Part IV. Items of General Interest

Estimated total annual reporting burden: 4,000 hours.

Estimated average annual burden hours per respondent: 0.2 hours.

Estimated number of respondents: 20,000. Estimated frequency of responses: Once. 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.

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

Temporary regulations in T.D. 8756 amend the Regulations on Income Taxes (26 CFR part 1) relating to section 460. The text of those temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in EO 12866. Therefore, a regulatory assessment is not required. It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the time required to prepare and file an election statement is minimal and will not have a significant impact on those small entities that choose to make the election. In addition, the election need only be made once by a taxpayer. 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.

Notice of Proposed Rulemaking

Election Not to Apply Look-Back Method in De Minimis Cases

REG–120200–97

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations.

SUMMARY: In T.D. 8756, page 4, the IRS is issuing temporary regulations under section 460 relating to the lookback method. The temporary regulations provide rules for electing not to apply the look-back method to long-term contracts in de minimis cases. The temporary regulations reflect changes to the law made by the Taxpayer Relief Act of 1997 and affect electing manufacturers and construction contractors whose long-term contracts otherwise are subject to the look-back method. The text of those temporary regulations also serves as the text of these proposed regulations.

DATES: Written comments and requests for a public hearing must be received by April 13, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG–120200–97), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. In the alternative, submissions may be hand delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG–120200–97), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent 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: John M.Aramburu or Leo F. Nolan II at (202) 622-4960 (not a toll-free number).

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 Manage- ment 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 Revenue Service, Attn: IRS Reports Clearance Officer, T:FP, Washington, DC 20224. Comments on the collection of information should be received by March 16, 1998. 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

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 §1.460–6(j). This information is required to notify the Commissioner of taxpayers’ elections under section 460(b)(6). This information will be used to determine whether taxpayers have properly elected under section 460(b)(6). This collection of information is required for a taxpayer to elect not to apply the look-back method to long-term contracts in de minimis cases. The likely respondents are for-profit entities.

March 23, 1998 32 1998–12 I.R.B.

Comments and Requests for a Public hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any electronic or 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 may be scheduled if requested in writing by a person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place of the hearing will be published in the Federal Register.

Draft Information

The principal author of these proposed regulations is Leo F. Nolan II, Office of Assistant Chief Counsel (Income Tax and Accounting). However, other personnel from the IRS and Treasury Department participated in their development.

- - - - Proposed Amendments to the Regulations

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

PART 1—INCOME TAXES

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

Authority: 26 U.S.C. 7805 *** Par. 2. Section 1.460–6 is amended by adding paragraph (j) to read as follows:

§1.460–6 Look-back Method.

- - - - (j) [The text of proposed paragraph (j)

is the same as the text of §1.460–6T(j) published in T.D. 8756.

Michael P. Dolan, Deputy Commissioner of

Internal Revenue.

(Filed by the Office of the Federal Register on January 12, 1998, 8:45 a.m., and published in the issue of the Federal Register for January 13, 1998, 63 F.R. 1932)

Amicus Brief in Geissal v. Moore Medical Corp.

Announcement 98–22

The Solicitor General of the United States is filing, on March 4, 1998, a brief

as amicus curiae in Geissal v. Moore Medical Corp., 114 F.3d 1458 (8th Cir. 1997), cert. granted, 66 U.S.L.W. 3490 (U.S. Jan. 23, 1998) (No. 97-689). In accordance with the recommendation of Treasury and the Internal Revenue Service, the Solicitor General takes a position in the brief that is contrary to a provision in proposed Treasury Regulations relating to the group health continuation coverage requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). ¹

This announcement provides for continued reliance, for purposes of the excise tax under section 4980B of the Internal Revenue Code, on the position taken in the proposed regulations pending the Supreme Court’s decision in Geissal.

BACKGROUND

Upon the occurrence of certain events (such as a termination of employment other than for gross misconduct) that would otherwise cause certain individuals to lose coverage under a group health plan subject to the COBRA continuation coverage requirements, the plan must offer to those individuals (defined in the statute as “qualified beneficiaries”) the right to elect continuation coverage. Among the dates on which a group health plan may stop making COBRA continuation coverage available is the “date on which the qualified beneficiary first becomes, after the date of the election, covered under any other group health plan . . . which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary . . . .” Section 4980B(f)(2)(B)(iv) of the Code. ²

Clause (d) of Q&A–38 of proposed Treasury Regulation 1.162–26 provides that COBRA continuation coverage can cease to be made available on “the first date after the date of the election upon which the qualified beneficiary is covered

1COBRA added group health continuation coverage requirements to the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 (ERISA), and the Public Health Service Act.

