Internal Revenue Bulletin 2012-47 (PDF rendition): IRS Announcements

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 201
2-47
November 19, 201
2
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
SPECIAL ANNOUNCEMENT
Announcement 2012–42, page 561.
This announcement modifies the rules set forth in the proposed
regulations under sections 1471 through 1474. The proposed
regulations under sections 1471 through 1474 were published
in the Federal Register (REG–121647–10, 77 Fed. Reg. 9022)
on February 15, 2012. This announcement outlines the time-
lines for withholding agents and foreign financial institutions
to complete due diligence and other requirements. This an-
nouncement also provides guidance concerning certain grand-
fathered obligations and withholding on gross proceeds. The
final regulations under sections 1471 through 1474 will incor-
porate the modified rules described in this announcement.
INCOME TAX
T.D. 9600, page 548.
New markets tax credit.Final regulations under section 45D
of the Code modifying the new markets tax credit program to
facilitate and encourage investments in non-real estate busi-
nesses in low-income communities by amending the reinvest-
ment rules for qualified equity investments in non-real estate
businesses.
Announcement 2012–42, page 561.
This announcement modifies the rules set forth in the proposed
regulations under sections 1471 through 1474. The proposed
regulations under sections 1471 through 1474 were published
in the Federal Register (REG–121647–10, 77 Fed. Reg. 9022)
on February 15, 2012. This announcement outlines the time-
lines for withholding agents and foreign financial institutions
to complete due diligence and other requirements. This an-
nouncement also provides guidance concerning certain grand-
fathered obligations and withholding on gross proceeds. The
final regulations under sections 1471 through 1474 will incor-
porate the modified rules described in this announcement.
EXEMPT ORGANIZATIONS
REG–134974–12, page 553.
Proposed regulations under section 4942 of the Code provide
guidance for private foundations regarding the standards for
making a good faith determination that a foreign organization
is a charitable organization, grants to which may be qualifying
distributions and not taxable expenditures. The regulations will
affect private foundations seeking to make such good faith
determinations.
Announcements of Disbarments and Suspensions begin on page 556.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
November 19, 20122012–47 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 45D.—
New Market
Tax Credit
26 CFR 1.45D–0: Table of contents.
T.D. 9600
DEPARTMENT O
FTHE
TREASURY
Internal Re
venue Service
26 CFR Part
1
New Markets Tax Credit
Non-Real Estate Investments
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION:
Final Regulations.
SUMMARY: This document contains fi-
nal regulations modifying the new markets
tax credit program to facilitate and encour-
age investments in non-real estate busi-
nesses in low-income communities. The
final regulations affect taxpayers claiming
the new markets tax credit and businesses
in low-income communities relying on the
program.
DATES:Effective Date:These regulations
are effective September 28, 2012.
Applicability Date:For date of applica-
bility see §1.45D–1(h)(4)
FOR FU
RTHER INFORMATION
CONT
ACT: Julie Hanlon-Bolton, (202)
622–
3040 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Thi
s document amends 26 CFR part
1to
provide additional rules relating to
the
new markets tax credit under section
45D
of the Internal Revenue Code (Code).
On J
une 7, 2011, a notice of proposed
rul
emaking and notice of public hearing
(R
EG–101826–11) was published in the
Fe
deral Register(76 FR 32882). The
IR
S received comments responding to the
no
tice of proposed rulemaking and held
ap
ublic hearing on September 29, 2011.
Af
ter consideration of all the comments,
the proposed r
egulations are adopted as
amended by thi
s Treasury decision. The
comments are d
iscussed in the preamble.
General Over
view
Under sectio
n 45D(a)(1), a taxpayer
may claim a n
ew markets tax credit on
certain cre
dit allowance dates described
in section 4
5D(a)(3) over a 7-year credit
period with
respect to a qualified eq-
uity invest
ment in a qualified community
developme
nt entity (CDE) described in
section 45
D(c).
Under sect
ion 45D(b)(1), an equity
investmen
tinaCDEisaqualified equity
investmen
tif, among other requirements:
(A) the inv
estment is acquired by the
taxpayer
at its original issue (directly or
through a
n underwriter) solely in exchange
for cash,
(B) substantially all of the cash is
used by th
e CDE to make qualified low-in-
come comm
unity investments, and (C) the
investm
ent is designated for purposes of
section
45D by the CDE.
Under se
ction 45D(b)(2), the maxi-
mum amou
nt of equity investments issued
by a CDE t
hat may be designated by the
CDE as qu
alified equity investments shall
not exc
eed the portion of the new markets
tax cre
dit limitation set forth in section
45D(f)
(1) that is allocated to the CDE by
the Sec
retary under section 45D(f)(2).
Sectio
n 45D(c)(1) provides that a do-
mestic
corporation or partnership is a CDE
if (A) t
he primary mission of the entity
is ser
ving, or providing investment capi-
tal fo
r, low-income communities or low-
incom
e persons, (B) the entity maintains
accou
ntability to residents of low-income
commu
nities through their representation
on an
ygoverningboardoftheentityoron
any a
dvisory board to the entity, and (C)
the e
ntity is certified by the Secretary as a
CDE.
Sect
ion 45D(d)(1) definesqualified
low-
income community investmentto
mean
: (A) any capital or equity investment
in, o
r loan to, any qualified active low-in-
com
e community business (as defined in
sec
tion 45D(d)(2)), (B) the purchase from
ano
ther CDE of any loan made by such en-
tit
y that is a qualified low-income commu-
nit
y investment, (C) financial counseling
and other serv
ices specified in regulations
prescribed by
the Secretary to businesses
located in, an
d residents of, low-income
communities
, and (D) any equity invest-
ment in, or lo
an to, any CDE.
Under sectio
n 45D(d)(2)(A), aqualified
active low-i
ncome community businessis
any corporat
ion (including a nonprofit cor-
poration) or
partnership if for such year,
among other
requirements, (i) at least 50
percent of t
he total gross income of the en-
tity is deri
ved from the active conduct of a
qualified b
usiness within any low-income
community
, (ii) a substantial portion of the
use of the t
angible property of the entity
(whether o
wned or leased) is within any
low-incom
e community, and (iii) a sub-
stantial p
ortion of the services performed
for the en
tity by its employees are per-
formed in
any low-income community.
Under sec
tion 45D(d)(3), with certain
exceptio
ns, aqualified businessis any
trade or b
usiness. The rental to others of
real prop
erty located in any low-income
communit
y is a qualified business only if
the prop
erty is not residential rental prop-
erty (as
defined in section 168(e)(2)(A))
and ther
e are substantial improvements
located
on the real property.
Section
1.45D–1(d)(2)(i) requires that a
CDE rece
iving returns on investments (in-
cludin
g principal repayments from amor-
tizing
loans) must reinvest those proceeds
into ot
her qualified low-income commu-
nity in
vestments during the 7-year credit
period
. If the proceeds are not reinvested,
then t
he credit may be subject to recapture
under
section 45D(g)(3)(B).
Many c
ommentators consider the new
marke
ts tax credit under section 45D to be
asucc
essful tool for encouraging private
secto
r investments in low-income commu-
nitie
s. To date, the majority of new mar-
kets
tax credit investments relate to real
esta
te projects. Real estate projects are
well
suited to the new markets tax credit
prog
ram because real estate remains in the
low-
income community and loans for real
esta
te can extend through the end of the
7-y
ear period in which investors may take
the
credit on their investment. The 7-year
cre
dit period and the reinvestment require-
men
ts make it difficult for CDEs to pro-
vid
e working capital and equipment loans
2012–47 I.R.B.548November 19, 2012

