Part IV. Items of General Interest

Notice of Proposed Rulemaking and Notice of Public Hearing

Tax Avoidance Transactions

REG–138326–07

AGENCY: Internal Revenue Service (IRS), Treasury.

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

SUMMARY: This document contains proposed regulations under section 6231 of the Internal Revenue Code that allow the IRS to convert partnership items to nonpartnership items when the application of the unified partnership audit and litigation procedures of sections 6221 through 6234 (TEFRA partnership procedures) with respect to certain tax avoidance transactions interferes with the effective and efficient enforcement of the internal revenue laws. The regulations affect taxpayers who have engaged in a listed transaction through an entity subject to the TEFRA partnership procedures. This document also provides notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by May 14, 2009. Outlines of topics to be discussed at the public hearing scheduled for June 4, 2009, at 10 a.m. must be received by May 15, 2009.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–138326–07), room 5205, 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–138326–07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG–138326–07). The public hearing will be held in the Auditorium, Internal Revenue Service Building, 1111 Constitution Avenue, N.W., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Robert T. Wearing at (202) 622–4570; concerning submissions of comments, the hearing, or to be placed on the building access list to attend the hearing, Richard.A.Hurst@irscounsel.treas.gov of the Publications and Regulations Branch at (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed amendments to the Procedure and Administration Regulations (26 CFR Part 301) under section 6231(c) of the Internal Revenue Code. Section 402 of the Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97–248 (96 Stat. 324) added sections 6221 through 6231 to the Internal Revenue Code to provide unified audit and litigation procedures for determining the tax treatment of partnership items at the partnership level rather than at the partner level. Sections 6233 and 6234 were subsequently added by section 714(p)(1) of the Tax Reform Act of 1984, Public Law 98–369 (98 Stat. 494) and section 1231(a) of the Taxpayer Relief Act of 1997, Public Law 105–34 (11 Stat. 788), respectively.

Ordinarily, under the TEFRA partnership procedures, the IRS must adjust a partner’s treatment of partnership items only through partnership-level proceedings. There are several exceptions that allow adjustments to be made through partner-level proceedings. The small partnership exception set forth in section 6231(a)(1)(B) provides that partnerships having ten or fewer partners, each of whom is an individual, a C corporation, or an estate, are not subject to the TEFRA partnership procedures. Section 6231(b) provides that items cease to be partnership items subject to the TEFRA partnership procedures in several different situations. Section 6231(c) allows the Treasury Department and the IRS to determine and provide by regulations that treating items as partnership items in areas that present special enforcement considerations will interfere with the effective and efficient enforcement of the internal revenue laws

and that, consequently, the items shall be treated as nonpartnership items. Section 6231(c) also allows the Treasury Department and the IRS to prescribe by regulations rules necessary to achieve the purposes of the TEFRA partnership procedures with respect to special enforcement areas. Section 6231(c) lists several specific special enforcement areas, including criminal investigations and indirect methods of proof of income, and provides that the Treasury Department and the IRS may determine others. The Treasury Department and the IRS previously have determined and provided by regulations that bankruptcy, receivership, and prompt assessment requests interfere with the effective and efficient enforcement of the internal revenue laws and designated them as special enforcement areas. See §§301.6231(c)–7 and –8 of the Procedure and Administration Regulations.

Explanation of Provisions

One of the principal purposes behind the enactment of the TEFRA partnership procedures was to provide for the more efficient use of the IRS’s resources by reducing multiple proceedings with respect to partnership items. The abusive tax shelters of the 1970s often used a single partnership to generate tax benefits for dozens, if not hundreds, of investors. Before the enactment of the TEFRA partnership procedures, the partnership items of each investor were subject to separate partner-level proceedings. The TEFRA partnership procedures effectively brought the partnership item components of these proceedings together in a single proceeding. Unlike the tax shelters of the 1970s, however, the recent generation of tax avoidance transactions often uses combinations of trusts, S corporations, limited liability companies, partnerships, and other entities, many times arranged in tiers, for the tax benefit of a single investor or a small group of investors. The application of the TEFRA partnership procedures to these tax avoidance transactions often results in multiple proceedings that complicate the ultimate determination of the investors’ tax liabilities and consume significant administrative resources.

