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Introduction

Part IV. Items of General Interest

Internal Revenue Bulletin 2007-38 · 2026-10-03 edition · updated 2026-10-04 · United States

Notice of Proposed Rulemaking

Public Inspection of Material Relating to Tax-Exempt Organizations

REG–116215–07

AGENCY: Internal Revenue Service, Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations that amend existing regulations issued under sections 6104 and 6110 of the Internal Revenue Code. The purpose of the proposed regulations is to clarify rules relating to information that is made available by the IRS for public inspection under section 6104(a) and materials that are made publicly available under section 6110. The changes reflect IRS practice as well as the United States Court of Appeals for the District of Columbia Circuit’s decision in Tax Analysts v. IRS, 350 F.3d 100 (D.C. Cir. 2003). The Tax Analysts decision invalidated the portions of §§301.6104(a)–1(i) and 301.6110–1(a) that excepted rulings that denied or revoked an organization’s tax exempt status from the public disclosure provisions of both sections 6104 and 6110. The proposed regulations will affect organizations exempt from Federal income tax under section 501(a) or 527, organizations that were exempt but are no longer exempt from Federal income tax, and organizations that were denied tax-exempt status.

DATES: Written or electronic comments and requests for a public hearing must be received by November 13, 2007.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–116215–07), room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–116215–07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, or sent

electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–116215–07).

FOR FURTHER INFORMATION CONTACT: Concerning submission of comments, Kelly Banks, (202) 622–7180 (not a toll-free number); concerning the proposed regulations, Mary Ellen Keys, (202) 622–4570 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Since 1950, the Internal Revenue Code has provided for the public inspection of information that is submitted to the IRS by certain exempt organizations and certain trusts. Under section 6104(a), the IRS makes available for public inspection approved applications for exemption from Federal income tax for organizations described in section 501(c) or (d) and exempt under section 501(a), notices of status filed under section 527(i) by political organizations exempt from taxation under section 527, and certain related documents. Section 6104(a) also permits the IRS to disclose whether an organization is currently recognized as exempt and the subsection and paragraph number of section 501 under which it is recognized. Section 6104(b) imposes an additional obligation on the IRS to make available for public inspection annual information returns filed by organizations exempt from Federal income tax. Section 6104(c) governs when the IRS may disclose certain information about charitable and certain other exempt organizations to state officials. Section 6104(d) imposes a parallel obligation on organizations and trusts to make available for public inspection annual returns, applications for exemption and notices of status. The proposed regulations do not address the obligations imposed by subsections (b), (c) and (d).

The decision in Tax Analysts v. IRS, 350 F.3d 100 (D.C. Cir. 2003), invalidated the portions of existing §301.6104(a)–1(i)(1), (2), and (3) and §301.6110–1(a) that excluded rulings that denied or revoked an organization’s tax exempt status from the public disclosure provisions of both sections 6104 and 6110. Sections

301.6104(a)–1(i)(1), (2) and (3) excluded from disclosure by the IRS unfavorable rulings or determination letters in response to exemption applications, rulings or determination letters that make or modify a favorable determination letter, and technical advice memoranda that relate to a disapproved exemption application or the revocation or modification of a favorable determination letter. Thus, because §301.6110–1(a) provided that the disclosure of such rulings, determination letters and technical advice memoranda is to be determined under section 6104, they also were not available under section 6110. The IRS has already modified its administrative practice to follow the court’s holding by making these documents available to the public. See AOD 2004–2, 2004–29 I.R.B., §601.601(d)(2)(ii)(a). The Treasury Department and IRS now propose to revise the existing regulations at §301.6104(a)–1 and §301.6110–1(a) to conform to the court’s holding in Tax Analysts .

Explanation of Provisions

The proposed regulations remove existing §301.6104(a)–1(i) and portions of §301.6110–1(a), in light of the holding in Tax Analysts . The proposed regulations clarify that the term “application” includes information submitted to the IRS relating to group exemption applications. The proposed regulations provide that notices of status filed under section 527(i) and the documents comprising the notices are available for public inspection under section 6104(a). The proposed regulations also add to the material that is available for public inspection the letters or documents filed with or issued by the IRS relating to an organization’s status as an organization described in sections 509(a), 4942(j)(3), or 4943(f), including a final determination letter that the organization is or is not a private foundation.

The proposed regulations clarify that the IRS may disclose, in response to or in anticipation of a request, the subsection and paragraph number of section 501 under which an organization or group has been determined, on the basis of its application, to qualify for exemption from Federal income tax, and whether an organiza

September 17, 2007 659 2007–38 I.R.B.

comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register .

Drafting Information

The principal author of the regulations is Mary Ellen Keys, Office of the Associate Chief Counsel (Procedure & Administration).

- - - -

Amendments to the Regulations

Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301—PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read as follows:

Authority: 26 U.S.C. 7805 *** Par. 2. §301.6104(a)–1 is revised to read as follows:

§301.6104(a)–1 Public inspection of material relating to tax-exempt organizations .

