Internal Revenue Bulletin 2009-18 (PDF rendition): IRS Notices

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Bulletin No. 200
9-18
May 4, 2009
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.
INCOME TAX
REG–144689–04, page 906.
Proposed regulations under section 706 of the Code relate to
the determination of partners’ distributive shares of partnership
items of income, gain, loss, deduction and credit when a part-
ner’s interests varies during a partnership taxable year. The
regulations also modify the existing regulations regarding the
required taxable year of a partnership.
Notice 2009–37, page 898.
This notice announces the phase-out of the new qualified hy-
brid motor vehicle credit and the new advanced lean burn tech-
nology motor vehicle credit for passenger automobiles and
light trucks manufactured by Ford Motor Company that are pur-
chased for use or lease in the United States beginning on April
1, 2009.
Notice 2009–38, page 901.
Section 382.This notice provides additional guidance regard-
ing the application of section 382 of the Code and other pro-
visions of law to corporations whose instruments are acquired
by the Treasury Department pursuant to the Emergency Eco-
nomic Stabilization Act of 2008 (EESA). Notice 2009–14 am-
plified and superseded.
EMPLOYEE PLANS
Notice 2009–39, page 902.
Weighted average interest rate update; corporate bond
indices; 30-year Treasury securities; segment rates.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in April 2009;
the 24-month average segment rates; the funding transitional
segment rates applicable for April 2009; and the minimum
present value transitional rates for March 2009.
Announcement 2009–34, page 916.
Request for comments on revenue procedure for sec-
tion 403(b) prototype plans.The Service intends to estab-
lish a program for the pre-approval of prototype plans under
section 403(b) of the Code. This announcement includes a
draft revenue procedure that contains the Service’s proposed
procedures for issuing opinion letters as to the acceptability
under section 403(b) of the form of prototype plans. The Ser-
vice posted draft sample plan language on theirs.govweb-
site for use in drafting section 403(b) prototype plan. The Ser-
vice seeks public input before finalizing these procedures and
sample plan language, and invites interested persons to sub-
mit comments.
EMPLOYMENT TAX
Rev. Rul. 2009–11, page 896.
Differential wage paymentsto active duty members of
the uniformed services.This ruling provides that differen-
tial pay that employers pay to their employees who leave their
job to go on active military duty is subject to income tax with-
holding, but is not subject to Federal Insurance Contributions
Act (FICA) or Federal Unemployment Tax Act (FUTA) taxes. Ad-
ditionally, the ruling provides that employers may use the ag-
gregate procedure or optional flat rate withholding to calculate
the amount of income taxes required to be withheld on these
payments, and that these payments must be reported on Form
W–2. Rev. Rul. 69–136 modified and superseded.
(Continued on the next page)
Finding Lists begin on page ii.

ADMINISTRATIVE
Announcement 2009–36, page 927.
This document cancels a public hearing on proposed regula-
tions (REG–150066–08, 2009–5 I.R.B. 423) relating to the
foreign base company sales income, in cases in which per-
sonal property sold by a controlled foreign corporation (CFC)
is manufactured, produced, or constructed pursuant to a con-
tract manufacturing arrangement or by one or more branches
of the CFC. The temporary regulations modify the foreign base
company sales income regulations to address current business
structures and practices, particulary the growing importance
of contract manufacturing and other manufacturing arrange-
ments. The temporary regulations, in general, will affect CFCs
and their United States shareholders.
May 4, 20092009–18 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
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.
2009–18 I.R.B.May 4, 2009

May 4, 20092009–18 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 3401.—Definitions
(Also §§ 3121(a), 3306(b).)
Differential wage payments to ac-
tive duty members of the uniformed
services.This ruling provides that dif-
ferential pay that employers pay to their
employees who leave their job to go on ac-
tive military duty is subject to income tax
withholding, but is not subject to Federal
Insurance Contributions Act (FICA) or
FederalUnemploymentTaxAct(FUTA)
taxes. Additionally, the ruling provides
that employers may use the aggregate pro-
cedure or optional flat rate withholding to
calculate the amount of income taxes re-
quired to be withheld on these payments,
and that these payments must be reported
on Form W–2. Rev. Rul. 69–136 modi-
fied and superseded.
Rev. Rul. 2009–11
ISSUES
1. Are differential wage payments made
by employers to individuals while on
active duty in the uniformed services
of the United States for more than 30
days “wages” for purposes of taxation
under the Federal Insurance Contribu-
tions Act (FICA), the Federal Unem-
ployment Tax Act (FUTA), and the
Collection of Income Tax at Source on
Wages (income tax withholding)?
2. How do employers calculate the
amount of income taxes required to
be withheld on differential wage pay-
ments?
3. What information return reporting re-
quirements apply to differential wage
payments?
FACTS
M, an employer, has employees who
are called or voluntarily enlist for active
military service in the United States uni-
formed services (as defined in chapter 43
of title 38, United Sates Code) for pe-
riods exceeding 30 days. M continues
making payments to the individuals in an
amount equal to the difference between the
compensation they receive for their mili-
tary service and the wages the employees
would have received from M if the em-
ployees were performing services for M.
The payments supplement compensation
received by the employees from the Fed-
eral government for their military service.
LAW AND ANALYSIS
Income Tax Withholding, FICA and FUTA
Treatment
Section 3402(a), relating to income
tax withholding, generally requires every
employer making a payment of wages to
deduct and withhold upon those wages a
tax determined in accordance with pre-
scribed tables or computational proce-
dures. Sections 3101 and 3111 impose
taxes under the Federal Insurance Contri-
butions Act (“FICA”) on employees and
employers for wages paid with respect to
employment. Section 3301 imposes tax
under the Federal Unemployment Tax Act
(“FUTA”) on employers on wages paid
with respect to employment.
Section 3401(a) defines “wages” for
income tax withholding purposes as all
remuneration for services performed by
an employee for his employer, subject to
certain exceptions. Sections 3121(a) and
3306(b) contain similar, but not identical,
definitions of wages for FICA and FUTA
purposes.
Revenue Ruling 69–136, 1969–1 C.B.
252, addresses the tax treatment of pay-
ments made by civilian employers to their
employees who are called to or enlist in ac-
tive military service for an extended time
period. The payments are made by the
civilian employers during the period of ac-
tive military service in amounts equal to
the difference between the compensation
paid by the military and the wages that
would have been paid if the individuals
were performing services for the civilian
employer. The ruling holds that the pay-
ments are not wages subject to the taxes
imposedbyFICAorFUTAortoincome
tax withholding.
Revenue Ruling 68–238, 1968–1 C.B.
420, addresses the tax treatment of pay-
ments made by civilian employers to their
employees who are temporarily absent
from work while serving in a State Na-
tional Guard. The payments are equivalent
to the difference between the employees’
normal wages and the amounts received
from the State for their services in the Na-
tional Guard. The ruling holds that these
payments are wages and are subject to
FICA and FUTA taxes as well as income
tax withholding.
Section 3401(h) was added to the Code
by section 105(a) of the Heroes Earnings
Assistance and Relief Tax Act of 2008,
Pub. L. No. 110–245, 122 Stat. 1624,
1628–630. New subsection 3401(h) pro-
vides that, for purposes of income tax with-
holding, any differential wage payment is
to be treated as a payment of wages by the
employer to the employee. The term “dif-
ferential wage payment” means any pay-
ment which (A) is made by an employer
to an individual with respect to any period
during which the individual is performing
service in the uniformed services (as de-
fined in chapter 43 of title 38, United States
Code) while on active duty for a period of
more than 30 days, and (B) represents all or
a portion of the wages the individual would
have received from the employer if the in-
dividual were performing service for the
employer. Section 3401(h) applies to dif-
ferential wage payments paid after Decem-
ber 31, 2008. The enactment of section
3401(h) modifies the holding in Revenue
Ruling 69–136 that differential wage pay-
ments are not subject to income tax with-
holding.
ThepaymentsmadebyMtotheem-
ployees while they are in military service
with the United States uniformed services
constitute “differential wage payments”
under section 3401(h) as these payments
represent all or a portion of the wages the
individuals would have received if still
performing services for M and are made
while the individuals are actively serving
in the United States uniformed services for
a period of duty scheduled to exceed 30
days. These payments are therefore treated
as wages for income tax withholding pur-
poses, and M must withhold income taxes
on the differential wage payments.
However, because the individuals are
scheduled to be on active military duty
for an extended period of time, rather than
being temporarily absent, the differential
wage payments are not wages for purposes
2009–18 I.R.B.896May 4, 2009

of FICA and FUTA taxes. Section 3401(h)
does not address the FICA and FUTA
treatment of differential wage payments
and does not alter the holding in Revenue
Ruling 69–136 that differential wage pay-
ments do not constitute wages subject to
FICA or FUTA taxes. Therefore M is
not required to withhold or pay FICA or
FUTA tax, with respect to the differential
wage payments.
Supplemental Wage Withholding
Differential wage payments are supple-
mental wages because they are not a pay-
ment for services for the nonmilitary em-
ployer in the current payroll period. As a
supplemental wage, if the amount of the
differential pay, when added to all other
supplemental wages paid by the same em-
ployer to the employee during the calen-
dar year does not exceed $1,000,000, then
the amount of the income tax withholding
is determined under the rules provided in
Regulations § 31.3402(g)–1(a)(6) and (7).
The two alternative procedures for calcu-
lating the amount of income taxes required
to be withheld from the differential wage
payments are the aggregate procedure and
optional flat rate withholding.
Under the aggregate procedure, M adds
the differential wage payment to the em-
ployee’s regular wages, if any, for the pay-
roll period and treats the aggregate of the
two as if it constituted a single wage pay-
ment for the payroll period. The withhold-
ingmethodusedbyMwithrespecttoregu-
lar wages is then used to calculate the with-
holding on this single wage payment and
M takes into consideration the Form W–4,
Employee’s Withholding Allowance Cer-
tificate, submitted by the employee.
Alternatively, M may determine the
income tax withholding on the differen-
tial wage payment using optional flat rate
withholding, if certain requirements are
satisfied. Optional flat rate withholding
may be used provided that (1) the dif-
ferential wage payment is either not paid
concurrently with regular wages or is sep-
arately stated on the payroll records of the
employer, and (2) income tax has been
withheld from the regular wages paid to
the employee during the calendar year
of the differential wage payment or the
preceding calendar year. The rate used
for optional flat rate withholding is pro-
vided in § 31.3402(g)–1(a)(7)(iii)(F) of
the Regulations. For 2009, the rate for
optional flat rate withholding is sched-
uled to be 25 percent, but this rate could
change if income tax rates change. The
determination of the amount of tax to be
withheld under optional flat rate with-
holding is made without reference to any
payment of regular wages, without al-
lowance for the number of withholding
allowances claimed by the employee on
Form W–4, and without regard to whether
the employee has requested additional
withholding on Form W–4.
If the differential wage payment, when
added to all supplemental wage pay-
ments previously made by M to the em-
ployee during the calendar year, exceeds
$1,000,000, § 31.3402(g)–1(a)(2) of the
Regulations provides that the rate used in
determining the amount of withholding
on the excess shall be equal to the highest
rate of tax applicable under section 1 of
the Code. Under current law, the highest
rate of tax applicable under section 1 is 35
percent.
Information Return Reporting
Section 6051(a) provides that any per-
son required to deduct and withhold from
employees the tax under § 3402, must fur-
nish each employee with a written state-
ment showing the amount of wages paid
and amounts withheld for income tax pur-
poses. Section 31.6051–1(a) states that
employers must use Form W–2 to fulfill
this requirement. Because differential pay-
ments are treated as wages subject to in-
come tax withholding, M must report the
payments on each employee’s Form W–2.
HOLDINGS
1. Differential wage payments made to
an individual while on active duty in
the United States uniformed services
for more than 30 days are subject to
income tax withholding, but are not
subject to FICA or FUTA taxes.
2. Employers may use either the aggre-
gate method or optional flat rate with-
holding to calculate the amount of in-
come tax required to be withheld on
differential wage payments which do
not exceed $1,000,000 when added to
all other supplemental wages paid by
the same employer to the individual
during the calendar year.
3. The amounts of the differential wage
payments must be reported by the em-
ployer on the employee’s Form W–2.
EFFECT ON OTHER REVENUE
RULINGS
Revenue Ruling 69–136, 1969–1 C.B.
252 is modified and superseded.
PROSPECTIVE APPLICATION
This revenue ruling is effective for
differential wage payments made after
December 31, 2008 (the effective date
of § 3401(h) under the Heroes Earnings
Assistance and Relief Tax Act of 2008).
DRAFTING INFORMATION
The principal author of this revenue
ruling is Joseph Perera of the Office of
Division Counsel/Associate Chief Coun-
sel (Tax Exempt & Government Entities).
For further information regarding this rev-
enue ruling, contact Mr. Perera at (202)
622–6040 (not a toll-free call).
May 4, 20098972009–18 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Phase-outofCreditfor
New Qualified Hybrid Motor
Vehicles and New Advanced
Lean Burn Technology Motor
Vehicles
Notice 2009–37
SECTION 1. PURPOSE
This notice announcesthe credit phase-
out schedule for advanced lean burn tech-
nology motor vehicles and hybrid passen-
ger automobiles and light trucks manufac-
turedbyFordMotorCompany.
SECTION 2. BACKGROUND
Section 30B(a)(2) of the Internal Rev-
enue Code provides for a credit determined
under § 30B(c) for certain new advanced
lean burn technology motor vehicles.
Section 30B(a)(3) provides for a credit
determined under § 30B(d) for certain new
qualified hybrid motor vehicles. Both the
new advanced lean burn technology motor
vehicle credit and the new qualified hybrid
motor vehicle credit begin to phase out for
a manufacturer’s passenger automobiles
and light trucks in the second calendar
quarter after the calendar quarter in which
at least 60,000 of the manufacturer’s pas-
senger automobiles and light trucks that
qualify for either credit have been sold
for use or lease in the United States (de-
termined on a cumulative basis for sales
after December 31, 2005). Taxpayers
purchasing the manufacturer’s vehicles
during the first twocalendar quarters of
the phase-out period may claim only 50
percent of the otherwise allowable credit.
Taxpayers purchasing the manufacturer’s
vehicles during the third and fourth calen-
dar quarters of the phase-out period may
claim only 25 percent of the otherwise
allowable credit. No credit is available for
vehicles purchased after the last day of the
fourth calendar quarter of the phase-out
period.
Notice 2006–9, 2006–1 C.B. 413, pro-
vides procedures for a vehicle manufac-
turer (or in the case of a foreign vehi-
cle manufacturer, its domestic distributor)
to certify to the Internal Revenue Service
(Service) both (1) that a particular make,
model and model year of vehicle quali-
fies for either the new advanced lean burn
technology motor vehicle credit or the new
qualified hybrid motor vehicle credit and
(2) the amount of the credit allowable with
respect to that vehicle.
Section 5.05 of Notice 2006–9 requires
a manufacturer (or, inthe case of a foreign
vehicle manufacturer,its domestic distrib-
utor) that has received from the Service an
acknowledgement of its certification for a
particular make, model, and model year of
vehicle to submit to the Service a report
of the number of qualified vehicles sold
by the manufacturer (or, in the case of a
foreign vehicle manufacturer, its domestic
distributor) to retail dealers during the cal-
endar quarter. A qualified vehicle is de-
fined for this purpose as any passenger au-
tomobile or light truck that is a new ad-
vanced lean burn technology motor vehi-
cle or a new qualified hybrid motor vehi-
cle.
In accordance with section 5.05 of No-
tice 2006–9, Ford Motor Company has
submitted quarterly reports that indicate
that its cumulative sales of qualified vehi-
cles to retail dealers reached the 60,000-
vehicle limit during the calendar quarter
ending December 31, 2008. Accordingly,
the credit for all new advanced lean burn
technology motor vehicles or new quali-
fied hybrid passenger automobiles or light
trucks manufactured by Ford Motor Com-
pany will begin to phase out on April 1,
2009.
SECTION 3. SCOPE OF NOTICE
This notice applies to any make, model,
or model year of new advanced lean burn
technology motor vehicle or new qualified
hybrid passenger automobile or light truck
that is —
(1) manufactured by Ford Motor Com-
pany; and
(2) purchased for use or lease in the
United States on or after April 1, 2009.
SECTION 4. CREDIT AMOUNT
.01In general. If a new advanced lean
burn technology motor vehicle or a new
qualified hybrid passenger automobile or
light truck manufactured by Ford Motor
Company is purchased for use or lease af-
ter March 31, 2009, the allowable credit is
as follows:
(1) For vehicles purchased for use or
lease on or after April 1, 2009, and on
or before September 30, 2009, the credit
is 50 percent of the otherwise allowable
amount determined under § 30B(c) or (d)
(whichever is applicable);
(2) For vehicles purchased for use or
lease on or after October 1, 2009, and on or
before March 31, 2010, the credit is 25 per-
cent of the otherwise allowable amount de-
termined under § 30B(c) or (d) (whichever
is applicable); and
(3) For vehicles purchased for use or
lease on or after April 1, 2010, no credit
is allowable.
.02Certified Vehicles.The following
tables set forth the credit available on or
after April 1, 2009, for hybrid motor ve-
hicles for which Ford Motor Company re-
ceived an acknowledgement of its certifi-
cation from the Service on or before April
8, 2009.
2009–18 I.R.B.898May 4, 2009

Table 1
April 1, 2009 – September 30, 2009
Model YearsModelCredit Amount
2005
Ford Escape 2WD
$1,300
2006Ford Escape 2WD
$1,300
2007Ford Escape 2WD
$1,300
2008Ford Escape 2WD
$1,500
2009Ford Escape 2WD
$1,500
2005
Ford Escape 4WD
$975
2006Ford Escape 4W
D
$975
2007Ford Escape 4WD
$975
2008Ford Escape 4WD
$1,100
2009Ford Escape 4
WD
$975
2010Ford Fusion
$1,700
2008Mercury Mariner 2WD
$1,500
2009Mercury Mar
iner 2WD
$1,500
2006Mercury Mariner 4WD
$975
2007Mercury Mariner 4WD
$975
2008Mercury Mar
iner 4WD
$1,100
2009Mercury Mariner 4WD
$975
2010Mercury Milan
$1,700
Table 2
October 1,
2009 – March 31, 2010
Model YearsModelCredit Amount
2005
Ford Escape 2WD
$650
2006Ford Escape 2WD
$650
2007Ford Escape 2WD
$650
2008Ford Escape 2WD
$750
2009Ford Escape 2WD
$750
2005
Ford Escape 4WD
$487.50
2006Ford Escape 4WD
$487.50
2007Ford Escape 4WD
$487.50
2008Ford Escape 4WD
$550
2009Ford Escape 4WD
$487.50
2010Ford Fusion
$850
2008Mercury Mariner 2WD
$750
2009Mercury Mariner 2WD
$750
May 4, 20098992009–18 I.R.B.

