Internal Revenue Bulletin 2005-45 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 200
5-45
November 7, 2005
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
SPECIAL ANNOUNCEMENT
Announcement 2005–81, page 941.
The Eighteenth Annual Institute on Current Issues in Interna-
tional Taxation, jointly sponsored by the Internal Revenue Ser-
vice and The George Washington University Law School, will be
held on December 8 and 9, 2005, at the J.W. Marriott Hotel in
Washington, DC.
INCOME TAX
Rev. Rul. 2005–70, page 919.
2005 base period T-bill rate.The “base period T-bill rate”
for the period ending September 30, 2005, is published as
required by section 995(f) of the Code.
Rev. Rul. 2005–71, page 923.
Federal rates; adjusted federal rates; adjusted federal
long-termrateandthelong-termexemptrate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for November 2005.
Announc
ement 2005–79, page 941.
Form 888
4,New York Liberty Zone Business Employee Credit,
is obsol
ete as of December 31, 2004. As a result, any carry-
forward
credit from Form 8884 is now reported in Section B
of Form 8
835,Renewable Electricity, Refined Coal, and Indian
Coal Pro
duction Credit.
EMPLOYEE PLANS
Notice 2005–75, page 929.
2006 cost-of-living adjustments; retirement plans, etc.
This notice sets forth certain cost-of-living adjustments effec-
tive January 1, 2006, applicable to the dollar limits on benefits
under qualified defined benefit pension plans and to other provi-
sions affecting (1) certain plans of deferred compensation and
(2) “control employees.” This notice restates the data in News
Release IR-2005-120 issued October 14, 2005.
EXEMPT ORGANIZATIONS
Announcement 2005–82, page 941.
Delta Regional Transit System, Inc., of Greenville, MS; Gibson
Trust, Inc., of Hollywood, FL; Housing Development Group, Inc.,
of Providence, RI; and National Credit Education and Review, of
Canton, MI, no longer qualify as organizations to which contri-
butions are deductible under section 170 of the Code.
Announcement 2005–83, page 941.
A list is provided of organizations now classified as private foun-
dations.
(Continued on the next page)
Announcements of Disbarments and Suspensions begin on page 935.
Fi
nding Lists begin on page ii.

EMPLOYMENT TAX
REG–114371–05, page 930.
Proposed regulations under section 7701 of the Code explain
that certain disregarded entities (qualified subchapter S sub-
sidiaries and single owner eligible entities) are to be treated as
entities separate from their owners for purposes of paying and
reporting federal employment and certain excise taxes.
EXCISE TAX
REG–114371–05, page 930.
Proposed regulations under section 7701 of the Code explain
that certain disregarded entities (qualified subchapter S sub-
sidiaries and single owner eligible entities) are to be treated as
entities separate from their owners for purposes of paying and
reporting federal employment and certain excise taxes.
ADMINISTRA
TIVE
T.D. 9227, p
age 924.
REG–114444
–05, page 934.
Final, temp
orary, and proposed regulations under section 7804
of the Code a
mend 26 CFR Part 801 to clarify when quantity
measures, w
hich are not tax enforcement results, may be used
in measuri
ng organizational and employee performance.
November 7, 20052005–45 I.R.B.

The IRS Mission
Provide America’s taxpayers top quality service by helping
them understand and 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 Sec-
retary (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.
2005–45 I.R.B.November 7, 2005