(a) Applications for exemption from Federal income tax, applications for a group exemption letter and supporting documents . If the Internal Revenue Service determines that an organization described in section 501(c) or (d) is exempt from Federal income tax for any taxable year, the application upon which the determination is based, together with any supporting documents, shall be open to public inspection. Such applications and supporting documents shall be open for public inspection even after any revocation of the Internal Revenue Service’s determination that the organization is exempt from Federal income tax. Some applications have been destroyed and therefore are not available for inspection. For purposes of determining the availability for public inspection, a claim for exemption

tion or group is currently recognized as exempt.

Section 6104(a) applies to the publication of certain information related to organizations that are exempt from Federal income taxation under section 501(a). The information covered by section 6104(a) includes material for any taxable year during which the organization was exempt. Under the proposed regulations, written determinations issued by the IRS, including, for example, unfavorable rulings or determination letters issued in response to applications for tax exemption and rulings or determination letters revoking or modifying a favorable determination letter, are made available for public inspection under section 6110.

Other changes to the existing regulations

The proposed regulations reorganize or revise certain provisions of the existing regulations to eliminate redundancy and/or to provide greater clarity. First, §301.6104(a)–1(a) is revised to clarify that applications for exemption from Federal income tax and supporting documents shall be open for public inspection, even if the IRS subsequently revokes the organization’s exempt status.

Second, new §301.6104(a)–1(b) is added to clarify that notices of status filed by political organizations described in section 527 are open for public inspection.

Third, §301.6104(a)–1(c) (formerly §301.6104(a)–1(b)) is revised to clarify that group exemption letters are included among the information that is available for public inspection under section 6104(a).

Fourth, §301.6104(a)–1(d) (formerly §301.6104(a)–1(c)) is revised to clarify that, where an organization is determined to be exempt for any taxable year, material shall not be withheld on the basis that the organization is determined not to be exempt for any other taxable year.

Fifth, §301.6104(a)–1(g) (formerly §301.6104(a)–1(e)), which defines the term “supporting document” with respect to an application for exemption from Federal income tax, is revised to clarify that there are no supporting documents with respect to notices of status filed by political organizations.

Sixth, new §301.6104(a)–1(h) is added to clarify that the IRS may disclose, in response to or in anticipation of a request,

the subsection and paragraph number of section 501 under which an organization or group has been determined to be exempt from Federal income taxation, whether an organization or group is exempt, or whether the IRS has revoked an organization’s or group’s exemption under section 501(c)(3). Finally, new §301.6104(a)–1(i) is added to refer the reader to section 6033(j), added to the Code by the Pension Protection Act of 2006, Pub. L. 109–280, 120 Stat. 780, which is an additional statutory provision that requires disclosure of information by the IRS regarding organizations formerly exempt from Federal income tax. Section 6033(j) governs the publication and maintenance of a list of organizations whose tax exempt status was revoked for failure to file required returns or notices for three consecutive years. Likewise, this paragraph cross-references section 7428(c), which relates to the revocation of a determination of exempt status, and section 501(p), added to the Code by the Military Family Tax Relief Act of 2003, Pub. L. 108–121, 117 Stat. 1335, which relates to suspension of the tax-exempt status of terrorist organizations, including public notice of suspensions.

Special Analyses

It has been determined that the proposed regulations are not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to the regulations, and, therefore, a regulatory flexibility analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comments on its impact on small businesses.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic

2007–38 I.R.B. 660 September 17, 2007

(4) Notice of status filed under section 527(i) . For purposes of this section, documents included in the term “notice of status filed under section 527(i)” include—

(i) Form 8871, Political Organization Notice of Section 527 Status ;

(ii) Form 8453–X, Political Organiza- tion Declaration for Electronic Filing of Notice of Section 527 Status ; and

(iii) Any other additional forms or documents that the Internal Revenue Service may prescribe.

(f) Material open to public inspection under section 6110 . Under section 6110, certain written determinations issued by the Internal Revenue Service are made available for public inspection. Section 6110 does not apply, however, to material that is open to public inspection under section 6104. See section 6110(l)(1).

(g) Supporting documents defined . For purposes of this section, “supporting documents,” with respect to an application for exemption from Federal income tax, means any statement or document not described in paragraph (e) of this section that is submitted by the organization or group in support of its application prior to a determination described in paragraph (c) of this section. Items submitted in connection with an application in draft form, or with an application submitted and later withdrawn, are not supporting documents. There are no supporting documents with respect to Notices of Status filed by political organizations.

(h) Statement of exempt status . For efficient tax administration, the Internal Revenue Service may publish, in paper or electronic format, the names of organizations currently recognized as exempt from Federal income tax, including organizations recognized as exempt from Federal income tax under particular paragraphs of section 501(c) or section 501(d). In addition to having the opportunity to inspect material relating to an organization exempt from Federal income tax, a person may request a statement, or the Internal Revenue Service may disclose, in response to or in anticipation of a request, the following information—

(1) The subsection and paragraph of section 501 (or the corresponding provision of any prior revenue law) under which the organization or group has been determined, on the basis of an application open

from Federal income tax filed to reestablish exempt status after denial thereof under the provisions of section 503 or 504 (as in effect on December 31, 1969), or under the corresponding provisions of any prior revenue law, is considered an application for exemption from Federal income tax.

