Part III. Administrative, Procedural, and Miscellaneous

Eligibility for Exemption from User Fee Requirement for Employee Plans Determination Letter Applications Filed After January 31, 2011

Notice 2011–86

I. Purpose

This notice provides guidance on § 7528(b)(2) of the Internal Revenue Code. Section 7528(b)(2) provides for exemption from the requirement to pay a user fee for certain applications to the Service for determination letters on the qualified status of pension, profit-sharing, stock bonus, annuity, and employee stock ownership (ESOP) plans. The guidance in this notice generally pertains to such applications that are filed with the Service after January 31, 2011. This notice amplifies Notice 2002–1, 2002–1 C.B. 283, by explaining how to determine, for purposes of eligibility for exemption from the user fee requirement, if such an application has been filed within a remedial amendment period with respect to the plan beginning within the plan’s first five plan years.

II. Background

Section 7528 directs the Secretary of the Treasury to establish a program requiring the payment of a user fee for requests to the Service for ruling letters, opinion letters, determination letters, and other similar requests. Rev. Proc. 2011–8, 2011–1 I.R.B. 237, as corrected by Announcement 2011–8, 2011–5 I.R.B. 446, contains the procedures under the Service’s user fee program with respect to requests involving employee plans and exempt organizations.

Section 7528(b)(2)(A) provides that the Secretary shall provide for such exemptions from the user fee requirement (and reduced fees) as the Secretary deems appropriate. Section 7528(b)(2)(B) and (C) provides that an application for a determination letter on the qualified status of a pension, profit-sharing, stock bonus, annuity, or ESOP plan or the exempt status of any trust which is part of the plan shall be exempt from the user fee requirement

if the plan is maintained solely by one or more eligible employers (within the meaning of § 7528(b)(2)(C)(ii)) and the application is filed by the later of the last day of the fifth plan year the plan is in existence or the last day of any remedial amendment period with respect to the plan beginning within the first five plan years.

Section 7528 was added to the Code in 2003, effective for requests made after October 1, 2003. Provisions identical to § 7528(b)(2)(B) and (C) were set forth in section 620 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16 (EGTRRA), and applied to requests made after December 31, 2001 and before the effective date of § 7528. Notice 2002–1, as amplified by Notice 2003–49, 2003–2 C.B. 294, provides guidance on section 620 of EGTRRA, including guidance on who is an eligible employer, when a plan is in existence, the types of determination letter applications that are eligible for exemption from the user fee requirement, and when a plan’s EGTRRA remedial amendment period begins for purposes of determining if a determination letter application is eligible for exemption from the user fee requirement. The guidance in Notice 2002–1, as amplified by Notice 2003–49, applies to § 7528(b)(2)(B) and (C), as well as to section 620 of EGTRRA, and continues to be effective, as further amplified by this notice.

Rev. Proc. 2007–44, 2007–2 C.B. 54, provides for a system of cyclical remedial amendment periods and staggered submission periods for determination letter applications for employee plans. Under the system set forth in Rev. Proc. 2007–44, applications for determination letters for a plan are generally not submitted more frequently than once every five or six years, depending on whether the plan is (1) individually designed and subject to a 5-year remedial amendment cycle or (2) pre-approved and subject to a 6-year cycle. Any remedial amendment period with respect to a plan that would otherwise expire before the end of the plan’s current 5- or 6-year cycle (and after the end of the plan’s preceding cycle) is extended to the end of the plan’s current cycle.

For example, the current 5-year remedial amendment cycle for an individually designed Cycle A plan (as defined in section 9 of Rev. Proc. 2007–44) ends on January 31, 2012, and the one-year determination letter submission period for the plan under the current cycle runs from February 1, 2011 to January 31, 2012. Any remedial amendment period with respect to the plan that would otherwise expire after January 31, 2007 and before January 31, 2012 is extended to January 31, 2012. The current 5-year remedial amendment cycles for individually designed Cycle B, C, D, and E plans end on January 31, 2013, 2014, 2015, and 2016, respectively. Similar remedial amendment cycle rules apply to pre-approved plans, except that the cycles are six years in length and are based on whether a plan is a defined contribution or a defined benefit plan.

