Part I. Rulings — Internal Revenue Bulletin 1997-4

methods for tax years ended on, or with reference to, November 30, 1996.

The Department Store Inventory Price Indexes are prepared on a national basis and include (a) 23 major groups of departments, (b) three special combinations of the major groups - soft goods, durable goods, and miscellaneous goods, and (c) a store total, which covers all departments, including some not listed separately, except for the following: candy, foods, liquor, tobacco, and contract departments.

Section 472.—Last-in, First-out Inventories

26 CFR 1.472–1: Last-in, first-out inventories.

LIFO; price indexes; department stores. The November 1996 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and lastin, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, November 30, 1996.

Rev. Rul. 97–6

The following Department Store Inventory Price Indexes for November 1996 were issued by the Bureau of Labor Statistics on December 12, 1996. The indexes are accepted by the Internal Revenue Service, under § 1.472–1(k) of the Income Tax Regulations and Rev. Proc. 86–46, 1986–2 C.B. 739, for appropriate application to inventories of department stores employing the retail inventory and last-in, first-out inventory

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS

(January 1941 = 100, unless otherwise noted)

Percent Change from Nov. 1995

to Nov. 1996 ¹

Groups

Nov. Nov. 1995 1996

Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509.3 555.9 9.1
Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . 632.0 634.7 0.4
Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . 637.8 656.1 2.9
Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 921.8 903.7 �2.0
Infants’ Wear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636.8 614.8 �3.5
Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527.8 535.4 1.4
Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288.2 287.4 �0.3
Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . . 559.8 562.5 0.5
Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . . 419.3 415.9 �0.8
Men’s Clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623.7 633.0 1.5
Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572.7 591.5 3.3
Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . 485.5 495.1 2.0
Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1001.1 1020.6 1.9
Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776.6 740.7 �4.6
Toilet Articles and Drugs. . . . . . . . . . . . . . . . . . . . . . . . . . . 875.3 903.4 3.2
Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661.2 667.8 1.0
Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555.4 585.6 5.4
Housewares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790.5 804.5 1.8
Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248.7 244.2 �1.8
Radio and Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.9 78.1 �2.3
Recreation and Education ² . . . . . . . . . . . . . . . . . . . . . . . . . . 113.4 111.3 �1.9
Home Improvements ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121.9 130.6 7.1
Auto Accessories ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.0 107.1 0.1 Groups 1 - 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595.2 602.1 1.2 Groups 16 - 20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . 465.0 466.5 0.3 Groups 21 - 23: Misc. Goods ² . . . . . . . . . . . . . . . . . . . . . . . . . . 113.5 113.0 �0.4 Store Total ³ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550.7 555.1 0.8

1 Absence of a minus sign before percentage change in this column signifies price increase. 2Indexes on a January 1986=100 base. 3The store total index covers all departments, including some not listed separately, except for the following: candy, foods, liquor, tobacco, and contract departments.

DRAFTING INFORMATION The principal author of this revenue ruling is Stan Michaels of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact

Mr. Michaels on (202) 622–4970 (not a toll-free call).

Section 501.—Exemption From Tax on Corporations, Certain Trusts, etc.

26 CFR 1.501(c)(5)-1: Labor, agricultural, and horticultural organizations.

Rev. Proc. 95–21, 1995–1 C.B. 686, which applies to organizations described in section 501(c)(5) that receive associate member dues payments, is modified to take into account newly enacted section 512(d). See Rev. Proc. 97–12, page 7.

with the Tax Division. The amendments also reflect a change to the law made by the Omnibus Budget Reconciliation Act of 1990 regarding the type of services about which disclosures may be made.

EFFECTIVE DATE: These regulations are effective on December 17, 1996.

FOR FURTHER INFORMATION CONTACT: Donald Squires, 202–622– 4570 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On December 15, 1995, a notice of proposed rulemaking (DL–40–95 [1996– 1 C.B. 731]) relating to the disclosure of returns and return information in connection with the procurement of property and services for tax administration purposes was published in the Federal Register (60 FR 64402). No public hearing was requested or held nor were any comments submitted by the public in response to this notice.

The regulations proposed by DL– 40–95 are adopted by this Treasury decision without revision and are discussed below.

Explanation of provisions

As previously written, 26 CFR 301.6103(n)–1 authorized the Tax Division of the Department of Justice, among other entities and individuals, to disclose returns and return information pursuant to section 6103(n) of the Internal Revenue Code. This authority allowed the Tax Division to disclose tax information incident to its contracts to private parties for, among other purposes, automated litigation support services.

The Department of Justice indicated its intention to establish an expanded automated tracking system for all monetary judgments in favor of the United States, which will be operated by a private company under contract with the Department. Although the majority of tax cases are handled by the Tax Division, there are several United States Attorneys’ offices that also have litigation responsibility in the civil tax area. In addition, the Tax Division refers some judgments in tax cases to the United States Attorneys for collection. The previously existing regulations arguably would not have permitted these offices, which are technically not part of the Tax Division, to disclose tax infor

26 CFR 1.501(c)(6)–1: Business leagues, cham- bers of commerce, real estate boards, and boards of trade.

The principles contained in Rev. Proc. 95–21, 1995–1 C.B. 686, which apply to organizations described in section 501(c)(5) that receive associate member dues payments, also apply to organizations described in section 501(c)(6). See Rev. Proc. 97–12, page 7.