(b) Notices of status filed by political organizations . If, in accordance with section 527(i), an organization notifies the Internal Revenue Service that it is a political organization as described in section 527, exempt from Federal income tax for any taxable year, the notice of status filed by the political organization shall be open to public inspection.

(c) Letters or documents issued by the Internal Revenue Service with respect to an application for exemption from Federal income tax . If an application for exemption from Federal income tax is filed with the Internal Revenue Service after October 31, 1976, and is open to public inspection under paragraph (a) of this section, then any letter or document issued to the applicant by the Internal Revenue Service that relates to the application is also open to public inspection. For rules relating to when a letter or document is issued, see §301.6110–2(h). Letters or documents to which this paragraph applies include, but are not limited to—

(1) Favorable rulings and determination letters, including group exemption letters, issued in response to applications for exemption from Federal income tax;

(2) Technical advice memoranda issued with respect to the approval, or subsequent approval, of an application for exemption from Federal income tax;

(3) Letters issued in response to an application for exemption from Federal income tax (including applications for a group exemption letter) that propose a finding that the applicant is not entitled to be exempt from Federal income tax, if the applicant is subsequently determined, on the basis of that application, to be exempt from Federal income tax; and

(4) Any letter or document issued by the Internal Revenue Service relating to an organization’s status as an organization described in sections 509(a), 4942(j)(3), or 4943(f), including a final determination letter that the organization is or is not a private foundation.

(d) Requirement of exempt status . An application for exemption from Federal income tax (including applications for a group exemption letter), supporting documents, and letters or documents issued by the Internal Revenue Service that relate to the application shall not be open to public inspection before the organization is determined, on the basis of that application, to be exempt from Federal income tax for any taxable year. If an organization is determined to be exempt from Federal income tax for any taxable year, these materials shall not be withheld from public inspection on the basis that the organization is subsequently determined not to be exempt for any other taxable year.

(e) Documents included in the term “application for exemption from Federal income tax .” For purposes of this section—

(1) Prescribed application form . If a form is prescribed for an organization’s application for exemption from Federal income tax, the application includes the form and all documents and statements that the Internal Revenue Service requires to be filed with the form, any amendments or revisions to the original application, or any resubmitted applications where the original application was submitted in draft form or was withdrawn. An application submitted in draft form or an application submitted and later withdrawn is not considered an application.

(2) No prescribed application form . If no form is prescribed for an organization’s application for exemption from Federal income tax, the application includes the submission by letter requesting recognition of tax exemption and any statements or documents as prescribed by Revenue Procedure 2007–52, 2007–30 I.R.B. 222, and any successor guidance. (See §601.201(n)(7)(i) of the Statement of Procedural Rules, 26 CFR part 601.)

(3) Application for a Group Exemp- tion Letter . The application for a group exemption letter includes the letter submitted by or on behalf of subordinate organizations that seek exempt status pursuant to a group exemption letter and any statements or documents as prescribed by Revenue Procedure 80–27, 1980–1 C.B. 677, and any successor guidance. (See §601.201(n)(8)(i) of the Statement of Procedural Rules, 26 CFR part 601.)

September 17, 2007 661 2007–38 I.R.B.

Qualified Films Under Section 199; Correction

Announcement 2007–77

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correction to notice of proposed rulemaking.

SUMMARY: This document contains corrections to a notice of proposed rulemaking (REG–103842–07, 2007–28 I.R.B. 79) that was published in the Federal Reg- ister on Thursday, June 7, 2007 (72 FR 31478). These regulations involve the deduction for income attributable to domestic production activities under section 199 and affect taxpayers who produce qualified films under section 199(c)(4)(A)(i)(II) and (c)(6) and taxpayers who are members of an expanded affiliated group under section 199(d)(4).

FOR FURTHER INFORMATION CONTACT: Concerning §1.199–3(k) of the proposed regulations, David McDonnell at (202) 622–3040; concerning §1.199–7 of the proposed regulations, Ken Cohen (202) 622–7790 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

The notice of proposed rulemaking (REG–103842–07) that is the subject of the correction is under section 199 of the Internal Revenue Code.

Need for Correction

As published, the notice of proposed rulemaking (REG–103842–07) contains errors that may prove to be misleading and are in need of clarification.

Correction of Publication

Accordingly, the publication of the notice of proposed rulemaking (REG–103842–07), that is the subject of FR Doc. E7–10821, is corrected as follows:

  1. On page 31480, column 2, in the preamble, under the paragraph heading “ Ex- panded Affiliated Groups ”, second paragraph of the column, lines 25 through 28,

to public inspection, to qualify for exemption from Federal income tax; and

(2) Whether an organization or group is currently recognized as exempt from Federal income tax.

(i) Publication of non-exempt sta- tus —(1) For publication of the notice of the revocation of a determination that an organization is described in section 501(c)(3), see section 7428(c). (2) For publication of a list including any organization the tax exemption of which is revoked for failure to file required returns or notices for three consecutive years, see section 6033(j).