March 2, 2009 638 2009–9 I.R.B.

that the partnership items related to listed transactions remain subject to the TEFRA partnership procedures unless and until the IRS sends written notification to the partner that the items will be treated as nonpartnership items. In this regard, the proposed regulations are consistent with the rules that are already in place with respect to sending notices under section 301.6231(c)–5 of the Procedure and Administration Regulations relating to partners under criminal investigation. See Phillips v. Commissioner, 272 F.3d 1172, 1176 (9th Cir. 2001). Specifically, the IRS will send written notification under the circumstances described in the proposed regulations using procedures similar to the procedures used under §301.6231(c)–5 of the Procedure and Administration Regulations, and will make conforming changes to the Internal Revenue Manual and Delegation Order 4–19, as necessary.

If the IRS concludes that a particular partner’s partnership items should be treated as nonpartnership items under the circumstances described in the proposed regulations, the IRS will send written notification to the partner identifying each partnership for which the partner’s partnership items will be treated as nonpartnership items. In the case of an indirect partner (as defined in section 6231(a)(10)) having an interest in a partnership through one or more pass-thru partners (as defined in section 6231(a)(9)), the IRS may send a written notification to the indirect partner identifying only the lower-tier partnership and not the pass-thru partners. In those circumstances, the partnership items attributable to the lower-tier partnership that flow through to the indirect partners will convert to nonpartnership items of the notified partner, even though the pass-thru partners were not identified in the written notification. Any partnership items originating with the pass-thru partners, that is, partnership items that are not attributable to the lower-tier partnership, will not convert to nonpartnership items unless the IRS identifies the pass-thru partner in the written notification (in which case all the partnership items directly attributable to the pass-thru partner also will convert to nonpartnership items of the notified partner).

As of the date that the IRS sends written notification of the conversion to the partner, all of the partner’s partnership items

For example, in a typical transaction described in Notice 2000–44, 2000–2 C.B. 255, (September 5, 2000), see §601.601(d)(2)(ii)( b ), in which the ultimate noneconomic loss or deduction is taken at the partner level by a single individual, the IRS first needs to initiate timely partnership-level proceedings to determine, among other things, whether the partnership is a sham and the amount and character of contributions and partnership liabilities. Following the partnership-level proceedings, the IRS often still must issue an affected items notice of deficiency to disallow the noneconomic loss or deduction at the partner level. Conducting both entity-level and partner-level proceedings in these cases to determine the tax liabilities of only a single individual or small group of related persons places an unnecessary burden on taxpayers, the IRS, and the federal courts.

Other tax avoidance transactions use multiple tiers of partnerships making coordinated partnership elections for the benefit of a single individual. Two or more separate partnership proceedings, as well as a partner-level proceeding, may need to take place before an assessment can be made against the individual. Again, conducting entity-level proceedings in these and similar cases in which a single individual or small group of related persons control multiple entities and receive all the tax benefits is inefficient and imposes a significant administrative burden.

The need to conduct partnership-level proceedings to determine the tax liabilities of a single individual or small group of related persons also generates complex and burdensome procedural issues that do not contribute to the determination of the individuals’ tax liabilities. For example, the application of the TEFRA partnership procedures may raise complicated issues concerning the segregation and aggregation of partnership items, affected items, and nonpartnership items. Often, the TEFRA partnership procedures make the identification and examination of the transactions more complicated and difficult. As a result, the Treasury Department and the IRS have determined that special enforcement considerations, within the meaning of section 6231(c)(1)(E), are present in the case of transactions that the Treasury Department and the IRS have publicly identified as tax avoidance transactions. Specifi

cally, the Treasury Department and the IRS have determined that treating items related to listed transactions within the meaning of §1.6011–4(b)(2) of the Income Tax Regulations as partnership items interferes with the effective and efficient enforcement of the internal revenue laws.

