Part IV. Items of General Interest

Change in Reporting Section 404(k) Dividends

Announcement 2008–56

Purpose

This announcement provides for a change in the reporting of dividends on employer securities that are distributed from an employee stock ownership plan (“ESOP”) under § 404(k) of the Internal Revenue Code (“§ 404(k) dividends”).

Background

Section 404(k)(1) provides that, in the case of a C corporation, there is allowed as a deduction for a taxable year the amount of any applicable dividend paid in cash by such corporation during the taxable year with respect to applicable employer securities held by an ESOP maintained by the corporation or by a related corporation within the meaning of § 409(l)(4). Section 404(k)(2)(A) provides, in relevant part, that the term “applicable dividend” means any dividend which, in accordance with plan provisions, is paid directly to plan participants or their beneficiaries; is paid to the plan and is distributed in cash to plan participants or their beneficiaries not later than 90 days after the close of the plan year in which paid; or is, at the election of plan participants or their beneficiaries, paid to such participants or their beneficiaries or paid to the plan and distributed in cash to such participants or their beneficiaries not later than 90 days after the close of the plan year in which paid.

Plan distributions that are § 404(k) dividends are not subject to the 10% additional tax under § 72 (see § 72(t)(2)(A)(vi)), are not eligible rollover distributions (see § 1.402(c)–2 of the Income Tax Regulations, Q&A–4(e)), are not subject to withholding under § 3405 (see § 3405(e)(1)(B)(iv)), and are not taken into account in determining if required minimum distributions have been made (see § 1.401(a)(9)–5, Q&A–9(b)(5)). For purposes of § 72, such distributions are treated as plan distributions paid from a contract that is separate from any other

contract under the plan (see § 1.404(k)–1T, Q&A–3). In addition, backup withholding under § 3406 does not apply to distributions that are § 404(k) dividends because they are reportable under § 6047 and not reportable under § 6041 or 6042.

Announcement 85–168, 1985–48 I.R.B. 40, provides that “to allow taxpayers using short Form 1040A to report this § 404(k) dividend income,” a plan must use Form 1099–DIV. At the time of the announcement, payments reported on Form 1099–R and its predecessor forms could not be reported on Form 1040A. The announcement further provided that if § 404(k) dividends were distributed in the same year as a total qualified distribution, the entire amount should be reported on Form 1099–R.

New Reporting

Distributions from a plan that are made in 2009 or later years and that are § 404(k) dividends must be reported on a Form 1099–R that does not report any other distributions, in accordance with the instructions to the form. Accordingly, if there are other distributions from the plan in such years that are not § 404(k) dividends, they must be reported on a separate Form 1099–R. It is anticipated that the instructions will require a special code in box 7 of the form to indicate the special tax treatment and rollover restrictions applicable to § 404(k) dividends. Payments of § 404(k) dividends made directly from the corporation to the plan participants or their beneficiaries are reported on Form 1099–DIV in accordance with the instructions to that form.

Effect on Other Documents

Announcement 85–168 is revoked.

Correction to Revenue Ruling 2008–17, 2008–12 I.R.B. 626

Announcement 2008–57

This document contains a correction to Rev. Rul. 2008–17, 2008–12 I.R.B. 626,

which was published in the Internal Revenue Bulletin on March 24, 2008.

BACKGROUND

The revenue ruling ( Rev. Rul. 2008–17 ) that is the subject of this correction provides guidance to assist a foreign corporation engaged in the international operation of ships or aircraft, and its shareholders, in determining whether the foreign corporation is organized in a country that grants an “equivalent exemption” from tax for purposes of sections 883(a) and (c) of the Internal Revenue Code (Code). It also assists a nonresident alien individual engaged in the international operation of ships or aircraft in determining whether a country grants an equivalent exemption from tax for purposes of section 872(b) of the Code. Part A of Table I of this revenue ruling provides a list of countries that grant an equivalent exemption as evidenced by a diplomatic note exchanged with the United States. Part B of Table I provides a list of countries that grant an equivalent exemption to U.S. corporations by statute or decree, or by not imposing tax on income from the international operation of ships or aircraft. Table II of this revenue ruling provides a list of countries that have entered into income tax conventions with the United States that include a shipping and air transport article or a gains article.

NEED FOR CORRECTION

As published, in Rev. Rul. 2008–17, Table II (Countries Granting Exemptions from Tax by Income Tax Convention), Column 9 (Cap Gains), two footnotes were inadvertently omitted. Footnote 26 applies to Cap Gains for India and footnote 18 applies to Cap Gains for New Zealand.