(3) For publication of notice of suspension of tax exemption of terrorist organizations, see section 501(p).

(j) Withholding of certain information from public inspection . For rules relating to certain information contained in an application for exemption from Federal income tax and supporting documents that will be withheld from public inspection, see §301.6104(a)–5(a).

(k) Procedures for inspection . For rules relating to procedures for public inspection of applications for exemption from Federal income tax and supporting documents, see §301.6104(a)–6.

(l) Effective/applicability date . The rules of this section apply to taxable years ending on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register.

Par. 3. §301.6110–1 is amended by:

  1. Revising paragraph (a).
  2. Adding paragraph (d). The addition and revision read as follows:

§301.6110–1 Public inspection of written determinations and background file documents .

(a) General rule . Except as provided in §301.6110–3, relating to deletion of certain information, §301.6110–5(b), relating to actions to restrain disclosure, paragraph (b)(2) of this section, relating to technical advice memoranda involving civil fraud and criminal investigations, and jeopardy and termination assessments, and paragraph (b)(3) of this section, relating to general written determinations relating to accounting or funding periods and methods, the text of any written determination

(as defined in §301.6110–2(a)) issued pursuant to a request postmarked or hand delivered after October 31, 1976, shall be open to public inspection in the places provided in paragraph (c)(1) of this section. The text of any written determination issued pursuant to a request postmarked or hand delivered before November 1, 1976, shall be open to public inspection pursuant to section 6110(h) and §301.6110–6, when funds are appropriated by Congress for such purpose. The procedures and rules set forth in §§301.6110–1 through 301.6110–5 and §301.6110–7 do not apply to written determinations issued pursuant to requests postmarked or hand delivered before November 1, 1976, unless §301.6110–6 states otherwise. There shall also be open to public inspection in each place of public inspection an index to the written determinations subject to inspection at such place. Each such index shall be arranged by section of the Internal Revenue Code, related statute or tax treaty and by subject matter description within such section in such manner as the Commissioner may from time to time provide. The Commissioner shall not be required to make any written determination or background file document open to public inspection pursuant to section 6110 or refrain from disclosure of any such documents or any information therein, except as provided by section 6110 or with respect to a discovery order made in connection with a judicial proceeding. The provisions of section 6110 shall not apply to material that is open to public inspection under section 6104. See section 6110(l)(1).

        • (d) Effective/applicability date . The rules of paragraph (a) of this section apply to taxable years ending on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register .

Kevin M. Brown, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on August 13, 2007, 8:45 a.m., and published in the issue of the Federal Register for August 14, 2007, 72 F.R. 45394)

2007–38 I.R.B. 662 September 17, 2007

the language “assume that X and Y each have $60 of taxable income and QPAI in 2007, Z has $170 of taxable income and QPAI in 2008, and that X, Y, and Z each have” is corrected to read “assume that X and Y each has $60 of taxable income and QPAI in 2007, Z has $170 of taxable income and QPAI in 2008, and that X, Y, and Z each has”.

§1.199–3 [Corrected]

  1. On page 31482, column 1, §1.199–3(k)(7)(i), line 2 from the bottom of the paragraph, the language “Paragraph (g)(4)(ii)(A) of this section” is corrected to read “Paragraph (g)(3)(ii)(A) of this section”.

§1.199–7 [Corrected]

  1. On page 31482, column 3, §1.199–7(e) Example 10 . paragraph (i), line 5 of the paragraph, the language “B each use the section 861 method for” is corrected to read “B each uses the section 861 method for”.

  2. On page 31482, column 3, §1.199–7(e) Example 10 . paragraph (iii), line 8 of the paragraph, the language “B becomes a non-member of the consolidated” is corrected to read “B becomes a nonmember of the consolidated”.

  3. On page 31483, column 1, §1.199–7(g)(3) Example . paragraph (i), lines 9 through 11 of the paragraph, the language “year, neither X, Y, nor Z join in the filing of a consolidated Federal income tax return. Assume that X, Y, and Z each have W–2” is corrected to read “year, neither X, Y, nor Z joins in the filing of a consolidated Federal income tax return. Assume that X, Y, and Z each has W–2”.

  4. On page 31483, column 1, §1.199–7(g)(3) Example . paragraph (ii), line 5 from the bottom of the column, the language “allocated $96 of the deduction. For the” is corrected to read “allocated $96 of the EAG’s section 199 deduction. For the”.

LaNita Van Dyke, Chief, Publications and

Regulations Branch, Legal Processing Division,

Associate Chief Counsel (Procedure and Administration).

(Filed by the Office of the Federal Register on July 19, 2007, 8:45 a.m., and published in the issue of the Federal Register for July 20, 2007, 72 F.R. 39770)

Application of Section 409A to Nonqualified Deferred Compensation Plans; Correction

Announcement 2007–78

ACTION: Correcting amendments.

AGENCY: Internal Revenue Service (IRS), Treasury.

SUMMARY: This document contains corrections to final regulations (T.D. 9321, 2007–19 I.R.B. 1123) that were published in the Federal Register on Tuesday, April 17, 2007 (73 FR 19234), relating to section 409A.