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of November 2005. See
Rev. Rul. 2005-71, page 923.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and Certain
Built-In Losses Following
Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of November 2005. See Rev.
Rul. 2005-71, page 923.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 467.—Certain
Payments for the Use of
Property or Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
Federal short-term, mid-term, and long-term rates
are set forth for the month of November 2005. See
Rev. Rul. 2005-71, page 923.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 642.—Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of November 2005. See
Rev. Rul. 2005-71, page 923.
Section 807.—Rules for
Certain Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 995.—Taxation
of DISC Income to
Shareholders
2005 base period T-bill rate.The
“base period T-bill rate” for the period
ending September 30, 2005, is published
as required by section 995(f) of the Code.
Rev. Rul. 2005–70
Section 995(f)(1) of the Internal Rev-
enue Code provides that a shareholder of a
DISC shall pay interest each taxable year
in an amount equal to the product of the
shareholder’s DISC-related deferred tax li-
ability for the year and the “base period
T-bill rate.” Under section 995(f)(4), the
base period T-bill rate is the annual rate
of interest determined by the Secretary to
be equivalent to the average of the 1-year
constant maturity Treasury yields, as pub-
lished by the Board of Governors of the
Federal Reserve System, for the 1-year pe-
riod ending on September 30 of the calen-
dar year ending with (or of the most recent
calendar year ending before) the close of
the taxable year of the shareholder. The
base period T-bill rate for the period end-
ing September 30, 2005 is 3.18 percent.
Pursuant to section 6222 of the Code,
interest must be compounded daily. The
table below provides factors for com-
pounding the base period T-bill rate daily
for any number of days in the share-
holder’s taxable year (including a 52–53
week accounting period) for the 2005 base
period T-bill rate. To compute the amount
of the interest charge for the shareholder’s
taxable year, multiply the amount of the
shareholder’s DISC-related deferred tax
liability (as defined in section 995(f)(2))
for that year by the base period T-bill rate
factor corresponding to the number of
days in the shareholder’s taxable year for
which the interest charge is being com-
puted. Generally, one would use the factor
for 365 days. One would use a different
factor only if the shareholder’s taxable
year for which the interest charge being
determined is a short taxable year, if the
shareholder uses the 52–53 week taxable
year, or if the shareholder’s taxable year
is a leap year.
For the base period T-bill rates for the
periods ending in prior years, see Rev. Rul.
2004–99, 2004–2 C.B. 720, Rev. Rul.
2003–111, 2003–2 C.B. 1009, Rev. Rul.
2002–68, 2002–2 C.B. 808, Rev. Rul.
2001–56, 2001–2 C.B. 500, and Rev. Rul.
2000–52, 2000–2 C.B. 516.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is David Bergkuist of the Office of the
Associate Chief Counsel (International).
2005–45 I.R.B.919November 7, 2005

For further information about this revenue
ruling, contact Mr. Bergkuist at (202)
622–3850 (not a toll-free call).
2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
1.000087123
2.000174254
3.000261393
4.000348539
5.000435692
6.000522854
7.000610022
8.000697199
9.000784383
10.000871575
11.000958774
12.001045981
13.001133195
14.001220417
15.001307647
16.001394884
17.001482129
18.001569381
19.001656641
20.001743909
21.001831184
22.001918467
23.002005757
24.002093055
25.002180361
26.002267674
27.002354995
28.002442323
29.002529659
30.002617003
31.002704354
32.002791713
33.002879080
34.002966454
35.003053836
2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
36.003141225
37.003228622
38.003316027
39.003403439
40.003490859
41.003578286
42.00366572
1
43.003753164
44.003840614
45.003928072
46.004015537
47.00410
3011
48.004190491
49.004277980
50.004365476
51.004452979
52.004
540491
53.004628009
54.004715536
55.004803070
56.004890612
57.0
04978161
58.005065718
59.005153283
60.005240855
61.005328435
62.005416022
63.005503618
64.005591220
65.005678831
66.005766449
67.005854075
68.005941708
69.006029349
70.006116997
71.006204654
72.006292317
73.006379989
74.006467668
75.006555355
2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
76.006643049
77.006730751
78.006818461
79.006906178
80.006993903
81.007081636
82.00716937
6
83.007257124
84.007344880
85.007432643
86.007520414
87.00760
8192
88.007695978
89.007783772
90.007871574
91.007959383
92.008
047199
93.008135024
94.008222856
95.008310695
96.008398543
97.0
08486398
98.008574260
99.008662131
100.008750009
101.008837894
102.008925788
103.009013689
104.009101597
105.009189513
106.009277437
107.009365369
108.009453308
109.009541255
110.009629210
111.009717172
112.009805142
113.009893119
114.009981104
115.010069097
November 7, 20059202005–45 I.R.B.

