Part III. Administrative, Procedural, and Miscellaneous

Request for Comments on Health Coverage Affordability Safe Harbor for Employers (Section 4980H)

Notice 2011–73

I. PURPOSE AND BACKGROUND

This request for comments is intended to continue the process of developing regulatory guidance on the shared employer responsibility provisions of § 4980H of the Internal Revenue Code (Code). The process was initiated with the release of Notice 2011–36, 2011–21 I.R.B. 792, which described potential approaches to interpreting and applying certain provisions of § 4980H and invited comments on those approaches. Section 4980H was added to the Code by § 1513 of the Patient Protection and Affordable Care Act (Affordable Care Act) enacted March 23, 2010, Pub. L. No. 111–148, and amended by § 1003 of the Health Care and Education Reconciliation Act of 2010, enacted March 30, 2010, Pub. L. No. 111–152. Section 4980H is effective for months beginning after December 31, 2013.

Generally, § 4980H provides that an applicable large employer (as defined in § 4980H(c)(2)) is subject to an assessable payment if any full-time employee is certified to receive an applicable premium tax credit or cost-sharing reduction and either (1) the employer does not offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (§ 4980H(a)) ¹ ; or (2) the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage that either is unaffordable within the meaning of § 36(B)(c)(2)(C)(i) or does not provide minimum value within the meaning of § 36(B)(c)(2)(C)(ii) (§ 4980H(b)).

Notice 2011–36 requested comments on several discrete issues under § 4980H and specifically on the issue of who is a full-time employee, including a potential “look-back/stability period safe harbor”

method for determining full-time status. This notice requests comments on a proposed safe harbor, which could be incorporated in future proposed regulations, for determining the affordability of coverage under an eligible employer sponsored plan for purposes of an employer’s potential assessable payment under § 4980H(b). The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) intend to publish proposed regulations on the issues addressed in Notice 2011–36, on the proposed employer safe harbor outlined in this notice and on a broader set of issues under § 4980H.

II. PROPOSED AFFORDABILITY SAFE HARBOR FOR EMPLOYERS

Whether an applicable large employer’s health coverage is affordable to its fulltime employees is essential in determining whether an employee can receive a premium tax credit and, in turn, whether the employer is subject to an assessable payment under § 4980H(b). Coverage under an employer-sponsored plan is affordable to a particular employee if the employee’s required contribution (within the meaning of § 5000A(e)(1)(B)) to the plan does not exceed 9.5 percent of the employee’s household income for the taxable year. ² Section 36B(c)(2)(C)(i). Household income for this purpose is defined as the modified adjusted gross income of the employee and any members of the employee’s family (which would include any spouse and dependents) who are required to file an income tax return. Section 36B(d)(2)(A). Modified adjusted gross income means adjusted gross income (within the meaning of § 62) increased by amounts excluded from gross income under § 911 and by the amount of any tax-exempt interest a taxpayer receives or accrues during the taxable year. Section 36B(d)(2)(B).

Because affordability is determined by reference to household income and because household income is determined by reference to variables that are generally unknown to an employer ( i.e., the modified adjusted gross income of the employee and the employee’s spouse and

dependents), employers may encounter practical difficulties in assessing whether the coverage they are offering is affordable to certain employees. To address this concern and provide employers a more workable option for determining the affordability of their health coverage, Treasury and the IRS expect to propose an affordability safe harbor whereby, for purposes of § 4980H(b), affordability of an employer’s coverage would be measured by reference to an employee’s wages from that employer. Wages for this purpose would be the total amount of wages as defined in § 3401(a), which is the amount required to be reported in Box 1 of Form W–2, Wage and Tax Statement (W–2 wages).

