Censure Issued by Consent

The following individuals have consented to the issuance of a Censure:

Under Title 31, Code of Federal Regulations, Part 10, in lieu of a proceeding being instituted or continued, an attorney,

certified public accountant, enrolled agent, or enrolled actuary, may offer his or her consent to the issuance of a censure. Censure is a public reprimand.

Name Address Designation Date of Censure

Haynes, Gwenivar L. Ellenwood, GA Enrolled Agent August 1, 2003

Ritchie, Donald Milton, MA Enrolled Agent September 3, 2003

Bagley, Haywood Vista, CA Enrolled Agent September 4, 2003

Book, Robert L. Plymouth, MN Enrolled Agent September 15, 2003

December 1, 2003 1170 2003-48 I.R.B.

Suspension of Tax-Exempt Status of Organizations Identified With Terrorism

Announcement 2003–74

I. Purpose

This announcement is a public notice of the suspension under section 501(p) of the Internal Revenue Code of the federal tax exemption of certain organizations that have been designated as supporting or engaging in terrorist activity or supporting terrorism. Contributions made to an organization during the period that the organization’s tax-exempt status is suspended are not deductible for federal tax purposes.

II. Background

The federal government has designated a number of organizations as supporting or engaging in terrorist activity or supporting terrorism under the Immigration and Nationality Act, the International Emergency Economic Powers Act, and the United Nations Participation Act of 1945. Federal law prohibits most contributions to organizations that have been so designated.

Section 501(p) of the Code was enacted as part of the Military Family Tax Relief Act of 2003 (P.L. 108–121), effective November 11, 2003. Section 501(p)(1) suspends the exemption from tax under section 501(a) of any organization described in section 501(p)(2). An organization is described in section 501(p)(2) if the organization is designated or otherwise individually identified (1) under certain provisions of the Immigration and Nationality Act as a terrorist organization or foreign terrorist organization; (2) in or pursuant to an Executive Order which is related to terrorism and issued under the authority of the International Emergency Economic Powers Act or section 5 of the United Nations Participation Act of 1945 for the purpose of imposing on such organization an economic or other sanction; or (3) in or pursuant to an Executive Order issued under the authority of any federal law, if the organization is designated or otherwise individually identified in or pursuant to the Executive Order as supporting or engaging in terrorist activity (as defined in the Immigration and Nationality Act) or supporting terrorism (as defined in

the Foreign Relations Authorization Act) and the Executive Order refers to section 501(p)(2). Under section 501(p)(3) of the Code, suspension of an organization’s tax exemption begins on the date of the first publication of a designation or identification with respect to the organization, as described above, or the date on which section 501(p) was enacted, whichever is later. This suspension continues until all designations and identifications of the organization are rescinded under the law or Executive Order under which such designation or identification was made.

Under section 501(p)(4) of the Code, no deduction is allowed under any provision of the Internal Revenue Code for any contribution to an organization during any period in which the organization’s tax exemption is suspended under section 501(p). Thus, for example, no charitable contribution deduction is allowed under section 170 (relating to the income tax), section 545(b)(2) (relating to undistributed personal holding company income), section 556(b)(2) (relating to undistributed foreign personal holding company income), section 642(c) (relating to charitable set asides), section 2055 (relating to the estate tax), section 2106(a)(2) (relating to the estate tax for nonresident aliens) and section 2522 (relating to the gift tax) for contributions made to the organization during the suspension period.

Prior to the effective date of suspension of exemption under section 501(p), the three organizations listed below were designated under Executive Order 13224, entitled "Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism.” Contributions made to these organizations in violation of the Executive Order prior to this suspension are not tax deductible under the Internal Revenue Code.

III. Notice of Suspensions and Nondeductibility of Contributions

Organizations whose tax exemption has been suspended under section 501(p) and the effective date of such suspension are listed below. Contributions made to these organizations during the period of suspension are not deductible for federal tax purposes.

Benevolence International Foundation, Inc. Palos Hills, Illinois Effective Date: November 11, 2003

Global Relief Foundation, Inc. Bridgeview, Illinois Effective Date: November 11, 2003

Holy Land Foundation for Relief and Development Richardson, Texas Effective Date: November 11, 2003

IV. Federal Tax Filings

An organization whose exempt status has been suspended under section 501(p) does not file Form 990 and is required to file the appropriate Federal income tax returns for the taxable periods beginning on the date of the suspension. The organization must continue to file all other appropriate federal tax returns, including employment tax returns, and may also have to file federal unemployment tax returns.