DATES: This correction is effective April 17, 2007.

FOR FURTHER INFORMATION CONTACT: Stephen Tackney, (202) 622–9639 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are subject to these corrections are under section 409A of the Internal Revenue Code.

Need for Correction

As published, final regulations (T.D. 9321) contain errors that may prove misleading and are in need of clarification.

Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:

- - - -

Part 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read as follows:

Authority: 26 U.S.C. 7805 * * *

§1.409A–1 [Corrected]

Par. 2. Section 1.409A–1 is amended as follows:

  1. Paragraph (a)(3)(i) is revised.

  2. The first and second sentences of paragraph (a)(5) are revised.

  3. The first sentences of paragraphs (b)(4)(i) and (b)(4)(i)(D) are revised.

  4. Examples 3 and 5 in paragraph (b)(4)(iii) are amended by revising the last sentences of the paragraphs.

  5. Paragraph (b)(5)(iv)(B)( 2 )( ii ) is revised.

  6. In paragraph (b)(8)(iii) the first sentence is revised.

  7. The first sentence of paragraph (b)(9)(v)(A) is revised.

  8. Paragraph (c)(2)(i)(H) is revised.

  9. Paragraph (c)(3)(viii) is revised.

  10. The last sentence of paragraph (f)(1) is revised.

  11. The ninth sentence of paragraph (h)(1)(ii) is revised.

  12. The first sentence of paragraph (i)(2) is revised.

§1.409A–1 Definitions and covered plans .

(a) * - * (3) - * (i) - - - With respect to an individual for a taxable year, the term nonqualified deferred compensation plan does not include any scheme, trust, arrangement, or plan maintained with respect to such individual, to the extent contributions made by or on behalf of such individual to such scheme, trust, arrangement, or plan, or credited allocations, accrued benefits, earnings, or other amounts constituting income, of such individual under such scheme, trust, arrangement, or plan, are excludable by such individual for Federal income tax purposes pursuant to any bilateral income tax convention, or other bilateral or multilateral agreement, to which the United States is a party.

        • (5) * * * The term nonqualified deferred compensation plan does not include a plan, or a portion of a plan, to the extent that the plan provides bona fide vacation leave, sick leave, compensatory time, disability pay, or death benefits. For these purposes, the terms “disability pay” and “death benefits” have the same meanings as provided in §31.3121(v)(2)–1(b)(4)(iv)(C) of this chapter, provided that for purposes of this paragraph, such disability pay and death benefits may be provided through insurance and the lifetime benefits payable

September 17, 2007 663 2007–38 I.R.B.

plan does not provide for a deferral of compensation to the extent such rights apply during a limited period of time (regardless of whether such rights extend beyond the limited period of time). - * *

        • (c) * - * (2) - * (i) - - (H) All deferrals of compensation with respect to that service provider under all plans of the service recipient to the extent such plans are stock rights (as defined in paragraph (l) of this section) subject to section 409A, are treated as deferred under a single plan.
        • (3) - * (viii) - - - The plan aggregation rules of paragraph (c)(2)(i) of this section do not apply to the written plan requirements of this paragraph (c)(3). Accordingly, deferrals of compensation under an agreement, method, program, or other arrangement that fails to meet the requirements of section 409A solely due to a failure to meet the written plan requirements of this paragraph (c)(3) are not aggregated with deferrals of compensation under other agreements, methods, programs, or other arrangements that meet such requirements.
        • (f) - - (1) In general . - - - The term service provider generally includes a person who has separated from service (a former service provider).
        • (h) - * (1) - * (ii) Termination of employment . - - Notwithstanding the foregoing provisions of this paragraph (h)(1)(ii), a plan may treat another level of reasonably anticipated permanent reduction in the level of bona fide services as a separation from service, provided that the level of reduction required must be designated in writing as a specific percentage, and the reasonably anticipated reduced level of bona fide services must be greater than 20 percent but less that 50 percent of the average level of bona fide services provided in the immediately preceding 36 months. - * *
        • (i) - -

under the plan are not treated as including the value of any taxable term life insurance coverage or taxable disability insurance coverage provided under the plan. - * *

(b) - * (4) - - - (i) In general . A deferral of compensation does not occur under a plan with respect to any payment (as defined in §1.409A–2(b)(2)) that is not a deferred payment, provided that the service provider actually or constructively receives such payment on or before the last day of the applicable 2 1 /2 month period.

