1. If the Form 2848 is remotely signed by the taxpayer (or the person signing on the taxpayer's behalf) using a permissible electronic or digital method, the representative should follow the necessary steps to verify the taxpayer's identity provided in the Electronic Signatures section of the Instructions for Form 2848, but is not required to provide a separate attestation unless requested by the Service. If the Form 2848 is signed by the taxpayer (or the person signing on the taxpayer's behalf) using a physical, wet-ink signature, a submission may include a copy or scanned version of the Form 2848 as long as its authenticity is not reasonably disputed. The taxpayer's authorized representative, as described in section 7.01(14) of Rev. Proc. 2023-1, whether or not enrolled, must comply with Treasury Department Circular No. 230, which provides the rules for practice before the Service. In situations where the Service believes that the taxpayer's representative is not in compliance with Circular 230, the Service will bring the matter to the attention of the Office of Professional Responsibility. SECTION 7. SUBMITTING THE REQUEST FOR TECHNICAL ADVICE Memorandum of issues,.01 The field office submits the request for technical advice. Every request for technical advice facts, law, and arguments must include a memorandum that describes the facts, issues, applicable law, and arguments supporting the taxpayer's position on the issues and the field office's position on the issues. The field office will prepare this statement with the assistance of field counsel. The memorandum must include a statement of all the facts and the issues. If the taxpayer and the field office disagree about ultimate findings of fact or about the relevance of facts, all of the facts should be included with an explanation that highlights the areas of disagreement. The memorandum must include an explanation of the taxpayer's position, discussing any relevant legal authority, including legislation, tax treaties, court decisions, regulations, notices, revenue rulings, revenue procedures, or announcements supporting the taxpayer's position. The memorandum must also include a similar explanation of the field office's position. Both the field office and the taxpayer should comment on any relevant legal authority contrary to their respective positions. If either party determines that there are no authorities contrary to its position, that statement should be noted in the memorandum. When the field office initiates a request for technical advice, the field office should notify the taxpayer that it is requesting technical advice and provide the taxpayer with a copy of the arguments supporting the field office's position. The taxpayer has 10 calendar days to state, in writing, any factual disagreement. The field office will make every effort to reach agreement on the facts and specific points at issue. The taxpayer is encouraged to submit a written statement with an explanation of the taxpayer's position, including a discussion of any relevant legal authority. Transaction involving.02 If the subject matter of the request involves a transaction among multiple taxpayers, the multiple taxpayers field office may submit a request for a single TAM, but only if each taxpayer agrees to participate in the process, including the furnishing of Forms 8821, Tax Information Authorization, or other written disclosure consent, as appropriate. Foreign laws and.03 If applicable, the request for technical advice must include a copy of the relevant parts of documents: submission of all foreign laws, including statutes, regulations, administrative pronouncements, and any other relevant foreign laws and relevant legal authority. The documents submitted must be in the official language of the country documents in the official involved and must be copied from an official publication of the foreign government or another language and in English widely available and generally accepted publication. If English is not the official language of the country involved, the submission must also include a copy of an English language version of the relevant parts of all foreign laws. This translation must be: (i) from an official publication of the foreign government or another widely available, generally accepted publication; or(ii)a certified English translation submitted in accordance with paragraph (2)of this section 7.03. The taxpayer or the field office must identify the title and date of publication, including updates, of any widely available and generally accepted publication used as a source for the relevant parts of the foreign law. The taxpayer and the field office must inform the Associate office of the implications of any authority believed to interpret the foreign law, such as pending legislation, treaties, court decisions, notices, and administrative decisions. (1) If the interpretation of a foreign law or foreign document is a material component of the request for technical advice, the Associate office, at its discretion, may refuse to provide a TAM. The interpretation of a foreign law or foreign document means making a judgment about the import or effect of the foreign law or document that goes beyond its plain meaning. This section applies whether or not the field office and the taxpayer dispute the interpretation of a foreign law or foreign document. (2) If applicable, a request for technical advice must include an accurate and complete certified English translation of the relevant parts of all contracts, wills, deeds, agreements, instruments, trust documents, proposed disclaimers, and other documents pertinent to the request that are in a language other than English. If the taxpayer or the field office chooses to submit certified English translations of foreign laws, those translations must be based on an official publication of the foreign government or another widely available and generally accepted publication. In either case, the translation must be that of a qualified translator and must be attested to by the translator. The attestation must contain: (i) a statement that the translation submitted is a true and accurate translation of the foreign language document or law; (ii) a statement as to the attestant's qualifications as a translator and as to that attestant's qualifications and knowledge regarding tax matters or foreign law if the law is not a tax law; and (iii) the attestant's name and address. Statement regarding.04 A request for technical advice involving the interpretation of a substantive provision of a interpretation of relevant relevant income tax or estate tax treaty must include a written statement addressing whether: (1) income tax or estate tax the tax authority of the treaty jurisdiction has issued a ruling on the same or similar issue for the treaty taxpayer, a related taxpayer (within the meaning of § 267 or a member of an affiliated group of which the taxpayer is also a member within the meaning of§ 1504 (related taxpayer)), or any predecessor; (2) the same or similar issue for the taxpayer, a related taxpayer, or any predecessor, is being examined, or has been settled, by the tax authority of the treaty jurisdiction or is otherwise the subject of a closing agreement in that jurisdiction; and (3) the same or similar issue for the taxpayer, a related taxpayer, or any predecessor, is being considered by the competent authority of the treaty jurisdiction. Statement recommending. 05 Except as provided below, every request for technical advice must separately include a information to be deleted statement of proposed deletions from public inspection (deletion statement). The text of TAMs from public inspection and background file documents are open to public inspection under § 6110(a). The Service deletes certain information from the text before it is made available to the public in order to protect the privacy of taxpayers. To help the Service make the necessary deletions, the taxpayer must provide a deletion statement indicating the deletions desired. A taxpayer who wants only names, addresses, and identifying numbers deleted should state this in the deletion statement. A taxpayer who wants more information deleted must provide a copy of the TAM request and supporting documents on which the taxpayer has placed brackets around the material to be deleted plus a deletion statement indicating the statutory basis under § 6110(c) for each proposed deletion. The deletion statement is not to be included in the memorandum described in section 7.01 of this revenue procedure. Instead, the deletion statement is to be made in a separate document that is signed and dated by the taxpayer, or the taxpayer's authorized representative in accordance with the requirements in section 7.01(13) of Rev. Proc. 2023-1. If the deletion statement is not submitted, the taxpayer will be notified and advised by the field office that the deletion statement is required and that failure to provide a deletion statement will be interpreted by the field office, field counsel, and Associate office to mean that the taxpayer only wants names, addresses, and identifying numbers deleted. If the deletion statement is not received within 10 calendar days after the notification, the field office will notify the Associate office that the taxpayer has not provided a deletion statement and will advise the Associate office of any information in addition to names, addresses, and identifying numbers, that should be deleted pursuant to § 6110(c). The taxpayer should follow this same process to propose deletions from any additional information submitted after the initial request for a TAM. An additional deletion statement is not required with each submission of additional information if the taxpayer's initial deletion statement requests that only names, addresses, and identifying numbers are to be deleted and the taxpayer wants only the same information deleted from the additional information. The above deletion statement requirements do not apply to the extent that the TAM is open to public inspection under§ 6104. Section 6104(a) (l)(A) generally provides that if an organization described in § 501(c) or § 50l(d) is exempt from taxation under§ 50l(a) or a political organization is exempt from taxation under§ 527, the application for exemption under § 501(a) that the organization filed or the notice of status filed by a political organization pursuant to § 527(i) is open for public inspection as prescribed by regulations. Generally, § 6104(a)(1)(B) provides that: (1) an application filed with respect to the qualification of a pension, profit-sharing, or stock bonus plan under § 401(a) or § 403(a) or an individual retirement arrangement under § 408(a) or § 408(b) will be open to public inspection pursuant to regulations, as will (2) any application filed for an exemption from tax under§ 501(a) of an organization forming part of a plan or account described above, (3) any papers submitted in support of an application referred to in (1) or (2) above, and (4) any letter or other document issued by the Internal Revenue Service and dealing with the qualification referred to in (1) or the exemption from tax referred to in (2). Preparation of the.06 The field office prepares the memorandum described in section 7.01 of this revenue procedure memorandum; resolution of with the assistance of field counsel and sends it to the taxpayer by mail, fax transmission, or disagreements electronic facsimile. The taxpayer then will have 10 calendar days from the date of mailing or fax to respond by providing a written statement specifying any disagreement on the facts and issues. This written statement may be submitted by mail, fax, electronic facsimile, or encrypted email attachment by following the procedures described in section 7.04(3) of Rev. Proc. 2023-1. There are more risks associated with email than with electronic facsimile, such as the possibility that sensitive taxpayer information could be intercepted. Accordingly, the Service encourages taxpayers to use a secure electronic facsimile service instead of email for electronically transmitting a written statement. The field office representative can provide a fax number to which the statement can be sent. A taxpayer who needs more than10 calendar days must submit a written request for an extension of time, subject to the approval of the field office. The field office will make a determination on the request for extension as soon as reasonably possible. The request for extension will be considered denied unless the field office informs the taxpayer otherwise. The decision of the field office on whether to approve an extension, and the length of any extension granted, is final and may not be appealed. After the taxpayer's response is received by the field office, the parties will have 10 calendar days to resolve remaining disagreements. If all disagreements about the statement of facts and issues are resolved, then the field office will prepare a single statement of those agreed facts and issues. If disagreements continue, both the taxpayer's set of facts and issues and the field's set of facts and issues will be forwarded to the Associate office. The field office, with the assistance of field counsel, will prepare a memorandum for the Associate office highlighting the material factual differences, and provide a copy to the taxpayer for review. The taxpayer may respond in writing to the memorandum highlighting material factual differences. The field office may revise the memorandum described in section 7.01 of this revenue procedure in response to the taxpayer's comments. This memorandum highlighting material factual differences will be forwarded with the initial request for technical advice. The taxpayer's statement of facts and issues must be accompanied by the following declaration: "Under penalties of perjury, I declare that I have examined this information, including accompanying documents, and, to the best of my knowledge and belief, the information contains all the relevant facts relating to the request for technical advice, and such facts are true, correct, and complete." This declaration must be signed in accordance with the requirements in section 7.01(16)(b) of Rev. Proc. 2023-1. The field office must submit this declaration with the initial request for technical advice. If no agreement regarding the facts is reached, the Associate office may rely on the facts presented by the field office. The field office will offer the taxpayer an opportunity to participate in the development of the request for technical advice. If the taxpayer participates in the process, the field office will continue to offer the taxpayer the opportunity to participate. If the taxpayer does not participate in a material stage of the process after being offered an opportunity, the Associate office will nonetheless process the request, and the taxpayer will have waived the right to participate in the development and issuance of the TAM, including the right to the taxpayer conference described in section 9. A taxpayer's failure to participate in the development of the memorandum described in section 7.01 of this revenue procedure will be considered a failure to participate in a material stage of the TAM process. · Under no circumstances will a taxpayer be treated as having waived its right to see the issued TAM or having waived its rights regarding disclosure and deletions described in section 10. Transmittal Form 4463,.07 The field counsel with whom the TAM request was coordinated must use Form 4463, Request for Technical Request for Technical Advice Memorandum, for submitting a request for a TAM through TSS4510 Advice to the Associate office. While the field office is responsible for preparing Form 4463, field counsel must submit the Form 4463 for a TAM request to the TSS Assignments email address. To the extent feasible, the accompanying documents should also be submitted to the TSS Assignments email address, followed by hard copies upon the request of the assigned Associate office. All supporting and.08 Field counsel should send additional or supporting documents that are not available in additional documents electronic form by fax to Technical Services Support Branch at 855-592-8976 or by express mail or private delivery service to the following address to avoid any delays in regular mail: Internal Revenue Service Attn: CC:PA:LPD:TSS, Room 5336 1111 Constitution A venue, NW Washington, DC 20224 Whenever possible, all documents should contain the case number and name of the Associate office attorney assigned to the pre-submission conference for the TAM request. The field office must indicate on theFo1m 4463 the proper mailing address of the Director to whom the Associate office should mail a copy of its reply to the TAM request under section 10.05 of this revenue procedure. Number of copies of request.09 The field office must submit one paper copy of the request for a TAM to the address in to be submitted section 7.08 of this revenue procedure. If the TAM relates to a W&I or TE/GE taxpayer, the field office must send one paper copy to the Division Counsel of the operating division that has jurisdiction over the taxpayer's tax return. If the TAM relates to a SB/SE taxpayer, the field office must send an electronic copy of the request to the SB/SE Division Counsel office using the "&SBSE HQ Coordination" email address. If the TAM relates to a LB&I taxpayer, the field office must send an electronic copy of the request (no paper copy to follow) to the "&LB&I HQ" email address. If the request is from an Appeals office, the field office must advise Appeals Policy Planning Quality & Analysis that a request has been submitted. The field office will send a copy of the TAM request to * AP TAM Coordinator by encrypted e-mail. SECTION 8. INITIAL PROCESSING OF THE REQUEST FOR TECHNICAL ADVICE BYTHE ASSOCIATE OFFICE Assignment and initial.01 After a request for technical advice has been received by the appropriate Associate office, review by Associate office it will be assigned to an Associate office attorney and reviewer. The Associate office attorney attorney determines whether the request meets all procedural requirements of sections 4, 5, 6, and 7 of this revenue procedure and whether it raises issues that may be appropriately addressed in a TAM. Unless otherwise indicated, all references in this section to the Associate office or Associate office attorney are to the Associate office and attorney with primary responsibility for the TAM request. Other forms of guidance.02 If the assigned reviewer in the Associate office determines that guidance other than a TAM should be provided, the reviewer will immediately notify the Associate Chief Counsel. This other form of guidance may be published guidance, generic advice, or case-specific advice. Although the reviewer should make this determination as soon as possible, it may be made at any time during the processing of the request for technical advice. To make this determination, the reviewer should consider whether the issue has a broad application to similarly situated taxpayers or a practice area and whether resolution of the issue is important to a clear understanding of the tax laws. The Associate Chief Counsel, after consultation with Division Counsel Headquarters and the Operating Division, will decide whether to provide the TAM or issue guidance in another form. The Associate Chief Counsel may decide to provide the TAM as well as another type of guidance, if doing so would promote sound tax administration. Initial acknowledgment and.03 Upon receipt of a request for technical advice, the Associate office attorney who is assigned processing as the primary attorney on the request should immediately contact the field office. The purpose of this contact is only to acknowledge receipt of the request. Deficiencies in request.04 Within 7 calendar days after assignment, the Associate office attorney will contact the field leading to return office and field counsel to discuss any deficiencies in the request and will work with the field office and field counsel to correct them. If only minor procedural deficiencies exist, the Associate office attorney will request the additional information without returning the case. If the deficiencies cannot be corrected over the next 7 calendar days, the request will be closed and returned to the field office. The request may be resubmitted when the deficiencies are corrected. If substantial additional information is required to resolve an issue or if major procedural problems cannot be resolved, the Associate office· attorney will inform the field office and field counsel that the request for technical advice will be returned. If a request is returned, the field office should promptly notify the taxpayer of that decision and the reasons for the decision. Initial discussion.05 Within 21 calendar days of receipt, the Associate office attorney should contact the field office to discuss any procedural and substantive issues in the request. The Associate office attorney should also inform the field office about any matters referred to another Associate office for assistance and provide points of contact. If additional information.06 If additional information is needed, the Associate office attorney will obtain that information requested from the taxpayer, the field office, or the Director in the most expeditious manner possible. Any additional information requested from the taxpayer by the Associate office must be submitted within 10 calendar days after the request for information is received and must be accompanied by a penalties of perjury statement that conforms with the penalties of perjury statement set forth in section 7.06 of this revenue procedure. The additional information may be submitted by mail, fax, electronic facsimile, or encrypted email attachment by following the procedures described in section 7.04(3) of Rev. Proc. 2023-1. A taxpayer's failure to submit the additional information requested is considered a failure to participate in a material stage of the TAM process and results in a waiver of the right to the taxpayer conference discussed in section 9. To facilitate prompt action, the Associate office and taxpayers are encouraged to exchange information by fax, electronic facsimile, or express mail service whenever feasible. There are more risks associated with email than with electronic facsimile, such as the possibility that sensitive taxpayer information could be intercepted. Accordingly, the Service encourages taxpayers to use a secure electronic facsimile service for transmitting additional information. The Associate office representative who requests additional information can provide a fax number to which the information can be sent. The Associate office attorney will take certain precautions to protect confidential information. For example, the Associate office attorney will use a cover sheet that identifies the intended recipient of the fax and the number of pages transmitted, that does not identify the taxpayer by name or tax identifying number and that contains a statement prohibiting unauthorized disclosure of the document if a recipient of the faxed document is not the intended recipient of the fax. The cover sheet will be faxed in an order in which it is the first page covering the faxed document. Taxpayer request for.07 A taxpayer's request for an extension of time to submit additional information must be extension of time to submit made in writing and received by the Associate office within the 10-day period. It must provide additional information compelling facts and circumstances to justify an extension. Only an Associate Chief Counsel may determine whether to grant or deny the request for an extension. Except in rare and unusual circumstances, the Associate office will not agree to an extension of more than 10 calendar days beyond the end of the 10-day period. There is no right to appeal the denial of a request for an extension. Where to send additional.08 Any additional information submitted by the taxpayer should be sent to the attention of the information assigned Associate office attorney. Generally, only the original of the additional information is necessary. In appropriate cases, however, the Associate office may request additional copies of the information. In all cases, the taxpayer must also send a copy of the additional information to the field office and field counsel for comment. Any comments by the field office or field counsel must be furnished within an agreed period of time to the Associate office with primary responsibility for the TAM request. If there are no comments, the Associate office attorney should be notified promptly. Tentative conclusions.09 The Associate office attorney will inform the field office and field counsel when all necessary substantive and procedural information has been received. If possible, the Associate office attorney will provide a tentative conclusion. If no tentative conclusion can be reached, the Associate office attorney is encouraged to discuss the underlying complexities with the field office and field counsel. Because the Associate office attorney's tentative conclusion may change during the preparation and review of the TAM, the tentative conclusion is not considered final. If the tentative conclusion is changed, the Associate office attorney will inform the field office and field counsel. Neither the Associate office, nor the field office or the field counsel, should discuss the tentative conclusion and its underlying rationale with the taxpayer or the taxpayer's representative until the Associate office is ready to provide a TAM that agrees with the taxpayer's position or is ready to hold an adverse conference. To afford taxpayers an appropriate opportunity to prepare and present their position at a taxpayer conference, however, the taxpayer or the taxpayer's representative is to be told (by the Associate office attorney) the tentative conclusion when scheduling the taxpayer conference. Field counsel should be notified of, and given the opportunity to participate in, the notification to the taxpayer of the tentative conclusions and scheduling of the taxpayer conference. SECTION 9. TAXPAYER CONFERENCES Notification of conference.01 If the Associate office proposes to provide a TAM that will be adverse to the taxpayer, and if the taxpayer has not waived its right to a taxpayer conference, the taxpayer will be informed of the time and place of the conference. Scheduling conference.02 The taxpayer conference for a TAM must occur within 10 calendar days after the taxpayer is informed that an adverse TAM is proposed. The Associate office will notify the field office and field counsel of the scheduled taxpayer conference and will offer the field office and field counsel the opportunity to participate in the conference. Taxpayer may request.03 Only an Associate Chief Counsel may approve an extension of the 10-day period for holding extensions a conference. Although extensions are granted in appropriate circumstances at the discretion of the Associate Chief Counsel, taxpayers should not expect extensions to be routinely granted. The taxpayer must submit a request for an extension in writing to the Associate office, and must immediately notify the field office and field counsel of the request. The request must contain a detailed justification for the extension and must be submitted sufficiently before the end of the 10-day period to allow the Associate Chief Counsel to consider, and either approve or deny, the request before the end of the 10-day period. If unusual circumstances near the end of the 10-day period make a timely written request impracticable, the taxpayer may orally inform the assigned Associate office attorney or reviewer before the end of the 10-day period about the need for an extension and then promptly submit the written request. The Associate office attorney will inform the taxpayer by telephone of the approval or denial of a requested extension. There is no right to appeal the denial of a request for extension. One conference of right.04 In general, a taxpayer who has not waived the right to a taxpayer conference is entitled by right to only one conference with the Associate office. The conference is normally held at the branch level. A person who has authority to sign the transmittal memorandum in his or her own name, or on behalf of the branch chief, will participate. When more than one branch of an Associate office has taken an adverse position on issues in the request or when the position ultimately adopted by one branch will affect another branch's determination, a representative from each branch with authority to sign in his or her own name, or for the branch chief, will participate in the conference. The conference is the taxpayer conference for each subject discussed. Additional conferences may.05 After the taxpayer conference, the Service will offer the taxpayer an additional conference be offered only if an adverse holding is proposed on a new issue or on the same issue but on grounds different from those discussed at the first conference. If a tentative position is changed at a higher level with a result less favorable to the taxpayer, the taxpayer has no right to another conference if the grounds or arguments on which the change is based were discussed at the taxpayer conference. The limitation on the number of conferences to which a taxpayer is entitled does not prevent the Associate office from inviting a taxpayer to participate in additional conferences if that office determines that additional conferences would be useful. These additional conferences are not to be offered routinely following an adverse decision. Additional information.06 In order to ensure that the taxpayer conference is productive, the taxpayer should make a submitted after the reasonable effort to supply all information, documents, and arguments in writing well before the conference conference. Sometimes, however, it becomes apparent that new information may be helpful in resolving issues discussed at the conference. If the Associate office and the taxpayer agree that such information would be helpful, all such materials must be submitted and received within 10 calendar days after the conference. Any extension of the 10-day period must be requested by the taxpayer in writing and must be approved by the branch chief of the Associate office attorney. Extensions will not be routinely granted. Taxpayers have no right to submit additional materials after the conference, and are discouraged from providing additional copies or versions of materials already submitted. If the additional information is not received from the taxpayer within 10 calendar days plus any extensions granted by the branch chief, the TAM will be issued on the basis of the existing record. The taxpayer must also send a copy of the additional information to the field office and field counsel for comment. If the additional information has a significant impact on the facts in the request, the Associate office will ask the field office and field counsel for comments, both of which will respond within the agreed upon period of time. If there are no comments, the Associate office attorney will be promptly notified. Normally conducted in.07 Conferences under this section are generally conducted in person, but may be conducted person by telephone. Service makes only.08 At the end of the taxpayer conference, no commitment will be made about the conclusion tentative recommendations that the Service will finally adopt for any issue, including the outcome of a request for relief under § 7805(b). Conference may not be.09 No tape, stenographic, or other verbatim recording of a taxpayer conference may be made taped by any party. SECTION 10..01 The Associate office attorney prepares replies to requests for technical advice in two parts. PREPARATION OF THE Each part identifies the taxpayer by name, address, identification number, and tax period(s) TECHNICAL ADVICE involved. The first part of the reply is a transmittal memorandum (Form M-6000). The second Reply consists of two parts part is the TAM, which contains: (1) a statement of the issues; (2) the conclusions of the Associate office; (3) a statement of the facts pertinent to the issues; ( 4) a statement of the relevant legal authority, including legislation, tax treaties, court decisions, regulations, notices, revenue rulings, revenue procedures, or announcements; and (5) a discussion of the rationale supporting the conclusions reached by the Associate office. The conclusions give direct answers, whenever possible, to the specific issues raised by the field office. The Associate office is not bound by the issues as submitted by the taxpayer or by the field office and may reframe the issues to be answered in a TAM after consultation with the field office and field counsel. The discussion of the issues in a TAM will be in sufficient detail so that the field or Appeals officials will understand the reasoning underlying the conclusion. Status of a request.02 The taxpayer or the taxpayer's authorized representative may obtain information on the status of the request by contacting the field office that requested the advice. The Associate office attorney or reviewer assigned to the TAM request will give frequent status updates to the field office and field counsel. Opportunity for field.03 The Associate office attorney will inform field counsel regarding the Associate office's final counsel review conclusions before a draft of the TAM is sent to the field office. Field counsel will be offered a reasonable opportunity to review and informally discuss these conclusions with the Associate office before the final TAM is sent to the field office. Copy of preliminary TAM.04 After field counsel is given a reasonable opportunity to review the Associate office's final to field office and field conclusions, the Associate office attorney will provide a draft of the proposed final version of the counsel TAM to the field office and field counsel. If the field office or field counsel disagrees with the proposed final conclusions, normal reconciliation and reconsideration procedures will be followed to resolve the disagreement. Routing of reply.05 A TAM is generally addressed to the field office that requested it. In the case of issues arising within the jurisdiction of the Director, Government Entities; the Director, Employee Plans or Exempt Organizations Examinations; or the Director, Employee Plans or Exempt Organizations Rulings & Agreements, the TAM is addressed to the appropriate Director with a copy sent to the field office and the field counsel attorney. A copy of a TAM requested by LB&I should be mailed simultaneously to the appropriate Practice Area Director. A copy of a TAM requested by Appeals should be addressed to the appropriate field office, and an electronic copy sent by encrypted e-mail to * AP TAM Coordinator. Copy of final TAM to.06 The Associate office will provide a copy of the final TAM to the individual field counsel field counsel and Division attorney who assisted the field office in submitting the request and to that attorney's Associate Counsel Area Counselor other manager, as appropriate. The Associate office also will provide a copy of the final TAM to the Division Counsel for the operating division from which the request originated or that has jurisdiction over the particular matter in the TAM. The TAM may be transmitted electronically if it is in.pdf format, or may be sent by mail or fax transmission. Reconsideration.07 Requests for reconsideration may be submitted by the field office, or in the case of bonds under the jurisdiction of the Director, Government Entities, by that Director after the Associate office has provided a final copy of the TAM to field counsel and Division Counsel. Requests for reconsideration should be submitted before the field provides a copy of the TAM to the taxpayer and must describe with specificity the errors in the analysis and conclusions. Requests should focus on points that the TAM overlooked or misconstrued rather than simply re-argue points raised in the initial request. The Associate office will give priority consideration to the request and should act on the request as expeditiously as possible. The Associate office may request further submissions from the field office and field counsel or the taxpayer, but the parties should otherwise make no additional submissions. If a request for reconsideration fails to follow the procedures set forth in this section of this revenue procedure, or the request fails to raise issues or arguments different from those asserted in the initial request for technical advice, the Associate office may return the request for reconsideration without ruling on the request for reconsideration. Discussing contents with.08 The Associate office will not discuss the specific contents of the TAM with the taxpayer the taxpayer until after the field office has provided a copy of the TAM to the taxpayer. Section 6110.09 Before the TAM is issued, the Associate office will inform the taxpayer in writing of the material likely to appear in the TAM that the taxpayer proposed for deletion but that the Associate office has determined should not be deleted. If so informed, the taxpayer may submit within 10 calendar days any further information or arguments supporting the taxpayer's proposed deletions. The Associate office will attempt to resolve all disagreements about proposed deletions before the TAM is issued. The taxpayer does not have the right to a conference to resolve any disagreements about material to be deleted from the text of the TAM. For TAMs subject to § 6110, accompanying the TAM is a notice under§ 6110(f)(1) of intention to disclose a TAM, including a copy of the version proposed to be open to public inspection and notations of third party communications under§ 61 l0(d).If the transmittal memorandum associated with the TAM provides information not in the TAM, or if the case is returned for further development without issuance of the TAM, the transmittal memorandum maybe Chief Counsel Advice, as defined in § 6110(i)(1), subject to public inspection under§ 6110. These procedures do not apply to TAMs to the extent that § 6104 applies. See section 7.05 of this revenue procedure and§ 6110(l)(1). TAM takes effect when.10 After a TAM is sent to the field office (or, for Tax Exempt Bonds, Employee Plans, and taxpayer receives a copy Exempt Organizations, to the Director), the field office or Director adopts and issues the TAM within the meaning of Treas. Reg. § 301.6110-2(h). Then the field office or Director provides the taxpayer a copy of the TAM, the notice of intention to disclose under§ 6110(f)(1), as applicable, and a copy of the version proposed to be open to public inspection, which includes notations of third party communications under § 6110(d), as applicable. If a request for technical advice pertains to more than one taxpayer, and the requirements of section 7.02 of this revenue procedure have been met, the field office or Director will provide each taxpayer with a copy of the TAM and will notify the Associate office when this occurs. The requirement to provide a taxpayer a copy of the TAM does not apply to a TAM involving civil fraud or a criminal investigation, or to a TAM involving a jeopardy or termination assessment. See section 10.12 of this revenue procedure. Taxpayer may protest.11 Generally, the Associate office considers only the deletion of material that the taxpayer has deletions not made proposed for deletion or other deletions as required under§ 6110(c) before the TAM is sent to the field office or Director. After receiving the notice of intention to disclose under§ 6110(f)(1), the taxpayer may protest the disclosure of certain information in it by submitting a written statement in accordance with the notice of intention to disclose under§ 6110(f)(1) (Notice 438, Notice of Intention to Disclose ). Public inspection in.12 The provisions of this revenue procedure about referring issues upon the taxpayer's request, civil fraud or criminal telling the taxpayer about the referral of issues, giving the taxpayer a copy of the arguments investigation cases submitted, submitting proposed deletions, granting conferences in the Associate office, or providing a copy of the TAM to the taxpayer do not apply to a TAM described in § 6110(g)(5) (A), which involves any matter that is the subject of a civil fraud or criminal investigation, or that involves a jeopardy or termination assessment. In these cases, after all proceedings in the investigations or assessments are complete, the taxpayer receives a copy of the TAM with the notice of intention to disclose under § 6110(f)(1). The taxpayer may protest the disclosure of certain information in the TAM by submitting a written statement in accordance with the Notice of Intention to Disclose (Notice 438). SECTION 11. WITHDRAWALOF REQUESTS FOR TECHNICAL ADVICE Taxpayer notified.01 Once a request for a. TAM has been sent to the Associate office, only a Director may withdraw the request, and this must be done before the responding transmittal memorandum for the TAM is signed. To withdraw the request, the Director must first notify the taxpayer of the intent to withdraw unless: (1) the period of limitation on assessment is about to expire and the taxpayer has declined to give written consent to extend the period; or (2) the notification would be prejudicial to the best interests of the Government. If the taxpayer does not agree that the request should be withdrawn and wishes to request review of the decision, the procedures in section 5.04 of this revenue procedure for review must be followed. Acknowledgment of.02 Acknowledgment of the withdrawal of a request submitted by a Director should be sent withdrawal to the appropriate Director, with a copy to the TAM coordinator. For a withdrawal of a request submitted by Appeals, send an electronic copy by encrypted e-mail to * AP TAM Coordinator. Associate office may decide.03 If the Associate office determines that a TAM will not be provided, it may return the request not to provide a TAM for technical advice unanswered. This determination must be made on the· basis of sound tax administration and must be approved by the Associate Chief Counsel. The decision not to provide a TAM should be an infrequent occurrence and be made only after consultation with field counsel and the requesting field office. If field counsel disagrees with this determination, they may request reconsideration through existing reconciliation procedures. Associate office may.04 If a request for technical advice is withdrawn or an Associate office decides not to provide a provide views TAM, the Associate office may address the substantive issues through other published guidance. The Associate office may also address the substantive issues through legal advice, either generic or case-specific. The decision to address the issues through these other forms of guidance will be based on the general standards for issuing those types of guidance. SECTION 12. USE OF THE TECHNICAL ADVICE Service generally applies.01 After a TAM is issued, the field office must process the taxpayer's case on the basis of the advice in processing the conclusions in the TAM. In the case of a TAM unfavorable to the taxpayer, the Appeals Area taxpayer's case Director may decide to settle the issue under existing settlement authority. Appeals, however, will not settle an issue contrary to a TAM if it concerns an organization's exempt status or private foundation classification, or if it concerns an employee plan's status or qualification. Thus, if the TAM received by the field office concerns an organization's exempt status, private foundation classification, or a plan's status or qualification, the organization or plan has no right to appeal those specific issues with the Appeals Office. Appeals may submit a proposed disposition of the issue contrary to a TAM as a request for a new TAM. If a TAM provides conclusions involving a § 103 obligation and the issuer of this obligation, the field office must apply the conclusions to the issuer and any holder of the obligation, unless a field office separately initiates a request for a TAM on behalf of the holder for the same issue addressed in the TAM involving the issuer, and the Associate office issues a TAM involving that issue and that holder. SECTION 13. RETROACTIVITY AND RELIANCE Usually applies.01 The holdings in a TAM are applied retroactively, whether they are initial holdings or retroactively they are later holdings that modify or revoke holdings in a prior TAM. The Associate Chief Counsel with jurisdiction over the TAM, however, may exercise the discretionary authority under § 7805(b) to limit the retroactive effect of any holding. This authority is exercised in rare and unusual circumstances. Revocation or modification.02 A TAM may be used to seek revocation or modification of an earlier TAM or revocation of an earlier letter ruling or or modification of a private letter ruling (PLR). See Rev. Proc. 2023-1, section 11.04 et seq. with TAM respect to revocation or modification of PLRs. Generally, a TAM that revokes or modifies a letter ruling or an earlier TAM will not be applied retroactively if: (1) the applicable law has not changed; (2) the taxpayer directly involved in the letter ruling or earlier TAM relied in good faith on it; and (3) revocation or modification would be detrimental to the taxpayer. The new TAM will be applied retroactively to the taxpayer whose tax liability was directly involved in the letter ruling or TAM if: (1) controlling facts have been misstated or omitted; or (2) the facts at the time of the transaction are materially different from the controlling facts on which the letter ruling or earlier TAM was based. If a letter ruling or a TAM is modified or revoked with retroactive effect, the notice to the taxpayer, except in fraud cases, should set forth the grounds on which the modification or revocation is being made and the reason why the modification or revocation is being applied retroactively. Continuing action or series.03 If an issue addressed in the TAM relates to a continuing action or a series of actions, it of actions is generally applied until it is withdrawn or until the conclusion is modified or revoked by a final decision in favor of the taxpayer with respect to that issue, the enactment of legislation, the ratification of a tax treaty, a decision of the United States Supreme Court, or the issuance of temporary regulations, final regulations, a revenue ruling, or other statement published in the Internal Revenue Bulletin. Publication of a notice of proposed rulemaking does not affect the application of a TAM. If a new holding in a TAM is less favorable to the taxpayer than the holding in an earlier TAM, the new holding is generally not applied to the tax period when the taxpayer relied on the earlier holding. It will be applied to that tax period, however, if material facts on which the earlier TAM was based have changed. Other taxpayers.04 Under § 6110(k)(3), a taxpayer may not rely on a TAM issued by the Service for another taxpayer. In addition, retroactive or non-retroactive treatment to one member of a practice area directly involved in a letter ruling or TAM does not extend to another member of that same practice area, and retroactive or non-retroactive treatment to one client of a tax practitioner does not extend to another client of that same practitioner. The tax liability of each employee covered by a letter ruling or TAM relating to a pension plan of an employer is directly involved in the letter ruling or TAM. SECTION 14. HOW MAY RETROACTIVE EFFECT BE LIMITED? Request for relief under.01 A taxpayer with respect to whom a TAM is issued, or for whom a TAM request is pending, § 7805(b) may request that the appropriate Associate Chief Counsel limit the retroactive effect of any holding in the TAM or of any subsequent modification or revocation of the TAM. For a pending request for technical advice, the taxpayer should make the request for relief under § 7805(b) as part of the initial request for advice. The Associate office will consider a request for relief under § 7805(b) made at a later time if the Director determines that there is justification for the delay in the making of the request. The Director's determination that the delayed request for § 7805 is not justified cannot be appealed. Requests for relief under § 7805(b) relating to the revocation or modification of determination letters and letter rulings issued by TE/GE are handled under the procedures in sections 23 and 29 of Rev. Proc. 2023-4, and section 12 of Rev. Proc. 2023-5, this Bulletin. Form of request for relief -.02 During the course of an examination of a taxpayer's return by the field office or during in general consideration of the taxpayer's return by the Appeals Area Director, a taxpayer's request to limit retroactivity must be made in the form of a request for a TAM. This includes recommendations by a Director that an earlier letter ruling or TAM be modified or revoked. The request must meet the general requirements of a request for technical advice. It must also: (1) state that it is being made under § 7805(b); (2) state the relief sought; (3) explain the reasons and arguments in support of the relief sought; and (4) include any documents bearing on the request. The taxpayer's request must be submitted to the Director, who should then forward the request to the Associate office for consideration. If a taxpayer submits a request for relief after the initial TAM request, the taxpayer must provide justification for having delayed the request. Requests for relief under § 7805(b) relating to the revocation or modification of determination letters and letter rulings issued by TE/ GE are handled under the procedures in sections23 and 29 of Rev. Proc. 2023-4, and section 12 of Rev. Proc. 2023-5, this Bulletin. Form of request for relief.03 A request for relief under § 7805(b) must be made in the form of a request for a letter - continuing transaction ruling if: (1) a TAM addressing a continuing transaction is modified or revoked by later published before examination of guidance; and (2) the request for relief is submitted before an examination has begun covering the return tax period(s) for which relief is sought. The requirements for a letter ruling request are given in Rev. Proc. 2023-1 (this Bulletin). Taxpayer's right to a. 04 When a request for a TAM concerns only the application of § 7805(b), the taxpayer has the conference right to a conference with the Associate office in accordance with the provisions of section 9 of this revenue procedure. If the request for application of§ 7805(b) is included in the request for a TAM on the substantive issues or is made before the taxpayer conference on the substantive issues, the § 7805(b) issues will be discussed at the taxpayer's one conference of right. If the request for the application of § 7805(b) is made as part of a pending TAM request after a taxpayer conference has been held on the substantive issues and the Director determines that there is justification for having delayed the request, then the taxpayer will have the right to a taxpayer conference concerning the application of § 7805(b), with the conference limited to discussion of this issue only. Reconsideration of request.05 When a TAM grants a taxpayer relief under § 7805(b), the Director may not request for relief under § 7805(b) reconsideration of the § 7805(b) issue unless the Director determines there has been a misstatement or omission of controlling facts by the taxpayer in its request for § 7805(b) relief. SECTION 15. SIGNIFICANT CHANGES MADE TOREV. PROC. 2022-2 SECTION 16. EFFECT Rev. Proc. 2022-2 is superseded. ON OTHER DOCUMENTS SECTION 17. EFFECTIVE This revenue procedure is effective January 03, 2023. DATE DRAFTING The principal author of this revenue procedure is David Villagrana of the Office of Associate INFORMATION Chief Counsel (Procedure and Administration). For further information regarding this revenue procedure for matters under the jurisdiction of: (1) the Associate Chief Counsel (Corporate), contact T. Ian. Russell or Jean Broderick at (202) 317-3181 (not a toll-free number); (2) the Associate Chief Counsel (Financial Institutions and Products), contact K. Scott Brown at (202) 317-4423 (not a toll-free number); (3) the Associate Chief Counsel (Income Tax and Accounting), contact R. Matthew Kelley at (202) 317-7002 (not a toll-free number); (4) the Associate Chief Counsel (Passthroughs and Special Industries), contact Jason Deirmenjian at (202) 317-4137 (not a toll-free number); (5) the Associate Chief Counsel (Procedure and Administration), contact Stephanie Chernoff at (202) 317-3400 (not a toll-free number); (6) the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), contact Melissa L. Duce at (202) 317-6000 (not a toll-free number); (7) the Associate Chief Counsel (International), contact Nancy Galib at (202) 317-3800 (not a toll-free number); (8) the Commissioner (Large Business & International Division), contact Shirley S. Lee at (202) 317-3152 (not a toll-free number); (9) the Commissioner (Small Business/Self-Employed Division), contact Charles Hall at (240) 613-6353 (not a toll-free number); (10) the Commissioner (Wage and Investment Division), contact Geoffrey Gerbore at (631) 977-3210 (not a toll-free number); or (11) the Office of Appeals, contact Mark K. Wesner at (602) 636-9571 (not a toll-free number).

