Part IV. Items — Internal Revenue Bulletin 1996-42

Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

The collection of information in this proposed regulation is in § 1.671– 1(h)(3)(iii). This information is required by the IRS to determine accurately the portion of certain foreign employees’ trusts properly treated as owned by the employer. This information will be used to notify the Commissioner that certain entities are relying on an exception for reasonable funding. The collection of information is mandatory. The likely respondents are businesses or other forprofit organizations.

Estimated total annual reporting burden: 1,000 hours.

The estimated annual burden per respondent varies from .5 hours to 1.5 hours, depending on individual circumstances, with an estimated average of 1 hour.

Estimated number of respondents: 1,000. Estimated annual frequency of responses: On occasion.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

Background

On May 7, 1993, the IRS issued proposed regulations under section 404A (58 FR 27219). The section 404A proposed regulations provide that section 404A is the exclusive means by which an employer may take a deduction or reduce earnings and profits for amounts used to fund deferred compensation in situations other than those in which a deduction or reduction of earnings and profits is permitted under section 404 (the ‘‘exclusive means’’ rule).

The section 404A proposed regulations do not provide rules regarding the treatment of income and ownership of assets of foreign trusts established to fund deferred compensation arrangements, but refer to ‘‘other applicable

Notice of Proposed Rulemaking and Notice of Public Hearing

Application of the Grantor Trust Rules to Nonexempt Employees’ Trusts

REG–209826–96

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document contains proposed regulations relating to the application of the grantor trust rules to nonexempt employees’ trusts. The proposed regulations clarify that the grantor trust rules generally do not apply to domestic nonexempt employees’ trusts, and clarify the interaction between the grantor trust rules, the rules generally governing the taxation of nonqualified deferred compensation arrangements, and the antideferral rules for United States persons holding interests in foreign entities. The proposed regulations affect nonexempt employees’ trusts funding deferred compensation arrangements, as well as U.S. persons holding interests in certain foreign corporations and foreign partnerships with deferred compensation arrangements funded through foreign nonexempt employees’ trusts. In addition, the proposed regulations affect U.S. persons that have deferred compensation arrangements funded through certain foreign nonexempt employees’ trusts. This document also provides notice of a public hearing on these proposed regulations.

DATES: Written comments must be received by December 26, 1996. Requests to speak (with outlines of oral comments to be discussed) at the public hearing scheduled for January 15, 1997, at 10:00 a.m. must be submitted by December 24, 1996.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG–209826–96), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG– 209826–96), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. The public hearing will be held in room 2615, Internal Revenue Building, 1111

Constitution Avenue, NW., Washington, DC. Alternatively, taxpayers may submit comments electronically via the Internet by selecting the ‘‘Tax Regs’’ option on the IRS Home Page, or by submitting comments directly to the IRS Internet site at http://www.irs.ustreas.gov/prod/ tax_regs/comments.html.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, James A. Quinn, (202) 622–3060; Linda S. F. Marshall, (202) 622– 6030; Kristine K. Schlaman (202) 622–3840; and M. Grace Fleeman (202) 622–3850; concerning submissions and the hearing, Michael Slaughter, (202) 622–7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Rev- enue Service, Attn: IRS Reports Clearance Officer, T:FP, Washington, DC 20224. Comments on the collection of information should be received by November 26, 1996. Comments are specifically requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Internal Revenue Service, including whether the information will have practical utility; The accuracy of the estimated burden associated with the proposed collection of information (see below); How the quality, utility, and clarity of the information to be collected may be enhanced; How the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and

provisions,’’ including the grantor trust rules of subpart E of the Internal Revenue Code of 1986, as amended. Thus, the 1993 proposed section 404A regulations imply that, if an employer cannot or does not elect section 404A treatment for a foreign trust established to fund the employer’s deferred compensation arrangements, the employer may be treated as the owner of the entire trust for purposes of subtitle A of the Code under sections 671 through 679 even though all or part of the trust assets are set aside for purposes of satisfying liabilities under the plan. Conversely, some commentators believe that, for U.S. tax purposes, a foreign employer would not be treated as the owner of any portion of a foreign trust established to fund a section 404A qualified foreign plan even though all or part of the trust assets might be used for purposes other than satisfying liabilities under the plan. A number of different rules, in addition to the grantor trust rules, potentially affect the taxation of foreign trusts established to fund deferred compensation arrangements. These rules include: the nonexempt deferred compensation trust rules of sections 402(b) and 404(a)(5); the partnership rules of subchapter K; and the antideferral rules, which include subpart F and the passive foreign investment company (PFIC) rules (sections 1291 through 1297). Following publication of the proposed 1993 regulations and enactment of section 956A in August of 1993, comments were received concerning both the asset ownership rules for foreign employees’ trusts and the ‘‘exclusive means’’ rule for deductions or reductions in earnings and profits. These proposed regulations address only comments concerning income and asset ownership rules for foreign employees’ trusts for federal income tax purposes. A foreign employees’ trust is a nonexempt employees’ trust described in section 402(b) that is part of a deferred compensation plan, and that is a foreign trust within the meaning of section 7701(a)(31). Comments concerning the ‘‘exclusive means’’ rule will be addressed in future regulations.

Statutory Background

1. Transfers of Property Not Complete for Tax Purposes

In certain situations, assets that are owned by a trust as a legal matter may be treated as owned by another person for tax purposes. Thus, assets may be

treated as owned by a pension trust for non-tax legal purposes but not for tax purposes. This occurs, for example, if the person who has purportedly transferred assets to the trust retains the benefits and burdens of ownership. See, e.g., Frank Lyon Co. v. United States, 435 U.S. 561 (1978); Corliss v. Bowers, 281 U.S. 376 (1930); Grodt & McKay Realty, Inc. v. Commissioner, 77 T.C. 1221 (1981); Rev. Proc. 75–21 (1975–1 C.B. 715). If, under these principles, no assets have been transferred to an employees’ trust for federal tax purposes, these proposed regulations do not apply.

2. Subpart E—Grantors and others treated as substantial owners

Even if there has been a completed transfer of trust assets, the subpart E rules may apply to treat the grantor as the owner of a portion of the trust for federal income tax purposes. Subpart E of part I of subchapter J, chapter 1 of the Code (sections 671 through 679) taxes income of a trust to the grantor or another person notwithstanding that the grantor or other person may not be a beneficiary of the trust. Under section 671, a grantor or another person includes in computing taxable income and credits those items of income, deduction, and credit against tax that are attributable to or included in any portion of a trust of which that person is treated as the owner.

Sections 673 through 679 set forth the rules for determining when the grantor or another person is treated as the owner of a portion of a trust for federal income tax purposes. Under sections 673 through 678, the grantor trust rules apply only if the grantor or other person has certain powers or interests. For example, section 676 provides that the grantor is treated as the owner of a portion of a trust where, at any time, the power to revest in the grantor title to that portion is exercisable by the grantor or a nonadverse party, or both. A grantor who is the owner of a trust under subpart E is treated as the owner of the trust property for federal income tax purposes. See Rev. Rul. 85–13 (1985–1 C.B. 184). This document is made available by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

Section 679 generally applies to a U.S. person who directly or indirectly transfers property to a foreign trust, subject to certain exceptions described below. Section 679 generally treats a U.S. person transferring property to a

3. Taxability of beneficiary of nonexempt employees’ trust

Section 402(b) provides rules for the taxability of beneficiaries of a nonexempt employees’ trust. Under section 402(b)(1), employer contributions to a nonexempt employees’ trust generally are included in the gross income of the employee in accordance with section 83. Section 402(b)(2) provides that amounts distributed or made available from a nonexempt employees’ trust generally are taxable to the distributee under the rules of section 72 in the taxable year in which distributed or made available. Section 402(b)(4) provides that, under certain circumstances, a highly compensated employee is taxed each year on the employee’s vested accrued benefit (other than the employee’s investment in the contract) in a nonexempt employees’ trust. Under section 402(b)(3), a beneficiary of a nonexempt employees’ trust generally is not treated as the owner of any portion of the trust under subpart E. The rules of section 402(b) apply to a beneficiary of a nonexempt employees’

foreign trust as the owner of the portion of the trust attributable to the transferred property for any taxable year of that person for which there is a U.S. beneficiary of any portion of the trust. In general, a trust is treated as having a U.S. beneficiary for a taxable year of the U.S. transferor unless, under the terms of the trust, no part of the income or corpus of the trust may be paid or accumulated during the taxable year to or for the benefit of a U.S. person, and unless no part of the income or corpus of the trust could be paid to or for the benefit of a U.S. person if the trust were terminated at any time during the taxable year. A U.S. person is treated as having made an indirect transfer to the foreign trust of property if a non-U.S. person acts as a conduit with respect to the transfer or if the U.S. person has sufficient control over the non-U.S. person to direct the transfer by the nonU.S. person rather than itself.

Section 679(a) provides several exceptions from the application of section 679 for certain compensatory trusts. Under these exceptions, section 679 does not apply to a trust described in section 404(a)(4) or section 404A. Pursuant to amendments made in section 1903(b) of the Small Business Job Protection Act of 1996 (SBJPA), section 679 also does not apply to any transfer of property after February 6, 1995, to a trust described in section 402(b).

trust regardless of whether the trust is a domestic trust or a foreign trust.

4. Employer deduction for contributions to a nonexempt employees’ trust

Section 404(a)(5) provides rules regarding the deductibility of contributions to a nonqualified deferred compensation plan. Under section 404(a)(5), any contribution paid by an employer under a deferred compensation plan, if otherwise deductible under chapter 1 of the Code, is deductible only in the taxable year in which an amount attributable to the contribution is includible in the gross income of employees participating in the plan, and only if separate accounts are maintained for each employee. Section 1.404(a)–12(b)(1) clarifies that an employer’s deduction for contributions to a nonexempt employees’ trust is restricted to the amount of the contribution, and excludes any income received by the trust with respect to contributed amounts.

5. The partnership rules of subchapter K

A partnership is not subject to income taxation. However, a partner must take into account separately on its return its distributive share of the partnership’s income, gain, loss, deduction, or credit. A U.S. partner of a foreign partnership is subject to U.S. tax on its distributive share of partnership income. In addition, a foreign partnership may have a controlled foreign corporation (CFC) partner which must take into account its distributive share of partnership income, gain, loss, or deduction in determining its taxable income. These distributive share inclusions of the CFC may result in subpart F income and thus income to a U.S. shareholder of the CFC. If the grantor trust rules do not apply to any portion of a foreign employees’ trust, a foreign partnership could fund a foreign employees’ trust in excess of the amount needed to meet its obligations to its employees under its deferred compensation plan and yet retain control over the excess amount. As a result, the foreign partnership would not have to include items in taxable income attributable to the excess amount, and consequently the U.S. partner or CFC would not have to include those items in its income.

6. The antideferral rules of subpart F, including section 956A, and PFIC

A U.S. person that owns stock in a foreign corporation generally pays no U.S. tax currently on income earned by the foreign corporation. Instead, the

United States defers taxation of that income until it is distributed to the U.S. person. The antideferral rules, however, which include subpart F and the PFIC rules, limit this deferral in certain situations.

Subpart F of part III of Subchapter N (sections 951 through 964) applies to CFCs. A foreign corporation is a CFC if more than 50 percent of the total voting power of all classes of stock entitled to vote, or the total value of the stock in the corporation, is owned by ‘‘U.S. shareholders’’ (defined as U.S. persons who own ten percent or more of the voting power of all classes of stock entitled to vote) on any day during the foreign corporation’s taxable year. The United States generally taxes U.S. shareholders of the CFC currently on their pro rata share of the CFC’s subpart F income and sections 956 and 956A amounts. In effect, the U.S. shareholders are treated as having received a distribution out of the earnings and profits (E&P) of the CFC.