The proposed regulations are limited to tax avoidance transactions that are publicly identified by the Treasury Department and the IRS as listed transactions under §1.6011–4(b)(2) of the Income Tax Regulations. Under the proposed regulations, the transaction must be a listed transaction on the date the IRS sends written notification to the partner that the partner’s partnership items will be treated as nonpartnership items. Accordingly, the fact that a transaction becomes a listed transaction after the date on which the taxpayer engages in the transaction does not preclude the conversion of items under the proposed regulations. This limitation promotes taxpayer awareness of the transactions that can subject their partnership items to removal from the TEFRA partnership procedures. The Treasury Department and the IRS also have determined that the limitation will provide for the more efficient use of the IRS’s resources.

Under the proposed regulations, the IRS will make determinations regarding whether to convert partnership items to nonpartnership items on a partnership-by-partnership and partner-by-partner basis. Thus, if a taxpayer is a partner in two partnerships with partnership items related to listed transactions and a third partnership that has no partnership items related to listed transactions, the IRS could convert the taxpayer’s partnership items in either or both of the first two partnerships but could not convert the taxpayer’s partnership items in the third partnership. Similarly, if a taxpayer engages in a listed transaction through a tier of TEFRA entities, the IRS could convert the taxpayer’s partnership items in any or all of the tier entities with partnership items related to the listed transaction.

Although, consistent with section 6231(c)(2), the Secretary has determined that treating items related to listed transactions as partnership items will interfere with the effective and efficient enforcement of the internal revenue laws and has so provided in the proposed regulations, the proposed regulations further provide

2009–9 I.R.B. 639 March 2, 2009

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 and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by May 15, 2009. 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 Robert T. Wearing of the Office of the Associate Chief Counsel (Procedure and Administration).

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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 is amended by adding the entry in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Section 301.6231(c)–9 is also issued under 26 U.S.C. 6230(k) and 6231(c)(1) and (c)(3). - * *

Par. 2. Section 301.6231(c)–3 is amended by revising paragraphs (a) introductory text, and (b) to read as follows:

§301.6231(c)–3 Limitation on applicability of §§301.6231(c)–4 through 301.6231(c)–9.

(a) In general . A provision of §§301.6231(c)–4 through 301.6231(c)–9 shall not apply with respect to partnership items arising in a partnership taxable year if, as of the date on which those items

attributable to the identified partnership will be treated as nonpartnership items for all of the identified partnership’s taxable years that (1) ended on or before the date written notification is sent by the IRS to the partner and (2) for which the partner has items attributable to that partnership that are related to the listed transaction. The deficiency procedures in subchapter B of chapter 63 will apply, pursuant to section 6230(a)(2)(A)(ii), as of the date of the notice.

The proposed regulations incorporate existing rules under §301.6231(c)–3 of the Procedure and Administration Regulations, which provide that the partnership items of a partnership may not be converted if a notice of final partnership administrative adjustment (FPAA) with respect to those partnership items has been mailed to the tax matters partner of the partnership and either (1) the period for bringing an action with respect to the FPAA has expired and no judicial action has been brought or (2) the decision of the court in an action brought with respect to the FPAA has become final. This rule allows the IRS to send notification converting partnership items to nonpartnership items after the commencement of a judicial proceeding related to the converted partnership items. The Treasury Department and the IRS recognize, however, that it is not in the best interest of taxpayers, the Treasury Department, the IRS, or the courts to unnecessarily delay conversion of partnership items to nonpartnership items. Consistent with its existing practices under section 6231(c), the IRS intends to make a decision regarding whether to convert partnership items to nonpartnership items before the commencement of any judicial proceeding, although on isolated and unusual occasions changed circumstances may require the IRS to revisit that decision after the commencement of a judicial proceeding. In addition, judicial doctrines such as collateral estoppel and res judicata may preclude litigating issues in a partner-level proceeding that were previously litigated in a partnership-level proceeding prior to conversion of partnership items to nonpartnership items. Finally, the partnership items of any partners to whom the IRS does not send written notification will not convert to nonpartnership items.