It is contemplated that under this proposed safe harbor, an employer would need to meet certain requirements, including: (1) that the employer must offer its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, and (2) that the employee portion of the self-only premium for the employer’s lowest cost coverage that provides minimum value (the employee contribution) must not exceed 9.5 percent of the employee’s W–2 wages. If the employer satisfies both of these requirements for a particular employee (as well as any other conditions for the safe harbor), the employer would not be subject to an assessable payment under § 4980H(b) with respect to that particular employee, even if that employee receives a premium tax credit or cost sharing reduction. Application of this safe harbor would be determined after the end of the calendar year and on an employee-by-employee basis, taking into account the W–2 wages and the employee contribution. So, for example, the employer would determine whether it met the proposed affordability safe harbor for 2014 for an employee by looking at that employee’s W–2 wages for 2014 and comparing 9.5 percent of that amount to the employee’s 2014 employee contribution.

1 Minimum essential coverage is defined in § 5000A(f) of the Code. The definition of “eligible employer-sponsored plan” in § 5000A(f)(2) applies for purposes of § 4980H.

2 The 9.5 percent may be adjusted after 2014 to reflect rates of premium growth relative to growth in income and after 2018 to reflect rates of premium growth relative to growth in the consumer price index. See Prop. Treas. Reg. §§ 1.36B–0 through 1.36B–5.

2011–40 I.R.B. 474 October 3, 2011

Although the determination of whether an employer actually satisfied the safe harbor would be made after the end of the calendar year, an employer could also use the safe harbor prospectively, at the beginning of the year, by structuring its plan and operations to set the employee contribution at a level so that the employee contribution for each employee would not exceed 9.5 percent of that employee’s W–2 wages for that year. It is contemplated that employers, on a consistent basis, would be permitted to make reasonable and necessary adjustments for pay periods so that the employee contribution does not exceed 9.5 percent of the employee’s W–2 wages.

By allowing employers to base their affordability calculations on each employee’s W–2 wages (which employers know) instead of each employee’s household income (which employers generally would not know), the safe harbor could provide a more workable and practical method for measuring the affordability of an employer’s coverage for § 4980H(b) purposes. In most instances, if employer-sponsored coverage were affordable based on the employee’s W–2 wages, it would also be affordable based on the employee’s household income because an employee’s household income is likely to be greater than the employee’s W–2 wages. In that case, a premium tax credit would not be available to that employee and, in turn, the employer would not be subject to an assessable payment under § 4980H(b) with respect to that employee. In some circumstances, an employee’s household income may be less than the employee’s W–2 wages (for example, because of adjustments to gross income for alimony paid or losses due to self-employment). The proposed safe harbor would address those situations by allowing the employer to rely on an employee’s W–2 wages for analyzing the affordability of the employer’s health coverage with respect to that employee.

This proposed affordability safe harbor would apply only for purposes of determining whether an employer’s coverage satisfies the 9.5 percent affordability test for purposes of the assessable payment under § 4980H(b). For example, the safe harbor would not affect an employee’s eligibility for a premium tax credit under § 36B. An employee’s eligibility for

the premium tax credit would continue to be based on the affordability of employer-sponsored coverage relative to an employee’s household income. Accordingly, in some instances, the effect of the safe harbor could be to treat an employer’s offer of coverage to an employee as affordable (based on W–2 wages) for purposes of determining whether the employer is subject to an assessable payment under § 4980H(b), while that same offer of coverage could be treated as unaffordable (based on household income) for purposes of determining whether the employee is eligible for a premium tax credit under § 36B.

III. REQUEST FOR COMMENTS

As noted, Treasury and the IRS intend to issue guidance, including proposed regulations, on the employer shared responsibility provisions under § 4980H. To help inform that guidance, comments are invited on the affordability safe harbor for employers for purposes of § 4980H(b). In particular, comments are invited on the following issues:

contribution amounts would need to be determined for employees who are employed by an employer for less than a full year, employees who move between full-time and part-time status, situations in which the plan year is not a calendar year, and other similar special circumstances.

harbor methods for determining the affordability of coverage under an employer-sponsored plan for purposes of calculating an employer’s potential assessable payment under § 4980H(b).

safe harbor with the full-time employee look-back/stability safe harbor described in Notice 2011–36.