to non-real estate businesses because these
loans are ordinarily amortizing loans with
a term of five years or less. To facilitate
investment in non-real estate businesses,
the proposed regulations modify the rein-
vestment requirements for non-real estate
projects.
Overview of Proposed Regulations and
Summary of Comments
To encourage investments in non-real
estate businesses for working capital
and equipment, the proposed regulations
modify the reinvestment requirements
under §1.45D–1(d)(2)(i). The proposed
regulations allow a CDE that makes a
qualified low-income community in-
vestment in a non-real estate business
to invest certain returns of capital from
those investments in unrelated certified
community development financial in-
stitutions that are CDEs under section
45D(c)(2)(B) (certified CDFIs) at various
points during the 7-year credit period.
The proposed regulations also allow
an increasing aggregate amount to be
invested in certified CDFIs and treated
as continuously invested in a qualified
low-income community investment in the
later years of the 7-year credit period.
Many commentators welcomed new
options for meeting the reinvestment
requirements. After considering the com-
ments received, the final regulations adopt
the provisions of the proposed regulations
with two minor changes based on these
comments. In addition to reinvestments
in certified CDFIs, the final regulations
provide that the Secretary may designate
other qualifying entities in the Internal
Revenue Bulletin. These final regulations
also clarify that investments in non-real
estate qualified active low-income com-
munity businesses may be made through
one or more CDEs. As discussed below,
the IRS and the Treasury Department are
considering other options for future guid-
ance.
Definition of Non-Real Estate Qualified
Active Low-Income Community Business
The proposed regulations define a
non-real estate qualified active low-in-
come community business as any busi-
ness whose predominant business activity
(measured by more than 50 percent of the
business’ gross income) does not include
the development (including construction
of new facilities and rehabilitation/en-
hancement of existing facilities), man-
agement, or leasing of real estate. The
purpose of the investment or loan must
not be connected to the development (in-
cluding construction of new facilities and
rehabilitation/enhancement of existing fa-
cilities), management, or leasing of real
estate.
Commentators requested that the defi-
nition of a non-real estate qualified active
low-income community business be ex-
panded to include investments connected
to the development of owner occupied fa-
cilities as long as the facility is used in
an operating business. The final regu-
lations do not incorporate this comment
because under current regulations, a sub-
stantial number of new markets tax cred-
its investments are already being made in
owner-occupied facilities. The purpose
of these final regulations is to encourage
more new markets tax credits investments
not related to real estate.
Commentators also requested that if
a non-real estate qualified active low-in-
come community business is allowed
to use investments for construction or
improvements to real estate facilities
primarily used in its business, then
the definition ofworking capitalunder
§1.45D–1(d)(4)(i)(E)(2) should include
the proceeds of an equity investment or
a loan that the non-real estate qualified
active low-income community business
will expend for the construction of real
property within 18 months (as opposed to
12 months) after the date of the investment
or loan. The final regulations do not in-
corporate this comment because the final
rules for non-real estate qualified active
low-income community businesses do not
pertain to investmentsfor construction or
improvements to realestate facilities.
In response to comments, the final
regulations clarify that an investment in
a non-real estate qualified active low-in-
come community business may be made
through one or more CDEs. Thus, for
example, a CDE that designates an equity
investment as a non-real estate qualified
equity investment may invest the pro-
ceeds in another CDE if that investment
is directly traceable to a non-real estate
qualified active low-income community
business.
Payments of Capital, Equity, or Principal
with Respect to a Non-Real Estate
Qualified Active Low-Income Community
Business
The proposed regulations require that
any portion that the CDE chooses to rein-
vest in a certified CDFI must be reinvested
by the CDE no later than 30 days from
the date of receipt to be treated as contin-
uously invested in a qualified low-income
community investment. Commentators
requested that instead of 30 days, CDEs
invested in a non-real estate qualified
active low-income community business
should have 12 months to decide whether
to reinvest capital, equity, or principal
in another non-real estate qualified ac-
tive low-income community business or a
certified CDFI under §1.45D–1(d)(9)(ii)
(similar to the 12-month reinvestment
requirement in §1.45D–1(d)(2)(i)). The
final regulations do not incorporate this
comment because a CDE that has not
found a new non-real estate qualified ac-
tive low-income community business to
invest in at the expiration of the 30 day
period can invest the capital, equity, or
principal in a certified CDFI until it finds
a suitable non-real estate qualified active
low-income community business. It can
then withdraw its investment in the certi-
fied CDFI and invest that capital, equity,
or principal in the suitable non-real estate
qualified active low-income community
business.
Commentators also requested that the
final regulations allow a CDE that makes
an equity investmentin a non-real estate
qualified active low-income community
business to reinvest up to 100 percent of its
equity investment in a certified CDFI un-
der §1.45D–1(d)(9)(ii) after the first year
of the 7-year credit period. The commen-
tators explained that this would encourage
venture capital investments in a non-real
estate qualified active low-income com-
munity business because liquidity events
(cashing out some or all of an investment)
occurring early in the 7-year credit period,
which often happen with venture capi-
tal investments, would not automatically
cause recapture. The final regulations
do not incorporate this comment because
the proposal could create a situation in
which the proceeds of the new markets tax
credit investment may only be invested in
a qualified active low-income community
November 19, 20125492012–47 I.R.B.

business for a brief period without any
new markets tax credit restrictions on how
a certified CDFI may use the proceeds.
Such a result would be inconsistent with
encouraging investments in qualified ac-
tive low-income community businesses
during the 7-year credit period.
Commentators also requested that the
final regulations allow a CDE to invest
returns of capital, equity, or principal into
entities other than certified CDFIs under
§1.45D–1(d)(9)(ii). Such entities would
include non-profit and for-profit entities
focused on economic and community de-
velopment, funds that provide equity and
loans to small and medium businesses, and
funds that provide equity or loans to mi-
nority and women owned businesses. The
final regulations do not incorporate this
comment because it would make admin-
istering the final regulations unworkable
given the breadth of potential reinvest-
ment vehicles. The final regulations allow
investments in certified CDFIs because
there are rules that ensure that a certified
CDFI serves low-income communities.
Such rules do not currently exist for other
potential reinvestment entities. However,
the final regulations provide that in the
future the Secretary may designate other
qualifying entities in the Internal Revenue
Bulletin. See §601.601(d)(2)(ii)(b).
Section 1.45D–1(d)(9) of the pro-
posed regulations is renumbered as
§1.45D–1(d)(10) in the final regulations
due to the amendments made by T.D.
9560, 2012–4 I.R.B. 299, involving tar-
geted populations.
Lines of Credit
A commentator requested that the final
regulations consider the entire amount of
a line of credit as outstanding loan princi-
pal for purposes of the substantially-all re-
quirement under §1.45D–1(c)(5)(i). Lines
of credit often serve the capital needs of
non-real estate businesses better than fully
disbursed loans with fixed terms, which
may be more appropriate for real estate in-
vestments. The IRS and the Treasury De-
partment are studying these issues and may
address them in future guidance.
Other Comments
Other comments were received on is-
sues unrelated to the proposed regulations.
The final regulations do not incorporate
comments that are outside the scope of the
proposed regulations, although they may
be relevant to future guidance under the
new markets tax credit.
Effective Date/Applicability
The IRS and the Treasury Depart-
ment received a few comments regarding
whether the final regulations should allow
a qualified equity investment made before
the effective date of the final regulations
to be eligible for designation as a non-real
estate qualified equity investment. The
majority of commentators recommended
not adopting a look-back rule because it
would be confusing and complicate com-
pliance. After further examination, the
IRS and the Treasury Department agree
with these commentators. Further, al-
lowing CDEs to designate investments
as non-real estate after the investments
are made does not serve the purpose of
incentivizing new investments in non-real
estate projects. Section 1.45D–1(c)(1)(iii)
requires that an investment in a non-real
estate qualified equity investment must be
designated as such for a CDE to qualify
for benefits allowed under the final regu-
lations. Accordingly, the final regulations
apply to equity investments made on or
after the date the final regulations are pub-
lished in theFederal Register.
Special Analyses
This Treasury decision is not a signif-
icant regulatory action as defined in Ex-
ecutive Order 12866,as supplemented by
Executive Order 13563.Therefore, a reg-
ulatory assessment is not required. Sec-
tion 553(b) of the Administrative Proce-
dure Act (5 U.S.C. chapter 5) does not ap-
ply to these regulations, and because the
regulations do not impose a collection of
information on small entities, the Regu-
latory Flexibility Act (5 U.S.C. chapter
6) does not apply. Pursuant to section
7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking that pre-
ceded these final regulations was submit-
ted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on its impact on small business
and no comments were received.
Drafting Information
The principal author of these regu-
lations is Julie Hanlon Bolton with the
Office of the Associate Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the IRS
and the Treasury Department participated
in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is 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 1.45D–0 is amended by:
1.Adding entries for para-
graphs (c)(8), (d)(10), (d)(10)(i),
(d)(10)(ii), (d)(10)(ii)(A), (d)(10)(ii)(B),
(d)(10)(ii)(C), (d)(10)(ii)(D), and (h)(4).
2. Revising the entry for paragraph
(d)(1)(i).
The additions and revisions read as fol-
lows:
§1.45D–0 Table of contents.
*****
(c) * * *
(8) Non-real estate qualified equity in-
vestment.
(d) * * *
(1) * * *
(i) Investment in a qualified active low-
income community business or a non-real
estate qualified active low-income com-
munity business.
*****
(10) Non-real estate qualified active
low-income community business.
(i) Definition.
(ii) Payments of, or for, capital, equity
or principal with respect to a non-real es-
tate qualified active low-income commu-
nity business.
(A) In general.
(B) Seventh year of the 7-year credit
period.
(C) Amounts received from a qualify-
ing entity.
(D) Definition of qualifying entity.
2012–47 I.R.B.550November 19, 2012

