Part III. Administrative, Procedural, and Miscellaneous

Hurricane Katrina

Notice 2005–66

PURPOSE

This notice under section 7508A postpones the deadlines for certain acts performed by the Internal Revenue Service (IRS) with respect to certain taxpayers affected by Hurricane Katrina. In response to Hurricane Katrina, the President issued four federal disaster declarations on August 28, 2005 and August 29, 2005, covering certain areas in Alabama, Mississippi, Louisiana, and Florida. The areas identified in the declarations each constitute a “covered disaster area” within the meaning of section 301.7508A–1(d)(2) of the Procedure and Administration Regulations.

The August 28, 2005 declaration for Florida covers the following three counties designated for relief: Monroe, Broward, and Miami-Dade. The August 29, 2005 declaration for Alabama covers the following six counties designated for relief: Baldwin, Clarke, Choctaw, Mobile, Sumter, and Washington Counties.

The August 29, 2005 declaration for Mississippi covers the following fifty-two counties designated for relief: Adams, Amite, Attala, Chickasaw, Choctaw, Claiborne, Clarke, Clay, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Itawamba, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lee, Lincoln, Lowndes, Madison, Marion, Monroe, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Webster, Wilkinson, and Winston.

The August 29, 2005 declaration for Louisiana covers the following sixty-four parishes designated for relief: Acadia, Allen, Ascension, Assumption, Avoyelles, Calcasieu, Cameron, Beauregard, Bienville, Bossier, Caddo, Caldwell, Catahoula, Claiborne, Concordia, Desoto, East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson, Jefferson Davis, Lafayette, Lafourche, LaSalle, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita,

Plaquemines, Pointe Coupee, Rapides, Red River, Richland, Sabine, St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Landry, St. Mary, St. Martin, St. Tammany, Tangipahoa, Tensas, Terrebonne, Union, Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana, and Winn.

By news releases issued on August 30, 2005, September 2, 2005, and September 8, 2005, the Internal Revenue Service granted relief for taxpayers affected by Hurricane Katrina. See IR–2005–84, IR–2005–91, and IR–2005–96. The news releases provided that taxpayers affected by the disaster will have until January 3, 2006, to file tax returns and submit payments. In addition, the news releases announced that the IRS will abate interest and any late filing or late payment penalties that otherwise would apply. This relief includes the September 15, 2005 due date for estimated taxes and for calendaryear corporate returns with automatic extensions.

BACKGROUND

Section 7508A provides the Secretary with authority to postpone the time for performing certain acts under the internal revenue laws for a taxpayer affected by a Presidentially declared disaster as defined in section 1033(h)(3). Pursuant to section 7508A(a), a period of up to one year may be disregarded in determining whether the performance of certain acts is timely under the internal revenue laws. Section 7508A(a)(1) includes the acts listed in section 7508(a) as those that may be postponed. See also § 301.7508A–1(c)(1). Section 7508(a) and § 301.7508A–1(c)(1) include a number of acts performed by taxpayers for which section 7508A relief may apply. These include, but are not limited to: the filing of certain tax returns; the payment of certain taxes; the filing of a Tax Court petition; the filing of a claim for credit or refund of tax; and the bringing of a lawsuit upon a claim for credit or refund of tax.

Section 301.7508A–1(d)(1) describes several types of “affected taxpayers” eligible for relief under section 7508A. These taxpayers include any individual whose principal residence, and any business en

tity whose principal place of business, is located in the covered disaster area; any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in the covered disaster area; any individual whose principal residence, and any business entity whose principal place of business, is not located in the covered disaster area, but whose records necessary to meet a filing or paying deadline are maintained in the covered disaster area; any estate or trust that has tax records necessary to meet a filing or paying deadline in a covered disaster area; any spouse of an affected taxpayer, solely with regard to a joint return of the husband and wife; and any other person determined by the IRS to be affected by a Presidentially declared disaster.