2A group health plan may generally also stop making COBRA continuation coverage available on the date on which a qualified beneficiary first becomes, after the date of the election, entitled to Medicare benefits. See section 4980B(f)(2)(B)(iv) of the Code.

. . . under any other group health plan . . . .” ³

Thus, under the proposed regulations, group health plans would not be precluded from terminating a qualified beneficiary’s COBRA continuation coverage due to the beneficiary’s other coverage merely because the beneficiary obtained the other coverage before the date of electing COBRA continuation coverage. ⁴

A number of cases brought by qualified beneficiaries under title I of ERISA have focused on this issue. The Tenth and Seventh Circuits have held that group health plans cannot cease making COBRA coverage available due to other coverage that began before the date of the election for COBRA coverage. ⁵ The brief being filed as amicus curiae in Geissal supports this view. The Fifth and Eleventh Circuits, and the Eighth Circuit in Geissal, have adopted a contrary view. ⁶

As noted above, proposed Treasury Regulation 1.162–26 took the position that a group health plan may cease making COBRA continuation coverage available to a qualified beneficiary due to the beneficiary’s other group health coverage even if the other coverage began before the date of the election for COBRA coverage. After further consideration of the issue, however, Treasury and the Internal Revenue Service now believe that the bet

3The proposed regulations were published in the Federal Register on June 15, 1987 (52 F.R. 22716), interpreting the COBRA continuation coverage requirements under section 162(k) of the Code. In 1988, the COBRA continuation coverage provisions in the Code were moved from section 162(k) to section 4980B.

4Under the proposed regulations, group health plans would also not be precluded from terminating a qualified beneficiary’s COBRA continuation coverage due to the beneficiary’s being entitled to Medicare benefits merely because the beneficiary became so entitled before the date of electing COBRA continuation coverage. See Q&A–38(e) of prop. Treas. Reg. 1.162–26. Moreover, under the proposed regulations, group health plans would not be required to make COBRA continuation coverage available at all to someone who, on the day before the qualifying event, was already entitled to Medicare benefits. See Q&A–15(b)(2) of prop. Treas. Reg. 1.162–26.

5 Oakley v. City of Longmont, 890 F.2d 1128 (10th Cir. 1989); Lutheran Hospital of Indiana, Inc. v. Business Men’s Assurance Company of America, 51 F.3d 1308 (7th Cir. 1995).

6 Brock v. Primedica, Inc., 904 F.2d 295 (5th Cir. 1990); National Companies Health Benefit Plan v. St. Joseph’s Hospital of Atlanta, Inc., 929 F.2d 1558 (11th Cir. 1991); Geissal v. Moore Medical Corp., 114 F.3d 1458 (8th Cir. 1997).

1998–12 I.R.B. 33 March 23, 1998

ter interpretation of the statute is that a plan is not permitted to cease making COBRA coverage available merely because of other coverage (or entitlement to Medicare benefits) that began before the date of the election for COBRA coverage.

RELIANCE ON PROPOSED REGULATIONS

Q&A–6 of proposed Treasury Regulation 1.162–26 provides that, for the period before the effective date of final regulations, a group health plan must comply in good faith with a reasonable interpretation of the statutory requirements. Q&A6 further provides that the Service will consider compliance with the terms of the proposed regulations to constitute good faith compliance with a reasonable interpretation of the statutory requirements as they existed when the proposed regulations were published (with an exception for provisions of the statute not addressed in the proposed regulations).

This announcement provides for continued reliance on Q&A–38(d) of proposed Treasury Regulation 1.162–26, pending a decision by the Supreme Court in Geissal, with respect to the treatment of certain qualified beneficiaries. (This announcement does not affect private rights of action of qualified beneficiaries under title I of ERISA.) Specifically, the continued reliance applies with respect to a qualified beneficiary who, after the date of the election for COBRA continuation coverage, has other group health coverage that does not contain any exclusion or limitation with respect to a preexisting condition of the qualified beneficiary. Accordingly, no excise tax under section 4980B of the Code will be assessed with respect to any period before the date of the Supreme Court’s decision in Geissal merely because the plan ceases to provide COBRA continuation coverage to a qualified beneficiary described in the preceding sentence, even if the other group health coverage took effect on or before the date of the election for COBRA continuation coverage. ⁷

7This announcement also provides for continued reliance on Q&A–15(b)(2) and Q&A–38(e) of proposed Treasury Regulation 1.162–26. Accordingly, no excise tax under section 4980B of the Code will be assessed with respect to any period before the date of the Supreme Court’s decision in Geissal

DRAFTING INFORMATION

The principal author of this announcement is Russ Weinheimer of the Office of the Associate Chief Counsel (Employee Benefits and Exempt Organizations). For further information regarding this announcement contact Mr. Weinheimer at (202) 622-4695 (not a toll-free call).