III. Remedial Amendment Period Beginning Within First Five Plan Years

An application for a determination letter does not meet the requirements in § 7528(b)(2)(B) and (C) for exemption from the user fee requirement if the application is not submitted to the Service by the later of the last day of the fifth plan year the plan is in existence or the last day of any remedial amendment period with respect to the plan beginning within the first five plan years. Ascertaining whether a particular application satisfies this requirement would require consideration of the effective dates with respect to the plan of changes in law and published guidance, the adoption and effective dates of the plan and amendments to the plan, and the plan’s current remedial amendment cycle. A separate analysis could be required for every application that is otherwise eligible for exemption from the user fee requirement.

In order to simplify the process for establishing whether a user fee is required to be paid with a determination letter application for a plan, for purposes of § 7528(b)(2), the Service will treat an application as having been filed by the last day of a remedial amendment period with respect to the plan beginning within the first five plan years if both of

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the following conditions are met: (1) the application is filed with the Service by the last day of the submission period for the plan’s current remedial amendment cycle, and (2) the plan is first in existence no earlier than January 1 of the tenth calendar year immediately preceding the year in which the submission period for the plan’s current remedial amendment cycle begins. For example, for purposes of § 7528(b)(2), the Service will treat an application for a determination letter for a Cycle A plan as filed by the last day of a remedial amendment period with respect to the plan beginning within the first five plan years if the application is filed with the Service by January 31, 2012 ( i.e., the last day of the submission period for the plan’s current remedial amendment cycle) and the plan is first in existence no earlier than January 1, 2001 ( i.e., January 1 of the tenth calendar year immediately preceding 2011, the year in which the submission period for the plan’s current remedial amendment cycle begins). An application for a determination letter for a Cycle B plan will be treated as filed by the last day of a remedial amendment period with respect to the plan beginning within the first five plan years if the application is filed with the Service by January 31, 2013, and the plan is first in existence no earlier than January 1, 2002.

There may be certain situations in which an application that is filed by the last day of a remedial amendment period with respect to the plan beginning within the first five plan years would nevertheless not be treated as such under the rule described in the preceding paragraph ( i.e., where a remedial amendment period beginning within the first five plan years ends on the last day of a submission period that begins more than ten years after the year in which the plan is first in existence). In such cases, where the other requirements for exemption from user fees are also met, the applicant should not include payment of a user fee with the application but should explain in a cover letter how the application meets the requirements for exemption. If the Service determines that the application is not exempt, the applicant will be asked to submit the required user fee.

The preceding rules apply to all applications for determination letters that are filed with the Service after

January 31, 2011, other than applications filed by April 30, 2012 for EGTRRA determination letters for defined benefit plans that are eligible for the 6-year EGTRRA remedial amendment cycle ending on April 30, 2012. Notice 2003–49 explains how to determine eligibility for exemption from the user fee requirement for a determination letter application filed within a plan’s EGTRRA remedial amendment period. Notice 2003–49 applies to applications for determination letters for defined benefit plans that are eligible for the 6-year EGTRRA remedial amendment cycle ending on April 30, 2012, regardless of whether such an application is filed on Form 5307, Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans, or Form 5300, Application for Determination for Employee Benefit Plan.

IV. Effect on Other Documents

Notice 2002–1 is amplified.

V. Effective Date

This notice is effective with respect to applications for determination letters on the qualified status of employee plans that are filed with the Service after January 31, 2011.

DRAFTING INFORMATION

The principal drafter of this notice is James Flannery of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please contact the Employee Plans’ taxpayer assistance telephone service at 1–877–829–5500 (a toll-free number) or Mr. Flannery at RetirementPlanQuestions@irs.gov .

