Bulletin No. 2010-6 February 8, 2010 HIGHLIGHTS OF THIS ISSUE · 2010–6 I.R.B. 385 February 8,...

Bulletin No. 2010-6February 8, 2010

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. 2010–6, page 387.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 February 2010.

T.D. 9477, page 385.REG–132232–08, page 401.Final, temporary, and proposed regulations under section 304of the Code address the tax treatment of certain shareholderswho transfer stock or securities to related corporations. Whenshareholders control two corporations and sell the stock or se-curities of one controlled corporation to the other, section 304governs the tax treatment of the shareholders on the amountsreceived for the transferred stock or securities. The regula-tions provide that shareholders will not avoid the application ofsection 304 by causing controlled corporations to form or availthemselves of related corporations to execute the transaction.

Notice 2010–16, page 396.Haiti earthquake in 2010. This notice designates the Haitiearthquake occurring in January 2010 as a qualified disasterfor purposes of section 139 of the Code.

EMPLOYEE PLANS

Notice 2010–15, page 390.Miscellaneous HEART Act changes. This notice providesguidance in the form of questions and answers with respectto certain provisions of the Heroes Earnings Assistance andRelief Act of 2008 (“HEART Act”). The notice also requests

comments regarding any additional issues relating to sectionsof the HEART Act that are addressed in the notice.

EMPLOYMENT TAX

REG–137036–08, page 398.Proposed regulations under section 3504 of the Code relate toemployment tax liability of agents authorized by the Secretaryto perform acts required of employers with respect to FederalUnemployment Tax Act (FUTA) taxes on wages paid for homecare services, as defined in these regulations. The regulationswould allow an enrolled participant in a home care servicesprogram to designate an agent to report, file, and pay all em-ployment taxes, including federal unemployment taxes. Thechange will allow an agent to file a single federal unemploy-ment tax return for multiple home care service recipients.

ADMINISTRATIVE

Announcement 2010–5, page 402.This document contains a correction to Revenue Procedure2010–1, 2010–1 I.R.B. 1, which contained an incorrect internalcross-reference.

Announcement 2010–6, page 402.This announcement provides notice of a public hearing on pro-posed regulations (REG–127270–06, 2009–42 I.R.B. 534) re-lating to the exclusion from gross income for amounts receivedon account of personal physical injuries or physical sickness.A public hearing is scheduled for February 23, 2010.

(Continued on the next page)

Finding Lists begin on page ii.

Announcement 2010–7, page 403.This document contains a correction to temporary regulations(T.D. 9458, 2009–43 I.R.B. 547) relating to modification toconsolidated return regulation permitting an election to treat aliquidation of a target, followed by a recontribution to a newtarget, as a crosschain reorganization.

February 8, 2010 2010–6 I.R.B.

The IRS MissionProvide America’s taxpayers top quality service by helping themunderstand 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 Secre-tary (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.

2010–6 I.R.B. February 8, 2010

February 8, 2010 2010–6 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 42.—Low-IncomeHousing Credit

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the monthof February 2010. See Rev. Rul. 2010-6, page 387.

Section 280G.—GoldenParachute Payments

Federal short-term, mid-term, and long-term ratesare set forth for the month of February 2010. See Rev.Rul. 2010-6, page 387.

Section 304.—RedemptionThrough Use of RelatedCorporations26 CFR 1.304–4T: Special rule for the use of relatedcorporations to avoid the application of section 304(temporary).

T.D. 9477

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 1

Use of Controlled Corporationsto Avoid the Application ofSection 304

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Final and temporary regula-tions.

SUMMARY: This document contains finaland temporary regulations under section304 of the Internal Revenue Code (Code).The regulations apply to certain transac-tions that are subject to section 304 butthat are entered into with a principal pur-pose of avoiding the application of section304 to a corporation that is controlled bythe issuing corporation in the transaction,or with a principal purpose of avoiding theapplication of section 304 to a corporationthat controls the acquiring corporation inthe transaction. The regulations affect per-sons treated as receiving distributions inredemption of stock by reason of section304. The text of the temporary regulations

serves as the text of the proposed regula-tions (REG–132232–08) in the notice ofproposed rulemaking on this subject pub-lished in this issue of the Bulletin.

DATES: Effective Date: These regulationsare effective on December 30, 2009.

Applicability Date: These regulationsapply to acquisitions of stock occurring onor after December 29, 2009.

FOR FURTHER INFORMATIONCONTACT: Sean W. Mullaney, (202)622–3860 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to26 CFR part 1 under section 304 of theCode. Section 304(a)(1) provides gener-ally that, for purposes of sections 302 and303, if one or more persons are in con-trol of each of two corporations and onesuch corporation (acquiring corporation)acquires in exchange for property stock ofthe other corporation (issuing corporation)from the person (or persons) so in control,then, unless section 304(a)(2) applies, theproperty shall be treated as received in re-demption of the stock of the acquiring cor-poration. Section 304(a)(2) provides gen-erally that, for purposes of sections 302and 303, if in exchange for property theacquiring corporation acquires stock of theissuing corporation from a shareholder ofthe issuing corporation and the issuing cor-poration controls the acquiring corpora-tion, then the shareholder shall be treatedas receiving the property in redemption ofthe stock of the issuing corporation. Forpurposes of section 304, control means theownership of stock possessing at least 50percent of the total combined voting powerof all classes of voting stock or at least 50percent of the total value of shares of allclasses of stock. With certain modifica-tions, the constructive ownership rules ofsection 318 apply for this purpose.

Under section 304(b)(2), the determina-tion of the amount of the property distri-bution that is a dividend (and the sourcethereof) is made as if the property were dis-tributed by the acquiring corporation to the

extent of its earnings and profits, and thenby the issuing corporation to the extent ofits earnings and profits. If the acquiringcorporation is foreign, section 304(b)(5)limits the amount of earnings and profitsof the acquiring corporation that are takeninto account for this purpose.

As part of a broad set of anti-avoid-ance rules published in the Federal Regis-ter on June 14, 1988 (T.D. 8209, 1988–2C.B. 174) the IRS and the Treasury De-partment promulgated §1.304–4T to ad-dress transactions that are subject to sec-tion 304 but that are entered into with aprincipal purpose of avoiding the appli-cation of section 304 to certain corpora-tions. Specifically, for purposes of deter-mining the amount of a property distribu-tion constituting a dividend (and the sourcethereof) under section 304(b)(2), the Dis-trict Director (now known as the Directorof Field Operations) is permitted to con-sider a corporation (deemed acquiring cor-poration) as having acquired for propertythe stock of the issuing corporation that isin fact acquired for property by the acquir-ing corporation, if the deemed acquiringcorporation controls the acquiring corpo-ration and if one of the principal purposesfor creating, organizing, or funding the ac-quiring corporation (through capital con-tributions or debt) is to avoid the applica-tion of section 304 to the deemed acquiringcorporation.

Explanation of the Provisions

A. Transactions at Issue

The IRS and Treasury Department havebecome aware of certain transactions thatare subject to section 304 but that areentered into with a principal purpose ofavoiding the treatment of a corporationas the issuing corporation. In one suchtransaction, for example, a domestic cor-poration (USP) wholly owns two foreigncorporations (F1 and F2). The basis andfair market value of the F1 stock is $100x.F1 does not have positive earnings andprofits (or its earnings and profits for pur-poses of section 304(b)(2) are limited bysection 304(b)(5)) but has at least $100xcash. The basis and fair market value ofthe F2 stock is $100x and F2 has earnings

2010–6 I.R.B. 385 February 8, 2010

and profits of at least $100x. USP formsa new foreign corporation (F3) and con-tributes the stock of F2 to F3 in exchangefor F3 stock. In a transaction subject tosection 304(a)(1), USP then transfers thestock of F3 to F1 in exchange for $100xcash. Because neither F1 (the acquiringcorporation) nor F3 (the issuing corpo-ration) has positive earnings and profits,USP reports the $100x cash received inredemption of the shares deemed issuedby F1 under section 304(a)(1) as a returnof basis under section 301(c)(2).

B. Anti-Avoidance Rule Applicable toDeemed Issuing Corporations

The IRS and Treasury Department be-lieve that an anti-avoidance rule similar to§1.304–4T, but that applies in the case ofa transaction entered into with a principalpurpose of avoiding the treatment of a cor-poration as the issuing corporation is ap-propriate for transactions such as the onedescribed above. Accordingly, the regu-lations amend §1.304–4T to provide thatfor purposes of determining the amountof a property distribution that is a divi-dend (and the source thereof) under sec-tion 304(b)(2), the acquiring corporationshall be treated as acquiring for propertythe stock of a corporation (deemed issu-ing corporation) that is controlled by theissuing corporation, if, in connection withthe acquisition for property of stock of theissuing corporation by the acquiring cor-poration, the issuing corporation acquiredstock of the deemed issuing corporationwith a principal purpose of avoiding theapplication of section 304 to the deemedissuing corporation.

C. Modifications to Current §1.304–4T

Current §1.304–4T applies at the dis-cretion of the District Director. The IRSand the Treasury Department believe theanti-avoidance rule of current §1.304–4Tshould be self-executing. Thus, current§1.304–4T is amended accordingly.

Current §1.304–4T applies when “oneof the principal purposes” for the transac-tion is to avoid the application of section304. The regulations included in this docu-ment apply when “a principal purpose” forthe transaction is to avoid the applicationof section 304. The IRS and the TreasuryDepartment do not view this modificationas a substantive change.

Finally, and as noted above, current§1.304–4T applies if one of the princi-pal purposes for creating, organizing, orfunding the acquiring corporation, throughcapital contributions or debt, is to avoid theapplication of section 304 to the deemedacquiring corporation. The regulationsincluded in this document clarify that thisrule may apply in cases where the fundingis from an unrelated party. For exam-ple, the regulations may apply when thedeemed acquiring corporation facilitatesthe repayment of an obligation incurredby the acquiring corporation (even if suchobligation is with respect to a borrowingfrom an unrelated party) to acquire thestock of the issuing corporation.

D. Effective/Applicability Dates

The regulations apply to acquisitionsoccurring on or after December 29, 2009.No inference is intended as to the potentialapplicability of other Code or regulatoryprovisions or judicial doctrines (includingstep transaction or substance over form) totransactions described in the regulations.

Special Analyses

It has been determined that this Trea-sury decision is not a significant regula-tory action as defined in Executive Order12866. Therefore, a regulatory assessmentis not required. It has also been determinedthat section 553(b) and (d) of the Admin-istrative Procedure Act (5 U.S.C. chapter5) do not apply to these regulations. Forapplicability of the Regulatory FlexibilityAct (5 U.S.C. chapter 6), refer to the Spe-cial Analyses section of the preamble andto the cross-referenced notice of proposedrulemaking published elsewhere in this is-sue of the Bulletin. Pursuant to section7805(f) of the Code, these regulations havebeen submitted to the Chief Counsel forAdvocacy of the Small Business Adminis-tration for comment on its impact on smallbusiness.

Drafting Information

The principal author of the regulationsis Sean W. Mullaney of the Office of Asso-ciate Chief Counsel (International). How-ever, other personnel from the IRS and theTreasury Department participated in theirdevelopment.

* * * * *

Amendments to the Regulations

Accordingly, 26 CFR part 1 is amendedas follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation forpart 1 is amended by adding an entry innumerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 1.304–4 is added to read

as follows:

§1.304–4 Special rule for the useof related corporations to avoid theapplication of section 304.

[Reserved]. For further guidance, see§1.304–4T(a) through (d).

Par. 3. Section 1.304–4T is revised toread as follows:

§1.304–4T Special rule for the useof related corporations to avoid theapplication of section 304 (temporary).

(a) Scope and purpose. This sectionapplies to determine the amount of a prop-erty distribution constituting a dividend(and the source thereof) under section304(b)(2), for certain transactions involv-ing controlled corporations. The purposeof this section is to prevent the avoidanceof the application of section 304 to a con-trolled corporation.

