Part IV. Items — Internal Revenue Bulletin 2004-21

Notice of Proposed Rulemaking

Special Consolidated Return Rules for the Disallowance of Interest Expense Deductions Under Section 265(a)(2)

REG–128590–03

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations under section 265(a)(2) that affect corporations filing consolidated returns. These regulations provide special rules for the treatment of certain intercompany transactions involving interest on intercompany obligations.

DATES: Written or electronic comments and requests for a public hearing must be received by August 5, 2004.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–128590–03), room 5203, 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 4 p.m. to CC:PA:LPD:PR (REG–128590–03), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit comments electronically via the IRS Internet site at www.irs.gov/regs or via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG–128590–03).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Frances L. Kelly, (202) 622–7770; concerning submissions of comments and/or requests for a public hearing, Guy Traynor, (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Section 265(a)(2)

Section 163(a) generally allows a deduction for all interest paid or accrued within the taxable year on indebtedness. Under section 265(a)(2), however, no deduction is allowed for interest on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from Federal income taxes.

Rev. Proc. 72–18, 1972–1 C.B. 740, provides guidelines for the application of section 265(a)(2) to taxpayers holding taxexempt obligations. Section 3.01 of the revenue procedure states that the application of section 265(a)(2) requires a determination, based upon all the facts and circumstances, of the taxpayer’s purpose in incurring or continuing each item of indebtedness. Such purpose may be established by either direct or circumstantial evidence. Direct evidence includes direct tracing of borrowed funds to investments in tax-exempt obligations and the pledging of tax-exempt obligations as security for the indebtedness. To the extent that there is direct evidence establishing a purpose to purchase or carry tax-exempt obligations, the interest paid or incurred on such indebtedness may not be deducted. In certain other cases when an interest deduction is disallowed (for example, when amounts borrowed by a dealer in tax-exempt obligations are not directly traceable to tax-exempt obligations), section 7 of Rev. Proc. 72–18 sets forth a formula to calculate the disallowed interest deduction. That formula provides that the amount of the disallowed interest deduction is determined by multiplying the total interest on the indebtedness by a fraction, the numerator of which is the average amount during the taxable year of the taxpayer’s tax-exempt obligations (valued at their adjusted bases), and the denominator of which is the average amount during

the taxable year of the taxpayer’s total assets (valued at their adjusted bases) minus the amount of any indebtedness the interest deduction on which is not subject to disallowance to any extent under Rev. Proc. 72–18. In H Enterprises International, Inc. v. Commissioner, 75 T.C.M. (CCH) 1948 (1998), aff’d, 183 F.3d 907 (8 ^th Cir. 1999), a parent and a subsidiary were members of the same consolidated group of corporations. The subsidiary declared a dividend and, a few days later, borrowed funds and immediately used part of those funds to make the dividend distribution to the parent. A portion of the distributed funds was disbursed to two investment divisions of the parent, which used the funds to acquire investments including tax-exempt obligations.

The court held that a portion of the subsidiary’s indebtedness was incurred for the purpose of purchasing or carrying tax-exempt obligations (held in the parent’s investment divisions) and, therefore, no deduction was allowed for the interest on this portion of the indebtedness under section 265(a)(2). To establish the required purposive connection under section 265(a)(2), the court reasoned that the activities of the parent corporation were relevant in determining the subsidiary’s purpose for borrowing the funds. The court stated that if the analysis only focused on the borrower and not the transferee, then the purpose of the borrower corporation would always be acceptable, frustrating the legislative intent of section 265(a)(2).

Rev. Rul. 2004–47, 2004–21 I.R.B. 941, provides guidance on the application of section 265(a)(2) in a number of situations in which a member of an affiliated group borrows money from an unrelated party and transfers funds to another member of the group that is a dealer in tax-exempt obligations. In Situation 4, P and S are members of the same affiliated group but file separate tax returns. P borrows funds from L, an unrelated bank, and lends the borrowed funds to S, a dealer in

May 24, 2004 952 2004-21 I.R.B.

of the exclusion rule is subject, however, to a limitation. In particular, the amount of interest income not excluded cannot exceed the interest expense on the portion of the nonmember indebtedness that is directly traceable to the intercompany obligation. This limitation ensures that applying section 265(a)(2) to disallow an interest deduction with respect to an intercompany obligation that can be directly traced to nonmember indebtedness does not result in a worse overall tax position for the group than applying section 265(a)(2) to disallow a deduction for the interest paid to the nonmember.

Therefore, subject to the limitation discussed above, if the proceeds of P’s borrowing from a nonmember can be directly traced to a P-S intercompany obligation and all or a portion of S’s interest expense on the P-S intercompany obligation is disallowed as a deduction under section 265(a)(2), these proposed regulations require that all or a portion of P’s interest income on the intercompany obligation not be excluded under §1.1502–13(c)(6)(i).

In an Advance Notice of Proposed Rulemaking (REG–128572–03, published as Announcement 2004–44) in this issue of the Bulletin, the IRS and Treasury Department are soliciting comments regarding whether regulations under section 7701(f) should address the application of sections 265(a)(2) and 246A in transactions involving related parties, pass-thru entities, or other intermediaries, and suggestions as to the approach that should be taken by those regulations. It is possible that those comments and any regulations proposed under section 7701(f) will result in amendments to the rules set forth in these proposed regulations.

Proposed Effective Date

These regulations are proposed to apply to taxable years beginning on or after the date these regulations are published as final regulations in the Federal Register .

Special Analysis

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations will not have a

tax-exempt obligations. S uses the borrowed funds in its business. The ruling examines the obligation from L to P and the obligation from P to S for the application of section 265(a)(2). With regard to the loan from L to P, P uses the borrowed funds to make a loan to S, and P separately accounts for the taxable interest income from the obligation. The ruling concludes that P does not have a purpose of using the borrowed funds to purchase or carry tax-exempt obligations within the meaning of section 265(a)(2). With regard to the loan from P to S, although the borrowed funds are not directly traceable to S’s purchase or carry of tax-exempt obligations, the ruling concludes that section 265(a)(2) applies to disallow a deduction for a portion of S’s interest expense. The portion of S’s interest deduction that is disallowed is determined pursuant to the formula of section 7 of Rev. Proc. 72–18.

The Intercompany Transaction Regulations

Section 1.1502–13 prescribes rules relating to the treatment of transactions between members of a consolidated group. With respect to intercompany obligations, the intercompany transaction rules generally operate to match the debtor member’s items with the lending member’s items from the intercompany obligation.

Under §1.1502–13(c)(6)(i), if section 265(a)(2) permanently and explicitly disallows a debtor member’s interest deduction with respect to a debt to another member, the lending member’s interest income is treated as excluded from gross income. See §1.1502–13(g)(5), Example 1 (d). In cases when a member of the group borrows from another member to purchase or carry tax-exempt obligations, and the lending member has not borrowed from sources outside of the group to fund the intercompany obligation, the result reached under the §1.1502–13(c)(6)(i) exclusion rule is appropriate in that it reflects that intercompany lending transactions do not alter the net worth of the group and, thus, should not affect consolidated taxable income.

However, when the lending member borrows from a nonmember, the lending member lends those funds to the debtor member, and the debtor member uses those funds to purchase or carry tax-exempt obligations, the application of the

§1.1502–13(c)(6)(i) exclusion rule may produce inappropriate results. For example, assume P borrows $100 from L, a nonmember, for the purpose of lending the $100 to S under the same terms, and S’s purpose for borrowing $60 of the intercompany loan from P is to purchase $60 of tax-exempt obligations. Under section 265(a)(2), a deduction would be disallowed for a portion of S’s interest expense on the intercompany obligation and a portion of P’s interest income would be excluded from P’s gross income under §1.1502–13(c)(6)(i). Accordingly, section 265(a)(2) may have no effect on the group’s taxable income, even though the group has borrowed to purchase tax-exempt obligations.

