Part IV. Items of General Interest

Section 1374 Effective Dates; Correction

Announcement 2005–35

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

SUMMARY: This document corrects temporary regulations (T.D. 9170, 2005–4 I.R.B. 363) that were published in the Fed- eral Register on Wednesday, December 22, 2004 (69 FR 76612). The document contains temporary regulations providing guidance concerning the applicability of section 1374 to S corporations that acquire assets in carryover basis transactions from C corporations on or after December 27, 1994, and to certain corporations that terminate S corporation status and later elect again to become S corporations.

DATES: This document is effective on December 22, 2004.

SUPPLEMENTARY INFORMATION:

Background

The temporary regulations (T.D. 9170) that are the subject of this correction are under section 1374 of the Internal Revenue Code.

Need for Correction

As published, the temporary regulations (T.D. 9170) contain errors that may prove to be misleading and are in need of clarification.

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Correction of Publication

Accordingly, 26 CFR Part 1 is corrected by making the following correcting amendments:

PART 1 — INCOME TAXES

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

Authority: 26 U.S.C. 7805 * * * Par. 2. The section heading and text of §1.1374–8T is revised to read as follows:

§1.1374–8T 1374(d)(8) transactions (temporary).

(a)(1) [Reserved]. For further guidance, see §1.1374–8(a).

(2) Section 1374(d)(8) applies to any section 1374(d)(8) transaction, as defined in paragraph (a)(1) of this section, that occurs on or after December 27, 1994, without regard to the date of the corporation’s election to be an S corporation under section 1362.

(b) through (d) [Reserved]. For further guidance, see §1.1374–8(b) through (d).

Cynthia Grigsby,

Acting Chief, Publications and Regulations Branch,

Legal Processing Division,

Associate Chief Counsel (Procedure and Administration).

(Filed by the Office of the Federal Register on May 4, 2005, 8:45 a.m., and published in the issue of the Federal Register for May 5, 2005, 70 F.R. 23790)

Closing of the GUST Program for Defined Contribution Pre-Approved Plans

Announcement 2005–36

The Service announced the opening of the initial ( i.e., EGTRRA ¹ ) six-year amendment/approval cycle for defined contribution pre-approved ( i.e., master and prototype (M&P) and volume submitter (VS)) plans in Rev. Proc. 2005–16,

2005–10 I.R.B. 674. Effective on February 17, 2005, Rev. Proc. 2005–16 modified and superseded Rev. Proc. 2000–20, 2000–1 C.B. 553. Accordingly, pursuant to this Announcement 2005–36, the GUST ² defined contribution pre-approved program will close as of June 15, 2005. Applications for:

proved non-mass submitter and mass submitter ( i.e., identical adopters and minor modifiers) plans, and

fined contribution non-mass submitter and mass submitter ( i.e., identical adopters and minor modifiers) plans

may be submitted through June 15, 2005. Any application for a defined contribution pre-approved plan (as described in the preceding two bullets) postmarked after June 15, 2005, will be returned along with the user fee. In addition, any application for a defined contribution pre-approved plan which previously received a GUST opinion or advisory letter (except for plans described in the second bullet) will be returned along with the user fee.

In the case of submissions described in the preceding two bullets that were previously returned after Rev. Proc. 2005–16 was issued, the applicants are permitted to resubmit their pre-approved applications, but not later than June 15, 2005. M&P sponsors and VS practitioners should send their applications to the respective Service offices which processed previous GUST applications.

The Service will announce at a later date the closing of the GUST programs for defined benefit pre-approved plans and for individually designed plans.

1 Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16

2 The term “GUST” refers to the following:

• the Uruguay Round Agreements Act, Pub. L. 103–465;

• the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub. L. 103–353;

• the Small Business Job Protection Act of 1996, Pub. L. 104–188;

• the Taxpayer Relief Act of 1997, Pub. L. 105–34;

• the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105–206; and

• the Community Renewal Tax Relief Act of 2000, Pub. L. 106–554.

The GUST remedial amendment period generally ended on the later of February 28, 2002, or the end of a plan’s 2001 plan year. However, for certain plans eligible for an extended GUST remedial amendment period under Rev. Proc. 2000–20, 2000–1 C.B. 553, the period generally ended on September 30, 2003.

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certain amendments causing it to be considered an individually designed plan, the practitioner’s authority to amend on behalf of that particular employer no longer applies.

Interim Relief for Certain Automatic Rollover Amendments

Under Notice 2005–5, 2005–3 I.R.B. 337, plan amendments complying with automatic rollover provisions under § 401(a)(31)(B) of the Code must be adopted by the end of the first plan year ending on or after March 28, 2005. It is possible certain practitioners may have amended VS plans on behalf of employers to comply with the automatic rollover provisions before amending the VS plan to include an implementing amendment. If this was done, the VS practitioner should comply with the above procedures by receiving the signed authorization form from all of the employers and adopting the implementing amendment giving the practitioner the general authority to make amendments for adopting employers (see sample language below) within 60 calendar days of May 9, 2005. This implementing amendment should be effective as of the date the practitioner first made the specific plan amendment on behalf of employers to comply with the automatic rollover provisions. For example, a practitioner who, on or after February 17, 2005, but before May 9, 2005, adopted a plan amendment on behalf of employers to reduce the mandatory cash-out amount to $1000, must comply with the procedures described above except that for purposes of this specific amendment reducing the mandatory cash-out amount, the practitioner will be deemed to have received timely authorization if the practitioner receives the signed authorization form from all of the employers and adopts the implementing amendment within 60 calendar days of May 9, 2005.

