Bulletin No. 2007-45 November 5, 2007 HIGHLIGHTS OF THIS …Bulletin No. 2007-45 November 5, 2007...

Bulletin No. 2007-45November 5, 2007

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

INCOME TAX

Rev. Rul. 2007–64, page 953.2007 base period T-bill rate. The “base period T-bill rate”for the period ending September 30, 2007, is published asrequired by section 995(f) of the Code.

Rev. Rul. 2007–66, page 956.Federal rates; adjusted federal rates; adjusted federallong-term rate and the long-term exempt rate. For pur-poses of sections 382, 642, 1274, 1288, and other sectionsof the Code, tables set forth the rates for November 2007.

Rev. Proc. 2007–65, page 967.This procedure under sections 704(b) and 45 of the Code pro-vides the necessary requirements for partnerships to meet asafe harbor in allocating wind energy production tax credits.

Rev. Proc. 2007–66, page 970.Cost-of-living adjustments for 2008. This procedure setsforth the cost-of-living adjustments to certain items for 2008as required under various provisions of the Code and Serviceguidance. Rev. Procs. 90–12 and 2002–41 modified.

EMPLOYEE PLANS

Rev. Rul. 2007–65, page 949.Employer’s deduction for contributions; limitation onemployer’s deduction; welfare benefit funds. This rulingdiscusses whether an employer’s deductions for contributionsto a welfare benefit fund under section 419 of the Code are“qualified direct costs” with respect to premiums paid by awelfare benefit fund on cash value life insurance policies.

Notice 2007–83, page 960.Abusive trust arrangements; cash value life insurance;welfare benefits. This notice identifies certain trust arrange-ments that claim to be welfare benefit funds and that utilizecash value life insurance policies, and substantially similar ar-rangements, as listed transactions.

Notice 2007–84, page 963.Post-retirement medical and life insurance benefits;nondiscrimination; welfare benefit funds. This noticealerts taxpayers that the tax treatment of trusts providingpost-retirement medical and life insurance benefits to ownersand other key employees may not provide the tax benefitsclaimed.

Notice 2007–87, page 966.2008 cost-of-living adjustments; retirement plans, etc.This notice sets forth certain cost-of-living adjustments effec-tive January 1, 2008, applicable to the dollar limits on benefitsunder qualified defined benefit pension plans and to other provi-sions affecting (1) certain plans of deferred compensation and(2) “control employees.” This notice also contains cost-of-livingadjustments for several pension-related amounts in restatingthe data in News Release IR–2007–171 issued October 18,2007.

(Continued on the next page)

Announcements of Disbarments and Suspensions begin on page 979.Finding Lists begin on page ii.

EXEMPT ORGANIZATIONS

Announcement 2007–105, page 984.The IRS has revoked its determination that Gregory and VickieIverson Charitable Supporting Organization, Salt Lake City, UT;The Scott Canepa Charitable Supporting Organization, Las Ve-gas, NV; Kyle Charitable Support Organization Trust, Austin,TX; Paul and Deborah Marvin Charitable Supporting Founda-tion, Salt Lake City, UT; Malecha Family Foundation, Apple Val-ley, MN; Shared Visions Foundation, Park City, UT; Harold BLee Foundation, Woodland, UT; Missouri Basketball Club, Co-lumbia, MO; Mahisekar Charitable Supporting Organization, Or-land Park, IL; Georgetown Title Foundation, Sandy, UT; Buddyand Rita Gregory Charitable Supporting Organization, Lehi, UT;Keith & Anna Barton Charitable Supporting Organization, Lehi,UT; Asafo Global Trust Fund, Inc., Phoenix, AZ; White WingEducational Dev Corp, New York, NY; AARO Credit Services,Costa Mesa, CA; Paul and Deborah Manning Charitable Sup-porting Org, Salt Lake City, UT; MOP Non-Profit, Inc., SterlingHeights, MI; Access Home Project, Inc., Los Angeles, CA; ToLife Foundation, New York, NY; Miami Latin Film Festival, Miami,FL; Larry and Kelli Cotton Charitable Supporting Organization,Fort Worth, TX, qualify as organizations described in sections501(c)(3) and 170(c)(2) of the Code.

ESTATE TAX


GIFT TAX


EXCISE TAX


ADMINISTRATIVE

T.D. 9359, page 931.Final regulations under section 330 of title 31 of the U.S. Codeprovide amendments to the provisions of Circular 230 relat-ing to various non-shelter items. This document reflects theTreasury Department and the IRS consideration of the com-ments received in response to the proposed regulations andthe amendments to section 330 made by the American JobsCreation Act of 2004, Public Law 108–357. The regulationsalso include conforming amendments to reflect the final regu-lations relating to best practices, covered opinions, and otherwritten advice published as T.D. 9165, 2005–1 C.B. 357, andas T.D. 9201, 2005–1 C.B. 1153, but do not otherwise ad-dress those final regulations.

REG–138637–07, page 977.Proposed regulations under section 330 of title 31 of the U.S.Code amends section 10.34 of Circular 230 relating to stan-dards with respect to tax returns. On May 25, 2007, the Pres-ident signed into law the Small Business and Work OpportunityTax Act of 2007, Public Law 110–28, which amended section6694(a) of the Code by altering the standards of conduct thatmust be met to avoid imposition of the penalty for preparinga return that reflects an understatement of liability. The stan-dards with respect to tax returns in section 10.34(a) of the reg-ulations have been amended to reflect the changes to section6694(a) made by the Small Business and Work Opportunity Actof 2007.

Notice 2007–85, page 965.This notice provides that a material advisor required to file acompleted Form 8918 by October 31, 2007, will be treatedas satisfying the disclosure requirement of regulations section301.6111–3(d) if the material advisor files Form 8264 instead.If Form 8918 is published on or before October 31, 2007,material advisors may choose to use either Form 8918 or Form8264 for disclosures required to be filed by October 31, 2007.For disclosures required to be filed after October 31, 2007,material advisors must use Form 8918 (or successor form)unless instructed otherwise by the IRS. Reportable transactionsdisclosed on the Form 8264 should be disclosed in the mannerdescribed in Notice 2004–80, 2004–2 C.B. 963, and Notice2005–22, 2005–1 C.B. 756.


November 5, 2007 2007–45 I.R.B.

The IRS MissionProvide America’s taxpayers top quality service by helpingthem understand and meet their tax responsibilities and by

applying the tax law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly and may be obtained from theSuperintendent of Documents on a subscription basis. Bulletincontents are compiled semiannually into Cumulative Bulletins,which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all sub-stantive rulings necessary to promote a uniform application ofthe tax laws, including all rulings that supersede, revoke, mod-ify, or amend any of those previously published in the Bulletin.All published rulings apply retroactively unless otherwise indi-cated. Procedures relating solely to matters of internal man-agement are not published; however, statements of internalpractices and procedures that affect the rights and duties oftaxpayers are published.

Revenue rulings represent the conclusions of the Service on theapplication of the law to the pivotal facts stated in the revenueruling. In those based on positions taken in rulings to taxpayersor technical advice to Service field offices, identifying detailsand information of a confidential nature are deleted to preventunwarranted invasions of privacy and to comply with statutoryrequirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,and Service personnel and others concerned are cautionedagainst reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.This part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A,Tax Conventions and Other Related Items, and Subpart B, Leg-islation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Sec-retary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative indexfor the matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

2007–45 I.R.B. November 5, 2007

Place missing child here.

November 5, 2007 2007–45 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 1.—Tax Imposed

The Service provides inflation adjustments to thetax rate tables for individuals, trusts, and estates fortaxable years beginning in 2008. In addition, theamounts of certain reductions allowed against theunearned income of minor children in computingthe “kiddie tax” are adjusted. Also adjusted are theamounts used to determine whether a parent mayelect to report the “kiddie tax” on the parent’s return.See Rev. Proc. 2007-66, page 970.

Section 23.—AdoptionExpenses

The Service provides inflation adjustments to theadoption credit allowed for the adoption of a child fortaxable years beginning in 2008. The Service alsoprovides inflation adjustments to the value used incalculating the modified adjusted gross income lim-itations used to determine the amount of adoptioncredit that is allowed in taxable years beginning in2008. See Rev. Proc. 2007-66, page 970.

Section 24.—Child TaxCredit

The Service provides inflation adjustments for thevalue used in determining the amount of the creditthat may be refundable beginning in 2008. See Rev.Proc. 2007-66, page 970.

Section 25A.—Hope andLifetime Learning Credits

The Service provides inflation adjustments for theamount of qualified tuition and related expenses thatare taken into account in determining the amount ofthe Hope Scholarship Credit for taxable years begin-ning in 2008, and for the amount of a taxpayer’s mod-ified adjusted gross income that is taken into accountin determining the reduction in the amount of theHope Scholarship and Lifetime Learning Credits oth-erwise available. See Rev. Proc. 2007-66, page 970.

Section 25B.—ElectiveDeferrals and IRAContributions by CertainIndividuals

The Service provides inflation adjustments to theadjusted gross income amounts used to determine theapplicable percentage for calculating the qualified re-tirement savings contributions credit that may be al-lowed for taxable years beginning in 2008. See Rev.Proc. 2007-66, page 970.

Section 32.—EarnedIncome

The Service provides inflation adjustments to thelimitations on the earned income credit for taxableyears beginning in 2008. See Rev. Proc. 2007-66,page 970.

Section 42.—Low-IncomeHousing Credit

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the monthof November 2007. See Rev. Rul. 2007-66, page956.

The Service provides inflation adjustments to theamounts used to calculate the State housing creditceiling used in determining the low-income housingcredit for calendar year 2008. See Rev. Proc. 2007-66, page 970.

Section 59.—OtherDefinitions and SpecialRules

The Service provides an inflation adjustment to theexemption amount used in computing the alternativeminimum tax for a minor child subject to the “kiddietax” for taxable years beginning in 2008. See Rev.Proc. 2007-66, page 970.

Section 62.—AdjustedGross Income Defined

The Service provides inflation adjustments to theamounts an eligible employer may pay in 2008 to cer-tain welders and heavy equipment mechanics for rig-related expenses that are deemed substantiated underan accountable plan if paid in accordance with Rev.Proc. 2002–41, 2002–1 C.B. 1098. See Rev. Proc.2007-66, page 970.

Section 63.—TaxableIncome Defined

The Service provides inflation adjustments to thestandard deduction amounts (including the limitationin the case of certain dependents, and the additionalstandard deduction for the aged or blind) for taxableyears beginning in 2008. See Rev. Proc. 2007-66,page 970.

Section 68.—OverallLimitation on ItemizedDeductions

The Service provides inflation adjustments to theoverall limitation on itemized deductions for taxableyears beginning in 2008. See Rev. Proc. 2007-66,page 970.

Section 132.—CertainFringe Benefits

The Service provides inflation adjustments to thelimitations on the exclusion of income for a qualifiedtransportation fringe benefit for taxable years begin-ning in 2008. See Rev. Proc. 2007-66, page 970.

Section 135.—IncomeFrom United States SavingsBonds Used to Pay HigherEducation Tuition and Fees

The Service provides inflation adjustments to thelimitation on the exclusion of income from UnitedStates savings bonds for taxpayers who pay qualifiedhigher education expenses for taxable years begin-ning in 2008. See Rev. Proc. 2007-66, page 970.

Section 137.—AdoptionAssistance Programs

The Service provides inflation adjustments to themaximum amount that can be excluded from an em-ployee’s gross income in connection with a qualifiedadoption assistance program for taxable years begin-ning in 2008. The Service also provides inflation ad-justments to the amount used to calculate the modi-fied adjusted gross income limitations used to deter-mine the amount that can be excluded from an em-ployee’s gross income for taxable years beginning in2008. See Rev. Proc. 2007-66, page 970.

Section 146.—Volume CapThe Service provides inflation adjustments to the

amounts used to determine the State ceiling for thevolume cap of private activity bonds for calendar year2008. See Rev. Proc. 2007-66, page 970.

Section 148.—Arbitrage26 CFR 1.148–5: Yield and valuation of investments.

The Service provides inflation adjustments for de-termining in the calendar year 2008 whether a bro-ker’s commission or similar fee with respect to the

2007–45 I.R.B. 930 November 5, 2007

acquisition of a guaranteed investment contract or in-vestments purchased for a yield restricted defeasanceescrow is reasonable. The Service provides an infla-tion adjustment to the computation credit determinedunder section 1.148–3(d)(4) of the proposed IncomeTax Regulations for bond years ending in 2008. SeeRev. Proc. 2007-66, page 970.

Section 151.—Allowanceof Deductions for PersonalExemptions

The Service provides inflation adjustments to thepersonal exemption and to the threshold amounts ofadjusted gross income above which the exemptionamount phases out for taxable years beginning in2008. See Rev. Proc. 2007-66, page 970.

Section 170.—Charitable,etc., Contributions and Gifts

The Service provides inflation adjustments to the“insubstantial benefit” guidelines for calendar year2008. Under the guidelines, a charitable contribu-tion is fully deductible even though the contributor re-ceives “insubstantial benefits” from the charity. SeeRev. Proc. 2007-66, page 970.

Section 179.—Electionto Expense CertainDepreciable BusinessAssets

The Service provides inflation adjustments to theaggregate cost of section 179 property that a taxpayermay elect to treat as an expense for taxable years be-ginning in 2008. See Rev. Proc. 2007-66, page 970.

Section 213.—Medical,Dental, etc., Expenses

The Service provides inflation adjustments to thelimitation on the amount of eligible long-term carepremiums includible in the term “medical care” fortaxable years beginning in 2008. See Rev. Proc.2007-66, page 970.

Section 219.—RetirementSavings

The Service provides inflation adjustments tothe applicable dollar amounts used to calculate theamount by which active participants must reducethe amount allowed as a deduction for qualifiedretirement contributions for taxable years beginningin 2008. See Rev. Proc. 2007-66, page 970.

Section 220.—Archer MSAsThe Service provides inflation adjustments to the

amounts used to determine whether a health plan is

a “high deductible health plan” for purposes of de-termining whether an individual is eligible for a de-duction for cash paid to a medical savings accountfor taxable years beginning in 2008. See Rev. Proc.2007-66, page 970.

Section 221.—Interest onEducation Loans

The Service provides inflation adjustments to theincome limitations used to determine the allowablededuction for interest on education loans for taxableyears beginning in 2008. See Rev. Proc. 2007-66,page 970.

Section 264.—CertainAmounts Paid in ConnectionWith Insurance Contracts

When a welfare benefit fund is directly or indi-rectly a beneficiary under a life insurance policywithin the meaning of section 264(a) of the Code,what are the limitations on an employer’s deduc-tion for contributions to the fund? See Rev. Rul.2007-65, page 949.

Section 280G.—GoldenParachute Payments

Federal short-term, mid-term, and long-term ratesare set forth for the month of November 2007. SeeRev. Rul. 2007-66, page 956.

Section 330 (31USC).—Best Practicesfor Tax Advisors31 CFR 10.3: Who may practice.

T.D. 9359

DEPARTMENT OFTHE TREASURYOffice of the Secretary31 CFR Part 10

Regulations GoverningPractice Before the InternalRevenue Service

AGENCY: Office of the Secretary, Trea-sury.

ACTION: Final regulations.

SUMMARY: This document contains finalregulations revising the regulations gov-erning practice before the Internal Rev-enue Service (Circular 230). These regu-

lations affect individuals who practice be-fore the Internal Revenue Service (IRS).The amendments modify the general stan-dards of practice before the IRS.

DATES: Effective Date: These regulationsare effective September 26, 2007.

Applicability Date: For dates of appli-cability, see §§10.1(d), 10.2(b), 10.3(i),10.4(e), 10.5(f), 10.6(p), 10.7(g), 10.22(c),10.25(e), 10.27(d), 10.29(d), 10.30(e),10.34(f), 10.50(e), 10.51(b), 10.52(b),10.53(e), 10.60(d), 10.61(c), 10.62(d),10.63(f), 10.65(c), 10.68(e), 10.70(c),10.71(g), 10.72(g), 10.73(g), 10.76(e),10.77(c), 10.78(d), 10.82(h), 10.90(b),and 10.91.

FOR FURTHER INFORMATIONCONTACT: Matthew Cooper at (202)622–4940.

SUPPLEMENTARY INFORMATION:

Background

Section 330 of title 31 of the UnitedStates Code authorizes the Secretary of theTreasury to regulate the practice of rep-resentatives before the Treasury Depart-ment. The Secretary is authorized, afternotice and an opportunity for a proceeding,to censure, suspend or disbar from prac-tice before the Treasury Department thoserepresentatives who are incompetent, dis-reputable, or who violate regulations pre-scribed under section 330 of title 31. TheSecretary also is authorized to impose amonetary penalty against these individualsor seek an injunction under section 7408 ofthe Internal Revenue Code.

The Secretary has published regulationsgoverning the practice of representativesbefore the IRS in Circular 230 (31 CFRpart 10). These regulations authorize theDirector of the Office of Professional Re-sponsibility to act upon applications forenrollment to practice before the IRS, tomake inquiries with respect to matters un-der the Office of Professional Responsibil-ity’s jurisdiction, to institute proceedingsto impose a monetary penalty or to cen-sure, suspend or disbar a practitioner frompractice before the IRS, to institute pro-ceedings to disqualify appraisers, and toperform other duties necessary to carry outthese functions.

On December 19, 2002, the Trea-sury Department and the IRS issued an

November 5, 2007 931 2007–45 I.R.B.

advance notice of proposed rulemaking(2002 ANPRM) (published in the I.R.B.as Announcement 2003–5, 2003–1 C.B.397 (67 FR 77724)) requesting commentson amendments to the regulations relatingto the Office of Professional Responsi-bility, unenrolled practice, eligibility forenrollment, sanctions and disciplinaryproceedings, contingent fees and confi-dentiality agreements. On February 8,2006, the Treasury Department and theIRS published in the Federal Register (71FR 6421) proposed amendments to theregulations (REG–122380–02, 2006–1C.B. 563) reflecting consideration of thecomments received in response to the2002 ANPRM and reflecting amendmentsto section 330 of title 31 made by theAmerican Jobs Creation Act of 2004, Pub-lic Law 108–357 (118 Stat. 1418) (theJobs Act). A public hearing was held onthese proposals on June 21, 2006. Writ-ten public comments responding to theproposed regulations were received. Af-ter consideration of the public comments,the proposed regulations are adopted asrevised by this Treasury decision.

Summary of Comments andExplanation of Revisions

Over 30 written comments were re-ceived in response to the notice of pro-posed rulemaking. All comments wereconsidered and are available for publicinspection upon request. A number ofthese comments are summarized in thispreamble. The scope of these regulationsis limited to practice before the IRS. Theseregulations do not alter or supplant ethicalstandards that are otherwise applicable topractitioners.

Definitions—Practice Before the InternalRevenue Service

Section 10.2(a)(4) of the final regula-tions adopts the proposed change withoutmodification. The final regulations pro-vide that practice before the IRS compre-hends all matters connected with a presen-tation to the IRS or any of its officers oremployees relating to a taxpayer’s rights,privileges, or liabilities under laws or reg-ulations administered by the IRS. Consis-tent with the Jobs Act amendment to sec-tion 330 of title 31, the final regulationsprovide that practice includes rendering

written advice with respect to any entity,transaction, plan or arrangement, or otherplan or arrangement having a potential fortax avoidance or evasion. Several com-mentators stated that, notwithstanding theclarification provided by the Jobs Act, therendition of tax advice is not, in and ofitself, an act constituting practice beforethe IRS. The Treasury Department and IRSconclude that the rendering of written ad-vice is practice before the IRS subject toCircular 230 when it is provided by a prac-titioner.

Who May Practice

Sections 10.3(a) and (b) of these finalregulations clarify that an attorney or CPAis not required to file a Form 2848, “Powerof Attorney and Declaration of Represen-tative”, with the IRS before renderingwritten advice covered under §10.35 or§10.37. As stated earlier in this preamble,the rendering of this advice is practicebefore the IRS when provided by a practi-tioner. Any practice before the IRS otherthan the rendering of written advice cov-ered under §10.35 or §10.37 continues torequire the attorney or CPA to file a Form2848 with the IRS.

The notice of proposed rulemakinginvited comments on a proposal fromthe Advisory Committee for Tax Ex-empt/Governmental Entities recommend-ing that individuals who provide technicalservices to plan sponsors to maintain thetax qualified status of their retirementplans (retirement plan administrators)be authorized to practice provided theydemonstrate the competency to do so.

The commentators supported this pro-posal provided that practice is limitedto representing taxpayers with respect toqualified retirement plan issues. In lightof the favorable comments and the im-mediate need for this program, the finalregulations under §10.3(e) establish anenrolled retirement plan agent designa-tion, subject to the limitations identified inthese regulations.

These regulations generally limit thepractice of enrolled retirement plan agentsto representation with respect to issuesarising under the following employee planprograms: (1) Employee Plans Determina-tion Letter program; (2) Employee PlansCompliance Resolution System; and (3)Employee Plans Master and Prototype and

Volume Submitter program. Enrolled re-tirement plan agents also are permitted torepresent taxpayers generally with respectto IRS forms under the 5300 and 5500series, which are filed by retirement plansand plan sponsors, but not with respect toactuarial forms or schedules.

The Advisory Committee recom-mended the implementation of proce-dures for enrollment similar to the currentenrolled agent program. The Treasury De-partment and IRS adopt that recommenda-tion. Enrolled retirement plan agents willbe subject to an examination to determinecompetency, a renewal process and contin-uing professional education requirements.

Enrollment Procedures

Sections 10.4, 10.5 and 10.6 of the reg-ulations set forth the applicable proceduresrelating to the enrollment and renewal ofenrollment of an enrolled agent. The finalregulations adopt the proposed changesin these sections with one modification.Sections 10.5(b) and 10.6(d)(6) are re-vised to reflect the publishing of T.D.9288, 2006–44 I.R.B. 794 (71 FR 58740),which establishes user fees for enrollmentand renewal of this enrollment in 26 CFRpart 300, on October 5, 2006. The proce-dures in §§10.4, 10.5, and 10.6 also areexpanded to include the enrollment and re-newal of enrollment for the new categoryof enrolled retirement plan agents.

Limited Practice Before the IRS

The final regulations do not adopt theprovisions governing limited practice asproposed under §10.7. Accordingly, theauthorization in §10.7(c)(viii), which al-lows an individual, who was not other-wise a practitioner, to represent a taxpayerduring an examination if that individualprepared the return for the taxable periodunder examination, is retained. An un-enrolled return preparer who prepared thetaxpayer’s return for the year under exam-ination, therefore, may continue to nego-tiate with the IRS on behalf of that tax-payer during an examination or bind thattaxpayer to a position during an exami-nation. The unenrolled return preparer,however, may still not represent a tax-payer before any other office of the IRS,including Collection or Appeals; executeclosing agreements, claims for refund, or

2007–45 I.R.B. 932 November 5, 2007

waivers; or otherwise represent taxpay-ers before the IRS unless authorized by§10.7(c)(1)(i) through (vii).

These final regulations do not adopt onecommentator’s suggestion that payroll re-porting agents be allowed to represent tax-payers on a limited basis with respect toFederal tax deposits made by the payrollagents on behalf of their clients. Payrollagents have not demonstrated their quali-fications to practice before the IRS as re-quired under section 330(a)(2) of title 31.Payroll agents may assist, however, in theexchange of information with the IRS re-garding a taxpayer’s return if the taxpayerspecifically authorizes the payroll agent toreceive confidential tax information fromthe IRS through the use of a tax informa-tion authorization.

Practice by Former GovernmentEmployees, Their Partners and TheirAssociates

The final regulations adopt the pro-posed amendments to §10.25, with mod-ification. The final regulations modify§10.25(b)(4) to prohibit, for a period ofone year after Government employment isended, former employees from appearingbefore, or communicating with the intentto influence, an employee of the TreasuryDepartment with respect to a rule in whichthey were involved in developing. Thismodification is consistent with the scopeof activities covered by 18 U.S.C. 207(a)and 207(c). Commentators generally sup-ported the changes to §10.25 governingthe restrictions on the practice of formerGovernment employees, their partners,and their associates with respect to mattersthat the former Government employeesparticipated in during the course of theirGovernment employment.

Contingent Fees

The final regulations adopt the amend-ments as proposed in §10.27, with severalmodifications. Most commentators op-posed further limitations on contingentfees under §10.27 and supported the with-drawal or significant modification of thissection. Specifically, several commenta-tors stated that the proposed rules wereoverly broad, improperly interfered withthe practitioner-client relationship, andprohibited some small and middle market

taxpayers from appropriately requestingrefunds. Another group of commentatorsrequested that contingent fees be allowedin situations in which IRS review of thetaxpayer’s position is probable and thefees do not provide an incentive for abuse(including interest and penalty reviews,private letter rulings, pre-filing agree-ments, advance pricing agreements, andrequests for relief under section 9100).

The Treasury Department and the IRScontinue to believe that a rule restrictingcontingent fees for preparing tax returnssupports voluntary compliance with theFederal tax laws by discouraging returnpositions that exploit the audit selectionprocess. In particular, the Treasury De-partment and IRS are concerned withthe use of contingent fee arrangementsin connection with claims for refund oramended returns filed late in the exami-nation process. Balancing these concernswith the appropriate use of contingent feearrangements in other situations, the finalregulations permit a practitioner to chargea contingent fee for services rendered inconnection with the IRS examination of,or challenge, to (i) an original tax return,or (ii) an amended return or claim for re-fund or credit where the amended return orclaim for refund or credit was filed within120 days of the taxpayer receiving a writ-ten notice of the examination or a writtenchallenge to the original tax return.

Based on comments received, the finalregulations also permit the use of contin-gent fees for interest and penalty reviewsbecause there is no exploitation of the auditlottery in these situations as they are gener-ally completed on a post-examination ba-sis. A practitioner, therefore, may chargea contingent fee for services rendered inconnection with a claim for credit or re-fund filed in connection with the determi-nation of statutory interest or penalties as-sessed by the Internal Revenue Service.

Finally, the final regulations adopt theamendment in proposed §10.27 which al-lows a practitioner to charge a contingentfee for services rendered in connectionwith any judicial proceeding arising underthe Internal Revenue Code.

To eliminate any adverse impact thatthe adoption of these final regulationscould have on pending or imminent trans-actions, §10.27(d), as amended, will apply

to fee arrangements entered into afterMarch 26, 2008.

Conflicting Interests

The final regulations adopt the pro-posed amendments found in §10.29 withmodification. Under the final regulations,a practitioner is required to obtain consentto the representation from each affectedclient in writing in order to represent theconflicting interests. The written consentmay vary in form. The practitioner mayprepare a letter to the client outlining theconflict, as well as the possible implica-tions of the conflict, and submit the letterto the client for the client to countersign.Unlike American Bar Association modelrule 1.7, which permits affected clientsto provide informed consent verbally ifthe consent is contemporaneously docu-mented by the practitioner in writing, averbal consent followed by a confirmatoryletter authored by the practitioner willnot satisfy §10.29 unless the confirma-tory letter is countersigned by the client.A number of commentators opposed theproposed rules on the grounds that it isarguably broader than American Bar As-sociation model rule 1.7. The TreasuryDepartment and IRS, however, concludethat the language in the final regulationsis appropriate to protect taxpayer interestsand protect settlements from future col-lateral attack. In order to provide greaterflexibility to both the practitioner andclient, the Treasury Department and IRShave revised the final regulations to allowthe confirmation to be made within a rea-sonable period after the informed consent,but in no event later than 30 days. It isnot the intent of the Treasury Departmentand IRS to sanction minor technical vio-lations of this final §10.29 when there islittle or no injury to a client, the public,or tax administration. For example, ifa client fails to return the confirmatorywriting to the practitioner, notwithstand-ing the practitioner’s documented goodfaith effort to obtain the client’s signature,the practitioner would not be subject toa sanction or monetary penalty providedthe practitioner promptly withdrew fromrepresentation upon the failure to receivethe client’s written confirmation within areasonable period.

November 5, 2007 933 2007–45 I.R.B.

Standards With Respect to Tax Returnsand Documents, Affidavits and OtherPapers

Section 10.34 sets forth standards ap-plicable to advice with respect to tax re-turn positions and applicable to preparingor signing returns. These final regulationsadopt §10.34 as proposed, with modifica-tions.

On May 25, 2007, the President signedinto law the Small Business and WorkOpportunity Tax Act of 2007, Public Law110–28 (121 Stat. 190), which amendedseveral provisions of the Code to extendthe application of the income tax returnpreparer penalties to all tax return prepar-ers, alter the standards of conduct that mustbe met to avoid imposition of the penal-ties for preparing a return that reflects anunderstatement of liability, and increaseapplicable penalties. On June 11, 2007,the IRS released Notice 2007–54, 2007–27I.R.B. 12 (see §601.601(d)(2)(ii)(b)), pro-viding guidance and transitional relieffor the return preparer provisions undersection 6694 of the Code, as recentlyamended. The standards with respect totax returns under §10.34(a) in these finalregulations do not reflect amendmentsto the Code made by the Small Busi-ness and Work Opportunity Tax Act of2007. Rather, the Treasury Departmentand the IRS are reserving §10.34(a) and(e) in these final regulations and are si-multaneously issuing a notice of proposedrulemaking proposing to amend this partto reflect these recent amendments to theCode.

Several commentators requested thatthe Treasury Department and the IRS clar-ify the rule concerning advising a client tosubmit a document that contains or omitsinformation in a manner that demonstratesan intentional disregard of a rule or reg-ulation and a taxpayer’s right to offer agood faith challenge to a rule or regula-tion. The language under §10.34(b)(2)(iii)now provides that a practitioner may notadvise a client to submit a document to theIRS that contains or omits information ina manner that demonstrates an intentionaldisregard of a rule or regulation unlessthe practitioner also advises the client tosubmit a document showing a good faithchallenge to the rule or regulation.

Sanctions

The final regulations adopt the amend-ments under §10.50 authorizing the impo-sition of a monetary penalty in addition to,or in lieu of, any other sanction in accor-dance with section 822(a) of the Jobs Act.The Treasury Department and the IRSreleased Notice 2007–39, 2007–20 I.R.B.1243 (see §601.601(d)(2)(ii)(b)), on April23, 2007, which provides guidance forpractitioners, employers, firms, and otherentities that may be subject to monetarypenalties. In addition, the notice requestscomments from the public regarding rulesand standards relating to the imposition ofthe monetary penalty. The regulations alsocontain conforming amendments to otherprovisions relating to sanctions, includingmodifications made by section 1219 of thePension Protection Act of 2006, PublicLaw 109–280 (120 Stat. 780). The Sec-retary of Treasury, or delegate, after duenotice and opportunity for hearing, maynow disqualify an appraiser who violatesCircular 230 with or without the assess-ment of a section 6701 penalty against theappraiser.

Incompetence and Disreputable Conduct

Section 10.51 of the regulations de-fines disreputable conduct for which apractitioner may be sanctioned. A numberof commentators stated that inclusion of“failure to sign a tax return” as a typeof disreputable conduct is inappropriateunless the rule clarifies how the practi-tioner should appropriately handle com-peting duties, including section 6694 ofthe Internal Revenue Code or §10.34 ofCircular 230. The Treasury Departmentand the IRS agree that there might be in-stances in which the failure to sign a returnshould not lead to discipline. Therefore,§10.51(a)(14) of the final regulations ismodified to provide that failure to sign areturn is not disreputable conduct if thefailure is due to reasonable cause and notdue to willful neglect. This change isconsistent with the standard applied undersection 6695(b) of the Code.

Conferences

The final regulations adopt the pro-posed rule in §10.61(a) relating to theability of the Director of the Office ofProfessional Responsibility to confer with

a practitioner, employer, firm or other en-tity, or an appraiser concerning allegationsof misconduct irrespective of whether aproceeding has been instituted. Commen-tators suggested that the practitioner, em-ployer, firm or other entity, or an appraiserbe provided with a right to a conferencewith the Office of Professional Respon-sibility. The commentators’ suggestionwas not adopted in light of the Office ofProfessional Responsibility’s policy that itwill not deny a first request for conferencemade by a practitioner, employer, firmor other entity, or an appraiser regardingallegations of misconduct. The Office ofProfessional Responsibility may conducta conference by telephonic means or inperson.

Service of Complaint

The final regulations adopt the rules re-lated to service of the complaint as pro-posed. Proposed regulations in §10.63(d)provide that within 10 days of serving thecomplaint, copies of the evidence in sup-port of the complaint must be served onthe respondent in any manner provided byregulations. Commentators requested thatthe Director of the Office of ProfessionalResponsibility furnish evidence not solelyin support of the complaint, but also addi-tional evidence collected during the courseof investigating the conduct of the respon-dent, including any exculpatory evidence.Although not formalized in the regulationsor the Internal Revenue Manual currently,the current practice of the Office of Pro-fessional Responsibility is to provide to therespondent upon request a copy of what in-formally is understood as the “OPR admin-istrative file” prior to the filing of a com-plaint under §10.60. In general, the OPRadministrative file contains material thatthe Office of Professional Responsibilityconsidered in the course of determiningwhether to issue a final complaint. Somematerial related to the case, including butnot limited to legal memoranda providedto the Office of Professional Responsibil-ity by the Office of Chief Counsel will notbe included in the OPR administrative file.The Treasury Department and IRS intendfor the practice of releasing the OPR ad-ministrative file upon request to continue.This practice addresses in part commenta-tors’ concern that documents included inthe investigatory file, including releasable

2007–45 I.R.B. 934 November 5, 2007

exculpatory evidence, be provided to therespondent. The IRS expects to issue In-ternal Revenue Manual provisions in thenear future pertaining to the Office of Pro-fessional Responsibility’s procedures forinvestigations. It is expected that thoseprovisions will formalize the definition ofthe OPR administrative file and the currentpractice of providing it to the respondentupon request. In order to help ensure thata respondent has access to the evidencein support of OPR’s position, as well asother evidence included in the investiga-tory file, the Treasury Department and IRSare considering ways in which the exist-ing practice relating to the OPR adminis-trative file can be formalized, and will con-sider addressing this issue in future pub-lished guidance.