(b) Amount and source of dividend. Forpurposes of determining the amount con-stituting a dividend (and source thereof)under section 304(b)(2), the followingrules shall apply:

(1) Deemed acquiring corporation.A corporation (deemed acquiring corpo-ration) shall be treated as acquiring forproperty the stock of a corporation (issuingcorporation) acquired for property by an-other corporation (acquiring corporation)that is controlled by the deemed acquiringcorporation, if a principal purpose for cre-ating, organizing, or funding the acquiringcorporation by any means (including,through capital contributions or debt) isto avoid the application of section 304 tothe deemed acquiring corporation. Seeparagraph (c) Example 1 of this section foran illustration of this paragraph.

(2) Deemed issuing corporation. Theacquiring corporation shall be treated as

February 8, 2010 386 2010–6 I.R.B.

acquiring for property the stock of a corpo-ration (deemed issuing corporation) con-trolled by the issuing corporation if, in con-nection with the acquisition for propertyof stock of the issuing corporation by theacquiring corporation, the issuing corpo-ration acquired stock of the deemed issu-ing corporation with a principal purpose ofavoiding the application of section 304 tothe deemed issuing corporation. See para-graph (c) Example 2 of this section for anillustration of this paragraph.

(c) Examples. The rules of this sectionare illustrated by the following examples:

Example 1. (i) Facts. P, a domestic corpora-tion, wholly owns CFC1, a controlled foreign cor-poration with substantial accumulated earnings andprofits. CFC1 is organized in Country X, which im-poses a high rate of tax on the income of CFC1. Palso wholly owns CFC2, a controlled foreign cor-poration with accumulated earnings and profits of$200x. CFC2 is organized in Country Y, which im-poses a low rate of tax on the income of CFC2. Pwishes to own all of its foreign corporations in a di-rect chain and to repatriate the cash of CFC2. In or-der to avoid having to obtain Country X approval forthe acquisition of CFC1 (a Country X corporation)by CFC2 (a Country Y corporation) and to avoid thedividend distribution from CFC2 to P that would re-sult if CFC2 were the acquiring corporation, P causesCFC2 to form CFC3 in Country X and to contribute$100x to CFC3. CFC3 then acquires all of the stockof CFC1 from P for $100x.

(ii) Result. Because a principal purpose for cre-ating, organizing or funding CFC3 (acquiring corpo-ration) is to avoid the application of section 304 toCFC2 (deemed acquiring corporation), under para-graph (b)(1) of this section, for purposes of deter-mining the amount of the $100x distribution con-stituting a dividend (and source thereof) under sec-tion 304(b)(2), CFC2 shall be treated as acquiringthe stock of CFC1 (issuing corporation) from P for$100x. As a result, P receives a $100x distribution,out of the earnings and profits of CFC2, to which sec-tion 301(c)(1) applies.

Example 2. (i) Facts. P, a domestic corporation,wholly owns CFC1, a controlled foreign corporationwith substantial accumulated earnings and profits.The CFC1 stock has a basis of $100x. CFC1 isorganized in Country X. P also wholly owns CFC2, acontrolled foreign corporation with zero accumulatedearnings and profits. CFC2 is organized in CountryY. P wishes to own all of its foreign corporations in adirect chain and to repatriate the cash of CFC2. In or-der to avoid having to obtain Country X approval forthe acquisition of CFC1 (a Country X corporation)by CFC2 (a Country Y corporation) and to avoida dividend distribution from CFC1 to P, P forms anew corporation (CFC3) in Country X and transfersthe stock of CFC1 to CFC3 in exchange for CFC3stock. P then transfers the stock of CFC3 to CFC2 inexchange for $100x.

(ii) Result. Because a principal purpose for thetransfer of the stock of CFC1 (deemed issuing cor-poration) by P to CFC3 (issuing corporation) is toavoid the application of section 304 to CFC1, under

paragraph (b)(2) of this section, for purposes of de-termining the amount of the $100x distribution con-stituting a dividend (and source thereof) under sec-tion 304(b)(2), CFC2 (acquiring corporation) shall betreated as acquiring the stock of CFC1 from P for$100x . As a result, P receives a $100x distribution,out of the earnings and profits of CFC1, to which sec-tion 301(c)(1) applies.

(d) Effective/applicability date. Thissection applies to acquisitions of stock oc-curring on or after December 29, 2009.See §1.304–4T, as contained in 26 CFRpart 1 revised as of April 1, 2008, for ac-quisitions of stock occurring on or afterJune 14, 1988, and before December 29,2009.

(e) Expiration date. This section ex-pires on or before December 28, 2012.

Linda E. Stiff,Deputy Commissioner

for Services and Enforcement.

Approved December 18, 2009.

Michael F. Mundaca,Acting Assistant Secretary

of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on December 29,2009, 8:45 a.m., and published in the issue of the FederalRegister for December 30, 2009, 74 F.R. 69021)

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 February 2010. See Rev.Rul. 2010-6, page 387.

Section 412.—MinimumFunding Standards


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 642.—SpecialRules for Credits andDeductions


Section 807.—Rules forCertain Reserves


Section 846.—DiscountedUnpaid Losses Defined


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 other

2010–6 I.R.B. 387 February 8, 2010

sections of the Code, tables set forth therates for February 2010.

Rev. Rul. 2010–6

This revenue ruling provides variousprescribed rates for federal income taxpurposes for February 2010 (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 the

Internal 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)(1) for buildings placed inservice during the current month. How-

ever, under section 42(b)(2), the applicablepercentage for non-federally subsidizednew buildings placed in service after July30, 2008, and before December 31, 2013,shall not be less than 9%. Finally, Table5 contains the federal rate for determiningthe present value of an annuity, an interestfor life or for a term of years, or a remain-der or a reversionary interest for purposesof section 7520.

REV. RUL. 2010–6 TABLE 1

Applicable Federal Rates (AFR) for February 2010

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term

AFR .72% .72% .72% .72%110% AFR .79% .79% .79% .79%120% AFR .86% .86% .86% .86%130% AFR .94% .94% .94% .94%

Mid-term

AFR 2.82% 2.80% 2.79% 2.78%110% AFR 3.10% 3.08% 3.07% 3.06%120% AFR 3.39% 3.36% 3.35% 3.34%130% AFR 3.67% 3.64% 3.62% 3.61%150% AFR 4.24% 4.20% 4.18% 4.16%175% AFR 4.96% 4.90% 4.87% 4.85%

Long-term

AFR 4.44% 4.39% 4.37% 4.35%110% AFR 4.89% 4.83% 4.80% 4.78%120% AFR 5.34% 5.27% 5.24% 5.21%130% AFR 5.79% 5.71% 5.67% 5.64%


Adjusted AFR for February 2010

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term adjustedAFR

.54% .54% .54% .54%

Mid-term adjusted AFR 1.84% 1.83% 1.83% 1.82%

Long-term adjustedAFR

4.02% 3.98% 3.96% 3.95%

February 8, 2010 388 2010–6 I.R.B.


Rates Under Section 382 for February 2010

Adjusted federal long-term rate for the current month 4.02%

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.) 4.14%


Appropriate Percentages Under Section 42(b)(1) for February 2010

Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July30, 2008, and before December 31, 2013, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit 7.84%

Appropriate percentage for the 30% present value low-income housing credit 3.36%


Rate Under Section 7520 for February 2010

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 3.4%

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


Section 7520.—ValuationTables


Section 7872.—Treatmentof Loans With Below-MarketInterest Rates


2010–6 I.R.B. 389 February 8, 2010

Part III. Administrative, Procedural, and MiscellaneousMiscellaneous HEART ActChanges

Notice 2010–15

I. Purpose and background

This notice provides guidance in theform of questions and answers with respectto certain provisions of the Heroes Earn-ings Assistance and Relief Tax Act of 2008(“HEART Act” or “Act”), Pub. L. No.110–245. This notice also requests com-ments regarding any additional issues re-lating to the sections of the HEART Actthat are addressed in this notice.

The sections of the HEART Act ad-dressed in this notice are section 104 (re-lating to survivor and disability paymentswith respect to qualified military service),section 105 (relating to treatment of dif-ferential military pay as wages), section107 (relating to distributions from retire-ment plans to individuals called to activeduty), section 109 (relating to contribu-tions of military death gratuities to RothIRAs and Coverdell education savings ac-counts), and section 111 (relating to anemployer credit for differential wage pay-ments to employees who are active dutymembers of the uniformed services).

II. Section 104 of the HEART Act

Background

Under the Uniformed Services Employ-ment and Reemployment Rights Act of1994 (“USERRA”), Pub. L. No. 103–353,an employee who leaves a civilian job forqualified military service generally is en-titled to be reemployed by the pre-servicecivilian employer if the individual returnsto employment within a specified periodand meets the other eligibility criteria un-der USERRA. USERRA also provides thatan individual, upon reemployment, is enti-tled to receive certain pension, profit-shar-ing, and similar benefits that would havebeen received but for the employee’s ab-sence during military service.

Section 414(u) of the Internal RevenueCode (“Code”) provides rules regardingthe interaction of USERRA with the rulesgoverning tax-qualified retirement plans.Section 414(u)(8) provides, in part, that

an employer maintaining a plan is treatedas meeting the requirements of USERRAonly if: an employee reemployed underUSERRA is treated as not having incurreda break in service because of the period ofmilitary service, the employee’s militaryservice is treated as service with the em-ployer for vesting and benefit accrual pur-poses, the employee is permitted to makeadditional elective deferrals and employeecontributions in an amount not exceedingthe maximum amount the employee wouldhave been permitted or required to con-tribute during the period of military ser-vice if the employee actually had been em-ployed by the employer during that period,and the employee is entitled to any accruedbenefits that are contingent on employeecontributions or elective deferrals to theextent the employee pays the contributionsor elective deferrals to the plan.

Section 104(a)

Section 104(a) of the HEART Actadds § 401(a)(37) to the Code. Under§ 401(a)(37), qualified retirement plansmust provide that, in the case of a partici-pant who dies while performing qualifiedmilitary service, the survivors of the par-ticipant are entitled to any additional ben-efits (other than benefit accruals relatingto the period of qualified military service)that would have been provided under theplan had the participant resumed employ-ment and then terminated employment onaccount of death. Under section 104(c) ofthe Act, this new tax qualification require-ment also applies to tax-deferred annuitiesunder § 403(b) of the Code and to gov-ernmental eligible deferred compensationplans under § 457(b).

Section 104(d)(1) of the Act states thatthe amendments made by section 104 ofthe Act apply with respect to deaths anddisabilities occurring on or after January 1,2007.

Q–1. What types of additional ben-efits provided by a plan are subject to§ 401(a)(37) of the Code?

A–1. Section 401(a)(37) requires thatthe survivors of a participant who dieswhile performing qualified military ser-vice be entitled to any additional benefits(other than benefit accruals relating to theperiod of qualified military service) that

would be provided under the plan if theparticipant had resumed employment andthen terminated employment on accountof death. The types of benefits subject to§ 401(a)(37) include accelerated vesting,ancillary life insurance benefits, and othersurvivor’s benefits provided under a planthat are contingent on a participant’s termi-nation of employment on account of death.

Q–2. If the amount of death bene-fits provided under a plan is based on theamount of the deceased participant’s ac-crued benefit, does § 401(a)(37) requirethat the death benefit be determined as ifthe participant had received benefit accru-als for the period of qualified military ser-vice?

A–2. No. Section 401(a)(37) specif-ically excepts benefit accruals for theperiod of qualified military service fromthe additional benefits to which survivorsmust be entitled in the case of a partic-ipant who dies while performing suchservice. Accordingly, § 401(a)(37) doesnot require that benefit accruals (whetherbenefit accruals under a defined benefitplan or contributions under a defined con-tribution plan) be imputed for the period ofqualified military service for purposes ofdetermining death benefits that are basedon a deceased participant’s accrued bene-fit.

Q–3. Does § 401(a)(37) require thatservice credit for vesting purposes be pro-vided for the period of a deceased partic-ipant’s qualified military service for pur-poses of determining death benefits underthe plan?