V. Contact Information

For additional information regarding the designation or identification of an organization described in section 501(p)(2), contact the Compliance Division at the Office of Foreign Assets Control of the U.S. Treasury Department at 202–622–2490. Additional information is also available for download from the Office’s Internet Home Page at www.treas.gov/ofac .

For additional information regarding the suspension of the federal tax exemption of an organization under section 501(p), contact Robert Fontenrose at (202) 283–9484 at the Internal Revenue Service.

Deletions From Cumulative List of Organizations Contributions to Which are Deductible Under Section 170 of the Code

Announcement 2003–76

The name of an organization that no longer qualifies as an organization described in section 170(c)(2) of the Internal Revenue Code of 1986 is listed below.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date

2003-48 I.R.B. 1171 December 1, 2003

certainty promoted by the check-the-box regulations in 1996.

After considering the comments received, Treasury and the IRS issued Notice 2003–46, 2003–28 IRB 53, on June 26, 2003, announcing the intention to withdraw the extraordinary transaction rule in proposed §301.7701–3(h) and to finalize the remaining provisions of the proposed regulations addressing grandfathered entities and the relevancy of classification status.

With the publication of this document, proposed §301.7701–3(h) is withdrawn. Final regulations (T.D. 9093) adopting without substantive change the portions of the proposed regulations relating to grandfathered entities and the relevancy of classification status are being published on page 1156 of this issue of the Bulletin. These final regulations do not adopt the extraordinary transaction rule in proposed §301.7701–3(h).

Drafting Information

The principal author of this withdrawal notice is Ronald M. Gootzeit, Office of Associate Chief Counsel (International). However, other personnel from Treasury and the IRS participated in its development.

- - - -

Partial Withdrawal of a Notice of Proposed Rulemaking

Accordingly, under the authority of 26 U.S.C. 7805, §301.7701–3(h) of the notice of proposed rulemaking published in the Federal Register on November 29, 1999, (64 FR 66591) is withdrawn.

Robert E. Wenzel, Deputy Commissioner for Services and Enforcement .

(Filed by the Office of the Federal Register on October 21, 2003, 8:45 a.m., and published in the issue of the Federal Register for October 22, 2003, 68 F.R. 60305)

of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on October 28, 2002, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.

Zaire Unlimited

Calumet Park, IL

Partial Withdrawal of Proposed Regulations Relating to Changes in Entity Classification

Announcement 2003–78

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of notice of proposed rulemaking.

SUMMARY: This document withdraws a portion of a notice of proposed rulemaking (REG–110385–99, 1999–2 C.B. 670) published on November 29, 1999, addressing certain transactions that occur within a specified period before or after a foreign entity changed its classification to disregarded-entity status.

EFFECTIVE DATES: The withdrawal of proposed §301.7701–3(h) is effective October 22, 2003.

FOR FURTHER INFORMATION CONTACT: Ronald M. Gootzeit, (202) 622–3860 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On December 18, 1996, Treasury and IRS published in the Federal Register final regulations (T.D. 8697, 1997–1 C.B. 215 [61 FR 66584]) relating to the classification of business entities under section 7701 (check-the-box regulations). On November 29, 1999, Treasury and the IRS published in the Federal Reg- ister a notice of proposed rulemaking (REG–110385–99, 1999–2 C.B. 670

[64 FR 66591]) proposing to amend §§301.7701–2 and 301.7701–3 of the current check-the-box regulations (proposed regulations). A public hearing on the proposed regulations was held on January 31, 2000. In addition, written comments were received. Most of the written and oral comments related to proposed §301.7701–3(h), which provided a rule that would have operated to change the classification of a foreign disregarded entity if a so-called “extraordinary transaction” occurred one day before or within one year after the election to treat the entity as disregarded. In general, commentators criticized the approach adopted in this rule as overly broad and expressed concern that it would mitigate the increased

December 1, 2003 1172 2003-48 I.R.B.