Supplemental Charges

The final regulations adopt the rules onsupplemental charges as proposed with mi-nor revisions. Section 10.65 of the reg-ulations provides that the Director of theOffice of Professional Responsibility mayfile supplemental charges against a practi-tioner or appraiser by amending the com-plaint to reflect the additional charges ifthe practitioner or appraiser is given noticeand an opportunity to prepare a defense tothe supplemental charges.

Discovery, Hearings, and Publicity ofProceedings

The final regulations adopt the pro-posed changes to §§10.68, 10.71, and10.72(a) through (c) without modification.Most commentators supported expand-ing the use of discovery in disciplinaryproceedings. Most commentators alsosupported providing further proceduralprotections such as a guarantee of theright to cross-examine witnesses. Section10.71(f) of the final regulations providesthat no discovery other than that specifi-cally provided in that section is permitted.

Section 10.72(d) regarding the public-ity of disciplinary proceedings is adoptedwith modification. These final regulationsprovide that reports and decisions of theALJ and appellate authority will be avail-able for public inspection within 30 daysafter the agency’s decision becomes final,subject to procedures to protect the identi-ties of any third-party taxpayers. This pub-

licity will provide greater transparency tothe disciplinary process.

Although most commentators do notoppose disclosure if a sanction is imposed,commentators raised concerns about dis-closure before the Secretary’s decisionis final. The concerns are that prema-ture public disclosure will unfairly tarnishpractitioners’ reputations and that IRSproceedings lack the independent reviewand system of checks and balances foundin State bar disciplinary proceedings. Sev-eral commentators specifically requestedthat an independent party outside of theIRS make a probable cause determinationprior to disclosure.

Attorneys in the Office of ProfessionalResponsibility review every allegation re-ceived by the office. If an allegation war-rants investigation, the practitioner is pro-vided with an opportunity to confer withthe Office of Professional Responsibilityregarding the allegation against the prac-titioner. After the conference, the Officeof Professional Responsibility may closetheir investigation without action, or, if aviolation of Circular 230 has occurred, at-tempt to reach an agreement with the prac-titioner on an appropriate sanction. If anagreement is not reached, the Office ofProfessional Responsibility sends the caseto the Office of the Associate Chief Coun-sel (General Legal Services) for furtheraction. An attorney in the Office of theAssociate Chief Counsel (General LegalServices) thoroughly reviews the case file,and, if a violation of Circular 230 has oc-curred, the practitioner is offered one moreopportunity to discuss the merits and set-tlement of the case before a formal com-plaint is filed. Only after the case hasbeen reviewed by the Office of the Asso-ciate Chief Counsel (General Legal Ser-vices) and the practitioner has been offeredthis second opportunity to discuss and set-tle the case is a formal complaint filed.

In light of the concerns raised by com-mentators that premature public disclosurecould potentially tarnish practitioners’ rep-utations, the final regulations require thatdisclosure of the disciplinary decision bedelayed until after the decision becomes fi-nal. This modification ensures that thereis no potential premature tarnishing of apractitioner’s reputation.

Decision of Administrative Law Judge

The final regulations do not adopt theproposed rules under §§10.77 and 10.78,which provided for a more streamlinedprocess for deciding appeals of the Admin-istrative Law Judges’ decisions. The in-tent of this streamlined process was to pro-vide a more timely process for decidingappeals. Numerous concerns were raisedwith the streamlined process, and, afterconsideration of the concerns, these finalregulations keep the current rules under§§10.77 and 10.78 in effect. But to achievea more timely review of any appeal, theregulations now provide that the Secretaryof the Treasury, or delegate, should makethe agency decision within 180 days afterreceipt of the appeal. The failure of theSecretary of the Treasury, or delegate, tomeet this timeframe, as well as any otherdiscretionary timeframe in subpart D, doesnot create a right of action for the practi-tioner.

Expedited Suspension

The final regulations adopt, with mod-ification, the proposed amendments to§10.82. Final §10.82 expands the author-ity of the Office of Professional Respon-sibility to institute expedited suspensionproceedings against practitioners who ad-vance frivolous or obstructionist positions(after a sanction by a court of competentjurisdiction). The Treasury Departmentand the IRS continue to believe that theexpedited suspension process is equitableand appropriate in the limited listed cir-cumstances. The Office of ProfessionalResponsibility completes an investigationof the issues prior to instituting an ex-pedited proceeding and practitioners areentitled to a conference with the Office ofProfessional Responsibility upon request.

Several commentators expressed con-cern that expanding the authorized use ofthe expedited procedures to compliancecases further erodes a practitioner’s rightsto due process. After further considera-tion of this issue, final §10.82 does not ex-pand the authority of the Office of Profes-sional Responsibility to institute expeditedsuspension proceedings against practition-ers who are not in compliance with theirown Federal tax obligations (failure to fileor pay a tax in 3 of the preceding 5 years,or in 4 of the preceding 7 periods).

November 5, 2007 935 2007–45 I.R.B.

Special Analyses

It has been determined that this finalrule is not a significant regulatory action asdefined in Executive Order 12866. There-fore, a regulatory assessment is not re-quired.

It is hereby certified, under the pro-visions of the Regulatory Flexibility Act(5 U.S.C. 601 et seq.), that these regula-tions will not have a significant economicimpact on a substantial number of smallentities. Persons authorized to practicehave long been required to comply withcertain standards of conduct when practic-ing before the Internal Revenue Service.These regulations do not alter the basicnature of the obligations and responsibil-ities of these practitioners. These regu-lations merely clarify those obligationsin response to public comments, replacecertain terminology to conform with theterminology used in 18 U.S.C. 207, and5 CFR parts 2637 and 2641 (or supersed-ing regulations), make modifications toreflect amendments to section 330 of title31 made by the Jobs Act, and make othermodifications to reflect concerns aboutgreater independence, transparency anddue process. These regulations will notimpose, or otherwise cause, a significantincrease in reporting, recordkeeping, orother compliance burdens on a substantialnumber of small entities. A regulatoryflexibility analysis, therefore, is not re-quired.

Pursuant to section 7805(f) of the In-ternal Revenue Code, the notice of pro-posed rulemaking preceding these regula-tions was submitted to the Chief Counselfor Advocacy of the Small Business Ad-ministration for comment on the regula-tions’ impact on small businesses.

Drafting Information

The principal author of these regula-tions is Matthew S. Cooper of the Officeof the Associate Chief Counsel (Procedureand Administration).

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 31 CFR part 10 isamended to read as follows:

PART 10 — PRACTICE BEFORE THEINTERNAL REVENUE SERVICE

Paragraph 1. The authority citation for31 CFR part 10 continues to read as fol-lows:

Authority: Sec. 3, 23 Stat. 258, secs.2–12, 60 Stat. 237 et. seq.; 5 U.S.C. 301,500, 551–559; 31 U.S.C. 321; 31 U.S.C.330; Reorg. Plan No. 26 of 1950, 15 FR4935, 64 Stat. 1280, 3 CFR, 1949–1953Comp., p. 1017.

Par. 2. In Part 10, remove the language“Director of Practice” where it appears andadd, in its place, the language “Director ofthe Office of Professional Responsibility”in each of the following sections and para-graphs:

Section 10.5(c), (d) and (e);Section 10.6(a)(5), (b), (g)(2)(iii),

(g)(2)(iv), (g)(4), (j)(1), (j)(2), (j)(4),(k)(1), (k)(2) and (n);

Section 10.7(c)(2)(iii) and (d);Section 10.20(b) heading, (b) and (c);Section 10.60(b);Section 10.63(c) heading, (c);Section 10.64(a);Section 10.66;Section 10.69(a)(1) and (b);Section 10.73(a);Section 10.79(a), (b), (c) and (d);Section 10.80;Section 10.81;Section 10.82(a), (c) introductory text,

(c)(3), (d), (e), (f)(1) and (g).Par. 3. Section 10.1 is revised to read

as follows:

§10.1 Director of the Office of ProfessionalResponsibility.

(a) Establishment of office. The Of-fice of Professional Responsibility is es-tablished in the Internal Revenue Service.The Director of the Office of ProfessionalResponsibility is appointed by the Secre-tary of the Treasury, or delegate.

(b) Duties. The Director of the Officeof Professional Responsibility acts on ap-plications for enrollment to practice beforethe Internal Revenue Service; makes in-quiries with respect to matters under theDirector’s jurisdiction; institutes and pro-vides for the conduct of disciplinary pro-ceedings relating to practitioners (and em-ployers, firms or other entities, if applica-ble) and appraisers; and performs other du-ties as are necessary or appropriate to carry

out the functions under this part or as areotherwise prescribed by the Secretary ofthe Treasury, or delegate.

(c) Acting Director of the Office of Pro-fessional Responsibility. The Secretary ofthe Treasury, or delegate, will designate anofficer or employee of the Treasury De-partment to act as Director of the Office ofProfessional Responsibility in the absenceof the Director or during a vacancy in thatoffice.

(d) Effective/applicability date. Thissection is applicable on September 26,2007.

Par. 4. Section 10.2 is revised to readas follows:

§10.2 Definitions.

(a) As used in this part, except wherethe text provides otherwise—

(1) Attorney means any person who is amember in good standing of the bar of thehighest court of any state, territory, or pos-session of the United States, including aCommonwealth, or the District of Colum-bia.

(2) Certified public accountant meansany person who is duly qualified to prac-tice as a certified public accountant in anystate, territory, or possession of the UnitedStates, including a Commonwealth, or theDistrict of Columbia.

(3) Commissioner refers to the Com-missioner of Internal Revenue.

(4) Practice before the Internal Rev-enue Service comprehends all matters con-nected with a presentation to the InternalRevenue Service or any of its officers oremployees relating to a taxpayer’s rights,privileges, or liabilities under laws or reg-ulations administered by the Internal Rev-enue Service. Such presentations include,but are not limited to, preparing and fil-ing documents, corresponding and com-municating with the Internal Revenue Ser-vice, rendering written advice with respectto any entity, transaction, plan or arrange-ment, or other plan or arrangement havinga potential for tax avoidance or evasion,and representing a client at conferences,hearings and meetings.

(5) Practitioner means any individualdescribed in paragraphs (a), (b), (c), (d) or(e) of §10.3.

(6) A tax return includes an amendedtax return and a claim for refund.

2007–45 I.R.B. 936 November 5, 2007

(7) Service means the Internal RevenueService.

(b) Effective/applicability date. Thissection is applicable on September 26,2007.

Par. 5. Section 10.3 is amended by:(1) Revising paragraphs (a) and (b).(2) Redesignating paragraphs (e), (f),

and (g) as paragraphs (f), (g), and (h) re-spectively.

(3) Adding new paragraphs (e) and (i).The revisions and additions read as fol-

lows:

§10.3 Who may practice.

(a) Attorneys. Any attorney who is notcurrently under suspension or disbarmentfrom practice before the Internal RevenueService may practice before the InternalRevenue Service by filing with the Inter-nal Revenue Service a written declarationthat the attorney is currently qualified asan attorney and is authorized to representthe party or parties. Notwithstanding thepreceding sentence, attorneys who are notcurrently under suspension or disbarmentfrom practice before the Internal RevenueService are not required to file a writtendeclaration with the IRS before renderingwritten advice covered under §10.35 or§10.37, but their rendering of this advice ispractice before the Internal Revenue Ser-vice.

(b) Certified public accountants. Anycertified public accountant who is notcurrently under suspension or disbarmentfrom practice before the Internal RevenueService may practice before the InternalRevenue Service by filing with the InternalRevenue Service a written declaration thatthe certified public accountant is currentlyqualified as a certified public accountantand is authorized to represent the partyor parties. Notwithstanding the precedingsentence, certified public accountants whoare not currently under suspension or dis-barment from practice before the InternalRevenue Service are not required to filea written declaration with the IRS beforerendering written advice covered under§10.35 or §10.37, but their rendering ofthis advice is practice before the InternalRevenue Service.

* * * * *(e) Enrolled Retirement Plan

Agents—(1) Any individual enrolled as

a retirement plan agent pursuant to thispart who is not currently under suspensionor disbarment from practice before theInternal Revenue Service may practicebefore the Internal Revenue Service.

(2) Practice as an enrolled retirementplan agent is limited to representation withrespect to issues involving the followingprograms: Employee Plans DeterminationLetter program; Employee Plans Compli-ance Resolution System; and EmployeePlans Master and Prototype and VolumeSubmitter program. In addition, enrolledretirement plan agents are generally per-mitted to represent taxpayers with respectto IRS forms under the 5300 and 5500 se-ries which are filed by retirement plans andplan sponsors, but not with respect to actu-arial forms or schedules.

(3) An individual who practices beforethe Internal Revenue Service pursuant toparagraph (e)(1) of this section is subject tothe provisions of this part in the same man-ner as attorneys, certified public accoun-tants and enrolled agents.

* * * * *(i) Effective/applicability date. This

section is applicable on September 26,2007.


§10.4 Eligibility for enrollment as enrolledagent or enrolled retirement plan agent.

(a) Enrollment as an enrolled agentupon examination. The Director of theOffice of Professional Responsibility maygrant enrollment as an enrolled agent to anapplicant who demonstrates special com-petence in tax matters by written exam-ination administered by, or administeredunder the oversight of, the Director of theOffice of Professional Responsibility andwho has not engaged in any conduct thatwould justify the censure, suspension, ordisbarment of any practitioner under theprovisions of this part.

(b) Enrollment as a retirement planagent upon examination. The Director ofthe Office of Professional Responsibilitymay grant enrollment as an enrolled re-tirement plan agent to an applicant whodemonstrates special competence in qual-ified retirement plan matters by writtenexamination administered by, or adminis-tered under the oversight of, the Director

of the Office of Professional Responsi-bility and who has not engaged in anyconduct that would justify the censure,suspension, or disbarment of any practi-tioner under the provisions of this part.

(c) Enrollment of former Internal Rev-enue Service employees. The Director ofthe Office of Professional Responsibilitymay grant enrollment as an enrolled agentor enrolled retirement plan agent to an ap-plicant who, by virtue of past service andtechnical experience in the Internal Rev-enue Service, has qualified for such enroll-ment and who has not engaged in any con-duct that would justify the censure, suspen-sion, or disbarment of any practitioner un-der the provisions of this part, under thefollowing circumstances—

(1) The former employee applies forenrollment to the Director of the Officeof Professional Responsibility on a formsupplied by the Director of the Office ofProfessional Responsibility and suppliesthe information requested on the form andsuch other information regarding the expe-rience and training of the applicant as maybe relevant.

(2) An appropriate office of the Inter-nal Revenue Service, at the request of theDirector of the Office of Professional Re-sponsibility, will provide the Director ofthe Office of Professional Responsibilitywith a detailed report of the nature andrating of the applicant’s work while em-ployed by the Internal Revenue Serviceand a recommendation whether such em-ployment qualifies the applicant techni-cally or otherwise for the desired autho-rization.

(3) Enrollment as an enrolled agentbased on an applicant’s former employ-ment with the Internal Revenue Servicemay be of unlimited scope or it may belimited to permit the presentation of mat-ters only of the particular class or onlybefore the particular unit or division ofthe Internal Revenue Service for whichthe applicant’s former employment hasqualified the applicant. Enrollment as anenrolled retirement plan agent based on anapplicant’s former employment with theInternal Revenue Service will be limitedto permit the presentation of matters onlywith respect to qualified retirement planmatters.

(4) Application for enrollment as an en-rolled agent or enrolled retirement plan

November 5, 2007 937 2007–45 I.R.B.

agent based on an applicant’s former em-ployment with the Internal Revenue Ser-vice must be made within 3 years from thedate of separation from such employment.

(5) An applicant for enrollment as anenrolled agent who is requesting suchenrollment based on former employmentwith the Internal Revenue Service musthave had a minimum of 5 years continu-ous employment with the Internal RevenueService during which the applicant musthave been regularly engaged in applyingand interpreting the provisions of the In-ternal Revenue Code and the regulationsrelating to income, estate, gift, employ-ment, or excise taxes.

(6) An applicant for enrollment as anenrolled retirement plan agent who is re-questing such enrollment based on formeremployment with the Internal RevenueService must have had a minimum of 5years continuous employment with theInternal Revenue Service during whichthe applicant must have been regularlyengaged in applying and interpreting theprovisions of the Internal Revenue Codeand the regulations relating to qualifiedretirement plan matters.

(7) For the purposes of paragraphs(b)(5) and (b)(6) of this section, an aggre-gate of 10 or more years of employmentin positions involving the application andinterpretation of the provisions of the In-ternal Revenue Code, at least 3 of whichoccurred within the 5 years preceding thedate of application, is the equivalent of 5years continuous employment.

(d) Natural persons. Enrollment topractice may be granted only to naturalpersons.

(e) Effective/applicability date. Thissection is applicable on September 26,2007.

Par. 7. Section 10.5 is amended by re-vising the section heading and paragraphs(a) and (b) and adding paragraph (f) to readas follows:

§10.5 Application for enrollment as anenrolled agent or enrolled retirement planagent.

(a) Form; address. An applicant for en-rollment as an enrolled agent or enrolledretirement plan agent must apply as re-quired by forms or procedures establishedand published by the Office of ProfessionalResponsibility, including proper execution

of required forms under oath or affirma-tion. The address on the application will bethe address under which a successful appli-cant is enrolled and is the address to whichall correspondence concerning enrollmentwill be sent.

(b) Fee. A reasonable nonrefundablefee will be charged for each applicationfor enrollment as an enrolled agent filedwith the Director of the Office of Profes-sional Responsibility in accordance with26 CFR 300.5. A reasonable nonrefund-able fee will be charged for each applica-tion for enrollment as an enrolled retire-ment plan agent filed with the Director ofthe Office of Professional Responsibility.

* * * * *(f) Effective/applicability date. This

section is applicable to enrollment appli-cations received on or after September 26,2007.

Par. 8. Section 10.6 is amended by:1. Revising the section heading.2. Removing paragraph (a).3. Redesignating paragraph (c) as para-

graph (a).4. Adding new paragraphs (c) and (p).5. Revising paragraphs (d) introduc-

tory text, (d)(4), (d)(5), (d)(6), (d)(7), (e),(f)(1), (f)(2)(iv)(A), (g)(5), (k)(4), (k)(7)and (l).

The revisions and additions read as fol-lows:

§10.6 Enrollment as an enrolled agent orenrolled retirement plan agent.

* * * * *(c) Change of address. An enrolled

agent or enrolled retirement plan agentmust send notification of any change ofaddress to the address specified by theDirector of the Office of ProfessionalResponsibility. This notification mustinclude the enrolled agent’s or enrolled re-tirement plan agent’s name, prior address,new address, social security number or taxidentification number and the date.

(d) Renewal of enrollment. To main-tain active enrollment to practice beforethe Internal Revenue Service, each indi-vidual is required to have the enrollmentrenewed. Failure to receive notificationfrom the Director of the Office of Pro-fessional Responsibility of the renewal re-quirement will not be justification for theindividual’s failure to satisfy this require-ment.

* * * * *(4) Thereafter, applications for renewal

as an enrolled agent will be required be-tween November 1 and January 31 of ev-ery subsequent third year as specified inparagraph (d)(1), (2) or (3) of this sectionaccording to the last number of the individ-ual’s social security number or tax identi-fication number. Those individuals whoreceive initial enrollment as an enrolledagent after November 1 and before April 2of the applicable renewal period will not berequired to renew their enrollment beforethe first full renewal period following thereceipt of their initial enrollment. Applica-tions for renewal as an enrolled retirementplan agent will be required of all enrolledretirement plan agents between April 1 andJune 30 of every third year period subse-quent to their initial enrollment.

(5) The Director of the Office of Pro-fessional Responsibility will notify the in-dividual of the renewal of enrollment andwill issue the individual a card evidencingenrollment.

(6) A reasonable nonrefundable fee willbe charged for each application for renewalof enrollment as an enrolled agent filedwith the Director of the Office of Profes-sional Responsibility in accordance with26 CFR 300.6. A reasonable nonrefund-able fee will be charged for each applica-tion for renewal of enrollment as an en-rolled retirement plan agent filed with theDirector of the Office of Professional Re-sponsibility.

(7) Forms required for renewal may beobtained by sending a written request tothe Director of the Office of ProfessionalResponsibility, Internal Revenue Service,1111 Constitution Avenue, NW, Washing-ton, DC 20224 or from such other sourceas the Director of the Office of Profes-sional Responsibility will publish in theInternal Revenue Bulletin (see 26 CFR601.601(d)(2)(ii)(b)) and on the InternalRevenue Service webpage (www.irs.gov).

(e) Condition for renewal: continuingprofessional education. In order to qual-ify for renewal of enrollment, an individ-ual enrolled to practice before the InternalRevenue Service must certify, on the ap-plication for renewal form prescribed bythe Director of the Office of ProfessionalResponsibility, that he or she has satisfiedthe following continuing professional edu-cation requirements.

2007–45 I.R.B. 938 November 5, 2007

(1) Definitions. For purposes of thissection—

(i) Enrollment year means January 1 toDecember 31 of each year of an enrollmentcycle.

(ii) Enrollment cycle means the threesuccessive enrollment years preceding theeffective date of renewal.

(iii) The effective date of renewal is thefirst day of the fourth month following theclose of the period for renewal describedin paragraph (d) of this section.

(2) For renewed enrollment effective af-ter December 31, 2006—(i) Requirementsfor enrollment cycle. A minimum of 72hours of continuing education credit mustbe completed during each enrollment cy-cle.

(ii) Requirements for enrollment year.A minimum of 16 hours of continuing edu-cation credit, including 2 hours of ethics orprofessional conduct, must be completedduring each enrollment year of an enroll-ment cycle.

(iii) Enrollment during enrollment cy-cle—(A) In general. Subject to paragraph(e)(2)(iii)(B) of this section, an individualwho receives initial enrollment during anenrollment cycle must complete 2 hoursof qualifying continuing education creditfor each month enrolled during the enroll-ment cycle. Enrollment for any part of amonth is considered enrollment for the en-tire month.

(B) Ethics. An individual who receivesinitial enrollment during an enrollment cy-cle must complete 2 hours of ethics or pro-fessional conduct for each enrollment yearduring the enrollment cycle. Enrollmentfor any part of an enrollment year is con-sidered enrollment for the entire year.

(f) Qualifying continuing educa-tion—(1) General. (i) Enrolled agents.To qualify for continuing education creditfor an enrolled agent, a course of learningmust—

(A) Be a qualifying program designedto enhance professional knowledge in Fed-eral taxation or Federal tax related mat-ters (programs comprised of current sub-ject matter in Federal taxation or Federaltax related matters, including accounting,tax preparation software and taxation orethics);

(B) Be a qualifying program consistentwith the Internal Revenue Code and effec-tive tax administration; and

(C) Be sponsored by a qualifying spon-sor.

(ii) Enrolled retirement plan agents. Toqualify for continuing education credit foran enrolled retirement plan agent, a courseof learning must—

(i) Be a qualifying program designed toenhance professional knowledge in quali-fied retirement plan matters;

(ii) Be a qualifying program consistentwith the Internal Revenue Code and effec-tive tax administration; and

(iii) Be sponsored by a qualifying spon-sor.

(2) * * *(iv) Credit for published articles,

books, etc. (A) For enrolled agents, con-tinuing education credit will be awardedfor publications on Federal taxation orFederal tax related matters, including ac-counting, tax preparation software, andtaxation or ethics, provided the content ofsuch publications is current and designedfor the enhancement of the professionalknowledge of an individual enrolled topractice before the Internal Revenue Ser-vice. The publication must be consistentwith the Internal Revenue Code and ef-fective tax administration. For enrolledretirement plan agents, continuing educa-tion credit will be awarded for publicationson qualified retirement plan matters, pro-vided the content of such publications iscurrent and designed for the enhancementof the professional knowledge of an indi-vidual enrolled to practice as an enrolledretirement plan agent before the InternalRevenue Service. The publication must beconsistent with the Internal Revenue Codeand effective tax administration.

* * * * *(g) * * *(5) Sponsor renewal. (i) In general. A

sponsor maintains its status as a qualifiedsponsor during the sponsor enrollment cy-cle.

(ii) Renewal period. Each sponsor mustfile an application to renew its status asa qualified sponsor between May 1 andJuly 31, 2008. Thereafter, applications forrenewal will be required between May 1and July 31 of every subsequent third year.

(iii) Effective date of renewal. The ef-fective date of renewal is the first day ofthe third month following the close of therenewal period.

(iv) Sponsor enrollment cycle. Thesponsor enrollment cycle is the threesuccessive calendar years preceding theeffective date of renewal.

* * * * *(k) * * *(4) Individuals placed in inactive en-

rollment status and individuals ineligibleto practice before the Internal RevenueService may not state or imply that theyare enrolled to practice before the InternalRevenue Service, or use the terms enrolledagent or enrolled retirement plan agent,the designations “EA” or “ERPA” or otherform of reference to eligibility to practicebefore the Internal Revenue Service.

* * * * *(7) Inactive enrollment status is not

available to an individual who is the sub-ject of a disciplinary matter in the Officeof Professional Responsibility.

(l) Inactive retirement status. An indi-vidual who no longer practices before theInternal Revenue Service may request be-ing placed in an inactive retirement sta-tus at any time and such individual will beplaced in an inactive retirement status. Theindividual will be ineligible to practice be-fore the Internal Revenue Service. Suchindividual must file a timely applicationfor renewal of enrollment at each applica-ble renewal or enrollment period as pro-vided in this section. An individual who isplaced in an inactive retirement status maybe reinstated to an active enrollment sta-tus by filing an application for renewal ofenrollment and providing evidence of thecompletion of the required continuing pro-fessional education hours for the enroll-ment cycle. Inactive retirement status isnot available to an individual who is thesubject of a disciplinary matter in the Of-fice of Professional Responsibility.

* * * * *(p) Effective/applicability date. This

section is applicable to enrollment effec-tive on or after September 26, 2007.

Par. 9. Section 10.7 is amended by:1. Revising paragraph (c)(2)(ii).2. And adding paragraph (g).The revisions and additions read as fol-

lows:

November 5, 2007 939 2007–45 I.R.B.

§10.7 Representing oneself; participatingin rulemaking; limited practice; specialappearances; and return preparation.

* * * * *(c) * * *(2) * * *(ii) The Director, after notice and op-

portunity for a conference, may deny eligi-bility to engage in limited practice beforethe Internal Revenue Service under para-graph (c)(1) of this section to any individ-ual who has engaged in conduct that wouldjustify a sanction under §10.50.

* * * * *(g) Effective/applicability date. This


Par. 10. Section 10.22 is amended byrevising paragraph (b) and adding para-graph (c) to read as follows:

§10.22 Diligence as to accuracy.

* * * * *(b) Reliance on others. Except as pro-

vided in §§10.34, 10.35, and 10.37, a prac-titioner will be presumed to have exerciseddue diligence for purposes of this section ifthe practitioner relies on the work productof another person and the practitioner usedreasonable care in engaging, supervising,training, and evaluating the person, takingproper account of the nature of the rela-tionship between the practitioner and theperson.

(c) Effective/applicability date. Thissection is applicable on September 26,2007.


§10.25 Practice by former governmentemployees, their partners and theirassociates.

(a) Definitions. For purposes of thissection—

(1) Assist means to act in such a way asto advise, furnish information to, or other-wise aid another person, directly, or indi-rectly.

(2) Government employee is an officeror employee of the United States or anyagency of the United States, including aspecial Government employee as definedin 18 U.S.C. 202(a), or of the District ofColumbia, or of any State, or a member ofCongress or of any State legislature.

(3) Member of a firm is a sole practi-tioner or an employee or associate thereof,or a partner, stockholder, associate, affili-ate or employee of a partnership, joint ven-ture, corporation, professional associationor other affiliation of two or more prac-titioners who represent nongovernmentalparties.

(4) Particular matter involving specificparties is defined at 5 CFR 2637.201(c), orsuperseding post-employment regulationsissued by the U.S. Office of GovernmentEthics.

(5) Rule includes Treasury regulations,whether issued or under preparation forissuance as notices of proposed rulemak-ing or as Treasury decisions, revenue rul-ings, and revenue procedures published inthe Internal Revenue Bulletin (see 26 CFR601.601(d)(2)(ii)(b)).

(b) General rules—(1) No former Gov-ernment employee may, subsequent toGovernment employment, represent any-one in any matter administered by theInternal Revenue Service if the represen-tation would violate 18 U.S.C. 207 or anyother laws of the United States.

(2) No former Government employeewho personally and substantially partici-pated in a particular matter involving spe-cific parties may, subsequent to Govern-ment employment, represent or knowinglyassist, in that particular matter, any personwho is or was a specific party to that par-ticular matter.

(3) A former Government employeewho within a period of one year priorto the termination of Government em-ployment had official responsibility for aparticular matter involving specific partiesmay not, within two years after Govern-ment employment is ended, represent inthat particular matter any person who isor was a specific party to that particularmatter.

(4) No former Government employeemay, within one year after Governmentemployment is ended, communicate withor appear before, with the intent to influ-ence, any employee of the Treasury De-partment in connection with the publica-tion, withdrawal, amendment, modifica-tion, or interpretation of a rule the develop-ment of which the former Government em-ployee participated in, or for which, withina period of one year prior to the termina-tion of Government employment, the for-mer government employee had official re-

sponsibility. This paragraph (b)(4) doesnot, however, preclude any former em-ployee from appearing on one’s own be-half or from representing a taxpayer beforethe Internal Revenue Service in connec-tion with a particular matter involving spe-cific parties involving the application orinterpretation of a rule with respect to thatparticular matter, provided that the repre-sentation is otherwise consistent with theother provisions of this section and the for-mer employee does not utilize or discloseany confidential information acquired bythe former employee in the development ofthe rule.

(c) Firm representation—(1) No mem-ber of a firm of which a former Govern-ment employee is a member may representor knowingly assist a person who was oris a specific party in any particular mat-ter with respect to which the restrictionsof paragraph (b)(2) of this section apply tothe former Government employee, in thatparticular matter, unless the firm isolatesthe former Government employee in sucha way to ensure that the former Govern-ment employee cannot assist in the repre-sentation.

(2) When isolation of a former Gov-ernment employee is required under para-graph (c)(1) of this section, a statement af-firming the fact of such isolation must beexecuted under oath by the former Gov-ernment employee and by another mem-ber of the firm acting on behalf of thefirm. The statement must clearly iden-tify the firm, the former Government em-ployee, and the particular matter(s) requir-ing isolation. The statement must be re-tained by the firm and, upon request, pro-vided to the Director of the Office of Pro-fessional Responsibility.

(d) Pending representation. The pro-visions of this regulation will governpractice by former Government employ-ees, their partners and associates withrespect to representation in particular mat-ters involving specific parties where actualrepresentation commenced before the ef-fective date of this regulation.



2007–45 I.R.B. 940 November 5, 2007

§10.27 Fees.

(a) In general. A practitioner may notcharge an unconscionable fee in connec-tion with any matter before the InternalRevenue Service.

(b) Contingent fees—(1) Except as pro-vided in paragraphs (b)(2), (3), and (4) ofthis section, a practitioner may not chargea contingent fee for services rendered inconnection with any matter before the In-ternal Revenue Service.

(2) A practitioner may charge a contin-gent fee for services rendered in connec-tion with the Service’s examination of, orchallenge to—

(i) An original tax return; or(ii) An amended return or claim for re-

fund or credit where the amended return orclaim for refund or credit was filed within120 days of the taxpayer receiving a writ-ten notice of the examination of, or a writ-ten challenge to the original tax return.

(3) A practitioner may charge a contin-gent fee for services rendered in connec-tion with a claim for credit or refund filedsolely in connection with the determina-tion of statutory interest or penalties as-sessed by the Internal Revenue Service.

(4) A practitioner may charge a contin-gent fee for services rendered in connec-tion with any judicial proceeding arisingunder the Internal Revenue Code.

(c) Definitions. For purposes of thissection—

(1) Contingent fee is any fee that isbased, in whole or in part, on whetheror not a position taken on a tax return orother filing avoids challenge by the Inter-nal Revenue Service or is sustained eitherby the Internal Revenue Service or in lit-igation. A contingent fee includes a feethat is based on a percentage of the re-fund reported on a return, that is based on apercentage of the taxes saved, or that oth-erwise depends on the specific result at-tained. A contingent fee also includes anyfee arrangement in which the practitionerwill reimburse the client for all or a por-tion of the client’s fee in the event that aposition taken on a tax return or other fil-ing is challenged by the Internal RevenueService or is not sustained, whether pur-suant to an indemnity agreement, a guaran-tee, rescission rights, or any other arrange-ment with a similar effect.

(2) Matter before the Internal RevenueService includes tax planning and advice,

preparing or filing or assisting in prepar-ing or filing returns or claims for refundor credit, and all matters connected with apresentation to the Internal Revenue Ser-vice or any of its officers or employeesrelating to a taxpayer’s rights, privileges,or liabilities under laws or regulations ad-ministered by the Internal Revenue Ser-vice. Such presentations include, but arenot limited to, preparing and filing docu-ments, corresponding and communicatingwith the Internal Revenue Service, render-ing written advice with respect to any en-tity, transaction, plan or arrangement, andrepresenting a client at conferences, hear-ings, and meetings.

(d) Effective/applicability date. Thissection is applicable for fee arrangementsentered into after March 26, 2008.


§10.29 Conflicting interests.