Private Letter Ruling Number: 202339014 Internal Revenue Service May 4, 2023 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Exempt Organizations Examinations Release Number: 202339014 Release Date: 9/29/2023 UIL Code: 501.03-00 Date: 05/04/2023 Tax ID number (last 4 digits): Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with United States Tax Court: 08/02/2023 CERTIFIED MAIL - Return Receipt Requested Dear ******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective ******, ******. Your determination letter dated ******, ******, is revoked. Our adverse determination as to your exempt status was made for the following reasons: Organizations described in IRC Section 501(c)(3) and exempt under IRC Section 501(a) must be both organized and operated exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 501(c)(3). You have not demonstrated that you are operated exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 501(c)(3) and that no part of your net earnings inure to the benefit of private shareholders or individuals. You failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by IRC sections 6001, 6033(a)(1) and Rev.Rul. 59-95, 1959-1 C.B. 627. Further, you were ****** by the State of ****** for violations of the ****** et seq., by procuring the organization through fraud; ******; ****** conducting its affairs in an unlawful manner, demonstrating that you are not operated exclusively for exempt purposes. Organizations that are not exempt under IRC Section 501generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov. Contributions to your organization are no longer deductible under IRC Section 170. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S, Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: US Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington. DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3). Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with he IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Internal Revenue Service Taxpayer Advocate Office Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. You may fax your documents to the fax number shown above, using either a fax machine or online fax service. Protect yourself when sending digital data by understanding the fax service's privacy and security policies. Keep the original letter for your records. Sincerely, ******, for Lynn A. Brinkley Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Exempt Organizations Examinations Date: November 14, 2022 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Internal Revenue Service Attn: Manager's contact information: Name: ID number: Telephone: Response due date: December 14, 2022 CERTIFIED MAIL - Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, ****** for Lynn A. Brinkley Acting Director Exempt Organizations Examinations Enclosures: Form 886-A and Attachments Form 6018 Issue: Whether ****** (Taxpayer) continues to qualify for exemption from Federal income tax under section 501(a) of the Internal Revenue Code (Code) as a charitable organization described in Code section 501(c)(3). Facts: Taxpayer was incorporated in the State of ****** on ******, ******, under the state's nonprofit corporation law. Taxpayer's organizing document, the Articles of Incorporation, was filed by Taxpayer ****** with the state and provides for the following corporate purpose: "To provide food, clothing, transportation, housing, and financial assistance to individuals ****** and their families. From their ****** all the way to ******, our mission is to improve the lives of those ****** by also providing emotional support to the entire family. ****** is, and will always be, a charitable organization." Article VII of Taxpayer's Articles of Incorporation provides that the organization is organized exclusively for charitable, religious, educational, and scientific purposes under section 501(c)(3) of the Code, or corresponding section of any future federal tax code. Taxpayer's organizing document also provides for a dissolution clause intended to allow Taxpayer to satisfy the organizational requirements for Federal exemption. Taxpayer's Articles of Incorporation identifies the incorporator as ****** with a residential or business address of ******, ******, ******, ******. ****** is also appointed as the resident agent of the corporation. According to Article IV, the street address of the registered office of the corporation (P.O. Boxes are not acceptable by the state) is ******, ******. The ****** initial directors listed in Article VI of Taxpayer's organizing document are ******, ******, and ******. ****** has a mailing address in ****** while ****** has a mailing address in ******, ******. A copy of Taxpayer's organizing document is appended as Exhibit A. The street address in ******, ****** furnished by ****** as his residential or business address corresponds to a ****** called ****** which offers mailbox services. See Exhibit B. The website for ****** contains the following description of mailbox services offered to its customers: "We provide you with a unique street address box number where you can have all your mail sent. When a new piece of mail arrives, our staff automatically scan the front of the envelope. You can then manage your mail through an online control panel and can request that we open and scan the contents, shred and recycle the item, or forward-ship it to your home or business address." In ******, Taxpayer filed Form ******, ******, with the Internal Revenue Service (IRS). ****** of the Form ****** requires ****** organizations to list the names, titles and mailing addresses of all officers, directors, and trustees. The same ****** individuals, listed as the initial directors on Taxpayer's organizing document are listed in ****** of the Form ******. ****** is listed as the Executive Director, ****** is listed as a Director and ****** is listed as the Managing Director. Their addresses correspond to the ones referenced on Taxpayer's organizing document. The Form ****** is signed by ****** as the Executive Director according to the declaration on page ******. The mailing address furnished for Taxpayer on its Form ****** is: Taxpayer's address in ****** corresponds to a ****** which offers mailbox services. According to information posted by ****** on the Internet, the retail store located at ****** in ******, ****** offers the following mailbox services: - A real street address in lieu of a P.O. Box. - Package and mail receipt notifications - Mail holding and forwarding - Call-in mail check A copy of the pertinent website content posted by or on behalf of the ****** located in ****** in ****** is appended as Exhibit C. In its Form ******, Taxpayer attested that it is both organized and operated exclusively for charitable purposes. Taxpayer did not furnish a copy of its Articles of Incorporation since the organizing document is not required to be filed with the ****** Form ******. Based on the representations and attestations made by Taxpayer in its Form ******, the IRS issued a favorable determination letter dated ******, ******, granting Taxpayer recognition of exemption under section 501(c)(3) of the Code effective ******, ******. Taxpayer was classified as a public charity under sections 509(a)(1) and 170(b)(1)(A)(vi) of the Code based on its attestation regarding public support in ****** of the Form ******. IRS records show that Taxpayer filed Form ******, ******, for the ******, ******, and ****** calendar tax years. Taxpayer filed Form ****** in lieu of a Form ****** or Form ****** return. The organization indicated on Form ****** that its gross receipts are normally $ ****** or less. The address reported by Taxpayer on its Forms ****** is the same address reported on the Form ****** - ******, ******, ******. In ******, the Tax Exempt and Governmental Entities (TE/GE) division of the IRS selected Taxpayer for examination of its books and records covering the ****** calendar year. The notice of examination package, which is dated ******, ******, consists of IRS letter #6031, Form ******, ****** (******), Publication 1, Your Rights as a Taxpayer, Notice 609, Privacy Act Notice, and Publication 3498-A, The Examination Process (Audits by Mail). The notice of examination package was mailed to Taxpayer at the last known address on file for the organization, which is as follows: As noted on ****** page of the ******-page ****** issued with the examination notice, the examination of Taxpayer's books and records is intended to verify that the organization: 1. Operates in accordance with section 501(c)(3) of the Code 2. Is eligible to file Form ****** based on gross receipts, and 3. Filed all required returns including information returns. As part of standard audit procedures, the IRS examiner requested that Taxpayer furnish certain records and information needed to determine whether the organization is operating in furtherance of charitable and other exempt purposes described in section 501(c)(3) of the Code. ****** # ****** issued to Taxpayer on ******, ******, requests copies of the following records and information covering the ****** calendar year under examination: - Chart of accounts - General ledger - Adjusted trial balance - Cash disbursements journal. - Monthly bank statements for Taxpayer's primary operating (checking) account together with canceled checks or check images furnished by the bank. - Monthly statements for all credit cards that may have been issued to Taxpayer. - Minutes of meetings held by Taxpayer's Board of Directors and committees of the Board. - Internal policies and procedures regarding the handling and recording of cash donations. - Lease agreements and other information relating to any office or other facility used by Taxpayer to conduct activities. - Contracts and other arrangements with individuals and/or organizations which solicit and raise funds for Taxpayer including, but not limited to, professional fundraising organizations. - The organization's website address, if any, and the identity of the party that hosts the website. If no website is maintained, Taxpayer was requested to provide copies of records which describe the activities conducted in ******. In the absence of formal marketing and fundraising materials, Taxpayer was asked to provide a statement describing the activities, services, programs, and events conducted by the organization in ****** - Information regarding the accounting software used by Taxpayer for preparation of its books and records. The response due date for ****** # was ******, ******. Taxpayer did not respond to the ****** or otherwise contact the IRS examiner or the group manager by the due date. In accordance with established IRS procedures, a follow-up "Delinquency Notice" letter was issued to Taxpayer with a copy of ****** # on ******, ******, with a response due date of ******, ******. The delinquency notice states, in part, that if the organization does not fully respond to the ****** by the response due date, the IRS will propose revocation of Taxpayer's exempt status. The delinquency notice was not returned by the post office as undeliverable. Taxpayer did not respond to the delinquency notice or otherwise contact the IRS examiner. Neither the IRS examiner nor the group manager subsequently received any of the requested records and information from ****** or any other officer or director of Taxpayer. There is no evidence that Taxpayer is an affiliate or chapter of any other exempt organization or network of charities that operate within the United States. The ****** Form ****** filed by ****** Taxpayer references a website (******) in section ******. The IRS examiner was unable to find the website domain listed by Taxpayer on its ****** Form ******. Taxpayer did not identify a website on Form ****** filed for the subsequent years including the ****** Form under exam. A search of the State of ****** corporate database, which provides information on the status of entities incorporated under ****** state law, shows that Taxpayer's was ****** dissolved as a corporation by ****** effective ******, ******. A copy of the entity status search for Taxpayer secured from the State of ****** online filing system is appended as Exhibit D. An ****** copy of the ****** dissolution of Taxpayer was also made available on the state's website and is appended as Exhibit E. The ****** indicates that the ****** against Taxpayer, the individuals ******, ******, and ******, and multiple related nonprofit organizations by the Attorney General of the State of ****** Following a ******, ****** held that the Taxpayer and the related ****** engaged in unlawful conduct in violation of the ****** (******), ****** et seq., by procuring the organizations through fraud; ****** conducting its affairs in an unlawful manner. ******. An ****** for ****** was filed with the corporations' division on ******, ****** Applicable Law: Section 501(c)(3) of the Code provides that an organization organized and operated exclusively for charitable or educational purposes is exempt from Federal income tax, provided no part of its net earnings inures to the benefit of any private shareholder or individual. Section 1.501(c)(3)-1(a)(1) of the Treasury Regulations states that to be exempt as an organization described in section 501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section - charitable, religious, educational, scientific, literary, testing for public safety, or for the prevention of cruelty to children or animals. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Section 1.501(c)(3)-1(b)(1)(i) of the regulations provides that an organization is organized exclusively for one or more exempt purposes only if its articles of organization (as defined in subparagraph (2)) limit its purposes to one or more exempt purposes and do not expressly empower it to engage, otherwise than as an insubstantial part of its activities, in activities which in themselves are not in furtherance of one or more exempt purposes. Section 1.501(c)(3)-1(b)(2) of the regulations provides that the term "articles of organization" or "articles" includes the trust instrument, the corporate charter, the articles of association, or any other written instrument by which an organization is created. Section 1.501(c)((3)-1(c) of the regulations describes the operational test requirements for 501(c)(3) exemption. The operational test focuses on how the organization is actually operated, regardless of whether it is properly organized for tax-exempt purposes. Section 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. This is referred to as the "primary activities" test. Section 1.501(c)(3)-1(c)(2) of the regulations provides that an organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Section 511 of the Code imposes a tax at corporate rates under section 11 on the unrelated business taxable income of certain tax-exempt organizations. Section 6001 of the Code provides, in part, that every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax under this title. Section 1.6001-1(c) of the regulations provides that in addition to such permanent books and records as are required by paragraph (a) of this section with respect to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under section 501(a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 6033 and regulations sections 1.6033-1 through 1.6033-3. Section 1.6001-1(e) of the regulations provides that the books or records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and, shall be retained as long as the contents thereof may be material in the administration of any internal revenue law. Section 6033 of the Code provides, in general, that every organization exempt under IRC 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the Internal Revenue laws as the Secretary may by forms of regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Section 6033 of the Code provides an exception to the annual filing requirement in the case of an organization described in section 501(c) (other than a private foundation or a supporting organization described in section 509(a)(3)) the gross receipts of which in each taxable year are normally not more than $50,000. See section 1.6033-2(g)(1)(iii) of the regulations. Section 1.6033-2(g)(5) of the regulations provide that an organization that is not required to file an annual return by virtue of the gross receipts exception must submit an annual electronic notice notification as described in section 6033(i) of the Code. Section 1.6033-2(i)(2) of the regulations provides that every organization which is exempt from tax, whether or not it is required to file an annual information return, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of subchapter F (section 501 and following), chapter 1 of subtitle A of the Code and section 6033. Rev.Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The Service held that the failure or inability to file the required information return or otherwise to comply with the provisions of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status. Organization's Position: Taxpayer's position is unknown at this time. Government's Position: Analysis The facts indicate that Taxpayer received recognition of exemption under section 501(c)(3) of the Code in ****** based on information presented in its Form ******. Taxpayer attested that it is both organized and operated exclusively for charitable purposes. The TE/GE division of the IRS maintains an examination program for exempt organizations to determine whether they are complying with statutory requirements regarding their tax-exempt status, the proper filing of returns, and other tax reporting matters. Taxpayer filed Form ******, ******, for the ****** calendar year. Operational Test Not Met Taxpayer was selected for audit to ensure that the organization's activities and operations align with their approved exempt status and to verify that the filing of Form ****** was proper based ****** on the organization's gross receipts. Section 6001 of the Code and the regulations thereunder impose requirements on exempt organizations to keep books and records to substantiate information required under section 6033 of the Code. Although Taxpayer filed an ****** in lieu of a return, the organization is nevertheless required to produce records and other information requested by the IRS to verify that it operates in furtherance of its exempt purpose. See regulations section 1.6033-2(i)(2). As part of standard audit procedures, the IRS examiner requested basic financial records including books of account, minutes of Board meetings and records and information pertaining to Taxpayer's activities. Such records and information are needed to verify whether Taxpayer continues to be operated exclusively for one or more of the exempt purposes specified in section 501(c)(3) of the Code. Taxpayer failed to respond to repeated reasonable requests to allow the IRS to examine its books and records including its receipts, disbursements, and other items required to be kept and maintained pursuant to sections 6001 and 6033(a)(1) of the Code. Accordingly, Taxpayer has failed to meet the requirements of section 501(c)(3) of the Code and sections 1.501(c)(3)-1(a) and 1.501(c)(3)-1(c) of the regulations, in that the organization has not established that it is operated exclusively for exempt purposes and that no part of its net earnings inures to the benefit of private shareholders or individuals. See also Rev.Rul. 59-95. Taxpayer is No Longer a Legal Entity Under State Law A basic premise of tax-exempt status under section 501(c)(3) of the Code is that it may apply only to an organization that is organized pursuant to "articles of organization" within the meaning of section 1.501(c)(3)-1(b)(2) of the regulations. Such articles of organization include a corporate charter, articles of incorporation, or similarly named instrument in the case of a corporation. Public records made available online by the State of ****** show that Taxpayer was dissolved as a corporate entity ****** filed on ******, ******. See Exhibit E. Upon the ****** dissolution of Taxpayer by the State of ****** Taxpayer is no longer exempt by operation of law since the organization is no longer a separate legal entity that can qualify for exemption under section 501(c)(3). See section 1.501(c)(3)-1(b) of the regulations regarding the organizational test requirements. Conclusion: For the reasons stated above, the IRS has determined that Taxpayer is no longer exempt from Federal income tax under section 501(a) of the Code as an organization described in Code section 501(c)(3). The IRS is proposing to revoke Taxpayer's 501(c)(3) tax-exempt status effective ******, ******, the ****** calendar year under examination. Please note that this Form 886-A, Explanation of Items, which is also known as the revenue agent report (RAR), constitutes an integral part of the attached 30-day letter #3618. Please refer to the attached letter #3618 for additional information including appeals rights and other options available to the organization and, the instructions for how to respond.

Private Letter Ruling Number: 202124006 Internal Revenue Service March 19, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202124006 Release Date: 6/18/2021 Index Number: 9100.00-00, 851.00-00, 851.01-00, 855.00-00, 1276.02-02 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:FIP:B01 PLR-126977-20 Date: March 19, 2021 Dear ******: This is in reply to a letter dated November 20, 2020, submitted on behalf of Fund, requesting an extension of time under sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to make an election under each of sections 851(b), 855(a), and 1276(b)(2) of the Internal Revenue Code (the "Code"). FACTS On Date 3, Fund was formed and commenced operations as a separate series of Trust, a State A statutory trust established on Date 2. Fund is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Fund intends to be a regulated investment company ("RIC") under subchapter M of chapter 1 of the Code beginning with its taxable year ended Date 4 ("Taxable Year"). Fund uses an overall accrual method of accounting and has a tax year ending Date 1. Accounting Firm prepared Fund's Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies, for Taxable Year (the "Tax Return"). The Tax Return included: (1) an election under section 851 to treat Fund as a RIC beginning with Taxable Year, (2) an election under section 855(a) to treat certain distributions paid after Taxable Year as paid during Taxable Year, and (3) an election under section 1276(b)(2) to accrue market discount on the basis of a constant interest rate with respect to specified bonds for which Fund was not required to determine market discount prior to Taxable Year. The Tax Return was due (without extensions) on Date 5. Fund timely filed Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, to extend the due date of Fund's return to Date 6. The Secretary of the Treasury, in response to the declared Coronavirus Disease (Covid-19) emergency, automatically postponed the Tax Return's due date to July 15, 2020. See Notice 2020-23, 2020-18 I.R.B. 742. The Tax Return was prepared and signed prior to July 15, 2020, and Taxpayer intended to file the return on or before that date. Fund represents (and Tax Officer avers) that Fund forgot to mail the Tax Return as a result of substantial disruptions caused by the Covid-19 emergency. Fund only discovered that the Tax Return was not yet mailed when Accounting Firm delivered to Fund's tax personnel additional Forms 1120-RIC to be mailed on behalf of Fund's affiliates (which have later tax years). By Date 7, two days after first discovering that the Tax Return was not yet filed, Fund mailed the Tax Return to the Internal Revenue Service (the "Service") and engaged Accounting Firm to prepare and submit the request for relief to which this letter responds. Fund makes the following additional representations: 1. The request for relief was filed before the failure to make the elections was discovered by the Service. 2. Granting the relief requested will not result in Fund having a lower tax liability in the aggregate for all years to which the elections apply than it would have had if the elections had been timely made (taking into account the time value of money). 3. Fund does not seek to alter a return position for which an accuracy-related penalty has been or could have been imposed under section 6662 at the time it requested relief, and the new position requires or permits the elections for which relief is requested. 4. Being fully informed of the required elections and related tax consequences, Fund did not choose to not file the elections. 5. Fund is not using hindsight in requesting relief. No facts have changed since the due date for making the elections that make the elections more advantageous to Fund. 6. The period of limitations on assessment under section 6501(a) has not expired for Fund for the taxable year in which the elections should have been filed, nor for any taxable year that would have been affected by the elections had they been timely filed. In addition, affidavits on behalf of Fund and Accounting Firm have been provided as required by section 301.9100-3(e). LAW AND ANALYSIS Section 851(b) provides that a corporation shall not be considered a RIC for any taxable year unless it files with its return for the taxable year an election to be a RIC or has made such election for a previous taxable year. Section 1.851-2(a) of the Income Tax Regulations provides that the taxpayer shall make its election to be treated as a RIC by computing taxable income as a RIC on its federal income tax return for the first taxable year for which the election is applicable. No other method of making such election is permitted. Section 855(a) provides, in relevant part, that if a RIC declares a dividend by the extended due date for filing the company's tax return for a taxable year and distributes the amount of such dividend to shareholders in the 12-month period following the close of such taxable year and not later than the date of the first dividend payment of the same type of dividend made after such declaration, then the amount so declared and distributed shall, to the extent the RIC elects in such return in accordance with regulations prescribed by the Secretary, be considered as having been paid during such taxable year, except as otherwise provided in section 855(b) and (c). Section 1.855-1(b)(1) provides that a section 855(a) election must be made in the return filed by the RIC for the taxable year. The election shall be made by the RIC by treating the dividend (or portion thereof) to which such election applies as a dividend paid during the taxable year in computing its investment company taxable income, or if the dividend (or portion thereof) to which such election applies is to be designated by the RIC as a capital gain dividend, in computing the amount of capital gain dividends paid during such taxable year. Section 1276(a)(1) provides that, except as otherwise provided in section 1276, gain on the disposition of any market discount bond is treated as ordinary income to the extent of accrued market discount on the bond. Section 1278(a)(1) defines a market discount bond as any bond having market discount, with certain exceptions. Market discount is generally defined by section 1278(a)(2) as the excess of the stated PLR-126977-20 4 redemption price of a bond at maturity over the basis of the bond immediately after its acquisition. Section 1276(b)(1) states that, except as otherwise provided in section 1276(b) or (c), accrued market discount is calculated on the basis of ratable accrual. Section 1276(b)(2) allows an election by a taxpayer to calculate accrued market discount on the basis of a constant interest rate. This election, which is irrevocable and made on a bond-by-bond basis, must be made by no later than the due date (including extensions) for the income tax return for the earliest taxable year for which the taxpayer is required to determine accrued market discount. See Rev. Proc. 92-67, sec. 2.12, 1992-2 C.B. 429, 430. Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles E, G, H, and I. Section 301.9100-1(b) defines a regulatory election as an election whose due date is prescribed by regulations or by a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin. Section 301.9100-3(a) through (c)(1) sets forth rules that the Service generally will use to determine whether, under the particular facts and circumstances of each situation, the Commissioner will grant an extension of time for regulatory elections that do not meet the requirements of section 301.9100-2. Section 301.9100-3(a) provides that requests for relief subject to this section will be granted when the taxpayer provides the evidence (including affidavits described in section 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government. Section 301.9100-3(b) provides that a taxpayer generally is deemed to have acted reasonably and in good faith if the taxpayer (i) requests relief under this section before the failure to make the regulatory election is discovered by the Service; (ii) failed to make the election because of intervening events beyond the taxpayer's control; (iii) failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer's experience and the complexity of the return or issue), the taxpayer was unaware of the necessity for the election; (iv) reasonably relied on the written advice of the Service; or (v) reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election. A taxpayer will be deemed to have not acted reasonably and in good faith, however, if the taxpayer (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested; (ii) was informed in all material respects of the required election and related tax consequences, but chose not to file the election; or (iii) uses hindsight in requesting relief. Section 301.9100-3(c)(1) provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in the taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the Government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. Section 301.9100-3(c)(2) provides special rules for accounting method regulatory elections. Under these rules, the interests of the Government are deemed to be prejudiced except in unusual and compelling circumstances if the accounting method regulatory election for which relief is requested (i) is subject to the procedure described in § 1.446-1(e)(3)(i) (requiring the advance written consent of the Commissioner); (ii) requires an adjustment under section 481(a) (or would require an adjustment under section 481(a) if the taxpayer changed to the method of accounting for which relief is requested in a taxable year subsequent to the taxable year the election should have been made); (iii) would permit a change from an impermissible method of accounting that is an issue under consideration by examination, an appeals office, or a federal court and the change would provide a more favorable method or more favorable terms and conditions than if the change were made as part of an examination; or (iv) provides a more favorable method of accounting or more favorable terms and conditions if the election is made by a certain date or taxable year. CONCLUSION Based upon the facts and representations submitted, we conclude that Fund has satisfied the requirements for granting a reasonable extension of time to make an election under each of sections 851(b), 855(a), and 1276(b)(2). Thus, these elections will be treated as having been timely made even though the Tax Return was not mailed to the Service (or otherwise filed) until Date 7. This ruling is limited to the timeliness of the filing of the elections described herein. This ruling's application is limited to the facts, representations, Code sections, and regulations cited herein. Except as specifically provided otherwise, no opinion is expressed on the federal income tax consequences of any transaction or item discussed or referenced in this letter. Specifically, no opinion is expressed regarding any material item or representation on the Tax Return. Additionally, no opinion is expressed with regard to whether the Fund otherwise qualifies as a RIC under part I of subchapter M of chapter 1 of the Code. No opinion is expressed with regard to whether the tax liability of Fund is not lower in the aggregate for all years to which the elections apply than such tax liability would have been if the elections had been timely made (taking into account the time value of money). Upon audit of the U.S. federal income tax return(s) involved, the director's office will determine such tax liability for the year(s) involved. If the director's office determines that such tax liability is lower, that office will determine the U.S. federal income tax effect. The ruling contained in this letter is based upon information and representations submitted by the Fund and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for ruling, it is subject to verification on examination. This ruling is directed only to the taxpayer(s) that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to the Fund's authorized representatives. Sincerely, Steven Harrison Branch Chief, Branch 1 Office of Associate Chief Counsel (Financial Institutions and Products) cc:

Internal Revenue Service - Fact Sheet FS-2023-24 Help for businesses: Steps for withdrawing an Employee Retention Credit claim October 2023 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 Help for businesses: Steps for withdrawing an Employee Retention Credit claim FS-2023-24, October 2023 The IRS and tax professionals continue to see aggressive advertising, direct mail solicitations and online promotions involving the Employee Retention Credit (ERC). These promoters have misled employers and harmed honest employers by misrepresenting and exaggerating who is eligible for this pandemic-era credit. The IRS is offering an option for taxpayers who filed a claim requesting a refund for an ERC and would now like to withdraw the claim to avoid getting a refund for which they're ineligible. The claim withdrawal process is a piece of a larger effort by the IRS, working in conjunction with the tax professional community, to help protect taxpayers by stopping a claim from being processed. The IRS is committed to protecting taxpayers that mistakenly claimed the ERC, as well as those eligible for the ERC, which is also sometimes called the Employee Retention Tax Credit or ERTC. As a reminder, anyone who incorrectly claims the ERC has to pay it back and may owe penalties and interest. The IRS wants to help honest taxpayers avoid this situation. The IRS encourages employers to seek out a trusted tax professional who understands the complex ERC eligibility rules, not a promoter or marketer trying to get a hefty contingency fee. Trusted tax professionals may also be able to assist with the claim withdrawal process. The IRS reminds employers that if they request a withdrawal, it means they are asking the IRS not to process their entire adjusted employment tax return for the tax period that included the ERC claim. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest. Who can request to withdraw an ERC claim Employers can use the ERC claim withdrawal process if all of the following apply: - They made the claim on an adjusted employment tax return (Forms 941-X, 943-X, 944-X, CT-1X). - They filed the adjusted return only to claim the ERC, and they made no other adjustments. - They want to withdraw the entire amount of their ERC claim. - The IRS has not paid their claim, or the IRS has paid the claim, but they haven't cashed or deposited the refund check. Businesses that have willfully filed fraudulent claims, assisted in such conduct or conspired to do so should be aware, however, that withdrawing a fraudulent claim will not exempt them from potential criminal investigation and prosecution. Employers that can't use this process may still be able to file another adjusted return if they need to: - Reduce the amount of their ERC claim - Make other changes to their adjusted return The frequently asked questions about the ERC have more details for these employers. How to request to withdraw an ERC claim Employers that filed their ERC claim through a professional payroll company and want to request a claim withdrawal will need to contact the entity that filed the claim on their behalf. These companies may include a certified professional organization (CPEO), professional employer organization (PEO) or other Section 3504 agents. Taxpayers that filed an adjusted return to claim the ERC and who want to withdraw their entire claim can use the process below. They must follow the steps for each tax period for which they are requesting a withdrawal. The fax line is a secure, relatively fast way for the IRS to receive withdrawal requests. If the IRS accepts the withdrawal request, the adjusted tax return will not be processed. Section A: Employers who haven't received a refund and haven't been notified their claim is under audit If the employer filed an adjusted return (Form 941-X, 943-X, 944-X, CT-1X) to claim the ERC and would like to withdraw the entire claim, they can use the process below. If they filed adjusted returns for more than one tax period, they must follow the steps below for each tax period for which they are requesting a withdrawal. To request a withdrawal, follow these steps: 1. Make a copy of the adjusted return with the claim they wish to withdraw. 2. In the left margin of the first page, write " Withdrawn. " 3. In the right margin of the first page: Have an authorized person sign and date it. Write their name and title next to their signature. 4. Fax the signed copy of the return to the IRS's ERC claim withdrawal fax line at 855-738-7609 using a computer or mobile device. This is the withdrawal request. Keep the copy with tax records. If a taxpayer can't fax their request, they can mail the signed copy to the address in the instructions for the adjusted return that applies to their business or organization. Before doing so they should make a copy of the signed and dated first page to keep with their tax records. It will take longer for the IRS to receive a mailed request. Track the package to confirm delivery. Section B: Employers that haven't received a refund and have been notified their claim is under audit Employers facing an IRS audit, also referred to as an exam, can still withdraw their ERC claim. If a taxpayer has been notified that the IRS is auditing the adjusted return that includes their ERC claim, they should prepare their withdrawal request using the steps in Section A, but they should not fax it to the withdrawal fax line or mail it using the address below. Instead: - If they've been assigned an examiner, they should communicate with the examiner about how to fax or mail the withdrawal request directly to them. - If they haven't been assigned an examiner, they should respond to the audit notice with the withdrawal request, using the instructions in the notice for responding. Section C: Employers who received a refund check but haven't cashed or deposited it Employers that have received a refund check but still haven't cashed or deposited it, can still withdraw their claim. They need to mail the voided check with their withdrawal request using these steps: 1. Prepare the claim withdrawal request using the steps in Section A but don't fax the request. 2. Write " Void " in the endorsement section on the back of the refund check. 3. Include a note that says, "ERC Withdrawal" and briefly explain the reason for returning the refund check. 4. Make copies for tax records of the front and back of the voided check, the explanation notes and the signed and dated withdrawal request page. 5. Don't staple, bend or paper clip the voided check; include it with your claim withdrawal request and mail it to the IRS at: Cincinnati Refund Inquiry Unit PO Box 145500 Mail Stop 536G Cincinnati, OH 45250 Track your package to confirm delivery. What to expect after submitting a withdrawal request Taxpayers will get a letter from the IRS about whether their withdrawal request was accepted or rejected. The approved request is not effective until the taxpayer has the acceptance letter from the IRS. If the IRS accepts the withdrawal, the taxpayer may need to amend their income tax return. See Claiming the ERC for explanation of how ERC affects your income tax return. If a taxpayer needs help, they should consult a trusted tax professional. Additional program coming for those who already received an ERC refund The IRS is also working on guidance to help employers that were misled into claiming the ERC and have already received the payment. More details will be available this fall. Other resources - To help businesses understand this complex credit, the IRS has an interactive Employee Retention Credit Eligibility Checklist that helps employers - and the tax professionals working with them - an easy way to check potential ERC eligibility. - Frequently asked questions about the Employee Retention Credit - ERC Webinar - IR-2023-193, IRS announces withdrawal process for Employee Retention Credit claims; special initiative aimed at helping businesses concerned about an ineligible claim amid aggressive marketing, scams - IR-2023-169, To protect taxpayers from scams, IRS orders immediate stop to new Employee Retention Credit processing amid surge of questionable claims; concerns from tax pros, aggressive marketing to ineligible applicants highlight unacceptable risk to businesses and the tax system

