SECTION 3. SCOPE — Internal Revenue Bulletin 2006-34

The following categories of services are eligible for treatment under section 1.482–9T(b)(4)(i):

a simplified cost based method (SCBM) intended to preserve some benefits of the current § 1.482–2(b) cost safe harbor. A number of commentators noted that SCBM called for quantitative judgments that business people are not qualified to make by themselves. As a practical matter, taxpayers would be required to devote significant compliance resources to enlist outside consultants or otherwise to develop support for those judgments.

In 2006, the Treasury Department and the IRS issued temporary regulations that eliminated the SCBM and replaced it with the services cost method (SCM), as set forth in § 1.482–9T(b). The Treasury Department and IRS recognized that because

Payroll:

the section 482 services regulations potentially affect a large volume of intragroup back office services that are common across many industries, it is in the interest of sound tax administration to minimize the compliance burden of such services, which would typically bear low arm’s length markups.

The SCM evaluates whether the price for covered services, as defined, is arm’s length by reference to the total services costs with no markup. Section 1.482–9T(b)(4) provides for two categories of covered services eligible for the SCM. The first category consists of specified covered services that will be identified in this revenue procedure. These specified

Compiling and posting employee time and other information needed to calculate periodic compensation to employees. Computing employees’ time worked, production, and commissions. Computing and posting wages and deductions to appropriate accounting records. Preparing paychecks, travel reimbursement and expense reimbursement.
Preparing payroll tax forms (such as the preparation of Forms 940, 941 and W–2 in order to comply with U.S. requirements or similar requirements under another country’s laws).

Premiums for Unemployment, Disability and Workers Compensation:

Processing employees’ unemployment insurance premiums, disability premiums and workers compensation premiums.

Accounts Receivable:

Compiling, analyzing and recording current credit data and other financial information regarding individuals or firms (including preparing reports with this information for use in decisionmaking).
Compiling and recording billing, accounting and other numerical data for billing purposes. Preparing billing invoices for services rendered or for delivery or shipment of goods.
Locating and notifying customers of delinquent accounts by mail (either electronic or otherwise) or telephone to solicit payment. Receiving payment from customers and posting payment to customer’s account. If customer fails to respond, preparing statements to credit department, initiating repossession proceedings or service disconnection. Keeping records of collection activities and status of accounts.

Accounts Payable:

Compiling information and records to draw up purchase orders for procurement of materials and services.
Making payment to vendors and posting payment to status of accounts.

General Administrative:

Performing clerical and administrative functions such as drafting correspondence, scheduling appointments, and organizing and maintaining paper and electronic files.
Performing data entry through use of a keyboard or scanning device, including verifying data and preparing materials for printing.
Using a word processor/computer or typewriter to generate (without substantial modification) letters, reports, forms, or other material from another person’s rough draft, corrected copy, or voice recording.
Performing duties relating to office management systems and procedures, such as answering telephones, bookkeeping, typing, word processing, office machine operation, and filing.
Operating any of the following office machines: photocopying, scanning and facsimile machines.

August 21, 2006 323 2006–34 I.R.B.

Public Relations:

Preparation and distribution of internal and external corporate communications.

Meeting Coordination:

Coordinating activities of staff and convention personnel to make arrangements for group meetings and conventions.

Accounting and Auditing:

Gathering and reviewing information in accounting records for use in preparing financial statements.
Computing, classifying, and recording numerical data to maintain accurate and complete financial records, performing any combination of calculating, posting, and verifying duties to obtain primary financial data for use in maintaining accounting records, checking the accuracy of figures, calculations, and postings pertaining to business transactions recorded by other workers.

Tax:

Processing tax payments according to prescribed laws and regulations.
Gathering information from accounting records and including that information in the preparation of income, property, sales/use, VAT, excise and other tax returns.

Compliance:

Gathering information and preparing documentation relating to eligibility for or compliance with laws and regulations governing contracts, licenses and permits.
Gathering information, verifying data and preparing documentation relating to compliance with laws and regulations governing financial and securities institutions and financial and real estate transactions. Examining and verifying correctness of, or establishing authenticity of records.