Explanation of Provisions

The IRS and Treasury Department believe that, when a member’s indebtedness to a nonmember is directly traceable to an intercompany obligation and another member of the group uses the funds borrowed from the nonmember to purchase or carry tax-exempt obligations, the net tax effect of these transactions for the group should be a disallowance of a deduction for interest under section 265(a)(2).

These proposed regulations reflect that when a member (P) borrows funds from a nonmember and lends all of those funds to another member (S) that uses those funds to purchase tax-exempt obligations, section 265(a)(2) will apply to disallow a deduction for the interest on S’s obligation to P, not P’s obligation to the nonmember. These proposed regulations provide that, if a member of a consolidated group incurs or continues indebtedness to a nonmember, that indebtedness to the nonmember is directly traceable to all or a portion of an intercompany obligation extended to a member of the group (the borrowing member) by another member of the group (the lending member), and section 265(a)(2) applies to disallow a deduction for all or a portion of the borrowing member’s interest expense incurred with respect to the intercompany obligation, then §1.1502–13(c)(6)(i) will not apply to exclude an amount of the lending member’s interest income with respect to the intercompany obligation that equals the amount of the borrowing member’s disallowed interest deduction. This override

2004-21 I.R.B. 953 May 24, 2004

proceeds to purchase tax-exempt securities. P’s indebtedness to L is directly traceable to the intercompany obligation between P and S. In addition, there is direct evidence that the proceeds of S’s intercompany obligation to P were used to fund S’s purchase or carrying of tax-exempt obligations. During the 2005 taxable year, P incurs $10x of interest expense on its loan from L, and S incurs $10x of interest expense on its loan from P. Under section 265(a)(2), the entire $10x of S’s interest expense on the intercompany obligation to P is disallowed as a deduction.

(ii) Analysis . Because section 265(a)(2) permanently and explicitly disallows $10x of S’s interest expense, ordinarily $10x of P’s interest income on the intercompany obligation would be redetermined to be excluded from P’s gross income under §1.1502–13(c)(6)(i). However, under this paragraph (c), §1.1502–13(c)(6)(i) will not apply to exclude P’s interest income with respect to the intercompany obligation in an amount that equals S’s disallowed interest deduction with respect to the intercompany obligation. Accordingly, §1.1502–13(c)(6)(i) will not apply to exclude P’s $10x of interest income on the intercompany obligation and P must include in income $10x of interest income from the intercompany obligation.

Example 2 . (i) Facts . The facts are the same as in Example 1, except that P incurs only $8x of interest expense on its loan from L.

(ii) Analysis . Section 1.1502–13(c)(6)(i) will apply to exclude only a portion of P’s $10x of interest income on the intercompany obligation. Under paragraph (c)(1)(ii) of this section, the amount of P’s interest income that §1.1502–13(c)(6)(i) will not apply to exclude is $8x, the total interest expense incurred by P on its indebtedness to L. Consequently, P must include in income $8x of interest income from the intercompany obligation and §1.1502–13(c)(6)(i) will apply to exclude $2x of interest income from the intercompany obligation.

(3) Effective date . The provisions of this section shall apply to taxable years beginning on or after the date these regulations are published as final regulations in the Federal Register .

Par. 3. Section 1.1502–13 is amended by:

Adding a sentence immediately after the second sentence of paragraph (c)(6)(ii)(A).
Adding paragraph (c)(6)(iii).
Revising the first sentence of Exam- ple 1 (d) of paragraph (g)(5).

The revisions and additions read as follows:

§1.1502–13 Intercompany transactions.

- - - (c) * - (6) - * (ii) - * (A) * * * However, see §1.265–2(c) for special rules related to the application of

significant economic impact on a substantial number of small entities. This certification is based upon the fact that these regulations will primarily affect affiliated groups of corporations that have elected to file consolidated returns, which tend to be larger businesses. 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, these regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their 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 (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register .

Drafting Information

The principal author of these proposed regulations is Frances L. Kelly, Office of the Associate Chief Counsel (Corporate). 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 is amended by adding an entry in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Section 1.265–2 also issued under 26 U.S.C. 1502 and 7701(f). - * *

Par. 2. In §1.265–2, paragraph (c) is added to read as follows:

§1.265–2 Interest relating to tax-exempt income.

- - - (c) Special rule for consolidated groups —(1) Treatment of intercompany obligations —(i) Direct tracing to non- member indebtedness . If a member of a consolidated group incurs or continues indebtedness to a nonmember, that indebtedness is directly traceable to all or a portion of an intercompany obligation (as defined in §1.1502–13(g)(2)(ii)) extended to a member of the group (B) by another member of the group (S), and section 265(a)(2) applies to disallow a deduction for all or a portion of B’s interest expense incurred with respect to the intercompany obligation, then §1.1502–13(c)(6)(i) will not apply to exclude an amount of S’s interest income with respect to the intercompany obligation that equals the amount of B’s disallowed interest deduction.

(ii) Limitation . The amount of interest income to which §1.1502–13(c)(6)(i) will not apply as a result of the application of paragraph (c)(1)(i) of this section cannot exceed the interest expense on the portion of the indebtedness to the nonmember that is directly traceable to the intercompany obligation.

(2) Examples . The rules of this paragraph (c) are illustrated by the following examples. For purposes of these examples, unless otherwise stated, P and S are members of a consolidated group of which P is the common parent. P owns all of the outstanding stock of S. The taxable year of the P group is the calendar year and all members of the P group use the accrual method of accounting. L is a bank unrelated to any member of the consolidated group. All obligations are on the same terms and conditions, remain outstanding at the end of the applicable year, and provide for payments of interest on December 31 of each year that are greater than the appropriate applicable Federal rate (AFR). The examples are as follows:

Example 1 . (i) Facts . On January 1, 2005, P borrows $100x from L and lends the entire $100x of borrowed proceeds to S. S uses the $100x of borrowed

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beneficiary, or to the PBGC, that employer may be liable to such participant or beneficiary or to the PBGC, in the discretion of the court, for a penalty of up to $100 a day from the date of the failure, or such other relief as the court deems proper.

II. Required Notice to Participants and Beneficiaries

A. Explanation of Context —Pursuant to section 302(d)(12)(E)(i) of ERISA, an employer that elects an alternative deficit reduction contribution must provide written notice of the election to each participant and to each beneficiary under the plan (“the participant notice”) and must explain the context in which the information set forth in section II.B. of this announcement is being provided. This requirement to explain the context is satisfied if the notice includes the following information:

“As permitted under a new law called the Pension Funding Equity Act of 2004, Pub. L. 108–218 (“PFEA’04”), [enter name of corporation] has made a special election that reduces the amount of contributions that are required to be made for [enter plan year] to [enter name of pension plan]. The election was made on [enter date of election]. The following information is being provided to you pursuant to the new law.”

B. Information Required in Notice to Participants and Beneficiaries —Pursuant to section 302(d)(12)(E)(i) of ERISA, the participant notice must also include the information described in this Section II.B.

