SECTION 4. POSSIBLE

PROCEDURES FOR A COLLECTOR ADOPTING AN EXCLUSION RATIO FOR A PROGRAM FOR A YEAR

4.01 The collector would file a new form (to be designated by the IRS at a future date) reporting the Exclusion Ratio to the IRS by February 1 following the close of the Base Period. The collector’s filing of the form by February 1 constitutes an election to use the safe harbor methodology. The election would be irrevocable for all frequent flyer miles purchased from the collector during the Election Year beginning on April 1 following the close of the Base Period.

4.02 The collector would provide notification of the adoption of the use of an Exclusion Ratio and specify the ratio itself in program literature available to taxpayers by February 1.

4.03 The collector would be required to use the Exclusion Ratio reported by the collector in its February 1 filing for the entire Election Year.

4.04 A taxpayer that purchased frequent flyer miles offered by the collector would be deemed to have elected application of the safe harbor methodology. The collector would be required to reference this deemed election in program literature available to taxpayers.

4.05 A taxpayer would not subsequently be able to obtain a credit or refund for a portion of the tax paid if the percentage of frequent flyer miles ultimately redeemed other than for taxable air transportation ends up being higher than the percentage calculated under the safe harbor methodology, nor would the taxpayer be assessed additional § 4261(a) tax if the percentage ends up being lower.