Proposed Effective Date

The regulations, when finalized, are proposed to apply to any taxable period ending on or after the date of publication of these rules as proposed regulations in the Federal Register .

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 also 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 these 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 Internal Revenue Code, this notice of proposed rulemaking 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 the IRS request comments on the clarity of the proposed rules and how they can be made easier to understand. The Treasury Department and the IRS also request comments that identify additional transactions or activities that present appropriate grounds for converting partnership items to nonpartnership items. All comments will be made available for public inspection and copying.

A public hearing has been scheduled for June 4, 2009, beginning at 10 a.m. in the Auditorium of the Internal Revenue Service Building, 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

March 2, 2009 640 2009–9 I.R.B.

(Filed by the Office of the Federal Register on February 12, 2009, 8:45 a.m., and published in the issue of the Federal Register for February 13, 2009, 74 F.R. 7205)

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Application of Section 367 to a Section 351 Exchange Resulting from a Transaction Described in Section 304(a)(1); Treatment of Gain Recognized Under Section 301(c)(3) for Purposes of Section 1248

REG–147636–08

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 Treasury Department are issuing temporary regulations (T.D. 9444) under sections 304 and 1248 of the Internal Revenue Code (Code). The temporary regulations provide rules under section 367(a) and (b) that apply to certain transfers of stock by a United States person to a foreign corporation described in section 304(a)(1). The temporary regulations under section 1248(a) provide that, for purposes of section 1248(a), gain recognized by a shareholder under section 301(c)(3) in connection with the receipt of a distribution of property from a foreign corporation with respect to its stock shall be treated as gain from the sale or exchange of the stock of such foreign corporation. The temporary regulations affect certain shareholders that transfer stock in a corporation to a foreign corporation in a transaction to which section 304(a)(1) applies, or that receive a distribution from a foreign corporation described in section 301(c)(3). The text of the temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations.

would otherwise begin to be treated as nonpartnership items under that provision—

• • • • (b) Effective/applicability date . The rules of this section, when adopted as final regulations in the Federal Register, will apply to partner taxable years ending on or after the date of publication of these proposed regulations in the Federal Register .

Par. 3. Section 301.6231(c)–9 is added to read as follows: §301.6231(c)–9 Tax avoidance transactions.

(a) In general . The treatment of items that relate to a listed transaction, as defined in §1.6011–4, as partnership items will interfere with the effective and efficient enforcement of the internal revenue laws. Accordingly, if a partner has partnership items that relate to a listed transaction and are attributable to a partnership that is identified in a written notification described in this paragraph, the partner’s partnership items that are attributable to the identified partnership shall be treated as nonpartnership items as of the date on which the written notification is sent by the Internal Revenue Service to the partner. The determination whether to treat the partnership items of a partner as nonpartnership items shall be made by the Internal Revenue Service on a partnershipby-partnership and partner-by-partner basis. The partnership items of a partner shall not be treated as nonpartnership items under this section unless and until the Internal Revenue Service sends the partner written notification that the partner’s partnership items attributable to the identified partnership will be treated as nonpartnership items. The written notification shall identify each partnership in which the partner holds an interest, directly or indirectly, with respect to which all the partner’s partnership items will be treated as nonpartnership items. All partnership items of a partner that are attributable to a partnership that is identified in a written notification shall be treated as nonpartnership items for all taxable years of the identified partnership ending on or before the date the Internal Revenue Service sends written notification to the partner in which the partner has partnership items attributable to the identified partnership that relate to the listed transaction. Partnership items of a partner that are attributable to a

partnership that is not identified in a written notification sent by the Internal Revenue Service to that partner shall not be treated as nonpartnership items of the notified partner, except that if the notified partner holds an interest in the identified partnership through one or more pass-thru partners (as defined in section 6231(a)(9)), the partnership items attributable to the identified partnership that flow through the pass-thru partners to the indirect partners (as defined in section 6231(a)(10)), will be treated as nonpartnership items of the notified partner even if the written notification does not identify the pass-thru partners.

