Part IV. Items of General Interest

Notice of Proposed Rulemaking; Notice of Public Hearing; and Withdrawal of Previously Proposed Rulemaking

Guidance on Reporting Interest Paid to Nonresident Aliens

REG–146097–09

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking; notice of public hearing; and withdrawal of previously proposed rulemaking.

SUMMARY: This document contains proposed regulations that provide guidance on the reporting requirements for interest on deposits maintained at U.S. offices of certain financial institutions and paid to nonresident alien individuals. These proposed regulations affect persons making payments of interest with respect to such deposits. This document also provides a notice of public hearing on these proposed regulations and withdraws the notice of proposed rulemaking published on August 2, 2002 (REG–133254–02, 2002–2 C.B. 412 [67 FR 50386]).

DATES: Written or electronic comments must be received by April 7, 2011. Outlines of topics to be discussed at the public hearing scheduled for April 27, 2011, at 10 a.m. must be received by April 8, 2011. The proposed rule published on August 2, 2002 is withdrawn as of January 7, 2011.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–146097–09), room 5203, 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–146097–09), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20224 or sent electronically via the Federal eRulemaking

Portal at www.regulations.gov (IRS REG–146097–09). The public hearing will be held in auditorium of the Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Kathryn Holman, (202) 622–3840; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Richard.A.Hurst@irscounsel.treas.gov, (202) 622–7180 (not toll-free numbers).

Paperwork Reduction Act

The collections of information contained in this notice of proposed rulemaking have been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections of information should be sent to the Office of Management and Budget, Attn: Desk Office for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by March 8, 2011. Comments are specifically requested concerning:

Whether the proposed collection of information is necessary for the proper performance of the functions of the Internal Revenue Service, including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed collection of information;

How the quality, utility, and clarity of the information to be collected may be enhanced;

How the burden of complying with the proposed collections of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and

Estimates of capital or start-up costs and costs of operation, maintenance and purchase of service to provide information.

The collection of information in these proposed regulations is in §1.6049–4(b)(5)(i) and §1.6049–6(e)(4)(i) and (ii). This information is required to determine if taxpayers have properly reported amounts received as income. The collection of information is mandatory. The likely respondents are businesses and other for-profit institutions.

Estimated total annual reporting burden: 500 hours.

The estimated annual burden per respondent: 15 minutes.

Estimated number of respondents: 2,000. Estimated annual frequency of responses: Annually.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential as required by 26 U.S.C. 6103.

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

On January 17, 2001, the IRS and Treasury Department published a notice of proposed rulemaking (REG–126100–00, 2001–1 C.B. 862) in the Federal Register (66 FR 3925, corrected by 66 FR 15820 and 66 FR 16019) under Section 6049 (the 2001 proposed regulations), which would provide that U.S. bank deposit interest paid to any nonresident alien individual must be reported annually to the IRS. On August 2, 2002, the Treasury Department and the IRS published a notice of proposed rulemaking (REG–133254–02) in the Federal Register (67 FR 50386) which withdrew these regulations and proposed narrower regulations (the 2002 regulations) that would require reporting only on interest payments to nonresident

February 22, 2011 516 2011–8 I.R.B.

enue of approximately $91,626,050,000, 17,984 credit unions with revenue of approximately $55,521,199,000, and 30,989 NAICS Code securities brokerages with revenue of approximately $167,337,807,000. It is estimated that approximately 25,000 commercial banks, 4,000 savings banks, and 4,000 credit unions with less than $175,000,000 in assets, and 15,000 securities brokerages with receipts of less than $7,000,000 that would be classified as small businesses.

Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. Section 605, the Chief Counsel certifies that this rule will not have a significant economic impact on a substantial number of small entities. This conclusion is based on all of the following. The depository accounts, the interest on which is subject to reporting under these regulations, tend to be with larger financial institutions operating in the United States, and therefore the number of small entities that will be required to undertake this collection of information is expected to be limited. Banks are already required to gather the underlying information from nonresident aliens on Form W–8, so there will be no change in the collection of information. Currently under the 2002 regulations, banks, including small financial institutions, are required to report this information to the IRS with respect to Canadian account holders. This rule would simply extend the reporting requirement to all nonresident aliens. The reporting required by this rule would be done on Form 1042 and Form 1042–S. This rule also requires that institutions prepare and deliver a statement to nonresident alien individuals to the effect that the information on the 1042 form is being furnished to the IRS and may be furnished to the government of the foreign country where the recipient resides. The amount of time required to complete the Form 1042 and Form 1042–S is brief, and the statement that is required to be collected is brief.

The IRS requests information regarding the economic impact of this rule on small commercial banks, savings institutions, credit unions, and small securities brokerages engaged in business involving payment of bank deposit interest to a nonresident alien. The IRS invites specific comments on the economic impact of compliance from members of the public who believe there will be a significant

alien individuals that are residents of certain designated countries or, at the option of the payor, on interest payments to all nonresident alien recipients of bank deposit interest. Under the 2002 regulations currently in effect, reporting of U.S. bank deposit interest is required only if the interest is paid to a U.S. person or a nonresident alien individual who is a resident of Canada. These proposed regulations withdraw the 2002 regulations and provide new proposed regulations that extend the information reporting requirement to include bank deposit interest paid to nonresident alien individuals who are residents of any foreign country.