Table 2
October 1, 2009 – March 31, 2010
Model YearsModelCredit Amount
2006Mercury Mariner 4WD
$487.50
2007Mercury Mariner 4WD
$487.50
2008Mercury Marine
r4WD
$550
2009Mercury Mariner 4WD
$487.50
2010Mercury Milan
$850
Table 3
On or after Apri
l1,2010
Model YearsModelCredit Amount
2005
Ford Escape 2WD
$0.00
2006Ford Escape 2WD
$0.00
2007Ford Escape 2WD
$0.00
2008Ford Escape 2WD
$0.00
2009Ford Escape 2WD
$0.00
2005
Ford Escape 4WD
$0.00
2006Ford Escape 4WD
$0.00
2007Ford Escape 4WD
$0.00
2008Ford Escape 4WD
$0.00
2009Ford Escape 4WD
$0.00
2010Ford Fusion
$0.00
2008Mercury Mariner 2WD
$0.00
2009Mercury Mariner 2WD
$0.00
2006Mercury Mariner 4WD
$0.00
2007Mercury Mariner 4WD
$0.00
2008Mercury Mariner 4WD
$0.00
2009Mercury Mariner 4WD
$0.00
2010Mercury Milan
$0.00
2009–18 I.R.B.900May 4, 2009

The principal author of this notice is
Patrick S. Kirwan of the Office of Asso-
ciate Chief Counsel (Passthroughs & Spe-
cial Industries). For further information
regarding this notice, contact Mr. Kirwan
at (202) 622–3110 (not a toll-free call).
Application of Section 382
to Corporations Whose
Instruments are Acquired
by the Treasury Department
Under Certain Programs
Pursuant to the Emergency
Economic Stabilization Act of
2008
Notice 2009–38
This notice provides additional guid-
ance regarding the application of section
382 of the Code and other provisions of
law to corporations whose instruments
are acquired by the Treasury Department
pursuant to the Emergency Economic
Stabilization Act of 2008, P.L. 110–343
(EESA). This notice amplifies and su-
persedes Notice 2009–14, 2009–7 I.R.B.
516, to address other EESA programs and
provide additional guidance.
I. Purpose.
The Internal Revenue Service (Service)
and Treasury Department (Treasury) in-
tend to issue regulations implementing cer-
tain of the rules as described below. Pend-
ing the issuance of further guidance, tax-
payersmayrelyontherulessetforthin
this notice to the extent provided herein.
Section 101(a)(1) of EESA authorizes
the Secretary to establish the Troubled
Asset Relief Program (TARP). Section
102(a) of EESA authorizes the Secretary
to also establish a program to guarantee
troubled assets. This notice provides guid-
ance to corporate issuers with respect to
Treasury’s acquisition of instruments pur-
suant to the following EESA programs:
(i) the Capital Purchase Program for pub-
licly-traded issuers (Public CPP); (ii) the
Capital Purchase Program for private
issuers (Private CPP); (iii) the Capital Pur-
chase Program for S corporations (S Corp
CPP); (iv) the Targeted Investment Pro-
gram (TARP TIP); (v) the Asset Guarantee
Program; (vi) the Systemically Signifi-
cant Failing Institutions Program; (vii) the
Automotive Industry Financing Program;
and (viii) the Capital Assistance Program
for publicly-traded issuers (TARP CAP).
Unless otherwise specified below, a refer-
ence to “the Programs” shall include any
of the various EESA programs described
in the preceding sentence.
II. Background.
Section 382(a) of the Internal Revenue
Code (Code) providesthat the taxable in-
come of a loss corporation for a year fol-
lowing an ownership change may be off-
setbypre-changelossesonlytotheex-
tent of the section 382 limitation for such
year. An ownership change occurs with re-
spect to a corporation if it is a loss cor-
poration on a testing date and, immedi-
ately after the close of the testing date,
the percentage of stock of the corporation
owned by one or more 5-percent share-
holders has increased by more than 50 per-
centage points over the lowest percent-
age of stock of suchcorporation owned
by such shareholders at any time during
the testing period. See § 1.382–2T(a)(1)
of the Income Tax Regulations. Section
382(m) of the Code provides that the Sec-
retary shall prescribe such regulations as
may be necessary or appropriate to carry
out the purposes of sections 382 and 383.
Section 101(c)(5) of EESA provides
that the Secretary is authorized to issue
such regulations and other guidance as
may be necessary or appropriate to carry
out the purposes of EESA.
Except as otherwise provided, any def-
initions and terms used in this notice have
the same meaning as they do in section 382
of the Code (and the regulations thereun-
der) or in EESA, as applicable. Unless oth-
erwise specified, a reference to “section” is
to the particular section of the Code or reg-
ulations.
III. Guidance Regarding Corporations
Whose Instruments are Acquired by the
Treasury Pursuant to EESA.
Taxpayersmayrelyontherulesde-
scribed in this Section III to the extent pro-
vided below.
RULES:
A.Characterization of instruments
(other than warrants) issued to Treasury.
AnyinstrumentissuedtoTreasurypur-
suant to any of the Programs except TARP
CAP, whether owned by Treasury or sub-
sequent holders, shall be treated for all
Federal income tax purposes as an instru-
ment of indebtedness if denominated as
such, and as stock described in section
1504(a)(4) if denominated as preferred
stock. No instrument so denominated
shall be treated as stock for purposes of
section 382 while held by Treasury or by
other holders, except that preferred stock
described in section 1504(a)(4) will be
treated as stock for purposes of section
382(e)(1). In the case of any instrument
issued to Treasury pursuant to TARP CAP,
the appropriate classification of such in-
strument shall be determined by applying
general principles of Federal tax law.
B.Characterization of warrants is-
sued to Treasury. For all Federal income
tax purposes, any warrant to purchase
stock issued to Treasury pursuant to any
of the Programs except Private CPP and
S Corp CPP, whether owned by Treasury
or subsequent holders, shall be treated
as an option (and not as stock). While
held by Treasury, such warrant will not be
deemed exercised under § 1.382–4(d)(2).
For all Federal income tax purposes,
any warrant to purchase stock issued to
Treasury pursuant to the Private CPP shall
be treated as an ownership interest in the
underlying stock, which shall be treated
as preferred stock described in section
1504(a)(4). For all Federal income tax
purposes, any warrant issued to Treasury
pursuant to the S Corp CPP shall be treated
as an ownership interest in the underlying
indebtedness.
C.Value-for-value exchange.Forall
Federal income tax purposes, any amount
received by an issuer in exchange for in-
struments issued to Treasury under the
Programs shall be treated as received, in
its entirety, as consideration for such in-
struments.
D.Section 382 treatment of stock ac-
quired by Treasury. For purposes of sec-
tion 382, with respect to any stock (other
than preferred stock described in section
1504(a)(4)) issued to Treasury pursuant to
the Programs (either directly or upon the
exercise of a warrant), the ownership rep-
May 4, 20099012009–18 I.R.B.

resented by such stock on any date on
whichitisheldbyTreasuryshallnotbe
considered to have caused Treasury’s own-
ership in the issuing corporation to have in-
creased over its lowest percentage owned
on any earlier date. Except as described
below, such stock is considered outstand-
ing for purposes of determining the per-
centage of stock owned by other 5-percent
shareholders on a testing date.
E.Section 382 treatment of redemp-
tions of stock from Treasury. For purposes
of measuring shifts in ownership by any
5-percent shareholder on any testing date
occurring on or after the date on which an
issuing corporation redeems stock held by
Treasury that had been issued to Treasury
pursuant to the Programs (either directly or
upon the exercise of a warrant), the stock
so redeemed shall be treated as if it had
never been outstanding.
F.Section 382(l)(1) not applicable with
respect to capital contributions made by
Treasury pursuant to the Programs.For
purposes of section 382(l)(1), any capital
contribution made by Treasury pursuant to
the Programs shall not be considered to
have been made as part of a plan a principal
purpose of which was to avoid or increase
any section 382 limitation.
G.Certain exchanges. Paragraphs (C),
(D), (E), and (F), but not paragraphs (A)
and (B), of this notice apply to “Covered
Instruments” as though such instruments
were issued directly to Treasury under the
Programs. For purposes of this notice, the
term “Covered Instrument” means any in-
strument acquired by Treasury in exchange
for an instrument that was issued to Trea-
sury under the Programs. In addition, the
term also includes any instrument acquired
by Treasury in exchange for a Covered In-
strument. General principles of Federal
tax law determine the characterization of
all Covered Instruments.
IV. Reliance on Notice.
Taxpayersmayrelyontherulesde-
scribed in Section III of this notice. These
rules will continue to apply unless and un-
til there is additional guidance. Any future
contrary guidance will not apply to any in-
strument (i) issued to Treasury pursuant to
the Programs, or acquired by Treasury in
an exchange described in Section III(G) of
this notice, prior to the publication of that
guidance, or (ii) issued to Treasury pur-
suant to the Programs, or acquired by Trea-
sury in an exchange described in Section
III(G) of this notice, under a binding con-
tract entered into prior to the publication
of that guidance. In exercising its author-
ity under EESA in this notice, the Treasury
and the Service intend no implication re-
garding the Federal income tax results that
would obtain with respect to instruments
that are not specifically described in this
notice. Accordingly, the Federal income
tax consequences of instruments not de-
scribed in this notice continue to be deter-
mined based upon the application of gen-
eral principles of Federal tax law to the
specific facts and circumstances of each
case.
V. Effect on Other Documents.
This notice amplifies and supersedes
Notice 2009–14, 2009–7 I.R.B. 516.
Drafting Information
The principal author of this notice is
Keith Stanley of the Office of Associate
Chief Counsel (Corporate). For further
information regarding this notice, contact
Keith Stanley at (202) 622–7750 (not a
toll-free call).
Update for Weighted Average
Interest Rates, Yield Curves,
and Segment Rates
Notice 2009–39
This notice provides guidance as to the
corporate bond weighted average interest
rate and the permissible range of interest
rates specified under § 412(b)(5)(B)(ii)(II)
of the Internal Revenue Code as in ef-
fect for plan years beginning before 2008.
It also provides guidance on the corpo-
rate bond monthly yield curve (and the
corresponding spot segment rates), the
24-month average segment rates, and
the funding transitional segment rates
under § 430(h)(2). In addition, this no-
tice provides guidance as to the interest
rate on 30-year Treasury securities un-
der § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008, the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the min-
imum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007.
CORPORATE BOND WEIGHTED
AVERAGE INTEREST RATE
Sections412(b)(5)(B)(ii)and
412(l)(7)(C)(i), as amended by the Pen-
sion Funding Equity Act of 2004 and by
the Pension Protection Act of 2006 (PPA),
provide that the interest rates used to cal-
culate current liability and to determine
the required contribution under § 412(l)
for plan years beginning in 2004 through
2007 must be within a permissible range
based on the weighted average of the rates
of interest on amounts invested conser-
vatively in long term investment grade
corporate bonds during the 4-year period
ending on the last day before the beginning
of the plan year.
Notice 2004–34, 2004–1 C.B. 848, pro-
vides guidelines for determining the cor-
porate bond weighted average interest rate
and the resulting permissible range of in-
terest rates used to calculate current liabil-
ity. That notice establishes that the corpo-
rate bond weighted average is based on the
monthly composite corporate bond rate de-
rived from designated corporate bond in-
dices. The methodology for determining
the monthly composite corporate bond rate
as set forth in Notice 2004–34 continues to
apply in determining that rate. See Notice
2006–75, 2006–2 C.B. 366.
The composite corporate bond rate for
March 2009 is 7.22 percent. Pursuant
to Notice 2004–34, the Service has de-
termined this rate as the average of the
monthly yields for the included corporate
bond indices for that month.
The following corporate bond weighted
average interest rate was determined for
plan years beginning in the month shown
below.
2009–18 I.R.B.902May 4, 2009

For Plan Years
Beginning inPermissible Range
MonthYear
Corporate
Bond Weighted
Average90%to100%
April20096.39
5.75
6.39
YIELD CURVE AND SEGMENT
RATES
Generally for plan years beginning
after 2007 (except for delayed effective
dates for certain plans under sections 104,
105, and 106 of PPA), § 430 of the Code
specifies the minimum funding require-
ments that apply to single employer plans
pursuant to § 412. Section 430(h)(2) spec-
ifies the interest rates that must be used
to determine a plan’s target normal cost
and funding target. Under this provision,
present value is generally determined us-
ing three 24-month average interest rates
(“segment rates”), each of which applies
to cash flows during specified periods.
However, an election may be made under
§ 430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates. For
plan years beginning in 2008 and 2009, a
transitional rule under § 430(h)(2)(G) pro-
vides that the segment rates are blended
with the corporate bond weighted average
as specified above. An election may be
made under § 430(h)(2)(G)(iv) to use the
segment rates without applying the transi-
tional rule.
Notice 2007–81, 2007–44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, the
24-month average corporate bond segment
rates, and the funding transitional segment
rates used to compute the target normal
cost and the funding target. Pursuant to
Notice 2007–81, the monthly corporate
bond yield curve derived from March 2009
data is in Table I at the end of this notice.
The spot first, second, and third segment
rates for the month of March 2009 are,
respectively, 5.70, 7.53, and 7.85. The
three 24-month average corporate bond
segment rates applicable for April 2009
under the election of § 430(h)(2)(G)(iv)
are as follows:
First
Segment
Second
Segment
Third
Segment
5.33
6.626.80
The transitional segment rates under
§ 430(h)(2)(G) applicable for April 2009,
taking into account the corporate bond
weighted average of 6.39 stated above, are
as follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
20086.046.47
6.53
2009
5.686.54
6.66
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 417(e)(3)(A)(ii)(II) (prior to
amendment by PPA) defines the appli-
cable interest rate, which must be used
for purposes of determining the minimum
present value of a participant’s benefit
under § 417(e)(1) and (2), as the annual
rate of interest on 30-year Treasury se-
curities for the month before the date
of distribution or such other time as the
Secretary may by regulations prescribe.
Section 1.417(e)–1(d)(3) of the Income
Tax Regulations provides that the applica-
ble interest rate for a month is the annual
rate of interest on 30-year Treasury secu-
rities as specified by the Commissioner
for that month in revenue rulings, notices
or other guidance published in the Internal
Revenue Bulletin.
The rate of interest on 30-year Treasury
securities for March 2009 is 3.64 percent.
The Service has determined this rate as the
monthly average of the daily determina-
tion of yield on the 30-year Treasury bond
maturing in February 2039.
Generally for plan years beginning
after 2007, § 431 specifies the mini-
mum funding requirements that apply to
multiemployer plans pursuant to § 412.
Section 431(c)(6)(B)specifies a minimum
amount for the full-funding limitation
described in section 431(c)(6)(A), based
on the plan’s current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 percent
below the weighted average of the rates of
interest on 30-year Treasury securities dur-
ing the four-year period ending on the last
day before the beginning of the plan year.
Notice 88–73, 1988–2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The following rates
were determined for plan years beginning
in the month shown below.
May 4, 20099032009–18 I.R.B.

For Plan Years
Beginning inPermissible Ran
ge
MonthYear
30-Year
Treasury
Weighted
Average
90%to
105%
April20094.484.034.70
MINIMUM PRESENT
VALUE
SEGMENT RATES
Generally for p
lan years beginning af-
ter December 31
, 2007, the applicable in-
terest rates u
nder § 417(e)(3)(D) are seg-
ment rates com
puted without regard to a
24-month averag
e. For plan years begin-
ning in 2008 thr
ough 2011, the applica-
ble interest ra
te is the monthly spot seg-
ment rate blend
ed with the applicable rate
under § 417(e)(
3)(A)(ii)(II) as in effect
for plan years
beginning in 2007. Notice
2007–81 provi
des guidelines for determin-
ing the minimum p
resent value segment
rates. Pursuan
t to that notice, the min-
imum present va
lue transitional segment
rates determin
ed for March 2009, taking
into account th
e March 2009 30-year Trea-
sury rate of 3.
64 stated above, are as fol-
lows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
2008
4.05
4.424.48
20094.46
5.205.32
DRAFTING INFORMATION
The principal author of this notice is
Tony Montanaro of the Employee Plans,
Tax Exempt and Government Entities Di-
vision. Mr. Montanaro may be e-mailed at
RetirementPlanQuestions@irs.gov.
2009–18 I.R.B.904May 4, 2009

Table I
Monthly Yield Curve for March 2009
Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield
0.5
4.62
20.5
7.70
40.5
7.87
60.5
7.92
80.5
7.95
1.04.7721.07.7141.07.8761.0
7.92
81.07.95
1.5
4.96
21.57.7241.57.8761.5
7.92
81.57.95
2.0
5.20
22.07.7342.07.8862.07.9382.07.95
2.55.5022.5
7.73
42.5
7.88
62.5
7.93
82.5
7.95
3.0
5.82
23.07.7443.07.8863.0
7.93
83.07.95
3.5
6.13
23.57.7543.5
7.88
63.5
7.93
83.5
7.95
4.06.4224.0
7.75
44.07.8864.0
7.93
84.07.95
4.56.6724.57.7644.57.8864.5
7.93
84.57.95
5.0
6.88
25.0
7.77
45.0
7.89
65.0
7.93
85.0
7.95
5.57.0525.5
7.77
45.5
7.89
65.5
7.93
85.5
7.95
6.0
7.19
26.07.7846.0
7.89
66.0
7.93
86.07.95
6.5
7.29
26.5
7.78
46.5
7.89
66.5
7.93
86.5
7.96
7.07.3627.0
7.79
47.0
7.89
67.0
7.93
87.0
7.96
7.57.4227.5
7.79
47.5
7.89
67.5
7.93
87.5
7.96
8.07.4628.07.8048.07.8968.07.9388.07.96
8.5
7.48
28.5
7.80
48.5
7.90
68.5
7.94
88.5
7.96
9.0
7.50
29.0
7.81
49.07.9069.07.9489.07.96
9.5
7.52
29.57.8149.5
7.90
69.5
7.94
89.5
7.96
10.0
7.53
30.07.81
50.0
7.90
70.0
7.9490.07.96
10.57.5430.57.8250.5
7.90
70.5
7.94
90.5
7.96
11.0
7.54
31.07.82
51.0
7.9071.07.9491.07.96
11.57.5531.5
7.82
51.5
7.90
71.5
7.94
91.5
7.96
12.0
7.55
32.07.83
52.0
7.90
72.0
7.9492.07.96
12.57.5632.5
7.83
52.5
7.91
72.5
7.94
92.5
7.96
13.0
7.56
33.07.83
53.0
7.91
73.0
7.9493.07.96
13.57.5733.57.8453.5
7.91
73.5
7.94
93.5
7.96
14.0
7.58
34.07.84
54.0
7.9174.07.9494.07.96
14.5
7.59
34.5
7.84
54.5
7.91
74.5
7.94
94.5
7.96
15.0
7.60
35.0
7.84
55.0
7.91
75.0
7.94
95.0
7.96
15.5
7.61
35.57.8555.5
7.91
75.5
7.94
95.5
7.96
16.07.6236.0
7.8556.0
7.91
76.0
7.9496.07.96
16.57.6236.57.8556.5
7.91
76.57.9596.5
7.96
17.07.6337.0
7.8557.0
7.9277.07.9597.07.96
17.5
7.64
37.5
7.86
57.5
7.92
77.5
7.9597.5
7.96
18.0
7.65
38.07.86
58.0
7.92
78.07.95
98.07.96
18.5
7.66
38.5
7.86
58.5
7.92
78.5
7.9598.5
7.96
19.0
7.67
39.0
7.8659.0
7.9279.0
7.95
99.07.96
19.57.6839.57.8759.5
7.92
79.57.9599.5
7.96
20.07.6940.07.8760.07.9280.07.95100.07.97
May 4, 20099052009–18 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Determinatio
n of Distributive
Share When a Pa
rtner’s
Interest Cha
nges
REG–144689–
04
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 determina-
tion of part
ners’ distributive shares of part-
nership ite
ms of income, gain, loss, deduc-
tion and cre
dit when a partner’s interests
varies duri
ng a partnership taxable year.
Also, the p
roposed regulations modify the
existing r
egulations regarding the required
taxable ye
ar of a partnership. These pro-
posed regu
lations affect partnerships and
their par
tners.
DATES: Wr
itten or electronic comments
and reque
sts for a public hearing must be
received
by July 13, 2009.
ADDRESSE
S: Send submissions to:
CC:PA:LP
D:PR(REG–144689–04),
Room 5203
, Internal Revenue Service,
PO Box 76
04, Ben Franklin Station,
Washing
ton, DC 20044. Submissions may
be hand-
delivered Monday through Friday
between
the hours of 8 a.m. and 4 p.m.
to CC:PA
:LPD:PR (REG–144689–04),
Courie
r’s Desk, Internal Revenue
Servic
e, 1111 Constitution Avenue, NW,
Washin
gton, DC; or sent electronically
viathe
FederaleRulemaking
Portal
atwww.regulations.gov(IRS
REG–1
44689–04).
FOR FU
RTHER INFORMATION
CONTA
CT: Concerning the pro-
posed
regulations, Laura Fields or
Jonat
han Cornwell at (202) 622–3050,
conce
rning submissions of comments
and th
e hearing, Richard Hurst at (202)
622–
7180 (not toll-free numbers) or
Rich
ard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTAR
Y INFORMATION:
Background
These propose
d regulations contain
amendments to
the Income Tax Regula-
tions (26 CFR P
art 1) under section 706 of
the Internal
Revenue Code (Code). These
amendments a
re proposed to conform the
Income Tax Re
gulations for certain of the
provisions o
f section 1246 of the Taxpayer
Relief Act o
f 1997, Public Law 105–34
(111 Stat. 7
88 (1997)) (the 1997 Act) and
section72o
f the Deficit Reduction Act of
1984, Publi
c Law 98–369 (98 Stat. 494
(1984)) (t
he 1984 Act).
Also, under
section 706(d)(1), the
Treasury S
ecretary may provide in regu-
lations va
rious methods for determining a
partner’s
distributive share of partnership
items of in
come, gain, loss, deduction and
credit th
at takes into account the varying
interest
s of the partners for any taxable
year of th
e partnership in which there is
a change i
n the interest of a partner. Pur-
suant to t
hat grant of regulatory authority,
the prop
osed regulations provide methods
for dete
rmining a partner’s distributive
share of
partnership items to take into ac-
count th
e varying interests of the partners
in any ye
ar in which there is a change
in a par
tner’s interest in the partnership.
Also, t
he proposed regulations provide
that a d
eemed disposition of a partner’s
entire
interest under other sections of the
regula
tions is a deemed disposition of a
partn
er’s entire interest for the purpose of
secti
on 706(d).
Final
ly, the proposed regulations
amend
the rules applicable to the determi-
natio
n of the taxable year of a partnership
in tho
se instances in which partnership
inter
ests are held by “disregarded for-
eign
partners” (as that term is defined in
§1.7
06–1(b)(6)(i)).
1.Va
rying Interest Rule
a.In
general
Sect
ion 702(a) of the Code provides
tha
t the partner in determining the part-
ner
’s income tax shall take into account
sep
arately the partner’s distributive share
of p
artnership items of income, gain, loss,
ded
uction, or credit.
Section 706(a
) provides that, in com-
puting the tax
able income of a partner for
a taxable year
, the inclusions required by
sections 702 a
nd 707(c) with respect to a
partnership s
hall be based on the income,
gain, loss, d
eduction, or credit of the part-
nership for a
ny taxable year of the partner-
ship ending w
ithin or with the taxable year
of the partne
r.
Section 706(
c)(1) provides that, except
in the case of
a termination of a partner-
ship and exc
eptasprovidedinsection
706(c)(2),
the taxable year of a partnership
shall not cl
ose as the result of the death of
a partner, t
he entry of a new partner, the
liquidati
on of a partner’s interest in the
partnersh
ip, or the sale or exchange of a
partner’s
interest in the partnership. Under
section 70
6(c)(2)(A), the taxable year of
a partners
hip shall close with respect to
a partner
whose entire interest terminates
(whether
by reason of death, liquidation,
or otherw
ise). Under section 706(c)(2)(B),
the taxab
le year of a partnership shall not
close (o
ther than at the end of a partner-
ship’s t
axable year as determined under
section
706(b)(1)) with respect to a part-
ner who s
ells or exchanges less than his
entire i
nterest in the partnership or with
respec
t to a partner whose interest is re-
duced (
whether by entry of a new partner,
partia
l liquidation of a partner’s interest,
gift, o
rotherwise).
Sectio
n 706(d)(1) provides that, ex-
cept as
required by sections 706(d)(2)
and (d)
(3), if there is a change in a part-
ner’s
interest in the partnership during
the pa
rtnership’s taxable year, each part-
ner’s
distributive share of any partnership
item o
f income, gain, loss, deduction or
credi
t for such taxable year is determined
by th
euseofanymethodprescribedby
the S
ecretary by regulations which takes
into
account the varying interests of the
part
ners in the partnership during such
taxa
ble year (the varying interests rule).
Sec
tion 706(d)(1) was added by the 1984
Act
, in part, to clarify that the varying
int
erests rule applies to the disposition of a
par
tner’s entire interest in the partnership
as w
ell as the disposition of less than a
par
tner’s entire interest, and to authorize
th
e Secretary to prescribe methods for de-
te
rmining a partner’s distributive share of
pa
rtnership items when there is a change
2009–18 I.R.B.906May 4, 2009

