Part IV. Items of General Interest

Buster L. Brown Memorial Scholarship

Fund, Tyler, TX Butler County Health Network,

Foundations Status of Certain Organizations

Announcement 97–119

Brecksville-Broadview Heights Schools

Foundation Program, Brecksville, OH Brentwood Educational Assistance

The following organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Accordingly, 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 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 as private foundations: Alpha Community Programs, Inc.,

Foundation, Inc., Springfield, OH Brentwood Park Resident Management

Jackson, MO Brotherhood Community Fund Inc.,

Corporation, Inc., Jacksonville, FL Brian Betzler Memorial Scholarship, Inc.,

Hamilton, OH Buy American Inc., Flushing, MI Delta Epsilon Kappa, Inc. Accounting

Honor Society, Montgomery, AL Families Unlimited, Bay Minette, AL Heavenly Vision Economic Development

Mt. Pleasant, MD Brian Shimer Bobsled Club Inc.,

Naples, FL Bridgefilm Company Inc., Aspen, CO Bridgerland Amateur Radio Club Inc.,

Rumson, NJ Lifecare Ministries of Oklahoma, Inc.,

Corporation, Los Angeles, CA Krzyzowa Kreisau Foundation,

Hyde Park, UT Bridges Ministries Incorporated,

Chicago, IL Bright Center Inc., Lawrenceburg, IN Bright Star International Inc., Tulsa, OK Brighton Township Beaver Soccer

Purcell, OK Majestic Opera Association Inc.,

San Francisco, CA Minnesota International Corporation,

Excelsior, MN National Domestic Violence Hotline,

South Orange, NJ National Policy Center on Blindness,

New York, NY Merced Heights Childrens Center,

Association, Beaver, PA Bristlecone Development Corporation,

Olmsted TWP, OH Britvil Community Food Pantry Inc.,

Sacramento, CA People to People Foundation for

Toledo, OH Amber and Babe Animal Foundation,

Oklahoma City, OK Broken Promises Inc., Marietta, GA Brookside Park Memorial to Veterans,

Vermilion, OH Boys & Girls Club of Camilla-Mitchell

County, Inc., Camilla, GA Boys and Girls Club of Denton County,

Burlington, IA Brotherhood Society of St. Anagiri of the

United States, LTD., Monticlair, NJ Brothers Joined Striders, Austin, TX Broward Autism Foundation Inc.,

Inc., Lewisville, TX Boys and Girls Club of Drew County

Arkansas, Inc., Monticello, AR Boys & Girls Club of Edcouch-Elsa, Inc.,

Coral Springs, FL Broward Coalition for the Homeless Inc.,

Ft. Lauderdale, FL Brownsburg Junior Soccer League Inc.,

Edcouch, TX Boys and Girls Club of Kenosha, Inc.,

Kenosha, WI Boys and Girls Clubs of the Mississippi

Brownsburg, IN Bruce Crampton Foundation Inc.,

Valley, Inc., Moline, IL Boys & Girls Club of Santa Cruz County,

Vienna, VA Brunswick Neighborhood Association,

Gary, IN Buchanan County Olympics Inc.,

Inc., Nogales, AZ Boys & Girls Club of Toccoa,

Toccoa, GA Boys Ranch of Nacogdoches, Inc.,

St. Joseph, MO Bucks Co. Center for the Performing

International Development, Portage, MI Randolph County Mayors Committee for

Disabled Persons, Asheboro, NC 396 Straight Street Corp., Patterson, NJ Traffic Safety Association, Kirkland, WA Women and Family Counseling Services

Inc., E. Lansing, MI 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.