ACTS PERFORMED BY THE GOVERNMENT

In News Release IR–2005–84, News Release IR–2005–91, and News Release IR–2005–96, the IRS granted affected taxpayers additional time until January 3, 2006, to file tax returns, to submit tax payments, and to perform certain time-sensitive acts listed in § 301.7508A–1(c)(1) and in Rev. Proc. 2005–27, 2005–20 I.R.B. 1050 (May 16, 2005). In consideration of the additional time that affected taxpayers have been granted to perform certain acts, this notice extends the period for the government to take certain actions. Under the authority of section 7508A(a)(1) and § 301.7508A–1(c)(2), for affected taxpayers covered by the news releases, a postponement until January 3, 2006, is provided under section 7508A for the following government acts if the last date for performance of the act is on or after September 6, 2005, and on or before January 3, 2006: making an assessment of any tax; issuing a statutory notice of deficiency; allowing a credit or refund of any tax; collecting by the Secretary, by levy or otherwise, the amount of any liability in respect of any tax; bringing suit by the United States, or any office on its behalf, in respect of any tax liability; returning property under section 6343; and the discharge of an executor from per

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sonal liability for a decedent’s taxes under section 6905.

Documents maintained by the IRS within the covered disaster area may have been lost or destroyed as a result of Hurricane Katrina, or remain in buildings that are inaccessible. The destruction, loss or inaccessibility of these documents will materially interfere with the IRS’s ability to timely administer the internal revenue laws with respect to certain taxpayers. The taxpayers to whom these records relate are “affected taxpayers” for the limited purpose of this paragraph. In these cases, a postponement until January 3, 2006, is provided under section 7508A for the following government acts if the last date for performance of the act is on or after September 6, 2005, and on or before January 3, 2006: making an assessment of any tax; issuing a statutory notice of deficiency; allowing a credit or refund of any tax; collecting by the Secretary, by levy or otherwise, the amount of any liability in respect of any tax; bringing suit by the United States, or any office on its behalf, in respect of any tax liability; returning property under section 6343; and the discharge of an executor from personal liability for a decedent’s taxes under section 6905. The IRS will notify as soon as practicable any affected taxpayers, as defined under this paragraph, of the government act or acts that will be postponed.

DRAFTING INFORMATION

The principal author of this notice is Dillon Taylor of the Office of Associate Chief Counsel, Procedure and Administration (Administrative Provisions and Judicial Practice Division). For further information regarding this notice, you may call (202) 622–4940 (not a toll-free call)

Weighted Average Interest Rates Update

Notice 2005–67

This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code. In addition, it provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II), and the weighted average interest rate and permissible ranges of interest rates based on the 30-year Treasury securities rate.

CORPORATE BOND WEIGHTED AVERAGE INTEREST RATE

Sections 412(b)(5)(B)(ii) and 412(l)(7)(C)(i), as amended by the Pension Funding Equity Act of 2004, provide

Corporate

that the interest rates used to calculate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 or 2005 must be within a permissible range based on the weighted average of the rates of interest on amounts invested conservatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004–34, 2004–1 C.B. 848, provides guidelines for determining the corporate bond weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond rate derived from designated corporate bond indices.

The composite corporate bond rate for August 2005 is 5.42 percent. Pursuant to Notice 2004–34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.

For Plan Years Bond 90% to 100%

Beginning in: Weighted Permissible Month Year Average Range

September 2005 5.84 5.25 to 5.84

The rate of interest on 30-year Treasury securities for August 2005 is 4.46 percent. Pursuant to Notice 2002–26, 2002–1 C.B. 743, the Service has determined this rate as the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in February 2031.

The following 30-year Treasury rates were determined for the plan years beginning in the month shown below.

30-YEAR TREASURY SECURITIES WEIGHTED AVERAGE INTEREST RATE

Section 417(e)(3)(A)(ii)(II) defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)–1(d)(3) of the Income

Tax Regulations provides that the applicable interest rate for a month is the annual interest rate on 30-year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin.

Section 404(a)(1) of the Code, as amended by the Pension Funding Equity Act of 2004, permits an employer to elect to disregard subclause (II) of § 412(b)(5)(B)(ii) to determine the maximum amount of the deduction allowed under § 404(a)(1).

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30-Year

For Plan Years Treasury 90% to 105% 90% to 110%

Beginning in: Weighted Permissible Permissible Month Year Average Range Range

September 2005 4.91 4.42 to 5.16 4.42 to 5.40

Drafting Information

The principal authors of this notice are Paul Stern and Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please contact the Employee Plans’ taxpayer assistance telephone service at 1–877–829–5500 (a toll-free number), between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday. Mr. Stern may be reached at 1–202–283–9703. Mr. Montanaro may be reached at 1–202–283–9714. The telephone numbers in the preceding sentences are not toll-free.