in the partners’ interests during the taxable
year of the partnership.
The existing regulations under section
706 have not been revised to reflect the
changes made to that section by the 1984
Act. Section 1.706–1(c)(2)(ii) provides
that in the case of a disposition of a part-
ner’s entire interest in a partnership the
partner’s distributive share of partnership
items for the taxable year of the partner-
ship in which the disposition occurs may
be determined by a closing of the partner-
ship’s books as of the date of disposition
(interim closing method). Alternatively,
the partners by agreement may determine
the departing partner’s distributive share
by taking hispro ratapart of the amount of
partnership items that such partner would
have included in his taxable income had he
remained a partner until the end of the part-
nership taxable year (proration method).
Section 1.706–1(c)(2)(ii). The proration
may be based on the portion of the taxable
year that has elapsed prior to the disposi-
tion or may be determined under any other
method that is reasonable. Moreover, the
transferee of such departing partner’s in-
terest shall include in his taxable income as
his distributive share of partnership items
with respect to the acquired interest thepro
ratapart (determined by the method used
by the transferor partner) of the amount of
such items that would have been included
had he been a partner from the beginning
of the partnership’s taxable year. The ex-
isting regulations, however, do not specif-
ically provide for the use of these methods
when there has been a disposition of less a
partner’s entire interest in the partnership.
In Rev. Rul. 77–310, 1977–2 C.B. 217,
(see §601.601(d)(2)(ii)(b)), the IRS pro-
vided an example of an acceptable method
for allocating a partnership loss for the
partnership’s taxable year among the part-
ners where their profit and loss sharing per-
centages were changed substantially one
month before the end of the taxable year
as a result of capital contributions of sev-
eral existing partners. The ruling pro-
vided that an acceptable method, under
the facts of the ruling, was to allocate
the partnership’s loss among the partners
based on their differing profit and loss
sharing percentages and the periods during
the year each partner’s differing percent-
age interests existed. See also Rev. Rul.
77–311, 1977–2 C.B. 218, (applying the
same method to a partnership’s distributive
share of a loss from a lower-tier partner-
ship). See §601.601(d)(2)(ii)(b).
Finally, the existing regulations under
section 706 have not been revised to reflect
the change to that section by the 1997 Act
requiring that the taxable year of the part-
nership shall close with respect to a partner
whose entire interest in the partnership ter-
minates by reason of death. In that regard,
§1.706–1(c)(3) provides that, when a part-
ner dies, the partnership taxable year shall
not close with respect to such partner prior
to the end of the partnership’s taxable year.
b.Change in partnership allocations
among contemporaneous partners
Section 761(c) provides that a partner-
ship agreement includes any modifications
of the partnership agreement made prior
to, or at, the time prescribed by law for
the filing of the partnership return for the
taxable year (not including extensions).
InLipke v. Commissioner,81T.C.689
(1983), the Tax Court held that section
706(c)(2)(B) (as in effect prior to the 1984
Act) prohibited retroactive allocations of
partnership losses where the allocations
resulted from additional capital contri-
butions made by both new and existing
partners. However, the Tax Court held that
the prohibition on retroactive allocations
under section 706(c)(2)(B) did not apply to
changes in the allocations among partners
who were members of the partnership for
the entire year (contemporaneous partners)
if the changes in the allocations did not
result from capital contributions.Lipke v.
Commissioner, supra, at 696 (1983).
As previously discussed, the 1984 Act
amended section 706, in part, to clarify
that the varying interests rule applies to
any change in a partner’s interest, whether
in connection with a complete disposition
of the partner’s interest or otherwise. To
that end, Congress in the 1984 Act re-
placed the varying interests rule in sec-
tion 706(c)(2)(B) with the rule that now
appears in Section 706(d)(1). The legisla-
tive history pertaining to this amendment
reflects Congress’s intention that the new
rule of section 706(d)(1) be comparable to
the pre–1984 law without overruling the
longstanding rule of section 761(c).
The committee wishes to make clear
that the varying interests rule is not in-
tended to override the longstanding rule
of section 761(c) with respect to inter-
est shifts among partners who are mem-
bers of the partnership for the entire tax-
able year, provided such shifts are not,
in substance, attributable to the influx
of new capital from such partners.See
Lipke v. Commissioner,81T.C.689
(1983).
S. Prt. 98–169, Vol. I, 98th Cong., 2d
Sess. 218–19 (1984); see also H. Rep. No.
432, Pt. 2, 98th Cong., 2d Sess. 1212–13
(1984) (containing similar language).
c.Conventions
Section 1.706–1(c)(2)(ii) provides that,
in determining the distributive share of
partnership items under section 702(a)
with respect to a partner whose entire
interest in the partnership terminates, a
partnership may use the interim closing
method or alternatively, the partners may
by agreement choose to use the proration
method. Under the proration method, the
partnership’s income and losses may be
prorated based on the portion of the tax-
able year that has elapsed prior to the date
upon which the partners’ interests varied,
or “under any other method that is rea-
sonable.” These other reasonable methods
have become known as conventions.
Staff of J. Comm. On Taxation, 98th
Cong., General Explanation of the Rev-
enue Provisions of the Deficit Reduction
Act of 1984, 222 (Comm. Print 1984), pro-
vides,
[I]n any case in which there is a dis-
position of less than an entire interest in
the partnership by a partner (including
the entry of a new partner), the partners
may elect to determine the varying in-
terests of the partners by using one or
more conventions that treat any change
in any partner’s interest in the partner-
ship during a particular month as occur-
ring on one or more specified days in
the month. The actual method for ap-
plying a convention is to be provided
by Treasury regulations. The regula-
tions may deny the use of any conven-
tion when the occurrence of significant,
discrete events (e.g., a large, unusual
gain or loss) would mean that use of
the convention could result in signifi-
cant tax avoidance.
. . Congress intended that the regu-
lations providing for these conventions
will be effective on a prospective ba-
sis only. Until these regulations are
May 4, 20099072009–18 I.R.B.

proposed, and for a reasonable tran-
sition period thereafter, it is expected
that Treasury will permit any reason-
able convention to be used. This may
include a method under which any part-
ner entering during amonth is treated as
entering on the first day of the month, a
method under which partners entering
during the first 15 days of a month are
treated as entering on the first day of the
month and partners entering after the
15
th
of the month are treated as enter-
ingonthe16
th
day of the month, or any
other method that is not abusive under
the relevant facts and circumstances.
As a general rule, use of a convention
is not permitted when the occurrence
of significant, discrete events (e.g.,a
large, unusual gain or loss) would result
in significant tax avoidance if the con-
vention is used.
OnDecember13,1984,
the IRS issued a news release
(IR–84–129) (http://www.irs.gov/puv/irs-
drop/ir–84–129.pdf) announcing that part-
nerships using the interim closing method
were permitted to use a semi-monthly
convention.Under a semi-monthly
convention, partners entering during the
first 15 days of the month are treated as
entering on the first day of the month,
and partners entering after the 15
th
day
of the month (but before the end of the
month) are treated as entering on the 16
th
day of the month (except to the extent that
section 706(c)(2)(A) applied). The news
release provided that, until regulations
were issued, partnerships that use the
proration method were required to use a
daily convention.
d.Deemed dispositions
Section 1.1502–76(b)(2)(i) provides
that the federal income tax returns for the
years that end and begin with a corporation
becoming (or ceasing to be) a member (as
defined in §1.1502–1(b)) of a consolidated
group (as defined in §1.1502–1(h)) are
separate tax years for all Federal income
tax purposes. The periods ending and
beginning with the corporation’s change
in status are different tax years, and the
corporation’s items of income, gain, loss,
deduction and credit must be allocated
between such separate tax years. Under
§1.1502–76(b)(2)(vi), if the corporation is
a partner in a partnership, the corporation
is treated for purposes of determining the
year to which the partnership’s items are
allocated as selling the corporation’s en-
tire interest in the partnership immediately
before the corporation’s change in status.
Section 1.1362–3(a) provides that, if an
S election (as defined in section 1362(a))
terminates under section1362(d)ona
date other than the first day of the taxable
year of the S corporation (as defined in
section 1361(a)), the portion of the year
ending as of the close of the day prior to
the termination is treated as a short tax-
able year for which the corporation is an
S corporation (S short year) and the portion
of the S termination year beginning on
the day of the termination is effective is
treated as a short taxable year for which the
corporation is a C corporation (as defined
in section 1362(a)(2)) (C short year).
Under §1.1362–3(a), the corporation’s
items of income, gain, loss, deduction
and credit must be allocated between the
S short year and C short year using the
pro rataallocation approach stated in
section 1362(e)(2) unless an election is
made to allocate the items using its normal
accounting method or in certain other
instances described in sections 1362(e)(3),
1362(e)(6)(C) or 1362(e)(6)(D). Under
§1.1362–3(c)(1), for purposes of section
706(c) only, the termination of the S
election of a corporation that is a partner
in a partnership is treated as a sale or
exchange of the corporation’s entire
interest in the partnership on the last day of
the S short year if (i) thepro rataallocation
rules do not apply and (ii) the taxable year
of the partnership ends with or within the
C short year.
Under section 1377(a)(2), if a share-
holder terminates the shareholder’s entire
interest in an S corporation and all af-
fected shareholders (as defined in section
1377(a)(2)(B)) and the corporation agree,
the S corporation may elect under section
1377(a)(2) (terminating election) to apply
thepro rataallocation method (as defined
in section 1377(a)(1)) as if the S cor-
poration’s taxable year consisted of two
separate taxable years, the first of which
ends at the close of the day on which the
shareholder’s entire interest in the S corpo-
ration is terminated. (See §1.1377–1(b)(1)
for certain exceptions to the preceding
rule.) Under §1.1377(b)(3)(iv), a termi-
nating election by an S corporation that is
a partner in a partnership is treated as a
sale or exchange of the corporation’s en-
tire interest in the partnership for purposes
of section 706(c) if the taxable year of the
partnership ends after the shareholder’s
interest is terminated and within the tax-
able year of the Scorporation.
2.Taxable years of partnerships
A partnership must determine its tax-
able year under section 706(b)(1)(B) un-
less the partnership establishes to the sat-
isfaction of the Secretary a business pur-
pose for a different year. In general, the re-
quired taxable year of a partnership is de-
termined by reference to the taxable year
of its partners. If partners owning a major-
ity interest in a partnership have the same
taxable year, the partnership is required to
have the same taxable year as the major-
ity interest owners (majority interest tax-
able year). If a taxable year for the partner-
ship cannot be determined under the ma-
jority interest taxable year rule, the taxable
year of the partnership shall be the taxable
year of all of its principal partners (princi-
pal partner taxable year). Finally, if there
is not taxable year described under the ma-
jority interest taxable year rule or princi-
pal partner taxable year rule, then the part-
nership is required under the regulations
to have the taxable year that results in the
least aggregate deferral of income. Section
1.706–1(b)(2)(C).
Under §1.706–1(b)(6)(i), the interest
held by a disregarded foreign partner is
not taken into account in determining the
taxable year of the partnership under the
foregoing rules. A foreign partner is a
disregarded foreign partner unless such
partner is allocated gross income that was
effectively connected with the conduct
of a trade or business of the partnership
within the U.S. and taxation of such in-
come is not otherwise precluded under
any U.S. income tax treaty. The interest
of a disregarded foreign partner is taken
into account in determining the taxable
year of the partnership, however, if the
partners that are not disregarded foreign
partners (regarded partners) hold a minor-
ity interest in the partnership (minority
interest rule). Section 1.706–1(b)(6)(iii).
Regarded partners hold a minority interest
for this purpose if each regarded partner
holds less than a 10-percent interest in
capital or profits of the partnership, and
the regarded partners in the aggregate hold
2009–18 I.R.B.908May 4, 2009

less than a 20-percent interest in the capi-
tal or profits of the partnership.
Explanation of Provisions
1.Varying Interests Rule
a.In general
The proposed regulations amend
§1.706–1(c) to reflect the change made
to section 706(c)(2)(A) in the 1997 Act
which requires that the taxable year of
the partnership close with respect to a
partner who dies. The proposed regu-
lations do not change the provisions in
§1.706–1(c)(3)(iv) that the sale or ex-
change of a partnership interest does not
include any transfer of a partnership in-
terest which occurs at death as a result of
inheritance or any testamentary disposi-
tion or in §1.706–1(c)(5) that the transfer
of a partnership interest by gift does not
close the partnership taxable year with
respect to the donor.
Also, the proposed regulations add
§1.706–4 to provide for the application of
the varying interests rule in all cases in
which a partner’s interest changes during
the taxable year, whether by reason of a
disposition of the partner’s entire interest
in the partnership or a disposition of less
than the partner’s entire interest in the
partnership.
b.Methods and conventions
Proposed §1.706–4(a) provides that,
if a partner’s interest changes during the
partnership’s taxable year, the partnership
shall determine the partner’s distributive
share using the interim closing method.
However, the partnership by agreement of
the partners may use the proration method.
For each partnership taxable year in which
a partner’s interest varies, the proposed
regulations provide that the partnership
must use the same method to take into
account all changes occurring within that
year.
Proposed §1.706–4(c) generally pro-
vides that a partnership shall take into
account any variation in the partners’ in-
terests in the partnership during the taxable
year by determining the distributive share
of partnership items under section 702(a)
for each segment of that taxable year using
an interim closing of the books method
and by allocating those items among
the partners in accordance with their re-
spective partnership interests during that
segment. Proposed §1.706–4(c)(1) and (2)
incorporate the principles of the former
§1.706–1(c)(2)(ii) (as finalized in T.D.
6175).
Proposed §1.706–4(d) provides that by
agreement among the partners a partner-
ship may use a proration method, rather
than the interim closing method, to take
into account any variation in a partner’s
interest in the partnership during the tax-
able year. Under this method, except
for extraordinary items (as defined in
§1.706–4(d)(3)), the partnership allocates
the distributive share of partnership items
under section 702(a) among the partners
in accordance with theirpro ratashares
of these same items for the entire taxable
year. In determining a partner’spro rata
share of partnership items, the partnership
shall take into account that partner’s inter-
est in such items during each segment of
the taxable year. Proposed §1.706–4(d)(1)
and (2) incorporate the principles of the
former §1.706–2(c)(2)(ii) (as finalized in
T.D. 6175).
For purposes of accounting for the part-
ners’ varying interests in the partnership,
proposed §1.706–4 requires that for each
partner whose interest changes in the tax-
able year the partnership shall maintain
segments to account for such changes. A
segment is specific portion of a partner-
ship’s taxable year. The first segment of
a taxable year for a partner that incurs a
change will begin on the partnership’s first
day of its taxable year and end as of the
close of business immediately preceding
the date of the change as determined un-
der the applicable convention (discussed
in this preamble) used by the partnership
and its partners. The next segment will be-
gin on the day prescribed by the applica-
ble convention and end on the earlier of
the close of the day immediately preced-
ing the date of the subsequent change as
determined by the applicable convention,
or the end of the partnership’s taxable year.
Proposed §1.706–4(a)(2) provides that the
partnership shall determine the items for
each segment of the taxable year created
by the variation event for a partner in ac-
cordance with the partnership’s method of
accounting used for its entire taxable year.
Each segment is treated as a separate pe-
riod.
For purposes of the interim closing
method in of §1.706–4(c) and the proration
method in §1.706–4(d), the proposed reg-
ulations provide a special accounting rule
that must be used to account for certain
items. For example, for an interim closing
method, the partnership may compute a
net capital loss for a segment even though
the partnership has net capital gain for the
complete taxable year. Also, any limi-
tation applicable to the partnership year
as a whole (for example, the limitation
under section 179) must be apportioned
among the segments using any reasonable
method provided that the method may
not exceed any limitation applicable to
the partnership as a whole. See proposed
§§1.706–4(a)(2)(i) and (ii).
In addition, proposed §1.706–4(d)(3)
requires a partnership using the proration
method to allocate extraordinary items
among the partners in proportion to their
interests at the beginning of the day on
which they are taken into account. For this
purpose, an extraordinary item is (i) any
item from the disposition or abandonment
(other than in the ordinary course of busi-
ness) of a capital asset as defined in section
1221 (determined without the application
of any other rules of law); (ii) any item
from the disposition or abandonment of
property used in a trade or business (other
than in the ordinary course of business)
as defined in section 1231(b) (determined
without the application of any holding pe-
riod requirement); (iii) any item from the
disposition or abandonment of an asset de-
scribed in sections 1221(1), (3), (4), or (5),
if substantially all the assets in the same
category from the same trade or business
are disposed of or abandoned in one trans-
action (or series of related transactions);
(iv) any item from assets disposed of in an
applicable asset acquisition under section
1060(c); (v) any section 481(a) adjust-
ment; (vi) any item from the discharge or
retirement of indebtedness (for example,
if a debtor partnership transfers a capital
or profits interest in such partnership to a
creditor in satisfaction of its recourse or
nonrecourse indebtedness, any discharge
of indebtedness income recognized under
section 108(e)(8) must be allocated among
the persons who were partners in the part-
nership immediately before the discharge);
(vii) any item from the settlement of a tort
or similar third-party liability; (viii) any
credit, to the extent it arises from activities
May 4, 20099092009–18 I.R.B.

