Part IV. Items of General Interest

tion of factors such as equity, hardship, and public policy in the compromise of tax cases, if such consideration would promote effective tax administration. The legislative history also states that the IRS should use this new compromise authority “to resolve longstanding cases by forgoing penalties and interest which have accumulated as a result of delay in determining the taxpayerís liability.” H. Conf. Rep. 599, 105th Cong., 2d Sess. 289 (1998). The text of the temporary regulation provides the authority to compromise cases involving issues of equity, hardship, and public policy, if such a compromise would promote effective tax administration. The temporary regulation provides factors to be considered and examples of cases that could be compromised under this authority when collection of the full amount of the tax liability would create economic hardship. The temporary regulation also provides limited examples of cases that could be compromised when the facts and circumstances presented indicate that collection of the full tax liability would be detrimental to voluntary compliance. The temporary regulation does not contain examples of longstanding cases that could be compromised to promote effective tax administration when penalties and interest have accumulated as the result of delay by the Service in determining the tax liability.

The public is specifically encouraged to make comments or provide examples regarding the particular types of cases or situations in which the Secretaryís authority to compromise should be used because: (1) collection of the full amount of tax liability would be detrimental to voluntary compliance or (2) IRS delay in determining the tax liability has resulted in the accumulation of significant interest and penalties. In formulating comments regarding delay in interest and penalty cases, consideration should be given to the possible interplay between cases compromised under this provision and the relief accorded taxpayers under I.R.C. § 6404(e).

All comments will be available for public inspection and copying.

A public hearing may be scheduled if requested in writing by a person that

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Compromises

REG–116991–98

AGENCY: Internal Revenue Service (IRS), Treasury.

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

SUMMARY: In T.D. 8829, on page 235, the IRS is issuing temporary regulations relating to the compromise of tax liabilities. These regulations provide additional guidance regarding the compromise of internal revenue taxes. The temporary regulations reflect changes to the law made by the Internal Revenue Service Restructuring and Reform Act of 1998 and the Taxpayer bill of Rights II. The text of the temporary regulations also serves as the text of these proposed regulations.

DATE: Written or electronically generated comments and requests for a public hearing must be received by October 19, 1999.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG–116991–98), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG–116991–98), Courier’s Desk, Internal Revenue Service, 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.gov/prod/tax_regs/ comments.html.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Carol A. Campbell, (202) 622-3620 (not a tollfree number).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in T.D. 8829 amend the Procedure and Administration Regulations (26 CFR part 301) under section 7122 of the Internal Revenue Code. The temporary regulations reflect the amendment of section 7122 by section 3462 of the Internal Revenue Service Restructuring and Reform Act of 1998 (“RRA 1998”) Public Law, 105–206, (112 Stat. 685, 764) and by section 503(a) of Taxpayer Bill of Rights II Public Law 104-168, (110 Stat. 1452, 1461). The text of the 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 also has 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 regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. 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 Requests for a 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) or electronically generated comments that are submitted timely to the IRS. The IRS generally requests any comments on the clarity of the proposed rule and how it may be made easier to understand.

Section 3462 of RRA 1998 and its legislative history provide for the considera

August 9, 1999 242 1999–32 I.R.B.

Discussion: Section 119 of the Internal Revenue Code provides that an employee’s gross income does not include the value of any meal furnished to him in kind by or on behalf of his employer for the convenience of the employer if the meal is furnished on the employer’s business premises. Treas. Reg. § 1.119–1(a)(2) provides that a meal is furnished for “the convenience of the employer” if it is furnished for a substantial noncompensatory business reason of the employer. Whether an employer-provided meal is furnished for “the convenience of the employer” is important to the employer for federal tax purposes because the interplay of sections 119, 132, and 274 of the Internal Revenue Code determines whether the employer can fully deduct the cost of the meal.

During the years in issue, the taxpayer furnished free meals on its business premises to all of its employees, most of whom were required to stay on the taxpayer’s business premises during their working hours primarily because of the particular security concerns of the casino industry. The taxpayer argued that, because its employees were required to remain on its business premises during their working hours, the meals it provided to its employees were provided for a substantial noncompensatory business reason.