Comments must be submitted by December 13, 2011. Comments should include a reference to Notice 2011–73. Send submissions to CC:PA:LPD:PR (Notice 2011–73), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Mon- day through Friday between the hours

of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (Notice 2011–73), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20044, or sent electronically, via the following e-mail address: Notice.comments@irscounsel.treas.gov . Please include “Notice 2011–73” in the subject line of any electronic communication. All material submitted will be available for public inspection and copying.

NO INFERENCE

No inference should be drawn from any provision of this notice concerning any other provision of § 4980H or any other section of the Affordable Care Act.

DRAFTING INFORMATION

The principal author of this notice is Mireille Khoury of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice, contact Mireille Khoury at (202) 622–6080 (not a toll-free call).

Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Notice 2011–75

This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

October 3, 2011 475 2011–40 I.R.B.

the monthly composite corporate bond rate as set forth in Notice 2004–34 continues to apply in determining that rate. See Notice 2006–75, 2006–2 C.B. 366. The composite corporate bond rate for August 2011 is 4.99 percent. Pursuant to Notice 2004–34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.

CORPORATE BOND WEIGHTED AVERAGE INTEREST RATE

Sections 412(b)(5)(B)(ii) and 412(l)(7)(C)(i), as amended by the Pension Funding Equity Act of 2004 and by the Pension Protection Act of 2006 (PPA), provide that the interest rates used to calculate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 through 2007 must be within a permissible range based on the weighted average of the rates of interest on amounts invested conser

For Plan Years

vatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004–34, 2004–1 C.B. 848, provides guidelines for determining the corporate bond weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond rate derived from designated corporate bond indices. The methodology for determining

Corporate Bond Weighted

Beginning in Permissible Range

Month Year

Average 90% to 100%

September 2011 5.91 5.32 5.91

monthly corporate bond yield curve, the 24-month average corporate bond segment rates, and the funding transitional segment rates used to compute the target normal cost and the funding target. Pursuant to Notice 2007–81, the monthly corporate bond yield curve derived from August 2011 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of August 2011 are, respectively, 1.85, 4.62, and 6.02. The three 24-month average corporate bond segment rates applicable for September 2011 under the election of § 430(h)(2)(G)(iv) are as follows:

Third Segment

YIELD CURVE AND SEGMENT RATES

Generally for plan years beginning after 2007 (except for delayed effective dates for certain plans under sections 104, 105, and 106 of PPA), § 430 of the Code specifies the minimum funding requirements that apply to single employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates

First Segment

(“segment rates”), each of which applies to cash flows during specified periods. However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates. Section 430(h)(2)G) set forth a transitional rule applicable to plan years beginning in 2008 and 2009 under which the segment rates were blended with the corporate bond weighted average described above, including an election under § 430(h)(2)(G)(iv) for an employer to use the segment rates without the transitional rule.

Notice 2007–81, 2007–2 C.B. 899, provides guidelines for determining the

Second Segment

2.06 5.25 6.32

ble interest rate for a month is the annual rate of interest on 30-year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin.

The rate of interest on 30-year Treasury securities for August 2011 is 3.65 percent. The Service has determined this rate as the average of the yield on the 30-year Treasury bond maturing in May 2041 determined each day through August 10, 2011, and the yield on the 30-year Treasury bond maturing in August 2041 determined each day for the balance of the month.

The transitional rule of § 430(h)(2)(G) does not apply to plan years beginning after December 31, 2009. Therefore, for a plan year beginning after 2009 with a lookback month to September 2011, the funding segment rates are the three 24-month average corporate bond segment rates applicable for September 2011, listed above without blending for any transitional period.

30-YEAR TREASURY SECURITIES INTEREST RATES

Section 417(e)(3)(A)(ii)(II) (prior to amendment by PPA) defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)–1(d)(3) of the Income Tax Regulations provides that the applica

2011–40 I.R.B. 476 October 3, 2011

ing the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The following rates were determined for plan years beginning in the month shown below.