        • (D) A payment is a deferred payment if it is made pursuant to a provision of a plan that provides for the payment to be made or completed on or after any date, or upon or after the occurrence of any event, that will or may occur later than the end of the applicable 2 1 /2 month period, such as a separation from service, death, disability, change in control event, specified time or schedule of payment, or unforeseeable emergency, regardless of whether an amount is actually paid as a result of the occurrence of such a payment date or event during the applicable 2 1 /2 month period. - * *
        • (iii) * - * Example 3 . - * * The bonus plan will not be considered to have provided for a deferral of compensation if the bonus is paid or made available to Employee C on or before March 15, 2011.
        • Example 5 . - - - The bonus plan provides for a deferral of compensation, and will not qualify as a short-term deferral regardless of whether the bonus is paid or made available on or before March 15, 2011 (and generally any payment before June 1, 2011 would constitute an impermissible acceleration of a payment).
        • (5) - * (iv) * * (B) - - ( 2 ) - - ( ii ) A valuation based upon a formula that, if used as part of a nonlapse restriction (as defined in §1.83–3(h)) with respect to the stock, would be considered to be the fair market value of the stock pursuant to §1.83–5, provided that such stock is valued in the same manner for purposes of any transfer of any shares of such class of stock (or any substantially similar class of stock) to the issuer or any person that

owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the issuer (applying the stock attribution rules of §1.424–1(d)), other than an arm’s length transaction involving the sale of all or substantially all of the outstanding stock of the issuer, and such valuation method is used consistently for all such purposes, and provided further that this paragraph (b)(5)(iv)(B)( 2 )( ii ) does not apply with respect to stock subject to a stock right payable in stock, where the stock acquired pursuant to the exercise of the stock right is transferable other than through the operation of a nonlapse restriction.

        • (8) - * (iii) * * * A tax equalization agreement does not provide for a deferral of compensation if payments made under such tax equalization agreement are made no later than the end of the second taxable year of the service provider beginning after the taxable year of the service provider in which the service provider’s U.S. Federal income tax return is required to be filed (including any extensions) for the year to which the compensation subject to the tax equalization payment relates, or, if later, the second taxable year of the service provider beginning after the latest such taxable year in which the service provider’s foreign tax return or payment is required to be filed or made for the year to which the compensation subject to the tax equalization payment relates. - * *
        • (9) - * (v) - * (A) * * * To the extent a separation pay plan (including a plan providing payments upon a voluntary separation from service) entitles a service provider to payment by the service recipient of reimbursements that are not otherwise excludible from gross income for expenses that the service provider could otherwise deduct under section 162 or section 167 as business expenses incurred in connection with the performance of services (ignoring any applicable limitation based on adjusted gross income), or of reasonable outplacement expenses and reasonable moving expenses actually incurred by the service provider and directly related to the termination of services for the service recipient, such

2007–38 I.R.B. 664 September 17, 2007

immediate payment of such amount does not constitute an accelerated payment for purposes of §1.409A–3(j), provided that such feature, including the predetermined amount, is established by no later than the time and form of payment is otherwise required to be established, and provided further that any change in such feature, including the predetermined amount, is a change in the time and form of payment.

§1.409A–3 [Corrected]

Par. 4. Section 1.409A–3 is amended as follows:

  1. The first sentence of paragraph (c) is revised.

  2. The last sentence of paragraph (i)(1)(ii)(B) is revised.

  3. The fourth sentence of paragraph (i)(3)(ii) is revised.

  4. The last sentence of paragraph (j)(4)(vi) is revised.

  5. The last sentence of paragraph (j)(4)(ix)(B) is revised.

  6. The first sentence of paragraph (j)(5) is revised.

  7. Paragraph (j)(5)(iv) is revised.

§1.409A–3 Permissible payments .

        • (c) * * * Except as otherwise provided in this paragraph (c), for an amount of deferred compensation under a plan, the plan may designate only one time and form of payment upon the occurrence of each event described in paragraph (a)(1), (2), (3), (5), or (6) of this section. - * *
        • (i) - - (1) - * (ii) - * (B) * * * A change in the limitation or a change in the time and form of payment of any payment that is not otherwise made at the scheduled payment date due to application of the formula limitation is subject to the requirements of §1.409A–2(b) (subsequent deferral elections) and paragraph (j) of this section (accelerated payments).
        • (3) - * (ii) - - - However, the determination of amounts reasonably necessary to satisfy the emergency need is not required to

(2) - - - For purposes of identifying a specified employee by applying the requirements of section 416(i)(1)(A)(i), (ii), and (iii), the definition of compensation under §1.415(c)–2(a) is used, applied as if the service recipient were not using any safe harbor provided in §1.415(c)–2(d), were not using any of the elective special timing rules provided in §1.415(c)–2(e), and were not using any of the elective special rules provided in §1.415(c)–2(g).

§1.409A–2 [Corrected]

Par. 3. Section 1.409A–2 is amended as follows:

  1. The first sentences of paragraphs (a)(6) and (a)(9) are revised.

  2. The third sentence of paragraph (b)(2)(ii)(A) is revised.

  3. A new sentence is added after the third sentence of paragraph (b)(2)(ii)(A).

§1.409A–2 Deferral elections .

