Part III. Administrative, Procedural, and Miscellaneous

FBAR Filing Requirements

— Extended Filing Date for U.S. Persons Having Signature Authority Over, But No Financial Interest In, a Foreign Financial Account, and for U.S. Persons with Financial Interest In, or Signature Authority Over, Foreign Commingled Funds: Request for Public Comments on FBAR Filing Requirements

Notice 2009–62

I. Background and Purpose

The Report of Foreign Bank and Financial Accounts, Form TD F 90–22.1 (hereinafter referred to as “FBAR”), provides necessary information for certain governmental agencies. Information on the FBAR may be used in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism. This governmental need for information is balanced with the administrative concerns presented by the filing of the information by U.S. persons.

In October 2008, the IRS revised the FBAR and the accompanying instructions. On June 5, 2009, the IRS issued Announcement 2009–51, 2009–25 I.R.B. 1105, which stated that the IRS is temporarily suspending the filing requirement of the FBAR for those persons who are not U.S. citizens, residents, or domestic entities. On May 6, 2009 and June 24, 2009, the IRS posted questions and answers (Q&As–9 and –43, respectively) on its public website ( www.irs.gov ) that provide relief to certain persons who only recently learned of their obligation to file an FBAR by setting forth conditions and procedures for filing Form TD F 90–22.1 by September 23, 2009. More information concerning this relief is available at http://www.irs.gov/newsroom/article/ 0,,id=210027,00.html . This notice provides additional administrative relief for (i) persons with no financial interest

in a foreign financial account but with signature or other authority over the foreign financial account (hereinafter referred to as “signature authority”), and (ii) persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund (hereinafter referred to as “foreign commingled funds”). The Department of the Treasury intends to issue regulations clarifying the FBAR filing requirements pertaining to those persons with respect to these foreign financial accounts, and solicits comments related to these FBAR filing requirements in this notice.

II. Extended Filing Date for Specified Persons

A. Current FBAR Instructions

The current instructions to the FBAR provide, with certain exceptions, that U.S. persons that have signature authority over, but no financial interest in, a foreign financial account are required to file an FBAR. These persons must report the account on an FBAR even if the foreign financial account is reported on an FBAR filed by the owner of the account (or other person that has a financial interest in the account).

The current instructions to the FBAR also provide that a foreign financial account that must be reported on an FBAR includes any bank, securities, securities derivatives, or other financial instruments account. The FBAR instructions further provide that those accounts “generally also encompass any accounts in which the assets are held in a commingled fund and the account owner holds an equity interest in the fund (including mutual funds).”

The current instructions to the FBAR also provide that Form TD F 90–22.1 with respect to a given calendar year must be filed with the Department of the Treasury on or before June 30 of the succeeding year. Thus, except as provided in the prior relief granted by the IRS on its public website and the relief granted in this notice, FBARs with respect to the 2008 calendar year should have been filed on or before June 30, 2009.

B. Extended Date for Filing an FBAR

In light of the additional time needed for the Department of the Treasury to address issues pertaining to FBAR filing requirements and the need to provide administrative relief for (i) persons with signature authority over, but no financial interest in, a foreign financial account, and (ii) persons with a financial interest in, or signature authority over, a foreign commingled fund, this notice provides that those persons have until June 30, 2010, to file an FBAR for the 2008 and earlier calendar years with respect to these foreign financial accounts. Thus, eligible persons that avail themselves of the administrative relief provided in this notice may need to file FBARs for the 2008, 2009 and earlier calendar years on or before June 30, 2010, to the extent provided in future guidance.

The FBAR filing extension provided by this notice applies to FBARs with respect to 2008 and earlier calendar years. For (i) persons with signature authority over, but no financial interest in, a foreign financial account, and (ii) persons with a financial interest in, or signature authority over, a foreign commingled fund, the FBAR filing extension provided in this notice supplements the filing extension to September 23, 2009, previously provided by the IRS on its public website.

III. Request for Public Comments

The Department of the Treasury is interested in receiving comments on the following issues affecting a person’s FBAR filing obligation.