(a) Except as provided by paragraph(b) of this section, a practitioner shall notrepresent a client before the Internal Rev-enue Service if the representation involvesa conflict of interest. A conflict of interestexists if—

(1) The representation of one client willbe directly adverse to another client; or

(2) There is a significant risk that therepresentation of one or more clients willbe materially limited by the practitioner’sresponsibilities to another client, a formerclient or a third person, or by a personalinterest of the practitioner.

(b) Notwithstanding the existence of aconflict of interest under paragraph (a) ofthis section, the practitioner may representa client if—

(1) The practitioner reasonably believesthat the practitioner will be able to providecompetent and diligent representation toeach affected client;

(2) The representation is not prohibitedby law; and

(3) Each affected client waives the con-flict of interest and gives informed con-sent, confirmed in writing by each affectedclient, at the time the existence of the con-flict of interest is known by the practi-tioner. The confirmation may be madewithin a reasonable period after the in-formed consent, but in no event later than30 days.

(c) Copies of the written consents mustbe retained by the practitioner for at least36 months from the date of the conclusionof the representation of the affected clients,and the written consents must be providedto any officer or employee of the InternalRevenue Service on request.


Par. 14. Section 10.30(a)(1) is revisedand paragraph (e) is added to read as fol-lows:

§10.30 Solicitation.

(a) Advertising and solicitation restric-tions.

(1) A practitioner may not, with re-spect to any Internal Revenue Service mat-ter, in any way use or participate in theuse of any form or public communicationor private solicitation containing a false,fraudulent, or coercive statement or claim;or a misleading or deceptive statement orclaim. Enrolled agents or enrolled retire-ment plan agents, in describing their pro-fessional designation, may not utilize theterm of art “certified” or imply an em-ployer/employee relationship with the In-ternal Revenue Service. Examples of ac-ceptable descriptions for enrolled agentsare “enrolled to represent taxpayers be-fore the Internal Revenue Service,” “en-rolled to practice before the Internal Rev-enue Service,” and “admitted to practicebefore the Internal Revenue Service.” Sim-ilarly, examples of acceptable descriptionsfor enrolled retirement plan agents are “en-rolled to represent taxpayers before theInternal Revenue Service as a retirementplan agent” and “enrolled to practice be-fore the Internal Revenue Service as a re-tirement plan agent.”

* * * * *(e) Effective/applicability date. This



§10.34 Standards with respect to taxreturns and documents, affidavits andother papers.

(a) [Reserved].(b) Documents, affidavits and other pa-

pers—(1) A practitioner may not advise a

November 5, 2007 941 2007–45 I.R.B.

client to take a position on a document, af-fidavit or other paper submitted to the In-ternal Revenue Service unless the positionis not frivolous.

(2) A practitioner may not advise aclient to submit a document, affidavit orother paper to the Internal Revenue Ser-vice—

(i) The purpose of which is to delay orimpede the administration of the Federaltax laws;

(ii) That is frivolous; or(iii) That contains or omits information

in a manner that demonstrates an inten-tional disregard of a rule or regulationunless the practitioner also advises theclient to submit a document that evidencesa good faith challenge to the rule or regu-lation.

(c) Advising clients on potential penal-ties—(1) A practitioner must inform aclient of any penalties that are reasonablylikely to apply to the client with respectto—

(i) A position taken on a tax return if—(A) The practitioner advised the client

with respect to the position; or(B) The practitioner prepared or signed

the tax return; and(ii) Any document, affidavit or other

paper submitted to the Internal RevenueService.

(2) The practitioner also must informthe client of any opportunity to avoid anysuch penalties by disclosure, if relevant,and of the requirements for adequate dis-closure.

(3) This paragraph (c) applies even ifthe practitioner is not subject to a penaltyunder the Internal Revenue Code with re-spect to the position or with respect to thedocument, affidavit or other paper submit-ted.

(d) Relying on information furnished byclients. A practitioner advising a client totake a position on a tax return, document,affidavit or other paper submitted to theInternal Revenue Service, or preparing orsigning a tax return as a preparer, generallymay rely in good faith without verificationupon information furnished by the client.The practitioner may not, however, ignorethe implications of information furnishedto, or actually known by, the practitioner,and must make reasonable inquiries if theinformation as furnished appears to be in-correct, inconsistent with an important fact

or another factual assumption, or incom-plete.

(e) [Reserved].(f) Effective/applicability date. Section

10.34 is applicable to tax returns, docu-ments, affidavits and other papers filed onor after September 26, 2007.

Par. 16. In §10.35(b)(1) remove thelanguage “§10.2(e)” and add the language“§10.2(a)(5)” in its place.


§10.50 Sanctions.

(a) Authority to censure, suspend, ordisbar. The Secretary of the Treasury,or delegate, after notice and an opportu-nity for a proceeding, may censure, sus-pend, or disbar any practitioner from prac-tice before the Internal Revenue Service ifthe practitioner is shown to be incompe-tent or disreputable (within the meaning of§10.51), fails to comply with any regula-tion in this part (under the prohibited con-duct standards of §10.52), or with intent todefraud, willfully and knowingly misleadsor threatens a client or prospective client.Censure is a public reprimand.

(b) Authority to disqualify. The Sec-retary of Treasury, or delegate, after duenotice and opportunity for hearing, maydisqualify any appraiser for a violation ofthese rules as applicable to appraisers.

(1) If any appraiser is disqualified pur-suant to this subpart C, the appraiser isbarred from presenting evidence or testi-mony in any administrative proceeding be-fore the Department of Treasury or the In-ternal Revenue Service, unless and untilauthorized to do so by the Director of theOffice of Professional Responsibility pur-suant to §10.81, regardless of whether theevidence or testimony would pertain to anappraisal made prior to or after the effec-tive date of disqualification.

(2) Any appraisal made by a disqual-ified appraiser after the effective date ofdisqualification will not have any proba-tive effect in any administrative proceed-ing before the Department of the Treasuryor the Internal Revenue Service. An ap-praisal otherwise barred from admissioninto evidence pursuant to this section maybe admitted into evidence solely for thepurpose of determining the taxpayer’s re-liance in good faith on such appraisal.

(c) Authority to impose monetarypenalty—(1) In general. (i) The Sec-retary of the Treasury, or delegate, afternotice and an opportunity for a proceed-ing, may impose a monetary penalty onany practitioner who engages in conductsubject to sanction under paragraph (a) ofthis section.

(ii) If the practitioner described in para-graph (c)(1)(i) of this section was acting onbehalf of an employer or any firm or otherentity in connection with the conduct giv-ing rise to the penalty, the Secretary of theTreasury, or delegate, may impose a mon-etary penalty on the employer, firm, or en-tity if it knew, or reasonably should haveknown, of such conduct.

(2) Amount of penalty. The amount ofthe penalty shall not exceed the gross in-come derived (or to be derived) from theconduct giving rise to the penalty.

(3) Coordination with other sanctions.Subject to paragraph (c)(2) of this sec-tion—

(i) Any monetary penalty imposed on apractitioner under this paragraph (c) maybe in addition to or in lieu of any sus-pension, disbarment or censure and maybe in addition to a penalty imposed on anemployer, firm or other entity under para-graph (c)(1)(ii) of this section.

(ii) Any monetary penalty imposed onan employer, firm or other entity may be inaddition to or in lieu of penalties imposedunder paragraph (c)(1)(i) of this section.

(d) Sanctions to be imposed. The sanc-tions imposed by this section shall takeinto account all relevant facts and circum-stances.

(e) Effective/applicability date. Thissection is applicable to conduct occurringon or after September 26, 2007, exceptparagraph (c) which applies to prohibitedconduct that occurs after October 22, 2004.


§10.51 Incompetence and disreputableconduct.

(a) Incompetence and disreputable con-duct. Incompetence and disreputable con-duct for which a practitioner may be sanc-tioned under §10.50 includes, but is notlimited to—

(1) Conviction of any criminal offenseunder the Federal tax laws.

2007–45 I.R.B. 942 November 5, 2007

(2) Conviction of any criminal offenseinvolving dishonesty or breach of trust.

(3) Conviction of any felony under Fed-eral or State law for which the conductinvolved renders the practitioner unfit topractice before the Internal Revenue Ser-vice.

(4) Giving false or misleading informa-tion, or participating in any way in the giv-ing of false or misleading information tothe Department of the Treasury or any offi-cer or employee thereof, or to any tribunalauthorized to pass upon Federal tax mat-ters, in connection with any matter pend-ing or likely to be pending before them,knowing the information to be false or mis-leading. Facts or other matters containedin testimony, Federal tax returns, financialstatements, applications for enrollment, af-fidavits, declarations, and any other docu-ment or statement, written or oral, are in-cluded in the term “information.”

(5) Solicitation of employment as pro-hibited under §10.30, the use of false ormisleading representations with intent todeceive a client or prospective client in or-der to procure employment, or intimatingthat the practitioner is able improperly toobtain special consideration or action fromthe Internal Revenue Service or any officeror employee thereof.

(6) Willfully failing to make a Federaltax return in violation of the Federal taxlaws, or willfully evading, attempting toevade, or participating in any way in evad-ing or attempting to evade any assessmentor payment of any Federal tax.

(7) Willfully assisting, counseling, en-couraging a client or prospective clientin violating, or suggesting to a client orprospective client to violate, any Federaltax law, or knowingly counseling or sug-gesting to a client or prospective client anillegal plan to evade Federal taxes or pay-ment thereof.

(8) Misappropriation of, or failure prop-erly or promptly to remit, funds receivedfrom a client for the purpose of paymentof taxes or other obligations due the UnitedStates.

(9) Directly or indirectly attempting toinfluence, or offering or agreeing to at-tempt to influence, the official action ofany officer or employee of the InternalRevenue Service by the use of threats, falseaccusations, duress or coercion, by the of-fer of any special inducement or promise

of an advantage, or by the bestowing of anygift, favor or thing of value.

(10) Disbarment or suspension frompractice as an attorney, certified publicaccountant, public accountant or actuaryby any duly constituted authority of anyState, territory, or possession of the UnitedStates, including a Commonwealth, or theDistrict of Columbia, any Federal courtof record or any Federal agency, body orboard.

(11) Knowingly aiding and abetting an-other person to practice before the InternalRevenue Service during a period of sus-pension, disbarment or ineligibility of suchother person.

(12) Contemptuous conduct in connec-tion with practice before the Internal Rev-enue Service, including the use of abu-sive language, making false accusations orstatements, knowing them to be false orcirculating or publishing malicious or li-belous matter.

(13) Giving a false opinion, knowingly,recklessly, or through gross incompetence,including an opinion which is intentionallyor recklessly misleading, or engaging in apattern of providing incompetent opinionson questions arising under the Federaltax laws. False opinions described in thisparagraph (a)(13) include those whichreflect or result from a knowing misstate-ment of fact or law, from an assertion of aposition known to be unwarranted underexisting law, from counseling or assistingin conduct known to be illegal or fraudu-lent, from concealing matters required bylaw to be revealed, or from consciouslydisregarding information indicating thatmaterial facts expressed in the opinion oroffering material are false or misleading.For purposes of this paragraph (a)(13),reckless conduct is a highly unreasonableomission or misrepresentation involvingan extreme departure from the standardsof ordinary care that a practitioner shouldobserve under the circumstances. A pat-tern of conduct is a factor that will betaken into account in determining whethera practitioner acted knowingly, recklessly,or through gross incompetence. Gross in-competence includes conduct that reflectsgross indifference, preparation whichis grossly inadequate under the circum-stances, and a consistent failure to performobligations to the client.

(14) Willfully failing to sign a tax re-turn prepared by the practitioner when the

practitioner’s signature is required by theFederal tax laws unless the failure is dueto reasonable cause and not due to willfulneglect.

(15) Willfully disclosing or otherwiseusing a tax return or tax return informationin a manner not authorized by the InternalRevenue Code, contrary to the order of acourt of competent jurisdiction, or contraryto the order of an administrative law judgein a proceeding instituted under §10.60.

(b) Effective/applicability date. Thissection is applicable to conduct occurringon or after September 26, 2007.


§10.52 Violations subject to sanction.

(a) A practitioner may be sanctionedunder §10.50 if the practitioner—

(1) Willfully violates any of the regula-tions (other than §10.33) contained in thispart; or

(2) Recklessly or through gross in-competence (within the meaning of§10.51(a)(13)) violates §§10.34, 10.35,10.36 or 10.37.

(b) Effective/applicability date. Thissection is applicable to conduct occurringon or after September 26, 2007.


§10.53 Receipt of information concerningpractitioner.

(a) Officer or employee of the InternalRevenue Service. If an officer or employeeof the Internal Revenue Service has reasonto believe that a practitioner has violatedany provision of this part, the officer oremployee will promptly make a written re-port to the Director of the Office of Profes-sional Responsibility of the suspected vio-lation. The report will explain the facts andreasons upon which the officer’s or em-ployee’s belief rests.

(b) Other persons. Any person otherthan an officer or employee of the InternalRevenue Service having information of aviolation of any provision of this part maymake an oral or written report of the al-leged violation to the Director of the Officeof Professional Responsibility or any of-ficer or employee of the Internal RevenueService. If the report is made to an officeror employee of the Internal Revenue Ser-vice, the officer or employee will make a

November 5, 2007 943 2007–45 I.R.B.

written report of the suspected violation tothe Director of the Office of ProfessionalResponsibility.

(c) Destruction of report. No reportmade under paragraph (a) or (b) of thissection shall be maintained by the Direc-tor of the Office of Professional Responsi-bility unless retention of the report is per-missible under the applicable records con-trol schedule as approved by the NationalArchives and Records Administration anddesignated in the Internal Revenue Man-ual. The Director of the Office of Profes-sional Responsibility must destroy the re-ports as soon as permissible under the ap-plicable records control schedule.

(d) Effect on proceedings under subpartD. The destruction of any report will notbar any proceeding under subpart D of thispart, but will preclude the Director of theOffice of Professional Responsibility’s useof a copy of the report in a proceedingunder subpart D of this part.


Par. 21. Section 10.60 is amended byrevising paragraph (a) and adding para-graph (d) to read as follows:

§10.60 Institution of proceeding.

(a) Whenever the Director of the Of-fice of Professional Responsibility deter-mines that a practitioner (or employer, firmor other entity, if applicable) violated anyprovision of the laws governing practicebefore the Internal Revenue Service or theregulations in this part, the Director ofthe Office of Professional Responsibilitymay reprimand the practitioner or, in ac-cordance with §10.62, institute a proceed-ing for a sanction described in §10.50. Aproceeding is instituted by the filing of acomplaint, the contents of which are morefully described in §10.62.

* * * * *(d) Effective/applicability date. This



§10.61 Conferences.

(a) In general. The Director of theOffice of Professional Responsibility mayconfer with a practitioner, employer, firm

or other entity, or an appraiser concerningallegations of misconduct irrespective ofwhether a proceeding has been instituted.If the conference results in a stipulation inconnection with an ongoing proceeding inwhich the practitioner, employer, firm orother entity, or appraiser is the respondent,the stipulation may be entered in the recordby either party to the proceeding.

(b) Voluntary sanction—(1) In general.In lieu of a proceeding being instituted orcontinued under §10.60(a), a practitioneror appraiser (or employer, firm or otherentity, if applicable) may offer a consentto be sanctioned under §10.50.

(2) Discretion; acceptance or declina-tion. The Director of the Office of Pro-fessional Responsibility may, in his or herdiscretion, accept or decline the offer de-scribed in paragraph (b)(1) of this sec-tion. In any declination, the Director ofthe Office of Professional Responsibilitymay state that he or she would accept theoffer described in paragraph (b)(1) of thissection if it contained different terms. TheDirector of the Office of Professional Re-sponsibility may, in his or her discretion,accept or reject a revised offer submittedin response to the declination or may coun-teroffer and act upon any accepted coun-teroffer.



§10.62 Contents of complaint.

(a) Charges. A complaint must namethe respondent, provide a clear and con-cise description of the facts and law thatconstitute the basis for the proceeding, andbe signed by the Director of the Officeof Professional Responsibility or a per-son representing the Director of the Of-fice of Professional Responsibility under§10.69(a)(1). A complaint is sufficientif it fairly informs the respondent of thecharges brought so that the respondent isable to prepare a defense.

(b) Specification of sanction. The com-plaint must specify the sanction sought bythe Director of the Office of ProfessionalResponsiblity against the practitioner orappraiser. If the sanction sought is a sus-pension, the duration of the suspensionsought must be specified.

(c) Demand for answer. The Directorof the Office of Professional Responsibil-ity must, in the complaint or in a separatepaper attached to the complaint, notify therespondent of the time for answering thecomplaint, which may not be less than 30days from the date of service of the com-plaint, the name and address of the Ad-ministrative Law Judge with whom the an-swer must be filed, the name and addressof the person representing the Director ofthe Office of Professional Responsibilityto whom a copy of the answer must beserved, and that a decision by default maybe rendered against the respondent in theevent an answer is not filed as required.

(d) Effective/applicability date. Thissection is applicable to complaints broughton or after September 26, 2007.

Par. 24. Section 10.63 is amended by:1. Revising the section heading and

paragraph (a)(4).2. Redesignating paragraph (d) as para-

graph (e).3. Adding new paragraphs (d) and (f).The revision and additions read as fol-

lows:

§10.63 Service of complaint; serviceof other papers; service of evidence insupport of complaint; filing of papers.

(a) * * *(4) For purposes of this section, respon-

dent means the practitioner, employer,firm or other entity, or appraiser named inthe complaint or any other person havingthe authority to accept mail on behalf ofthe practitioner, employer, firm or otherentity, or appraiser.

* * * * *(d) Service of evidence in support of

complaint. Within 10 days of serving thecomplaint, copies of the evidence in sup-port of the complaint must be served onthe respondent in any manner described inparagraphs (a)(2) and (3) of this section.

* * * * *(f) Effective/applicability date. This

section is applicable to complaints broughton or after September 26, 2007.


§10.65 Supplemental charges.

(a) In general. The Director of theOffice of Professional Responsibility may

2007–45 I.R.B. 944 November 5, 2007

file supplemental charges, by amendingthe complaint with the permission of theAdministrative Law Judge, against the re-spondent, if, for example—

(1) It appears that the respondent, in theanswer, falsely and in bad faith, denies amaterial allegation of fact in the complaintor states that the respondent has insuffi-cient knowledge to form a belief, when therespondent possesses such information; or

(2) It appears that the respondent hasknowingly introduced false testimony dur-ing the proceedings against the respondent.

(b) Hearing. The supplemental chargesmay be heard with other charges in thecase, provided the respondent is given duenotice of the charges and is afforded a rea-sonable opportunity to prepare a defense tothe supplemental charges.



§10.68 Motions and requests.

(a) Motions—(1) In general. At anytime after the filing of the complaint, anyparty may file a motion with the Admin-istrative Law Judge. Unless otherwise or-dered by the Administrative Law Judge,motions must be in writing and must beserved on the opposing party as providedin §10.63(b). A motion must conciselyspecify its grounds and the relief sought,and, if appropriate, must contain a memo-randum of facts and law in support.

(2) Summary adjudication. Eitherparty may move for a summary adjudi-cation upon all or any part of the legalissues in controversy. If the non-movingparty opposes summary adjudication inthe moving party’s favor, the non-movingparty must file a written response within30 days unless ordered otherwise by theAdministrative Law Judge.

(3) Good Faith. A party filing a mo-tion for extension of time, a motion forpostponement of a hearing, or any othernon-dispositive or procedural motion mustfirst contact the other party to determinewhether there is any objection to the mo-tion, and must state in the motion whetherthe other party has an objection.

(b) Response. Unless otherwise orderedby the Administrative Law Judge, the non-moving party is not required to file a re-

sponse to a motion. If the AdministrativeLaw Judge does not order the nonmovingparty to file a response, and the nonmov-ing party files no response, the nonmovingparty is deemed to oppose the motion. If anonmoving party does not respond within30 days of the filing of a motion for deci-sion by default for failure to file a timelyanswer or for failure to prosecute, the non-moving party is deemed not to oppose themotion.

(c) Oral motions; oral argument—(1)The Administrative Law Judge may, forgood cause and with notice to the parties,permit oral motions and oral opposition tomotions.

(2) The Administrative Law Judge may,within his or her discretion, permit oralargument on any motion.

(d) Orders. The Administrative LawJudge should issue written orders dispos-ing of any motion or request and any re-sponse thereto.


Par. 27. Section 10.70 is amendedby revising paragraphs (a) and (b)(6) andadding paragraph (c) to read as follows:

§10.70 Administrative Law Judge.

(a) Appointment. Proceedings on com-plaints for the sanction (as described in§10.50) of a practitioner, employer, firm orother entity, or appraiser will be conductedby an Administrative Law Judge appointedas provided by 5 U.S.C. 3105.

(b) * * *(6) Take or authorize the taking of de-

positions or answers to requests for admis-sion;

* * * * *(c) Effective/applicability date. This


Par. 28(a). Section 10.73 is removed.Par. 28(b). Sections 10.71 and 10.72

are redesignated as §§10.72 and 10.73, re-spectively.

Par. 29. New §10.71 is added to read asfollows:

§10.71 Discovery.

(a) In general. Discovery may be per-mitted, at the discretion of the Adminis-trative Law Judge, only upon written mo-

tion demonstrating the relevance, materi-ality and reasonableness of the requesteddiscovery and subject to the requirementsof §10.72(d)(2) and (3). Within 10 daysof receipt of the answer, the Administra-tive Law Judge will notify the parties ofthe right to request discovery and the time-frames for filing a request. A request fordiscovery, and objections, must be filed inaccordance with §10.68. In response to arequest for discovery, the AdministrativeLaw Judge may order—

(1) Depositions upon oral examination;or

(2) Answers to requests for admission.(b) Depositions upon oral examina-

tion—(1) A deposition must be takenbefore an officer duly authorized to ad-minister an oath for general purposes orbefore an officer or employee of the In-ternal Revenue Service who is authorizedto administer an oath in Federal tax lawmatters.

(2) In ordering a deposition, the Ad-ministrative Law Judge will require rea-sonable notice to the opposing party as tothe time and place of the deposition. Theopposing party, if attending, will be pro-vided the opportunity for full examinationand cross-examination of any witness.

(3) Expenses in the reporting of deposi-tions shall be borne by the party at whoseinstance the deposition is taken. Travelexpenses of the deponent shall be borneby the party requesting the deposition, un-less otherwise authorized by Federal lawor regulation.

(c) Requests for admission. Any partymay serve on any other party a writtenrequest for admission of the truth of anymatters which are not privileged and arerelevant to the subject matter of this pro-ceeding. Requests for admission shall notexceed a total of 30 (including any sub-parts within a specific request) withoutthe approval from the Administrative LawJudge.

(d) Limitations. Discovery shall not beauthorized if—

(1) The request fails to meet any re-quirement set forth in paragraph (a) of thissection;

(2) It will unduly delay the proceeding;(3) It will place an undue burden on

the party required to produce the discoverysought;

(4) It is frivolous or abusive;(5) It is cumulative or duplicative;

November 5, 2007 945 2007–45 I.R.B.

(6) The material sought is privilegedor otherwise protected from disclosure bylaw;

(7) The material sought relates to men-tal impressions, conclusions, or legal the-ories of any party, attorney, or other repre-sentative, of a party prepared in anticipa-tion of a proceeding; or

(8) The material sought is availablegenerally to the public, equally to the par-ties, or to the party seeking the discoverythrough another source.

(e) Failure to comply. Where a partyfails to comply with an order of the Admin-istrative Law Judge under this section, theAdministrative Law Judge may, amongother things, infer that the informationwould be adverse to the party failing toprovide it, exclude the information fromevidence or issue a decision by default.

(f) Other discovery. No discovery otherthan that specifically provided for in thissection is permitted.

(g) Effective/applicability date. Thissection is applicable to proceedings initi-ated on or after September 26, 2007.

Par. 30. Newly designated §10.72 isamended by:

1. Redesignating paragraphs (b), (c)and (d) as paragraphs (d), (e) and (f), re-spectively.

2. Revising paragraph (a) and newlydesignated paragraph (d).

3. Adding new paragraphs (b), (c) and(g).

The additions and revisions read as fol-lows:

§10.72 Hearings.

(a) In general—(1) Presiding officer.An Administrative Law Judge will presideat the hearing on a complaint filed under§10.60 for the sanction of a practitioner,employer, firm or other entity, or appraiser.

(2) Time for hearing. Absent a deter-mination by the Administrative Law Judgethat, in the interest of justice, a hearingmust be held at a later time, the Adminis-trative Law Judge should, on notice suffi-cient to allow proper preparation, schedulethe hearing to occur no later than 180 daysafter the time for filing the answer.

(3) Procedural requirements. (i) Hear-ings will be stenographically recorded andtranscribed and the testimony of witnesseswill be taken under oath or affirmation.

(ii) Hearings will be conducted pur-suant to 5 U.S.C. 556.

(iii) A hearing in a proceeding re-quested under §10.82(g) will be conductedde novo.

(iv) An evidentiary hearing must beheld in all proceedings prior to the is-suance of a decision by the AdministrativeLaw Judge unless—

(A) The Director of the Office of Pro-fessional Responsibility withdraws thecomplaint;

(B) A decision is issued by default pur-suant to §10.64(d);

(C) A decision is issued under§10.82(e);

(D) The respondent requests a decisionon the written record without a hearing; or

(E) The Administrative Law Judge is-sues a decision under §10.68(d) or ruleson another motion that disposes of the caseprior to the hearing.

(b) Cross-examination. A party is enti-tled to present his or her case or defense byoral or documentary evidence, to submitrebuttal evidence, and to conduct cross-ex-amination, in the presence of the Admin-istrative Law Judge, as may be requiredfor a full and true disclosure of the facts.This paragraph (b) does not limit a partyfrom presenting evidence contained withina deposition when the Administrative LawJudge determines that the deposition hasbeen obtained in compliance with the rulesof this subpart D.

(c) Prehearing memorandum. Unlessotherwise ordered by the AdministrativeLaw Judge, each party shall file, andserve on the opposing party or the op-posing party’s representative, prior to anyhearing, a prehearing memorandum con-taining—

(1) A list (together with a copy) of allproposed exhibits to be used in the party’scase in chief;

(2) A list of proposed witnesses, includ-ing a synopsis of their expected testimony,or a statement that no witnesses will becalled;

(3) Identification of any proposed ex-pert witnesses, including a synopsis oftheir expected testimony and a copy ofany report prepared by the expert or at hisor her direction; and

(4) A list of undisputed facts.(d) Publicity—(1) In general. All re-

ports and decisions of the Secretary of theTreasury, or delegate, including any re-

ports and decisions of the AdministrativeLaw Judge, under this Subpart D are, sub-ject to the protective measures in para-graph (d)(4) of this section, public andopen to inspection within 30 days after theagency’s decision becomes final.

(2) Request for additional publicity.The Administrative Law Judge may granta request by a practitioner or appraiser thatall the pleadings and evidence of the disci-plinary proceeding be made available forinspection where the parties stipulate inadvance to adopt the protective measuresin paragraph (d)(4) of this section.

(3) Returns and return information—(i)Disclosure to practitioner or appraiser.Pursuant to section 6103(l)(4) of the In-ternal Revenue Code, the Secretary of theTreasury, or delegate, may disclose returnsand return information to any practitioneror appraiser, or to the authorized repre-sentative of the practitioner or appraiser,whose rights are or may be affected by anadministrative action or proceeding underthis subpart D, but solely for use in the ac-tion or proceeding and only to the extentthat the Secretary of the Treasury, or dele-gate, determines that the returns or returninformation are or may be relevant and ma-terial to the action or proceeding.

(ii) Disclosure to officers and employ-ees of the Department of the Treasury.

Pursuant to section 6103(l)(4)(B) of theInternal Revenue Code, the Secretary ofthe Treasury, or delegate, may disclose re-turns and return information to officers andemployees of the Department of the Trea-sury for use in any action or proceeding un-der this subpart D, to the extent necessaryto advance or protect the interests of theUnited States.

(iii) Use of returns and return informa-tion. Recipients of returns and return in-formation under this paragraph (d)(3) mayuse the returns or return information solelyin the action or proceeding, or in prepara-tion for the action or proceeding, with re-spect to which the disclosure was made.

(iv) Procedures for disclosure of re-turns and return information. Whenproviding returns or return information tothe practitioner or appraiser, or authorizedrepresentative, the Secretary of the Trea-sury, or delegate, will—

(A) Redact identifying information ofany third party taxpayers and replace itwith a code;

2007–45 I.R.B. 946 November 5, 2007

(B) Provide a key to the coded informa-tion; and

(C) Notify the practitioner or appraiser,or authorized representative, of the re-strictions on the use and disclosure of thereturns and return information, the appli-cable damages remedy under section 7431of the Internal Revenue Code, and thatunauthorized disclosure of informationprovided by the Internal Revenue Serviceunder this paragraph (d)(3) is also a viola-tion of this part.

(4) Protective measures—(i) Manda-tory protective order. If redaction ofnames, addresses, and other identifyinginformation of third party taxpayers maystill permit indirect identification of anythird party taxpayer, the AdministrativeLaw Judge will issue a protective orderto ensure that the identifying informationis available to the parties and the Admin-istrative Law Judge for purposes of theproceeding, but is not disclosed to, oropen to inspection by, the public.

(ii) Authorized orders. (A) Upon mo-tion by a party or any other affected per-son, and for good cause shown, the Admin-istrative Law Judge may make any orderwhich justice requires to protect any per-son in the event disclosure of informationis prohibited by law, privileged, confiden-tial, or sensitive in some other way, includ-ing, but not limited to, one or more of thefollowing—

(1) That disclosure of information bemade only on specified terms and condi-tions, including a designation of the timeor place;

(2) That a trade secret or other informa-tion not be disclosed, or be disclosed onlyin a designated way.

(iii) Denials. If a motion for a protec-tive order is denied in whole or in part, theAdministrative Law Judge may, on suchterms or conditions as the AdministrativeLaw Judge deems just, order any party orperson to comply with, or respond in ac-cordance with, the procedure involved.

(iv) Public inspection of documents.The Secretary of the Treasury, or dele-gate, shall ensure that all names, addressesor other identifying details of third partytaxpayers are redacted and replaced withthe code assigned to the correspondingtaxpayer in all documents prior to publicinspection of such documents.

* * * * *

(g) Effective/applicability date. Thissection is applicable on September 26,2007.

Par. 31. Newly designated §10.73 isamended by:

1. Redesignating paragraphs (c), (d),and (e) as paragraphs (d), (e), and (f), re-spectively.

2. Revising paragraph (b) and newlydesignated paragraph (d).

3. Adding new paragraphs (c) and (g).The revisions and additions read as fol-

lows:

§10.73 Evidence.

* * * * *(b) Depositions. The deposition of any

witness taken pursuant to §10.71 may beadmitted into evidence in any proceedinginstituted under §10.60.

(c) Requests for admission. Any matteradmitted in response to a request for ad-mission under §10.71 is conclusively es-tablished unless the Administrative LawJudge on motion permits withdrawal ormodification of the admission. Any ad-mission made by a party is for the purposesof the pending action only and is not an ad-mission by a party for any other purpose,nor may it be used against a party in anyother proceeding.

(d) Proof of documents. Official docu-ments, records, and papers of the InternalRevenue Service and the Office of Profes-sional Responsibility are admissible in ev-idence without the production of an offi-cer or employee to authenticate them. Anydocuments, records, and papers may be ev-idenced by a copy attested to or identifiedby an officer or employee of the InternalRevenue Service or the Treasury Depart-ment, as the case may be.

* * * * *(g) Effective/applicability date. This



§10.76 Decision of Administrative LawJudge.

(a) In general— (1) Hearings. Within180 days after the conclusion of a hear-ing and the receipt of any proposed find-ings and conclusions timely submitted bythe parties, the Administrative Law Judge

should enter a decision in the case. The de-cision must include a statement of findingsand conclusions, as well as the reasons orbasis for making such findings and conclu-sions, and an order of censure, suspension,disbarment, monetary penalty, disqualifi-cation, or dismissal of the complaint.

(2) Summary adjudication. In the eventthat a motion for summary adjudicationis filed, the Administrative Law Judgeshould rule on the motion for summaryadjudication within 60 days after the partyin opposition files a written response, orif no written response is filed, within 90days after the motion for summary adjudi-cation is filed. A decision shall thereafterbe rendered if the pleadings, depositions,admissions, and any other admissible evi-dence show that there is no genuine issueof material fact and that a decision may berendered as a matter of law. The decisionmust include a statement of conclusions,as well as the reasons or basis for makingsuch conclusions, and an order of censure,suspension, disbarment, monetary penalty,disqualification, or dismissal of the com-plaint.

(3) Returns and return information.In the decision, the Administrative LawJudge should use the code assigned to thirdparty taxpayers (described in §10.72(d)).

(b) Standard of proof. If the sanctionis censure or a suspension of less than sixmonths’ duration, the Administrative LawJudge, in rendering findings and conclu-sions, will consider an allegation of fact tobe proven if it is established by the partywho is alleging the fact by a preponderanceof the evidence in the record. If the sanc-tion is a monetary penalty, disbarment ora suspension of six months or longer du-ration, an allegation of fact that is neces-sary for a finding against the practitionermust be proven by clear and convincingevidence in the record. An allegation offact that is necessary for a finding of dis-qualification against an appraiser must beproven by clear and convincing evidencein the record.

(c) Copy of decision. The Administra-tive Law Judge will provide the decision tothe Director of the Office of ProfessionalResponsibility, with a copy to the Direc-tor’s authorized representative, and a copyof the decision to the respondent or the re-spondent’s authorized representative.