Nacogdoches, TX Bradford County Families Against Drugs,

Arts, Doylestown, PA Build for Michigan, Bloomfield Hills, MI Bulgarian Orthodox Religious Education

Society, Fort Wayne, IN Burlington County Friends of the

Inc., Starke, FL Brain Injury Resource Network Inc.,

Richmond, VA Brandcarr Publications Inc.,

IRS Reassures Nursery Growers About Farming Exception

Announcement 97–120

This announcement confirms that recently issued proposed regulations specifically permit nursery growers to qualify

Baltimore, MD Brazos Retreat and Conference Center,

Sugar Land, TX Breast Implant Information Foundation

Environment, Inc., Mt. Holly, NJ Burns United Support Groups Inc.,

Grosse Pointe Farms, MI Burt Lake Band of Ottawa and Chippewa

Miami, FL

Support Group, Oklahoma City, OK

Indians, Inc., Brutus, MI Business Leadership for Tomorrow,

1997–50 I.R.B. 61 December 15, 1997

for the “farming exception” to the uniform capitalization rules under § 263A of the Internal Revenue Code. In recent weeks, the Internal Revenue Service has received numerous form letters from nursery growers expressing concern that they would no longer be eligible for the farming exception as a result of the proposed regulations. However, as Service and Treasury officials stated at a November 19, 1997, public hearing, these proposed regulations did not change who is eligible for the farming exception.

Under § 263A(d), enacted by the Tax Reform Act of 1986, the farming exception to the uniform capitalization rules is available for certain plants “produced” ( e.g., grown) in a farming business. Thus, the regulations permit nursery growers using the farming exception to deduct the costs of seeds and young plants purchased for further development and cultivation prior to sale, as well as the costs of growing the plants. Under the regulations, nursery growers using the farming exception are permitted to deduct these costs even if the plants are partly grown by another person or are grown by the nursery in temporary containers. Because the statutory exception only applies to the costs of plants “produced” in a farming business, the exception cannot be used for costs incurred by a taxpayer in activities in which the taxpayer does not grow

plants, but merely buys and resells plants grown entirely by others. An example will be added to the final regulations to illustrate these points.

Employee Plans Compliance Programs

Announcement 97–121

The Office of the Assistant Commissioner, Employee Plans and Exempt Organizations of the Internal Revenue Service (Service) has established and is committed to the enhancement of a number of programs to enable sponsors of qualified retirement plans and tax-sheltered arrangements to maintain the tax-favored status of these plans without risking the tax consequences of plan disqualification. In addition to the Closing Agreement Program (CAP), for plans under examination, there is the Administrative Policy Regarding Self-Correction (APRSC), the Standardized (SVP) and regular Voluntary Compliance Resolution (VCR) Programs, the Tax Sheltered Annuity Voluntary Compliance (TVC) Program, and the Voluntary Closing Agreement Program (Walk-in CAP).

APRSC is the self-correction program that encourages employers to monitor their plans and correct any operational defect or violation they find as soon as pos

sible. Under APRSC, if defects are discovered and corrected within a short time following the year of the qualification error, there is no need to contact the Service, no compliance fee and no tax sanction with respect to the error. APRSC, as published in January 1997, allows plan sponsors one year to correct defects without penalty. Based on our experience to date with this well-received and increasingly used program, the Service is extending the self-correction period from one to two years following the year in which the operational violation occurs. As we continue to gain experience, we anticipate that this program will continue to evolve in order to best facilitate compliance.

The Service is about to issue a field directive that will provide additional insight on the self-correction program and clarify certain issues including, for example, timing for correction. In addition, in early 1998, the Service will publish a consolidated guide to the compliance programs for plan sponsors and their advisors. Since all of these programs operate out of each of the EP/EO Key District Offices as well as Employee Plans Division in Washington, communication to achieve consistency and coordination in the programs is essential. The following information about how to contact the appropriate office for information and assistance will be included in the consolidated guide.

HEADQUARTERS EP Division Projects Branch 2 CP:E:EP:P:2 1111 Constitution, Ave., NW Washington, DC 20224 Office (202) 622-6214 FAX (202) 622-6199

NORTHEAST REGION EP/EO Division Review Staff 10 Metro Tech Center 625 Fulton St. Brooklyn, NY 11201 Phone (718) 488-2400 FAX (718) 488-2405

SOUTHEAST REGION EP/EO Division Technical Branch P.O. Box 13163 Baltimore, MD 21203 Phone (410) 962-3709 FAX (410) 962-0867

December 15, 1997 62 1997–50 I.R.B.

