Part IV. Items of General Interest

Notice of Proposed Rulemaking and Notice of Public Hearing

Notice Requirements for Certain Pension Plan Amendments Significantly Reducing the Rate of Future Benefit Accrual

REG–110136–07

AGENCY: Internal Revenue Service (IRS), Department of the Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document contains proposed regulations that would provide guidance relating to the application of section 4980F of the Internal Revenue Code to a plan amendment that is permitted to reduce benefits accrued before the plan amendment’s applicable amendment date. These regulations would also reflect certain amendments made to section 4980F by the Pension Protection Act of 2006, Public Law 109–280 (120 Stat. 780). These proposed regulations would affect sponsors, administrators, participants, and beneficiaries of pension plans. This document also provides a notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by June 19, 2008. Outlines of topics to be discussed at the public hearing scheduled for July 10, 2008, at 10 a.m. must be received by June 20, 2008.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–110136–07), 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 (REG–110136–07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20224, or sent via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG–110136–07). The public hearing

will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, N.W., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Pamela R. Kinard, at (202) 622–6060; concerning submission of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Richard A. Hurst, Richard.A.Hurst@irscounsel.treas.gov, or (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collections of information referenced in this notice of proposed rulemaking were previously reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545–1780, in conjunction with the Treasury Decision (T.D. 9052, 2003–1 C.B. 879), relating to Notice of Significant Reduction in the Rate of Future Benefit Accrual, published on April 9, 2003 in the Federal Register (68 FR 17277). There are no proposals for substantive changes to this collection of information.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

Background

Overview

This document contains proposed amendments to 26 CFR parts 1 and 54 under section 4980F of the Internal Revenue Code (Code). Section 4980F sets forth the requirements for providing notice to

certain affected persons when a plan significantly reduces future benefit accruals. A notice required under section 4980F of the Code or the parallel rules in section 204(h) of the Employee Retirement Income Security Act of 1974 (ERISA) is referred to as a “section 204(h) notice.” These proposed regulations would set forth timing rules for providing a section 204(h) notice for a plan amendment that is permitted to be effective before the applicable amendment date. In addition, the regulations provide guidance relating to changes made in section 4980F by the Pension Protection Act of 2006, Public Law 109–280 (120 Stat. 780) (PPA ’06).

Section 411(d)(6) Protected Benefits

Section 411(d)(6)(A) provides that a plan is treated as not satisfying the requirements of section 411 if the accrued benefit of a participant is decreased by an amendment of the plan. There are certain exceptions to this general rule. For example, amendments described in section 412(d)(2) (section 412(c)(8) for plan years beginning before January 1, 2008) of the Code or section 4281 of ERISA. Section 204(g) of ERISA contains parallel rules to section 411(d)(6) of the Code.

Notice Requirements for Significant Reduction in the Rate of Future Benefit Accruals

Section 4980F imposes an excise tax when a plan administrator fails to provide timely notice of a plan amendment that provides for a significant reduction in the rate of future benefit accrual. For this purpose, the elimination or reduction of an early retirement benefit or retirement-type subsidy is treated as having the effect of reducing the rate of future benefit accrual. Section 4980F(e)(3) provides that, except as provided in regulations, the notice must be provided within a “reasonable time” before the effective date of the plan amendment. Section 204(h) of ERISA contains parallel rules to section 4980F of the Code.

For both section 204(g) and section 204(h) of ERISA, the Secretary of the Treasury has interpretive authority over the subject matter addressed in these regulations for purposes of ERISA, as well

2008–17 I.R.B. 838 April 28, 2008

ERISA. The notice must be provided no later than the earlier of 45 days after the amendment reducing benefits is adopted or the date of the first reduced benefit payment. Paragraph (e) of 29 CFR 4281.32 sets forth the content requirements applicable to a notice of benefit reduction.

Additional Provisions of Pension Protection Act of 2006

Section 402 of PPA ’06 provides special funding rules for plans maintained by an employer that is a commercial passenger airline or the principal business of which is providing catering services to a commercial passenger airline. Section 402(h)(4) of PPA ’06 provides that in the case of a plan amendment adopted in order to comply with the rules in section 402 of PPA ’06, any notice required under section 4980F(e) of the Code (or section 204(h) of ERISA) must be provided within 15 days of the effective date of the plan amendment. Section 402 of PPA ’06 generally applies to amendments made pursuant to section 402 of PPA ’06 for plan years ending after the date of enactment of PPA ’06 (August 17, 2006). Section 502(c) of PPA ’06 amended section 4980F(e)(1) of the Code (and section 204(h) of ERISA) to add as a recipient of a section 204(h) notice any employer that has an obligation to contribute to the plan. This new disclosure requirement is effective for plan years beginning after December 31, 2007.

Section 1107 of PPA ’06 provides that any plan amendment made pursuant to any PPA ’06 change may be retroactively effective, and, except as provided by the Secretary of the Treasury, does not violate the anti-cutback rules of section 411(d)(6) of the Code (or section 204(g) of ERISA) if, in addition to satisfying the conditions specified in section 1107(b)(2) of PPA ’06, the amendment is made on or before the last day of the first plan year beginning on or after January 1, 2009 (January 1, 2011, with respect to governmental plans).

Explanation of Provisions

PPA ’06 Rules

These proposed regulations would add contributing employers to the list of persons to whom a section 204(h) notice must be provided. A contributing employer is

as the Code. Pursuant to section 101(a) of Reorganization Plan No. 4 of 1978, 29 U.S.C. 1001nt, the Secretary of the Treasury generally has the authority to issue regulations under parts 2 and 3 of subtitle B of title I of ERISA, including section 204(g) and (h) of ERISA. Thus, these proposed Treasury regulations under section 4980F of the Code would apply as well for purposes of section 204(h) of ERISA.

Notice Requirements Relating to Plan Amendments Affecting Benefits for Prior Service

Section 412(d)(2) of the Code (section 412(c)(8) for plan years beginning before January 1, 2008) provides special rules relating to retroactive plan amendments. Rev. Proc. 94–42, 1994–1 C.B. 717, see §601.601(d)(2)(ii)( b ), sets forth procedures under which a plan sponsor may file notice with and obtain approval from the Secretary of the Treasury for a retroactive amendment described in section 412(d)(2) that reduces accrued benefits. Section 4 of Rev. Proc. 94–42 provides guidance relating to the written notice that must be provided to affected parties regarding the application for approval of a retroactive plan amendment to reduce accrued benefits under section 412(d)(2) (a “section 412(d)(2) written notice”). The content requirements of a section 412(d)(2) written notice include a description of the plan amendment and its effect, including the range in reduction of accrued benefits of participants, beneficiaries, and alternate payees.

Section 212(a) of PPA ’06 added section 432 of the Code, which provides rules relating to multiemployer plans that are in endangered or critical status. Under certain circumstances, a plan may adopt a plan amendment that reduces previously accrued benefits. Section 432(e)(8)(C) requires a plan to provide notice of the plan amendment to affected parties at least 30 days before the general effective date of the reduction. The notice must include information that is sufficient for participants and beneficiaries to understand the effect of any reduction on their benefits and a description of the possible rights and remedies of plan participants and beneficiaries.

Section 113(a)(1)(B) of PPA ’06 added Code section 436, providing rules limiting benefits and benefit accruals for single-employer plans with certain funding

shortfalls. Section 101(j) of ERISA generally requires the plan administrator to provide a written notice to plan participants and beneficiaries within 30 days after the plan becomes subject to this benefit limitation.