The Tax Court held that the taxpayer’s stay-on-the-business-premises requirement did not satisfy the convenience-ofthe-employer requirement of section 119, determining that there must be a “closer and better documented connection between the necessities of the employer’s business and the furnishing of free meals.”

The Ninth Circuit reversed the Tax Court decision. The Ninth Circuit found that the taxpayer’s particular security and other business-related concerns provided sufficient justification for its policy of requiring employees to stay on the employer’s business premises to satisfy “the convenience of the employer” test of section 119. Specifically, the Ninth Circuit stated that –

Boyd was required to and did support its closed campus policy with adequate evidence of legitimate business reasons. While reasonable minds might differ regarding whether a “stay-onthe-premises” policy is necessary for

timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the hearing will be published in the Federal Register.

Drafting Information

The principal author of these regulations is Carol A. Campbell, Office of the Assistant Chief Counsel (General Litigation) CC:EL:GL, IRS. However, other personnel from the IRS and Treasury Department participated in their development.

- - - -

Proposed Amendments to the Regulations

Accordingly, 26 CFR Part 301 is proposed to be 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. 7122–1 is added to read as follows:

§ 301.7122–1 Compromises.

[The text of this proposed section is the same as the text of § 301.7122–1T published in T.D. 8829, on page 235.]

Charles O. Rossotti,

Commissioner of Internal Revenue.

(Filed by the Office of the Federal Register on July 19, 1999, 8:45 a.m., and published in the issue of the Federal Register for July 21, 1999, 64 F.R. 39106)

Boyd Gaming Corporation v. Commissioner

Announcement 99–77

The Service (1) acquiesces in the opinion, (2) withdraws proposed training materials relating primarily to the application of section 119 of the Internal Revenue Code to employer-provided meals in the hospitality industry, and (3) terminates the settlement initiative related to this issue.

The Internal Revenue Service (Service) announces three actions as a result of the

opinion of the United States Court of Appeals for the Ninth Circuit in Boyd Gam- ing Corporation v. Comm’r, ___ F.3d ___ (9th Cir. May 12, 1999), reversing T.C. Memo 1997–445 T.C. Dkt. Nos. 3433–95, 3434–95 (1997). First, the Solicitor General has decided not to file a petition for a writ of certiorari with the United States Supreme Court with respect to the Ninth Circuit’s opinion. Accordingly, the Service announces today that it acquiesces in the Ninth Circuit’s opinion in Boyd Gaming Corpora- tion. The acquiescence will appear in 1999–32 I.R.B. (August 9, 1999), and a copy of the Action on Decision memorandum in support of that acquiescence accompanies this announcement.

Second, the Service withdraws the proposed training materials described in Announcement 98–77, 1998–34 I.R.B. 30. See also Announcement 98-100, 1998–46 I.R.B. 42. These materials relate primarily to the application of section 119 of the Internal Revenue Code to meals provided to employees in the hospitality industry.

Finally, the Service terminates the settlement initiative relating to employee meals described in Announcement 98–78, 1998–34 I.R.B. 30. Pending cases involving this issue will be resolved on the basis of their particular facts in light of the Ninth Circuit’s opinion in Boyd Gaming Corporation and the Service’s acquiescence in that opinion.

The principal author of this announcement is Thomas Burger, Director, Office of Employment Tax Administration and Compliance (OETAC). For further information regarding this announcement contact Mr. Burger at (202) 622-3650 (not a toll-free call).

ACTION ON DECISION

Subject: Boyd Gaming Corporation v. Commissioner, F.3d (9th Cir. 1999), rev’g T.C. Memo. 1997–445 T.C. Dkt. Nos. 3433–95, 3434–95

Issue: Whether a meal furnished by the taxpayer/employer on its business premises to an employee is furnished for “the convenience of the employer” within the meaning of that phrase in section 119 of the Internal Revenue Code.

1999–32 I.R.B. 243 August 9, 1999

security and logistics, the fact remains that the casinos here operate under this policy. Given the credible and uncontradicted evidence regarding the [business] reasons underlying the “stay-onthe-premises” policy, it is inappropriate to second guess these reasons or to substitute a different business judgment for that of Boyd.