Due Date of the Alternative Deficit Reduction Contribution and Amount by Which Required Contribution is Reduced

The participant notice must specify the following information with respect to the due date and the reduction in required contributions resulting from the alternative deficit reduction contribution election for the plan year:

a. The amount of the required minimum contribution under § 412 of the Code for the plan year for which the alternative deficit reduction contribution election was made, calculated taking into account that election;

b. The amount of the required minimum contribution under § 412 for the plan

paragraph (c)(6)(i) of this section to interest income with respect to certain intercompany obligations the interest deduction on which is disallowed under section 265(a)(2). - - *

- - - (iii) Effective date . The third sentence of paragraph (c)(6)(ii)(A) of this section shall apply to taxable years beginning on or after the date these regulations are published as final regulations in the Federal Register .
- - - (g) - - (5) - - Example 1 - * *
- - - (d) Tax-exempt income . The facts are the same as in paragraph (a) of this Exam- ple 1, except that B’s borrowing from S is allocable under section 265 to B’s purchase of state and local bonds to which section 103 applies and §1.265–2(c) does not apply. - -

Mark E. Matthews, Deputy Commissioner for Services and Enforcement .

(Filed by the Office of the Federal Register on May 6, 2004, 8:45 a.m., and published in the issue of the Federal Register for May 7, 2004, 69 F.R. 25535)

Election of Alternative Deficit Reduction Contribution

Announcement 2004–43

This announcement provides guidance on the notices that must be given by an employer to plan participants and their beneficiaries and to the Pension Benefit Guaranty Corporation (the “PBGC”) if the employer elects the alternative deficit reduction contribution under § 412(l)(12) of the Internal Revenue Code (the “Code”) and section 302(d)(12) of the Employee Retirement Income Security Act of 1974 (“ERISA”), as added by section 102 of the Pension Funding Equity Act of 2004, Pub. L. 108–218 (“PFEA’04”). This announcement also sets forth timing requirements for the election.

I. Background

Section 102 of PFEA’04, which was enacted on April 10, 2004, added § 412(l)(12) to the Code and section 302(d)(12) to ERISA. Section 412(l)(12) of the Code permits certain employers who are required to make additional contributions under § 412(l) to elect a reduced amount of those contributions (“alternative deficit reduction contributions”) for certain plan years. An employer is eligible to make such an election if it is (1) a commercial passenger airline, (2) primarily engaged in the production or manufacture of a steel mill product or the processing of iron ore pellets, or (3) an organization described in § 501(c)(5) that established a plan on June 30, 1955, to which § 412 now applies. On April 12, 2004, the Internal Revenue Service (the “Service”) issued Announcement 2004–38, 2004–18 I.R.B. 878, which provides guidance for making the election for an alternative deficit reduction contribution.

Section 302 of ERISA contains minimum funding standard requirements that are parallel to those under § 412 of the Code, and section 302(d)(12) of ERISA provides an election that is identical to the election under § 412(l)(12) of the Code. Moreover, section 302(d)(12)(E) of ERISA requires an employer that elects an alternative deficit reduction contribution under section 302(d)(12) of ERISA and § 412(l)(12) of the Code for any year to provide certain notices to the participants and beneficiaries under the plan and to the PBGC. The notices must be provided within 30 days of the filing of the election for such year, and the written notices of the election must specify various information.

Section 302(d)(12)(F) of ERISA as added by section 102(a) of PFEA’04 authorizes the Secretary of the Treasury to prescribe the time and manner of making an alternative deficit reduction contribution election. In addition, under section 101 of Reorganization Plan No. 4 of 1978, 1979–1 C.B. 480, the Secretary of the Treasury has sole interpretive authority (except for certain matters not relevant here) over the subject matter addressed in this announcement.

Section 102(d) of PFEA’04 amended section 502(c)(3) of ERISA to provide that if an employer fails to provide the required notices on a timely basis to a participant or

2004-21 I.R.B. 955 May 24, 2004

sets, (2) total liabilities, (3) stockholder equity (deficit), (4) paid-in capital, and (5) retained earnings (accumulated loss).

The capitalization information should be shown as of the same date for which the underfunded amount in the paragraph above is specified. If, however, the capitalization information is not available as of such date, capitalization information as of the end of the most recently ended fiscal year of the corporation may be substituted.

Method of Delivery

The delivery requirement for the PBGC notice is set forth on the PBGC’s website at www.pbgc.gov .

IV. Time For Making Election

Pursuant to the authority contained in section 302(d)(12)(F) of ERISA, and subject to the transition rule in Section V of this announcement, an election to make the alternative deficit reduction contribution for any plan year must be made by the end of the first quarter of that plan year.

V. Transition

Notwithstanding the requirement to make an election by the end of the first quarter of the plan year, the following transitional rules are applicable. If an employer makes an alternative deficit reduction contribution election on or before June 30, 2004, that election will be deemed timely for the plan year that begins during calendar 2004. In addition, if an employer issues a PBGC notice for a plan on or before June 5, 2004, the PBGC will treat the PBGC notice as timely issued.

VI. Paperwork Reduction Act

The collection of information contained in this announcement has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1884. 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 control number.

The collection of information in this announcement is in sections II and III. This information is required to meet the

year for which the alternative deficit reduction contribution election was made, calculated without taking into account the election;

c. The due date of the required minimum contribution under § 412 for the plan year for which the alternative deficit reduction contribution election was made; and

d. If the electing employer is required to make quarterly contributions to the plan for the plan year for which the election is made, the aggregate amount of the required minimum contribution under § 412 for the plan year that is required to be paid in quarterly installments (calculated taking into account the election).

The employer may provide reasonable estimates of the amounts described above, and the participant notice may also specify the amount and date of any contributions that were made for the plan year prior to the date of the participant notice.

Benefits Eligible for Guarantee and Limitations on Guarantee

The participant notice must include a description of the benefits under the plan that are eligible for guarantee by the PBGC, an explanation of the limitations on the PBGC’s guarantee and the circumstances in which the limitations apply, including the maximum guaranteed monthly benefits that the PBGC would pay if the plan terminated while underfunded. This requirement will be satisfied if an employer includes in the participant notice the text from the portion of the model notice in Appendix A to 29 CFR Part 4011 that is found under the heading “PBGC Guarantees.”

C. Method of Delivery

The delivery requirement for the participant notice is treated as satisfied if the participant notice is mailed to the last known address of each participant or beneficiary.

III. Required Notice to PBGC

Pursuant to section 302(d)(12)(E)(iii) of ERISA an employer electing an alternative deficit reduction contribution must provide the information described in this section.

A. Due Date of the Alternative Deficit Reduction Contribution and Amount by Which Required Contribution Was Reduced

This PBGC notice must include the information regarding the contribution amounts and due dates set forth in the description of the participant notice in section II.B.1. of this announcement.

B. Time to Restore Plan to Full Funding

The PBGC notice must include the number of years it will take to restore the plan to full funding if the employer only makes the required minimum contributions. For this purpose, a plan will be considered to be in full funding for a plan year if, for the plan year, the plan is subject to the full-funding limitation of § 412(c)(7), taking into account the 90% override of § 412(c)(7)(E).

The projection of when the plan will be in full funding must be based on reasonable actuarial assumptions and, for plan years beginning in 2006 and later years, must reflect the interest rate rules (§§ 412(b)(5)(ii)(III) and 412(l)(7)(C)(i)(II)) that are applicable for plan years beginning after 2005. In addition, the PBGC notice must also include the required minimum contributions that form the basis of the projections for the plan year of the election and each of the 4 subsequent plan years.

C. Comparison of Underfunded Amount with Capitalization

The PBGC notice must include (1) the amount by which the plan is underfunded and (2) the capitalization of the employer making the election.

For purposes of providing the amount by which the plan is underfunded, the PBGC notice must include the plan’s termination liability as of a date within the most recently ended plan year and the market value of plan assets as of that date.

In the case of an employer whose stock is publicly traded, the capitalization of the employer is the product of the number of outstanding shares of stock and the market price per share. In the case of any other employer, the capitalization information required to be shown is the following: (1) the fair market value of total as

May 24, 2004 956 2004-21 I.R.B.

no deduction shall be allowed for interest on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from Federal income taxes.