Internal Revenue Service - Fact Sheet FS-2022-17 IRS updates the 2021 Child Tax Credit and Advance Child Tax Credit frequently asked questions March 2022 Internal Revenue Service Media Relations Office Washington, D.C. Media Contact: 202.317.4000 Public Contact: 800.829.1040 www.irs.gov/newsroom IRS updates the 2021 Child Tax Credit and Advance Child Tax Credit frequently asked questions FS-2022-17, March 2022 This Fact Sheet updates the 2021 Child Tax Credit and Advance Child Tax Credit frequently asked questions (FAQs). These updates are to help eligible families properly claim the credit when they prepare and file their 2021 tax return. These FAQs revisions are as follows: - 2021 Child Tax Credit and Advance Child Tax Credit Payments -- Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit: Q3 - 2021 Child Tax Credit and Advance Child Tax Credit Payments -- Topic C: Calculation of the 2021 Child Tax Credit: Q1 - 2021 Child Tax Credit and Advance Child Tax Credit Payments -- Topic D: Calculation of Advance Child Tax Credit Payments: Q1 These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer's specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer's case, the law will control the taxpayer's tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so. More information about reliance is available. These FAQs were announced in IR-2022-53. 2021 Child Tax Credit and Advance Child Tax Credit Payments Background There have been important changes to the Child Tax Credit that will help many families receive advance payments. The American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit (CTC) for tax year 2021 only. Below are frequently asked questions about the Advance Child Tax Credit Payments in 2021, separated by topic. Do not call the IRS. Our phone assistors don't have information beyond what's available on IRS.gov. - Topic A: General Information - Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit - Topic C: Calculation of the 2021 Child Tax Credit - Topic D: Calculation of Advance Child Tax Credit Payments - Topic E: Advance Payment Process of the Child Tax Credit - Topic F: Updating Your Child Tax Credit Information During 2021 - Topic G: Receiving Advance Child Tax Credit Payments - Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return - Topic I: U.S. Territory Residents and Advance Child Tax Credit Payments - Topic J: Unenrolling from Advance Payments - Topic K: Verifying Your Identity to View your Payments - Topic L: Commonly Asked Shared-Custody Questions - Topic M: Commonly Asked Immigration-Related Questions - Topic N: Returning a Payment 2021 Child Tax Credit and Advance Child Tax Credit Payments -- Topic A: General Information Q A1. What are advance Child Tax Credit payments? (updated January 11, 2022) A1. Advance Child Tax Credit payments are early payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit that you may properly claim on your 2021 tax return during the 2022 tax filing season. If the IRS processed your 2020 tax return or 2019 tax return before the end of June, these monthly payments began in July and continued through December 2021, based on the information contained in that return. Note: Advance Child Tax Credit payment amounts are not based on the Credit for Other Dependents, which is not refundable. For more information about the Credit for Other Dependents, see IRS Schedule 8812 (Form 1040), Credits for Qualifying Children and Other Dependents. For more information about how your advance Child Tax Credit payments were calculated, see Topic D: Calculation of Advance Child Tax Credit Payments. QA2. What did I need to do to receive advance Child Tax Credit payments? (updated January 11, 2022) A2. Generally, nothing. If you were eligible to receive advance Child Tax Credit payments based on your 2020 tax return or 2019 tax return (including information you entered into the Non-Filer tool for Economic Impact Payments on IRS.gov in 2020, or the Child Tax Credit Non-filer Sign-up Tool in 2021), you generally received those payments automatically without needing to take any additional action. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. For more information regarding eligibility and how advance Child Tax Credit payments have been disbursed, see Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit and Topic E: Advance Payment Process of the Child Tax Credit. Q A3. Did I need income to receive advance Child Tax Credit payments? (updated January 11, 2022) A3. No. Even if you had $0 in income, you could have received advance Child Tax Credit payments if you were eligible. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. For information regarding eligibility, see Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit. Q A4. Where can I get help completing my 2020 tax return if I can't do it myself? (updated January 11, 2022) A4. If you could not or chose not to use the Child Tax Credit Non-filer Sign-up Tool, IRS Free File, or Free File Fillable Forms to file your 2020 tax return, there are various types of tax return preparers, including certified public accountants, enrolled agents, attorneys, and others who can assist you in filing your return. For more information about these and other return preparers who might be right for you, visit Need someone to prepare your tax return ? Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. Q A5. What if I did not want to receive advance Child Tax Credit payments? (updated January 11, 2022) A5. If you preferred not to receive monthly advance Child Tax Credit payments because you would rather claim the full credit when you file your 2021 tax return, or you knew you were not eligible for the Child Tax Credit for your 2021 tax year, the IRS provided an option to unenroll from advance Child Tax Credit payments through the Child Tax Credit Update Portal (CTC UP). For more information regarding CTC UP, see Topic F: Updating Your Child Tax Credit Information During 2021. Q A6. When did the IRS begin disbursing advance Child Tax Credit payments? (updated January 11, 2022) A6. The IRS began disbursing advance Child Tax Credit payments on July 15. After that, payments were disbursed on a monthly basis through December 2021. For more information regarding how advance Child Tax Credit payments were disbursed, see Topic E: Advance Payment Process of the Child Tax Credit. Q A7. Did the IRS contact individuals about advance Child Tax Credit payments before they were disbursed? (updated January 11, 2022) A7. Yes. In June 2021, the IRS sent Letter 6417. This letter informed recipients of the amount of their estimated Child Tax Credit monthly payments. This letter also indicated where recipients could find additional information about advance Child Tax Credit payments. Q A8. How could I have qualified for advance Child Tax Credit payments? (updated January 11, 2022) A8. You qualified for advance Child Tax Credit payments if you had a qualifying child. Also, you -- or your spouse, if married filing a joint return -- must have had your main home in one of the 50 states or the District of Columbia for more than half the year. Your main home can be any location where you regularly live. Your main home may be your house, apartment, mobile home, shelter, temporary lodging, or other location and doesn't need to be the same physical location throughout the taxable year. You don't need a permanent address to get these payments. If you are temporarily away from your main home because of illness, education, business, vacation, or military service, you are generally treated as living in your main home. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. For more information regarding eligibility for advance Child Tax Credit payments, and the Child Tax Credit generally, see Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit. For information on how the amount of your Child Tax Credit could be reduced based on the amount of your income, see Topic C: Calculation of the 2021 Child Tax Credit. Q A9. Will receiving advance Child Tax Credit payments cause a delay in my refund when I file my 2021 tax return during the 2022 tax filing season? (updated January 11, 2022) A9. No. However, if you fail to properly reconcile your advance Child Tax Credit payments with the amount of Child Tax Credit for which you are eligible on your 2021 federal income tax return, processing of your return by the IRS will be delayed. For more information regarding how to reconcile your advance Child Tax Credit payments with your Child Tax Credit on your 2021 tax return, see Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return. Q A10. Are advance Child Tax Credit payments taxable? (updated January 11, 2022) A10. No. Advance Child Tax Credit payments are not income and will not be reported as income on your 2021 tax return. Advance Child Tax Credit payments are advance payments of your tax year 2021 Child Tax Credit. However, the total amount of advance Child Tax Credit payments that you received during 2021 was based on the IRS's estimate of your 2021 Child Tax Credit. If the total of your advance Child Tax Credit payments is greater than the Child Tax Credit amount that you are allowed to claim on your 2021 tax return, you may have to repay the excess amount on your 2021 tax return during the 2022 tax filing season. For example, if you received advance Child Tax Credit payments for two qualifying children properly claimed on your 2020 tax return, but you no longer have qualifying children in 2021,the advance Child Tax Credit payments that you received based on those children are added to your 2021 income tax unless you qualify for repayment protection. For more information regarding your eligibility for repayment protection, and how to reconcile your advance Child Tax Credit payments with your Child Tax Credit on your 2021 tax return, see Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return. For this reason, individuals could unenroll from receiving advance Child Tax Credit payments. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly payment disbursed in December. You were able to unenroll through the Child Tax Credit Update Portal (CTC UP). For more information regarding the CTC UP, see Topic F: Updating Your Child Tax Credit Information During 2021 and Topic J: Unenrolling from Advance Payments. Q A11. Will the IRS send me a letter about my advance Child Tax Credit payments to help me claim the correct Child Tax Credit amount on my 2021 return during the 2022 tax filing season? (updated January 11, 2022) A11. Yes. In January 2022, the IRS will send you Letter 6419 to provide the total amount of advance Child Tax Credit payments that were disbursed to you during 2021. Please keep this letter regarding your advance Child Tax Credit payments with your tax records. You may need to refer to this letter when you file your 2021 tax return during the 2022 tax filing season. For more information regarding this letter and how to reconcile your advance Child Tax Credit payments with your Child Tax Credit on your 2021 return, see Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return. Q A12. Will advance Child Tax Credit payments affect any government benefits that I receive? (updated January 11, 2022) A12. No. Advance Child Tax Credit payments cannot be counted as income when determining if you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. These programs also cannot count advance Child Tax Credit payments as a resource for purposes of determining eligibility for at least 12 months after you receive them. Q A13. Can I call the IRS or my tax software company or bank to update my bank account information for advance Child Tax Credit payments? (updated January 11, 2022) A13. The IRS launched on IRS.gov a Child Tax Credit Update Portal (CTC UP), which allowed you to update information with the IRS. CTC UP allowed you to elect not to receive advance Child Tax Credit payments by unenrolling. You also could update your income, your bank account information, and change your address. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly payment scheduled for December 15. Q A14. How do I avoid scams relating to advance Child Tax Credit payments? (updated January 11, 2022) A14. The IRS has urged everyone to be on the lookout for scam artists trying to use advance Child Tax Credit payments as a cover for schemes to steal personal information and money. The IRS doesn't initiate contact by email, text messages, or social media channels to request personal or financial information - even information related to advance Child Tax Credit payments. Also, watch out for emails with attachments or links claiming to have special information about advance Child Tax Credit payments or refunds of the Child Tax Credit. If you receive a suspicious IRS-related email, see Report Phishing and Online Scams for additional information. Q A15. I want to help spread the news about the Child Tax Credit and advance Child Tax Credit payments within my community. How can I do that? (updated January 11, 2022) A15. The IRS has materials and information that can be easily shared by social media, email, and other methods. The IRS urges employers, community groups, non-profits, associations, education groups, and anyone else with connections to people with children to share this critical information about advance Child Tax Credit payments and the Child Tax Credit expansions for the 2021 tax year. You can find materials to share at 2021 Child Tax Credit and Advance Child Tax Credit Payments: Resources and Guidance. In advance of the 2022 tax filing season, the IRS will continue to provide materials on how to claim the 2021 Child Tax Credit, as well as how to reconcile your advance Child Tax Credit payments with the amount of 2021 Child Tax Credit for which you are eligible. For more information regarding how to reconcile your advance Child Tax Credit payments with your Child Tax Credit on your 2021 tax return, see Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. Q A16. When was I able to update my information? (updated January 11, 2022) Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly payment disbursed in December. Updates to the number of qualifying children or filing status should be made when you file your 2021 tax return. Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit Q B1. Who was eligible for advance Child Tax Credit payments? (updated January 11, 2022) A1. You qualified for advance Child Tax Credit payments if you have a qualifying child. Also, you -- or your spouse, if married filing a joint return -- must have had your main home in one of the 50 states or the District of Columbia for more than half the year. Your main home can be any location where you regularly live. Your main home may be your house, apartment, mobile home, shelter, temporary lodging, or other location and doesn't need to be the same physical location throughout the taxable year. You don't need a permanent address to get these payments. If you are temporarily away from your main home because of illness, education, business, vacation, or military service, you are generally treated as living in your main home. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. For information on how the amount of your Child Tax Credit could be reduced based on the amount of your income, see Topic C: Calculation of the 2021 Child Tax Credit. Q B2. Did the requirements for "qualifying children" change for the Child Tax Credit for 2021? (added June 14, 2021) A2. Yes. Q B3. Who is a "qualifying child" for purposes of the 2021 Child Tax Credit? (updated March 8, 2022) A3. For tax year 2021, a qualifying child is an individual who does not turn 18 before January 1, 2022, and who satisfies the following conditions: 1. The individual is the taxpayer's son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, a grandchild, niece, or nephew). 2. The individual does not provide more than one-half of his or her own support during 2021. 3. The individual lives with the taxpayer for more than one-half of tax year 2021. For exceptions to this requirement, see IRS Schedule 8812 (Form 1040), Credits for Qualifying Children and Other Dependents. 4. The individual is properly claimed as the taxpayer's dependent. For more information about how to properly claim an individual as a dependent, see IRS Publication 501, Dependents, Standard Deduction, and Filing Information. 5. The individual does not file a joint return with the individual's spouse for tax year 2021 or files it only to claim a refund of withheld income tax or estimated tax paid. 6. The individual was a U.S. citizen, U.S. national, or U.S. resident alien. For more information on this condition, see IRS Publication 519, U.S. Tax Guide for Aliens. Q B4. Do I, or my children, need to have Social Security numbers to qualify for the Child Tax Credit? (updated January 11, 2022) A4. You -- and your spouse, if married filing a joint return -- must have a Social Security number (SSN) or an IRS Individual Taxpayer Identification Number (ITIN). You received advance Child Tax Credit payments only if you used your correct SSN or ITIN when you filed a 2020 tax return or 2019 tax return (including when you entered information into the Non-Filer tool on IRS.gov in 2020 or the Child Tax Credit Non-filer Sign-up Tool in 2021). Advance Child Tax Credit payments were made for qualifying children who have an SSN that is valid for employment in the United States. Q B5. What is meant by a Social Security number that is valid for employment? (added June 14, 2021) A5. For qualifying children, a valid SSN is one that is valid for employment in the United States and is issued by the Social Security Administration (SSA) before the due date of your 2021 tax return (including extensions). If an individual was a U.S. citizen when he or she received the SSN, then it is valid for employment in the United States. If "Not Valid for Employment" is printed on the individual's Social Security card and the individual's immigration status has changed so that he or she is now a U.S. citizen or permanent resident, ask the SSA for a new Social Security card. However, if "Valid for Work Only With DHS Authorization" is printed on the individual's Social Security card, the individual has the required SSN only as long as the Department of Homeland Security authorization is valid. Q B6. Was I eligible to receive advance Child Tax Credit payments if my qualifying child died in 2021? (updated January 11, 2022) A6. Yes. If your qualifying child was alive at any time during 2021 and lived with you for more than half the time in 2021 that the child was alive, then your child is a qualifying child for purposes of the 2021 Child Tax Credit. As a result, you were eligible to receive advance Child Tax Credit payments for your qualifying child. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. Q B7. How could I have checked to see if I was eligible for advance Child Tax Credit payments? (updated January 11, 2022) A7. The Advance Child Tax Credit Eligibility Assistant allowed you to see if you were eligible for advance Child Tax Credit payments. Q B8. My payment was issued but I didn't receive it. What can I do? (updated January 11, 2022) A8. You can request a payment trace to track your payment if you have not received it within the timeframes below. We will not be able to trace your payment unless it has been: - 5 days since the deposit date and the bank says it hasn't received the payment - 4 weeks since the payment was mailed by check to a standard address - 6 weeks since the payment was mailed, and you have a forwarding address on file with the local post office - 9 weeks since the payment was mailed, and you have a foreign address To start a payment trace, mail or fax a completed Form 3911, Taxpayer Statement Regarding Refund. Topic C: Calculation of the 2021 Child Tax Credit Q C1. What is the amount of the Child Tax Credit for 2021? (updated March 8, 2022) A1. For tax year 2021, the Child Tax Credit increased from $2,000 per qualifying child to: - $3,600 for children ages 5 and under at the end of 2021; and - $3,000 for children ages 6 through 17 at the end of 2021. Note: The $500 nonrefundable Credit for Other Dependents amount has not changed. For more information about the Credit for Other Dependents, see IRS Schedule 8812 (Form 1040), Credits for Qualifying Children and Other Dependents Q C2. Can my Child Tax Credit amount be reduced based on the amount of my 2021 income? (added June 14, 2021) A2. Yes. The Child Tax Credit phases out in two different steps based on your modified adjusted gross income (AGI) in 2021. The first phaseout can reduce the Child Tax Credit to $2,000 per child. - That is, the first phaseout step can reduce only the $1,600 increase for qualifying children ages 5 and under, and the $1,000 increase for qualifying children ages 6 through 17, at the end of 2021. The second phaseout can reduce the remaining Child Tax Credit below $2,000 per child. For additional information on the amounts of modified AGI that reduce the 2021 Child Tax Credit, see Q C4 and Q C5, below. Q C3. What is my modified AGI? (added June 14, 2021) A3. For purposes of the Child Tax Credit and advance Child Tax Credit payments, your modified AGI is your adjusted gross income (from the 2020 IRS Form 1040, line 11, or, if you haven't filed a 2020 return, the 2019 IRS Form 1040, line8b), plus the following amounts that may apply to you. - Any amount on line 45 or line 50 of the 2020 or 2019 IRS Form 2555, Foreign Earned Income. - Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa. If you do not have any of the above, your modified AGI is the same as your AGI. Q C4. How does the first phaseout reduce the 2021 Child Tax Credit to $2,000 per child? (added June 14, 2021) A4. The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds: - $150,000 if married and filing a joint return or if filing as a qualifying widow or widower; - $112,500 if filing as head of household; or - $75,000 if you are a single filer or are married and filing a separate return. The first phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you. Q C5. How does the second phaseout reduce the remaining $2,000 Child Tax Credit? (added June 14, 2021) A5. The Child Tax Credit won't begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds: - $400,000 if married and filing a joint return; or - $200,000 for all other filing statuses. The second phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you. Topic D: Calculation of Advance Child Tax Credit Payments Q D1. How were my advance Child Tax Credit payment amounts determined? (updated March 8, 2022) A1. The IRS determined your advance Child Tax Credit payment amounts by estimating the amount of the Child Tax Credit that you will be eligible to claim on your 2021 tax return during the 2022 tax filing season. Our estimate of your 2021 Child Tax Credit was based on information shown on your processed 2020 tax return (including information you entered in the Child Tax Credit Non-filer Sign-up Tool in 2021). If we had not processed your 2020 tax return when we determined the amount of your advance Child Tax Credit payment for any month starting July2021, we estimated the amount of your 2021 Child Tax Credit based on information shown on your 2019 tax return (including information you entered into the Non-Filer tool on IRS.gov in 2020). If we processed your 2020 return, we recalculated your advance Child Tax Credit payments and adjusted any remaining monthly payments. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. Note: Advance Child Tax Credit payment amounts do not include the $500 Credit for Other Dependents, which is not refundable. For more information about the Credit for Other Dependents, see IRS Schedule 8812 (Form 1040), Credits for Qualifying Children and Other Dependents. Q D2. How much did eligible individuals receive in advance Child Tax Credit payments? (updated January 11, 2022) A2. An eligible individual's total advance Child Tax Credit payment amounts equaled half of the amount of the individual's estimated 2021 Child Tax Credit. This amount was then divided into monthly advance payments. As a result: - For each qualifying child age 5 or younger, an eligible individual generally received $300 each month. That was determined by dividing $3,600 in half, which is $1,800. Six monthly payments of $300 provided the eligible individual with $1,800. - For each qualifying child ages 6 to 17, an eligible individual generally received $250 each month. That was determined by dividing $3,000 in half, which is $1,500. Six monthly payments of $250 provided the eligible individual with $1,500. Topic E: Advance Payment Process of the Child Tax Credit Q E1. When did eligible individuals receive advance Child Tax Credit payments? (updated January 11, 2022) A1. Advance Child Tax Credit payments were disbursed in monthly installments from July through December 2021. Q E2. How did eligible individuals receive their advance Child Tax Credit payments? (updated January 11, 2022) A2. If the IRS received the eligible individual's banking information, payment was sent as a direct deposit. We used bank account information from the following sources, in the following order: - The eligible individual's 2020 tax return, including information entered into the Child Tax Credit Non-filer Sign-up Tool in 2021. - The eligible individual's 2019 tax return, including information entered into the Non-Filer tool on IRS.gov in 2020. - Your banking information listed in the Child Tax Credit Update Portal. - A federal agency that provides the eligible individual with benefits, such as: Social Security Administration, Department of Veterans Affairs, or the Railroad Retirement Board. If we did not have bank account information to issue a direct deposit, we sent advance Child Tax Credit payments by mail. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. Q E3. My 2019 tax return was used to determine my advance Child Tax Credit payments. I filed my 2020 tax return during 2021 with a different amount of income. Did the IRS update my advance Child Tax Credit payment amounts? (updated January 11, 2022) A3. Yes. Your advance Child Tax Credit payments were recalculated after the IRS processed your 2020 tax return. We adjusted your remaining payments in 2021 to increase or decrease the total amount of your advance Child Tax Credit payments that should have been disbursed to you during 2021. Topic F: Updating Your Child Tax Credit Information During 2021 Q F1. What if information about my bank, mailing address, income, or family changed during 2021? (updated January11, 2022) A1. The IRS launched on IRS.gov a Child Tax Credit Update Portal (CTC UP) to allow you to: - Elect not to receive advance Child Tax Credit payments during 2021; - Update your bank account information; - Update your mailing address; and - Update your income. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly advance Child Tax Credit payments disbursed in December. Note: If you don't have an account, many financial institutions will help you open a low-cost or no-cost bank account. Visit the Federal Deposit Insurance Corporation website for details on opening an account online or use the FDIC's Bank Find tool to locate an FDIC-insured bank. BankOn, American Bankers Association, Independent Community Bankers of America, and the National Credit Union Administration have lists of banks and credit unions that can open an account online. See the Veterans Benefits Banking Program, if you're a veteran, for access to financial services at participating banks. Q F2. My income for 2021 was significantly different from the income shown on my 2020 tax return that I filed. Did the IRS update my advance Child Tax Credit payment amounts to take that change into account? (updated January 11, 2022) A2. Yes, if you provided your updated income by using the Child Tax Credit Update Portal (CTC UP). This online portal allowed you to update income you planned to report on your 2021 tax return so that we could change our estimate of your 2021 Child Tax Credit. This allowed us to adjust the amount of your monthly advance Child Tax Credit payments in2021 to account for your income change. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly advance Child Tax Credit payments disbursed in December. Q F3. What if I will claim a child on my 2021 tax return but did not claim that child on my 2020 tax return? (updated January 11, 2022) A3. Your advance Child Tax Credit payments were based on the children you claimed for the Child Tax Credit on your2020 tax return (or 2019 tax return, if your 2020 tax return had not been processed as of the payment determination date for any of your monthly advance Child Tax Credit payments). If you did not receive advance Child Tax Credit payments for a qualifying child you will claim for 2021, you can claim the full amount of your allowable Child Tax Credit for that child when you file your 2021 tax return during the 2022 tax filing season. Q F4. How can the expanded and increased Child Tax Credit and advance Child Tax Credit payments, coupled with the current income tax withholding from my pay, affect the amount of my tax refund or balance due on my income tax return for 2021? (updated January 11, 2022) A4. In July 2021, the IRS started making advance monthly payments of the 2021 Child Tax Credit. For many families, the amount of the 2021 Child Tax Credit increased compared to the amount of the 2020 Child Tax Credit. However, the total advance payments may be greater than any increase in the 2021 credit, depending on a family's circumstances. If you're in this situation and did not adjust income tax withholding from your pay in 2021 (and did not unenroll from advance monthly payments), the amount of your tax refund received in 2022 may decrease compared to the refund received in 2021, or the balance due in 2022 with your 2021 income tax return may increase compared to the balance due in 2021. Some taxpayers also may shift from getting a refund in 2021 to owing a balance in 2022. Therefore, if you received a small refund or had a balance due when you filed your tax return for 2020 in 2021, you could have unenrolled from advance Child Tax Credit payments, updated your Form W-4 by entering an additional amount to be withheld each pay period on step 4c of the form, or made quarterly estimated tax payments for the remainder of 2021. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly advance Child Tax Credit payments disbursed in December. For more information about how your advance Child Tax Credit payments were calculated and disbursed, see Topic D: Calculation of Advance Child Tax Credit Payments, and Topic E: Advance Payment Process of the Child Tax Credit. Individuals were able to unenroll from advance Child Tax Credit payments through the Child Tax Credit Update Portal (CTC UP). For more information regarding the CTC UP, see Topic F: Updating Your Child Tax Credit Information During2021. Topic G: Receiving Advance Child Tax Credit Payments Q G1. What can I do if I think the amount of my advance Child Tax Credit payment was incorrect for a month?(updated January 11, 2022) A1. First, you should review the Letter 6417 that the IRS mailed to you before you received your first advance Child Tax Credit payment. This letter informed you of your estimated Child Tax Credit amount for tax year 2021 and the amounts of your estimated advance Child Tax Credit payments. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return during the 2022 tax filing season. For more information regarding CTC UP, see Topic F: Updating Your Child Tax Credit Information During 2021. Q G2. Were any of my advance Child Tax Credit payments reduced if I owed taxes from previous years or other federal or state debts? (updated January 11, 2022) A2. No. Advance Child Tax Credit payments were not reduced (that is, offset) for overdue taxes from previous years or other federal or state debts that you owed. However, if you receive a refund when you file your 2021 tax return, any remaining Child Tax Credit amounts included in your refund may be subject to offset for tax debts or other federal or state debts you owe. Q G3. Were my advance Child Tax Credit payments offset if my spouse or I owed past-due child support? (updated January 11, 2022) A3. No. Q G4. Were my advance Child Tax Credit payments subject to garnishment? (updated January 11, 2022) A4. Yes. Advance Child Tax Credit payments were not exempt from garnishment by non-federal creditors under federal law. Therefore, to the extent permitted by the laws of your state and local government, your advance Child Tax Credit payments might have been subject to garnishment by your state, local government, and private creditors, including pursuant to a court order involving a non-federal party (which can include fines related to a crime, administrative court fees, restitution, and other court-ordered debts). Some states and financial institutions have chosen to act to protect these payments, however, and these payments were still protected from offset by the federal government. For example, if a taxpayer has a judgment against them obtained by a private party, but also owes assessed federal taxes, the IRS did not subject the payment to offset with respect to the federal taxes. Q G5. Did I need to file an injured spouse claim (Form 8379, Injured Spouse Allocation) if my spouse owed a federal or state debt and I did not? (updated January 11, 2022) A5. No. Advance Child Tax Credit payments were not reduced (that is, offset) for overdue taxes from previous years or other federal or state debts that your spouse owed. However, if you file a joint 2021 tax return with your spouse and receive a refund, any remaining Child Tax Credit amounts included in your refund may be subject to offset for tax debts or other federal or state debts your spouse owes. You can file Form 8379 with your 2021 tax return. Q G6. I filed my 2020 tax return with a U.S. address although my child and I do not live in the United States. I received Letter 6417 at my U.S. address stating that the IRS will begin to disburse advance Child Tax Credit payments to me. What could I have done? (updated January 11, 2022) A6. You were not entitled to advance Child Tax Credit payments. You may be eligible to claim the Child Tax Credit when you file your 2021 tax return, but may not be able to claim all $3,000 or $3,600 per qualifying child because your main home will not be in the United States for more than half of 2021. The advance payments we sent to you might have exceeded the amount of Child Tax Credit that you will be allowed to claim on your 2021 tax return. You could have unenrolled from receiving advance Child Tax Credit payments by using the Child Tax Credit Update Portal (CTC UP). Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly advance Child Tax Credit payments disbursed in December. For more information regarding CTC UP, see Topic F: Updating Your Child Tax Credit Information During 2021. Q G7. I received one or more advance Child Tax Credit payments for my qualifying child, but that child moved in with her other parent in early 2021. What could I have done? (updated January 11, 2022) A7. You could have taken one of the following actions: - Agreed with your qualifying child's other parent to allow you to claim that child for the Child Tax Credit for 2021. You need to receive from your child's other parent a signed Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent and attach it to your 2021 tax return on which you claim the Child Tax Credit. - Considered using the Child Tax Credit Update Portal (CTC UP) to unenroll from receiving advance Child Tax Credit payments, or to remove that child from your Child Tax Credit information provided to the IRS. As a result, your future advance Child Tax Credit payment amounts would have been reduced to take into account your unenrollment or removal of that child. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly advance Child Tax Credit payments disbursed in December. If you took neither action, you may need to repay to the IRS the amount of advance Child Tax Credit payments you received that are based on that child when you file your 2021 tax return. This is because a qualifying child is one who lives with you for more than half the year, among other factors. If the child's residency changed, they may no longer be your qualifying child. For more information regarding CTC UP, see Topic F: Updating Your Child Tax Credit Information During 2021 and Topic M: Commonly Asked Shared-Custody Questions. Q G8. If I reported that I was a victim of tax-related identity theft, how could I have ensured that I would receive advance Child Tax Credit payments? (updated January 11, 2022) A8. If you reported that you are a victim of tax-related identity theft, the IRS would not have disbursed advance Child Tax Credit payments to you until your tax-related identity theft issue had been resolved. Q G9. If I suspect I've been a victim of tax-related identity theft, what can I do to make sure that I receive advance Child Tax Credit payments? (updated January 11, 2022) A9. If you believe you are a victim of tax-related identity theft and have not reported the tax-related identity theft issue to the IRS, you should take steps to protect yourself. Notify the IRS by filing a Form 14039, Identity Theft Affidavit through Identity Theft.gov or by paper. The IRS would not have disbursed advance Child Tax Credit payments to you until your tax-related identity theft issue had been resolved. If you did not receive advance Child Tax Credit payments for a qualifying child you will claim in 2021,you can claim the full amount of your allowable Child Tax Credit for that child when you file your 2021 tax return during the 2022 tax filing season. Q G10. What did I need to do to get advance Child Tax Credit payments? (updated January 11, 2022) A10. The IRS used information from your processed 2019 or 2020 tax return, information you entered into the Non-Filer Tool on IRS.gov in 2020 to register for Economic Impact Payments, or information you entered into the Child Tax Credit Non-filer Sign-up Tool in 2021 to determine if you qualified and automatically enroll you. You did not need to take any additional action. If you did not have to file your taxes this year or last year, and you did not register for Economic Impact Payments last year, you may be able to claim the Child Tax Credit for any amount you did not receive when you file your 2021 tax return during the 2022 tax filing season. Q G11: Why did I receive my monthly advance Child Tax Credit payment as a paper check by mail? (updated January11, 2022) A11. The IRS sent your advance Child Tax Credit payment as a paper check by mail if we did not have your bank account information to send you a payment by direct deposit. Also, if you had a closed or invalid bank account on file, the IRS reissued your payment as a paper check by mail. For more information on how individuals could have provided or updated their bank account information, see FAQ F1: What if information about my bank, mailing address, income, or family has changed during 2021? Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return Q H1. How do I reconcile my advance Child Tax Credit payments and my Child Tax Credit on my 2021 tax return? (updated January 11, 2022) A1. When you file your 2021 tax return during the 2022 tax filing season, you will need to compare: 1. The total amount of the advance Child Tax Credit payments that you received during 2021; with 2. The amount of the Child Tax Credit that you can properly claim on your 2021 tax return. Excess Child Tax Credit Amount: If the amount of your Child Tax Credit exceeds the total amount of your advance Child Tax Credit payments, you can claim the remaining amount of your Child Tax Credit on your 2021 tax return. Excess Advance Child Tax Credit Payment Amount: If you received a total amount of advance Child Tax Credit payments that exceeds the amount of Child Tax Credit that you can properly claim on your 2021 tax year, you may need to repay to the IRS some or all of that excess payment. In January 2022, the IRS will send you Letter 6419 to provide the total amount of advance Child Tax Credit payments that were disbursed to you during 2021. Please keep this letter regarding your advance Child Tax Credit payments with your tax records. You may need to refer to this letter when you file your 2021 tax return during the 2022 tax filing season. Q H2. How can the total amount of advance Child Tax Credit payments be greater than the amount of my 2021 Child Tax Credit? (updated January 11, 2022) A2. The amount of advance Child Tax Credit payments that you received during 2021 is based on the IRS's estimate of the Child Tax Credit amount that you properly would be allowed for the 2021 tax year. The law requires this estimate to be based on these primary sources of information: 1. Your 2020 tax year return or, if that return is not available, your 2019 tax year return (including a 2019 tax return filed through the Non-Filer Tool for Economic Impact Payments on IRS.gov, or a 2020 tax return filed through the Child Tax Credit Non-filer Sign-up Tool); and 2. Any updated information you provided to the IRS in 2021, including information provided through the Child Tax Credit Update Portal (CTC UP) or the Non-Filer tool for Economic Impact Payments on IRS.gov in 2020. Family and life situations can be fluid throughout a given year. Here are examples of changes that could have resulted in excess advance Child Tax Credit payments. - A qualifying child who resided with you may have changed homes during 2021 and resided more than half of the 2021 tax year with a different individual. - Your income increased in 2021. - Your filing status changed for 2021. - Your main home was outside of the United States for more than half of 2021. As a result of these types of family and life changes, you may have received a total amount of advance Child Tax Credit payments that exceeds the amount of Child Tax Credit that you are allowed on your 2021 tax return. For more information regarding eligibility for advance Child Tax Credit payments, including the definition of your main home, see Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit. Q H3. Will I need to repay advance Child Tax Credit payments back to the IRS if they were greater than the Child Tax Credit amount that I am allowed on my 2021 tax return? (updated January 11, 2022) A3. Maybe. If you qualify for the repayment protection described in this Topic H, you will be excused from repaying some or all of the excess amount. If you do not qualify for repayment protection, you will need to report the entire excess amount on your 2021 tax return as additional income tax. This additional income tax will reduce the amount of your tax refund or increase your total tax due for 2021. Q H4. How do I know if I don't qualify for the repayment protection for filers based on their income during 2021? (updated February 1, 2022) A4. You won't qualify for any repayment protection if your modified adjusted gross income (AGI) is at or above the amounts listed below based on the filing status on your 2021 tax return. - $120,000 if you are married and filing a joint return or if filing as a qualifying widow or widower; - $100,000 if you are filing as head of household; and - $80,000 if you are a single filer or are married and filing a separate return. For information on the definition of modified AGI, see Topic C: Calculation of the 2021 Child Tax Credit. Q H5. How do I know if I qualify for the full repayment protection for filers based on income during 2021? (updated June 14, 2021) A5. You qualify for full repayment protection and won't need to repay any excess amount of your advance Child Tax Credit payments if your main home was in the United States for more than half of 2021 and your modified adjusted gross income (AGI) for 2021 is at or below the following amount based on the filing status on your 2021 tax return: - $60,000 if you are married and filing a joint return or if filing as a qualifying widow or widower; - $50,000 if you are filing as head of household; and - $40,000 if you are a single filer or are married and filing a separate return. Your repayment protection may be limited if your modified AGI exceeds these amounts or your main home was not in the United States for more than half of 2021. For more on the definition of your main home, see Topic B: Eligibility for Advance Child Tax Credit Payments and the2021 Child Tax Credit. For information on the definition of modified AGI, see Topic C: Calculation of the 2021 Child Tax Credit. Q H6. If I qualify for repayment protection, how much repayment relief will I qualify for? (added June 14, 2021) A6. If you qualify for repayment protection, the amount of your tax liability from excess advance Child Tax Credit payments is reduced by up to the full repayment protection amount. The full repayment protection amount equals $2,000, multiplied by the following: - The number of qualifying children that the IRS took into account in determining the IRS's initial estimate of your advance Child Tax Credit payments, minus - The number of qualifying children properly taken into account in determining the allowed Child Tax Credit amount on your 2021 tax return. Example: You properly claimed three qualifying children on your 2020 tax return but claim only one qualifying child on your 2021 tax return. You can receive up to $4,000 in repayment protection (that is, $2,000 for each excess qualifying child) if you qualify. You will be able to apply the full repayment protection amount of $2,000 for each excess qualifying child if your modified adjusted gross income (AGI) is at or below the following amounts based on the filing status on your 2021 tax return: - $60,000 if you are married and filing a joint return or if filing as a qualifying widow or widower; - $50,000 if you are filing as head of household; and - $40,000 if you are a single filer or you are married and filing a separate return. For information on the definition of modified AGI, see Topic C: Calculation of the 2021 Child Tax Credit. Q H7. Does my amount of repayment protection for excess advance Child Tax Credit payments decrease if my modified adjusted gross income (AGI) is higher than the modified AGI amount that would qualify me for full repayment protection? (updated January 11, 2022) A7. Yes. Your repayment protection amount will decrease based on how much your modified adjusted gross income(AGI) is greater than the following amounts based on the filing status on your 2021 tax return: - $60,000 if you are married and filing a joint return or if filing as a qualifying widow or widower; - $50,000 if you are filing as head of household; and - $40,000 if you are a single filer or are married and filing a separate return. This repayment protection amount is then phased out - or reduced - as your modified AGI exceeds the amount above. Your repayment protection amount will equal $0 and your repayment amount will not be reduced when your modified AGI is at or above this higher amount based on the filing status on your 2021 tax return: - $120,000 if married and filing a joint return or if filing as a qualifying widow or widower; - $100,000 if filing as head of household; or - $80,000 if you are a single filer or are married and filing a separate return. Example: You filed a joint return with your spouse for tax year 2020 and properly claimed the Child Tax Credit for three qualifying children. The IRS estimated your total advance Child Tax Credit payment amount based on these qualifying children. However, when you file your 2021 joint tax return with a modified AGI of $75,000, you claim the Child Tax Credit for only one qualifying child - and therefore have two excess qualifying children. Your modified AGI of $75,000 exceeds your applicable $60,000 modified AGI threshold by 25 percent. Your potential full repayment protection amount of $4,000 (that is, $2,000 for each excess qualifying child) is reduced by 25 percent to $3,000. Q H8. What happens if I have a balance due to the IRS because of excess advance Child Tax Credit payments, but I cannot afford to make the balance due payment when filing my 2021 tax return? (added June 14, 2021) A8. The majority of individuals who need to repay excess advance Child Tax Credit payments will satisfy that balance through a reduction in their expected federal income tax refund. However, if you owe a balance in excess of your refund, the IRS routinely works with taxpayers who owe amounts they cannot afford to pay. The process to make a payment arrangement for these balances due is the same as for other tax balances. For further information on how to pay your past due federal income tax liability, see Paying Your Taxes. Q H9. Will the IRS provide me with information to help me reconcile my advance Child Tax Credit payments on my2021 tax return? (updated January 11, 2022) A9. Yes. In January 2022, the IRS will send you Letter 6419 to provide the total amount of advance Child Tax Credit payments that were disbursed to you during 2021. Important: Please keep this letter regarding your advance Child Tax Credit payments with your tax records. You may need to refer to this letter when you file your 2021 tax return during the 2022 tax filing season. This letter will be mailed to your address on file as of the letter's mailing date. This generally will be the address on your most recent tax return, or as updated through the Child Tax Credit Update Portal (CTC UP) or the United States Postal Service (USPS). For more information regarding CTC UP, see Topic F: Updating Your Child Tax Credit Information During 2021. Q H10. What do I do if my Child Tax Credit Update Portal shows that a payment was issued, but I never received it? (added February 1, 2022) A10. Review your payments in the Child Tax Credit Update Portal to ensure the payment was not returned. If you did not receive the payment and the payment was not returned, you may request the IRS to trace the payment. If it is determined the payment was not received or was returned to the IRS, IRS records will be updated, and you can exclude the payment from the aggregate amount of advance Child Tax Credit payments you report on your tax return. This will allow you to claim, if eligible, the missing payment with your Child Tax Credit on your 2021 return. Contact the IRS, as soon as possible, from 7 a.m. to 7 p.m. local time at 800-908-4184. When you call the IRS, you must provide the following information about the missing payment: the payment date, method, status, and amount that is displayed in your Child Tax Credit Update Portal. Topic I: U.S. Territory Residents and Advance Child Tax Credit Payments Q I1. If I am a resident of Puerto Rico, was I eligible to receive advance Child Tax Credit payments? (updated January11, 2022) A1. No. You were not eligible to receive advance Child Tax Credit payments, but you may be eligible to claim the Child Tax Credit for your qualifying children on your: - 2021 Form 1040-PR - 2021 Form 1040-SS - Other 1040 series form filed with the IRS For additional information, please visit IRS.gov or see the instructions for Form 1040-PR or Form 1040-SS. Or, if you file another 1040 series form with the IRS, see Schedule 8812 (Form 1040) and the Schedule 8812 Instructions. Q I2. For Puerto Rico residents, how has the Child Tax Credit changed for 2021? (added June 14, 2021) A2. The maximum Child Tax Credit amount for 2021 has increased from $2,000 to $3,000 for children who are ages 6 through 17 or $3,600 for children ages 5 and under at the end of 2021. You may claim this increased credit even if you don't have earnings or pay U.S. Social Security taxes. The requirement to have three qualifying children was removed starting in 2021, and you need only one qualifying child to claim the Child Tax Credit on: - 2021 Form 1040-PR - 2021 Form 1040-SS - Other 1040 series form filed with the IRS for 2021. Q I3. If I am a resident of American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, or the U.S. Virgin Islands, was I eligible to receive advance Child Tax Credit payments? And, how has the Child Tax Credit changed for 2021? (updated January 11, 2022) A3. You may have been eligible for advance Child Tax Credit payments with your U.S. territory tax agency. Please contact your local territory tax agency for additional information about any advance payments and other changes to the Child Tax Credit. Q I4. I am a citizen or resident of one of the Freely Associated States (Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau). Was I eligible for advance Child Tax Credit payments? Am I eligible for the Child Tax Credit? (updated January 11, 2022) A4. Citizenship or residency status in the Freely Associated States, by itself, does not entitle you to advance Child Tax Credit payments or the Child Tax Credit. If your main home was in the 50 states or the District of Columbia for more than half the year, you may be eligible for the Child Tax Credit and may have been eligible for an advance payment of this credit with the IRS. If you're a resident of Puerto Rico, you may be eligible for the Child Tax Credit with the IRS, but you were not eligible for advance payments of this credit. If you are a resident of American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, or the U.S. Virgin Islands, you may have been eligible for advance Child Tax Credit payments with your U.S. territory tax agency. Please contact your local territory tax agency for additional information about any advance payments and other changes to the Child Tax Credit. Topic J: Unenrolling from Advance Payments Q J1. What are the reasons why an individual would have chosen to unenroll from advance Child Tax Credit payments? (updated January 11, 2022) A1. Individuals have chosen to unenroll from receiving advance Child Tax Credit payments for several reasons. For example, individuals chose to unenroll because they expected the amount of tax that they would owe to be greater than their expected refund when they file their 2021 tax return. The payments that individuals received were an advance of the Child Tax Credit that they would normally get when they file their 2021 tax return. Because these credits were paid in advance, every dollar received by an individual in 2021 will reduce the amount of Child Tax Credit that the individual can claim on their 2021 tax return. This means that by accepting advance Child Tax Credit payments, the amount of an individual's refund may be reduced or the amount of tax that they owe may increase. Individuals could avoid owing tax to the IRS if you unenroll by unenrolling from advance Child Tax Credit payments and claiming the entire credit when they file their 2021 tax return during the 2022 tax filing season. Q J2. What were the deadlines to unenroll or make changes to my bank information? (updated January 11, 2022) A2. To stop advance payments or to make changes to your bank information through the Child Tax Credit Update Portal, (CTC UP), you needed to unenroll or make changes 3 days before the first Thursday of the next month by 11:59 p.m. Eastern Time. Note: Once you unenrolled for one month, you did not need to unenroll for subsequent months. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly advance Child Tax Credit payments disbursed on December 15. Q J3. What happened if I missed an unenroll deadline? (updated January 11, 2022) A3. You received the next scheduled advance Child Tax Credit payment until we processed your request to unenroll. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the monthly advance Child Tax Credit payments disbursed in December. Q J4. How long did it generally take for the IRS to complete the unenrollment process? (updated January 11, 2022) A4. It could have taken up to seven calendar days. Updates must be made by 11:59 pm Eastern Time on November 29 were reflected in the advance Child Tax Credit payments disbursed in December. Q J5. Could I have re-enrolled? (updated January 11, 2022) A5. No. Unenrollment was a one-time action that could not be reversed. Q J6. If I'm married filing jointly, did my spouse also need to unenroll? (updated January 11, 2022) A6. Yes. Unenrolling applied solely to the individual who unenrolled with the IRS. Q J7. If my spouse unenrolled and I didn't unenroll, what would have happened? (updated January 11, 2022) A7. If you didn't unenroll, you would have continued to receive half of the joint payment you were supposed to receive with your spouse. Topic K: Verifying Your Identity to View your Payments Q K1. Why am I required to authenticate my identity? (revised Nov. 10, 2021) A1. The IRS needs to make sure you're you - and not someone pretending to be you - before we give you access to your sensitive account information. The verification of your identity helps to keep your information safe and prevent fraud and identity theft. Q K2. How do I authenticate my identity? (revised Nov. 10, 2021) A2. If you are a new user, you must create an ID.me account at the IRS and verify your identity. ID.me is a trusted credential service provider selected to support IRS.gov login services. ID.me uses the latest in identity verification technology to authenticate your identity quickly and easily. Learn more about ID.me and the IRS verification process at Sign In or Create a New Account. If you have an existing account with the IRS, use your Secure Access username and password and enter the security code as part of the multi-factor authentication (MFA) process. If you have an existing account with ID.me from a state government or federal agency, you may use your email and password and complete MFA. Q K3. I'm under 18 years old and was told I can't authenticate; how do I manage my payments? (updated January 11, 2022) A3. ID.me authenticates individuals 18 years old and older. If you are 17 or younger, call the telephone number on your IRS letter should you opt to unenroll from monthly payments. Q K4. Will ID.me retain my information? (revised Nov. 10, 2021) A4. Yes, as a credential service provider certified against federal standards, ID.me is required to store the individual's information. ID.me protects all sensitive data with stronger encryption than many financial institutions. Q K5. I can't verify my identity. What do I need to do? (revised Nov. 10, 2021) A5. If you're a new user, you must create an ID.me account at the IRS to verify your identity. You can get help verifying your identity with ID.me on the ID.me help site. ID.me is a trusted credential service provider selected to support IRS.gov login services. You also can try signing in to the Child Tax Credit Update Portal with the IRS username you use to access other services such as Online Account. Online Account is an online system that allows you to securely access your individual account information with the IRS. If you can't verify your identity online, you can call the telephone number on the letter you received from the IRS telling you that you may be eligible to receive advance Child Tax Credit payments ( Letter 6416 ). When you call, you'll need to answer questions to verify your identity with the customer service representative. Q K6. When I call the IRS for help to authenticate my identity, what information updates can I provide to the IRS regarding my advance Child Tax Credit payments? (revised Nov. 10, 2021) A6. You can update your address or unenroll from advance Child Tax Credit payments. Other updates to your information, such as changing your bank account information, can only be made through the Child Tax Credit Update Portal (CTC UP), after you verify your identity. Q K7. I'm getting a message that says "A condition has been identified that's preventing your access to this service." What does this mean? (revised Nov. 10, 2021) A7. After verifying your identity with ID.me, you may see an IRS message saying that "A condition has been identified that's preventing your access to this service." If you see this message, please try to sign in again later. If you continuously receive this message, this means that you won't be able to use the online Child Tax Credit Update Portal. Instead, you can call the telephone number on the letter you received from the IRS telling you that you may be eligible to receive advance Child Tax Credit payments ( Letter 6416 ). When you call, you'll need to answer questions to verify your identity with the customer service representative. Topic L: Commonly Asked Shared-Custody Questions Q L1. My child's other parent and I share custody of our child. How did the IRS decide which of us will receive advance Child Tax Credit payments? (updated January 11, 2022) A1. The IRS determined who received 2021 advance Child Tax Credit payments based on the information on your 2020 tax return, or your 2019 return if the IRS hadn't processed your 2020 return. In other words, if you claimed the Child Tax Credit for your child on your 2020 return, then you would have received the advance Child Tax Credit payments. If your child's other parent claimed the Child Tax Credit on their 2020 tax return, then they would have received the advance Child Tax Credit payments. If you knew you would not be eligible to claim the Child Tax Credit on your 2021 return (the one due in April of 2022), then you should have unenrolled from receiving monthly payments by using the Child Tax Credit Update Portal (CTC UP) at IRS.gov. Receiving monthly payments during 2021 could mean that you have to repay those payments when you file your 2021 tax return during the 2022 tax filing season. If things changed again and you are entitled to the Child Tax Credit for 2021, you can claim the full amount on your 2021 tax return when you file it. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the advance Child Tax Credit payments disbursed in December. Q L2. My child's other parent and I have agreed that, for federal income tax purposes, I'll claim our child for each even-numbered year while the other parent will claim our child for each odd-numbered year. I claimed the Child Tax Credit for our child on my 2020 tax return. Why did the IRS disburse the 2021 advance Child Tax Credit payments to me even though I won't be claiming the Child Tax Credit on my 2021 tax return? (updated January 11, 2022) A2. Because you claimed your child on your 2020 tax return, the IRS automatically disbursed advance Child Tax Credit payments to you even though you knew you wouldn't be claiming your child on your 2021 tax return. When you file your 2021 tax return (the one due in April of 2022), you could have to pay back the advance payments that exceed the amount of the Child Tax Credit you're entitled to claim on that return. You may be excused from repaying some or all of the excess amount if you qualify for repayment protection. For more information about repayment protection, see Topic H: Reconciling Your Advance Child Tax Credit Payments on Your2021 Tax Return. If you knew you wouldn't be claiming the Child Tax Credit on your 2021 return, then you could have unenrolled from receiving monthly payments using the Child Tax Credit Update Portal (CTC UP) at IRS.gov. If things changed again and you are entitled to the Child Tax Credit for 2021, you can claim the full amount on your 2021 tax return during the 2022 tax filing season. Updates made by 11:59 pm Eastern Time on November 29 were reflected in the advance Child Tax Credit payments disbursed in December. Q L3. My child's other parent received the advance Child Tax Credit payments even though I will be claiming the Child Tax Credit for our child on my 2021 tax return. Will I still be able to claim the full Child Tax Credit? (updated January 11, 2022) A3. Yes. You will be able to claim the full amount of the Child Tax Credit for your child on your 2021 tax return even if the other parent is received advance Child Tax Credit payments. The other parent should have unenrolled from receiving advance payments, but their decision will not affect your ability to claim the Child Tax Credit. Topic M: Commonly Asked Immigration-Related Questions Q M1. I don't have a Social Security number (SSN), but I have an Individual Taxpayer Identification Number (ITIN) from the IRS. Am I eligible for the Child Tax Credit? (updated January 11, 2022) A1. Yes. You -- and your spouse, if married filing a joint return -- must have a Social Security number (SSN) or an IRS Individual Taxpayer Identification Number (ITIN) to be eligible for the Child Tax Credit. You were eligible to receive advance Child Tax Credit payments only if you used your correct SSN or ITIN when you filed a 2020 tax return or 2019 tax return, (including a return filed through the Non-Filer Tool on IRS.gov in 2020 or the Child Tax Credit Non-filer Sign-up Tool in 2021). Advance Child Tax Credit payments were made for qualifying children who had an SSN that is valid for employment in the United States. Q M2. Does my child need to have a Social Security number (SSN) to qualify me for the Child Tax Credit? (updated January 11, 2022) A2. Yes. For your child to qualify you for the Child Tax Credit, your child must have a Social Security number (SSN) that is valid for employment. Therefore, if your child does not have an SSN that is valid for employment, you were not eligible to receive advance Child Tax Credit payments for that child. Q M3. What does it mean for a Social Security number (SSN) to be valid for employment? (added August 19, 2021) A3. For qualifying children, a valid Social Security number (SSN) is one that is valid for employment in the United States and is issued by the Social Security Administration (SSA) before the due date of your 2021 tax return (including extensions). If an individual was a U.S. citizen when he or she received the SSN, then it is valid for employment in the United States. If "Not Valid for Employment" is printed on the individual's Social Security card and the individual's immigration status has changed so that he or she is now a U.S. citizen or permanent resident, ask the SSA for a new Social Security card. However, if "Valid for Work Only With DHS Authorization" is printed on the individual's Social Security card, the individual has the required SSN only as long as the Department of Homeland Security authorization is valid. Q M4. Will receiving the 2021 Child Tax Credit or advance Child Tax Credit payments affect my immigration status or ability to get a green card? (added August 19, 2021) A4. No. Under current law, receiving the Child Tax Credit or other federal tax credits that you are eligible for will not affect your immigration status, your ability to get a green card, or your future eligibility for immigration benefits. Use of federal tax credits is not considered for purposes of a "public charge" determination by U.S. Citizenship and Immigration Services. Q M5. As a recipient of Deferred Action for Childhood Arrivals (DACA), am I prevented from claiming the 2021 Child Tax Credit or receiving advance Child Tax Credit payments for my qualifying child? (updated January 11, 2022) A5. No. Having DACA does not affect your eligibility. If you and your child satisfy all eligibility requirements, you can claim your child for the 2021 Child Tax Credit and were eligible to receive advance Child Tax Credit payments. Q M6. My child is a DACA recipient. Can I still claim my child for the Child Tax Credit and receive advance Child Tax Credit payments? (updated January 11, 2022) A6. Yes. Your eligibility is not affected by your child being a DACA recipient. If your child has a Social Security number (SSN) that is valid for employment, and you and your child satisfy all other eligibility requirements, you are eligible for the Child Tax Credit and were eligible to receive advance Child Tax Credit payments. Topic N: Returning a Payment Q N1. What should I do to return an advance Child Tax Credit payment that I received as a direct deposit or a paper check? (updated January 11, 2022) A1. You should return the payment as soon as possible by following the instructions below. If the payment was a paper check and you have not cashed it: - Write "Void" in the endorsement section on the back of the check. Mail the voided Treasury check to the appropriate IRS location listed below. Don't staple, bend or paper clip the check. - Include with the voided check a separate, brief, written explanation stating the reason for returning the check, including whether you want to unenroll from future monthly advance Child Tax Credit payments. If the payment was a paper check and you have cashed it, or if the payment was a direct deposit: - Submit a personal check or money order payable to "U.S. Treasury" to the appropriate IRS location listed below. In the memo line, write "Advance CTC" and the Social Security number or Individual Taxpayer Identification Number of the recipient of the check or deposit. - Include with your personal check or money order a separate, brief, written explanation stating the reason for returning the payment, including whether you want to unenroll from future monthly advance Child Tax Credit payments. IRS-FAQ