Foundations Status of Certain Organizations

Announcement 98–23

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: Christian Care Network, Jackson, MI Christian Cares Association Inc.,

Inc., Naples, FL Diamon Valley Youth Ranch Inc.,

Cliff and Clara Herlache Foundation,

Inc., Sturgeon Bay, WI Clinton County Leadership Institute,

Wilmington, OH Clothe A Child Inc., Indianapolis, IN Cloverport Main Street Revitalization

Committee, Inc., Cloverport, KY Co-Operative Services Inc., Gainesville,

FL Committee To Save Susquehannas Lady

Liberty Inc., Harrisburg, PA Common Sense Solutions Inc., Elgin, TX Common Threads, Columbia, SC Communicative Device Benevolent

Fund, Mentor, OH Communities in Schools Kingsville Texas

Inc., Corpus Christi, TX Communities Resolved To Encourage Art

That Edifies Inc., Port Lavaca, TX Designated Driver Program Inc., Troy,

AL Designs for Transforming Education,

Minneapolis, MN Deska Firesafety Program, Oak Park, MI Desoto Housing & Human Development

Corp., Hernando, MS Detroit Freeze Hockey Club, St. Clair

Shores, MI Detroit Mass Community Services Inc.,

Detroit, MI Deutscher Hilfs Club Florida Westkuste

Inc., Palmetto, FL Developmental Resource Corporation,

Shreveport, LA Dfyit Inc., Houston, TX Diabetes Foundation of Collier County

Missouri City, TX Christian Computer Concepts,

Lakewood, CO Christian Counseling Center, Jackson,

Hutchinson, KS Disability Community Development

TN Christian Counseling Center of Northeast

Arkansas, Jonesboro, AR Christian Discipleship International, Inc.,

Corporation, Ypsilanti, MI Disabled Housing Concepts Inc.,

Hartington, NE Egyptian Heritage Society, Houston, TX Festa Italiana Inc., Atlanta, GA Festival at Dunmaglas Inc., Charlevoix,

Columbus, OH Discovery Days Daycare Inc.,

Georgetown, OH Christian Extension Ministries Inc.,

Hialeh, FL Christian Family Resource Center,

Champaign, IL

merely because a plan does not make COBRA continuation coverage available to an individual who is entitled to Medicare benefits on the day before a qualifying event affecting the individual, or merely because a plan ceases to provide COBRA continuation coverage to a qualified beneficiary on the basis that the qualified beneficiary is entitled to Medicare benefits, even if the beneficiary became entitled to Medicare benefits on or before the date of the election for COBRA continuation coverage.

MI Fibromyalgia Association of Houston

Lilburn, GA Gym Parents Inc., Lancaster, PA

Inc., Bellaire, TX Great American Air Affair Inc., Bowling

Green, KY Great Falls Teachers Federal Credit

Union, Great Falls, MT Gwinnett Panther Association Inc.,

March 23, 1998 34 1998–12 I.R.B.

National Link Incorporated, Durham, NC Native Gospel Outreach, Cortez, CO Natrona County 4-H Foundation, Casper,

Headway Homes of Texas Inc., Garland,

TX Healing Forest Conservancy,

Washington, DC Healing Hearts Foundation Inc., Roswell,

Maryland Alternative Resource Center

for Youth MARMARCY, Oxon Hill, MD Maryland Freshwater Foundation Inc.,

Baltimore, MD Maryland Native Plant Society Inc.,

GA Health and Wholeness Foundation Inc.,

Silver Spring, MD Maryland Womens Basketball Coaches,

WY Natural Bridges Inc., Indianapolis, IN Nature Studies Center International Inc.,

Charleston, WV Homeless Benefit Ball Inc., Louisville,

KY Homeless Foundation of America Inc.,

Ranchos De Toas, NM Navajo County Genealogical Society,

Arlington, VA Hondo Youth Basketball Association Inc.,

Columbia, MD McClain Ministries Inc., Gainesville, FL McCollier Group Home Inc., Canton, OH McGrane Self-Esteem Foundation Inc.,

