SECTION 2. Request for Comments.

The Treasury Department and the IRS seek public comments on all aspects of the proposed revenue procedure, including comments on ways to facilitate market innovation consistent with promoting administrative certainty and sound tax policy. The Treasury Department and the IRS seek specific public comment on whether or under what circumstances the proposed revenue procedure should apply when the variable interest holder has a minimum gain share percentage of less than five percent, such as circumstances in which the variable-rate interest holders receive particular rights to control sales of underlying tax-exempt bond assets held by a tax-exempt bond partnership. The Treasury Department and the IRS also seek specific comment on whether or under what circumstances the proposed revenue procedure should be expanded to allow qualifying income from assets beyond original assets of the partnership referred to in § 4.02(3) of the proposed revenue procedure. The Treasury Department and the IRS also seek specific comment on whether or under what circumstances the proposed revenue procedure should be expanded to allow application to any other types of transactions besides the contemplated tax-exempt bond partnerships.

Before the proposed revenue procedure described in this notice is made effective, consideration will be given to any written public comments on this notice that are submitted in a timely fashion by December 15, 2008. A signed original and eight (8) copies of public comments should be sent by mail to the IRS at CC:PA:LPD:PR (reference IRS Notice 2008–80), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Public comments also may be sent electronically, via the IRS Internet site at www.irs.gov/regs or via the Federal eRulemaking portal at www.regulations.gov (reference IRS Notice 2008–80). All

2008–40 I.R.B. 820 October 6, 2008

received by a partnership retains its character when the partnership allocates the income to a partner.

Under § 706(a), a partner generally includes in income for a taxable year the partner’s allocable share of items of partnership income, gain, loss, deduction, and credit for the partnership’s taxable year ending within or with the partner’s taxable year. A partner must also include in income for a taxable year guaranteed payments under § 707(c) that are taken into account by the partnership under its method of accounting in the partnership’s taxable year ending within or with the partner’s taxable year. Moreover, for each taxable year in which a partnership has income, deductions, or credits, § 6031(a) and (b) requires the partnership to file a Form 1065, U.S. Return of Partnership Income, and to issue Schedules K–1 (Form 1065) to each partner.

Annual inclusion of income under § 706(a) can be incompatible with the needs of money market funds and certain other investors that invest in tax-exempt bonds. To assist tax-exempt bond partnerships to meet the needs of the market for tax-exempt bonds within the requirements of the Code, the Treasury Department and the Internal Revenue Service (“IRS”) are issuing this revenue procedure to allow partners in tax-exempt bond partnerships to take into account on a monthly basis their distributive shares of partnership items (“monthly closing”) if the partnership has made an effective monthly closing election with the consent of all partners (“monthly closing election”). A partnership may make a monthly closing election by including a binding provision to that effect in the partnership’s governing documents. A partnership that has a monthly closing election in effect for the partnership’s entire taxable year and that meets the other applicable requirements is not required to file a Form 1065, U.S. Return of Partnership Income, or to issue Schedules K–1 (Form 1065) to its partners for the taxable year.

In the past, to resolve the annual inclusion of income problem, many tax-exempt-bond partnerships attempted to make an election under § 761(a) to be excluded from the provisions of subchapter K. A tax-exempt-bond partnership is not eligible to elect to be wholly or partially excluded from subchapter K, however, and

comments will be available for public inspection and copying.