Internal Revenue Service - Information Release IR-2022-211 IRS, Security Summit partners wrap up National Tax Security Awareness Week with steps businesses should take to prevent data loss, fraud December 2, 2022 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS, Security Summit partners wrap up National Tax Security Awareness Week with steps businesses should take to prevent data loss, fraud IR-2022-211, December 2, 2022 WASHINGTON -- To wrap up National Tax Security Awareness Week, the Internal Revenue Service and the Security Summit partners today urged businesses to remain vigilant against cyberattacks aimed at stealing their customer's personal information and other business data. The IRS continues to see instances where small businesses and others face a variety of identity-theft related schemes that try to obtain information that can be used to file fake business tax returns. For example, phishing schemes continue to target businesses as well as tax professionals and individual taxpayers. "Just like individuals and tax professionals, businesses of all types need to be on the lookout for attempts to steal information and data," said IRS Acting Commissioner Doug O'Donnell. "Businesses are especially attractive to cyberthieves because there is a potential to steal a lot of data. They may use the information to file a business tax return or use customer data for identity theft." The IRS, state tax agencies and the nation's tax software and tax professional industries operate cooperatively as the Security Summit to highlight data security and fight identity theft. Today marks the final day of the seventh annual week dedicated to information security and helpful tips for individuals, businesses and tax professionals. Cyber criminals target businesses of all sizes; knowing some cybersecurity basics and putting them in practice will help business owners protect their business and reduce the risk of a cyber-attack. Criminals can target a business's credit card or payment information, business identity information or employee identity information. Businesses are encouraged to follow best practices from the Federal Trade Commission, including: - Use multi-factor authentication. - Set security software to update automatically. - Back up important files. - Require strong passwords for all devices. - Encrypt devices. More information is available at FTC's Cybersecurity for Small Businesses. Businesses should especially be alert to phishing email scams that attempt to trick employees into opening embedded links or attachments. IRS related scams may be sent to phishing@irs.gov so the IRS can try to track, stop or disrupt scams. To improve security, the IRS now masks sensitive information from business tax transcripts, which summarizes tax return information, to help prevent thieves from obtaining identifiable information that would allow them to file fake business tax returns. Only financial entries are fully visible. Other information has varying masking rules. For example, only the first four letters of each first and last name will display for individuals and businesses. Also, only the last four digits of the Employer Identification Number will be visible. The IRS also has the Form 14039-B, Business Identity Theft Affidavit PDF, that will allow companies to proactively report possible identity theft to the IRS when, for example, an e-filed tax return is rejected. Businesses should file the Form 14039-B if it receives a: - Rejection notice for an electronically filed return because a return is already on file for that same period. - Notice about a tax return that the entity didn't file. - Notice about Forms W-2 filed with the Social Security Administration that the entity didn't file. - Notice of a balance due that is not owed. This form will enable the IRS to respond to the business and work to resolve issues created by a fraudulent tax return. Businesses should not use the form if they experience a data breach but see no tax-related impact. For more information, see Identity Theft Central's business section. In addition to phishing and other scams, all employers should remain alert to Form W-2 theft schemes. For example, a thief may pose as a company executive who emails payroll employees and asks for a list of employees and their W-2s. Businesses often don't know they've been scammed until an employee reports that a fraudulent tax return has been filed. There's a special reporting procedure for employers who experience the W-2 scam. It's available in the Identity Theft Central's business section. Finally, Security Summit partners urge businesses to keep their EIN application information current. Changes of address or responsible party information may be reported using Form 8822-B. Changes in the responsible party must be reported to the IRS within 60 days. Current information can help the IRS find a point of contact to resolve identity theft and other issues. For more details and to learn more about this year's National Tax Security Awareness Week's efforts, visit IRS.gov/securitysummit.

Internal Revenue Service - Fact Sheet FS-2023-4 IRS updates frequently asked questions related to new, previously owned and qualified commercial clean vehicle credits February 2023 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS updates frequently asked questions related to new, previously owned and qualified commercial clean vehicle credits FS-2023-04, February 2023 IRS updates frequently asked questions related to new, previously owned and qualified commercial clean vehicle credits FS-2023-04, February 2023 Note: These FAQs supersede earlier FAQs that were posted in FS-2022-42 on December 29, 2022. This Fact Sheet updates frequently asked questions related to new, previously owned and qualified commercial clean vehicle. The FAQs revisions are as follows: - Topic A: Eligibility Rules for the New Clean Vehicle Credit: Questions 1and 8 - Topic B: Income and Price Limitations for the New Clean Vehicle Credit: Questions 2, 6, 8, 9, added new Question 7 - Topic C: When the New Requirements Apply to the New Clean Vehicle Credit: Question 7 - Topic D: Eligibility Rules for the Previously owned Clean Vehicle Credit: Question 4 - Topic G: Qualified Commercial Clean Vehicles Credit: Question 6 These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer's specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer's case, the law will control the taxpayer's tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so. More information about reliance is available. These FAQs were announced in IR-2023-18. New clean vehicle credit, previously owned vehicle credit and qualified commercial clean vehicles credit frequently asked questions Background The Inflation Reduction Act of 2022 (IRA) makes several changes to the tax credit provided in § 30D of the Internal Revenue Code (Code) for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles to the § 30D tax credit. The IRA also added a new credit for previously owned clean vehicles under § 25E of the Code. These FAQs provide detail on how the IRA revises the credit available under § 30D (new clean vehicle credit) for individuals and businesses, and information on the credit available under § 25E (previously owned clean vehicle credit) for individuals, and the new credit for qualified commercial clean vehicles under § 45W of the Code. - Topic A: Eligibility Rules for the New Clean Vehicle Credit - Topic B: Income and Price Limitations for the New Clean Vehicle Credit - Topic C: When the New Requirements Apply to the New Clean Vehicle Credit - Topic D: Eligibility Rules for the Previously Owned Clean Vehicles Credit - Topic E: Income and Price Limitations Previously Owned Clean Vehicles - Topic F: Claiming the Previously Owned Clean Vehicles Credit - Topic G: Qualified Commercial Clean Vehicles Credit Topic A: Eligibility Rules for the New Clean Vehicle Credit under § 30D effective 1/1/2023 Q1. What is a new clean vehicle for purposes of the new clean vehicle credit? (updated February 3, 2023) A1. For purposes of the new clean vehicle credit, a new clean vehicle is a clean vehicle placed in service on or after January 1, 2023, that is acquired by a taxpayer for original use. In addition, to qualify for the credit, the vehicle: - Cannot be acquired for resale; - Must be manufactured by a qualified manufacturer; - Must meet the definition of a motor vehicle under Title II of the Clean Air Act (that is, any vehicle manufactured primarily for use on public streets, roads, and highways. It must also have at least four wheels); - Must have a gross vehicle weight rating of less than 14,000 pounds; - Must be powered to a significant extent by an electric motor with a battery capacity of 7 kilowatt hours or more and must be capable of being recharged from an external source of electricity; and - Must have final assembly in North America. Moreover, for a taxpayer to claim the credit, the seller of a new clean vehicle must provide a report containing taxpayer and vehicle information to the taxpayer and to the IRS. See Topic B FAQs 7-9 for additional detail. Fuel cell vehicles are also new clean vehicles if (1) the original use begins with the taxpayer, (2) the final assembly is in North America, and (3) the seller of the vehicle provides a report to the taxpayer and the IRS. Q2. Is there a list of vehicles that qualify for the new clean vehicle credit? (added December 29, 2022) A2. Yes. The following link contains a list of eligible clean vehicles, including fuel cell vehicles, qualified manufacturers have indicated to the IRS meet the requirements to claim the new clean vehicle credit beginning January 1, 2023: Clean Vehicle Qualified Manufacturer Requirements. This list will be updated to reflect changes in vehicle eligibility. Verification of the manufacturer's suggested retail price and final assembly is required, see Topic B FAQs 2 and 3. Q3. How will I know if the final assembly of a new clean vehicle is in North America? (added December 29, 2022) A3. The final assembly point will be listed on the vehicle information label attached to each vehicle on a dealer's premises. In addition, you can search the vehicle identification number (VIN) of the vehicle on the Department of Energy's Alternative Fuels Data Center website. In general, North America includes the United States (defined, for this purpose to mean the 50 states, the District of Columbia, and Puerto Rico), Canada, and Mexico for purposes of determining the location of final assembly. The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) also provides final assembly location information. The website, including instructions, can be found at VIN Decoder. Q4. How will I know what the vehicle identification number (VIN) is for a new clean vehicle? (added December 29, 2022) A4. The vehicle identification number is a 17-character number that uniquely identifies a vehicle. It is permanently attached to a vehicle in several locations, appearing on the dashboard for most passenger vehicles and on the label located on the driver's door frame. The VIN is also located on the window sticker of new vehicles and often appears on the vehicle listing on dealers' websites. Q5. If I order a new clean vehicle in one year and don't receive it until a subsequent year, when do I claim the credit? (added December 29, 2022) A5. The new clean vehicle credit is claimed in the tax year that the vehicle is placed in service, meaning the tax year that includes the date the taxpayer takes delivery of the vehicle. Q6. What is the amount of the new clean vehicle credit? (added December 29, 2022) A6. Beginning January 1, 2023, eligible vehicles may qualify for a tax credit of up to $7,500. Until the day after the Treasury Department and the IRS issue proposed guidance on the critical mineral and battery component requirements of the new clean vehicle credit under § 30D, the credit is calculated as a $2,500 base amount plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours, up to an additional $5,000 beyond the base amount. In general, the minimum credit amount will be $3,751 ($2,500 + 3 * $417), representing the credit amount for a vehicle with the minimum of 7 kilowatt hours of battery capacity. Once the Treasury Department and the IRS issue the proposed critical mineral and battery component guidance later in 2023, additional requirements will change the amount of the credit (that is, an eligible vehicle may qualify for more or less credit than before). The credit amount will depend on the vehicle meeting the critical minerals requirement ($3,750) and/or the battery components requirement ($3,750). A vehicle meeting neither requirement will not receive a credit, a vehicle meeting only one requirement may be eligible for a $3,750 credit, and a vehicle meeting both requirements may be eligible for the full $7,500 credit. The Treasury Department and the IRS anticipate issuing the proposed guidance in March. Q7. Is the new clean vehicle credit refundable or able to be carried forward? (added December 29, 2022) A7. No. The new clean vehicle credit may only be claimed to the extent of reported tax due of the taxpayer and cannot be refunded or carried forward. Q8. What does "original use" mean? (updated February 3, 2023) A8. For purposes of the new clean vehicle credit, "original use" means the first use to which the vehicle is put after it is sold, registered, or titled. A vehicle is not a new clean vehicle if (1) another person (including a dealer) has ever purchased, registered, or titled the clean vehicle and (2) placed it in service for any purpose (including as a dealer demonstrator vehicle). Where a vehicle is acquired for lease to another person, the lessor is the original user. Test drives by potential buyers do not disqualify a vehicle from eligibility for the new clean vehicle credit provided the dealer has not titled the vehicle to itself as a demonstrator vehicle. Q9. What is a qualified manufacturer? (added December 29, 2022) A9. A qualified manufacturer is a manufacturer that enters into a written agreement with the IRS to file periodic reports with vehicle identification numbers (VINs) and other information for each vehicle they manufacture. The IRS maintains a list of qualified manufacturers that can be found at Clean Vehicle Qualified Manufacturer Requirements. Q10. Do I have to report the vehicle identification number on my return to claim the new clean vehicles credit? (added December 29, 2022) A 10. Yes. The vehicle identification number of the new clean vehicle is required to be included on Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, when you file your income tax return. Topic B: Income and Price Limitations for the New Clean Vehicle Credit Q1. Could my income level prevent me from taking the new clean vehicle credit? (added December 29, 2022) A1. Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the year that the new clean vehicle was placed in service or for the preceding year. The relevant modified AGI thresholds are as follows: - Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) - $300,000 - Head of household - $225,000 - All other taxpayers - $150,000 Your modified AGI is the amount from line 11 of your Form 1040 plus: - Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. - Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa. Q2. Are there any price limitations on new clean vehicles eligible for the credit? (updated February 3, 2023) A2. Yes. The manufacturer's suggested retail price (MSRP) for the new clean vehicle may not exceed the following amounts for the following vehicle types: - Vans - $80,000 - Sport Utility Vehicles - $80,000 - Pickup Trucks - $80,000 - Other - $55,000 If the MSRP exceeds the limitation for that specific vehicle type, that vehicle is not eligible for the new clean vehicle credit. The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees. The Clean Vehicle Qualified Manufacturer Requirements contains a list of eligible clean vehicles, including fuel cell vehicles, that qualified manufacturers have indicated to the IRS meet the requirements to claim the new clean vehicle credit beginning January 1, 2023, including the applicable MSRP limitation. Q3. How will I know what the manufacturer's suggested retail price (MSRP) is for a vehicle? (added December 29, 2022) A3. The MSRP will be on the vehicle information label attached to each vehicle on a dealer's premises. The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees. Q4. Would I still qualify for the new clean vehicle credit if the purchase price, including sales tax, fees, negative equity on a trade, etc., exceeds the manufacturer's suggested retail price threshold? (added December 29, 2022) A4. The credit limitations on the price of the vehicle are based on manufacturer's suggested retail price, not the actual price you paid for the vehicle. See FAQ 2 for how to determine the manufacturer's suggested retail price. Q5. If the manufacturer/dealer offers incentives on the purchase, and the total purchase price drops below the manufacturer's suggested retail price limitation, will the vehicle be eligible for the new clean vehicles credit? (added December 29, 2022) A5. The credit limitations on the price of the vehicle are based on manufacturer's suggested retail price (MSRP), not the actual price you paid for the vehicle. See FAQ 2 for how to determine MSRP. Q6. How do I know if my vehicle is a pickup truck, van, sport utility vehicle (SUV), or other type of vehicle for purposes of determining the applicable manufacturer's suggested retail price for a vehicle? (updated February 3, 2023) A6. The vehicle classifications of eligible vehicles are described in IRS Notice 2023-16 issued on February 3, 2022, which applies to clean vehicles placed in service on or after January 1, 2023 and updates a previously issued notice. A vehicle's classification for this purpose relates to the classification describing the vehicle on the fuel economy label included as part of the window sticker as well as the EPA Size class displayed on FuelEconomy.gov. Vehicles whose class includes "sport utility vehicle," "pickup truck," or "van" on the fuel economy label or on FuelEconomy.gov are considered a sport utility vehicle, pickup truck, or van respectively for this purpose and the $80,000 MSRP limit applies, including for the following vehicle classes: - Small Sport Utility Vehicle - Standard Sport Utility Vehicle - Small Pickup Truck - Standard Pickup Truck - Minivan - Van If your eligible vehicle is not in one of the classes described in the list above, the $55,000 MSRP limitation applies. Vehicle classification information to determine the applicable MSRP can also be found at the Clean Vehicle Qualified Manufacturer Requirements page containing a listing of eligible clean vehicles, including fuel cell vehicles, that qualified manufacturers have indicated to the IRS meet the requirements to claim the new clean vehicle credit beginning January 1, 2023. Q7. If my vehicle's classification changed since it was purchased can I claim the tax credit? (Added February 3, 2023) A7. Eligible taxpayers who placed in service an eligible vehicle on or after January 1, 2023 may claim the credit on their tax return based on the updated vehicle classification definition provided in Notice 2023-16 issued on February 3, 2022, and the associated MSRP limitation. All vehicles that were classified as an SUV, van, or pickup truck for the purpose of the new clean vehicle tax credit prior to the updated notice continue to be subject to the same $80,000 MSRP limitation. Some vehicles that were previously subject to the $55,000 MSRP limitation are now classified as SUVs and therefore get the benefit of the $80,000 MSRP limitation. The vehicles now classified as SUVs for this purpose include but may not be limited to the 2023 Cadillac Lyriq, the 2022 and 2023 Ford Mustang Mach-E, certain variants of the 2022 and 2023 Tesla Model Y, certain variants of the 2022 and 2023 Volkswagen ID.4, and the 2022 and 2023 Ford Escape Plug-In Hybrid. In the case where vehicles have been reclassified for the purpose of this credit, taxpayers should obtain a report from the seller, see Q9. Q8. What information does a seller have to provide to a taxpayer purchasing a new clean vehicle to allow the taxpayer to claim the new clean vehicle credit? (updated February 3, 2023) A8. A seller must provide the following information on a report to the taxpayer and to the IRS: - Name and taxpayer identification number of the seller - Name and taxpayer identification number of the taxpayer - Vehicle identification number of the new clean vehicle - Battery capacity of the new clean vehicle - Verification that the taxpayer is the original user of the new clean vehicle - The date of the sale and the sales price of the vehicle - Maximum credit allowable for the new clean vehicle being sold - For sales after December 31, 2023, the amount of any transfer credit applied to purchase - A declaration under penalties of perjury from the seller For further details see Revenue Procedure 2022-42. Q9. When must the seller provide the report to the taxpayer? (Updated February 3, 2023) A9. The seller must provide the report to the taxpayer not later than the date the vehicle is purchased. However, taxpayers that did not receive a report from the seller because their vehicle was previously ineligible but their vehicle is now eligible (such as due to a change in the vehicle's classification and the applicable MSRP limitation) may request and receive a report from the seller after the vehicle's purchase date. For further details see Revenue Procedure 2022-42. Q10. How will a seller provide these reports to the IRS? (added December 29, 2022) A10. For vehicle sales occurring in calendar year 2023 and later, sellers must file reports within 15 days after the end of the calendar year, in a format and method that the IRS provides. For further details see Revenue Procedure 2022-42. Topic C: When the New Requirements Apply to the New Clean Vehicle Credit Q1. On the day after the Inflation Reduction Act of 2022 became law (August 16, 2022), did any requirements for taxpayers or vehicles to qualify for the credit for new clean vehicles change? (added December 29, 2022) A1. Yes, after August 16, 2022, a new clean vehicle must have had its final assembly in North America to be eligible for the credit. There is a transition rule for vehicles purchased before August 16, 2022. Additional changes begin January 1, 2023. Q2. What additional changes to the credit apply for vehicles placed in service on or after January 1, 2023? (added December 29, 2022) A2. The most significant changes to the credit for vehicles delivered on or after January 1, 2023, include: - The minimum battery capacity is increased to 7 kilowatt hours - Vehicles must be made by a qualified manufacturer (see Topic A, FAQ 9 for more detail) - MSRP limitations apply, based on the type of vehicle (see Topic B, FAQs 2 and 5 for more detail) - Income limits apply to taxpayers (see Topic B, FAQ 1 for more detail) - The taxpayer must report the vehicle identification number (VIN) of the vehicle on the taxpayer's income tax return - Sellers must provide reports to the taxpayer and the IRS regarding the sale of the vehicle Q3. Does the "phase-out period" that limited or eliminated the credit for vehicles sold by certain manufacturers that had sold more than 200,000 vehicles still apply for vehicles sold after January 1, 2023? (added December 29, 2022) A3. No, for vehicles sold on or after January 1, 2023, the prior sales volume limitations no longer apply. The prior sales volume limitations apply to vehicles sold before January 1, 2023. Q4. Do the new critical mineral and battery components requirements apply? (added December 29, 2022) A4. Not yet. The critical mineral and battery component requirements under § 30D(e) will apply for vehicles placed in service after proposed guidance on these requirements is issued. The publication of these FAQs is not the issuance of proposed guidance with respect to the critical mineral and battery component requirements under § 30D(e) and does not trigger the applicability of those requirements. The Treasury Department and the IRS will explicitly identify when they have issued proposed guidance with respect to the critical mineral and battery component requirements under § 30D(e). However, vehicles ordered or purchased prior to but placed in service after Treasury and the IRS issue this proposed guidance will be subject to the critical mineral and battery component requirements. This proposed guidance is expected to be issued in March 2023. Q5. If I order a new clean vehicle in one year and don't receive it until a subsequent year, when do I claim the credit? (added December 29, 2022) A5. The new clean vehicle credit is claimed in the tax year that the vehicle is placed in service, meaning the date the taxpayer takes delivery of the vehicle. For vehicles that are placed in service after they are ordered, a vehicle's eligibility for the new clean vehicle credit may change as certain eligibility criteria vary based on when the taxpayer takes delivery of the vehicle. For more information, see FAQ 7. Q6: If I order (or purchase) an eligible new clean vehicle on or after August 16, 2022, but don't take delivery until after Treasury issues proposed guidance on the critical mineral and battery component requirements, will my vehicle still be eligible? (added December 29, 2022) A6: The vehicle may or may not be eligible depending on whether it meets the critical mineral and battery component requirements. New clean vehicles placed in service after Treasury issues proposed guidance on critical mineral and battery component requirements are subject to those requirements even if the vehicle was ordered or purchased before the proposed guidance was issued. A vehicle's eligibility for the new clean vehicle credit is generally based on the criteria that apply as of the date a vehicle is placed in service, meaning the date the taxpayer takes delivery of the vehicle. For vehicles purchased prior to August 16, 2022, see Credits for New Electric Vehicles Purchased in 2022 or Before. Q7: If I purchase a new clean vehicle in 2022 on or after August 16, 2022, but take delivery of the vehicle in 2023, do the income and MSRP limitations apply? (updated February 3, 2023) A7: Yes, the income and MSRP limitations apply to any vehicle that is placed in service (delivered to the taxpayer) in 2023. Q8: If I purchase a new clean vehicle in 2022 that was made by a manufacturer that had already reached the manufacturer sales cap but it is not delivered until 2023, does the manufacturer sales cap still apply? (added December 29, 2022) A8: Yes, the sales cap of 200,000 vehicles applies to vehicles sold before January 1, 2023. If you purchased a vehicle that is subject to the sales cap, it is not eligible for the credit regardless of when you place it in service. Topic D: Eligibility Rules for the Previously owned Clean Vehicles Credit Q1. What is the previously owned clean vehicles credit under § 25E? (added December 29, 2022) A1. The previously owned clean vehicles credit is a credit of up to $4,000 for the purchase of an eligible previously owned clean vehicle with a sale price of $25,000 or less that is placed in service during a tax year by a qualified buyer. To claim the credit, a qualified buyer must meet certain income requirements (see Topic E FAQ 1 ) and it must be the vehicle's first qualified sale to a qualified buyer since August 16, 2022, other than to the original owner. Q2. What is a previously owned clean vehicle for the purpose of the previously owned clean vehicles credit? (added December 29, 2022) A2. A previously owned clean vehicle is a motor vehicle that meets the following requirements: - The model year of the vehicle is at least two years earlier than the calendar year in which a taxpayer acquires the vehicle - The purchasing taxpayer is not the original user of the vehicle - The vehicle was acquired for a sales price of $25,000 or less from a dealer and the purchasing taxpayer is the first qualified buyer (see FAQ 4 ) to claim the credit since August 16, 2022, other than its original user - And such motor vehicle is a: o Qualified fuel cell motor vehicle with a gross vehicle weight rating of less than 14,000 pounds, or o A vehicle made by a qualified manufacturer (see Topic A FAQ 9 ) that meets the definition of a motor vehicle under Title II of the Clean Air Act, has a gross vehicle weight rating of less than 14,000 pounds, is powered to a significant extent by an electric motor with a battery capacity of seven kilowatt hours or more, and is capable of being recharged from an external source of electricity. The dealer selling the previously owned clean vehicle must provide a report containing purchaser and vehicle information to the purchasing taxpayer and to the IRS. Q3. How will I know if a previously owned clean vehicle may be eligible for a credit? (added December 29, 2022) A3. Please see the following list Used Electric Vehicle Credit list about vehicle eligibility. In addition, qualified buyers will want to ensure their income does not exceed certain thresholds (see Topic E FAQ 1 ) and check the sales history of the vehicle to ensure that their purchase will qualify as the first transfer of the previously owned vehicle to a qualified buyer (see FAQ 4, 7 ) other than the person who was the original user of the vehicle. Q4. Who is eligible to claim the previously owned clean vehicle credit? (updated February 3, 2023) A4. Only individuals who meet the following requirements can claim the previously owned clean vehicle credit: - The taxpayer purchases the vehicle for use and not for resale. - The taxpayer cannot be claimed as a dependent on another taxpayer's tax return. - The taxpayer has not been allowed another previously owned clean vehicle credit in the three-year period prior to the date the previously owned clean vehicle is purchased. - The taxpayer's income level cannot exceed certain thresholds. (see Topic E FAQ 1 ) Q5. What is the amount of the previously owned clean vehicle credit? (added December 29, 2022) A5. The previously owned clean vehicle credit is the lesser of $4,000 or an amount equal to thirty (30) percent of the sales price of the vehicle purchased. Q6. What is "original use" of a previously owned clean vehicle? (added December 29, 2022) A6. Original use occurs the first time an individual or business places a vehicle in service for personal or business purposes. Q7. What is the first transfer since the date of enactment of a previously owned clean vehicle? (added December 29, 2022) A7. It is the first transfer of the vehicle after August 16, 2022, to a qualified buyer of the previously owned clean vehicle credit other than the person who was the original user of the vehicle. See FAQ 4 information on individuals eligible to claim the previously owned clean vehicle credit. Q8. Can a business entity (e.g., a corporation or a partnership) purchase a previously owned clean vehicle and claim the previously owned clean vehicle credit? (added December 29, 2022) A8. No. Only individuals are eligible for the previously owned clean vehicle credit. Q9. Can I buy a previously owned clean vehicle from a person who isn't a dealer and still qualify for the previously owned clean vehicle credit? (added December 29, 2022) A9. No. To qualify for the credit, the previously owned clean vehicle must be purchased from a dealer. A dealer is a person licensed to engage in the sale of motor vehicles in a State, the District of Columbia, the Commonwealth of Puerto Rico, any other territory or possession of the United States, an Indian tribal government, or any Alaska Native Corporation. Q10: If I order or purchase a previously owned clean vehicle in 2022 but take delivery of the vehicle in 2023, can the vehicle qualify for the previously owned clean vehicle credit? (added December 29, 2022) A10: Yes, if all other eligibility criteria are met. Topic E: Income and Price Limitations Previously owned Clean Vehicles Q1. Could my income level prevent me from taking the previously owned clean vehicle credit? (added December 29, 2022) A1. Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the year that the previously owned clean vehicle was placed in service or for the preceding year. The relevant modified AGI thresholds are as follows: - Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) - $150,000 - Head of household - $112,500 - All other filers - $75,000 Your modified AGI is the amount from line 11 of your Form 1040 plus: - Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. - Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa. Q2. Is there a price limitation on a previously owned clean vehicles eligible for the credit? (added December 29, 2022) A2. If the sales price exceeds the $25,000 limitation for previously owned clean vehicle, the vehicle is not eligible for the previously owned clean vehicle credit. Topic F: Claiming the Previously owned Clean Vehicles Credit Q1. What information does a dealer have to provide to a taxpayer purchasing a previously owned clean vehicle to allow the taxpayer to claim the previously owned clean vehicle credit? (added December 29, 2022) A1. A dealer must provide the following information on a report to the taxpayer and to the IRS: - Name and taxpayer identification number of the dealer - Name and taxpayer identification number of the taxpayer - Vehicle identification number of the vehicle - Battery capacity of the vehicle - The date of the sale and the sales price of the vehicle - Maximum credit allowable for the vehicle being sold - For sales after December 31, 2023, the amount of any transfer credit applied to purchase - A declaration under penalties of perjury from the dealer The dealer must provide the report to the taxpayer not later than the date the vehicle is purchased. For further details on dealer reporting see Topic B, FAQs 7- 9 a Revenue Procedure 2022-42. Q2. Do I have to report the vehicle identification number on my return to claim the previously owned clean vehicle credit? (added December 29, 2022) A2. Yes. The vehicle identification number of the previously owned clean vehicle is required to be included on Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles and New Clean Vehicles), when you file your income tax return. Q3. Is the previously owned clean vehicle credit refundable or able to be carried forward? (added December 29, 2022) A3. No. The previously owned clean vehicle credit may only be used by a taxpayer to the extent the taxpayer has a reported tax due. The credit cannot be carried forward and the excess is not refundable. Topic G: Qualified Commercial Clean Vehicles Credit Q1. Who is eligible to claim a credit under § 45W of the Code for purchasing a qualified commercial clean vehicle (qualified commercial clean vehicles credit)? (added December 29, 2022) A1. A taxpayer can claim a qualified commercial clean vehicles credit for purchasing and placing in service in the taxpayer's business a "qualified commercial clean vehicle" during the taxable year. The taxpayer must use the vehicle for a "business use." See FAQ 9. Q2. What is a "qualified commercial clean vehicle"? (added December 29, 2022) A2. A "qualified commercial clean vehicle" is defined as any vehicle of a character subject to the allowance for depreciation that: - Is made by a qualified manufacturer (See Topic A FAQ 9 ) - Is acquired for use or lease by the taxpayer and not for resale, - Is treated as a motor vehicle for purposes of title II of the Clean Air Act and is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), or is mobile machinery, as defined in § 4053(8) of the Code, and - Is propelled to a significant extent by an electric motor which draws electricity from a battery that has a capacity of not less than 15 kilowatt hours (or, in the case of a vehicle that has a gross vehicle weight rating of less than 14,000 pounds, 7 kilowatt hours) and is capable of being recharged from an external source of electricity, or satisfies the requirements under § 30B(b)(3)(A) and (B) of the Code for being a new qualified fuel cell motor vehicle. Q3. What is the amount of the qualified commercial clean vehicle credit a taxpayer can claim? (added December 29, 2022) A3. The amount of the qualified commercial clean vehicle credit is the lesser of (1) 15 percent of the taxpayer's tax basis in the vehicle (30 percent in the case of a vehicle not powered by a gasoline or diesel internal combustion engine), or (2) the incremental cost of the vehicle. The credit is limited to $7,500 in the case of a vehicle that has a gross vehicle weight rating of less than 14,000 pounds, and $40,000 for all other vehicles. Q4. How is "incremental cost" determined? (added December 29, 2022) A4. The incremental cost is the excess of the purchase price of a qualified commercial clean vehicle over the price of a comparable vehicle. A comparable vehicle is a vehicle powered solely by a gasoline or diesel internal combustion engine that is comparable in size and use to the qualified commercial clean vehicle. For a safe harbor to determine incremental cost for taxable year 2023, see Notice 2023-9. Q5. Is a taxpayer that leases clean vehicles to customers as its business eligible to claim the qualified commercial clean vehicle credit? (added December 29, 2022) A5. Whether a taxpayer can claim the qualified commercial clean vehicle credit in its business depends on who is the owner of the vehicle for federal income tax purposes. The owner of the vehicle is determined based on whether the lease is respected as a lease or recharacterized as a sale for federal income tax purposes. Q6. What factors are used to determine if a transaction is a "lease" for tax purposes? (updated February 3, 2023) A6. Based on longstanding tax principles, the determination whether a transaction constitutes a sale or a lease of a vehicle for tax purposes is a question of fact. Features of a vehicle lease agreement that would make it more likely to be recharacterized as a sale of the vehicle for tax purposes include, but are not limited to: - A lease term that covers more than 80% to 90% of the economic useful life of the vehicle - A bargain purchase option at the end of the lease term (that is, the ability to purchase the vehicle at less than its fair market value at the end of the term) or other terms/provisions in the lease that economically compel the lessee to acquire the vehicle at the end of the lease term - Terms that result in the lessor transferring ownership risk to the lessee, for example, a terminal rental adjustment clause (TRAC) that requires the lessee to pay the difference between the actual and expected value of the vehicle at the end of the lease. (Note that special rules exist under § 7701(h) for qualified motor vehicle operating agreements that contains a TRAC.) Q7. What happens if the clean vehicle lease agreement is recharacterized as a sale for tax purposes? (added December 29, 2022) A7. In the event the clean vehicle lease is recharacterized as a sale, the lessee would need to determine if they are eligible to claim either a clean vehicle credit or a qualified commercial vehicle credit. The lessor would not be eligible to claim either credit because they would have engaged in a resale of the vehicle. Q8. What does "of a character subject to the allowance for depreciation" mean for purposes of the qualified commercial clean vehicle credit? (added December 29, 2022) A8. In general, property is subject to the allowance for depreciation if it is used in a trade or business of the taxpayer or for the production of income (business use). Q9. H does a taxpayer determine if a vehicle is used in a "business use"? (added December 29, 2022) A9. Generally, the term business use means any use in a trade or business of the taxpayer. IRS-FAQ

