Part IV. Items of General Interest

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Application for Recognition as a 501(c)(29) Organization

REG–135071–11

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations.

SUMMARY: In this issue of the Bulletin are temporary regulations (T.D. 9574) authorizing the IRS to prescribe the procedures by which a qualified nonprofit health insurance issuer participating in the Consumer Operated and Oriented Plan program, established by the Centers for Medicare and Medicaid Services, may apply for recognition as a tax-exempt organization under the Internal Revenue Code. The text of those regulations also serves as the text of these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing must be received by April 9, 2012.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–135071–11), Room 5203, Internal Revenue Service, P.O. 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–135071–11), 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–135071–11).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Amy Franklin or Martin Schäffer at (202) 622–6070; concerning submission of comments and request for hearing, Oluwafunmilayo Taylor at (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

The temporary regulations in this issue of the Bulletin make additions to the Income Tax Regulations (26 CFR part 1) relating to section 501(c)(29) of the Internal Revenue Code (Code). The temporary regulations provide that the Commissioner has the authority to prescribe the procedures under which a qualified nonprofit health insurance issuer (within the meaning of section 1322(c) of the Patient Protection and Affordable Care Act, Public Law 111–148 (March 23, 2010)) which has received a loan or grant from the Centers for Medicare and Medicaid Services under the Consumer Operated and Oriented Plan program may request to be recognized as tax-exempt under section 501(a) as an organization described in section 501(c)(29). The temporary regulations expressly authorize the Commissioner to recognize a qualified nonprofit health insurance issuer as exempt effective as of a date prior to the date of its application, provided that the application is submitted in the manner and within the time prescribed by the Commissioner and the organization’s prior purposes and activities were consistent with the requirements for exempt status under section 501(c)(29). The text of the temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the additions.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. 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, and because no collection of information is imposed on small entities, the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply. Pursuant to section 7805(f) of the Code, the proposed regulation has been submitted to the Chief Counsel for Advo

cacy of the Small Business Administration for comments on its impact on small businesses.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the “Addresses” heading. The IRS and the Treasury Department request comments on the proposed regulations, including how they might be made easier to understand. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register .

Drafting Information

The principal authors of these regulations are Amy Franklin and Martin Schäffer of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities), although other persons in the IRS and the Treasury Department participated in their development.

- - - -

Proposed Amendment 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 is amended by adding an entry in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Section 1.501(c)(29)–1 also issued under 26 U.S.C. 501(c)(29)(B)(i). - * *

Par. 2. Section 1.501(c)(29)–1 is added to read as follows:

§1.501(c)(29)–1 CO-OP Health Insurance Issuers .

[The text of proposed amendment to §1.501(c)(29)–1 is the same as the text for

March 19, 2012 561 2012–12 I.R.B.

§1.501(c)(29)–1T(a) through (c) published elsewhere in this issue of the Bulletin].

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

(Filed by the Office of the Federal Register on February 6, 2012, 8:45 a.m., and published in the issue of the Federal Register for February 7, 2012, 77 F.R. 6027)

Procedures for Certain Trusts that Qualify as Type III Supporting Organizations, Announcement 2010–19 Obsolete

Announcement 2012–12

Announcement 2010–19, 2010–14 I.R.B. 529 (April 5, 2010), described pro

cedures for certain charitable trusts that classified themselves as private foundations after August 16, 2007, to be reclassified as Type III supporting organizations. These procedures applied to trusts that met the requirements to be classified as a Type III supporting organization through the end of the 2008 taxable year (including by meeting the significant voice responsiveness test for periods after August 16, 2007), but erroneously filed Form 990–PF and paid Internal Revenue Code § 4940 tax for the 2008 taxable year. Announcement 2010–19 explained, among other things, how such a trust could request a ruling that it was, and continued to be, a Type III supporting organization described in § 509(a)(3).

Since Announcement 2010–19 was issued, the IRS has updated its procedures for an organization to obtain a determina

tion regarding its foundation status. See Rev. Proc. 2012–10, 2012–2 I.R.B. 273. In addition, in June 2011 the IRS released Form 8940, Request for Miscellaneous De- terminations Under Section 507, 509(a), 4940, 4942, 4945, and 6033 of the In- ternal Revenue Code, referenced in Rev. Proc. 2012–10, which describes the detailed procedures for a “[c]hange in Type (or initial determination of Type) of a section 509(a)(3) organization” (Part II, box 8f) and a “Reclassification of foundation status, . . .” (Part II, box 8g). A user fee applies to these determinations.

Accordingly, Announcement 2010–19 is hereby declared to be obsolete.

For further information regarding this announcement, contact Mike Repass of the Exempt Organizations, Tax Exempt and Government Entities Division at (202) 283–8924 (not a toll-free call).

2012–12 I.R.B. 562 March 19, 2012