Generally, section 246A reduces the dividends received deduction under section 243, 244, or 245(a) to the extent that the portfolio stock, with respect to which the dividends are received, is debt-financed. Stock is treated as debt-financed if there is indebtedness directly attributable to the stock investment.

Section 7701(f) provides that the Secretary shall prescribe such regulations as may be necessary or appropriate to prevent the avoidance of the provisions of the Internal Revenue Code that deal with (1) the linking of borrowing to investment, or (2) diminishing risk, through the use of related persons, pass-thru entities, or other intermediaries.

Concurrent with the publication of this advance notice of proposed rulemaking in the Federal Register, the IRS and Treasury are issuing Rev. Rul. 2004–47, 2004–21 I.R.B. 941, which provides guidance on the application of section 265(a)(2) to disallow a portion of interest incurred by one member of an affiliated group when it transfers borrowed funds to another member of the group that is a dealer in tax-exempt bonds. In the circumstances described in Situations 1 and 2 of that ruling, the funds borrowed by one member are directly traceable to the funds the borrowing member transfers to the dealer member. Under Rev. Proc. 72–18, 1972–1 C.B. 740, the application of section 265(a)(2) to these facts requires a determination of the borrowing member’s purpose for incurring or continuing each item of indebtedness. The revenue ruling holds that the purpose of the borrowing member is determined by reference to the use of the borrowed funds in the business of the dealer member to whom the funds are made available. This conclusion is based on H Enterprises International v. Commissioner, 75 T.C.M. 1948 (1998), aff’d per curiam, 183 F.3d 907 (8 ^th Cir. 1999). The result is a disallowance of the borrowing member’s interest expense under section 265(a)(2).

In H Enterprises, a parent and a subsidiary were members of the same consolidated group of corporations. The subsidiary declared a dividend and, a few

requirements of section 102 of the Pension Funding Equity Act of 2004 to monitor and make valid determinations with respect to employers that elect an alternative deficit reduction contribution for certain plans. As a result of such elections, an employer’s deficit reduction contribution for certain plans will be based on amounts specified under § 412(l)(12) of the Code. If an employer does not give timely notice of an election to make a deficit reduction contribution (including all of the requirements described above), a court may in its discretion impose a penalty. The likely respondents are businesses or other for-profit institutions, and nonprofit institutions.

The estimated total annual reporting and/or recordkeeping burden is 12,000 hours.

The estimated annual burden per respondent/recordkeeper varies from 20 to 100 hours, depending on individual circumstances, with an estimated average of 60 hours. The estimated number of respondents and/or recordkeepers is 200.

The estimated frequency of responses is occasional.

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.

VII. Effect on Other Documents

Announcement 2004–38, 2004–18 I.R.B. 878, is modified.

Drafting Information

The principal authors of this announcement are James E. Holland and Michael Rubin of the Employee Plans, Tax Exempt and Government Entities Division. Mr. Holland may be reached at 1–202–283–9699 and Mr. Rubin may be reached at 1–202–283–9888 (not toll-free numbers).

Application of Sections 265(a)(2) and 246A in Multi-Party Financing Arrangements; Request for Comments

Announcement 2004–44

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Advance notice of proposed rulemaking.

SUMMARY: The IRS and Treasury Department are soliciting comments and suggestions regarding the scope and details of regulations (REG–128572–03) that may be proposed under section 7701(f) of the Internal Revenue Code to address the application of sections 265(a)(2) and 246A in transactions involving related parties, pass-through entities, or other intermediaries.

DATES: Written or electronic comments must be submitted by August 5, 2004.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG–128572–03), room 5203, 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 4 p.m. to: CC:PA:LPD:PR (REG–128572–03), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC or sent electronically, via the IRS Internet site at www.irs.gov/regs or via the Federal eRulemaking Portal at www.regulations.gov (IRS and REG–128572–03).

FOR FURTHER INFORMATION CONTACT: Concerning submissions, LaNita Van Dyke, (202) 622–7180; concerning the notice, Avital Grunhaus, (202) 622–3930 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Section 163(a) generally allows a deduction for all interest paid or accrued within the taxable year on indebtedness. Section 265(a)(2), however, provides that

2004-21 I.R.B. 957 May 24, 2004

(Filed by the Office of the Federal Register on May 6, 2004, 8:45 a.m., and published in the issue of the Federal Register for May, 7, 2004, 69 F.R. 25534)

Foundations Status of Certain Organizations

Announcement 2004–45

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:

4 the Kids, Mountain View, CA 4K12 Com, Las Vegas, NV Abundant Life of Perrysburg 3, Inc.,

Perrysburg, OH Academy for Adult Learning,

St. Augustine, FL ADA A Grant, Inc., Chicago, IL Adaptive Recovery Options, Inc.,

Tigard, OR Agape Productions, Inc., Passaic, NJ Aixale Martial Arts Fitness, Inc.,

Bronx, NY Alaqua Womens Charitable Fund, Inc.,

Lake Mary, FL Alcaitorrian Senior Housing Corporation,

Bloomington, MN Alicias Animal Haven, Los Angeles, CA Alliance for Gifted Children,

Ann Arbor, MI Alpha-Omega Sports Ministries,

Ridgefield, WA Alta California Regional Foundation,

Sacramento, CA Alumni Partners, Fairfax, VA American Academy for Integrated

Practice of Medicine, Berkeley, CA American Bulldoggers Helping to Educate

and Rescue Together, Islip Terrace, NY

days later, borrowed funds and immediately used part of those funds to make the dividend distribution to the parent. A portion of the distributed funds was disbursed to two investment divisions of the parent, which used the funds to acquire investments including tax-exempt obligations and corporate stock. The court held that a portion of the indebtedness was incurred to purchase and carry tax-exempt obligations for the purpose of section 265(a)(2) and that a portion of the indebtedness was directly attributable to the purchase and carry of portfolio stock for the purpose of section 246A.

The transactions described in Situations 1 and 2 of Rev. Rul. 2004–47 and the transaction before the court in H Enter- prises all involve funds borrowed by one member of an affiliated group that can be directly traced to funds transferred to another member of the group.

In contrast to the transactions described in Situations 1 and 2, in the transaction described in Situation 3 of Rev. Rul. 2004–47, the borrowed funds are not directly traceable to the funds transferred to the dealer member, and there is no other direct evidence linking the borrowed funds to the funds transferred to the dealer member. The revenue ruling holds that in these circumstances, section 265(a)(2) will not be applied to disallow interest expense of the borrowing member.

Other situations may not be so clear. For example, funds may be transferred among the members of an affiliated or consolidated return group in a variety of ways that make it difficult to match borrowed funds with particular investments or other uses. Furthermore, certain taxpayers may affirmatively seek to avoid application of the rules of sections 265(a)(2) and 246A by using related parties, pass-thru entities, or other intermediaries in a manner that obscures the linkage between borrowing outside of the affiliated group and the purchase or carry of investments within the group.

During the course of developing Rev. Rul. 2004–47, the IRS and Treasury began preliminary consideration of possible regulations that might be adopted under the authority granted by section 7701(f) to provide clearer rules for matching borrowings and investments and for administering more effectively the purposes of section 265(a)(2). For example, Treasury

and IRS are considering a rule that would permit taxpayers to trace proceeds of borrowings to specific taxable investments or other specific uses but would apply a pro rata approach to determine the use of proceeds of borrowings that are not traceable to a specific use. This would differ from a general rule requiring a pro rata allocation of borrowings among all available uses, such as the rule in section 265(b) applicable to financial institutions.

The IRS and Treasury also are considering whether to adopt regulations under section 7701(f) for purposes of section 246A (dealing with debt financing of portfolio stock).