State of New York Low-Income Housing Credit Disaster Relief

Notice 2011–87

The Internal Revenue Service is suspending certain requirements under § 42 of the Internal Revenue Code for low-income housing credit projects to provide emergency housing relief needed as a result of the devastation in the State of New

York caused by either Hurricane Irene during the period of August 26, 2011 to September 5, 2011, or the remnants of Tropical Storm Lee during the period of September 7, 2011 to September 11, 2011. This relief is being granted pursuant to the Service’s authority under § 42(n) and § 1.42–13(a) of the Income Tax Regulations.

BACKGROUND

On August 31, 2011, and September 13, 2011, the President declared major disasters for the State of New York. The declarations were made under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq . Subsequently, the Federal Emergency Management Agency (FEMA) designated jurisdictions for Individual Assistance. The State of New York has requested that the Service allow owners of low-income housing credit projects to provide temporary housing in vacant units to individuals who resided in jurisdictions designated for Individual Assistance in the State of New York and who have been displaced because their residences were destroyed or damaged as a result of the devastation caused by Hurricane Irene or the remnants of Tropical Storm Lee. Based upon this request and because of the widespread damage to housing caused by Hurricane Irene and the remnants of Tropical Storm Lee, the Service has determined that the New York State Homes and Community Renewal Agency (Agency) may provide approval to project owners to provide temporary emergency housing for displaced individuals in accordance with this notice.

I. SUSPENSION OF INCOME LIMITATIONS

The Service has determined that it is appropriate to temporarily suspend certain income limitation requirements under § 42 for certain qualified low-income housing projects. The suspension will apply to low-income housing projects approved by the Agency, in which vacant units are rented to displaced individuals. The Agency will determine the appropriate period of temporary housing for each project, not to extend beyond October 31, 2012 (temporary housing period).

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The project owner must obtain approval from the Agency for the relief described in this notice. The Agency will determine the appropriate period of temporary housing for each project, not to extend beyond October 31, 2012.

(3) Certifications and Recordkeeping To comply with the requirements of § 1.42–5, project owners are required to maintain and certify certain information concerning each displaced individual temporarily housed in the project, specifically the following: name, address of damaged residence, social security number, and a statement signed under penalties of perjury by the displaced individual that, because of damage to the individual’s residence in a New York jurisdiction designated for Individual Assistance by FEMA as a result of the devastation caused in the State of New York by either Hurricane Irene during the period of August 26, 2011 to September 5, 2011, or the remnants of Tropical Storm Lee during the period of September 7, 2011 to September 11, 2011, as applicable, the individual requires temporary housing. The owner must notify the Agency that vacant units are available for rent to displaced individuals.

The owner must also certify the date the displaced individual began temporary occupancy and the date the project will discontinue providing temporary housing as established by the Agency. The certifications and recordkeeping for displaced individuals must be maintained as part of the annual compliance monitoring process with the Agency.

(4) Rent Restrictions Rents for the low-income units that house displaced individuals must not exceed the existing rent-restricted rates for the low-income units established under § 42(g)(2).

(5) Protection of Existing Tenants Existing tenants in occupied low-income units cannot be evicted or have their tenancy terminated as a result of efforts to provide temporary housing for displaced individuals.

EFFECTIVE DATES

This notice is effective August 31, 2011 (the date of the President’s major disaster declaration) for devastation caused by Hurricane Irene in the State of New York during the period of August 26, 2011 to

II. STATUS OF UNITS

A. Units in the first year of the credit period

A displaced individual temporarily occupying a unit during the first year of the credit period under § 42(f)(1) will be deemed a qualified low-income tenant for purposes of determining the project’s qualified basis under § 42(c)(1), and for meeting the project’s 20–50 test or 40–60 test as elected by the project owner under § 42(g)(1). After the end of the temporary housing period established by the Agency (not to extend beyond October 31, 2012), a displaced individual will no longer be deemed a qualified low-income tenant.