Private Letter Ruling Number: 202231007 Internal Revenue Service February 4, 2022 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202231007 Release Date: 8/5/2022 Index Number: 507.00-00, 4940.00-00, 4941.00-00, 4942.00-00, 4944.00-00, 4945.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:EEE:EOET:EO3 PLR-116648-21 Date: February 04, 2022 Dear *******: This letter responds to the letter, dated July 27, 2021, as supplemented by a letter dated November 23, 2021, requesting certain rulings under sections 507, 4940, 4941, 4942, 4944, and 4945 of the Internal Revenue Code 1. ******** 1 The Internal Revenue Code of 1986, as amended, to which all subsequent "section" references are made unless otherwise indicated. ******** Facts According to representations made by the Taxpayer, Family Foundation is a grant-making charitable trust recognized as an exempt organization described in section 501(c)(3) and classified as a private non-operating foundation under section 509(a). Family Foundation's sole trustee is Trustee, a family trust company that provides fiduciary, financial, and personal services to family members and their designated charitable entities. Family members 2 comprise a majority of the board of Trustee. Family members are donors to Family Foundation. As of the end of Year 1, Family Foundation had assets of approximately x and had excess distributions of over y. Family Foundation is a calendar year taxpayer. ******** 2 The term "family members" throughout this documents denote the members of the same family. ******** Company, a business corporation and public company, is controlled by family members through their ownership of all of the control shares of Company while unrelated persons own some of the non-controlling shares. Company Foundation is a non-profit corporation recognized as an exempt organization described in section 501(c)(3) and classified as a non-operating private foundation under section 509(a). Company Foundation makes grants and supports educational programs in geographic areas in which Company has a business presence. In addition, Company Foundation makes grants to support college programs training students in the industry in which Company does business. Company Foundation is funded through annual investment income from its current endowment assets, as well as from gifts from family members and other donors. New Foundation is a grant-making charitable trust that has been recognized as an exempt organization described in section 501(c)(3) and classified as a non-operating private foundation under section 509(a). The dispositive terms of the trust agreement creating New Foundation are substantially identical to those of the trust agreement creating Family Foundation. Family members own all of the control shares of Company. Company controls Company Foundation. Family members also comprise a majority of the persons serving on the board of Trustee. Trustee is the sole trustee of both Family Foundation and New Foundation. Taxpayer represents that Family Foundation, Company Foundation, and New Foundation are all effectively controlled by the same persons within the meaning of Treas.Reg. § 1.507-3(a)(2)(ii). Family Foundation expects to receive a large bequest (Bequest) from A who died several years ago and left all of his assets for charitable purposes to Family Foundation under his estate plan. Family Foundation expects to receive the Bequest through multiple distributions from A's estate in Year 2 based on the anticipated estate settlement timeline. In anticipation of the settlement of the estate and receipt of the Bequest, New Foundation was established. After the receipt of the Bequest, Family Foundation anticipates a series of transfers (Proposed Transfers) that will collectively transfer at least 80 percent of the assets of Family Foundation to Company Foundation and New Foundation in the subsequent calendar year, Year 3. The Proposed Transfers would better facilitate separate and distinct programmatic grantmaking between the two transferee foundations, increase transparency of the foundations' respective charitable activities, and allow a separate annual financial statement audit for New Foundation that covers the Bequest. Family Foundation will transfer the Bequest to New Foundation as capital endowment grants. Trustee believes the transfers are necessary to better serve A's charitable intent, because transfers to New Foundation will allow the Bequest to be administered and invested within New Foundation, with its activities separated from the smaller-in-scale grant-making activities of Family Foundation. This will allow more flexibility in charitable programming and would not subject Family Foundation to additional costs likely to be incurred in managing the Bequest. New Foundation expects to have dedicated resources to enable it to more effectively carry out the charitable intentions of A by engaging in larger-scale programmatic grant-making, developing grantee outcome measurements, building partnerships with secondary educational institutions, and defining programs that meet A's charitable intentions. Family Foundation also plans to provide capital endowment grants to Company Foundation from its existing assets which would be restricted so that only the annual income from the endowment may be expended in furtherance of Company Foundation's charitable purposes. Company Foundation has announced a new capital campaign to expand Company Foundation's mission to geographic areas Company has recently entered. This campaign is designed to build an endowment that will generate annual income, which income will in turn be used to fund increased grant-making. Thus, Family Foundation's Proposed Transfers will provide New Foundation and Company Foundation with additions to their respective endowments, the income of which will be used for their respective charitable purposes. Family Foundation will exercise expenditure responsibility over all the capital endowment grants to New Foundation and Company Foundation for the taxable year in which they are made and for the immediately succeeding two taxable years. Family Foundation will enter into grant agreements with New Foundation and Company Foundation. These agreements will specify the permitted uses of the Proposed Transfers and require annual reporting on the use of the transfers and any income generated therefrom. The reporting will be for the year in which the Proposed Transfers are made and for a minimum of the two succeeding years on how the funds are being used. For each Proposed Transfer, Family Foundation will then review the reports received from the grant recipient as well as its overall operations and make a determination that neither the principal nor the income from the transfers has been used for any purpose which would result in liability for tax under section 4945(d). Family Foundation intends to make this determination for each Proposed Transfer after receiving the report covering the second subsequent year after that transfer. Because Family Foundation intends to treat the Proposed Transfers to New Foundation and Company Foundation as capital endowment grants rather than as qualifying distributions, Family Foundation represents that it will not seek to obtain records from New Foundation or Company Foundation showing that either foundation has made distributions out of corpus in connection with the transfers. At no time during the proposed transactions will Family Foundation distribute all of its net assets. Transfers from Family Foundation to New Foundation will be made only after Family Foundation receives distributions of the Bequest from A's estate. Family Foundation has not and will not notify the IRS of an intent to terminate its status as a private foundation pursuant to section 507(a)(1). Family Foundation also represents that it has not engaged in willfully repeated acts (or failures to act) or committed a willful and flagrant act (or failure to act) which would give rise to tax under chapter 42, nor will it commit any such acts at the time of distribution. Rulings Requested, Law, and Analysis Requested Rulings 1, 2, 3, and 4: 1. The Proposed Transfers from Family Foundation to Company Foundation and New Foundation of at least 80 percent of the assets of Family Foundation will constitute a significant disposition of assets described in section 507(b)(2). 2. The Proposed Transfers constitute transfers described in section 507(b)(2). 3. Company Foundation will not be treated as a newly created organization following the Proposed Transfers. 4. New Foundation will not be treated as a newly created organization following the Proposed Transfers. Law: Section 507(b)(2) states that when one private foundation transfers assets to another private foundation pursuant to any liquidation, merger, redemption, recapitalization, or other adjustment, organization, or reorganization, the transferee private foundation shall not be treated as a newly created organization. A transfer described in section 507(b)(2) is referred to as a "section 507(b)(2) transfer." Treas.Reg. § 1.507-3(a)(1) states that, in the case of a significant disposition of assets to one or more private foundations pursuant to a transfer described in section 507(b)(2) and § 1.507-3(c), the transferee organization shall not be treated as a newly created organization, but shall succeed to those attributes and characteristics of the transferor organization which are described in § 1.507-3(a)(2), (3) and (4), which includes its aggregate tax benefit, substantial contributors, and Chapter 42 tax and penalty liabilities. Section 1.507-3(c)(1) states that for purposes of section 507(b)(2), the terms "other adjustment, organization, or reorganization" shall include any partial liquidation or any other significant disposition of assets to one or more private foundations, other than transfers for full and adequate consideration or distributions out of current income." A significant disposition of assets may occur in a single taxable year or over the course of two or more taxable years. The determination whether a significant disposition has occurred through a series of related distributions will be made on the basis of all the facts and circumstances of the particular case. Section 1.507-3(c)(2)(ii) defines "significant disposition of assets to one or more private foundations" to mean any disposition or series of dispositions where the cumulative total of dispositions is twenty-five percent (25%) or more of the fair market value of the net assets of the foundation at the beginning of the taxable year. Section 1.507-3(c)(5) illustrates the above paragraph by the following examples: Example (1). M is a private foundation on the calendar year basis. It has net assets worth $100,000 as of January 1, 1971. In 1971, in addition to distributions out of current income, M transfers $10,000 to N, $10,000 to O, and $10,000 to P. N, O, and P are all private foundations. Under subparagraph (2)(i) of this paragraph, M has made a significant disposition of its assets in 1971 since M has disposed of more than 25 percent of its net assets (with respect to the fair market value of such assets as of January 1, 1971). M has therefore made section 507(b)(2) transfers within the meaning of this paragraph, and section 507(b)(2) applies to the transfers made to N, O, and P. Example (2). U, a tax-exempt private foundation on the calendar year basis, has net assets worth $100,000 as of January 1, 1971. As part of a series of related dispositions in 1971 and 1972, U transfers in 1971, in addition to distributions out of current income, $10,000 to private foundation X and $10,000 to private foundation Y, and in 1972, in addition to distributions out of current income, U transfers $10,000 to private foundation Z. Under subparagraph (2)(ii) of this paragraph, U is treated as having made a series of related dispositions in 1971 and 1972. The aggregate of the 1972 disposition (under subparagraph (2)(i) of this paragraph) and the series of related dispositions (under subparagraph (2)(ii) of this paragraph) is $30,000, which is more than 25 percent of the fair market value of U's net assets as of the beginning of 1971 ($100,000), the first year in which any such disposition was made. Thus, U has made a significant disposition of its assets and has made transfers described in section 507(b)(2). The provisions of paragraphs (a) and (b) of this section apply to each of the transferees as of the date on which it received assets from U. Analysis: Family Foundation had assets in Year 1 of approximately x. In Year 2, Family Foundation will receive the Bequest in a series of transactions from A. In Year 3, the year subsequent to Year 2, Family Foundation proposes to transfer at least eighty percent (80%) of its assets to two separate foundations, New Foundation and Company Foundation. Section 1.507-3(c)(2)(ii), as illustrated by the examples in § 1.507-3(c)(5), provides that the amount of the transfers is measured against a foundation's net assets at the beginning of the first taxable year in which any of the series of related dispositions is made. The Proposed Transfers will be made in Year 3. Because the Proposed Transfers to New Foundation and Company Foundation will occur in Year 3, and because Family Foundation is a calendar year taxpayer, the measure of the amount of the disposition can be taken with respect to Family Foundation's assets at the beginning of Year 3. Section 1.507-3(c)(2)(ii). Family Foundation's assets at the beginning of Year 3 will include the Bequest and (because at no time will Family Foundation distribute all of its assets) some or all of its assets, approximately x, as of Year 1. Because the Proposed Transfers will be at least eighty percent of Family Foundation's assets, including the Bequest, the Proposed Transfers will exceed twenty-five percent (25%) of Family Foundation's assets and thus will constitute a significant disposition of assets. Section 1.507-3(c)(1); § 1.507-3(c)(2)(ii). Thus, the Proposed Transfers are described in section 507(b)(2). Transferee foundations are not treated as newly created foundations as a result of a section 507(b)(2) transfer of assets. Section 507(b)(2); § 1.507-3(a)(1). Because Family Foundation will be making section 507(b)(2) transfers to Company Foundation, Company Foundation will not be treated as a newly created organization following the Proposed Transfers. Also, because Family Foundation will be making section 507(b)(2) transfers to New Foundation, New Foundation will not be treated as a newly created organization following the Proposed Transfers. Requested Ruling 5: 5. The Proposed Transfers will not cause Family Foundation's termination as a private foundation under section 507(a) and will not result in the imposition of any termination tax under section 507(c). Law: Section 507(a) provides that, except as provided in subsection (b), the status of any organization as a private foundation shall be terminated only if (1) it notifies the Secretary of its intent to accomplish such a termination, or (2) with respect to such organization, there have been either willful repeated acts (or failures to act), or a willful and flagrant act (or failure to act), giving rise to liability for tax under chapter 42, and the Secretary notifies such organization that it is liable for the tax imposed by section 507(c), and either such organization pays the tax (or any portion not abated under section 507(g)) or the entire amount of such tax is abated under section 507(g). Section 507(c) imposes an excise tax on an organization that voluntarily terminates its private foundation status equal to the lower of: (1) the aggregate tax benefit that has resulted from the private foundation's tax-exempt status under section 501(c)(3), or (2) the value of the net assets of the foundation. Section 1.507-3(d) states that unless a private foundation voluntarily gives notice pursuant to section 507(a)(1), a transfer of assets described in section 507(b)(2) will not constitute a termination of the transferor's private foundation status under section 507(a)(1). Such transfer must, nevertheless, satisfy the requirements of any pertinent provisions of chapter 42. Treas.Reg. § 1.507-4(b) states that private foundations that make transfers described in section 507(b)(2) are not subject to the tax imposed under section 507(c) with respect to such transfers unless the provisions of section 507(a) become applicable. Analysis: Family Foundation has not and represents that it will not notify the IRS of an intent to terminate its status as a private foundation pursuant to section 507(a)(1). Family Foundation also represents that it has not willfully engaged in repeated acts (or failures to act) or committed a willful and flagrant act (or failure to act) which would give rise to tax under chapter 42, nor will it commit any such acts at the time of distribution. See section 507(a)(2). The Proposed Transfers themselves, as described above, will not constitute such acts. Therefore, the Proposed Transfers will not cause Family Foundation's termination as a private foundation under section 507(a) and will not result in the imposition of any termination tax under section 507(c). Section 1.507-3(d); § 1.507-4(b). Requested Rulings 6 and 7: 6. Because the Proposed Transfers do not constitute a transfer of all of Family Foundation's net assets, § 1.507-3(a)(9)(i) will not apply and Company Foundation will not be treated as if it is Family Foundation with respect to the Proposed Transfers. 7. Because the Proposed Transfers do not constitute a transfer of all of Family Foundation's net assets, § 1.507-3(a)(9)(i) will not apply and New Foundation will not be treated as if it is Family Foundation with respect to the Proposed Transfers. Law: Section 1.507-3(a)(9)(i) states that if a private foundation transfers all of its net assets to one or more private foundations that are effectively controlled by the same person or persons that effectively controlled the transferor private foundation, for purposes of chapter 42 (section 4940 et. seq.) and part II of subchapter F of chapter 1 of the Code (sections 507 through 509) such a transferee private foundation shall be treated as if it were the transferor. Aggregate Tax Benefit: Section 507(d)(1) defines "aggregate tax benefit" as the sum of the following amounts: (i) the aggregate increases in tax under chapters 1,11 and 12 of the Internal Revenue Code that would have been imposed on the substantial contributors to the private foundation if the charitable income, estate and gift tax deductions were disallowed for contributions made after February 28, 1913; (ii) the aggregate increases in tax under chapter 1 that would have been imposed on the private foundation's income for taxable years beginning after December 31, 1912 if the foundation had not been exempt under section 501(c)(3) or if deductions under section 642(c) had been limited to 20 percent of taxable income (in the case of a trust); and (iii) interest on the amounts described in items (i) and (ii) above from the first date each amount would have been due and payable until the date when the organization ceases to be a private foundation. Section 1.507-3(a)(1) states that, in the case of a significant disposition of assets to one or more private foundations pursuant to a transfer described in section 507(b)(2) and § 1.507-3(c), the transferee organization shall not be treated as a newly created organization, but shall succeed to those attributes and characteristics of the transferor organization which are described in § 1.507-3(a)(2), (3) and (4), which includes its aggregate tax benefit, substantial contributors, and chapter 42 tax and penalty liabilities. However, § 1.507-3(a)(2)(ii) provides that a transferee organization which is not effectively controlled (within the meaning of Treas.Reg. § 1.482-1(a)(3)), directly or indirectly, by the same person or persons who effectively control the transferor organization shall not succeed to an aggregate tax benefit in excess of the fair market value of the assets transferred at the time of transfer. The examples in Treas.Reg. § 1.507-3(a)(2)(iii) illustrate that when the transferee and transferor organizations are effectively controlled by the same persons, the transferee organization succeeds to the aggregate tax benefit of the transferor in an amount equal to the amount of such aggregate tax benefit (within the meaning of section 507(d)(1)), multiplied by a fraction the numerator of which is the fair market value of the assets (less encumbrances) transferred and the denominator of which is the fair market value of the assets of the transferor (less encumbrances) immediately before the transfer. Section 1.507-3(a)(8)(ii) provides that certain provisions enumerated in that section (including section 4940(c)(4)(B) with respect to the basis of property and section 4942(f)(4) with respect to distributions of income) shall apply to the transferee foundation with respect to the assets transferred to the same extent and in the same manner that they would have applied to the transferor foundation had the transfer described in section 507(b)(2) not been effected. Treas.Reg. § 1.507-7(d) provides that for purposes of section 507 and the regulations thereunder, the term "net assets" shall mean the gross assets of a private foundation reduced by all liabilities of the foundation, including appropriate estimated and contingent liabilities. Analysis: Company Foundation, Family Foundation, and New Foundation are all effectively controlled by family members who control Company and Trustee. Trustee, Family Foundation, Company Foundation, and New Foundation stipulate that Family Foundation, Company Foundation, and New Foundation are all effectively controlled within the meaning of § 1.507-3(a)(2)(i) (and thus also § 1.507-3(a)(9)(i)). Family Foundation anticipates a series of transfers (Proposed Transfers) that will collectively transfer at least 80 percent of the assets of Family Foundation to Company Foundation and New Foundation, as opposed to all of Family Foundation's assets. At no time during the proposed transactions will Family Foundation distribute all of its net assets. Transfers from Family Foundation to New Foundation will be made only after Family Foundation receives distributions of the Bequest from A's estate. Despite the fact that the foundations are all effectively controlled, since Family Foundation is not transferring all of its net assets as part of the Proposed Transfers, but rather only a part of its net assets, neither Company Foundation nor New Foundation will be treated as Family Foundation and § 1.507-3(a)(9)(i) will not apply. Aggregate Tax Benefit: Under Treas.Reg. § 1.507-3(a)(1), in the case of a transfer of assets from one private foundation to another private foundation described in section 507(b)(2), the transferee organization is treated as possessing those attributes and characteristics of the transferor organization that are described in § 1.507-3(a)(2), (3), and (4). As discussed above, the Proposed Transfers are described in section 507(b)(2). Therefore, § 1.507-3(a)(1) applies. At the time of the Proposed Transfers, Family Foundation, Company Foundation, and New Foundation will be controlled by the same persons. Therefore, Company Foundation and New Foundation will succeed to a fraction of Family Foundation's aggregate tax benefit, calculated as described in § 1.507-3(a)(2)(iii). As Family Foundation is not terminating under section 507 and will continue as a private non-operating foundation after the Proposed Transfers, Family Foundation will retain the portion of its aggregate tax benefit that is not passing to Company Foundation and New Foundation. See § 1.507-3(a)(2)(iii). Furthermore, in the event of a transfer of assets described in section 507(b)(2), § 1.507-3(a)(3) provides that any person who is a "substantial contributor" (within the meaning of section 507(d)(2)) with respect to the transferor foundation will be treated as a "substantial contributor" with respect to the transferee foundation. Therefore, any person who is a disqualified person with respect Family Foundation at the time of the Transfer will be considered a "substantial contributor" with respect to Company Foundation and New Foundation as a result of the Transfer. Finally, if a private foundation incurs liability for one or more of the taxes imposed under chapter 42 (or any penalty resulting therefrom) prior to, or as a result of, making a transfer of assets described in section 507(b)(2), in any case where transferee liability applies § 1.507-3(a)(4) provides that the transferee foundation will be treated as receiving the transferred assets subject to such liability to the extent the transferor foundation does not satisfy such liability. Therefore, should Family Foundation have incurred liability for any chapter 42 tax prior to, or as a result of, the Transfer, Company Foundation and New Foundation will be treated as receiving the Proposed Transfers subject to such liability to the extent that Family Foundation does not satisfy the liability where transferee liability applies. Thus, each of Company Foundation and New Foundation will be treated as possessing Family Foundation's attributes and characteristics described in § 1.507-3(a)(2), (3), (4), and, to the extent applicable, (8)(ii). Given Family Foundation's representation that it is effectively controlled by the same persons that control Company Foundation and New Foundation, each will succeed to a portion of Family Foundation's aggregate tax benefit in proportion to the assets received. Section 1.507-3(a)(1) and (2)(ii) and (iii). Requested Ruling 8(a): 8. The Proposed Transfers, whether or not constituting transfers described in section 507(b)(2), will not result in: a. Gross investment income or capital gain income within the meaning of section 4940 and the excise tax on net investment income; Law: Section 4940(a) imposes an excise tax on a private foundation's net investment income for the taxable year. Section 4940(c)(1) defines net investment income as the amount by which the sum of the gross investment income and the capital gain net income exceeds the deductions allowed by section 4940(c)(3). Section 4940(c)(2) provides, in part, that for purposes of section 4940, the term "gross investment income" means the gross amount of income from interest, dividends, rents, payments with respect to securities loans, and royalties. Rev.Rul. 2002-28, 2002-1 C.B. 941, presents situations where a private foundation transfers all of its assets to transferee private foundations that are effectively controlled (within the meaning of the regulations under section 507), directly or indirectly by the same person who effectively controlled the transferor private foundations. The ruling concludes that the transfers do not constitute investments of the transferor for purposes of section 4940; therefore, the transfers do not give rise to net investment income subject to tax under section 4940(a). Analysis: Family Foundation expects to receive the Bequest through multiple distributions from A's estate in Year 2 based on the anticipated estate settlement timeline. After the receipt of the Bequest, Family Foundation will transfer the Bequest to New Foundation in the subsequent calendar year, Year 3. Family Foundation also plans to provide capital endowment grants to Company Foundation from its existing assets. The Proposed Transfers by Family Foundation to New Foundation and Company Foundation will lack consideration and, therefore, will not otherwise generate net investment income (including capital gains from the taxable sale or disposition of property) to Family Foundation subject to excise tax under section 4940. Sections 4940(a), (c)(1), and (c)(2). Similar to the transfers described in Rev.Rul. 2002-28, the transfers do not constitute investments of the transferor for purposes of section 4940. Even though the transfers in Rev.Rul. 2002-28 were complete transfers, the concept that a section 507(b)(2) transfer, even though partial, is not an investment remains applicable. Accordingly, none of the Proposed Transfers will result in the imposition of tax under section 4940(a) on Family Foundation. Requested Ruling 8(b): 8. The Proposed Transfers, whether or not constituting transfers described in section 507(b)(2) will not result in: b. An act of self-dealing under section 4941 and the excise tax imposed on self-dealing. Law: Section 4941(a) imposes an excise tax on each act of self-dealing between a private foundation and a disqualified person, as defined in section 4946. Taxes are imposed on both the self-dealers involved in an act of self-dealing and on any foundation managers who knowingly participate in an act of self-dealing. Section 4941(d)(1)(E) provides that the term "self-dealing" includes any direct or indirect transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a private foundation. Treas.Reg. § 53.4946-1(a)(8) states that, for purposes of section 4941 only, "disqualified person" shall not include any organization that is described in section 501(c)(3) (other than an organization described in section 509(a)(4)). Rev.Rul. 2002-28, 2002-1 C.B. 941, presents situations where a private foundation transfers all of its assets to transferee private foundations that are effectively controlled (within the meaning of the regulations under section 507), directly or indirectly by the same person who effectively controlled the transferor private foundations. The ruling states that the transfers are to section 501(c)(3) organizations, which are not treated as disqualified persons for purposes of section 4941. See section 53.4946-1(a)(8). Thus, the transfers do not constitute self-dealing transactions and are not subject to tax under section 4941(a). Analysis: Company Foundation is recognized as tax exempt under section 501(c)(3). New Foundation also is recognized by the IRS as an organization exempt from tax under section 501(c)(3). Therefore, under § 53.4946-1(a)(8), the Proposed Transfers from Family Foundation to Company Foundation and New Foundation do not constitute transfers to disqualified persons because both Company Foundation and New Foundation are described in section 501(c)(3), and are not organizations described in section 509(a)(4). See sections 4941(a); 4941(d)(1)(E); and Rev.Rul. 2002-28. None of the Proposed Transfers to Company Foundation and New Foundation are acts of self-dealing with respect to Company Foundation or New Foundation, provided Company Foundation and New Foundation maintain their tax-exempt status under section 501(c)(3) and are recognized by the IRS as organizations exempt from tax under section 501(c)(3) at the dates of the Proposed Transfers. See § 53.4946-1(a)(8). Requested Ruling 8(c): 8. The Proposed Transfers, whether or not constituting transfers described in section 507(b)(2) will not result in: c. a qualifying distribution under section 4942. Law: Section 4942(a) generally imposes a tax on the undistributed income of a private nonoperating foundation for any taxable year. Section 4942(c) defines "undistributed income" for any taxable year as the amount by which the distributable amount for such taxable year exceeds the qualifying distributions made out of such distributable amount for such taxable year. Section 4942(g)(1)(A) and § 53.4942(a)-3(a)(2)(i) provide, in part, that the term "qualifying distribution" means any amount paid to accomplish one or more purposes described in section 170(c)(1) or (2)(B), other than any contribution to (i) a private nonoperating foundation, unless the amount paid satisfies the requirements of section 4942(g)(3); (ii) an organization controlled (directly or indirectly) by the private foundation or one or more disqualified persons (as defined in section 4946) with respect to the foundation; or (iii) a supporting organization described in section 4942(g)(4)(A)(i) or (ii), including a Type III functionally integrated supporting organization if a disqualified person of the private foundation directly or indirectly controls such organization or a supported organization (as defined in section 509(f)(3)) of such organization. Section 4942(g)(3) and § 53.4942(a)-3(c)(1) provides that the term "qualifying distribution" includes a contribution to (i) another charitable organization controlled directly or indirectly by the transferor foundation or one or more disqualified persons with respect to the transferor or (ii) a private non-operating foundation if two requirements are satisfied. The first such requirement is that the transferee organization satisfy certain distribution requirements described in section 4942(g)(3)(A). The second requirement is that the transferor obtains adequate records or other sufficient evidence from the transferee organization(s) showing that the required pass-through distributions were made as described in section 4942(g)(3)(B). The distributions must be made no later than the close of the first taxable year after its taxable year in which such contribution is received and must be equal to the amount of the contribution. Section 1.507-3(a)(5) states that, except as provided in § 1.507-3(a)(9), a private foundation is required to meet the distribution requirements of section 4942 for any taxable year in which it makes a section 507(b)(2) transfer of all or part of its net assets to another private foundation. Analysis: A private foundation must meet the distribution requirements of section 4942 for any taxable year in which it makes a section 507(b)(2) transfer of all or part of its net assets to another private foundation; thus, Family Foundation is required to meet the distribution requirements of section 4942. Section 1.507-3(a)(5). Under section 4942(g)(3) and § 53.4942(a)-3(c)(1), a grant by a private non-operating foundation to another private non-operating foundation (or to another organization controlled by disqualified persons with respect to the transferor) is not treated as a qualifying distribution by the transferor foundation for purposes of section 4942 except to the extent that the transferee makes one or more distributions that would be qualifying distributions under section 4942(g) prior to the close of the transferee's first taxable year following the taxable year in which it received the transfer and the distributions are treated as being made out of corpus. Thus, under section 4942(g)(3), a transfer to another private foundation shall count toward an organization's distribution requirements only if the redistribution requirements are met. However, the Proposed Transfers are meant to be capital endowment grants, meaning that the corpus will remain undistributed and that only income from the grants will be used by New Foundation and Company Foundation for charitable purposes. Additionally, because Family Foundation does not intend to obtain records from New Foundation or Company Foundation showing that either foundation has made distributions out of corpus in connection with the transfers, the Proposed Transfers will not satisfy the requirements for qualifying distributions under section 4942(g)(3). Requested Ruling 8(d): 8. The Proposed Transfers, whether or not constituting transfers described in section 507(b)(2), will not result in: d. an investment that jeopardizes charitable purposes under section 4944 and the excise tax imposed on jeopardizing investments. Law: Section 4944(a)(1) imposes a tax on any investments by a private foundation that jeopardize the carrying out of any of a private foundation's exempt purposes. Section 4944(c) provides an exception for investments where the primary purpose of the investment is to accomplish exempt purposes and no significant purpose of which is the production of income or appreciation of property. Rev.Rul. 2002-28, 2002-1 C.B. 941, presents situations where a private foundation transfers all of its assets to transferee private foundations that are effectively controlled (within the meaning of the regulations under section 507), directly or indirectly by the same person who effectively controlled the transferor private foundations. The ruling holds that the transfers do not constitute investments for purposes of section 4944. Therefore the transfers do not constitute investments jeopardizing the transferor foundation's exempt purposes and are not subject to tax under section 4944(a)(1). Analysis: Under section 4944(c), a transfer is not considered a jeopardizing investment for purposes of section 4944 if the transfer of assets was made for the purpose of accomplishing a charitable purpose and not for the production of income or appreciation of property. The Proposed Transfers are being made to Company Foundation and New Foundation as grants for capital endowments to fulfill the transferee foundations' charitable purposes and for no consideration. The grants are not investments, and Family Foundation expects no return on investment, nor a return of principal. Therefore, the Proposed Transfers do not constitute investments and will not result in the imposition of tax for a jeopardizing investment under section 4944. See also Rev.Rul. 2002-28. Requested Ruling 8(e): 8. The Proposed Transfers, whether or not constituting transfers described in section 507(b)(2) will not result in: e. taxable expenditures under section 4945 provided Family Foundation, New Foundation, and Company Foundation comply with the reporting and determination provisions of § 53.4945-5(c)(2). Law: Section 4945(a) imposes an excise tax on each taxable expenditure incurred by a private foundation. Section 4945(d)(4) provides that the term "taxable expenditure" includes a grant paid to an organization unless (A) the grantee is either a public charity described in section 509(a)(1), (2), or (3) (other than certain supporting organizations described in section 4942(g)(4)(A)(i) or (ii)) or an exempt operating foundation described in section 4940(d)(2), or (B) unless the grantor exercises expenditure responsibility over the grant pursuant to section 4945(h). Section 4945(d)(5) provides that the term "taxable expenditure" also includes any amount paid or incurred by a private foundation for any purpose other than one specified in section 170(c)(2)(B). Section 170(c)(2)(B) lists the following purposes: "religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals." The purposes listed in section 170(c)(2)(B) generally are the same as the purposes listed in section 501(c)(3). Thus, a grant by a private foundation to another organization described in section 501(c)(3) ordinarily is an amount paid to accomplish a purpose described in section 170(c)(2)(B). Section 4945(h) defines "expenditure responsibility" to mean that the grantor private foundation is responsible for exerting all reasonable efforts to establish adequate procedures to see that the grant is spent solely for the purpose for which it was made, obtain full and complete reports from the grantee on how the funds are spent, and make full and detailed reports with respect to such expenditures to the Secretary. Section 53.4945-5(c)(2) provides that, with regard to capital endowment grants made to private foundations, if a private foundation makes a grant to another private foundation for endowment or for other capital purposes, the grantor foundation must require reports from the grantee foundation on the uses of the principal and income (if any) from the grant funds. The grantee must make such reports annually for the taxable year in which the grant was made and for the immediately succeeding two taxable years. The grantor may allow the grantee's reports to be discontinued only if it is reasonably apparent to the grantor, before the end of such grantee's second succeeding taxable year, that neither the principal nor the income from the grant funds has been used for any purpose that would result in liability for tax under section 4945(d). Analysis: Neither Company Foundation nor New Foundation is treated as Family Foundation under § 1.507-3(a)(9)(i), as discussed in Requested Ruling 6 and 7. Thus, each of the Proposed Transfers would be a taxable expenditure under section 4945(d)(4) unless the grants are made for section 170(c)(2)(B) purposes and Family Foundation exercises expenditure responsibility as required by section 4945(h). Family Foundation's Proposed Transfers will provide New Foundation and Company Foundation with additions to their respective endowments, the income of which will be used for their respective charitable purposes. However, because Family Foundation is making capital expenditure grants to New Foundation and Company Foundation, it is required to follow the rules of section 4945(h) and § 53.4945-5(c)(2). Family Foundation represents that it will exercise expenditure responsibility over the Proposed Transfers for the year of the transfer and for a minimum of the two succeeding years until Family Foundation determines that neither the transferred funds nor the income therefrom have been used for any purpose that would result in liability for tax under section 4945(d). Thus, the Proposed Transfers will not be considered taxable expenditures as long as Family Foundation exercises expenditure responsibility over the transfers in accordance with section 4945(h) and § 53.4945-5(c)(2). Requested Ruling 9 9. After the Proposed Transfers are completed, no part of Family Foundation's excess qualifying distribution carryover will transfer to New Foundation or Company Foundation; Family Foundation will retain its excess qualifying distribution carryover. Law: Section 1.507-3(a)(5) states that, except as provided in § 1.507-3(a)(9), a private foundation is required to meet the distribution requirements of section 4942 for any taxable year in which it makes a section 507(b)(2) transfer of all or part of its net assets to another private foundation. Section 1.507-3(a)(9)(i) states that if a private foundation transfers all of its net assets to one or more private foundations that are effectively controlled by the same person or persons that effectively controlled the transferor private foundation, for purposes of chapter 42 and part II of subchapter F of chapter 1 of the Code such a transferee private foundation shall be treated as if it were the transferor. Rev.Rul. 78-387, 1978-2 C.B. 270, held that in a transfer described in § 1.507-3(a)(9)(i) from one private foundation to another, the transferor's excess qualifying distributions carryover reduced the transferee's distributable amount. Analysis: The Proposed Transfers do not satisfy the requirements for qualifying distributions under section 4942(g)(3) and Family Foundation must satisfy the distribution requirements of section 4942, without considering the Proposed Transfers. As discussed in Rulings 6 and 7, Family Foundation is transferring less than all of its net assets; therefore, § 1.507-3(a)(9)(i) and Rev.Rul. 78-387 do not apply, and neither Company Foundation nor New Foundation is treated as Family Foundation for purposes of Chapter 42. As of Year 1, Family Foundation had excess distributions of y prior to the Proposed Transfers. Because neither Company Foundation nor New Foundation is treated as Family Foundation, no part of Family Foundation's excess qualifying distribution carryover prior to the Proposed Transfers will transfer to Company Foundation or New Foundation. Family Foundation will retain its excess qualifying distribution carryover. Rulings: Based on the foregoing, and assuming the accuracy of the facts and representations set forth herein, we rule as follows: 1) The Proposed Transfers from Family Foundation to Company Foundation and New Foundation of at least 80 percent of the assets of Family Foundation will constitute a significant disposition of assets described in section 507(b)(2). 2) The Proposed Transfers constitute transfers described in section 507(b)(2). 3) Company Foundation will not be treated as a newly created organization following the Proposed Transfers. 4) New Foundation will not be treated as a newly created organization following the Proposed Transfers. 5) The Proposed Transfers will not cause Family Foundation's termination as a private foundation under section 507(a) and will not result in the imposition of any termination tax under section 507(c). 6) Because the Proposed Transfers do not constitute a transfer of all of Family Foundation's net assets, section 1.507(a)(9)(i) will not apply and Company Foundation will not be treated as if it is Family Foundation with respect to the Proposed Transfers. 7) Because the Proposed Transfers do not constitute a transfer of all of Family Foundation's net assets, section 1.507(a)(9)(i) will not apply and New Foundation will not be treated as if it is Family Foundation with respect to the Proposed Transfers. 8) The Proposed Transfers will not result in: a. Gross investment income or capital gain net income within the meaning of section 4940 and the excise tax on net investment income; b. An act of self-dealing under section 4941 and the excise tax imposed on self-dealing; c. A qualifying distribution under section 4942; d. An investment that jeopardizes charitable purposes under section 4944 and the excise tax imposed on jeopardizing investments; e. Taxable expenditures under section 4945 provided Family Foundation, New Foundation, and Company Foundation comply with the expenditure responsibility provisions of section 4945(h) and the regulations thereunder with respect to the Proposed Transfers, including the reporting and determination provisions of § 53.4945-5(c)(2). 9) After the Proposed Transfers are complete, no part of Family Foundation's excess qualifying distribution carryover will transfer to New Foundation or Company Foundation; Family Foundation will retain its excess qualifying distribution carryover. The rulings contained in this letter are based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an individual with authority to bind the taxpayers and upon the understanding that there will be no material changes in the facts. This office has not verified any of the materials submitted in support of the request for rulings, and such material is subject to verification on examination. Except as specifically set forth above, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. This letter does not address the applicability of any section of the Code or Regulations to the facts submitted other than with respect to the sections specifically described and upon which rulings are granted. Neither does this letter constitute a determination that Family Foundation, New Foundation, and Company Foundation are exempt from tax under section 501(a) or are private foundations under section 509(a). Because it could help resolve questions concerning your federal income tax status, this ruling should be kept in your permanent records. This letter will be made available for public inspection under section 6110 of the Code after certain deletions of identifying information are made. For details, see the enclosed Notice 437, Notice of Intention to Disclose. A copy of this ruling with deletions that we intend to make available for public inspection is attached to the Notice 437. If you disagree with our proposed deletions, you should follow the instructions in the Notice 437. The Associate Office (Employee Benefits, Exempt Organizations, and Employment Taxes) will revoke or modify a letter ruling and apply the revocation retroactively if: (1) there has been a misstatement or omission of controlling facts; (2) the facts at the time of the transaction are materially different from the controlling facts on which the ruling is based; or (3) the transaction involves a continuing action or series of actions and the controlling facts change during the course of the transaction. See Rev.Proc. 2022-1, 2022-1 IRB 1, § 11.05. This letter is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent. A copy of this letter must be attached to any tax return to which it is relevant. Alternatively, if taxpayer files its returns electronically, it may satisfy this requirement by attaching a statement to its return that provides the date and control number of this letter. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. If you have any questions about this ruling, please contact the person whose name and phone number are shown in the heading of this letter. Sincerely, Virginia Richardson Senior Tax Law Specialist Office of the Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) Cc:

Private Letter Ruling Number: 202326010 Internal Revenue Service April 5, 2023 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202326010 Release Date: 6/30/2023 Index Number: 1382.00-00, 1388.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:PSI:B05 PLR-119498-22 Date: April 05, 2023 Dear ******: This is in response to a letter dated September 28, 2022, on behalf of Taxpayer by your authorized representative requesting a ruling on the transaction described below. Taxpayer is a rural telephone cooperative that was incorporated in a, under State A statutes. Taxpayer operates on a cooperative basis and was formed to bring telephone service to rural regions of State A. Taxpayer's Bylaws require it to allocate patronage earnings among its patrons on a patronage basis. Taxpayer considers a customer as any other entity with which the Taxpayer does business on a nonpatronage basis. Taxpayer was previously granted exemption as a rural telephone cooperative under section 501(c)(12) of the Internal Revenue Code (Code). At some point in its history, Taxpayer was no longer able to satisfy the requirement that it derive 85 percent or more of its income from members as required by the Code. As a result, Taxpayer now operates as a taxable cooperative corporation. Taxpayer is the parent and agent of an affiliated group that files a consolidated federal income tax return using a December 31 year end and the accrual method of accounting. Taxpayer wholly owns Consolidated Subsidiary A. Prior to b, Consolidated Subsidiary A wholly owned Consolidated Subsidiary B. Effective b, Consolidated Subsidiary B merged into Consolidated Subsidiary A, with Consolidated Subsidiary A as the surviving corporation. At the time of this merger, Consolidated Subsidiary B owned c percent of the partnership interests in Partnership, and an unrelated party owned the remaining d percent of the partnership interests in Partnership. Consolidated Subsidiary A was Taxpayer's sole subsidiary from e through f. On the day after f, Consolidated Subsidiary C was formed as a wholly owned subsidiary of Consolidated Subsidiary A. On g, Consolidated Subsidiary C acquired the d percent minority partnership interest in Partnership from the unrelated party that owned it. As a result, effective g, Taxpayer owned h percent of the partnership interests in Partnership through its ownership of Consolidated Subsidiary A, which directly owned c percent of Partnership, and its ownership of Consolidated Subsidiary C, which directly owned the remaining d percent of Partnership. As the result of transactions occurring on i and j, substantially all assets of Partnership, including related wireless licenses and equipment held by Consolidated Subsidiary A that were used in Partnership's business, were sold to unrelated parties. Taxpayer owns, operates, and maintains a fiber optic communications system in rural regions of State A, that it uses to provide state-of-the-art telecommunications services to homes and businesses in the rural communities it serves. Taxpayer's services include telecommunications exchange and local access services, long distance services, internet services, video services, wireless communications, and telecommunication equipment sales. Taxpayer provides these services to its patrons and to customers with which the Taxpayer does business on a nonpatronage basis. As a provider of telecommunication services, Taxpayer is subject to federal, state, and local regulations. To assist Taxpayer in complying with applicable regulations, Consolidated Subsidiary A holds nonregulated telecommunication assets for the benefit of Taxpayer and in furtherance of Taxpayer's telecommunication services. In k, four telecommunication companies, including Taxpayer, formed Partnership to serve rural State A communities. Partnership was formed to build a cellular network and provide cellular telecommunication services and equipment to patrons and customers with which the Taxpayer does business on a nonpatronage basis in rural areas in State A. The pooling of resources in Partnership enabled the four partners to: 1) raise necessary capital to be awarded a cellular license, 2) share costs of developing, operating, and maintaining a cellular network in rural regions of State A, 3) leverage the partners' combined purchasing power to get more favorable pricing terms on roaming and telecommunications equipment for their patrons and non-patron customers, 4) improve the quality, reliability, and affordability of the cellular services offered in their respective service areas, and 5) develop new revenue generating services and products using state-of-the-art technology, among other things. When Partnership was formed in k, Consolidated Subsidiary B and the other three partners in Partnership, each acquired a d percent partnership interest in Partnership. In l, Consolidated Subsidiary B purchased the partnership interests of two other partners, increasing its ownership to c percent of Partnership. The remaining d percent partnership interest in Partnership was owned by Entity A, a wholly owned subsidiary of Entity B. In m, Consolidated Subsidiary A and Entity A decided to end their partnership due to differences of opinion on operational matters. On n, Consolidated Subsidiary A and Entity A entered into a purchase and sale agreement, whereby Entity A agreed to sell its d percent partnership interest in Partnership to Consolidated Subsidiary C for an all-cash purchase price. The sale closed on g. Following the sale, Taxpayer owned h percent of Partnership through its ownership of Consolidated Subsidiary A, which directly owned c percent of Partnership, and its ownership of Consolidated Subsidiary C, which directly owned the remaining d percent of Partnership. During its existence, Partnership constructed and operated a wireless network in rural regions of State A that grew to include telecommunications towers and related wireless equipment and facilities at various other cellular service sites. Partnership also operated retail stores. Taxpayer used the wireless network and retail stores to provide cutting-edge wireless communication services and equipment to its patrons and to customers with which the Taxpayer does business on a nonpatronage basis in its service areas at competitive prices. In o, Taxpayer decided to exit the wireless business conducted through Partnership and focus on its services delivered through fiber optic cable. This decision was based on the belief that Taxpayer could not effectively compete with other major wireless carriers. As a result, Taxpayer decided to divest Partnership's wireless business by selling substantially all of Partnership's assets, including the wireless licenses and equipment held by Consolidated Subsidiary A that Partnership used in its business. To effectuate the divestiture, four sale agreements were entered into with three unrelated buyers. Following regulatory approval, the sale agreements were executed on i and j. Taxpayer is using the proceeds from these divestiture transactions to build out its fiber optic local exchange networks, to improve fiber-delivered services to its patrons and other customers, and to focus on its core mission of bringing state-of-theart telecommunications services to businesses and residents in the rural communities it serves. Based on the foregoing, Taxpayer requests a ruling that: 1. Consolidated Subsidiary A's distributive share of partnership income from Partnership's sale of substantially all its assets resulting from three separate divestiture transactions, constitutes patronage-sourced income and, if properly allocated to Taxpayer's patrons, is excludable from Taxpayer's consolidated gross income in the tax year of the sale. 2. Consolidated Subsidiary C's distributive share of partnership income from Partnership's sale of substantially all its assets resulting from a singular divestiture transaction, constitutes patronage-sourced income and, if properly allocated to Taxpayer's patrons, is excludable from Cooperative's consolidated gross income in the tax year of the sale. In the event a rural telephone cooperative such as Taxpayer loses its tax-exempt status, section 501(c)(12) no longer applies until such time as the cooperative again satisfies the requirements for exemption. During any taxable period, the rules applicable to the telephone cooperative depend on the reasons why it failed its exemption test. If exemption was lost because the company failed to operate on a cooperative basis, then it will be taxed under the same rules applicable to for-profit corporations. Alternatively, if the cooperative becomes taxable because it failed the so-called 85-percent-income test imposed by section 501(c)(12), then the organization will be taxed as a cooperative. While the requirements of subchapter C of the Code regarding corporate distributions and adjustments and other provisions are generally applicable to nonexempt cooperatives, these entities are distinguished from other types of corporations by a specific body of tax law. The scheme of taxation for nonexempt cooperatives was developed from the administrative pronouncements of the Service and decision of the judiciary over a fifty-year period. These rules for tax treatment of most nonexempt cooperatives and their patrons were finally codified with the enactment Subchapter T of the Code as part of the Revenue Act of 1962. Pub. L. No. 87-834 (H.R. 10650). With passage of Subchapter T, the rules for deduction of patronage dividends and the treatment of patronage dividends in the hands of a cooperative's patrons were defined. However, section 1381(a)(2)(C) of the Code states that Subchapter T is not applicable to an organization engaged in furnishing electric energy, or providing telephone service to persons in rural areas. According to the Senate Finance Committee Report accompanying the 1962 Act, the intent of Congress was that nonexempt rural electric and telephone cooperatives would continue to be treated as under "present law." In its report accompanying the legislation, the Senate Finance Committee described "present law" as follows: "Under present law patronage dividends paid by taxable cooperatives result in a reduction in the cooperative's taxable income only if they are paid during the taxable year in which the patronage occurred or within the period in the next year elapsing before the prior year's income tax return is required to be filed (including any extensions of time granted)." S. Rep. No. 1881, 87th Cong., 1st Sess. 113 (1962). Under this earlier body of tax law applicable to nonexempt telephone cooperatives, a cooperative may reduce its taxable income by any qualifying patronage dividends paid to their members/patrons. Further, under pre-1962 cooperative rules, the term "paid" means paid in cash or paid by notice of allocation. See also Rev.Rul. 83-135, 1983-2 C.B. 149 (A taxable cooperative not subject to the provisions of subchapter T may exclude from gross income the patronage dividends paid or allocated to its patrons in accordance with its by-laws). While Subchapter T does not control the taxation of nonexempt telephone cooperatives, its foundations rest upon pre-1962 cooperative tax law. As a result, there are certain basic parallels between the tax treatment of nonexempt utility cooperatives and treatment of other cooperative organizations under Subchapter T. Therefore, to extent that Subchapter T reflects cooperative taxation as it existed prior to 1962, it is in instructive resolving certain issues facing rural telephone cooperatives. This is because Congress stated that in enacting Subchapter T it was merely codifying the long common law history of cooperative taxation (with the exception of ensuring at least one annual level of tax at the cooperative or patron level. See S. Rep. No. 1881, 87 th Cong., 1 st Sess. 113 (1962)) and, arguably, the case law post-enactment is merely a continuation and refinement of the pre-enactment common law. This is particularly true with respect to defining certain terms such as "operating on a cooperative basis" and "patronage income." Perhaps the most succinct definition of the term "cooperative" for Federal income tax purposes was provided by the U.S. Tax Court in Puget Sound Plywood, Inc. v. Commissioner, 44 T.C. 305 (1965), acq. 1966-1 C.B. 3. The Tax Court said: "Under the cooperative association form or organization, on the other hand, the worker-members of the association supply their own capital at their own risk; select their own management and supply their own direction for the enterprise, through worker meetings conducted on a democratic basis; and then themselves receive the fruits of their cooperative endeavors, through allocations of the same among themselves as coworkers, in proportion to the amounts of their active participation in the cooperative undertaking." The Tax Court went on to describe three guiding principles at the core of economic cooperative theory as: "(1) Subordination of capital, both as regards control over the cooperative undertaking, and as regards the ownership of the pecuniary benefits arising therefrom; (2) democratic control by the worker-members themselves; and, (3) the vesting in and allocation among the worker-members of all fruits and increases arising from their cooperative endeavor (i.e., the excess of operating revenues over the costs incurred in generating those revenues), in proportion to the worker-members active participation in the cooperative endeavor." 44 T.C. at 308. The mechanism by which telephone cooperatives achieve operation at cost is the patronage dividend (or capital credit). Since the payment of patronage dividends (and operation at cost) is so critical to achieving cooperative status as defined by Puget Sound, it is important to analyze this issue. Rural telephone cooperatives perform a final accounting at year-end to determine the net margin derived from their members' patronage during the course of the year. Then, the excess over cost collected from members is returned to them by a capital credit allocation based on each member's patronage. Those capital credits are typically "paid" by allocations of capital credit certificates or notices of allocation, rather than in cash. The capital credits retained form the foundation for the organization's equity capital. A true patronage dividend that may be excluded from the income of a rural telephone cooperative must meet the three tests set forth in Farmers Cooperative Co. v. Birmingham, 86 F.Supp. 201 (N.D. Ia. 1949), and Pomeroy Cooperative Grain Co. v. Commissioner, 31 T.C. 674 (1958), acq., AOD 1959-2 C.B. 6. Those tests are: 1. It must be made subject to a preexisting legal obligation; 2. the allocation must be made on the basis of patronage; and 3. the margins allocated must be derived from the profits generated from patrons' dealings with the cooperative. Although the Code does not provide specific guidance as to what constitutes patronage-sourced income for a nonexempt telephone cooperative, regulations and rulings address the issues for cooperatives governed by Subchapter T. While not directly applicable to taxable utility cooperatives per se, arguably they reflect the correct analysis with respect patronage income of cooperatives subject to pre-1962 law. The Senate Committee Report accompanying the cooperative provisions in the Revenue Act of 1951 indicated that the Congress intended to tax "ordinary" (i.e., nonfarmer) cooperatives for: "non-operating income not derived from patronage, as for example in the case of interest or rental income, even if distributed to patrons on a pro rata basis." S. Rep. No. 781, 82d Cong. 1 st Sess. (1951). In response to that guidance of Congress, the Service promulgated regulations distinguishing nonpatronage income from that which is patronage derived. Section 1388(a) of the Code defines the term "patronage dividend" as an amount paid to a patron (1) on the basis of quantity or value of business done with or for such patron, (2) under an obligation of such organization to pay such amount, which obligation existed before the organization received the amount so paid, and (3) which is determined by reference to the net earnings of the organization from business done with or for its patrons. Such term does not include any amount paid to a patron to the extent that (A) such amount is out of earnings other than from business done with or for patrons, or (B) such amount is out of earnings from business done with or for other patrons to whom no amounts are paid, or to whom smaller amounts are paid, with respect to substantially identical transactions. The (B) exception is further explained under Section 1.1388-1(a)(2)(ii) of the Income Tax Regulations: "An amount paid to a patron by a cooperative organization to the extent that such amount is paid out of earnings from business done with or for other patrons to whom no amounts are paid, or to whom smaller amounts are paid, with respect to substantially identical transactions. Thus, if a cooperative organization does not pay any patronage dividends to nonmembers, any portion of the amounts paid to members which is out of net earnings from patronage with nonmembers, and which would have been paid to the nonmembers if all patrons were treated alike, is not a patronage dividend." In Rev.Rul. 69-576, 1962-2 C.B. 166, the taxpayer (a nonexempt farmers' cooperative) borrowed money from a bank for cooperatives to finance the acquisition of agricultural supplies for resale to its members. At the close of the taxable year for the bank, the bank determined its net earnings, which it then allocated to its patrons, including the nonexempt farmers' cooperative, on a patronage basis. The patronage allocations were based on the proportion of the total interest paid to it by each cooperative during the taxable year. The nonexempt farmers' cooperative included the patronage allocations received by it from the bank for cooperatives in its gross income for the taxable year received under section 1385 of the Code. Under a preexisting obligation the nonexempt farmers' cooperative then allocated and paid the same amount it received from the bank for cooperatives to its own patrons. The Rev. Rul. held that the allocation and payment of the amount by the nonexempt farmer's cooperative to its own patrons qualified as a patronage dividend. The Rev. Rul. stated that: "The classification of an item as from either patronage or non-patronage sources is dependent on the relationship of the activity generating the income to the marketing, purchasing, or service activities of the cooperative. If the income is produced by a transaction which actually facilitates the accomplishment of the cooperative's marketing, purchasing, or servicing activities, the income is from patronage sources." In Farmland Industries, Inc. v. Commissioner, 78 T.C.M. 846, 864 (1999), acq., AOD 2001-03, a cooperative organized for the purpose of providing petroleum products to its patrons, sought to have the proceeds from the disposition of its stock in three subsidiaries, along with the income from the sale of its gas and soybean facilities, and miscellaneous depreciable business assets classified as patronage source. In articulating the "directly related" test for making the determination, th e Court provides that if the income at issue is produced by a transaction which is directly related to the cooperative enterprise, such that the transaction facilitates the cooperative's marketing, purchasing or service activities, then the income is deemed to be patronage income. On the other hand, if the income is derived from a transaction that has no integral and necessary linkage to the cooperative enterprise, such that it may fairly be said that the income is merely incidental to the cooperative enterprise and does nothing more than add to the overall profitability of the cooperative, then the income is deemed to be nonpatronage income. The determination of whether income derived from a transaction that is directly related to the cooperative enterprise, and, thus, is patronage income is a determination that is necessarily fact intensive. In considering the relatedness of the income-producing transaction to the cooperative enterprise, it is important to focus on the "totality of the circumstances" and to view the business environment to which the income-producing transaction is related and not to view the transaction so narrowly as to limit it only to its income-generating characteristic when such a characterization is not consistent with the actual activity. The Court ruled that the sale of cooperative's assets met the directly related test and therefore the resultant gains and losses were patronage sourced. Section 1.1388-1(e) defines patron to include any person with whom or for whom the cooperative association does business on a cooperative basis. Based on consideration of Taxpayer's representations, since Consolidated Subsidiary A and Consolidated Subsidiary C were used for the purpose of securing cellular service for Taxpayer's patrons, income from these investments satisfies the directly related test. Accordingly, the portion of Taxpayer's income that is allocable to Taxpayer's patrons' use of Consolidated Subsidiary A's and Consolidated Subsidiary C's networks is directly related to securing cellular service for Taxpayer's patrons and is patronage sourced income, which may be excluded from Taxpayer's income if properly allocated to Taxpayer's patrons. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. The rulings contained in this letter are based upon information and representations submitted by the Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. This ruling is directed only to the taxpayers that requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent. In accordance with the power of attorney submitted with the ruling request, a copy of this letter is being sent to your authorized representatives. Sincerely yours, Associate Chief Counsel (Passthroughs & Special Industries) By: James Holmes James A. Holmes Senior Counsel, Branch 5 Office of Associate Chief Counsel (Passthroughs & Special Industries) Enclosure Copy for §6110 Purposes cc:

Internal Revenue Service - Information Release IR-2021-129 IRS unveils online tool to help low-income families register for monthly Child Tax Credit payments June 14, 2021 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS unveils online tool to help low-income families register for monthly Child Tax Credit payments IR-2021-129, June 14, 2021 WASHINGTON -- The Treasury Department and the Internal Revenue Service today unveiled an online Non-filer Sign-up tool designed to help eligible families who don't normally file tax returns register for the monthly Advance Child Tax Credit payments, scheduled to begin July 15. This tool, an update of last year's IRS Non-filers tool, is also designed to help eligible individuals who don't normally file income tax returns register for the $1,400 third round of Economic Impact Payments (also known as stimulus checks) and claim the Recovery Rebate Credit for any amount of the first two rounds of Economic Impact Payments they may have missed. Developed in partnership with Intuit and delivered through the Free File Alliance, this tool provides a free and easy way for eligible people who don't make enough income to have an income tax return-filing obligation to provide the IRS the basic information needed--name, address, and Social Security numbers--to figure and issue their Advance Child Tax Credit payments. Often, these are individuals and families who receive little or no income, including those experiencing homelessness and other underserved groups. This new tool is available only on IRS.gov. "We have been working hard to begin delivering the monthly Advance Child Tax Credit to millions of families with children in July," said IRS Commissioner Chuck Rettig. "This new tool will help more people easily gain access to this important credit as well as help people who don't normally file a tax return obtain an Economic Impact Payment. We encourage people to review the details about this important new effort." The Non-filer Sign-up tool is for people who did not file a tax return for 2019 or 2020 and who did not use the IRS Non-filers tool last year to register for Economic Impact Payments. The tool enables them to provide required information about themselves, their qualifying children age 17 and under, their other dependents, and their direct deposit bank information so the IRS can quickly and easily deposit the payments directly into their checking or savings account. No action needed by most families Eligible families who already filed or plan to file 2019 or 2020 income tax returns should not use this tool. Once the IRS processes their 2019 or 2020 tax return, the information will be used to determine eligibility and issue advance payments. Families who want to claim other tax benefits, such as the Earned Income Tax Credit for low- and moderate-income families, should not use this tool and instead file a regular tax return. For them, the fastest and easiest way to file a return is the Free File system, available only on IRS.gov. Public-private partnership plays vital role Intuit developed the Non-filer Sign-up tool for the IRS and delivers this tool through its participation in the Free File Alliance. Intuit has a long history of working closely with the IRS on innovative solutions, including last year's Non -filers: Enter Payment Info Here tool. In addition, for many years, Intuit has offered Free File Fillable Forms, also delivered through the Free File Alliance. This is the electronic version of IRS paper forms, which provides all taxpayers with the option to electronically file for free. There are no income restrictions for using this option to file a 2020 tax return. Watch out for scams The IRS urges everyone to be on the lookout for scams related to both Advance Child Tax Credit payments and Economic Impact Payments. The IRS emphasized that the only way to get either of these benefits is by either filing a tax return with the IRS or registering online through the Non-filer Sign-up tool, exclusively on IRS.gov. Any other option is a scam. Watch out for scams using email, phone calls or texts related to the payments. Be careful and cautious: The IRS never sends unsolicited electronic communications asking anyone to open attachments or visit a non-governmental web site. Other tools coming soon The IRS has created a special Advance Child Tax Credit 2021 page at IRS.gov/childtaxcredit2021, designed to provide the most up-to-date information about the credit and the advance payments. The page already features a link to the Non-filer Sign-up tool. In the next few weeks, it will also feature other useful new tools, including: - An interactive Child Tax Credit eligibility assistant to help families determine whether they qualify for the Advance Child Tax Credit payments. - Another tool, the Child Tax Credit Update Portal, will initially enable anyone who has been determined to be eligible for advance payments to see that they are eligible and unenroll/opt out of the advance payment program. Later, it will allow people to check on the status of their payments, make updates to their information and be available in Spanish. Community partners can help The IRS urges community groups, non-profits, associations, education organizations and anyone else with connections to people with children to share this critical information about the Advance Child Tax Credit as well as other important benefits. The IRS will provide additional materials and information in the near future that can be easily shared by social media, email and other methods. About the Advance Child Tax Credit The expanded and newly-advanceable Child Tax Credit was authorized by the American Rescue Plan Act, enacted in March. Normally, the IRS will calculate the payment based on a person's 2020 tax return, including those who use the Non-filer Sign-up tool. If that return is not available because it has not yet been filed or is still being processed, the IRS will instead determine the initial payment amounts using the 2019 return or the information entered using the Non-filers tool that was available in 2020. The payment will be up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 through 17. To make sure families have easy access to their money, the IRS will issue these payments by direct deposit, as long as correct banking information has previously been provided to the IRS. Otherwise, people should watch their mail around July 15 for their mailed payment. The dates for the Advance Child Tax Credit payments are July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec. 15. For more information, visit IRS.gov/childtaxcredit2021, or read FAQs on the 2021 Child Tax Credit and Advance Child Tax Credit Payments.

Internal Revenue Service - Information Release IR-2020-148 IRS provides last-minute tips for last-minute filers July 10, 2020 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS provides last-minute tips for last-minute filers IR-2020-148, July 10, 2020 WASHINGTON -- With the July 15 tax-filing deadline postponed from April 15 - only a few days away, the IRS is reminding taxpayers who have yet to file their tax returns that IRS.gov has tools and services to help them meet their tax obligations. IRS tax help is available 24 hours a day on IRS.gov. Whether filing a tax return, requesting an extension or making a payment, the IRS website can help last-minute filers on just about everything related to taxes. Taxpayers can also use the Interactive Tax Assistant tool to answer many tax questions they may encounter. The IRS reminds taxpayers they have a range of expert help available through a qualified tax professional, including certified public accountants, enrolled agents and attorneys. The IRS encourages people who need the help of a tax professional to visit a special page on IRS.gov. Prepare and file taxes for free Taxpayers also have several options for preparing and filing their tax returns: - Taxpayers with income of $69,000 or less can use IRS Free File to find free tax preparation software. - Taxpayers with incomes above $66,000 and comfortable doing their own taxes can use Free File Fillable Forms for free. - Use commercial tax prep software to prepare and file taxes through IRS approved electronic channels. - Use an authorized e-File provider accepted by our electronic filing program. Authorized IRS e-file providers are qualified to prepare, transmit and electronically file returns. - Members of the military and qualified veterans can use MilTax, a free online tax service provided by the Department of Defense and Military OneSource. Receive refunds faster The fastest way to receive a refund is to file electronically and use direct deposit. Taxpayers who file electronically and request direct deposit for their refund need to know that: - Nine out of 10 tax refunds are issued in 21 days or less. - The best way to check on a refund is the Where's My Refund? tool. - The Where's My Refund? tool available on IRS.gov and the IRS2Go mobile app. - Where's My Refund? is updated once a day, usually overnight. - Refunds can be divided into up to three accounts. Delays for paper tax returns The IRS is experiencing delays in processing paper tax returns due to limited staffing. This is another reason that taxpayers should choose to electronically file their taxes. Taxpayers who filed a paper tax return and expect a refund may experience a delay beyond the normal time frame of four to six weeks from the time they mailed the return. The IRS will process paper returns in the order they are received. Taxpayers should not file the same return again or call the IRS if they filed a paper tax return and are experiencing a refund delay. Get more time to file Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension to Oct. 15 in one of two ways: - Filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. - Submitting an electronic payment with Direct Pay, Electronic Federal Tax Payment System or by debit, credit card or digital wallet options and selecting Form 4868 or extension as the payment type. The automatic extension of time to file will process when taxpayers pay all or part of their taxes, electronically, by the July 15 due date. An extension to file is not an extension to pay. Taxes are still due by July 15. Special rules may apply for some military personnel if they are: - Serving in a combat zone or a qualified hazardous duty area - Living outside the United States Pay with ease Taxpayers can file now and schedule their federal tax payments up to the July 15 due date. They can pay online, by phone or with their mobile device using the IRS2Go app. When paying federal taxes electronically taxpayers should remember: - Electronic payment options are the optimal way to make a tax payment. - They can pay when they file electronically using tax software online. If using a tax preparer, taxpayers should ask the preparer to make the tax payment through an electronic funds withdrawal from a bank account. - IRS Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance. - Taxpayers can choose to pay with a credit card, debit card or digital wallet option through a payment processor. The payment processor adds a fee; no fees go to the IRS. - The IRS2Go app provides the mobile-friendly payment options, including Direct Pay and through payment providers. - Taxpayers may also enroll in the Electronic Federal Tax Payment System and have a choice of paying online or by phone by using the EFTPS Voice Response System. Get more time to pay Qualified taxpayers can choose to pay any taxes owed over time through an installment agreement. An online payment plan can be set up in a matter of minutes. Interest and late-payment penalties continue to accrue on any unpaid taxes after July 15. Payment options include: - Short-term payment plan (paying within 120 days). - Long-term payment plan (paying in more than 120 days). However, a taxpayer's specific tax situation will determine which payment options are available. The IRS has more information for taxpayers who owe taxes, but cannot afford to pay the full amount. Get the full picture Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, access their tax records online, review their payment history and view key tax return information for the most recent tax return as originally filed.

Notice 2023-62 Internal Revenue Service 2023-37 I.R.B. 817 Guidance on Section 603 of the SECURE 2.0 Act with Respect to Catch-Up Contributions Notice 2023-62 I. PURPOSE This notice provides guidance with respect to section 603 of Division T of the Consolidated Appropriations Act, 2023, Pub. L. 117-328, 136 Stat. 4459 (2022), known as the SECURE 2.0 Act of 2022 (SECURE 2.0 Act). Among other changes, section 603 of the SECURE 2.0 Act requires that, in the case of certain eligible participants, catch - up contributions under section 414(v)(1) of the Internal Revenue Code (Code) must be designated as Roth contributions pursuant to an employee election. This notice is not intended to provide comprehensive guidance as to section 603 of the SECURE 2.0 Act, but rather is intended to provide guidance on particular issues to assist in the implementation of that section. This notice also announces a 2-year administrative transition period with respect to the requirement under section 603 of the SECURE 2.0 Act that catch-up contributions made on behalf of certain eligible participants be designated as Roth contributions. The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have been made aware of taxpayer concerns with being able to timely implement section 603 of the SECURE 2.0 Act. The administrative transition period described in this notice is intended to facilitate an orderly transition for compliance with that requirement. The Treasury Department and the IRS continue to work on implementation of section 603 of the SECURE 2.0 Act and intend to issue further guidance, as described in section V of this notice. The Treasury Department and the IRS invite comments on this notice and any other aspect of section 603 of the SECURE 2.0 Act. II. BACKGROUND Section 414(v)(1) of the Code provides that an applicable employer plan (as defined in section 414(v)(6)(A)) will not be treated as failing to meet any requirement of the Code solely because the plan permits an eligible participant (as defined in section 414(v)(5)) to make additional elective deferrals under section 414(v) (catch-up contributions) in any plan year. Section 414(v)(3)(A)(i) further provides that a catch - up contribution is not, with respect to the year in which the contribution is made, subject to any otherwise applicable limitation contained in section 401(a)(30) (that is, the limitation on the exclusion of elective deferrals from gross income under section 402(g)(1)(A)), 403(b) (including the requirement under section 403(b)(1)(E) that a contract purchased under a salary reduction agreement satisfy the requirements of section 401(a)(30)), or 457(b)(2) (determined without regard to section 457(b)(3)), among other provisions. Section 603(a) of the SECURE 2.0 Act amends section 414(v) of the Code to add section 414(v)(7). Section 414(v)(7)(A) generally provides that, in the case of an eligible participant whose wages (as defined in section 3121(a)) for the preceding calendar year from the employer sponsoring the plan exceed $145,000 (as adjusted under section 414(v)(7)(E)), section 414(v)(1) applies only if any catch-up contributions are designated Roth contributions (as defined in section 402A(c)(1)) made pursuant to an employee election. Section 414(v)(7)(B) provides that, in the case of an applicable employer plan with respect to which section 414(v)(7)(A) applies to any participant for a plan year, section 414(v)(1) does not apply to the plan unless the plan provides that any eligible participant may make catch-up contributions as designated Roth contributions. Thus, if a plan provides that an eligible participant who is subject to the requirements of section 414(v)(7)(A) may make catch-up contributions as designated Roth contributions, then all eligible participants in the plan must be permitted to make catch-up contributions as designated Roth contributions. Section 414(v)(7)(C) provides that section 414(v)(7)(A) does not apply in the case of an applicable employer plan described in section 414(v)(6)(A)(iv) (a SEP arrangement under section 408(k) or a SIMPLE IRA plan under section 408(p)). Thus, section 414(v)(7)(A) applies in the case of an applicable employer plan that is a qualified plan under section 401(a) (including a section 401(k) plan), a section 403(b) plan, or a section 457(b) plan maintained by an employer described in section 457(e)(1)(A) (an eligible governmental plan). Section 414(v)(7)(D) provides that the Secretary (the Secretary of the Treasury or the Secretary's delegate) may provide by regulations that an eligible participant may elect to change the participant's election to make catch-up contributions if the participant's compensation is determined to exceed the limitation under section 414(v)(7)(A) after the election is made. Section 603(b) of the SECURE 2.0 Act includes conforming amendments with respect to section 603(a). Section 603(b)(1) of the SECURE 2.0 Act strikes section 402(g)(1)(C) of the Code. Prior to that amendment, section 402(g)(1)(C) provided that an eligible participant's gross income does not include elective deferrals in excess of the applicable dollar amount under section 402(g)(1)(B) 1 to the extent that the amount of those elective deferrals does not exceed the applicable dollar amount under section 414(v)(2)(B)(i) 2 for the taxable year (without regard to the treatment of the elective deferrals by an applicable employer plan under section 414(v)). ******** 1 The applicable dollar amount under section 402(g)(1)(B) is $22,500 for 2023. 2 The applicable dollar amount under section 414(v)(2)(B)(i) is $7,500 for 2023. ******** Section 603(b)(2) of the SECURE 2.0 Act amends section 457(e)(18)(A)(ii) of the Code to replace "the applicable dollar amount for the taxable year determined under section 414(v)(2)(B)(i), or" with "the lesser of any designated Roth contributions made by the participant to the plan or the applicable dollar amount for the taxable year determined under section 414(v)(2)(B)(i), or". Section 603(c) of the SECURE 2.0 Act provides that the amendments made by section 603 apply to taxable years beginning after December 31, 2023. III. GUIDANCE ON SECTION 603 OF THE SECURE 2.0 ACT A. Catch-Up Contributions for Taxable Years Beginning After December 31, 2023 Pursuant to section 414(v)(1), an applicable employer plan is not treated as failing to meet any requirement of the Code solely because the plan permits an eligible participant to make catch-up contributions under section 414(v) in any plan year. Accordingly, for taxable years beginning after December 31, 2023, an applicable employer plan may permit an eligible participant to make elective deferrals under the plan that exceed the applicable dollar amount under section 402(g)(1)(B) (or deferrals under the plan that exceed the applicable dollar amount under section 457(e)(15)) if those contributions in excess of the applicable dollar amount satisfy the requirements under section 414(v) for catch-up contributions. The elimination of section 402(g)(1)(C) of the Code under section 603(b)(1) of the SECURE 2.0 Act does not change this result for taxable years beginning after December 31, 2023. 3 ******** 3 Proposed regulations, which were issued before the enactment in 2002 of section 402(g)(1)(C), permitted catch - up contributions in excess of the applicable dollar amount under section 402(g)(1)(B) or 457(e)(15) for purposes of section 414(v). See proposed § 1.414(v)-1(a)(1) and (b)(1)(i), 66 FR 53555 (the 2001 NPRM). ******** If an eligible participant is subject to the requirements of section 414(v)(7)(A), then any catch-up contributions that are made to the plan on behalf of the participant must be designated as Roth contributions. However, if an eligible participant is not subject to the requirements of section 414(v)(7)(A), then any catch-up contributions that are made to the plan on behalf of the participant are not required to be designated as Roth contributions. In that case, any catch - up contributions under section 414(v) that are made to the plan on behalf of the participant that are not designated as Roth contributions are not includible in the participant's gross income under section 402(g)(1)(A) (and do not exceed the limitation in section 457(b)(2)) because, in accordance with section 414(v)(3)(A)(i), the limitations on elective deferrals under sections 401(a)(30) and 403(b) (and the limitation on deferrals under section 457(b)(2)) do not apply to those catch-up contributions. B. Elective Deferrals Made to Two or More Plans If an individual makes elective deferrals to two or more plans during a taxable year (including plans maintained by unrelated employers), then, under section 402(g)(1)(A), those elective deferrals are aggregated for purposes of determining whether the amount of the individual's elective deferrals exceeds the applicable dollar amount under section 402(g)(1)(B). Similarly, an eligible participant's elective deferrals made to two or more plans during a taxable year are also aggregated for purposes of applying the limitation on the amount of catch-up contributions under section 414(v)(2). The elimination of section 402(g)(1)(C) of the Code under section 603(b)(1) of the SECURE 2.0 Act does not change this result for taxable years beginning after December 31, 2023. 4 ******** 4 Proposed § 1.414(v) - 1(g) of the 2001 NPRM also provided for aggregation of an eligible participant's elective deferrals made to two or more plans for purposes of section 414(v)(2). ******** IV. ADMINISTRATIVE TRANSITION PERIOD Under section 603(c) of the SECURE 2.0 Act, the provisions of section 603 apply to taxable years beginning after December 31, 2023. However, the first two taxable years beginning after December 31, 2023, will be regarded as an administrative transition period with respect to the requirement under section 414(v)(7)(A) of the Code that catch-up contributions made on behalf of certain eligible participants be designated as Roth contributions. Specifically, until taxable years beginning after December 31, 2025, (1) those catch-up contributions will be treated as satisfying the requirements of section 414(v)(7)(A), even if the contributions are not designated as Roth contributions, and (2) a plan that does not provide for designated Roth contributions will be treated as satisfying the requirements of section 414(v)(7)(B). V. GUIDANCE UNDER CONSIDERATION REGARDING SECTION 603 OF THE SECURE 2.0 ACT As noted in section I of this notice, the Treasury Department and the IRS intend to issue further guidance to assist taxpayers with the implementation of section 603 of the SECURE 2.0 Act. The guidance that the Treasury Department and the IRS anticipate issuing with respect to section 603 of the SECURE 2.0 Act, after taking into account any comments received, is expected to include: 1. Guidance clarifying that section 414(v)(7)(A) of the Code would not apply in the case of an eligible participant who does not have wages as defined in section 3121(a) (that is, wages for purposes of the Federal Insurance Contributions Act (FICA)) for the preceding calendar year from the employer sponsoring the plan. For example, under that guidance, if an eligible participant did not have any wages for purposes of FICA for the preceding calendar year because the individual was a partner (or other self-employed individual) receiving self-employment income or because the individual was a State or local government employee whose services were excluded from the definition of employment under section 3121(b)(7), then the eligible participant would not be subject to the requirements of section 414(v)(7)(A). 2. Guidance providing that, in the case of an eligible participant who is subject to section 414(v)(7)(A), the plan administrator and the employer would be permitted to treat an election by the participant to make catch - up contributions on a pre-tax basis as an election by the participant to make catch-up contributions that are designated Roth contributions. 5 ******** 5 Under section 402A(c)(1)(B), an employee may designate elective deferrals as Roth contributions at such time and in such manner as the Secretary may prescribe. Sections 1.401(k)-1(f)(1)(i) and 1.403(b) - 3(c)(1) provide that a designation of an elective contribution as a Roth contribution must be made at the time of the cash or deferred election, and a similar rule applies to an eligible governmental plan. ******** 3. Guidance addressing an applicable employer plan that is maintained by more than one employer (including a multiemployer plan). The guidance would provide that an eligible participant's wages for the preceding calendar year from one participating employer would not be aggregated with the wages from another participating employer for purposes of determining whether the participant's wages for that year exceed $145,000 (as adjusted). For example, under that guidance, if an eligible participant's wages for a calendar year were: (1) $100,000 from one participating employer; and (2) $125,0000 from another participating employer, then the participant's catch - up contributions under the plan for the next year would not be subject to section 414(v)(7)(A) (even if the participant's aggregate wages from the participating employers for the prior calendar year exceed $145,000, as adjusted). The guidance also would provide that, even if an eligible participant is subject to section 414(v)(7)(A) because the participant's wages from one participating employer in the plan for the preceding calendar year exceed $145,000 (as adjusted), elective deferrals made on behalf of the participant by another participating employer that are catch-up contributions would not be required to be designated as Roth contributions unless the participant's wages for the preceding calendar year from that other employer also exceed that amount. VI. REQUEST FOR COMMENTS The Treasury Department and the IRS invite comments and suggestions regarding the matters discussed in this notice and any other aspect of section 603 of the SECURE 2.0 Act. In particular, the Treasury Department and the IRS request comments on section V of this notice. In addition, comments are requested with respect to whether the intended guidance should address a plan that permits eligible participants to make catch-up contributions under section 414(v) but does not include a qualified Roth contribution program. In particular, should the guidance provide that such a plan will not fail to satisfy section 414(v)(4) (which provides that all eligible participants must be allowed to make the same election with respect to catch-up contributions) or section 414(v)(7)(B), merely because the plan provides that eligible participants who are not subject to section 414(v)(7)(A) are permitted to make catch-up contributions while eligible participants who are subject to section 414(v)(7)(A) are prohibited from making catch-up contributions. 6 ******** 6 Under section 402A(a), an applicable retirement plan may, but is not required to, include a qualified Roth contribution program. However, in the case of an eligible participant who is subject to section 414(v)(7)(A), the catch - up contribution provisions of section 414(v)(1) apply only if any catch - up contributions are designated as Roth contributions. Accordingly, if an applicable employer plan does not include a qualified Roth contribution program, then an eligible participant who is subject to section 414(v)(7)(A) would be prohibited from making catch-up contributions under the plan. ******** Comments should be submitted in writing on or before October 24, 2023, and should include a reference to Notice 2023-62. Comments may be submitted electronically via the Federal eRulemaking Portal at www.regulations.gov (type "IRS-2023-0039" in the search field on the Regulations.gov home page to find this notice and submit comments). Alternatively, comments may be submitted by mail to: Internal Revenue Service, Attn: CC:PA:LPD:PR (Notice 2023-62), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. The Treasury Department and the IRS will publish for public availability any comment submitted electronically or on paper to its public docket. VII. DRAFTING INFORMATION The principal author of this notice is the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the Treasury Department and the IRS participated in the development of this guidance. For further information regarding this notice, contact Kara M. Soderstrom at (202) 317-6799 (not a toll-free number).

