HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

SPECIAL ANNOUNCEMENT

Announcement 2006–95, page 1105. This announcement provides a two-part settlement initiative offered by the IRS under which current and former employees of foreign embassies, foreign consular offices, or international organizations in the United States can (1) resolve income tax matters related to their employment at a foreign embassy, foreign consular office, or international organization and (2) unwind their participation in SEP/IRA plans, which they erroneously established. In addition, the announcement sets forth the eligibility for and terms of the settlement, including procedures to be followed by eligible participants.

INCOME TAX

T.D. 9296, page 1078. Final regulations under section 41 of the Code provide rules for the computation and allocation of the credit for increasing research activities in the case of a controlled group of corporations or a group of trades or businesses under common control. The regulations also provide rules for making and revoking an election to compute the research credit using the alternative incremental research credit rules.

T.D. 9297, page 1089. Final regulations under section 937(a) of the Code provide a new alternative under the presence test for determining whether an individual is a bona fide resident of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands, referred to as U.S. possessions or territories. Generally, an individual is a bona fide resident of a territory if the individual satisfies a presence test, a tax home