A–3. Yes. Section 401(a)(37) requiresthat the survivors of a participant be enti-tled to any additional benefits (other thanbenefit accruals relating to the period ofqualified military service) provided un-der the plan had the participant resumedemployment and then terminated em-ployment on account of death. Section414(u)(8)(B) provides that each periodof an individual’s qualified military ser-vice is, upon reemployment, deemed toconstitute service with the employer forvesting and accrual purposes. Although§ 401(a)(37) provides an exception forbenefit accruals for the period of qualifiedmilitary service, there is no exception forvesting service. Accordingly, even though

February 8, 2010 390 2010–6 I.R.B.

§ 401(a)(37) does not require that bene-fit accruals be provided for the deceasedparticipant’s period of qualified militaryservice, service credit for the period of thedeceased participant’s period of qualifiedmilitary service must be provided (dueto the interaction of §§ 401(a)(37) and414(u)(8)(B)) for vesting purposes.

Q–4. Does § 401(a)(37) apply in thecase of a plan participant who dies whileperforming military service, but who wasnot entitled to reemployment rights withrespect to the employer maintaining theplan?

A–4. No. Section 401(a)(37) pro-vides that a qualified plan must providethat, in the case of a participant whodies while performing qualified militaryservice (as defined in § 414(u)), the par-ticipant’s survivors are entitled to certaindeath benefits. Section 414(u)(5) definesqualified military service with respect toan individual as any service in the uni-formed services by an individual entitledto reemployment rights under USERRA.Therefore, if a participant would not be en-titled to reemployment rights with respectto an employer under USERRA if theparticipant had applied for reemploymentrights immediately before his or her death,§ 401(a)(37) does not apply in determiningthe death benefits to which the partic-ipant’s survivors are entitled under theemployer’s plan. For information regard-ing reemployment rights under USERRA,see http://www.dol.gov/vets/programs/userra/main.htm.

Section 104(b)

Section 104(b) of the HEART Act addsa new § 414(u)(9) to the Code. Under§ 414(u)(9), an employer sponsoring aretirement plan may, for benefit accrualpurposes, treat an individual who dies orbecomes disabled while performing qual-ified military service as if the individualhad resumed employment in accordancewith the individual’s USERRA reem-ployment rights on the day preceding thedeath or disability and then terminatedemployment on the actual date of deathor disability. Section 414(u)(9) also pro-vides that this provision applies only ifall individuals performing qualified mili-tary service with respect to the employermaintaining the plan who die or becomedisabled as a result of performing qualified

military service prior to reemployment bythe employer are credited with service andbenefits on reasonably equivalent terms.Section 414(u)(9)(C) provides that theamount of employee contributions andthe amount of elective deferrals of anindividual treated as reemployed under§ 414(u)(9) are determined on the basis ofthe individual’s average actual employeecontributions or elective deferrals for thelesser of: (1) the 12-month period of ser-vice with the employer immediately priorto qualified military service, or (2) theactual length of continuous service withthe employer.

Section 104(d)(1) of the Act states thatthe amendments made by section 104 ofthe Act apply with respect to deaths anddisabilities occurring on or after January 1,2007.

Q–5. May § 414(u)(9) of the Code beapplied to a plan as of any date on or afterJanuary 1, 2007?

A–5. Yes. Under section 104(d) of theHEART Act, § 414(u)(9) of the Code ap-plies to deaths and disabilities occurringon or after January 1, 2007. However, be-cause the provisions of § 414(u)(9) are per-missive rather than mandatory, they maybe applied beginning as of any date on orafter January 1, 2007. For nondiscrimi-nation rules regarding the timing of planamendments, see § 1.401(a)(4)–5 of the In-come Tax Regulations.

Q–6. If, for benefit accrual purposes,a plan provides under § 414(u)(9)(A) fortreatment of an individual who dies whileperforming qualified military service as ifthe individual had resumed employment,must the plan also provide vesting creditfor that service?

A–6. Yes. As described inQ&A–3 above, under §§ 401(a)(37) and414(u)(8)(B), vesting credit must be pro-vided for the period of the deceasedindividual’s period of qualified militaryservice. This vesting credit is taken intoaccount for purposes of determining aparticipant’s vested percentage in accru-als earned both during qualified militaryservice and during other periods.

Q–7. If, for benefit accrual purposes,a plan provides under § 414(u)(9)(A) fortreatment of an individual who becomesdisabled while performing qualified mil-itary service as if the individual had re-sumed employment, must the plan alsoprovide vesting credit for that service?

A–7. No. Section 414(u)(9) appliesonly for benefit accrual purposes and nei-ther that section nor any other Code sec-tion requires that a plan provide vestingcredit to a disabled individual under thesecircumstances. However, § 414(u)(9) doesnot prohibit plans from providing vest-ing credit for a disabled individual’s qual-ified military service to the extent per-mitted under other applicable rules, in-cluding § 1.401(a)(4)–11(d)(3), which pro-vides nondiscrimination rules for creditingimputed service, i.e., service other than ac-tual service with the employer.

Under § 1.401(a)(4)–11(d)(3), theremust be a legitimate business reason forcrediting the imputed service (which isdeemed to exist in the case of credit formilitary service), the plan provision cred-iting the imputed service to any highlycompensated employee (HCE) must applyon the same terms to all similarly-situ-ated nonhighly compensated employees(NHCEs), and the plan provision mustnot by design or in operation discrim-inate significantly in favor of HCEs.Pursuant to the authority granted by§ 1.401(a)(4)–1(d), imputed service for aperiod of qualified military service that iscredited for vesting purposes to an individ-ual who became disabled while perform-ing qualified military service will satisfythese requirements if the plan provisioncrediting the service to any HCE applieson the same terms to all similarly-situatedNHCEs.

Q–8. How may a plan determine em-ployer-provided contributions or benefitsfor an individual treated as reemployed un-der § 414(u)(9) when those contributionsor benefits are contingent on the individ-ual’s employee contributions or electivedeferrals?

A–8. Section 414(u)(9) does not pro-vide for actual employee contributionsor elective deferrals. Instead, under§ 414(u)(9)(C), an individual who dies orbecomes disabled while performing qual-ified military service is deemed to havemade employee contributions or electivedeferrals for the purpose of determiningbenefits under § 414(u)(8)(C) that arecontingent on employee contributions orelective deferrals. Under § 414(u)(9)(C),for this purpose, the individual is deemedto have made employee contributions orelective deferrals in an amount equal tothe lesser of the actual average employee

2010–6 I.R.B. 391 February 8, 2010

contributions or elective deferrals madeby the individual under the plan during the12-month period prior to military serviceor, if service with the employer is less than12 months, the average actual employeecontributions or elective deferrals for theactual length of continuous service withthe employer.

However, in the case of a disabled in-dividual who is covered by a plan thatpermits disabled individuals to make em-ployee contributions or elective deferralsand who is treated as reemployed under§ 414(u)(9), § 414(u)(9) does not prohibitthe plan from allowing the disabled indi-vidual to make elective deferrals or em-ployee contributions with respect to pe-riods of qualified military service in theamounts permitted under § 414(u)(8)(C)without regard to § 414(u)(9). In that case,§ 414(u)(9) also does not prohibit the planfrom determining the disabled individual’semployer-sponsored contributions or ben-efits based on the actual employee contri-butions or elective deferrals made by thedisabled individual.

III. Section 105 of the HEART Act

In the case of employees who are calledto active duty, some employers have paidsome or all of the compensation that a ser-vice member would have received fromthe employer during the service member’speriod of active duty had the employee notbeen called to active duty. Prior to theenactment of the HEART Act, these pay-ments, commonly referred to as “differ-ential wage payments,” were not treatedas wages for Federal employment tax pur-poses, pursuant to Rev. Rul. 69–136,1969–1 C.B. 252.

Section 105(a) of the HEART Actamends § 3401 of the Code to treat dif-ferential wage payments as wages forincome tax withholding purposes. Theterm “differential wage payment” is de-fined in § 3401(h) as any payment which(1) is made by an employer to an indi-vidual with respect to any period duringwhich the individual is performing servicein the uniformed services while on activeduty for a period of more than 30 days,and (2) represents all or a portion of thewages the individual would have receivedfrom the employer if the individual wereperforming service for the employer. Thisamendment applies to remuneration paid

after December 31, 2008. See Rev. Rul.2009–11, 2009–18 I.R.B. 896, for guid-ance relating to § 3401(h).

Section 105(b)(1)(A) of the Act adds§ 414(u)(12)(A) to the Code, whichprovides that, for purposes of applyingthe Code to retirement plans subject to§ 414(u), (1) an individual receiving adifferential wage payment is treated asan employee of the employer making thepayment, (2) the differential wage pay-ment is treated as compensation, and (3)the plan is not treated as failing to meet therequirements of any provisions describedin § 414(u)(1)(C) by reason of any con-tribution or benefit which is based on thedifferential wage payment. The provisionsdescribed in § 414(u)(1)(C) include var-ious nondiscrimination requirements, in-cluding requirements under §§ 401(a)(4),401(k)(3), and 401(m).

Section 105(b)(1)(A) of the Act alsoadds § 414(u)(12)(B) to the Code, underwhich, notwithstanding the treatment ofan individual receiving differential wagepayments as an employee, an individualis treated for purposes of distributions(including distributions from a desig-nated Roth account under § 402A) under§§ 401(k)(2)(B)(i)(I), 403(b)(7)(A)(ii),403(b)(11)(A), and 457(d)(1)(A)(ii) ashaving been severed from employmentduring any period the individual is per-forming service in the uniformed ser-vices described in § 3401(h). Section414(u)(12)(B)(ii) provides that, if an in-dividual elects to receive a distributionunder this provision, the plan must pro-vide that the individual may not make anelective deferral or employee contributionduring the 6-month period beginning onthe date of the distribution. For purposesof the 6-month restriction, the definitionof “elective deferral” under § 414(u)(2)(C)applies, which includes any deferral ofcompensation under an eligible deferredcompensation plan under § 457(b).

Section 105(b)(2) of the Act amends§ 219(f)(1) of the Code to provide that, forpurposes of determining the limitation oncontributions to an IRA, the term “com-pensation” includes differential wage pay-ments.

The amendments made by section105(b) of the Act apply to years beginningafter December 31, 2008.

Q–9. Must differential wage paymentsbe treated as compensation for purposes

of determining contributions and benefitsunder a plan?

A–9. No. Differential wage paymentsare not required to be treated as compensa-tion for purposes of determining contribu-tions and benefits under a plan. However,such payments are treated as compensationfor purposes of applying the Code. Ac-cordingly, these payments must be treatedas compensation under § 415(c)(3) and§ 1.415–2(d).

Q–10. Will a plan’s definition of com-pensation fail to satisfy § 414(s) if differen-tial wage payments are excluded from theplan’s definition of compensation for pur-poses of determining benefits and contri-butions under the plan?

A–10. No. A plan’s definition of com-pensation will not fail to satisfy § 414(s)merely because differential wage pay-ments are excluded from the plan’s def-inition of compensation for purposes ofdetermining benefits and contributions.

Q–11. Is the rule in § 414(u)(12)(B)which treats an individual as severed fromemployment while performing service inthe uniformed services limited to individu-als receiving differential wage payments?

A–11. No. Section 414(u)(12)(B) ap-plies to all individuals on active duty fora period of more than 30 days, regard-less of whether they are receiving differ-ential wage payments. Thus, for purposesof applying rules that permit distributionsupon severance from employment under§§ 401(k), 403(b), and 457(d), an individ-ual is treated as having been severed fromemployment during any period the individ-ual is performing service in the uniformedservices while on active duty for a periodof more than 30 days.

Q–12. Is a plan required to providefor distributions to an individual who istreated as severed from employment whileperforming service in the uniformed ser-vices pursuant to § 414(u)(12)(B)?