(a) - * (6) * * * In the case of a service recipient with a taxable year that is not the same as the taxable year of the service provider, a plan may provide that fiscal year compensation may be deferred at the service provider’s election if the election to defer such compensation is made not later than the close of the service recipient’s taxable year immediately preceding the first taxable year of the service recipient in which any services are performed for which such compensation is payable. - * *

        • (9) * * * If a nonqualified deferred compensation plan provides that the amount deferred under the plan is determined under the formula for determining benefits under a qualified employer plan (as defined in §1.409A–1(a)(2)) or a broad-based foreign retirement plan (as defined in §1.409A–1(a)(3)(v)) maintained by the service recipient but applied without regard to one or more limitations applicable to the qualified employer plan under the Internal Revenue Code or to the broad-based foreign retirement plan under other applicable law, or that the amount deferred under the nonqualified deferred compensation plan is determined as an

amount offset by some or all of the benefits provided under the qualified employer plan or the broad-based foreign retirement plan, an increase in amounts deferred under the nonqualified deferred compensation plan that results directly from the operation of the qualified employer plan or broad-based foreign retirement plan (other than service provider actions described in paragraphs (a)(9)(iii) and (iv) of this section) including changes in benefit limitations applicable to the qualified employer plan or the broad-based foreign retirement plan under the Internal Revenue Code or other applicable law does not constitute a deferral election under the nonqualified deferred compensation plan, provided that such operation does not otherwise result in a change in the time or form of a payment under the nonqualified deferred compensation plan, and provided further that such change in the amounts deferred under the nonqualified deferred compensation plan does not exceed that change in the amounts deferred under the qualified employer plan or the broad-based foreign retirement plan, as applicable. - * *

        • (b) - * (2) - * (ii) - - * (A) - - - For purposes of §1.409A–1, this section, and §§1.409A–3 through 1.409A–6, the term life annuity means a series of substantially equal periodic payments, payable not less frequently than annually, for the life (or life expectancy) of the service provider, or a series of substantially equal periodic payments, payable not less frequently than annually, for the life (or life expectancy) of the service provider, followed upon the death or end of the life expectancy of the service provider by a series of substantially equal periodic payments, payable not less frequently than annually, for the life (or life expectancy) of the service provider’s designated beneficiary (if any). Notwithstanding the foregoing, a schedule of payments does not fail to be an annuity solely because such plan provides for an immediate payment of the actuarial present value of all remaining annuity payments if the actuarial present value of the remaining annuity payments falls below a predetermined amount, and the

September 17, 2007 665 2007–38 I.R.B.

nonqualified deferred compensation plan that is a nonaccount balance plan (as defined in §1.409A–1(c)(2)(i)(C)), equals the present value of the amount to which the service provider would have been entitled under the plan if the service provider voluntarily terminated services without cause on December 31, 2004, and received a payment of the benefits available from the plan on the earliest possible date allowed under the plan to receive a payment of benefits following the termination of services, and received the benefits in the form with the maximum value. - * *

(ii) * * * The amount of compensation deferred before January 1, 2005, under a nonqualified deferred compensation plan that is an account balance plan (as defined in §1.409A–1(c)(2)(i)(A)), equals the portion of the service provider’s account balance as of December 31, 2004, the right to which was earned and vested (as defined in paragraph (a)(2) of this section) as of December 31, 2004, plus any future contributions to the account, the right to which was earned and vested (as defined in paragraph (a)(2) of this section) as of December 31, 2004, to the extent such contributions are actually made.

        • (4) - * (iv) - - - With respect to an account balance plan (as defined in §1.409A–1(c)(2)(i)(A)), it is not a material modification to change a notional investment measure to, or to add to an existing investment measure, an investment measure that qualifies as a predetermined actual investment within the meaning of §31.3121(v)(2)–1(d)(2) of this chapter or, for any given taxable year, reflects a reasonable rate of interest (determined in accordance with §31.3121(v)(2)–1(d)(2)(i)(C) of this chapter). - -

Guy R. Traynor, Federal Register Liaison, Legal Processing Division, Publication & Regulations Branch,

Associate Chief Counsel (Procedure & Administration).

(Filed by the Office of the Federal Register on July 30, 2007, 8:45 a.m., and published in the issue of the Federal Register for July 31, 2007, 72 F.R. 41620)

take into account any additional compensation that is available from a qualified employer plan as defined in §1.409A–1(a)(2) (including any amount available by obtaining a loan under the plan), or that due to the unforeseeable emergency is available under another nonqualified deferred compensation plan (including a plan that would provide for deferred compensation except due to the application of the effective date provisions under §1.409A–6). - * *

        • (j) - - (4) - * (vi) - - - However, the total payment under this acceleration provision must not exceed the aggregate of the FICA or RRTA amount, and the income tax withholding related to such FICA or RRTA amount.
        • (ix) * * (B) - - - Solely for purposes of this paragraph (j)(4)(ix)(B), the applicable service recipient with the discretion to liquidate and terminate the agreements, methods, programs, and other arrangements is the service recipient that is primarily liable immediately after the transaction for the payment of the deferred compensation.
        • (5) * * * If a nonqualified deferred compensation plan provides that the amount deferred under the plan is the amount determined under the formula determining benefits under a qualified employer plan (as defined in §1.409A–1(a)(2)), or a broad-based foreign retirement plan (as defined in §1.409A–1(a)(3)(v)) maintained by the service recipient but applied without regard to one or more limitations applicable to the qualified employer plan under the Internal Revenue Code or to the broad-based foreign retirement plan under other applicable law, or that the amount deferred under the nonqualified deferred compensation plan is determined as an amount offset by some or all of the benefits provided under the qualified employer plan or broad-based foreign retirement plan, a decrease in amounts deferred under the nonqualified deferred compensation plan that results directly from the operation of the qualified employer plan or broad-based foreign retirement plan (other than service provider actions described in paragraphs (j)(5)(iii) and (iv)

of this section) including changes in benefit limitations applicable to the qualified employer plan or the broad-based foreign retirement plan under the Internal Revenue Code or other applicable law does not constitute an acceleration of a payment under the nonqualified deferred compensation plan, provided that such operation does not otherwise result in a change in the time or form of a payment under the nonqualified deferred compensation plan, and provided further that the change in the amounts deferred under the nonqualified deferred compensation plan does not exceed such change in the amounts deferred under the qualified employer plan or the broad-based foreign retirement plan, as applicable. - * *