or items that are not ratably allocated (for
example, the rehabilitation credit under
section 47, which is based on placement
in service); and (ix) any item which, in
the opinion of the Commissioner, would,
if ratably allocated, result in a substantial
distortion of income in any consolidated
return or separate return in which the item
is included. The IRS and the Treasury
Department request comments concerning
whether any items should be added to or
removed from the definition of extraordi-
nary items.
Under proposed §1.706–4(e), a partner-
ship using the interim closing method may
use either a calendar day convention or a
semi-monthly convention. A partnership
using the proration method may use only
the calendar day convention. The calendar
day convention requires that, with respect
to a partner whose interest terminates, the
partnership’s taxable year closes as of the
close of the day on which the change oc-
curs. Section 1.706–4(e)(1). The semi-
monthly convention requires that any vari-
ation in a partner’s interest occurring dur-
ing the first through 15
th
day of the cal-
endar month is deemed to occur at the be-
ginning of the first day of the month, and
any variation in a partner’s interest occur-
ring during the 16
th
through the last day of
the month is deemed to occur at the begin-
ning of the 16
th
day of that month. Section
1.706–4(e)(2).
A partnership must use the same
method and convention for all variations
in the partners’ interests during the taxable
year of the partnership. For example, a
partnership could not use the proration
method and interim closing method in the
same taxable year. Additionally, a part-
nership using the interim closing method
could not use the calendar day convention
to account for a variation in one partner’s
interest during the partnership’s taxable
year while using a monthly convention to
account for that partner’s, or a different
partner’s,variationinaninterestduring
the partnership’s taxable year. Comments
are requested with regard to the possible
expansion of this rule to include other
conventions or other methods.
The IRS and the Treasury Department
are aware that some publicly traded part-
nerships (as defined in section 7704) are
using conventions other than a monthly
or semi-monthly convention and are us-
ing these conventions with the proration
method. Thus, the IRS and the Treasury
Department are requesting comments con-
cerning the use of conventions other than
monthly or semi-monthly convention. The
proposed regulations regarding the use of
conventions will not apply to existing pub-
licly traded partnerships.
c.Change in partnership allocations
among contemporaneous partners
Proposed §1.706–4(b)(1) provides that
the varying interests rule will not preclude
changes in the allocations among contem-
poraneous partners resulting from amend-
ments to the partnership agreement made
no later than the due date of the partner-
ship return for the taxable year (excluding
extensions). This exception applies only
to allocations that are valid under section
704(b) and the regulations promulgated in
association with that section. Moreover,
consistent with the Tax Court’s decision in
Lipke, this exception to the varying inter-
ests rule will not apply to any changes in
interests of the partners attributable to con-
tributions of money or other property to the
partnership. The proposed regulations fur-
ther provide that this exception will not ap-
ply to changes in the interests of the part-
ners as a result of distributions of capital
from the partnership to a partner.
d.Safe harbors for service partnerships
and publicly traded partnerships
Proposed §1.706–4(b)(2) provides that
service partnerships (as defined in that sec-
tion) may allocate items relating to the
provision of services among the partners
whose interests vary during the year using
any reasonable method to account for such
changes even though such method is not
described in paragraph (a) of the proposed
regulations and the partnership does not
use the methods or conventions described
in paragraphs (c) and (d), and paragraph (e)
of the proposed regulations, respectively.
However, the allocations must be valid un-
der section 704(b).
Proposed §1.706–4(b)(3) provides that
publicly traded partnerships (as defined in
section 7704(b)) may treat all transfers of
its publicly traded units (as described in
§1.7704–1(b)(1)) during a calendar month
as occurring on the first day of the fol-
lowing month under a consistent method
adopted by the partnership or may use
the semi-monthly convention described in
§1.706–4(e)(2). Block transfers of pub-
licly traded partnership (PTP) units (as
described in §1.7704–1(e)(2)) will not
qualify for this safe harbor.
e.Deemed dispositions
The proposed regulations amend
§1.706–1(c) to provide that a deemed
disposition of a partner’s entire in-
terest in the partnership pursuant to
§§1.1502–76(b)(2)(vi), 1.1362–3(c)(1),
and 1.1377–1(b)(3)(iv) shall be treated
as a disposition of the partner’s entire in-
terest for purposes of section 706. The
IRS and Treasury Department request
comments concerning the relationship of
§1.1502–76(b)(2)(vi)(B) and the proposed
regulations regarding the deemed disposi-
tion of partnership interests.
2.Taxable years of partnerships
Theproposedregulations
amend the minority interest rule in
§1.706–1(b)(6)(iii) to provide that re-
garded partners have a minority interest
only if each regarded partner has less than
a 10-percent interest in capital and profits,
and the regarded partners collectively
have less than a 20-percent interest in
partnership capital and profits. This
modification means that the interests of
foreign partners will be taken into account
in determining the taxable year of the
partnership only if the regarded partners
have interests below the stated thresholds
in partnership capital and profits, rather
than the current rule which requires only
an interest below the threshold in either
capital or profits. For example, under the
current regulations, the taxable year of
disregarded foreign partners would not be
ignored in determining the taxable year
of the partnership if the regarded partners
had aggregate capital interests of less than
20-percent but profits interests of more
than 20-percent. By contrast, under the
proposed regulations,in that example, the
taxable year of the disregarded foreign
partners would not be applicable in deter-
mining the taxable year of the partnership.
Additional Requests for Comments
The IRS and the Treasury Department
are also requesting comments relating to
any other outstanding issues arising under
section 706(d). Specifically, the IRS and
2009–18 I.R.B.910May 4, 2009

the Treasury Department are seeking com-
ments with regard to issues that arise con-
cerning allocable cash basis items and/or
tiered partnerships.
Section 706(d)(2)(A) provides a spe-
cial rule for determining a partner’s dis-
tributive share of an allocable cash ba-
sis item. Section 706(d)(2) effectively re-
quires a cash method partnership to use
an economic accrual method solely for the
purpose of allocating certain items. Under
the statute, a partner’s distributive share of
any allocable cash basisitem is determined
by assigning apro ratashare of any allo-
cable cash basis item to each day within a
specified period to which it is attributable
and then allocating each day’s portion in an
amount equivalent to each partner’s inter-
est in the partnership on that day. A list of
allocable cash basis items is found in sec-
tion 706(d)(2)(B). The IRS and the Trea-
sury Department are seeking comments as
to whether that list should be expanded (to
include, for example, items such as prop-
erty insurance), as well as on any other
issuewithregardtoallocating cash basis
items.
Section 706(d)(3) provides that if dur-
ing any taxable year of the partnership
there is a change in any partner’s inter-
est in the partnership (upper-tier partner-
ship), and such partnership is a partner
in another partnership(lower-tier partner-
ship), then (except to the extent provided
by regulations) each partner’s distributive
share of any item of the upper-tier partner-
ship attributable to the lower-tier partner-
ship shall be determined by first assign-
ing the appropriate portion of each such
item to the appropriate days during which
the upper-tier partnership is a partner in
the lower-tier partnership, and then allo-
cating the portion assigned to any such day
among the partners in proportion to their
interests in the upper-tier partnership at the
close of such day. Thus, the daily allo-
cation method, used for cash basis items,
is applicable to all items of the lower-tier
partnership if there is a change in the part-
nership interests in the upper-tier partner-
ship. The IRS and the Treasury Depart-
ment are seeking comments on this and
any other issue related to tiered partner-
ships and determining a partner’s varying
interests.
Proposed Effective Date
In accord with the legislative history
to section 706(d), the proposed regu-
lations provide a reasonable transition
period for taxpayers in the effective
date provisions of this proposed regula-
tion. Thus, the proposed amendments
to §§1.706–1 (with the exception of the
change to §1.706–1(b)(6)(iii)), 1.706–4,
and 1.706–5 are proposed to apply to part-
nership taxable years that begin after the
date the final regulations are published
in theFederal Register, but not before
taxable years beginning after December
31, 2009.
The proposed amendment to
§1.706–1(b)(6)(iii) generally is applicable
to the first taxable year of a partnership
that begins on or after the date final regu-
lations are published in theFederal Reg-
ister, subject to two special rules. First,
under the current regulations, partner-
ships formed prior to September 23, 2002
(“existing partnerships”) generally are
exempt from the rules of §1.706–1(b)(6)
unless they have voluntarily elected to
apply them or unless they have under-
gone a technical termination under section
708(b)(1)(B). The proposed regulation re-
tains this special rule, such that an existing
partnership will not be subject to the mod-
ified minority interest rule in proposed
§1.706–1(b)(6)(iii) unless there has been
such an election or technical termination.
Second, because the proposed regulation
would modify §1.706–1(b)(6)(iii) but oth-
erwise leave the rules of §1.706–1(b)(6)
unchanged, it is appropriate to exempt
other partnerships from the modified mi-
nority interest rule if they are already
subject to §1.706–1(b)(6) and the minor-
ity interest rule of the current regulations
(“interim period partnerships”). Thus, in-
terim period partnerships will be exempt
from the modified minority interest rule
of proposed §1.706–1(b)(6)(iii) unless
they voluntarily elect to be subject to this
rule or undergo a technical termination.
Accordingly, the proposed amendment to
§1.706–1(b)(6)(iii) would apply to the first
taxable year of a partnership that begins
on or after the date final regulations are
published in theFederal Register, subject
to these special rules for existing partner-
ships and interim period partnerships.
The proposed amendments in
§§1.706–4(c)(2) and (d)(2) are proposed
to apply for the taxable year of a partner-
ship other than an existing publicly traded
partnership that begin after the date the
final regulations are published in theFed-
eral Register, but not before taxable years
beginning after December 31, 2009.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866. Therefore, a regula-
tory assessment is not required. It has also
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regu-
lations, and because the regulation 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 Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Request for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timelytotheIRS.TheIRSandtheTrea-
sury Department specifically request com-
ments on the clarity of the proposed rules
and how they can be made easier to under-
stand. All comments will be available for
public inspection and copying.
A public hearing will be scheduled if
requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the pubic hearing
will be published in theFederal Register.
Drafting Information
The principal authors of these pro-
posed regulations are Laura Fields and
Jonathan Cornwell, Office of the Associate
Chief Counsel (Passthroughs and Special
Industries). However, other personnel
from the IRS and the Treasury Department
participated in their development.
*****
May 4, 20099112009–18 I.R.B.

Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding a new entry in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.706–2 also issued under
26 U.S.C. 706(d). * * *
Par. 2. Section 1.706–0 is added to read
as follows:
§1.706–0 Table of contents.
This section lists the captions contained
in the regulations under section 706.
§1.706–1 Taxable years of partner and
partnership.
(a) Year in which partnership income is
includible.
(b) Taxable year.
(1) Partnership treated as taxpayer.
(2) Partnership’s taxable year.
(i) Required taxable year.
(ii) Exceptions.
(3) Least aggregate deferral.
(i) Taxable year that results in the least
aggregate deferral of income.
(ii) Determination of the taxable year of
a partner or partnership that uses a 52–53
week taxable year.
(iii) Specialde minimisrule.
(iv) Examples.
(4) Measurement of partner’s profits
and capital interest.
(i) In general.
(ii) Profits interest.
(A) In general.
(B) Percentage share of partnership net
income.
(C) Distributive share.
(iii) Capital interest.
(5) Taxable year of a partnership with
tax-exempt partners.
(i) Certain tax-exempt partners disre-
garded.
(ii) Example.
(iii) Effective date.
(6) Certain foreign partners disre-
garded.
(i) Interests of disregarded foreign part-
ners not taken into account.
(ii) Definition of foreign partner.
(iii) Minority interest rule.
(iv) Example.
(v) Effective date.
(A) Generally.
(B) Voluntary change in taxable year.
(C) Subsequent sale or exchange of in-
terests.
(D) Transition rule.
(7) Adoption of taxable year.
(8) Change in taxable year.
(i) Partnerships.
(A) Approval required.
(B) Short period tax return.
(C) Change in required taxable year.
(ii) Partners.
(9) Retention of taxable year.
(10) Procedures for obtaining approval
or making a section 444 election.
(11) Effect on partner elections under
section 444.
(i) Election taken into account.
(ii) Effective date.
(c) Closing of partnership year.
(1) General rule.
(2) Disposition of entire interest
(i) In general.
(ii) Example.
(iii) Deemed dispositions.
(3) Disposition of less than entire inter-
est.
(4) Determination of distributive
shares.
(5) Transfer of interest by gift.
(d) Effective/applicability date.
§1.706–2 Certain cash basis items
prorated over period to which attributable.
[Reserved]
§1.706–3 Items attributable to interest
in lower-tier partnership prorated over
entire taxable year.[Reserved]
§1.706–4 Determination of Distributive
Share When a Partner’s Interest Varies.
(a) General rule.
(1) Methods.
(2) Segments.
(i) General rule.
(ii) Other provisions.
(b) Exceptions.
(1) Permissible changes among con-
temporaneous partners.
(2) Safe harbor for certain service part-
nerships.
(3) Safe harbor for publicly traded units
of publicly traded partnerships.
(c) Interim closing method.
(1) In general.
(2) Conventions.
(3) Example.
(d) Proration method.
(1) In general.
(2) Conventions.
(3) Extraordinary items.
(4) Example.
(e) Conventions.
(1) Calendar day convention.
(2) Semi-monthly convention.
(f) Effective/applicability date.
§1.706–5 Taxable year determination.
(a) General rule.
(b) Effective/applicability date.
Par. 3. Section 1.706–1 is amended as
follows:
1. The language “capital or profits” in
the first sentence in paragraph (b)(6)(iii)
is removed and the language “capital and
profits” is added in its place.
2. Paragraph (b)(6)(v)(A) is revised.
3. The last sentence of paragraph
(b)(6)(v)(B) is removed and four new sen-
tences are added in its place.
4. Paragraph (b)(6)(v)(C) is revised.
5. Add a new sentence at the end of
paragraph (b)(6)(v)(D).
6. Paragraph (c)(2) is revised.
7. Paragraph (c)(3) is removed.
8. Paragraph (c)(4) is redesignated as
(c)(3) and the last sentence of newly des-
ignated paragraph (c)(3) is removed.
9. New paragraph (c)(4) is added.
10. Paragraph (d) is revised.
The additions and revisions read as fol-
lows:
§1.706–1 Taxable years of partner and
partnership.
*****
(b) * * *
(6) * * *
(v)***(A)Generally. The provisions
of this paragraph (b)(6) (other than para-
graph (b)(6)(iii) of this section) are appli-
cable for the first taxable year of a part-
nership other than an existing partnership
that begins on or after July 23, 2002. The
provisions of paragraph (b)(6)(iii) of this
section are applicable for the first taxable
year of a partnership other than an existing
partnership or an interim period partner-
ship that begins on or after the date these
2009–18 I.R.B.912May 4, 2009

regulations become effective. For this pur-
pose, an existing partnership is a partner-
ship that was formed prior to September
23, 2002, and an interim period partnership
is a partnership that was formed on or after
September 23, 2002, and prior to the date
these regulations become effective.
(B)***Anexistingpartnershipthat
makes such a change prior to the date these
regulations become effective will cease
to be exempted from the requirements of
paragraph (b)(6) (other than paragraph
(b)(6)(iii)) of this section. An existing
partnership that makes such a change on
or after the date these regulations become
effective will cease to be exempted from
the requirements of paragraph (b)(6) of
this section. An interim period partner-
ship may change its taxable year to a year
determined in accordance with paragraph
(b)(6)(iii) of this section. An interim pe-
riod partnership that makes such a change
will cease to be exempted from the re-
quirements of paragraph (b)(6)(iii) of this
section.
(C)Subsequent sale or exchange of in-
terests. If an existing partnership or an in-
terim period partnership terminates under
section 708(b)(1)(B), the resulting partner-
ship is not an existing partnership or an
interim period partnership for purposes of
paragraph (b)(6)(v)(A) of this section.
(D)***If,inthefirsttaxableyearbe-
ginning on or after the date these regula-
tions become effective, an interim period
partnership voluntarily changes its taxable
year to a year determined in accordance
with paragraph (b)(6)(iii) of this section,
then the partners of that partnership may
apply the provisions of §1.702–3T to take
into account all items of income, gain, loss,
deduction, and credit attributable to the
partnership year of change ratably over a
four-year period.
*****
(c) * * *
(2)Disposition of entire interest—(i)In
general. A partnership taxable year shall
close with respect to a partner who sells
or exchanges his entire interest in the part-
nership, with respect to a partner whose
entire interest in the partnership is liqui-
dated and with respect to a partner who
dies. In the case of a death or liquidation,
or sale or exchange of a of partner’s en-
tire interest in the partnership, the partner
shall include in his taxable income for his
taxable year within or with which the part-
ner’s membership in the partnership ends,
the partner’s distributive share of items de-
scribed in section 702(a), and any guar-
anteed payments under section 707(c), for
the partner’s partnership taxable year end-
ing with the date of such termination. If
the decedent partner’s estate or other suc-
cessor sells or exchanges its entire interest
in the partnership, or if its entire interest
is liquidated, the partnership taxable year
with respect to the estate or other successor
in interest shall close on the date of such
sale or exchange, or the date of the com-
pletion of the liquidation. The sale or ex-
change of a partnership interest does not,
for the purpose of this rule, include any
transfer of a partnership interest which oc-
curs at death as a result of inheritance or
any testamentary disposition.
(ii)Example. H is a member of a partnership hav-
ing a taxable year ending December 31. Both H and
his wife W are on a calendar year and file joint re-
turns. H dies on March 31, 2010. Administration of
the estate is completed and the estate, including the
partnership interest, is distributed to W as legatee on
November 30, 2010. Such distribution by the estate is
not a sale or exchange of H’s partnership interest. The
taxable year of the partnership will close with respect
to H on March 31, 2010, and H will include in his fi-
nal return for his final taxable year (January 1 through
March 31, 2010) his distributive share of partnership
items for that period under the rules of §1.706–4. W
will include in her return for the taxable year ending
December 31, 2010, her distributive share of partner-
ship items for the period ofApril 1 through December
31, 2010, under the rules of §1.706–4.
(iii)Deemed dispositions. A deemed
disposition of the partner’s interest pur-
suant to §§1.1502–76(b)(2)(vi) (relating
to corporate partners that become or cease
to be members of a consolidated group
within the meaning of §1.1502–1(h)),
1.1362–3(c)(1) (relating to the termination
of the subchapter S election of an S cor-
poration partner), and 1.1377–1(b)(3)(iv)
(regarding an election to terminate the
taxable year of an S corporation partner),
shall be treated as a disposition of the
partner’s entire interest in the partnership.
*****
(4)Determination of distributive
shares. See §1.706–4 for rules regarding
themethodstobeusedindeterminingthe
distributive shares of items described in
section 702(a) for partners whose interests
in the partnership vary as a result of a
disposition of a partner’s entire interest
in a partnership as described in paragraph
(c)(2) of this section or as a result of a
disposition of less than an entire interest
as described in paragraph (c)(3) of this
section during the partnership’s taxable
year.
*****
(d)Effective/applicability date.The
rules for paragraphs (a) and (b) of this
section are applicable for partnership tax-
able years ending on or after May 17,
2002, except for paragraph (b)(6)(iii) of
this section which applies to partnership
taxable years beginning the day after final
regulations are published in theFederal
Register. The rules for paragraph (c)(1) of
this section apply for partnership taxable
years beginning after December 31, 1953.
All other paragraphs under paragraph (c)
of this section apply for partnership tax-
able years that begin after the date the final
regulations are published in theFederal
Register, but not before taxable years be-
ginning after December 31, 2009.
Par. 4. Section 1.706–2 is added and
reserved to read as follows:
§1.706–2 Certain cash basis items
prorated over period to which attributable.
[Reserved]
Par. 5. Section 1.706–3 is added and
reserved to read as follows:
§1.706–3 Items attributable to interest
in lower-tier partnership prorated over
entire taxable year.[Reserved]
Par. 6. Section 1.706–4 is added to read
as follows:
§1.706–4 Determination of distributive
share when a partner’s interest varies.
(a)General rule—(1)Methods. Except
as provided in paragraph (b) of this sec-
tion, if a partner’s interest in a partnership
varies during the taxable year as a result
of a disposition of an entire interest in a
partnership as described in §1.706–1(c)(2)
or as a result of the disposition of less
than the entire interest in a partnership or
with respect to a partner whose interest
in a partnership is reduced as described
in §1.706–1(c)(3), the partnership shall
determine the partner’s distributive share
of partnership items by using the interim
closing method (described in paragraph
(c) of this section). Alternatively, a part-
nership may, by agreement of the partners,
use the proration method (described in
May 4, 20099132009–18 I.R.B.

paragraph (d) of this section). The part-
nership and all of its partners shall use the
same method (interim closing or proration)
and, if applicable, the same convention
(described in paragraph (e) of this section)
for all variations in the partners’ interests
occurring within eachpartnership taxable
year.
(2)Segments—(i)General rule.For
purposes of accounting for a variation in
a partner’s interest within a taxable year
of the partnership as a result of disposi-
tions or reductions of interests as described
in §1.706–1(c)(2) or (c)(3), the partner-
ship shall maintain segments, which are
specific periods of the partnership’s tax-
able year. The first segment to account
for a change in a partner’s interest shall
commence with the beginning of the tax-
able year of the partnership and end at the
close of the day specified by the conven-
tion used by the partnership to account for
such change. Any additional segment shall
commence with the day specified by the
convention used by the partnership to ac-
count for a previous change in the partner’s
interest and shall end as a result of an ad-
ditional change in the partner’s interest at
the close of the day specified by the con-
vention used by the partnership to account
for such change, provided, however, that
the last segment of the taxable year of the
partnership shall end no later than the close
of the day of the partnership’s taxable year.
The partnership shall determine the items
of income, gain, loss, deduction and credit
of the partnership for each segment in ac-
cordance with the method of accounting
that it uses for the partnership’s entire tax-
able year. In general, a partnership using
the interim closing method shall treat each
segment as though the segment were a sep-
arate distributive share period. For exam-
ple, a partnership using the interim closing
method may compute a net capital loss for
a segment of a taxable year even though
the partnership has a net capital gain for
the entire taxable year.
(ii)Other provisions. Any limitation
applicable to the partnership year as a
whole (for example, the limitation under
section 179, relating to elections to ex-
pense certain depreciable business assets)
must be in connection with the interim
closing method apportioned among the
segments by the partnership using any rea-
sonable method, provided, however, that
the amounts apportioned among segments
shall not exceed the limitation applicable
to the partnership as a whole.
(b)Exceptions—(1)Permissible
changes among contemporaneous part-
ners. The general rule of paragraph (a)
of this section, with respect to the vary-
ing interests of a partner described in
§1.706–1(c)(3), will not preclude changes
in the allocations of the distributive share
ofitemsdescribedinsection702(a)among
contemporaneous partners for the entire
partnership taxable year, provided that—
(i) Any variation in a partner’s inter-
est is not attributable to a contribution of
money or property by a partner to the cap-
ital of the partnership or a distribution of
money or property by the partnership to a
partner that is a return of capital; and
(ii) The allocations resulting from the
modification satisfy the provisions of sec-
tion 704(b) and the regulations promul-
gated in association with that section.
(2)Safe harbor for certain service part-
nerships. Notwithstanding paragraph (a)
of this section, with respect to any taxable
year in which there is a change in any part-
ner’s interest in a service partnership (as
defined below in this subsection), the part-
nership and such partner may choose to de-
termine the partner’s distributive share of
partnership income, gain, loss, deduction
and credit using any reasonable method
to account for the varying interests of the
partners in the partnership during the tax-
able year provided that the allocations are
valid under section 704(b). A service part-
nership is a partnership in which substan-
tially all the activities involve the perfor-
mance of services in the fields of health,
law, engineering, architecture, accounting,
actuarial science, or consulting.
(3)Safe harbor for publicly traded units
of publicly traded partnerships. Notwith-
standing paragraph (a) of this section, a
publicly traded partnership (PTP) (as de-
fined in section 7704(b)) using either the
interim closing of the books method in
paragraph (c) of this section or the prora-
tion method in paragraph (d) of this section
may treat all transfers of its publicly traded
units (as described in §1.7704–1(b)(1))
during a calendar month as occurring for
purposes of determining partner status
on the first day of the following month
under a consistent method adopted by the
partnership or may use the semi-monthly
convention describedin paragraph (e)(2)
of this section. For example, PRS, a PTP,
uses the proration method in paragraph (d)
of this section. PRS adopts a method treat-
ing all transfers of its publicly traded units
as occurring on the first day of the month
following the transfer. If on May 5, A, a
partner in PRS, sells a unit in PRS to B,
and on May 12 B sells that unit to C, who
holds the interest beyond May 31, PRS
may allocate all items with respect to that
unit for the month of May to A, and may
allocate all partnership items with respect
to that unit for the month of June to C. B
will not be considered a partner and will
receive no allocation of partnership items.
Block transfers of PTP units (as described
in §1.7704–1(e)(2)) will not qualify for
this safe harbor.
(c)Interim closing method—(1)In gen-
eral. A partnership shall take into account
any variation in a partner’s interest in the
partnership as described in §1.706–1(c)(2)
or (c)(3) during the partnership’s taxable
year by determining the distributive share
of partnership items under section 702(a)
for each segment of that taxable year us-
ing an interim closing of the books method,
and by allocating those items among the
partners in accordance with their respec-
tive partnership interests during that seg-
ment.
(2)Conventions. A partnership using
the interim closing method may use either
the calendar day convention provided in
paragraph (e)(1) of this section or the semi-
monthly convention provided in paragraph
(e)(2) of this section to determine when the
segments within that taxable year end.
(3)Example. PRS is a partnership that was
formed in 2004. It has three partners, P,R, and S,
who each own a one-third interest in the partnership.
PRS owns and operates a skiing enterprise and under
section 706(b)(1)(C), has adopted a calendar year
end of June 30
th
. Each partner is an individual who
is on the calendar year. On December 31, 2010,
S sold her entire interest in PRS to Y. PRS, for its
fiscal year ending June 30, 2011, earned $150,000 of
income, and under an interim closing of the books on
December 31, 2010, $90,000 of income was earned
for the period beginning after December 31, 2010,
and $60,000 of income was earned before January 1,
2011. The partnership has no specific provision in
the partnership agreement relating to which section
706 method to use with regard to varying interests
of the partnership. Thus, pursuant to §1.706–4(a)(1),
PRS will be required to use the interim closing of the
books method to account for the varying interests of
S and Y in the partnership. As a result, S is allocated
one-third of the income earned prior to January 1,
2011, or $20,000. Y is allocated $30,000 which is
one-third of the income earned after December 31,
2010. Since S sold her entire interest in PRS, the
partnership taxable year closes with respect to her
2009–18 I.R.B.914May 4, 2009