(d) When final. In the absence of an ap-peal to the Secretary of the Treasury or del-

November 5, 2007 947 2007–45 I.R.B.

egate, the decision of the AdministrativeLaw Judge will, without further proceed-ings, become the decision of the agency30 days after the date of the Administra-tive Law Judge’s decision.

(e) Effective/applicability date. Thissection is applicable to proceedings initi-ated on or after September 26, 2007.


§10.77 Appeal of decision ofAdministrative Law Judge.

(a) Appeal. Any party to the proceed-ing under this subpart D may file an ap-peal of the decision of the AdministrativeLaw Judge with the Secretary of the Trea-sury, or delegate. The appeal must includea brief that states exceptions to the deci-sion of the Administrative Law Judge andsupporting reasons for such exceptions.

(b) Time and place for filing of appeal.The appeal and brief must be filed, in du-plicate, with the Director of the Office ofProfessional Responsibility within 30 daysof the date that the decision of the Admin-istrative Law Judge is served on the par-ties. The Director of the Office of Pro-fessional Responsibility will immediatelyfurnish a copy of the appeal to the Secre-tary of the Treasury or delegate who de-cides appeals. A copy of the appeal forreview must be sent to any non-appealingparty. If the Director of the Office of Pro-fessional Responsibility files an appeal, heor she will provide a copy of the appeal andcertify to the respondent that the appeal hasbeen filed.



§10.78 Decision on review.

(a) Decision on review. On appealfrom or review of the decision of the Ad-ministrative Law Judge, the Secretary ofthe Treasury, or delegate, will make theagency decision. The Secretary of theTreasury, or delegate, should make theagency decision within 180 days after re-ceipt of the appeal.

(b) Standard of review. The decision ofthe Administrative Law Judge will not bereversed unless the appellant establishesthat the decision is clearly erroneous in

light of the evidence in the record and ap-plicable law. Issues that are exclusivelymatters of law will be reviewed de novo.In the event that the Secretary of the Trea-sury, or delegate, determines that there areunresolved issues raised by the record, thecase may be remanded to the Administra-tive Law Judge to elicit additional testi-mony or evidence.

(c) Copy of decision on review. TheSecretary of the Treasury, or delegate, willprovide copies of the agency decision tothe Director of the Office of ProfessionalResponsibility and the respondent or therespondent’s authorized representative.


Par. 35. Section 10.82 is amended by:1. Revising the section heading and

paragraph (b).2. Adding paragraph (h).The revisions and addition read as fol-

lows:

§10.82 Expedited suspension.

* * * * *(b) To whom applicable. This section

applies to any practitioner who, within fiveyears of the date a complaint instituting aproceeding under this section is served:

(1) Has had a license to practice as an at-torney, certified public accountant, or actu-ary suspended or revoked for cause (not in-cluding failure to pay a professional licens-ing fee) by any authority or court, agency,body, or board described in §10.51(a)(10).

(2) Has, irrespective of whether an ap-peal has been taken, been convicted of anycrime under title 26 of the United StatesCode, any crime involving dishonesty orbreach of trust, or any felony for which theconduct involved renders the practitionerunfit to practice before the Internal Rev-enue Service.

(3) Has violated conditions imposed onthe practitioner pursuant to §10.79(d).

(4) Has been sanctioned by a courtof competent jurisdiction, whether in acivil or criminal proceeding (includingsuits for injunctive relief), relating to anytaxpayer’s tax liability or relating to thepractitioner’s own tax liability, for—

(i) Instituting or maintaining proceed-ings primarily for delay;

(ii) Advancing frivolous or groundlessarguments; or

(iii) Failing to pursue available admin-istrative remedies.

* * * * *(h) Effective/applicability date. This



§10.90 Records.

(a) Roster. The Director of the Office ofProfessional Responsibility will maintain,and may make available for public inspec-tion in the time and manner prescribed bythe Secretary of the Treasury, or delegate,rosters of—

(1) Enrolled agents, including individu-als—

(i) Granted active enrollment to prac-tice;

(ii) Whose enrollment has been placedin inactive status for failure to meet therequirements for renewal of enrollment;

(iii) Whose enrollment has been placedin inactive retirement status; and

(iv) Whose offer of consent to resignfrom enrollment has been accepted by theDirector of the Office of Professional Re-sponsibility under §10.61;

(2) Individuals (and employers, firmsor other entities, if applicable) censured,suspended, or disbarred from practice be-fore the Internal Revenue Service or uponwhom a monetary penalty was imposed;

(3) Disqualified appraisers; and(4) Enrolled retirement plan agents, in-

cluding individuals—(i) Granted active enrollment to prac-

tice;(ii) Whose enrollment has been placed

in inactive status for failure to meet therequirements for renewal of enrollment;

(iii) Whose enrollment has been placedin inactive retirement status; and

(iv) Whose offer of consent to resignfrom enrollment has been accepted by theDirector of the Office of Professional Re-sponsibility under §10.61.

(b) Other records. Other records of theDirector of the Office of Professional Re-sponsibility may be disclosed upon spe-cific request, in accordance with the appli-cable law.

(b) Effective/applicability date. Thissection is applicable on September 26,2007.

2007–45 I.R.B. 948 November 5, 2007


§10.91 Saving provision.

Any proceeding instituted under thispart prior to July 26, 2002, for which afinal decision has not been reached or forwhich judicial review is still available willnot be affected by these revisions. Anyproceeding under this part based on con-duct engaged in prior to September 26,2007, which is instituted after that date,will apply subpart D and E or this part asrevised, but the conduct engaged in priorto the effective date of these revisions willbe judged by the regulations in effect atthe time the conduct occurred.

Linda E. Stiff,Acting Deputy Commissioner for

Services and Enforcement.

Approved September 19, 2007.

Robert Hoyt,General Counsel,

Office of the Secretary.

(Filed by the Office of the Federal Register on September25, 2007, 8:45 a.m., and published in the issue of the FederalRegister for September 26, 2007, 72 F.R. 54540)

Section 382.—Limitationon Net Operating LossCarryforwards and CertainBuilt-In Losses FollowingOwnership Change

The adjusted applicable federal long-term rate isset forth for the month of November 2007. See Rev.Rul. 2007-66, page 956.

Section 408A.—Roth IRAsThe Service provides inflation adjustments to

the applicable dollar amounts used to calculate theamount by which a taxpayer must reduce the maxi-mum amount allowed as contributions to Roth IRAsfor taxable years beginning in 2008. See Rev. Proc.2007-66, page 970.

Section 412.—MinimumFunding Standards


Section 419.—Treatment ofFunded Welfare BenefitPlans26 CFR § 1.419–1T: Treatment of welfare benefitfunds.(Also, §§ 264, 7805; § 301.7805–1.)

Employer’s deduction for contribu-tions; limitation on employer’s deduc-tion; welfare benefit funds. This rulingdiscusses whether an employer’s deduc-tions for contributions to a welfare bene-fit fund under section 419 of the Code are“qualified direct costs” with respect to pre-miums paid by a welfare benefit fund oncash value life insurance policies.

Rev. Rul. 2007–65

ISSUES

(I) For purposes of determining the lim-itations on an employer’s deduction forcontributions to a welfare benefit fund un-der §§ 419 and 419A of the Internal Rev-enue Code (the “Code”), are premiums oncash value life insurance policies paid bythe fund included in the fund’s qualifieddirect cost if the benefit provided throughthe fund is life insurance coverage?

(2) For purposes of determining the lim-itations on an employer’s deduction forcontributions to a welfare benefit fund un-der §§ 419 and 419A, are premiums oncash value life insurance policies paid bythe fund included in the fund’s qualifieddirect cost if the benefit provided throughthe fund is other than life insurance cover-age?

FACTS

Situation 1. Employer C maintains anemployer-financed life insurance plan forthe benefit of its employees. The life insur-ance provided to C’s employees under theplan satisfies the definition of group-termlife insurance for purposes of § 79 andis provided through a taxable trust. Theplan does not provide permanent bene-fits within the meaning of § 1.79–0 ofthe Income Tax Regulations. The plan,which is not maintained pursuant to acollective bargaining agreement, providesthat C will provide a stated amount oflife insurance coverage for each employeewhile the employee is actively employedby C. No other benefits are provided tothe employees under the plan or from the

trust. The trustee has obtained a cashvalue life insurance policy on the life ofeach employee, where the amount of thedeath benefit under each policy equalsthe amount of the death benefit payableunder the plan to the employee’s benefi-ciary and the death benefit proceeds undereach policy are payable to the beneficiarydesignated by the employee. The trust hasretained all other policy rights. During theyear, C contributes to the trust an amountequal to the aggregate premiums due onthe life insurance policies payable by thetrustee. The trust has no administrativeexpenses and no after-tax income (withinthe meaning of § 419(c)(4)) for the year.The taxable year for both C and the trust isthe calendar year, and C uses the accrualmethod of accounting.

Situation 2. The facts are the same as inSituation 1 except that, instead of group-term life insurance, the plan provides dis-ability benefits to C’s employees if theybecome disabled while they are activelyemployed by C. The trust is the owner andthe named beneficiary of the life insurancepolicies held by the trust, which are in-tended to accumulate value to pay the dis-ability benefits. The employees have nointerest in the life insurance policies. Dur-ing the taxable year, the trust distributed $xof disability benefits with respect to claimsincurred during the year (and there were nobenefits paid during the year with respectto any claims incurred in prior years).

LAW

Section 419 prescribes limits on theamount of deductions for contributionspaid or accrued by an employer to a wel-fare benefit fund. The term “welfarebenefit fund” is defined in § 419(e)(1)to mean any fund that is part of a planof an employer, and through which theemployer provides welfare benefits toemployees or their beneficiaries. Section419(e)(2) defines “welfare benefit” as anybenefit other than a benefit with respect towhich § 83(h), § 404 (determined withoutregard to § 404(b)(2)), or § 404A applies.Under § 419(e)(3), a “fund” is any or-ganization described in § 501(c)(7), (9),(17) or (20); any trust, corporation, orother organization not exempt from taximposed by chapter 1, subtitle A of theCode; or, to the extent provided in regula-tions, any account held for an employer by

November 5, 2007 949 2007–45 I.R.B.

any person (other than amounts describedin § 419(e)(4)).

Under § 419(a) and (b), an employer’scontributions to a welfare benefit fund aredeductible in the taxable year in whichpaid but only if they would otherwise bedeductible under Chapter 1 of the Code,and the amount of the deduction is lim-ited to the welfare benefit fund’s quali-fied cost for the taxable year. Pursuant to§ 419(d), if the amount of the contributionspaid by the employer during any taxableyear to a welfare benefit fund exceeds thisdeduction limit, the excess is treated as anamount paid by the employer to the fundduring the succeeding taxable year.

The term “qualified cost” is defined in§ 419(c)(1) to generally mean, with re-spect to any taxable year, the sum of (i) thequalified direct cost for that taxable year,and (ii) any addition to a qualified assetaccount for the taxable year (but only tothe extent the addition does not exceed thelimit on the additions to the account un-der § 419A(b)). Under § 419(c)(2), thefund’s qualified cost must be reduced bythe fund’s after-tax income for the taxableyear (as defined in § 419(c)(4)). Under§ 419(c)(5), no item may be taken into ac-count more than once in determining thequalified cost of any welfare benefit fund.

The term “qualified direct cost” is gen-erally defined in § 419(c)(3)(A) to mean,with respect to any taxable year, the aggre-gate amount (including administrative ex-penses) that would have been allowable asa deduction to the employer with respect tothe benefits provided during the year if (i)such benefits were provided directly by theemployer, and (ii) the employer used thecash receipts and disbursements methodof accounting. Under § 419(c)(3)(B), abenefit is treated for this purpose as pro-vided when that benefit would be includi-ble in the gross income of the employeeif provided directly by the employer (orwould be so includible but for a provisionof chapter 1 of the Code excluding the ben-efit from gross income).

The term “qualified asset account” isdefined in § 419A(a) to mean any accountconsisting of assets set aside to provide forthe payment of disability benefits, medi-cal benefits, supplemental unemploymentcompensation benefits or severance paybenefits, or life insurance benefits. Pur-suant to § 419A(b), no additions to any

qualified asset account may be taken intoaccount under § 419(c)(1)(B) to the ex-tent that the addition would result in theamount in the account exceeding the ac-count limit specified in § 419A(c).

Section 419A(c)(1) provides that theaccount limit for any qualified asset ac-count for any taxable year is generally theamount reasonably and actuarially neces-sary to fund claims incurred but unpaid (asof the close of the taxable year) for bene-fits referred to in § 419A(a), and adminis-trative costs with respect to those claims.Section 419A(c)(2) allows an additionallimited reserve for certain post-retirementmedical and post-retirement life insurancebenefits to be provided to covered employ-ees. Section 419A(c)(3) through (c)(6)and § 419A(d) and (e) specify additionalrules with regard to the account limit un-der §419A(c).

Under Q&A–6(a) of § 1.419–1T of theTemporary Income Tax Regulations, thequalified direct cost of a welfare benefitfund for any taxable year of the fund is theaggregate amount that would have been al-lowable as a deduction to the employer forbenefits provided by the fund during theyear (including insurance coverage for theyear) if (i) those benefits were provideddirectly by the employer and (ii) the em-ployer used the cash receipts and disburse-ments method of accounting and had thesame taxable year as the fund. In this re-gard, a benefit is treated as provided whenthe benefit would be includible in the grossincome of the employee if provided di-rectly by the employer (or would be so in-cludible but for a provision excluding itfrom gross income). Under Q&A–6(c) of§ 1.419–1T, the qualified direct cost of awelfare benefit fund does not include ex-penditures by the fund that would not havebeen deductible if they had been made di-rectly by the employer. As an example ofsuch an expenditure, the regulations pro-vide that a fund’s purchase of land for anemployee recreational facility will not betreated as a qualified direct cost, notingthat the purchase would not have been de-ductible under § 263 if made directly bythe employer. Q&A–6(c) of § 1.419–1Talso refers to §§ 264 and 274.

In its explanation of “qualified directcost,” the legislative history of § 419 statesthat the rules in other Code sections thatgenerally limit deductions if an employer

provides the plan benefits directly are“passed through” to limit deductions withrespect to fund contributions. An exam-ple of this limitation is given for fundexpenditures for insurance that would nothave been deductible under § 264 if madedirectly by the employer. “[T]hus, nodeductions are available to the employerwith respect to such expenditures.” H.R.Rep. No. 432, 98th Cong., 2d Sess. at1277–78 (1984).

Section 264(a)(1) provides that no de-duction is allowable for premiums on anylife insurance policy, or endowment or an-nuity contract, if the taxpayer is directly orindirectly a beneficiary under the policy orcontract.

Pursuant to § 61(a)(1), except as oth-erwise provided, gross income means allincome from whatever source derived, in-cluding compensation for services, includ-ing fees, commissions, fringe benefits, andsimilar items. Gross income includes thevalue of any economic benefit conferredon an employee by his or her employer,whatever the form or mode by which itis effected. Commissioner v. Smith, 324U.S. 177, 181 (1945), 1945 C.B. 49, 51.Accordingly, if an employer pays pre-miums on a life insurance policy that itowns and the death benefits are payableto an employee’s beneficiaries, the valueof the economic benefits provided to theemployee, including the cost of currentlife insurance protection, is includible inthe employee’s gross income annually.This is true even if the employee only hasrights with respect to all or a portion of thedeath proceeds and the employer retainsall other rights and benefits under the pol-icy. See, e.g., Genshaft v. Commissioner,64 T.C. 282, 290 (1975), acq., 1976–2C.B. 2; Frost v. Commissioner, 52 T.C.89, 96 (1969). Special rules apply under§ 1.61–22 for a split-dollar life insurancearrangement, as that term is defined in§ 1.61–22(b), that is entered into or mate-rially modified after September 17, 2003.

Section 79 generally provides an exclu-sion from an employee’s gross income forthe cost of group-term life insurance onthe employee’s life provided under a pol-icy carried directly or indirectly by his orher employer (or employers), but only tothe extent that the cost does not exceed thecost of $50,000 of coverage.

2007–45 I.R.B. 950 November 5, 2007

ANALYSIS

In Situation 1, the trust is a welfare ben-efit fund within the meaning of § 419(e).The qualified direct cost of the trust forthe year involved is the aggregate amount(including administrative expenses) thatwould have been allowable as a deductionto C for the benefit provided by the trustduring the year (current life insurancecoverage) if the life insurance coveragehad been provided directly by C, and ifC had used the cash receipts and dis-bursements method of accounting. Under§ 419(c)(3)(B), the life insurance cover-age is treated as provided when it wouldbe includible in the gross income of theemployee if provided directly by the em-ployer (or would be so includible absentthe exclusion from gross income providedunder § 79). Absent the § 79 exclusion, thecost of the current life insurance protectionprovided to C’s employees for part or allof a year is includible in the employees’incomes for that year.

If C had provided the current life insur-ance coverage directly (that is, if C hadnot interposed a trust to obtain and holdthe cash value life insurance policies, butinstead had held the policies and paid thepremiums itself), C would have retainedownership rights in each of the policies, in-cluding the right to withdraw funds from apolicy’s cash value or to surrender the pol-icy for cash. As a result, C would havebeen, directly or indirectly, a beneficiaryunder the policies. Thus, § 264(a) wouldhave precluded any deduction by C withrespect to the premium payments if C hadowned the policies directly. See Rev. Rul.70–148, 1970–1 C.B. 60.

Under § 419(c)(3) and Q&A–6(c) of§ 1.419–1T, the qualified direct cost ofa welfare benefit fund does not includeexpenditures by the fund that would nothave been deductible if they had beenmade directly by the employer. Accord-ingly, the trust’s qualified direct cost forthe taxable year in Situation 1 does notinclude any amounts for premiums on thecash value life insurance policies paid bythe trust. Further, because all the benefitsprovided by the plan are fully insured,no amounts are reasonably and actuari-ally necessary to fund claims incurred butunpaid for purposes of the account limitunder § 419A(c)(1). Thus, the qualifiedcost is zero and no portion of C’s contri-

butions is deductible under § 419 for thetaxable year.

The conclusions for Situation 1 are thesame regardless of whether the plan ben-efits are provided through a taxable trust,an exempt VEBA described in § 501(c)(9),or any other type of welfare benefit fundas defined in § 419(e). Also, the con-clusions for Situation 1 are the same re-gardless of whether the death proceeds arepayable from the insurance company di-rectly to the beneficiaries designated bythe employees, or are payable to the trust orplan for the benefit of the employees’ ben-eficiaries. Additionally, the conclusionsfor Situation 1 are the same regardless ofthe number or amount of premiums, andregardless of the type of life insurance pol-icy. Thus, the conclusions would apply,for example, to a variable policy, to a pol-icy with level premiums payable to age 65,or to any other life insurance policy, if thetrust is directly or indirectly a beneficiaryunder the policy. Further, the same rule ap-plies if the employer, rather than the wel-fare benefit fund, is directly or indirectly abeneficiary under the policy.

The conclusion for Situation 1 that nodeduction is allowable with respect to thepremium amounts would be the same if theplan were an arrangement subject to theregulations for split-dollar life insurancearrangements. See § 1.61–22 for the rulesfor split-dollar life insurance arrange-ments, including § 1.61–22(c)(1)(iii)(C)(providing that the employer is treatedas the owner of a life insurance policyif the owner is a welfare benefit fundwithin the meaning of § 419(e)(1)); and§ 1.61–22(f)(2)(ii) (concerning the non-deductibility of premium amounts by theemployer under a split-dollar arrange-ment).

In Situation 2, the qualified direct costof the trust for the taxable year is the aggre-gate amount (including administrative ex-penses) that would have been allowable asa deduction to C for the uninsured disabil-ity benefits provided by the trust during theyear if the disability benefits had been pro-vided directly by C, and if C had used thecash receipts and disbursements method ofaccounting. In this regard, the disabilitybenefits are treated as provided when theywould be includible in the gross incomeof the employees if provided directly by C(or would be includible in income absent a

provision of the Code excluding them fromincome).

Under the facts of Situation 2, the trustpaid $x during the year with respect to dis-ability benefits incurred during the year(and no benefits were paid with respect toany claims incurred in prior years). Thesedisability benefits are includible in an em-ployee’s income under § 105(a) when thebenefits are received by the employee. IfEmployer C had used the cash receipts anddisbursements method of accounting, andif C had provided the uninsured disabil-ity benefits directly (that is, if C had notinterposed a trust to provide the disabil-ity benefits, but instead had paid the dis-ability benefits to the employees itself), Cwould have been allowed a deduction forthe year for the $x actually paid duringthe year. Thus, the fund’s qualified directcost for the year with respect to the ben-efits under the plan is $x. Furthermore,if C had purchased the cash value life in-surance policies directly to accumulate as-sets to pay the uninsured disability bene-fits, § 264(a) would have precluded any de-duction by C with respect to the premiumpayments because C would have retainedownership rights in the policies. Thus, thepremium amounts paid by the trust are notincluded in the fund’s qualified direct costunder § 419(c)(3). However, some of C’scontribution amounts may be deductible asqualified cost in the taxable year as an ad-dition to a qualified asset account for dis-ability claims incurred but unpaid as ofthe close of the taxable year, but only ifthe amounts are otherwise deductible, andonly to the extent they are reasonably andactuarially necessary to fund incurred butunpaid claims and satisfy the requirementsof § 419A(c)(4) and (c)(5).

The conclusions for Situation 2 are thesame regardless of whether the plan ben-efits are provided through a taxable trust,an exempt VEBA described in § 501(c)(9),or any other type of welfare benefit fundas defined in § 419(e). Additionally, theconclusions for Situation 2 are the sameregardless of the type of assets, if any,purchased by the trustee to fund the dis-ability benefits (other than the purchaseof disability insurance to the extent thepremiums paid for the insurance wouldotherwise be deductible by the employerif the employer had purchased it directlyand the employer used the cash receiptsand disbursement method of accounting).

November 5, 2007 951 2007–45 I.R.B.

The conclusion for Situation 2 that thequalified direct cost does not include anyamounts paid for life insurance premiumswould be the same if the benefit or ben-efits provided under the plan were unin-sured medical or severance benefits, or anyother type of uninsured benefit.

HOLDINGS

(1) For purposes of determining the lim-itations on an employer’s deduction forcontributions to a welfare benefit fund un-der §§ 419 and 419A, if the benefit pro-vided through the fund is life insurancecoverage, premiums paid on cash value lifeinsurance policies by the fund are not in-cluded in the fund’s qualified direct costwhenever the fund is directly or indirectlya beneficiary under the policy within themeaning of § 264(a).

(2) For purposes of determining the lim-itations on an employer’s deduction forcontributions to a welfare benefit fund un-der §§ 419 and 419A, if the benefit pro-vided through the fund is other than life in-surance coverage, premiums paid on cashvalue life insurance policies by the fundare not included in the fund’s qualified di-rect cost whenever the fund is directly orindirectly a beneficiary under the policywithin the meaning of § 264(a). How-ever, the fund’s qualified direct cost in-cludes amounts paid as welfare benefits bythe fund during the taxable year for claimsincurred during the year.

PROSPECTIVE APPLICATION

Pursuant to the authority contained in§ 7805(b)(8) and § 301.7805–1 of theProcedure and Administration Regula-tions, with respect to Holding (1) theCommissioner has determined that forany taxable year of an employer endingbefore November 5, 2007, if a deductionis otherwise allowable, then to the extentset forth in the following paragraph, adeduction for contributions to a welfarebenefit fund under an arrangement that isnot subject to the regulations applicableto split-dollar life insurance arrangementswill not be disallowed under § 419(b) and(c)(3) merely because the deduction wouldhave been disallowed under § 264 had theemployer provided the benefits directly.

In the case of an employer with a tax-able year that is the calendar year, theamount of the deduction that will not be

disallowed for a taxable year is the portionof the amounts that are otherwise disal-lowed under this revenue ruling that werereported (or would have been reported butfor the exclusion under § 79) by the em-ployer as the cost of insurance on each em-ployee’s Forms W–2 (or Forms 1099) forthat year. In the case of an employer witha taxable year other than the calendar year,the deduction that will not be disallowedfor a taxable year is the reported (and ex-cluded) amounts described in the previoussentence that are properly allocable to theemployer’s taxable year. In either case,these amounts are to be determined with-out regard to any amendment to any FormW–2 or Form 1099 made after October 17,2007.

REFERENCE TO LISTEDTRANSACTIONS NOTICE

Some of the arrangements described inthis revenue ruling and substantially sim-ilar arrangements (as well as certain otherarrangements utilizing cash value life in-surance policies for which an employerhas deducted amounts as contributions to awelfare benefit fund) may be transactionsthat have been designated as listed transac-tions. See Notice 2007–83, this Bulletin.If a transaction is designated as a listedtransaction, affected persons may be sub-ject to additional penalties and disclosureresponsibilities.

DRAFTING INFORMATION

The principal authors of this revenueruling are Betty J. Clary of the Office ofDivision Counsel/Associate Chief Coun-sel (Tax Exempt & Government Enti-ties) and Larry Isaacs of the EmployeePlans, Tax Exempt and Government En-tities Division. For further informationregarding this revenue ruling, please con-tact Betty J. Clary at (202) 622–6080(not a toll-free call) or Larry Isaacs [email protected].

Section 467.—CertainPayments for the Use ofProperty or Services


Section 468.—SpecialRules for Mining and SolidWaste Reclamation andClosing Costs


Section 482.—Allocationof Income and DeductionsAmong Taxpayers


Section 483.—Interest onCertain Deferred Payments


Section 512.—UnrelatedBusiness Taxable Income

The Service provides an inflation adjustment to themaximum amount of annual dues that can be paidto certain agricultural or horticultural organizationswithout any portion being treated as unrelated tradeor business income by reason of any benefits or priv-ileges available to members for taxable years begin-ning in 2008. See Rev. Proc. 2007-66, page 970.

Section 513.—UnrelatedTrade or Business

The Service provides an inflation adjustment tothe maximum cost of a “low cost article” for tax-able years beginning in 2008. Funds raised througha charity’s distribution of “low cost articles” will notbe treated as unrelated business income to the charity.See Rev. Proc. 2007-66, page 970.

Section 642.—SpecialRules for Credits andDeductions


Section 685.—Treatmentof Funeral Trusts

The Service provides an inflation adjustment to themaximum amount of contributions that may be made

2007–45 I.R.B. 952 November 5, 2007

to a qualified funeral trust for contracts entered incalendar year 2008. See Rev. Proc. 2007-66, page970.

Section 807.—Rules forCertain Reserves


Section 846.—DiscountedUnpaid Losses Defined


Section 877.—Expatriationto Avoid Tax

The Service provides an inflation adjustment tothe amount used for calendar year 2008 to determinewhether an individual’s loss of United States citizen-ship had the avoidance of United States tax as one ofits principal purposes. See Rev. Proc. 2007-66, page970.

Section 911.—Citizens orResidents of the UnitedStates Living Abroad

The Service provides an inflation adjustment tothe amount of foreign earned income that may be ex-cluded from gross income for taxable years beginningin 2008. See Rev. Proc. 2007-66, page 970.

Section 995.—Taxationof DISC Income toShareholders

2007 base period T-bill rate. The“base period T-bill rate” for the periodending September 30, 2007, is publishedas required by section 995(f) of the Code.

Rev. Rul. 2007–64

Section 995(f)(1) of the Internal Rev-enue Code provides that a shareholder of aDISC shall pay interest each taxable yearin an amount equal to the product of theshareholder’s DISC-related deferred tax li-ability for the year and the “base periodT-bill rate.” Under section 995(f)(4), the

base period T-bill rate is the annual rateof interest determined by the Secretary tobe equivalent to the average of the 1-yearconstant maturity Treasury yields, as pub-lished by the Board of Governors of theFederal Reserve System, for the 1-year pe-riod ending on September 30 of the calen-dar year ending with (or of the most recentcalendar year ending before) the close ofthe taxable year of the shareholder. Thebase period T-bill rate for the period end-ing September 30, 2007 is 4.87 percent.

Pursuant to section 6622 of the Code,interest must be compounded daily. Thetable below provides factors for com-pounding the base period T-bill rate dailyfor any number of days in the share-holder’s taxable year (including a 52–53week accounting period) for the 2007 baseperiod T-bill rate. To compute the amountof the interest charge for the shareholder’staxable year, multiply the amount of theshareholder’s DISC-related deferred taxliability (as defined in section 995(f)(2))for that year by the base period T-bill ratefactor corresponding to the number ofdays in the shareholder’s taxable year forwhich the interest charge is being com-puted. Generally, one would use the factorfor 365 days. One would use a differentfactor only if the shareholder’s taxableyear for which the interest charge beingdetermined is a short taxable year, if theshareholder uses the 52–53 week taxableyear, or if the shareholder’s taxable yearis a leap year.

For the base period T-bill rates for theperiods ending in prior years, see Rev. Rul.2006–54, 2006–45 I.R.B. 834, Rev. Rul.2005–70, 2005–2 C.B. 919, Rev. Rul.2004–99, 2004–2 C.B. 720, Rev. Rul.2003–111, 2003–2 C.B. 1009, Rev. Rul.2002–68, 2002–2 C.B. 808, Rev. Rul.2001–56, 2001–2 C.B. 500, and Rev. Rul.2000–52, 2000–2 C.B. 516.


The principal author of this revenue rul-ing is David F. Bergkuist of the Office ofAssociate Chief Counsel (International).For further information regarding this rev-enue ruling, contact David F. Bergkuist at(202) 622–3850 (not a toll-free call).

2007 ANNUAL RATE,COMPOUNDED DAILY

4.87 PERCENT

DAYS FACTOR

1 .0001334252 .0002668673 .0004003274 .0005338055 .000667301

6 .0008008157 .0009343478 .0010678969 .001201463

10 .001335048

11 .00146865112 .00160227113 .00173591014 .00186956615 .002003240

16 .00213693217 .00227064218 .00240437019 .00253811520 .002671878

21 .00280565922 .00293945823 .00307327524 .00320711025 .003340963

26 .00347483327 .00360872128 .00374262729 .00387655130 .004010493

31 .00414445332 .00427843133 .00441242634 .00454644035 .004680471

36 .00481452037 .00494858738 .00508267239 .00521677540 .005350895

November 5, 2007 953 2007–45 I.R.B.


4.87 PERCENT

DAYS FACTOR

41 .00548503442 .00561919143 .00575336544 .00588755745 .006021767

46 .00615599647 .00629024248 .00642450649 .00655878750 .006693087

51 .00682740552 .00696174053 .00709609454 .00723046555 .007364855

56 .00749926257 .00763368758 .00776813059 .00790259260 .008037071

61 .00817156862 .00830608363 .00844061664 .00857516665 .008709735

66 .00884432267 .00897892768 .00911354969 .00924819070 .009382849

71 .00951752572 .00965222073 .00978693274 .00992166375 .010056411

76 .01019117777 .01032596278 .01046076479 .01059558580 .010730423


4.87 PERCENT

DAYS FACTOR

81 .01086527982 .01100015483 .01113504684 .01126995685 .011404885

86 .01153983187 .01167479588 .01180977889 .01194477890 .012079797

91 .01221483392 .01234988793 .01248496094 .01262005095 .012755159

96 .01289028597 .01302543098 .01316059299 .013295773100 .013430972

101 .013566188102 .013701423103 .013836676104 .013971947105 .014107236

106 .014242542107 .014377867108 .014513210109 .014648571110 .014783951

111 .014919348112 .015054763113 .015190196114 .015325648115 .015461117

116 .015596605117 .015732110118 .015867634119 .016003176120 .016138736


4.87 PERCENT

DAYS FACTOR

121 .016274314122 .016409910123 .016545524124 .016681156125 .016816807

126 .016952475127 .017088162128 .017223866129 .017359589130 .017495330

131 .017631089132 .017766866133 .017902661134 .018038474135 .018174306

136 .018310155137 .018446023138 .018581909139 .018717813140 .018853735

141 .018989675142 .019125633143 .019261610144 .019397605145 .019533617

146 .019669648147 .019805697148 .019941765149 .020077850150 .020213953

151 .020350075152 .020486215153 .020622373154 .020758549155 .020894744

156 .021030956157 .021167187158 .021303436159 .021439703160 .021575988

2007–45 I.R.B. 954 November 5, 2007


4.87 PERCENT

DAYS FACTOR

161 .021712291162 .021848613163 .021984953164 .022121311165 .022257687

166 .022394081167 .022530494168 .022666925169 .022803374170 .022939841

171 .023076326172 .023212830173 .023349352174 .023485892175 .023622450

176 .023759027177 .023895621178 .024032234179 .024168865180 .024305515

181 .024442182182 .024578868183 .024715572184 .024852295185 .024989035

186 .025125794187 .025262571188 .025399366189 .025536180190 .025673012

191 .025809862192 .025946730193 .026083617194 .026220522195 .026357445

196 .026494386197 .026631346198 .026768324199 .026905320200 .027042334


4.87 PERCENT

DAYS FACTOR

201 .027179367202 .027316418203 .027453487204 .027590575205 .027727681

206 .027864805207 .028001948208 .028139109209 .028276288210 .028413485

211 .028550701212 .028687935213 .028825187214 .028962458215 .029099747

216 .029237054217 .029374380218 .029511724219 .029649086220 .029786466

221 .029923865222 .030061283223 .030198718224 .030336172225 .030473644

226 .030611135227 .030748644228 .030886171229 .031023717230 .031161281

231 .031298863232 .031436464233 .031574083234 .031711720235 .031849376

236 .031987050237 .032124743238 .032262454239 .032400183240 .032537931


4.87 PERCENT

DAYS FACTOR

241 .032675697242 .032813481243 .032951284244 .033089105245 .033226944

246 .033364802247 .033502679248 .033640573249 .033778487250 .033916418

251 .034054368252 .034192336253 .034330323254 .034468328255 .034606352

256 .034744394257 .034882454258 .035020533259 .035158630260 .035296746

261 .035434880262 .035573033263 .035711204264 .035849393265 .035987601

266 .036125827267 .036264072268 .036402335269 .036540617270 .036678917

271 .036817235272 .036955572273 .037093928274 .037232302275 .037370694

276 .037509105277 .037647534278 .037785982279 .037924448280 .038062933

November 5, 2007 955 2007–45 I.R.B.