In light of the Ninth Circuit’s opinion, the Service will not challenge whether meals provided to employees of casino businesses similar to that operated by Boyd Gaming meet the section 119 “convenience of the employer” test where the employer’s business policies and practices would otherwise preclude employees from obtaining a proper meal within a reasonable meal period. A bona fide and enforced policy that requires employees to stay on the employer’s business premises during their normal meal period is only one example of the type of business practice that could justify the employer’s providing of meals that would qualify for section 119 treatment. Another example could be a practice requiring “check-out” procedures for employees leaving the premises in order to address the same type of security concerns that were relevant in Boyd Gaming where these procedures have the same practical effect.

More generally, in applying section 119 and Treas. Reg. § 1.119–1, the Service will not attempt to substitute its judgment for the business decisions of an employer as to what specific business policies and practices are best suited to addressing the employer’s business concerns. By the same token, to paraphrase the Ninth Circuit, “it would not [be] enough for [an employer] to wave a ‘magic wand’ and say it had a policy in order [for meals to qualify under section 119].” Thus, the Service will consider whether the policies decided upon by the employer are reasonably related to the needs of the employer’s business (apart from a desire to provide additional compensation to its employees) and whether these policies are in fact followed in the actual conduct of the business. If such reasonable procedures are adopted and applied, and they preclude employees from obtaining a proper meal off the employer’s business premises during a reasonable meal period, section 119 will apply.

Recommendation: Acquiescence

Reviewer: Paul C. Feinberg,

Special Counsel.

Approved: Stuart L. Brown,

Chief Counsel.

By: Nancy J. Marks, ,

Acting Associate Chief Counsel, (Employee Benefits and Exempt Or- ganizations).

THIS DOCUMENT IS NOT TO BE RELIED UPON OR OTHERWISE CITED AS PRECEDENT BY TAXPAYERS

Internal Revenue Service to Make Litigation Guideline Memoranda Available for Public Inspection

Announcement 99–81

On July 22, 1999, the Internal Revenue Service (IRS) will make, among other documents, Litigation Guideline Memoranda (LGMs), issued between January 1, 1986, and October 20, 1998, available for public inspection. Section 3509(d)(2)(A) of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98), Pub. L. No. 105–206, required that certain types of “Chief Counsel Advice” be made available for public inspection at this time. In general, Chief Counsel Advice is advice about the tax laws written by the National Office of Chief Counsel to field offices, including District Counsel, Examination and Appeals.

As reflected in Chief Counsel Notice N(32)210–1 (April 18, 1988) LGMs “provide information and instruction relating to litigating procedures and methods, and standards and criteria on issues and matters of significant interest to litigating attorneys in the Office of Chief Counsel.” However, “each [LGM] represents the litigating position criteria and procedures of the Office of Chief Counsel as of the date of issuance and may not represent the current position.” Because some of the LGMs do not represent current Chief Counsel position, they may have been designated internally as “obsolete.” This designation will not necessarily be appar

ent on the face of the document. Despite the fact that the Chief Counsel attorneys no longer follow the guidance and instructions set forth in obsolete LGMs, all LGMs issued between 1986-1998 are being made publicly available. It is anticipated that the IRS will make available to the public a Title Index that identifies which LGMs are current and those that have been obsoleted.

Pursuant to § 3509 of RRA 98, Congress has authorized the IRS to delete taxpayer identifying details and information that is exempt from public disclosure under the Freedom of Information Act (FOIA). See § 6110(i)(3). The FOIA deletions will be made only if it is determined that disclosure might “seriously impede or nullify IRS activities in carrying out a responsibility or function;” for example, jeopardize an ongoing investigation or judicial proceeding or that would be harmful to other interests specified in the FOIA. IRM 1230, Internal Management Document System Handbook, at text 293(2). After the documents have been made available to the public, the correctness of the deletion of any information may be challenged under section 6110.

Documents released under this process will be found in the Freedom of Information Room, 1111 Constitution Ave., NW, Washington, DC 20224, where they may be read and copied by the public during the hours 9:00 A.M. to 4:00 P.M.