pursuant to §1.706–1(c)(2)(i). Thus, she must in-
clude her share of PRS’s income on her 2010 federal
income tax return.
(d)Proration method—(1)In general.
Except as provided in paragraph (d)(3) of
this section, a partnership may, by agree-
ment of the partners, take into account
any variation in a partner’s interest in the
partnership described in §1.706–1(c)(2) or
(c)(3) during the partnership’s taxable year
by allocating the distributive share of part-
nership items under section 702(a) among
the partners according to theirpro rata
shares of such items for the entire taxable
year. In determining a partner’spro rata
share of partnership items, the partnership
shall take into account that partner’s in-
terest in such items during each segment.
For purposes of this paragraph (d), specific
items that are aggregated by the partner-
ship at the end of the year (other than ex-
traordinary items as defined in paragraph
(d)(3) of this section) shall be disregarded,
and the aggregate of the items shall be con-
sidered to be the partnership item for the
year.
(2)Conventions. A partnership using
the proration method shall use the calen-
dar day convention described in paragraph
(e)(1) of this section.
(3)Extraordinary items.A partnership
must allocate extraordinary items among
the partners in proportion to their interests
at the beginning of the calendar day of the
day on which they are taken into account.
For purposes of this paragraph (d), an ex-
traordinary item is—
(i) Any item from the disposition or
abandonment of a capital asset (other than
in the ordinary course of business) as de-
finedinsection1221(determinedwithout
the application of any other rules of law);
(ii) Any item from the disposition or
abandonment of property used in a trade or
business (other than in the ordinary course
of business) as defined in section 1231(b)
(determined without the application of any
holding period requirement);
(iii) Any item from the disposition or
abandonment of an asset described in sec-
tion 1221(1), (3), (4), or (5), if substan-
tially all the assets in the same category
from the same trade or business are dis-
posed of or abandoned in one transaction
(or series of related transactions);
(iv) Any item from assets disposed of in
an applicable asset acquisition under sec-
tion 1060(c);
(v) Any section 481(a) adjustment;
(vi) Any item from the discharge or
retirement of indebtedness (for example,
if a debtor partnership transfers a capital
or profits interest in such partnership to a
creditor in satisfaction of its recourse or
nonrecourse indebtedness, any discharge
of indebtedness income recognized under
section 108(e)(8) must be allocated among
the persons who were partners in the part-
nership immediately before the discharge);
(vii) Any item from the settlement of a
tort or similar third-party liability or pay-
ment of a judgment;
(viii) Any credit, to the extent it arises
from activities or items that are not ratably
allocated (for example, the rehabilitation
credit under section 47, which is based on
placement in service); or
(ix) Any item which, in the opinion of
the Commissioner, would, if ratably allo-
cated, result in a substantial distortion of
income in any return in which the item is
included.
(4)Example. PRS is a partnership that was
formed in 2004. It has three partners, P,R, and S,
who each own a one-third interest in the partnership.
PRS owns and operates a skiing enterprise, and under
section 706(b)(1)(C), has adopted a calendar year
end of June 30
th
. Each partner is an individual who
is on the calendar year. On December 31, 2010,
S sold her entire interest in PRS to Y. PRS, for its
fiscal year ending June 30, 2010, earned $150,000
of income. The partnership has a specific provision
in the partnership agreement agreeing to use the pro-
ration method when accounting for varying interests
in the partnership. (See §1.706–4(a)(1)). Using the
proration method, $75,000 of income is included
in the first segment of the year that begins July 1,
2010 and ends December 31, 2010, and $75,000
is included in the second segment of the year that
begins January 1, 2011 and ends June 30, 2011. For
the first segment, S’s distributive share of partnership
income is one-third of $75,000, or $25,000. For the
second segment, Y’s distributive share of partnership
income is one-third of $75,000, or $25,000. Because
S sold her entire interest in PRS, the partnership
taxable year closes with respect to her pursuant to
§1.706–1(c)(2)(i). Thus, she must include her dis-
tributive share of PRS’s income, or $25,000, on her
2010 Federal income tax return.
(e)Conventions—(1)Calendar day
convention. Under the calendar day con-
vention, the first segment of the partner-
ship’s taxable year commences with the
beginning of the partnership’s taxable year
and ends at the close of any day on which
the variation occurs in the partner’s in-
terest in the partnership. Any additional
segment shall commence with the begin-
ning of the day following a prior variation
in a partner’s interest and end on the ear-
lier of the close of the day on which an
additional variation occurs in the partner’s
interest or the close of the partnership’s
taxable year, as applicable.
(2)Semi-monthly convention. Under
the semi-monthly convention, the first
segment of the partnership’s taxable year
commences with the beginning of the part-
nership’s taxable year, and with respect to
a partner’s variation in interest occurring
on the first through the 15
th
day of a calen-
dar month, is deemed to close at the end of
the last day of the immediately preceding
calendar month, and with respect to any
variation in interest occurring on the 16
th
through the last day of a calendar month,
is deemed to close at the end of the 15
th
calendar day of that month. Any addi-
tional segment of the partnership taxable
year shall commence with beginning of
the first day, or 16
th
day of the month of
the last segment, as the case may be, as
determined for a prior change and shall
close at the earlier of the close of the part-
nership’s taxable year, or with respect to
a partner’s variation in interest occurring
on the first through 15
th
day of a calendar
month, is deemed to close at the end of
the last day of the immediately preceding
calendar month, and with respect to any
variation in interest occurring on the 16
th
through last day of a calendar month, is
deemed to close at the end of the 15
th
calendar day of that month.
(f)Effective/applicability date. Except
with respect to paragraphs (c)(2) and (d)(2)
of this section, this section is applicable
for partnership taxable years that begin the
day after the date final regulations are pub-
lished in theFederal Register,butnotbe-
fore taxable years beginning after Decem-
ber 31, 2009. The rules of paragraphs
(c)(2) and (d)(2) of this section are appli-
cable for the taxable year of partnerships
other than existing publicly traded partner-
ships that begin after the date the final reg-
ulations are published in theFederal Reg-
ister, but not before taxable years begin-
ning after December 31, 2009. For pur-
poses of the immediately preceding sen-
tence, an existing publicly traded partner-
ship is a partnership described in section
7704(b) of the Internal Revenue Code that
wasformedonadatebeforethesepro-
posed regulations are published in theFed-
eral Register. However, existing publicly
traded partnerships may rely on the provi-
sions of this section.
May 4, 20099152009–18 I.R.B.

Par. 7. Section 1.706–5 is added to read
as follows:
§1.706–5 Taxable year determination.
(a)In general. For purposes of
§1.706–4, the taxable year of a partner-
ship shall be determined without regard to
section 706(c)(2)(A) and the regulations
promulgated under that Internal Revenue
Code section.
(b)Effective/applicability date.This
section is applicable for partnership tax-
able years that begin the day after the date
final regulations are published in theFed-
eral Register, but not before taxable years
beginning after December 31, 2009.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on April 13, 2009,
8:45 a.m., and published in the issue of the Federal Register
for April 14, 2009, 74 F.R. 17119)
Request for Comments on
Revenue Procedure for
§403(b)PrototypePlans
Announcement 2009–34
The Internal Revenue Service intends to
establish a program for the pre-approval of
prototype plans under § 403(b) of the Inter-
nal Revenue Code (Code). This announce-
ment includes a draft revenue procedure
that contains the Service’s proposed pro-
cedures for issuing opinion letters as to the
acceptability under §403(b) of the form of
prototype plans. The Service is simultane-
ously posting draft sample plan language
on theirs.govwebsite for use in draft-
ing § 403(b) prototype plans. The Service
seeks public input before finalizing these
procedures and sample plan language, and
invites interested persons to submit com-
ments.
Background
Final regulations under § 403(b) (the
2007 regulations) were published on July
26, 2007 (T.D. 9340, 2007–36 I.R.B. 487
[72 Fed. Reg. 41128]). These regulations
are a comprehensive update of the § 403(b)
regulations and are generally effective Jan-
uary 1, 2009. Under the 2007 regulations,
sponsors of § 403(b) plans are required to
maintain a written plan. Notice 2009–3,
2009–2 I.R.B. 250, provides, in part, that
the Service will not treat a § 403(b) plan
as failing to satisfy the requirements of
§ 403(b) and the 2007 regulations during
the 2009 calendar year if certain conditions
are met. One condition is that by no later
than December 31, 2009, the sponsor of
the plan has adopted a written plan that
is intended to satisfy the requirements of
§ 403(b) (including the 2007 regulations)
effective as of January 1, 2009.
In Rev. Proc. 2007–71, 2007–51 I.R.B.
1184, the Service provided guidance re-
garding compliance with the 2007 regula-
tions and published model plan language
thatmaybeusedbypublicschoolseither
to adopt a written plan to reflect the re-
quirements of § 403(b) and the 2007 regu-
lations or to amend a § 403(b) plan to re-
flect the requirements of § 403(b) and the
2007 regulations. Rev. Proc. 2007–71
also provides that other eligible employ-
ers may use the model language as sam-
ple language to comply with one or more
of the requirements imposed by the 2007
regulations. Rev. Proc. 2007–71, includ-
ing its provisions regarding the extent to
which the model plan language may be
relied upon, is not modified by the draft
revenue procedure in this announcement.
Accordingly, absent further notice, public
schools and other eligible employers may
continue to use the model language in Rev.
Proc. 2007–71.
§ 403(b) Prototype Plan Program
In order to promote compliance with
§ 403(b) and the 2007 regulations, the Ser-
vice is establishing an opinion letter pro-
gram for § 403(b) prototype plans. This is
described in detail in the draft revenue pro-
cedure in the appendix of this announce-
ment. While this will be the first time
the Service has had a § 403(b) prototype
plan program, the procedures and rules of
this program, as set forth in the draft rev-
enue procedure, will generally be simi-
lar to those that apply under Rev. Proc.
2005–16, 2005–1 C.B. 674, the Service’s
opinion letter program for master and pro-
totype plans qualified under § 401(a), ex-
cept for differences related to the require-
ments of § 403(b).
This program for § 403(b) prototype
plans will allow employee benefits prac-
titioners and financial organizations, such
as mutual funds and insurance companies,
to obtain advance approval of the form of
a § 403(b) prototype plan. Generally, un-
der the draft revenue procedure, a § 403(b)
prototype plan is a plan document prepared
by a vendor (or other person) who ex-
pects the plan to be adopted by at least 30
employers, along with an adoption agree-
ment to be completed by each adopting
employer. Employers who adopt these
§ 403(b) prototype plans will generally
have assurance that the form of the plan
meets the requirements under § 403(b) and
the 2007 regulations. As described in No-
tice 2009–3, the draft revenue procedure
would provide for a retroactive remedial
amendment of § 403(b) plans for years af-
ter 2009.
The Service will announce the date that
it will start accepting applications for opin-
ion letters for § 403(b) prototype plans
when the draft revenue procedure has been
finalized after consideration of the com-
ments received. Vendors will be able to
sponsor an approved prototype plan that
the Service expects will enable most eli-
gible employers to satisfy the written plan
requirement of the 2007 regulations. How-
ever, the Service also intends to establish a
determination letter program for § 403(b)
plans at a later date that would allow eligi-
ble employers to obtain determination let-
ters for individually designed plans.
Request for Comments and Information
Interested persons are invited to
comment on the draft revenue pro-
cedure, the sample plan language
draft(http://www.irs.gov/pub/irs-tege/
draft_lrm_403b_prototypes.pdf),orany
other aspect of the § 403(b) prototype plan
program, generally.
Written comments should be submit-
ted by June 1, 2009, to CC:PA:LPD:PR
(Announcement 2009–34), Room 5203,
Internal Revenue Service, POB 7604,
Ben Franklin Station, Washington, D.C.
20044. Comments may be hand de-
livered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (Announcement
2009–34), Courier’s Desk, Internal Rev-
enue Service, 1111 Constitution Ave., NW,
Washington, D.C. Alternatively, com-
ments may be submitted via the Internet at
Notice.Comments@irscounsel.treas.gov.
2009–18 I.R.B.916May 4, 2009

All materials submitted will be available
for public inspection and copying.
In order to anticipate its future work-
load, the Service also requests each entity
that expects to file an opinion letter ap-
plication for a § 403(b) prototype plan,
either as a prototype plan sponsor or as a
mass submitter (each within the meaning
of section 7 of the draft revenue proce-
dure), to so advise the Service in writing
by June 1, 2009, at the following ad-
dress:ep.prototype.projections@irs.gov.
Each entity that expects to file as a mass
submitter is also asked to provide an
estimate of how many opinion letter
applications it will submit on behalf of
prototype sponsors that use the mass
submitter’s plan.This information
should be submitted separately from any
comments on the draft revenue procedure
and sample plan language.
Drafting Information
The principal authors of this an-
nouncement are Angelique Carring-
ton and James P. Flannery of the
Employee Plans, Tax Exempt and
Government Entities Division. For further
information regarding this announcement,
please contact the Employee Plans
taxpayer assistance answering service at
1–877–829–5500 (a toll-free number) or
e-mail Ms. Carrington or Mr. Flannery at
RetirementPlanQuestions@irs.gov.
Appendix
Draft Revenue Procedure
Rev. Proc.
TABLE OF CONTENTS
SECTION 1. PURPOSE
SECTION 2. BACKGROUND
SECTION 3. OVERVIEW OF THE REVENUE PROCEDURE
SECTION 4. WHAT IS A § 403(b) PROTOTYPE PLAN?
SECTION 5. PROVISIONS REQUIRED IN EVERY § 403(b) PROTOTYPE PLAN
SECTION 6. STANDARDIZED PLANS AND NONSTANDARDIZED PLANS
SECTION 7. WHO CAN SPONSOR A § 403(b) PROTOTYPE PLAN? / WHO CAN BE A MASS SUBMITTER?
SECTION 8. DUTIES OF A PROTOTYPE SPONSOR
SECTION 9. SCOPE OF AN OPINION LETTER
SECTION 10. EMPLOYER RELIANCE ON AN OPINION LETTER
SECTION 11. MAINTENANCE OF APPROVED STATUS
SECTION 12. HOW TO APPLY FOR AN OPINION LETTER
SECTION 13. WITHDRAWAL OF APPLICATION
SECTION 14. ABANDONMENTS
SECTION 15. REVOCATION
SECTION 16. RETROACTIVE REMEDIAL AMENDMENT
SECTION17.EFFECTONOTHERDOCUMENTS
SECTION 18. EFFECTIVE DATE
SECTION 19. PAPERWORK REDUCTION ACT
SECTION 1. PURPOSE
.01 This revenue procedure establishes
an opinion letter program for § 403(b)
prototype plans. Under this program,
the Service will accept applications for
opinion letters regarding the acceptability
under § 403(b) of the Internal Revenue
Code of the form of prototype plans start-
ing[DATE TO BE DETERMINED].
The procedures and rules of this program
are generally similar to those that apply
under Rev. Proc. 2005–16, 2005–1 C.B.
674, to the Service’s opinion letter pro-
gram for master and prototype (M&P)
plans qualified under § 401(a), except for
differences related to the requirements of
§ 403(b).
.02 The Service expects that most el-
igible employers will be able to adopt a
prototype plan approved under this rev-
enue procedure to satisfy the requirement
in § 1.403(b)–3(b)(3) of the Income Tax
Regulations that a § 403(b) contract be
issued pursuant to a written plan. How-
ever, the Service also intends to establish a
determination letter program for § 403(b)
May 4, 20099172009–18 I.R.B.