The types of income earned by a foreign employees’ trust (dividends, interest, income equivalent to interest, rents and royalties, and annuities) are generally subpart F income. The inclusion under section 956 is based on the CFC’s investment in U.S. property, which generally includes stock of a U.S. shareholder of the CFC. A U.S. shareholder’s section 956A amount for a taxable year is the lesser of two amounts. The first amount is the excess of the U.S. shareholder’s pro rata share of the CFC’s ‘‘excess passive assets’’ over the portion of the CFC’s E&P treated as previously included in gross income by the U.S. shareholder under section 956A. For purposes of section 956A, ‘‘passive asset’’ includes any asset which produces (or is held for the production of) passive income, and generally includes property that produces dividends, interest, income equivalent to interest, rents and royalties, and annuities, subject to exceptions that generally are not relevant in this context. The second amount is the U.S. shareholder’s pro rata share of the CFC’s ‘‘applicable earnings’’ to the extent accumulated in taxable years beginning after September 30, 1993. Section 1501(a)(2) of SBJPA repeals section 956A. The repeal is effective for taxable years of foreign corporations beginning after December 31, 1996, and for taxable years of U.S. shareholders with or within which such taxable years of foreign corporations end.

If a CFC employer is not treated for federal income tax purposes as the owner of any portion of a foreign employees’ trust under the grantor trust rules, then to the extent that passive assets contributed by a CFC to a nonexempt employees’ trust would otherwise result in subpart F consequences for the CFC and its shareholders, the CFC’s contribution could allow those consequences to be avoided. For example, a contribution by a CFC of passive assets to its foreign employees’ trust could reduce the CFC’s subpart F earnings and profits, and its applicable earnings or passive assets for section 956A purposes, and could affect the CFC’s increase in investment in U.S. property for purposes of section 956, all of which could affect a U.S. shareholder’s pro rata subpart F inclusions for the taxable year.

In contrast to the subpart F rules, the PFIC rules apply to any U.S. person who directly or indirectly owns any stock in a foreign corporation that is a PFIC under either an income or asset test. A foreign corporation, including a CFC, is a PFIC if either (1) 75 percent or more of its gross income for the taxable year is passive income or (2) at least 50 percent of the value of the corporation’s assets produce passive income or are held for the production of passive income. For this purpose, passive income generally is the same type of income (dividends, interest, income equivalent to interest, rents and royalties, and annuities) that would be earned by a foreign employees’ trust.

Under the PFIC rules, a U.S. person who is a direct or indirect shareholder of a PFIC is subject to a special tax regime upon either disposition of the PFIC’s stock or receipt of certain distributions (excess distributions) from the PFIC. A shareholder, however, may avoid the application of this special regime by electing to include its pro rata share of certain of the PFIC’s passive income in the year in which the foreign corporation earns it.

If the grantor trust rules did not apply to any portion of a foreign employees’ trust, a contribution by a foreign corporation of passive assets to a nonexempt employees’ trust would enable a U.S. person to avoid the PFIC rules if those assets would otherwise generate PFIC consequences for the foreign corporation and its shareholders. For example, by transferring passive assets to its nonexempt employees’ trust in excess of the amount needed to meet obligations

to its employees under its deferred compensation plan while retaining control over the excess amount, a foreign corporation could divest itself of a sufficient amount of passive assets and the passive income they produce to avoid meeting the income and asset tests. Furthermore, a foreign corporation that is a PFIC could minimize income inclusions for a U.S. shareholder that has made an election to include PFIC income currently by transferring income-producing assets to a foreign employees’ trust.

Overview of proposed regulations

Under the proposed regulations, an employer is not treated as an owner of any portion of a domestic nonexempt employees’ trust described in section 402(b) for federal income tax purposes. Section 404(a)(5) and § 1.404(a)–12(b) provide a deduction to the employer solely for contributions to a nonexempt employees’ trust, and not for any income of the trust. This rule is inconsistent with treating the employer as owning any portion of a nonexempt employees’ trust, which would require the employer to recognize the trust’s income that it may not deduct under section 404(a)(5). Accordingly, such a trust is treated as a separate taxable trust that is taxed under the rules of section 641 et seq. The rule in the proposed regulations is consistent with the holdings of a number of private letter rulings with respect to nonexempt employees’ trusts and with the Service’s treatment of trusts that no longer qualify as exempt under 501(a) (because they are no longer described in section 401(a)) as separate taxable trusts rather than as grantor trusts. See also Rev. Rul. 74– 299 (1974–1 C.B. 154). This document is made available by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

Under the proposed regulations, an employer generally is not treated as the owner of any portion of a foreign nonexempt employees’ trust for federal income tax purposes, except as provided under section 679. The proposed regulations, however, also provide that the grantor trust rules apply to determine whether an employer that is a CFC or a U.S. employer is treated as the owner of a specified ‘‘fractional interest’’ in a foreign employees’ trust. This rule applies whether or not the employer elects section 404A treatment for the trust. Under the proposed regulations, this rule also applies in the case of an employer

that is a foreign partnership with one or more partners that are U.S. persons or CFCs (U.S.-related partnership). Such an employer is treated as the owner of a portion of a foreign employees’ trust under these proposed regulations only if the employer retains a grantor trust power or interest over a foreign employees’ trust and has a specified ‘‘fractional interest’’ in the trust.

Under these proposed regulations, the grantor trust rules of subpart E do not apply to a foreign employees’ trust with respect to a foreign employer other than a CFC or a U.S.-related foreign partnership, except for cases in which assets are transferred to a foreign employees’ trust with a principal purpose of avoiding the PFIC rules. The IRS and Treasury will continue to consider whether these regulations should provide additional antiabuse rules that may be necessary for other purposes, including for purposes of calculating earnings and profits, determining the foreign tax credit limitation, and applying the interest allocation rules of § 1.882–5.

Explanation of provisions

1. § 1.671–1(g): Domestic nonexempt employees’ trusts

The proposed regulations provide that an employer is not treated for federal income tax purposes as an owner of any portion of a nonexempt employees’ trust described in section 402(b) that is part of a deferred compensation plan, and that is not a foreign trust within the meaning of section 7701(a)(31), regardless of whether the employer has a power or interest described in sections 673 through 677 over any portion of the trust. This rule is analogous to the rule set forth in § 1.641(a)–0, which provides that subchapter J, including the grantor trust rules, does not apply to tax-exempt employees’ trusts.

2. § 1.671–1(h): Subpart E rules for certain foreign employees’ trusts

The proposed regulations provide Subpart E rules for foreign employees’ trusts of CFCs, foreign partnerships, and U.S. employers that apply for all federal income tax purposes. Under the proposed regulations, except as provided under section 679 or the proposed regulations (as described below), an employer is not treated as an owner of any portion of a foreign employees’ trust for federal income tax purposes. If an employer is treated as the owner of a portion of a foreign employees’ trust for federal income tax purposes as de

C. Plan of U.S.-related foreign partner- ship employer

The proposed regulations provide that, if a U.S.-related foreign partnership maintains a deferred compensation plan funded through a foreign employees’ trust, then, with respect to the U.S.related foreign partnership, the provisions of subpart E apply to the portion of the trust that is the fractional interest of the trust described in the proposed regulations. The IRS and Treasury solicit comments on whether these regulations should provide a safe harbor rule for a U.S.-related foreign partnership

scribed below, then the employer is considered to own the trust assets attributable to that portion of the trust for all federal income tax purposes. Thus, for example, if an employer is treated as the owner of a portion of a foreign employees’ trust for federal income tax purposes as described below, then income of the trust that is attributable to that portion of the trust increases the employer’s earnings and profits for purposes of sections 312 and 964.

A foreign employees’ trust is a nonexempt employees’ trust described in section 402(b) that is part of a deferred compensation plan, and that is a foreign trust within the meaning of section 7701(a)(31). The proposed regulations apply to any foreign employees’ trust of a CFC or U.S.-related foreign partnership, whether or not a trust funds a qualified foreign plan (as defined in section 404A(e)). The proposed regulations clarify that the income inclusion and asset ownership rules apply to the entity whose employees or independent contractors are covered under the deferred compensation plan.

A. Plan of CFC employer

The proposed regulations provide that, if a CFC maintains a deferred compensation plan funded through a foreign employees’ trust, then, with respect to the CFC, the provisions of subpart E apply to the portion of the trust that is the fractional interest of the trust described in the proposed regulations.

B. Plan of U.S. employer

The proposed regulations provide that if a U.S. person maintains a deferred compensation plan funded through a foreign employees’ trust, then, with respect to the U.S. person, the provisions of subpart E apply to the portion of the trust that is the fractional interest of the trust described in the proposed regulations.

that maintains a deferred compensation plan funded through a foreign employees’ trust if U.S. or CFC partnership interests are de minimis. The IRS and Treasury specifically solicit comments concerning the amount of U.S. or CFC partnership interests that would qualify as ‘‘de minimis.’’

D. Plan of non-CFC foreign employer

The proposed regulations provide that a foreign employer that is not a CFC is treated as an owner of a portion of a foreign employees’ trust only as provided in the antiabuse rule of § 1.1297– 4.

E. Fractional interest

The fractional interest of a foreign employees’ trust described above is defined in the proposed regulations as an undivided fractional interest in the trust for which the fraction is equal to the relevant amount determined for the employer’s taxable year divided by the fair market value of trust assets determined for the employer’s taxable year.

F. Relevant amount

The relevant amount for the employer’s taxable year is defined in the proposed regulations as the amount, if any, by which the fair market value of trust assets, plus the fair market value of any assets available to pay plan liabilities (including any amount held under an annuity contract that exceeds the amount that is needed to satisfy the liabilities provided for under the contract) that are held in the equivalent of a trust within the meaning of section 404A(b)(5)(A), exceed the plan’s accrued liability, determined using a projected unit credit funding method.

The relevant amount is reduced to the extent the taxpayer demonstrates to the Commissioner that the relevant amount is attributable to amounts that were properly contributed to the trust pursuant to a reasonable funding method, or experience that is favorable relative to any actuarial assumptions used that the Commissioner determines to be reasonable. In addition, if an employer that is a controlled foreign corporation otherwise would be treated as the owner of a fractional interest in a foreign employees’ trust, the taxpayer may rely on this rule only if it so indicates on a statement attached to a timely filed Form 5471. The IRS and Treasury solicit comments regarding the most appropriate way in which to extend a filing

requirement to partners in U.S.-related foreign partnerships and other affected taxpayers.

G. Plan’s accrued liability

Under the proposed regulations, the plan’s accrued liability for a taxable year of the employer is computed as of the plan’s measurement date for the employer’s taxable year. The plan’s accrued liability is determined using a projected unit credit funding method, taking into account only liabilities relating to services performed for the employer or a predecessor employer. In addition, the plan’s accrued liability is reduced (but not below zero) by any liabilities that are provided for under annuity contracts held to satisfy plan liabilities.

Because CFCs generally are required to determine their taxable income by reference to U.S. tax principles, the definition of a plan’s ‘‘accrued liability’’ refers to § 1.412(c)(3)–1. This definition generally is intended to track the method used for calculating pension costs under Statement of Financial Accounting Standards No. 87, Employers’ Accounting for Pensions (FAS 87), available from the Financial Accounting Standards Board, 401 Merritt 7, Norwalk, CT 06856. Under the method required to be used to calculate FAS 87’s projected benefit obligation (PBO), plan costs are based on projected salary levels. Because many taxpayers already compute PBO annually to determine the pension costs of their nonexempt employees’ trusts for financial reporting, the timing, interval and method to compute plan liabilities under § 1.671–1(h) should minimize taxpayer burden. The IRS and Treasury solicit comments regarding the extent to which the proposed regulations conform to existing procedures under FAS 87 and applicable foreign law, and regarding appropriate conforming adjustments.

H. Fair market value of trust assets

Under the proposed regulations, for a taxable year of the employer, the fair market value of trust assets, and the fair market value of retirement annuities or other assets held in the equivalent of a trust, equals the fair market value of those assets, as of the measurement date for the employer’s taxable year. The fair market value of these assets is adjusted to include contributions made between the measurement date and the end of the employer’s taxable year.

I. De minimis exception

The proposed regulations provide an exception to the general rule for determining the relevant amount. If the relevant amount would not otherwise be greater than the plan’s normal cost for the plan year ending with or within the employer’s taxable year, then the relevant amount is considered to be zero.