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in section 431(c)(6)(A), based

For Plan Years

on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities dur

30-Year Treasury Weighted

Beginning in Permissible Range

Month Year

Average 90% to 105%

September 2011 4.23 3.81 4.44

mum present value transitional segment rates determined for August 2011, taking into account the August 2011 30-year Treasury rate of 3.65 stated above for plan years beginning in 2010 and 2011, are as follows:

Third Segment

MINIMUM PRESENT VALUE SEGMENT RATES

Generally for plan years beginning after December 31, 2007, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. For plan years begin

For Plan Years

Beginning in

ning in 2008 through 2011, the applicable interest rates are the monthly spot segment rates blended with the applicable rate under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning in 2007. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the mini

First Segment

Second Segment

2010 2.57 4.23 5.07 2011 2.21 4.43 5.55 2012 1.85 4.62 6.02

DRAFTING INFORMATION

The principal author of this notice is Tony Montanaro of the Employee Plans,

Tax Exempt and Government Entities Division. Mr. Montanaro may be e-mailed at RetirementPlanQuestions@irs.gov .

October 3, 2011 477 2011–40 I.R.B.

Table I

Monthly Yield Curve for August 2011

Derived from August 2011 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

2011–40 I.R.B. 478 October 3, 2011

Due Dates for Filing Form 706, Form 706-NA, or Form 8939, Extension of Time to Pay Estate Tax, and Penalty Relief for Recipients of Property Acquired from Decedents who Died in 2010

Notice 2011–76

PURPOSE

This notice provides the executor of an estate of a decedent who died in 2010 (Executor of a 2010 Estate) who timely files a Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Es- tate (and Generation-Skipping Transfer) Taxes, an automatic extension of time to file an estate tax return and to pay the estate tax due. Furthermore, this notice revises the due date of Form 8939, Alloca- tion of Increase in Basis for Property Ac- quired From a Decedent . It also provides penalty relief to certain persons who acquired property, the basis of which is determined under section 1022, and disposed of such property during 2010. This notice applies to each Executor of a 2010 Estate and to recipients of property acquired from decedents who died in 2010.

BACKGROUND

In General

Section 501 of the Economic Growth and Tax Relief Reconciliation Act of 2001, P.L. 107–16 (115 Stat. 69) (EGTRRA), repealed the estate tax for the estates of decedents who died in 2010 (2010 Decedents). EGTRRA also repealed section 1014 and replaced it with section 1022. Section 1014 generally provides that the recipient’s basis in property passing from a decedent is the fair market value (FMV) of the property on the decedent’s date of death. Section 1022 generally provides that the recipient’s basis in property acquired from a decedent is the lesser of the decedent’s adjusted basis in the property and the FMV of the property on the decedent’s date of death.

Section 301(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111–312 (124 Stat. 3296) (TRUIRJCA),

repealed section 501 of EGTRRA and section 1022. The repeal of EGTRRA retroactively reinstated the estate tax for 2010 Decedents and also reinstated section 1014. TRUIRJCA also increased the applicable exclusion amount to $5,000,000 for 2010 Decedents. Section 301(c) of TRUIRJCA, however, allows the Executor of a 2010 Estate to elect not to have the estate tax provisions and section 1014 apply, but rather, to have the provisions of section 1022 apply (Section 1022 Election). With the election, the estate will pay no estate tax and in most cases the basis of the property acquired from the decedent will be determined under section 1022. In addition, the executor may allocate additional basis to certain property. See Rev. Proc. 2011–41, 2011–35 I.R.B. 188.

Filing and Payment Dates

Under section 301(d) of TRUIRJCA, the due date for filing an estate tax return and for paying the estate tax for an estate of a decedent who died after December 31, 2009, and before December 17, 2010, is no earlier than September 17, 2011. The due date, therefore, for estates of decedents who died on or after January 1, 2010, and on or before December 16, 2010, is September 19, 2011, because September 17, 2011, falls on a Saturday. Under section 6075(a), the due date for filing an estate tax return for a decedent who died after December 16, 2010, is nine months after the date of the decedent’s death. Section 6151 provides that, when a tax return is required, the person required to make such return shall pay such tax at the time and place fixed for filing the return (determined without regard to any extension of time for filing the return).