*****
(h) * * *
(4) Investments in non-real estate busi-
nesses.
*****
Par. 3. Section 1.45D–1 is amended by:
1. Revising paragraphs (c)(1)(iii),
(c)(3)(ii) introductory text, and (d)(1)(i).
2. Amending paragraph (h)(1) by re-
moving the language “paragraph (h)(2)”
and adding “paragraphs (h)(2), (h)(3), and
(h)(4)” in its place.
3. Adding new paragraphs (c)(8),
(d)(10), and (h)(4).
The additions and revisions read as fol-
lows:
§1.45D–1 New m
arkets tax credit.
*****
(c) * * *
(1) * * *
(iii) The investment is designated for
purposes of section 45D and this section
as a qualified equity investment or a non-
real estate qualified equity investment (as
defined in paragraph (c)(8) of this section)
by the CDE on its books and records using
any reasonable method.
*****
(3) * * *
(ii)Exceptions. Notwithstanding para-
graph (c)(3)(i) of thissection, an equity in-
vestment in an entity is eligible to be desig-
nated as a qualified equity investment or a
non-real estate qualified equity investment
under paragraph (c)(1)(iii) of this section
if—
*****
(8)Non-real estate qualified equity in-
vestment. If a qualified equity investment
is designated as a non-real estate qual-
ified equity investment under paragraph
(c)(1)(iii) of this section, then the quali-
fied equity investment may only satisfy the
substantially-allrequirement under para-
graph (c)(5) of this section if the CDE
makes qualified low-income community
investments that are directly traceable (in-
cluding investments made through one or
more CDEs) to non-real estate qualified
active low-income community businesses
(as defined in paragraph (d)(10) of this sec-
tion). The proceeds of a non-real estate
qualified equity investment cannot be used
for transactions involving a qualified ac-
tive low-income community business that
is not a non-real estate qualified active
low-income community business.
(d) * * *
(1) * * *
(i)Investment in a qualified active low-
income community business or a non-real
estate qualified active low-income commu-
nity business. Any capital or equity invest-
ment in, or loan to, any qualified active
low-income community business (as de-
fined in paragraph (d)(4) of this section) or
any non-real estate qualified active low-in-
come community business (as defined in
paragraph (d)(10) of this section).
*****
(10)Non-real estate qualified active
low-income community business—(i)Def-
inition.Thetermnon-real estate quali-
fied active low-income community busi-
nessmeans any qualified active low-in-
come community business (as defined in
paragraph (d)(4) of this section) whose
predominant business activity does not
include the development (including con-
struction of new facilities and rehabilita-
tion/enhancement of existing facilities),
management, or leasing of real estate.
For purposes of the preceding sentence,
predominant business activity means a
business activity that generates more than
50 percent of the business’ gross income.
The purpose of the capital or equity in-
vestment in, or loan to, the non-real estate
qualified active low-income community
business must not be connected to the de-
velopment (includingconstructionofnew
facilities and rehabilitation/enhancement
of existing facilities), management, or
leasing of real estate.
(ii)Payments of, or for, capital, equity
or principal with respect to a non-real
estate qualified active low-income com-
munity business—(A)In general.For
purposes of paragraph (d)(2)(i) of this
section, a portion of the amounts received
by a CDE in payment of, or for, capi-
tal, equity, or principal with respect to a
non-real estate qualified active low-in-
come community business after year one
of the 7-year credit period (as defined
by paragraph (c)(5)(i) of this section)
maybereinvestedbytheCDEinaqual-
ifying entity (as defined in paragraph
(d)(10)(ii)(D)). Any portion that the CDE
chooses to reinvest in a qualifying entity
must be reinvested by the CDE no later
than 30 days from the date of receipt to
be treated as continuously invested in a
qualified low-income community invest-
ment for purposes of paragraph (d)(2)(i)
of this section. If the amount reinvested in
a qualifying entity exceeds the maximum
aggregate portion of the non-real estate
qualified equity investment, then the ex-
cess will not be treated as invested in a
qualified low-income community invest-
ment. The maximum aggregate portion
of the non-real estate qualified equity in-
vestment that may be reinvested into a
qualifying entity, which will be treated
as continuously invested in a qualified
low-income community investment, may
not exceed the following percentages of
the non-real estate qualified equity invest-
ment in the following years:
(1) 15 percent in Year 2 of the 7-year
credit period.
(2) 30 percent in Year 3 of the 7-year
credit period.
(3) 50 percent in Year 4 of the 7-year
credit period.
(4) 85 percent in Year 5 and Year 6 of
the 7-year credit period.
(B)Seventh year of the 7-year credit pe-
riod. Amounts received by a CDE in pay-
ment of, or for, capital, equity, or princi-
pal with respect to a non-real estate qual-
ified active low-income community busi-
ness (as defined in paragraph (d)(10)(i) of
this section) during the seventh year of
the 7-year credit period do not have to
be reinvested by the CDE in a qualified
low-income community investment to be
treated as continuously invested in a qual-
ified low-income community investment.
(C)Amounts received from qualifying
entity. Except for the seventh year of
the 7-year credit period under paragraph
(d)(10)(ii)(B) of this section, amounts re-
ceived from a qualifying entity must be
reinvested by the CDE no later than 30
days from the date of receipt to be treated
as continuously invested in a qualified
low-income community investment.
(D)
Definition of qualifying entity.For
purposes of paragraphs (d)(10)(ii) and
(d)(10)(iii) of this section, aqualifying
entityis—
(1) A certified community development
financial institution (certified CDFI) that is
a CDE under section 45D(c)(2)(B) (as de-
fined by 12 CFR 1805.201), which is un-
related to the CDE making the investment
in the certified CDFI within the meaning
of section 267(b) or section 707(b)(1); or
November 19, 20125512012–47 I.R.B.

(2) An entity designated by the Secre-
tary by publication in the Internal Revenue
Bulletin (see §601.601(d)(2)(ii)(b)ofthis
chapter).
*****
(h) * * *
*****
(4)Investments in non-real estate busi-
nesses. Paragraphs (c)(8) and (d)(10) of
this section apply to equity investments
in CDEs made on or after September 28,
2012.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved September 21, 2012.
Mark J. Mazur,
Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on September 26,
2012, 11:15 a.m., and published in the issue of the Federal
Register for September 28, 2012, 77 F.R. 59544)
2012–47 I.R.B.552November 19, 2012

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Reliance Stan
dards
for Making Goo
dFaith
Determinati
ons
REG–134974–
12
AGENCY: Inte
rnal Revenue Service
(IRS), Treas
ury.
ACTION: Noti
ce of proposed rulemaking.
SUMMARY: Thi
s document contains pro-
posed regul
ations regarding the standards
for making a
good faith determination that
a foreign or
ganization is a charitable or-
ganization
, grants to which may be qual-
ifying dist
ributions and not taxable expen-
ditures. T
he regulations will affect private
foundatio
ns seeking to make such good
faith dete
rminations.
DATES: Com
ments and requests for a
public hea
ring must be received by De-
cember 24
, 2012.
ADDRESSE
S: Send submissions to:
CC:PA:LP
D:PR(REG–134974–12),
room 5205
, Internal Revenue Ser-
vice, PO B
ox 7604, Ben Franklin Sta-
tion, Was
hington, DC 20044. Submis-
sions ma
y be hand-delivered Monday
through
Friday between the hours of 8
a.m. and
4p.m. toCC:PA:LPD:PR
(REG–13
4974–12), Courier’s Desk, In-
ternal R
evenue Service, 1111 Constitution
Avenue
, NW, Washington, DC, or sent
electr
onically via the Federal eRulemak-
ing Por
tal athttp://www.regulations.gov/
(IRS RE
G–134974–12).
FOR FUR
THER INFORMATION
CONTAC
T:
Concer
ning the proposed regulations,
Courtn
ey D. Jones at (202) 622–6070;
conce
rning submissions of comments
and re
quests for a public hearing,
Oluwa
funmilayo Taylor, (202) 622–7180
(not t
oll-free numbers).
SUPPLEMENTAR
Y INFORMATION:
Background
To avoid certa
in excise taxes under
chapter 42, pr
ivate foundations must make
a minimum leve
l of qualifying distribu-
tions (as defi
ned in section 4942 of the
Internal Rev
enue Code) each year and
must avoid ma
king taxable expenditures
(as defined i
n section 4945). Grants for
charitable p
urposes to certain foreign
organizatio
ns generally may be treated
as qualifyi
ng distributions under section
4942 if the p
rivate foundation makes a
good faith d
etermination that the foreign
organizati
on is an organization described
in section
s 501(c)(3) and 509(a)(1), (a)(2),
or (a)(3) (
“public charity”) that is not
a supporti
ng organization described in
section 49
42(g)(4)(A)(i) or (g)(4)(A)(ii)
(“disqua
lified supporting organization”)
or is an or
ganization described in sec-
tions 501
(c)(3) and 4942(j)(3) (“private
operatin
g foundation”). Similarly, grants
for chari
table purposes to certain foreign
organiz
ations may be treated as other than
taxable
expenditures under section 4945
if the pr
ivate foundation makes a good
faith de
termination that the foreign or-
ganizat
ion is a public charity (other than
adisqu
alified supporting organization)
or an or
ganization described in sections
501(c)
(3) and 4940(d)(2) (“exempt oper-
ating f
oundation”).
Qualif
ying Distributions under Section
4942
Sectio
n 4942 generally requires a pri-
vate f
oundation (other than a private
opera
ting foundation) to make “qualify-
ing di
stributions” equal to or exceeding
amini
mum “distributable amount” for
each t
axable year. If a private foundation
has n
ot distributed the full distributable
amou
nt by the end of the succeeding tax-
able
year, section 4942 imposes an excise
tax o
n the undistributed portion. A private
foun
dation’s distributable amount for any
taxa
ble year generally equals five percent
of t
he aggregate fair market value of its
non
-exempt-use assets, increased by any
rep
ayments of amounts treated as quali-
fyi
ng distributions in prior years, and re-
duc
ed by any taxes imposed under subtitle
A and section 4
940. Section 4942(g) gen-
erally define
s a “qualifying distribution”
as any expendi
ture or grant, including
program-rela
ted investments and certain
set-asides of
income, paid to accomplish
oneormorepu
rposes described in sec-
tion 170(c)(
2)(B) (“charitable purposes”).
Under sectio
n 4942(g)(1)(A), however,
grants to org
anizations controlled, di-
rectly or in
directly, by the foundation or
oneormoreo
f its disqualified persons
are not qual
ifying distributions unless
the grant is
redistributed for charitable
purposes w
ithin the period specified in
section 49
42(g)(3). Similarly, grants to
other priv
ate foundations (except private
operating
foundations), are not qualifying
distribut
ions. In addition, in 2006, the
Pension P
rotection Act of 2006, Public
Law No. 10
9–208, 120 Stat. 780 (2006)
(“PPA”),
added section 4942(g)(4), which
provides
that a qualifying distribution
does not
include any amount paid to a dis-
qualifi
ed supporting organization. Section
53.4942
(a)–3(a)(6), however, has not been
amended
to reflect this statutory change.
For purp
oses of section 4942, a grant
for char
itable purposes to a foreign organ-
ization
that does not have a determination
letter
from the IRS may be treated as
a quali
fying distribution if the grantor
privat
e foundation makes a “good faith
determ
ination” that the foreign organiza-
tion is
a private operating foundation or
a publ
ic charity that is not a disqualified
suppo
rting organization, provided that
the fo
reign organization is not controlled
by the
foundation or its disqualified per-
sons.
See §53.4942(a)–3(a)(6). Under
§53.
4942(a)–3(a)(6), a private founda-
tion
will ordinarily be considered to have
made
a “good faith determination” if the
dete
rmination is based on an affidavit of
the g
rantee or on an opinion of counsel
of ei
ther the grantor or the grantee. The
aff
idavit or opinion must set forth suffi-
cie
nt facts concerning the operations and
sup
port of the grantee for the IRS to de-
ter
mine that the grantee would be likely
to q
ualify as a public charity or a private
op
erating foundation.
Ta
xable Expenditures under Section 4945
Se
ction 4945 imposes an excise tax on
ap
rivate foundation’s “taxable expendi-
November 19, 20125532012–47 I.R.B.