The IRS and Treasury are requesting comments on whether regulations should be adopted under section 7701(f) for purposes of applying section 265(a)(2) or section 246A and, if so, the approach that should be taken in such regulations. Specifically, the IRS and Treasury are inviting comments on the approach of supplementing a specific tracing rule with a pro rata allocation rule, as well as suggestions for alternative approaches. Comments addressing the possible adoption of regulations for purposes of section 246A should take into account any differences in approach that may be required under section 7701(f) because section 246A defines portfolio indebtedness by reference to indebtedness “directly attributable to” portfolio stock, while section 265(a)(2) refers to indebtedness “incurred or continued to purchase or carry” tax-exempt obligations. Persons making comments may also wish to address the mandate in section 246A(f) to adopt regulations providing for interest disallowance, rather than disallowance of the dividends received deduction, when indebtedness is incurred by a person other than the person receiving dividends.

SPECIAL ANALYSIS

This advance notice of proposed rulemaking is not a significant regulatory action for purposes of Executive Order 12866, “Regulatory Planning and Review.”

Mark E. Matthews, Deputy Commissioner for Services and Enforcement .

May 24, 2004 958 2004-21 I.R.B.

Center Sown Seed Ministries Outreach,

Inc., Ft. Worth, TX Central Maui Youth Center, Kahului, HI Centre for Self Empowerment and Social

Services, Inc., San Diego, CA C E S Care, Tempe, AZ Chamberlyne Foundation, Inc.,

Winter Haven, FL Chandler Sister Cities, Inc., Chandler, AZ Change Agent Programs, Inc.,

Orlando, FL Changes Behavioral Services, Inc.,

Oak Park, IL Changing Helping and Networking

for Community Empowerment, Inc., Fort Valley, GA Chaplains for Assisted Living, Inc.,

Buttgart, AR Charlotte Amalie High School Class of

1991, Inc., Charlotte Ama, VI Charlotte Amalie High School Class of

1991, Inc., St. Thomas, VI Children Helped in Illness Loss or Death,

Inc., Rochester, NY Children Need Both Parents,

Grand Rapids, MI Children of Promise, Inc., Acworth, GA Children Yes, Santa Barbara, CA Childrens Helpers Educating Reassuring

& Uniting by Sharing, North Bend, WA Christian Child Care Center, Inc.,

Memphis, TN Christian Life Movement, Inc.,

Denver, CO Christmas in April Albuquerque,

Albuquerque, NM Christmas in April Truckee Meadows,

Reno, NV Church Computer Project, Inc.,

Harriman, TN Circle of Wellness, Inc.,

Salt Lake City, UT Cirrus Arts, Houston, TX City of Brevig Mission, Brevig, AK Civitas Associates, Inc., St. Louis, MO Clackamas County Duii Impact Panel,

Oregon City, OR Coalition for Youth, Roswell, NM Coalition on Media Concerns, Inc.,

Santa Monica, CA Collaborative for Tribal Education,

Sacramento, CA College of John Paul in the Desert,

Tucson, AZ Columbus Housing Development

Corporation, Columbus, NE Communities in School of Walton County,

Inc., Monroe, GA

American Center for Cultural and

Education, Washington, DC American Dream Associates, Inc.,

Los Angeles, CA American Friends of the Calgary

Health Trust Foundation, Calgary, Alberta, Canada American High School of Fremont

Alumni Association, Inc., Fremont, CA American Home Care Services, Inc.,

Los Angeles, CA American Israel Education Fund, Troy, MI American Russian Publishing, Inc.,

Longmeadow, MA Amigos De La Raza, Inc.,

Chattanooga, TN Andrew Paul Foundation,

Staten Island, NY Annex Credit Management, Inc.,

Orlando, FL Apelles Quest, Santa Clarita, CA Appalachian Mountain Ministries, Inc.,

Brevard, NC Arizona Grassroots Collaborations,

Phoenix, AZ Arizona Public Schools Donation Service,

Phoenix, AZ Arizona Scholarships and Grants

Organization A S G O, Phoenix, AZ Ars Antiqua Biblica, Los Angeles, CA Artists Gym, Toluca Lake, CA Ashona Foundation, Valley Center, CA Australian Legal Resources International,

Sydney South NJW 1235, Australia Autum Springs Corporation,

Smithville, TX Baptist Saint Thomas Home Care

Services, Inc., Nashville, TN Barlow High School Boosters Club,

Gresham, OR Basin Educational Excellence Foundation,

Durango, CO Bay County D A R E Officers Association,

Inc., Panama City, FL Beckendorf Intermediate School Parent

Teacher Organization, Tomball, TX Ben Amarfio International Sports

Company, Staten Island, NY Benicia Education and Astronomical

Research, Inc., Benicia, CA Berks Radio Association,

Lenhartsville, PA Bethel Sexual Assault Response Team,

Inc., Bethel, AK Beyond Dreams Foundation,

San Francisco, CA Bico Properties, Inc.,

Colorado Springs, CO

Big Sur Arts Initiative, Inc., Big Sur, CA Birth Network of Santa Cruz County,

Santa Cruz, CA Blackwater Research Initiatives, Inc.,

Kingsport, TN Blake Elementary PTO, Spokane, WA Blue Circles, Inc., Nashville, TN Bobbindoctrin Puppet Theatre,

Houston, TX Booker T. Washington High School

National Alumni Association, Inc., Tulsa, OK Boston Center for Propagation &

Knowledge, Boston, MA Bread of Life, Royal, NE B S A Troop 206 Margate FL, Inc.,

Coral Springs, FL Buena Vista Childrens Center, Inc.,

Walnut Creek, CA Building Science Resource Group,

Berkeley, CA Burning Bush, Inc., Los Angeles, CA Businesses Against Drugs, Inc.,

Salt Lake City, UT Caleb Missionary Relief Services, Inc.,

Decatur, GA California Association of Local

Agency Formation Commissions, Nevada City, CA California Space Program, Berkeley, CA California Wild Turkey Association,

Stockton, CA Cameron Park Volunteer Firefighter

Association, Cameron Park, CA Caring About Kids, Auburn, CA Carmel Art Festival, Carmel, CA Carteret County International Choralfest,

Inc., Morehead City, NC Casa De Paz Housing, Inc.,

Thousand Oaks, CA C A S A Guardian Ad Litems of McIntosh

Co., Inc., Eufaula, OK Catholic Charities Connect IPA, Inc.,

Brooklyn, NY Catoosa Foundation for the Performing

Art, Inc., Ringgold, GA CCM Ministries, Inc., Evansville, IN CCM Ministries, Inc., Minneapolis, MN Center for Market-Based Education, Inc.,

Rumney, NH Center for Performance Enhancement

Research and Education, Omaha, NE Center for the Study of Adult

Development, Montecilto, CA Center of Resource for Educational

Enhancement and Development, Inc., Laud Lakes, FL

2004-21 I.R.B. 959 May 24, 2004

Foundation for American Renewal Corp.,

Indianapolis, IN Foundations for Success II, Bellevue, WA Franklin Childrens Foundation,

Las Vegas, NV Fraternidad Misionera De La Providencia,

Perth Amboy, NJ Freedom Educational Group,

Philadelphia, PA Freedom West Computer Learning Center,

San Francisco, CA Freemasons Hall, Inc., Indianapolis, IN Friends of 32nd St. School Booster Club,

Los Angeles, CA Friends of Alameda County Casa, Inc.,

Oakland, CA Friends of Albuquerques Environmental

Story, Albuquerque, NM Friends of Bellaire High School Choirs,

Bellaire, TX Friends of Childrens United Succeed,

Inc., Ft. Lauderdale, FL Friends of Evergreen and Fairview

Cemeteries, Colorado Springs, CO Friends of the Monterey Public Library,

Monterey, CA Fund for the National Commission

on Nonprofit Governance, East Patchogue, NY Garza Rodriguez & Tajon Childrens

Services, Santa Maria, CA George Washington School Foundation,

Inc., South America Giles County Youth Leadership

Development, Pulaski, TN GLA Foundation, Grove, OK Global Alliance for the Less Privileged,