The public is cautioned that LGMs may not be used or cited as precedent. See § 6110(k)(3).

The principal author of this announcement is Andrea Tucker of the Office of the Associate Chief Counsel (Domestic). For further information regarding this announcement contact Andrea Tucker on (202) 622-4540 (not a toll-free call).

Recovery Period for Certain Personal Property Used in Rental Real Estate Activities; Correction

Announcement 99–82

The 1998 instructions for Form 4562, Depreciation and Amortization, and Pub- lication 527, Residential Rental Property, classify certain personal property used in a rental real estate activity (appliances,

August 9, 1999 244 1999–32 I.R.B.

Washington PC, Washington, DC Unlimited Senior Housing Inc.,

carpeting, furniture, etc.) as 7-year property. The correct classification is 5-year property. This property is included in Asset Class 57.0, Distributive Trades and Services (see Rev. Proc. 87–56, 1987–2 C.B. 674). Therefore, the correct recovery period to be used for the regular tax is 5 years under the General Depreciation System (GDS) and 9 years under the Alternative Depreciation System (ADS).

When using a 5-year recovery period for this property for the regular tax, any alternative minimum tax (AMT) adjustment generally must be figured using a 9year recovery period. However, if the property was placed in service after 1998, the same recovery period applies for both the regular tax and the AMT.

The action, if any, to be taken is determined for each property based on when the property was placed in service.

• For property placed in service during any tax year for which a return has not yet been filed, taxpayers must use a 5year recovery period under GDS (9 years under ADS). For the AMT, taxpayers must use a 9-year recovery period for property placed in service before 1999.

• For property placed in service during the most recent tax year for which a tax return has been filed, the taxpayer may do either of the following:

1. Continue to depreciate the property using a 7-year recovery period under GDS (12 years under ADS). For the AMT, continue using a 12- year recovery period for property placed in service before 1999. 2. File an amended return for that year to change the recovery period from 7 years to 5 years under GDS (12 years to 9 years under ADS). For the AMT, use

tax year prior to the most recent tax year for which a tax return has been filed, the taxpayer may do either of the following:

1. Continue to depreciate the property using a 7-year recovery period under GDS (12 years under ADS). For the AMT, continue using a 12- year recovery period for property placed in service before 1999. 2. File Form 3115, Application for Change in Accounting Method, to change to a 5-year recovery period under GDS (9 years under ADS). Also use Form 3115 to change to a 9-year recovery period for the AMT for property placed in service before 1999. The change is automatic and no user fee is required, but Form 3115 must be filed. See Rev. Proc. 98–60, 1998–51 I.R.B. 16, for details on how to make the change and file Form 3115.

You can obtain Form 3115 and its separate instructions by telephone or by using IRS electronic information services. Approved July 20, 1999.

Sheldon D. Schwartz, National Director, Tax Forms

and Publications Division.

Foundations Status of Certain Organizations

Announcement 99–83

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 Orga

tions 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: Center for Art and Earth Inc., New York,

NY George A. Boyce Military Museum,

Tempe, AZ Help Ourselves Project, Philadelphia,

PA Medcetera Education Foundation, Inc.,

Bellaire, TX Memorial Neighborhood Health Centers

Inc., South Bend, IN Moose-Willow Sportsman Club, Hill

City, MN United States Amateur Basketball

Association Inc., Ft. Worth, TX United States Army Command and

General Staff College Alumni, Ft. Leavenworth, KS United States Coalition for Education for

All Inc., Arlington, VA United States Medical Triathlon

Association Inc., Roanoke, VA United States Water Fitness, Boynton

Beach, FL United Victim Recovery Service, Toledo,

OH United Way of Scott County Indiana Inc.,

Scottsburg, IN Unity Community Center of South Jersey

Incorporated, Camden, NJ Unity to Assist Humanity Alliance, Salt,

Lake City, UT Universal Awareness Association Inc.,

Phoenix, AZ Universal Community & Housing

Development Corporation, Detroit, MI Universal Ministries Inc., Pittsburgh, PA University Ophthalmic Consultants of