Section 542 of EGTRRA provides that the return required under former section 6018 (Form 8939, which is filed to make a Section 1022 Election, to report the information required under section 6018, and to allocate additional basis under section 1022) shall be filed with the decedent’s final income tax return (for example: Form 1040, United States Individual Income Tax Return, or Form 1040-NR, United States Nonresident Alien Income Tax Return) or by such later date specified in regulations prescribed by the Secretary. Notice 2011–66, 2011–35 I.R.B. 184, which the

Treasury Department and IRS intend to confirm in regulations, provides that Form 8939 is due on or before November 15, 2011. Section 6081 provides that the Secretary may grant a reasonable extension of time for filing any return and that, except in the case of taxpayers who are abroad, no such extension may be for more than six months. In addition, section 6161(a) provides that the Secretary may extend the time for payment of the amount of the tax shown, or required to be shown, on any return for a reasonable period from the date fixed for payment thereof.

GUIDANCE

Forms 706 and 706-NA

Because of the date Congress enacted TRUIRJCA and the length of time required to implement the legislative changes and to issue the Form 8939 with related instructions, the Executor of a 2010 Estate may not have sufficient time to make an informed decision as to whether or not to make a Section 1022 Election and to complete the required filings. Therefore, the Treasury Department and IRS believe it is reasonable to grant the estates of 2010 Decedents an automatic extension of time to file the estate tax return and an extension of time to pay the estate tax. Accordingly, the Treasury Department and IRS grant the Executor of a 2010 Estate who files a Form 4768 by the due date for filing Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, or Form 706-NA, United States Estate (and Generation-Skipping Trans- fer) Tax Return Estate of Nonresident not a Citizen of the United States, both an automatic six-month extension of time to file Form 706 or Form 706-NA pursuant to section 6081, and a six-month extension of time to pay the estate tax. The Executor of a 2010 Estate is not required to substantiate on the Form 4768 the reason for requesting an extension of time for payment of the estate tax to receive the six-month extension of time to pay the estate tax due. However, interest will accrue on the estate tax liability from the due date of the return, excluding extensions. See I.R.C. § 6601.

Except in the case of an executor abroad, under section 6081, the Treasury

October 3, 2011 479 2011–40 I.R.B.

tial understatement of income tax. Section 6664(c) provides that no penalty under section 6662(a) shall be imposed on any portion of an underpayment if it is shown that there is a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.

Revenue Procedure 2011–41 provides a safe harbor for determining a recipient’s basis and other pertinent information such as the tax character and holding period of property acquired from a 2010 Decedent and whose executor makes a Section 1022 Election. However, when the recipient of property acquired from a decedent who disposed of such property during 2010 files the recipient’s income tax return, the recipient may not know whether the decedent’s executor will make the Section 1022 Election and, if so, the amount (if any) of Basis Increase (as defined in Rev. Proc. 2011–41) the executor will allocate to that property. Therefore, the recipient may not know the property’s basis or other pertinent information such as tax character and holding period. When filing the recipient’s income tax return and computing the income tax liability, the recipient will have to make a good faith estimate, based on the facts and circumstances, regarding such information with respect to the property acquired from the 2010 Decedent. Accordingly, to the extent that the recipient’s tax liability is increased, as shown on an amended return or otherwise, by reason of the application of section 1022 to the estate of a 2010 Decedent, the recipient’s reasonable cause and good faith will be presumed and the Treasury Department and IRS will not impose either the section 6651(a)(2) addition to tax for failure to pay, or the section 6662(a) penalty. The recipient should write across the top of the amended return “IR Notice 2011–76” to alert the IRS that the recipient meets these requirements for reasonable cause.

EFFECTIVE DATE

This notice is effective on September 13, 2011. This notice applies to each Executor of a 2010 Estate and to persons acquiring property from a 2010 Decedent.