plans (“the determination letter program”)
that will allow eligible employers that
maintain § 403(b) plans with features
which preclude the use of a prototype doc-
ument under this revenue procedure or that
choose not to use a prototype document to
receive assurance that the form of a plan
satisfies the requirements of § 403(b).
.03 An eligible employer that adopts an
approved § 403(b) prototype plan will gen-
erally be able to rely directly on the proto-
type plan’s opinion letter and will not need
to request an individual determination let-
ter under the determination letter program.
In the case of a plan that provides for con-
tributions that, under§ 403(b)(12)(A)(i),
are subject to the nondiscrimination re-
quirements of §§ 401(a)(4) and 410(b),
this reliance will be limited to contribu-
tions that satisfy certain uniform coverage
and contribution standards. If such a plan
does not satisfy these standards, the eligi-
ble employer will still generally be able
to rely directly on the prototype § 403(b)
plan’s opinion letter, except with respect to
whether those contributions satisfy the re-
quirements of §§ 401(a)(4) and 410(b). In
this case, if the eligible employer wishes to
obtain reliance with respect to the require-
ments of §§ 401(a)(4) and 410(b), the em-
ployer will have the opportunity to request
a determination letter after the determina-
tion letter program is established.
.04 This revenue procedure allows an
eligible employer to retroactively correct
defects in the form of its written § 403(b)
plan by timely adopting an approved
§ 403(b) prototype plan that was submit-
ted to the Service for an opinion letter by
a date that will be announced in the future
(and will not be earlier than March 15,
2010), or by otherwise timely amending
its plan and submitting a request for a
determination letter. Future guidance will
specify the date(s) for timely adoption and
for timely amendment and submission.
SECTION 2. BACKGROUND
.01 Contributions for an annuity con-
tract purchased for an employee by an
eligible employer are generally excluded
from the employee’s gross income if the
requirements described in § 403(b) are
met. Amounts paid by an eligible em-
ployer to a custodial account which sat-
isfies the requirements of § 401(f)(2) are
treated as contributed to an annuity con-
tract for an employee if the requirements
of § 403(b)(7)(A)(i) and (ii) are met. For
purposes of this revenue procedure, and
except where otherwise indicated, an el-
igible employer is a public school or an
employer described in § 501(c)(3) which
is exempt from tax under § 501(a).
.02 Final regulations under § 403(b)
(“the 2007 regulations”) were published
on July 26, 2007 (72 FR 41128). The
2007 regulations are generally effective as
of January 1, 2009.
.03 Section 1.403(b)–3(b)(3) of the
2007 regulations provides that a contract
(or custodial account) does not satisfy the
requirements of § 403(b) unless it is main-
tained pursuant to a plan. A plan means a
written defined contribution plan which,
in both form and operation, satisfies the
requirements of the 2007 regulations.
.04 The Service has not heretofore
maintained a program for the issuance of
determination or opinion letters as to the
acceptability of a planunder § 403(b).
However, the Service did on occasion
issue private letter rulings regarding the
excludability of contributions to a contract
under § 403(b).
.05 The Service has received comments
from the public recommending ways to
assist eligible employers in complying
with the written plan requirement of the
2007 regulations. Among the recom-
mendations have been the publication of
model plan language for § 403(b) plans of
public schools, the establishment of a de-
termination letter process for individually
designed § 403(b) plans, and the expan-
sion of the scope of the Service’s master
and prototype plan opinion letter program
for the pre-approval of plans qualified
under § 401(a) to include § 403(b) plans.
.06 In Rev. Proc. 2007–71, 2007–2
C.B. 1184, the Service provided guidance
regarding compliance with the 2007 regu-
lations and published model plan language
thatmaybeusedbypublicschoolseither
to adopt a written plan to reflect the re-
quirements of § 403(b) and the 2007 regu-
lations or to amend a § 403(b) plan to re-
flect the requirements of § 403(b) and the
2007 regulations. Rev. Proc. 2007–71
also provides that other eligible employ-
ers may use the model language as sam-
ple language to comply with one or more
of the requirements imposed by the 2007
regulations. Rev. Proc. 2007–71, includ-
ing its provisions regarding the extent to
which the model plan language may be
relied upon, is not modified by this rev-
enue procedure. Accordingly, absent fur-
ther notice, public schools and other eligi-
ble employers may continue to utilize the
language in Rev. Proc. 2007–71 as model
or sample language.
.07 Notice 2009–3, 2009–2 I.R.B. 250,
states that the Service and Treasury have
concluded that compliance with the 2007
regulations would be facilitated by the es-
tablishment of both pre-approved and indi-
vidually designed plan programs and that
transition relief should be provided to all
§ 403(b) plan sponsors who have made ap-
propriate efforts to comply with the writ-
ten plan requirement in the 2007 regula-
tions. The transition relief under the no-
tice provides that the Service will not treat
a § 403(b) plan as failing to satisfy the re-
quirements of § 403(b) and the 2007 regu-
lations during the 2009 calendar year, pro-
vided that:
(1) on or before December 31, 2009, the
sponsor of the plan has adopted a written
§ 403(b) plan that is intended to satisfy
the requirements of § 403(b) (including the
2007 regulations) effective as of January 1,
2009;
(2) during 2009, the sponsor operates
the plan in accordance with a reasonable
interpretation of § 403(b), taking into ac-
count the 2007 regulations; and
(3) before the end of 2009, the spon-
sor makes its best efforts to retroactively
correct any operational failure during the
2009 calendar year to conform to the terms
of the written § 403(b) plan, with such cor-
rection to be based on the general prin-
ciples of correction set forth in the Ser-
vice’s Employee Plans Compliance Reso-
lution System (EPCRS) at section 6 of Rev.
Proc. 2008–50, 2008–35 I.R.B. 464.
The relief in Notice 2009–3 applies
solely with respect to the 2009 calendar
year, and may not be relied on with respect
totheoperationofa§403(b)planorcor-
rection of operational defects in any prior
or subsequent year.
.08 The Service expects that most el-
igible employers will be able to adopt a
§ 403(b) prototype plan approved under
the opinion letter program described in this
revenue procedure. As indicated in No-
tice 2009–3 and in section 1.02 above, the
Service also intends to establish a deter-
mination letter program that will enable
other eligible employers to receive assur-
2009–18 I.R.B.918May 4, 2009

ance that the form of a plan satisfies the re-
quirements of § 403(b). Eligible employ-
ers that utilize either the opinion letter pro-
gram or the determination letter program
will be able to retroactively correct defects
in the form of a written § 403(b) plan for
years after 2009 by timely adopting reme-
dial amendments.
SECTION 3. OVERVIEW OF THE
REVENUE PROCEDURE
.01 The Service is establishing a
§ 403(b) prototype plan program through
this revenue procedure with the intent of
assisting eligible employers in comply-
ing with the written plan requirement of
the 2007 regulations. For many years the
Service has maintained a similar program
for plans qualified under § 401(a). Based
on the Service’s experience with the pro-
totype plan program for qualified plans,
it believes that the prototype program for
§ 403(b) plans offers most eligible em-
ployers a lower-cost way to satisfy the
written plan requirement and obtain assur-
ance from the Service that a plan meets
the requirements of § 403(b) than an indi-
vidual determination letter.
.02 As more fully described in section 4,
a § 403(b) prototype plan is a two-part plan
document intended to satisfy the require-
ments of § 403(b) and the 2007 regulations
which a vendor or other entity (referred to
as “the prototype sponsor”) provides to el-
igible employers that wish to adopt a writ-
ten § 403(b) plan. The prototype spon-
sor submits the document to the Service
for approval, in the form of an opinion let-
ter issued to the sponsor by the Service,
that the form of the document meets the re-
quirements of § 403(b) and the 2007 regu-
lations.
.03 The first part of a § 403(b) prototype
plan document, called the basic plan docu-
ment, contains provisions that apply to the
plan of any eligible employer that uses the
document to adopt a written § 403(b) plan.
Under the prototype program, an eligible
employer may not modify the provisions
of a basic plan document. The second
part of the document, called the adoption
agreement, is the part of the plan document
which the eligible employer completes and
signs in order to establish a written plan.
The adoption agreement gives the eligible
employer elections and options to choose
among in order to customize the particu-
lar features of its plan. Thus, many eligi-
ble employers can use the same § 403(b)
prototype plan document to adopt a writ-
ten § 403(b) plan, with the plans differ-
entiated by the different choices each eli-
gible employer makes in its plan’s adop-
tion agreement and the different invest-
ment arrangements (i.e., annuity contracts
and custodial accounts) offered under each
plan. This revenue procedure does not im-
pose any special restrictions on the types,
number, or features of investment arrange-
ments that may be offered under an eligible
employer’s § 403(b) prototype plan. How-
ever, the terms of the § 403(b) prototype
plan must override any inconsistent pro-
visions of investment arrangements under
the plan.
.04 Because the terms of a § 403(b)
prototype plan apply to each eligible em-
ployer that adopts the plan (with variations
according to the different adoption agree-
ment elections made by each employer)
and because the revenue procedure does
not impose special restrictions on invest-
ment arrangements under a § 403(b) proto-
type plan, the terms of the prototype plan
must satisfy the requirements of § 403(b)
and the 2007 regulations, regardless of
the employer’s choices in the adoption
agreement or the terms of investment ar-
rangements under the plan, and the Service
therefore will not review the terms of any
investment arrangements or documents
other than the basic plan document and
adoption agreement. Section 5 describes
the provisions that must therefore be in-
cluded in every § 403(b) prototype plan.
Also see section 9 regarding the scope of
an opinion letter.
.05 Some of the provisions described
in section 5 that must be included in ev-
ery § 403(b) prototype plan reflect require-
ments of the prototype program rather than
requirements of law. One of those re-
quirements is that each § 403(b) prototype
plan allow the prototype sponsor to amend
the § 403(b) prototype plan on behalf of
each eligible employer that has adopted
the plan. Under this revenue procedure,
each prototype sponsor obligates itself to
carry out certain duties under the proce-
dure, among them to keep the document
up to date for changes in law and to pro-
vide copies of amendments to the docu-
ment to eligible employers. See section 7
for eligibility to sponsor a § 403(b) proto-
type plan, section 12 for opinion letter ap-
plication procedures, and sections 8 and 11
through 15 regarding the duties of sponsor-
ship.
.06 One of the Service’s goals in estab-
lishing the § 403(b) prototype plan pro-
gram is to ensure that § 403(b) prototype
plans will be broadly suitable for the ma-
jority of eligible employers. The Service
does not intend that prototype plans be
suitable for every eligible employer or ev-
ery circumstance. Thus, the revenue pro-
cedure does not permit § 403(b) proto-
type plans to include certain provisions
that the Service believes do not apply to
most eligible employers, such as vesting
schedules and provisions applicable only
to churches and organizations described in
§ 3121(w)(3). See section 5.06 and section
9.
.07 While the Service intends to es-
tablish a determination letter program for
§ 403(b) plans in the future, the § 403(b)
prototype plan program is designed to
enable eligible employers that adopt a
§ 403(b) prototype plan to obtain assur-
ance (referred to in section 10 as “re-
liance”), without the need to apply for an
individual determination letter, that the
Service has determined that the terms of
the eligible employer’s § 403(b) prototype
plan satisfy § 403(b) and the 2007 regu-
lations. However, if the adopting eligible
employer is neither a governmental entity
nor a church, the extent to which the em-
ployer may rely directly on the § 403(b)
prototype plan’s opinion letter without
applying for an individual determination
letter depends on the form of the eligible
employer’s § 403(b) prototype plan, as
explained in section 3.08 (next paragraph).
.08 There are two forms of § 403(b) pro-
totype plan under this revenue procedure:
a “standardized plan” and a “nonstandard-
ized plan.” A plan is a standardized plan
if the only contributions the employer may
choose to provide under the plan are elec-
tive deferrals or if the plan automatically
satisfies uniform coverage and contribu-
tion standards with respect to any other
contributions under the plan. A nonstan-
dardized plan is a plan that is not a stan-
dardized plan. An eligible employer that
adopts a standardized plan generally may
rely directly on the opinion letter for the
plan. An eligible employer that adopts a
nonstandardized plan generally may rely
directly on the opinion letter for the plan
except with respect to whether the plan sat-
May 4, 20099192009–18 I.R.B.

isfies the nondiscrimination requirements
of §§ 401(a)(4) and 410(b) relating to con-
tributions under the plan other than elec-
tive deferrals. The eligible employer will
be able to request a determination letter
on the nondiscrimination requirements, if
desired, after the determination letter pro-
gram is open. Finally, if the § 403(b)
prototype plan is a governmental plan as
described in § 414(d) or a “nonelecting
church plan” (see section 5.05(4)), the eli-
gible employer may generally rely on the
opinion letter regardless of whether the
plan is a standardized plan or a nonstan-
dardized plan. Of course, an opinion letter
may not be relied upon with respect to Ti-
tle I of ERISA, although the Service may
decline to issue an opinion letter on a plan
that fails to satisfy a Code provision that
is parallel to a provision of Part 2 of Sub-
title B of Title I of ERISA. Standardized
and nonstandardized plans are discussed in
section 6, and reliance is discussed in sec-
tion 10. Also see section 9 regarding the
scope of reliance on an opinion letter.
.09 As indicated in Notice 2009–3, this
revenue procedure provides a remedial
amendment provision that allows eligible
employers to retroactively correct defects
in the form of their § 403(b) plans for
certain years throughthe timely adoption
of remedial amendments. This provision
applies to eligible employers that timely
adopt a § 403(b) prototype plan or that
otherwise timely amend and request a de-
termination letter for a § 403(b) plan. Plan
sponsors should not draw any inferences
from this provision regarding the appli-
cation of § 401(b) regarding retroactive
changes in plans qualified under § 401(a).
See section 16.
SECTION 4. WHAT IS A § 403(b)
PROTOTYPE PLAN?
.01 A § 403(b) prototype plan is a de-
fined contribution plan that is intended to
satisfy the requirements of § 403(b) and
is made available by a prototype spon-
sor for adoption by eligible employers. A
§ 403(b) prototype plan consists of a ba-
sic plan document and an adoption agree-
ment. The basic plan document contains
all the nonelective provisions of the pro-
totype plan that apply to the plans of all
adopting eligible employers. The basic
plan document may not include any op-
tions or blanks to be completed. The adop-
tion agreement contains all the options that
may be selected by an adopting eligible
employer.
.02 An adoption agreement can be used
with only one basic plan document. A
basic plan document can be used with
more than one adoption agreement, but
each basic plan document/adoption agree-
ment pair constitutes a separate § 403(b)
prototype plan. A § 403(b) prototype plan
adopted by an eligible employer is a single
plan regardless of whether there are mul-
tiple investment arrangements or multiple
vendors (i.e., insurance companies or reg-
ulated investment company custodians)
under the plan. Adoption of two prototype
§ 403(b) plans (that is, execution of two
separate adoption agreements) constitutes
the adoption of two separate § 403(b)
plans.
.03 A prototype sponsor may maintain
more than one basic plan document. For
example, a prototype sponsor may main-
tain one basic plan document to be used
only with plans that limit contributions to
elective deferrals and another basic plan
document to be used with plans that pro-
vide for elective deferrals and employer
nonelective contributions, whether or not
such plans also provide for matching con-
tributions and/or after-tax employee con-
tributions.
.04 As described above, a basic plan
document may have more than one adop-
tion agreement. For example, a basic plan
document may have one adoption agree-
ment to be used to adopt a standardized
plan and another adoption agreement to be
used to adopt a nonstandardized plan. See
section 6 for an explanation of the differ-
ence between a standardized plan and a
nonstandardized plan.
SECTION 5. PROVISIONS
REQUIRED IN EVERY § 403(b)
PROTOTYPE PLAN
.01 Subsections .05 though .11 of this
section 5 describe provisions that must
be included in every § 403(b) prototype
plan. Some of these requirements reflect
requirements in the 2007 regulations; oth-
ers derive from the nature and purposes of
the prototype plan program and are gen-
erally similar to requirements that apply
under Rev. Proc. 2005–16 to the Service’s
opinion letter program for M&P plans
qualified under § 401(a).
.02 As provided in section 9.02, the Ser-
vice’s review of a § 403(b) prototype plan
will consider only the terms of the basic
plan document and adoption agreement.
Accordingly, the provisions described in
subsections .05 though .11 of this sec-
tion5mustbeincludedinthebasicplan
document or adoption agreement of every
§ 403(b) prototype plan, regardless of the
terms of any investment arrangements un-
der the plan or any documents that may be
incorporated by reference. This does not
preclude the adoption of a § 403(b) proto-
type plan (including a standardized plan,
as described in section 6) in cases where
different investment arrangements (annu-
ity contracts or custodial accounts) under
a plan have different features or prevent
the inclusion of additional provisions in
the terms of the investment arrangements
under the plan or documents incorporated
by reference. However, the terms of the
basic plan document and adoption agree-
ment must satisfy the requirements of law
and subsections .05 though .11 of this
section 5 without regard to the terms of
investment arrangements under the plan or
any documents incorporated by reference.
.03 For example, an eligible employer’s
§ 403(b) prototype plan may offer both
investment arrangements that permit loans
and investment arrangements that do not.
In this case, the basicplan document and
adoption agreement, as completed by the
employer, must (1) provide that partici-
pant loans are available, depending on the
choice of investment arrangements, (2)
include provisions reflecting the require-
ments of the 2007 regulations, including
§ 1.403(b)–6, and § 1.72(p)–1, and (3)
identify the party responsible (e.g.,the
employer) for coordination among the
vendors to ensure compliance with the
requirements and limitations on partic-
ipant loans. For sample plan language
that satisfies these requirements, see the
Listing of Required Modifications (for
§ 403(b) plans) which may be down-
loaded from the Internet at the follow-
ing address:(http://www.irs.gov/pub/irs-
tege/draft_lrm_403b_prototypes.pdf).As
another example, a § 403(b) prototype
plan may provide that the forms of annuity
benefit available under the plan are those
described in the contracts under the plan.
However, the terms of the basic plan docu-
ment and adoption agreement must ensure
that the required minimum distributions
2009–18 I.R.B.920May 4, 2009

of § 401(a)(9) will be satisfied regardless
of the form of benefit paid, and the dis-
tributable events under the plan must be
described in the basic plan document and
adoption agreement.
.04Asprovidedinsubsection.07ofthis
section 5, the terms of the basic plan doc-
ument and adoption agreement must over-
ride any inconsistent provisions of invest-
ment arrangements under the plan or docu-
ments incorporated by reference. An eligi-
ble employer that adopts a § 403(b) proto-
type plan should take this and the other re-
quirements of this section 5 into account in
considering investment arrangements to be
offered under the plan as well as other doc-
uments that may be incorporated by refer-
ence.
.05 Every § 403(b) prototype plan must
satisfy the requirements of §§ 1.403(b)–1
through 1.403(b)–11, including the follow-
ing requirements:
(1) The plan must contain all the ma-
terial terms and conditions for eligibility,
benefits, applicable limitations, the invest-
ment arrangements available under the
plan, and the time and form under which
benefit distributions will be made.
(2) The plan must satisfy the uni-
versal availability requirement with re-
spect to elective deferrals described in
§ 1.403(b)–5(b), whether or not this re-
quirement is applicable to the plan under
§ 1.403(b)–5.
(3) The plan must limit the amount
of compensation that can be taken into
account with respect to any contribution
under the plan to the limitation in effect
under § 401(a)(17), whether or not this
limitation is applicable to the plan under
§ 1.403(b)–5.
(4) Unless the plan is designed by the
prototype sponsor to be available for adop-
tion only as a governmental plan as defined
in § 414(d) or a church plan as defined
in § 414(e) for which the election under
§ 410(d) has not been made (a “nonelect-
ing church plan”), the plan must include
terms that satisfy the applicable require-
ments of § 401(m) if the plan provides for
matching or after-tax employee contribu-
tions.
(5) The plan must set forth the
terms governing any hardship distribu-
tions, loans, plan-to-plan transfers, con-
tract-to-contract exchanges, and rollovers
into the plan that are available under the
plan.
.06 Every § 403(b) prototype plan must
provide for full and immediate vesting of
all contributions under the plan.
.07 Every § 403(b) prototype plan must
provide that in the event of any conflict be-
tween the terms of the plan and the terms
of any annuity contract or custodial ac-
count under the plan, or of any other doc-
ument that is incorporated by reference in
the plan, the terms of the plan shall control.
.08 Every § 403(b) prototype plan must
provide a procedure for amendment of
the plan by the prototype sponsor, so that
changes in the Code, regulations, revenue
rulings, or other guidance published by the
Service, or corrections of prior approved
plans, may be applied to all eligible em-
ployers that have adopted the plan.
.09 Under § 1.415(f)–1(a)(3), all
§ 403(b) annuity contracts purchased by
an employer for a participant are treated as
one § 403(b) annuity contract for purposes
of § 415. Every § 403(b) prototype plan
must include plan language reflecting this
rule. In particular, the plan language must
coordinate the application of the § 415
limits to all the § 403(b) prototype plans
of the adopting eligible employer and
its related employers so that, if the only
§ 403(b) plans maintained by the adopt-
ing employer and its related employers
are prototype plans, the plans will satisfy
§ 415(c) and § 1.415(f)–1(a)(3) without
requiring the addition of overriding plan
language. The plan language must also
allow the adopting eligible employer to
add overriding language to the adoption
agreement if necessary to coordinate the
application of the § 415 limits where the
adopting eligible employer or its related
employers also maintain § 403(b) plans
that are not prototype plans. For this
purpose, the term “related employers”
means all employers that are aggregated
with the adopting eligible employer un-
der § 414(b) and (c) (each as modified
by § 415(h)), (m), and (o), including
§ 1.414(c)–5. Sample language provided
in the Listing of Required Modifica-
tions (for § 403(b) plans) may be down-
loaded from the Internet at the follow-
ing address:(http://www.irs.gov/pub/irs-
tege/draft_lrm_403b_prototypes.pdf).
.10 Every § 403(b) prototype plan must
provide that the eligible employer is con-
sidered to have adopted an individually de-
signed plan, and the eligible employer is
not entitled to reliance on an opinion letter
issued with respect to the plan, if:
(1) the eligible employer amends any
provision of the plan, including its adop-
tion agreement (other than to (a) change
the choice of options or procedures in the
adoption agreement, (b) add overriding
language in the adoption agreement if
necessary to satisfy § 415 because of the
required aggregation of multiple plans, or
(c) adopt sample or model amendments
published by the Service that specifically
provide that their adoption by an adopter
of an approved § 403(b) prototype plan
will not cause such plan to be treated as
individually designed); or
(2) the eligible employer chooses to
discontinue participation in the plan as
amended by the prototype sponsor and
does not substitute another approved
§ 403(b) prototype plan.
.11 The adoption agreement of every
§ 403(b) prototype plan must satisfy the
following requirements:
(1) The adoption agreement must re-
quire the adopting employer to indicate
whether:
(a) the plan is a governmental plan as
defined in § 414(d),
(b) the plan is a nonelecting church
plan, or
(c) the adopting eligible employer is an
organization described in § 501(c)(3) and
the plan is neither a governmental plan
as defined in § 414(d) nor a nonelecting
church plan.
(2) The adoption agreement must allow
the adopting eligible employer to add over-
riding plan language if necessary to satisfy
§ 415 because of the required aggregation
of multiple plans.
(3) The adoption agreement must iden-
tify who: (a) is responsible for the various
administrative functions under the plan to
comply with the requirements of § 403(b)
and other tax requirements, including such
requirements that apply on the basis of the
aggregated contracts issued to a participant
under the plan; and (b) is responsible to
maintain a list of all the vendors of annuity
contracts and custodial accounts under the
plan.
(4) The adoption agreement must con-
tain a dated employer signature line. The
eligible employer must sign the adoption
agreement when it first adopts the plan and
must complete and sign a new adoption
agreement if the plan has been restated. In
May 4, 20099212009–18 I.R.B.