This extension is appropriate for several reasons. First, since the 2002 proposed regulations were released, there is a growing global consensus regarding the importance of cooperative information exchange for tax purposes that has developed. Significant agreements have been reached on international standards for the exchange of information, including, for example, the understanding that information exchange will not be limited by bank secrecy or the absence of a domestic tax interest. Second, requiring routine reporting to the IRS of all U.S. bank deposit interest paid to any nonresident alien individual will further strengthen the United States exchange of information program, consistent with adequate provisions for reciprocity, usability, and confidentiality in respect of this information. Finally, this extension will help to improve voluntary compliance by U.S. taxpayers by making it more difficult to avoid the U.S. information reporting system (such as through false claims of foreign status).

In addition to requiring reporting of U.S. bank deposit interest paid to any nonresident alien individual, the proposed regulations also make the following minor changes and clarifications. Section 1.6049–6 provides that a copy of Form 1042–S, “ Foreign Person’s U.S. Source Income Subject to Withholding ”, must be furnished to the recipient for interest paid on deposits maintained at a bank’s office within the United States. Section 1.6049–6(e)(4) has been revised to clarify that the payor or middleman can satisfy this requirement by furnishing a copy of Form 1042–S either in person or to the last known address of the recipient.

Proposed Effective Date

These regulations are proposed to apply to payments made after December 31 of the year in which they are published as final 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 this regulation.

These regulations impose a collection of information on small entities, and the Regulatory Flexibility Act (5 U.S.C. chapter 6) applies. This rule regulates commercial banks, savings institutions, credit unions, and securities brokerages. The Small Business Administration (SBA) has established size standards for types of economic activities which are classified based on the North American Industry Classification Codes (NAICS). The regulations specifying size standards are set forth in Title 13, Code of Federal Regulations, part 121 (13 CFR part 121), Small Business Size Regulations. The NAICS Code for small commercial banks, savings institutions, credit unions, and securities brokerages is specified at 13 CFR 121.201. Pursuant to subsectors 522110, 522120, and 522130 of NAICS 2007, a small commercial bank, savings institution, or credit union is one with $175 million or less in assets. Pursuant to subsector 523120 of NAICS 2007, a small securities brokerage is one with receipts of less than $7 million. Because this rule will affect all institutions that maintain accounts for nonresident alien individuals, this rule may affect a substantial number of small entities.

The U.S. Census Bureau American FactFinder provides data based on the 2007 Economic Census released November 24, 2009 including the number of establishments and the annual revenue of the establishments within each NAICS Code. According to this data, for Sector 52: ECO752I1: Finance and Insurance Industry Series, there were 94,192 commercial banking establishments with revenue of approximately $609,748,098,000, 16,098 savings institutions with rev

2011–8 I.R.B. 517 February 22, 2011

rules pursuant to a treaty or executive agreement for uniform formatting, standards for sharing information, and for usability, reciprocity, and confidentiality of taxpayer information.

(ii) Effective/applicability date . Paragraph (b)(5)(i) of this section shall be effective for payments made after December 31 of the year in which the final regulations are published in the Federal Register . (For interest paid to a Canadian nonresident alien individual on or before December 31 of the year in which final regulations are published in the Federal Register, see paragraph (b)(5) of this section as in effect and contained in 26 CFR part 1 revised April 1, 2000.)

• • • • Par. 3. Section 1.6049–5 is amended as follows:

1. In paragraph (b)(12) the last sentence is revised.

2. In paragraph (f) the last sentence is revised.

The revisions read as follows:

§1.6049–5 Interest and original issue discount subject to reporting after December 31, 1982.

• • • • (b) - * (12) - - - This paragraph (b)(12) does not apply to interest paid after December 31 of the year in which the final regulations are published in the Federal Register to a nonresident alien individual as provided in §1.6049–8.
• • • • (f) - - - Original issue discount on an obligation (including an obligation with a maturity of not more than 6 months from the date of original issue) held by a nonresident alien individual or foreign corporation is interest described in paragraph (b)(1)(vi)(A) or (B) of this section and, therefore is not interest subject to reporting under section 6049 unless it is described in §1.6049–8(a) (relating to bank deposit interest paid after December 31 of the year in which the final regulations are published in the Federal Register to a nonresident alien individual).
• • • • Par. 4. Section 1.6049–6 is amended as follows:

1. Paragraph (e)(4) is revised.

economic impact on small businesses that are regulated by this rule. Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel of Advocacy of the Small Business Administration for comment on its impact on small businesses.

Comments and Public Hearing

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 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 has been scheduled for April 27, 2011, beginning at 10 a.m. in the auditorium of the Internal Revenue Building, 1111 Constitution Avenue, NW, 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 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 electronic or written 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 April 8, 2011. 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 the regulations is Kathryn Holman, Office of Associate Chief Counsel (International). However,

other personnel from the IRS and Treasury Department participated in their development.

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Withdrawal of Proposed Amendments

Accordingly, under the authority of 26 U.S.C. 7805, the proposed amendment to 26 CFR parts 1 and 31 that was published in the Federal Register on Friday, August 2, 2002 (67 FR 50386) is withdrawn.