The Department of the Treasury requests comments regarding when a person with signature authority over, but no financial interest in, a foreign financial account should be relieved of filing an FBAR for the account. For example, comments are requested regarding whether relief from filing would be appropriate if a person with a financial interest in the account has filed an FBAR.

The Department of the Treasury requests comments discussing in what circumstances the exception from FBAR filing currently available for officers and employees of banks and certain publicly-traded domestic companies might be

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expanded to apply to all officers and employees with only signature authority over, and no financial interest in, an employer’s foreign financial account, including circumstances in which an individual has been advised that an FBAR has been filed with respect to a foreign financial account for which that person has signature authority. The Department of the Treasury also requests comments discussing how the bank and publicly-traded company exception (including the requirement of notification that an FBAR was filed by a U.S. person with a financial interest in the account) might apply to officers and employees with only signature authority over accounts owned by clients of their employer.

The Department of the Treasury requests comments concerning when an interest in a foreign entity ( e.g., a corporation, partnership, trust, or estate) should be subject to FBAR reporting. For example, comments are requested regarding the possibility of applying the principles of sections 1297 and 1298(b) of the Internal Revenue Code to determine when an interest in a foreign entity should be subject to FBAR reporting. Comments are also requested regarding whether the passive asset and passive income thresholds of 50 percent and 75 percent, respectively, are appropriate and whether the tests should apply conjunctively.

The Department of the Treasury also requests comments on whether a U.S. person should be relieved from an FBAR filing requirement with respect to a foreign commingled fund in other circumstances, such as when filing would be duplicative of other reporting.

Interested persons should submit comments and suggestions with respect to the guidance on FBAR reporting in this notice by October 6, 2009, to:

Internal Revenue Service Attn: CC:PA:LPD:PR

(Notice 2009–62) Room 5203 P.O. Box 7604 Ben Franklin Station Washington, D.C. 20044

or hand deliver comments Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Courier’s Desk Internal Revenue Service Attn: CC:PA:LPD:PR

(Notice 2009–62) 1111 Constitution Avenue, N.W. Washington, D.C. 20224

A copy of those comments should also be sent to:

Financial Crimes Enforcement

Network Department of the Treasury P.O. Box 39 Vienna, VA 22183

Alternatively, the public may submit comments electronically via e-mail to the following address: Notice.Comments@irscounsel.treas.gov with a copy to regcomments@fincen.gov . Respondents should include “Notice 2009–62” in the subject line of any comment submitted.

All comments submitted by the public will be made available for public inspection and copying in their entirety.

IV. Effective Date

This notice applies to FBARs (Form TD F 90–22.1) with respect to calendar year 2008 and prior calendar years.

V. Contact Information

For further information regarding the relief relating to signature authority, contact Terra-Lynn Zentara at (202) 283–7659 (not a toll-free call). For further information regarding foreign commingled funds, contact Joseph Henderson at (202) 622–3446 (not a toll-free call).

Section 51 — Work Opportunity Tax Credit

Notice 2009–69

PURPOSE

This notice clarifies Notice 2009–28, 2009–24 I.R.B. 1082, published on June 15, 2009. As explained in Notice 2009–28, § 51 of the Internal Revenue Code (the Code) provides for a Work Opportunity

Tax Credit (WOTC) for employers who hire individuals who are members of targeted groups. Section 1221 of the American Recovery and Reinvestment Tax Act of 2009 (ARRTA), enacted February 17, 2009, Div. B, Tit. I of Pub. L. No. 111–5, amended § 51 to add two new targeted groups for purposes of the WOTC. New § 51(d)(14) provides that unemployed veterans and disconnected youth who begin work for an employer during 2009 or 2010 shall be treated as members of a targeted group for purposes of the WOTC.

Notice 2009–28 sets forth the statutory definitions of “unemployed veteran” and “disconnected youth,” and provides guidance on the definition of “disconnected youth.” With respect to “disconnected youth,” Notice 2009–28 is being revised to clarify § 51(d)(14)(B)(ii)(IV), the definition of “not readily employable by reason of lacking a sufficient number of basic skills.”