CORRECTION OF PUBLICATION

Accordingly, the publication of the revenue ruling ( Rev. Rul. 2008–17 ) is corrected as follows: On page 631 of Bulletin No. 2008–12, Table II is corrected by adding footnote 26 to the Cap Gains column for India and footnote 18 to the Cap Gains column for New Zealand as follows:

2008–26 I.R.B. 1192 June 30, 2008

TABLE II

Countries Granting Exemptions from Tax by Income Tax Convention ¹⁵

BASIS FOR EXEMPTION TYPES OF SHIPPING AND AIRCRAFT INCOME EXEMPTED ²

Operating Income

Incidental Container Rental

Bare-Boat Rental

LOB ²⁹

Article

Residence & Flag Reciprocal

Countries And Territories

Residence Based No Flag

Cap Gains

Full Rental (Time or voyage charter)

On page 28701, column 2, in the preamble, under the paragraph heading “ B. The Baseline for Comparison in § 1.704–1(b)(2)(iii) ”, line 2 from the bottom of the second paragraph, the language “and (2) and the conclusions reached by” is corrected to read “and ( 2 ) and the conclusions reached by”.

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 June 11, 2008, 8:45 a.m., and published in the issue of the Federal Register for June 12, 2008, 73 F.R. 33301)

Partner’s Distributive Share; Correction

Announcement 2008–59

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

SUMMARY: This document contains corrections to final regulations (T.D. 9398, 2008–24 I.R.B. 1143) that were published in the Federal Register on Monday, May 19, 2008 (73 FR 28699) providing rules for testing whether the economic effect

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 2008–17, 2008–12 I.R.B. 626, is modified.

DRAFTING INFORMATION

The principal author of this announcement is Patricia A. Bray of the Office of Associate Chief Counsel (International). For further information regarding this announcement, contact Patricia A. Bray at (202) 622–3880 (not a toll-free call).

Partner’s Distributive Share; Correction

Announcement 2008–58

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations; Correction.

SUMMARY: This document contains a correction to final regulations (T.D. 9398, 2008–24 I.R.B. 1143) that were published in the Federal Register on Monday, May 19, 2008 (73 FR 28699) providing rules for testing whether the economic effect of an allocation is substantial within the meaning of section 704(b) where partners are look-through entities or members of a consolidated group. The final regulations clarify the application of section 704(b)

to partnerships the interests of which are owned by look-through entities and members of consolidated groups and, through an example, reiterate the effect of other provisions of the Internal Revenue Code on partnership allocations.

DATES: This correction is effective June 12, 2008 and is applicable on May 19, 2008.

FOR FURTHER INFORMATION CONTACT: Jonathan E. Cornwell and Kevin I. Babitz at (202) 622–3050 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the subject of this document are under section 704 of the Internal Revenue Code.

Need for Correction

As published, final regulations (T.D. 9398) contain an error that may prove to be misleading and is in need of clarification.

Correction of Publication

Accordingly, the publication of the final regulations (T.D. 9398), which were the subject of FR Doc. E8–11176, is corrected as follows:

June 30, 2008 1193 2008–26 I.R.B.

of an allocation is substantial within the meaning of section 704(b) where partners are look-through entities or members of a consolidated group. The final regulations clarify the application of section 704(b) to partnerships the interests of which are owned by look-through entities and members of consolidated groups and, through an example, reiterate the effect of other provisions of the Internal Revenue Code on partnership allocations.

DATES: This correction is effective June 12, 2008, and is applicable on May 19, 2008.

FOR FURTHER INFORMATION CONTACT: Jonathan E. Cornwell and Kevin I. Babitz at (202) 622–3050 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the subject of this document are under section 704 of the Internal Revenue Code.

Need for Correction

As published, final regulations (T.D. 9398) 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 1.704–1 is amended as follows:

1. In paragraph (b)(2)(iii)( d )( 3 ), the last sentence, the language “In the case of a controlled foreign corporation that is a look-through entity, the tax attributes to be taken into account are those of any person that is a United States shareholder (as defined in paragraph (b)(2)(iii)(d)(5) of this section) of the controlled foreign corporation, or, if the United States shareholder is a look-through entity, a United

States person that owns an interest in such shareholder directly or indirectly through one or more look-through entities.” is removed and the language “In the case of a controlled foreign corporation that is a look-through entity, the tax attributes to be taken into account are those of any person that is a United States shareholder (as defined in paragraph (b)(2)(iii)( d )( 5 ) of this section) of the controlled foreign corporation, or, if the United States shareholder is a look-through entity, a United States person that owns an interest in such shareholder directly or indirectly through one or more look-through entities.” is added in its place.