Proposed Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 31 are proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority 26 U.S.C. 7805 * * * Par. 2. In §1.6049–4, paragraph (b)(5) is revised to read as follows:

§1.6049–4 Return of information as to interest paid and original issue discount includible in gross income after December 31, 1982.

• • • • (b) - - (5) Interest payments to nonresident alien individuals —(i) General rule . In the case of interest aggregating $10 or more paid to a nonresident alien individual (as defined in section 7701(b)(1)(B)) that is reportable under §1.6049–8(a), the payor shall make an information return on Form 1042–S, “ Foreign Person’s U.S. Source Income Subject to Withholding ”, for the calendar year in which the interest is paid. The payor or middleman shall prepare and file Form 1042–S at the time and in the manner prescribed by section 1461 and the regulations under that section and by the form and its accompanying instructions. See §§1.1461–1(b) (rules regarding the preparation of a Form 1042) and 1.6049–6(e)(4) (rules for furnishing a copy of the Form 1042–S to the payee). To determine whether an information return is required for original issue discount, see §§1.6049–5(f) and 1.6049–8(a). The Commissioner may by ruling or other administrative pronouncement prescribe

February 22, 2011 518 2011–8 I.R.B.

1042–S, “ Foreign Person’s U.S. Source Income Subject to Withholding,” as paid to a nonresident alien individual under §1.6049–8(a) of this chapter is not subject to withholding under section 3406. (For interest paid to a Canadian nonresident alien individual on or before December 31 of the year in which final regulations are published in the Federal Register, see paragraph (d) of this section as in effect and contained in 26 CFR part 1 revised April 1, 2000.)

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

(Filed by the Office of the Federal Register on January 6, 2011, 8:45 a.m., and published in the issue of the Federal Register for January 7, 2011, 76 F.R. 1105)

Notice of Proposed Rulemaking

Rewards and Awards for Information Relating to Violations of Internal Revenue Laws

REG–131151–10

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains a proposed regulation relating to the payment of rewards under section 7623(a) of the Internal Revenue Code and awards under section 7623(b). The guidance is necessary to clarify the definition of proceeds of amounts collected and collected proceeds under section 7623. This regulation provides needed guidance to the general public as well as officers and employees of the IRS who review claims under section 7623.

DATES: Written or electronic comments and requests for a public hearing must be received by April 18, 2011.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG–131151–10), Room 5203, Internal Revenue Service, PO

2. In paragraph (e)(5), the first sentence is revised and a new sentence is added at the end of the paragraph.

The additions and revisions read as follows:

§1.6049–6 Statements to recipients of interest payments and holders of obligations for attributed original issue discount .

• • • • (e) - - (4) Special rule for amounts described in §1.6049–8(a). In the case of amounts described in §1.6049–8(a) (relating to payments of deposit interest to nonresident alien individuals) paid after December 31 of the year in which the final regulations are published in the Federal Register, any person who makes a Form 1042–S, “ For- eign Person’s U.S. Source Income Subject to Withholding ”, under section 6049(a) and §1.6049–4(b)(5) shall furnish a statement to the recipient either in person or by first class mail to the recipient’s last known address. The statement shall include a copy of the Form 1042–S required to be prepared pursuant to §1.6049–4(b)(5) and a statement to the effect that the information on the form is being furnished to the United States Internal Revenue Service and may be furnished to the government of the foreign country where the recipient resides.

(5) Effective/applicability date . Paragraph (e)(4) of this section applies to payee statements reporting payments of deposit interest to nonresident alien individuals paid after December 31 of the year in which the final regulations are published in the Federal Register . - * - (For interest paid to a Canadian nonresident alien individual on or before December 31 of the year in which final regulations are published in the Federal Register, see paragraph (e)(4) of this section as in effect and contained in 26 CFR part 1 revised April 1, 2000.)

Par. 5. In §1.6049–8 the section heading and paragraph (a) are revised to read as follows:

§1.6049–8 Interest and original issue discount paid to nonresidents.

(a) Interest subject to reporting re- quirement . For purposes of §§1.6049–4, 1.6049–6, and this section and except as

provided in paragraph (b) of this section, the term interest means interest paid to a nonresident alien individual after December 31 of the year in which the final regulations are published in the Federal Register, where the interest is described in section 871(i)(2)(A) with respect to a deposit maintained at an office within the United States. For purposes of the regulations under section 6049, a nonresident alien individual is a person described in section 7701(b)(1)(B). The payor or middleman may rely upon a valid Form W–8BEN, “ Beneficial Owners Certificate of Foreign Status for U.S. Tax Withhold- ing ” to determine whether the payment is made to a nonresident alien individual. Generally, amounts described in this paragraph (a) are not subject to backup withholding under section 3406. See §31.3406(g)–1(d) of this chapter. However, if the payor or middleman does not have either a valid Form W–8BEN or valid Form W–9, “ Request for Taxpayer Identification Number and Certification ”, the payor or middleman must report the payment as made to a U.S. non-exempt recipient if it must so treat the payee under the presumption rules of §1.6049–5(d)(2) and §1.1441–1(b)(3)(iii) and must also backup withhold under section 3406. (For interest paid to a Canadian nonresident alien individual on or before December 31 of the year in which final regulations are published in the Federal Register, see paragraph (a) of this section as in effect and contained in 26 CFR part 1 revised April 1, 2000.)