Section D of Notice 2009–28 is therefore revised to read as follows:

For purposes of § 51(d)(14)(B)(ii)(IV), an individual is not readily employable by reason of lacking a sufficient number of basic skills if the individual states in writing that he or she does not have a certificate of graduation from a secondary school or a GED Certificate. For purposes of § 51(d)(14)(B)(ii)(IV), an individual also is not readily employable by reason of lacking a sufficient number of basic skills if the individual states in writing that he or she has a certificate of graduation from a secondary school or a GED Certificate that was awarded no less than 6 months preceding his or her hiring date and has not held a job (other than occasionally) or been admitted to a technical school or post-secondary school since receiving the certificate. This clarifies that an individual who received a high school diploma or GED certificate at least six months prior to the hiring date and who otherwise satisfies the requirements for a disconnected youth will not fail to qualify as a disconnected youth merely because the individual has been employed at times since graduation, as long as that employment was no more than occasional.

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TRANSITION RELIEF

Section 51(d)(13) provides that an individual shall not be treated as a member of a targeted group unless the employer obtains certification from a designated local agency on or before the day the individual begins work that the individual is a member of a targeted group or completes a pre-screening notice (IRS Form 8850) on or before the day the individual is offered employment and submits such notice to the designated local agency to request certification not later than 28 days after the individual begins work. Notice 2009–28 provides that any employer who hires an unemployed veteran or a disconnected youth (as defined in § 51(d)(14)) after December 31, 2008, and before July 17, 2009, will be considered to satisfy the deadline in § 51(d)(13)(A)(ii)(II) if the employer submits the pre-screening notice to the designated local agency to request certification not later than August 17, 2009. This notice extends the transition relief in Notice 2009–28. Specifically, under this notice, any employer who hires an unemployed veteran or disconnected youth (as defined in § 51(d)(14)) after December 31, 2008, and before September 17, 2009, will be considered to satisfy the deadline in § 51(d)(13)(A)(ii)(II) if the employer submits the pre-screening notice to the designated local agency to request certification not later than October 17, 2009.

EFFECT ON OTHER DOCUMENTS

Notice 2009–28, 2009–24 I.R.B. 1082, is clarified.

DRAFTING INFORMATION

The principal author of this notice is Robin Ehrenberg of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other individuals participated in its development. For further information regarding this notice, contact Ms. Ehrenberg at (202) 622–6080 (not a toll-free call).

Special Rules Governing Eligible Combined Plans

Notice 2009–71

I. PURPOSE

The Treasury Department and the Internal Revenue Service plan to issue guidance relating to eligible combined plans under § 414(x) of the Internal Revenue Code (Code). Section 414(x) was added by section 903(a) of the Pension Protection Act of 2006, Public Law 109–280, 120 Stat. 780 (PPA ’06), effective for plan years beginning after December 31, 2009, and amended by section 109(c) of the Worker, Retiree, and Employer Recovery Act of 2008, Public Law 110–458, 122 Stat. 5092 (WRERA). An eligible combined plan provides a vehicle through which an employer can maintain both a defined contribution plan and a defined benefit plan on a combined basis, thus reducing the administrative burdens and costs of maintaining separate plans. This notice requests comments on issues presented by § 414(x) of the Code with respect to eligible combined plans.

II. BACKGROUND

In general

Qualified retirement plans are subject to various requirements under the Code. Whether a particular requirement applies, or how a particular requirement applies, may depend on whether the plan is a defined contribution plan or a defined benefit plan. These requirements include nondiscrimination with respect to contributions or benefits under § 401(a)(4), vesting under §§ 401(a)(7) and 411, survivor annuity requirements under § 401(a)(11), limits on contributions and benefits under §§ 401(a)(16) and 415, and minimum funding standards under § 412.