A–12. No. Just as a plan may, but is notrequired to, provide for distributions un-der § 401(k), 403(b), or 457(d) upon ac-tual severance from employment, a planmay, but is not required to, provide for dis-tributions upon a deemed severance fromemployment under § 414(u)(12)(B). Thus,for example, a plan that provides for distri-butions upon severance from employmentmay, but is not required to, also providefor distributions upon a deemed severancefrom employment under § 414(u)(12)(B).

February 8, 2010 392 2010–6 I.R.B.

If a plan provides for a distribution upona deemed severance from employment un-der § 414(u)(12)(B), the plan must alsoprovide that an individual receiving thedistribution may not make an elective de-ferral or employee contribution during the6-month period beginning on the date ofthe distribution.

Q–13. How does the deemed severancerule of § 414(u)(12)(B) affect other rulesapplicable to plan distributions?

A–13. Section 414(u)(12)(B) appliesonly for purposes of the provisions of§§ 401(k), 403(b), and 457(d) that permitdistributions on severance from employ-ment. Thus, for example, in the eventan individual is treated as severed fromemployment under § 401(k)(2)(B)(i)(I),the individual may receive a distribu-tion otherwise subject to the distributionrestrictions of § 401(k)(2)(B). On theother hand, merely because an individualis treated as severed from employmentunder § 414(u)(12)(B) does not causesuch individual to be treated as severedfrom employment under sections of theCode other than §§ 401(k)(2)(B)(i)(I),403(b)(7)(A)(ii), 403(b)(11)(A), and457(d)(1)(A)(ii).

Q–14. Does § 414(u)(12)(B) apply toindividuals who have an actual severancefrom employment or who otherwise are el-igible to take a distribution of plan bene-fits?

A–14. No. Section 414(u)(12)(B)does not affect the status of an individ-ual who is on active duty for a periodof more than 30 days and who has, infact, had a severance from employment.Thus, for example, if such an individualreceives a distribution from a retirementplan under § 401(k)(2)(B)(i)(I) and re-turns to employment within six months,§ 414(u)(12)(B)(ii) would not preclude theindividual from making elective deferrals(as defined under § 414(u)(2)(C)) or em-ployee contributions to the plan before theend of the 6-month period.

Section 414(u)(12)(B) also does notaffect a plan’s ability to make other in-ser-vice distributions to the extent permittedunder other applicable rules and planterms. Thus, for example, a § 401(k)plan may distribute a participant’s elec-tive deferrals when the participant attainsage 591/2, or under other circumstanceslisted in § 401(k)(2)(B), and the distribu-tion would not be subject to the 6-month

restriction on elective deferrals under§ 414(u)(12)(B) (although a 6-month re-striction may apply under § 401(k) to adistribution on account of a financial hard-ship under § 401(k)(2)(B)(i)(IV)).

Q–15. If an individual is eligibleunder a plan to receive a distribution un-der § 401(k)(2)(B)(i)(I) as a result of adeemed severance from employment un-der § 414(u)(12)(B), and is also eligibleunder the plan to receive a qualified re-servist distribution within the meaningof § 72(t)(2)(G)(iii), as permitted un-der § 401(k)(2)(B)(i)(V), what treatmentapplies to a distribution that could bemade under § 401(k)(2)(B)(i)(I) or under§ 401(k)(2)(B)(i)(V)?

A–15. If an individual receives adistribution that meets the definition ofa qualified reservist distribution under§ 72(t)(2)(G)(iii), the distribution willbe treated as a qualified reservist dis-tribution, even if the distribution wouldalso have been permitted as a result ofa deemed severance of employment un-der § 414(u)(12)(B). For example, if aplan provides for qualified reservist dis-tributions and for distributions on deemedseverance under § 414(u)(12)(B), a dis-tribution to an individual that could beeither type of distribution will be treatedas a qualified reservist distribution. In thatcase, the distribution would not be sub-ject to the 6-month restriction on electivedeferrals or to the 10-percent additionalincome tax of § 72(t). The rules applica-ble to qualified reservist distributions arediscussed in Section IV, below.

Q–16. Is a distribution made pur-suant to § 414(u)(12)(B) an eligiblerollover distribution within the meaningof § 402(c)(4)?

A–16. Yes. A distribution made pur-suant to § 414(u)(12)(B) is an eligiblerollover distribution within the meaningof § 402(c)(4), except to the extent oneof the exceptions listed under § 402(c)(4)(other than the exception for hardshipdistributions under § 401(k)(2)(B)(i)(IV))applies. A distribution made pursuant to§ 414(u)(12)(B) is not treated as a hardshipdistribution ineligible for rollover. Aneligible rollover distribution that is paidto an employee (rather than directly rolledover) is subject to 20-percent mandatorywithholding under § 3405(c).

Q–17. May the contributions and bene-fits provided as a result of differential wage

payments be included in a plan’s nondis-crimination testing?

A–17. Yes. Under § 414(u)(12)(A),a qualified plan is not treated as fail-ing to meet the requirements of anynondiscrimination provision described in§ 414(u)(1)(C) by reason of any contri-bution or benefit based on a differentialwage payment, as long as the differentialwage payment and the ability to makecontributions based on the differentialwage payment are provided on reasonablyequivalent terms. Accordingly, the contri-butions and benefits provided under a planas a result of differential wage paymentsneed not be included in the plan’s nondis-crimination testing. On the other hand,§ 414(u)(1)(C) does not prevent such con-tributions and benefits from being takeninto account, as long as they do not causethe plan to fail the nondiscrimination re-quirements. If such contributions andbenefits are included in the plan’s nondis-crimination testing for any employee, theymust be taken into account for all employ-ees.

IV. Section 107 of the HEART Act

Under current law, a taxpayer who re-ceives a distribution from a qualified re-tirement plan prior to age 591/2, death, ordisability is generally subject to a 10-per-cent additional income tax under § 72(t)unless an exception applies. Pursuant toamendments made by the Pension Pro-tection Act of 2006 (PPA ’06), Pub. L.No. 109–280, § 72(t)(2)(G) of the Codeprovides that the 10-percent additional in-come tax does not apply to a qualified re-servist distribution.

A qualified reservist distribution isdefined under § 72(t)(2)(G)(iii) as a dis-tribution from an IRA or a distributionattributable to elective deferrals under a§ 401(k) or 403(b) plan (or a plan de-scribed in § 501(c)(18)) to a member of thereserves who has been ordered or calledto active duty for a period exceeding 179days or for an indefinite period. A qual-ified reservist distribution can be madewithout regard to otherwise applicablerestrictions under §§ 401(k) and 403(b) onin-service distributions of amounts attrib-utable to elective deferrals. In addition,during the two-year period beginning onthe day after the end of the individual’sactive duty service, an individual who

2010–6 I.R.B. 393 February 8, 2010

receives a qualified reservist distributionmay make contributions to an IRA in anamount up to the amount of the qualifiedreservist distribution, which are not sub-ject to the otherwise applicable limits onIRA contributions and are not deductible.

As originally enacted in PPA ’06,these special rules for qualified re-servist distributions applied to individ-uals ordered or called to active dutyafter September 11, 2001, and beforeDecember 31, 2007. Section 107 ofthe HEART Act amends § 72(t)(2)(G)of the Code to delete the reference toDecember 31, 2007, so that the specialrules for qualified reservist distributionsno longer have an expiration date.

V. Remedial Amendment Period forSections 104, 105, and 107 of theHEART Act

Section 401(b) provides for a reme-dial amendment period during whichcertain plan amendments may be maderetroactively effective to enable the plan tocomply with the requirements of § 401(a)during that period. Section 1.401(b)–1(a)provides that, under § 401(b), a planthat does not satisfy the requirements of§ 401(a) on any day solely as a result ofa disqualifying provision (as defined in§ 1.401(b)–1(b)) is considered to havesatisfied those requirements on that dateif, on or before the last day of the reme-dial amendment period with respect to thedisqualifying provision, all provisions ofthe plan that are necessary to satisfy allrequirements of § 401(a) are in effect andhave been made effective for all purposesfor the whole of the remedial amendmentperiod. Section 1.401(b)–1(b)(1) providesthat the term “disqualifying provision”includes a provision of a new plan, theabsence of a provision from a new plan, oran amendment to an existing plan whichcauses the plan to fail to satisfy the re-quirements of the Code applicable to thequalification of the plan as of the date theplan or amendment is first made effective.

As provided in § 1.401(b)–1(d),the remedial amendment period for adisqualifying provision described in§ 1.401(b)–1(b)(1) begins, in the case ofa provision of, or absence of a provisionfrom, a new plan, on the date the planis put into effect, and, in the case of anamendment to an existing plan, on the

date the plan amendment is adopted or putinto effect (whichever is earlier). Gen-erally, the remedial amendment periodfor a disqualifying provision describedin § 1.401(b)–1(b)(1) ends with the duedate (including extensions) for filing theincome tax return for the employer’s taxyear that includes, in the case of a provi-sion of, or absence of a provision from, anew plan, the date the plan is put into ef-fect, or, in the case of an amendment to anexisting plan, the date the plan amendmentis adopted or put into effect (whicheveris later). Section 1.401(b)–1(f) grants theCommissioner the discretion to extend theremedial amendment period.

Section 1.401(b)–1(b)(3) provides thatthe Commissioner also may designate asa disqualifying provision under § 401(b)a plan provision that either (1) resultsin the failure of the plan to satisfy thequalification requirements of the Codeby reason of a change in those require-ments, or (2) is integral to a qualificationrequirement that has been changed. Under§ 1.401(b)–1(d)(1)(iv), in the case of a planprovision that is designated as a disquali-fying provision under § 1.401(b)–1(b)(3)and that results in the failure of the planto satisfy the changed qualification re-quirements, the remedial amendmentperiod begins on the date on which thechange effected by the amendment to theCode became effective with respect tothe plan. Under § 1.401(b)–1(d)(1)(v), inthe case of a plan provision that is desig-nated as a disqualifying provision under§ 1.401(b)–1(b)(3) and that is integral toa qualification requirement that has beenchanged, the remedial amendment periodgenerally begins on the first day on whichthe plan was operated in accordance withthe changed qualification requirement.Under § 1.401(b)–1(d)(2)(i), the remedialamendment period for a plan provisionthat is designated as a disqualifying pro-vision under § 1.401(b)–1(b)(3) generallyends on the date prescribed by law, includ-ing extensions, for filing the income taxreturn of the employer for the employer’staxable year that includes the beginningof the remedial amendment period (un-less the remedial amendment period isextended by the Commissioner).

Section 104(d)(1) of the Act providesthat the statutory changes made by section104 of the Act apply with respect to deathsand disabilities occurring on or after Jan-

uary 1, 2007. Section 104(d)(2) of the Actadds that a plan subject to these new provi-sions is treated as being operated in accor-dance with the terms of the plan if a planamendment is made to comply with therequirements of § 401(a)(37) of the Code(which was added by section 104(a) of theAct) and is made on or before the last dayof the first plan year beginning on or af-ter January 1, 2010 (January 1, 2012, forgovernmental plans). By its terms, section104(d)(2) of the Act does not apply to planamendments made pursuant to § 414(u)(9)of the Code (which was added by section104(b) of the Act).

Section 105(b)(2) of the Act providesthat the statutory changes made by section105(b) of the Act apply to years beginningafter December 31, 2008. Section 105(c)of the Act adds that a plan subject to thesenew provisions is treated as being operatedin accordance with the terms of the planif a plan amendment is made pursuant tosection 105(b)(1) of the Act and is madeon or before the last day of the first planyear beginning on or after January 1, 2010(January 1, 2012, for governmental plans).

Section 107 of the Act amends§ 72(t)(2)(G) of the Code to delete thereference to December 31, 2007, added aspart of PPA ’06. This amendment appliesto individuals ordered or called to activeduty on or after December 31, 2007.

Q–18. When must plans be amended tosatisfy the requirements of section 104(b)of the Act?