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PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT THE SOURCE

Par. 6. The authority citation for part 31 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Par. 7. In §31.3406(g)–1, paragraph (d) is revised to read as follows:

§31.3406(g)–1 Exceptions for payments to certain payees and certain other payments .

• • • • (d) Reportable payments made to nonresident alien individuals . A payment of interest that is reported on Form

2011–8 I.R.B. 519 February 22, 2011

Comments and Requests for a Public Hearing

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

Drafting Information

The principal author of this regulation is Kirsten N. Witter, Office of the Associate Chief Counsel (General Legal Services).

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Proposed Amendment 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 an entry in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * * Section 301.7623–1 also issued under 26 U.S.C. 7623. - * * Par. 2. Section 301.7623–1 is amended by:

Revising the section heading, and paragraphs (a) and (g) to read as follows:

§301.7623–1 Rewards and awards for information relating to violations of internal revenue laws .

(a) In general —(1) Rewards and awards . When information that has been provided to the Internal Revenue Service results in the detection of underpayments of tax or the detection and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same, the IRS may approve a reward

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–131151–10), 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–131151–10).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulation, Kirsten N. Witter, at (202) 927–0900; concerning submissions of comments and requests for a public hearing, Richard A. Hurst at Richard.A.Hurst@irscounsel.treas.gov or (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provision

Section 7623(a) provides the Secretary with the authority to pay such sums as he deems necessary from proceeds of amounts collected based on information provided to the Secretary when the information relates to the detection of underpayments of tax or the detection and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same. Section 7623(b) provides the Secretary with the authority to pay awards to individuals if the Secretary proceeds with an administrative or judicial action described in section 7623(a) that results in collected proceeds based on information provided by the individuals. Section 301.7623–1(a) currently provides that proceeds of amounts (other than interest) collected by reason of the information provided include both amounts collected because of the information provided and amounts collected prior to receipt of the information if the information leads to the denial of a claim for refund that otherwise would have been paid. 63 Fed. Reg. 44777.

Section 301.7623–1(a) was promulgated prior to amendments of section 7623 as part of the Tax Relief and Health Care Act of 2006, division A, section 406, Public Law 109–432, 120 Stat. 2958. The amendments designated the existing

section 7623 as section 7623(a). As originally enacted, section 7623 provided that rewards shall be paid “from the proceeds of amounts (other than interest) collected by reason of the information provided . . . ” The 2006 amendments to section 7623 struck the “other than interest” language. The amendments also added section 7623(b), which provides that in certain cases individuals shall receive an award of at least 15% but not more than 30% of the collected proceeds resulting from the action with which the Secretary proceeded based on information brought to the attention of the Secretary by the individual. The 2006 amendments to section 7623 also created the IRS Whistleblower Office, which is responsible for administering a whistleblower program within the IRS.

This regulation clarifies the definitions of proceeds of amounts collected and collected proceeds for purposes of section 7623 and that the provisions of Treas. Reg. §301.7623–1(a) concerning refund prevention claims are applicable to claims under section 7623(a) and (b). In clarifying the definitions of proceeds of amounts collected and collected proceeds, this regulation provides that the reduction of an overpayment credit balance is also considered proceeds of amounts collected and collected proceeds under section 7623.

Special Analysis

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 also has 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 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 Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses.

February 22, 2011 520 2011–8 I.R.B.

the debt instrument. Similarly, if the debt instrument is issued for stock or securities (or other property) that are publicly traded, the issue price of the debt instrument is the fair market value of the property. Section 1.1273–2 of the Income Tax Regulations (the “current regulations”) also applies to determine the issue price of a debt instrument that is publicly traded or is issued for publicly traded property. Under §1.1273–2(c)(1), the term property means a debt instrument, stock, security, contract, commodity, or nonfunctional currency. Section 1.1273–2(f) defines when property is traded on an established market (that is, publicly traded) for purposes of section 1273(b)(3) and §1.1273–2.

In general, under §1.1273–2(f) of the current regulations, a debt instrument is traded on an established market if either the debt instrument or the property for which the debt instrument is exchanged is described in §1.1273–2(f)(2) through (f)(5) in the time period 30 days before or after the exchange. Property is described in §1.1273–2(f)(2) if it is listed on a specified exchange. Property is described in §1.1273–2(f)(3) if it is of a kind that is traded on a contract market designated by the Commodities Futures Trading Commission or an interbank market. Property is described in §1.1273–2(f)(4) if it appears on a system of general circulation that disseminates price quotations or recent trading prices. Property is described in §1.1273–2(f)(5) if price quotations are readily available from dealers, brokers or traders, subject to certain exceptions.

The issue price of a debt instrument has important income tax consequences. As an initial matter, the difference between the issue price of a debt instrument and its stated redemption price at maturity measures whether there is any original issue discount associated with the instrument. A debt-for-debt exchange (including a significant modification of existing debt) in the context of a work-out may result in a reduced issue price for the new debt, which generally would produce cancellation of indebtedness income for the issuer, a loss to the holder whose basis is greater than the issue price of the new debt, and original issue discount that generally must be accounted for by both the issuer and the holder of the new debt. These consequences, exacerbated by recent turmoil in the debt markets, have focused attention on

under section 7623(a) in a suitable amount from the proceeds of amounts collected in cases when rewards are not otherwise provided by law, or shall determine an award under section 7623(b) from collected proceeds.