Under § 414(i), a “defined contribution plan” is a plan that provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures allocated to the participant’s account. Under § 414(j), a “defined benefit plan” is any plan that is not a defined contribution plan. Under § 414(k), a

defined benefit plan that provides a benefit derived from employer contributions based partly on the balance of a participant’s separate account is treated as a defined contribution plan for certain purposes and as a defined benefit plan for other purposes.

Certain defined contribution plans may include a qualified cash or deferred arrangement under § 401(k). A qualified cash or deferred arrangement is an arrangement: (1) under which an eligible employee may elect to have the employer make payments as contributions to the plan on behalf of the employee (referred to as “elective contributions”) or to make payments directly to the employee in cash; and (2) which meets certain other requirements. See § 401(k)(2) and § 1.401(k)–1(a)(4)(i) of the Income Tax Regulations. In some cases, a qualified cash or deferred arrangement is structured so that an eligible employee is treated as having elected to have the employer make elective contributions in a specified amount unless the employee elects to receive the amount directly in cash or to have the employer make elective contributions in a different amount (referred to as an “automatic contribution arrangement”).

Section 701 of PPA ’06 added new provisions to the Code relating to applicable defined benefit plans. Under § 411(a)(13)(C) of the Code, an “applicable defined benefit plan” is: (1) a defined benefit plan under which the accrued benefit (or any portion thereof) is calculated as the balance of a hypothetical account maintained for the participant or as an accumulated percentage of the participant’s final average compensation; or (2) to the extent provided under regulations, a defined benefit plan (or any portion of such a plan) that has a similar effect.

Section 6058 generally requires an employer maintaining a qualified retirement plan to file an annual return with respect to the plan. Section 6059 generally requires the plan administrator of a defined benefit plan to file an actuarial report with respect to the plan on a periodic basis. Form 5500, Annual Return/Report of Employee Bene- fit Plan, which consists of a primary form and various schedules, includes the information required to be filed under §§ 6058 and 6059, as well as information required to be reported to the Department of Labor and the Pension Benefit Guaranty Corpo

2009–35 I.R.B. 262 August 31, 2009

sion plans with separate participant accounts, do not apply to eligible combined plans.

Minimum benefits and vesting under defined benefit plan

Under § 414(x)(2)(B), the defined benefit plan that forms part of the eligible combined plan must provide each participant with a minimum employer-provided accrued benefit. The minimum benefit must be an annual retirement benefit that is not less than the applicable percentage of the participant’s final average pay. For this purpose, the applicable percentage is the lesser of: (1) 1 percent multiplied by the participant’s years of service with the employer or (2) 20 percent. Final average pay is determined using the period of consecutive years (not exceeding five) during which the participant had the greatest aggregate compensation from the employer.

A special rule applies in the case of an applicable defined benefit plan that meets certain interest credit requirements under § 411(b)(5)(B)(i). Such a plan is treated as meeting the minimum benefit requirement with respect to any plan year if, for the plan year, each participant receives a minimum pay credit to his or her hypothetical account. The minimum pay credit must be not less than the percentage of compensation applicable to the participant in accordance with the following table:

ration under the Employee Retirement Income Security Act of 1974, as amended, Public Law 93–406 (ERISA). The plan administrator generally satisfies annual reporting requirements with respect to each of the three agencies by filing the Form 5500.

Code § 414(x)

Section 414(x) of the Code, added by section 903(a) of PPA ’06 and amended by section 109(c) of WRERA, provides special rules for eligible combined plans. ¹

Definitions

Under § 414(x)(2)(A) of the Code, an “eligible combined plan” is a plan: (1) that is maintained by an employer that is a small employer at the time the plan is established; (2) that consists of a defined benefit plan and an applicable defined contribution plan; (3) the assets of which are held in a single trust forming part of the plan and are clearly identified and allocated to the defined benefit plan and the applicable defined contribution plan to the extent necessary for the separate application of the Code; and (4) that meets the benefit, contribution, vesting, and nondiscrimination requirements under § 414(x). Section 414(x)(2)(A) also provides that a “small employer” is generally an employer (taking into account the rules of § 414(b), (c), (m), and (o)) that employed an average

of at least 2 but not more than 500 employees on each business day during the preceding calendar year and who employs at least 2 employees on the first day of the plan year. In the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a small employer is based on the average number of employees it is reasonably expected the employer will employ on business days in the current calendar year. Section 414(x)(7) defines an “applicable defined contribution plan” as a defined contribution plan that includes a qualified cash or deferred arrangement.

