Bulletin No. 2007-21 May 21, 2007

Rev. Rul. 2007–32, page 1278. Accrual of interest. This ruling requires an accrual method bank with a reasonable expectancy of receiving future payments on a loan to include accrued interest (determined under regulations section 1.446–2(a)(2)) in gross income for the taxable year in which the right to receive the interest becomes fixed, notwithstanding bank regulatory rules that prevent accrual of the interest for regulatory purposes. The ruling also provides guidance as to the period in which a bank that has elected the conformity method of accounting under regulations section 1.166–2(d)(3) can treat uncollected interest as worthless. Rev. Rul. 81–18 distinguished.

Rev. Rul. 2007–33, page 1281. Real estate investment trust (REIT) foreign currency. This ruling provides that section 988 gain that is recognized by a REIT will be qualifying income under section 856(c)(2) or (3) of the Code to the extent that the underlying income so qualifies.

Notice 2007–40, page 1284. Renewable electricity production, refined coal produc- tion, and Indian coal production; calendar year 2007 inflation adjustment factors and reference prices. This notice announces the calendar year 2007 inflation adjustment factors and reference prices for the renewable electricity production credit, refined coal production credit, and Indian coal production credit under section 45 of the Code.

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Notice 2007–41, page 1287. The Department of Treasury and the Service invite public comments on recommendations for items that should be included on the 2007–2008 Guidance Priority List. Taxpayers may submit recommendations for guidance at any time during the year. Recommendations submitted by May 31, 2007, will be reviewed for possible inclusion on the original 2007–2008 Guidance Priority List. Recommendations received after May 31, 2007, will be reviewed for inclusion in the next periodic update.

Notice 2007–42, page 1288. This notice provides guidance to real estate investment trusts (REITs) concerning the circumstances under which section 856(c)(2) or (3) of the Code characterizes section 987 gain as qualifying income for REIT qualification.

Rev. Proc. 2007–33, page 1289. This document provides the exclusive procedures under which a bank may change its method of accounting for uncollected interest to an elective safe harbor method based on the bank’s collection experience. Rev. Proc. 2002–9 modified and amplified.