Section 4244A of ERISA provides that a multiemployer plan in reorganization is permitted to adopt an amendment reducing or eliminating certain accrued benefits (increases adopted within the prior 5 years) attributable to employer contributions under the plan. Under section 4244A(b)(2) of ERISA, an amendment is not permitted to reduce or eliminate benefits unless notice is given to plan participants, beneficiaries, and other affected persons at least 6 months before the first day of the plan year in which the amendment reducing benefits is adopted. The notice must include certain information, including explaining the rights and remedies of participants and beneficiaries under the plan and informing the recipients that if contributions under the plan are not increased, accrued benefits under the plan for certain participants and beneficiaries will be reduced or an excise tax will be imposed on employers.

Section 4245 of ERISA provides rules relating to suspension of benefits under insolvent multiemployer plans. If benefit payments under the plan exceed the resource benefit level for the plan year, the payment of benefits must be suspended to the extent necessary to reduce such payments to the greater of the resource benefit level or the level of basic benefits. Section 4245(e) of ERISA provides that certain plans in reorganization must provide notice to plan participants and beneficiaries that certain non-basic benefit payments will be suspended.

Section 4281 of ERISA provides rules relating to benefits under certain multiemployer terminated plans. Section 4281(c) of ERISA provides that if the value of nonforfeitable benefits exceeds the value of the plan assets, the plan must be amended to reduce benefits in excess of nonforfeitable benefits arising from increases adopted within the prior 5 years, or the level that can be provided by plan assets, if greater. The regulations at 29 CFR 4281.32 provide that a plan sponsor must notify the Pension Benefit Guaranty Corporation (PBGC) and plan participants and beneficiaries of a plan amendment reducing benefits pursuant to section 4281(c) of

April 28, 2008 839 2008–17 I.R.B.

defined in the proposed regulations as an employer that has an obligation to contribute to a plan (within the meaning of section 4212(a) of ERISA). This requirement to give section 204(h) notice to contributing employers was added to reflect section 502(c)(2) of PPA ’06. This requirement would only apply to amendments adopted in plan years beginning after December 31, 2007.

The regulations would also add a special timing rule to reflect section 402 of PPA ’06. For certain plans maintained by an employer that is a commercial passenger airline or the principal business of which is providing catering services to a commercial passenger airline, section 204(h) notice must be provided at least 15 days before the effective date of the amendment. ¹

Plan Amendments Reflecting a Change in Statutorily Mandated Minimum Present Value Rules

Section 417(e)(3) provides that, in distributing the present value of an accrued benefit to a plan participant, the present value of the benefit is not permitted to be less than the present value using the applicable mortality table and the applicable interest rate, as defined in section 417(e)(3)(B) and (C), respectively. Section 302(b) of PPA ’06 amended section 417(e)(3) to provide new actuarial assumptions for calculating the minimum present value of a participant’s accrued benefit. Plan sponsors have asked whether a plan amendment to reflect the change in these section 417(e)(3) statutory actuarial assumptions would trigger the requirement to provide a section 204(h) notice. Revenue Ruling 2007–67, 2007–48 I.R.B. 1047, see §601.601(d)(2)(ii)( b ), which includes guidance on plan amendments regarding the new interest rate and mortality table under section 417(e)(3), states that certain amendments to reflect the new interest rate or mortality table for an annuity starting date in 2008 or later would not violate the anti-cutback rules of section 411(d)(6). The proposed regulations

would provide that a reduced single-sum distribution resulting from an amendment to a traditional defined benefit plan to substitute the prescribed actuarial assumptions under section 417(e)(3), as amended by PPA ’06, for the pre-PPA ’06 actuarial assumptions under section 417(e)(3) does not require a section 204(h) notice.

Interaction of the Section 204(h) Notice Timing Rules with Plan Amendments that Have a Retroactive Effective Date

Section 1.411(d)–3(a)(1) generally provides that a plan is not a qualified plan if a plan amendment decreases the accrued benefit of any plan participant. These rules are generally based on the applicable amendment date, which is defined in §1.411(d)–3(g)(4) as the later of the effective date of the amendment or the date the amendment is adopted. While the general rule under §1.411(d)–3(a)(1) prohibits plan amendments that reduce a plan participant’s accrued benefit, certain exceptions exist. These exceptions include amendments permitted under sections 412(d)(2), 418D, and 418E of the Code, section 4281 of ERISA, and section 1107 of PPA ’06. The proposed regulations would provide a conforming amendment to §1.411(d)–3(a)(1) to reference the rules at section 1107 of PPA ’06.

The proposed regulations generally state that the effective date of an amendment that is permitted to be adopted retroactively is the date the amendment is put into effect on an operational basis, so that a section 204(h) notice must nevertheless generally be provided at least 45 days before the date the amendment is effective (15 days for multiemployer plans). The proposed regulations would add special timing rules for when a section 204(h) notice must be provided to recipients with respect to a section 204(h) amendment ² that is permitted to reduce benefits accrued before the plan amendment’s applicable amendment date. Specifically, for purposes of section 1107(b)(2)(A) of PPA ’06, the proposed regulations would clarify that the date on which such a plan amendment

is effective is the first day that the plan is operated as if the amendment were in effect. Thus, a section 204(h) notice must generally be provided at least 45 days (15 days for a multiemployer plan) before the amendment is effective (even though the amendment is not adopted until a later date). Except to the extent a special timing rule is set forth in these regulations, a determination of whether a section 204(h) notice is required in connection with an amendment made pursuant to section 1107 of PPA ’06 should be made in accordance with the general standards set forth in §54.4980F–1, Q&As–5, 6, 7, and 8.

The proposed regulations provide a special timing rule for section 204(h) amendments to an applicable defined benefit plan as defined in section 411(a)(13)(C)(i). The regulations provide that for any section 204(h) notice that is required to be provided in connection with an amendment to an applicable defined benefit plan within the meaning of section 411(a)(13)(C)(i) that is first effective before January 1, 2009, and that limits the amount of the distribution to the account balance as permitted under section 411(a)(13)(A), the notice will not fail to be timely if provided at least 30 days before the date the amendment is first effective. This special timing rule reflects the 30-day timing rule described in Notice 2007–6, 2007–3 I.R.B. 272, see §601.601(d)(2)(ii)( b ), which provides transitional guidance on the requirements of sections 411(a)(13) and 411(b)(5) of the Code. ³ The proposed regulations would permit a plan amendment to an applicable defined benefit plan within the meaning of section 411(a)(13)(C)(i) to use this special timing rule through the end of 2008. Thereafter, the general 45-day timing rule would apply to such amendments.

Interaction of Section 204(h) Notice Requirements with Other Notice Requirements Relating to Plan Amendments

As explained earlier in this preamble, under the heading “Notice Requirements Relating to Plan Amendments Affecting

1 This timing rule is consistent with the Joint Committee on Taxation’s Technical Explanation to section 402 of PPA ’06, which states that the section 204(h) notice must be provided at least 15 days before the effective date of the plan amendment. See Joint Committee on Taxation, Technical Explanation of H.R. 4, the “Pension Protection Act of 2006” (JCX–38–06), August 3, 2006, 109 ^th Cong., 2 ^nd Sess. 87 (2006).

2 A section 204(h) amendment is defined in Q&A–4(b) of §54.4980F–1 of the Treasury Regulations as an amendment for which section 204(h) notice is required.