Section 512.—Unrelated Business Taxable Income

26 CFR 1.512(a)–1: Definition.

The principles contained in Rev. Proc. 95–21, 1995–1 C.B. 686, which apply to organizations described in section 501(c)(5) that receive associate member dues payments, are extended to organizations described in section 501(c)(6). Also, Rev. Proc. 95–21 is modified to take into account newly enacted section 512(d). See Rev. Proc. 97–12, page 7.

Section 832.—Insurance Company Taxable Income

26 CFR 1.832–4: Gross Income.

Insurance companies; premium sta- bilization reserves. A non-life-insurance company’s surplus does not include amounts held on behalf of a group of insureds in a premium stabilization reserve. Rev. Rul. 70–480, revoked.

Rev. Rul. 97–5

Rev. Rul. 70–480, 1970–2 C.B. 142, provides that amounts held by a nonlife insurance company in a ‘‘stabilization reserve’’ funded with credits on retrospectively rated term insurance contracts are not taken into account in determining the company’s unearned premiums under § 832(b)(4) of the Internal Revenue Code. Rev. Rul. 70–480 concludes that stabilization reserves are not unearned premiums because the credits retained by the insurance company to fund the stabilization reserves came into being after the relevant risk period expired and thus were part of the company’s earned premiums. Rev. Rul. 70–480 further states that the company’s earned premiums less its costs and expenses constitute part of its surplus, which is available to pay policyholder dividends. Rev. Rul. 70–480 thus treats the stabilization reserves as part of the company’s surplus.

Rev. Rul. 70–480’s conclusion that the stabilization reserves are part of the insurance company’s surplus is erroneous. The stabilization reserves are avail

able to the policyholders upon cancellation of the term accident and health insurance contracts. The nonlife insurance company at all times had a legal obligation to return the stabilization reserves to its policyholders to the extent that the stabilization reserves were not used to purchase future coverage. Thus, stabilization reserves are not part of the nonlife company’s surplus.

HOLDING

A non-life insurance company’s surplus does not include amounts held in a stabilization reserve of the type described above.

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 70–480 is revoked.

DRAFTING INFORMATION

The principal author of this revenue ruling is Gary Geisler of the Office of the Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling contact Mr. Geisler on (202) 622– 3970 (not a toll-free call).

Section 6103.—Confidentiality and Disclosure of Returns and Return Information

26 CFR 301.6103(n)–1: Disclosure of returns and return information in connection with procurement of property and services for tax administration purposes.

T.D. 8695

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 301

Disclosure of Returns and Return Information to Procure Property or Services for Tax Administration Purposes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final regulations relating to the disclosure of returns and return information in connection with the procurement of property and services for tax administration purposes. The regulations authorize the Department of Justice, including offices of United States Attorneys, to make such disclosures. Prior to these amendments, disclosure authority within the Department of Justice rested only

The concluding text of paragraph (a) is amended by removing the language ‘‘Tax Division,’’.
The second sentence of paragraph (d) introductory text is amended by removing the language ‘‘Tax Division,’’.
Paragraph (d)(2) is amended by removing the language ‘‘Tax Division,’’.
Paragraph (e)(1) is amended by removing the language ‘‘, and’’ at the end of the paragraph and adding a semicolon in its place.
Paragraph (e)(2) is amended by removing the period at the end of the paragraph and adding ‘‘; and’’ in its place.
Paragraph (e)(3) is added.
The authority citation immediately following § 301.6103(n)–1 is removed.

The addition reads as follows:

§ 301.6103(n)–1 Disclosure of returns and return information in connection with procurement of property and ser- vices for tax administration purposes.

- - - - (e) - - (3) The term Department of Justice

includes offices of the United States Attorneys.

Margaret Milner Richardson, Commissioner of Internal Revenue.

Approved June 26, 1996.

Donald C. Lubick, Acting Assistant Secretary of the

Treasury.

(Filed by the Office of the Federal Register on December 16, 1996, and published in the issue of the Federal Register for December 17, 1996, 61 F.R. 66217)

mation incident to their inclusion of tax judgments in the automated tracking system.

The amendments adopted by this Treasury decision authorize the Department of Justice, including offices of United States Attorneys, to make disclosures to procure property and services for tax administration purposes. Any such disclosures will be made under the same conditions and restrictions already set forth in the previously existing regulations. By definition, any office within the Department of Justice without tax administration duties will not have occasion or authority pursuant to these regulations to make such disclosures.

The amendments also authorize disclosures in connection with ‘‘the providing of other services,’’ i.e., services not related to the strict mechanical processing or manipulation of tax returns or return information. This conforms the regulations to the language of the statute, as amended by the Omnibus Budget Reconciliation Act of 1990 (Public Law 101–508, 104 Stat. 1388–353).

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in EO 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the notice of proposed rulemaking preceding the regulations was issued prior to March 29, 1996, the Regulatory

Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Small Business Administration for comment on its impact on small business.

Drafting Information

The principal author of these regulations is Donald Squires, Office of the Assistant Chief Counsel (Disclosure Litigation), IRS. However, other personnel from the IRS, Department of Justice and Treasury Department participated in their development.

- - - -

Adopted Amendments to the Regulations

Accordingly, 26 CFR part 301 is amended as follows:

PART 301—PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read in part as follows;

Authority: 26 U.S.C. 7805 - - Paragraph 2. Section 301.6103(n)–1 is amended as follows:

The first sentence of paragraph (a) introductory text is amended by removing the language ‘‘Tax Division,’’.
Paragraph (a)(2) is amended by removing the language ‘‘or to’’.
Paragraph (a)(2) is further amended by adding the language ‘‘or the providing of other services,’’ immediately following the text ‘‘other property,’’.