2. In paragraph (b)(5) Example 29 ., the fourth sentence, the language “C is a partnership with two partners, E, an individual, and F, a corporation that is member of a consolidated group within the meaning of § 1.1502–1(h).” is removed and the language “C is a partnership with two partners, E, an individual, and F, a corporation that is a member of a consolidated group within the meaning of § 1.1502–1(h).” is added in its place.

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 June 11, 2008, 8:45 a.m., and published in the issue of the Federal Register for June 12, 2008, 73 F.R. 33301)

Foundations Status of Certain Organizations

Announcement 2008–60

The following organizations have failed to establish or have been unable to maintain 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:

Acquiring Leaders of Tomorrow Today,

Inc., San Antonio, TX Africa Institute for Biblical Christianty,

Inc., Tampa, FL American Donor Services, Inc.,

Millington, TN APWL Legacy Choir, Baltimore, MD Artists in Residence, New Hope, PA Birdye’s Performing Arts Outreach, Inc.,

Pine Bluff, AR Cabaniss Caring, Lynchburg, VA Center for Development of Scientific

Literacy, Inc., Saratoga Springs, NY Community Outreach and Supportive

Services, Sumter, SC Connie Thompson Foundation, Inc.,

Hot Springs, AR Crossover Broadcast Network,

Incorporated, Santa Ana, CA CW Film Foundation, Inc.,

San Francisco, CA Ecumenical Covenant Corporation,

Locust Grove, VA Education Humanity Foundation,

Columbia, CA Family Development & Learning Center

of Mercer County, Trenton, NJ Fireman Al Foundation, Redding, CA First Choice Family Support Services,

Bellevue, WA First World Foundation, Inc.,

Washington, DC Foundation for Neurology Research, Inc.,

Orlando, FL George Cragg Hopkins, Jr. Arts

Endowment, Inc., Lexington Park, MD Giles Arthur Harmon Memorial

Scholarship Fund, Inc., Asheville, NC Haitian American Center for Business

& Economic Development, Inc., Snellville, GA Heirs of Christ, Austin, TX High Expectations, Inc., Raleigh, NC HIRE-Dona Rosita II Housing

Development Fund Corporation, New York, NY Hot Springs Rural Network, Inc.,

Fords, NJ Human Shelter Research Institute,

Valencia, CA

2008–26 I.R.B. 1194 June 30, 2008

United Services for Human Development,

Newark, DE Zion’s International Mission,

Roanoke, VA

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.

Humananatura, Incorporated,

Armonk, NY Infrastructure Education Foundation,

San Francisco, CA International Sports and Education

Centers, Lakewood, CA Kansas Avenue Resource Center, Inc.,

Riverside, CA Kellogg Fellows Leadership Alliance,

Inc., Denver, CO Kings Dominion World Worship Ministry,

Memphis, TN Konspire2B Foundation, Potsdam, NY Little Light Ministries, Charlotte, NC Ministry to Children, Crosby, TX MTM Housing and Community

Development Corp., Sacramento, CA Myhelp, Houston, TX Myths and Facts, Inc., Forest Hills, NY Neighborhood Community Outreach,

Incorporated, Jonesboro, GA Networks Electronic Commerce and

Telecommunications NET Institute, New York, NY

New Vision Housing Alliance,

Houston, TX No Other Way Ministry, Fordyce, AR NOAH Center, Inc., Great Barrington, MA OEA Educational Foundation,

Columbus, OH OSHA Assistance & Training Services,

Orange, CA Post Release Employment Support

Services, Newark, CA Proceed Community Development

Corporation, Inc., Elizabeth, NJ Ragtops Museum of Michigan City, Inc.,

Palos Park, IL Second Bethany Holiness Outreach

Ministries, Memphis, TN Sheridan Medical Foundation,

Sheridan, WY Slavic Community Center of Central

America, Sedalia, MO Southeastern Indiana Workforce

Investment Board, Lawrenceburg, IN Turn It Around Multi-Community Service

Center, Inc., Los Angeles, CA