3 Section B.4 of Notice 2007–6 provides that, in the case of a plan amendment that is permitted to reduce benefit accruals, a section 204(h) notice must be provided at least 30 days before the amendment is effective. This rule would require the notice to be provided at least 30 days before the earliest date on which the plan is operated in accordance with the amendment.

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Delegation of Authority to the Commissioner

The proposed regulations would also delegate to the Commissioner of the Internal Revenue Service the authority to publish revenue rulings, notices, or other guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)( b ) of this chapter) under section 4980F of the Code (which would also apply to section 204(h) of ERISA) that the Commissioner determines to be necessary or appropriate with respect to a section 204(h) amendment that applies with respect to benefits accrued before the applicable amendment date but that does not violate section 411(d)(6) of the Code. This delegation of authority provides the Commissioner with greater flexibility to develop special rules to address the limited circumstances in which Congress permits a plan to be amended to reduce benefits accrued before the adoption date of the plan amendment. This delegation of authority also extends to circumstances in which a section 204(h) amendment may require another notice in addition to a section 204(h) notice, regardless of whether that amendment reduces benefits accrued before the adoption date of the amendment. Often these notices must provide content requirements similar to a section 204(h) notice. This delegation would permit the Commissioner to treat plans providing these other notices as having complied with the requirement to provide a section 204(h) notice, thus eliminating unnecessary overlap in the administration of plans.

Proposed Effective Dates

These regulations are generally proposed to be applicable to section 204(h) amendments that are effective on or after January 1, 2008. However, for any section 204(h) amendment that is adopted after the effective date of the amendment, the clarification of the effective date of the amendment in these proposed regulations is applicable to those amendments that are effective on or after July 1, 2008. In addition, for any amendment to which the proposed regulations would otherwise apply, no inference is intended as to when a section 204(h) notice must be provided if the amendment is effective before July 1, 2008.

Benefits for Prior Service,” both the Code and ERISA include a number of notice requirements for plan amendments that are permitted to reduce or eliminate accrued benefits. These notice requirements are in addition to the notice requirements under section 4980F of the Code and section 204(h) of ERISA. To eliminate the need for a plan to provide multiple notices with substantially the same function and information to affected persons, these proposed regulations would provide that if a plan provides one of these notices in accordance with the applicable standards for such notices, the plan will be treated as having complied with the requirement to provide a section 204(h) notice with respect to a section 204(h) amendment. Under the proposed regulations, this treatment would apply to the following notices:

94–42 relating to retroactive plan amendments that reduce accrued benefits described in section 412(d)(2);

of ERISA if an amendment is adopted to comply with the benefit limitation requirements of section 436 of the Code (section 206(g) of ERISA);

ERISA for an amendment that reduces or eliminates accrued benefits attributable to employer contributions with respect to a multiemployer plan in reorganization;

4245(e) of ERISA, relating to the effects of the insolvency status for a multiemployer plan; and

of ERISA and 29 CFR 4281.32 for an amendment of a multiemployer plan reducing benefits pursuant to section 4281(c) of ERISA.

Timing and Content Rules for Multiemployer Plans in Endangered or Critical Status

Section 432, relating to multiemployer plans that are in endangered or critical status (as defined in section 432(b)), permits a plan amendment to be adopted that re

duces prior accruals under certain circumstances. With respect to any such amendment for a plan that is in critical status, section 432(e)(8)(C) requires notice of the plan amendment. Notice under section 432(e)(8)(C) must be provided at least 30 days before the general effective date of the reduction. Section 432(e)(8)(C) requires the notice to include information that is sufficient for participants and beneficiaries to understand the effect of any reduction on their benefits and a description of the possible rights and remedies of participants and beneficiaries, including contact information for the Department of Labor for further assistance and information where appropriate.

As discussed in this preamble under the heading “Interaction of the Section 204(h) Timing Rules with Plan Amendments that Have a Retroactive Effective Date,” PPA ’06 requires that notice be given 30 days before the general effective date for an amendment to a plan in critical status under section 432(e)(8)(C). Q&A–9(c) of §54.4980F–1 of the Treasury Regulations provides that a section 204(h) amendment made in the case of a multiemployer plan must be provided at least 15 days before the effective date of the amendment. Compliance with the 30-day timing rule of section 432(e)(8)(C) notice would thus also satisfy this 15-day timing rule. These proposed regulations also include a rule under which the content of a notice under 432(e)(8)(C) would also satisfy the content requirements for a section 204(h) notice. As a result, under these proposed regulations, any notice for a multiemployer plan in critical status that satisfies the timing and content requirements under section 432(e)(8)(C) would be treated as satisfying the timing and content requirements of a section 204(h) notice.

However, in the case of an amendment to which section 432 applies for a multiemployer plan in endangered status, the normal timing and content rules for a section 204(h) notice under section 4980F would apply (so that any required section 204(h) notice must be provided at least 15 days before the effective date).

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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 1.411(d)–3 is amended by revising the first sentence of paragraph (a)(1) to read as follows:

§1.411(d)–3 Section 411(d)(6) protected benefits .

(a) Protection of accrued benefits —(1) General rule . Under section 411(d)(6)(A), a plan is not a qualified plan (and a trust forming a part of such plan is not a qualified trust) if a plan amendment decreases the accrued benefit of any plan participant, except as provided in section 412(d)(2) (section 412(c)(8) for plan years beginning before January 1, 2008), section 4281 of the Employee Retirement Income Security Act of 1974 as amended (ERISA), or other applicable law (see, for example, sections 418D and 418E of the Internal Revenue Code, and section 1107 of the Pension Protection Act of 2006, Public Law 109–280 (120 Stat. 780, 1063)). - * *

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PART 54—PENSION EXCISE TAXES

Par. 3. The authority citation for part 54 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Section 54.4980F–1 also issued under 26 U.S.C. 4980F and section 1107 of the Pension Protection Act of 2006, Public Law 109–780 (120 Stat. 780). - * *

Par. 4. Section 54.4980F–1 is amended by:

1. Revising the second sentence of A–1(a).

2. Redesignating A–8(d) as A–8(e) and adding new A–8(d).

3. Revising the first sentence of A–9(a), A–9(b), and A–9(c), and revising A–9(d)(1).

4. Adding A–9(f) and A–9(g).

5. Revising the first sentence of A–10(a).

6. Revising A–11(a)(1) and adding A–11(a)(7).

7. Adding A–18(a)(4) and A–18(a)(5).

8. Revising A–18(b)(1) and adding (b)(3)(i), (b)(3)(ii), and (b)(3)(iii).

These additions and revisions read as follows:

As described in this preamble under the heading “Interaction of the Section 204(h) Notice Timing Rules with Plan Amendments that Have a Retroactive Effective Date,” with respect to any section 204(h) amendment to a lump sum-based benefit formula (or any other amendment adopted pursuant to section 701 of PPA ’06), the special rules under the proposed regulations relating to an amendment that applies with respect to benefits accrued before the applicable amendment date apply to amendments adopted after December 21, 2006 (the date on which Notice 2007–6 was published). However, the special 30-day timing rule for providing a section 204(h) notice applies to such amendments effective on or after December 21, 2006, and not later than December 31, 2008. With respect to the rule relating to adding contributing employers to the list of section 204(h) recipients, the effective date is proposed to apply to section 204(h) amendments adopted in plan years beginning after December 31, 2007.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation. It is hereby certified that the collection of information in this regulation would not have a significant impact on a substantial number of small entities. This certification is based on the fact that this regulation only provides guidance on how to satisfy existing collection of information requirements. Accordingly, 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 comment on its impact on small business.