J. Proposed effective date and transition rules

The proposed regulations are proposed to be prospective. For taxable years ending prior to September 27, 1996, employers generally would not be treated for federal income tax purposes as owning the assets of foreign nonexempt employees’ trusts (except as provided under section 679), consistent with the rules applying to domestic nonexempt employees’ trusts. A transition rule, for purposes of § 1.671–1(h), exempts certain amounts from the application of the proposed regulations. This exemption is phased out over a ten-year period. There is a special transition rule for any foreign corporation that becomes a CFC after September 27, 1996. In addition, there is a special transition rule for certain entities that become U.S.related foreign partnerships after September 27, 1996.

3. § 1.671–2: General asset ownership rules

The proposed regulations provide that a person who is treated as the owner of any portion of a trust under subpart E is considered to own the trust assets attributable to that portion of the trust for all federal income tax purposes.

4. § 1.1297–4: Subpart E rules for for- eign employers that are not controlled foreign corporations

Under the proposed regulations, a foreign employer other than a CFC is not treated as the owner of any portion of a foreign nonexempt employees’ trust for purposes of sections 1291 through 1297, except for cases in which a principal purpose for transferring property to the trust is to avoid classification of a foreign corporation as a PFIC (as defined in section 1296) or, if the foreign corporation is classified as a PFIC, in cases in which a principal purpose for transferring property to the trust is to avoid or to reduce taxation of U.S. shareholders of the PFIC under section 1291 or 1293. The effective date of this rule is September 27, 1996.

Income inclusion and related asset own- ership rules for foreign welfare benefit plans

The IRS and Treasury solicit comments on the need for (and content of) income inclusion and asset ownership rules for foreign welfare benefit trusts.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations do not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that these regulations will primarily affect U.S. owners of significant interests in foreign entities, which owners generally are large multinational corporations. This certification is also based on the fact that the burden imposed by the collection of information in the regulation, which is a requirement that certain entities may rely on an exception for reasonable funding only if they indicate such reliance on a statement attached to a timely filed Form 5471, is minimal, and, therefore, the collection of information will not impose a significant economic impact on such entities. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8) copies) that are submitted timely to the IRS. All comments will be available for public inspection and copying.

A public hearing has been scheduled for January 15, 1997, at 10:00 a.m. in room 2615, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington DC. Because of access restrictions, visitors will not be admitted beyond the Internal Revenue Building lobby more than 15 minutes before the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing.

Persons that wish to present oral comments at the hearing must submit written comments by December 26, 1996, and submit an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by December 24, 1996. A period of 10 minutes will be allotted to each person for making comments.

An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

Drafting Information

The principal authors of these regulations are James A. Quinn of the Office of Assistant Chief Counsel (Passthroughs and Special Industries), Linda S. F. Marshall of the Office of Associate Chief Counsel (Employee Benefits and Exempt Organizations), and Kristine K. Schlaman and M. Grace Fleeman of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and Treasury Department participated in their development.

Proposed Amendments to the Regula- tions

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

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by removing the entry for sections 1.1291–10T, 1.1294–1T, 1.1295–1T, and 1.1297–3T and adding entries in numerical order to read as follows:

Authority: 26 U.S.C. 7805 - - Section 1.671–1 also issued under 26 U.S.C. 404A(h) and 672(f)(2)(B). - - Section 1.1291–10T also issued under 26 U.S.C. 1291(d)(2). Section 1.1294–1T also issued under 26 U.S.C. 1294. Section 1.1295–1T also issued under 26 U.S.C. 1295. Section 1.1297–3T also issued under 26 U.S.C. 1297(b)(1). Section 1.1297–4 also issued under 26 U.S.C. 1297(f). - - Par. 2. Section 1.671–1 is amended by adding paragraphs (g) and (h) to read as follows:

§ 1.671–1 Grantors and others treated as substantial owners; scope.

- - - -

(g) Domestic nonexempt employees’ trust —(1) General rule. An employer is not treated as an owner of any portion of a nonexempt employees’ trust described in section 402(b) that is part of a deferred compensation plan, and that is not a foreign trust within the meaning of section 7701(a)(31), regardless of whether the employer has a power or interest described in sections 673 through 677 over any portion of the trust. See section 402(b)(3) and § 1.402(b)–1(b)(6) for rules relating to treatment of a beneficiary of a nonexempt employees’ trust as the owner of a portion of the trust.

(2) Example. The following example illustrates the rules of paragraph (g)(1) of this section:

Example. Employer X provides nonqualified deferred compensation through Plan A to certain of its management employees. Employer X has created Trust T to fund the benefits under Plan A. Assets of Trust T may not be used for any purpose other than to satisfy benefits provided under Plan A until all plan liabilities have been satisfied. Trust T is classified as a trust under § 301.7701–4 of this chapter, and is not a foreign trust within the meaning of section 7701(a)(31). Under § 1.83– 3(e), contributions to Trust T are considered transfers of property to participants within the meaning of section 83. On these facts, Trust T is a nonexempt employees’ trust described in section 402(b). Because Trust T is a nonexempt employees’ trust described in section 402(b) that is part of a deferred compensation plan, and that is not a foreign trust within the meaning of section 7701(a)(31), Employer X is not treated as an owner of any portion of Trust T.

(h) Foreign employees’ trust (1) General rules. Except as provided under section 679 or as provided under this paragraph (h)(1), an employer is not treated as an owner of any portion of a foreign employees’ trust (as defined in paragraph (h)(2) of this section), regardless of whether the employer has a power or interest described in sections 673 through 677 over any portion of the trust.

(i) Plan of CFC employer. If a controlled foreign corporation (as defined in section 957) maintains a deferred compensation plan funded through a foreign employees’ trust, then, with respect to the controlled foreign corporation, the provisions of subpart E apply to the portion of the trust that is the fractional interest described in paragraph (h)(3) of this section.

(ii) Plan of U.S. employer. If a United States person (as defined in section 7701(a)(30)) maintains a deferred compensation plan that is funded through a

foreign employees’ trust, then, with respect to the U.S. person, the provisions of subpart E apply to the portion of the trust that is the fractional interest described in paragraph (h)(3) of this section.

(iii) Plan of U.S.-related foreign part- nership employer - (A) General rule. If a U.S.-related foreign partnership (as defined in paragraph (h)(1)(iii)(B) of this section) maintains a deferred compensation plan funded through a foreign employees’ trust, then, with respect to the U.S.-related foreign partnership, the provisions of subpart E apply to the portion of the trust that is the fractional interest described in paragraph (h)(3) of this section.

(B) U.S.-related foreign partnership. For purposes of this paragraph (h), a U.S.-related foreign partnership is a foreign partnership in which a U.S. person or a controlled foreign corporation owns a partnership interest either directly or indirectly through one or more partnerships.

(iv) Application of § 1.1297–4 to plan of foreign non-CFC employer. A foreign employer that is not a controlled foreign corporation may be treated as an owner of a portion of a foreign employees’ trust as provided in § 1.1297–4.

(v) Application to employer entity. The rules of paragraphs (h)(1)(i) through (h)(1)(iv) of this section apply to the employer whose employees benefit under the deferred compensation plan funded through a foreign employees’ trust, or, in the case of a deferred compensation plan covering independent contractors, the recipient of services performed by those independent contractors, regardless of whether the plan is maintained through another entity. Thus, for example, where a deferred compensation plan benefitting employees of a controlled foreign corporation is funded through a foreign employees’ trust, the controlled foreign corporation is considered to be the grantor of the foreign employees’ trust for purposes of applying paragraph (h)(1)(i) of this section.

(2) Foreign employees’ trust. A foreign employees’ trust is a nonexempt employees’ trust described in section 402(b) that is part of a deferred compensation plan, and that is a foreign trust within the meaning of section 7701(a)(31). (3) Fractional interest for paragraph (h)(1) —(i) In general. The fractional interest for a foreign employees’ trust used for purposes of paragraph (h)(1) of this section for a taxable year of the

employer is an undivided fractional interest in the trust for which the fraction is equal to the relevant amount for the employer’s taxable year divided by the fair market value of trust assets for the employer’s taxable year.

(ii) Relevant amount —(A) In general. For purposes of applying paragraph (h)(3)(i) of this section, and except as provided in paragraph (h)(3)(iii) of this section, the relevant amount for the employer’s taxable year is the amount, if any, by which the fair market value of trust assets, plus the fair market value of any assets available to pay plan liabilities that are held in the equivalent of a trust within the meaning of section 404A(b)(5)(A), exceed the plan’s accrued liability. The following rules apply for this purpose:

( 1 ) The plan’s accrued liability is determined using a projected unit credit funding method that satisfies the requirements of § 1.412(c)(3)–1, taking into account only liabilities relating to services performed through the measurement date for the employer or a predecessor employer.

( 2 ) The plan’s accrued liability is reduced (but not below zero) by any liabilities that are provided for under annuity contracts held to satisfy plan liabilities.

( 3 ) Any amount held under an annuity contract that exceeds the amount that is needed to satisfy the liabilities provided for under the contract (e.g., the value of a participation right under a participating annuity contract) is added to the fair market value of any assets available to pay plan liabilities that are held in the equivalent of a trust.

( 4 ) If the relevant amount as determined under this paragraph (h)(3)(ii), without regard to this paragraph (h)(3)(ii)(A)(4), is greater than the fair market value of trust assets, then the relevant amount is equal to the fair market value of trust assets.

(B) Permissible actuarial assump- tions for accrued liability. For purposes of paragraph (h)(3)(ii)(A) of this section, a plan’s accrued liability must be calculated using an interest rate and other actuarial assumptions that the Commissioner determines to be reasonable. It is appropriate in determining this interest rate to look to available information about rates implicit in current prices of annuity contracts, and to look to rates of return on high-quality fixed-income investments currently available and expected to be available during the period prior to maturity of the plan benefits. If

the qualified business unit computes its income or earnings and profits in dollars pursuant to the dollar approximate separate transactions method under § 1.985– 3, the employer must use an exchange rate that can be demonstrated to clearly reflect income, based on all relevant facts and circumstances, including appropriate rates of inflation and commercial practices.

(iii) Exception for reasonable fund- ing. The relevant amount does not include an amount that the taxpayer demonstrates to the Commissioner is attributable to amounts that were properly contributed to the trust pursuant to a reasonable funding method, applied using actuarial assumptions that the Commissioner determines to be reasonable, or any amount that the taxpayer demonstrates to the Commissioner is attributable to experience that is favorable relative to any actuarial assumptions used that the Commissioner determines to be reasonable. For this paragraph (h)(3)(iii) to apply to a controlled foreign corporation employer described in paragraph (h)(1)(i) of this section, the taxpayer must indicate on a statement attached to a timely filed Form 5471 that the taxpayer is relying on this rule. For purposes of this paragraph (h)(3)(iii), an amount is considered contributed pursuant to a reasonable funding method if the amount is contributed pursuant to a funding method permitted to be used under section 412 (e.g., the entry age normal funding method) that is consistently used to determine plan contributions. In addition, for purposes of this paragraph (h)(3)(iii), if there has been a change to that method from another funding method, an amount is considered contributed pursuant to a reasonable funding method only if the prior funding method is also a funding method described in the preceding sentence that was consistently used to determine plan contributions. For purposes of this paragraph (h)(3)(iii), a funding method is considered reasonable only if the method provides for any initial unfunded liability to be amortized over a period of at least 6 years, and for any net change in accrued liability resulting from a change in funding method to be amortized over a period of at least 6 years.

(iv) Reduction for transition amount. The relevant amount is reduced (but not below zero) by any transition amount described in paragraphs (h)(5), (h)(6), or (h)(7) of this section.

(v) Fair market value of assets. For purposes of paragraphs (h)(3)(i) and (ii) of this section, for a taxable year of the employer, the fair market value of trust assets, and the fair market value of other assets held in the equivalent of a trust within the meaning of section 404A(b)(5)(A), equals the fair market value of those assets, as of the measurement date for the employer’s taxable year, adjusted to include contributions made after the measurement date and by the end of the employer’s taxable year.

(vi) Annual valuation. For purposes of determining the relevant amount for a taxable year of the employer, the fair market value of plan assets, and the plan’s accrued liability as described in paragraphs (h)(3)(ii) and (iii) of this section, and the normal cost as described in paragraph (h)(4) of this section, must be determined as of a consistently used annual measurement date within the employer’s taxable year.