4.87 PERCENT

DAYS FACTOR

281 .038201436282 .038339958283 .038478498284 .038617057285 .038755634

286 .038894229287 .039032844288 .039171476289 .039310127290 .039448797

291 .039587485292 .039726192293 .039864917294 .040003660295 .040142422

296 .040281203297 .040420002298 .040558820299 .040697656300 .040836511

301 .040975384302 .041114276303 .041253186304 .041392115305 .041531062

306 .041670028307 .041809013308 .041948016309 .042087037310 .042226077

311 .042365136312 .042504213313 .042643309314 .042782423315 .042921556

316 .043060708317 .043199878318 .043339066319 .043478274320 .043617499


4.87 PERCENT

DAYS FACTOR

321 .043756744322 .043896006323 .044035288324 .044174588325 .044313907

326 .044453244327 .044592600328 .044731974329 .044871367330 .045010779

331 .045150209332 .045289658333 .045429125334 .045568611335 .045708116

336 .045847639337 .045987181338 .046126741339 .046266320340 .046405918

341 .046545535342 .046685170343 .046824823344 .046964495345 .047104186

346 .047243896347 .047383624348 .047523371349 .047663136350 .047802920

351 .047942723352 .048082544353 .048222384354 .048362243355 .048502121

356 .048642017357 .048781931358 .048921865359 .049061817360 .049201787


4.87 PERCENT

DAYS FACTOR

361 .049341777362 .049481785363 .049621812364 .049761857365 .049901921

366 .050042004367 .050182105368 .050322226369 .050462365370 .050602522

371 .050742698

Section 1274.—Determi-nation of Issue Price in theCase of Certain Debt Instru-ments Issued for Property(Also Sections 42, 280G, 382, 412, 467, 468, 482,483, 642, 807, 846, 1288, 7520, 7872.)

Federal rates; adjusted federal rates;adjusted federal long-term rate and thelong-term exempt rate. For purposes ofsections 382, 642, 1274, 1288, and othersections of the Code, tables set forth therates for November 2007.

Rev. Rul. 2007–66

This revenue ruling provides variousprescribed rates for federal income taxpurposes for November 2007 (the currentmonth). Table 1 contains the short-term,mid-term, and long-term applicable fed-eral rates (AFR) for the current monthfor purposes of section 1274(d) of theInternal Revenue Code. Table 2 containsthe short-term, mid-term, and long-termadjusted applicable federal rates (adjustedAFR) for the current month for purposesof section 1288(b). Table 3 sets forth theadjusted federal long-term rate and thelong-term tax-exempt rate described insection 382(f). Table 4 contains the ap-propriate percentages for determining thelow-income housing credit described insection 42(b)(2) for buildings placed inservice during the current month. Finally,Table 5 contains the federal rate for deter-mining the present value of an annuity, an

2007–45 I.R.B. 956 November 5, 2007

interest for life or for a term of years, ora remainder or a reversionary interest forpurposes of section 7520.

REV. RUL. 2007–66 TABLE 1

Applicable Federal Rates (AFR) for November 2007

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term

AFR 4.11% 4.07% 4.05% 4.04%110% AFR 4.53% 4.48% 4.46% 4.44%120% AFR 4.94% 4.88% 4.85% 4.83%130% AFR 5.36% 5.29% 5.26% 5.23%

Mid-term

AFR 4.39% 4.34% 4.32% 4.30%110% AFR 4.83% 4.77% 4.74% 4.72%120% AFR 5.28% 5.21% 5.18% 5.15%130% AFR 5.72% 5.64% 5.60% 5.57%150% AFR 6.62% 6.51% 6.46% 6.42%175% AFR 7.74% 7.60% 7.53% 7.48%

Long-term

AFR 4.89% 4.83% 4.80% 4.78%110% AFR 5.38% 5.31% 5.28% 5.25%120% AFR 5.88% 5.80% 5.76% 5.73%130% AFR 6.38% 6.28% 6.23% 6.20%


Adjusted AFR for November 2007

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term adjustedAFR

3.40% 3.37% 3.36% 3.35%

Mid-term adjusted AFR 3.61% 3.58% 3.56% 3.55%

Long-term adjustedAFR

4.30% 4.25% 4.23% 4.21%


Rates Under Section 382 for November 2007

Adjusted federal long-term rate for the current month 4.30%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjustedfederal long-term rates for the current month and the prior two months.) 4.49%

November 5, 2007 957 2007–45 I.R.B.


Appropriate Percentages Under Section 42(b)(2) for November 2007Appropriate percentage for the 70% present value low-income housing credit 8.08%

Appropriate percentage for the 30% present value low-income housing credit 3.46%


Rate Under Section 7520 for November 2007

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,or a remainder or reversionary interest 5.2%

Section 1288.—Treatmentof Original Issue Discounton Tax-Exempt Obligations


Section 2032A.—Valuationof Certain Farm, etc.,Real Property

The Service provides an inflation adjustment to themaximum amount by which the value of certain farmand other qualified real property included in a dece-dent’s gross estate may be decreased for purposes ofvaluing the estate of a decedent dying in calendar year2008. See Rev. Proc. 2007-66, page 970.

Section 2503.—TaxableGifts

The Service provides an inflation adjustment to theamount of gifts that may be made to a person in acalendar year without including the amount in taxablegifts for calendar year 2008. See Rev. Proc. 2007-66,page 970.

Section 2523.—Gift toSpouse

The Service provides an inflation adjustment to theamount of gifts that may be made in a calendar yearto a spouse who is not a citizen of the United Stateswithout including the amount in taxable gifts for cal-endar year 2008. See Rev. Proc. 2007-66, page 970.

Section 4161.—Impositionof Tax

The Service provides an inflation adjustment to theamount of excise tax imposed for calendar year 2008

on the first sale by a manufacturer, producer, or im-porter of any shaft of a type used in the manufactureof certain arrows. See Rev. Proc. 2007-66, page 970.

Section 6033.—Returns byExempt Organizations

The Service provides an inflation adjustment tothe amount of dues certain exempt organizations withnondeductible lobbying expenditures can charge andstill be excepted from reporting requirements for tax-able years beginning in 2008. See Rev. Proc. 2007-66, page 970.

Section 6039F.—Notice ofLarge Gifts Received FromForeign Persons

The Service provides an inflation adjustment to theamount of gifts received, in a taxable year from for-eign persons, that triggers a reporting requirement fora United States person for taxable years beginning in2008. See Rev. Proc. 2007-66, page 970.

Section 6323.—Validityand Priority AgainstCertain Persons

The Service provides inflation adjustments for cal-endar year 2008 to (1) the maximum amount of a ca-sual sale of personal property below which a federaltax lien will not be valid against a purchaser of theproperty and (2) the maximum amount of a contractfor the repair or improvement of certain residentialproperty at or below which a federal tax lien will notbe valid against a mechanic’s lienor. See Rev. Proc.2007-66, page 970.

Section 6334.—PropertyExempt From Levy

The Service provides inflation adjustments to thevalue of certain property exempt from levy (fuel, pro-visions, furniture, household personal effects, arms

for personal use, livestock, poultry, and books andtools of a trade, business, or profession) for calendaryear 2008. See Rev. Proc. 2007-66, page 970.

Section 6601.—Intereston Underpayment,Nonpayment, or Extensionsof Time for Payment, of Tax

The Service provides an inflation adjustment tothe amount used to determine the amount of interestcharged on a certain portion of the estate tax payablein installments for the estate of a decedent dying incalendar year 2008. See Rev. Proc. 2007-66, page970.

Section 7430.—Awardingof Costs and Certain Fees

The Service provides an inflation adjustment to thehourly limit on attorney fees incurred in calendar year2008 that may be awarded in a judgment or settlementof an administrative or judicial proceeding concern-ing the determination, collection, or refund of tax, in-terest, or penalty. See Rev. Proc. 2007-66, page 970.

Section 7520.—ValuationTables


Section 7702B.—Treatmentof Qualified Long-TermCare Insurance

The Service provides an inflation adjustment to thestated dollar amount for calendar year 2008 of the perdiem limitation regarding periodic payments receivedunder a qualified long-term care insurance contractor periodic payments received under a life insurancecontract that are treated as paid by reason of the death

2007–45 I.R.B. 958 November 5, 2007

of a chronically ill individual. See Rev. Proc. 2007-66, page 970.

Section 7805.—Rulesand Regulations26 CFR 301.7805–1: Rules and regulations.

Whether a holding in Rev. Rul. 2007–65 will beapplied retroactively. See Rev. Rul. 2007-65, page949.

Section 7872.—Treatmentof Loans With Below-MarketInterest Rates


November 5, 2007 959 2007–45 I.R.B.

Part III. Administrative, Procedural, and MiscellaneousAbusive Trust ArrangementsUtilizing Cash Value LifeInsurance Policies Purportedlyto Provide Welfare Benefits

Notice 2007–83

The Internal Revenue Service (IRS)and Treasury Department are aware ofcertain trust arrangements claiming to bewelfare benefit funds and involving cashvalue life insurance policies that are be-ing promoted to and used by taxpayersto improperly claim federal income andemployment tax benefits. This notice in-forms taxpayers and their representativesthat the tax benefits claimed for these ar-rangements are not allowable for federaltax purposes. This notice also alerts tax-payers and their representatives that thesetransactions are tax avoidance transactionsand identifies certain transactions usingtrust arrangements involving cash valuelife insurance policies, and substantiallysimilar transactions, as listed transactionsfor purposes of § 1.6011–4(b)(2) of theIncome Tax Regulations and §§ 6111 and6112 of the Internal Revenue Code. Thisnotice further alerts persons involved withthese transactions of certain responsibili-ties that may arise from their involvementwith these transactions.

Concurrently with this notice, the IRSis publishing Rev. Rul. 2007–65 (con-cluding that for purposes of deductionsallowable to an employer under § 419,a welfare benefit fund’s qualified directcost does not include premium amountsfor cash value life insurance policies paidby the fund, whenever the fund is directlyor indirectly a beneficiary under the pol-icy within the meaning of § 264(a)), andNotice 2007–84 (describing trust arrange-ments involving purported welfare bene-fit funds that, in form, provide post-retire-ment medical and life insurance benefitsto employees on a nondiscriminatory ba-sis but, in operation, result in the owner orowners receiving all or a substantial por-tion of the post-retirement and other bene-fits, and all or a substantial portion of anyassets distributed from the trust).

BACKGROUND

1. Promoted Arrangements

Trust arrangements utilizing cash valuelife insurance policies and purporting toprovide welfare benefits to active employ-ees are being promoted to small businessesand other closely held businesses as a wayto provide cash and other property to theowners of the business on a tax-favored ba-sis. The arrangements are sometimes re-ferred to by persons advocating their use as“single employer plans” and sometimes as“419(e) plans.” Those advocates claim thatthe employers’ contributions to the trustare deductible under §§ 419 and 419A asqualified cost, but that there is not a corre-sponding inclusion in the owner’s income.

A promoted trust arrangement may bestructured either as a taxable trust or atax-exempt trust, i.e., a voluntary employ-ees’ beneficiary association (VEBA) thathas received a determination letter fromthe IRS that it is described in § 501(c)(9).The plan and the trust documents indicatethat the plan provides benefits such as cur-rent death benefit protection, self-insureddisability benefits, and/or self-insuredseverance benefits to covered employees(including those employees who are alsoowners of the business), and that the ben-efits are payable while the employee isactively employed by the employer. Theemployer’s contributions are often basedon premiums charged for cash value lifeinsurance policies. For example, contri-butions may be based on premiums thatwould be charged for whole life policies.As a result, the arrangements often requirelarge employer contributions relative tothe actual cost of the benefits currentlyprovided under the plan.

Under these arrangements, the trusteeuses the employer’s contributions to thetrust to purchase life insurance policies.The trustee typically purchases cash valuelife insurance policies on the lives of theemployees who are owners of the busi-ness (and sometimes other key employ-ees), while purchasing term life insurancepolicies on the lives of the other employ-ees covered under the plan.

It is anticipated that after a number ofyears the plan will be terminated and thecash value life insurance policies, cash, or

other property held by the trust will bedistributed to the employees who are planparticipants at the time of the termination.While a small amount may be distributedto employees who are not owners of thebusiness, the timing of the plan termina-tion and the methods used to allocate theremaining assets are structured so that thebusiness owners and other key employeeswill receive, directly or indirectly, all or asubstantial portion of the assets held by thetrust.

Those advocating the use of these plansoften claim that the employer is allowed adeduction under § 419(c)(3) for its contri-butions when the trustee uses those con-tributions to pay premiums on the cashvalue life insurance policies, while at thesame time claiming that nothing is includi-ble in the owner’s gross income as a re-sult of the contributions (or, if amountsare includible, they are significantly lessthan the premiums paid on the cash valuelife insurance policies). They may alsoclaim that nothing is includible in the in-come of the business owner or other keyemployee as a result of the transfer of acash value life insurance policy from thetrust to the employee, asserting that theemployee has purchased the policy when,in fact, any amounts the owner or other keyemployee paid for the policy may be sig-nificantly less than the fair market valueof the policy. Some of the plans are struc-tured so that the owner or other key em-ployee is the named owner of the life insur-ance policy from the plan’s inception, withthe employee assigning all or a portion ofthe death proceeds to the trust. Advocatesof these arrangements may claim that noincome inclusion is required because thereis no transfer of the policy itself from thetrust to the employees.

2. Intent to Challenge Transactions

The IRS intends to challenge theclaimed tax benefits for the above-de-scribed transactions for various reasons.Depending on the facts and circumstancesof a particular arrangement, contributionsto a purported welfare benefit fund onbehalf of an employee who is a share-holder may properly be characterized asdividend income to the owner, the valueof which is includible in the owner’s gross

2007–45 I.R.B. 960 November 5, 2007

income, and for which amounts are notdeductible by the corporation. See Neona-tology Associates v. Commissioner, 299F.3d 221 (3d Cir. 2002). Depending onthe facts and circumstances of a partic-ular arrangement, the arrangement mayproperly be characterized as a plan de-ferring the receipt of compensation forpurposes of § 404(a)(5), resulting in theapplication of the rules under § 404(a)(5)governing the timing of any otherwiseavailable deductions. See Wellons v. Com-missioner, 31 F.3d 569 (7th Cir. 1994).In addition, an arrangement may prop-erly be characterized as a nonqualifieddeferred compensation plan for purposesof § 409A. Application of § 409A may re-sult in immediate inclusion of income andadditional taxes to the employee, as wellas income tax withholding liabilities to theemployer. The facts and circumstancesof a particular arrangement may resultin it coming within the definition of asplit-dollar life insurance arrangement, sothat the tax consequences to the employerand the employees are subject to the rulesgoverning those types of arrangements,including potentially § 409A. Under theeconomic benefit regime of the split-dollarlife insurance arrangement rules set forthin § 1.61–22, the employee must includein income the full value of the economicbenefits provided to the employee underthe arrangement for the taxable year with-out a corresponding employer deduction.

If, based on the facts and circum-stances, an arrangement described aboveis properly characterized as a welfare ben-efit fund for purposes of §§ 419 and 419A(rather than a dividend arrangement, a plandeferring the receipt of compensation, ora split-dollar life insurance arrangement),an employer is allowed a deduction forcontributions to the trust or other welfarebenefit fund only to the extent allowedunder §§ 419 and 419A. Under §§ 419and 419A, no deduction is allowed withrespect to premiums paid for life insurancecoverage provided to current employees ifthe welfare benefit fund or the employeris directly or indirectly a beneficiary un-der the life insurance policy within themeaning of § 264(a). In the promotedarrangements discussed above, the trusttypically retains rights in the life insur-ance policies and is directly or indirectly

a beneficiary under the policies, so that nodeduction is allowed with respect to thelife insurance premiums. See Situation 1in Rev. Rul. 2007–65. Further, any de-duction with respect to uninsured benefits(for example, uninsured medical, disabil-ity, or severance benefits) is not based onthe premiums paid on the life insurancepolicies, but is generally limited to claimsincurred and paid during the year.1 SeeSituation 2 in Rev. Rul. 2007–65. Thus,contrary to the claims made by personsadvocating the use of the arrangementsdiscussed above, premiums on cash valuelife insurance policies paid through thetrust are not a justification for claiming adeduction under §§ 419 and 419A.

Moreover, in appropriate cases, the IRSintends to challenge the value claimed bythe taxpayer for property distributed fromthe trust, including cash value life insur-ance policies.

The above conclusions apply whetherthe trust used to provide the plan bene-fits is a taxable trust or a VEBA. Whilethe trust may have received a determina-tion letter stating the trust is exempt under§ 501(c)(9), a letter of this type does notaddress the tax deductibility of contribu-tions to the trust with respect to the em-ployer nor the income inclusion with re-spect to the employees.

The IRS has previously identified cer-tain other transactions that claim to bewelfare benefit funds as listed transac-tions, concluding that the tax benefitsclaimed to be generated by these transac-tions are not allowable for federal incometax purposes. Notice 2003–24, 2003–1C.B. 853, describes certain transactionspurporting to meet the exception under§ 419A(f)(5) for collectively bargainedplans and identifies those and substantiallysimilar transactions as listed transactions,and Notice 95–34, 1995–1 C.B. 309, de-scribes transactions that purport to meetthe 10-or-more employer plan exceptionunder § 419A(f)(6). The transactions de-scribed in Notice 95–34 and substantiallysimilar transactions have also been iden-tified as listed transactions. See Notice2004–67, 2004–2 C.B. 600.

LISTED TRANSACTIONS

1. Transactions Identified As ListedTransactions

Any transaction that has all of the fol-lowing elements, and any transaction thatis substantially similar to such a trans-action, are identified as “listed transac-tions” for purposes of § 1.6011–4(b)(2)and §§ 6111 and 6112, effective October17, 2007, the date this notice is released tothe public.

(1) The transaction involves a trust orother fund described in § 419(e)(3) that ispurportedly a welfare benefit fund.

(2) For determining the portion of itscontributions to the trust or other fundthat are currently deductible the em-ployer does not rely on the exceptionin § 419A(f)(5)(A) (regarding collectivelybargained plans).

(3) The trust or other fund pays premi-ums (or amounts that are purported to bepremiums) on one or more life insurancepolicies and, with respect to at least one ofthe policies, value is accumulated either:

(a) within the policy (for example, acash value life insurance policy); or

(b) outside the policy (for example, in aside fund or through an agreement outsidethe policy allowing the policy to be con-verted to or exchanged for a policy whichwill, at some point in time, have accumu-lated value based on the purported premi-ums paid on the original policy).

(4) The employer has taken a deductionfor any taxable year for its contributionsto the fund with respect to benefits pro-vided under the plan (other than post-re-tirement medical benefits, post-retirementlife insurance benefits, and child care fa-cilities) that is greater than the sum of thefollowing amounts:

(a) With respect to any uninsured bene-fits provided under the plan,

(i) an amount equal to claims that wereboth incurred and paid during the taxableyear; plus

(ii) the limited reserves allowable under§ 419A(c)(1) or (c)(3), as applicable; plus

(iii) amounts paid during the taxableyear to satisfy claims incurred in a priortaxable year (but only to the extent that nodeduction was taken for such amounts in aprior year); plus

1 Limited deductions are allowable under §§ 419 and 419A for additions to certain reserves, including a reserve for claims incurred but unpaid as of the close of a taxable year.

November 5, 2007 961 2007–45 I.R.B.

(iv) amounts paid during the taxableyear or a prior taxable year for adminis-trative expenses with respect to uninsuredbenefits and that are properly allocable tothe taxable year (but only to the extent thatno deduction was taken for such amountsin a prior year).

(b) With respect to any insured benefitsprovided under the plan,

(i) insurance premiums paid during thetaxable year that are properly allocable tothe taxable year (other than premiums paidwith respect to a policy described in (3)(a)or (b) above); plus

(ii) insurance premiums paid in priortaxable years that are properly allocable tothe taxable year (other than premiums paidwith respect to a policy described in (3)(a)or (b) above); plus

(iii) amounts paid during the taxableyear or a prior taxable year for administra-tive expenses with respect to insured ben-efits and that are properly allocable to thetaxable year (but only to the extent that nodeduction was taken for such amounts in aprior year).

(c) For taxable years ending prior toNovember 5, 2007, with respect to lifeinsurance benefits provided through poli-cies described in (3)(a) and (b) above, thegreater of the following amounts:2

(i) in the case of an employer with ataxable year that is the calendar year, theaggregate amounts reported by the em-ployer as the cost of insurance with respectto such policies on the employees’ FormsW–2 (or Forms 1099) for that year, plusan amount equal to the amounts that wouldhave been reportable on the employees’Forms W–2 for that year, but for the exclu-sion under section 79 (relating to the costof up to $50,000 of coverage); or, in thecase of an employer with a taxable yearother than the calendar year, the portions ofthe aggregate amounts reported by the em-ployer on the Forms W–2 (or Forms 1099)as described in (i), above, (or that wouldhave been reported absent the exclusionunder § 79) that are properly allocable tothe employer’s taxable year; and

(ii) with respect to each employee in-sured under a cash value life insurancepolicy, the aggregate cost of insurancecharged under the policy or policies with

respect to the amount of current life insur-ance coverage provided to the employeeunder the plan (but limited to the prod-uct of the current life insurance coverageunder the plan multiplied by the currentyear’s mortality rate provided in the higherof the 1980 or 2001 CSO Table).

(d) The additional reserve, if any, un-der § 419A(c)(6) (relating to medical ben-efits provided through a plan maintainedby a bona fide association), but only to theextent amounts are not already includedabove in this paragraph (4), and only to theextent that no deduction was taken for suchamounts in a prior taxable year.

2. Participation in the Listed Transactions

Whether a taxpayer has participatedin the listed transaction described inthis notice will be determined under§ 1.6011–4(c)(3)(i)(A). However, an in-dividual who is not the employer will betreated as a participant for a taxable yearif, and only if the individual owns, directlyor indirectly, 20 percent or more of anentity, other than a C corporation, that isa participant in the listed transaction forthe taxable year. For this purpose, indi-rect ownership is determined under rulessimilar to the rules of § 318 but withoutregard to the family attribution rules of§ 318(a)(1).

3. Disclosure, List Maintenance, andRegistration Requirements; Penalties;Other Considerations

In general, if a taxpayer has partici-pated in a listed transaction, the rules of§ 1.6011–4(e) determine when a disclo-sure statement must be filed by the tax-payer. However, if, under § 1.6011–4(e),a taxpayer is required to file a disclosurestatement with respect to the listed transac-tion described in this notice after October17, 2007, and prior to January 15, 2008,that disclosure statement will be consid-ered to be timely filed if the taxpayer alter-natively files the disclosure statement withthe Office of Tax Shelter Analysis (OTSA)by January 15, 2008.

Some transactions described in Notice95–34 and substantially similar transac-tions may be identified as a listed trans-

action in this notice also. It should benoted that, independent of their classifica-tion as “listed transactions” for purposes of§ 1.6011–4(b)(2) and §§ 6111 and 6112,transactions that are the same as, or sub-stantially similar to, the transaction iden-tified in this notice may already be subjectto the requirements of §§ 6011, 6111, 6112,or the regulations thereunder. Persons re-quired to disclose these transactions under§ 1.6011–4 and who fail to do so may besubject to the penalty under § 6707A.3 Per-sons required to disclose or register thesetransactions under § 6111 who have failedto do so may be subject to the penalty un-der § 6707(a). Persons required to main-tain lists of investors under § 6112 who failto do so (or who fail to provide such listswhen requested by the IRS) may be subjectto the penalty under § 6708(a).

In addition, the IRS may impose otherpenalties on persons involved in this trans-action or substantially similar transactions(including the accuracy-related penaltyunder § 6662 or 6662A) and, as appli-cable, on persons who participate in thepromotion or reporting of this transactionor substantially similar transactions (in-cluding the return preparer penalty under§ 6694, the promoter penalty under § 6700,and the aiding and abetting penalty under§ 6701).

Further, under § 6501(c)(10), the pe-riod of limitations on assessment may beextended beyond the general three-yearperiod of limitations for persons requiredto disclose transactions under § 1.6011–4who fail to do so. See Rev. Proc. 2005–26,2005–1 C.B. 965.

The IRS and the Treasury Departmentrecognize that some taxpayers may havefiled tax returns taking the position thatthey were entitled to the purported tax ben-efits of the types of transactions describedin this notice. These taxpayers should con-sult with a tax advisor to ensure that theirtransactions are disclosed properly and totake appropriate corrective action.


The principal authors of this noticeare Larry Isaacs of the Employee Plans,Tax Exempt and Government EntitiesDivision and Betty Clary of the Office

2 For taxable years ending on or after November 5, 2007, the amount under this (4)(c) is zero.

3 Section 6707A applies to returns and statements due after October 22, 2004. See Notice 2005–11, 2005–1 C.B. 493. The amount of the penalty under § 6707A with respect to a listedtransaction is $100,000 in the case of a natural person and $200,000 in any other case.

2007–45 I.R.B. 962 November 5, 2007

of Division Counsel/Associate ChiefCounsel (Tax Exempt and GovernmentEntities). For further information re-garding this notice, contact Mr. Isaacsat [email protected] orMs. Clary at (202) 622–6080 (not atoll-free call).

Trust ArrangementsPurporting to ProvideNondiscriminatoryPost-Retirement Medicaland Life Insurance Benefits

Notice 2007–84

Sections 419 and 419A of the Inter-nal Revenue Code set forth rules underwhich employers are permitted to makecurrently deductible contributions to wel-fare benefit funds in order to provide theirretirees with medical and life insurancebenefits. Businesses often maintain wel-fare benefit funds that comport with theintent of §§ 419 and 419A and do in factprovide meaningful medical and life insur-ance benefits to retirees on a nondiscrimi-natory basis, and make substantial contri-butions to those welfare benefit funds thatare fully deductible. Such welfare benefitfunds are outside the scope of this notice.

This notice addresses certain trust ar-rangements that are being promoted to andused by small businesses to avoid fed-eral income and employment taxes. Thearrangements described in this notice in-volve purported welfare benefit funds that,in form, provide post-retirement medicaland life insurance benefits to employees ona nondiscriminatory basis, but that, in op-eration, will primarily benefit the ownersor other key employees of the businesses.This notice alerts taxpayers and their rep-resentatives that the tax treatment of thesearrangements may vary from the claimedtax treatment. The Internal Revenue Ser-vice (IRS) may issue further guidance toaddress these arrangements, and taxpayersshould not assume that the guidance willbe applied prospectively only.

Concurrently with this notice, the IRS ispublishing Notice 2007–83, this Bulletin,which identifies as listed transactions cer-tain transactions involving purported wel-fare benefit fund arrangements using cash

value life insurance policies. The fact thatan arrangement is described in this noticedoes not preclude it from also being a listedtransaction under Notice 2007–83 wherethe arrangement provides benefits to activeemployees as well as to retired employees.

The IRS has previously identified cer-tain other transactions that claim to bewelfare benefit funds as listed transac-tions. Notice 2003–24, 2003–1 C.B. 853,describes certain transactions purportingto meet the exception under § 419A(f)(5)of the Internal Revenue Code for collec-tively bargained plans. Notice 95–34,1995–1 C.B. 309, describes transactionsthat purport to meet the 10-or-more em-ployer plan exception under § 419A(f)(6).Notice 2004–67, 2004–2 C.B. 600, in-cludes transactions described in Notice2003–24 and Notice 95–34, as well assubstantially similar transactions, as listedtransactions.

BACKGROUND

Promoted trust arrangements claimingto provide nondiscriminatory post-retire-ment medical benefits and post-retirementlife insurance benefits have recently cometo the attention of the IRS. These arrange-ments, among others, may be referred toby persons advocating the use of the plansas “single employer plans” or “419(e)plans.” These purported welfare benefitarrangements are usually sold to smallbusinesses and other closely held busi-nesses as a way to provide post-retirementmedical benefits, post-retirement life in-surance, and cash and other property tothe owners or other key employees of thebusiness on a tax-favored basis throughthe use of a trust. Those advocating theuse of these plans usually assert that thecontributions are tax-deductible, but withno corresponding inclusion by the owneror other key employee. Some of these ar-rangements involve plans that previouslyhad claimed to be 10-or-more employerplans under § 419A(f)(6); some otherswere established to receive policies trans-ferred from terminating plans that claimedto be 10-or-more employer plans.

A promoted arrangement may involveeither a taxable trust or a tax-exempt trust,i.e., a voluntary employees’ beneficiary as-sociation (VEBA) that has received a de-termination letter from the IRS that it is de-scribed in § 501(c)(9). The trust frequently

uses the employer’s contributions to pur-chase cash value life insurance policies onthe lives of employees who are owners ofthe business and, sometimes, on the livesof other key employees.

The amount of the employer’s deduc-tion for contributions to one of these plansis often based on a calculation of a reserveassociated with each of the plan partici-pants. However, the calculation may bebased on an unreasonable assumption thatall of the covered employees will eventu-ally receive post-retirement benefits underthe plan, or may be based on other actuarialassumptions that either are not reasonableor are not permitted to be reflected in thereserve calculations for purposes of §§ 419and 419A.

Under some arrangements, the plandocuments may indicate that post-retire-ment benefits will be provided on a nondis-criminatory basis when, in fact, only a fewemployees (primarily the employees whoare also owners of the business) will everreceive those benefits. To the extent a trustholds excess assets not needed to pay theoriginal benefits, the owner will also re-ceive a substantial portion of those assets.Under some arrangements, this will beaccomplished through the use of “loans”to the owners. For some arrangements, theplan will be amended to provide benefitsother than the plan’s original post-retire-ment medical or life insurance benefits.For others, the plan will be terminatedprior to the payment of the post-retirementbenefits and the timing of the termina-tion and the methods used to allocate theremaining assets are structured so thatthe owners and other key employees willreceive, directly or indirectly, all or a sub-stantial portion of the assets held by thetrust.

Persons advocating the use of theseplans claim that the employer’s contribu-tions for the post-retirement medical andlife benefits are deductible under §§ 419and 419A as additions to a qualified assetaccount. They may also claim that own-ers or other key employees receive theeconomic benefits from the contributionswith little or no income inclusion.

LAW

Sections 419 and 419A prescribe lim-its on the amount of deductions for con-tributions paid or accrued by an employer

November 5, 2007 963 2007–45 I.R.B.

to a welfare benefit fund. A welfare ben-efit fund generally consists of a taxable orexempt trust, corporation, or other organi-zation that is part of a plan of an employerthrough which the employer provides wel-fare benefits to employees or their benefi-ciaries. Under § 419, the employer’s con-tributions to a welfare benefit fund are de-ductible only if they would otherwise bedeductible under Chapter 1 of the Code,and the amount of the deduction is limitedto the welfare benefit fund’s qualified costfor the taxable year.

One component of qualified cost is afund’s qualified direct cost for the year,which is the amount (including administra-tive expenses) that would have been allow-able as a deduction to the employer withrespect to the benefits provided during theyear if those benefits had been provided di-rectly by the employer, and the employerhad used the cash receipts and disburse-ments method of accounting. A secondcomponent of qualified cost is any addi-tion to a qualified asset account for the tax-able year, but only to the extent the addi-tion does not exceed specified limits. Fur-ther, the qualified cost for the taxable yearis reduced by the fund’s after-tax incomefor the year.

Under § 419A(a), the term “qualifiedasset account” means any account con-sisting of assets set aside to provide forthe payment of disability benefits, medi-cal benefits, supplemental unemploymentbenefits or severance pay benefits, or lifeinsurance benefits. Sections 419A(b) and419A(c)(1) generally limit the additions toa qualified asset account to an amount thatis reasonably and actuarially necessary tofund claims incurred but unpaid (as of theclose of the taxable year) for the benefitsreferred to above, plus administrative costswith respect to those claims.

Section 419A(c)(2) allows additionallimited reserves for post-retirement med-ical and post-retirement life insurancebenefits. The reserves must be fundedover the working lives of the coveredemployees and must be actuarially deter-mined on a level basis using assumptionsthat are reasonable in the aggregate as nec-essary for the post-retirement benefits tobe provided to the covered employees. Forpurposes of § 419A(c)(2), contributions toa reserve are deductible under § 419A onlyif the contributions are intended to actuallyaccumulate for the purpose of funding the

post-retirement benefits. General SignalCorporation v. Commissioner, 142 F.2d546 (2d Cir. 1998).

Under § 419A(c)(2)(A), the reserve forpost-retirement medical benefits is furtherlimited by the requirement that it be de-termined on the basis of current medicalcosts. In addition, for post-retirement lifeinsurance the maximum insurance cover-age that can be taken into account with re-spect to any covered employee is $50,000of coverage. Moreover, in the case ofpost-retirement benefits for or on behalf ofa key employee (as defined in § 416(i)(1)),§ 419A(d) requires that a separate accountbe established for any medical or life in-surance benefits provided with respect tothe key employee, and any medical or lifeinsurance benefits provided with respectto the key employee after retirement mayonly be paid from the separate account.Under § 419A(e)(1), in order for reservesfor post-retirement medical and life insur-ance benefits to be taken into account theplan must meet the nondiscrimination re-quirements of § 505(b) with respect tothose benefits (even if those requirementsdo not otherwise apply to the plan).