Roswell, GA Global House, Inc., Philadelphia, PA Global Seas Foundation, Inc.,

Lake Worth, FL Gods World Photography, Bothell, WA Good Works Foundation, Inc.,

Hood River, OR Granbury Educational Access Channel,

Inc., Granbury, TX Great Falls Elks Lodge Charitable Corp.,

Great Falls, MT Greater New Jericho Economic

Development, Los Angeles, CA Greek American Medical Society of South

Florida, Inc., Boca Raton, FL Green River Regional Education

Cooperative, Inc., Bowling Green, KY Greenbriar P E A S, Fort Worth, TX Groups Memorial, Inc., of the Army Air

Forces, Canon City, CO

Communities in Schools of Okeechobee,

Inc., Okeechobee, FL Communities in Schools of Orange

County, Inc., Orlando, FL Community Advancement Through

Service, Hawthorne, CA Community Development Corporation

of Northeast Tennessee, Inc., Johnson City, TN Community Growth, Inc.,

Long Beach, CA Community Helps of Coosa County, Inc.,

Goodwater, AL Community Housing Assistance of New

Mexico, Inc., Edgewood, NM Community Resources Network of

Arkansas, Inc., Little Rock, AR Compass Montessori Erd Kinder

Foundation, Lakewood, CO Computer Sciences for the Blind, Inc.,

Brooklyn, NY Concerned Area Residents Get Organized,

Smyrna, TN Coppell Organization of Parents for

Education, Coppell, TX Corans Dream, Los Angeles, CA Corban, Inc., Alto, TX Corn Palace Balloon Club, Tyndall, SD Covenant Partners of Dekalb County, Inc.,

Smithville, TN Crafty Chair-Ubs, Inc., Old Hickory, TN Creative You, Glendale, AZ Critical Ceramics, Freeport, ME Cross to Freedom Ministries,

Mesquite, TX Dallas Stars Foundation, Inc.,

Arlington, TX Danville Area Housing Foundation, Inc.,

Danville, IL Deaf Abused Women and Children

Advocacy Services, Austin, TX Deerfield Beach Roller Hockey

Association, Inc., Deerfield Beach, FL Denton Creek Elementary Parent Teacher

Organization, Coppell, TX Devereux Kids, Inc., Orlando, FL Dewitt Community Development

Foundation, Inc., Cuero, TX Disabled Childrens Assistance Fund,

Glendale, AZ Discipleship in Action, Booneville, MS Dive Deeper, Honolulu, HI Diversified Working Solutions,

Bolivar, MO Donations for Christian Education

Foundation, Purvis, MS Don’t Give Up, Inc., Las Vegas, NV E-Access Foundation, Van Nuys, CA

E-Mainstreet, Honolulu, HI Eagle Valley Merit Award Fund, Vail, CO East Diablo Tournaments, Brentwood, CA East Diablo Tournaments, Temple, TX East Mesa Friends, Inc., Organ, NM East Timor Scholarship Foundation,

Keaau, HI Eastern Technology Council Foundation,

Wayne, PA Eastside Community Substance Abuse

Center, Inc., Des Moines, IA Edserve, Inc., Littleton, CO Educare, Incorporated, Las Vegas, NV El Rito Public Library, El Rito, NM Elder Care Advocates of Marin,

Novato, CA Elizabethtown Christian Academy,

Elizabethtown, KY Eljeannette White Helping Hands Parent

Child Center, New Orleans, LA Elmer G. Bondy PTO, Pasadena, TX Employment Job Seekers, Inc.,

Los Angeles, CA Employment of Adults With Disabilities,

Inc., Tamarac, FL Endless Mountains Theatre Company,

New Milford, PA Ernest J. Brucker Foundation, Inc.,

Antigo, WI Escontrias Elementary PTO, El Paso, TX Excellence Foundation, Canton, MS Faith and Health International Ministries,

Lake Forest, IL Faith United, Inc., Frankfort, KY Families in Crisis Ministries, Orlando, FL Family Support Services, Inc.,

Pasadena, CA Family Support Services, Inc.,

White Hall, AR Family Tree Services, Chico, CA Fanus Non Profit Organization,

Woodland Hills, CA Faunavision, Inc., New York, NY F B Alliance, Los Angeles, CA Fighting Spartan Scholarship, Inc.,

Houston, TX Fine Arts Norwalk, Inc., Norwalk, CT Five Acre School PSO, Carlsborg, WA Five Star Gymnastics Boosters,

Erlanger, KY Fleishmann Family Fund, Galveston, TX Florida Association for Pupil

Transportation, Inc., Tallahassee, FL Flury Place, Inc., Catonsville, MD Flying Eagle Community Development

Corporation, Inc., North Stonington, CT Focased, Philadelphia, PA

May 24, 2004 960 2004-21 I.R.B.

Kristen Watt Foundation for Eating

Disorders Awareness, Stockton, CA La Causa Alcohol & Drug Services,

San Bernardino, CA Laborers in the Harvest Unlimited,

Omaha, NE Laborers Local 300 Scholarship Fund,

Los Angeles, CA Lafreniere Soccer Association, Inc.,

Metairie, LA Lakeview High School Alumni

Association, Lakeview, OR Lakewood School PTO, Sunnyvale, CA Lambda Chi Alpha Educational

Foundation, Inc., Indianapolis, IN Landowner Resource Management

Corporation, Central Point, OR Lapetite Preparatory School,

Pine Bluff, AR Las Casas De Vida Corporation,

Clovis, NM Latinos in America Moving for Peace,

Highland, CA League of Idaho Cities, Incorporated,

Boise, ID Liberty Lake Elementary PTSA,

Tacoma, WA Life Building Ministries, Inc.,

Florence, KY Linda Cesarski & Mary Ann Evans

Foundation for Cancer Research, Batesville, AR Lions Club of North Bend, Incorporated,

Coos Bay, OR London Parent Teacher Organization,

Corpus Christi, TX Long Island Chapter of the Association

of Certified Fraud Examiners, Inc., Hicksville, NY Longboat Key Lions Foundation, Inc.,

Longboat Key, FL Longview Childrens Clinic, Inc.,

Longview, TX Loudoun Bar Foundation, Leesburg, VA Louisiana Pharmacists Recovery

Network, Inc., Monroe, LA Lovefest Charities, Inc., Hollywood, FL Loving Care Center, San Diego, CA Low Income Living, Inc.,

Los Angeles, CA Maap Foundation, Pacific Beach, WA Mac Foundation, Pahoa, HI Male Advocacy in Pregnancy and

Parenting, Richmond, CA Maricopa Community Chamber of

Commerce, Inc., Maricopa, AZ Maryland Regional Practitioners Network

for Fathers and Families, Baltimore, MD

Guadalupe Educational Technology

Association, Guadalupe, CA Gunnerman Global Environmental

Foundation, Reno, NV Hallsville Rotary Club Foundation, Inc.,

Longview, TX Handicapped Health Housing Education

Activity League, Inc., Cranston, RI Harney County Watershed Council, Inc.,

Burns, OR Haven of Hope, Inc., Oklahoma City, OK Haven West, Inc., Edmond, OK Healdsburg Hope Homes, Inc.,

Healdsburg, CA Health Adventures Visioning Education

Network, Batside, CA Heart and Soul Studios, Inc.,

Boca Raton, FL Helms Manor, Culver City, CA Henderson Aquatic Center Corporation,