DRAFTING INFORMATION

The principal authors of this notice are Laura Daly, Theresa Melchiorre, and

Department and IRS cannot grant additional extensions of time to file Form 706 or Form 706-NA to such estates, regardless of whether an executor files a Form 4768 requesting an additional extension of time to file. An executor, however, may apply for an additional extension of time to pay the estate tax under section 6161 if the executor files a Form 4768 on or before the extended due date of the payment of tax and provides the documentation required with such form. See I.R.C. § 6161.

The IRS will not impose late filing and late payment penalties under section 6651(a)(1) or (2) on estates of decedents who died after December 31, 2009, and before December 17, 2010, if the estate timely files Form 4768 and then files Form 706 or Form 706-NA and pays the estate tax by March 19, 2012. The IRS also will not impose late filing or late payment penalties under section 6651(a)(1) or (2) on estates of decedents who died after December 16, 2010, and before January 1, 2011, if the estate timely files Form 4768 and then files Form 706 or Form 706-NA and pays the estate tax within 15 months after the decedent’s date of death.

Form 8939

The due date for filing Form 8939 is changed from November 15, 2011, to January 17, 2012. Thus, a Section 1022 Election is timely if made on a Form 8939 filed by (and may be amended or revoked on or before) January 17, 2012. The Treasury Department and IRS will not grant any further extension of time to file Form 8939, to make the Section 1022 Election, or to amend or revoke the Section 1022 Election, except as provided in sections I.A, B, or D.1 or 2 of Notice 2011–66. Accordingly, as contemplated in section I.D.2 of Notice 2011–66, an executor may file an amended Form 8939 if the provisions of § 301.9100–2(b) are satisfied, by July 17, 2012. Moreover, the penalty under section 6716 does not apply to the Executor of a 2010 Estate solely because the Form 8939 is filed after November 15, 2011, but on or before January 17, 2012. Similarly, a penalty under section 6716 does not apply to the Executor of a 2010 Estate solely because a statement required to be furnished to beneficiaries is provided af

ter December 15, 2011, but on or before February 17, 2012.

Generation-Skipping Transfer (GST) Tax

If an executor makes a Section 1022 Election on a Form 8939 filed on or before January 17, 2012, and allocates the decedent’s available GST exemption (or makes an election under the GST tax) on an attached Schedule R or R–1, the allocation or election will be considered timely and effective as of the decedent’s date of death pursuant to section 2632. Alternatively, the automatic allocation rules under section 2632 will apply if the executor timely files the Form 8939 without attaching a Schedule R or R–1. If the executor does not make the Section 1022 Election or if the executor timely revokes a Section 1022 Election, then the automatic allocation rules under section 2632 will apply unless the executor timely files Form 706 or Form 706-NA with the Schedule R or R–1 attached.

Federal Income Tax Return for any Individual, Estate, or Trust, Form 709, and State Estate or Inheritance Tax

This notice does not extend the due date for paying any income tax or for filing any income tax return for any individual, estate, or trust (for example, Form 1040, Form 1040-NR, or Form 1041, United States Income Tax Return for Estates & Trusts) . In addition, this notice does not extend the due date for paying any gift tax or for filing any Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return . Finally, this notice does not extend the time to file an estate or inheritance tax return required by any state of the United States or to pay any estate or inheritance tax due to such state.

Penalty Relief

Section 6651(a)(2) generally provides that, in the case of any failure to pay the tax shown on any return required to be filed under subchapter A of chapter 61 on its due date, unless it is shown that the failure is due to reasonable cause and not willful neglect, an addition to tax shall apply. In addition, section 6662(a) imposes a 20 percent penalty on any portion of an underpayment of tax due to negligence, disregard of rules or regulations, or a substan

2011–40 I.R.B. 480 October 3, 2011

Mayer Samuels of the Office of Associate Chief Counsel (Passthroughs & Special

Industries). For further information regarding this notice, contact Laura Daly,

Theresa Melchiorre, or Mayer Samuels at (202) 622–3090 (not a toll-free call).

October 3, 2011 481 2011–40 I.R.B.