A plan meets the nondiscrimination re-quirements of § 505(b) only if (i) eachclass of benefits under the plan is pro-vided under a classification of employeeswhich is set forth in the plan and whichis found by the Secretary not to be dis-criminatory in favor of employees who arehighly compensated individuals, and (ii) inthe case of each class of benefits, such ben-efits do not discriminate in favor of em-ployees who are highly compensated in-dividuals. Under § 505(b)(3), in the caseof any benefit for which another section ofthe Code provides nondiscrimination rules(e.g., § 105(h) in the case of a self-insuredmedical reimbursement plan), those rulesapply instead with respect to the benefit.Under §§ 105(h)(8) and 414(t), all employ-ees who are treated as employed by a sin-gle employer under the rules of § 414(b),(c), or (m) are treated as employed by asingle employer for purposes of §§ 105(h),79, and 505.

Sections 104(a)(3) and 105(b), (c), and(d) exclude from gross income certainamounts received by an employee throughaccident and health insurance. Section105(e) provides that for purposes of §§ 104and 105, amounts received through an “ac-cident and health plan for employees” are

treated as amounts received through acci-dent or health insurance. Thus, the planmust exist primarily for the benefit of em-ployees, as opposed to shareholders. See,e.g., Larkin v. Commissioner, 48 T.C. 629(1967), aff’d, 394 F.2d 494 (1st Cir. 1968)(holding that the plan was merely a deviceto use corporate earnings to meet the antic-ipated medical needs of the shareholders).

Section 4976(a) imposes on an em-ployer an excise tax in the amount of 100percent of the amount of any disqualifiedbenefit provided with respect to a welfarebenefit fund maintained by the employer.Under § 4976(b)(1), a “disqualified bene-fit” means (i) any post-retirement medicalbenefit or life insurance benefit providedwith respect to a key employee if a sepa-rate account is required to be establishedfor the key employee under § 419A(d) andthe payment is not from that employee’saccount; (ii) any post-retirement medicalbenefit or life insurance benefit providedwith respect to an individual in whose fa-vor discrimination is prohibited unless theplan meets the requirements of § 505(b)with respect to the benefit (whether or notthe § 505(b) requirements apply to theplan); and (iii) any portion of a welfarebenefit fund reverting to the benefit of theemployer.

INTENT TO CHALLENGEARRANGEMENTS

The IRS may challenge the claimed taxbenefits for the above-described arrange-ments for various reasons. Depending onthe facts and circumstances of a particulararrangement, contributions to a purportedwelfare benefit arrangement on behalfof an employee who is an owner mayproperly be characterized as dividendsor as non-qualified deferred compensa-tion subject to § 404(a)(5) or 409A (orboth), or the arrangement may be subjectto the rules for split-dollar life insurancearrangements. See Notice 2007–83.

If, based on the facts and circum-stances, an arrangement described aboveis properly characterized as a welfare ben-efit fund, an employer’s deductions forcontributions to the welfare benefit trustor other fund are subject to the rules of§§ 419 and 419A. Under those rules, de-ductions for post-retirement medical andlife benefits are subject to a number oflimitations and requirements, including

2007–45 I.R.B. 964 November 5, 2007

the use of reasonable actuarial assump-tions, the requirement that the plan meetthe nondiscrimination requirements of§ 505(b) (determined after applicationof the rules of § 414(b), (c), and (m)),a prohibition against considering futureincreases in medical costs, and a limit onthe reserves for post-retirement life insur-ance benefits to the reserves that wouldapply with respect to $50,000 of coverage.Moreover, in order to obtain a deductionfor reserves for post-retirement medicalor life benefits, the taxpayer cannot geta deduction unless the employer actuallyintends to use the contributions for thatpurpose.

The tax benefit rule may require thatsome or all of the deductions taken by theemployer in earlier years be included in itsincome in a later year in which an eventoccurs that is fundamentally inconsistentwith the premise on which the deductionswere initially based. (For a further discus-sion of the tax benefit rule, see HillsboroNational Bank v. Commissioner, 460 U.S.370 (1983)).

Further, the IRS intends to challenge theclaimed value of property distributed froma trust, including life insurance policies,whenever the property has not been prop-erly valued by the taxpayer.

Finally, based on the facts and circum-stances of a particular arrangement, someor all of the benefits or distributions pro-vided to or for the benefit of employeeswho are also owners or other key employ-ees may be disqualified benefits for pur-poses of § 4976 subjecting the employerto a 100% excise tax.

Taxpayers should be aware that the IRSmay impose penalties on persons involvedin these arrangements or similar arrange-ments (including the accuracy-relatedpenalty under § 6662) and, as applicable,on persons who participate in the promo-tion or reporting of these arrangementsor similar arrangements (including thereturn preparer penalty under § 6694, thepromoter penalty under § 6700, and theaiding and abetting penalty under § 6701).

The above rules apply whether the trustused to provide benefits under the arrange-ment is a taxable trust or a VEBA. Whilethe trust may have received a determina-tion letter stating the trust is exempt under§ 501(c)(9), a letter of this type does notaddress the tax deductibility of contribu-tions to the trust with respect to the em-

ployer, nor the income inclusion with re-spect to the employees.


The principal authors of this noticeare Larry Isaacs of the Employee Plans,Tax Exempt and Government EntitiesDivision and Betty Clary of the Officeof Division Counsel/Associate ChiefCounsel (Tax Exempt and GovernmentEntities). For further information re-garding this notice, contact Mr. Isaacsat [email protected] orMs. Clary at (202) 622–6080 (not atoll-free call).

Form 8918 — Section 6111Disclosures

Notice 2007–85

This notice provides guidance to ma-terial advisors required to file a disclo-sure statement by October 31, 2007, under§ 301.6111–3 of the Procedure and Admin-istration Regulations.

BACKGROUND

On August 3, 2007, the InternalRevenue Service and Treasury Depart-ment published final regulations under§ 301.6111–3 in the Federal Register(72 FR 43157) providing the rules relatingto the disclosure of reportable transactionsby material advisors under section 6111of the Internal Revenue Code. See T.D.9351, 2007–38 I.R.B. 616. In general,these regulations apply to transactionswith respect to which a material advisormakes a tax statement on or after August3, 2007. However, these regulations applyto transactions of interest entered into onor after November 2, 2006, with respectto which a material advisor makes a taxstatement on or after November 2, 2006.

The regulations provide that each ma-terial advisor, with respect to any re-portable transaction, must file a return asdescribed in § 301.6111–3(d). Section301.6111–3(d) provides that each mate-rial advisor required to file a disclosurestatement under § 301.6111–3 must filea completed Form 8918, “Material Advi-sor Disclosure Statement” (or successorform). The Form 8918 must be filed with

the Office of Tax Shelter Analysis (OTSA)by the last day of the calendar month thatfollows the end of the calendar quarterin which the advisor became a materialadvisor with respect to the reportabletransaction or in which the circumstancesnecessitating an amended disclosure oc-cur.

Prior to the publication of the final reg-ulations, material advisors were requiredto disclose reportable transactions on Form8264, “Application for Registration of aTax Shelter.” Notice 2004–80, 2004–2C.B. 963, and Notice 2005–22, 2005–1C.B. 756, described the manner in whichthe Form 8264 was to be completed.

INTERIM PROVISION

The next due date for disclosures bymaterial advisors is October 31, 2007. Asof the date of release of this notice, Form8918 has not yet been published. The IRSanticipates that the Form 8918 will be pub-lished soon.

Due to the unavailability of Form 8918,a material advisor required to file a com-pleted Form 8918 by October 31, 2007,will be treated as satisfying the disclo-sure requirement of § 301.6111–3(d) if thematerial advisor files Form 8264 instead.If Form 8918 is published on or beforeOctober 31, 2007, material advisors maychoose to use either Form 8918 or Form8264 for disclosures required to be filed byOctober 31, 2007. For disclosures requiredto be filed after October 31, 2007, materialadvisors must use Form 8918 (or successorform) unless instructed otherwise by theIRS. Reportable transactions disclosed onthe Form 8264 should be disclosed in themanner described in Notice 2004–80 andNotice 2005–22.

EFFECTIVE DATE

This notice is effective October 16,2007, the date this notice was released tothe public.


The principal author of this notice isCharles D. Wien of the Office of AssociateChief Counsel (Passthroughs & Special In-dustries). For further information regard-ing this notice, contact Charles D. Wien at202–622–3070 (not a toll-free call).

November 5, 2007 965 2007–45 I.R.B.

2008 Limitations Adjusted AsProvided in Section 415(d),etc.1

Notice 2007–87

Section 415 of the Internal RevenueCode (the Code) provides for dollar lim-itations on benefits and contributions un-der qualified retirement plans. Section 415also requires that the Commissioner an-nually adjust these limits for cost-of-liv-ing increases. Other limitations applica-ble to deferred compensation plans are alsoaffected by these adjustments. Many ofthe limitations will change for 2008 be-cause the increase in the cost-of-living in-dex met the statutory thresholds that trig-ger their adjustment. However, for others,the limitation will remain unchanged. Forexample, the limitation under § 402(g)(1)on the exclusion for elective deferrals de-scribed in § 402(g)(3) remains unchangedat $15,500. This limitation affects elec-tive deferrals to section 401(k) plans and tothe Federal Government’s Thrift SavingsPlan, among other plans.

Cost-of-Living limits for 2008

Effective January 1, 2008, the limita-tion on the annual benefit under a definedbenefit plan under § 415(b)(1)(A) is in-creased from $180,000 to $185,000. Forparticipants who separated from servicebefore January 1, 2008, the limitation fordefined benefit plans under § 415(b)(1)(B)is computed by multiplying the partic-ipant’s compensation limitation, as ad-justed through 2007, by 1.0236.

The limitation for defined contributionplans under § 415(c)(1)(A) is increasedfrom $45,000 to $46,000.

The Code provides that various otherdollar amounts are to be adjusted at thesame time and in the same manner as thedollar limitation of § 415(b)(1)(A). Thesedollar amounts and the adjusted amountsare as follows:

The limitation under § 402(g)(1)on the exclusion for elective deferralsdescribed in § 402(g)(3) remains un-changed at $15,500.

The annual compensation limit un-der §§ 401(a)(17), 404(l), 408(k)(3)(C),

and 408(k)(6)(D)(ii) is increased from$225,000 to $230,000.

The dollar limitation under§ 416(i)(1)(A)(i) concerning the defi-nition of key employee in a top-heavyplan is increased from $145,000 to$150,000.

The dollar amount under§ 409(o)(1)(C)(ii) for determiningthe maximum account balance in anemployee stock ownership plan sub-ject to a 5-year distribution period isincreased from $915,000 to $935,000,while the dollar amount used to de-termine the lengthening of the 5-yeardistribution period is increased from$180,000 to $185,000.

The limitation used in the definitionof highly compensated employee un-der § 414(q)(1)(B) is increased from$100,000 to $105,000.

The dollar limitation under§ 414(v)(2)(B)(i) for catch-up con-tributions to an applicable employerplan other than a plan described in§ 401(k)(11) or 408(p) for individualsaged 50 or over remains unchangedat $5,000. The dollar limitation under§ 414(v)(2)(B)(ii) for catch-up contri-butions to an applicable employer plandescribed in § 401(k)(11) or 408(p) forindividuals aged 50 or over remainsunchanged at $2,500.

The annual compensation limitationunder § 401(a)(17) for eligible partic-ipants in certain governmental plansthat, under the plan as in effect on July1, 1993, allowed cost-of-living adjust-ments to the compensation limitationunder the plan under § 401(a)(17) to betaken into account, is increased from$335,000 to $345,000.

The compensation amount under§ 408(k)(2)(C) regarding simplifiedemployee pensions (SEPs) remains un-changed at $500.

The limitation under § 408(p)(2)(E)regarding SIMPLE retirement accountsremains unchanged at $10,500.

The limitation on deferrals under§ 457(e)(15) concerning deferred com-pensation plans of state and local gov-ernments and tax-exempt organizationsremains unchanged at $15,500.

The compensation amounts under§ 1.61–21(f)(5)(i) of the Income Tax

Regulations concerning the defini-tion of “control employee” for fringebenefit valuation purposes remains un-changed at $90,000. The compensationamount under § 1.61–21(f)(5)(iii) isincreased from $180,000 to $185,000.The Code also provides that several

pension-related amounts are to be adjustedusing the cost-of-living adjustment under§ 1(f)(3). These dollar amounts and theadjustments are as follows:

The adjusted gross income limita-tion under § 25B(b)(1)(A) for determin-ing the retirement savings contributioncredit for taxpayers filing a joint returnis increased from $31,000 to $32,000;the limitation under § 25B(b)(1)(B)is increased from $34,000 to $34,500;and the limitation under § 25B(b)(1)(C)and (D) is increased from $52,000 to$53,000.

The adjusted gross income limita-tion under § 25B(b)(1)(A) for deter-mining the retirement savings contri-bution credit for taxpayers filing ashead of household is increased from$23,250 to $24,000; the limitation un-der § 25B(b)(1)(B) is increased from$25,500 to $25,875; and the limitationunder § 25B(b)(1)(C) and (D) is in-creased from $39,000 to $39,750.

The adjusted gross income limita-tion under § 25B(b)(1)(A) for deter-mining the retirement savings contri-bution credit for all other taxpayers isincreased from $15,500 to $16,000; thelimitation under § 25B(b)(1)(B) is in-creased from $17,000 to $17,250; andthe limitation under § 25B(b)(1)(C)and (D) is increased from $26,000 to$26,500.

The applicable dollar amount under§ 219(g)(3)(B)(i) for determining thedeductible amount of an IRA contri-bution for taxpayers who are activeparticipants filing a joint return or as aqualifying widow(er) is increased from$83,000 to $85,000. The applicabledollar amount under § 219(g)(3)(B)(ii)for all other taxpayers (other than mar-ried taxpayers filing separate returns)is increased from $52,000 to $53,000.The applicable dollar amount under§ 219(g)(7)(A) for a taxpayer who isnot an active participant but whose

1 Based on News Release IR–2007–171 dated October 18, 2007.

2007–45 I.R.B. 966 November 5, 2007

spouse is an active participant is in-creased from $156,000 to $159,000.

The adjusted gross income limita-tion under § 408A(c)(3)(C)(ii)(I) for de-termining the maximum Roth IRA con-tribution for taxpayers filing a joint re-turn or as a qualifying widow(er) is in-creased from $156,000 to $159,000.

The adjusted gross income limita-tion under § 408A(c)(3)(C)(ii)(II) forall other taxpayers (other than marriedtaxpayers filing separate returns) is in-creased from $99,000 to $101,000.Administrators of defined benefit or de-

fined contribution plans that have receivedfavorable determination letters should notrequest new determination letters solelybecause of yearly amendments to adjustmaximum limitations in the plans.


The principal author of this notice isJohn Heil of the Employee Plans, Tax Ex-empt and Government Entities Division.For further information regarding the datain this notice, please contact the EmployeePlans’ taxpayer assistance telephoneservice at 1–877–829–5500 (a toll-freecall) between the hours of 8:30 a.m. and4:30 p.m. Eastern time Monday throughFriday. For information regarding themethodology used in arriving at the datain this notice, please e-mail Mr. Heil [email protected].

26 CFR 601.105: Examination of returns and claimsfor refund, credit or abatement; determination of cor-rect tax liability.(Also: §§ 45, 704, 1.704–1.)

Rev. Proc. 2007–65

SECTION 1. PURPOSE

Notice 2006–88, 2006–42 I.R.B. 686,regarding Electricity Produced fromOpen-Loop Biomass, announced that theInternal Revenue Service (the “Service”)would not rule on any issues under Sub-chapter K for partnerships claiming thecredit under § 45 of the Internal RevenueCode. This revenue procedure establishesthe requirements (the Safe Harbor) underwhich the Service will respect the alloca-tion of § 45 wind energy production taxcredits by partnerships in accordance with§ 704(b). The Treasury Department and

the Service intend for the Safe Harbor tosimplify the application of § 45 to partnersand partnerships that own and produceelectricity from qualified wind energy fa-cilities.

SECTION 2. BACKGROUND

Section 45 provides for a renewableelectricity production credit in an amountequal to the product of 1.5 cents, multi-plied by the kilowatt hours of electricityproduced by the taxpayer from qualifiedenergy resources and at a qualified facil-ity during the 10-year period beginning onthe date the facility was originally placedin service, and sold by the taxpayer to anunrelated person during the taxable year.

Section 45(c)(1) defines “qualified en-ergy resources” to include wind. Section45(d)(1) defines a “qualified facility” inthe case of a facility using wind to produceelectricity as any facility owned by the tax-payer that is originally placed in service af-ter December 31, 1993, and before January1, 2009.

Under Rev. Rul. 94–31, 1994–1 C.B.16, with respect to electricity producedfrom wind energy, the term “facility” un-der § 45(d)(1) means each separate windturbine, together with the tower on whichthe turbine is mounted and the supportingpad on which the tower is situated. Al-though § 45 does not define “placed in ser-vice,” the term has been defined for pur-poses of the deduction for depreciation andthe investment tax credit. For these pur-poses, property is considered to be placedin service in the taxable year that the prop-erty is placed in a condition or state ofreadiness and available for a specificallyassigned function. See §§ 1.46–3(d)(1)(ii)and 1.167(a)–11(e)(1)(i) of the Income TaxRegulations.

Section 704(a) provides that a partner’sdistributive share of income, gain, loss, de-duction, or credit is, except as otherwiseprovided in chapter 1 of subtitle A of Title26, determined by the partnership agree-ment. Under § 704(b), a partner’s distribu-tive share of income, gain, loss, deduction,or credit (or item thereof) is determinedin accordance with the partner’s interestin the partnership (determined by takinginto account all facts and circumstances), if(i) the partnership agreement does not pro-vide for the partner’s distributive share ofincome, gain, loss, deduction, or credit (or

item thereof), or (ii) the allocation to a part-ner under the agreement of income, gain,loss, deduction, or credit (or item thereof)lacks substantial economic effect.

Section 1.704–1(b)(4)(ii) provides thatallocations of tax credits and tax creditrecapture (except for § 38 property) arenot reflected by adjustments to the part-ners’ capital accounts. Thus, these allo-cations cannot have economic effect un-der § 1.704–1(b)(2)(ii)(b)(1), and the taxcredits and tax credit recapture must be al-located in accordance with the partners’interests in the partnership as of the timethe tax credit or credit recapture arises. Ifa partnership expenditure (whether or notdeductible) that gives rise to a tax credit ina partnership taxable year also gives riseto valid allocations of partnership loss ordeduction (or other downward capital ac-count adjustments) for the year, then thepartners’ interests in the partnership withrespect to the credit (or the cost givingrise to it) are in the same proportion asthe partners’ respective distributive sharesof the loss or deduction (and adjustments).See § 1.704–1(b)(5), Example 11. Sec-tion 1.704–1(b)(4)(ii) further provides thatidentical principles apply in determiningthe partners’ interests in the partnership re-garding tax credits, such as the credit under§ 45, that arise from receipts of the partner-ship (whether or not taxable).

SECTION 3. SCOPE

The Safe Harbor in section 4 of thisrevenue procedure applies to any partner-ship (the “Project Company”) betweena project developer (the “Developer”)and one or more investors, as defined insection 4.01 (the “Investors”), with theProject Company owning and operatingthe project containing the qualified energyfacilities (“Wind Farm” and for purposesof this definition the term does not includeenergy produced from such Wind Farm).In addition to the Project Company, theDeveloper, and the Investors, wind energytransactions typically involve lenders, landowners, a turbine supplier, a constructioncontractor, power purchasers, and a projectoperator. In order to qualify for the SafeHarbor, all of the requirements set forth insection 4 of this revenue procedure mustbe met. This Safe Harbor will apply only ifthe Developer, Investors and Project Com-pany satisfy each and every requirement in

November 5, 2007 967 2007–45 I.R.B.

section 4 of this revenue procedure. Fur-thermore, this revenue procedure appliesonly to partners or partnerships with § 45production tax credits from renewableresources from wind. Thus, this revenueprocedure does not apply to any other taxcredits.

The Service generally will closely scru-tinize a Project Company as a partnershipor Investors as partners if a Project Com-pany’s partnership agreement does notsatisfy each requirement of this revenueprocedure. The Safe Harbor in this rev-enue procedure is to provide guidanceto taxpayers establishing or participat-ing in wind energy partnerships in lieuof taxpayers requesting a letter ruling.Therefore, the Service will not rule on anyissues under Subchapter K for partnershipsclaiming the credit under § 45.

SECTION 4. SAFE HARBOR

.01 Investors Defined. Investors arepartners in the Project Company whose in-vestment return is reasonably anticipatedto be derived from both § 45 credits andparticipation in operating cash flow.

.02 Partners’ Minimum Partnership In-terest. The Developer must have a mini-mum one percent interest in each materialitem of partnership income, gain, loss, de-duction and credit at all times during theexistence of the Project Company. EachInvestor must have, at all times duringthe period it owns a partnership interestin the Project Company, a minimum inter-est in each material item of partnership in-come and gain equal to 5 percent of the In-vestor’s percentage interest in partnershipincome and gain for the taxable year forwhich the Investor’s percentage share ofincome and gain will be the largest, as ad-justed for sales, redemptions or dilution ofits interest.

.03 Investor’s Minimum UnconditionalInvestment. On or before the later of thedate the Wind Farm is placed in serviceor the date the Investor acquires its inter-est in the Project Company, the Investormust make a minimum unconditional in-vestment in the Project Company (the “In-vestor Minimum Investment”). The In-vestor must maintain the Investor Mini-mum Investment throughout the durationof its ownership of its partnership inter-est in the Project Company, except that theInvestor Minimum Investment can be re-

duced as a result of distributions of cashflow from the Project Company’s opera-tion of the Wind Farm or in connectionwith section 4.05. Contributions requiredto be made in the future will not be in-cluded in the Investor Minimum Invest-ment until the contributions are actuallymade to the partnership. The InvestorMinimum Investment must be equal to atleast 20 percent of the sum of the fixedcapital contributions plus reasonably an-ticipated contingent capital contributionsrequired to be made by the Investor underthe partnership agreement. The Investormust not be protected against loss of anyportion of the Investor Minimum Invest-ment through any arrangement, directly orindirectly, with the Developer, any otherInvestor, the turbine supplier or the powerpurchaser or any party related to the De-veloper, other Investors, turbine supplieror the power purchaser.

.04 Contingent Consideration. At least75 percent of the sum of the fixed capitalcontributions plus reasonably anticipatedcontingent capital contributions to be con-tributed by an Investor with respect to aninterest in the Project Company must befixed and determinable obligations that arenot contingent in amount or certainty ofpayment.

.05 Purchase Rights. Neither the De-veloper, the Investors nor any related par-ties may have a contractual right to pur-chase, at any time, the Wind Farm, anyproperty included in the Wind Farm oran interest in the Project Company at aprice less than its fair market value deter-mined at the time of exercise of the con-tractual right to purchase, and providedfurther that the Developer (or any partyrelated to the Developer) may not havea contractual right to purchase the WindFarm or an interest in the Project Companyearlier than 5 years after the qualified facil-ity is first placed into service.

Any determination of the fair marketvalue of the Wind Farm or an interest in theProject Company may take into account:(i) contracts or other arrangements creat-ing rights or obligations (excluding powerpurchase agreements) only if such con-tracts or other arrangements creating rightsor obligations are entered into in the ordi-nary course of the Wind Farm’s businessand are negotiated at arm’s length withparties not related to the Project Companyor Investors; and (ii) any power purchase

contract only if such contract is enteredinto with parties not related to (within themeaning of § 45(e)(4)) to the Project Com-pany.

.06 Sale Rights. The Project Companymay not have a contractual right to causeany party to purchase the Wind Farm orany property included in the Wind Farm,excluding electricity, from the ProjectCompany. An Investor may not have acontractual right to cause any party to pur-chase its partnership interest in the ProjectCompany.

.07 Guarantees and Loans. No personmay guarantee or otherwise insure the In-vestor the right to any allocation of thecredit under § 45.

The Project Company must bear the riskthat the available wind resource is not asgreat as anticipated or projected. The De-veloper, the turbine supplier, or any powerpurchaser may not provide a guarantee thatthe wind resource will be available at a cer-tain level. A guarantee regarding wind re-source availability may be provided by athird party not related to the Developer, theturbine supplier, any power purchaser, orany other project participant if the ProjectCompany or an Investor directly pays thecost of or premium for such guarantee. Forexample, a weather derivative contract be-tween the Project Company and an un-related third party (such as an insurancecompany) is an acceptable guarantee.

A long-term power purchase agreemententered into between the Project Companyand a party not related to the Project Com-pany under § 45(e)(4) does not constitutea guarantee. However, a Take or Pay con-tract between related parties would con-stitute a guarantee and is not permissible.Any sale of electricity between related per-sons as defined in § 45(e)(4) will not qual-ify for the credit under § 45.

The Developer (or a party related to theDeveloper) may not lend any Investor thefunds to acquire any part of the Investor’sinterest in the Project Company or guaran-tee any indebtedness incurred or created inconnection with the acquisition of such In-vestor’s interest in the Project Company.

.08 Allocation of § 45 Production TaxCredits. The § 45 credit must be allocatedin accordance with § 1.704–1(b)(4)(ii).

.09 Separate Activity for Purposes of§ 469. For purposes of the passive activ-ity loss rules, under § 1.469–4(d)(4) eachqualified facility will be treated as a sep-

2007–45 I.R.B. 968 November 5, 2007

arate activity for purposes of § 469 andthat activity may not be grouped with anyother activity, except other qualified windfacilities. Thus, generally, only entities notsubject to § 469, and not individuals, willbe able to offset non-project income withcredits received as a passive investor in apartnership.

.10 Definition of Related Party. Ex-cept as otherwise provided, for purposes ofthis revenue procedure parties are related ifthey bear a relationship to each other thatis specified in § 267(b) or 707(b)(1).

SECTION 5. EXAMPLES

.01 Example 1. The following is an example ofa valid wind energy limited liability company that isclassified as a partnership for federal tax purposes.Developer is a C corporation that owns and man-ages wind-based generation projects. Project Com-pany is a limited liability company (LLC) that hasbeen formed by Developer to develop, own and man-age a renewable energy project that utilizes wind tur-bines to produce electricity from wind (the Project).Investor is a C corporation that invests in renewableenergy projects primarily to benefit from § 45 cred-its. Developer has caused LLC to enter into, or hasassigned to LLC, a number a contracts or agreementsrelating to the development of the Project.

Developer will own all of LLC during construc-tion of the Project. Construction of the Project will befinanced with $100x of construction financing. When

construction of the Project is substantially complete,pursuant to a Membership Interest Purchase and Eq-uity Capital Contribution Agreement, (1) Developerwill contribute $15x to LLC, and (2) Investor will ac-quire newly issued membership interests from LLCin exchange for an upfront cash capital contributionin the amount of $10x which is 20% of Investor’s to-tal agreed capital contributions to LLC of $50x. De-veloper, as the developer of the Project, has not pro-vided a guarantee to LLC or Investor regarding thelevel of the available wind resource at the Project orthe amount of § 45 credits.

Pursuant to the limited liability company operat-ing agreement (the “Operating Agreement”), Devel-oper will have the right to manage LLC, subject to theright of Investor to consent to certain activities. Be-low is a chart and explanation that generally describesthe distribution and allocation provisions applicableto Developer and Investor over various time periods.

Developer Investor

CashGross Income/Lossand Section 45 Credits Cash

Gross Income/Lossand Section 45 Credits

Period 1 100% 1% 0% 99%

Period 2 0% 1% 100% 99%

Period 3 95% 95% 5% 5%

During Period 1, 99% of LLC’s gross income orloss and the § 45 credits will be allocated to Investor,and 100% of LLC’s cash flows will be distributed toDeveloper. Period 1 will continue until the earlier of(i) such time that Developer has received aggregatecash distributions in an amount equal to the aggregatecontributions made by Developer (i.e., $15x) and (ii)a fixed outside date. Period 1 is expected to last fourto six years. When Period 1 ends, Period 2 will begin.

During Period 2, 99% of LLC’s gross incomeor loss and the § 45 credits will be allocated to, and100% of LLC’s cash flows will be distributed toInvestor. Period 2 will continue until Investor hasachieved an agreed after-tax internal rate of return(the “Flip Point”). Although the Flip Point mightoccur sooner, it is expected that the Flip Point willnot occur until after the end of year 10 of the Project,at which time § 45 credits will no longer be availablefor the production and sale of electricity from theProject. Period 2 is expected to last four to six years.When Period 2 ends, Period 3 will begin. Moreover,upon the tenth anniversary of Investor’s investment,Developer will have the option to purchase Investor’sinterest for its then-appraised fair market value. As-suming that option is not exercised, during Period 3,5% of LLC’s gross income or loss and § 45 creditswill be allocated to, and 5% of LLC’s cash flows will

be distributed to, Investor; and 95% of LLC’s grossincome or loss and § 45 credits will be allocated to,and 95% of LLC’s cash flows will be distributed to,Developer. Period 3 will continue for the remaininglife of the Project.

.02 Example 2. The facts are the same as in Ex-ample 1, except Investor is initially allocated 99.5%of LLC’s gross income or loss and § 45 credits. Un-der these facts, the wind energy limited liability com-pany’s classification as a valid partnership would beclosely scrutinized by the Service. Likewise, if anyother provision of this safe harbor is not followed forany wind energy partnerships, the Service will closelyscrutinize the validity of such purported partnerships.

SECTION 6. EFFECTIVE DATE

This revenue procedure is effective fortransactions entered into on or after thedate of publication in the Internal RevenueBulletin. If a Project Company, Developerand Investor satisfied all the requirementsof the Safe Harbor provided in section 4 ofthis revenue procedure for transactions en-tered into before the date of publication of

this revenue procedure in the Internal Rev-enue Bulletin, the Service will not chal-lenge the allocation of § 45 wind energyproduction tax credits by the partnershipthat are in accordance with § 704(b) forsuch taxable year(s).

SECTION 7. DRAFTINGINFORMATION

The principal authors of this rev-enue procedure are Vishal R. Amin andRichard T. Probst of the Office of Asso-ciate Chief Counsel (Passthroughs & Spe-cial Industries). For further informationregarding this revenue procedure, contactVishal R. Amin or Richard T. Probst at(202) 622–3060 (not a toll-free call).

November 5, 2007 969 2007–45 I.R.B.

26 CFR 601.602: Tax forms and instructions.(Also Part I, §§ 1, 23, 24, 25A, 25B, 32, 42, 59, 62, 63, 68, 132, 135, 137, 146, 148, 151, 170, 179, 213, 219, 220, 221, 408A, 512, 513, 685, 877, 911, 2032A, 2503,2523, 4161, 6033, 6039F, 6323, 6334, 6601, 7430, 7702B; 1.148–3, 1.148–5.)

Rev. Proc. 2007–66

TABLE OF CONTENTS

SECTION 1. PURPOSE

SECTION 2. CHANGES

SECTION 3. 2008 ADJUSTED ITEMS

Code Section

.01 Tax Rate Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1(a)–(e)

.02 Unearned Income of Minor Children Taxed as if Parent’s Income (“Kiddie Tax”) . . . . . . . . . . . . . . . . 1(g)

.03 Adoption Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

.04 Child Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

.05 Hope and Lifetime Learning Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25A

.06 Elective Deferrals and IRA Contributions by Certain Individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25B

.07 Earned Income Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

.08 Low-Income Housing Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42(h)

.09 Alternative Minimum Tax Exemption for a Child Subject to the “Kiddie Tax” . . . . . . . . . . . . . . . . . . . 59(j)

.10 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules forPayments to Employees under Accountable Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62(c)

.11 Standard Deduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

.12 Overall Limitation on Itemized Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

.13 Qualified Transportation Fringe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132(f)

.14 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher EducationExpenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

.15 Adoption Assistance Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

.16 Private Activity Bonds Volume Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146(d)

.17 General Arbitrage Rebate Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148(f)

.18 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or InvestmentsPurchased for a Yield Restricted Defeasance Escrow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

.19 Personal Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

.20 Election to Expense Certain Depreciable Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

.21 Eligible Long-Term Care Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213(d)(10)

.22 Retirement Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

.23 Medical Savings Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.24 Interest on Education Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

.25 Roth IRAs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408A

.26 Treatment of Dues Paid to Agricultural or Horticultural Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . 512(d)

.27 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-RaisingCampaigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513(h)

2007–45 I.R.B. 970 November 5, 2007

.28 Funeral Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685

.29 Expatriation to Avoid Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877

.30 Foreign Earned Income Exclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911

.31 Valuation of Qualified Real Property in Decedent’s Gross Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2032A

.32 Annual Exclusion for Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2503 & 2523

.33 Tax on Arrow Shafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4161

.34 Reporting Exception for Certain Exempt Organizations with NondeductibleLobbying Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6033(e)(3)

.35 Notice of Large Gifts Received from Foreign Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6039F

.36 Persons Against Whom a Federal Tax Lien Is Not Valid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6323

.37 Property Exempt from Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6334

.38 Interest on a Certain Portion of the Estate Tax Payable in Installments . . . . . . . . . . . . . . . . . . . . . . . . . . 6601(j)

.39 Attorney Fee Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7430

.40 Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or under CertainLife Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7702B(d)


SECTION 5. DRAFTING INFORMATION

SECTION 1. PURPOSE

This revenue procedure sets forth infla-tion adjusted items for 2008.

SECTION 2. CHANGES

.01 The excise taxes imposed under§ 4261(b) and (c), as enacted by theAirport and Airway Trust Fund Tax Re-instatement Act of 1997 and extended by§ 149(a) of Pub. L. No. 110–92, 121Stat. 989 (2007), apply to transportationtaken through November 16, 2007, and toamounts paid on or before November 16,2007, for transportation beginning afterthat date. Accordingly, the amounts in§ 4261(b) and (c) are not included in thisrevenue procedure.