Ft. Mitchell, KY McPherson Babe Ruth Inc., McPherson,

Hondo, TX Hoosier Youth Invitational Games Inc.,

KS Meadowoods Education Foundation Inc.,

Winslow, AZ Navajo Museum and Library Foundation,

Window Rock, AZ New Jersey Chapter American College of

Health Care Administrators, Inc., Paterson, NJ New Jerusalem Day Care Center, Killeen,

TX New Life Network, Bozeman, MT New Orleans Volunteers in Court, New

Indianapolis, IN Hope and Development Center

Development Organization, Inc., Shreveport, LA New Sober Movement Inc., Ignacio, CO New Trinity Coalition Inc., Dallas, TX New Visions Inc., New York, NY

Incorporated, Beaumont, TX James Sterett Smith Memorial Education

Orlando, FL Mishpachat Alizim, Houston, TX Missing Children of Utah Inc., Ogden,

UT Missing Children Society of USA Inc.,

Orleans, LA New Shreveport Community Housing

Foundation Inc., Towanda, PA Janie Butler Alcohol & Drug Prevention

Center Alcohol and Drug Center, Meridian, MS Japan-American Art and Cultural

Fellowship LTD., Baltimore, MD Jefferson Ark Community Development,

St. Rose, LA Mission of Help Inc., Ft. Pierce, FL Mississippi Association of the Deaf

Incorporated, Batesville, MS Monarch House Group Inc., Colorado

Springs, CO Monarch Youth Program Inc., Chicago, IL Monmouth County Medical Society,

Gary, IN Kevin Shelley Memorial Childrens

Community Christmas Fund, Clinton, MD Key Ministries Inc., Tulsa, OK Keys Childrens Shelter Foundation Inc.,

Key Largo, FL Keystone Soccer Club, Philadelphia, PA La Siembra the Sowing, Espanola, NM La Tropa Michoacana Inc., E. Chicago,

Tinton Falls, NJ Monroe County Environmental

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.

IN Labor Council Community Services Inc.,

Education Advisory Council, Inc., Big Pine Key, FL Montana Freedom Home, Anaconda, MT Montana Poets Society, Three Forks, MT Mulvane Care & Share, Mulvane, KS Muncie Alliance for the Prevention of

Substance Abuse, Inc., Muncie, IN Murray Rotary Club Foundation, Murray,

Mobile, AL Ladies in Motion Corporation, Chicago,

IL Lake Cities Community Band, Southlake,

UT Museum on the Common, Mt. Pleasant,

SC National Financial Literacy Institute, Inc.,

Availability of Publication 970, Tax Benefits for Higher Education

Announcement 98–24

TX Lake Community Homes Inc., Mentor,

Wheaton, MD National Foundation for Future Minority

OH Lake Como Child Care Inc., Lake

Geneva, WI Lake Leon Flood Control Fund Inc.,

Eastland, TX Lake Park Area Historical Society Inc.,

Astronauts, Inc., Houston, TX National Health Foundation of Russia,

Washington, DC National Hispanic Council on Aging of

Wichita, Wichita, KS National Institute for the Study of

Lake Park, GA Lakeland Baptist Education Center,

Lewisville, TX Martin Luther King Jr Association,

New Publication 970 will be available in March, 1998. The publication explains the tax benefits for persons who are saving for or paying higher education costs for themselves and members of their families or who are repaying student loans. The topics include:

• Two new education tax credits (the Hope credit and the lifetime learning credit),

• Using funds from education individ

Pickens, MS Martins Adult Foster Care Incorporated,

Cognitive and Sensorimotor Therapies, Boulder, CO National IOTA Foundation, Baltimore,

MD National Leadership Ministries Inc.,

Washington, DC

Bay City, MI

1998–12 I.R.B. 35 March 23, 1998

ual retirement accounts (IRAs) or traditional IRAs to pay education costs,

• Student loans used to pay education costs,

• Using proceeds from qualified state tuition programs to pay education costs,

• Excluding from income interest earned on certain savings bonds, and

• Excluding from income employerprovided educational assistance benefits.

Most of the benefits become available in 1998, and this publication will help you determine which benefits apply to you so that you can plan for your 1998 federal income tax return.

You can get a copy of this publication

by calling 1-800-829-3676. Or you can write to the IRS Forms Distribution Center nearest you. Check your income tax package for the address. The publication is also available on the IRS Internet Web Site at www.irs.ustreas.gov.

March 23, 1998 36 1998–12 I.R.B.