tures”asdefinedinsection4945(d),in-
cluding expenditures for other than chari-
table purposes. Under section 4945(d)(4),
a taxable expenditure includes any grant
to an organization unless: (1) the grantee
is a public charity (other than a disquali-
fied supporting organization) or an exempt
operating foundation; or (2) the private
foundation exercises expenditure respon-
sibility with respect to the grant in accor-
dance with section 4945(h). The Deficit
Reduction Act of 1984, Public Law No.
98–369, 98 Stat. 494 (1984), amended
section 4945(d)(4) to provide that expen-
diture responsibility is not required for a
grant to an exempt operating foundation.
The PPA amended section 4945(d)(4) to
require the exercise of expenditure respon-
sibility with respect to a grant to a dis-
qualified supporting organization. Section
53.4945–5(a)(5), however, has not been
amended to reflect these statutory changes.
Section 53.4945–5(a)(5) provides that a
grant to a foreign organization that does
not have a determination letter from the
IRS will be treated as a grant to a pub-
lic charity (for which the grantor is not re-
quired to exercise expenditure responsibil-
ity) if the grantor has made a “good faith
determination” that the grantee is a public
charity. Under §53.4945–5(a)(5), a private
foundation will ordinarily be considered to
have made a “good faith determination” if
the determination is based on an affidavit
of the grantee or on an opinion of counsel
of either the grantor or the grantee. The af-
fidavit or opinion must set forth sufficient
facts concerning the operations and sup-
port of the grantee for the IRS to determine
that the grantee would be likely to qualify
asapubliccharity.
Standards Relating to Written Advice and
Taxpayer Reliance
Section 330 of title 31 of the United
States Code authorizes the Secretary of
theTreasurytoregulate practice before
the Treasury Department. The Secretary
has published regulations governing prac-
tice before the IRS in 31 CFR part 10
and reprinted the regulations as Treasury
Department Circular No. 230 (“Circular
230”). Circular 230 provides minimum
standards of conduct that tax practition-
ers are required to meet with respect to
written advice concerning Federal tax is-
sues. Many of these standards (including,
among others, §10.37 and §10.51(a)(13))
reflect principles a qualified and compe-
tent practitioner uses when considering
and rendering any written tax advice.
Section 6664 of the Internal Revenue
Code provides a defense to taxpayers for
certain penalties imposed on an under-
payment of tax if the taxpayer shows that
there was reasonable cause for the under-
payment and the taxpayer acted in good
faith with respect to the underpayment.
A taxpayer may demonstrate reasonable
cause and good faith with respect to the
underpayment by reasonably relying on
written advice from a professional tax
advisor. Section 1.6664–4(c)(1) provides
that all pertinent facts and circumstances
must be taken into account in determining
whether a taxpayer has reasonably relied
in good faith on written advice, includ-
ing written advicefrom a professional
tax advisor. A taxpayer’s education, so-
phistication, and business experience are
factors taken into account in determining
whether the taxpayer’s reliance on written
advice was reasonable and made in good
faith. A taxpayer will not be considered
to have reasonably relied in good faith
on written advice unless the requirements
of §1.6664–4(c)(1) are satisfied. For ex-
ample, a private foundation’s reliance on
written advice is not reasonable and in
good faith if the private foundation knows,
or reasonably should have known, that
a professional tax advisor lacks knowl-
edge of the relevant aspects of Federal tax
law or that the professional tax advisor is
otherwise not qualified or competent to
render the written advice. Moreover, a
private foundation may not rely on written
advice if it knows, or has reason to know,
that relevant facts were not disclosed to
the professional tax advisor or the writ-
ten advice is based on a representation
or assumption that the private foundation
knows, or has reason to know, is unlikely
to be true.
Explanation of Provisions
The current regulations under sections
4942 and 4945 state that a determination
is ordinarily considered as made in good
faith if it is based on an affidavit of the for-
eign organization or an opinion of coun-
sel of the grantor or the grantee. The
proposed regulations modify this rule to
identify a broader class of tax practition-
ers upon whose written advice a private
foundation may base a “good faith deter-
mination.” The proposed regulations also
make certain conforming changes consis-
tent with statutory amendments that have
been made to sections 4942 and 4945.
Under the proposed regulations, a pri-
vate foundation’s good faith determination
ordinarily may be based on written ad-
vice given by a “qualified tax practitioner”
who is subject to the requirements in Cir-
cular 230, including the requirements in
current §§10.37 and 10.51(a)(13) (or suc-
cessor provisions). A qualified tax practi-
tioner means an attorney, a certified public
accountant (“CPA”), or an enrolled agent,
as those practitioners are defined in §§10.2
and 10.3 of Circular 230. The proposed
regulations limit the definition of a qual-
ified tax practitioner to attorneys, CPAs,
and enrolled agents because these practi-
tioners generally provide advice to clients
with respect to taking positions on tax re-
turns, and these practitioners are generally
authorized to represent their clients before
the IRS without limitations applicable to
other types of practitioners (such as en-
rolled actuaries). The Treasury Depart-
ment and the IRS believe that expanding
the class of practitioners on whose writ-
ten advice a private foundation may base a
good faith determination will decrease the
cost of seeking professional advice regard-
ing these determinations, enabling foun-
dations to engage in international philan-
thropy in a more cost-effective manner.
At the same time, expressly allowing re-
liance on a broader spectrum of profes-
sional tax advisors may encourage more
private foundations to obtain written tax
advice, thus promoting the quality of the
determinations being made.
Although the proposed regulations gen-
erally expand the class of practitioners on
whose written advice a private foundation
mayordinarilybaseagoodfaithdeter-
mination, unlike the current rule, the ex-
panded class would not include foreign
counsel unless the foreign counsel is a
qualified tax practitioner (as defined in the
proposed regulations). The proposed rule
is consistent with the general requirements
of Circular 230 that an attorney or CPA be
licensed in a state, territory, or possession
of the United States, and an enrolled agent
be enrolled by the IRS, in order to practice
before the IRS.
2012–47 I.R.B.554November 19, 2012