(b) Examples . The provisions of this section may be illustrated by the following examples:

Example 1 . PS1 and PS2 are unrelated partnerships subject to the provisions of subchapter C, chapter 63 of the Internal Revenue Code. A is one of the partners of PS1 and one of the partners of PS2. PS1 and PS2 have partnership items that relate to a listed transaction, as defined in §1.6011–4(b)(2). The IRS sends written notification to A that his partnership items in PS1 will be treated as nonpartnership items, but the IRS does not send written notification to A that his partnership items in PS2 will be treated as nonpartnership items. As a result, A’s partnership items in PS1 are treated as nonpartnership items as of the date that the IRS sent written notification of the conversion to A, and A’s partnership items in PS2 remain as partnership items.

Example 2 . PS3 and PS4 are partnerships subject to the provisions of subchapter C, chapter 63 of the Internal Revenue Code. B is one of the partners of PS3 and PS3 is one of the partners of PS4. B is an indirect partner in PS4 within the meaning of section 6231(a)(10). Both PS3 and PS4 have partnership items related to a listed transaction, as defined in §1.6011–4(b)(2). The IRS sends written notification to B that his partnership items in PS4 will be treated as nonpartnership items. As a result, all of B’s partnership items flowing from PS4 are treated as nonpartnership items of B as of the date that the IRS sent written notification of the conversion to B. However, since the IRS did not send written notification to B that his partnership items in PS3 will be treated as nonpartnership items, B’s partnership items in PS3 that are not attributable to PS4 will remain partnership items.

(c) Effective/applicability date . The rules of this section, when adopted as final regulations in the Federal Register, will apply to partner taxable years ending on or after the date of publication of these proposed regulations in the Federal Register .

Linda M. Kroening, Deputy Commissioner for Services and Enforcement.

2009–9 I.R.B. 641 March 2, 2009

PART 1—INCOME TAXES

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

Authority: 26 U.S.C. 7805* * * Section 1.367(a)–9 also issued under 26 U.S.C. 367(a) and (b).* * * Par. 2. Section 1.367(a)–9 is added to read as follows:

§1.367(a)–9 Treatment of deemed section 351 exchanges pursuant to section 304(a)(1) .

[The text of proposed §1.367(a)–9 is the same as the text of §1.367(a)–9T published elsewhere in this issue of the Bulletin].

Par. 3. Section 1.367(b)–4 is amended by revising paragraphs (e), (f) and (g) to read as follows:

§1.367(b)–4 Acquisition of foreign corporate stock or assets by a foreign corporation in certain nonrecognition transactions .

• • • • (e) [The text of proposed §1.367(b)–4(e) is the same as the text of §1.367(b)–4T(e) published elsewhere in this issue of the Bulletin].

(f) [The text of proposed §1.367(b)–4(f) is the same as the text of §1.367(b)–4T(f) published elsewhere in this issue of the Bulletin].

(g) [The text of proposed §1.367(b)–4(g) is the same as the text of §1.367(b)–4T(g) published elsewhere in this issue of the Bulletin].

Par. 4. Section 1.1248–1 is amended by revising paragraphs (b) and (g) to read as follows:

§1.1248–1 Treatment of gain from certain sales or exchanges of stock in certain foreign corporations.

• • • • (b) [The text of proposed §1.1248–1(b) is the same as the text of §1.1248–1T(b) published elsewhere in this issue of the Bulletin].
• • • • (g) [The text of proposed §1.1248–1(g) is the same as the text of §1.1248–1T(g) published elsewhere in this issue of the Bulletin].