(vii) Special rule for plan funded through multiple trusts. In cases in which a plan is funded through more than one foreign employees’ trust, the fractional interest determined under paragraph (h)(3)(i) of this section in each trust is determined by treating all of the trusts as if their assets were held in a single trust for which the fraction is determined in accordance with the rules of this paragraph (h)(3).

(4) De minimis exception. If the relevant amount is not greater than the plan’s normal cost for the plan year ending with or within the employer’s taxable year, computed using a funding method and actuarial assumptions as described in paragraph (h)(3)(ii) of this section or as described in paragraph (h)(3)(iii) of this section if the requirements of that paragraph are met, that are used to determine plan contributions, then the relevant amount is considered to be zero for purposes of applying paragraph (h)(3)(i) of this section.

(5) General rule for transition amount —(i) General rule. If paragraphs (h)(6) and (h)(7) of this section do not apply to the employer, the transition amount for purposes of paragraph (h)(3)(iv) of this section is equal to the preexisting amount multiplied by the applicable percentage for the year in which the employer’s taxable year begins.

(ii) Preexisting amount. The preexisting amount is equal to the relevant amount of the trust, determined without regard to paragraphs (h)(3)(iv) and (h)(4) of this section, computed as of

the measurement date that immediately precedes September 27, 1996, disregarding contributions to the trust made after the measurement date.

(iii) Applicable percentage. The applicable percentage is equal to 100 percent for the employer’s first taxable year ending after this document is published as a final regulation in the Federal Register and prior taxable years of the employer, and is reduced (but not below zero) by 10 percentage points for each subsequent taxable year of the employer.

(6) Transition amount for new CFCs —(i) General rule. In the case of a new controlled foreign corporation employer, the transition amount for purposes of paragraph (h)(3)(iv) is equal to the pre-change amount multiplied by the applicable percentage for the year in which the new controlled foreign corporation employer’s taxable year begins.

(ii) Pre-change amount. The prechange amount for purposes of paragraph (h)(6)(i) is equal to the relevant amount of the trust, determined without regard to paragraphs (h)(3)(iv) and (h)(4) of this section and disregarding contributions to the trust made after the measurement date, for the new controlled foreign corporation employer’s last taxable year ending before the corporation becomes a new controlled foreign corporation employer.

(iii) Applicable percentage —(A) Gen- eral rule. Except as provided in paragraph (h)(6)(iii)(B) of this section, the applicable percentage is equal to 100 percent for a new controlled foreign corporation employer’s first taxable year ending after the corporation becomes a controlled foreign corporation. The applicable percentage is reduced (but not below zero) by 10 percentage points for each subsequent taxable year of the new controlled foreign corporation.

(B) Interim rule. For any taxable year of a new controlled foreign corporation employer that ends on or before the date this document is published as a final regulation in the Federal Register, the applicable percentage is equal to 100 percent. The applicable percentage is reduced by 10 percentage points for each subsequent taxable year of the new controlled foreign corporation employer that ends after the date this document is published as a final regulation in the Federal Register.

(iv) New CFC employer. For purposes of paragraph (h)(6) of this section, a new controlled foreign corporation employer is a corporation that first becomes a controlled foreign corporation

within the meaning of section 957 after September 27, 1996. A new controlled foreign corporation employer includes a corporation that was a controlled foreign corporation prior to, but not on, September 27, 1996, and that first becomes a controlled foreign corporation again after September 27, 1996.

(v) Anti-stuffing rule. Notwithstanding paragraph (h)(6)(iii) of this section, if, prior to becoming a controlled foreign corporation, a corporation contributes amounts to a foreign employees’ trust with a principal purpose of obtaining tax benefits by increasing the prechange amount, the applicable percentage with respect to those amounts is 0 percent for all taxable years of the new controlled foreign corporation employer.

(7) Transition amount for new U.S.- related foreign partnerships —(i) Gen- eral rule. In the case of a new U.S.related foreign partnership employer, the transition amount for purposes of paragraph (h)(3)(iv) of this section is equal to the pre-change amount multiplied by the applicable percentage for the year in which the new U.S.-related foreign partnership employer’s taxable year begins.

(ii) Pre-change amount. The prechange amount for purposes of paragraph (h)(7)(i) of this section is equal to the relevant amount of the trust, determined without regard to paragraphs (h)(3)(iv) and (h)(4) of this section and disregarding contributions to the trust made after the measurement date, for the entity’s last taxable year ending before the entity becomes a new U.S.related foreign partnership employer. (iii) Applicable percentage —(A) Gen- eral rule. Except as provided in paragraph (h)(7)(iii)(B) of this section, the applicable percentage is equal to 100 percent for a new U.S.- related foreign partnership employer’s first taxable year ending after the entity becomes a new U.S.-related foreign partnership employer. The applicable percentage is reduced (but not below zero) by 10 percentage points for each subsequent taxable year of the new U.S.-related foreign partnership employer.

(B) Interim rule. For any taxable year of a new U.S.- related foreign partnership employer that ends on or before the date this document is published as a final regulation in the Federal Register, the applicable percentage is equal to 100 percent. The applicable percentage is reduced by 10 percentage points for each subsequent taxable year of the new U.S.-related foreign partnership employer that ends after the date this

document is published as a final regulation in the Federal Register.

(iv) New U.S.-related foreign partner- ship employer. For purposes of paragraph (h)(7) of this section, a new U.S.-related foreign partnership employer is an entity that was a foreign corporation other than a controlled foreign corporation, or that was a foreign partnership other than a U.S.-related foreign partnership, and that changes from this status to a U.S.-related foreign partnership after September 27, 1996. A new U.S.-related foreign partnership employer includes a corporation that was a U.S.-related foreign partnership prior to, but not on, September 27, 1996, and that first becomes a U.S.-related foreign partnership again after September 27, 1996. (v) Anti-stuffing rule. Notwithstanding paragraph (h)(7)(iii) of this section, if, prior to becoming a new U.S.- related foreign partnership employer, an entity contributes amounts to a foreign employees’ trust with a principal purpose of obtaining tax benefits by increasing the pre-change amount, the applicable percentage with respect to those amounts is 0 percent for all taxable years of the new U.S.-related foreign partnership employer.

(8) Examples. The following examples illustrate the rules of paragraph (h) of this section. In each example, the employer has a power or interest described in sections 673 through 677 over the foreign employees’ trust, and the monetary unit is the applicable functional currency (FC) determined in accordance with section 985(b) and the regulations thereunder.

Example 1. (i) Employer X is a controlled foreign corporation (as defined in section 957). Employer X maintains a defined benefit retirement plan for its employees. Employer X’s taxable year is the calendar year. Trust T, a foreign employees’ trust, is the sole funding vehicle for the plan. Both the plan year of the plan and the taxable year of Trust T are the calendar year.

(ii) As of December 31, 1997, Trust T’s measurement date, the fair market value (as described in paragraph (h)(3)(iv) of this section) of Trust T’s assets is FC 1,000,000, and the amount of the plan’s accrued liability is FC 800,000, which includes a normal cost for 1997 of FC 50,000. The preexisting amount for Trust T is FC 40,000. Thus, the relevant amount for 1997 is FC 160,000 (which is greater than the plan’s normal cost for the year). Employer X’s shareholder does not indicate on a statement attached to a timely filed Form 5471 that any of the relevant amount qualifies for the exception described in paragraph (h)(3)(iii) of this section. Therefore, the fractional interest for Employer X’s taxable year ending on December 31, 1997, is 16 percent. Employer X is treated as the owner for federal income tax purposes of an undivided 16 percent interest in

each of Trust T’s assets for the period from January 1, 1997 through December 31, 1997. Employer X must take into account a 16 percent pro rata share of each item of income, deduction or credit of Trust T during this period in computing its federal income tax liability.

Example 2. Assume the same facts as in Example 1, except that Employer X’s shareholder indicates on a statement attached to a timely filed Form 5471 and can demonstrate to the satisfaction of the Commissioner that, in reliance on paragraph (h)(3)(iii) of this section, FC 100,000 of the fair market value of Trust T’s assets is attributable to favorable experience relative to reasonable actuarial assumptions used. Accordingly, the relevant amount for 1997 is FC 60,000. Because the plan’s normal cost for 1997 is less than FC 60,000, the de minimis exception of paragraph (h)(4) of this section does not apply. Therefore, the fractional interest for Employer X’s taxable year ending on December 31, 1997, is 6 percent. Employer X is treated as the owner for federal income tax purposes of an undivided 6 percent interest in each of Trust T’s assets for the period from January 1, 1997, through December 31, 1997. Employer X must take into account a 6 percent pro rata share of each item of income, deduction or credit of Trust T during this period in computing its federal income tax liability.

(9) Effective date. Paragraphs (g) and (h) of this section apply to taxable years of an employer ending after September 27, 1996. Par. 3. Section 1.671–2 is amended by adding paragraph (f) to read as follows:

§ 1.671–2 Applicable principles

- - - - (f) For purposes of subtitle A of the

Internal Revenue Code, a person that is treated as the owner of any portion of a trust under subpart E is considered to own the trust assets attributable to that portion of the trust.

Par. 4. Section 1.1297–4 is added to read as follows:

§ 1.1297–4 Application of subpart E of subchapter J with respect to foreign employees’ trusts.

(a) General rules. For purposes of part VI of subchapter P, chapter 1 of the Code, a foreign employer that is not a controlled foreign corporation is not treated as the owner of any portion of a foreign employees’ trust (as defined in § 1.671–1(h)(2)) except as provided in this paragraph (a), regardless of whether the employer has a power or interest described in sections 673 through 677 over any portion of the trust.

(1) Principal purpose to avoid classi- fication as a passive foreign investment company. If a principal purpose for a transfer of property by any person to a foreign employees’ trust (as defined in § 1.671–1(h)(2)) is to avoid classification of a foreign corporation as a passive foreign investment company, then

the following rule applies. If the foreign employer has a power or interest described in sections 673 through 677 over the trust, then the grantor trust rules of subpart E of part I of subchapter J, chapter 1 of the Code will apply, for purposes of part VI of subchapter P, to a fixed dollar amount in the trust that is equal to the fair market value of the property that is transferred for the purpose of avoiding classification as a passive foreign investment company. Whether a principal purpose for a transfer is the avoidance of classification as a passive foreign investment company will be determined on the basis of all of the facts and circumstances, including whether the amount of assets held by the foreign employees’ trust is reasonably related to the plan’s anticipated liabilities, taking into account any local law and practice relating to proper funding levels.

(2) Principal purpose to reduce or eliminate taxation under section 1291 or 1293. If a principal purpose for a transfer of property by any person to a foreign employees’ trust (as defined in § 1.671–1(h)(2)) is to reduce or eliminate taxation under section 1291 or 1293, then the following rule applies. If the foreign employer has a power or interest described in sections 673 through 677 over the trust, then the provisions of subpart E will apply, for purposes of part VI of subchapter P, to a fixed dollar amount in the trust that is equal to the fair market value of the property transferred for the purpose of reducing or eliminating taxation under section 1291 or 1293. Whether a principal purpose for a transfer is to reduce or eliminate taxation under section 1291 or 1293 will be determined on the basis of all the facts and circumstances, including whether the amount of assets held by the foreign employees’ trust is reasonably related to the plan’s anticipated liabilities, taking into account any local law and practice relating to proper funding levels.

(3) Application to employer entity. The rules of this section apply to the employer whose employees benefit under the deferred compensation plan funded through the foreign employees’ trust, or, in the case of a deferred compensation plan covering independent contractors, the recipient of services performed by those independent contractors, regardless of whether the plan is maintained through another entity. Thus, for example, where a deferred compensation plan benefitting employees of a

(‘‘Employer’’) and the District Director of Internal Revenue (‘‘District Director’’) hereby agree to the following Tip Reporting Alternative Commitment (‘‘TRAC’’).