Treatment of Certain Amounts Paid to Section 170(c) Organizations Under Certain Employer Leave-Based Donation Programs

Notice 2005–68

In view of the extreme need for charitable relief in the aftermath of Hurricane Katrina, employers may have adopted or may be considering adopting leave-based donation programs to aid victims of this hurricane. Under these programs employees elect to forgo vacation, sick, or personal leave in exchange for cash payments an employer makes to organizations described in § 170(c) of the Internal Revenue Code (§ 170(c) organizations) for the relief of victims of Hurricane Katrina. This notice provides guidance on the treatment of these cash payments for income and employment tax purposes.

Notice 2001–69, 2001–2 C.B. 491, as modified and superseded by Notice 2003–1, 2003–1 C.B. 257, provided similar guidance in view of the extreme need for charitable relief following the September 11, 2001, terrorist attacks. This guidance is provided in view of the

extraordinary damage and destruction caused by Hurricane Katrina.

The Service will not assert that cash payments an employer makes to § 170(c) organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are: (1) made to the § 170(c) organizations for the relief of victims of Hurricane Katrina; and (2) paid to the § 170(c) organizations before January 1, 2007.

Similarly, the Service will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages for employees. Electing employees may not claim a charitable contribution deduction under § 170 with respect to the value of forgone leave excluded from compensation and wages.

The Service will not assert that an employer will be only permitted to deduct these cash payments under the rules of § 170 rather than the rules of § 162. Cash payments to which this guidance applies need not be included in Box 1, 3 (if applicable), or 5 of the Form W–2.

For further information, please contact Sheldon A. Iskow of the Office of Associate Chief Counsel (Income Tax and Accounting) at (202) 622–4920 (not a tollfree call).

Relief From Certain Low-Income Housing Credit Requirements Due to Hurricane Katrina

Notice 2005–69

The Internal Revenue Service is suspending certain requirements under § 42 of the Internal Revenue Code for low-income housing credit projects in the United States as a result of the devastation caused by Hurricane Katrina. This relief is being granted pursuant to the Service’s authority under § 42(n) and § 1.42–13(a) of the Income Tax Regulations.

BACKGROUND

On August 29, 2005, the President declared major disasters for the States of Alabama, Louisiana, and Mississippi as a result of Hurricane Katrina. These declarations were made under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, Title 42 U.S.C. 5121–5206 (2000 and Supp. II 2002). Subsequently, the Federal Emergency Management Agency (FEMA) designated jurisdictions for Individual Assistance.

State housing credit agencies throughout the United States have requested that the Service allow owners of low-income housing credit projects to provide temporary housing in vacant units to individuals who resided in jurisdictions designated for Individual Assistance in Alabama, Louisiana, and Mississippi and who have been displaced because their residences were destroyed or damaged as a result of the devastation caused by Hurricane Katrina (displaced individuals). State housing credit agencies have further requested that the temporary housing of the displaced individuals in low-income units without regard to income not cause the owners to lose low-income housing credits. Based upon these requests and because of the widespread damage to housing caused by Hurricane Katrina, the Service has determined that any housing credit agency of a state or a possession of the United States (state housing credit agency) may provide approval to project owners in their respective state or possession to provide temporary emergency housing for displaced individuals in accordance with this notice.

I. SUSPENSION OF INCOME LIMITATIONS

The Service has determined that it is appropriate to temporarily suspend certain income limitation requirements under § 42 for certain qualified low-income projects. The suspension will apply to low-income housing projects approved by the state

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(2) Approval of State Housing Credit Agency

The project owner must obtain approval from the state housing credit agency for the relief described in this notice. The state housing credit agency will determine the appropriate period of temporary housing for each project, not to extend beyond September 30, 2006.

(3) Certifications and Recordkeeping

To comply with the requirements of § 1.42–5, project owners are required to maintain and certify certain information concerning each displaced individual temporarily housed in the project, specifically: name, address of damaged residence, social security number, and a statement signed under penalties of perjury by the displaced individual that, because of damage to the individual’s residence in an Alabama, Louisiana, or Mississippi jurisdiction designated for Individual Assistance by FEMA as a result of Hurricane Katrina, the individual requires temporary housing. The owner must list the project on the National Emergency Resource Registry (NERR) maintained by the Department of Homeland Security. The NERR assists coordination efforts between resources that are needed and resources that are available. The web site for listing the project is: www.SWERN.gov .