        • (iv) A service provider’s action or inaction under a qualified employer plan with respect to elective deferrals and other employee pre-tax contributions subject to the contributions restrictions under section 401(a)(30) or section 402(g), and after-tax contributions by the service provider to a qualified employer plan that provides for such contributions, that affects the amounts that are credited under one or more nonqualified deferred compensation plans as matching amounts or other similar amounts contingent on such elective deferrals, pre-tax contributions, or after-tax contributions, provided that the total of such matching or contingent amounts, as applicable, never exceeds 100 percent of the matching or contingent amounts that would be provided under the qualified employer plan absent any plan-based restrictions that reflect limits on qualified plan contributions under the Internal Revenue Code.

§1.409A–6 [Corrected]

Par. 5. Section 1.409A–6 is amended by revising paragraphs (a)(3)(i) and (ii) and (a)(4)(iv) to read as follows:

§1.409A–6 Application of section 409A and effective dates .

        • (a) - * (3) - * (i) - - - The amount of compensation deferred before January 1, 2005, under a

2007–38 I.R.B. 666 September 17, 2007

Built-in Gains and Losses Under Section 382(h); Correction

Announcement 2007–80

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

SUMMARY: This document contains corrections to temporary regulations (T.D. 9330, 2007–31 I.R.B. 239) that were published in the Federal Register on Thursday, June 14, 2007 (72 FR 32792) applying to corporations that have undergone ownership changes within the meaning of section 382. These regulations provide guidance regarding the treatment of prepaid income under the built-in gain provisions of section 382(h).

DATES: These corrections are effective August 1, 2007.

FOR FURTHER INFORMATION CONTACT: Keith Stanley at (202) 622–7750 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The temporary regulations that are the subject of this document are under section 382 of the Internal Revenue Code.

Need for Correction

As published, temporary regulations (T.D. 9330) contain errors that may prove to be misleading and are in need of clarification.

- - - -

Correction of Publication

Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.382–7T is amended by revising paragraph (b)(2) to read as follows:

§1.382–7T Built-in gains and losses (temporary) .

        • (b) - * (2) The applicability of this section expires on June 14, 2010.

Par. 3. The signature block is revised by adding the language “Approved: June 4, 2007.”

LaNita Van Dyke, Chief, Publications and

Regulations Branch, Legal Processing Division,

Associate Chief Counsel (Procedure and Administration).

(Filed by the Office of the Federal Register on July 31, 2007, 8:45 a.m., and published in the issue of the Federal Register for August 1, 2007, 72 F.R. 41891)

Grantor Retained Interest Trusts — Application of Sections 2036 and 2039; Hearing

Announcement 2007–81

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Change of location for public hearing.

SUMMARY: This document provides a change of location for a public hearing on proposed regulations (REG–119097–05, 2007–28 I.R.B. 74) providing guidance on the portion of a trust properly includible in a grantor’s gross estate under Internal Revenue Code sections 2036 and 2039 if the grantor has retained the use of property in a trust or the right to annuity, unitrust, or other income payment from such trust for life, for any period not ascertainable without reference to the grantor’s death, or for a period that does not in fact end before the grantor’s death.

DATES: The public hearing is being held on Wednesday, September 26, 2007, at 10 a.m.

ADDRESSES: The public hearing was originally being held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. The hearing location has changed. The public hearing will be held in room 2116, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: LaNita Van Dyke, (202) 622–3215 or Richard Hurst at Richard.A.Hurst@irscounsel.treas.gov .

SUPPLEMENTARY INFORMATION:

The subject of the public hearing is a notice of proposed rulemaking (REG–119097–05) that was published in the Federal Register on Thursday, June 7, 2007 (72 FR 31487). The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons, who submit written comments and outlines by September 5, 2007, may present oral comments at the hearing.

A period of 10 minutes is allotted to each person for presenting oral comments. The IRS will prepare an agenda containing the schedule of speakers. Copies of the agenda will be made available, free of charge, at the hearing.

LaNita Van Dyke, Chief, Publications and

Regulations Branch, Legal Processing Division,

Associate Chief Counsel (Procedure and Administration).

(Filed by the Office of the Federal Register on August 20, 2007, 8:45 a.m., and published in the issue of the Federal Register for August 21, 2007, 72 F.R. 46586)

September 17, 2007 667 2007–38 I.R.B.

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Internal Revenue Bulletin 2007-38

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