The parties agree that the current law requirements for reporting cash and charged tips and for determining the Employer’s liability for Federal Insurance Contribution Act (‘‘FICA’’) taxes with respect to those tips operate as described below:

A. Section 6053(a) of the Internal Revenue Code of 1986, as amended (‘‘Code’’), requires employees to furnish one or more written statements to their employers reporting all tips received in each calendar month. The statements must be furnished to the employer by the 10th day of the following month. For purposes of both the employer and employee shares of FICA taxes, the tips are deemed to be ‘‘remuneration’’ at the time the employee’s report is furnished to the employer. Section 3121(q) of the Code was amended by section 9006 of the Omnibus Reconciliation Act of 1987, Pub. L. No. 100–203, effective January 1, 1988, to cross-reference sections 3111(a) and (b) of the Code, thereby obligating employers to pay the employer share of FICA taxes on employees’ tip income ‘‘remuneration.’’ Accordingly, effective for tips received after 1987, an employer must pay its share of FICA taxes on the tip income reported to it by its employees under section 6053(a) of the Code at the time the income is deemed to be remuneration by section 3121(q) of the Code.

B. If an employee fails to report tip income to the employer as required by section 6053(a) of the Code, or underreports tip income to the employer, the employer’s liability for the portion of FICA taxes attributable to such tip income is collectible only under the ‘‘notice and demand’’ procedure found in the last clause of section 3121(q) of the Code. Under this procedure, the Internal Revenue Service (‘‘Service’’) provides a ‘‘notice and demand’’ to the employer to reflect tip income not previously reported by the employee to the employer. This tip income then becomes ‘‘remuneration’’ under section 3121(q) for purposes of determining the employer’s share of FICA taxes under sections 3111(a) and (b) of the Code. C. Under section 6652(b) of the Code, if an employee fails to report the tip income received in any calendar month as required by section 6053(a), the employee can be assessed a penalty

foreign employer that is not a controlled foreign corporation is funded through a foreign employees’ trust, the foreign employer is considered to be the grantor of the foreign employees’ trust for purposes of this paragraph (a).

(b) Effective date. This section applies to taxable years of a foreign corporation ending after September 27, 1996.

Margaret Milner Richardson, Commissioner of Internal Revenue.

(Filed by the Office of the Federal Register on September 26, 1996, 8:45 a.m., and published in the issue of the Federal Register for September 27, 1996, 61 F.R. 50778)

Proposed Tip Reporting Agreement for Use in the Hairstyling Industry

Announcement 96–105

SUMMARY

The Internal Revenue Service is considering expansion of its Market Segment Understanding (MSU) Program as a means to enhance tax compliance through taxpayer education and voluntary advance agreements instead of traditional audit techniques. This announcement solicits comments on a draft model MSU Agreement entitled Tip Reporting Alternative Commitment (Hairstyling Industry).

OVERVIEW

The Service developed its MSU Program in 1993 as a means of enhancing tax compliance while reducing taxpayer burden. In essence, the Program envisions that the Service and taxpayers in particular market segments would work together to improve tax compliance in those areas through educational efforts and other collaborative approaches rather than through traditional audit techniques.

Since 1995, the Service has entered into Tip Reporting Alternative Commitment (TRAC) agreements with taxpayers in the food service industry. In general, these TRAC agreements involve an educational program for tipped employees and tip reporting procedures for cash and charged tips. The agreements also set forth an understanding that both the employer and employees who comply with the terms of the TRAC agreement will generally not be subject to challenge by the District Director. The decision to enter into a TRAC agreement is entirely optional on the part of the employer.

Taxpayers in the hairstyling industry have expressed interest in entering into a TRAC agreement with the Service. To ensure consistency in these agreements and provide an opportunity for public comment prior to expanding this aspect of the MSU Program, the Service has developed a draft form of TRAC agreement that could be used as a model for the hairstyling industry. This draft model Agreement is entitled ‘‘Tip Reporting Alternative Commitment (Hairstyling Industry)’’ and is attached to this announcement.

COMMENTS

Written comments must be received by December 14, 1996. Send submissions to Office of Specialty Taxes, c/o CC:DOM:CORP:R (Announcement 96– 105), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Alternatively, taxpayers may submit comments electronically via the Internet by selecting the ‘‘Tax Regs’’ option on the IRS Home Page, or by submitting comments directly to the IRS Internet site at http://www.irs.ustreas.gov/prod/tax_regs/ comments.html. In the alternative, submissions may be hand delivered between the hours of 8 a.m. and 5 p.m. to Office of Specialty Taxes, c/o CC:DOM:CORP:R (Announcement 96– 105), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC.

DRAFTING INFORMATION

The principal author of this announcement is Karin Loverud of the Office of the Associate Chief Counsel (Employee Benefits and Exempt Organizations). For further information regarding this announcement, contact Kathy Mort, MSU program administrator, Office of Specialty Taxes, on (202) 376–0687 (not a toll-free call).

Draft release date: 10/15/96

TIP REPORTING ALTERNATIVE

COMMITMENT (Hairstyling Industry)

between

Department of the Treasury-Internal

Revenue Service

and

[Name of Employer]

(Taxpayer-Employer’s name, address, and identifying number)

quarter following the date the District Director agrees in writing to the addendum.

Change in Ownership or Control. If an Employer or Establishment currently participating in a TRAC agreement undergoes a change in ownership or control, such Employer or Establishment must provide an addendum to Attachment A to the District Director within six months after the effective date of the change. The addendum will include the name, address, and identifying number of the acquiring entity. The acquiring entity will be treated as the successor Employer under the original TRAC agreement beginning on the date of change in ownership or control unless the District Director rejects the addendum in writing within three months of its submission, in whole or in part, for the reasons set forth in Section II. B. 5. Failure to furnish an addendum may result in a revocation under Section V.B. as of the last day of the six-month period.
Rejection by the District Director. The District Director may reject a TRAC application or addendum for one of the following reasons:

a. the failure of the Employer to comply with the rules relating to the filing of any federal tax return, paying the amount of any undisputed federal tax, or making any deposit of federal taxes;

b. the inability of an Establishment to comply with the procedures set forth in Section III.; or

c. the pursuit, by the Internal Revenue Service or another federal agency, of administrative or judicial action relating to the applicant or related party.

C. Ongoing tip examination. A tip examination in progress on the date the Employer submits its TRAC application will not affect the effective date of this Agreement.

III. COMMITMENT OF EMPLOYER

While this Agreement is in effect, the Employer agrees to the following provisions:

A. Educational Program. The Employer must institute and maintain for each calendar quarter an educational program that trains newly hired Employees and periodically updates existing Employees as to their reporting obligations with respect to tip income received as either cash tips or charged tips. This educational program may include on-site or off-site training by the Establishment,

equal to 50 percent of the additional employee FICA tax due with respect to the tip income, unless the employee can show that the failure is due to reasonable cause and not willful neglect.

In October 1993, the Service implemented nationally its Tip Rate Education Program (‘‘Program’’). The purpose of the Program is to ensure maximum compliance by employees with the provisions of the Code relating to tip income.

The Service will accept a TRAC agreement in every District, will permit all eligible employers to enter into a TRAC agreement, and will assist applicants in understanding and meeting the requirements for participation in a TRAC agreement.

The District Director and the Employer have agreed to resolve disputes concerning the responsibilities of the Employer and the District Director under section 3121(q) of the Code and to establish procedures to prevent such disputes in the future. Therefore, the parties agree as follows:

I. DEFINITIONS

A. Employer means

[insert name].

B. Establishment means each of the establishments listed by name, address, and identifying number in Attachment A. [sample attached] If the Employer has one place of business, that place of business is an Establishment.

C. Employee means a person employed by the Establishment who directly or indirectly receives tips of at least $20.00 per month during the course of the employee’s employment.

D. TRAC application means a signed request to enter into a TRAC agreement submitted by mail.

E. District Director means the District Director of Internal Revenue for

[insert name of District] or designee.

II. EFFECTIVE DATE OF AGREEMENT

A. General rule. Except as described below, this Agreement is effective on the first day of the first calendar quarter following the date the District Director signs the Agreement.

B. Special rules.

Employer with Establishment open to the public before [insert date pro- gram is to go into effect (‘‘date A’’)]— Applications submitted before [insert date 1 year later (‘‘date B’’)]. In the

case of an Employer who (1) had one or more Establishments open to the public before [insert date A], and (2) submits its TRAC application before [insert date B], the TRAC agreement is effective on the first day of the first calendar quarter following the quarter in which the application is submitted to the District Director, unless the District Director rejects the application (with respect to any or all of the Establishments) in writing within 3 months after the date of submission. (Section II. B. 5. sets forth the reasons for which the District Director may reject a TRAC application.)

Employer with no Establishment open to the public before [insert Date A]—Applications submitted within 12 months after first Establishment opens. In the case of an Employer who (1) had no Establishment open to the public before [insert date A], and (2) submits its TRAC application within 12 months after its first Establishment opens to the public, the TRAC agreement is effective on the first day of the first calendar quarter following the quarter in which the application is submitted to the District Director, unless the District Director rejects the application (with respect to any or all of the Establishments) in writing within 3 months after the date of submission. (Section II. B. 5. sets forth the reasons for which a District Director may reject a TRAC application.)
Employer acquisition or public opening of Establishment—Participation and nonparticipation in Agreement. If an Employer acquires or opens to the public an additional Establishment and the Employer wishes to include the Establishment in the Employer’s TRAC agreement, the Employer must provide an addendum to Attachment A to the District Director within six months after the date of any such acquisition or public opening. The addendum will include the name, address, and identifying number of the acquired or opened Establishment. Such Establishment will be treated as participating in the TRAC agreement beginning on the date of acquisition or public opening, unless the District Director rejects the application in writing within three months after the date of submission of the addendum. If the Employer does not furnish a timely addendum, the general rule of Section II.A. applies, and thus the TRAC agreement will not become effective with respect to the additional Establishment until the first day of the first calendar

video programs, and written materials, such as tip reporting booklets offered as part of new employee informational materials.

This educational program must emphasize that, in addition to charged tips attributable to Employees, all cash tips paid to and retained by the Employees must be reported to their employing Establishment. The Employer may illustrate this by informing the Employees of the Establishment’s charged sales to cash sales ratio and explaining the correlation between charged tips and cash tips.

The Employer as part of this program must explain to the employees their obligation to maintain for their records the information required in Form 4070A, Employee’s Daily Record of Tips. This educational program also should advise all participants of the benefits of proper tip reporting (e.g., Social Security wage credit history, increased retirement plan contributions, and creation of adequate records of tip income).

B. Requirements regarding returns, taxes, and records.

Filing returns. a. Form 941. Each calendar quarter, the Employer must comply with the requirements for filing Form 941, Employer’s Quarterly Federal Tax Return. The Form 941 must include all charged and cash tips reported by the Employees to the employing Establishment(s) in accordance with the procedures set forth in Section III. C.

b. Forms W–2. The Employer (or employing Establishment) must comply with the requirements for filing Forms W–2 for all the Employees and include all reported charged and cash tips on the Employees’ Forms W–2, including tips verified or corrected pursuant to Section III. C.

c. Other returns. The Employer must comply with the requirements for filing all other required federal tax returns.

Payment and deposit of taxes. The Employer must comply with the requirements for paying the amount of any undisputed federal tax that is due and depositing federal taxes.
Maintenance of records. Each Establishment must maintain records of the following:

a. Gross receipts subject to tipping, and

b. Charge receipts showing charged tips.

The Employer must retain these records for at least 4 years after the April 15 following the calendar year to which the records relate.

Availability of records. Upon the request of the District Director, the Employer will make the following quarterly totals available, by Establishment, for statistical samplings of its Establishments:

a. Gross receipts subject to tipping, b. Charge receipts showing charged tips,

c. Total charged tips, and d. Total tips reported. C. Employee tip-reporting proce- dures.

Charged Tips. Each Establishment must establish a procedure under which a written statement is prepared and processed on a regular basis (no less frequently than monthly), reflecting all charged tips for sales attributable to each directly tipped Employee. The Establishment must implement reasonable procedures under which each directly tipped Employee is given the opportunity to verify or correct any statement of proposed attribution of charged tips, in order to reflect tip outs, tip sharing, tip pooling, and other adjustments. For example, the Establishment would satisfy this paragraph if it provided a written statement that contained the following information: Employee’s charged sales, Employee’s total charged tips, and the ratio, as a percentage, of charged tips to charged sales.