Comments and 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 comments that are submitted timely to the IRS.

The Treasury Department and IRS 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 has been scheduled for July 10, 2008, beginning at 10 a.m. in the Auditorium, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the “FOR FURTHER INFORMATION CONTACT” section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit written or electronic comments by June 19, 2008 and an outline of the topics to be discussed and the amount of time to be devoted to each topic (a signed original and eight (8) copies) by June 20, 2008. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

Drafting Information

The principal author of these regulations is Pamela R. Kinard, Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and the Treasury Department participated in their development.

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Proposed Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 54 are proposed to be amended as follows:

2008–17 I.R.B. 842 April 28, 2008

if a plan provides one of the notices in paragraph (g)(3)(ii) of this Q&A–9 in accordance with the applicable timing and content rules for such notice, the plan is treated as providing a section 204(h) notice with respect to a section 204(h) amendment and is treated as satisfying the timing rules of this Q&A–9 and the content rules of paragraphs (a)(3), (4), and (6) of Q&A–11 of this section.

(ii) Notice requirements . The notices in this paragraph (g)(3)(ii) are —

(A) A notice required under any revenue ruling, notice, or other guidance published under the authority of the Commissioner in the Internal Revenue Bulletin to affected parties in connection with a retroactive plan amendment described in section 412(d)(2) (section 412(c)(8) for plan years beginning before January 1, 2008); (B) A notice required under section 101(j) of ERISA if an amendment is adopted to comply with the benefit limitation requirements of section 206(g) of ERISA (section 436 of the Code);

(C) A notice required under 4244A(b) of ERISA for an amendment that reduces or eliminates accrued benefits attributable to employer contributions with respect to a multiemployer plan in reorganization;

(D) A notice required under section 4245(e) of ERISA, relating to the effects of the insolvency status for a multiemployer plan; and

(E) A notice required under section 4281 of ERISA for an amendment of a multiemployer plan reducing benefits pursuant to section 4281(c) of ERISA.

(4) Delegation of authority to Commis- sioner . The Commissioner may provide special rules under section 4980F, in revenue rulings, notices, or other guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)( b ) of this chapter), that the Commissioner determines to be necessary or appropriate with respect to a section 204(h) amendment—

(i) that applies to benefits accrued before the applicable amendment date but that does not violate section 411(d)(6) or

(ii) for which there is a required notice with timing and content requirements similar to a section 204(h) notice.

• • • • A–10. (a) In general . Section 204(h) notice must be provided to each applicable

§54.4980F–1 Notice requirements for certain pension plan amendments significantly reducing the rate of future benefit accrual .

• • • • A–1. (a) Requirements of Internal Rev- enue Code section 4980F(e) and ERISA section 204(h) . - - - The notice is required to be provided to plan participants and alternate payees who are applicable individuals (as defined in Q&A–10 of this section), to certain employee organizations, and to contributing employers (as described in Q&A–10 of this section).
• • • • A–8. - - (d) Plan amendments reflecting a change in statutorily mandated minimum present value rules . If a defined benefit plan offers a distribution to which the minimum present value rules of section 417(e)(3) apply (other than a payment to which section 411(a)(13)(A) applies), and the plan is amended to reflect the changes to the applicable interest and mortality assumptions in section 417(e)(3) made by PPA ’06 (and no change is made in the dates on which the payment will be made), no section 204(h) notice is required to be provided.
• • • • A–9. (a) 45-day general rule . Except as otherwise provided in this Q&A–9, section 204(h) notice must be provided at least 45 days before the effective date of any section 204(h) amendment. - * *

(b) 15-day rule for small plans . Except for amendments described in paragraphs (d)(2) and (g) of this Q&A–9, section 204(h) notice must be provided at least 15 days before the effective date of any section 204(h) amendment in the case of a small plan. - * *

(c) 15-day rule for multiemployer plans . Except for amendments described in paragraphs (d)(2) and (g) of this Q&A–9, section 204(h) notice must be provided at least 15 days before the effective date of any section 204(h) amendment in the case of a multiemployer plan. - * *

(d) Special timing rule for business transactions —(1) 15-day rule for section 204(h) amendment in connection with an acquisition or disposition . Except for amendments described in paragraphs (d)(2) and (g) of this Q&A–9, if a section

204(h) amendment is adopted in connection with an acquisition or disposition, section 204(h) notice must be provided at least 15 days before the effective date of the section 204(h) amendment.

• • • • (f) Special timing rule for certain plans maintained by commercial airlines . See section 402 of the Pension Protection Act of 2006, Public Law 109–780 (120 Stat.

780. (PPA ’06) for a special rule that applies to certain plans maintained by an employer that is a commercial passenger airline or the principal business of which is providing catering services to a commercial passenger airline. Under this special rule, section 204(h) notice must be provided at least 15 days before the effective date of the amendment.

(g) Special timing rules relating to cer- tain section 411(d)(6) plan amendments (1) Plan amendments permitted to reduce prior accruals . This paragraph (g) generally provides special rules with respect to a plan amendment that would not violate section 411(d)(6) even if the amendment applies with respect to benefits accrued before the applicable amendment date. Thus, for example, this paragraph (g) applies to amendments that are permitted to be effective retroactively under section 412(d)(2) (section 412(c)(8) for plan years beginning before January 1, 2008), 418D, or 418E of the Code, section 4281 of ERISA, or section 1107 of PPA ’06. See, generally, §1.411(d)–3(a)(1).

(2) General timing rule for amendments to which this paragraph (g) applies . For an amendment to which this paragraph (g) applies, the amendment is effective on the first date on which the plan is operated as if the amendment were in effect. Thus, except as otherwise provided in this paragraph (g), a section 204(h) notice for an amendment to which paragraph (a) of this section applies that is adopted after the effective date of the amendment must be provided, with respect to any applicable individual, at least 45 days before (or such other date as may apply under paragraphs (b), (c), (d), or (f) of this Q&A–9) the date the amendment is effective.

(3) Special rules for section 204(h) notices provided in connection with other disclosure requirements —(i) In general . Notwithstanding the requirements in this Q&A–9 and Q&A–11 of this section,

April 28, 2008 843 2008–17 I.R.B.

Notice of Proposed Rulemaking

Travel Expenses of State Legislators

REG–119518–07

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations relating to travel expenses of state legislators while away from home. The regulations affect eligible state legislators who make the election under section 162(h) of the Internal Revenue Code (Code). The regulations are necessary to clarify the amount of travel expenses that may be deducted by a state legislator who makes the election under section 162(h).