MIDSTATES REGION EP/EO Division Branch Office (CHI)(1) 230 S. Dearborn Chicago, IL 60604 Phone (312) 886-4700 FAX (312) 886-3275

WESTERN REGION EP/EO Division Technical Branch McCaslin Industrial Park 2 Cupania Circle Monterey Park, CA 91755 Phone (213) 725-7164 FAX (213) 725-1442

Drafting Information

The principal author of this announcement is Carlton Watkins of the Employee Plans Division. For further information regarding this announcement, call (202) 622-6074/622-6075 between 1:30 and 3:30 p.m. Eastern time (not a toll-free number). Mr. Watkins’ number is (202) 622-6214 (also not a toll-free number).

Interim Guidance on Roth IRAs

Announcement 97–122

The Service is issuing two model Roth IRA Forms, 5305–R and 5305–RA, for use by trustees and custodians, respectively, beginning in 1998. In addition, the following interim guidance is provided for prototype sponsors and individual contributors to Roth IRAs established under § 408A of the Internal Revenue Code in response to questions from the public.

Background

Individuals are permitted to make deductible and nondeductible contributions to individual retirement accounts and annuities described in § 408(a) or (b), respectively (Traditional IRAs).

The Taxpayer Relief Act of 1997, Pub. L. 105–34, added § 408A creating Roth IRAs beginning in 1998. The rules that apply to Roth IRAs and Traditional IRAs are generally the same, except as modified by § 408A. A Roth IRA must be designated at the time of establishment as a Roth IRA. Contributions to a Roth IRA are not deductible and qualified distributions are not includible in gross income.

Interim Guidance

Model forms.—New Form 5305–R, Roth Individual Retirement Trust Account, and Form 5305–RA, Roth Individual Retirement Custodial Account, will serve as Service-approved model forms for use by financial institutions to offer Roth IRAs to their customers. These forms can be downloaded from the IRS homepage at www.irs.ustreas.gov.

Separate trusts.—Contributions to a Roth IRA must be maintained as a separate trust, custodial account or annuity from contributions to a Traditional IRA. Separate accounting within a single trust, custodial account or annuity is not permitted.

Opinion letters.—The Service is not presently accepting submissions for opinion letters on prototype Roth IRAs, but will issue procedures in the future for requesting such opinion letters.

Combined documents.—The Service will permit a prototype sponsor to combine a Roth IRA and a Traditional IRA in the same document provided that (1) the separate trust requirement, above, is satisfied and (2) the document, as completed by the owner, clearly indicates whether it is to be used as a Traditional IRA or as a Roth IRA. This must be done in a way that makes clear that designation as one type of IRA precludes its designation as the other type of IRA.

Transitional Relief

The Service will provide transitional relief for sponsors of Roth IRAs and their customers that is similar to the transition relief provided for users of documents establishing SIMPLE IRAs that had not been pre-approved by the Service. See

section 7.01 of Rev. Proc. 97–29, 1997– 24, I.R.B. 9. The Simple IRA transition relief was conditioned on the prototype sponsors who furnished the documents having them subsequently approved by the Service and meeting certain other conditions. Transition relief will also be conditioned on the document, or associated written material, clearly designating the trust, custodial account or annuity as a Roth IRA at the time of establishment.

Technical Corrections

The House of Representatives has passed technical corrections legislation (H.R. 2645) affecting, among other things, the taxability of distributions from Roth IRAs. The legislation, if enacted, would be effective January 1, 1998. In light of this pending legislation, prototype sponsors may wish to consider maintaining, or encouraging individuals to maintain, qualified rollover contributions (described in § 408A(e)) in separate Roth IRAs from Roth IRAs containing regular Roth IRA contributions (described in § 408A(c)(2)).

Paperwork Reduction Act

The collection of information contained in this announcement has been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1568.

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

1997–50 I.R.B. 63 December 15, 1997

The estimated annual frequency of responses is one per respondent.

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.

The collection of information in this announcement is in the section headed “Interim Guidance.” This information is required to comply with § 302 of the Taxpayer Relief Act of 1997 in order to meet the statutory requirements for establishing a Roth IRA. The collection of information is required to obtain a benefit. The likely respondents are businesses or other

for-profit institutions, and not-for-profit institutions.

The estimated total annual reporting burden is 8,000 hours.

The estimated annual burden per respondent varies from 0.5 hours to 4 hours, depending on individual circumstances, with an estimated average of 2 hours. The estimated number of respondents is 4,000.

December 15, 1997 64 1997–50 I.R.B.