The Establishment must also adopt a reasonable method for reporting charged tips received by indirectly tipped Employees. For example, the Employee may report to the Establishment the amount and with whom tips were shared. Alternatively, the directly tipped Employee may provide to the Establishment a copy of Form 4070A indicating the shared tips. As another example, the Establishment could furnish the indirectly tipped Employee a written statement, which that Employee would verify or correct in a manner similar to the procedure for directly tipped Employees.

The Employer’s procedures must enable Employees to meet their reporting requirements under section 6053(a) of the Code. To meet these requirements, the Employee must sign the verified or corrected statement of attributed tips (no less frequently than monthly) and give the statement to the Establishment no later than the 10th day of the month following the month in which the Employee received the tips.

This verified or corrected statement (if completed by the 10th of the month for tips received during the preceding month) will satisfy the Employee’s requirement of reporting charged tips to the Employer under section 6053(a). The Employer may satisfy the requirements of the section if it remits charged tips to the Employees through the payroll system under a method that ensures reporting of tips by Employees and is consistent with sections 3102 and 3402 of the Code.

Cash Tips. Each Establishment must establish a procedure under which a written statement is prepared and processed on a regular basis (no less frequently than monthly), reflecting all cash tips for sales attributable to each directly tipped Employee. For example, if the Employee signs for charged tips on a daily basis, the Employee may record the amount of cash tips received at the same time. As another example, a procedure comparable to the procedure for charged tips would be appropriate for cash tips. The Employer may also provide a separate procedure for reporting cash tips.

IV. COMMITMENT OF DISTRICT DIRECTOR

A. General rule. Except as provided in B. below, any section 3121(q) notice and demand issued to the Employer (or Establishment) by the District Director shall be based solely on amounts reflected on one or more of the following forms:

Form 4137, Social Security and Medicare Tax on Unreported Tip Income, filed by an Employee with his or her Form 1040, or
Form 885–T, Adjustment of Social Security Tax on Tip Income Not Reported to Employer, prepared at the conclusion of an employee tip examination.

B. Special rules.

Retroactive revocation. In the event the District Director revokes the Agreement retroactively as provided under Section V. A. 1., the general rule of Section IV. A. does not apply.
Prospective revocation. In the event of a revocation under Section V. A. 2. or 3., or Section V. B., the general rule in Section IV. A. will apply with respect to tip income actually received by (or deemed under section 3121(q) of the Code to have been paid to) Employees at the Establishment during the

period from the effective date of the TRAC agreement until the effective date of revocation.

Ongoing Tip Examination. If the District Director has initiated a tip examination of one or more Establishments prior to the filing of the TRAC application, the District Director will not be bound by the general rule of Section IV. A., with respect to any tip income actually received by Employees at the Establishment during any calendar quarters under tip examination. TRAC will be available to the Employer for all other calendar quarters as provided in this Agreement.

C. Compliance review. The District Director may not evaluate the Employer (or Establishment) for compliance with the provisions of Section III. A. (pertaining to the Employer’s educational program) or Section III. C. (pertaining to Employee tip-reporting procedures) until the second calendar quarter following the quarter in which this Agreement becomes effective. During the first two calendar quarters of this Agreement the District may review the Employer’s (or Establishment’s) progress in complying with the provisions of those Sections.

D. Examinations and/or inspections of books and records. The inspection of books of account or records pursuant to a tip examination or compliance review will not preclude or impede (under section 7605(b) of the Code, section 530(a)(2) of the Revenue Act of 1978, or any administrative provisions adopted by the Service) a later examination of a return or inspection of books of account or records with respect to any tax period involved in the tip examination or compliance review. The Service need not comply with any applicable procedural restrictions (for example, providing notice under section 7605(b)) before beginning such examination or inspection.

V. REVOCATION

A. Revocation by District Director. The District Director will revoke this Agreement only for the following reasons:

Failure to comply with Section III. A. or Section III. C. If the District Director determines that the Employer (or any Establishment) has failed to substantially comply with Section III. A. (pertaining to the education program) or Section III. C. (pertaining to employee tip-reporting procedures), the District Director may retroactively revoke this Agreement. The revocation will be effective the first day of the first calendar

quarter of the Employer’s (or Establishment’s) substantial noncompliance. The District Director must notify the Employer in writing of the revocation and the Establishment(s) to which the revocation applies. If the revocation applies to all the Establishments of the Employer, the Agreement will be terminated, as of the above-stated effective date.

Failure to meet requirements of Section III. B. 1., 2., 3, and 4. If the Employer (or any Establishment) fails to meet any of the requirements of Section III. B. 1., 2., 3., or 4. (pertaining to filing returns, paying and depositing taxes, maintenance of records, and availability of records), the District Director may revoke this Agreement. The revocation will be effective the first day of the first calendar quarter after the District Director notifies the Employer in writing that the Agreement no longer applies to the Employer (or Establishment).
Employee underreporting of tips. If the District Director determines that the Employees of an Establishment have collectively and substantially underreported tip income for at least two continuous calendar quarters despite the Employer’s (or Establishment’s) substantial compliance with the procedures in Section III. C. (employee-tipreporting procedures), the District Director may revoke this Agreement with respect to the Establishment. The revocation will be effective the first day of the first calendar quarter after the District Director notifies the Employer in writing that the Agreement no longer applies to the Establishment. If the revocation applies to all the Establishments of the Employer, the Agreement will be terminated, as of the above-stated effective date.
Other. In addition to the reasons for revocation listed in this section, the District Director may revoke the Agreement when the Internal Revenue Service or another federal agency pursues an administrative or judicial action relating to the Employer or Establishment that is a party or related party to this Agreement.

B. Revocation by Employer. If the Employer no longer wishes this Agreement to apply to one or more Establishments, the Employer may revoke this Agreement with respect to the Establishment(s), by providing written notification to the District Director identifying the Establishments(s). The revocation by the Employer will be effective the first

day of the first calendar quarter after the Employer notifies the District Director in writing. If the revocation applies to all the Establishments of the Employer, the Agreement will be terminated, as of the above-stated effective date. If an Employer fails to furnish an addendum pursuant to Section II.B.4., the Service may treat the failure as an employer revocation under this paragraph as of the last day of the six-month period described in Section II.B.4.

C. Reapplication by Employer. If the District Director revokes this Agreement either with respect to the Employer or with respect to an Establishment(s), the Employer may submit a new TRAC application. In the event of a reapplication, the effective date provided in Section II. A. will apply.

VI. MISCELLANEOUS

A. Notices. All correspondence pertaining to this Agreement, including a notice of revocation, must be sent to the parties to this Agreement at the addresses stated below, unless notified in writing of a change of address. In the event of a change of address, all correspondence must be sent to the new address.

B. Authority. The Employer represents that it has the authority to enter into this Agreement on behalf of itself and the Establishment(s) listed in Attachment A.

C. Date of notices. All notices and TRAC applications are deemed to be sent or submitted on the date of the postmark stamped on the envelope or, in the case of a notice or application sent by certified mail, the sender’s receipt.

D. Statutory changes. The Commissioner may terminate this Agreement at any time following a significant statutory change in the FICA taxation of tips.

E. Sunset provision. The Commissioner of Internal Revenue may terminate prospectively the Tip Rate Education Program or TRAC agreements after

[insert date 5 years after date A].

VII. PAPERWORK REDUCTION ACT

respond to, a collection of information unless the collection of information displays a valid control number. The collections of information in this document are in sections I.B., I.D., II.B.3. and 4., III.A., III.B.3. and 4., III.C., and V.B. This information is required to comply with sections 6053(a) and 6001 of the Internal Revenue Code and to assist the Internal Revenue Service in its compliance efforts. This information will be used to monitor the Employer’s performance under the Agreement. The collec tions of information are required to obtain the benefits available under the Agreement. The likely respondents are business or other for-profit institutions.

The estimated total annual reporting and/or recordkeeping burden is 47,733 hours.

The estimated annual burden per respondent/recordkeeper varies from 12 hours to 51 hours, depending on individual circumstances, with an estimated average of 15 hours. The estimated

number of respondents and/or recordkeepers is 3,200.

The estimated annual frequency of responses (used for reporting requirements only) is on occasion.

By signing this Agreement, the parties certify that they have read and agreed to the terms of this document, including Attachment A, Names, Addresses, and Employer Identification Numbers by Employer of Establishments Covered Under TRAC Agreements. EMPLOYER: INTERNAL REVENUE SERVICE

District (Name of Employer)

(Signature) (Signature)

BY: BY:

(Director’s Name)

TITLE: TITLE: District Director

ADDRESS: ADDRESS:

(Headquarters street address) (Street address)

(City, state, ZIP code) (City, state, ZIP code)

DATE: DATE:

through taxpayer education and voluntary advance agreements instead of traditional audit techniques. This announcement solicits comments on a draft model MSU Agreement entitled Tip Rate Determination Agreement (Gaming Industry).

OVERVIEW

Since 1992, the Service has entered into tip agreements with taxpayers in the gaming industry in Nevada. In general, these tip agreements establish a ‘‘tip rate’’ for dealers, based on information

TRAC AGREEMENT

(Hairstyling Industry)

Attachment A

[format for individual establishments]

Employer A & B Hairstylists xx–xxxxxxx Street address City, state, zip code

[format for chains]

Employer (parent, if applicable) XYZ Corp. yy–yyyyyyy Street address City, state, zip code

Establishments (if applicable) AB Hairstyling Street address City, state, zip code

CD Hairstyling Street address City, state, zip code

Related entity (if applicable) UVW Corp. zz–zzzzzzz Street address City, state, zip code

Establishments (if applicable) EF Hairstyling Street address City, state, zip code

GH Hairstyling Street address City, state, zip code

Proposed Tip Reporting Agreement for Use in the Gaming Industry

Announcement 96–106

SUMMARY

The Internal Revenue Service is considering expansion of its Market Segment Understanding (MSU) Program as a means to enhance tax compliance

provided by the employer, and set forth an understanding that both the employer and employees who report tips at the established rate will generally not be subject to challenge by the District Director. The decision to enter into a tip agreement is entirely optional on the part of the employer and each employee; however, the Service will generally not agree to a tip agreement with a particular taxpayer unless at least 75 percent of its affected employees elect to participate.

A number of other taxpayers in the gaming industry have expressed interest in entering into a tip agreement with the Service. To ensure consistency in these agreements and provide an opportunity for public comment prior to expanding this aspect of the MSU Program, the Service has developed a draft form of tip agreement that could be used as a model for the gaming industry. This draft model Agreement is entitled ‘‘Tip Rate Determination Agreement (Gaming Industry)’’ and is attached to this announcement.

COMMENTS

Written comments must be received by December 14, 1996. Send submissions to Office of Specialty Taxes, c/o CC:DOM:CORP:R (Announcement 96– 106), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Alternatively, taxpayers may submit comments electronically via the Internet by selecting the ‘‘Tax Regs’’ option on the IRS Home Page, or by submitting comments directly to the IRS Internet site at http://www.irs.ustreas.gov/prod/tax_regs/ comments.html. In the alternative, submissions may be hand delivered between the hours of 8 a.m. and 5 p.m. to Office of Specialty Taxes, c/o CC:DOM:CORP:R (Announcement 96– 106), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC.

DRAFTING INFORMATION

[Name of Employer]

(Taxpayer-Employer’s name, address, and identifying number) (‘‘Employer’’) and the District Director of Internal Revenue (‘‘District Director’’) hereby agree to the following Tip Rate Determination Agreement (‘‘Agreement’’ or ‘‘Gaming TRDA’’). All employees who receive tips are required (1) to keep contemporaneous and accurate records of the tips received, (2) to report the tips received to their employer at least monthly, and (3) to report those tips on their federal income tax returns.

This document has been developed pursuant to the Market Segment Understanding (MSU) Program. The purpose of this document is to implement a program (1) to ensure maximum compliance by the employees of the Employer with those provisions of the Internal Revenue Code of 1986, as amended, relating to tip income; and (2) to avoid disputes under section 3121(q) of the Code. This program will minimize the burden on the Employer resulting from tip compliance programs of the District Director and reduce the enforcement costs of the District Director.

