SECTION 5. REQUEST FOR — Internal Revenue Bulletin 2006-29

COMMENTS

.01 The Internal Revenue Service and Treasury Department invite taxpayers to submit written comments on issues relating to § 45D(e)(2) and this notice. In particular, the Internal Revenue Service and Treasury Department encourage taxpayers to submit written comments regarding circumstances under which an entity can be a QALICB when its activities involve individuals, or an identifiable group of individuals, including an Indian tribe, who otherwise lack adequate access to loans or equity investments under 12 U.S.C. 4702(20).

.02 Send comments to: CC:PA:LPD:PR (Notice 2006–60), room 5203, Internal Revenue Service, PO 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 2006–60), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Submissions may also be sent electronically via the Internet to the following e-mail address: Notice.comments@irscounsel.treas.gov . Include the notice number (Notice 2006–60) in the subject line. Comments must be received on or before August 31, 2006.

Notice 2006–61 Table 1

APPLICABLE PERCENTAGE FOR MARGINAL PRODUCTION

Calendar Year Applicable Percentage

1991 15 percent 1992 18 percent 1993 19 percent 1994 20 percent 1995 21 percent 1996 20 percent 1997 16 percent 1998 17 percent 1999 24 percent

July 17, 2006 85 2006–29 I.R.B.

Notice 2006–61 Table 1

APPLICABLE PERCENTAGE FOR MARGINAL PRODUCTION - Continued

Calendar Year Applicable Percentage

2000 19 percent 2001 15 percent 2002 15 percent 2003 15 percent 2004 15 percent 2005 15 percent 2006 15 percent

which is the GNP implicit price deflator for 1990.

Because the reference price for the 2005 calendar year ($50.26) exceeds $28 multiplied by the inflation adjustment factor for the 2005 calendar year by $11.78, the credit for enhanced oil recovery credit for qualified costs paid or incurred in 2006 is phased out completely.

Table 1 contains the GNP implicit price deflator used for the 2006 calendar year, as well as the previously published GNP implicit price deflators used for the 1991 through 2005 calendar years.

The principal author of this notice is Jaime C. Park of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice, contact Ms. Park at (202) 622–3120 (not a toll-free call).

2006 Section 43 Inflation Adjustment

Notice 2006–62

Section 43(b)(3)(B) of the Internal Revenue Code requires the Secretary to publish an inflation adjustment factor.

The enhanced oil recovery credit under § 43 for any taxable year is reduced if the “reference price,” determined under § 45K(d)(2)(C), for the calendar year preceding the calendar year in which the taxable year begins is greater than $28 multiplied by the inflation adjustment factor for that year. The credit is phased out in any taxable year in which the reference price for the preceding calendar year exceeds $28 (as adjusted) by at least $6.

The term “inflation adjustment factor” means, with respect to any calendar year, a fraction the numerator of which is the GNP implicit price deflator for the preceding calendar year and the denominator of

Notice 2006–62 TABLE 1

GNP IMPLICIT PRICE DEFLATORS

Calendar Year GNP Implicit Price Deflator

1990 112.9 (used for 1991) 1991 117.0 (used for 1992) 1992 120.9 (used for 1993) 1993 124.1 (used for 1994) 1994 126.0 (used for 1995)* 1995 107.5 (used for 1996) 1996 109.7 (used for 1997)** 1997 112.35 (used for 1998) 1998 112.64 (used for 1999)*** 1999 104.59 (used for 2000) 2000 106.89 (used for 2001) 2001 109.31 (used for 2002) 2002 110.63 (used for 2003) 2003 105.67 (used for 2004)**** 2004 108.23 (used for 2005) 2005 112.129 (used for 2006)

2006–29 I.R.B. 86 July 17, 2006

**** Beginning in 2003, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to compute the 2004 § 43 inflation adjustment factor is 81.589.

*** Beginning in 1999, the GNP implicit price deflator was rebased relative to 1996. The 1990 GNP implicit price deflator used to compute the 2000 § 43 inflation adjustment factor is 86.53.

** Beginning in 1997, two digits follow the decimal point in the GNP implicit price deflator. The 1990 GNP price deflator used to compute the 1998 § 43 inflation adjustment factor is 93.63.

Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price deflator used to compute the 1996 § 43 inflation adjustment factor is 93.6.

Table 2 contains the inflation adjustment factor and the phase-out amount for taxable years beginning in the 2006

calendar year as well as the previously published inflation adjustment factors and phase-out amounts for taxable years be

Notice 2006–62 TABLE 2

ginning in 1991 through 2005 calendar years.

Phase-out

Amount

Calendar

Year

INFLATION ADJUSTMENT FACTORS AND

PHASE-OUT AMOUNTS

Inflation Adjustment

Factor

1991 1.0000 0 1992 1.0363 0 1993 1.0708 0 1994 1.0992 0 1995 1.1160 0 1996 1.1485 0 1997 1.1720 0 1998 1.1999 0 1999 1.2030 0 2000 1.2087 0 2001 1.2353 0 2002 1.2633 0 2003 1.2785 0 2004 1.2952 0 2005 1.3266 0 2006 1.3743 100 percent

tention requirements on issuers and other parties to tax-exempt bond transactions in order to substantiate compliance with section 103 and related provisions.