A–18. Pursuant to the authority pro-vided under § 1.401(b)–1(b)(3), plan pro-visions that relate to the requirements of§ 414(u)(9) of the Code (as added by sec-tion 104(b) of the Act) are hereby desig-nated as disqualifying provisions. More-over, pursuant to the authority granted tothe Commissioner under § 1.401(b)–1(f)with respect to disqualifying provisions,plans need not be amended to include anyprovisions relating to the permissive rulesof § 414(u)(9) of the Code until the last dayof the first plan year beginning on or af-ter January 1, 2010 (January 1, 2012, forgovernmental plans). Thus, the remedialamendment period for section 104(b) ofthe Act is the same period as the period formaking plan amendments pursuant to sec-tions 104(a) and 105(b) of the Act.

Q–19. When must plans be amended tosatisfy the requirements of section 107 ofthe Act?

February 8, 2010 394 2010–6 I.R.B.

A–19. Section 72(t)(2)(G)(iv) of theCode, as amended by section 107 of theAct, generally does not affect the quali-fication of a retirement plan. However,the amendment to § 72(t)(2)(G)(iv) ofthe Code made by section 107 of the Actalso applies under § 401(k)(2)(B)(i)(V) ofthe Code to the definition of a “qualifiedreservist distribution.” Pursuant to the au-thority provided under § 1.401(b)–1(b)(3),plan provisions that relate to the require-ments of § 401(k)(2)(B)(i)(V), as extendedby section 107 of the Act to individualscalled to active duty after December 31,2007, are hereby designated as disquali-fying provisions. Pursuant to the author-ity granted to the Commissioner under§ 1.401(b)–1(f) with respect to disquali-fying provisions, the remedial amendmentperiod with respect to these disqualifyingprovisions is extended so that it ends noearlier than the last day of the first planyear beginning on or after January 1, 2010(January 1, 2012, for governmental plans).

VI. Section 109 of the HEART Act

Section 1477 of Title 10 of the UnitedStates Code provides for the payment of amilitary death gratuity to an eligible sur-vivor of a service member. This gratu-ity is excludable from income under § 134of the Internal Revenue Code. Section1967 of Title 38 of the United States Codeprovides that certain members of the uni-formed services are automatically insuredagainst death under the Servicemembers’Group Life Insurance (SGLI) program. Ingeneral, life insurance proceeds are alsoexcludable from income.

Section 408A of the Code providesrules for the tax treatment of Roth IRAs.Contributions to a Roth IRA are not de-ductible, and “qualified distributions”(generally distributions made after age591/2, death, or disability, and also madeafter the 5-year period following an initialcontribution to any Roth IRA) from a RothIRA are excluded from income. A distri-bution that is not a qualified distributionis generally taxed under the rules of §§ 72and 408A(d)(4), under which the portionof the distribution that is not in excess ofthe participant’s investment in the contract(i.e., basis), taking into account all priordistributions from the owner’s Roth IRAs,is not included in income, and any portionof the distribution that exceeds the recipi-

ent’s investment in the contract is includedin income. Subject to certain exceptions, a10-percent additional income tax on earlydistributions under § 72(t) will also apply.Contributions to a Roth IRA are subjectto annual limits and a phase-out based onincome, except for certain rollover con-tributions to the extent permitted fromanother IRA or employer-sponsored plan.

For years before 2008, § 408A(e) pro-vided that a Roth IRA could only accepta rollover contribution of amounts dis-tributed from another Roth IRA, from anon-Roth IRA (subject to income limitson conversion of a non-Roth IRA to aRoth IRA), or from a designated Rothaccount under an employer-sponsoredplan described in § 402A. These rollovercontributions to Roth IRAs are called“qualified rollover contributions.” Section824 of PPA ’06 amended the definitionof a qualified rollover contribution in§ 408A(e) of the Code to also permitrollovers to Roth IRAs from various typesof employer-sponsored plans, even if therollover is not from a designated Rothaccount (subject to the income limits onconversion of a non-Roth IRA to a RothIRA), effective for distributions made af-ter December 31, 2007.

Section 530 provides rules for the taxtreatment of a Coverdell education sav-ings account (“Coverdell ESA”). Contri-butions to a Coverdell ESA are not de-ductible and distributions from a CoverdellESA are generally excluded from incomeup to the amount of the beneficiary’s qual-ified education expenses, subject to coor-dination with other tax benefits for educa-tion expenses. Distributions that are notexcluded from income are generally taxedunder the rules of § 72, under which a por-tion of the distribution is treated as a non-taxable recovery of the recipient’s invest-ment in the contract (i.e., basis) and the re-mainder is included in income. Subject tocertain exceptions, a 10-percent additionalincome tax on distributions not used forqualified expenses will also apply. Contri-butions to a Coverdell ESA are subject toan annual limit and a phase-out based onincome. Special rules apply in the case ofrollover contributions.

Under section 109 of the HEART Act,§ 408A(e) of the Code, as in effect bothbefore and after the amendments made byPPA ’06, is amended to include as a quali-fied rollover contribution the contribution

to a Roth IRA of a military death gratu-ity or SGLI payment if the contribution ismade before the end of the 1-year periodbeginning on the date on which the IRAbeneficiary receives the military death gra-tuity or SGLI payment. Thus, the annuallimits on Roth IRA contributions and thephase-out based on income do not applyto such a contribution. Section 530 ofthe Code is similarly amended to treat thecontribution of a military death gratuityor SGLI payment to a Coverdell ESA asa rollover contribution. The annual limiton Coverdell ESA contributions and thephase-out of the annual limit based on in-come do not apply to such a contribution.

The amount treated as a qualifiedrollover contribution to a Roth IRA cannotexceed the total amount of the militarydeath gratuity and SGLI payments re-ceived, reduced by any portion of suchamount contributed to a Coverdell ESA oranother Roth IRA. Similarly, the amounttreated as a qualified rollover contributionto a Coverdell ESA cannot exceed the totalamount of the military death gratuity andSGLI payments received, reduced by anyportion of such amount contributed to aRoth IRA or another Coverdell ESA. Forpurposes of applying § 72 to a distribu-tion from a Roth IRA or Coverdell ESA,the amount treated as a qualified rollovercontribution (in the case of a Roth IRA) oras a rollover contribution (in the case ofa Coverdell ESA) is treated as investmentin the contract.

The amendments made by section 109of the Act generally apply with respect todeaths from injuries occurring on or afterJune 17, 2008. In addition, section 109 ofthe Act permits a contribution to a RothIRA or a Coverdell ESA of a military deathgratuity or an SGLI payment received withrespect to a death from injuries occurringbefore June 17, 2008 (and on or after Oc-tober 7, 2001), if the contribution is madeno later than June 17, 2009.

VII. Section 111 of the HEART Act

Section 111 of the HEART Act adds§ 45P to the Code. Section 45P pro-vides a credit to eligible small businessemployers that make eligible differentialwage payments to qualified employeeswho are on active duty in the uniformedservices for more than 30 days. An eli-gible small business employer may take

2010–6 I.R.B. 395 February 8, 2010

a credit against its income tax liability inan amount equal to 20 percent of the sumof the eligible differential wage paymentsmade to qualified employees during thetaxable year. The definition of eligibledifferential wage payments for purposesof the § 45P credit is the same definitionenacted in new § 3401(h) discussed inSection III, above. The amount of eligibledifferential wage payments that may betaken into account for the taxable year islimited to $20,000 per qualified employee,resulting in a maximum credit for a taxableyear of $4,000 per qualified employee.An employee is a qualified employee if heor she has been an employee of the tax-payer for the 91-day period immediatelypreceding the period for which differentialwage payments are made. An employeris an eligible small business employerif it employed an average of fewer than50 employees on business days duringthe taxable year and provides differentialwage payments under a written plan toevery qualified employee. For purposes ofdetermining an employer’s eligibility, therules of § 414(b), (c), (m) and (o) apply,under which the members of a controlledgroup and other related entities are treatedas a single employer.

Section 45P(c) provides a rule to coor-dinate the § 45P credit with other creditsunder Chapter 1 of the Code (§§ 1 through1400T) that are calculated taking into ac-count employee compensation. Under thisrule, the amount of any such other creditdetermined with respect to compensationof an employee must be reduced by theamount of the § 45P credit determined withrespect to that employee.

Q–20. In what circumstances does thecredit under § 45P reduce the amount ofanother credit?

A–20. The amount of another creditunder Chapter 1 of the Code determinedwith respect to compensation of an em-ployee must be reduced by the amount ofthe § 45P credit determined with respect tothat employee if: (1) compensation paid inthe current taxable year is an expense useddirectly in determining the amount of theother credit, (2) military differential wagepayments are a type of compensation thatcan be taken into account in determiningthe amount of the other credit, and (3) themilitary differential wage payments takeninto account in determining the employer’s

§ 45P credit are also taken into account indetermining the other credit.

Comments Requested

The Service is considering issuing ad-ditional guidance regarding the abovesections of the HEART Act, and commentsare requested regarding such possibleguidance. Written comments should besubmitted by April 9, 2010. Send sub-missions to CC:PA:LPD:DRU (Notice2010–15), Room 5203, Internal Rev-enue Service, POB 7604 Ben FranklinStation, Washington, DC 20044. Com-ments may be hand delivered betweenthe hours of 8 a.m. and 4 p.m., Mon-day through Friday, to CC:PA:LPD:DRU(Notice 2010–15), Courier’s Desk, Inter-nal Revenue Service, 1111 ConstitutionAvenue, NW, Washington, DC, or sentelectronically via the Federal eRulemak-ing portal at http://www.regulations.gov(Notice 2010–15). All comments will beavailable for public inspection.

DRAFTING INFORMATION

The principal authors of this notice areRobert M. Walsh of the Employee Plans,Tax Exempt and Government EntitiesDivision and Joseph Perera of the Of-fice of Division Counsel/Associate ChiefCounsel (Tax Exempt and GovernmentEntities). For further information regard-ing Sections I through VI of this notice,please call the Employee Plans taxpayerassistance number between 8:30 a.m.and 4:30 p.m. Eastern time, Mondaythrough Friday at (877) 829–5500 (atoll-free number) or email Mr. Walsh [email protected]. Forfurther information regarding Section VIIof this notice, please contact Mr. Perera at202–622–6040 (not a toll-free number).

Haiti Earthquake Occurringin January 2010 Designatedas a Qualified Disaster Under§ 139 of the Internal RevenueCode

Notice 2010–16

This notice designates the Haiti earth-quake occurring in January 2010 as a qual-

ified disaster for purposes of § 139 of theInternal Revenue Code.

EARTHQUAKE DISASTER

On January 12, 2010, a magnitude 7.0earthquake with numerous significant af-tershocks affected southern Haiti (“Haitiearthquake”). The earthquake and result-ing aftershocks affected approximately 3million people, and caused extensive dam-age to dwellings, transportation networks,and infrastructure in Port-au-Prince andthe surrounding areas of Haiti. USAIDHaiti — Earthquake Fact Sheet No. 1 (Jan-uary 13, 2010) and No. 7 (January 19,2010).

This notice enables employer-spon-sored private foundations to assist certainvictims in areas affected by the Haiti earth-quake and enables recipients to excludequalified disaster relief payments fromgross income.

QUALIFIED DISASTER RELIEFPAYMENTS EXCLUDED FROMRECIPIENT’S GROSS INCOME

Section 139(a) provides that gross in-come shall not include any amount re-ceived by an individual as a qualified dis-aster relief payment.

Section 139(b) provides that a quali-fied disaster relief payment includes anyamount paid to or for the benefit of an in-dividual—

(1) to reimburse or pay reasonableand necessary personal, family, living,or funeral expenses (not otherwise com-pensated for by insurance or otherwise)incurred as a result of a qualified disaster,or

(2) to reimburse or pay reasonable andnecessary expenses (not otherwise com-pensated for by insurance or otherwise) in-curred for the repair or rehabilitation ofa personal residence or repair or replace-ment of its contents to the extent that theneed for such repair, rehabilitation, or re-placement is attributable to a qualified dis-aster.

Under § 139(c)(3) the term “qualifieddisaster” includes a disaster resulting froman event that is determined by the Secre-tary to be of a catastrophic nature.

February 8, 2010 396 2010–6 I.R.B.