Sample Plan Language — Implementing Amendment

Practitioners may or may not be able to adopt this sample language verbatim, depending on the circumstances.

The practitioner will amend the plan on behalf of all adopting employers, includ- ing those employers who have adopted the

Submission Deadlines for Initial Six-Year Cycle for Defined Contribution Pre-Approved Plans for EGTRRA Program

In the draft revenue procedure attached to Announcement 2004–71, 2004–40 I.R.B. 569, the Service proposed October 31, 2005, as the end of the submission period for sponsors and practitioners of mass submitter plans and national sponsor plans. Pursuant to this Announcement 2005–36, the deadline for mass submitter plan and national sponsor plan applications is October 31, 2005. Rev. Proc. 2005–16 stated that the end of the submission period for sponsors and practitioners of defined contribution pre-approved plans is January 31, 2006; this later deadline, however applies only for submissions of defined contribution non-mass submitter pre-approved plans.

Authority of Volume Submitter Practitioner to Amend for Adopting Employers

Announcement 2005–37

Section 15.05 of Rev. Proc. 2005–16, 2005–10 I.R.B. 674, effective February 17, 2005, permits a Volume Submitter (VS) plan to include a provision (“implementing amendment”) that authorizes the VS practitioner to amend the plan on behalf of adopting employers. This announcement explains how a VS practitioner adopts the implementing amendment, describes the type of amendments that can be made on behalf of adopting employers, provides practitioners with interim relief of 60 days to adopt the implementing amendment in certain cases, and contains sample language for the implementing amendment.

Procedures for adopting implementing amendment

There are 3 steps to implement these procedures:

thorization form and a copy of the proposed amendment to each adopting employer. The authorization form should inform the employer that if it does not accept this implementing

amendment or adopt another pre-approved plan, the employer’s plan will become an individually designed plan. The authorization form should also require the employer to state whether it accepts or rejects the practitioner’s authority to amend on its behalf.

pleted form to the practitioner, signed and dated.

not adopt the implementing amendment for a plan until it receives responses from all adopting employers. However, interim relief for certain amendments is provided below.

For a defined contribution VS plan, the implementing amendment will be reviewed as part of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16 (EGTRRA) submission of the VS plan under Rev. Proc. 2005–16 if the plan is amended by the date the VS practitioner submits a timely application for an advisory letter. (Applications are due October 31, 2005, for mass submitter and national sponsor applications and January 31, 2006, for other defined contribution pre-approved plans.) With respect to a defined benefit VS plan, which has a later submission date, the implementing amendment will also be reviewed as part of the EGTRRA submission if the plan is amended by the date the VS practitioner submits a timely application for a defined benefit plan.

Types of Amendments Made for Adopting Employers

Section 15.05 of Rev. Proc. 2005–16 provides that the authority to amend on behalf of employers extends to changes in the Code, regulations, revenue rulings, and other statements published by the Service, including model, sample or other required good faith amendments, and corrections of prior approved plans. The practitioner must make all required and discretionary amendments for adopting employers. Depending on the circumstances, the employer may also need to sign the amendments. For example, the employer would sign a good faith amendment that requires the adopting employer to choose some optional provisions. As described in section 15.05, if the employer makes

2005–21 I.R.B. 1096 May 23, 2005

plan prior to this amendment, for changes in the Code, regulations, revenue rulings, other statements published by the Internal Revenue Service, including model, sample or other required good faith amendments, but only if their adoption will not cause such plan to be individually designed, and for corrections of prior approved plans. These amendments will be applied to all employers who have adopted the plan.

The practitioner will no longer have the authority to amend the plan on behalf of any adopting employer as of either: (1) the date the Service requires the employer to file Form 5300 as an individually designed plan as a result of an employer amendment to the plan to incorporate a type of plan not allowable in the Volume Submitter pro- gram, as described in Rev. Proc. 2005–16, or (2) as of the date the plan is otherwise considered an individually designed plan due to the nature and extent of the amend- ments. If the employer is required to ob- tain a determination letter for any reason in order to maintain reliance on the advi- sory letter, the practitioner’s authority to amend the plan on behalf of the adopting employer is conditioned on the plan receiv- ing a favorable determination letter.

The VS practitioner will maintain, or have maintained on its behalf, a record of the employers that have adopted the plan, and the VS practitioner will make rea-

sonable and diligent efforts to ensure that adopting employers have actually received and are aware of all plan amendments and that such employers adopt new documents when necessary. This amendment super- sedes other provisions of the plan to the ex- tent those other provisions are inconsistent with this amendment.

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

Announcement 2005–38

The names of organizations that no longer qualify as organizations described in section 170(c)(2) of the Internal Revenue Code of 1986 are listed below.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date 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 May 23, 2005, 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.

Beacon Ministries of North Carolina, Inc.

Creston, NC Haysville Tiger Baseball Foundation

Haysville, KS National Center for Debt Elimination, Ltd.

North Huntingdon, PA

May 23, 2005 1097 2005–21 I.R.B.