.02 For 2008, the inflation adjusteditems in §§ 25B, 219, and 408A also will

be included in a separate news release andrelated notice with other inflation adjustedamounts relating to pension and retirementaccounts. For future years, these amountswill not be included in this revenue proce-dure but will appear only in the separatenews release and related notice.

.03 For taxable years beginning af-ter 2007, the inflation adjusted items forhealth savings accounts under § 223 arepublished no later than June 1 of the pre-ceding calendar year. See § 223(g) andRev. Proc. 2007–36, 2007–22 I.R.B.1335. Accordingly, these items are notincluded in this revenue procedure.

.04 Section 1.148–3(d)(1)(iv) of theproposed Income Tax Regulations pro-vides that on the last day of each bondyear during which there are amounts al-located to gross proceeds of an issue that

are subject to the rebate requirement, andon the final maturity date, there can be in-cluded as a payment a computation creditof $1,400 for any bond year ending in2007. For bond years ending after 2007,the $1,400 computation credit will be ad-justed for inflation pursuant to proposed§ 1.148–3(d)(4). See section 3.17 of thisrevenue procedure.

SECTION 3. 2008 ADJUSTED ITEMS

.01 Tax Rate Tables. For taxable yearsbeginning in 2008, the tax rate tables under§ 1 are as follows:

TABLE 1 — Section 1(a). — Married Individuals Filing Joint Returns and Surviving Spouses.

If Taxable Income Is: The Tax Is:

Not over $16,050 10% of the taxable income

Over $16,050 but not over $65,100 $1,605 plus 15% of the excess over $16,050

Over $65,100 but not over $131,450 $8,962.50 plus 25% of the excess over $65,100



Over $357,700 $96,770 plus 35% of the excess over $357,700

November 5, 2007 971 2007–45 I.R.B.

TABLE 2 — Section 1(b). — Heads of Households.








TABLE 3 — Section 1(c). — Unmarried Individuals (other than Surviving Spouses and Heads of Households).



Over $8,025 but not over $32,550 $802.50 plus 15% of the excess over $8,025




Over $357,700 $103,791.75 plus 35% of the excess over $357,700

TABLE 4 — Section 1(d). — Married Individuals Filing Separate Returns.



Over $8,025 but not over $32,550 $802.50 plus 15% of the excess over $8,025





TABLE 5 — Section 1(e). — Estates and Trusts.



Over $2,200 but not over $5,150 $330 plus 25% of the excess over $2,200




.02 Unearned Income of Minor Chil-dren Taxed as if Parent’s Income (the“Kiddie Tax”). For taxable yearsbeginning in 2008, the amount in§ 1(g)(4)(A)(ii)(I), which is used to re-duce the net unearned income reported

on the child’s return that is subject to the“kiddie tax,” is $900. This amount isthe same as the $900 standard deductionamount provided in section 3.11(2) ofthis revenue procedure. The same $900amount is used for purposes of § 1(g)(7)

(that is, to determine whether a parent mayelect to include a child’s gross income inthe parent’s gross income and to calculatethe “kiddie tax”). For example, one of therequirements for the parental election isthat a child’s gross income is more than the

2007–45 I.R.B. 972 November 5, 2007

amount referenced in § 1(g)(4)(A)(ii)(I)but less than 10 times that amount; thus,a child’s gross income for 2008 must bemore than $900 but less than $9,000.

.03 Adoption Credit. For taxable yearsbeginning in 2008, under § 23(a)(3) thecredit allowed for an adoption of a childwith special needs is $11,650. For taxableyears beginning in 2008, under § 23(b)(1)the maximum credit allowed for otheradoptions is the amount of qualified adop-tion expenses up to $11,650. The availableadoption credit begins to phase out under§ 23(b)(2)(A) for taxpayers with modi-fied adjusted gross income in excess of$174,730 and is completely phased out fortaxpayers with modified adjusted grossincome of $214,730 or more. (See section

3.15 of this revenue procedure for the ad-justed items relating to adoption assistanceprograms.)

.04 Child Tax Credit. For taxableyears beginning in 2008, the value used in§ 24(d)(1)(B)(i) to determine the amountof credit under § 24 that may be refundableis $12,050.

.05 Hope and Lifetime Learning Cred-its.

(1) For taxable years beginning in2008, the Hope Scholarship Credit under§ 25A(b)(1) is an amount equal to 100percent of qualified tuition and relatedexpenses not in excess of $1,200 plus50 percent of those expenses in excessof $1,200, but not in excess of $2,400.Accordingly, the maximum Hope Schol-

arship Credit allowable under § 25A(b)(1)for taxable years beginning in 2008 is$1,800.

(2) For taxable years beginning in 2008,a taxpayer’s modified adjusted gross in-come in excess of $48,000 ($96,000 fora joint return) is used to determine thereduction under § 25A(d)(2)(A)(ii) in theamount of the Hope Scholarship and Life-time Learning Credits otherwise allowableunder § 25A(a).

.06 Elective Deferrals and IRA Contri-butions by Certain Individuals. For tax-able years beginning in 2008, the appli-cable percentage under § 25B(b) is deter-mined based on the following amounts:

Modified Adjusted Gross Income

Joint Return Head of Household All Other Cases

Over Not Over Over Not Over Over Not OverApplicablePercentage

$ 0 $32,000 $ 0 $24,000 $ 0 $16,000 50%

$32,000 $34,500 $24,000 $25,875 $16,000 $17,250 20%

$34,500 $53,000 $25,875 $39,750 $17,250 $26,500 10%

$53,000 $39,750 $26,500 0%

.07 Earned Income Credit.(1) In general. For taxable years be-

ginning in 2008, the following amountsare used to determine the earned incomecredit under § 32(b). The “earned in-come amount” is the amount of earned

income at or above which the maximumamount of the earned income credit is al-lowed. The “threshold phaseout amount”is the amount of adjusted gross income(or, if greater, earned income) above whichthe maximum amount of the credit begins

to phase out. The “completed phaseoutamount” is the amount of adjusted grossincome (or, if greater, earned income) at orabove which no credit is allowed.

Number of Qualifying Children

Item One Two or More None

Earned Income Amount $ 8,580 $12,060 $ 5,720

Maximum Amount of Credit $ 2,917 $ 4,824 $ 438

Threshold Phaseout Amount(Single, Surviving Spouse, orHead of Household)

$15,740 $15,740 $ 7,160

Completed Phaseout Amount(Single, Surviving Spouse, orHead of Household)

$33,995 $38,646 $12,880

Threshold Phaseout Amount(Married Filing Jointly)

$18,740 $18,740 $10,160

Completed Phaseout Amount(Married Filing Jointly)

$36,995 $41,646 $15,880

November 5, 2007 973 2007–45 I.R.B.

The instructions for the Form 1040 se-ries provide tables showing the amount ofthe earned income credit for each type oftaxpayer.

(2) Excessive investment income. Fortaxable years beginning in 2008, theearned income tax credit is not allowedunder § 32(i) if the aggregate amountof certain investment income exceeds$2,950.

.08 Low-Income Housing Credit. Forcalendar year 2008, the amount used un-der § 42(h)(3)(C)(ii) to calculate the Statehousing credit ceiling for the low-incomehousing credit is the greater of (1) $2.00

multiplied by the State population, or (2)$2,325,000.

.09 Alternative Minimum Tax Exemp-tion for a Child Subject to the “KiddieTax.” For taxable years beginning in 2008,for a child to whom the § 1(g) “kiddie tax”applies, the exemption amount under §§ 55and 59(j) for purposes of the alternativeminimum tax under § 55 may not exceedthe sum of (1) the child’s earned incomefor the taxable year, plus (2) $6,400.

.10 Transportation Mainline PipelineConstruction Industry Optional ExpenseSubstantiation Rules for Payments to Em-ployees under Accountable Plans. For

calendar year 2008, an eligible employermay pay certain welders and heavy equip-ment mechanics an amount of up to $15per hour for rig-related expenses that isdeemed substantiated under an account-able plan if paid in accordance with Rev.Proc. 2002–41. If the employer pro-vides fuel or otherwise reimburses fuelexpenses, up to $9 per hour is deemedsubstantiated if paid under Rev. Proc.2002–41.

.11 Standard Deduction.(1) In general. For taxable years be-

ginning in 2008, the standard deductionamounts under § 63(c)(2) are as follows:

Filing Status Standard Deduction

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $10,900

Heads of Households (§ 1(b)) $ 8,000

Unmarried Individuals (other than Surviving Spouses and Heads ofHouseholds) (§ 1(c))

$ 5,450

Married Individuals Filing Separate Returns (§ 1(d)) $ 5,450

(2) Dependent. For taxable years be-ginning in 2008, the standard deductionamount under § 63(c)(5) for an individualwho may be claimed as a dependent by an-other taxpayer cannot exceed the greater of(1) $900, or (2) the sum of $300 and the in-dividual’s earned income.

(3) Aged or blind. For taxable yearsbeginning in 2008, the additional standarddeduction amount under § 63(f) for theaged or the blind is $1,050. These amountsare increased to $1,350 if the individual isalso unmarried and not a surviving spouse.

.12 Overall Limitation on Itemized De-ductions. For taxable years beginning in2008, the “applicable amount” of adjustedgross income under § 68(b), above whichthe amount of otherwise allowable item-ized deductions is reduced under § 68, is$159,950 (or $79,975 for a separate returnfiled by a married individual).

.13 Qualified Transportation Fringe.For taxable years beginning in 2008, themonthly limitation under § 132(f)(2)(A),regarding the aggregate fringe benefitexclusion amount for transportation in acommuter highway vehicle and any tran-sit pass, is $115. The monthly limitationunder § 132(f)(2)(B), regarding the fringebenefit exclusion amount for qualifiedparking, is $220.

.14 Income from United States SavingsBonds for Taxpayers Who Pay QualifiedHigher Education Expenses. For taxableyears beginning in 2008, the exclusion un-der § 135, regarding income from UnitedStates savings bonds for taxpayers whopay qualified higher education expenses,begins to phase out for modified adjustedgross income above $100,650 for jointreturns and $67,100 for other returns.The exclusion is completely phased outfor modified adjusted gross income of$130,650 or more for joint returns and$82,100 or more for other returns.

.15 Adoption Assistance Programs. Fortaxable years beginning in 2008, under§ 137(a)(2) the amount that can be ex-cluded from an employee’s gross incomefor the adoption of a child with specialneeds is $11,650. For taxable years be-ginning in 2008, under § 137(b)(1) themaximum amount that can be excludedfrom an employee’s gross income for theamounts paid or expenses incurred by anemployer for qualified adoption expensesfurnished pursuant to an adoption assis-tance program for other adoptions by theemployee is $11,650. The amount exclud-able from an employee’s gross income be-gins to phase out under § 137(b)(2)(A) fortaxpayers with modified adjusted gross in-come in excess of $174,730 and is com-

pletely phased out for taxpayers with mod-ified adjusted gross income of $214,730 ormore. (See section 3.03 of this revenueprocedure for the adjusted items relating tothe adoption credit.)

.16 Private Activity Bonds Volume Cap.For calendar year 2008, the amounts usedunder § 146(d)(1) to calculate the Stateceiling for the volume cap for privateactivity bonds is the greater of (1) $85multiplied by the State population, or (2)$262,095,000.

.17 General Arbitrage Rebate Rules.For bond years ending in 2008, the amountof the computation credit determined un-der § 1.148–3(d)(4) of the proposed In-come Tax Regulations is $1,430.

.18 Safe Harbor Rules for BrokerCommissions on Guaranteed Invest-ment Contracts or Investments Purchasedfor a Yield Restricted Defeasance Es-crow. For calendar year 2008, under§ 1.148–5(e)(2)(iii)(B)(1), a broker’s com-mission or similar fee for the acquisitionof a guaranteed investment contract or in-vestments purchased for a yield restricteddefeasance escrow is reasonable if (1) theamount of the fee that the issuer treats asa qualified administrative cost does notexceed the lesser of (A) $34,000, and (B)0.2 percent of the computational base (asdefined in § 1.148–5(e)(2)(iii)(B)(2)) or,

2007–45 I.R.B. 974 November 5, 2007

if more, $3,000; and (2) the issuer doesnot treat more than $95,000 in brokers’commissions or similar fees as qualifiedadministrative costs for all guaranteedinvestment contracts and investments foryield restricted defeasance escrows pur-chased with gross proceeds of the issue.

.19 Personal Exemption.(1) Exemption amount. For taxable

years beginning in 2008, the personal ex-emption amount under § 151(d) is $3,500.The exemption amount for taxpayers withadjusted gross income in excess of the

maximum phaseout amount is $2,333 fortaxable years beginning in 2008.

(2) Phaseout. For taxable years be-ginning in 2008, the personal exemptionamount begins to phase out at, and reachesthe maximum phaseout amount after, thefollowing adjusted gross income amounts:

Filing StatusAGI – Beginningof Phaseout

AGI – MaximumPhaseout

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $239,950 $362,450

Heads of Households (§ 1(b)) $199,950 $322,450

Unmarried Individuals (other than Surviving Spouses andHeads of Households) (§ 1(c))

$159,950 $282,450

Married Individuals Filing Separate Returns (§ 1(d)) $119,975 $181,225

.20 Election to Expense Certain Depre-ciable Assets. For taxable years begin-ning in 2008, under § 179(b)(1) the aggre-gate cost of any § 179 property a taxpayermay elect to treat as an expense can notexceed $128,000. Under § 179(b)(2), the

$128,000 limitation is reduced (but not be-low zero) by the amount by which the costof § 179 property placed in service duringthe 2008 taxable year exceeds $510,000.

.21 Eligible Long-Term Care Premi-ums. For taxable years beginning in 2008,

the limitations under § 213(d)(10), re-garding eligible long-term care premiumsincludible in the term “medical care,” areas follows:

Attained Age Before the Close of the Taxable Year Limitation on Premiums

40 or less $ 310More than 40 but not more than 50 $ 580More than 50 but not more than 60 $1,150More than 60 but not more than 70 $3,080More than 70 $3,850

.22 Retirement Savings.(1) For taxable years beginning in

2008, the applicable dollar amount under§ 219(g)(3)(B)(i) for taxpayers filing ajoint return is $85,000. If the taxpayer’sspouse is not an active participant, theapplicable dollar amount for the spouseunder § 219(g)(3)(B)(i) is $159,000 fortaxable years beginning in 2008.

(2) For taxable years beginning in2008, the applicable dollar amount under§ 219(g)(3)(B)(ii) for all other taxpayers(except for married taxpayers filing sepa-rately) is $53,000.

(3) The applicable dollar amount under§ 219(g)(3)(B)(iii) for married taxpayersfiling separately is $0.

.23 Medical Savings Accounts.(1) Self-only coverage. For taxable

years beginning in 2008, the term “highdeductible health plan” as defined in§ 220(c)(2)(A) means, for self-only cov-erage, a health plan that has an annual

deductible that is not less than $1,950 andnot more than $2,900, and under which theannual out-of-pocket expenses required tobe paid (other than for premiums) for cov-ered benefits does not exceed $3,850.

(2) Family coverage. For taxable yearsbeginning in 2008, the term “high de-ductible health plan” means, for familycoverage, a health plan that has an annualdeductible that is not less than $3,850 andnot more than $5,800, and under which theannual out-of-pocket expenses required tobe paid (other than for premiums) for cov-ered benefits does not exceed $7,050.

.24 Interest on Education Loans. Fortaxable years beginning in 2008, the$2,500 maximum deduction for inter-est paid on qualified education loansunder § 221 begins to phase out under§ 221(b)(2)(B) for taxpayers with mod-ified adjusted gross income in excess of$55,000 ($115,000 for joint returns), andis completely phased out for taxpayers

with modified adjusted gross income of$70,000 or more ($145,000 or more forjoint returns).

.25 Roth IRAs.(1) For taxable years beginning in

2008, the applicable dollar amount under§ 408A(c)(3)(C)(ii)(I) for taxpayers filinga joint return is $159,000.

(2) For taxable years beginning in2008, the applicable dollar amount under§ 408A(c)(3)(C)(ii)(II) for all other tax-payers (except for married taxpayers filingseparately) is $101,000.

(3) The applicable dollar amount under§ 408A(c)(3)(C)(ii)(III) for married tax-payers filing separately is $0.

.26 Treatment of Dues Paid to Agricul-tural or Horticultural Organizations. Fortaxable years beginning in 2008, the limi-tation under § 512(d)(1), regarding the ex-emption of annual dues required to be paidby a member to an agricultural or horticul-tural organization, is $139.

November 5, 2007 975 2007–45 I.R.B.

.27 Insubstantial Benefit Limitationsfor Contributions Associated with Chari-table Fund-Raising Campaigns.

(1) Low cost article. For taxable yearsbeginning in 2008, the unrelated businessincome of certain exempt organizationsunder § 513(h)(2) does not include a “lowcost article” of $9.10 or less.

(2) Other insubstantial benefits. Fortaxable years beginning in 2008, the $5,$25, and $50 guidelines in section 3 ofRev. Proc. 90–12, 1990–1 C.B. 471 (asamplified by Rev. Proc. 92–49, 1992–1C.B. 987, and modified by Rev. Proc.92–102, 1992–2 C.B. 579), for disregard-ing the value of insubstantial benefitsreceived by a donor in return for a fullydeductible charitable contribution under§ 170, are $9.10, $45.50, and $91, respec-tively.

.28 Funeral Trusts. For a contract en-tered into during calendar year 2008 fora “qualified funeral trust,” as defined in§ 685, the trust may not accept aggregatecontributions by or for the benefit of an in-dividual in excess of $9,000.

.29 Expatriation to Avoid Tax. For cal-endar year 2008, an individual with “aver-age annual net income tax” of more than$139,000 for the five taxable years endingbefore the date of the loss of United Statescitizenship under § 877(a)(2)(A) is subjectto tax under § 877(b).

.30 Foreign Earned Income Exclusion.For taxable years beginning in 2008, theforeign earned income exclusion amountunder § 911(b)(2)(D)(i) is $87,600.

.31 Valuation of Qualified Real Prop-erty in Decedent’s Gross Estate. For anestate of a decedent dying in calendar year2008, if the executor elects to use the spe-cial use valuation method under § 2032Afor qualified real property, the aggregatedecrease in the value of qualified real prop-erty resulting from electing to use § 2032Afor purposes of the estate tax can not ex-ceed $960,000.

.32 Annual Exclusion for Gifts.(1) For calendar year 2008, the first

$12,000 of gifts to any person (other thangifts of future interests in property) arenot included in the total amount of taxablegifts under § 2503 made during that year.

(2) For calendar year 2008, the first$128,000 of gifts to a spouse who is nota citizen of the United States (other thangifts of future interests in property) arenot included in the total amount of taxable

gifts under §§ 2503 and 2523(i)(2) madeduring that year.

.33 Tax on Arrow Shafts. For calen-dar year 2008, the tax imposed under§ 4161(b)(2)(A) on the first sale by themanufacturer, producer, or importer ofany shaft of a type used in the manufac-ture of certain arrows is $0.43 per shaft.

.34 Reporting Exception for CertainExempt Organizations with NondeductibleLobbying Expenditures. For taxable yearsbeginning in 2008, the annual per per-son, family, or entity dues limitation toqualify for the reporting exception under§ 6033(e)(3) (and section 5.05 of Rev.Proc. 98–19, 1998–1 C.B. 547), regardingcertain exempt organizations with nonde-ductible lobbying expenditures, is $97 orless.

.35 Notice of Large Gifts Received fromForeign Persons. For taxable years begin-ning in 2008, recipients of gifts from cer-tain foreign persons may be required to re-port these gifts under § 6039F if the ag-gregate value of gifts received in a taxableyear exceeds $13,561.

.36 Persons Against Whom a FederalTax Lien Is Not Valid. For calendar year2008, a federal tax lien is not valid against(1) certain purchasers under § 6323(b)(4)who purchased personal property in acasual sale for less than $1,320, or (2)a mechanic’s lienor under § 6323(b)(7)that repaired or improved certain residen-tial property if the contract price with theowner is not more than $6,600.

.37 Property Exempt from Levy. Forcalendar year 2008, the value of propertyexempt from levy under § 6334(a)(2) (fuel,provisions, furniture, and other householdpersonal effects, as well as arms for per-sonal use, livestock, and poultry) can notexceed $7,900. The value of property ex-empt from levy under § 6334(a)(3) (booksand tools necessary for the trade, business,or profession of the taxpayer) can not ex-ceed $3,950.

.38 Interest on a Certain Portion of theEstate Tax Payable in Installments. For anestate of a decedent dying in calendar year2008, the dollar amount used to determinethe “2-percent portion” (for purposes ofcalculating interest under § 6601(j)) of theestate tax extended as provided in § 6166is $1,280,000.

.39 Attorney Fee Awards. For feesincurred in calendar year 2008, the

attorney fee award limitation under§ 7430(c)(1)(B)(iii) is $170 per hour.

.40 Periodic Payments Received un-der Qualified Long-Term Care InsuranceContracts or under Certain Life Insur-ance Contracts. For calendar year 2008,the stated dollar amount of the per diemlimitation under § 7702B(d)(4), regardingperiodic payments received under a qual-ified long-term care insurance contract orperiodic payments received under a lifeinsurance contract that are treated as paidby reason of the death of a chronically illindividual, is $270.


.01 General Rule. Except as providedin section 4.02, this revenue procedure ap-plies to taxable years beginning in 2008.

.02 Calendar Year Rule. This rev-enue procedure applies to transactions orevents occurring in calendar year 2008for purposes of sections 3.08 (low-in-come housing credit), 3.10 (transportationmainline pipeline construction industryoptional expense substantiation rules forpayments to employees under accountableplans), 3.16 (private activity bond volumecap), 3.17 (general arbitrage rebate rules),3.18 (safe harbor rules for broker commis-sions on guaranteed investment contractsor investments purchased for a yield re-stricted defeasance escrow), 3.28 (funeraltrusts), 3.29 (expatriation to avoid tax),3.31 (valuation of qualified real propertyin decedent’s gross estate), 3.32 (annualexclusion for gifts), 3.33 (tax on arrowshafts), 3.36 (persons against whom a fed-eral tax lien is not valid), 3.37 (propertyexempt from levy), 3.38 (interest on acertain portion of the estate tax payable ininstallments), 3.39 (attorney fee awards),and 3.40 (periodic payments received un-der qualified long-term care insurancecontracts or under certain life insurancecontracts).

SECTION 5. DRAFTINGINFORMATION

The principal author of this revenueprocedure is Marnette M. Myers of the Of-fice of Associate Chief Counsel (IncomeTax & Accounting). For further infor-mation regarding this revenue procedure,contact Ms. Myers at (202) 622–4920 (nota toll-free call).

2007–45 I.R.B. 976 November 5, 2007

Part IV. Items of General InterestNotice of ProposedRulemaking

Regulations GoverningPractice Before the InternalRevenue Service

REG–138637–07

AGENCY: Office of the Secretary, Trea-sury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains pro-posed modifications of the regulationsgoverning practice before the IRS (Cir-cular 230). These proposed regulationsaffect individuals who practice before theIRS. The proposed amendments modify§10.34 of Circular 230 relating to stan-dards with respect to tax returns.

DATES: Written or electronic commentsand requests for a public hearing must bereceived by October 26, 2007.

ADDRESSES: Send submissions to:CC:PA:LPD:PR (REG–138637–07), room5203, Internal Revenue Service, PO Box7604, Ben Franklin Station, Washing-ton, DC 20044. Submissions may behand delivered Monday through Fridaybetween the hours of 8 a.m. and 4 p.m.to: CC:PA:LPD:PR (REG–138637–07),Courier’s Desk, Internal Revenue Ser-vice, 1111 Constitution Avenue, NW,Washington, DC, or sent electroni-cally via the Federal eRulemaking Por-tal at http://www.regulations.gov (IRSREG–138637–07).

FOR FURTHER INFORMATIONCONTACT: Concerning the proposedregulations, Matthew S. Cooper at (202)622–4940; concerning submissions ofcomments and request for a public hear-ing, Kelly Banks of the Publications andRegulation Branch at (202) 622–7180 (nottoll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation ofProvisions

This document contains proposedamendments to §10.34 of Circular 230.Section 330 of title 31 of the United StatesCode authorizes the Secretary of the Trea-sury to regulate the practice of represen-tatives before the Treasury Department.Pursuant to section 330 of title 31, theSecretary has published the regulations inCircular 230 (31 CFR part 10).

On May 25, 2007, the President signedinto law the Small Business and WorkOpportunity Tax Act of 2007, Public Law110–28 (121 Stat. 190), which amendedseveral provisions of the Internal RevenueCode to extend the application of the in-come tax return preparer penalties to alltax return preparers, alter the standardsof conduct that must be met to avoid im-position of the penalties for preparing areturn that reflects an understatement ofliability, and increase applicable penal-ties. On June 11, 2007, the IRS releasedNotice 2007–54, 2007–27 I.R.B. 12 (see§601.601(d)(2)(ii)(b)), providing guid-ance and transitional relief for the returnpreparer provisions under section 6694of the Internal Revenue Code, as recentlyamended.

Final regulations (T.D. 9359) are, si-multaneously to these proposed regula-tions, being promulgated on September26, 2007, modifying the general standardsof practice before the IRS under Circular230. Those final regulations finalize thestandards with respect to documents, affi-davits and other papers as proposed, withmodifications. Those final regulations,however, do not finalize the standards withrespect to tax returns under §10.34(a) andthe definitions under §10.34(e) becauseof the amendments made by the SmallBusiness and Work Opportunity Tax Actof 2007. Rather, the Treasury Departmentand the IRS are reserving §10.34(a) and(e) in those final regulations and are simul-

taneously issuing this notice of proposedrulemaking proposing to amend this partto reflect these recent amendments to theCode.

The Treasury Department and the IRShave determined that the professional stan-dards under §10.34 of Circular 230 shouldconform with the civil penalty standardsfor return preparers. Previously, for exam-ple, on June 20, 1994 (T.D. 8545, 1994–2C.B. 415 [59 FR 31523]), the regulationswere modified to reflect more closely therules under section 6694 and professionalguidelines. The standards with respect totax returns in §10.34(a) of these proposedregulations have been amended to reflectchanges to section 6694(a) of the InternalRevenue Code made by the Small Busi-ness and Work Opportunity Tax Act of2007.

Under §10.34(a) of these proposed reg-ulations, a practitioner may not sign a taxreturn as a preparer unless the practitionerhas a reasonable belief that the tax treat-ment of each position on the return wouldmore likely than not be sustained on itsmerits, or there is a reasonable basis foreach position and each position is ade-quately disclosed to the Internal RevenueService. A practitioner may not advise aclient to take a position on a tax return, orprepare the portion of a tax return on whicha position is taken, unless (1) the practi-tioner has a reasonable belief that the posi-tion satisfies the more likely than not stan-dard; or (2) the position has a reasonablebasis and is adequately disclosed to the In-ternal Revenue Service. The definitions of“more likely than not” and “reasonable ba-sis” under §10.34(e) also are proposed tobe amended to reflect these changes in ac-cordance with the well-established defini-tions of these terms under the section 6662penalty regulations.

On June 11, 2007, the IRS releasedNotice 2007–54, 2007–27 I.R.B. 12 (see§601.601(d)(2)(ii)(b)), providing guid-ance and transitional relief for the returnpreparer provisions under section 6694 of

November 5, 2007 977 2007–45 I.R.B.

the Code, as recently amended. In orderto apply §10.34 of these regulations con-sistently with the transitional relief underNotice 2007–54, §10.34(a) and (e) areproposed to apply to returns filed or ad-vice provided on or after the date that finalregulations are published in the FederalRegister, but no earlier than January 1,2008.

Proposed Effective Date

These regulations are proposed to ap-ply to returns filed or advice provided onor after the date that final regulations arepublished in the Federal Register, but noearlier than January 1, 2008.

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a significantregulatory action as defined in ExecutiveOrder 12866. Therefore, a regulatory as-sessment is not required.

It is hereby certified, under the pro-visions of the Regulatory Flexibility Act(5 U.S.C. 601 et seq.), that these regula-tions will not have a significant economicimpact on a substantial number of smallentities. Persons authorized to practicehave long been required to comply withcertain standards of conduct when practic-ing before the Internal Revenue Service.The general requirements of these regula-tions are substantially the same as the re-cent Congressional amendments to section6694 of the Code by the Small Businessand Work Opportunity Tax Act of 2007.Practitioners already enroll in educationalseminars or training programs to keep upto date with the latest changes to the In-ternal Revenue Code, the provisions of theAct, and Circular 230, and the proposedregulations will generally be covered aspart of that training. These regulations willnot impose, or otherwise cause, a signifi-cant increase in reporting, recordkeeping,or other compliance burdens on a substan-tial number of small entities. A regula-tory flexibility analysis, therefore, is notrequired.

Pursuant to section 7805(f) of the Inter-nal Revenue Code, this regulation has beensubmitted to the Chief Counsel for Advo-cacy of the Small Business Administrationfor comment on the regulations’ impact onsmall businesses.

Comments and Requests for PublicHearing

Before these proposed regulations areadopted as final regulations, considerationwill be given to any written (a signed origi-nal and eight (8) copies) or electronic com-ments that are submitted timely to the IRS.The IRS and Treasury Department requestcomments on the substance of the pro-posed regulations, as well as on the clarityof the proposed rules and how they can bemade easier to understand. All commentswill be available for public inspection andcopying. A public hearing will be sched-uled if requested in writing by any personthat timely submits written comments. Ifa public hearing is scheduled, notice of thedate, time, and place for the public hearingwill be published in the Federal Register.


The principal author of these regula-tions is Matthew S. Cooper of the Officeof the Associate Chief Counsel (Procedureand Administration).

* * * * *

Proposed Amendments to theRegulations

Accordingly, 31 CFR part 10 is pro-posed to be amended to read as follows:

PART 10 — PRACTICE BEFORE THEINTERNAL REVENUE SERVICE

Paragraph 1. The authority citation for31 CFR part 10 continues to read as fol-lows:

Authority: Sec. 3, 23 Stat. 258, secs.2–12, 60 Stat. 237 et. seq.; 5 U.S.C. 301,500, 551–559; 31 U.S.C. 321; 31 U.S.C.330; Reorg. Plan No. 26 of 1950, 15 FR4935, 64 Stat. 1280, 3 CFR, 1949–1953Comp., p. 1017.

Par. 2. Section 10.34(a) and (e) areadded and paragraph (f) is revised to readas follows:

§10.34 Standards with respect to taxreturns and documents, affidavits andother papers.

(a) Tax returns. A practitioner may notsign a tax return as a preparer unless thepractitioner has a reasonable belief that the

tax treatment of each position on the re-turn would more likely than not be sus-tained on its merits (the more likely thannot standard), or there is a reasonable basisfor each position and each position is ade-quately disclosed to the Internal RevenueService. A practitioner may not advise aclient to take a position on a tax return, orprepare the portion of a tax return on whicha position is taken, unless—

(1) The practitioner has a reasonablebelief that the position satisfies the morelikely than not standard; or

(2) The position has a reasonable basisand is adequately disclosed to the InternalRevenue Service.

* * * * *(e) Definitions. For purposes of this

section—(1) More likely than not. A practitioner

is considered to have a reasonable beliefthat the tax treatment of a position is morelikely than not the proper tax treatment ifthe practitioner analyzes the pertinent factsand authorities, and based on that analysisreasonably concludes, in good faith, thatthere is a greater than fifty-percent likeli-hood that the tax treatment will be upheldif the IRS challenges it. The authorities de-scribed in 26 CFR 1.6662–4(d)(3)(iii), orany successor provision, of the substantialunderstatement penalty regulations may betaken into account for purposes of thisanalysis.

(2) Reasonable basis. A position isconsidered to have a reasonable basis ifit is reasonably based on one or moreof the authorities described in 26 CFR1.6662–4(d)(3)(iii), or any successor pro-vision, of the substantial understatementpenalty regulations. Reasonable basis isa relatively high standard of tax report-ing, that is, significantly higher than notfrivolous or not patently improper. Thereasonable basis standard is not satisfiedby a return position that is merely arguableor that is merely a colorable claim. Thepossibility that a tax return will not beaudited, that an issue will not be raised onaudit, or that an issue will be settled maynot be taken into account.

(3) Frivolous. A position is frivolous ifit is patently improper.

(f) Effective/applicability date. Section10.34(a) and (e) is applicable for returnsfiled or advice provided on or after thedate that final regulations are published in

2007–45 I.R.B. 978 November 5, 2007

the Federal Register, but no earlier thanJanuary 1, 2008.

Linda E. Stiff,Deputy Commissioner forServices and Enforcement.

Approved September 19, 2007.

Robert Hoyt,General Counsel,

Office of the Secretary.

(Filed by the Office of the Federal Register on September25, 2007, 8:45 a.m., and published in the issue of the FederalRegister for September 26, 2007, 72 F.R. 54621)

Announcement of Disciplinary Actions InvolvingAttorneys, Certified Public Accountants, Enrolled Agents,and Enrolled Actuaries — Reinstatements, Suspensions,Censures, Disbarments, and ResignationsAnnouncement 2007-104

Under Title 31, Code of Federal Regu-lations, Part 10, attorneys, certified publicaccountants, enrolled agents, and enrolledactuaries may not accept assistance from,or assist, any person who is under disbar-ment or suspension from practice beforethe Internal Revenue Service if the assis-tance relates to a matter constituting prac-tice before the Internal Revenue Serviceand may not knowingly aid or abet another

person to practice before the Internal Rev-enue Service during a period of suspen-sion, disbarment, or ineligibility of suchother person.

To enable attorneys, certified publicaccountants, enrolled agents, and enrolledactuaries to identify persons to whomthese restrictions apply, the Director, Of-fice of Professional Responsibility, willannounce in the Internal Revenue Bulletin

their names, their city and state, their pro-fessional designation, the effective dateof disciplinary action, and the period ofsuspension. This announcement will ap-pear in the weekly Bulletin at the earliestpracticable date after such action and willcontinue to appear in the weekly Bulletinsfor five successive weeks.