DESIGNATION AS QUALIFIEDDISASTER

The Commissioner of Internal Rev-enue, pursuant to delegation by the Sec-retary, has determined that the Haitiearthquake occurring in January 2010 isan event of a catastrophic nature under§ 139(c)(3). Therefore, the Haiti earth-quake is designated as a qualified disasterunder § 139.

SECTION 501(c)(3) ORGANIZATIONS

Employer-sponsored private founda-tions may choose to provide disaster reliefto employee victims of the Haiti earth-quake. Like all organizations describedin § 501(c)(3), private foundations shouldexercise due diligence when providingdisaster relief as set forth in Publication3833, Disaster Relief: Providing Assis-tance Through Charitable Organizations.

DRAFTING INFORMATION

The principal author of this notice isSheldon Iskow of the Office of AssociateChief Counsel (Income Tax & Account-ing). For further information regardingthis notice, contact Mr. Iskow at (202)622–4920 (not a toll-free call).

2010–6 I.R.B. 397 February 8, 2010

Part IV. Items of General InterestNotice of ProposedRulemaking

Section 3504 AgentEmployment Tax Liability

REG–137036–08


ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains pro-posed regulations relating to employmenttax liability of agents authorized by theSecretary under section 3504 of the Inter-nal Revenue Code (Code) to perform actsrequired of employers with respect to taxesunder the Federal Unemployment Tax Acton wages paid for home care services, asdefined in these regulations. These pro-posed regulations affect employers whoare home care service recipients, as de-fined in these regulations, and their desig-nated agents. These regulations also pro-pose amendments to modify the existingregulations under section 3504 to be con-sistent with the organizational structure ofthe Internal Revenue Service (IRS), and toupdate the citation to the Internal RevenueCode of 1986.

DATES: Written or electronic commentsmust be received by April 13, 2010.

ADDRESSES: Send submissions to:CC:PA:LPD:PR (REG–137036–08), room5203, Internal Revenue Service, POB7604, Ben Franklin Station, WashingtonDC, 20044. Submissions may be handdelivered Monday through Friday, be-tween the hours of 8 a.m. and 4 p.m.to CC:PA:LPD:PR (REG–137036–08),Courier’s Desk, Internal Revenue Ser-vice, 1111 Constitution Avenue, NW,Washington, DC. Additionally, taxpay-ers may submit comments electronicallyvia the Federal eRulemaking Portal athttp://www.regulations.gov. (Indicate IRSand REG–137036–08.)

FOR FURTHER INFORMATIONCONTACT: Concerning the proposed reg-ulations, contact Selvan Boominathan at

(202) 622–0047; concerning the submis-sion of comments or requests for a hearing,contact Oluwafunmilayo (Funmi) Taylor,at (202) 622–7180 (not toll-free numbers).


Background

Federal, state, and local governmentprograms seek to help elderly or disabledindividuals maintain their independenceby funding home health care and otherpersonal services. See, for example,Deficit Reduction Act of 2005, PublicLaw No. 109–171, section 6071, 120Stat. 4, 102–110 (2006) (authorizing theSecretary of Health and Human Servicesto, among other things, award grantsto states to “[i]ncrease the use of homeand community-based, rather than insti-tutional, long-term care services.”) Thegovernment agencies that administer theprograms seek to assist the service recipi-ents with employment tax compliance byhelping the service recipients to designateagents to report, file, and pay employ-ment taxes on their behalf. The IRS andthe Treasury Department are proposingchanges to the regulations under section3504, the section under which a third partycan be authorized to act as an agent for anemployer, to permit designated agents toprovide comprehensive assistance to theseservice recipients who are employers.

1. Employment Taxes In General

Employers are generally required towithhold income tax and Federal Insur-ance Contributions Act (FICA) taxes fromtheir employees’ wages under sections3402(a) and 3102(a), respectively, and areseparately liable for the employer’s shareof FICA taxes and Federal UnemploymentTax Act (FUTA) taxes under sections 3111and 3301, respectively (collectively re-ferred to herein as “employment taxes”).Sections 3102(b), 3111, 3301, and 3403provide that the employer is the personliable for the withholding and payment ofemployment taxes; additionally, the em-ployer is required to make tax deposits, fileemployment tax returns, and file and fur-nish Forms W–2, Wage and Tax Statement,to employees (collectively referred to

herein as “employment tax obligations”).An employer is generally defined as theperson for whom an individual performsservices as an employee. See Sections3121(d), 3306(a), and 3401(d).

FUTA tax is imposed under section3301 on each employer in an amountequal to a percentage of wages paid bythe employer with respect to employment.FUTA tax is imposed on the employer inan amount equal to 6.2 percent of wages.Under section 3306(b), wages of an em-ployee subject to the FUTA tax are limitedto $7,000 per calendar year. Section 3302provides for a credit against FUTA taxin the amount of contributions paid bythe employer into an unemployment fundmaintained during the taxable year underthe unemployment law of a state. Thecredit is limited to an amount equal to 90percent of the FUTA tax.

2. Domestic Service Employment

The employment tax obligations of anemployer are modified with respect todomestic services provided in a privatehome of the employer. Employers arenot required to withhold income taxes onwages paid for domestic services, but mayenter into a voluntary withholding agree-ment to withhold income taxes from oneor more domestic employees. See sections3401(a)(3) and 3402(p). An employer isnot liable for FICA taxes with respect tocash wages for domestic services as longas the cash wages are less than an appli-cable dollar threshold amount, which isadjusted annually. Sections 3121(a)(7)(B)and 3121(x). When the cash wages equalor exceed the threshold amount, all ofthe cash wages (including amounts belowthe threshold) paid to that employee bythe employer are subject to FICA taxes.For example, the FICA wage thresholdfor domestic services for 2009 is $1,700.This threshold applies separately to eachemployer with respect to each employee.An employer is liable for FUTA taxeswith regard to domestic services if theemployer paid aggregate wages of $1,000or more (for all domestic employees) inany calendar quarter in the current or prioryear. Section 3306(c)(2).

February 8, 2010 398 2010–6 I.R.B.

3. Agency Relationship Under CodeSection 3504

Section 3504 of the Code authorizes theSecretary of the Treasury to promulgateregulations to authorize an agent to per-form certain specified acts required of em-ployers. Under section 3504, all provi-sions of law (including penalties) appli-cable with respect to employers are ap-plicable to the agent and remain applica-ble to the employer. Accordingly, boththe agent and employer are liable for theemployment taxes and penalties associatedwith the employer’s employment tax obli-gations undertaken by the agent. Section31.3504–1 of the Employment Tax Regu-lations provides that the IRS may authorizean agent to undertake the employment taxobligations of an employer with respect toincome tax withholding and FICA taxes.The agent is required to file only one re-turn for each tax return period using theagent’s own employer identification num-ber (EIN) regardless of the number of em-ployers for whom the agent acts. The cur-rent regulations do not authorize an agentto undertake the employment tax obliga-tions of an employer with respect to theFUTA tax. Thus, an authorized agent canact on behalf of the employer for incometax withholding and FICA tax purposes,but the employer must continue to meet itsemployment tax obligations with respectto FUTA tax.

4. Home Care Service Recipients

Federal, state, and local governmentsfund programs to provide elderly or dis-abled individuals with services to as-sist them with health care or other per-sonal needs in their homes or commu-nities. Following an evolution in policythat seeks to empower the individualsreceiving services to have autonomy,these programs generally give the ser-vice recipients discretion in selectingthe service providers and directing theiractivities. See Deficit Reduction Actof 2005 section 6071(d)(2)(C)(ii), 120Stat. at 108 (providing that the Sec-retary of Health and Human Servicesshall give preference when awardinggrants to state applications proposingto provide eligible individuals with theopportunity to receive home and com-munity-based long-term care services as

self-directed services); also see “Roadmapto Medicaid Reform,” Centers for Medi-care and Medicaid Services, availableat http://www.cms.hhs.gov/smdl/down-loads/Rvltcneeds.pdf. The programs au-thorize the use of certain intermediariesto serve as agents to disburse paymentsto service providers on the service recip-ient’s behalf. The federal, state, or localgovernment agencies that administer theseprograms screen intermediaries beforethey are entrusted with funds to pay forthe services. Intermediaries can be publicor private entities. Many are nonprofitorganizations. The IRS addressed ques-tions with regard to certain intermediariesworking with state or local governmentagencies in previous guidance. See No-tice 2003–70, 2003–2 C.B. 916. See§601.601(d)(2).

The service recipient is generally theemployer of the individuals providing theservices for employment tax purposes.However the Service recognizes that thereare some government programs underwhich parents, grandparents, or guardianswho are engaged in providing care for adisabled child or grandchild receive fund-ing that do not give rise to an employmentrelationship between the service recipi-ent and the care provider. Although theservices generally constitute domestic ser-vices under section 3401(a)(3) such thatincome tax withholding is not required,FICA tax and FUTA tax must still be paidsubject to the applicable thresholds, andsome service recipients and their serviceproviders may agree to voluntarily with-hold income tax under section 3402(p). Inrecent years, many home care service re-cipients have applied to designate the inter-mediary that arranges to pay their serviceproviders as an agent under section 3504so that the intermediary can withhold, re-port, and pay income tax withholding andFICA tax on the service recipient’s behalf.Designating these intermediaries as agentsreduces the administrative burden on theservice recipient who may not otherwisehave an obligation to report, file, or payemployment taxes. The intermediarieshave access to training in compliance withemployment tax requirements and havethe payroll information from the paymentsthey make to the service providers. Anintermediary that is designated as an agentcan efficiently handle reporting, filing,and paying income tax withholding and

FICA on behalf of multiple service recipi-ents on a single return. A service recipientcan complete the application to designatethe intermediary as agent at the time therecipient enrolls with the intermediary.

Under the current regulations, a servicerecipient can designate an intermediary asagent to handle income tax withholdingand FICA but cannot designate an inter-mediary as agent to pay FUTA tax andfile FUTA returns. As a result, separateFUTA returns must be prepared for thou-sands of individual service recipients re-porting small amounts of wages and FUTAtax.

Explanation of Provisions

These proposed regulations wouldamend the current regulations to allow ahome care service recipient to designatean agent under section 3504 to report, file,and pay all employment taxes, includingFUTA. This change will allow an inter-mediary to file a single FUTA return onbehalf of multiple home care service re-cipients as the intermediary does currentlywith respect to income tax withholdingand FICA.

Specifically, the proposed regulationwould amend the employment tax regula-tions under section 3504 to provide that theIRS may authorize a party to act as agenton behalf of employers who are home careservice recipients with respect to FUTAtaxes imposed on wages paid for homecare services, provided that the party hasbeen authorized to act as an agent for thosehome care service recipients for incometax withholding and FICA tax purposes.The agent is permitted to act for FUTA taxpurposes only on behalf of employers whoare home care service recipients, and notfor any other type of employer on whosebehalf the agent is authorized to act forincome tax withholding and FICA tax pur-poses. Additionally, the agent is permittedto act as an agent for FUTA tax purposesonly with respect to wages paid for homecare services rendered to the home careservice recipient.

These regulations propose to define theterm home care service recipient as an in-dividual who is an enrolled participant in aprogram administered by a Federal, state,or local government agency that providesFederal, state, or local government fundsto pay, in whole or in part, for the pro-

2010–6 I.R.B. 399 February 8, 2010

vision of home care services, as definedin the proposed regulations. A participantqualifies as a home care service recipientwhile enrolled in such a program and un-til the end of the calendar year in which theparticipant ceases to be enrolled in the pro-gram. In all such programs, intermediarieswho are engaged to assist beneficiaries toreceive and distribute funds on the benefi-ciaries’ behalf are reviewed and approvedby a state or local government agency.

These regulations propose to definehome care services to include health careand personal attendant care services ren-dered to a home care service recipientin his home or local community. Ser-vices provided outside the home careservice recipient’s private home may qual-ify as home care services for purposes ofthese regulations even if the services donot qualify as domestic service in a pri-vate home of the employer for purposesof sections 3121(a)(7), 3306(c)(2), and3401(a)(3), so long as the services are pro-vided within the service recipient’s localcommunity.