The parties therefore agree as follows:

I. DEFINITIONS

A. District Director means the District Director of Internal Revenue for

[insert name of District] or designee.

B. Gaming establishment means a casino or other building, vessel, or room used for gambling. It includes land and water based establishments, bingo parlors, card rooms, slot machine and keno facilities, and any similar place where wagering is conducted.

C. Employee means an individual who:

is described in an Occupational Category defined in section I.E.,
has completed more than 30 consecutive days of service with the Employer, and
receives tips (directly or indirectly) of at least $20 a month during the course of the Employee’s employment.

Draft release date: 10/15/96

TIP RATE DETERMINATION

AGREEMENT (Gaming Industry)

between Department of the Treasury-Internal

Revenue Service

and

D. Employer means

[insert name].

E. Occupational Category means a category listed in Attachment A.

F. Participating Employee means an Employee who—

gives to the Employer a signed Tipped Employee Participation Agreement (‘‘TEPA’’) (Attachment B), indicating participation in the tip reporting program, and
in accordance with this Agreement, reports tips to the Employer, as required by law, at or above the tip rate established for the Employee’s Occupational Category. At the option of the Employer, a Par- ticipating Employee may also include a tipped employee with 30 or fewer days of service who has given the Employer a signed TEPA.

G. Tip Rate means the applicable rate described in Section III.

II. COMMITMENT OF EMPLOYER

A. Records maintenance require- ments. While this Agreement is in effect, and in addition to records otherwise required to be maintained, the Employer agrees to maintain the following records:

Employee records. For each Employee, the Employee’s name, address, and social security number; the Employee’s Occupational Category or Categories (as defined in section I.E.); the Employee’s wage rate or rates; the Employee’s reported tips and charged tips (if any); and the Employee’s sales (if appropriate), shift(s), and hours.
Gaming establishment records. If the Employer is not otherwise required, by state statute or regulation, to maintain records of tips received by gaming establishment Employees,

a. For each instance of toke and chip-cashing, the dollar amount of tokes and chips presented to the cage for cashing by the toke committee (or other representatives of gaming establishment Employees), and

b. For each instance of toke and chip-cashing, a list of the tip splits furnished to the Employer by its Employees or the toke committee (or other representatives of gaming establishment Employees).

Food and beverage operations records. If the Occupational Categories defined in section I.E. include food or beverage servers,

a. Gross receipts subject to food or beverage tipping, and

b. Charge receipts showing charged tips.

Tip rates records. For each Occupational Category, all records of data used to determine the tip rates. The Employer must retain the records listed in this section II.A. for at least 4 years after the April 15 following the calendar year to which the records relate.

B. Requirements for furnishing infor- mation. The Employer will furnish to the District Director the following documents:

Quarterly report of employees. A quarterly report showing, as of the last day of each quarter, (1) the total number of Employees, and (2) the total number of Participating Employees. The report is due on the last day of the month following each calendar quarter.
Annual report of nonparticipating Employees.

a. General rule. For each Employee who is a nonparticipating Employee on the last day of the calendar year, an annual report showing the Employee’s name, address, and social security number; the Employee’s Occupational Category or Categories (as defined in section I.E.); the Employee’s wage rate; the Employee’s reported tips and charged tips (if any); and the Employee’s sales (if appropriate), shift(s), and hours. The report may list all Employees, indicating those Employees who are nonparticipating Employees, as long as the required information is included for all nonparticipating Employees. The report is due on the last day of February following each calendar year.

b. Exception. No report is required for a calendar year if the Employees reported tips for the calendar year at a rate equal to or greater than the rates established under section III. of this Agreement.

Form 8027. If the Occupational Categories defined in section I.E. include Employees of one or more food or beverage establishments, a copy of the Forms 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, filed for those establishments with the service center. The copies are due on the last day of February following each calendar year.

C. Requirements for making records available at the request of the District Director. At the request of the District Director, the Employer will furnish any of the records identified in section II.A.

D. Requirements for filing returns and paying and depositing taxes. The

Employer will comply with the requirements for filing all required federal tax returns and paying and depositing all federal taxes.

III. TIP RATES

A. Methods of measuring tips. Depending on the Occupational Category and the Employer’s business practices, tips can be measured in different ways. This Agreement contemplates the following types of measurements:

Actual tips. Actual tips generally apply to Employees in Occupational Categories where pooling of tips is common. Generally, they pool the tips collected during a shift and split the total among the Employees of the Occupational Category who worked the shift.
Tip rates. Tip rates generally apply to Employees in Occupational Categories where pooling of tips is not common. The rate may be a percentage of sales, a dollar amount per hour or shift, a dollar amount per drink served, a dollar amount per dealing hour, or other accurate basis of measurement.

B. Methods for determining tip rates. The Employer will determine tip rates for the Occupational Categories based on information available to the Employer, historical information provided by the District Director, and generally accepted accounting principles. The rates will specify whether the tips are received as a percentage of sales, a dollar amount per hour or shift, a dollar amount per drink served, a dollar amount per dealing hour, or on another basis.

C. Initial tip rates. The initial tip rate approved for each Occupational Category is shown on Attachment A. Where Employees pool and split tips, the ‘‘Actual tips’’ method will be indicated on Attachment A.

D. Determination of subsequent tip rates and Occupational Categories.

Annual review. The Employer will review annually, on a calendar year basis, the tip rates assigned to its Occupational Categories. In connection with this review, the Employer may review its Occupational Categories. The initial rates for each Occupational Category shown on Attachment A will apply to the first full calendar year of this Agreement.
Procedures. a. Employer submission. If the Employer believes that a revision of one or more rates or Occupational Categories is appropriate, the Employer will submit

proposed revisions to the District Director by September 30. If the Employer fails to submit a proposed rate revision by September 30, the Employer will be treated as having submitted the rate in effect for the current year.

b. District Director review. The District Director will review the proposed rates and notify the Employer in writing of its approval or disapproval by November 30. If the District Director does not approve one or more proposed rates, the existing rate or rates will be continued until no later than the last day of the following February. If the Employer and the District Director are unable to agree upon a rate or rates by the last day of the following February, this Agreement will terminate pursuant to section V.C.

Effective date of revised rates and Occupational Categories. Approved revised rates and Occupational Categories for a calendar year will become effective on the later of (1) January 1 of the calendar year, or (2) the first day of the month following the date the Employer and the District Director agree upon a revised rate.

IV. COMMITMENT OF DISTRICT DIRECTOR

A. Participating Employee. The District Director agrees that it may examine a Participating Employee’s tip income for any period for which a TEPA is in effect only if the Employee reports tips at a rate that is less than the tip rate for the Employee’s Occupational Category.

B. Employer.

General rule. Except as provided in section IV.B.2. below, any section 3121(q) notice and demand issued to the Employer by the District Director with respect to tips received by Employees in the Occupational Categories defined in section I.E. shall be based solely on amounts reflected on one or more of the following forms:

a. Form 4137, Social Security and Medicare Tax on Unreported Tip Income, filed by an Employee with his or her Form 1040, or

b. Form 885–T, Adjustment of Social Security Tax on Tip Income Not Reported to Employer, prepared at the conclusion of an employee tip examination.

Special rules. a. Termination. In the event of a termination under section V., the general rule in section IV.B.1. will apply with respect to tip income actually received

by (or deemed under section 3121(q) of the Code to have been paid to) Employees during the period from the effective date of this Agreement until the effective date of termination.

b. Ongoing tip examination or TRDA validation. If the District Director initiated a tip examination or TRDA validation of the Employer prior to the date the parties enter into this Agreement, the District Director may issue a section 3121(q) notice and demand with respect to any calendar quarters under tip examination or validation.

C. Compliance review. The District Director may evaluate the Employer and its Participating Employees for compliance with the provisions of this Agreement.

V. TERMINATION

A. Termination by Employer. The Employer may terminate this Agreement at any time.

B. Termination by District Director. The District Director may terminate this Agreement if:

Lack of Employee participation. At the end of any two consecutive calendar quarters, less than 75 percent of the Employees in the Occupational Categories defined in section I.E. are Participating Employees,
Failure of Employer to comply with section II. The Employer fails to meet any of the requirements of section II., or
Other. The Internal Revenue Service or another federal agency pursues an administrative or judicial action relating to the Employer or a person that is a related party to this Agreement.

C. Termination upon failure of parties to agree to revision of tip rates. If the Employer and the District Director fail to agree to a revision of any of the tip rates under the procedures set forth in section III.B.2.b., this Agreement will terminate.

D. Notice of termination and effective date. Any termination under section

V.A. or B. must be in writing and will be effective on the first day of the calendar quarter following the date of the notice.

VI. MISCELLANEOUS

A. Effective date of agreement. This Agreement is effective when executed by the District Director.

B. Examinations and/or inspections of books and records. The inspection of books of account or records pursuant to a tip examination or compliance review will not preclude or impede (under section 7605(b) of the Code, section 530(a)(2) of the Revenue Act of 1978, or any administrative provisions adopted by the Service) a later examination of a return or inspection of books of account or records with respect to any tax period involved in the tip examination or compliance review. The Service need not comply with any applicable procedural restrictions (for example, providing notice under section 7605(b)) before beginning such examination or inspection.

C. Notices. All correspondence pertaining to this Agreement must be sent to the parties to this Agreement at the addresses stated below, unless notified in writing of a change of address. In the event of a change of address, all correspondence must be sent to the new address. All notices are deemed to be sent or submitted on the date of the postmark stamped on the envelope or, in the case of a notice sent by certified mail, the sender’s receipt.

D. Authority. The Employer represents that it has the authority to enter into this Agreement.

E. Statutory changes. The Commissioner may terminate this Agreement at any time following a significant statutory change in the FICA taxation of tips.

F. Sunset provision. The Commissioner of Internal Revenue may terminate prospectively the Tip Rate Education Program or this TRDA after, 200.

VII. PAPERWORK REDUCTION ACT

The collections of information contained in this document will be submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act (44 U.S.C. 3507(c)). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number. The collections of information in this document are in sections II.A, II.B., II.C., III.D., V.A., and V.D. This information is required to comply with sections 6053(a) and 6001 of the Internal Revenue Code and to assist the Internal Revenue Service in its compliance efforts. This information will be used to monitor the Employer’s performance under the Agreement. The collections of information are required to obtain the benefits available under the Agreement. The likely respondents are business or other for-profit institutions.

The estimated total annual reporting and/or recordkeeping burden is 4,342 hours.

The estimated annual burden per respondent/recordkeeper varies from 12 hours to 99 hours, depending on individual circumstances, with an estimated average of 43 hours. The estimated number of respondents and/or recordkeepers is 100.

The estimated annual frequency of responses (used for reporting requirements only) is on occasion.

VIII. SIGNATURES

By signing this Agreement, the parties certify that they have read and agreed to the terms of this document, including Attachments A and B. EMPLOYER: INTERNAL REVENUE SERVICE

District (Name of Employer)

(Signature) (Signature)

BY: BY:

(Director’s Name)

TITLE: TITLE: District Director

ADDRESS: ADDRESS:

(Headquarters street address) (Street address)

(City, state, ZIP code) (City, state, ZIP code)

DATE: DATE:

TRDA (Gaming Industry)

Attachment A

[sample format] Occupational Categories Initial Tip Rates

Dealers actual tips Food servers _% of sales Cocktail servers _% of sales Bartenders _% of sales Room service food servers _% of sales Bell persons $ / Valets $ /

TRDA (Gaming Industry)

Attachment B

TIPPED EMPLOYEE PARTICIPATION AGREEMENT

I am an employee of and wish to participate in my employer’s tip reporting program.

In accordance with a Tip Rate Determination Agreement (Gaming Industry) between my employer and the District Director of Internal Revenue, I agree to report my tips to my employer, as required by law, at or above the tip rate established by my employer and approved by the District Director for my Occupational Category.

EMPLOYEE

Name (printed):

Signature:

Home address:

Social Security Number:

DATE:

Attachments:

Copy of TRDA (Gaming Industry) and Attachment A (Occupational Categories and Tip Rates)

as organizations described in section 501(c)(3), eligible to receive deductible contributions.

