SECTION 8. DRAFTING

INFORMATION

The principal author of this revenue procedure is Dillon Taylor of the Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions & Judicial Practice Division. For further information regarding this revenue procedure, contact [ ] at

[ ] (not a toll-free call).

Suspension of Employer and Payer Reporting and Wage Withholding Requirements With Respect to Deferrals of Compensation Under § 409A for Calendar Year 2005; No Assertion of Penalties Against Service Providers in Certain Circumstances

Notice 2005–94

I. PURPOSE

This notice suspends employers’ and payers’ reporting and wage withholding requirements for calendar year 2005 with respect to deferrals of compensation within the meaning of § 409A of the Internal Revenue Code (the Code). However, future published guidance may require an employer or payer to file a corrected information return and to furnish a corrected payee statement reporting any previously unreported amounts includible in gross income under § 409A. This notice does not affect the application of § 3121(v)(2) or an employer’s reporting obligations under Treas. Reg. § 31.3121(v)(2)–1.

This notice does not affect a service provider’s filing requirements, individual income tax liability, or interest on underpayments of tax. However, pursuant to this notice, the IRS will not assert penalties under §§ 6651(a)(1) and (2), 6654, and 6662 with respect to amounts includible in gross income under § 409A for calendar year 2005 if the service provider reports and pays any taxes due with respect

to such amounts in accordance with future published guidance.

II. BACKGROUND

A. The American Jobs Creation Act of 2004

Section 885(a) of the American Jobs Creation Act of 2004, Pub. Law No. 108–357, 118 Stat. 1418 (the Act) added § 409A, which provides, inter alia, that amounts deferred under a nonqualified deferred compensation plan for all taxable years are currently includible in gross income to the extent not subject to a substantial risk of forfeiture and not previously included in gross income, unless the plan meets certain requirements. Section 885(b) of the Act amended the Code to impose the following reporting and wage withholding requirements with respect to deferrals of compensation within the meaning of § 409A:

to require that an employer or payer report all deferrals for the year under a nonqualified deferred compensation plan on a Form W–2 ( Wage and Tax Statement ) or a Form 1099 ( Miscella- neous Income ).

vide that the term “wages” includes any amount includible in gross income of an employee under § 409A.

that a payer report amounts includible in gross income under § 409A that are not treated as wages under § 3401(a) as gross income.

B. Notice 2005–1

On December 20, 2004, the IRS issued Notice 2005–1, 2005–2 I.R.B. 274 (published as modified on January 6, 2005), which provides guidance with respect to the application of § 409A. Additionally, in accordance with the amendments made by § 885(b) of the Act, Notice 2005–1 imposes the following reporting and wage withholding requirements with respect to deferred amounts:

ployee the total amount of deferrals for the year under a nonqualified deferred

compensation plan in box 12 of Form W–2 using code Y. See Q&A–29.

cludible in gross income under § 409A and in wages under § 3401(a) in box 1 of Form W–2 as wages paid to the employee during the year. An employer must also report such amounts in box 12 of Form W–2 using code Z. See Q&A–33.

the total amount of deferrals for the year under a nonqualified deferred compensation plan in box 15a of Form 1099-MISC. See Q&A–30.

ble in gross income under § 409A and not treated as wages under § 3401(a) as nonemployee compensation in box 7 of Form 1099-MISC. A payer must also report such amounts in box 15b of Form 1099-MISC. See Q&A–35.

C. Proposed Regulations

On September 29, 2005, the IRS issued proposed regulations regarding the application of § 409A. See 70 Fed. Reg. 58930 (Oct. 4, 2005). The proposed regulations incorporate and expand on the guidance provided in Notice 2005–1 and are proposed to be generally applicable for taxable years beginning on or after January 1, 2007. As stated in the preamble to the proposed regulations, taxpayers may rely on the proposed regulations for periods preceding the effective date of the final regulations. However, the proposed regulations do not affect the applicability of this notice (and generally do not affect the application of other guidance issued with respect to § 409A, including Notice 2005–1).