Private Letter Ruling Number: 202141004 Internal Revenue Service July 21, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202141004 Release Date: 10/15/2021 Index Number: 1400Z.02-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:5 PLR-109639-21 Date: July 21, 2021 Dear *******: This ruling responds to Taxpayer's request for a letter ruling dated Date 1. Specifically, Taxpayer requests an extension under sections 301.9100-1 and 301.9100-3 of the Income Tax Regulations to (1) make a timely election under section 1.1400Z2(a)-1(a)(2)(i) to be certified as a qualified opportunity fund (QOF), as defined in section 1400Z-2(d) of the Internal Revenue Code, and (2) for Taxpayer to be treated as a QOF as of the first month of its taxable year ending Date 2, as provided by section 1400Z-2 and section 1.1400Z2(d)-1(a). FACTS Taxpayer is a limited liability company organized under the laws of State Z on Date 3 and is treated as a partnership for Federal income tax purposes. Taxpayer was organized for the purpose of investing in and rehabilitating qualified opportunity zone property as defined in section 1400Z-2(d)(2) of the Internal Revenue Code. Taxpayer's method of accounting is the accrual method of accounting with a tax year end Date 4. Taxpayer is requesting an extension of time under section 301.9100-3(b)(1) of the Income Tax Regulations to self-certify as a Qualified Opportunity Fund (QOF) under section 1.1400Z2(d)-1. Taxpayer was formed with the intent to be the X% owner of Entity. Entity is an LLC classified as a partnership for federal income tax purposes and was formed for the purpose of operating as a Qualified Opportunity Zone Business as defined in § 1400Z-2(d)(3) and section 1400Z2(d)(-1). Taxpayer engaged the services of Accounting Firm in Year 1. Tax Advisor was the primary contact for Taxpayer, and aware of Entity's acquisition of the property in a qualified opportunity zone. According to the affidavits and additional information provided to us, B and Taxpayer discussed forming a QOF. However, Tax Advisor was unaware of the requirement to file Form 8996, Qualified Opportunity Fund with the Taxpayer's timely filed Year 1 Federal income tax return for Taxpayer to self-certify QOF status, as Taxpayer otherwise had no filing obligation for that taxable year. As a result, Taxpayer failed to file Form 8996 and its Form 1065, U.S. Return of Partnership Income for Year 1 by the due date. B became concerned with the level of service Taxpayer received from Tax Advisor. B engaged the services of Accounting Firm C in Year 2. In discussions with Accounting Firm C concerning the qualification of Taxpayer as a QOF,B was informed of the need to file Form 8996 with the tax return for the Year 1. B subsequently authorized Accounting Firm C to file a private ruling request for relief under sections 301.9100-1 and 301.9100-3 on Date 1. LAW AND ANALYSIS Section 1400Z-2(e)(4)(A) of the Internal Revenue Code directs the Secretary to prescribe regulations for rules for the certification of QOFs. Section 1.1400Z2(d)-1(a)(2) of the Income Tax Regulations provides that the rules for an entity to self-certify as a QOF. Section 1.1400Z2(a)-1(a)(2)(i) provides that the entity electing to be certified as a QOF must do so annually on a timely filed return in such form and manner as may be prescribed by the Commissioner of Internal Revenue in the Internal Revenue Service forms or instructions, or in publications or guidance published in the Internal Revenue Bulletin. To self-certify as a QOF, a taxpayer must file Form 8996, Qualified Opportunity Fund, with its tax return for the year to which the certification applies. The Form 8996 must be filed by the due date of the tax return (including extensions). The information provided indicates that the taxpayer did not file its Form 8996 by the due date of its income tax return (including extensions) due to his belief that submission was not required for the year at issue. Because section 1.1400Z2(d)-1(a)(2)(i) sets forth the manner and timing for an entity to self-certify as a QOF, these elections are regulatory elections, as defined in section 301.9100-1(b). Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections (other than automatic extensions covered in section 301.9100-2) will be granted when the taxpayer provides evidence (including affidavits) to establish that the taxpayer acted reasonably and in good faith and the grant of relief will not prejudice the interests of the Government. Under section 301.9100-3(b) a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer requests relief before the failure to make the regulatory election is discovered by the Service, or reasonably relied on a qualified tax professional, and the tax professional failed to make, or advise the taxpayer to make, the election. However, a taxpayer is not considered to have reasonably relied on a qualified tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or was not aware of all relevant facts. In addition, section 301.9100-3(b)(3) provides that a taxpayer is deemed not to have acted reasonably and in good faith if the taxpayer-- (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under § 6662 at the time the taxpayer requests relief, and the new position requires or permits a regulatory election for which relief is requested; (ii) was fully informed in all material respects of the required election and related tax consequences but chose not to make the election; or (iii) uses hindsight in requesting relief. If specific facts have changed since the original deadline that make the election advantageous to a taxpayer, the Service will not ordinarily grant relief. Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under § 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. Based on the facts and information submitted and the representations made, we conclude that Taxpayer has acted reasonably and in good faith, and that the granting of relief would not prejudice the interests of the government. Accordingly, based solely on the facts and information submitted, and the representations made in the ruling request, we grant the taxpayer an extension of 45 days from the date of this letter ruling to file an amended return to make the election under section 1400Z-2 and section 1.1400Z2(d)-1(a)(2)(i). The election is to be made on Form 8996. This ruling is based upon facts and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. This office has not verified any of the material submitted in support of the request for a ruling. However, as part of an examination process, the Service may verify the factual information, representations, and other data submitted. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we express no opinion, either express or implied, concerning whether any investments made into Taxpayer are qualifying investments as defined in section 1.1400Z2 (a)-1(b)(3) or whether the taxpayer meets the requirements under section 1400Z-2 and the regulations thereunder to be a QOF. We express no opinion regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. Sincerely, Shareen S. Pflanz Chief, Branch 5 Office of Associate Chief Counsel (Income Tax & Accounting) cc:

Private Letter Ruling Number: 202319018 Internal Revenue Service November 15, 2022 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Release Number: 202319018 Release Date: 5/12/2023 UIL Code: 501.03-00 Date: November 15, 2022 Taxpayer ID number (last 4 digits): Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with United States Tax Court: February 13, 2023 CERTIFIED MAIL - Return Receipt Requested Dear ******: Why we are sending you this letter This is a final determination that you don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective ******. Your determination letter dated ******, is revoked. Our adverse determination as to your exempt status was made for the following reasons: Organizations described in IRC Section 501(c)(3) and exempt under IRC Section 501(a) must be both organized and operated exclusively for exempt purposes. You have not demonstrated that you are organized for exempt purposes within the meaning of IRC Section 501(c)(3). Additionally, you have not demonstrated that you are operated for exempt purposes within the meaning of IRC Section 501(c)(3). Organizations that are not exempt under Internal Revenue Code (IRC) Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov. Contributions to your organization are no longer deductible under IRC Section 170. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a fillable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: US Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3). Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Internal Revenue Service Taxpayer Advocate Office Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. You may fax your documents to the fax number shown above, using either a fax machine or online fax service. Protect yourself when sending digital data by understanding the fax service's privacy and security policies. Keep the original letter for your records. Sincerely, Lynn A. Brinkley Acting Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: 01/21/2022 Taxpayer ID number: Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: 02/20/2022 CERTIFIED MAIL -- Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3). If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(3) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpaveradvocate.irs.gov, or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely. Karen T. Hood ****** for Sean E. O'Reilly Director, Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 Form 4621-A Publication 892 Publication 3498 ISSUES: 1) Did ****** fail to timely file the required Information Return Form 990, fail to establish reasonable cause, and therefore is liable for penalties under §6652 of the Internal Revenue Code ("Code")? 2) Is ****** organized and operated exclusively for an exempt purpose within the meaning of §501(c)(3) of the Code? 3) Should ****** continue to be recognized as tax exempt under §501(a) of the Code as an organization described in §501(c)(3)? FACTS ******, hereinafter referred to as the Organization, was incorporated under the laws of the state of ****** as a nonprofit corporation on ******. In a determination letter dated ******, the Organization was held to be exempt from federal income tax as an organization described in Code §501(c)(3) and classified as a public charity described in Code §509(a)(1) and §170(b)(1)(A)(vi). The Organization filed for an exemption determination electronically on Form 1023-EZ, Streamline Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, signed on ******. The application attested that the organizational document contained the required limitation and dissolution provisions, that it was organized and operated for charitable purposes, and that it would not conduct activities that violate the applicable prohibitions and restrictions. The Articles of Incorporation provides the following statement to address the specific purpose for which the corporation was organized: "OUR MAIN GOAL IS TO TAKE CARE OF THE ONES WHO TOOK CARE OF US. WE ARE HERE TO HELP VETERANS IN NEED AS WELL AS THEIR FAMILY MEMBERS, WHETHER SOMEONE IS IN NEED OF FOOD, SHELTER, CLOTHES, ETC..., WE WILL BE THERE" The Articles does not contain the dissolution provision required under §501(c)(3). The ****** officers described their exempt activities to include talking to ****** in need of conversation, referring ****** to the ****** (******) for services and providing financial assistance to veterans and their family members. The ****** was also included in databases where it received referrals from other charities to assist needy individuals in their area. The ****** frequently set up a booth at the ****** in ****** where it would advertise the EO's services, give out T-Shirts, and solicit cash donations. The ****** also received donations through various corporate programs, such as ******, where donors selected a charity to which ****** would remit a portion of the donors purchase as a charitable contribution. On ******, the ****** website, ******, was observed to include information about ******, including an image and contact information for the purchase of the product. The website stated the following: The website also included a page titled "******", which included live links to the websites of ******, an ****** owned and operated by the ****** Treasurer, and ******, a ****** owned and operated by the ****** Vice President. During the periods under examination, the ****** issued a total of ****** grants to individuals. Between ****** and ******, the ****** issued one grant to individuals totaling $ ******. Between ****** and ******, the ****** issued no grants. Between ****** and ******, the ****** issued a total of ****** grants to individuals, totaling $ ******. The payments are summarized in the Appendix on Page 13, Exhibit 1. On ******, in response to Information Document Request 4, the ****** provided a narrative regarding the charitable distributions issued in ******. "****** received $ ****** for tools. He was part of a ****** program for the homeless and needed tools to do the program. We gave him the grant so he would get off the streets and start a new life. ******, was given $ ****** to catch up on bills. He was behind on bills and was on the verge of becoming homeless, so we helped him. ****** received $ ****** for food. Simply put he needed food and we helped him ****** received ****** for electric. He was behind on his payments and we helped him so his electric would not be shut off. ****** received $ ****** to help him purchase gifts for his daughter. His daughter loves music and they did not have any funds to buy her some musical instruments, so we helped them. Everyone we help is on a case by case phone call evaluation. I ask them their yearly income, if they're married or have children. I ask if they are service connected and if so how much. We do not have an application process due to not being a big non-profit organization. I have no documentation for my decisions." The ****** acquired and disposed of real property in bargain sale transactions facilitated by ****** (******), a disinterested for-profit entity, who was contracted for brokerage and property management services. As a part of the services, the ****** located sellers who wished to donate real estate properties at an amount below the fair market value (FMV), a listing of qualified appraisers to complete the required appraisals, and buyers who desired to purchase the property from the ******. The ****** also facilitated financing through negotiating seller financing, or covered acquisition costs and recouped these costs from the ****** during the closing of the disposition sale. Beginning in ****** and concluding in ******, the ****** acquired properties appraised at $ ******. As a part of the transactions, the ****** provided the donors acknowledgement of $ ****** in noncash contributions. The ****** financed the remaining $ ****** through the ****** and sellers. During the period of ownership, the ****** collected $ ****** on behalf of the ******, comprising of rents and earnest money income from breached buyer contracts. This income was later netted against expenditures associated with acquisition and disposition costs after the final disposition of the property. In ******, the ****** disposed of all properties for $ ******, and paid total fees and closing costs of $ ******, of which $ ****** was paid to the ****** for services. The ****** net income from these transactions totaled $ ******. See Page 14, Exhibit 2 for a summary of transactions by property, including gross income, fees, and net income. For the periods ending ****** and ******, the ****** timely filed ******, declaring that their gross receipts are normally $ ****** or less. During the examination, the ****** was requested to file an information return to report noncash contributions, assets, and income and expenses from rental and real estate activities. On ******, the ****** filed ****** the tax period ending ****** indicating gross receipts of $ ****** and total assets of $ ******. On the same day, it filed ****** for the period ending ****** indicating gross receipts of $ ****** and total assets of $ ******. It also timely filed ****** for the tax period ending ****** on ******, indicating gross receipts of $ ****** and total assets of $ ******. Return information, as filed, is detailed in the Appendix on Page 15, Exhibit 3: LAW Code §501(c)(3) exempts from federal income tax organizations organized and operated exclusively for charitable, educational, and other purposes, provided that no part of the organization's net earnings inures to the benefit of any private shareholder or individual. Code §6033(a)(1) requires, in part, that organizations exempt from taxation under §501(a) to file an annual return stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe. Code §6652(c) imposes a penalty for failure to file a return required under §6033(a)(1) on the date and in the manner prescribed, failure to include any of the information required to be shown on a return, or failure to show the correct information. The penalty is $20 for each day during which such failure continues. For returns required to be filed in 2019, the maximum penalty for failure to timely file the required return with all required information with respect to any one return shall not exceed the lesser of $10,000 or 5 percent of the gross receipts of the organization for the year. Treas.Reg. §1.501(c)(3)-1(a) of the Income Tax Regulations (Treas.Reg.) provides that in order to be exempt as an organization described in Code §501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt. Treas.Reg. §1.501(c)(3)-1(b)(4) states that an organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt purpose. An organization's assets will be considered dedicated to an exempt purpose, for example, if, upon dissolution, such assets would, by reason of a provision in the organization's articles or operation of law, be distributed for one or more exempt purposes. Treas.Reg. §1.501(c)(3)-1(c)(1) provides that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in Code §501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. Treas.Reg. §1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or operated exclusively for one or more of the purposes specified in subdivision (i) of this subparagraph unless it serves a public rather than a private interest. Thus, to meet the requirement of this subdivision, it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such private interests. Treas.Reg. §1.501(c)(3)-1(d)(1)(iii), Example 3, describes an organization that is deemed to violate the restriction on private benefit due to their arrangement with a related for-profit entity, regardless of whether the payments to the related for-profit entity are reasonable. Treas.Reg. §1.501(c)(3)-1(d)(2) defines "Charitable" to include; relief of the poor and distressed or of the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening of the burdens of government; and promotion of social welfare by organizations designed to accomplish any of the above purposes, or (i) to lessen neighborhood tensions; (ii) to eliminate prejudice and discrimination; (iii) to defend human and civil rights secured by law; or (iv) to combat community deterioration and juvenile delinquency. Revenue Procedure (Rev.Proc.) 82-2, 1982-1 C.B.367 identifies the states and circumstances in which the Service will not require an express provision for the distribution of assets upon dissolution in an exempt organization's articles of incorporation, trust instrument, or other organizing document to satisfy the "organizational" test in Treas.Reg. §1.501(c)(3)-1(b)(4). In Better Business Bureau of Washington, D.C. v. U.S., 326 U.S. 279 (1945), the Supreme Court held that "the presence of a single non-exempt purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of truly exempt purposes." In est of Hawaii v. Commissioner, 71 T.C. 1067 (1979), several for-profit est organizations exerted significant indirect control over est of Hawaii, a nonprofit entity, through contractual arrangements. The Tax Court concluded that the for-profits were able to use the nonprofit as an "instrument" to further their for-profit purposes. The question for the Tax Court was not whether petitioner's payments to the for-profits were excessive but whether the for-profits benefited substantially from petitioner's operations. The Tax Court noted that petitioner provided a substantial private benefit to the for-profit corporations. Petitioner "was simply the instrument to subsidize the for-profit corporations and not vice versa and had no life independent of those corporations." Accordingly, the Tax Court held that est of Hawaii did not qualify for exemption under §501(c)(3). In American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989), the Tax Court determined that the American Campaign Academy, a training program for political campaign professionals, operated for the private benefit of the Republican party because its curriculum was tailored to Republican interests, its graduates worked for Republican candidates and incumbents, and it was financed by Republican sources. The Tax Court defined private benefit as "nonincidental benefits conferred on disinterested persons that serve private interests." Private benefits included "advantage; profit; privilege; gain; [or] interest." ISSUE #1 - Did ****** fail to timely file the required Information Return ******, fail to establish reasonable cause, and therefore is liable for penalties under §6652 of the Code? TAXPAYER'S POSITION On ******, the ****** provided an unsigned written penalty relief request for the period ending ******. On ****** the ****** provided a signed written penalty relief request for the period ending ******. The ****** requests stated, in part, the following: "Our ****** was filed late because ****** was the first time we were required to file a ******. There was a misunderstanding of the filing requirement because of how a bargain sale was handled by the company managing the bargain sale (******). We fully believed that since the transaction and all funds were handled through ******, we were only required to report the net profit of the property when the was sold." "Our ****** was filed late because ****** was audited and ****** was the first time we were required to file a ******. Due to poor knowledge of the filing requirement because of how a bargain sale was handled by ******, managing the bargain sale. We fully believed that since the transaction and all funds were handled through ******, we were only required to report the net profit of the property when the was sold. The net profit from the bargain sale was well below the ****** filing requirement and a ****** was timely filed for ******. All future ****** will be filed timely." GOVERNMENT'S POSITION It has been determined that the ****** failed to timely file the required information return, ******, failed to establish reasonable cause, and this therefore liable for penalties under §6652(c) of the Code. The ****** is liable for penalties of $ ****** and $ ****** for the periods ending ****** and ****** respectively. Under Code §6033(c)(1), all organizations exempt from taxation under Code §501(c) are required to file an annual return, which correctly and completely states gross income, receipts, disbursements, and assets held for the period. This return must be filed on the proper form by the due date or extended due date for the period in question. The filing requirements, as detailed in the Form 990 Series Instructions booklets, and posted on www.irs.gov is as follows: For the periods ending ****** and ******, the ****** submitted ******, ****** instead of a ******, when their income and/or assets surpassed the minimum filing requirement thresholds for the periods. As the gross receipts for the period ending ****** included the non-cash contribution of ******, which was appraised at $ ****** when received, the ****** was required to file ****** to report the gross receipt. As the ****** retained the asset throughout the period ending ******, it was required to file ****** to report the total assets, which surpassed $ ****** based on their accepted valuation. By filing an electronic notice instead of an annual information return, the ****** failed to provide the Service with the necessary information required for the purposes of carrying out the internal revenue laws, as prescribed by the Secretary. The ****** failed to establish reasonable cause, as it did not exercise ordinary care and prudence. The Service finds that the ****** should have had knowledge sufficient to determine the correct filing requirements under the law for the periods under examination. To make this determination, the Service considered the facts and circumstances against the ****** argument of 'ignorance of the law' and a 'mistake being made.' Information regarding filing requirements is widely available, as can be obtained online at www.irs.gov, including on the ****** (******) landing page, as well as the ****** and ****** booklets. The Chief Executive Officer (CEO) and Treasurer both hold bachelor's in business administration degrees, the latter having a concentration in Accounting. The Treasurer, who completed the filing of the ****** also possesses an ****** (******) Certification and owns and operates a bookkeeping and tax practice, where he works year-round as a tax preparer. It is a reasonable expectation that, based on the Officer's education and experience in the handling of business matters and tax issues, they should have known about the filing requirement. Additionally, making a mistake generally is not in keeping with the ordinary business care and prudence standard and does not provide a basis for reasonable cause. The penalty is computed based on the taxpayer's figures, as follows: I SSUE #2 -- Is ****** organized and operated exclusively for an exempt purpose within the meaning of §501(c)(3) of the Code? TAXPAYER'S POSITION The Taxpayer's position is unknown. GOVERNMENT'S POSITION It has been determined that the ****** is not organized and operated exclusively for and exempt purpose because it does not meet the organizational test or the operational test under Treas.Reg. §1.501(c)(3)-1(a)(1). Organizational Test The ****** Articles of Incorporation do not contain a provision that dedicates its assets to exempt purposes described in Code §501(c)(3) upon dissolution. Furthermore, the ****** is organized in the State of ******, who does not have statutes applicable to nonprofit charitable corporations that satisfy the provisions of Treas.Reg. §1.501(c)(3)-1(b)(4), per Rev.Proc. 82-2. The ****** was granted exemption based on their statement on Form 1023-EZ that the organizing document contained the required language. During the examination, the Service reviewed the articles of incorporation, found no dissolution language, and confirmed that there were no amendments to the document that effected the dissolution clause. Therefore, the ****** does not meet the organizational test as described in Treas.Reg. §1.501(c)(3)-1(b)(4). Operational Test The ****** substantially engaged in non-exempt activity that conferred more than a nonincidental private benefit on disinterested parties. Treas.Reg. §1.501(c)(3)-1(c)(1) provides that an organization will be regarded as operated exclusively for exempt purposes only if it engages primarily in activities which accomplish one or more exempt purposes. An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. Treas.Reg. §1.501(c)(3)-1(d)(1)(ii) provides that an organization is not operated exclusively for exempt purposes unless it serves a public rather than a private interest. Thus, even if an organization has many activities which further exempt purposes, exemption may be precluded if it serves a private interest. The ****** activity involving the acquisition and disposition of real estate as apart of bargain sales transactions served the private interests of the ****** and the donors of the properties. Private benefit has been defined as "nonincidental benefits conferred on disinterested persons that service private interests." American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989). "Prohibited private benefit may include an 'advantage; profit; privilege; gain; [or] interest.'" In analyzing the factors of the transactions against the factors observed by the courts, the Service considered the benefit conferred and whether that benefit was qualitatively and quantitatively incidental. Qualitatively incidental means that the private benefit is a mere byproduct of the public benefit. For private benefit to be quantitatively incidental, it must be insubstantial in amount. The private benefit must be compared to the public benefit of the specific activity in question, not the public benefit provided by all the ****** activities. The benefits in question are the $ ****** in fees paid to the ****** for the facilitation of the bargain sales transactions, as well as the $ ****** in charitable deduction documentation given to the donors, which were based on appraisals that the ****** currently suspects to be overvalued. First, the ****** entered an exclusive contract to acquire, manage, and dispose of property through the ******, and completed a total of ****** transactions encompassing the purchase and sale of ****** individual properties. The fee schedule was based on the appraised value of the property, not the actual purchase or sale price, which was substantially less. This arrangement maximized the earnings of the ******, while minimizing the earnings of the ******. Typically, an entity looking to purchase goods and services would deal with a number of different entities. In addition, it is abnormal to accept unfavorable terms or fail to compare prices prior to entering a contract. In this case, the ****** entered into an exclusive contract with a for-profit entity that had a highly unfavorable fee structure. On ******, during the initial interview, the ****** indicated that it discontinued the relationship with the ****** after the Treasurer reviewed the documentation and fee schedule and determined that the ****** was "taking a lot of money out of the transactions" and that the ****** net proceeds were low. Second, the structure of the acquisition transaction involved a seller who would transfer the property to the ****** for a value below the appraised amount, treat the difference between the FMV and the sales price as a non-cash contribution, and claim a charitable deduction under Code §170(a) based on the appraised FMV of the property at the time of the sale. In this case, the ****** found the donor and connected them with a tax-exempt entity willing to participate in the transaction. The FMV was determined by an appraiser who was chosen from a list of preferred appraisers provided by the ******. During the initial interview, the ****** stated that it was minimally involved in the appraisal process, and never met with or talked to the appraiser. The ****** further stated that at the time it did not doubt the valuation, but now believes that the ****** and the appraisers were working together to overstate the values of the properties. As apart of each transaction, the ****** provided a signed, written communication to the donor listing their name, date and amount of donation, based on the potentially overstated FMV, totaling $ ******. As a result, any excess benefit received by the donor in the form of deductions that are not allowable serves their private benefit, and not the benefit of the public at large. The benefits received by the ****** and the donors were not a mere byproduct of a benefit received by the public. The real estate transactions were not related to the ****** charitable purpose, or any activity carried on to fulfill that charitable purpose. The purchase and sale of the real estate was purely for investment purposes with the goal of generating capital. The activity had no direct benefits to the public at large. Therefore, the benefit was not qualitatively incidental. The benefits received by the ****** and the donors were not insubstantial. The fee schedule of the transaction is structured so that the EO retains very little profit and the real estate broker and their related contractors (appraiser, title search company, etc.) receive the largest benefit from the transaction. Analysis of the individual transactions show the proportion of financial benefit received by the ****** the ******, and the other related contractors. On average, the ****** retained *** % of the proceeds ($ ****** in Fees/ $ ****** in Adjusted Gross Profit (computed as $ ****** Sales of Investments less $ ****** Acquisition Contract Prices)). On Average, The ****** retained *** % of the proceeds ($ ****** Net Profit/ $ ****** in Adjusted Gross Profit (computed above)). Of the $ ****** in proceeds received, the ****** issued only $ ****** in grants to individuals. Therefore, the benefit was not quantitatively incidental. See Exhibit 4 on Page 16 in the Appendix for comparison of the income distribution between the ******, the ******, and Other by property. Also refer to Exhibit 2 for additional details related to income by property. The Service also analyzed the ****** other activities to determine if it served an exempt purpose, specifically the provision of financial assistance to ****** and family members of ******, talking to ****** in need of conversation, outreach efforts at the ******, referring ****** to the ****** for services, and promotion of ******. After review of all the facts and circumstances, the ****** failed to provide evidence of substantial exempt activities. The ****** failed to substantiate that the payments made to individuals were given to a charitable class, such as the poor, elderly, physically or mentally handicapped, or distressed, and that the payments furthered a charitable purpose. As indicated by the CEO during the initial interview, the primary criteria for assistance is being a ****** or the family member of a ******. Assisting ****** and their families alone does not constitute as charitable under the meaning of Treas.Reg. 1.503(c)(3)-1(d)(2). By his statement, the ****** does not assist ****** who are *** % disabled because they can receive assistance directly from the ******. The ****** does not have a process to analyze need. No application or formal request for assistance is required. No established procedures of oversight are in place, such as board member approvals. Instead, if contacted, the CEO reviews the ******, driver's license, or state identification, and assesses whether they currently receive benefits from the ******. This practice supports the government's assertion that the criteria for assistance is more associated with the recipient's status as a ****** than being in a charitable class. The determination to assist the individual is then made at the CEO's discretion. No documentation exists to establish a financial need, such as a past due bill. No documentation related to the transaction is kept, other than the cancelled check, to establish the recipient as a member of a charitable class. Furthermore, the explanations provided by the ****** about each grant does not clearly identify how the expenditure advanced an exempt purpose. In addition, it is noted that during the ****** years under examination, ****** grants were issued totaling $ ******. No grants were awarded in the period ending ******. Based on the Service's analysis of the books and records, outside of noncash contributions, rental income and real estate sales proceeds received in connection with the bargain sales transactions, charitable receipts totaled $ ****** in the period ending ******, $ ****** in the period ending ******, and $ ****** in the period ending ******. Between ****** and ******, prior to the receipt of the real estate proceeds, the ****** paid a total of $ ****** in grants to fulfill their exempt purpose. In the absence of the funding gained from non-exempt real estate activities during ******, there would be little to no exempt activities. Taking the scope of their prior activities into consideration, and when measured in comparison with the magnitude of the real estate activities that resulted in ****** in gross income, these activities appear substantially insignificant. Activities related to conversations with ****** was not shown to serve and exempt purpose, as no information was provided to establish that the discussions were conducted with a charitable class. In addition, ****** referrals were not shown to advance an exempt purpose. While lessening the burden of government is a charitable purpose under §501(c)(3), the ****** failed to demonstrate that it acts on the government's behalf, and thereby actually free up government assets - human, material, and fiscal. In addition, no relevant factors to determine if the government unit has made the necessary objective manifestation exists. While the activities with the ****** are found to serve an exempt purpose, they were not found to be substantial. The ****** explained that, since formation, it received ****** referrals from the ******, of which it assisted ****** individual. The outreach activities at the ****** events are shown to support the ****** by allowing the general public to find out about their services and donate, however no substantiation was provided to show how the public benefitted from the activity. Activities associated with ****** did not advance an exempt purpose, but instead would serve the private interests of the Vice President and his business entities. Based on the statement of the Vice President during an interview on ******, the arrangement entailed the ****** licensing the brand and use of image from ******. The ****** would assist in the promotion of the product, cases would be pre-ordered, and the product would be manufactured to fill the order. The ****** would cover all expenses, donate $ ****** per bottle to the ******, take a charitable deduction, and retain any remaining profit. This arrangement allows an insider to receive a financial benefit, specifically the charitable deduction and the gross profit, through their affiliation with the ******. The CEO and Vice President assert that sales were insignificant, and no profit or charitable deductions were realized. However, the ****** shared their name and logo with the product and actively promoted the ******through advertisement on their website. In addition, the ****** website also contains live links to the websites of for-profit businesses owned by their board members, including ******. Regardless of the actual income realized from these activities, the insiders received an advantage created by the ****** promotion of the product and services. The court established in American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989) that a prohibited private benefit may include an 'advantage; profit; privilege; gain or interest'. The existence of the advertisement and links to the websites of insider's for-profit entities on the ****** website, in conjunction with the arrangement with ****** that advances the private interest of an insider, are factors that contribute to the determination that the ****** activities served private interests. The presence of a single non-exempt purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of truly exempt purposes. Better Business Bureau of Washington, D.C. v. U.S., 326 U.S. 279 (1945). In the case of ******, evidence indicates that there is a lack of activities fulfilling an exempt purpose, where there is an abundance of activities that fulfill non-exempt purposes. Like the ruling in est of Hawaii v. Commissioner, the for-profit entities were able to use the ****** as an "instrument" to further their for-profit purposes. The ****** allowed for the for-profit entities to receive substantial private benefit from the arrangements. In the instance of the arrangement with the ******, the ****** participated in separate transactions, and was used as an instrument resulting in $ ****** of earnings in one fiscal period. As such, the ****** fails the operational test under Treas. Reg §1.501(c)(3)-1(c)(1) and Treas.Reg. §1.501(c)(3)-1(d)(1)(ii) as it engaged in activities that served private interests, and therefore more than an insubstantial part of their activities is not in furtherance of an exempt purpose. ISSUE #3 -- Should the taxpayer continue to be recognized as tax exempt under §501(a) of the Code as an organization described in §501(c)(3)? TAXPAYER'S POSITION The Taxpayer's position is unknown. GOVERNMENT'S POSITION It has been determined that the ****** does not qualify for exemption as an organization described in Code §501(c)(3) because it does not meet the organizational test or the operational test under Treas.Reg. §1.501(c)(3)-1(a)(1). The ****** should not continue to be recognized as tax exempt under §501(a) of the Code as an organization described in §501(c)(3). The ****** fails the organizational test because its organizing document does not contain the required dissolution clause dedicating its assets to exempt purposes. It fails the operational test because more than an insubstantial part of its activities is not in furtherance of an exempt purpose, as it serves a private rather than a public benefit. CONCLUSION As required under Code §6033(c)(1), the ****** did not timely file an annual return that correctly and completely stated their gross income, receipts, disbursements, and assets held for the periods, and failed to establish reasonable cause for the purposes of determining penalty relief. The ****** is liable for penalties under Code §6652(c) of $ ****** and $ ****** for the periods ending ****** and ****** respectively. The ****** is not an organization described in Code § 501(c)(3) and therefore is not exempt from federal income tax. The government will propose revocation of exemption on the first day of the tax year in which the noncompliant activities were substantiated, which is the first period under examination. Therefore, the effective date of revocation is ******. Forms 1120, U.S. Corporate Income Tax Return, should be prepared and filed by the ****** for the period of examination forward. Appendix Exhibit 2 Real Estate Transactions Detail by Property Net Income and Fee Structure Exhibit 3 ****** Form ****** Return Data, As Filed by Taxpayer Periods ending ****** through ****** Exhibit 4 Real Estate Transaction Income as a Percentage by Property

Private Letter Ruling Number: 202326021 Internal Revenue Service April 3, 2023 Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Number: 202326021 Release Date: 6/30/2023 Date: April 3, 2023 Taxpayer ID number (last 4 digits): Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Last day to file petition with United States Tax Court: UIL CODE: 501.07-00 CERTIFIED MAIL - Return Receipt Requested Dear ******: Why we are sending you this letter This is a final determination explaining why your organization doesn't qualify as an organization described in Internal Revenue Code (IRC) Section 501(c)(7) for the tax periods above. In the future, if you believe your organization qualifies for tax-exempt status and would like a determination letter from the Internal Revenue Service, you can request a determination by filing Form 1024, Application for Recognition of Exemption Under Section 501(a), or Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code, (as applicable) and paying the required user fee. Our adverse determination as to your exempt status was made for the following reasons: Organizations described under IRC Section 501(c)(7) are organized and operated for the pleasure and recreation of their members or other non-profitable purposes and no part of the net earnings inure to the benefit of any private shareholder. You have not established that you are organized and operated exclusively for an exempt purpose within the meaning of IRC Section 501(c)(7). Your primary activity is managing and maintaining property. As a result, you are not operating substantially for pleasure, recreation, or other non-profitable purposes. Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov. What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below. How to file your action for declaratory judgment If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either: - The United States Tax Court, - The United States Court of Federal Claims, or - The United States District Court for the District of Columbia You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this determination letter to you. You can download a finable petition or complaint form and get information about filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint. You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax. Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below: United States Tax Court 400 Second Street, NW Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below: US Court of Federal Claims 717 Madison Place, NW Washington, DC 20439 uscfc.uscourts.gov US District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428. Information about the IRS Taxpayer Advocate Service The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Contact your local Taxpayer Advocate Office at: Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment. Where you can find more information Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter. If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter. You may fax your documents to the fax number shown above, using either a fax machine or online fax service. Protect yourself when sending digital data by understanding the fax service's privacy and security policies. Keep the original letter for your records. Sincerely, Lynn A. Brinkley Director, Exempt Organizations Examinations Enclosures: Publication 1 Publication 594 Publication 892 cc: Department of the Treasury Internal Revenue Service Tax Exempt and Government Entities Date: September 1, 2022 Taxpayer ID number Form: Tax periods ended: Person to contact: Name: ID number: Telephone: Fax: Address: Manager's contact information: Name: ID number: Telephone: Response due date: Certified Mail - Return Receipt Requested Dear ******: Why you're receiving this letter We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(7) If you agree If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501(c)(7) for the periods above. After we issue the final adverse determination letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170. If you disagree 1. Request a meeting or telephone conference with the manager shown at the top of this letter. 2. Send any information you want us to consider. 3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information. The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status. Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter. 4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS. If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals. If we don't hear from you If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter. Contacting the Taxpayer Advocate Office is a taxpayer right The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. For additional information You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person shown at the top of this letter. Sincerely, Jerry Marrow Jerry Morrow for Lynn A. Brinkley Acting Director Exempt Organizations Examinations Enclosures: Form 886-A Form 6018 ISSUE: Whether the ****** ("******") meets the requirements for exemption under Internal Revenue Code ("IRC") section 501(c)(7). FACTS: ****** was originally incorporated on ******. Per the Articles, its purpose is "performing and engaging in educational, charitable, and athletic activities and encouraging temperance and morality among its members in the community". There is no determination ruling for the ****** in the IRS records ****** owns and manages the property at ******, including a Lodge and several cottages that are "owned" by certain members for their exclusive use. Property taxes are paid through ****** who charges cottage members for their portion of taxes. ****** rents the lodge out to members and non-members for activities such as weddings, meetings, etc. In partnership with the ******, ****** sponsors a seasonal series of breakfasts open to the public and for the purpose of subsidizing the upkeep of the Lodge. ****** meetings and activities are limited to planning and implementing property maintenance and property management and does not regularly include many of the cottage owners, many of whom live significant distances from ******. LAW: IRC section 501(c)(7) exempts from federal income tax clubs organized for pleasure, recreation, and other non-profitable purposes. Prior to its amendment in 1976, IRC section 501(c)(7) required that social clubs be operated exclusively for pleasure, recreation and other nonprofitable purposes. Public Law 94-568 amended the "exclusive" provision to read "substantially' in order to allow an IRC section 501(c)(7) organization to receive up to 35% of its gross receipts, including investment income, from sources outside its membership without losing its tax exempt status. P. L. 94-568 amended IRC 501(c)(7) to provide for exemption from federal income tax of clubs organized for pleasure, recreation, and other nonprofitable purposes, substantially all of the activities of which are for such purposes and no part of the net earnings of which inures to the benefit of any private shareholder. Various revenue rulings have defined the requirement for fellowship, commingling, and the sharing of interest and goals including - Rev.Rul. 69-635, 1969-2 C.B. 126 - Rev.Rul. 74-30, 1974-1 C.B. 137 - Rev.Rul. 70-32, 1970-1 C.B. 132 - Rev.Rul. 55-716, 1955-2 C.B. 263 (Face-to-Face interaction) - Rev.Rul.67-139, 1967-1 C.B. 129 (Mineral Society) - Rev.Rul. 66-179, 1966-1 C.B. 139 (Garden Club) Therefore, an IRC section 501(c)(7) organization must satisfy the following statutory requirements: - A club which may consist of a membership of individuals, the existence of personal contact, commingling, fellowship among members, sharing of active interests amongst members, and sharing goals by members justifying the existence of the organization; - Organized for pleasure, recreation, and other nonprofitable purposes; - Substantially all of the activities of which are for such purposes; - No part of the net earnings inure to the benefit of a private shareholder; and - No written policy discriminating against individuals seeking membership on the basis of race, color, or religion. GOVERNMENT'S POSITION: Based upon the facts found during the examination, ****** is not operated exclusively for exempt purposes within the scope of IRC Section 501(c)(7) and as a result, it does not qualify for exemption under IRC Section 501(c)(7). ****** primary activity is managing and maintaining the ****** property and not fellowship and commingling related to the stated purpose of the organization and fails the social component of IRC section 501(c)(7). Cottages are not open to all member's use and enjoyment, and in fact, membership in ****** appears to be a pro forma requirement for members to maintain their cottage ownership. This fails the prohibition on inurement in IRC section 501(c)(7). We are proposing revocation of your tax-exempt status for tax years ended ****** through ****** and effective ******. For the years referenced, ****** has a ****** filing requirement and is responsible for filing the ****** with the Service. TAXPAYER'S POSITION: Pending CONCLUSION: Pending Taxpayer response