Henderson, KY Herd Community Development

Corporation, Los Angeles, CA High Desert Employment Services

Network, Incorp., Victorville, CA High Hopes Childrens Center,

Redway, CA Highland Oaks Educational Foundation,

Grass Valley, CA Hillcrest Elementary PTA,

Oak Harbor, WA Hispanic Arts Center of New York State,

Peekskill, NY HIVAIDS Resource Team, Inc., H A R T,

Thibodaux, LA Hmong Organization for Parents

Educators and Students, Inc., Sacramento, CA Hollywood Arts and Education Coalition,

Hollywood, CA Holy Temple Human Services

Corporation, Opa Locka, FL Home Church International, Aurora, CO Hope Tree, Inc., Baton Rouge, LA House of Umpja Bridgeport, Inc.,

New Haven, CT Hui Maka Ainana O Makana, Hanalei, HI Human Development & Resource Center

of Ft. Pierce Florida, Inc., Ft. Pierce, FL Hurricane Baseball Booster Club of Palm

Harbor, Inc., Palm Harbor, FL Ican Project, Inkom, ID Immunology Allergy & Asthma

Foundation, Inc., Fort Wayne, IN Impressions of Grace Abg, Inc.,

Baldwin, CA Indian River Institute, Inc., Fort Pierce, FL

Industry Hills Rotary Foundation,

La Puente, CA Informed Buyers Coalition, Sylmar, CA Innovators in Milestones, Inc.,

New Orleans, LA Inoka, Inc., Lake Oswego, OR Institute for Renaissance and Reformation

Biblical Studies, Philadelphia, PA Instituto Sanchez-Mendoza Para La

Capacitacion De La Comunidad, Santa Rosa, CA Intercollegiate Equestrian Foundation,

Inc., Stony Brook, NY International Center for Art Intelligence,

Inc., Culver City, CA International Institute for Womens Health,

Vancouver, WA International Pediatric Respiratory and

Allergy Forum, San Francisco, CA International Service and Aid, Inc.,

Oklahoma City, OK Ishi Valley Family Resources, Inc.,

Chico, CA It’s a Wonderful Life, Inc., Allendale, NJ J & T Enterprises, Inc., Pine Bluff, AR Jacob K. Javits Foundation, Inc.,

New York, NY Jason Berger Memorial Scholarship Fund,

Boston, MA Jeff Davis County Family Connection

Council, Inc., Hazlehurst, GA Jefferson County Tea Coalition,

Pine Bluff, AR Jesse James Carter Memorial Foundation,

New Orleans, LA Journal of Legal Advocacy & Practice,

Inc., Woodland Hills, CA Journal Press, Salt Lake City, UT Junior Stars Hockey Association,

Arlington, TX Justice for all Alliance, Houston, TX Kefalas-Pinto Foundation,

Mountainside, NJ Kennedy Krieger Marcus National

Foundation, Inc., Baltimore, MD Kerry Restoration, Inc.,

Huntington Beach, CA Kid Gloves Boxing Foundation,

Simi Valley, CA Kids for Literary and the Arts, Inc.,

Evergreen, CO K I D S of Sonoma County,

Santa Rosa, CA Kidsville Preschool & Daycare Center,

Jackson, MS Krista Ford Foundation,

Stone Mountain, GA

2004-21 I.R.B. 961 May 24, 2004

Polaris Chapter of Texas Mental Health

Consumers, Inc., El Paso, TX Portland Pounders, Portland, OR Positive Attitude Outlook of Southern

California, Rancho Cucamonga, CA Preston Hot Springs Library Memorial

Foundation, Hot Springs, MT Prince Boxing Gym, Inc., Houston, TX Prodigals House, Bakersfield, CA Progressive Housing Concepts, Inc.,

Los Angeles, CA Progressive Rehabilitation Center, Inc.,

New Orleans, LA Project America Development Company,

Phoenix, AZ PTA Texas Congress, El Paso, TX Public Education Enrichment Fund,

Nevada City, CA Quality Community Services,

Whittier, CA Rancho Cordova Rotary Charitable

Foundation, Rancho Cordova, CA Rapides Community Housing

Development Corporation, Inc., Alexandria, LA Razzy Baileys I Hate Hate, Inc.,

Gooclettsville, TN Real People Ministries, Inc., Dallas, TX Red Bluff Parent Teacher Organization,

Pasadena, TX Reflections of Love, Inc., Chicago, IL Renewed Family Joy Service,

Los Angeles, CA Rescue Animal Fund, Inc., Divide, CO Retired Scientists Cooperative, Inc.,

Douglaston, NY Richard Burdell Memorial Foundation,

Portland, OR Ridgerunner Wrestling Club, Grove, OK Riverrun, Salem, OR Riverton School Preservation Society,

Riverton, UT Rocklin Elementary Parent Teacher Club,

Rocklin, CA Romeo Corporation, Tempe, AZ Ropp for Girls, Inc., Dallas, TX Rowan County Domestic Violence

Council, Morehead, KY Royal High Dance Guard Booster,

Simi Valley, CA Royal Palm Symphoney Chorus and

Orchestra, Inc., Boca Raton, FL Sackets Safe Harbor, Sackets Harbor, NY S A F E Coalition, Inc., Bakersfield, CA Sage Theatre Group, Dallas, TX Salinas Barrios Unidos, Inc., Salinas, TX Sami Disharoon Brain Tumor Research

Foundation, Cotati, CA

Master Classes International, Inc.,

Los Angeles, CA McKinney High School Basketball

Booster Club, McKinney, TX Media Literacy Alliance Central Coast,

Salinas, CA Medicine and Science Discovery Center

of Central Texas, Temple, TX Memphis Performing Arts Conservatory,

Inc., Memphis, TN Men’s Self Advocacy Council of

Durango, Inc., Durango, CO Mexican American Historical Society in

Ventura County, Oxnard, CA Mexico Academy Educational

Foundation, Mexico, NY Miami Contender Yamaha Kingfish

Championship, Inc., Miami, FL Miami County Arts Foundation, Troy, OH Michael Charles Albert Scholarship Fund,

Walkerton, IN Mickey Cox Elementary School Parent

Club, Clovis, CA Mid-San Gabriel Valley Televillage, Inc.,

El Monte, CA Middle Country Central School

District Education Foundation, Inc., Centerreach, NY Millbrae Community Foundation a

California Non Profit Benefit Corp., Millbrae, CA Minnesota American Legion and

Auxiliary Brain Science Foundation, St. Paul, MN Moments 2 Success, Sacramento, CA Monticello High School Music Boosters,

Inc., Charlottesville, VA Montly Sponsor, Tooele, UT Mud, Inc., Philadelphia, PA Museum of the American West,

Lander, WY Music at La Gesse Foundation, Inc.,

Cabin John, MD My Contribution, Hercules, CA My Fathers House of Erie, Erie, PA Na Mele Hawaii Apau, Honolulu, HI National Council of Negro Women, Inc.,

Seattle, WA National Down Payment Assistance

Corp., Northglenn, CO Neuronoetics, Edmonds, WA New Era Armenian Charitable Mission

USA, Inc., Burbank, CA New Joshua Center for Hope,

Cleveland, OH New Sardis Daycare, Memphis, TN Newman Center Foundation,

Columbia, MO

Noel’s Barn, Tucson, AZ Nolan Elementary School Parent Teacher

Association, Signal Mountain, TN North American Housing Foundation,

Inc., Englewood, CO North American Transportation Institute,

Oklahoma City, OK North Carolina Public Interest

Research Group Education Fund, Inc., Chapel Hill, NC North Star Alliance Bingo Boosters,