DATES: Written (paper or electronic) comments or a request for a public hearing must be received by June 30, 2008.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG–119518–07), room 5203, Internal Revenue Service, POB 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 (REG–119518–07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit comments electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–119518–07).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, R. Matthew Kelley, (202) 622–7900; concerning submission of comments or a request for a hearing, Kelly Banks, (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this notice of proposed rulemaking has

individual, to each employee organization representing participants who are applicable individuals, and, for plan years beginning after December 31, 2007, to each employer that has an obligation to contribute (within the meaning of section 4212(a) of ERISA) to the plan.* * *

• • • • A–11. (a) Explanation of notice re- quirement —(1) In general . Section 204(h) notice must include sufficient information to allow applicable individuals to understand the effect of the plan amendment. In order to satisfy this rule, a plan administrator providing section 204(h) notice must generally satisfy paragraphs (a)(2), (3), (4), (5), and (6) of this Q&A–11. See paragraph (a)(7) of this Q&A–11 for a special rule relating to section 204(h) notices provided in connection with a notice required under section 432(e)(8)(C). See paragraph (g)(3) of Q&A–9 of this section for special rules relating to section 204(h) notices provided in connection with certain other written notices. See also paragraph (g)(4) of Q&A–9 of this section for a delegation of authority to the Commissioner to provide special rules.
• • • • (7) Information in section 204(h) no- tice provided in connection with a notice required under section 432(e)(8)(C) . The information required in a notice under section 432(e)(8)(C) is treated as satisfying the content requirements of paragraphs (a)(3), (4), and (6) of this Q&A–11 for a section 204(h) notice.
• • • • A–18. (a) * * * (4) Special effective date for certain section 204(h) amendments made by plans of commercial airlines . Section 402 of PPA ’06 applies to section 204(h) amendments adopted in plan years ending after August 17, 2006.

(5) Special effective date for rule re- lating to contributing employers . Section 502 of PPA ’06, which amended section 4980F(e)(1) of the Code, applies to section 204(h) amendments adopted in plan years beginning after December 31, 2007.

(b) Regulatory effective date —(1) Gen- eral effective date . Except as otherwise provided in this paragraph (b), section 4980F and section 204(h) of ERISA, as amended by EGTRRA, apply to plan

amendments taking effect on or after June 7, 2001 (statutory effective date), which is the date of enactment of EGTRRA.

• • • • (3) Effective dates for Q&A–9(g)(1), (g)(3), and (g)(4) and Q&A–11(a)(7) —(i) General effective date . Except as provided in Q&A–18(b)(3)(ii) or (b)(3)(iii) of this section, the rules in Q&A–9(g)(1), (g)(3), and (g)(4) and Q&A–11(a)(7) of this section apply to amendments that are effective on or after January 1, 2008.

(ii) Effective date for Q&A–9(g)(2) . Except as provided in Q&A–18(b)(3)(iii) of this section, the rules in Q&A–9(g)(2) of this section apply to amendments that are effective on or after July 1, 2008.

(iii) Special rules for section 204(h) amendments to applicable defined ben- efit plan . Notwithstanding paragraph (b)(3)(i) or (b)(3)(ii) of this Q&A–18, with respect to any section 204(h) notice provided in connection with a section 204(h) amendment to an applicable defined benefit plan within the meaning of section 411(a)(13)(C)(i) to limit distributions as permitted under section 411(a)(13)(A) for distributions made after August 17, 2006, that is made pursuant to section 701 of PPA ’06, the special rules in paragraphs (g)(1) and (2) of Q&A–9 of this section apply to amendments made effective after December 21, 2006. For such an amendment that is effective not later than December 31, 2008, section 204(h) notice does not fail to be timely if the notice is provided at least 30 days, rather than 45 days, before the date that the amendment is first effective.

---

Linda E. Stiff, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on March 20, 2008, 8:45 a.m., and published in the issue of the Federal Register for March 21, 2008, 73 F.R. 15101)

2008–17 I.R.B. 844 April 28, 2008

ment to the legislator’s income tax return (or amended return) for the taxable year for which the election is effective. The statement must include the following information: (1) the taxpayer’s name, address, and taxpayer identification number; (2) a statement that the taxpayer is making an election under section 162(h); and (3) information establishing that the taxpayer is entitled to make the election. A legislator must make the election by the due date for filing the return (including extensions). Under §301.9100–4T(g), a legislator may revoke an election only with the consent of the Commissioner. Consent is requested by filing an application with the service center where the election was filed. The application must include the following information: (1) the taxpayer’s name, address, and taxpayer identification number; (2) a statement that the taxpayer is revoking an election under section 162(h) for a specified year; and (3) a statement explaining why the taxpayer seeks to revoke the election.

Rev. Rul. 82–33, 1982–1 C.B. 28, (see §601.601(d)(2)(ii)( b )) holds that (1) an electing legislator’s tax home for all legislative travel, including travel between sessions, is the legislator’s place of residence within the legislative district represented by the legislator; (2) the term “living expenses” for purposes of section 162(h) includes expenses for lodging, meals, laundry, and other incidental expenses but does not include expenses for travel fares, local transportation, or telephone calls; (3) a legislative day includes the days of any period for which the legislature is not in session for 4 consecutive days or less, without extension for Saturdays, Sundays, or holidays; (4) for purposes of section 162(h)(1)(B)(ii), the amount generally allowable to employees of the executive branch of the Federal government for per diem while traveling away from home in the United States is the per diem amount for the particular city in which the state capitol is located; and (5) any amount deductible by an electing legislator for deemed living expenses under section 162(h) is in addition to any other amount deductible under section 162(a) for other expenses incurred while traveling away from home.

An electing legislator’s deduction under section 162(h) for deemed living expenses is reduced by the amount of any

been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Rev- enue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by May 30, 2008. Comments are specifically requested concerning:

Whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed collection of information;

How the quality, utility, and clarity of the information to be collected may be enhanced;

How the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and

Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

The collection of information in these proposed regulations is in §1.162–24(e). This collection of information will help the IRS determine if a taxpayer may make an election under section 162(h). The collection of information is required to obtain a benefit.

The estimated burden is 30 minutes. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

Background

This document contains proposed amendments to 26 CFR part 1 and 26 CFR part 301, relating to travel expenses of state legislators while away from home.

Section 162(a)(2) provides that a taxpayer generally is allowed a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business, including traveling expenses while away from home.

Section 162(h) provides that an eligible individual who is a state legislator at any time during the taxable year may make an election under section 162(h) (an electing legislator). Under section 162(h)(4), the election is not available to any legislator whose place of residence within the legislative district represented by the legislator is 50 or fewer miles from the state capitol building.

As a result of making the election for a taxable year, under section 162(h)(1)(A) an electing legislator’s place of residence within the district represented by the legislator is treated as the legislator’s home. In addition, under section 162(h)(1)(B) an electing legislator is deemed to have expended for living expenses (in connection with the trade or business of being a legislator), on each legislative day of the electing legislator, the greater of the amount generally allowable for the day (i) to employees of the legislator’s state for per diem while away from home, to the extent the amount does not exceed 110 percent of the amount described in (ii); or (ii) to employees of the executive branch of the Federal government for per diem while traveling away from home in the United States. Finally, under section 162(h)(1)(C) an electing legislator is deemed to be away from home in the pursuit of a trade or business on each legislative day.

Section 162(h)(2) defines a legislative day for an electing legislator as any day on which (A) the legislature is in session (including any day in which the legislature is not in session for a period of 4 consecutive days or less), or (B) the legislature is not in session but the physical presence of the electing legislator is formally recorded at a meeting of a committee of the legislature.

Section 301.9100–4T(a) of the Procedure and Administration Regulations provides that a legislator makes the election under section 162(h) by attaching a state

April 28, 2008 845 2008–17 I.R.B.

and Accounting). However, other personnel from the IRS and the Treasury Department participated in their development.

- - - -

Proposed Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 301 are proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding an entry to read in part as follows:

Authority: 26 U.S.C. 7805 * * * §1.162–24 also issued under 26 U.S.C. 162(h). - * * Par. 2. Section 1.162–24 is added to read as follows:

§1.162–24 Travel expenses of state legislators .

