SECTION 3. BACKGROUND

.01 Current Procedures Ordinarily, the Service will not issue a letter ruling on only part of an integrated transaction. Section 6.03 of Rev. Proc. 2009–1; Section 4.02(2) of Rev. Proc. 2009–3. If, however, a part of a transaction falls under a no-rule area, a letter ruling on other parts of the transaction may be issued. Where it is impossible for the Service to determine the tax consequences of a larger transaction without knowing the resolution of an issue on which the Service will not issue rulings under Rev. Proc. 2009–3, and the Service nevertheless rules on the larger transaction, then the taxpayer

granted under the contract as originally issued. Thus, for example, a death benefit increase does not cause a contract to be treated as a new contract if the increase is necessary to keep the contract in compliance with § 7702, or if the increase results from the application of policyholder dividends to purchase paid-up additions, or if the increase is the result of market performance or contract design with regard to a variable contract. Notice and consent are required if a contract is treated as a new contract by reason of a material increase in death benefit or other material change, unless a valid consent remains in effect with regard to the insured.

Q–15. Under what circumstances does § 101(j) apply to a contract that is received after August 17, 2006, in an exchange for an employer-owned life insurance contract issued on or before that date?

A–15. Section 863(d) of the PPA provides that § 101(j) generally does not apply to a contract issued after August 17, 2006 in an exchange described in § 1035 for a contract issued on or before that date. Section 863(d) also provides that, for purposes of determining when a contract is issued, a material increase in the death benefit or other material change generally causes the contract to be treated as a new contract. A § 1035 exchange that results in a material increase in death benefit or other material change (other than a change in issuer) is treated as the issuance of a new contract after August 17, 2006 for purposes of determining whether § 101(j) applies to the contract. See A–14, this Notice.

Q–16. Under what circumstances is notice and consent required with regard to a contract received in a § 1035 exchange for an employer-owned life insurance contract issued after August 17, 2006, for which the notice and consent requirements were previously satisfied?

A–16. No further notice and consent are required if either (1) the existing consent remains valid (see A–9, this Notice), or (2) the exchange does not result in a material change in the death benefit or other material change in the contract. The same standards apply to determine whether a change is “material” for this purpose as apply to determine whether an exchange results in a material increase in death benefit or other material change under the transition rule for purposes of determining

whether § 101(j) applies to a contract. See A–14, this Notice.

Information Reporting under Section 6039I and Form 8925

Section 6039I and Form 8925 require that every applicable policyholder owning 1 or more employer-owned life insurance contracts issued after August 17, 2006, provide the following information showing for each year the contracts are owned: (1) the number of employees of the applicable policyholder at the end of the year; (2) the number of such employees insured under such contracts; (3) the total amount of insurance in force at the end of the year under such contracts; (4) the name, address, and identifying number of the applicable policyholder and the type of business in which the policyholder is engaged; and (5) that the applicable policyholder has a valid consent for each insured employee (or, if all such consents are not obtained, the number of employees for whom such consent was not obtained).

Q–17. Are there circumstances under which more than one taxpayer may be required to file Form 8925 by reason of the same employer-owned life insurance contract?

A–17. Section 6039I requires that a return be filed by “every applicable policyholder owning 1 or more employer-owned life insurance contracts issued after the date of enactment.” Section 6039I(c) provides that any term used in § 6039I that is also used in § 101(j) has the same meaning given the term by § 101(j). Under § 101(j)(3)(B)(i), the term “applicable policyholder” is generally the owner of the employer-owned life insurance contract. Although § 101(j)(3)(B)(ii) also includes certain related persons in the definition of “applicable policyholder,” those related persons are not the applicable policyholders who own the contracts. Only the applicable policyholder “owning 1 or more employer-owned life insurance contracts” is required to file Form 8925.

EFFECTIVE DATE

This Notice is effective June 15, 2009. The Service will not challenge a taxpayer who made a good faith effort to comply with § 101(j) based on a reasonable interpretation of that provision before that date.

June 15, 2009 1088 2009–24 I.R.B.

requests for rulings made pursuant to this revenue procedure. See, for example, Rev. Proc. 2003–48, 2003–2 C.B. 86 (no-rule policy regarding business purpose and device issues under § 355, and § 355(e) plan issues). In addition, the Service will not grant a ruling on a significant non-plan issue or issues under § 355(e) unless an adverse ruling on such non-plan issue or issues would result in there being a direct or indirect acquisition by one or more persons of stock representing a 50-percent or greater interest in the distributing corporation or the controlled corporation that is part of a plan under § 355(e). With respect to ruling requests regarding the effect of a redemption under section 355(e), the Service will entertain such requests under the conditions described in sections 5.09 and 5.10 of this revenue procedure. Rev. Proc. 2009–3 is amplified to reflect these policies.

The Service will, if requested, endeavor to issue letter rulings requested pursuant to this revenue procedure within ten weeks from receipt of the request, provided that the request meets the requirements of sections 7.02(4) and 8.05(1) of Rev. Proc. 2009–1 as amplified by this revenue procedure.

The ruling program under this revenue procedure is a pilot program that applies to ruling requests postmarked or, if not mailed, received after May 4, 2009. This pilot program will be evaluated by the Service periodically.