Application of qualified plan requirements to eligible combined plans

Section 414(x)(1) provides that, except as otherwise provided in § 414(x), the requirements of the Code are applied to a defined benefit plan or applicable defined contribution plan that is part of an eligible combined plan in the same manner as if each such plan were not a part of the eligible combined plan. Further, in the case of the termination of both the defined benefit plan and the applicable defined contribution plan forming an eligible combined plan, the defined benefit plan and the applicable defined contribution plan must be terminated separately by the plan administrator. Under § 414(x)(6)(A), the rules of § 414(k), which determine the requirements applicable to defined benefit pen

part of the eligible combined plan must meet certain contribution requirements. In particular, the qualified cash or deferred arrangement included in such plan must constitute an automatic contribution arrangement. In addition, the employer must be required to make matching contributions on behalf of each employee eligible to participate in the qualified cash or deferred arrangement. To satisfy the basic matching contribution requirement

For purposes of the minimum benefit rules, years of service are determined under the rules of § 411(a)(4), (5), and (6), except that the plan may not disregard any year of service merely because a participant makes, or fails to make, any elective contributions under the qualified cash or deferred arrangement that is included in the applicable defined contribution plan that forms part of the eligible combined plan.

Under § 414(x)(2)(D), a participant must be fully vested in his or her employer-provided accrued benefit under the defined benefit plan after completion of three years of service.

Minimum contributions and vesting under applicable defined contribution plan

Under § 414(x)(2)(C), the applicable defined contribution plan that forms

1 Similarly, section 903(b) of PPA ’06 amends ERISA to add new section 210(e), which provides special rules for eligible combined plans.

August 31, 2009 263 2009–35 I.R.B.

addition, within a reasonable period before any year, each eligible employee must be given notice of the employee’s rights and obligations under the arrangement. The notice must be sufficiently accurate and comprehensive to apprise the employee of the employee’s rights and obligations and must be written in a manner calculated to be understood by the average eligible employee.

Reporting requirements

Section 414(x)(6)(B) provides that an eligible combined plan is treated as a single plan for purposes of §§ 6058 and 6059.

III. EFFECTIVE DATE

Section 414(x) is effective for plan years beginning after December 31, 2009. It is anticipated that the guidance under consideration in this notice would be prospective.

IV. COMMENTS REQUESTED

Written comments are requested regarding possible issues to be addressed in guidance under § 414(x).

Written comments should be submitted by October 15, 2009. Send submissions to CC:PA:LPD:PR, (Notice 2009–71), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. Comments may also be hand delivered Monday through Friday between the hours of 8 a.m. and 4:00 p.m. to: CC:PA:LPD:PR, (Notice 2009–71), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington DC. Alternatively, comments may be submitted via the Internet at notice.comments@irscounsel.treas.gov (Notice 2009–71). All comments will be available for public inspection.

DRAFTING INFORMATION

The principal author of this notice is Natalie Payne, formerly of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice, contact Qualified Plans Branch 1 of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) at (202) 622–6090 (not a toll-free number).

in § 414(x)(2)(C)(i)(II), matching contributions must be made in an amount equal to 50 percent of the elective contributions of the employee to the extent such elective contributions do not exceed 4 percent of compensation. Alternatively, the plan may provide for a different rate of matching contribution, provided that the rate of matching contribution does not increase as the participant’s rate of elective contribution increases, and the aggregate amount of matching contributions at each rate of elective contribution is no less than the aggregate amount of matching contributions that would be provided under the basic matching contribution requirement. In no case may the rate of matching contribution for any elective contribution of a highly compensated employee at any rate of elective contribution be higher than the rate of matching contribution for a nonhighly compensated employee.