Because section 3504 provides that allprovisions of law applicable to an em-ployer apply to the agent, the agent canreport on its aggregate FUTA tax returnthe state unemployment contributions paidinto a state unemployment fund on thehome care service recipient’s behalf asa credit under section 3302 against theFUTA tax. The credit can be reported bythe agent regardless of whether the stateunemployment contributions are made un-der the name and state identifying numberof the home care service recipient or theagent.

These regulations also propose amend-ments to modify the existing regulationsunder section 3504 to be consistent withthe organizational structure of the IRS andto update the citation to the Internal Rev-enue Code of 1986.

Proposed Effective Date

These regulations are proposed to ap-ply to wages paid on or after January 1of the calendar year following the date ofpublication of a Treasury decision adopt-ing these rules as final regulations in theFederal Register. Taxpayers may relyon these proposed regulations for guid-ance pending the issuance of final reg-ulations. Additionally, pursuant to sec-

tion 7805(b)(7), taxpayers may apply theseproposed regulations to all taxable yearsfor which a valid designation as an agenthas been in effect under §31.3504–1(a) ofthe Employment Tax Regulations. Thus,prior to publication of a Treasury decisionadopting these rules as final regulations,any party already authorized under section3504 to serve as an agent for a home careservice recipient, as defined in the pro-posed regulations, or with an applicationpending, will not need to file any addi-tional application in order to expand thescope of the agency to cover FUTA taxes.

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 also has beendetermined that section 553(b) of the Ad-ministrative Procedure Act (5 U.S.C. chap-ter 5) does not apply to this regulation, andbecause the regulation does not impose acollection of information on small entities,the Regulatory Flexibility Act (5 U.S.C.chapter 6) does not apply. Pursuant to sec-tion 7805(f) of the Internal Revenue Code,this regulation has been submitted to theChief Counsel for Advocacy of the SmallBusiness Administration for comment onits impact on small business.

Comments and Requests for PublicHearing

Before these proposed regulations areadopted as final regulations, considerationwill be given to any written or electroniccomments that are submitted timely to theIRS. The Treasury Department and the IRSspecifically request comments on the clar-ity of the proposed regulations and howthey can be made easier to understand. Allcomments will be available for public in-spection and copying. A public hearingwill be scheduled and held upon written re-quest by any person who submits writtencomments on the proposed regulation. If apublic hearing is scheduled, notice of thetime and place for the hearing will be pub-lished in the Federal Register.


The principal author of these proposedregulations is Selvan Boominathan, Of-

fice of Division Counsel/Associate ChiefCounsel (Tax Exempt and GovernmentEntities), Internal Revenue Service. How-ever, personnel from other offices of theIRS and Treasury participated in their de-velopment.

* * * * *

Proposed Amendments to theRegulations

Accordingly, 26 CFR part 31 is pro-posed to be amended as follows:

PART 31—EMPLOYMENT TAXESAND COLLECTION OF INCOME TAXAT SOURCE

Paragraph 1. The authority citation forpart 31 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Par.2. Section 31.3504–1 is revised to

read as follows:

§31.3504–1 Designation of Agent byApplication.

(a) In general. In the event wages asdefined in chapter 21 or 24 of the Inter-nal Revenue Code of 1986, or compensa-tion as defined in chapter 22 of the Code,of an employee or group of employees,employed by one or more employers, ispaid by a fiduciary, agent, or other per-son (“agent”), or if that agent has the con-trol, receipt, custody, or disposal of thosewages, or compensation, the Internal Rev-enue Service may, subject to the termsand conditions as it deems proper, autho-rize that agent to perform the acts requiredof the employer or employers under thoseprovisions of the Code and the regulationswhich have application, for purposes of thetaxes imposed by the chapter or chapters,in respect of the wages or compensation. Ifthe agent is authorized by the Internal Rev-enue Service to perform such acts, all pro-visions of law (including penalties) and ofthe regulations applicable to an employershall be applicable to the agent. How-ever, each employer for whom the agentacts shall remain subject to all provisionsof law (including penalties) and of the reg-ulations applicable to an employer. Anyapplication to authorize an agent to per-form such acts, signed by the agent andthe employer, shall be made on the formprescribed by the Internal Revenue Service

February 8, 2010 400 2010–6 I.R.B.

and shall be filed with the Internal Rev-enue Service as prescribed in the instruc-tions to the form and other applicable guid-ance.

(b) Special rule for home care servicerecipients. (1) In general. In the event afiduciary, agent, or other person (“agent”)is authorized pursuant to paragraph (a) ofthis section to perform the acts required ofan employer under chapters 21 or 24 onbehalf of one or more home care servicerecipients, as defined in paragraph (b)(3)of this section, the Internal Revenue Ser-vice may authorize that agent to performthe acts as are required of employers forpurposes of the tax imposed by chapter 23of the Internal Revenue Code of 1986 withrespect to wages paid for home care ser-vices, as defined in paragraph (b)(2) of thissection rendered to the home care servicerecipient. Each home care service recipi-ent for whom the agent performs the actsof an employer and each agent authorizedunder this section to perform the acts of anemployer shall remain subject to all pro-visions of law (including penalties) and ofthe regulations applicable to an employerwith respect to those wages paid.

(2) Home care services. For purposesof this section, the term home care ser-vices includes health care and personal at-tendant care services rendered in the homecare service recipient’s home or local com-munity.

(3) Home care service recipient. Forpurposes of this section, the term homecare service recipient means any individ-ual who receives home care services, asdefined in paragraph (b)(2) of this section,while enrolled, and for the remainder of thecalendar year after ceasing to be enrolled,in a program administered by a Federal,state, or local government agency that pro-vides Federal, state, or local governmentfunds, to pay, in whole or in part, for thehome care services for that individual.

(c) Effective and applicability dates.An authorization under paragraph (a) ofthis section in effect prior to the date ofpublication of a Treasury decision adopt-ing these rules as final regulations in theFederal Register continues to be in effectafter that date. Paragraph (b) of this sec-tion applies to wages paid on or after Jan-uary 1 of the calendar year following thedate of publication of a Treasury decisionadopting these rules as final regulations inthe Federal Register. However, pursuant

to section 7805(b), taxpayers may rely onparagraph (b) of this section for all taxableyears for which a valid designation is ineffect under paragraph (a) of this section.

Linda M. Kroening,Acting Deputy Commissionerfor Services and Enforcement.

(Filed by the Office of the Federal Register on January 12,2010, 8:45 a.m., and published in the issue of the FederalRegister for January 13, 2010, 75 F.R. 1735)

Notice of ProposedRulemaking byCross-Reference toTemporary Regulations

Use of Controlled Corporationsto Avoid the Application ofSection 304

REG–132232–08


ACTION: Notice of proposed rulemakingby cross-reference to temporary regula-tions.

SUMMARY: In this issue of the Bulletin,the IRS and the Treasury Department areissuing temporary regulations (T.D. 9477)under section 304 of the Internal RevenueCode (Code). The temporary regulationsapply to certain transactions that are sub-ject to section 304 but that are entered intowith a principal purpose of avoiding theapplication of section 304 to a corporationcontrolled by the issuing corporation in thetransaction, or to a corporation that con-trols the acquiring corporation in the trans-action. The temporary regulations affectshareholders treated as receiving distribu-tions in redemption of stock by reason ofsection 304. The text of temporary regula-tions published in this issue of the Bulletinserves as the text of these proposed regu-lations.

DATES: Written or electronic commentsand requests for a public hearing must bereceived by March 30, 2010.

ADDRESSES: Send submissions to:CC:PA:LPD:PR (REG–132232–08), room5203, Internal Revenue Service, P.O. Box

7604, 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–132232–08),Courier’s Desk, Internal RevenueService, 1111 Constitution Avenue NW,Washington, DC, or sent electronicallyvia the Federal eRulemaking Portalat http://www.regulations.gov (IRSREG–132232–08).

FOR FURTHER INFORMATIONCONTACT: Concerning the proposedregulations, Sean W. Mullaney, (202)622–3860; concerning submissionsof comments or requests for a pub-lic hearing, Richard Hurst at (202)622–7180 (not toll-free numbers) [email protected].


Background and Explanation ofProvisions

Temporary regulations in this issue ofthe Bulletin amend the Income Tax Regu-lations (26 CFR part 1) relating to section304 of the Code. The text of the tempo-rary regulations serves as the text of theseproposed regulations. The preamble to thetemporary regulations explains the tempo-rary regulations and these proposed regu-lations.

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a signifi-cant regulatory action as defined in Ex-ecutive Order 12866. Therefore, a reg-ulatory assessment is not required. It ishereby certified that the collections of in-formation contained in these regulationswill not have a significant economic im-pact on a substantial number of small en-tities. Accordingly, a regulatory flexibilityanalysis is not required. These regulationsprimarily will affect United States personsthat are large corporations engaged in cor-porate transactions among their controlledcorporations. Thus, the number of affectedsmall entities—in whichever of the threecategories defined in the Regulatory Flex-ibility Act (small businesses, small organi-zations, and small governmental jurisdic-tions)—will not be substantial. The IRSand the Treasury Department estimate that

2010–6 I.R.B. 401 February 8, 2010

small organizations and small governmen-tal jurisdictions are likely to be affectedonly insofar as they transfer the stock ofa controlled corporation to a related cor-poration. While a certain number of smallentities may engage in such transactions,the IRS and the Treasury Department donot anticipate the number to be substantial.Pursuant to section 7805(f) of the Code,this regulation has been submitted to theChief Counsel for Advocacy of the SmallBusiness Administration for comment onits impact on small business.

Comments and Requests for a PublicHearing

Before these proposed regulations areadopted as final regulations, considerationwill be given to any electronic or writtencomments (a signed original and eight (8)copies) that are submitted timely to theIRS. The IRS and the Treasury Depart-ment specifically request comments on theclarity of the proposed rules and how theycan be made easier to understand. Com-ments are also requested as to whether theregulations should include factors that areindicative of a principal purpose, or lackof a principal purpose, to avoid the ap-plication of section 304. If such factorsshould be included, specific examples arerequested. See, for example, Prop. Treas.Reg. §1.987–2(b)(3)(ii) and (iii).

All comments will be available for pub-lic inspection and copying. A public hear-ing will be scheduled if requested in writ-ing by any person that timely submits writ-ten comments. If a public hearing is sched-uled, notice of the date, time, and place forthe public hearing will be published in theFederal Register.


The principal author of these proposedregulations is Sean W. Mullaney of the Of-fice of Associate Chief Counsel (Interna-tional). However, other personnel from theIRS and the Treasury Department partici-pated in their development.

* * * * *

Proposed Amendments to theRegulations

Accordingly, 26 CFR part 1 is proposedto be amended as follows:


Paragraph 1. The authority citation forpart 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 1.304–4 is revised to

read as follows:

§1.304–4 Special rule for the useof related corporations to avoid theapplication of section 304.

[The text of proposed §1.304–4 is thesame as the text of §1.304–4T(a) through(d) published elsewhere in this issue of theBulletin].

Linda E. Stiff,Deputy Commissioner forServices and Enforcement.

(Filed by the Office of the Federal Register on December 29,2009, 8:45 a.m., and published in the issue of the FederalRegister for December 30, 2009, 74 F.R. 69043)

Correction to an ErroneousCross-Reference in RevenueProcedure 2010–1, 2010–1I.R.B. 1

Announcement 2010–5

This document contains a correctionto Revenue Procedure 2010–1, 2010–1I.R.B. 1, which contained an incorrectinternal cross-reference.

Section 8.08(2)(b) incorrectly read:“For a § 301.9100 letter ruling request

for an extension of time to file an entityclassification election for multiple entitiesqualifying under section 15.07(4) for theuser fee provided in paragraph (A)(5)(d)of Appendix A of this revenue procedure,the Associate office generally will issue asingle letter on behalf of all entities that arethe subject of the request. The taxpayermay request that separate letters be issuedto each entity that are the subject of therequest. See generally section 5.03 of thisrevenue procedure.”