(2) Proceeds of amounts collected and collected proceeds . For purposes of section 7623 and this section, both proceeds of amounts collected and collected proceeds include: tax, penalties, interest, additions to tax, and additional amounts collected by reason of the information provided; amounts collected prior to receipt of the information if the information provided results in the denial of a claim for refund that otherwise would have been paid; and a reduction of an overpayment credit balance used to satisfy a tax liability incurred because of the information provided.

• • • • (g) Effective/applicability date . This section is applicable with respect to rewards paid after January 29, 1997, except the rules of paragraph (a) of this section apply with respect to rewards and awards paid after these regulations are published as final regulations in the Federal Regis- ter .

Heather C. Maloy, (Acting) Deputy Commissioner

for Services and Enforcement.

(Filed by the Office of the Federal Register on January 14, 2011, 8:45 a.m., and published in the issue of the Federal Register for January 18, 2010, 76 F.R. 2852)

Notice of Proposed Rulemaking and Notice of Public Hearing

Property Traded on an Established Market

REG–131947–10

AGENCY: Internal Revenue Service (IRS), Treasury.

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

SUMMARY: This document contains proposed regulations relating to determining when property is traded on an established

market (that is, publicly traded) for purposes of determining the issue price of a debt instrument. The regulations amend the current regulations to clarify the circumstances that cause property to be publicly traded. The regulations provide needed guidance to issuers and holders of debt instruments. This document also provides a notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by March 8, 2011. Outlines of topics to be discussed at the public hearing scheduled for April 13, 2011, at 10:00 a.m. must be received by March 4, 2011.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–131947–10), room 5203, 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–131947–10), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, or sent electronically, via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG–131947–10).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, William E. Blanchard at (202) 622–3950; concerning submission of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Oluwafunmilayo.P.Taylor@irscoun- sel.treas.gov, at (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

The issue price of a debt instrument is determined under section 1273(b) of the Internal Revenue Code or, in the case of certain debt instruments issued for property, under section 1274. Section 1273(b)(3) generally provides that in the case of a debt instrument that is issued for property and that is part of an issue some or all of which is traded on an established securities market (often referred to as “publicly traded”), the issue price of the debt instrument is the fair market value of

2011–8 I.R.B. 521 February 22, 2011

securities association registered under section 15A of the Securities Exchange Act of 1934 because none exist or are contemplated. Rather than list foreign exchanges, the proposed regulations specify that a foreign securities exchange that is officially recognized, sanctioned, regulated or supervised by a governmental authority of the foreign country in which the market is located is an exchange that causes property to be publicly traded.

Second, §1.1273–2(f)(3) of the proposed regulations treats property as publicly traded when a sales price for the property is reasonably available. Market participants have access to information about the securities markets from a variety of sources, which are constantly changing and evolving. If information about the sales price of a debt instrument (or information sufficient to calculate the sales price) appears in a medium that is made available to persons that regularly purchase or sell debt instruments, or persons that broker purchases or sales of debt instruments, the sales price will be considered reasonably available. For example, in the case of a debt instrument, a sale that is reported electronically at any time in the 31-day time period, such as in the Trade Reporting and Compliance Engine (“TRACE”) database maintained by the Financial Industry Regulatory Authority, would cause the instrument to be publicly traded, as would other pricing services and trading platforms that report prices of executed sales on a general basis or to subscribers.

Third, property is considered to be traded on an established market if a firm price quote to buy or sell the property is available. A firm, or executable, price quote may be labeled as such, or a price quote may function as a firm quote as a matter of law or industry practice. In either case, §1.1273–2(f)(4) of the proposed regulations treats property with a firm quote as publicly traded.

Finally, a price quote (other than a firm quote) that is provided by a dealer, a broker, or a pricing service (an indicative quote) will cause property to be publicly traded under §1.1273–2(f)(5) of the proposed regulations.

The proposed regulations provide that the fair market value of property described in §1.1273–2(f) will be presumed to be equal to its trading price, sales price, or

the definition of when property is traded on an established market for purposes of §1.1273–2(f).

Commenters have criticized the definition of an established market in §1.1273–2(f) of the current regulations. They argue that comparatively little debt is listed on an exchange described in §1.1273–2(f)(2), and that even debt that is listed rarely trades on the exchange. They point out that the list of foreign exchanges in §1.1273–2(f)(2)(iii) is outdated. Commenters also struggle to interpret the meaning of an interbank market in §1.1273–2(f)(3).

Even more troublesome for commenters is the question of what constitutes a quotation medium for purposes of §1.1273–2(f)(4) of the current regulations. Debt instruments typically trade in various ways in the current markets, but the vast majority of debt instruments are purchased or sold over-the-counter for a price negotiated between a financial entity (such as a securities dealer or broker) and a customer. A dealer or broker may quote a firm price, sometimes referred to as a “firm” or “executable” quote, entitling a customer to purchase or sell at that price, subject to volume limits or other specified restrictions. Alternatively, a dealer, broker or listing service may quote a price that indicates a willingness to purchase and/or sell a specified debt instrument, again subject to volume limits or other limitations, but not necessarily at the quoted price. This is sometimes referred to as a “soft” or an “indicative” quote. The decision to send a price quote to a customer (or customers) may be initiated by a dealer or broker, or a customer may request a price quote from one or more dealers or brokers. Additionally, a service provider may provide subscribers with valuations based on data collected from contributors that may reflect actual sales, price quotes, or any other information it deems relevant to the value of the debt instrument in question. Commenters struggled to apply the description of a quotation medium in §1.1273–2(f)(4) to this informal marketplace, which has evolved considerably since the regulations were originally promulgated in 1994.