The proposed regulations provide that a
private foundation’s determination that is
based on the written advice of a qualified
tax practitioner will be considered as made
in good faith if the private foundation’s re-
liance on the written advice meets the re-
quirements of §1.6664–4(c)(1), which are
the standards that must be taken into ac-
count in determining whether a taxpayer
has reasonably relied in good faith on ad-
vice for purposes of section 6664. Addi-
tionally, as is the case under the present
regulations under sections 4942 and 4945,
the written advice must provide sufficient
facts about the operations and financial
support of the foreign organization for the
IRS to determine that the grantee would be
likely to qualify as a public charity (other
than a disqualified supporting organiza-
tion) or as a private operating foundation
or an exempt operating foundation, as ap-
plicable.
The Treasury Department and the IRS
are considering whether it is appropriate
to limit the timeframe during which a pri-
vate foundation will be permitted to rely
upon a qualified tax practitioner’s written
advice solely for purposes of these regu-
lations. For example, the final regulations
or future guidance published in the Inter-
nal Revenue Bulletin may provide that a
private foundation may base a good faith
determination on written advice of a qual-
ified tax practitioner for distributions that
occur within a particular timeframe (such
as 12 months) from the date of the writ-
ten advice, provided the private foundation
does not know nor have reason to know
that the facts underlying the written advice
have changed. The Treasury Department
and the IRS request comments regarding
the appropriateness of a time limit and, if
appropriate, the length of the time limit.
The Treasury Department and the IRS
are also considering whether the current
standards in Rev. Proc. 92–94, 1992–2
C.B. 507, should be modified to take into
account changes to the public support test
for public charity status under sections 170
and 509 and whether additional guidelines
regarding appropriate timeframes for gath-
ering information upon which written ad-
vice is based should be provided in final
regulations or in guidance published in the
Internal Revenue Bulletin. Comments on
this issue are requested.
Because the proposed rule is expected
to make it easier and less costly to obtain
professional tax advice that can be used as
a basis to make a good faith determination,
the Treasury Department and the IRS also
are considering whether it is appropriate to
further amend the current regulations to re-
move the ability of a private foundation to
baseagoodfaithdeterminationonanaffi-
davit of a foreign grantee, which may be a
less reliable basis for making a good faith
determination than advice from a quali-
fied tax practitioner. The Treasury Depart-
ment and the IRS are concerned, however,
that eliminating the ability to base a good
faith determination on an affidavit of a for-
eign grantee may inappropriately discour-
age foreign grantmaking by smaller pri-
vate foundations, or inhibit smaller foreign
grants generally. While Rev. Proc. 92–94
continues to provide a simplified proce-
dure that private foundations may follow
in making good faith determinations based
on affidavits, the Treasury Department and
the IRS request comments on whether a
foundation’s ability to base a good faith
determination on affidavits should be re-
tained, and if so, whether the use of affi-
davits should be restricted. For example,
future guidance could prohibit the use of
affidavits for grants above a certain dol-
lar threshold, or could require supporting
factual information that might serve to cor-
roborate the content of affidavits.
Proposed Effective/Applicability Date
The proposed regulations will apply
for grants made after the date of publi-
cation of the Treasury decision adopting
these paragraphs as final regulations in
theFederal Register. However, a private
foundation may rely on these proposed
regulations for grants made on or after
September 24, 2012.
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 Execu-
tive 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 to this notice
of proposed rulemaking, and because this
notice of proposed rulemaking 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, this notice of proposed
rulemaking has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small businesses.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are sub-
mitted timely to the IRS as prescribed in
this preamble under the “Addresses” head-
ing. The Treasury Department and the IRS
request comments on all aspects of the pro-
posed regulations. All comments will be
available atwww.regulations.govor upon
request. A public hearing will be sched-
uled 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 theFederal Register.
Drafting Information
The principal author of these proposed
regulations is Courtney D. Jones, Office of
the Chief Counsel (Tax-Exempt and Gov-
ernment Entities). However, other person-
nel from the Treasury Department and the
IRS participated intheir development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 53 is pro-
posed to be amended as follows:
Part 53—FOUNDATION AND SIMILAR
EXCISE TAXES
Par. 1. The authority citation for part
53 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 53.4942(a)–3 is
amended by revising paragraph (a)(6) to
read as follows:
§53.4942(a)–3 Qualifying distributions
defined.
(a) * * *
(6)Certain foreign organizations—(i)
In general. A distribution for purposes de-
scribedinsection170(c)(2)(B)toaforeign
November 19, 20125552012–47 I.R.B.

organization, which has not received a rul-
ing or determination letter that it is an or-
ganization described in section 509(a)(1),
(a)(2), or (a)(3) or section 4942(j)(3), will
be treated as a distribution made to an or-
ganization described in section 509(a)(1),
(a)(2), or (a)(3) (other than an organiza-
tion described in section 4942(g)(4)(A)(i)
or (g)(4)(A)(ii)) or section 4942(j)(3) if
the distributing foundation has made a
good faith determination that the donee
organization is an organization described
in section 509(a)(1), (a)(2), or (a)(3) (other
than an organization described in sec-
tion 4942(g)(4)(A)(i) or (g)(4)(A)(ii)) or
section 4942(j)(3).A “good faith deter-
mination” ordinarily will be considered as
made if the determination is based on an
affidavit of the donee organization or writ-
ten advice from a qualified tax practitioner
that the donee is an organization described
in section 509(a)(1), (a)(2), or (a)(3) (other
than an organization described in sec-
tion 4942(g)(4)(A)(i) or (g)(4)(A)(ii)) or
section 4942(j)(3). In the case of a de-
termination based on written advice, the
determination will be considered as made
in good faith if the foundation reasonably
relied in good faith on the written advice
in accordance with the requirements of
§1.6664–4(c)(1). Furthermore, the af-
fidavit or written advice must set forth
sufficient facts concerning the operations
and support of the donee organization for
the Internal Revenue Service to determine
that the donee organization would be likely
to qualify as an organization described in
section 509(a)(1), (a)(2), or (a)(3) (other
than an organization described in section
4942(g)(4)(A)(i) or (g)(4)(A)(ii)) or sec-
tion 4942(j)(3).
(ii)Definitions. For purposes of this
paragraph (a)(6)—
(a) The term “foreign organization”
means any organization that is not de-
scribed in section 170(c)(2)(A).
(b) The term “qualified tax practitioner”
means an attorney, a certified public ac-
countant, or an enrolled agent, within the
meaning of 31 CFR 10.2 and 10.3, who is
subject to the requirements in 31 CFR part
10.
(iii)Effective/applicability date. Para-
graph (a)(6) of this section will apply with
respect to grants made after the date of
publication of the Treasury decision adopt-
ing this paragraph as a final regulation in
theFederal Register. However, a private
foundation may rely on these proposed
regulations with respect to grants made on
or after September 24, 2012.
*****
Par. 3. Section 53.4945–5 is amended
by revising paragraph (a)(5) to read as fol-
lows:
§53.4945–5 Grants to organizations.
(a) * * *
(5)Certain foreign organizations—(i)
In general. If a private foundation makes
a grant to a foreign organization, which
does not have a ruling or determination
letter that it is an organization described
in section 509(a)(1), (a)(2), or (a)(3) or
section 4940(d)(2), the grant will nonethe-
less be treated as a grant made to an or-
ganization described in section 509(a)(1),
(a)(2), or (a)(3) (other than an organiza-
tion described in section 4942(g)(4)(A)(i)
or (g)(4)(A)(ii)) or section 4940(d)(2) if
the grantor private foundation has made a
good faith determination that the grantee
organization is an organization described
in section 509(a)(1), (a)(2), or (a)(3) (other
than an organization described in section
4942(g)(4)(A)(i) or (g)(4)(A)(ii)) or sec-
tion 4940(d)(2). A “good faith determina-
tion” ordinarily will be considered as made
if the determination is based on an affidavit
of the grantee organization or written ad-
vice from a qualified tax practitioner that
the grantee is an organization described in
section 509(a)(1), (a)(2), or (a)(3) (other
than an organization described in section
4942(g)(4)(A)(i) or (g)(4)(A)(ii)) or sec-
tion 4940(d)(2). In the case of a deter-
mination based on written advice, the de-
termination will be considered as made in
good faith if the foundation reasonably re-
lied in good faith on the written advice
in accordance with the requirements of
§1.6664–4(c)(1). Furthermore, the affi-
davit or written advice must set forth suf-
ficient facts concerning the operations and
support of the grantee organization for the
Internal Revenue Service to determine that
the grantee organization would be likely
to qualify as an organization described in
section 509(a)(1), (a)(2), or (a)(3) (other
than an organization described in section
4942(g)(4)(A)(i) or (g)(4)(A)(ii)) or sec-
tion 4940(d)(2). See paragraphs (b)(5) and
(b)(6) of this section for additional rules re-
lating to foreign organizations.
(ii)Definitions. For purposes of this
paragraph (a)(5)—
(a) The term “foreign organization”
means any organization that is not de-
scribedinsection170(c)(2)(A).
(b) The term “qualified tax practitioner”
means an attorney, a certified public ac-
countant, or an enrolled agent, within the
meaningof31CFR10.2and10.3,whois
subject to the requirements in 31 CFR part
10.
(iii)Effective/applicability date. Para-
graph (a)(5) of this section will apply with
respect to grants made after the date of
publication of the Treasury decision adopt-
ing this paragraph as a final regulation in
theFederal Register. However, a private
foundation may rely on these proposed
regulations with respect to grants made on
or after September 24, 2012.
*****
Steven
T. Miller,
Deputy
Commissioner for
Servi
ces and Enforcement.
(Filed by the Office of the Federal Register on
September 21, 2011, 8:45 a.m., and published in the issue of
the Federal Register for September 24, 2011, 77 F.R. 58796)
Announcement of Disciplinary Sanctions From the Office
of Professional Responsibility
Announcement 2012-40
TheOfficeofProfessionalResponsi-
bility (OPR) announcesrecent disciplinary
sanctions involving attorneys, certified
public accountants, enrolled agents, en-
rolled actuaries, enrolled retirement plan
agents, and appraisers. These individuals
2012–47 I.R.B.556November 19, 2012