(a) In general . For purposes of section 162(a), in the case of any taxpayer who is a state legislator at any time during the taxable year and who makes an election under section 162(h) for the taxable year—

(1) The taxpayer’s place of residence within the legislative district represented by the taxpayer is the taxpayer’s home for that taxable year;

(2) The taxpayer is deemed to have expended for living expenses (in connection with the taxpayer’s trade or business as a legislator) an amount equal to the sum of the amounts determined by multiplying each legislative day of the taxpayer during the taxable year by the greater of—

(i) The amount generally allowable with respect to that day to employees of the state of which the taxpayer is a legislator for per diem while away from home, to the extent the amount does not exceed 110 percent of the amount described in paragraph (a)(2)(ii) of this section; or

(ii) The Federal per diem with respect to that day for the taxpayer’s state capital; and

(3) The taxpayer is deemed to be away from home in the pursuit of a trade or business on each legislative day.

(b) Legislative day . For purposes of section 162(h)(1) and this section, for any taxpayer who makes an election under section 162(h), a legislative day is any day

reimbursement received for the expenses that is not included in the legislator’s gross income.

Section 1.62–1T(e)(4) provides rules regarding the allocation between meals and lodging of unreimbursed expenses of state legislators. Section 274(n) provides rules regarding the limitations on the amount allowable as a deduction for expenses for or allocable to meals.

Explanation of Provisions

The proposed regulations incorporate the holdings of Rev. Rul. 82–33, which will be obsoleted when the proposed regulations are issued as final regulations. The proposed regulations further provide that a taxpayer becomes a state legislator on the day the taxpayer is sworn into office and ceases to be a state legislator on the day following the day on which the taxpayer’s term in office ends. The proposed regulations provide that the legislature of which an electing legislator is a member is in session when the members of the legislature are expected to attend and participate as an assembled body of the legislature, whether or not the electing legislator actually attends. The proposed regulations also provide that a legislator’s legislative days include a day on which the legislator’s attendance at a meeting of a committee of the legislature is formally recorded. A committee of the legislature is defined as a group that consists solely of members of the legislature charged with conducting business of the legislature. The proposed regulations further provide that a legislator’s legislative days include any day that is not otherwise a legislative day if the legislator’s attendance at a session of the legislature on that day is formally recorded. An example in the proposed regulations illustrates that if the members of the legislature are not expected to attend and participate as an assembled body on a day, then the legislature is not in session on that day; however, that day is a legislative day for those members whose actual attendance on that day is formally recorded.

The proposed regulations incorporate the current rules in §301.9100–4T for making and revoking the election under section 162(h). The regulations propose to amend §301.9100–4T by removing these rules from that section.

Effective/Applicability Date

The regulations are proposed to apply to expenses deemed expended under section 162(h) after the date the regulations are published as final regulations in the Fed- eral Register .

Effect on Other Documents

When the proposed regulations are published as final regulations, Rev. Rul. 82–33 will be obsoleted.

Special Analyses

This notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations and, because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (either a signed paper original with eight (8) copies or electronic) comments that are submitted timely to the IRS. Comments are requested on the clarity of the proposed regulations and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing may be scheduled if requested in writing by any person who timely submits written (including electronic) 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 these regulations is R. Matthew Kelley of the Office of Associate Chief Counsel (Income Tax

2008–17 I.R.B. 846 April 28, 2008

on which the taxpayer is a state legislator and—

(1) The legislature is in session; (2) The legislature is not in session for a period that is not longer than 4 consecutive days, without extension for Saturdays, Sundays, or holidays;

(3) The taxpayer’s attendance at a meeting of a committee of the legislature is formally recorded; or

(4) The taxpayer’s attendance at any session of the legislature that only a limited number of members are expected to attend (such as a “pro forma” session), on any day not described in paragraph (b)(1) or (b)(2) of this section, is formally recorded.

(c) Fifty mile rule . Section 162(h) and this section do not apply to any taxpayer who is a state legislator and whose place of residence within the legislative district represented by the taxpayer is 50 or fewer miles from the capitol building of the state. For purposes of this paragraph (c), the distance between the taxpayer’s place of residence within the legislative district represented by the taxpayer and the capitol building of the state is the shortest of the more commonly traveled routes between the two points.

(d) Definitions and special rules . The following definitions apply for purposes of section 162(h) and this section.

(1) State legislator . A taxpayer becomes a state legislator on the day the taxpayer is sworn into office and ceases to be a state legislator on the day following the day on which the taxpayer’s term in office ends.

(2) Living expenses . Living expenses include lodging, meals, and incidental expenses. Incidental expenses has the same meaning as in 41 CFR 300–3.1.

(3) In session —(i) In general . For purposes of this section, the legislature of which a taxpayer is a member is in session on any day if, at any time during that day, the members of the legislature are expected to attend and participate as an assembled body of the legislature.

(ii) Examples . The following examples illustrate the rules of this paragraph (d)(3):

Example 1 . B is a member of the legislature of State X. On Day 1, the State X legislature is convened and the members of the legislature generally are expected to attend and participate. On Day 1, the State X legislature is in session within the meaning of paragraph (d)(3)(i) of this section. B does not attend the session of the State X legislature on Day 1. However,

Day 1 is a legislative day for B for purposes of section 162(h)(2)(A) and paragraph (b)(1) of this section. Example 2 . C, D, and E are members of the legislature of State X. On Day 2, the State X legislature is convened for a limited session in which not all members of the legislature are expected to attend and participate. C and D are the only members who are called to, and do, attend the limited session on Day 2, and their attendance at the session is formally recorded. E is not called and does not attend. Day 2 is not a day described in paragraph (b)(2) of this section. On Day 2, the State X legislature is not in session within the meaning of paragraph (d)(3)(i) of this section. Day 2 is a legislative day as to C and D under section 162(h)(2)(B) and paragraph (b)(4) of this section. Day 2 is not a legislative day as to C and D under section 162(h)(2)(A) and paragraph (b)(1) of this section. Day 2 is not a legislative day as to E under sections 162(h)(2)(A) and (h)(2)(B) and paragraphs (b)(1) and (b)(4) of this section.

(4) Committee of the legislature . A committee of the legislature is any group consisting solely of legislators charged with conducting business of the legislature. Committees of the legislature include, but are not limited to, committees to which the legislature refers bills for consideration, committees that the legislature has authorized to conduct inquiries into matters of public concern, and committees charged with the internal administration of the legislature. For purposes of this section, groups that are not considered committees of the legislature include, but are not limited to, groups that promote particular issues, raise campaign funds, or are caucuses of members of a political party.

(5) Federal per diem . The Federal per diem for any city and day is the maximum amount allowable to employees of the executive branch of the Federal government for living expenses while away from home in pursuit of a trade or business in that city on that day. See 5 U.S.C. 5702 and the regulations under that section.

(e) Election —(1) Time for making elec- tion . A taxpayer’s election under section 162(h) must be made for each taxable year for which the election is to be in effect and must be made no later than the due date (including extensions) of the taxpayer’s Federal income tax return for the taxable year.

(2) Manner of making election . A taxpayer makes an election under section 162(h) by attaching a statement to the taxpayer’s income tax return for the taxable year for which the election is made. The statement must include—

(i) The taxpayer’s name, address, and taxpayer identification number;

(ii) A statement that the taxpayer is making an election under section 162(h); and

(iii) Information establishing that the taxpayer is a state legislator entitled to make the election, for example, a statement identifying the taxpayer’s state and legislative district and representing that the taxpayer’s place of residence in the legislative district is not 50 or fewer miles from the state capitol building.