Former Public Charities . The following organizations (which have been treated as organizations that are not private foundations described in section 509(a) of the Code) are now classified

Foundations Status of Certain Organizations

Announcement 96–107

The following organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Accord

ingly, grantors and contributors may not, after this date, rely on previous rulings or designations in the Cumulative List of Organizations (Publication 78), or on the presumption arising from the filing of notices under section 508(b) of the Code. This listing does not indicate that the organizations have lost their status

as private foundations: Abundant Grace Ministries Inc.,

Beta Epsilon Boule Foundation Inc.,

Columbia County Community Health

Coalition Inc., Appling, GA Community Action on Drug Abuse Inc.,

Jonesboro, AR Community Re-Development

Plainview, AR African American Association for the

Greensboro, NC Bird Island Trust Inc., Boynton Beach,

FL Birmingham Metro Jazz Institute,

Family Inc., Birmingham, AL African American Interdenominal

Hartwell, GA Conquering Warriors Ministries,

Ministerial Fellowship Inc., Athens, GA Ahava Services Foundation Inc., Atlanta,

Birmingham, AL Black Men for the Development of

Black Males Inc., Jacksonville, AL Blueprints of a Dream Inc., Conover,

NC Boonoonoonoos, Stone Mountain, GA Cabarrus County Bicentennial

Foundation Inc., Atlanta, GA Concerned Citizens of Hartwell Inc.,

Birmingham, AL Conservative Society of North Carolina,

Wilmington, NC Consumer Credit Counseling Service of

GA AIDS Coalition of Charlotte for

Education Service and Support Inc., Charlotte, NC Alabama Family Center Inc.,

Commission Inc., Concord, NC Calhoun Education Foundation Inc.,

Calhoun, GA Calhoun-Gordon County Georgia

Wayne County Inc., Goldsboro, NC Contra Costa Resources Development,

Montgomery, AL Alabama Gymnastics Development

Martinez, CA Cooperative Baptist Fellowship Inc.,

Decatur, GA Dalton Preschool Inc., Dalton, GA Davidson County Community

Socio-Economical Center of Hope, Clemmons, NC Dekalb Coalition for Public Education

Inc., Decatur, GA Dekalb County Childrens Organization

Program, Birmingham, AL Alabama Spinal Cord Injury

Association, Atalla, AL Alabama Vector Management Society

Inc., Auburn University, AL Albany State College Sportsmans Club

Scholarship Fund Inc., Calhoun, GA Camden Area Players Inc., St. Marys,

GA Canterbury Health Care Inc., Waterford,

MI Canterbury School Foundation Inc.,

Atlanta, GA Cape Fear Charitable Foundation,

Inc., Albany, GA All Creatures Great and Small of

Henderson County Inc., Hendersonville, NC Ambassador Community Choir &

Fayetteville, NC Carolina Eagles Track and Field Club

Inc., Decatur, GA Dickson County Soccer Association Inc.,

Dickson, TN Down Syndrome Adult Residences Inc.,

Hoover, AL Drug Prevention and Alternative Center

Orchestra Association, Winston Salem, NC American Indian Heritage Council Inc.,

Inc., Raleigh, NC Carters Kids Foundation, Memphis, TN Catholic Media Productions, Nashville,

TN Center for Community in the

Charlotte, NC Andrews Ministerial Association of

Inc., Cartersville, GA Dystonia Medical Research

Andrews North Carolina, Andrews, NC Anniston Christian Counseling Services

Workplace, Raleigh, NC Charlotte Foreign Policy Forum,

Chattanooga, TN Child at Rest Inc., Atlanta, GA Child Care Alliance Inc., Nashville, TN Child Educare Center Inc., Tuscaloosa,

Foundation—Georgia Chapter Inc., Atlanta, GA East Texas Rails to Trails, Tyler, TX Educational Resource Inc., Montgomery,

Assistance Program Inc., Springfield, GA Epiphany Ministry Inc., Montgomery,

Inc., Anniston, AL Arkansas Theatre Association, Beebe,

Charlotte, NC Chattanooga Inner City Outreach Inc.,

AR Associated Universities for Toxicology

AL Childrens Christmas Shopping Spree

AL Effingham County Victim Witness

Research & Education, Little Rock, AR Association for Couples in Marriage

Advocacy Council for Persons With Disabilities, Fort Bragg, NC FIB Economic Development

Enrichment NC Council, Greensboro, NC Association of Environmentally

Inc. of Jackson Tennessee, Jackson, TN Childrens International Foundation,

Chattanooga, TN Childrens Living Farm Inc., Cary, NC Childrens Video Ministries LTD,

AL Family Initiative, Inc., Norwalk, OH Fayetteville Cumberland County

Responsible Businesses, Asheville, NC Association on Displaced Youth Inc.,

Decatur, GA Astronomical Society of the Atlantic

Inc., Atlanta, GA Athens Clark Safe Cycling Association

Charlotte, NC Christians in Action, Corning, AR Citizens Coalition for a Better

Tomorrow, Winston-Salem, NC Citizens for a Clean Industry Inc., Tar

Heel, NC City Federation of Colored Womens

Corporation Inc., Atlanta, GA Firehouse Society, Greensboro, NC First Friday of Charlotte Community

Foundation, Charlotte, NC First Priority of Alabama Inc.,

Incorporated, Athens, GA Atlanta Council for International

Cooperation Inc., Atlanta, GA Atlanta Rehabilitation Institute

Birmingham, AL Food for the Lambs Inc., Columbus, GA Frenchtown Community Association,

Houston, TX Friends Incorporated of Howard County,

Historic Maritime Forest Land Trust for Preservation Inc., Buxton, NC Friends of Hayes Taylor Inc.,

Greensboro, NC

Foundation Inc., Atlanta, GA Augusta Chaplaincy Inc., Augusta, GA Augusta Metro AAU Basketball League

Inc., Augusta, GA Augusta Right to Life Inc., Augusta, GA Battle of Murfreesboro Reenactment

Club Inc., Americus, GA Class of 1967 Scholarship Fund, Jasper,

AL Clinton Band Boosters, Clinton, TN Coalition for the Survival of the African

American Male in Tennessee, Inc., Brentwood, TN Cocker Spaniel Rescue of Georgia Inc.,

Atlanta, GA

Nashville, AR Friends of Hatteras Island Natural

Association Inc., Smyrna, TN

Friends of Reliance Inc., Reliance, TN Friends of the Cayce—West Columbia

Hospice of Americus and Sumter

Liberia Committee for Relief

Resettlement & Reconstruction, Washington, DC Little Rock Air Force Base Historical

Branch Library, West Columbia, SC Friends of the Playground Inc., Raleigh,

County Georgia Inc., Americus, GA House of Benefits Ministry, Russellville,

AL Houston County Jr. Pro Football

NC Friends of the Wake County Guardian

Association, Erin, TN Ideals Foundation Inc., Stone Mountain,

Foundation Inc., Jacksonville, AR Living Hope Ministries Inc., Duluth, GA Living Room Inc., Atlanta, GA Loon Lake Village Development

Committee, Loon Lake, WA Love Your Mother Inc., Chapel Hill, NC Lovell Oklahoma Historical Foundation,

Ad Litem Program, Raleigh, NC Foundation for St. Michaels School,

Haleiwa, HI Fuquay Varina Community Development

GA Independence County Sheriffs Posse,

Batesville, AR Institute for Creativity and Human

Corporation, Fuquay Varina, NC George C. Nicholson Aepha CSRA

Chapter 407 Educational Fund Inc., Augusta, GA Georgia Planning Group for Health

Genius, Monroe, NC Institute for Languages and Culture,

Promotion, Atlanta, GA Georgia Striders Inc., Atlanta, GA Gibsonville Friends of the Library Inc.,

Crestline, CA Institute for the Harmonious

Magnolia, AR Mandarin Athletic Association Inc.,

Jacksonville, FL Mary Margaret Simmons Memorial

Talladega, AL Medi Properties Inc., Germantown, TN Memphis Biosphere 96, Memphis, TN Messiah Ministries, Daphne, AL Mid Hoosier Athletic Conference,

Gibsonville, NC Good Faith Child Nutrition Inc., Wynne,

AR Good News Day Care and Development

Development of Man, Silver Springs, MD Institute of African American Studies

and Programs Inc., Little Rock, AR International Athletic Center of Atlanta

Inc., Atlanta, GA International Congress on Revival,

Chattanooga, TN International Network for Higher

Scholarship Fund, Shelbyville, TN MC-WAF My Child With a Future,

Center Inc., Lenoir, NC Good Samaritan Center of Wayne

County Inc., Jesup, GA Grand Guardian Council of Indiana

IOJD Educational Foundation Inc., Indianapolis, IN Greater Little Rock Community

Development Corporation Inc., Little Rock, AR Greater Work Ministries Inc., New Bern,

Learning Inc., Franklin, TN Jabril World Institute for Community

and Human Enhancement Inc., Memphis, TN Jaym Session Outreach Inc., Carolina

Beach, NC Jeffersontown Youth Football League

Inc., Louisville, KY Junior Hill Ministries Inc., Hartselle, AL Keyboard Artists Foundation Inc.,

Edinburgh, IN Mishoe Ministries Inc., Greensboro, NC Mobile Scottish Rite Temple

Preservation Foundation Inc., Mobile, AL Montgomery Guardianship Corporation

for Retarded Persons, Montgomery, AL National Association for Education and

Motivation of Young People, Little Rock, AR National Association of Midnight

NC Greenhill Human Development

Corporation, Clarksville, TN Guilford Business and Health Alliance

Memphis, TN Kids are the Future Foundation Inc.,

Inc., Greensboro, NC H. Lee Atwater Foundation Inc.,

Basketball Leagues Inc., Landover, MD National Association of Pupil Services

Administrators, Alexandria, VA National Black College Alumni Hall of

Charlotte, NC Harpeth Youth Soccer Association,

Nashville, TN Harriett Tubman Resident Corporation,

Atlanta, GA King-Chang Memorial Foundation Inc.,

Rockville, MD Klowns for the Kingdom Inc., Atlanta,

GA Knoxville Rowing Association Inc.,

Knoxville, TN Kokohead Keikis Playgroup, Honolulu,

Chattanooga, TN Harry Bryce African American Dance

Theatre Inc., Atlanta, GA Hart County Hospital Foundation Inc.,

Hartwell, GA Hatteras Island Adult Care Inc., Dare,

Fame Foundation Inc., Atlanta, GA National Coaltn. of Engnrng. Scts. for

Precllge. Math and Science Eduction, Washington, DC National Womens Theatre Festival,

HI Kokopelli Inc., Atlanta, GA Ladies Soldiers Friend Society Inc.,

Philadelphia, PA If an organization listed above submits information that warrants the renewal of its classification as a public charity or as a private operating foundation, the Internal Revenue Service will issue a ruling or determination letter with the revised classification as to foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as provided in section 1.509(a)–7 of the Income Tax Regulations. It is not the practice of the Service to announce such revised classification of foundation status in the Internal Revenue Bulletin.

NC Haven of Hope Inc., Alpharetta, GA Helping Hands Incorporated,

Birmingham, AL Henry County Prevention Alliance Inc.,

McDonough, GA Heritage Dance Foundation Inc.,

Goldsboro, NC Heritage Village of South Sebastian Inc.,

Nashville, TN Larry Birgans Ministries Inc., Decatur,

AL Larry Hatchett Fishing Fund, Ellendale,

TN Last Generation Ministries, Berlin, PA Law Enforcement Alliance of America

Foundation Inc., Falls Church, VA Law Enforcement Family Training Inc.,

Montgomery, AL Lebanon County Crime Stoppers Inc.,

Fort Smith, AR His Love, Dothan, AL Hoke Kids Inc., Raeford, NC Homeless Childrens Association Inc.,

Memphis, TN Horton Gardens Residents Association,

Lebanon, PA Lebanon Valley Catholic Home Inc.,

Lebanon, PA Legal Resource Center for Nonprofit

Housing Sponsors Inc., Washington, DC

Memphis, TN