III. INTERIM EMPLOYER AND PAYER REPORTING AND WAGE WITHHOLDING PROVISIONS

This notice suspends employers’ and payers’ reporting and wage withholding requirements for calendar year 2005 with respect to deferrals of compensation within the meaning of § 409A. In lieu thereof the following reporting and wage withholding provisions apply for calendar year 2005 until superseded by future published guidance:

December 27, 2005 1208 2005–52 I.R.B.

VI. EFFECTIVE DATE

This notice is effective with respect to employers’ and payers’ reporting and wage withholding requirements for calendar year 2005 and with respect to service providers’ filing requirements and tax payment obligations relating to amounts includible in gross income under § 409A for calendar year 2005.

VII. DRAFTING INFORMATION

The principal author of this notice is Frederick L. Wesner of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities), though other Treasury and IRS officials participated. For further information regarding this notice, contact Mr. Wesner at (202) 622–6040 (not a toll-free number).

Weighted Average Interest Rates Update

Notice 2005–96

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 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

A. Amounts reportable on Form 941 and Form W–2

is not required to report deferrals for the year under a nonqualified deferred compensation plan as § 409A deferrals in box 12 of Form W–2 using code Y.

is not required to include in the total amount of wages as defined in § 3401(a) amounts includible in the gross income of an employee under § 409A that the employee has neither actually nor constructively received during the calendar year. Thus, an employer may exclude such amounts from wages for income tax withholding purposes and is not required to report such amounts as wages paid to the employee in box 2 of Form 941 or in box 1 of Form W–2. Additionally, an employer is not required to report such amounts as § 409A income in box 12 of Form W–2 using code Z. However, see paragraph III.C. of this notice regarding an employer’s potential obligation to file a corrected information return and to furnish a corrected payee statement.

B. Amounts reportable on Form 1099

required to report deferrals for the year under a nonqualified deferred compensation plan as § 409A deferrals in box 15a of Form 1099-MISC.

required to report amounts includible in the gross income of a nonemployee under § 409A that the nonemployee has neither actually nor constructively received during the calendar year. Thus, a payer is not required to report such amounts as nonemployee compensation in box 7 of Form 1099-MISC or as § 409A income in box 15b of Form 1099-MISC. However, see paragraph III.C. of this notice regarding a payer’s potential obligation to file a corrected information return and to furnish a corrected payee statement.

C. Corrected Information Return and Corrected Payee Statement

Future published guidance may require an employer or payer to file a corrected information return and to furnish a corrected payee statement for calendar year 2005 reporting any previously unreported amounts includible in gross income under § 409A.

IV. SERVICE PROVIDER REQUIREMENTS WITH RESPECT TO AMOUNTS INCLUDIBLE IN GROSS INCOME UNDER § 409A

A service provider must file a return and pay any taxes due relating to amounts includible in gross income under § 409A for calendar year 2005. However, the IRS understands that it is likely that service providers will find it difficult to determine the correct amount and timing of inclusions under § 409A without reporting from the employer or payer. The IRS is working on guidance regarding the employers’ and payers’ reporting and withholding requirements, and that guidance is expected to be issued in the first half of 2006. Consequently, the IRS will not assert penalties under §§ 6651(a)(1) and (2), 6654, and 6662 with respect to amounts includible in gross income under § 409A for calendar year 2005 if the service provider reports and pays any taxes due with respect to such amounts in accordance with future published guidance. Such future guidance will provide a period during which the service provider may report and pay any taxes due with respect to amounts includible in gross income under § 409A without incurring such penalties. However, interest imposed under Chapter 67 of the Code will apply to any underpayments of tax resulting from a service provider’s failure to include amounts includible in gross income under § 409A for calendar year 2005.

V. EFFECT ON OTHER DOCUMENTS

This notice suspends employers’ and payers’ reporting and wage withholding requirements for calendar year 2005 with respect to deferrals of compensation within the meaning of § 409A as set forth in Notice 2005–1.