(3) Revocation of election . An election under section 162(h) may be revoked only with the consent of the Commissioner. An application for consent to revoke an election must be signed by the taxpayer and filed with the submission processing center with which the election was filed, and must include—

(i) The taxpayer’s name, address, and taxpayer identification number;

(ii) A statement that the taxpayer is revoking an election under section 162(h) for a specified year; and

(iii) A statement explaining why the taxpayer seeks to revoke the election.

(f) Effect of election on otherwise de- ductible expenses for travel away from home —(1) Legislative days —(i) Living expenses . For any legislative day for which an election under section 162(h) and this section is in effect, the amount of an electing taxpayer’s living expenses while away from home is the greater of the amount of the living expenses—

(A) Specified in paragraph (a)(2) of this section in connection with the trade or business of being a legislator; or

(B) Otherwise allowable under section 162(a)(2) in the pursuit of any other trade or business of the taxpayer.

(ii) Other expenses . For any legislative day for which an election under section 162(h) and this section is in effect, the amount of an electing taxpayer’s expenses (other than living expenses) for travel away from home is the sum of the substantiated expenses, such as expenses for travel fares, telephone calls, and local transportation, that are otherwise deductible under section 162(a)(2) in the pursuit of any trade or business of the taxpayer.

(2) Non-legislative days . For any day that is not a legislative day, the amount of an electing taxpayer’s expenses (including amounts for living expenses) for travel away from home is the sum of the substantiated expenses that are otherwise de

April 28, 2008 847 2008–17 I.R.B.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. Chapter 5) does not apply to this regulation. Because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. Chapter 6) does not apply, either. 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 comment on its impact.

Comments and Request 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 comments that are submitted timely to the Internal Revenue Service (IRS). The IRS and the 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 .

Proposed Effective Date

The regulations proposed in this document would be applicable for entities existing on or after March 21, 2008.

Drafting Information

The principal author of these proposed regulations is S. James Hawes of the Office of Associate Chief Counsel (International); however, other personnel from the IRS and the Treasury Department participated in their development.

- - - -

ductible under section 162(a)(2) in the pursuit of any trade or business of the taxpayer.

(g) Cross references . See §1.62–1T(e)(4) for rules regarding allocation of unreimbursed expenses of state legislators and section 274(n) for limitations on the amount allowable as a deduction for expenses for or allocable to meals.

(h) Effective/applicability date . This section applies to expenses deemed expended under section 162(h) after the date these regulations are published as final regulations in the Federal Register .

Part 301—PROCEDURE AND ADMINISTRATION

Par. 3. The authority citation for part 301 continues to read as follows: Authority: 26 U.S.C. 7805 * * *

§301.9100–4T [Amended]

Par. 4. Section 301.9100–4T is amended by removing from the table in paragraph (a)(1) the language relating to section 127(a) of the Economic Recovery Tax Act of 1981 and removing paragraph (a)(2)(iv).

Linda E. Stiff, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on March 28, 2008, 8:45 a.m., and published in the issue of the Federal Register for March 31, 2008, 73 F.R. 16797)

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Classification of Certain Foreign Entities

REG–143468–07

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations.

SUMMARY: In this issue of the Bulletin, the IRS and the Treasury Department are

issuing temporary and final regulations (T.D. 9388) relating to certain business entities included on the list of foreign business entities that are always classified as corporations for Federal tax purposes. The regulations are needed to make the Federal tax classification of Bulgarian public limited liability companies consistent with the Federal tax classification of public limited liability companies organized in other countries of the European Economic Area. They will affect persons owning an interest in a Bulgarian aktsionerno druzhestvo on or after January 1, 2007. The text of the temporary regulations also serves as the text of these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing must be received by June 19, 2008.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG–143468–07), 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 (REG–143468–07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–143468–07).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, S. James Hawes, (202) 622–3860; concerning submissions of comments, Kelly Banks, (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

Temporary regulations in this issue of the Bulletin amend and revise 26 CFR part 301 relating to section 7701 of the Internal Revenue Code. The temporary regulations add certain business entities to the list of foreign business entities that are always classified as corporations for Federal tax purposes. The preamble to the temporary regulations explains both the temporary regulations and these proposed regulations.

2008–17 I.R.B. 848 April 28, 2008

After the deadline for receiving outlines has passed, 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 or in the Freedom of Information Reading Room (FOIA RR) (Room 1621) which is located at the 11 ^th and Pennsylvania Avenue, NW entrance, 1111 Constitution Avenue, NW, Washington, DC.

Because of access restrictions, the IRS will not admit visitors beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this document.

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 March 27, 2008, 8:45 a.m., and published in the issue of the Federal Register for March 28, 2008, 73 F.R. 16610)

Abandonment of Stock or Other Securities; Correction

Announcement 2008–35

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations; Correction.

SUMMARY: This document contains a correction to final regulations (T.D. 9386, 2008–16 I.R.B. 788) that were published in the Federal Register on Wednesday, March 12, 2008 (73 FR 13124) concerning the availability and character of a loss deduction under section 165 of the Internal Revenue Code for losses sustained from abandoned stock or other securities. These regulations clarify the tax treatment of losses from abandoned securities, and affect any taxpayer claiming a deduction for a loss from abandoned securities.

DATES: The correction is effective March 25, 2008.

FOR FURTHER INFORMATION CONTACT: Sean M. Dwyer at (202)

Proposed 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 in part as follows:

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 301.7701–2 is amended by revising paragraphs (b)(8)(vi) and (e)(7) to read as follows:

§301.7701–2 Business entities; definitions.

• • • • (b) - * (8) - * (vi) [The text of the proposed amendment to §301.7701–2(b)(8)(vi) is the same as the text of §301.7701–2T(b)(8)(vi) published elsewhere in this issue of the Bulletin.]
• • • • (e) - * (7) [The text of the proposed amendment to §301.7701–2(e)(7) is the same as the text of §301.7701–2T(e)(7) published elsewhere in this issue of the Bulletin.]

Linda E. Stiff, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on March 20, 2008, 8:45 a.m., and published in the issue of the Federal Register for March 21, 2008, 73 F.R. 15107)

Automatic Contribution Arrangements; Hearing

Announcement 2008–34

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of public hearing on proposed rulemaking.

SUMMARY: This document provides notice of public hearing on a notice of proposed rulemaking (REG–133300–07, 2007–49 I.R.B. 1140) under sections 401(k), 401(m), 402(c), 411(a), 414(w),

and 4979(f) of the Internal Revenue Code relating to automatic contribution arrangements. These proposed regulations will affect administrators of, employers maintaining, participants in, and beneficiaries of eligible plans that include an automatic contribution arrangement under section 401(k)(13), 401(m)(12), or 414(w).

DATES: The public hearing is being held on Monday, May 19, 2008, at 10 a.m. The IRS must receive outlines of the topics to be discussed at the hearing by Monday, April 28, 2008.

ADDRESSES: The public hearing is being held in the auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Send submissions to: CC:PA:LPD:PR (REG–133300–07), room 5203, Internal Revenue Service, P.O. 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 (REG–133300–07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit electronic outlines of oral comments via the Federal eRulemaking Portal at http://www.regulations.gov .

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, R. Lisa Mojiri-Azad, Dana Barry or William D. Gibbs at (202) 622–6060; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Richard A. Hurst at Richard.A.Hurst@irscounsel.treas.gov or (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: The subject of the public hearing is the notice of proposed rulemaking (REG–133300–07) that was published in the Federal Register on Thursday, November 8, 2007 (72 FR 63144).

