SECTION 2. THE QUALIFIED

NMWHFIT EXCEPTION

The final regulations under § 1.671–5 provide that if a NMWHFIT satisfies the qualified NMWHFIT exception in § 1.671–5(c)(2)(iv)(E), trustees and middlemen of those trusts are excepted from specific reporting requirements regarding market discount, bond premium, sales and dispositions, redemptions, and sales of trust interests. Section 1.671–5(c)(2)(iv)(E) provides that the qualified NMWHFIT exception is satisfied if a NMWHFIT has a start-up date that is before February 23, 2006, and the calendar year for which the trustee is reporting begins before January 1, 2011. Section 1.671–5(b)(19) defines a WHFIT’s start-up date as the date on which substantially all of the assets have been deposited with the trustee of the WHFIT.

Since the issuance of the § 1.671–5 final regulations, a number of comments have been received requesting that the definition of start-up date be clarified with re

spect to the qualified NMWHFIT exception and that the qualified NMWHFIT exception be extended to NMWHFITs created a certain period of time on or after February 23, 2006.

In response, the Treasury Department and the Internal Revenue Service intend to amend § 1.671–5(c)(2)(iv)(E) to provide that if, prior to February 23, 2006, both: (1) the registration statement of a NMWHFIT becomes effective under the Securities Act of 1933, as amended (15 U.S.C. 77a, et seq. ); and (2) trust interests are offered for sale to the public, the NMWHFIT will be considered to have a start-up date that satisfies the qualified NMWHFIT exception. Section 1.671–5(c)(2)(iv)(E) will also be amended to provide that if, on or after February 23, 2006 and before June 1, 2006, both: (1) the registration statement of the NMWHFIT becomes effective under the Securities Act of 1933; and (2) trust interests are offered for sale to the public, the NMWHFIT will be considered to have a start-up date that satisfies the qualified NMWHFIT exception, provided that the NMWHFIT is fully funded before August 1, 2006.