are subject to the regulations governing
practice before the Internal Revenue Ser-
vice (IRS), which are set out in Title 31,
Code of Federal Regulations, Part 10, and
which are published in pamphlet form as
Treasury Department Circular No. 230.
The regulations prescribe the duties and
restrictions relating to such practice and
prescribe the disciplinary sanctions for
violating the regulations.
The disciplinary sanctions to be im-
posed for violation of the regulations are:
Disbarred from practice before the
IRS—An individual who is disbarred is
not eligible to represent taxpayers before
the IRS.
Suspended from practice before the
IRS—An individual who is suspended is
not eligible to represent taxpayers before
the IRS during the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
to represent taxpayers before the IRS, but
OPR may subject the individual’s future
representations to conditions designed to
promote high standards of conduct.
Monetary penalty—A monetary
penalty may be imposed on an individual
who engages in conduct subject to sanc-
tion or on an employer, firm, or entity
if the individual was acting on its behalf
and if it knew, or reasonably should have
known, of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Under the regulations, attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, and enrolled retirement
plan agents may not assist, or accept assis-
tance from, individuals who are suspended
or disbarred with respect to matters consti-
tuting practice (i.e., representation) before
the IRS, and they may not aid or abet sus-
pended or disbarred individuals to practice
before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision after hearing,
Suspended by decision after hearing,
Censured by decision after hearing,
Monetary penalty imposed after hear-
ing, and Disqualified after hearing—An
administrative law judge (ALJ) conducted
an evidentiary hearing upon OPR’s com-
plaint alleging violation of the regulations
and issued a decision imposing one of
these sanctions. After 30 days from the
issuance of the decision, in the absence of
an appeal, the ALJ’s decision became the
final agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured by
default decision, Monetary penalty im-
posed by default decision, and Disqual-
ified by default decision—An ALJ, after
findingthatnoanswertoOPR’scomplaint
had been filed, granted OPR’s motion for a
default judgment and issued a decision im-
posing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on ap-
peal, and Disqualified by decision on
appeal—The decision of the ALJ was
appealed to the agency appeal authority,
acting as the delegate of the Secretary
of the Treasury, and the appeal authority
issued a decision imposing one of these
sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—In lieu of a
disciplinary proceeding being instituted
or continued, an individual offered a con-
sent to one of these sanctions and OPR
accepted the offer. Typically, an offer
of consent will provide for: suspension
for an indefinite term; conditions that the
individual must observe during the sus-
pension; and the individual’s opportunity,
after a stated number of months, to file
with OPR a petition for reinstatement af-
firming compliance with the terms of the
consent and affirming current eligibility
to practice (i.e., an active professional
license or active enrollment status). An
enrolled agent or an enrolled retirement
plan agent may also offer to resign in order
to avoid a disciplinary proceeding.
Suspended by decision in expedited
proceeding, Suspended by default de-
cision in expedited proceeding, Sus-
pended by consent in expedited pro-
ceeding—OPR instituted an expedited
proceeding for suspension (based on cer-
tain limited grounds, including loss of a
professional license and criminal convic-
tions).
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a decision
on or after September 26, 2007, which was
the effective date of amendments to the
regulations that permit making such deci-
sions publicly available; (2) the individual
has settled a disciplinary case by signing
OPR’s “consent to sanction” form, which
requires consenting individuals to admit to
one or more violations of the regulations
and to consent to the disclosure of the in-
dividual’s own return information related
to the admitted violations (for example,
failure to file Federal income tax returns);
or (3) OPR has issued a decision in an
expedited proceeding for suspension.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by the names of states and sec-
ond by the last names of individuals. Un-
less otherwise indicated, section numbers
(e.g., §10.51) refer to the regulations.
November 19, 20125572012–47 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
California
Palm DesertBonnheim, William S. AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
August 28, 2012
Florida
Gulf BreezeHanley, Jane B.Enrolled AgentSuspended by consent
for admitted violation of
§10.51 (failure to timely
file Federal individual
income tax returns for tax
years 2003, 2004, 2005,
and 2006)
Indefinite from
July 25, 2012
Kentucky
PaducahChristian, Charles E.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
September 18,
2012
Massachusetts
SouthboroughUhl, Christopher M.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
July 31, 2012
Michigan
CharlotteCarter Jr., David B.AttorneySuspended by default
decision in expedited
proceeding under
§10.82 (conviction under
26 U.S.C. §7203, willful
failure to file U.S. Income
Tax Returns)
Indefinite from
September 13,
2012
Minnesota
Mendota HeightsFairbairn, Jo M.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
September 24,
2012
2012–47 I.R.B.558November 19, 2012

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Missouri
LeasburgBasham, Angela D.Enrolled AgentSuspended by default
decision in expedited
proceeding under §10.82
(conviction under
26 U.S.C. §7206(2),
aiding and assisting in the
preparation and filing of a
falseincometaxreturn)
Indefinite from
August 14, 2012
St. LouisLowery, Martha L.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
August 9, 2011
New York
KatonahFecci, Eric J.CPASuspended by default
decision in expedited
proceeding under §10.82
(convicted of failure to
file a New York state
personal income tax
return)
Indefinite from
September 24,
2012
New Jersey
Morris PlainsLewis, David A.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(conviction under
26 U.S.C. §7206(1),
filing fraudulent income
tax return)
Indefinite from
August 15, 2012
ChesterWilliamson, Kevin P.CPASuspended by default
decision in expedited
proceeding under §10.82
(conviction under
26 U.S.C. §7206, tax
fraud)
Indefinite from
August 15, 2012
North Carolina
HighlandsSossomon, Creighton W. AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
August 9, 2011
November 19, 20125592012–47 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Ohio
AuroraCrow, Alan B.CPASuspended by default
decision in expedited
proceeding under §10.82
(revocation of CPA
license)
Indefinite from
September 24,
2012
RipleyWelti, Robert C.CPASuspended by default
decision in expedited
proceeding under §10.82
(conviction under
26 U.S.C. §7212(a),
attempting to obstruct
or impede the due
administration of the
Internal Revenue Code)
Indefinite from
August 14, 2012
Oregon
Saint HelensBunn, BarbaraEnrolled AgentCensured by consent
for admitted violation
of §10.51(a)(6) (failed to
timely file Federal income
taxreturnfortaxyears
2007, 2008, 2009, and
2010)
Indefinite from
July 13, 2012
Pennsylvania
MinersvilleTroese Sr., Stephen J.AttorneySuspended by default
decision in expedited
proceeding under
§10.82 (conviction under
18 U.S.C. §1343, wire
fraud)
Indefinite from
September 10,
2012
South Carolina
BambergSmith, Flint P.CPASuspended by default
decision in expedited
proceeding under §10.82
(revocation of CPA
license)
Indefinite from
July 30, 2012
South Dakota
Box ElderFitch, Nakata S.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
July 30, 2012
2012–47 I.R.B.560November 19, 2012

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Virginia
RichmondSmith, William O.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
July 27, 2012
Timelines for Due Diligence
and Other Requirements
under FATCA
Announcement 2012–42
I. PURPOSE
This announcement outlines (i) cer-
tain timelines for withholding agents and
foreign financial institutions (FFIs) to
complete due diligence and other require-
ments and (ii) certain additional guidance
concerning gross proceeds withholding
and the status of certain instruments as
grandfathered obligations under sections
1471 through 1474 of the Internal Rev-
enue Code (Code). The Department of
the Treasury (Treasury Department) and
the Internal Revenue Service (IRS) intend
to incorporate the rules described in this
announcement in final regulations under
sections 1471 through 1474.
II. BACKGROUND
On March 18, 2010, the Hiring Incen-
tives to Restore Employment Act of 2010,
Pub. L. 111–147 (H.R. 2847), added sec-
tions 1471 through 1474 (chapter 4) to
Subtitle A of the Code. These provisions
are commonly referred to as the Foreign
Account Tax Compliance Act, or FATCA.
Chapter 4 requires withholding agents to
withhold 30 percent of certain payments
to an FFI unless the FFI has entered into
an agreement (FFI agreement) with the
IRS to, among other things, report certain
information with respect to U.S. accounts.
Chapter 4 also imposes on withholding
agents certain withholding, documen-
tation, and reporting requirements with
respect to certain payments made to cer-
tain other foreign entities.
On February 15, 2012, the Treasury De-
partment and the IRS published proposed
regulations under chapter 4 in the Federal
Register (REG–121647–10, 77 Fed. Reg.
9022) (proposed regulations). On May 15,
2012, the IRS held a public hearing on the
proposed regulations. On July 26, 2012,
the Treasury Department released a model
for bilateral agreements with other juris-
dictions (in both reciprocal and nonrecip-
rocal versions) under which FFIs would
satisfy their chapter 4 requirements by re-
porting information about U.S. accounts to
their respective tax authorities, followed
by the automatic exchange of that informa-
tion on a government-to-government ba-
sis with the United States. The model
agreement outlines time frames for FFIs in
partner jurisdictions to complete the nec-
essary due diligence to identify U.S. ac-
counts. On June 21, 2012, the Treasury
Department announcedits intent to de-
velop a second model agreement, under
which financial institutions in the partner
jurisdiction would report specified infor-
mation directly to the IRS in a manner con-
sistent with the FATCA regulations, sup-
plemented by government-to-government
exchange of information on request. The
Treasury Department intends to conclude
bilateral agreements (“Intergovernmental
Agreements”) based on the model agree-
ments.
The Treasury Department and the IRS
have received comments identifying cer-
tain practical issues in implementing the
chapter 4 rules within the time frames
prescribed in the proposed regulations.
In particular, comments have noted that
the chapter 4 status of entity account
holders may change during 2013 as FFIs
enter into FFI agreements with the IRS,
with the result that withholding agents
that put in place new account opening
procedures by January 1, 2013, could be
required to undertake duplicative efforts
to verify an FFI’s status as a participating,
deemed-compliant, or nonparticipating
FFI. Furthermore, comments have in-
dicated that global financial institutions
intend to implement uniform due diligence
procedures for all affiliates. Accordingly,
these comments have suggested aligning
the timelines for due diligence for U.S.
withholding agents, FFIs in countries with
Intergovernmental Agreements, and FFIs
in countries without Intergovernmental
Agreements in order to significantly re-
duce administrative burden.
In addition, the Treasury Department
and the IRS have received comments re-
questing that obligations that may give
rise to foreign passthru payments, but not
to withholdable payments, be treated as
grandfathered obligations if such obliga-
tions are executed prior to the issuance
of final regulations that define foreign
passthru payments. Comments also have
requested that an obligation to make pay-
ments with respect to collateral posted in
connection with a grandfathered derivative
transaction be treated as a grandfathered
obligation. Finally,comments have ex-
pressed concern over the treatment of
existing financial transactions that may
begin to give rise to withholdable pay-
ments for purposes of chapter 4 due to the
promulgation of regulations under sec-
tion 871(m) (treating certain payments on
notional principal contracts and certain
other financial instruments as U.S. source
dividends).
In consideration of these comments, the
Treasury Department and the IRS intend
to issue regulations that modify the rules
set forth in the proposed regulations as
follows. Unless otherwise defined, terms
used in this announcement have the mean-
ings set forth in the proposed regulations.
November 19, 20125612012–47 I.R.B.

