INCOME TAX

REG–121475–03, page 793. Proposed regulations under section 1397E of the Code amend the final regulations regarding qualified zone academy bonds (QZABs). The proposed regulations contain guidance for state and local governments that issue QZABs and for banks, insurance companies, and other taxpayers that hold those bonds on the maximum term, use of proceeds, and remedial actions for QZABs. A public hearing is scheduled for July 21, 2004.

Notice 2004–28, page 783. Frivolous claims for refunds of income or alternative minimum tax incurred upon the exercise of compen- satory stock options. This notice describes five claims and explains that in most cases the arguments behind such claims are without merit and will not be respected by the Service. This notice also enumerates the penalties which may be applicable to taxpayers relying on such claims or arguments.