2005–52 I.R.B. 1209 December 27, 2005

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.

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 de

rived from designated corporate bond indices.

The composite corporate bond rate for November 2005 is 5.78 percent. Pursuant to Notice 2004–34, the Service has determined this rate as the average of the

Corporate

For Plan Years Bond 90% to 110%

Beginning in: Weighted Permissible Month Year Average Range

December 2005 5.78 5.20 to 5.78

imum amount of the deduction allowed under § 404(a)(1).

The rate of interest on 30-year Treasury securities for November 2005 is 4.73 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 max

30-Year

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

Beginning in: Weighted Permissible Permissible Month Year Average Range Range

December 2005 4.87 4.38 to 5.11 4.38 to 5.35

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.

Request for Comments Regarding Procedures for Automatic Changes in Methods of Accounting Contained in Rev. Proc. 2002–9

Notice 2005–97

The Internal Revenue Service and the Treasury Department invite public comments on possible changes to Rev. Proc. 2002–9, 2002–1 C.B. 327, as modified and clarified by Announcement 2002–17, 2002–1 C.B. 561, modified and amplified by Rev. Proc. 2002–19, 2002–1 C.B. 696, and amplified, clarified, and modified by Rev. Proc. 2002–54, 2002–2 C.B. 432.

Rev. Proc. 2002–9 sets forth the procedures under § 446 of the Internal Revenue Code and the regulations thereun

der for taxpayers to request automatic consent from the Commissioner to change to certain methods of accounting. In general, Rev. Proc. 2002–9 grants consent to any taxpayer within the scope of Rev. Proc. 2002–9 to change the taxpayer’s method(s) of accounting as described in the APPENDIX of Rev. Proc. 2002–9 if the taxpayer complies with all the applicable provisions of the revenue procedure and implements the change in method of accounting for the requested year of change.

Since its publication, the Service has clarified, modified, and amplified Rev. Proc. 2002–9 in numerous revenue procedures, revenue rulings, notices, and other guidance. The Service and the Treasury Department intend to update Rev. Proc. 2002–9 with a revised revenue procedure that will consolidate this subsequently issued guidance.

December 27, 2005 1210 2005–52 I.R.B.

The Service and the Treasury Department are considering whether to make any other changes to Rev. Proc. 2002–9. This includes the accounting method changes that should be eligible for the automatic consent procedures and changes that should be made to the rules and procedures applicable to automatic accounting method changes.

This notice identifies several issues that may be addressed in the revised revenue procedure. The Service and the Treasury Department request public comments on whether, why, and how these or other issues should be addressed in the revised revenue procedure.

ISSUES ON WHICH COMMENTS ARE REQUESTED

1. Should any accounting method changes that are currently ineligible for automatic consent be made eligible for automatic consent?

2. Should any accounting method changes that are currently eligible for automatic consent be made ineligible for automatic consent?

3. Should modifications be made to any aspect (such as to the description or scope) of the accounting method changes currently eligible for automatic consent?

4. Should any modifications be made to the general procedures applicable to all automatic accounting method changes?

Comments should be submitted in writing on or before March 27, 2006, and should include a reference to Notice 2005–97. Send submissions to: CC:PA:LDP:PR (Notice 2005–97), Room 5203, Internal Revenue Service, P.O. Box 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 (Notice 2005–97), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC. Alternatively, comments may be submitted electronically directly to the Service via the following e-mail address: Notice.comments@irscounsel.treas.gov. Please include “Notice 2005–97” in the subject line of any electronic communication. All materials submitted will be available for public inspection and copying.

DRAFTING INFORMATION

The principal authors of this notice are Kari Fisher and Cheryl Oseekey of the Office of the Associate Chief Counsel (Income Tax and Accounting). For further information concerning this notice, contact Ms. Fisher or Ms. Oseekey at (202) 622–4970 (not toll-free numbers).

Clean Renewable Energy Bonds

Notice 2005–98