III. DUE DILIGENCE TIMELINES
A. Timeline for Implementing New
Account Opening Procedures and the
Definition of Preexisting Obligations
Withholding agents, including partici-
pating FFIs and registered deemed-com-
pliant FFIs, generally will be required to
implement new account opening proce-
dures by January 1, 2014. Accordingly,
the definition of the term “preexisting
obligation” (currently set forth in Prop.
Reg. §1.1471–1(b)(48)) will be modified
in the final regulations to include:
•With respect to a withholding agent
other than a participating FFI or
a registered deemed-compliant FFI:
any account, instrument, or contract
maintained or executed by the with-
holding agent prior to January 1, 2014;
•With respect to a participating
FFI:any account, instrument, or
contract maintained or executed by
the participating FFI prior to the
later of January 1, 2014, or the
date that the participating FFI’s FFI
agreement becomes effective (the
final regulations will provide that an
FFI agreement entered into prior to
January 1, 2014, will have an effective
date of January 1, 2014); and
•With respect to a registered deemed-
compliant FFI:any account, instru-
ment, or contract maintained or exe-
cuted by the FFI prior to the date on
which the FFI implements its required
account opening procedures. A regis-
tered deemed-compliant FFI must im-
plement any required account opening
procedures by the later of January 1,
2014, or the date on which the FFI reg-
isters as a deemed-compliant FFI.
B. Transition Rules for Completing Due
Diligence on Preexisting Obligations
1. Withholding and Documentation for
Prima Facie FFIs
Withholding Agents other than Partic-
ipating FFIs.With respect to preexist-
ing obligations, the final regulations will
provide that withholding agents, other than
participating FFIs, will be required to doc-
ument payees that areprima facieFFIs by
June 30, 2014. Accordingly, the rule set
forth in Prop. Reg. §1.1471–2(a)(4)(ii)
will be modified in the final regulations to
provide that a withholding agent will not
be required to withhold on payments made
to aprima facieFFI with respect to a pre-
existing obligation prior to July 1, 2014,
unless the withholding agent has docu-
mentation establishing the payee’s status
as a nonparticipating FFI. Beginning on
July 1, 2014, a withholding agent will be
required to treat a payee that is aprima fa-
cieFFI as a nonparticipating FFI until the
date the withholding agent obtains docu-
mentation sufficient to establish a different
chapter 4 status of the payee.
Participating FFIs.With respect to
a preexisting obligation, the final regula-
tions will provide that a participating FFI
will be required to perform the requisite
identification procedures and obtain the
appropriate documentation to determine
whether aprima facieFFI payee is itself a
participating FFI, deemed-compliant FFI,
or nonparticipating FFI within six months
after the effective date of its FFI agree-
ment (that is, by June 30, 2014, for any
FFI that enters into an FFI agreement on
or before December 31, 2013). The rule
set forth in Prop. Reg. §1.1471–4(c)(3)
will be modified accordingly. In addi-
tion, the final regulations will provide that
the presumption rules set forth in Prop.
Reg. §1.1471–3(f) will begin to apply to
aprima facieFFI payee with respect to
a preexisting obligation six months after
the effective date of the payor FFI’s FFI
agreement.
2. Withholding and Documentation for
other Preexisting Entity Obligations
Withholding Agents other than Partic-
ipating FFIs.With respect to preexisting
obligations, the final regulations will pro-
vide that withholdingagents, other than
participating FFIs, will be required to
document payees that are entities other
thanprima facieFFIs by December 31,
2015. Accordingly, the rules set forth
in Prop. Reg. §§1.1471–2(a)(4)(ii) and
1.1472–1(b) will be modified to reflect
this change. Beginning on January 1,
2016, a withholding agent will be required
to treat any undocumented payee that is
treated as a foreign entity but that is not a
prima facieFFI as a nonparticipating FFI
until the date the withholding agent ob-
tains documentation sufficient to establish
a different chapter 4 status of the payee.
Participating FFIs.The final regu-
lations will modify the rule set forth in
Prop. Reg. §1.1471–4(c)(3) to provide
that a participating FFI will be required to
perform the requisite identification proce-
dures and obtain the appropriate documen-
tation to determine whether an entity, other
than aprima facieFFI, is itself a participat-
ing FFI by the later of December 31, 2015,
or the date that is two years after the ef-
fective date of its FFI agreement. In addi-
tion, the final regulations will provide that
a participating FFI will not be required to
apply the presumption rules (currently set
forth in Prop. Reg. §1.1471–3(f)) to such
accounts until the day after the date (de-
scribed above) by which the participating
FFI is required to perform the identifica-
tion procedures and obtain the appropriate
documentation.
3. Withholding and Documentation
Requirements of Participating FFIs for
Preexisting Individual Accounts
Preexisting High-Value Accounts.A
participating FFI must perform the requi-
site identification procedures and obtain
the appropriate documentation to identify
preexisting individual accounts that are
high-value accounts (as described in Prop.
Reg. §1.1471–4(c)(8)(i)) by the later of
December 31, 2014, or the date that is one
year after the effective date of the FFI’s
FFI agreement. Accordingly, the final reg-
ulations will modify the rule set forth in
Prop. Reg. §1.1471–5(g)(3)(i)(B) to pro-
vide that after the date described above,
a participating FFI must treat any preex-
isting account that is a high-value account
as held by a recalcitrant account holder
unless the participating FFI has performed
the requisite identification procedures and
obtained the appropriate documentation.
Preexisting Accounts other than High
Value Accounts.A participating FFI must
perform the requisite identification pro-
cedures and obtain the appropriate docu-
mentation to identify preexisting individ-
ual accounts (other than high-value ac-
counts) prior to the later of December 31,
2015, or the date that is two years after
the effective date of the FFI’s FFI agree-
ment. Accordingly, the final regulations
will modify the rule set forth in Prop. Reg.
§1.1471–5(g)(3)(i)(A) to provide that after
the date described above, a participating
FFI must treat any preexisting individual
2012–47 I.R.B.562November 19, 2012

account, other than a high-value account,
as held by a recalcitrant account holder un-
less the participating FFI has performed
the requisite identification procedures and
obtained the appropriate documentation.
IV. DUE DATE FOR FIRST REPORT
OF A PARTICIPATING FFI WITH
RESPECT TO U.S. ACCOUNTS
The final regulations will mod-
ify the rule set forth in Prop. Reg.
§1.1471–4(d)(7)(v)(B) to provide that a
participating FFI will be required to file
the information reports with respect to the
2013 and 2014 calendar years not later
than March 31, 2015.
V. GROSS PROCEEDS
WITHHOLDING
The final regulations will mod-
ify the rule set forth in Prop. Reg.
§1.1473–1(a)(1)(ii) to provide that the
term “withholdable payment” includes
gross proceeds from any sale or other
disposition occurring after December 31,
2016, of any property of a type that can
produce interest or dividends that are U.S.
source FDAP income.
VI. CLARIFICATION OF THE
SCOPE OF GRANDFATHERED
OBLIGATIONS
The final regulations will modify the
grandfathered obligation rules to cover the
following additional categories of obliga-
tions. First, the rule set forth in Prop. Reg.
§1.1471–2(b)(2) will be amended to pro-
vide that the term “grandfathered obliga-
tion” includes any obligation that produces
or could produce a foreign passthru pay-
ment and that cannot produce a withhold-
able payment, provided that the obligation
is outstanding as of the date that is six
months after the date on which final regu-
lations defining the term “foreign passthru
payment” are filed with the Federal Regis-
ter. Second, the term “grandfathered obli-
gation” will include any instrument that
gives rise to a withholdable payment solely
because the instrument is treated as giving
rise to a dividend equivalent pursuant to
section 871(m) and the regulations there-
under, provided that the instrument is out-
standing on the date that is six months after
the date on which instruments of its type
first become subject to such treatment. Fi-
nally, the term “grandfathered obligation”
will include any obligation to make a pay-
ment with respect to, or to repay, collat-
eral posted to secure obligations under a
notional principal contract that is a grand-
fathered obligation.
DRAFTING INFORMATION
The principal author of this announce-
ment is Tara Ferris of the Office of As-
sociate Chief Counsel (International). For
further information regarding this notice,
contact John Sweeney at (202) 622–3840
(not a toll-free call).
November 19, 20125632012–47 I.R.B.