Reinstatement To Practice Before the Internal RevenueService

Under Title 31, Code of Federal Reg-ulations, Part 10, The Director, Office ofProfessional Responsibility, may entertaina petition for reinstatement for any attor-ney, certified public accountant, enrolled

agent, or enrolled actuary censured, sus-pended, or disbarred, from practice beforethe Internal Revenue Service.

The following individuals’ eligibility topractice before the Internal Revenue Ser-vice has been restored:

Name Address Designation Date of Reinstatement

Dotson, Lewis S. Mattoon, IL Attorney April 8, 2007

Adams, Jr., Joseph T. Philadelphia, PA Enrolled Agent July 30, 2007

Cramer, George C. Chicago, IL CPA July 30, 2007

Garlikov, Mark B. Dayton, OH Attorney July 30, 2007

Grant, Elaine C. Woodway, WA Enrolled Agent July 30, 2007

Rubesh, Leland Gillette, WY CPA July 30, 2007

Schawe, Rudolph B. Brenham, TX Enrolled Agent July 30, 2007

Sobel, Herbert L. Elkins Park, PA CPA July 30, 2007

Welch, Frank G. Stamford, CT CPA July 30, 2007

Ferguson, Charles E. Naples, FL CPA July 31, 2007

Lim, Edgar E. St. Louis, MO Attorney July 31, 2007

November 5, 2007 979 2007–45 I.R.B.

Name Address Designation Date of Reinstatement

Sneathen, Lowell D. Orange, CA CPA August 30, 2007

Smith, David B. Kettering, OH Enrolled Agent September 9, 2007

Young, Ronald B. Fairfield, CT CPA September 9, 2007

Sheiman, Alan P. Sherman Oaks, CA Enrolled Agent September 14, 2007

DiSiena, Frank E. Somers, NY CPA September 19, 2007

Leggio, Joseph J. Katonah, NY CPA September 24, 2007

Consent Suspensions From Practice Before the InternalRevenue Service

Under Title 31, Code of Federal Regu-lations, Part 10, an attorney, certified pub-lic accountant, enrolled agent, or enrolledactuary, in order to avoid the institutionor conclusion of a proceeding for his orher disbarment or suspension from prac-tice before the Internal Revenue Service,

may offer his or her consent to suspensionfrom such practice. The Director, Officeof Professional Responsibility, in his dis-cretion, may suspend an attorney, certifiedpublic accountant, enrolled agent, or en-rolled actuary in accordance with the con-sent offered.

The following individuals have beenplaced under consent suspension frompractice before the Internal Revenue Ser-vice:

Name Address Designation Date of Suspension

Hunter, Richard Moweaqua, IL Enrolled Agent IndefinitefromJuly 16, 2007

Sheehy, William J. Northville, MI Attorney IndefinitefromJuly 16, 2007

Szwyd, Edward R. Housatonic, MA CPA IndefinitefromJuly 16, 2007

Lettieri, Louis E. Red Bank, NJ CPA IndefinitefromAugust 1, 2007

Stein, Jerold A. Alpharetta, GA CPA IndefinitefromAugust 1, 2007

Tutino, Philip R. East Hampton, NY CPA IndefinitefromAugust 1, 2007

Dorr, Mark A. Gillette, WY CPA IndefinitefromAugust 7, 2007

Nelson, Carole S. Riverside, CA Enrolled Agent IndefinitefromAugust 8, 2007

2007–45 I.R.B. 980 November 5, 2007


Siegel, Herbert New City, NY CPA IndefinitefromAugust 10, 2007

Taylor, Linda W. Las Vegas, NV CPA IndefinitefromAugust 15, 2007

Finkelstein, Meyer Staten Island, NY CPA IndefinitefromAugust 15, 2007

Schenck, Thomas M. Tampa, FL CPA IndefinitefromAugust 20, 2007

Shah, Sudhir P. Richardson, TX CPA IndefinitefromAugust 20, 2007

Bender, Elmer P. Missoula, MT CPA IndefinitefromAugust 31, 2007

Tselepis, John Jarrettsville, MD CPA IndefinitefromSeptember 5, 2007

Perez, Ricardo L. Cedar Lake, IN CPA IndefinitefromSeptember 10, 2007

Golden, Roberta A. Framington, MA Attorney IndefinitefromSeptember 13, 2007

Ward, Thomas R. St. Louis Park, MN Attorney IndefinitefromSeptember 13, 2007

Expedited Suspensions From Practice Before the InternalRevenue Service

Under Title 31, Code of Federal Regu-lations, Part 10, the Director, Office of Pro-fessional Responsibility, is authorized toimmediately suspend from practice beforethe Internal Revenue Service any practi-tioner who, within five years from the date

the expedited proceeding is instituted (1)has had a license to practice as an attor-ney, certified public accountant, or actuarysuspended or revoked for cause or (2) hasbeen convicted of certain crimes.

The following individuals have beenplaced under suspension from practice be-fore the Internal Revenue Service by virtueof the expedited proceeding provisions:


Murphy, John F. Wellsboro, PA Attorney IndefinitefromJune 28, 2007

November 5, 2007 981 2007–45 I.R.B.


Aakre, Steven K. Hawley, MN Attorney IndefinitefromJuly 11, 2007

Brogan, Jane K. York, NE Attorney IndefinitefromJuly 11, 2007

Clark, Clifford A. Raleigh, NC CPA IndefinitefromJuly 11, 2007

Downing, Jr., Eugene W. Arlington, MA Attorney IndefinitefromJuly 11, 2007

Kahn, Arthur M. Woodstock, NY Attorney IndefinitefromJuly 11, 2007

Kossmeyer, Carl F. Town and Country, MO CPA IndefinitefromJuly 11, 2007

Lee, John C. Charlotte, NC Attorney IndefinitefromJuly 11, 2007

McAvoy, Donald L. Windermere, FL CPA IndefinitefromJuly 11, 2007

McCabe, Edwin A. Gloucester, MA Attorney IndefinitefromJuly 11, 2007

O’Donnell, Judith R. Westborough, MA Attorney IndefinitefromJuly 11, 2007

Taylor, John G. Lincoln, NE Attorney IndefinitefromJuly 11, 2007

Turner, D. Scott Mooresville, NC Attorney IndefinitefromJuly 11, 2007

Csaszar, James J. Columbus, OH CPA IndefinitefromJuly 13, 2007

Fischer, Mark W. Boulder, CO Attorney IndefinitefromJuly 16, 2007

Behunin, Michael N. Sandy, UT Attorney IndefinitefromAugust 8, 2007

2007–45 I.R.B. 982 November 5, 2007


Carpenter, Jr., Darwin R. Melbourne, FL CPA IndefinitefromAugust 23, 2007

Gresham, James L. Broken Arrow, OK CPA IndefinitefromAugust 23, 2007

Krezminski, Allen D. Milwaukee, WI Attorney IndefinitefromAugust 23, 2007

Neary, Hugh M. Ottumwa, IA Attorney IndefinitefromAugust 23, 2007

Weiss, Randy A. Potomac, MD Attorney IndefinitefromAugust 23, 2007

Whiddon, Edward L. Houston, TX CPA IndefinitefromAugust 23, 2007

Hazen, Robert D. Lindon, UT CPA IndefinitefromAugust 29, 2007

Schafer, III, Harry J. Edmond, OK CPA IndefinitefromSeptember 6, 2007

Pullin, Wendy F. San Antonio, TX CPA IndefinitefromSeptember 24, 2007

Suspensions From Practice Before the Internal RevenueService After Notice and an Opportunity for a Proceeding

Under Title 31, Code of Federal Reg-ulations, Part 10, after notice and an op-portunity for a proceeding before an ad-

ministrative law judge, the following indi-viduals have been placed under suspension

from practice before the Internal RevenueService:

Name Address Designation Effective Date

Newton, Douglas M. Fernandina Beach, FL CPA IndefinitefromJune 4, 2007

Snell, Barry A. Santa Monica, CA CPA IndefinitefromJune 6, 2007

Khoury, Naif S. Fort Smith, AR Attorney IndefinitefromJune 14, 2007

November 5, 2007 983 2007–45 I.R.B.


Bukovac, Jane Alexandria, VA Enrolled Agent IndefinitefromJune 29, 2007

Kreke, David J. Bartelso, IL Enrolled Agent IndefinitefromJuly 12, 2007

Dunkley, John D. San Antonio, TX Enrolled Agent IndefinitefromJuly 27, 2007

Disbarments From Practice Before the Internal RevenueService After Notice and an Opportunity for a Proceeding

Under Title 31, Code of Federal Regu-lations, Part 10, after notice and an oppor-tunity for a proceeding before an adminis-

trative law judge, the following individu-als have been disbarred from practice be-fore the Internal Revenue Service:


Ruocchio, Robert Havertown, PA CPA June 11, 2007

Turner, John S. Paradise, CA Enrolled Agent June 15, 2007

Johnson, Ted R. Frankfort, IN Attorney July 30, 2007

Ayers, Dani D. Kelseyville, CA Enrolled Agent August 6, 2007

Deletions From CumulativeList of OrganizationsContributions to Whichare Deductible Under Section170 of the Code

Announcement 2007–105

The Internal Revenue Service has re-voked its determination that the organi-zations listed below qualify as organiza-tions described in sections 501(c)(3) and170(c)(2) of the Internal Revenue Code of1986.

Generally, the Service will not disallowdeductions for contributions made to alisted organization on or before the dateof announcement in the Internal RevenueBulletin that an organization no longerqualifies. However, the Service is notprecluded from disallowing a deductionfor any contributions made after an or-ganization ceases to qualify under section170(c)(2) if the organization has not timely

filed a suit for declaratory judgment undersection 7428 and if the contributor (1) hadknowledge of the revocation of the rulingor determination letter, (2) was aware thatsuch revocation was imminent, or (3) wasin part responsible for or was aware of theactivities or omissions of the organizationthat brought about this revocation.

If on the other hand a suit for declara-tory judgment has been timely filed, con-tributions from individuals and organiza-tions described in section 170(c)(2) thatare otherwise allowable will continue tobe deductible. Protection under section7428(c) would begin on November 5,2007, and would end on the date the courtfirst determines that the organization isnot described in section 170(c)(2) as moreparticularly set forth in section 7428(c)(1).For individual contributors, the maximumdeduction protected is $1,000, with a hus-band and wife treated as one contributor.This benefit is not extended to any indi-vidual, in whole or in part, for the acts oromissions of the organization that werethe basis for revocation.

Gregory and Vickie IversonCharitable Supporting OrganizationSalt Lake City, UT

The Scott Canepa CharitableSupporting OrganizationLas Vegas, NV

Kyle Charitable SupportOrganization TrustAustin, TX

Paul and Deborah MarvinCharitable Supporting FoundationSalt Lake City, UT

Malecha Family FoundationApple Valley, MN

Shared Visions FoundationPark City, UT

Harold B Lee FoundationWoodland, UT

Missouri Basketball ClubColumbia, MO

Mahisekar CharitableSupporting OrganizationOrland Park, IL

Georgetown Title FoundationSandy, UT

2007–45 I.R.B. 984 November 5, 2007

Buddy & Rita Gregory CharitableSupporting OrganizationLehi, UT

Keith & Anna Barton CharitableSupporting OrganizationLehi, UT

Asafo Global Trust Fund, Inc.Phoenix, AZ

White Wing Educational Dev CorpNew York, NY

AARO Credit ServicesCosta Mesa, CA

Paul and Deborah ManningCharitable Supporting OrgSalt Lake City, UT

MOP Non-Profit, Inc.Sterling Heights, MI

Access Home Project, Inc.Los Angeles, CA

To Life FoundationNew York, NY

Miami Latin Film FestivalMiami, FL

Larry and Kelli Cotton CharitableSupporting OrganizationFort Worth, TX

November 5, 2007 985 2007–45 I.R.B.

Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as “rulings”) thathave an effect on previous rulings use thefollowing defined terms to describe the ef-fect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position is be-ing extended to apply to a variation of thefact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds that thesame principle also applies to B, the earlierruling is amplified. (Compare with modi-fied, below).

Clarified is used in those instanceswhere the language in a prior ruling is be-ing made clear because the language hascaused, or may cause, some confusion.It is not used where a position in a priorruling is being changed.

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them.

Modified is used where the substanceof a previously published position is beingchanged. Thus, if a prior ruling held that aprinciple applied to A but not to B, and thenew ruling holds that it applies to both A

and B, the prior ruling is modified becauseit corrects a published position. (Comparewith amplified and clarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations. A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted.

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling.

Superseded describes a situation wherethe new ruling does nothing more than re-state the substance and situation of a previ-ously published ruling (or rulings). Thus,the term is used to republish under the1986 Code and regulations the same po-sition published under the 1939 Code andregulations. The term is also used whenit is desired to republish in a single rul-ing a series of situations, names, etc., thatwere previously published over a period oftime in separate rulings. If the new rul-ing does more than restate the substance

of a prior ruling, a combination of termsis used. For example, modified and su-perseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that is selfcontained. In this case, the previously pub-lished ruling is first modified and then, asmodified, is superseded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling and thatlist is expanded by adding further names insubsequent rulings. After the original rul-ing has been supplemented several times, anew ruling may be published that includesthe list in the original ruling and the ad-ditions, and supersedes all prior rulings inthe series.

Suspended is used in rare situationsto show that the previous published rul-ings will not be applied pending somefuture action such as the issuance of newor amended regulations, the outcome ofcases in litigation, or the outcome of aService study.

AbbreviationsThe following abbreviations in current useand formerly used will appear in materialpublished in the Bulletin.

A—Individual.Acq.—Acquiescence.B—Individual.BE—Beneficiary.BK—Bank.B.T.A.—Board of Tax Appeals.C—Individual.C.B.—Cumulative Bulletin.CFR—Code of Federal Regulations.CI—City.COOP—Cooperative.Ct.D.—Court Decision.CY—County.D—Decedent.DC—Dummy Corporation.DE—Donee.Del. Order—Delegation Order.DISC—Domestic International Sales Corporation.DR—Donor.E—Estate.EE—Employee.E.O.—Executive Order.

ER—Employer.ERISA—Employee Retirement Income Security Act.EX—Executor.F—Fiduciary.FC—Foreign Country.FICA—Federal Insurance Contributions Act.FISC—Foreign International Sales Company.FPH—Foreign Personal Holding Company.F.R.—Federal Register.FUTA—Federal Unemployment Tax Act.FX—Foreign corporation.G.C.M.—Chief Counsel’s Memorandum.GE—Grantee.GP—General Partner.GR—Grantor.IC—Insurance Company.I.R.B.—Internal Revenue Bulletin.LE—Lessee.LP—Limited Partner.LR—Lessor.M—Minor.Nonacq.—Nonacquiescence.O—Organization.P—Parent Corporation.PHC—Personal Holding Company.PO—Possession of the U.S.PR—Partner.

PRS—Partnership.PTE—Prohibited Transaction Exemption.Pub. L.—Public Law.REIT—Real Estate Investment Trust.Rev. Proc.—Revenue Procedure.Rev. Rul.—Revenue Ruling.S—Subsidiary.S.P.R.—Statement of Procedural Rules.Stat.—Statutes at Large.T—Target Corporation.T.C.—Tax Court.T.D. —Treasury Decision.TFE—Transferee.TFR—Transferor.T.I.R.—Technical Information Release.TP—Taxpayer.TR—Trust.TT—Trustee.U.S.C.—United States Code.X—Corporation.Y—Corporation.Z —Corporation.

2007–45 I.R.B. i November 5, 2007

Numerical Finding List1

Bulletins 2007–27 through 2007–45

Announcements:

2007-61, 2007-28 I.R.B. 84

2007-62, 2007-29 I.R.B. 115

2007-63, 2007-30 I.R.B. 236

2007-64, 2007-29 I.R.B. 125

2007-65, 2007-30 I.R.B. 236

2007-66, 2007-31 I.R.B. 296

2007-67, 2007-32 I.R.B. 345

2007-68, 2007-32 I.R.B. 348

2007-69, 2007-33 I.R.B. 371

2007-70, 2007-33 I.R.B. 371

2007-71, 2007-33 I.R.B. 372

2007-72, 2007-33 I.R.B. 373

2007-73, 2007-34 I.R.B. 435

2007-74, 2007-35 I.R.B. 483

2007-75, 2007-36 I.R.B. 540

2007-76, 2007-36 I.R.B. 560

2007-77, 2007-38 I.R.B. 662

2007-78, 2007-38 I.R.B. 663

2007-79, 2007-40 I.R.B. 749

2007-80, 2007-38 I.R.B. 667

2007-81, 2007-38 I.R.B. 667

2007-82, 2007-40 I.R.B. 749

2007-83, 2007-40 I.R.B. 752

2007-84, 2007-41 I.R.B. 797

2007-85, 2007-39 I.R.B. 719

2007-86, 2007-39 I.R.B. 719

2007-87, 2007-40 I.R.B. 753

2007-88, 2007-42 I.R.B. 801

2007-89, 2007-41 I.R.B. 798

2007-90, 2007-42 I.R.B. 856

2007-91, 2007-42 I.R.B. 857

2007-92, 2007-42 I.R.B. 857

2007-93, 2007-42 I.R.B. 858

2007-94, 2007-42 I.R.B. 858

2007-95, 2007-43 I.R.B. 894

2007-96, 2007-42 I.R.B. 859

2007-97, 2007-43 I.R.B. 895

2007-98, 2007-43 I.R.B. 896

2007-99, 2007-43 I.R.B. 896

2007-100, 2007-44 I.R.B. 922

2007-101, 2007-43 I.R.B. 898

2007-102, 2007-44 I.R.B. 922

2007-103, 2007-44 I.R.B. 923

2007-104, 2007-44 I.R.B. 924

2007-105, 2007-45 I.R.B. 984

Notices:

2007-54, 2007-27 I.R.B. 12

2007-55, 2007-27 I.R.B. 13

2007-56, 2007-27 I.R.B. 15

2007-57, 2007-29 I.R.B. 87

Notices— Continued:

2007-58, 2007-29 I.R.B. 88

2007-59, 2007-30 I.R.B. 135

2007-60, 2007-35 I.R.B. 466

2007-61, 2007-30 I.R.B. 140

2007-62, 2007-32 I.R.B. 331

2007-63, 2007-33 I.R.B. 353

2007-64, 2007-34 I.R.B. 385

2007-65, 2007-34 I.R.B. 386

2007-66, 2007-34 I.R.B. 387

2007-67, 2007-35 I.R.B. 467

2007-68, 2007-35 I.R.B. 468

2007-69, 2007-35 I.R.B. 468

2007-70, 2007-40 I.R.B. 735

2007-71, 2007-35 I.R.B. 472

2007-72, 2007-36 I.R.B. 544

2007-73, 2007-36 I.R.B. 545

2007-74, 2007-37 I.R.B. 585

2007-75, 2007-39 I.R.B. 679

2007-76, 2007-40 I.R.B. 735

2007-77, 2007-40 I.R.B. 735

2007-78, 2007-41 I.R.B. 780

2007-79, 2007-42 I.R.B. 809

2007-80, 2007-43 I.R.B. 867

2007-81, 2007-44 I.R.B. 899

2007-82, 2007-44 I.R.B. 904

2007-83, 2007-45 I.R.B. 960

2007-84, 2007-45 I.R.B. 963

2007-85, 2007-45 I.R.B. 965

2007-87, 2007-45 I.R.B. 966

Proposed Regulations:

REG-107592-00, 2007-44 I.R.B. 908

REG-121475-03, 2007-35 I.R.B. 474

REG-128274-03, 2007-33 I.R.B. 356

REG-114084-04, 2007-33 I.R.B. 359

REG-149036-04, 2007-33 I.R.B. 365

REG-149036-04, 2007-34 I.R.B. 411

REG-101001-05, 2007-36 I.R.B. 548

REG-119097-05, 2007-28 I.R.B. 74

REG-128843-05, 2007-37 I.R.B. 587

REG-142695-05, 2007-39 I.R.B. 681

REG-143326-05, 2007-43 I.R.B. 873

REG-143397-05, 2007-41 I.R.B. 790

REG-147171-05, 2007-32 I.R.B. 334

REG-148951-05, 2007-36 I.R.B. 550

REG-163195-05, 2007-33 I.R.B. 366

REG-118886-06, 2007-37 I.R.B. 591

REG-128224-06, 2007-36 I.R.B. 551

REG-138707-06, 2007-32 I.R.B. 342

REG-139268-06, 2007-34 I.R.B. 415

REG-142039-06, 2007-34 I.R.B. 415

REG-144540-06, 2007-31 I.R.B. 296

REG-148393-06, 2007-39 I.R.B. 714

REG-103842-07, 2007-28 I.R.B. 79

REG-106143-07, 2007-43 I.R.B. 881

Proposed Regulations— Continued:

REG-113891-07, 2007-42 I.R.B. 821

REG-116215-07, 2007-38 I.R.B. 659

REG-118719-07, 2007-37 I.R.B. 593

REG-129916-07, 2007-43 I.R.B. 891

REG-138637-07, 2007-45 I.R.B. 977

Revenue Procedures:

2007-42, 2007-27 I.R.B. 15

2007-43, 2007-27 I.R.B. 26

2007-44, 2007-28 I.R.B. 54

2007-45, 2007-29 I.R.B. 89

2007-46, 2007-29 I.R.B. 102

2007-47, 2007-29 I.R.B. 108

2007-48, 2007-29 I.R.B. 110

2007-49, 2007-30 I.R.B. 141

2007-50, 2007-31 I.R.B. 244

2007-51, 2007-30 I.R.B. 143

2007-52, 2007-30 I.R.B. 222

2007-53, 2007-30 I.R.B. 233

2007-54, 2007-31 I.R.B. 293

2007-55, 2007-33 I.R.B. 354

2007-56, 2007-34 I.R.B. 388

2007-57, 2007-36 I.R.B. 547

2007-58, 2007-37 I.R.B. 585

2007-59, 2007-40 I.R.B. 745

2007-60, 2007-39 I.R.B. 679

2007-61, 2007-40 I.R.B. 747

2007-62, 2007-41 I.R.B. 786

2007-63, 2007-42 I.R.B. 809

2007-64, 2007-42 I.R.B. 818

2007-65, 2007-45 I.R.B. 967

2007-66, 2007-45 I.R.B. 970

Revenue Rulings:

2007-42, 2007-28 I.R.B. 44

2007-43, 2007-28 I.R.B. 45

2007-44, 2007-28 I.R.B. 47

2007-45, 2007-28 I.R.B. 49

2007-46, 2007-30 I.R.B. 126

2007-47, 2007-30 I.R.B. 127

2007-48, 2007-30 I.R.B. 129

2007-49, 2007-31 I.R.B. 237

2007-50, 2007-32 I.R.B. 311

2007-51, 2007-37 I.R.B. 573

2007-52, 2007-37 I.R.B. 575

2007-53, 2007-37 I.R.B. 577

2007-54, 2007-38 I.R.B. 604

2007-55, 2007-38 I.R.B. 604

2007-56, 2007-39 I.R.B. 668

2007-57, 2007-36 I.R.B. 531

2007-58, 2007-37 I.R.B. 562

2007-59, 2007-37 I.R.B. 582

2007-60, 2007-38 I.R.B. 606

2007-61, 2007-42 I.R.B. 799

2007-62, 2007-41 I.R.B. 767

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2007–1 through 2007–26 is in Internal Revenue Bulletin2007–26, dated June 25, 2007.

November 5, 2007 ii 2007–45 I.R.B.

Revenue Rulings— Continued:

2007-63, 2007-41 I.R.B. 778

2007-64, 2007-45 I.R.B. 953

2007-65, 2007-45 I.R.B. 949

2007-66, 2007-45 I.R.B. 956

Tax Conventions:

2007-75, 2007-36 I.R.B. 540

2007-88, 2007-42 I.R.B. 801

Treasury Decisions:

9326, 2007-31 I.R.B. 242

9327, 2007-28 I.R.B. 50

9328, 2007-27 I.R.B. 1

9329, 2007-32 I.R.B. 312

9330, 2007-31 I.R.B. 239

9331, 2007-32 I.R.B. 298

9332, 2007-32 I.R.B. 300

9333, 2007-33 I.R.B. 350

9334, 2007-34 I.R.B. 382

9335, 2007-34 I.R.B. 380

9336, 2007-35 I.R.B. 461

9337, 2007-35 I.R.B. 455

9338, 2007-35 I.R.B. 463

9339, 2007-35 I.R.B. 437

9340, 2007-36 I.R.B. 487

9341, 2007-35 I.R.B. 449

9342, 2007-35 I.R.B. 451

9343, 2007-36 I.R.B. 533

9344, 2007-36 I.R.B. 535

9345, 2007-36 I.R.B. 523

9346, 2007-37 I.R.B. 570

9347, 2007-38 I.R.B. 624

9348, 2007-37 I.R.B. 563

9349, 2007-39 I.R.B. 668

9350, 2007-38 I.R.B. 607

9351, 2007-38 I.R.B. 616

9352, 2007-38 I.R.B. 621

9353, 2007-40 I.R.B. 721

9354, 2007-41 I.R.B. 759

9355, 2007-37 I.R.B. 577

9356, 2007-39 I.R.B. 675

9357, 2007-41 I.R.B. 773

9358, 2007-41 I.R.B. 769

9359, 2007-45 I.R.B. 931

9360, 2007-43 I.R.B. 860

2007–45 I.R.B. iii November 5, 2007

Finding List of Current Actions onPreviously Published Items1

Bulletins 2007–27 through 2007–45

Announcements:

84-26

Obsoleted by

T.D. 9336, 2007-35 I.R.B. 461

84-37

Obsoleted by

T.D. 9336, 2007-35 I.R.B. 461

Notices:

89-110

Modified by

REG-142695-05, 2007-39 I.R.B. 681

99-6

Obsoleted as of January 1, 2009 by

T.D. 9356, 2007-39 I.R.B. 675

2002-45

Modified by

REG-142695-05, 2007-39 I.R.B. 681

2003-81

Modified and supplemented by

Notice 2007-71, 2007-35 I.R.B. 472

2006-1

Modified by

Notice 2007-70, 2007-40 I.R.B. 735

2006-43

Modified by

T.D. 9332, 2007-32 I.R.B. 300

2006-56

Clarified by

Notice 2007-74, 2007-37 I.R.B. 585

2006-89

Modified by

Notice 2007-67, 2007-35 I.R.B. 467

2007-3

Modified by

Notice 2007-69, 2007-35 I.R.B. 468

2007-26

Modified by

Notice 2007-56, 2007-27 I.R.B. 15

Proposed Regulations:

EE-16-79

Withdrawn by

REG-142695-05, 2007-39 I.R.B. 681

EE-130-86

Withdrawn by

REG-142695-05, 2007-39 I.R.B. 681

Proposed Regulations— Continued:

REG-243025-96

Withdrawn by

REG-142695-05, 2007-39 I.R.B. 681

REG-105964-98

Withdrawn by

REG-107592-00, 2007-44 I.R.B. 908

REG-117162-99

Withdrawn by

REG-142695-05, 2007-39 I.R.B. 681

REG-157711-02

Corrected by

Ann. 2007-74, 2007-35 I.R.B. 483

REG-119097-05

Hearing location change by

Ann. 2007-81, 2007-38 I.R.B. 667

REG-142695-05


Ann. 2007-91, 2007-42 I.R.B. 857

REG-148951-05

Corrected by

Ann. 2007-94, 2007-42 I.R.B. 858

REG-109367-06

Hearing scheduled by

Ann. 2007-66, 2007-31 I.R.B. 296

REG-128224-06


Ann. 2007-92, 2007-42 I.R.B. 857

Corrected by

Ann. 2007-95, 2007-43 I.R.B. 894

REG-138707-06

Corrected by

Ann. 2007-79, 2007-40 I.R.B. 749

Cancellation of hearing by

Ann. 2007-101, 2007-43 I.R.B. 898

REG-143601-06

Corrected by

Ann. 2007-71, 2007-33 I.R.B. 372

REG-143797-06

Cancellation of hearing by

Ann. 2007-85, 2007-39 I.R.B. 719

REG-148393-06

Corrected by

Ann. 2007-98, 2007-43 I.R.B. 896

REG-103842-07

Corrected by

Ann. 2007-77, 2007-38 I.R.B. 662

REG-116215-07

Corrected by

Ann. 2007-97, 2007-43 I.R.B. 895

Revenue Procedures:

90-12

Modified by

Rev. Proc. 2007-66, 2007-45 I.R.B. 970

90-27

Superseded by

Rev. Proc. 2007-52, 2007-30 I.R.B. 222

95-28

Superseded by

Rev. Proc. 2007-54, 2007-31 I.R.B. 293

97-14

Modified and superseded by

Rev. Proc. 2007-47, 2007-29 I.R.B. 108

98-48

Modified by

T.D. 9353, 2007-40 I.R.B. 721

2002-41

Modified by

Rev. Proc. 2007-66, 2007-45 I.R.B. 970

2002-9

Modified and amplified by

Rev. Proc. 2007-48, 2007-29 I.R.B. 110Rev. Proc. 2007-53, 2007-30 I.R.B. 233

2003-43

Supplemented by

Rev. Proc. 2007-62, 2007-41 I.R.B. 786

2004-42

Superseded by

Notice 2007-59, 2007-30 I.R.B. 135

2004-48

Supplemented by

Rev. Proc. 2007-62, 2007-41 I.R.B. 786

2005-16

Modified by

Rev. Proc. 2007-44, 2007-28 I.R.B. 54

2005-27

Superseded by

Rev. Proc. 2007-56, 2007-34 I.R.B. 388

2005-66

Clarified, modified, and superseded by

Rev. Proc. 2007-44, 2007-28 I.R.B. 54

2006-25

Superseded by

Rev. Proc. 2007-42, 2007-27 I.R.B. 15

2006-27

Modified by

Rev. Proc. 2007-49, 2007-30 I.R.B. 141

2006-33

Superseded by

Rev. Proc. 2007-51, 2007-30 I.R.B. 143

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2007–1 through 2007–26 is in Internal Revenue Bulletin 2007–26, dated June 25, 2007.

November 5, 2007 iv 2007–45 I.R.B.

Revenue Procedures— Continued:

2006-41

Superseded by

Rev. Proc. 2007-63, 2007-42 I.R.B. 809

2006-45

Modified and clarified by

Rev. Proc. 2007-64, 2007-42 I.R.B. 818

2006-53

Modified by

Rev. Proc. 2007-60, 2007-39 I.R.B. 679

2006-55

Superseded by

Rev. Proc. 2007-43, 2007-27 I.R.B. 26

2007-4

Modified by

Notice 2007-69, 2007-35 I.R.B. 468

2007-15

Superseded by

Rev. Proc. 2007-50, 2007-31 I.R.B. 244

Revenue Rulings:

54-378

Clarified by

Rev. Rul. 2007-51, 2007-37 I.R.B. 573

67-93

Obsoleted by

T.D. 9347, 2007-38 I.R.B. 624

69-141

Modified by

REG-142695-05, 2007-39 I.R.B. 681

74-299

Amplified by

Rev. Rul. 2007-48, 2007-30 I.R.B. 129

75-425

Obsoleted by

Rev. Rul. 2007-60, 2007-38 I.R.B. 606

76-278

Obsoleted by

T.D. 9354, 2007-41 I.R.B. 759

76-288

Obsoleted by

T.D. 9354, 2007-41 I.R.B. 759

76-450

Obsoleted by

T.D. 9347, 2007-38 I.R.B. 624

78-257

Obsoleted by

T.D. 9347, 2007-38 I.R.B. 624

78-369

Revoked by

Rev. Rul. 2007-53, 2007-37 I.R.B. 577

Revenue Rulings— Continued:

89-96

Amplified by

Rev. Rul. 2007-47, 2007-30 I.R.B. 127

92-17

Modified by

Rev. Rul. 2007-42, 2007-28 I.R.B. 44

94-62

Supplemented by

Rev. Rul. 2007-58, 2007-37 I.R.B. 562

2001-48

Modified by

T.D. 9332, 2007-32 I.R.B. 300

2002-41

Modified by

REG-142695-05, 2007-39 I.R.B. 681

2003-102

Modified by

REG-142695-05, 2007-39 I.R.B. 681

2005-24

Modified by

REG-142695-05, 2007-39 I.R.B. 681

2006-36

Modified by

REG-142695-05, 2007-39 I.R.B. 681

2006-57

Modified by

Notice 2007-76, 2007-40 I.R.B. 735

2007-54

Suspended by

Rev. Rul. 2007-61, 2007-42 I.R.B. 799

2007-59

Amplified by

Notice 2007-74, 2007-37 I.R.B. 585

Treasury Decisions:

8073

Removed by

T.D. 9349, 2007-39 I.R.B. 668

9321

Corrected by

Ann. 2007-68, 2007-32 I.R.B. 348Ann. 2007-78, 2007-38 I.R.B. 663

9330

Corrected by

Ann. 2007-80, 2007-38 I.R.B. 667

9332

Corrected by

Ann. 2007-83, 2007-40 I.R.B. 752Ann. 2007-84, 2007-41 I.R.B. 797

9334

Corrected by

Ann. 2007-93, 2007-42 I.R.B. 858

Treasury Decisions— Continued:

9340

Corrected by

Ann. 2007-102, 2007-44 I.R.B. 922

9353

Corrected by

Ann. 2007-103, 2007-44 I.R.B. 923

2007–45 I.R.B. v November 5, 2007

November 5, 2007 2007–45 I.R.B.

INTERNAL REVENUE BULLETINThe Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

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