Private Letter Ruling Number: 202202004 Internal Revenue Service October 21, 2021 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202202004 Release Date: 1/14/2022 Index Number: 853.00-00, 853.01-00, 9100.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:FIP:B01 PLR-109662-21 Date: October 21, 2021 Dear *******: This ruling responds to a letter dated April 15, 2021 submitted on behalf of Taxpayer. Taxpayer requests an extension of time under sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to make elections under sections 851 and 853 of the Internal Revenue Code (the "Code") for the taxable year ended on Date 1. FACTS Taxpayer is a State statutory trust registered as an open-end management investment company under the Investment Company Act of 1940, as amended. Taxpayer uses an overall accrual method of accounting and has a tax year ending Date 2. Taxpayer intended to elect to be a regulated investment company ("RIC") under section 851(b) of the Code effective for its initial taxable year ended Date 1. For its taxable year ended Date 1, Taxpayer represents that it satisfied the requirements of section 853 to pass through to its shareholders the deduction or credit for foreign taxes that Taxpayer paid, and that Taxpayer intended to make an election under section 853. Taxpayer provided notice to its shareholders of the section 853 treatment in its annual report for its fiscal year ended Date 1, which was provided to shareholders within 60 days of Date 1. Taxpayer contracts with Manager to provide accounting, administration, and tax services. Manager is responsible for overseeing Taxpayer's tax function, which includes filing tax returns and requests for extension requests on behalf of Taxpayer. Taxpayer's books and records are maintained at Manager's offices. For Taxpayer's taxable year ended Date 1, Manager was engaged to prepare Taxpayer's (1) Form 1120-RIC, U.S. Federal Income Tax Return for Regulated Investment Companies, and (2) Form 7004, Application for Automatic 6-month Extension of Time to File Certain Business Income Tax, Information, And Other Returns. The original due date for Taxpayer's return was Date 3. Manager generally prepares the Form 7004 and mails it via certified mail prior to the original due date for filing the return. Manager drafted the Form 7004 to extend the due date to Date 4 and thought that the Form 7004 was timely filed. Because of workplace restrictions relating to the COVID-19 emergency, which limited personnel in its office, Manager inadvertently failed to timely file the Form 7004 on or before Date 3. Manager discovered on Date 5 that the Form 7004 had not been timely filed during an internal comparison of the filing checklist and the filing record. Because Form 7004 was not timely filed, the deadline for filing Taxpayer's federal income tax return, on which Taxpayer's section 851(b) and section 853 elections were to be made, was not extended from Date 3 to Date 4. Taxpayer represents that Manager advised Taxpayer to request a letter ruling for relief under sections 301.9100-1 and 301.9100-3 prior to filing Taxpayer's initial tax return, and to include a statement on its return noting the taxpayer had filed a private letter ruling request. On Date 6, Administrator filed Taxpayer's Form 1120-RIC for its taxable year ended Date 1. Taxpayer makes the following additional representations in connection with its request for an extension of time: 1. The request for relief was filed before the failure to make the regulatory elections was discovered by the Service. 2. Granting the relief requested will not result in Taxpayer having a lower U.S. federal tax liability in the aggregate for all years to which the elections apply than Taxpayer would have had if the elections had been timely made (taking into account the time value of money). 3. Taxpayer does not seek to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662 of the Code at the time Taxpayer requested relief and the new position requires or permits the regulatory elections for which relief is requested. 4. Being fully informed of the required regulatory elections and related tax consequences, Taxpayer did not choose to not file the elections. 5. Taxpayer is not using hindsight in making the decision to seek the relief requested. No specific facts have changed since the due date for making the elections that make the elections advantageous to Taxpayer. 6. The period of limitations on assessment under section 6501(a) has not expired for Taxpayer for the taxable year in which the elections should have been filed, nor for any taxable year(s) that would have been affected by the elections had the elections been timely filed. In addition, affidavits on behalf of Taxpayer and Manager have been provided as required by section 301.9100-3(e)(2) and (3). LAW AND ANALYSIS Section 851(b) provides that a corporation shall not be considered a RIC for any taxable year unless it files with its return for the taxable year an election to be a RIC or has made such election for a previous year. Pursuant to section 1.851-2 of the Income Tax Regulations, the election shall be made by computing taxable income as a RIC on the corporation's return for the first taxable year for which the election is applicable. Section 853(a) provides that a RIC, more than 50 percent of the value (as defined in section 851(c)(4)) of whose total assets at the close of the taxable year consist of stock or securities in foreign corporations, and which meets the requirements of section 852(a) for the taxable year, may elect the application of section 853 for the taxable year with respect to certain taxes paid by the RIC during the taxable year to foreign countries and possessions of the United States. Section 853(b)(1) provides that the electing RIC (A) is not allowed for the taxable year any deduction under section 164(a) or any credit under section 901 for these taxes, and (B) is allowed an addition to its dividends paid deduction for the taxable year for the amount of these taxes. Section 853(b)(2) provides that each shareholder of the electing RIC shall (A) include in gross income and treat as paid by the shareholder its proportionate share of these taxes, and (B) treat as gross income from sources within the respective foreign countries and possessions of the United States the sum of the shareholder's proportionate share of these taxes and the portion of any dividend paid by the RIC that represents income derived from sources within foreign countries or possessions of the United States. Section 853(c) provides that the amount to be treated by a shareholder of the electing RIC as the shareholder's proportionate share of taxes paid to any foreign country or possession of the United States, and gross income derived from sources within any foreign country or possession of the United States, shall not exceed the amounts so reported by the RIC in a written statement furnished to the shareholder. Section 1.853-4(b) of the Income Tax Regulations provides that an election under section 853 must be made not later than the time prescribed for filing the return (including extensions). The election, once made, is irrevocable with respect to the dividend (or portion thereof), and the foreign taxes paid with respect thereto, to which the election applies. Section 1.853-4(c) requires that certain information pertinent to the election, including, among other things, the date, form, and contents of its notice to its shareholders, shall accompany the RIC' s timely filed federal income tax return for the taxable year on or with a modified Form 1118. Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles E, G, H, and I. Section 301.9100-1(b) defines a regulatory election as an election whose due date is prescribed by regulations or by a revenue ruling, a revenue procedure, a notice, or an announcement published in the Internal Revenue Bulletin. Section 301.9100-3(a) through (c)(1) sets forth rules that the Service generally will use to determine whether, under the particular facts and circumstances of each situation, the Commissioner will grant an extension of time for regulatory elections that do not meet the requirements for an automatic extension under section 301.9100-2. Section 301.9100-3(a) provides that requests for relief subject to section 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in section 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government. Section 301.9100-3(b) provides that a taxpayer generally is deemed to have acted reasonably and in good faith if the taxpayer (i) requests relief under section 301.9100-3 before the failure to make the regulatory election is discovered by the Service; (ii) failed to make the election because of intervening events beyond the taxpayer's control; (iii) failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer's experience and the complexity of the return or issue), the taxpayer was unaware of the necessity for the election; (iv) reasonably relied on the written advice of the Service; or (v) reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election. A taxpayer will be deemed to have not acted reasonably and in good faith, however, if the taxpayer (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under section 6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested; (ii) was informed in all material respects of the required election and related tax consequences, but chose not to file the election; or (iii) uses hindsight in requesting relief. Section 301.9100-3(c)(1) provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in the taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the Government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under section 301.9100-3. CONCLUSIONS Based on the information submitted and representations made we conclude that Taxpayer has satisfied the requirements for granting a reasonable extension of time to make elections under sections 851(b) and 853 for the taxable year ended on Date 1. Accordingly, Taxpayer's Form 1120-RIC filed on Date 6 will be treated as a timely filed return for purposes of the elections under sections 851(b) and 853. This ruling is limited to the timeliness of the filing of the elections under sections 851(b) and 853 of the Code. This ruling's application is limited to the facts, representations, Code sections, and regulations cited herein. No opinion is expressed with regard to whether Taxpayer otherwise qualifies as a RIC or satisfies the requirements of section 853(a). No opinion is expressed on the timeliness of Taxpayer's tax return for any purpose other than the elections under sections 851(b) and 853. These rulings are directed only to the taxpayer that requested them. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. In accordance with the terms of a power of attorney on file in this office, a copy of this letter is being sent to your authorized representative. Sincerely, _________________________ Steven Harrison Branch Chief, Branch 1 Office of Associate Chief Counsel (Financial Institutions and Products) cc:

Internal Revenue Service - Information Release IR-2022-10 IRS updates FAQs for 2021 Child Tax Credit and Advance Child Tax Credit Payments January 11, 2022 Media Relations Office Washington, D.C. www.IRS.gov/newsroom Media Contact: 202.317.4000 Public Contact: 800.829.1040 IRS updates FAQs for 2021 Child Tax Credit and Advance Child Tax Credit Payments IR-2022-10, January 11, 2022 WASHINGTON -- The Internal Revenue Service today updated frequently asked questions (FAQs) for the 2021 Child Tax Credit and Advance Child Tax Credit to help eligible families properly claim the credit when they prepare and file their 2021 tax return. This extensive FAQ update PDF includes multiple streamlined questions for use by taxpayers and tax professionals and is being issued as expeditiously as possible. The updates can be found in: - Topic A: General Information - Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit - Topic C: Calculation of the 2021 Child Tax Credit - Topic D: Calculation of Advance Child Tax Credit Payments - Topic E: Advance Payment Process of the Child Tax Credit - Topic F: Updating Your Child Tax Credit Information During 2021 - Topic G: Receiving Advance Child Tax Credit Payments - Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return - Topic I: U.S. Territory Residents and Advance Child Tax Credit Payments - Topic J: Unenrolling from Advance Payments - Topic K: Verifying Your Identity to View your Payments - Topic L: Commonly Asked Shared-Custody Questions - Topic M: Commonly Asked Immigration-Related Questions - Topic N: Returning a Payment Recipients of advance Child Tax Credit payments will need to compare the amount of payments received during 2021 with the amount of the Child Tax Credit that can be claimed on their 2021 tax return. Those that received less than the amount they are eligible for can claim a credit for the remaining amount. Those that received more than they are eligible for may need to repay some or all of the excess amount. The IRS will send Letter 6419 in January of 2022 to provide the total amount of advance Child Tax Credit payments that were received in 2021. The IRS urges taxpayers receiving these letters to make sure they hold onto them to assist them in preparing their 2021 federal tax returns in 2022. More information about reliance is available. IRS-FAQ

Private Letter Ruling Number: 202031008 Internal Revenue Service May 7, 2020 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202031008 Release Date: 7/31/2020 Index Number: 72.00-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:FIP:B04 PLR-137676-17 Date: May 07, 2020 Dear *******: This letter responds to your submission requesting rulings under sections 72(q)(2) and 72(u)(1) of the Internal Revenue Code (the "Code") in the scenarios described below in which an annuity contract is issued to a trust. These rulings are requested so the Taxpayer may satisfy its reporting obligations under section 6047(d). FACTS The Taxpayer is a life insurance company organized and operated under the laws of State. The Taxpayer is a subsidiary of the Parent and joins in the filing of a consolidated federal income tax return with the Parent on a calendar year basis using an accrual method of accounting. The Taxpayer issues nonqualified deferred annuity contracts that may be fixed, indexed, or variable contracts, that contain customary, industry standard terms, and that are considered annuity contracts in accordance with the customary practice of life insurance companies (the "Contracts"). The Taxpayer regularly issues Contracts to both grantor trusts and non-grantor trusts in situations similar to those described below. The Taxpayer has information reporting obligations under section 6047(d) with respect to distributions or payments under the Contracts. In the Grantor Trust Scenario, the Taxpayer issues a Contract to a grantor trust (i.e., a trust described in subpart E of part I of subchapter J (sections 671 through 679)) (the "Grantor Trust") that was established by one individual (the "Grantor"). The beneficiaries of the Grantor Trust (each, a "Grantor Trust Beneficiary") are an individual who is not the Grantor and a charitable organization. There are no contingent beneficiaries under the Grantor Trust. The Grantor Trust is named in the Contract as the owner and beneficiary of the Contract (i.e., the person entitled to receive distributions under the Contract). The individual Grantor Trust Beneficiary is named in the Contract as the sole annuitant, the individual the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the Contract (i.e., the measuring life). In the Non-Grantor Trust Scenario, the Taxpayer issues a Contract to a trust subject to tax under section 641 (the "Non-Grantor Trust") that was established by one individual (the "Settlor"). The sole beneficiary of the Non-Grantor Trust (the "Non-Grantor Trust Beneficiary") is an individual who is not the Settlor and who does not have a power exercisable by himself to vest trust income or corpus in himself as described in section 678. There are no contingent beneficiaries under the Non-Grantor Trust. The Non-Grantor Trust is named in the Contract as the owner and beneficiary of the Contract (i.e., the person entitled to receive distributions under the Contract). The Non-Grantor Trust Beneficiary is named in the Contract as the sole annuitant, the individual the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the Contract (i.e., the measuring life). REPRESENTATIONS The Taxpayer makes the following additional representations: 1. In the Grantor Trust Scenario, the Grantor will be considered the owner of the entire Grantor Trust under subpart E of part I of subchapter J. 2. In the Non-Grantor Trust Scenario, neither the Settlor nor any other person will be considered the owner of the Non-Grantor Trust under subpart E of part I of subchapter J, and the Non-Grantor Trust is a trust subject to tax under section 641. 3. Each Contract is an annuity contract under the law of the jurisdiction where issued. 4. Each Contract qualifies for treatment as an annuity contract for federal income tax purposes, including by complying with the requirements of section 72(s) and, where applicable, the requirements of section 817(h) and the "investor control" doctrine. 5. The sole annuitant named in each Contract is the "primary annuitant" within the meaning of section 72(s)(6)(B). 6. No Contract will be issued in a situation where an employer is the nominal owner of the Contract and the employer's employees are the beneficial owners of the Contract, including as part of any arrangement to provide deferred compensation to such employees. LAW Section 72 Section 72 prescribes the income tax treatment of amounts received under annuity contracts. Section 1.72-2(a) of the Income Tax Regulations provides that contracts under which amounts paid will be subject to section 72 include contracts that are considered to be annuity contracts in accordance with the customary practice of life insurance companies. Section 72(q) provides, subject to certain exceptions, that if a taxpayer receives an amount under an annuity contract, such taxpayer's tax for the taxable year in which such amount is received is increased by 10 percent of the portion of such amount that is includible in gross income. The exceptions listed in section 72(q)(2) include situations where the distribution is: (A) made on or after the date on which the taxpayer attains age 591⁄2 (section 72(q)(2)(A)), (B) made on or after the death of the holder (or, where the holder is not an individual, the death of the primary annuitant (as defined in section 72(s)(6)(B)) (section 72(q)(2)(B)), (C) attributable to the taxpayer's becoming disabled within the meaning of section 72(m)(7) (section 72(q)(2)(C)), or (D) part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of such taxpayer and his or her designated beneficiary (section 72(q)(2)(D)). Section 72(s) provides that a contract will not be treated as an annuity contract for federal income tax purposes unless, with certain exceptions, the contract provides for certain distributions in the event its holder dies before the entire interest in the contract is distributed. Under section 72(s)(1)(A), the contract must provide that if any holder dies on or after the annuity starting date and before the entire interest in the contract has been distributed, the remaining portion of such interest will be distributed at least as rapidly as under the method of distribution being used as of the date of such death. Under section 72(s)(1)(B), the contract must also provide that if any holder dies before the annuity starting date, the entire interest in the contract will be distributed within five years after the date of such death. Exceptions apply when distributions after a holder's death are made to a designated beneficiary, including the surviving spouse of the deceased holder. Section 72(s)(6)(A) provides that for certain purposes, if the holder of the contract is not an individual, then the primary annuitant is treated as the holder of the contract. Section 72(s)(6)(B) defines primary annuitant to be the individual, the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the contract. Section 72(u)(1) generally provides that if an annuity contract is held by a person who is not a natural person, then such contract is not treated as an annuity contract for federal income tax purposes (other than subchapter L) and the income on such contract for any taxable year is treated as ordinary income received or accrued by the owner during such taxable year. Section 72(u) was enacted as part of the Tax Reform Act of 1986, Pub. L. No. 99-514, 100 Stat. 2085, 1986-3 (Vol. 1) C.B. 1. The legislative history contains the following reasons for enacting section 72(u): The committee believes that the present-law rules relating to deferred annuity contracts present an opportunity for employers to fund, on a taxfavored basis, significant amounts of deferred compensation for employees. This favorable tax treatment may create a disincentive for employers to provide benefits to employees under qualified pension plans, which are subject to significantly greater restrictions. In addition, because deferred annuity contracts can be provided to a limited class of employees, rather than to employees generally (as is required in the case of a qualified pension plan), the committee is concerned that the present-law treatment of deferred annuity contracts dilutes the effect of the nondiscrimination rules applicable to qualified pension plans. H.R. Rep. No. 426, 99th Cong., 1st Sess. 703 (1985), 1986-3 (Vol. 2) C.B. 1, 580. The flush language of section 72(u)(1), however, provides that holding by a trust or other entity as an agent for a natural person is not taken into account. The legislative history contains the following explanation of this flush language: In the case of a contract the nominal owner of which is a person who is not a natural person (e.g., a corporation or a trust), but the beneficial owner of which is a natural person, the contract is treated as held by a natural person. Thus, if a group annuity contract is held by a corporation as an agent for natural persons who are the beneficial owners of the contracts, the contract is treated as an annuity contract for Federal income tax purposes. However, the committee intends that, if an employer is the nominal owner of an annuity contract, the beneficial owners of which are employees, the contract will be treated as held by the employer. The committee intends this rule because it is concerned that the Internal Revenue Service would have difficulty monitoring compliance with the general rule that a deferred annuity is not available on a tax-favored basis, to fund nonqualified deferred compensation. H.R. Rep. No. 426, 99th Cong., 1st Sess. 704 (1985), 1986-3 (Vol. 2) C.B. 1, 580. Section 7701(a)(14) defines "taxpayer" to mean any person subject to any internal revenue tax. Trust Classification Section 301.7701-4(a) of the Procedure and Administration Regulations provides that, in general, the term "trust" as used in the Code refers to an arrangement created either by a will or by an inter vivos declaration whereby trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules applied in chancery or probate courts. Usually, the beneficiaries of a trust do no more than accept the benefits thereof and are not the voluntary planners or creators of the trust arrangement. However, the beneficiaries may be the persons who created the trust, and the trust will be recognized as a trust under the Code if it was created for the purpose of protecting or conserving the trust property for beneficiaries who stand in the same relation to the trust as they would if the trust had been created by others for them. Generally speaking, an arrangement will be treated as a trust under the Code if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in a joint enterprise for the conduct of business for profit. Rev.Rul. 69-300, 1969-1 C.B. 167, concludes that an agreement creates a trust rather than an agency relationship if the trustee is vested with broad discretionary powers of administration and management. United States v. Anderson, 132 F.2d 98 (6th Cir. 1942), involved the issue of whether an agreement between the taxpayer and a bank created a trust or an agency relationship. In that case, the bank could not invest or dispose of any corpus without the consent of the settlor and was relieved of all liability for any decline in the value of the corpus. The settlor had the power to vote any corporate stock held by the bank and could remove the bank and select a successor at any time. The court stated that while an agent undertakes to act on behalf of its principal and is subject to its control, a trustee usually has discretionary powers and acts for a term. Accordingly, because the bank did not have discretionary powers, the court held that the agreement created an agency relationship rather than a trust. See also City Nat'l Bank & Trust Co. v. United States, 109 F.2d 191 (7th Cir. 1940) (holding that no trust was formed where bank's investment decisions could be overridden by settlor and other evidence of managerial power was lacking). Non-Grantor Trust Section 641(a) generally provides that the tax imposed by section 1(e) applies to the taxable income of estates or of any kind of property held in trust. Section 1.641(a)- 0(b) provides that subparts A through D of part I of subchapter J (including section 641) have no application to any portion of the corpus or income of a trust which is to be regarded, within the meaning of the Code, as that of the grantor or others treated as its substantial owners. Grantor Trust Section 671 provides that when it is specified in subpart E of part I of subchapter J that the grantor or another person is treated as the owner of any portion of a trust, there will then be included in computing the taxable income and credits of the grantor or the other person those items of income, deductions, and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter 1 in computing taxable income or credits against the tax of an individual. Section 1.671-3(a) provides that when a grantor or other person is treated under subpart E as the owner of any portion of a trust, there are included in computing such grantor's or other person's tax liability those items of income, deduction, and credit against tax attributable to or included in that portion. For example, if a grantor or another person is treated as the owner of an entire trust (corpus as well as ordinary income), the grantor takes into account in computing the grantor's income tax liability all items of income, deduction, and credit (including capital gains and losses) to which the grantor would have been entitled had the trust not been in existence during the period the grantor is treated as the owner. Revenue Ruling 85-13, 1985-1 C.B. 184, provides that a grantor who is treated as the owner of the entire trust under section 671 is treated as the owner of the trust assets for federal income tax purposes. Therefore, a transfer of assets between the grantor and the trust is not recognized as a sale or exchange. ANALYSIS Grantor Trust Scenario Sections 72(q)(2)(A), (C), (D) Section 72(q) generally imposes an additional 10% tax on amounts received under an annuity contract that are includible in income unless certain exceptions apply. Sections 72(q)(2)(A), (C), and (D) respectively provide exceptions to the 10% additional tax if the distribution is made on or after the date the "taxpayer" attains age 591⁄2, if the distribution is attributable to the "taxpayer's" becoming disabled, or if the distribution is part of a series of substantially equal periodic payments made for the life of the "taxpayer" or the "taxpayer" and his or her designated beneficiary. Section 7701(a)(14) defines "taxpayer" to mean any person subject to any internal revenue tax. Under the grantor trust rules, section 671 provides that when the grantor is treated as the owner of any portion of a trust, the grantor must include in computing his or her taxable income those items of income, deductions, and credits that are attributable to that portion of the trust. Section 1.671-3(a)(1) provides, in relevant part, that if a grantor is treated as the owner of an entire trust, the grantor takes into account in computing his or her income tax liability all items of income to which the grantor would have been entitled had the trust not been in existence during the period the grantor is treated as owner of the trust. In the Grantor Trust Scenario, the Grantor is the owner of the Grantor Trust for federal income tax purposes. As a consequence, the Grantor is required to include in income any income arising from the receipt by the Grantor Trust of distributions under the Contract. Accordingly, the Grantor is the "taxpayer" with respect to the Contract, and references to the "taxpayer" in sections 72(q)(2)(A), (C), and (D) are references to the Grantor. Section 72(q)(2)(B) Section 72(q)(2)(B) provides an exception to the 10% additional tax if the distribution is made on or after the death of the "holder" or, when the "holder" is not an individual, the death of the primary annuitant (as defined in section 72(s)(6)(B)). Section 72(s)(6)(B) defines the primary annuitant as the individual the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the contract. In the Grantor Trust Scenario, the Grantor Trust is the "holder" of the Contract because it is designated in the Contract as the owner of the Contract. The Grantor Trust is not an individual, however, so the exception provided in section 72(q)(2)(B) applies if the distribution is made on or after the death of the primary annuitant, as defined in section 72(s)(6)(B). In the Grantor Trust Scenario, the primary annuitant is the individual Grantor Trust Beneficiary. Thus, the exception provided in section 72(q)(2)(B) will apply in the Grantor Trust Scenario to distributions made on or after the death of the individual Grantor Trust Beneficiary. Section 72(u)(1) Section 72(u)(1) generally provides that an annuity contract is not treated as such for federal income tax purposes (other than subchapter L) if it is held by a person who is not a natural person. The flush language of section 72(u)(1), however, provides that holding by a trust or other entity as an agent for a natural person is not taken into account for this purpose. A trustee generally has fiduciary obligations under trust documents and governing law that are inconsistent with it acting as an agent for the beneficiary of a trust. See, e.g., Restatement (Third) of Agency section 1.01 cmt. g (2018); Restatement (Third) of Trusts section 5(e) & cmt. e (2003); Restatement (Second) of Agency section 14B (1958). This principle also applies for federal income tax purposes. See, e.g., Rev.Rul. 69-300; United States v. Anderson, 132 F.2d 98 (6th Cir. 1942). Accordingly, the phrase "as an agent" in the flush language of section 72(u)(1) pertains only to "other entity." It does not pertain to "trust." Thus, for purposes of section 72(u)(1), the holding of an annuity contract by a trust is not taken into account if the contract is held for a natural person. In the Grantor Trust Scenario, the Grantor Trust is the "holder" of the Contract within the meaning of section 72(u)(1) because it is designated in the Contract as the owner of the Contract. The Grantor is treated as the owner of the entire Grantor Trust, and as a consequence, the Grantor is also treated as the owner of the Contract for federal income tax purposes. See Rev. Rul. 85-13. The Grantor Trust is holding the Contract for the Contract's tax owner, the Grantor, who is a natural person. Accordingly, the holding of the Contract by the Grantor Trust is not taken into account for purposes of section 72(u)(1). This determination is consistent with the purpose for adopting section 72(u). Section 72(u) was adopted to encourage employers to offer benefits to employees under qualified pension plans, which are subject to certain restrictions and generally must be made available to a wide class of employees, as opposed to offering deferred compensation to a limited class of employees that is funded by deferred annuity contacts. Because the Contract in the Grantor Trust Scenario is not issued in the employment context, the arrangement does not provide the sort of tax-favored benefit that section 72(u) was intended to limit. Non-Grantor Trust Scenario Sections 72(q)(2)(A), (C), (D) As discussed above, sections 72(q)(2)(A), (C), and (D) provide exceptions to the 10% additional tax imposed by section 72(q)(1) if a distribution is made on or after the date the "taxpayer" attains age 591⁄2, if the distribution is attributable to the "taxpayer's" becoming disabled, or if the distribution is part of a series of substantially equal periodic payments made for the life of the "taxpayer" or the "taxpayer" and his or her designated beneficiary. Unlike grantor trusts, a non-grantor trust is potentially subject to federal income tax. (Although the tax burden may be passed through to a non-grantor trust's beneficiaries, the non-grantor trust is initially subject to the tax and must claim a deduction to eliminate any income tax liability at the trust level.) In the Non-Grantor Trust Scenario, the Non-Grantor Trust is required to include in income any income arising from the receipt by the Non-Grantor Trust of distributions under the Contract. Accordingly, the Non-Grantor Trust is the "taxpayer" with respect to the Contract, and references to the "taxpayer" in sections 72(q)(2)(A), (C), and (D) are references to the Non-Grantor Trust. The Non-Grantor Trust, however, cannot attain age 591⁄2, become disabled, or have a life expectancy, as contemplated by sections 72(q)(2)(A), (C), and (D), respectively. Thus, the exceptions provided by these provisions are not applicable to distributions under the Contract in the Non-Grantor Trust Scenario. Section 72(q)(2)(B) Section 72(q)(2)(B) provides an exception to the 10% additional tax if a distribution is made on or after the death of the "holder" or, when the "holder" is not an individual, the death of the primary annuitant (as defined in section 72(s)(6)(B)). Section 72(s)(6)(B) defines the primary annuitant as the individual the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the Contract. In the Non-Grantor Trust Scenario, the Non-Grantor Trust is the "holder" of the Contract because it is designated in the Contract as the owner of the Contract. The Non-Grantor Trust is not an individual, however, so the exception provided in section 72(q)(2)(B) applies if the distribution is made on or after the death of the primary annuitant, as defined in section 72(s)(6)(B). In the Non-Grantor Trust Scenario, the primary annuitant is the Non-Grantor Trust Beneficiary. Thus, the exception provided in section 72(q)(2)(B) will apply in the Non-Grantor Trust Scenario to distributions made on or after the death of the Non-Grantor Trust Beneficiary. Section 72(u)(1) As discussed above, for purposes of section 72(u)(1), the holding of an annuity contract by a trust is not taken into account if the contract is held for a natural person. In the Non-Grantor Trust Scenario, the Non-Grantor Trust is the "holder" of the Contract because it is designated in the Contract as the owner of the Contract. In the Non-Grantor Trust Scenario, the Non-Grantor Trust Beneficiary is the only beneficiary of the trust and the only person who will benefit from the distributions under the Contract. Thus, the Non-Grantor Trust is holding the Contract for the benefit of the Non-Grantor Trust Beneficiary, a natural person. Accordingly, the holding of the Contract by the Non-Grantor Trust is not taken into account for purposes of section 72(u)(1). This determination is consistent with the purpose for adopting section 72(u), which was discussed above. Because the Contract in the Non-Grantor Trust Scenario is not issued in the employment context, the arrangement does not provide the sort of tax-favored benefit that section 72(u) was intended to limit. RULINGS We rule that in the Grantor Trust Scenario - (1) For purposes of section 72(q)(2), (i) the Grantor is the "taxpayer," so the exceptions in sections 72(q)(2)(A), (C), and (D) will apply based on the age, disability, and life or life expectancy, respectively, of the Grantor and (ii) the Grantor Trust is the "holder" of the Contract, so that the exception in section 72(q)(2)(B) will apply based upon the death of the primary annuitant (as defined in section 72(s)(6)(B)), who is the individual Grantor Trust Beneficiary. (2) For purposes of section 72(u)(1) and pursuant to the flush language of that section, the Contract is held by the Grantor Trust for the Grantor, so that section 72(u)(1) will not apply even though one of the Grantor Trust Beneficiaries is a charitable organization. We rule that in the Non-Grantor Trust Scenario - (1) For purposes of section 72(q)(2), (i) the Non-Grantor Trust is the "taxpayer," so that the exceptions in sections 72(q)(2)(A), (C), and (D) will not apply to any distribution from the Contract because the Non-Grantor Trust cannot attain age 591⁄2, become disabled, or have a life or life expectancy within the meaning of such sections and (ii) the Non-Grantor Trust is the "holder" of the Contract, so that the exception in section 72(q)(2)(B) will apply based upon the death of the primary annuitant (as defined in section 72(s)(6)(B)), who is the Non-Grantor Trust Beneficiary. (2) For purposes of section 72(u)(1) and pursuant to the flush language of that section, the Contract is held by the Non-Grantor Trust for the Non-Grantor Trust Beneficiary, so that section 72(u)(1) will not apply. Except as expressly provided herein, no opinion is expressed concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter, including whether the Contracts qualify as annuity contracts for purposes of section 72. The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. This ruling is directed only to the taxpayer who requested it. A copy of this ruling must be attached to any tax return to which it is relevant. Section 6110(k)(3) provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives. Sincerely, Daniel P. Phillips Senior Counsel, Branch 4 Financial Institutions & Products cc:

Private Letter Ruling Number: 202417011 Internal Revenue Service January 31, 2024 Internal Revenue Service Department of the Treasury Washington, DC 20224 Number: 202417011 Release Date: 4/26/2024 Index Number: 1400Z.02-00 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: ID No. Telephone Number: Refer Reply To: CC:ITA:B08 PLR-115988-23 Date: January 31, 2024 Dear ******: This letter responds to Taxpayer's request dated Date 1. Specifically, Taxpayer requests relief under sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations, for an extension of time to (1) make a timely election under section 1.1400Z2(d)-1(a)(2)(i) of the Income Tax Regulations to be certified as a qualified opportunity fund (QOF), as defined in section 1400Z-2(d) of the Internal Revenue Code (Code) and (2) for Taxpayer to be treated as a QOF, effective as of Date 2, as provided by section 1400Z-2(d) and section 1.1400Z2(d)-1(a). FACTS Taxpayer is a limited liability company, organized under the laws of State on Date 2. Taxpayer is treated as a partnership for Federal income tax purposes and was formed for the purpose of investing in qualified opportunity zone properties in State. Taxpayer uses the cash method of accounting and has a tax year end date of Date 3. Taxpayer represents that it has two members: Member A, who owns X Percent, and Member B, who owns Y Percent. Taxpayer represents that it intended to elect to be a QOF beginning on Date 2. According to the information and representations provided, Member A engaged Accountant during Year 1 for the purposes of preparing and filing Taxpayer's Federal income tax return, and all related forms and elections, including the filing of Taxpayer's Form 8996, Qualified Opportunity Fund, for the Taxpayer to self-certify its QOF status and to be treated as a QOF. Taxpayer provided Accountant with all the necessary information to file the Form 8996. Although Accountant was aware that the Form 8996 needed to be attached to Taxpayer's timely filed initial tax return, Accountant failed to timely file such return and failed to file an extension by the return due date of Date 4. Accountant represents that it failed to request an automatic extension to file Taxpayer's Year 2 return due to an administrative error. Taxpayer represents that granting relief under section 301.9100-3 of the Procedure and Administration Regulations will not result in a lower tax liability for the year affected by the election. LAW AND ANALYSIS Section 1400Z-2(e)(4) of the Internal Revenue Code directs the Secretary to prescribe regulations to carry out the purposes of section 1400Z-2, including rules for the certification of QOFs. Section 1.1400Z2(d)-1(a)(2) of the Income Tax Regulations provides the rules for an entity to self-certify as a QOF. Section § 1.1400Z2(d)-1(a)(2)(i) provides that the self-certification of a QOF must be timely-filed and effectuated annually in such form and manner as may be prescribed by the Commissioner of Internal Revenue in the Internal Revenue Service forms or instructions, or in publications or guidance published in the Internal Revenue Bulletin. The Form 8996 Instructions published pursuant to these regulations specify that to self-certify as a QOF, a taxpayer must file Form 8996 with its tax return for the year to which the certification applies by the due date of the tax return (including extensions). Section 301.9100-3(a) of the Procedure and Administration Regulations provides that requests for extensions of time for regulatory elections (other than automatic extensions covered in section 301.9100-2) will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that the granting of relief will not prejudice the interests of the government. Under section 301.9100-3(b) a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer requests relief before the failure to make the regulatory election is discovered by the Service, failed to make the election, because after exercising reasonable diligence (taking into account the taxpayer's experience and the complexity of the return or issue), the taxpayer was unaware of the necessity for the election, or reasonably relied on a qualified tax professional, and the tax professional failed to make, or advise the taxpayer to make the election. However, a taxpayer is not considered to have reasonably relied on a qualified tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or was not aware of all relevant facts. In addition, section 301.9100-3(b)(3) provides that a taxpayer is deemed not to have acted reasonably and in good faith if the taxpayer - (i) seeks to alter a return position for which an accuracy-related penalty has been or could be imposed under § 6662 at the time the taxpayer requests relief, and the new position requires or permits a regulatory election for which relief is requested; (ii) was fully informed in all material respects of the required election and related tax consequences but chose not to make the election; or (iii) uses hindsight in requesting relief. If specific facts have changed since the original deadline that make the election advantageous to a taxpayer, the Service will not ordinarily grant relief. Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii) provides that the interests of the Government are ordinarily prejudiced if the taxable year in which the regulatory election should have been made, or any taxable year that would have been affected by the election had it been timely made, are closed by the period of limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. Based on the facts and information submitted and the representations made, we conclude that Taxpayer has acted reasonably and in good faith, and that the granting of relief would not prejudice the interests of the government. Accordingly, based sole ly on the facts and information submitted, and the representations made in the ruling request, we grant Taxpayer an extension of 60 days from the date of this letter ruling to file a Form 8996 to make the election to self-certify as a QOF under section 1400Z-2 and section 1.1400Z2(d)-1(a)(2)(i). The election must be made on a completed Form 8996 attached to the Taxpayer's amended tax return or administrative adjustment request (as applicable). This ruling is based upon facts and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by all appropriate parties. This office has not verified any of the material submitted in support of the request for a ruling. However, as part of an examination process, the Service may verify the factual information, representations, and other data submitted. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Specifically, we express no opinion, either express or implied, concerning whether any investments made into Taxpayer are qualifying investments as defined in section 1.1400Z2(a)-1(b)(34) or whether the taxpayer meets the requirements under section 1400Z-2 and the regulations thereunder to be a QOF. Further, we also express no opinion on whether any interest owned in any entity by Taxpayer qualifies as qualified opportunity zone property, as defined in section 1400Z-2(d)(2), or whether such entity would be treated as a qualified opportunity zone business, as defined in section 1400Z-2(d)(3). We express no opinion regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. Enclosed is a copy of the letter ruling showing the deletions proposed to be made when it is disclosed under § 6110. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. Sincerely, Shareen S. Pflanz Branch Chief, Branch 8 Office of Associate Chief Counsel (Income Tax & Accounting) cc: ******