DATES: Written or electronic comments and requests for a public hearing must be received by May 11, 2009.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–147636–08), room 5205, 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–147636–08), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–147636–08).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Sean W. Mullaney, (202) 622–3860; concerning submissions of comments or requests for a public hearing, Richard.A.Hurst@irscounsel.treas.gov ; at (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

Temporary regulations in this issue of the Bulletin amend the Income Tax Regulations (26 CFR part 1) relating to sections 304 and 1248 of the Code. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations.

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. These regulations are necessary to ensure that the appropriate amount of income (dividend income, capital gain or both) is recognized currently in the transactions described in the explanation of provisions section in this preamble. Accordingly, good cause is found for dispensing with notice and public comment pursuant to 5 U.S.C. 553(b) and (c) and with a delayed effective date

pursuant to 5 U.S.C. 553(d). For applicability of the Regulatory Flexibility Act, see the cross-referenced notice of proposed rulemaking published elsewhere in this Federal Register . Pursuant to section 7805(f) of the Code, these regulations have been 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

Comments are also requested regarding whether IRS and Treasury Department should exercise the regulatory authority under section 304(b)(6) to permit an increase to the basis of the transferred stock in a section 304(a)(1) transaction to the extent the distribution in redemption of the shares deemed issued by the acquiring corporation is treated as a dividend from the earnings and profits of the issuing corporation.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department specifically request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register .

Drafting Information

The principal author of these proposed regulations is Sean W. Mullaney of the Office of Associate Chief Counsel (International). 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 part 1 is proposed to be amended as follows:

March 2, 2009 642 2009–9 I.R.B.

Linda M. Kroening, Acting Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on February 10, 2009, 8:45 a.m., and published in the issue of the Federal Register for February 11, 2009, 74 F.R. 6840)

Taxpayer Identification Number (“TIN”) Matching Program Is Available to Persons Required to Make Returns Under New Section 6050W of the Internal Revenue Code

Announcement 2009–6

The Housing Assistance Tax Act of 2008, Div. C of Pub. L. No. 110–289, 122 Stat. 2653 (the “Act”), enacted on July 30, 2008, added section 6050W to the Internal Revenue Code. This new section requires information returns to be made for each calendar year by merchant acquiring entities and third party settlement organizations with respect to payment card transactions and third party payment network transactions occurring in that calendar year. This requirement to make information returns applies to returns for calendar years beginning after December 31, 2010. Section 3406(a)(1) requires certain payors to perform backup withholding by deducting and withholding income tax from a reportable payment if the payee fails to furnish the payee’s taxpayer identification number (“TIN”) to the payor on a required return, or if the Secretary notifies the payor that the TIN furnished by the payee is incorrect. The Act amended section 3406(b)(3) by expanding the meaning of “other reportable payments” that are subject to backup withholding to include payments that are required to be shown on an information return under section 6050W. Backup withholding for amounts reportable under section 6050W applies to amounts paid after December 31, 2011. The Act also amended section 6724(d) by adding returns required by section 6050W to the definition of information returns for purposes of penalties for failure to comply with certain information reporting requirements.

The Act further provides that, solely for purposes of carrying out TIN matching under section 3406, section 6050W is effective on the date of enactment, July 30, 2008. The TIN matching program described in Rev. Proc. 2003–9, 2003–1 C.B. 516, permits program participants to verify the payee TINs required to be reported on information returns and payee statements. Prior to making an information return, a participant may check the TIN furnished by the payee against the name/TIN combination contained in the IRS’s database maintained for the program, and the IRS will inform the participant whether or not the name/TIN combination furnished by the payee matches a name/TIN combination in the database. The matching information provided to participants will help avoid TIN errors and reduce the number of backup withholding notices required under section 3406(a)(1)(B) of the Code. A verified TIN/name match will also provide participants with reasonable cause relief from penalties under section 6724(a).