Bakersfield, CA Northern Kentucky Workforce Investment

Board, Inc., Florence, KY Nowata Area Senior Service Organization,

Inc., Nowata, OK Nu Chapter Alpha Chi Sigma Professional

Society, Schaefferstown, PA NVCSS Whispering Oaks, Inc.,

Redding, CA Oak Park Education Foundation,

Oak Park, CA Oak View Parent Club, Acampo, CA On the Way Home, Inc., Logandale, NV Open Door Program, Greensboro, NC Opera in the Hills, Fremont, CA Oregon Foundation for Free Expression,

Inc., Portland, OR Orinda Intermediate School Parents Club,

Inc., Orinda, CA Oxnard Public Access Assistance

Corporation, Oxnard, CA Palms Manor, Culver City, CA Pannonia Christian Educational Exchange,

Inc., Grand Rapids, MI Panthers Operation Graduation, Inc.,

Grangerland, TX Pathways to Achievement,

Sacramento, CA Paws Animal Rescue, Inc., Alvin, TX Peace Foundation, Inc., Chester, NY Pendulum, Inc., Houston, TX Personal Retirement Alliance, Ltd.,

New York, NY Pet Pals, Inc., Fort Lauderdale, FL Petlink, Inc., Nicholasville, KY Philanthropy Foundation, Inc.,

Ft. Lauderdale, FL Philippine American National Museum,

Los Angeles, CA Place in Time, Coosada, AL Placer County Crime Stoppers, Inc.,

Rocklin, CA Plano West Senior High School Band

Boosters, Plano, TX Plantados Until Freedom and Democracy

in Cuba, Inc., Miami, FL Plasma @ Cincinnati, Utica, IN

May 24, 2004 962 2004-21 I.R.B.

Waimea Project Graduation, Waimea, HI Walksacramento, Sacramento, CA Washington County Community

Partnership, Springdale, AR Washington County Fire Chiefs

Association, Vera, OK W E C Group Home, Portland, OR Weed Wildlife Refuge & Botanical

Gardens, Weed, CA Wesley Neighborhood, Inc., Redding, CA West Coast Armor and Artillery Museum,

Petaluma, CA West Hollywood Community Foundation,

W. Hollywood, CA West Kauai Early Childhood Development

Center, Eleele, HI Western Regional EMS Council, Inc.,

Montrose, CO Western States Health Alliance,

Tesuque, NM Westside Community Park, Lakeport, CA Westside Cultural Center, Ventura, CA Wholly Living for Him Educational

Resources, Inc., Decatur, GA Why We Were Chosen Foundation

Corporation, Fort Lauderdale, FL Wicker Basket Alzheimer Homes,

Las Vegas, NV Willie Landry Mount Foundation,

Lake Charles, LA Windsong Intermediate School Parent

Teacher Organization, Friendswood, TX Winters Conservancy, Winters, CA Wisconsin North Youth Ballet State

Regional Arts Center, Altoona, WI Women and Children Center for

Development, San Francisco, CA Women and Children First, Inc.,

Helena, MT Women in Motion Incorporation,

Denver, CO Women of Vision, Los Angeles, CA Womens Armed Forces Memorial,

Cincinnati, OH Women’s Outreach, Inc., Syracuse, NY Womens Resource Center, Inc.,

Nashville, TN Womens Resource Center, Inc.,

New Orleans, LA Woodbridge Rotary Foundation,

Woodbridge, VA Woodlands High School Boys Track and

Field Booster Club, The Woodlands, TX Word of Salvation, El Paso, TX Wyoming Alternatives for Youth, Inc.,

Buffalo, NY Yeuani, San Diego, CA

Samoa for all of Sacramento,

Sacramento, CA San Francisco Bay Area Polio Survivors,

Concord, CA Santa Fe High School Parent Teacher

Coalition, Santa Fe, NM Santa Monica Citizen Police Academy

Alumni Association, Santa Monica, CA Santee Focus Foundation, Santee, CA Sassfa, Inc., Whittier, CA Sausalito Jazz and American Music

Foundation, Sausalito, CA Say Yes to Life, Los Angeles, CA Scholarship Association of Fort Plain,

Inc., Fort Plain, NY Scholarship Foundation of the Colorado

Technical Recruiters Network, Denver, CO Seattle Debate Foundation, Seattle, WA Self Advocacy Council VI, Stockton, CA Services & Immigrant Rights & Education

Network, San Jose, CA Shawnee Surge, Inc., Shawnee, OK Shelby County Alcohol and Drug

Rehabilitation School, Memphis, TN Shepherds Ranch, Snowflake, AZ Sickle Cell Forum, Phoenix, AZ Sierra Food Bank, Inc., Placerville, CA Sierra High School Band Boosters,

Manteca, CA Sims Middle School PTO, Pace, FL Sipa Community Development Corp.,

Los Angeles, CA Snake River Chamber Orchestra,

Idaho Falls, ID Society of Academy Women, Hudson, OH Soroptimist International Boca Raton

Deerfield Beach, Inc., Boca Raton, FL Soroptimist International of St. Petersburg

Florida, Inc., St. Petersburg, FL SOS Children’s Village of Arizona, Inc.,

Scottsdale, AZ South Aurora Family Resource Center,

Aurora, CO South Everett Mukilteo Rotary

Foundation, Everett, WA South Hills High School Scorpions

Athletics Booster Club, Ft. Worth, TX South Stockton Diabetes Society,

Stockton, CA Southern California Rays Women Hockey

Club, Diamond Bar, CA Southern High School Athletic Booster

Club, Inc., Louisville, KY Southside School Alumni Association,

Rowland, NC Southwest Care, Inc., McComb, MS

Southwest College of Naturopathic

Medicine Student Government, Tempe, AZ Southwest Georgia Perpetual Arts Fund,

Inc., Cordele, GA Southwest Section PGA Foundation,

Scottsdale, AZ Special Kids Network, Inc., Jackson, MS Springs of Life Community Outreach,

Inc., Atlanta, GA St. Luke Surgical Foundation, Inc.,

Cleveland, OH Starz Gymnastics Competitive Team,

Reno, NV Stone City Art Institute, Cedar Rapids, IA Student Junxion, Santa Cruz, CA Sunshine Vision, Fort Pierce, FL Supai PTO, Scottsdale, AZ Supporters of Summit, Inc., Boulder, CO Tacoma Chapter of the Washington

State Music Teachers Association, Tacoma, WA Tara De Christo, Inc., Austin, TX Taytumns House, Inc., Loveland, CO Team Hardin County, Inc., Savannah, TN Ted Warthen Center, St. George, UT Texarkana Wilbur Smith Rotary Club

Foundation, Texarkana, TX Texas Christian Counseling Services, Inc.,

Palestine, TX Theta Upsilon Education Company, Inc.,

Newark, OH Threshold of Hope Center, Inc.,

Eunice, LA Tri County Childrens Advocacy Center,

Lafayette, AL Trussville-East Jefferson Rotary

Foundation, Birmingham, AL Tuba City Boarding School, Inc.,

Tuba City, AZ Ujima, San Bernardino, CA United Coalition of Families, Inc.,

Cedar Hill, TX United Counties Minority Aids Care and

Education, Inc., Defuniak Springs, FL Upper Room Ministry, Inc., Cushing, OK Van R. Butler Elementary School

Parent Teacher Organization, Inc., Santa Rosa Beach, FL Velvet Victories, Inc., Bartlett, TN Villa Apartments Housing Foundation,

Pasadena, CA VNA Foundation, Inc., Orlando, FL Volunteer Coordinators of Pueblo,

Pueblo, CO Volunteers of Africa, Inglewood, CA Voters United in God We Trust, Inc.,

New Port Richey, FL

2004-21 I.R.B. 963 May 24, 2004