Section 8.08(2)(b) should have read:“For a § 301.9100 letter ruling request

for an extension of time to file an entityclassification election for multiple entitiesqualifying under section 15.07(2) for theuser fee provided in paragraph (A)(5)(a)of Appendix A of this revenue procedure,the Associate office generally will issue asingle letter on behalf of all entities that are

the subject of the request. The taxpayermay request that separate letters be issuedto each entity that are the subject of therequest. See generally section 5.03 of thisrevenue procedure.”

For further information regard-ing this announcement, contactGregory T. Armstrong at (202) 622–7950(not a toll-free call).

Damages Received onAccount of Personal PhysicalInjuries or Physical Sickness;Hearing



ACTION: Notice of public hearing on pro-posed rulemaking.

SUMMARY: This document provides no-tice of public hearing on a notice of pro-posed rulemaking (REG–127270–06) re-lating to the exclusion from gross incomefor amounts received on account of per-sonal physical injuries or physical sick-ness.

DATES: The public hearing is being heldon Tuesday, February 23, 2010, at 10 a.m.The IRS must receive outlines of the topicsto be discussed at the hearing by Tuesday,February 2, 2010.

ADDRESSES: The public hearing is be-ing held in room 2615, Internal RevenueBuilding, 1111 Constitution Avenue, NW,Washington, DC. Send submissions to:CC:PA:LPD:PR (REG–127270–06), room5203, Internal Revenue Service, P.O. 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–127270–06),Courier’s Desk, Internal Revenue Service,1111 Constitution Avenue, NW, Wash-ington, DC. Alternatively, taxpayers maysubmit electronic outlines of oral com-ments via the Federal eRulemaking Portalat http://www.regulations.gov.

FOR FURTHER INFORMATIONCONTACT: Concerning the regu-lations, Sheldon A. Iskow at (202)

February 8, 2010 402 2010–6 I.R.B.

622–4920; concerning submissions ofcomments, the hearing, and/or to beplaced on the building access list to at-tend the hearing, Richard A. Hurst [email protected] or(202) 622–7180 (not toll-free numbers).


The subject of the public hearingis the notice of proposed rulemaking(REG–127270–06, 2009–42 I.R.B. 534)that was published in the Federal Regis-ter on Tuesday, September 15, 2009 (74FR 47152).

Persons, who wish to present oral com-ments at the hearing that submitted writ-ten comments, must submit an outline ofthe topics to be discussed and the amountof time to be devoted to each topic (signedoriginal and eight (8) copies) by February2, 2010.

A period of 10 minutes is allotted toeach person for presenting oral comments.After the deadline for receiving out-lines has passed, the IRS will prepare anagenda containing the schedule of speak-ers. Copies of the agenda will be madeavailable, free of charge, at the hearing orin the Freedom of Information ReadingRoom (FOIA RR) (Room 1621) whichis located at the 11th and PennsylvaniaAvenue NW entrance, 1111 ConstitutionAvenue, NW, Washington, DC.

Because of access restrictions, the IRSwill not admit visitors beyond the imme-diate entrance area more than 30 minutesbefore the hearing starts. For informa-tion about having your name placed on thebuilding access list to attend the hearing,see the FOR FURTHER INFORMATIONCONTACT section of this document.

LaNita Van Dyke,Chief, Publications and

Regulations Branch,Legal Processing Division,

Associate Chief Counsel(Procedure and Administration).


Modification to ConsolidatedReturn Regulation Permittingan Election to Treat aLiquidation of a Target,Followed by a Recontributionto a New Target, as aCross-Chain Reorganization



ACTION: Correcting amendment.

Summary: This document contains a cor-rection to temporary regulations (T.D.9458, 2009–43 I.R.B. 547), which werepublished in the Federal Register on Fri-day, September 4, 2009 (74 FR 45757)relating to modification to consolidatedreturn regulation permitting an electionto treat a liquidation of a target, followedby a recontribution to a new target, as across-chain reorganization.

DATES: The correction is effective on Jan-uary 13, 2010 and is applicable beginningSeptember 4, 2009.

FOR FURTHER INFORMATIONCONTACT: Guy Traynor at (202)622–3693 (not a toll-free number).

SUPPLEMENTARY INFORATION:

Background

The temporary regulation that is thesubject to this correction is under section1502 of the Internal Revenue Code.

Need for Correction

As published, temporary regulations(T.D. 9458), contains an error which may

prove to be misleading and is in need ofclarification.

* * * * *

Correction of Publication

Accordingly, 26 CFR part 1 is cor-rected by making the following correctingamendment.


Paragraph 1. The authority for part 1continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Par. 2. Paragraph (f)(5)(ii)(G)

needs to be added following paragraph(f)(5)(ii)(F)(3), to read as follows:

§1.1502–13T Intercompany transactions(temporary).

* * * * *(f) * * *(5) * * *(ii) * * *(G) Expiration date. Paragraphs

(f)(5)(ii)(B), (B)(1), (B)(2) and (F)(1),(2), and (3) of this section will expire onSeptember 3, 2012.

* * * * *

Guy R. Traynor,Federal Register Liaison,

Publications & Regulations Branch,Legal Processing Division,

Associate Chief Counsel(Procedure & Administration).


2010–6 I.R.B. 403 February 8, 2010

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 situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome of casesin litigation, or the outcome of a Servicestudy.

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.

February 8, 2010 i 2010–6 I.R.B.

Numerical Finding List1

Bulletins 2010–1 through 2010–6

Announcements:

2010-1, 2010-4 I.R.B. 333

2010-2, 2010-2 I.R.B. 271

2010-3, 2010-4 I.R.B. 333

2010-4, 2010-5 I.R.B. 384

2010-5, 2010-6 I.R.B. 402

2010-6, 2010-6 I.R.B. 402

2010-7, 2010-6 I.R.B. 403

Notices:

2010-1, 2010-2 I.R.B. 251

2010-2, 2010-2 I.R.B. 251

2010-3, 2010-2 I.R.B. 253

2010-4, 2010-2 I.R.B. 253

2010-5, 2010-2 I.R.B. 256

2010-6, 2010-3 I.R.B. 275

2010-7, 2010-3 I.R.B. 296

2010-8, 2010-3 I.R.B. 297

2010-9, 2010-3 I.R.B. 298

2010-10, 2010-3 I.R.B. 299

2010-11, 2010-4 I.R.B. 326

2010-12, 2010-4 I.R.B. 326

2010-13, 2010-4 I.R.B. 327

2010-14, 2010-5 I.R.B. 344

2010-15, 2010-6 I.R.B. 390

2010-16, 2010-6 I.R.B. 396

Proposed Regulations:

REG-132232-08, 2010-6 I.R.B. 401

REG-137036-08, 2010-6 I.R.B. 398

REG-101896-09, 2010-5 I.R.B. 347

REG-131028-09, 2010-4 I.R.B. 332

Revenue Procedures:

2010-1, 2010-1 I.R.B. 1

2010-2, 2010-1 I.R.B. 90

2010-3, 2010-1 I.R.B. 110

2010-4, 2010-1 I.R.B. 122

2010-5, 2010-1 I.R.B. 165

2010-6, 2010-1 I.R.B. 193

2010-7, 2010-1 I.R.B. 231

2010-8, 2010-1 I.R.B. 234

2010-9, 2010-2 I.R.B. 258

2010-10, 2010-3 I.R.B. 300

2010-11, 2010-2 I.R.B. 269

2010-12, 2010-3 I.R.B. 302

2010-13, 2010-4 I.R.B. 329

Revenue Rulings:

2010-1, 2010-2 I.R.B. 248

2010-2, 2010-3 I.R.B. 272

2010-3, 2010-3 I.R.B. 272

Revenue Rulings— Continued:

2010-4, 2010-4 I.R.B. 309

2010-5, 2010-4 I.R.B. 312

2010-6, 2010-6 I.R.B. 387

Treasury Decisions:

9474, 2010-4 I.R.B. 322

9475, 2010-4 I.R.B. 304

9476, 2010-5 I.R.B. 336

9477, 2010-6 I.R.B. 385

9478, 2010-4 I.R.B. 315

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin2009–52, dated December 28, 2009.

2010–6 I.R.B. ii February 8, 2010

Finding List of Current Actions onPreviously Published Items1

Bulletins 2010–1 through 2010–6

Notices:

2005-88

Superseded by

Notice 2010-13, 2010-4 I.R.B. 327

2008-41

Modified by

Notice 2010-7, 2010-3 I.R.B. 296

2008-55

Modified by

Notice 2010-3, 2010-2 I.R.B. 253

2008-88

Modified by

Notice 2010-7, 2010-3 I.R.B. 296

2008-113

Modified by

Notice 2010-6, 2010-3 I.R.B. 275

2008-115

Modified by

Notice 2010-6, 2010-3 I.R.B. 275

2009-11

Amplified by

Notice 2010-9, 2010-3 I.R.B. 298

2009-13

Obsoleted by

T.D. 9478, 2010-4 I.R.B. 315REG-131028-09, 2010-4 I.R.B. 332

2009-38

Amplified and superseded by

Notice 2010-2, 2010-2 I.R.B. 251

Proposed Regulations:

REG-127270-06

Hearing scheduled by

Ann. 2010-6, 2010-6 I.R.B. 402

Revenue Procedures:

80-59

Modified and superseded by

Rev. Proc. 2010-11, 2010-2 I.R.B. 269

87-35

Obsoleted by

Rev. Proc. 2010-3, 2010-1 I.R.B. 110

2009-1

Superseded by

Rev. Proc. 2010-1, 2010-1 I.R.B. 1

2009-2

Superseded by

Rev. Proc. 2010-2, 2010-1 I.R.B. 90

Revenue Procedures— Continued:

2009-3

Superseded by

Rev. Proc. 2010-3, 2010-1 I.R.B. 110

2009-4

Superseded by

Rev. Proc. 2010-4, 2010-1 I.R.B. 122

2009-5

Superseded by

Rev. Proc. 2010-5, 2010-1 I.R.B. 165

2009-6

Superseded by

Rev. Proc. 2010-6, 2010-1 I.R.B. 193

2009-7

Superseded by

Rev. Proc. 2010-7, 2010-1 I.R.B. 231

2009-8

Superseded by

Rev. Proc. 2010-8, 2010-1 I.R.B. 234

2009-9

Superseded by

Rev. Proc. 2010-9, 2010-2 I.R.B. 258

2009-15

Amplified and superseded by

Rev. Proc. 2010-12, 2010-3 I.R.B. 302

2009-25

Superseded by

Rev. Proc. 2010-3, 2010-1 I.R.B. 110

2010-1

Corrected by

Ann. 2010-5, 2010-6 I.R.B. 402

Revenue Rulings:

67-436

Obsoleted by

REG-101896-09, 2010-5 I.R.B. 347

2008-52

Supplemented and superseded by

Rev. Rul. 2010-2, 2010-3 I.R.B. 272

Treasury Decisions:

9458

Corrected by

Ann. 2010-7, 2010-6 I.R.B. 403

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,2009.

February 8, 2010 iii 2010–6 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

Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-tendent of Documents when their subscriptions must be renewed.

CUMULATIVE BULLETINSThe contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are

sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weeklyBulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of printand are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from theSuperintendent of Documents.

ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNETYou may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select

More Topics. Then select Internal Revenue Bulletins.

INTERNAL REVENUE BULLETINS ON CD-ROMInternal Revenue Bulletins are available annually as part of Publication 1796 (Tax Products CD-ROM). The CD-ROM can be

purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.

HOW TO ORDERCheck the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,

detach entire page, and mail to the Superintendent of Documents, P.O. Box 371954, Pittsburgh PA, 15250–7954. Please allow two tosix weeks, plus mailing time, for delivery.

WE WELCOME COMMENTS ABOUT THE INTERNALREVENUE BULLETIN

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, wewould be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov)or write to the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224.

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