Finally, commenters pointed out that the general rule in §1.1273–2(f)(5) of the current regulations, which treats a debt instrument as publicly traded if price

quotations are readily available from dealers, brokers or traders could cause almost every debt instrument to be within this definition but for the safe harbors in §1.1273–2(f)(5)(ii).

Explanation of Provisions

As a general matter, the Treasury Department and the IRS believe that the “traded on an established market” standard established by section 1273(b)(3) is intended to be interpreted broadly. When section 1275(a)(4) was repealed by section 11325(a)(2) of the Revenue Reconciliation Act of 1990, Public Law 101–508, 104 Stat. 1388, 1388–466 (1990), issue price was required to be determined under section 1273 and section 1274 even in a debt-for-debt exchange that qualified as a corporate reorganization. As the depth of trading and the transparency of the markets that trade debt instruments has improved, the earlier concerns that trading prices may not reflect the fair market value of a debt instrument have diminished. Thus, to the extent accurate pricing information exists, whether it derives from executed sales, reliable price quotations, or valuation estimates that are based on some combination of sales and quotes, the Treasury Department and the IRS believe that that information should be the basis for the issue price determined under section 1273(b)(3).

To address concerns with the current regulations, the proposed regulations simplify and clarify the determination of when property is traded on an established market. The proposed regulations identify four ways for property to be traded on an established market. In each case, the time period for determining whether the property is publicly traded is the 31-day period ending 15 days after the issue date of the debt instrument.

First, property that is listed on an exchange continues to be publicly traded property under §1.1273–2(f)(2) of the proposed regulations. Although relatively few debt instruments are listed or traded on an exchange, the regulations may still apply to other property that is listed, such as stock for which a debt instrument is issued in a debt-for-stock exchange. The proposed regulations, however, delete the reference to an interdealer quotation system that is sponsored by a national

February 22, 2011 522 2011–8 I.R.B.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1— INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.1273–1 is amended by adding a new paragraph (c)(6) to read as follows:

§1.1273–1 Definition of OID .

• • • • (c) * - (6) Business day convention —(i) Rule . For purposes of this paragraph (c), if a scheduled payment date for stated interest falls on a Saturday, Sunday, or Federal holiday (within the meaning of 5 U.S.C. 6103) but, under the terms of the debt instrument, the stated interest is payable on the first business day that immediately follows the scheduled payment date, the stated interest is treated as payable on the scheduled payment date, provided no additional interest is payable as a result of the deferral.

(ii) Effective/ applicability d ate. Paragraph (c)(6)(i) of this section applies to debt instruments that are issued on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register . A taxpayer, however, may rely on paragraph (c)(6)(i) of this section for debt instruments issued before that date.

• • • • Par. 3. Section 1.1273–2 is amended by revising paragraph (f) to read as follows:

§1.1273–2 Determination of issue price and issue date .

• • • • (f) Traded on an established market (publicly traded) —(1) In general . Except as provided in paragraph (f)(7) or (f)(8) of this section, property (including a debt instrument described in paragraph (b)(1) of this section) is traded on an established market for purposes of this section if, at any time during the 31-day period ending 15 days after the issue date—

quoted price, whichever is applicable. However, if there is more than one price or quote, a taxpayer is permitted to reconcile competing prices or quotes in a reasonable manner. In the case of an indicative quote, if a taxpayer determines that the quoted price or prices misrepresents the fair market value of the property by a material amount, §1.1273–2(f)(6)(ii) of the proposed regulations permits the taxpayer to use any method that provides a reasonable basis to determine the fair market value of the property, provided the taxpayer can establish that the method chosen more accurately reflects the value of the property than the extant quote or quotes for the property.

In response to commenters, the proposed regulations also contain guidance in areas ancillary to publicly traded debt, such as proposed regulations clarifying and revising the rules to determine when an issue of debt instruments is eligible to be part of a qualified reopening under §1.1275–2(k) and proposed regulations clarifying the treatment of a debt instrument issued in a debt-for-debt exchange under the potentially abusive rules in section 1274(b)(3). In addition, in response to commenters, the proposed regulations include a business day convention to determine if certain stated interest payments affect whether the payments are qualified stated interest.

Proposed Effective Date

The regulations, as proposed, apply to debt instruments that have an issue date on or after the publication date of the Treasury decision adopting these rules as final 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 also has 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 Internal Revenue 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 Public Hearing

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 the Treasury Department 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 has been scheduled for April 13, 2011, beginning at 10 a.m. in the Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. All visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance 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 electronic or written comments and an outline of the topics to be discussed and the time to be devoted to each topic by March 4, 2011. 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

These regulations were drafted by personnel in the Office of Associate Chief Counsel (Financial Institutions and Products) and the Treasury Department.