addition, the eligible employer must com-
plete a new signaturepageifitmodifies
any prior elections or makes new elections
in its adoption agreement. The signature
requirement may be satisfied by an elec-
tronic signature that reliably authenticates
and verifies the adoption of the adoption
agreement, or restatement, amendment or
modification thereof, by the eligible em-
ployer.
(5) The adoption agreement must state
that it is to be used only with one spe-
cific basic plan document, and must iden-
tify that document.
(6) The adoption agreement must con-
tain a cautionary statement to the effect
that the failure to properly fill out the
adoption agreement may result in failure
of the plan to satisfy the requirements
of § 403(b). The Service expects that
§ 403(b) prototype plan documents will
be written in a manner designed to assist
adopting eligible employers in the correct
completion of the adoption agreement.
(7) The adoption agreement must also
state that the prototype sponsor will in-
form the adopting eligible employer of any
amendments made to the plan or of the dis-
continuance or abandonment of the plan.
(8) The adoption agreement must in-
clude the prototype sponsor’s name, ad-
dress, and telephone number (or a space for
the address and telephone number of the
prototype sponsor’s authorized representa-
tive) for inquiries by adopting eligible em-
ployers regarding the adoption of the plan,
the meaning of plan provisions, or the ef-
fect of the opinion letter.
SECTION 6. STANDARDIZED
PLANS AND NONSTANDARDIZED
PLANS
.01 Each § 403(b) prototype plan is ei-
ther a standardized plan or a nonstandard-
ized plan. A § 403(b) prototype plan is a
standardized plan if:
(1) the only contributions which an
adopting eligible employer may elect to
provide under the plan are elective defer-
rals; or
(2) the form of the plan satisfies the
requirements in section 6.02 with respect
to any contributions under the plan other
than elective deferrals, regardless of the
adopting eligible employer’s elections in
the adoption agreement or the terms of any
investment arrangements under the plan or
any documents incorporated by reference
in the plan.
.02 The form of a § 403(b) prototype
plan satisfies the requirements in this sec-
tion 6.02 with respect to any contributions
under the plan other than elective deferrals
if:
(1) The plan by its terms benefits
all employees except those that may be
excluded under § 1.410(b)–6. For this
purpose, employee means an employee,
within the meaning of § 1.403(b)–2(b)(9),
of the adopting eligible employer and any
eligible employer within the meaning of
§ 1.403(b)–2(b)(8) in the adopting eli-
gible employer’s controlled group. The
controlled group consists of the adopting
eligible employer and each other employer
that is aggregated with the adopting eli-
gible employer under § 414(b), (c), (m)
or (o), including § 1.414(c)–5. Thus, if
there is more than one eligible employer
in the controlled group, the plan must ben-
efit all the employees of all the eligible
employers in the controlled group except
those employees that may be excluded
under § 1.410(b)–6. (A plan does not fail
to satisfy this requirement with respect to
contributions other than elective deferrals
merely because the plan provides, either
as the result of an elective provision or
by default in the absence of an election to
the contrary, that individuals who become
employees as the result of a transaction
described in § 410(b)(6)(C), relating to
certain employer acquisitions and dispo-
sitions, are excluded from eligibility to
participate in the plan during the period
beginning on the date of the transaction
and ending on a date that is not later than
the earlier of the last day of the first plan
year beginning afterthedateofthetrans-
action or the date of a significant change
in the plan or in the coverage of the plan.)
(2) All benefits, rights, and features un-
der the plan (other than those, if any, that
have been prospectively eliminated) are
currently available to all employees bene-
fiting under the plan. (For information re-
garding benefits, rights, and features, see
§ 1.401(a)(4)–4.) Thus, for example, all
employees benefiting under the plan must
be able to choose among all the investment
arrangements available under the plan.
(3) If the plan provides for employer
nonelective contributions (other than
matching contributions), the plan must
satisfy one of the design-based safe har-
bors described in § 1.401(a)(4)–2(b)(2)
with respect to such contributions.
(4) The plan must define compensation
for purposes of determining the amount of
contributions other than elective deferrals
as total compensation. For this purpose,
total compensation means a definition of
compensation that includes all compen-
sation within the meaning of § 415(c)(3)
(disregarding § 415(c)(3)(E)) and excludes
all other compensation, or that otherwise
satisfies § 414(s) under § 1.414(s)–1(c).
.03 A nonstandardized plan is a
§ 403(b) prototype plan that is not a stan-
dardized plan.
SECTION 7. WHO CAN SPONSOR A
§ 403(b) PROTOTYPE PLAN? / WHO
CAN BE A MASS SUBMITTER?
.01 A person is eligible to sponsor a
§ 403(b) prototype plan if the person (1)
has an established place of business in the
United States where it is accessible during
every business day and (2) expects at least
30 eligible employers to adopt its § 403(b)
prototype plan basic plan document(s). A
person eligible to sponsor a § 403(b) pro-
totype plan may request opinion letters for
any number of basic plan documents and
adoption agreements.
.02 Any person that has an estab-
lished place of business in the United
States where it isaccessible during ev-
ery business day may sponsor a plan as
a word-for-word identical adopter of a
§ 403(b) prototype plan of a mass submit-
ter, regardless of the number of eligible
employers expected to adopt the plan. A
mass submitter is any person that (1) has
an established place of business in the
United States where it is accessible during
every business day and (2) submits opin-
ion letter applications on behalf of at least
30 prototype sponsors each of which is
sponsoring, on a word-for-word identical
basis, the same basic plan document. A
§ 403(b) prototype plan of a mass sub-
mitter must include language designating
the mass submitter as agent for the pro-
totype sponsor for purposes of making
plan amendments. A mass submitter may
request opinion letters for any number of
basic plan documents and adoption agree-
ments.
.03 The filing of an application for an
opinion letter for a § 403(b) prototype
plan constitutes a representation that the
2009–18 I.R.B.922May 4, 2009

requirements in .01 or .02 of this section 7
are satisfied.
SECTION 8. DUTIES OF A
PROTOTYPE SPONSOR
.01 A prototype sponsor must maintain
a written record of the eligible employers
that have adopted the plan. Upon written
request, the prototype sponsor must pro-
vide the Service a list of the names, ad-
dresses, and employer identification num-
bers of all eligible employers that have
adopted the plan, excluding employers that
ceased to maintain the plan as a prototype
plan more than three years prior to the re-
quest.
.02 Unless the prototype sponsor has
withdrawn its opinion letter application
pursuant to section 13, notified the Service
and adopting eligible employers that it is
abandoning the plan pursuant to section
14, or been notified by the Service under
section 15 that its opinion letter has been
revoked, the prototype sponsor must con-
tinue to maintain theapproved status of
the plan as provided in section 11. Thus,
the prototype sponsor must timely amend
the plan for changes in the Code, regula-
tions, revenue rulings, or other guidance
published by the Service, and must apply
for new opinion letters when required.
The prototype sponsor must provide to the
eligible employer copies of the plan and
any restatements thereof, all amendments
and all opinion letters, and must comply
with the notice requirements under this
procedure and any other written guidance.
.03 The prototype sponsor must have a
procedure to verify that an adopting eli-
gible employer has timely completed and
signed a new adoption agreement when re-
quired (i.e., upon initial adoption and re-
statement of the prototype plan). If the
prototype sponsor is unable to verify an
adopting eligible employer’s timely com-
pletion of a new adoption agreement, the
prototype sponsor must notify the eligible
employer that failure to timely complete a
new adoption agreement could result in ad-
verse tax consequences to participants.
.04 The prototype sponsor must have
a procedure for adopting eligible employ-
ers to acknowledge receipt of plan amend-
ments when an adopting eligible employer
is not required to complete a new adop-
tion agreement. The prototype sponsor
must notify any adopting eligible employ-
ers that fail to acknowledge receipt of a
plan amendment that failure to take the
amendment into account in the operation
of the plan could result in adverse tax con-
sequences to participants.
.05Thefilingofanapplicationforan
opinion letter for a § 403(b) prototype plan
constitutes a representation that the pro-
totype sponsor agrees to comply with the
requirements of this revenue procedure.
Failure to do so may result in the loss of
eligibility to sponsor § 403(b) prototype
plans and the revocation of opinion let-
ters that have been issued to the prototype
sponsor.
SECTION 9. SCOPE OF AN OPINION
LETTER
.01 An opinion letter for a § 403(b) pro-
totype plan constitutes a determination that
the plan as adopted by a particular adopt-
ing eligible employer satisfies the require-
ments of § 403(b) only under the circum-
stances, and to the extent, described in sec-
tion 10.
.02 The Service’s review of a prototype
sponsor’s application for an opinion let-
ter for a § 403(b) prototype plan, or of an
adopting eligible employer’s application
for a determination letter for the eligible
employer’s § 403(b) prototype plan, will
consider only the terms of the basic plan
document and adoption agreement. The
Service’s review will not consider, and an
opinion or determination letter will not ex-
press an opinion with respect to, the terms
of any annuity contracts or custodial ac-
counts under the plan of any adopting el-
igible employer or any other documents
that may be incorporated into an adopting
eligible employer’s plan by reference.
.03 An opinion letter for a § 403(b) plan
does not express an opinion, and may not
be relied upon, with respect to whether any
plan is subject to the requirements of Title
IofERISAorwhetheraplansatisfiesany
of those requirements.
.04 Opinion letters will not be issued for
any of the following:
(1) TEFRA church defined benefit
plans. (See § 1.403(b)–10(f)(2).)
(2) Plans that:
(a) include provisions applicable only
to churches or qualified church-con-
trolled organizations as described in
§ 3121(w)(3), church-related organiza-
tions described in § 1.403(b)–2(b)(6), or
ministers describedin § 414(e)(5)(A),
such as the provisions of § 1.403(b)–9,
relating to retirement income accounts and
special limitations under § 415(c)(7); or
(b) fail to satisfy requirements that ap-
ply to organizations other than churches
and qualified church-controlled organiza-
tions as described in § 3121(w)(3), such as
universal availability for elective deferrals
or the limitation of § 401(a)(17).
(3) Plans grandfathered under Rev. Rul.
82–102, 1982–1 C.B. 62.
(4) Plans that include blanks or fill-in
provisions for the eligible employer to
complete unless the provisions have pa-
rameters that preclude the eligible em-
ployer from completing the provisions in
a manner that could cause the plan to fail
to satisfy § 403(b).
(5) Plans that incorporate by reference
the limitations of § 415 or the ACP test of
§ 401(m)(2).
Paragraph (2) of this section 9.04 does
not preclude the adoption of a § 403(b)
prototype plan by an exempt organization
under § 501(c)(3) that is one of the enti-
ties described in paragraph (2). The Ser-
vice may, in its discretion, decline to issue
opinion letters for other types of plans not
described in this section 9.04. For exam-
ple, in the case of a plan that provides for
nonelective contributions and is neither a
governmental plan as defined in § 414(d)
nor a nonelecting church plan, the Service
may, in its discretion, decline to issue an
opinion letter where the plan fails to sat-
isfy a Code provision that is parallel to a
provision in Part 2 of Subtitle B of Title I
of ERISA (such as §§ 410 and 411 of the
Internal Revenue Code).
SECTION 10. EMPLOYER
RELIANCE
.01 An eligible employer that adopts
a standardized § 403(b) prototype plan
may rely upon a favorable opinion letter
issued for the plan that the form of the
adopting eligible employer’s plan satisfies
the requirements of § 403(b) if (1) the only
contributions under the plan are elective
deferrals or (2) all of the employers in the
adopting eligible employer’s controlled
group are eligible employers within the
meaning of § 1.403(b)–2(b)(8). If the
plan provides for contributions other than
elective deferrals and the adopting eligible
employer’s controlled group includes any
May 4, 20099232009–18 I.R.B.

employer that is not an eligible employer
within the meaning of § 1.403(b)–2(b)(8),
the adopting eligible employer may rely
on the opinion letter, except with respect
to whether contributions under the plan
other than elective deferrals satisfy the re-
quirements of §§ 401(a)(4) and 410(b). In
this case, the adopting eligible employer
may request an individual determination
letter in order to obtain reliance with re-
spect to the requirements of §§ 401(a)(4)
and 410(b). The Service intends to publish
procedures for requesting such a letter in
the future.
.02 An eligible employer that adopts
a standardized or a nonstandardized
§ 403(b) prototype plan may rely upon
a favorable opinion letter issued for the
plan that the form of the adopting eligible
employer’s plan satisfies the requirements
of § 403(b) if the plan is a governmental
plan as defined in § 414(d) or a nonelect-
ingchurchplan. However,theissuance
of a favorable opinion letter does not con-
stitute a determination that the plan is a
governmental plan as defined in § 414(d)
or a nonelecting church plan, but instead
is conditioned on the adopting eligible
employer’s representation to that effect.
.03 An eligible employer that adopts a
nonstandardized § 403(b) prototype plan
may rely upon a favorable opinion let-
ter issued for the plan that the form of
the adopting eligible employer’s plan sat-
isfies the requirements of § 403(b), except
with respect to whether contributions un-
der the plan other than elective deferrals
satisfy the requirements of §§ 401(a)(4)
and 410(b), if applicable. The adopting el-
igible employer may request an individual
determination letter in order to obtain re-
liance with respect to the requirements of
§§ 401(a)(4) and 410(b), under procedures
to be published in the future.
.04 Notwithstanding the other provi-
sions of this section, an opinion letter is-
sued for a § 403(b) prototype plan may
not be relied upon with respect to the re-
quirements of § 415 if the adopting eligible
employer or any of its related employers
maintains another § 403(b) plan covering
any of the same participants as the § 403(b)
prototype plan, unless the other plan is also
a § 403(b) prototype plan. For this pur-
pose, the term “related employers” means
all employers that are aggregated with the
adopting eligible employer under § 414(b)
and (c) (each as modified by § 415(h)),
(m), and (o), including § 1.414(c)–5. The
adopting eligible employer may request an
individual determination letter in order to
obtain reliance with respect to the require-
ments of § 415 under procedures to be pub-
lished in the future.
.05 An opinion letter for a § 403(b) pro-
totype plan also may not be relied upon
with respect to issues of an inherently fac-
tual nature, such as whether the effective
availability of any benefits, rights, and fea-
tures is nondiscriminatory, or with respect
to whether a plan satisfies the requirements
of §§ 401(a)(4) and 410(b) with respect to
former employees.
.06 An eligible employer’s reliance on
an opinion letter will not be adversely af-
fected by the prototype sponsor’s correc-
tion, after the § 403(b) prototype plan has
been approved, of obvious and unambigu-
ous typographical errors in the approved
plan and/or cross-references in the plan
that merely correct a reference but that
do not in any way change the original in-
tended meaning of the provisions. The
Service in its discretion may determine
whether any changes made by the proto-
type sponsor to the approved § 403(b) pro-
totype plan conform to these standards.
SECTION 11. MAINTENANCE OF
APPROVED STATUS
.01Anapproved§403(b)prototype
plan must be amended by the prototype
sponsor and, if necessary, the eligible em-
ployer, to retain its approved status if any
provisions therein fail to meet the require-
ments of § 403(b) as a result of a changes
in the Code, regulations, revenue rulings,
or other guidance published by the Ser-
vice. The Service expects future guidance
to require the restatement of every § 403(b)
prototype plan by the prototype sponsor
every six years. Upon issuance of a new
opinion letter for the restated plan, adopt-
ing eligible employers would be required
to complete new adoption agreements. Fu-
ture guidance will also address operational
compliance and whether interim amend-
ments may be required between plan re-
statements.
.02 If a prototype sponsor determines
that a § 403(b) prototype plan as adopted
by an eligible employer may no longer sat-
isfy the requirements of § 403(b) and the
prototype sponsor does not or cannot sub-
mit a request to correct under the Voluntary
Correction Program (VCP) component of
the Employee Plans Compliance Resolu-
tion System (EPCRS), the prototype spon-
sor must notify the eligible employer that
the plan may no longer satisfy § 403(b), ad-
vise the eligible employer that adverse tax
consequences to participants may ensue,
and inform the eligible employer about the
availability of EPCRS. See Rev. Proc.
2008–50, or any successor thereto.
SECTION 12. HOW TO APPLY FOR
AN OPINION LETTER
.01 The Service will accept applications
for opinion letters for § 403(b) prototype
plans beginning[DATE TO BE DETER-
MINED].
.02 A separate application is required
for each adoption agreement that is offered
for adoption by the prototype sponsor. For
example, if a prototype sponsor maintains
two basic plan documents and there are
two adoption agreements that may be used
with each basic plan document, the proto-
type sponsor must submit four separate ap-
plications.
.03 An application for an opinion let-
ter for a § 403(b) prototype plan may be
filed by a prototype sponsor as defined in
section 7.01, by a mass submitter as de-
finedinsection7.02withrespecttoits
mass submitter plan, or by a mass submit-
teronbehalfofaword-for-wordidenti-
cal adopter of the mass submitter’s plan.
An application filed by a prototype spon-
sor or by a mass submitter with respect to
a mass submitter plan must be submitted
on Form 8929,Application for Approval
of § 403(b) Prototype Plan. An applica-
tion filed by a mass submitter on behalf
of a word-for-word identical adopter of
the mass submitter’s plan must be filed on
Form 8929–A,Application for Approval
of § 403(b) Prototype Plan Mass Submit-
ter Adopting Sponsor.Theforms(andin-
structions) specify what to include with the
application. These forms may be down-
loaded from the Internet at the following
address:[TO BE ADDED WHEN FI-
NALIZED]. All information on the first
page of the application must be typed. The
applicable user fee, determined under sec-
tion 6.03 of Rev. Proc. 2009–8, 2009–1
I.R.B. 229, as if the application were for
a master and prototype plan, should be in-
cluded with the application. The request is
to be sent to:
2009–18 I.R.B.924May 4, 2009

Internal Revenue Service
P.O. Box 2508
Cincinnati, OH 45201
Attn: § 403(b) Prototype Coordinator
Room 5106
A request shipped by Express Mail or a
delivery service should be sent to:
Internal Revenue Service
550 Main Street
P.O. Box 2508
Cincinnati, OH 45202
Attn: § 403(b) Prototype Coordinator
Room 5106
.04Inthecaseofaninitialsubmission
of a mass submitter’s basic plan document
under this revenue procedure, the mass
submitter’s application(s) must also be ac-
companied by applications for opinion let-
ters filed on behalf of at least 30 word-for-
word identical adopters, unless the mass
submitter has already satisfied this require-
ment in connection with a previous ap-
plication under this revenue procedure in-
volving another basic plan document. Af-
ter satisfying the 30 word-for-word iden-
tical adopter requirement, the mass sub-
mitter may submit additional applications
on behalf of other prototype sponsors that
wish to adopt a word-for-word identical
plan. In addition, the mass submitter may
then submit requests for opinion letters for
its other § 403(b) prototype plans regard-
less of the number of identical adopters of
such other plans.
.05 Sample plan language to be used
in drafting § 403(b) prototype plans is
available from Employee Plans Rulings
and Agreements. Such language is not
automatically required in § 403(b) pro-
totype plans, but should be used as a
guide in drafting such plans. To ex-
pedite the review of their plans, pro-
totype sponsors are encouraged to use
the Service’s sample plan language and
to identify where such language is be-
ing used in their plan documents. The
sample plan language may be down-
loaded from the Internet at the follow-
ing address:(http://www.irs.gov/pub/irs-
tege/draft_lrm_403b_prototypes.pdf).
.06 The Service may determine the ex-
tent of review of a § 403(b) prototype plan
based on the application. A failure to dis-
close a material fact or misrepresentation
of a material fact in the application may ad-
versely affect the reliance that would oth-
erwise be obtained through issuance by the
Service of a favorable opinion letter. Sim-
ilarly, failure to accurately provide any of
the information called for on any form re-
quired by this revenue procedure may re-
sult in no reliance.
.07 The Service may, at its discretion,
require any additional information that it
deems necessary in connection with its re-
view of a § 403(b) prototype plan. If a let-
ter requesting changes to plan documents
is sent to the prototype sponsor or an au-
thorized representative, the changes must
be received no later than 30 days from the
date of the letter, and the response must
include either a copy of the plan with the
changes highlighted or, if the changes are
not extensive, replacement pages. If the
changes are not received within 30 days,
the application may beconsidered with-
drawn. An extension of the 30-day time
limit will only be granted for good cause.
.08 The Service will return, without fur-
ther action, plans that are not in substan-
tial compliance with the approval require-
ments or plans that are so deficient that
they cannot be reviewed in a reasonable
amount of time. A plan may be considered
not to be in substantial compliance if, for
example, it omits an applicable Code sec-
tion or merely incorporates by reference an
applicable Code section. The Service will
not consider these plans until after they are
revised, and they will be treated as new re-
quests as of the date they are resubmitted.
No additional user fee will be charged if
an inadequate submission is amended to be
in substantial compliance and is resubmit-
ted to the Service within 30 days following
the date the prototype sponsor is notified of
such inadequacy.
.09 If the plan document submitted as
part of an opinion letter request contains
a provision that gives rise to an issue for
which contrary published authorities exist,
failure to disclose and address significant
contrary authorities may result in requests
for additional information, which will de-
layactionontherequest.
.10 An opinion letter issued to a pro-
totype sponsor is not transferable to any
other entity. For this purpose, a change of
employer identification number is deemed
to be a change of entity.
.11 A change in a prototype sponsor’s
name only is not deemed to be a change
of entity. However, the prototype spon-
sor must notify the Service in writing of
the change in name and certify that it still
meets the conditions for sponsorship de-
scribedinsection7.Noopinionletterwill
be issued and no user fee will be required
for a mere change in name.
SECTION 13. WITHDRAWAL OF
REQUESTS
.01 A prototype sponsor may withdraw
its request for an opinion letter at any time
prior to the issuance of such letter by noti-
fying EP Rulings and Agreements in writ-
ing of such withdrawal. The prototype
sponsor must also notify each eligible em-
ployer that has adopted the plan that the
request has been withdrawn. Such an el-
igible employer will be deemed to have an
individually designed plan.
.02 Even though a request is with-
drawn, EP Rulings and Agreements will
retain all correspondence and documents
associated with that request and will not
return them to the prototype sponsor.
EP Rulings and Agreements may furnish
it views concerning the approval status of
the plan to EP Examinations, which has
audit jurisdiction over the returns of the
eligible employers that have adopted the
plan.
SECTION 14. ABANDONMENT OF
SPONSORSHIPOF§403(b)PLANS
.01 A prototype sponsor must notify
EP Rulings and Agreements in writing of
an approved § 403(b) prototype plan that
is no longer used by any eligible employer
and which the prototype sponsor no longer
intends to offer for adoption. Such written
notification should be sent to the address
in section 12.03 and should refer to the
file folder number appearing on the latest
opinion letter issued.
.02 A prototype sponsor that intends to
abandon an approved § 403(b) prototype
plan that is in use by any adopting eli-
gible employer must inform each adopt-
ing eligible employer that the form of the
plan has been terminated, that the eligible
employer’s plan will become an individu-
ally designed plan (unless the eligible em-
ployer adopts another approved § 403(b)
prototype plan), and that any employer re-
liance will not continue if there is a change
in § 403(b), the regulations, revenue rul-
ings, or other guidance published by the
Service. After so informing all adopting
May 4, 20099252009–18 I.R.B.