B. Vacant units after the first year of the credit period

During the temporary housing period established by the Agency, the status of a vacant unit (that is, market-rate or low-income for purposes of § 42 or never previously occupied) after the first year of the credit period that becomes temporarily occupied by a displaced individual remains the same as the unit’s status before the displaced individual moves in. Displaced individuals temporarily occupying vacant units will not be treated as low-income tenants under § 42(i)(3)(A)(ii). However, even if it houses a displaced individual, a low-income or market rate unit that was vacant before the effective date of this notice will continue to be treated as a vacant low-income or market rate unit. Similarly, a unit that was never previously occupied before the effective date of this notice will continue to be treated as a unit that has never been previously occupied even if it houses a displaced individual. Thus, the fact that a vacant unit becomes occupied by a displaced individual will not affect the building’s applicable fraction under § 42(c)(1)(B) for purposes of determining the building’s qualified basis, nor will it affect the 20–50 test or 40–60 test of § 42(g)(1). If the income of occupants in low-income units exceeds 140 percent of the applicable income limitation, the temporary occupancy of a unit by a displaced individual will not cause application of the available unit rule under § 42(g)(2)(D)(ii). In addition, the project owner is not required during the temporary

housing period to make attempts to rent to low-income individuals the low-income units that house displaced individuals.

III. SUSPENSION OF NON-TRANSIENT REQUIREMENTS

The non-transient use requirement of § 42(i)(3)(B)(i) shall not apply to any unit providing temporary housing to a displaced individual during the temporary housing period determined by the Agency in accordance with section I of this notice.

IV. OTHER REQUIREMENTS

All other rules and requirements of § 42 will continue to apply during the temporary housing period established by the Agency. After the end of the temporary housing period, the applicable income limitations contained in § 42(g)(1), the available unit rule under § 42(g)(2)(D)(ii), the nontransient requirement of § 42(i)(3)(B)(i), and the requirement to make reasonable attempts to rent vacant units to low-income individuals shall resume. If a project owner offers to rent a unit to a displaced individual after the end of the temporary housing period, the displaced individual must be certified under the requirements of § 42(i)(3)(A)(ii) and § 1.42–5(b) and (c) to be a qualified low-income tenant. To qualify for the relief in this notice, the project owner must additionally meet all of the following requirements:

(1) Major Disaster Area In the case of an individual displaced by the devastation caused by Hurricane Irene, the displaced individual must have resided in a New York jurisdiction designated for Individual Assistance by FEMA as a result of the devastation in the State of New York caused by Hurricane Irene during the period of August 26, 2011 to September 5, 2011. In the case of an individual displaced by the devastation caused by the remnants of Tropical Storm Lee, the displaced individual must have resided in a New York jurisdiction designated for Individual Assistance by FEMA as a result of the devastation in the State of New York caused by the remnants of Tropical Storm Lee during the period of September 7, 2011 to September 11, 2011.

(2) Approval of the Agency

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law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

DRAFTING INFORMATION

The principal author of this notice is David Selig of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Mr. Selig at (202) 622–3040 (not a toll-free call).

26 CFR 601.602: Tax forms and instructions. (Also Part I, §§ 1, 23, 24, 25A, 32, 42, 59, 62, 63, 132, 135, 137, 146, 147, 148, 151, 179, 213, 220, 221, 512, 513, 877, 877A, 911, 2010, 2032A, 2503, 2523, 4161, 4261, 6033, 6039F, 6323, 6334, 6601, 7430, 7702B; 1.148–5.)

Rev. Proc. 2011–52

Code Section

September 5, 2011. This notice is effective September 13, 2011 (the date of the President’s major disaster declaration) for devastation caused by the remnants of Tropical Storm Lee in the State of New York during the period of September 7, 2011 to September 11, 2011.

PAPERWORK REDUCTION ACT

The collection of information contained in this notice has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–2220.

An Agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collection of information in this notice is in the section titled “OTHER REQUIREMENTS” under “(3) Certifications