Budgeting:

Compiling data for use by cost estimators in determining cost projections and in preparing budget estimates, including verifying information for completeness, accuracy, and conformance with internal procedures and regulations.
Compiling data to prepare budget and accounting reports for management.

Treasury Activities:

Establishing bank accounts and lockboxes for use by controlled parties, including overdraft facilities and lines of credit.

Statistical Assistance:

Compiling data for use in statistical studies.

Staffing, Recruiting and Related Services:

Providing staffing support that includes creating job announcements, determining eligibility, evaluating qualifications of candidates, conducting background checks on final candidates, verifying references, developing performance evaluation procedures and forms, and conducting exit interviews for departed employees.
Coordinating with temporary employment agencies, applicants, and management throughout the recruiting process.
Providing information to applicants regarding open positions, the application and recruiting process, and employment policies.
Providing administrative support that includes sourcing and processing resumes, arranging interview schedules for open positions, preparing offer letters, and entering new employee information into the human resource system.
Establishing and maintaining employee files relating to payroll, performance and other personnel issues.
Assisting with new employee orientations and paperwork.
Implementing recruiting plan and locating potential candidates by working with professional search firms, colleges, universities and professional associations. Organizing and attending job fairs and other recruitment events.
Developing recruiting and marketing materials and assisting in developing and maintaining content for recruiting website.
Analyzing recruiting data and review all job analysis, promotion and placement products.
Posting job opening advertisements in appropriate markets through publications, journals and other media.

2006–34 I.R.B. 324 August 21, 2006

Managing company-wide job postings and employee referral program.

Training Services:

Assisting in training of personnel including assessing development and training needs, creating and conducting internal development and training programs and communicating training opportunities to personnel.
Arranging for management training on employment law compliance, employer liability avoidance, interviewing, hiring, terminations, promotions, performance reviews, safety, and sexual harassment.

Benefit Services:

Implementing employee compensation and benefits including healthcare, life insurance, 401(k), pension, worker’s compensation, unemployment, dental, profit sharing, employee incentive compensation, and employee assistance programs.
Providing guidance and direction to employees regarding elections for benefits, applications for benefits and receipt of benefits (including providing assistance to employees in completing all necessary forms).
Arranging annual benefit enrollment meetings and employee benefit seminars.
Processing employee benefits inquiries and complaints, and reconciling billing issues.
Coordinating with hospitals, physicians, insurers, employees, and beneficiaries to facilitate proper and complete utilization of benefits for all employees.

Computer Support:

Providing technical assistance to users of computer systems and other information technology devices. Answering questions or resolving technical problems relating to computer systems and other information technology devices in person, via telephone or from remote location. Providing assistance concerning the use of computer hardware and software, including printing, installation, word processing, electronic mail, and operating systems.

Database Administration:

Maintaining and testing existing computer databases (including implementing security measures to safeguard computer databases), but not to include analyzing user needs or developing hardware or software solutions (such as systems integration, website design, writing computer programs, modifying general applications software, or recommending the purchase of commercially available hardware or software).

Network and Computer System Administration:

Supporting an organization’s existing local area network (LAN), wide area network (WAN), and Internet system or a segment of a network system, regular maintenance of network hardware and software, monitoring network to ensure network availability to all system users and performing necessary maintenance to support network availability, supervising other network support and client server specialists (including implementing network security measures), but not to include analyzing user needs or developing hardware or software solutions (such as systems integration, website design, writing computer programs, modifying general applications software, or recommending commercially available software).

Legal Services:

General legal services performed on behalf of the taxpayer by in-house legal counsel, including but not limited to, drafting and review of contracts, legal documents, and opinions, representation and advocacy before courts, administrative agencies, arbitrators, legislatures, or other bodies. Support and administrative functions associated with the above activities (legal research, secretarial, filing and document retrieval, etc.).

Insurance Claims Management:

Coordination with third party insurers, including preparing claims for submission to such third party insurers.

December 31, 2006. Taxpayers may elect to apply retroactively the provisions of § 1.482–9T to certain taxable years. See § 1.482–9T(n)(1). In the case of a valid election, this revenue procedure would also apply to the taxable years subject to such an election.