Part IV. Items — Internal Revenue Bulletin 2010-4

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Amendments to the Section 7216 Regulations—Disclosure or Use of Information by Preparers of Returns

REG–131028–09

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 is issuing temporary regulations (T.D. 9478) that provide updated guidance affecting tax return preparers regarding the use of information related to lists for solicitation of tax return business; the disclosure or use of statistical compilations of data under section 7216 of the Internal Revenue Code (Code) by a tax return preparer in connection with, or in support of, a tax return preparer’s tax return preparation business, including identification of additional limited circumstances when a tax return preparer who compiles statistical information may disclose the compilation without taxpayer consent, and the placement of additional restrictions on the content of the compilation that may be disclosed under those circumstances without taxpayer consent; and the disclosure or use of information for the purpose of performing conflict reviews. The text of those temporary regulations also serves as the text of these proposed regulations. This document invites comments from the public on these regulations.

DATES: Written or electronic comments and requests for a public hearing must be received by March 5, 2010.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–131028–09), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 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–131028–09), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C., or sent electronically, via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–131028–09).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Molly K. Donnelly, (202) 622–4940; concerning the submissions of comments and requests for hearing, Richard Hurst, (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

This document contains proposed amendments to 26 CFR part 301 under section 7216 to provide modified rules relating to the ability of a tax return preparer to use tax return information, without taxpayer consent, for the purposes of compiling, maintaining, and using lists for solicitation of tax return business under §301.7216–2(n); disclose and use statistical compilations of data described in §301.7216–1(b)(3)(i)(B) under §301.7216–2(o), and disclose and use tax return information for the purpose of performing conflict reviews under §301.7216–2(p). Temporary regulations in the Procedure and Administration section of this issue of the Bulletin amend 26 CFR part 301. The text of those regulations also serves as the text of these 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. 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 the regulation does

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 Code, this regulation has 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

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 IRS and the Treasury Department request comments on the clarity of the proposed rules, how they can be made easier to understand, and the administrability of the rules in the proposed regulations. All comments will be made 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 regulations is Molly K. Donnelly, 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 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 301.7216–2 is amended by revising paragraphs (n), (o), and (p) to read as follows:

2010–4 I.R.B. 332 January 25, 2010

Background

A change in funding method can occur when the business organization providing actuarial services to a plan modifies its valuation software. A change in funding method can also occur when the enrolled actuary and business organization providing actuarial services for a plan is changed and the new enrolled actuary uses different valuation software than the prior enrolled actuary, or otherwise applies the overall funding method in a different manner (plans for which both the enrolled actuary and the business organization providing actuarial services are changed are referred to as “takeover plans”).

Under § 412(c)(5) of the Code (and its counterpart in section 302(c)(5) of ERISA) as in effect prior to PPA ‘06, any change of funding method required the approval of the Secretary. Revenue Procedure 2000–40, 2000–2 C.B. 357, provided automatic approval for certain changes in funding method resulting from changes in valuation software (section 4.04) and for changes in funding method that occurred with respect to takeover plans (section 4.03). With respect to changes in funding method resulting from changes in valuation software, Revenue Procedure 2000–40 provided approval for the changes if: (1) net charges to the funding standard account determined using the new valuation software did not differ by more than 2% from the net charges determined using the old valuation software (the “pre-PPA 2% test”); (2) the modification to the computations in the valuation software or the use of a different valuation software system were designed to produce results that were no less accurate than the results produced prior to the modification or change; and (3) the approval for takeover plans described in the next paragraph was not applicable.

With respect to takeover plans, Revenue Procedure 2000–40 provided approval for changes in funding method if: (1) there was both a change in the enrolled actuary for the plan and a change in the business organization providing actuarial services to the plan; and (2) the method used by the new actuary was applied to the prior plan year and that the absolute value of each resulting difference in normal cost, accrued liability (if directly computed under the method), and actuarial value of

§301.7216–2 Permissible disclosures or uses without consent of the taxpayer .

- - - (n) [The text of proposed amendments to §301.7216–2(n) is the same as the text for §301.7216–2T(n) published elsewhere in this issue of the Bulletin].

(o) [The text of proposed amendments to §301.7216–2(o) is the same as the text for §301.7216–2T(o) published elsewhere in this issue of the Bulletin].

(p) [The text of proposed amendments to §301.7216–2(p) is the same as the text for §301.7216–2T(p) published elsewhere in this issue of the Bulletin].

Steven T. Miller, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on December 29, 2009, 4:15 p.m., and published in the issue of the Federal Register for January 4, 2010, 75 F.R. 94)

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

Announcement 2010–1

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 January 25, 2010, 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.

Call of the Wild Sportsmen, Inc

Mt Airy, MD

Automatic Approval of Changes in Funding Method for Takeover Plans and Changes in Pension Valuation Software

Announcement 2010–3

This announcement provides, for plan years beginning on or after January 1, 2009, automatic approval for certain changes in funding method with respect to single-employer defined benefit plans that result either from a change in the valuation software used to determine the liabilities for such plans or from a change in the enrolled actuary and the business organization providing actuarial services to the plan. This guidance is being provided in response to numerous requests from actuaries and plan sponsors, many of whom are continuing to modify their valuation software in order to implement the changes to the funding rules made by the Pension Protection Act of 2006 (PPA ’06), the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA ’08), and guidance regarding these legislative changes.

January 25, 2010 333 2010–4 I.R.B.