The owner must also certify the date the displaced individual began temporary occupancy and the date the project will discontinue providing temporary housing as established by the state housing credit agency. The certifications and recordkeeping for displaced individuals must be maintained as part of the annual compliance monitoring process with the state housing credit agency.

(4) Rent Restrictions

Rents for the low-income units housing displaced individuals must not exceed the existing rent-restricted rates for the lowincome units established under § 42(g)(2).

(5) Protection of Existing Tenants

Existing tenants in occupied low-income units cannot be evicted or have their tenancy terminated as a result of efforts to

housing credit agency, in which vacant units are rented to displaced individuals. The state housing credit agency will determine the appropriate period of temporary housing for each project, not to extend beyond September 30, 2006 (temporary housing period).

II. STATUS OF UNITS

A. Units in the first year of the credit period

A displaced individual temporarily occupying a unit during the first year of the credit period under § 42(f)(1) will be deemed a qualified low-income tenant for purposes of determining the project’s qualified basis under § 42(c)(1), and for meeting the project’s 20–50 test or 40–60 test as elected by the project owner under § 42(g)(1). After the end of the temporary housing period established by the state housing credit agency (not to extend beyond September 30, 2006), a displaced individual will no longer be deemed a qualified low-income tenant.

B. Vacant units after the first year of the credit period

During the temporary housing period established by a state housing credit agency, the status of a vacant unit (that is, market-rate or low-income for purposes of § 42 or never previously occupied) after the first year of the credit period that becomes temporarily occupied by a displaced individual remains the same as the unit’s status before the displaced individual moves in. Displaced individuals temporarily occupying vacant units will not be treated as low-income tenants under § 42(i)(3)(A)(ii) (a low-income unit that was vacant before the effective date of this notice will continue to be treated as a vacant low-income unit even if it houses a displaced individual, a market rate unit that was vacant before the effective date of this notice will continue to be treated as a vacant market rate unit even if it houses a displaced individual, and a unit that was never previously occupied before the effective date of this notice will continue to be treated as a unit that has never been previously occupied even if it houses a displaced individual). Thus, the fact that a vacant unit becomes occupied by a displaced individual will not

affect the building’s applicable fraction under § 42(c)(1)(B) for purposes of determining the building’s qualified basis, nor will it affect the 20–50 test or 40–60 test of § 42(g)(1). If the income of occupants in low-income units exceeds 140 percent of the applicable income limitation, the temporary occupancy of a unit by a displaced individual will not cause application of the available unit rule under § 42(g)(2)(D)(ii). In addition, the project owner is not required during the temporary housing period to make attempts to rent to low-income individuals the low-income units housing displaced individuals.

III. SUSPENSION OF NON-TRANSIENT REQUIREMENTS

The non-transient use requirement of § 42(i)(3)(B)(i) shall not apply to any unit providing temporary housing to a displaced individual during the temporary housing period determined by the state housing credit agency in accordance with section I of this notice.

IV. OTHER REQUIREMENTS

All other rules and requirements of § 42 will continue to apply during the temporary housing period established by the state housing credit agency. After the end of the temporary housing period, the applicable income limitations contained in § 42(g)(1), the available unit rule under § 42(g)(2)(D)(ii), the non-transient requirement of § 42(i)(3)(B)(i), and the requirement to make reasonable attempts to rent vacant units to low-income individuals shall resume. If a project owner offers to rent to a displaced individual after the end of the temporary housing period, a displaced individual must be certified under the requirements of § 42(i)(3)(A)(ii) and § 1.42–5(b) and (c) to be a qualified low-income tenant. To qualify for the relief in this notice, the project owner must additionally meet all of the following requirements:

(1) Major Disaster Area

The displaced individual must have resided in an Alabama, Louisiana, or Mississippi jurisdiction designated for Individual Assistance by FEMA as a result of Hurricane Katrina.

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law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

DRAFTING INFORMATION

The principal author of this notice is Jack Malgeri of the Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice, contact Mr. Malgeri at (202) 622–3040 (not a toll-free call).

provide temporary housing for displaced individuals.

EFFECTIVE DATE

This notice is effective August 29, 2005 (the date of the President’s major disaster declarations as a result of Hurricane Katrina).

PAPERWORK REDUCTION ACT

Pursuant to 5 CFR 1320.18(d), the Office of Management and Budget has waived the requirements of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ) with respect to the recordkeeping requirements contained in this notice.

Books or records relating to a collection of information must be retained as long as their contents may become material to the administration of the internal revenue

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