eligible employers, the prototype sponsor
must notify EP Rulings and Agreements in
accordance with subsection .01 of this sec-
tion 14.
SECTION 15. REVOCATION
An opinion letter found to be in error or
not in accord with the current views of the
Service may be revoked. However, except
in rare or unusual circumstances, such re-
vocation will not be applied retroactively
if the conditions set forth in sections 13
and 14 of Rev. Proc. 2009–4, 2009–1
I.R.B. 118 (disregarding references therein
to §§ 7428 and 7476) are met. For this pur-
pose, opinion letters will be given the same
effect as rulings. Revocation may be ef-
fected by a notice to the prototype spon-
sor to which the letter was originally is-
sued, or by a regulation, revenue ruling,
or other statement published in the Inter-
nal Revenue Bulletin. The prototype spon-
sor should then notifyeach adopting eligi-
ble employer of the revocation as soon as
possible. The content of the notification
to each adopting eligible employer must
explain how the revocation affects any re-
liance an adopting eligible employer has
on the applicable opinion letter.
SECTION 16. RETROACTIVE
REMEDIAL AMENDMENT
.01 Effective January 1, 2009, a con-
tract does not satisfythe requirements of
§ 403(b) unless the contract is maintained
pursuant to a written plan which, in both
form and operation, satisfies the require-
ments of the 2007 regulations. The transi-
tion relief in Notice 2009–3 sets forth con-
ditions under which a § 403(b) plan will
not be treated as failing to satisfy the re-
quirements of § 403(b) and the 2007 regu-
lations during the 2009 calendar year. The
relief in Notice 2009–3 applies solely with
respect to the 2009 calendar year.
.02Thissection16allowsaneligible
employer to retroactively correct defects
in the form of its written § 403(b) plan
by timely adopting an approved § 403(b)
prototype plan or by otherwise timely
amending its plan and submitting a re-
quest for a determination letter. Under
this remedial amendment provision, an
eligible employer must amend its plan to
the extent necessary to correct any form
defects retroactive to the first day of the
plan’s remedial amendment period. For
this purpose, “the first day of the plan’s
remedial amendment period” means the
later of January 1, 2010, or the effective
date of the plan.
.03 The form of a plan will be treated
as satisfying the requirements of the 2007
regulations as of the first day of the plan’s
remedial amendment period if, on or be-
fore such day, the eligible employer adopts
a written plan that is intended to satisfy the
requirements of § 403(b) and the 2007 reg-
ulations and the conditions in paragraphs
(1) or (2) of this section 16.02 are satisfied:
(1) The eligible employer amends the
plan to the extent necessary to correct any
form defects retroactive to the first day of
the plan’s remedial amendment period by
timely adopting an approved § 403(b) pro-
totype plan. (An eligible employer that
timely adopts an approved § 403(b) pro-
totype plan is not required, but may never-
theless choose, to amend its plan retroac-
tive to January 1, 2009. However, for pur-
poses of Notice 2009–3 and whether the
Service will treat the eligible employer’s
§ 403(b) plan as satisfying the require-
ments of § 403(b) and the 2007 regula-
tions during the 2009 calendar year, only
the plan that was adopted and in effect
on December 31, 2009, will be taken into
account.) For this purpose, an approved
§ 403(b) prototype plan means a plan for
which a favorable opinion letter is issued
pursuant to a timely filed application un-
der this revenue procedure. An applica-
tion for an opinion letter under this rev-
enue procedure is timely filed if (a) the
application is filedwith the Service by a
date to be announced in the future (which
will not be earlier than March 15, 2010), or
(b) if the plan is a word-for-word identical
adopter of a mass submitter plan, the opin-
ion letter application for the mass submit-
ter plan is filed with the Service by a date
to be announced in the future (which will
not be earlier than March 15, 2010), irre-
spective of when the opinion letter applica-
tion for the identical adopter plan is filed.
The Service will announce, in subsequent
guidance, the date by which an approved
§ 403(b) prototype plan must be adopted
to be considered timely adopted for pur-
poses of this section. The Service expects
that eligible employers will have a period
in excess of one year from the date of the
announcement in which to timely adopt an
approved § 403(b) prototype plan.
(2) The eligible employer timely
amends the plan to the extent necessary
to correct any form defects retroactive to
the first day of the plan’s remedial amend-
ment period and timely submits the plan
to the Service for a determination letter.
(An eligible employer that timely submits
its plan for a determination letter is not
required, but may nevertheless choose, to
amend the plan retroactive to January 1,
2009. However, for purposes of Notice
2009–3 and whether the Service will treat
the eligible employer’s § 403(b) plan as
satisfying the requirements of § 403(b) and
the 2007 regulations during the 2009 cal-
endar year, only the plan that was adopted
and in effect on December 31, 2009, will
be taken into account.) Future guidance
regarding the determination letter program
for § 403(b) plans will specify the date by
which a § 403(b) plan must be amended
and submitted to the Service to be con-
sidered timely amended and submitted for
purposes of this section, but this date will
not be earlier than March 15, 2010. Any
amendments required by the Service as
a result of its review of a timely submit-
ted determination letter application for a
§ 403(b) plan will be considered timely
adopted if they are adopted by the 91
st
day following issuance of a determination
letter.
.04 For purposes of this section 16, a
“written plan intended to satisfy the re-
quirements of § 403(b) and the 2007 regu-
lations” includes both a new plan that is in-
tended to satisfy those requirements and an
existing plan that has been amended with
the intent of satisfying those requirements,
including a plan that is based on the model
plan language in Rev. Proc. 2007–71 and
a plan that is an adoption of a § 403(b) pro-
totype plan that has been timely submit-
ted for an opinion letter under this revenue
procedure.
SECTION 17. EFFECT ON OTHER
DOCUMENTS
Section 6.03 of Rev. Proc. 2009–8 is
modified to provide that the user fee for
an application for an opinion letter for a
§ 403(b) prototype plan is the same user
fee that would apply if the application were
for a master or prototype plan.
2009–18 I.R.B.926May 4, 2009

SECTION 18. EFFECTIVE DATE
This revenue procedure is effective
[TO BE ADDED WHEN FINALIZED].
SECTION 19. PAPERWORK
REDUCTION ACT
[TO BE ADDED WHEN FINAL-
IZED].
DRAFTING INFORMATION
The principal authors of this rev-
enue procedure are Angelique Carrington
and James P. Flannery of the Employee
Plans, Tax Exempt and Government
Entities Division. For further information
regarding this revenue procedure,
please contact the Employee Plans
taxpayer assistance answering service at
1–877–829–5500 (a toll-free number) or
e-mail Ms. Carrington or Mr. Flannery at
RetirementPlanQuestions@irs.gov.
Guidance Regarding Foreign
Base Company Sales Income;
Hearing Cancellation
Announcement 2009–36
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Cancellation of notice of public
hearing on proposed rulemaking.
SUMMARY: This document cancels a
public hearing on proposed rulemaking
relating to the foreign base company sales
income, in cases in which personal prop-
erty sold by a controlled foreign corpora-
tion (CFC) is manufactured, produced, or
constructed pursuant to a contract manu-
facturing arrangement or by one or more
branches of the CFC. The temporary reg-
ulations modify the foreign base company
sales income regulations to address current
business structures and practices, particu-
larly the growing importance of contract
manufacturing and other manufacturing
arrangements. The temporary regulations,
in general, will affect CFCs and their
United States shareholders.
DATE: The public hearing, originally
scheduled for April 20, 2009, at 10 a.m.,
is cancelled.
FOR FURTHER INFORMATION
CONTACT: Richard A. Hurst of the Pub-
lications and Regulations Branch, Legal
Processing Division, Associate Chief
Counsel (Procedure and Administration),
atRichard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
A notice of public hearing that appeared
in theFederal Registeron Monday,
December 29, 2008 (REG–150066–08,
2009–5 I.R.B. 423 [73 FR 79421]), an-
nounced that a public hearing was sched-
uled for April 20, 2009, at 10 a.m., in the
auditorium, Internal Revenue Building,
1111 Constitution Avenue, NW, Washing-
ton, DC. The subject of the public hearing
is under section 954 of the Internal Rev-
enue Code.
The public comment period for these
regulations expired on March 30, 2009.
Outlines of topics to be discussed at the
hearing were due on April 2, 2009. The no-
tice of proposed rulemaking and notice of
public hearing instructed those interested
in testifying at the public hearing to sub-
mit an outline of the topics to be addressed.
As of Monday, April 6, 2009, no one has
requested to speak. Therefore, the public
hearing scheduled for April 20, 2009, is
cancelled.
LaNita Van Dyke,
Chief, Publications and
Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on April 8, 2009,
8:45 a.m., and published in the issue of the Federal Register
for April 9, 2009, 74 F.R. 16161)
May 4, 20099272009–18 I.R.B.

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.
2009–18 I.R.B.iMay 4, 2009

Numerical Finding List
1
Bulletins 2009–1 through 2009–18
Announcements:
2009-1, 2009-1 I.R.B.242
2009-2, 2009-5 I.R.B.424
2009-3, 2009-6 I.R.B.459
2009-4, 2009-8 I.R.B.597
2009-5, 2009-8 I.R.B.569
2009-6, 2009-9 I.R.B.643
2009-7, 2009-10 I.R.B.663
2009-8, 2009-8 I.R.B.598
2009-9, 2009-9 I.R.B.643
2009-10, 2009-9 I.R.B.644
2009-11, 2009-10 I.R.B.663
2009-12, 2009-11 I.R.B.686
2009-13, 2009-11 I.R.B.686
2009-14, 2009-11 I.R.B.687
2009-15, 2009-11 I.R.B.687
2009-16, 2009-11 I.R.B.691
2009-17, 2009-12 I.R.B.714
2009-18, 2009-12 I.R.B.714
2009-19, 2009-12 I.R.B.715
2009-20, 2009-12 I.R.B.716
2009-21, 2009-13 I.R.B.730
2009-22, 2009-13 I.R.B.731
2009-23, 2009-13 I.R.B.731
2009-24, 2009-13 I.R.B.732
2009-25, 2009-14 I.R.B.755
2009-26, 2009-14 I.R.B.755
2009-27, 2009-14 I.R.B.756
2009-28, 2009-15 I.R.B.760
2009-29, 2009-14 I.R.B.757
2009-30, 2009-15 I.R.B.794
2009-31, 2009-15 I.R.B.798
2009-32, 2009-15 I.R.B.799
2009-33, 2009-15 I.R.B.799
2009-34, 2009-18 I.R.B.916
2009-35, 2009-17 I.R.B.892
2009-36, 2009-18 I.R.B.927
Notices:
2009-1, 2009-2 I.R.B.250
2009-2, 2009-4 I.R.B.344
2009-3, 2009-2 I.R.B.250
2009-4, 2009-2 I.R.B.251
2009-5, 2009-3 I.R.B.309
2009-6, 2009-3 I.R.B.311
2009-7, 2009-3 I.R.B.312
2009-8, 2009-4 I.R.B.347
2009-9, 2009-5 I.R.B.419
2009-10, 2009-5 I.R.B.419
2009-11, 2009-5 I.R.B.420
2009-12, 2009-6 I.R.B.446
2009-13, 2009-6 I.R.B.447
Notices— Continued:
2009-14, 2009-7 I.R.B.516
2009-15, 2009-6 I.R.B.449
2009-16, 2009-8 I.R.B.572
2009-17, 2009-8 I.R.B.575
2009-18, 2009-10 I.R.B.648
2009-19, 2009-10 I.R.B.660
2009-20, 2009-12 I.R.B.711
2009-21, 2009-13 I.R.B.724
2009-22, 2009-14 I.R.B.741
2009-23, 2009-16 I.R.B.802
2009-24, 2009-16 I.R.B.817
2009-25, 2009-15 I.R.B.758
2009-26, 2009-16 I.R.B.833
2009-27, 2009-16 I.R.B.838
2009-29, 2009-16 I.R.B.849
2009-30, 2009-16 I.R.B.852
2009-31, 2009-16 I.R.B.856
2009-32, 2009-17 I.R.B.865
2009-33, 2009-17 I.R.B.865
2009-34, 2009-17 I.R.B.876
2009-35, 2009-17 I.R.B.876
2009-36, 2009-17 I.R.B.883
2009-37, 2009-18 I.R.B.898
2009-38, 2009-18 I.R.B.901
2009-39, 2009-18 I.R.B.902
Proposed Regulations:
REG-144615-02, 2009-7 I.R.B.561
REG-144689-04, 2009-18 I.R.B.906
REG-148568-04, 2009-5 I.R.B.421
REG-160872-04, 2009-4 I.R.B.358
REG-158747-06, 2009-4 I.R.B.362
REG-116699-07, 2009-13 I.R.B.727
REG-138326-07, 2009-9 I.R.B.638
REG-143686-07, 2009-8 I.R.B.579
REG-150670-07, 2009-4 I.R.B.378
REG-113462-08, 2009-4 I.R.B.379
REG-147636-08, 2009-9 I.R.B.641
REG-150066-08, 2009-5 I.R.B.423
Revenue Procedures:
2009-1, 2009-1 I.R.B.1
2009-2, 2009-1 I.R.B.87
2009-3, 2009-1 I.R.B.107
2009-4, 2009-1 I.R.B.118
2009-5, 2009-1 I.R.B.161
2009-6, 2009-1 I.R.B.189
2009-7, 2009-1 I.R.B.226
2009-8, 2009-1 I.R.B.229
2009-9, 2009-2 I.R.B.256
2009-10, 2009-2 I.R.B.267
2009-11, 2009-3 I.R.B.313
2009-12, 2009-3 I.R.B.321
2009-13, 2009-3 I.R.B.323
2009-14, 2009-3 I.R.B.324
Revenue Procedures— Continued:
2009-15, 2009-4 I.R.B.356
2009-16, 2009-6 I.R.B.449
2009-17, 2009-7 I.R.B.517
2009-18, 2009-11 I.R.B.670
2009-19, 2009-14 I.R.B.747
2009-20, 2009-14 I.R.B.749
2009-21, 2009-16 I.R.B.860
2009-22, 2009-16 I.R.B.862
2009-23, 2009-17 I.R.B.884
2009-24, 2009-17 I.R.B.885
Revenue Rulings:
2009-1, 2009-2 I.R.B.248
2009-2, 2009-2 I.R.B.245
2009-3, 2009-5 I.R.B.382
2009-4, 2009-5 I.R.B.408
2009-5, 2009-6 I.R.B.432
2009-6, 2009-12 I.R.B.694
2009-7, 2009-13 I.R.B.717
2009-8, 2009-10 I.R.B.645
2009-9, 2009-14 I.R.B.735
2009-10, 2009-14 I.R.B.738
2009-11, 2009-18 I.R.B.896
Tax Conventions:
2009-5, 2009-8 I.R.B.569
Treasury Decisions:
9434, 2009-4 I.R.B.339
9435, 2009-4 I.R.B.333
9436, 2009-3 I.R.B.268
9437, 2009-4 I.R.B.341
9438, 2009-5 I.R.B.387
9439, 2009-5 I.R.B.416
9440, 2009-5 I.R.B.409
9441, 2009-7 I.R.B.460
9442, 2009-6 I.R.B.434
9443, 2009-8 I.R.B.564
9444, 2009-9 I.R.B.603
9445, 2009-9 I.R.B.635
9446, 2009-9 I.R.B.607
9447, 2009-12 I.R.B.694
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin
2008–52, dated December 29, 2008.
May 4, 2009ii2009–18 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2009–1 through 2009–18
Notices:
99-35
Obsoleted by
Notice 2009-15, 2009-6 I.R.B.449
2001-55
Modified by
Notice 2009-1, 2009-2 I.R.B.250
2002-27
Modified by
Notice 2009-9, 2009-5 I.R.B.419
2005-74
Obsoleted by
T.D. 9446, 2009-9 I.R.B.607
2007-26
Modified by
Notice 2009-15, 2009-6 I.R.B.449
2007-52
Clarified, modified, and amplified by
Notice 2009-24, 2009-16 I.R.B.817
2007-53
Clarified, modified, and ampilfied by
Notice 2009-23, 2009-16 I.R.B.802
2007-54
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-11
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-12
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-13
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
List of forms modified and superseded by
Rev. Proc. 2009-11, 2009-3 I.R.B.313
Modified and clarified by
Notice 2009-5, 2009-3 I.R.B.309
2008-46
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-100
Amplified and superseded by
Notice 2009-14, 2009-7 I.R.B.516
Notices— Continued:
2008-110
Modified by
Notice 2009-34, 2009-17 I.R.B.876
Proposed Regulations:
REG-144615-02
Corrected by
Ann. 2009-19, 2009-12 I.R.B.715
REG-149519-03
Withdrawn by
Ann. 2009-4, 2009-8 I.R.B.597
REG-148326-05
Corrected by
Ann. 2009-14, 2009-11 I.R.B.687
REG-158747-06
Hearing scheduled by
Ann. 2009-29, 2009-14 I.R.B.757
REG-150066-08
Corrected by
Ann. 2009-31, 2009-15 I.R.B.798
Hearing cancelled by
Ann. 2009-36, 2009-18 I.R.B.927
Revenue Procedures:
2007-17
Superseded by
Rev. Proc. 2009-14, 2009-3 I.R.B.324
2007-66
Modified and superseded by
Rev. Proc. 2009-21, 2009-16 I.R.B.860
2007-68
Superseded by
Rev. Proc. 2009-17, 2009-7 I.R.B.517
2007-71
Modified by
Notice 2009-3, 2009-2 I.R.B.250
2008-1
Superseded by
Rev. Proc. 2009-1, 2009-1 I.R.B.1
2008-2
Superseded by
Rev. Proc. 2009-2, 2009-1 I.R.B.87
2008-3
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-4
Superseded by
Rev. Proc. 2009-4, 2009-1 I.R.B.118
2008-5
Superseded by
Rev. Proc. 2009-5, 2009-1 I.R.B.161
Revenue Procedures— Continued:
2008-6
Superseded by
Rev. Proc. 2009-6, 2009-1 I.R.B.189
2008-7
Superseded by
Rev. Proc. 2009-7, 2009-1 I.R.B.226
2008-8
Superseded by
Rev. Proc. 2009-8, 2009-1 I.R.B.229
2008-9
Superseded by
Rev. Proc. 2009-9, 2009-2 I.R.B.256
2008-17
Obsoleted in part by
Rev. Proc. 2009-18, 2009-11 I.R.B.670
2008-61
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-65
Amplified and supplemented by
Rev. Proc. 2009-16, 2009-6 I.R.B.449
2008-66
Modified and superseded by
Rev. Proc. 2009-21, 2009-16 I.R.B.860
2008-68
Amplified and superseded by
Rev. Proc. 2009-15, 2009-4 I.R.B.356
Revenue Rulings:
65-286
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
71-381
Obsoleted in part by
Rev. Rul. 2009-9, 2009-14 I.R.B.735
76-54
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
92-19
Supplemented by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
2008-19
Modified by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
Treasury Decisions:
9436
Corrected by
Ann. 2009-15, 2009-11 I.R.B.687
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin 2008–52, dated December 29,
2008.
2009–18 I.R.B.iiiMay 4, 2009

Treasury Decisions— Continued:
9438
Corrected by
Ann. 2009-30, 2009-15 I.R.B.794
9439
Corrected by
Ann. 2009-12, 2009-11 I.R.B.686
9441
Corrected by
Ann. 2009-18, 2009-12 I.R.B.714
9442
Corrected by
Ann. 2009-13, 2009-11 I.R.B.686
Ann. 2009-20, 2009-12 I.R.B.716
9446
Corrected by
Ann. 2009-23, 2009-13 I.R.B.731
May 4, 2009iv2009–18 I.R.B.

2009–18 I.R.B.May 4, 2009

May 4, 20092009–18 I.R.B.

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