The Service has received inquiries regarding the scope and nature of records that issuers and other parties to tax-exempt bond transactions must retain. In addition, the Service has received requests for guidance addressing State and local governmental recordkeeping requirements in the tax-exempt bond context. For example, industry representatives have recommended that the Service issue guidance that would permit a combination of assumptions, certifications, and summaries of original documents to ease the compliance burden.

DRAFTING INFORMATION

Record Retention Requirements for Tax Exempt Bonds

Notice 2006–63

PURPOSE

This notice requests comments for developing record retention standards,

including recordkeeping limitation programs, for tax-exempt bond issues. In particular, the Service is seeking comments on managing any burdens potentially associated with the record retention requirements that apply to issuers and other parties to tax-exempt bond transactions in order to substantiate compliance with section 103 of the Internal Revenue Code and related provisions.

BACKGROUND

In general, under section 103(a), gross income does not include interest on any State or local bond if certain requirements are met. Various provisions of the Code and the Income Tax Regulations, including, but not limited to, sections 103, 141–150, and 6001, impose record re

July 17, 2006 87 2006–29 I.R.B.

REQUEST FOR COMMENTS

The Service requests comments for developing record retention standards, including recordkeeping limitation programs, for tax-exempt bond issues. Comments are invited regarding all aspects of compliance with recordkeeping requirements for tax-exempt bond transactions, including whether different programs may be appropriate for specific types of bond records or specific classes of tax-exempt bond issues. Interested persons should send comments to CC:PA:LPD:PR (Notice 2006–63), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. Alternatively, comments may be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. Monday to Friday to CC:PA:LPD:PR (Notice 2006–63), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, D.C. Comments may also be transmitted electronically via the following e-mail address: Notice.Comments@irscounsel.treas.gov . Please include “Notice 2006–63” in the subject line of any electronic communications. Written comments should be received by October 16, 2006. All comments will be available for public inspection and copying.

DRAFTING INFORMATION

The principal authors of this notice are Barbara M. Pettoni of the Office of Associate Chief Counsel (Procedure & Administration) and Steven A. Chamberlin of the Tax Exempt Bonds Division, Office of Outreach, Planning & Review (Tax Exempt & Government Entities). For further information regarding this notice, please contact Ms. Pettoni at (202) 622–4910 or Mr. Chamberlin at (636) 940–6466 (not a toll-free call).

Interim Guidance on the Application of Section 409A to Accelerated Payments to Satisfy Federal Conflict of Interest Requirements

Notice 2006–64

I. Background

Section 409A was added to the Internal Revenue Code as part of the American Jobs Creation Act of 2004, Pub. Law No. 108–357, 118 Stat. 1418. Section 409A generally provides that all 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 certain requirements are met. The IRS issued Notice 2005–1, 2005–1 C.B. 274, on December 20, 2004 (published as modified on January 6, 2005) and issued proposed regulations (REG–158080–04, 2005–2 C.B. 786) under section 409A on September 29, 2005 (70 Fed. Reg. 57930 (Oct. 4, 2005)). The proposed regulations do not limit the application of the guidance provided in Notice 2005–1.

II. Accelerated Payments of Nonqualified Deferred Compensation to Satisfy Federal Conflict of Interest Requirements

Section 409A(a)(3) provides that a plan may not permit acceleration of the time or schedule of payment for nonqualified deferred compensation subject to section 409A except as provided in regulations by the Secretary. The legislative history to section 409A provides that it was intended that the Secretary would provide limited exceptions to the prohibition on acceleration of payments, including, for example, a distribution necessary to comply with Federal conflict of interest requirements. H.R. Conf. Rep. No. 108–755, at 731 (2004). Both Notice 2005–1, Q&A–15(c) and § 1.409A–3(h)(2)(ii) of the proposed regulations provide that a plan may permit such acceleration of the time and schedule of a payment of nonqualified deferred compensation subject to the requirements

of section 409A as may be necessary to comply with a certificate of divestiture (as defined in section 1043(b)(2)).

Commentators, including the Office of Government Ethics, expressed concern about the indication in Notice 2005–1 and the proposed regulations that a “certificate of divestiture” (as defined in section 1043(b)(2)) would be effective to permit an accelerated payment of nonqualified deferred compensation subject to section 409A. The Office of Government Ethics issues such certificates of divestiture so that an employee may defer recognition of capital gains when property is sold to comply with conflict of interest provisions. Because payment under a nonqualified deferred compensation plan is treated as ordinary income, rather than as capital gain, the Office of Government Ethics could not issue a certificate of divestiture in connection with an accelerated payment under such a plan.

Accordingly, until further guidance is issued, a nonqualified deferred compensation arrangement subject to section 409A may permit such acceleration of the time or schedule of payment as is necessary to satisfy requirements established pursuant to a written determination by the Office of Government Ethics that: (1) divestiture of the financial interest or termination of the financial arrangement is reasonably necessary to comply with any Federal conflict of interest statute, regulation, rule or executive order (including section 208 of title 18, United States Code), or is requested by a congressional committee as a condition of confirmation; and (2) specifies the financial interest to be divested or terminated. Of course, amounts actually paid pursuant to such acceleration generally will be includible in income by the recipient.

III. Drafting Information

The principal author of this notice is Stephen Tackney of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, contact Stephen Tackney at (202) 927–9639 (not a toll-free call).

2006–29 I.R.B. 88 July 17, 2006