Summary of Timing for Performing Due DiligenceProcedures to Identifyand Document Accounts
The following table summarizes the dates by which withholding agents and financial institutions must fully implement new
account opening procedures to identify account holders and the dates by which withholding agents and financial institutions
must complete the review and documentation of all preexisting accounts for purposes of applying the relevant Treasury
regulations. The table is intended only as an illustrative tool and therefore should be interpreted consistently with the
accompanying announcement. It is important to emphasize that although the final regulations will provide a reasonable
period of time to allow withholding agents to review and document all preexistingaccounts, the final regulations will make
clear that once a particular account has been documented, for example as a U.S. Account or as a nonparticipating FFI,
withholding or reporting, as appropriate, must begin with respect to that account even though the time period for completing
the identification and documentation of preexisting accounts may not have expired.
New Individual
and Entity
Accounts
(Implementation
of new account
opening
procedures)
Preexisting
Accounts of
Prima Facie
FFIs (Date
by which due
diligence must be
completed for all
accounts)
Preexisting
Accounts of
Entities other
thanPrima Facie
FFIs
Preexisting High
Value Accounts
of Individuals
Preexisting
Accounts of
Individuals other
than High Value
Accounts
Withholding
Agents
other than
Participating
FFIs and
Deemed-
Compliant FFIs
By January 1,
2014
By June 30, 2014 By December 31,
2015
N/AN/A
Withholding
Agents that are
Participating
FFIs
By later of
January 1, 2014,
or effective date of
FFI agreement
By the later of
June 30, 2014, or
6 months after the
effective date of
the FFI Agreement
By the later of
December 31,
2015, or two years
after the effective
date of the FFI
Agreement
By the later of
December 31,
2014, or one year
after the effective
date of the FFI
Agreement
By the later of
December 31,
2015, or two years
after the effective
date of the FFI
Agreement
Withholding
Agents that
are Registered
Deemed-
Compliant FFIs
By later of
January 1, 2014, or
date of registration
N/AN/AN/AN/A
2012–47 I.R.B.564November 19, 2012

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
November 19, 2012i2012–47 I.R.B.

Numerical Finding List
1
Bulletins 2012–27 through 2012–47
Announcements:
2012-26, 2012-27 I.R.B.8
2012-27, 2012-27 I.R.B.10
2012-28, 2012-27 I.R.B.10
2012-29, 2012-42 I.R.B.500
2012-30, 2012-34 I.R.B.314
2012-31, 2012-34 I.R.B.315
2012-32, 2012-35 I.R.B.325
2012-33, 2012-35 I.R.B.325
2012-34, 2012-36 I.R.B.334
2012-35, 2012-38 I.R.B.356
2012-36, 2012-46 I.R.B.547
2012-37, 2012-45 I.R.B.543
2012-38, 2012-43 I.R.B.527
2012-41, 2012-44 I.R.B.532
2012-40, 2012-47 I.R.B.556
2012-42, 2012-47 I.R.B.561
Notices:
2012-2, 2012-45 I.R.B.538
2012-39, 2012-31 I.R.B.95
2012-44, 2012-28 I.R.B.45
2012-45, 2012-29 I.R.B.59
2012-46, 2012-30 I.R.B.86
2012-47, 2012-31 I.R.B.98
2012-48, 2012-31 I.R.B.102
2012-49, 2012-31 I.R.B.119
2012-50, 2012-31 I.R.B.121
2012-51, 2012-33 I.R.B.150
2012-52, 2012-35 I.R.B.317
2012-53, 2012-35 I.R.B.317
2012-55, 2012-36 I.R.B.332
2012-56, 2012-39 I.R.B.370
2012-57, 2012-40 I.R.B.424
2012-58, 2012-41 I.R.B.436
2012-59, 2012-41 I.R.B.443
2012-60, 2012-41 I.R.B.445
2012-61, 2012-42 I.R.B.479
2012-62, 2012-42 I.R.B.489
2012-63, 2012-42 I.R.B.496
2012-64, 2012-44 I.R.B.528
Proposed Regulations:
REG-126770-06, 2012-38 I.R.B.347
REG-138367-06, 2012-40 I.R.B.426
REG-101812-07, 2012-34 I.R.B.311
REG-134042-07, 2012-27 I.R.B.5
REG-140668-07, 2012-43 I.R.B.501
REG-153627-08, 2012-29 I.R.B.60
REG-136491-09, 2012-35 I.R.B.321
REG-138489-09, 2012-38 I.R.B.355
REG-125570-11, 2012-30 I.R.B.93
Proposed Regulations— Continued:
REG-130266-11, 2012-32 I.R.B.126
REG-134935-11, 2012-29 I.R.B.64
REG-141832-11, 2012-28 I.R.B.54
REG-107889-12, 2012-28 I.R.B.53
REG-113738-12, 2012-29 I.R.B.66
REG-134974-12, 2012-47 I.R.B.553
Revenue Procedures:
2012-28, 2012-27 I.R.B.4
2012-29, 2012-28 I.R.B.49
2012-30, 2012-33 I.R.B.165
2012-31, 2012-33 I.R.B.256
2012-32, 2012-34 I.R.B.267
2012-33, 2012-34 I.R.B.272
2012-34, 2012-34 I.R.B.280
2012-35, 2012-37 I.R.B.341
2012-36, 2012-39 I.R.B.374
2012-37, 2012-41 I.R.B.449
2012-39, 2012-41 I.R.B.470
2012-40, 2012-40 I.R.B.424
2012-41, 2012-45 I.R.B.539
2012-42, 2012-46 I.R.B.545
Revenue Rulings:
2012-19, 2012-28 I.R.B.16
2012-20, 2012-27 I.R.B.1
2012-21, 2012-32 I.R.B.123
2012-23, 2012-39 I.R.B.359
2012-24, 2012-36 I.R.B.329
2012-25, 2012-37 I.R.B.337
2012-26, 2012-39 I.R.B.358
2012-27, 2012-41 I.R.B.435
2012-28, 2012-42 I.R.B.476
2012-29, 2012-42 I.R.B.475
2012-30, 2012-45 I.R.B.534
Treasury Decisions:
9591, 2012-28 I.R.B.32
9592, 2012-28 I.R.B.41
9593, 2012-28 I.R.B.17
9594, 2012-29 I.R.B.57
9595, 2012-30 I.R.B.71
9596, 2012-30 I.R.B.84
9597, 2012-34 I.R.B.258
9598, 2012-38 I.R.B.343
9599, 2012-40 I.R.B.417
9600, 2012-47 I.R.B.548
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin
2012–26, dated June 25, 2012.
2012–47 I.R.B.iiNovember 19, 2012

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–27 through 2012–47
Announcements:
83-196
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
85-141
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
2008-105
Modified and superseded by
Ann. 2012-34, 2012-36 I.R.B.334
2012-29
Corrected by
Ann. 2012-41, 2012-44 I.R.B.532
2012-38
Corrected by
Ann. 2012-41, 2012-44 I.R.B.532
Notices:
2009-24
Amplified by
Notice 2012-51, 2012-33 I.R.B.150
2011-81
Superseded by
Notice 2012-63, 2012-42 I.R.B.496
2012-51
Amplified by
Notice 2012-51, 2012-33 I.R.B.150
Proposed Regulations:
REG-100276-97
Withdrawn by
Ann. 2012-27, 2012-27 I.R.B.10
REG-130266-11
Hearing scheduled by
Ann. 2012-29, 2012-42 I.R.B.500
Ann. 2012-38, 2012-43 I.R.B.527
Hearing rescheduled by
Ann. 2012-41, 2012-44 I.R.B.532
Revenue Procedures:
94-22
Modified and superseded by
Rev. Proc. 2012-35, 2012-37 I.R.B.341
95-15
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
97-27
Modified by
Rev. Proc. 2012-39, 2012-41 I.R.B.470
Revenue Procedures— Continued:
98-32
Modified and superseded by
Rev. Proc. 2012-33, 2012-34 I.R.B.272
2007-38
Modified and superseded by
Rev. Proc. 2012-32, 2012-34 I.R.B.267
2011-14
Clarified and modified by
Rev. Proc. 2012-39, 2012-41 I.R.B.470
2011-40
Superseded by
Rev. Proc. 2012-30, 2012-33 I.R.B.165
2011-50
Superseded by
Rev. Proc. 2012-36, 2012-39 I.R.B.374
2012-30
Corrected and clarified by
Ann. 2012-36, 2012-46 I.R.B.547
Treasury Decisions:
9752
Corrected by
Ann. 2012-35, 2012-38 I.R.B.356
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin 2012–26, dated June 25, 2012.
November 19, 2012iii2012–47 I.R.B.

Internal Revenue Service
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