- - - -

2011–8 I.R.B. 523 February 22, 2011

(ii) Definition of de minimis trading for debt instruments . For purposes of paragraph (f)(7)(i) of this section, a debt instrument will be treated as traded in de minimis quantities only if—

(A) Each trade of such debt instrument during the 31-day period ending 15 days after the issue date is for quantities of US$1 million or less (or, for debt denominated in a currency other than the U.S. dollar, the equivalent amount in the currency in which the debt is denominated); and

(B) The aggregate amount of all such trades does not exceed US$5 million (or, for debt denominated in a currency other than the U.S. dollar, the equivalent amount in the currency in which the debt is denominated).

(8) Exception for small debt issues . Notwithstanding any other provision in this section, a debt instrument will not be treated as traded on an established market if the original stated principal amount of the issue that includes the debt instrument does not exceed US$50 million (or, for debt denominated in a currency other than the U.S. dollar, the equivalent amount in the currency in which the debt is denominated).

(9) Anti-abuse rules —(i) Effect of cer- tain temporary restrictions on trading . If there is any temporary restriction on trading a purpose of which is to avoid the characterization of the property as one that is traded on an established market for Federal income tax purposes, then the property is treated as traded on an established market. For purposes of the preceding sentence, a temporary restriction on trading need not be imposed by the issuer.

(ii) Artificial pricing information . If a principal purpose for the existence of any sale or price quotation is to materially misrepresent the value of property, that sale or price quotation may be disregarded.

(10) Convertible debt instruments . A debt instrument is not treated as traded on an established market solely because the debt instrument is convertible into property that is so traded.

(11) Effective/applicability date . Paragraph (f) of this section applies to a debt instrument issued on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Fed- eral Register .

(i) The property is listed on an exchange described in paragraph (f)(2) of this section;

(ii) There is a sales price for the property as described in paragraph (f)(3) of this section;

(iii) There are one or more firm quotes for the property as described in paragraph (f)(4) of this section; or

(iv) There are one or more indicative quotes for the property as described in paragraph (f)(5) of this section.

(2) Exchange listed property . Property is listed on an exchange for purposes of this paragraph (f)(2) if it is listed on—

(i) A national securities exchange registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f);

(ii) A board of trade designated as a contract market by the Commodities Futures Trading Commission;

(iii) A foreign securities exchange that is officially recognized, sanctioned, regulated or supervised by a governmental authority of the foreign country in which the market is located; or

(iv) Any other exchange, board of trade, or other market which the Commissioner identifies in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)) as an exchange for purposes of this paragraph (f)(2).

(3) Sales price —(i) In general . A sales price exists if the price for an executed purchase or sale of the property is reasonably available.

(ii) Pricing information for a debt instrument . For purposes of paragraph (f)(3)(i) of this section, the price of a debt instrument is considered reasonably available if the sales price (or information sufficient to calculate the sales price) appears in a medium that is made available to persons that regularly purchase or sell debt instruments (including a price provided only to certain customers or to subscribers), or persons that broker purchases or sales of debt instruments.

(4) Firm quote . A firm quote is considered to exist when a price quote is available from at least one broker, dealer, or pricing service (including a price provided only to certain customers or to subscribers) for property and the quoted price is substantially the same as the price for which the property could be purchased or sold. The identity of the person providing the quote must be reasonably ascertainable for

a quote to be considered a firm quote for purposes of this paragraph (f)(4). A quote will be considered a firm quote if market participants typically purchase or sell, as the case may be, at the quoted price, even if the party providing the quote is not legally obligated to do so.

(5) Indicative quote . An indicative quote is considered to exist when a price quote is available from at least one broker, dealer, or pricing service (including a price provided only to certain customers or to subscribers) for property and the price quote is not a firm quote described in paragraph (f)(4) of this section.

(6) Presumption that price or quote is equal to fair market value —(i) In gen- eral . The fair market value of property described in this section will be presumed to be equal to its trading price on an exchange described in paragraph (f)(2) of this section, or its sales price or quoted price determined under paragraphs (f)(3) through (f)(5) of this section. If there is more than one trading price under paragraph (f)(2) of this section, sales price under paragraph (f)(3) of this section, or quoted price under paragraph (f)(4) or (f)(5) of this section, a taxpayer may use any reasonable method, consistently applied, to determine the price.

(ii) Special rule for property for which there is only an indicative quote . If property is described only in paragraph (f)(5) of this section, and the taxpayer determines that the quote (or an average of the quotes) materially misrepresents the fair market value of the property, the taxpayer can use any method that provides a reasonable basis to determine the fair market value of the property. A taxpayer must establish that the method chosen more accurately reflects the value of the property than the quote or quotes for the property to use the method provided in this paragraph (f)(6)(ii). For an equity or debt instrument, a volume discount or control premium will not be considered to create a material misrepresentation of value for purposes of this paragraph (f)(6).

(7) Exception for property for which there is de minimis trading —(i) In gen- eral . Notwithstanding any other provision in this section, property will not be treated as traded on an established market if there is no more than de minimis trading of the property.

February 22, 2011 524 2011–8 I.R.B.

• • • • Par. 4. Section 1.1274–3 is amended by adding a new paragraph (b)(4) to read as follows:

§1.1274–3 Potentially abusive situations defined .