Conditions (2), (3), and (4) are each applied by disregarding any change in funding method for which approval has been automatically provided (without regard to this announcement) for the current plan year. For example, automatic approval is provided under § 1.430(d)–1(g)(3)(ii)(C) for changes in the allocation of liabilities that are necessary to apply the rules of § 1.430(d)–1(c)(1)(iii) for a plan year beginning before January 1, 2010. Thus, if such a change in funding method is made for a takeover plan for the 2009 plan year, the 5% test of condition (3) with respect to the prior plan year (2008) is determined using the allocation of liabilities used by the prior enrolled actuary.

For plan years beginning on or after January 1, 2009, automatic approval is provided for any change in funding method under § 430 resulting from a change in valuation software if the following conditions are satisfied:

(1) There has not been both a change in the enrolled actuary for the plan and a change in the business organization providing actuarial services to the plan;

(2) Except to the extent automatic approval has been provided for a change in funding method without regard to this announcement, the underlying method is unchanged and is consistent with the information contained in the prior actuarial valuation report and prior Schedule SB of Form 5500;

(3) The new valuation software is generally used by the enrolled actuary for the single-employer plans to which the enrolled actuary provides actuarial services;

(4) The funding target and target normal cost (without regard to any adjustments for employee contributions and plan-related expenses) under the new valuation software (for either the current plan year or the prior plan year) are each within 2% of the respective values under the prior valuation software (all other factors being held constant);

(5) For plan years beginning on or after January 1, 2011, the actuarial value of assets for the plan under the new valuation software (for either the current plan year or the prior plan year) is within 2% of the value under the prior valuation software (all other factors being held constant); and

(6) The modifications to the computations in the valuation software or the use of a different valuation software system are

assets, that was attributable to the change in method did not exceed 5% of the respective amounts calculated by the prior actuary for that prior year (the “pre-PPA 5% test”).

PPA ‘06 Funding Rules

Section 412 of the Code and section 302 of ERISA, as amended by PPA ‘06, retain the requirement that a change in funding method be approved by the Secretary. Under PPA ‘06, a single funding method must be used for any singleemployer defined benefit plan, but there may be some variation in the manner the method is applied. Final regulations were issued under § 430 on October 15, 2009, T.D. 9467, 2009–50 I.R.B. 760, 74 FR 53004, (the “October 2009 regulations”) and are generally effective for plan years beginning on or after January 1, 2010. Under § 1.430(d)–1(f)(1)(iv) of the October 2009 regulations, a plan’s funding method includes not only the overall funding method used by the plan, but also each specific method of computation used in applying the overall method. Accordingly, a change in valuation software can result in a change in funding method that requires the approval of the Secretary.

The October 2009 regulations provide approval for a number of changes in funding method and for changes in the interest rate. For the first plan year beginning on or after January 1, 2008, any changes in funding method that are not inconsistent with the requirements of § 430 are treated as having been approved by the Commissioner and do not require specific prior approval. For plan years beginning in 2009 and 2010, certain changes in funding method (concerning the methodology of allocating liabilities to years, the selection of the valuation date, and the selection of the asset valuation method) and in the selection of interest rates are also approved. Section 1.430(d)–1(g)(3) provides general approval for a change in funding method (which would include a change in funding method resulting from a change in valuation software) for the first plan year beginning on or after January 1, 2010. However, if certain sections of the regulations were applied to a plan for a plan year beginning on or after January 1, 2009, but before January 1, 2010, approval is provided with respect to such a plan for a change in fund

ing method (including a change in funding method resulting from a change in valuation software) for that plan year, in lieu of the general approval for changes for the first plan year beginning on or after January 1, 2010.

Even though approval was provided for certain changes for the 2009 and 2010 plan years, actuaries and plan sponsors have expressed concern that changes in valuation software may encompass changes in funding method for which the October 2009 regulations do not provide automatic approval. Furthermore, forthcoming regulations under § 430 may result in additional changes in valuation software.

Revenue Procedure 2000–40 has not been updated to reflect the changes made by PPA ‘06. Moreover, the calculations that were used for the pre-PPA 2% test and the pre-PPA 5% test are not used under § 430 of the Code and section 303 of ERISA.

Automatic Approval for Takeover Plans and Valuation Software Changes

For plan years beginning on or after January 1, 2009, automatic approval is provided for any change in funding method under § 430 if the following conditions are satisfied:

(1) There has been a change both in the enrolled actuary for the plan and in the business organization providing actuarial services to the plan;

(2) The new method is substantially the same as the method used by the prior enrolled actuary and is consistent with the description of the method contained in the prior actuarial valuation report or prior Schedule SB of Form 5500;

(3) The funding target and target normal cost (without regard to any adjustments for employee contributions and plan-related expenses), as determined for the prior plan year by the new enrolled actuary (using the actuarial assumptions of the prior enrolled actuary), are both within 5% of those values as determined by the prior enrolled actuary; and

(4) For plan years beginning on or after January 1, 2011, the actuarial value of plan assets, as determined for the prior plan year by the new enrolled actuary (using the actuarial assumptions of the prior enrolled actuary), is within 5% of the value as determined by the prior enrolled actuary.

2010–4 I.R.B. 334 January 25, 2010

designed to produce results that are no less accurate than the results produced prior to the modifications or change.

The automatic approval provided by this announcement will apply until it is superseded by future guidance.

The principal authors of this announcement are James E. Holland, Jr. and

Carolyn E. Zimmerman of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this announcement, please email RetirementPlanQuestions@irs.gov .

January 25, 2010 335 2010–4 I.R.B.