The applicable defined contribution plan can also provide for nonelective employer contributions, but nonelective contributions are not taken into account in determining whether the matching contribution requirements are met.

Under § 414(x)(2)(D), all participants must be fully vested in any matching contributions provided under the applicable defined contribution plan, including any matching contributions exceeding required matching contributions. In addition, a participant must be fully vested in any nonelective contributions under the applicable defined contribution plan after completion of three years of service.

Other benefit and contribution requirements

Under § 414(x)(2)(E), all contributions and benefits under the defined benefit plan and applicable defined contribution plan forming part of the eligible combined plan, and all rights and features under each such plan, must be provided uniformly to all participants. Under § 414(x)(2)(F), the minimum benefit and contribution requirements applicable to the defined benefit plan and applicable defined contribution plan must be met without application of the permitted disparity rules under § 401(l). In addition, the defined benefit plan and applicable defined contribution plan must meet the nondiscrimination requirements under § 401(a)(4) and the minimum cover

age requirements under § 410(b) without application of the permitted disparity rules and without being combined with any other plan.

Nondiscrimination and top-heavy requirements

Under § 414(x)(3), a qualified cash or deferred arrangement that is included in the applicable defined contribution plan that forms part of an eligible combined plan and that meets the minimum contribution requirements described above is treated as meeting the actual deferral percentage test under § 401(k) on a safe harbor basis. In addition, in applying the safe harbor contribution percentage test for matching contributions under § 401(m)(11), the minimum contribution requirements described above and the notice requirements described below are substituted for the otherwise applicable minimum contribution and notice requirements.

Under § 414(x)(4), a defined benefit plan and applicable defined contribution plan forming part of an eligible combined plan for any plan year are treated as meeting the top-heavy requirements under § 416.

Automatic contribution and notice requirements

Under § 414(x)(5), the qualified cash or deferred arrangement that is included in an eligible combined plan is treated as an automatic contribution arrangement if it meets certain notice and election requirements and provides that each employee eligible to participate in the arrangement is treated as having elected to make elective contributions in an amount equal to 4 percent of the employee’s compensation unless the employee specifically elects not to have such contributions made or to have such contributions made at a different rate. Each employee eligible to participate in the qualified cash or deferred arrangement must receive a notice explaining the employee’s right under the arrangement to elect not to have elective contributions made on the employee’s behalf or to have the contributions made at a different rate. Each eligible employee must also have a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election. In

2009–35 I.R.B. 264 August 31, 2009

NOTE:

Following is a list of related instructions and forms for filing Form 1042-S Electronically:

nation of tax law associated with Form 1042-S)

The Internal Revenue Service (IRS), Enterprise Computing Center at Martinsburg (ECC-MTB) encourages filers to make copies of the blank forms in the back of this publication for future use . These forms can also be obtained by calling 1–800–TAX–FORM (1–800–829–3676). You can also download forms and publications from the IRS Web Site at www.irs.gov .

IMPORTANT NOTES:

Electronic filing will be the ONLY acceptable method for filing Form 1042-S at IRS/ECC-MTB. IRS/ECC-MTB offers an Internet connection at http://fire.irs.gov for electronic filing. The Filing Information Returns Electronically (FIRE) System will be down the week of December 22, 2009 through January 4, 2010 for upgrading. It is not operational during this time for submissions. In addition, the FIRE System may be down every Wednesday 3:00 a.m. to 5:00 a.m. EST for maintenance.

The Form 4419 is subject to review before the approval to transmit electronically is granted and may require additional documentation at the request of the IRS. If a determination is made concerning the validity of the documents transmitted electronically, IRS has the authority to revoke the Transmitter Control Code (TCC) and terminate the release of the files.

Rev. Proc. 2009–35

TABLE OF CONTENTS

Part A. General

SEC. 1. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

SEC. 2. NATURE OF CHANGES—CURRENT YEAR (TAX YEAR 2009 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267