Uniontown, PA Upper Michigan Central Model RR Club,

Scottsdale, AZ Upward Movement Nutritional Service,

Wells, MI Upper Rio FM Society Inc.,

Albuquerque, NM Villa D Ames Organization Intent on

Changing Its Environment, Marrero, LA Upstreet Educational Media Inc.,

1999–32 I.R.B. 245 August 9, 1999

Voice for Life, Colorado Springs, CO Voice of Freedom Inc., Washington, DC Voice of Triumph Ministries Inc., Tucson,

AZ Voices for Life, Houston, TX Volunteer Center of the Lowcountry Inc.,

Houston, TX Urban Agriculture Network, Washington,

Columbus, OH Veterans Action Force USA Inc., Tucker,

DC Urban Christian Ministries Inc.,

Arlington Heights, IL Urban Genesis Inc., Philadelphia, PA Urban Harvest Ministries Inc., Beaumont,

GA Veterans Foodlocker and Relief Fund,

Lisbon, OH Veterans Support Task Force Inc.,

Madison, WI Victim Protection Services, Denver, CO Victims of Choice & Abortions Legacy

Charleston, SC Volunteer Emergency Services Support

Group, Hernando, MS Volunteer Firemens Association,

TX Urban Life Challenge Inc., Paterson, NJ Urban Ministries of Springfield Inc.,

Calumet, OK Volunteer for AIDS Information and

Jacksonville, FL Urban Shelters of America Inc., Chicago,

Inc., Snellville, GA Victorious Living Foundation Inc.,

Broken Arrow, OK Victory Museum Foundation Inc.,

IL Urban Vision Inc., Richmond, VA USA Compete Inc. A Non-Profit

Corporation, Greeley, CO USA Karate Federation of New Mexico,

Hinesville, GA Victory Videos Inc., Florence, KY Video Portrait Society of America Inc.,

Denver, CO Video Vista of New York Ltd., New York,

Service, Dallas, TX Volusia Surf Lifesaving Association Inc.,

Daytona Beach, FL Voters Against Sexual Abuse Inc., Grand

Rapids, MI Walker Mill Towne Affordable Home

Ownership Corporation, Seat Pleasant, MD We Stay-Nos Quedamos Inc., Bronx, NY West Bank Safety Center, Minneapolis,

Albuquerque, NM Utah Harvest, Sandy, UT Utah Head and Spinal Cord Injury

Prevention Program, Salt Lake City, UT Utah Taxpayers Legal Foundation, Salt

NY Villa Vista Nonprofit Housing

Corporation, Saginaw, MI Village Association of Batavia Inc.,

MN World Outreach International, Detroit,

MI Yenping Association Inc., New York, NY Zachary & Elizabeth M. Fisher Medical

Lake City, UT Ute Pass Field of Dreams Inc., Cascade,

Cincinnati, OH Village Puppet Theatre Inc., Covington,

KY Vincennes Area Youth Adult Ministries

CO Uvalde Youth Rodeo Club, Uvalde, TX VIPs Performing Dance Company Inc.,

Wilmington, NC Valley Christian Radio Inc., Littleton, CO Valley Youth Athletic Parks Boosters

Inc., Vincennes, IN Vinita Unlimited Inc., Vinita, OK Virginia Association of Black Women

VA Virginia Theatrical Society Inc.,

Foundation, Inc., New York, NY Zichron Chaim Shlomo, Passaic, NJ

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.

Inc., Lucasville, OH Variety Clubs of Colorado Inc.,

Attorneys, Midlothian, VA Virginia Caring Program Inc., Richmond,

Englewood, CO Vaut Association, Riverdale, IL Venable Apartments Inc., Owensboro,

KY Vernon Daniels Evangelistic Association,

Chesapeake, VA Vision International Inc., Hays, KS Vision Music Ministries, Gastonia, NC Visions Studio for the Creative Arts, De

Soto, TX Visions Unfolding Incorporated,

Norman, OK Vestavia Hills Chamber of Commerce

Foundation, Birmingham, AL Vet-Group Inc., W. Monroe, LA Veteran Information and Service Center,

Houston, TX Vocational Technical Educational

Foundation of Delaware, Woodside, DE

August 9, 1999 246 1999–32 I.R.B.