Accordingly, persons who will be required to make returns under section 6050W may now match TINs under the procedures established by Rev. Proc. 2003–9. The principal author of this announcement is Barbara M. Pettoni of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this announcement, please contact Barbara M. Pettoni at (202) 622–4910 (not a toll-free call). For technical information about, or problems with, the TIN matching program, please call 1–866–255–0654.

Foundations Status of Certain Organizations

Announcement 2009–9

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:

Alta Housing Corporation, Granbury, TX American Healthcare Foundation,

Newport Beach, CA Arrowhead Center for the Arts,

Eveleth, MN Bethel Baptist Economic Development,

Inc., Montgomery, AL Bexar County Youth in Action,

San Antonio, TX California State Youth Empowerment,

Inc., Vacaville, CA Caring Community, Inc., Burlington, IA Ceeatta’s Housing, Inc., Richmond, VA Charros La Esperanza, Inc.,

San Marcos, CA City of Marion Recreation Association,

Marion, SC Computer Homework Center,

Ferndale, MI Cortez Hill Interfaith Housing

Corporation, Lemon Grove, CA Educate for Life, Spring Valley, CA Evolve Project a Nonprofit Public Benefit

Corporation, Los Angeles, CA First Family, Inc., Baltimore, MD Freedom in Christ Ministries,

Brooksville, FL Future Executives, Inc., Brooklyn, NY Glory Ministries, Inc., Romulus, MI God’s Unique Angels Righteously

Designed, Inc., Arlington, TX Good Neighbor Food Service,

Paulden, AZ Heal America, Richmond Heights, OH In His Name, Justice, Education, and

Social Services, Washington, DC Jehovah Adult Daycare, Spartanburg, SC J E W Ministries, Lake City, SC Mawus Mothers and Childrens Home

Carson, CA Men In & Out of Schools, Inc.,

Riverdale, GA Multiple District 19 Lions Service &

Leadership Development Foundation, Bellington, WA National Land & Wildlife Preservation,

Inc., Gilmanton, NH

2009–9 I.R.B. 643 March 2, 2009

Nora’s Vision NFP, Chicago, IL Philanthropy International, Clarement, CA R & N Adult Daycare & Youth Center,

Hollandale, MS River City Small Business Connection,

Sacramento, CA Schoolbox Foundation Corp., Atlanta, GA Serena Bailey Foundation, Inc.,

Lakeland, FL Shannon’s Place, Inc., Non for Profit,

Chicago, IL Sturgeon Bay Breakfast Rotary Charitable

Tr, Irving, TX Successful Living Services, Westland, MI Transition Network, Stafford, TX Vida Support Services Parent & Youth

Counseling Organization, Whittier, CA Viet Vets Foundation, Inc., Houston, TX Zhinga-Wee-Thay, Inc., Irving, TX

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.

Deletions From Cumulative List of Organizations Contributions to Which are Deductible Under Section 170 of the Code

Announcement 2009–10

The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986. Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on March 2, 2009, and would end on the date the court first

determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.

Leszinski Family Support Organization

Atlanta, GA Kuumba Trust

Pittsburgh, PA Consumer Debt Management Services

Deerfield Beach, FL RealtyAmerica.Org, Inc.

Indian Harbour Beach, FL Consumer Budget Counseling, Inc.

Port Charlotte, FL Innovative Womens Network, Inc.

Houston, TX Ellen Stephen Hospice & Home Care

Kyle, SD Starfish Foundation, Inc.

Richardson, TX Ronsard Foundation

Statesville, NC Alternative Care, Inc.

Gainesville, FL Credit Counseling, Inc.

Sunrise, FL A New Goal Credit Counseling Agency

San Francisco, CA Trans-Atlantic Health Organization, Inc.

Gaithersburg, MD Ammend Credit Counseling and Debt

Consolidation Cincinnati, OH

March 2, 2009 644 2009–9 I.R.B.