Persons, who wish to present oral comments at the hearing that submitted written comments, must submit an outline of the topics to be discussed and the amount of time to be devoted to each topic (signed original and eight (8) copies) by April 28, 2008. A period of 10 minutes is allotted to each person for presenting oral comments.

April 28, 2008 849 2008–17 I.R.B.

Gifts Help to Heal, Birmingham, AL Great Urban Commission, Inc.,

Corona, NY Home Sweets Home, Inc.,

Los Angeles, CA Hunterbrook Ridge at Fieldhome, Inc.,

Yorktown Heights, NY Johnnies Care, Inc., Warren, AR Lamb Down Ministries,

Greenwell Springs, LA Lasallian Association of Miguel Schools,

Washington, DC Light for the Nations, Inc.,

Gardnerville, NV Mack East Community Center, Detroit, MI Manjula Arts and Theatre, Inc.,

San Jose, CA Metro Family Services & Resources, Inc.,

Buford, GA Moore House, Inc., Baltimore, MD New Hopewell Community Outreach,

Inc., Bernice, LA One Family at a Time / Love Academy,

Incorporated, Milwaukee, WI Ont Art, Pomona, CA Order Sons of Italy in America Housing

Corp., Bellmore, NY Pathways to Family Communication, Inc.,

Fayetteville, NC Pine Foundation, Inc., Lone Tree, CO Poteet Community Commodity,

Poteet, TX Project Star, Inc., Apopka, FL Praise & Worship Outreach for the Poor,

Sawyerville, AL Pyramid Health Network, Montclair, NJ Quality Tech Employment Services, Inc.,

Brooklyn, NY Riverflow, Inc., Gary, IN Seek Ye First the Kingdom of God

Ministries, American Canyon, CA Society of Non Profit Public Relations,

Taylorsville, NC Spirit of Religious Charity, Inc.,

Gastonia, NC Stallions of Honor, Inc., Riverside, CA Synergy Project, Richmond, VA Three Suns, Cutbank, MT True Fellowship Community

Development, Inc., Detroit, MI Turentine Twins Quarter Horse Ranch,

Inc., Indianapolis, IN United Enterprises Development

Corporation, Kansas City, MO Universal Housing Development

Corporation, St. Louis, MO Unlimited Goals Foundation, Tenino, WA Veritas Dei, Silver Spring, MD

622–5020 or Peter C. Meisel at (202) 622–7750 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

The final regulations (T.D. 9386) that are the subject of the correction are under section 165 of the Internal Revenue Code.

Need for Correction

As published, final regulations (T.D. 9386) contain an error that may prove to be misleading and are in need of clarification.

Correction of Publication

Accordingly, the publication of the final regulations (T.D. 9386), which were the subject of FR Doc. E8–4862, is corrected as follows:

On page 13124, column 2, in the preamble, under the paragraph heading “Background”, the language “A statement in the preamble to the proposed regulations requires clarification. The preamble described section 165(g)(3) as providing an exception from capital loss treatment for certain worthless securities in a domestic corporation affiliated with the taxpayer. Section 165(g)(3) provides an exception from capital loss treatment for a taxpayer that is a domestic corporation that owns certain worthless securities of a domestic or foreign corporation affiliated with the taxpayer. See §1.165–5(d)(1) of the Income Tax Regulations.” is inserted as a second paragraph.

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 March 24, 2008, 8:45 a.m., and published in the issue of the Federal Register for March 25, 2008, 73 F.R. 15668)

Foundations Status of Certain Organizations

Announcement 2008–37

The following organizations have failed to establish or have been unable to main

tain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not, after this date, rely on previous rulings or designations in the Cumulative List of Organizations (Publication 78), or on the presumption arising from the filing of notices under section 508(b) of the Code. This listing does not indicate that the organizations have lost their status as organizations described in section 501(c)(3), eligible to receive deductible contributions.

Former Public Charities. The following organizations (which have been treated as organizations that are not private foundations described in section 509(a) of the Code) are now classified as private foundations:

Aboutsmilesworld, Ltd.,

East Setauket, NY Applied Inventions, Miami, FL Art of Music Project, Inc.,

Sturgeon Bay, WI Baltimore Family Resources, Inc.,

Timonium, MD Bethel Foundation & Subsidiaries, Inc.,

Vidalia, LA Betty Harris Homes, Inc., Philadelphia, PA Camp Fund-to-Brush, Inc.,

Pembroke Pines, FL Center of Tomorrows Future, Inc.,

Heuvelton, NY Charitable Association for Relief and

Education International, Matthews, NC Cherokee County YMCA,

Jacksonville, FL Chinatown Learning Center,

Philadelphia, PA Connecticut Maritime Foundation, Inc.,

Stonington, CT Empowerment Through Exposure,

Annandale, VA Esperanza Para la Familia, Inc.,

Stafford, TX Family Enrichment Resource Center, Inc.,

Eureka, MO FHC Gosnold Grove Corporation,

Falmouth, MA Freedom House One, Peoria, IL Freeman Housing Human Services, Inc.,

Brooklyn, NY Fremont Economic Adjustment

Corporation, St. Anthony, ID Friends of Paraguay Foundation, Inc.,

Stratford, CT Full Circle Empowerment Center,

Chattanooga, TN

2008–17 I.R.B. 850 April 28, 2008

Walter Adams Community Development

Corporation, Bronx, NY Youth and Family Impact, Inc.,

Columbus, OH Youth for a Violence Free Community,

Carson, CA

If an organization listed above submits information that warrants the renewal of its classification as a public charity or as a private operating foundation, the Internal Revenue Service will issue a ruling or determination letter with the revised classification as to foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as provided in section 1.509(a)–7 of the Income Tax Regulations. It is not the practice of the Service to announce such revised classification of foundation status in the Internal Revenue Bulletin.

Simplification of Entity Classification Rules; Correction

Announcement 2008–38

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

SUMMARY: This document contains a correction to final regulations (T.D. 8697, 1997–1 C.B. 215) that were published in the Federal Register on Wednesday, December 18, 1996 (61 FR 66584). The final regulations classify certain business organizations under an elective regime.

DATES: This correction is effective April 4, 2008, and is applicable on January 1, 1997.

FOR FURTHER INFORMATION CONTACT: Stephen J. Hawes, (202) 622–3860 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations (T.D. 8697) that is the subject of this correction is under section 7701 of the Internal Revenue Code.

Need for Correction

As published, T.D. 8697 contains an error that may prove to be misleading and is in need of clarification.

- - - -

Correction of Publication

Accordingly, 26 CFR part 301 is corrected by making the following correcting amendment:

PART 301—PROCEDURE AND ADMINISTATION

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

Authority: 26 USC 7805 * * * Par. 2. Section 301.7701–2(b)(8)(i) is amended by revising the entry for “Romania, Societe pe Actiuni” to read as follows:

§301.7701–2 Business entities; definitions.

• • • • (b) - * (8) * * * (i) * * * Romania, Societate pe Actiuni

---

Cynthia E. Grigsby, Senior Federal Register Liaison Officer,

Publications and Regulations Branch,

Legal Processing Division,

Associate Chief Counsel (Procedure and Administration).

(Filed by the Office of the Federal Register on April 3, 2008, 8:45 a.m., and published in the issue of the Federal Register for April 4, 2008, 73 F.R. 18442)

April 28, 2008 851 2008–17 I.R.B.