• • • • (b) - - (4) Debt-for-debt exchange —(i) Rule . A debt instrument issued in a debt-for-debt exchange, including a deemed exchange under §1.1001–3, will not be treated as the subject of a recent sales transaction for purposes of section 1274(b)(3)(B)(ii)(I) even if the debt instrument exchanged for the newly issued debt instrument was recently acquired prior to the exchange. Therefore, the issue price of the debt instrument will not be determined under section 1274(b)(3). However, if the debt instrument or the property for which the debt instrument is issued is publicly traded within the meaning of §1.1273–2(f), the rules of §1.1273–2 will apply to determine the issue price of the debt instrument.

(ii) Effective/applicability date . Paragraph (b)(4)(i) of this section applies to a debt instrument issued on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register .

• • • • Par. 5. Section 1.1275–2 is amended by revising paragraphs (k)(3)(ii)(A), (k)(3)(iii)(A) and (k)(5) and adding a new paragraph (k)(3)(v) to read as follows:

§1.1275–2 Special rules relating to debt instruments .

• • • • (k) - - (3) - - (ii) * - (A) The original debt instruments are publicly traded (within the meaning of §1.1273–2(f)) as of the reopening date of the additional debt instruments;
• • • • (iii) * - (A) The original debt instruments are publicly traded (within the meaning of §1.1273–2(f)) as of the reopening date of the additional debt instruments;

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(v) Non-publicly traded debt issued for cash . Notwithstanding paragraphs (k)(3)(ii)(A) and (k)(3)(iii)(A) of this section, a qualified reopening includes a reopening of original debt instruments if the additional debt instruments are issued for cash to persons unrelated to the issuer (as determined under section 267(b) or 707(b)) for an arm’s length price and the other requirements in paragraph (k)(3)(ii) or (k)(3)(iii) of this section are satisfied, whichever is applicable. For purposes of paragraph (k)(3)(ii)(C) of this section, the yield test is satisfied if, on the reopening date of the additional debt instruments, the yield of the additional debt instruments (based on their cash purchase price) is not more than 110 percent of the yield of the original debt instruments on their issue date (or, if the original debt instruments were issued with no more than a de min- imis amount of OID, the coupon rate).

• • • • (5) Effective/applicability dates —(i) Except as provided in paragraph (k)(5)(ii) of this section, this paragraph (k) applies to debt instruments that are part of a reopening where the reopening date is on or after March 13, 2001.

(ii) Paragraph (k)(3)(v) of this section applies to debt instruments that are part of a reopening if the reopening date is on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register .

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

(Filed by the Office of the Federal Register on January 6, 2011, 8:45 a.m., and published in the issue of the Federal Register for January 7, 2011, 76 F.R. 1101)

Foundations Status of Certain Organizations

Announcement 2011–13

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:

African American Future Society,

Carrollton, GA After That, Inc., Lehigh Acres, FL Al Moreland Productions, LTD,

Milwaukee, WI Association of Gospel Songwriters,

Atlanta, GA Ballet Fedotov, Bradenton, FL Change Your Life Foundation,

New Bern, NC Crossroads Folkloric Arts Association,

Chicago, IL Daiscan, Inc., Union, NJ Dan Ashnic, Inc., Westland, MI Day Star Arise Production Company,

Stockbridge, GA Eaton Youth Family Foundation,

Los Angeles, CA Ellison’s Community Outreach Center,

San Bernardino, CA Greater Sacramento Grandparent

Network, Carmichael, CA Hair and Hope, Dallas, TX Health Care Africa, Inc.,

New Carrollton, MD Help, Hope, and Life, Inc., St. Louis, MO Indianapolis Symphonic Winds,

Indianapolis, IN Institute of Physical and Postural

Repatterning, Los Angeles, CA John H Shorter Community Service and

Development Corporation, Newark, NJ Joy in Christ Ministries, Inc.,

Hernando, FL Kingdom Economic Development,

Pinellas Park, FL Koreatown Police Booster Association,

Inc., Los Angeles, CA Lanihuli Hawaiian Civic Club, Laie, HI Living Room Theatre Company,

Vanderbilt, PA Neighborhood Housing Services of Lake

County, Waukegan, IL News-2-Use, Inc., Raeford, NC

2011–8 I.R.B. 525 February 22, 2011

Nicol’s Women and Children Shelter,

Gadsden, AL Oakland Box Theater, Oakland, CA One Group Charities, Inc., Durham, NC Opens Arms Daycare Center, Inc.,

Camden, MS Organization for Urban and Rural Health

and Nutritional Development Services, Memphis, TN River Cities Rollers Corporation,

Sterling, IL Rotimi Foundation, Jackson, NJ Seeds of Greatness, Inc., Houston, TX Self Image, Inc., Lake Worth, FL (S I S) Stay in School, Inc., Chicago, IL Still The One, Naperville, IL Sutton Community Development

Corporation, Inc., LaGrange, NC Waves of Glory Ministries, Inc.,

Catasauqua, PA

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 2011–15

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 organiza

tions described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin February 22, 2011, 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.

Acclimation Incorporated

Stockton, CA At Your Service: Prestigious In-Home

Care, Inc. San Antonio, TX Civil Liberty and Indigent Parents

Institution and Charity Adams Run, SC Debt Serve, Inc.

Fort Lauderdale, FL International Fund for Protection of

Victims of Crimes, Inc. New York, NY

February 22, 2011 526 2011–8 I.R.B.