2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
116.010157098
117.010245106
118.010333122
119.010421145
120.010509177
121.010597216
122.01068526
2
123.010773316
124.010861378
125.010949448
126.011037525
127.01112
5610
128.011213703
129.011301803
130.011389911
131.011478026
132.011
566150
133.011654281
134.011742419
135.011830566
136.011918720
13
7
.0
12006881
138.012095051
139.012183228
140.012271412
141.012359605
142.012447805
143.012536013
144.012624228
145.012712451
146.012800682
147.012888921
148.012977167
149.013065421
150.013153682
151.013241952
152.013330229
153.013418513
154.013506806
155.013595106
2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
156.013683413
157.013771729
158.013860052
159.013948383
160.014036721
161.014125068
162.01421342
1
163.014301783
164.014390152
165.014478529
166.014566914
167.01465
5306
168.014743707
169.014832114
170.014920530
171.015008953
172.015
097384
173.015185823
174.015274269
175.015362723
176.015451185
17
7
.0
15539654
178.015628131
179.015716616
180.015805109
181.015893609
182.015982117
183.016070633
184.016159156
185.016247687
186.016336226
187.016424773
188.016513327
189.016601889
190.016690459
191.016779036
192.016867621
193.016956214
194.017044815
195.017133423
2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
196.017222039
197.017310663
198.017399294
199.017487933
200.017576580
201.017665235
202.01775389
7
203.017842567
204.017931245
205.018019930
206.018108624
207.01819
7325
208.018286033
209.018374750
210.018463474
211.018552206
212.018
640945
213.018729693
214.018818448
215.018907211
216.018995981
21
7
.0
19084760
218.019173546
219.019262339
220.019351141
221.019439950
222.019528767
223.019617592
224.019706424
225.019795264
226.019884112
227.019972968
228.020061831
229.020150702
230.020239581
231.020328468
232.020417362
233.020506264
234.020595174
235.020684092
2005–45 I.R.B.921November 7, 2005

2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
236.020773017
237.020861950
238.020950891
239.021039840
240.021128796
241.021217760
242.02130673
2
243.021395712
244.021484699
245.021573694
246.021662697
247.02175
1708
248.021840726
249.021929752
250.022018786
251.022107828
252.022
196877
253.022285934
254.022374999
255.022464072
256.022553152
25
7
.0
22642240
258.022731336
259.022820440
260.022909551
261.022998671
262.023087798
263.023176933
264.023266075
265.023355225
266.023444383
267.023533549
268.023622723
269.023711904
270.023801093
271.023890290
272.023979495
273.024068707
274.024157928
275.024247156
2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
276.024336391
277.024425635
278.024514886
279.024604145
280.024693412
281.024782687
282.02487196
9
283.024961260
284.025050558
285.025139863
286.025229177
287.02531
8498
288.025407827
289.025497164
290.025586509
291.025675861
292.025
765222
293.025854590
294.025943966
295.026033349
296.026122741
29
7
.0
26212140
298.026301547
299.026390962
300.026480384
301.026569814
302.026659253
303.026748699
304.026838152
305.026927614
306.027017083
307.027106560
308.027196045
309.027285538
310.027375038
311.027464547
312.027554063
313.027643587
314.027733118
315.027822658
2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
316.027912205
317.028001760
318.028091323
319.028180894
320.028270472
321.028360058
322.02844965
3
323.028539254
324.028628864
325.028718482
326.028808107
327.02889
7740
328.028987381
329.029077030
330.029166687
331.029256351
332.029
346023
333.029435703
334.029525391
335.029615087
336.029704790
33
7
.0
29794501
338.029884220
339.029973947
340.030063682
341.030153425
342.030243175
343.030332933
344.030422699
345.030512473
346.030602254
347.030692044
348.030781841
349.030871646
350.030961459
351.031051280
352.031141109
353.031230945
354.031320789
355.031410641
November 7, 20059222005–45 I.R.B.

2005 ANNUAL RATE,
COMPOUNDED DAILY
3.180 PERCENT
DAYSFACTOR
356.031500501
357.031590369
358.031680244
359.031770128
360.031860019
361.031949918
362.03203982
5
363.032129740
364.032219662
365.032309593
366.032399531
367.03248
9477
368.032579431
369.032669392
370.032759362
371.032849339
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments Issued for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate and the
long-term exempt rate.For purposes of
sections 382, 642, 1274, 1288, and other
sections of the Code, tables set forth the
rates for November 2005.
Rev. Rul. 2005–71
This revenue ruling provides various
prescribed rates for federal income tax
purposes for November 2005 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month
for purposes of section 1274(d) of the
Internal Revenue Code. Table 2 contains
the short-term, mid-term, and long-term
adjusted applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the ap-
propriate percentages for determining the
low-income housing credit described in
section 42(b)(2) for buildings placed in
service during the current month. Finally,
Table 5 contains the federal rate for deter-
mining the present value of an annuity, an
interest for life or for a term of years, or
a remainder or a reversionary interest for
purposes of section 7520.
REV.
RUL. 2005–71 TABLE 1
Applicable Federal Rates(AFR) for November 2005
Period for Compounding
Ann
ual
Sem
iannual
Qua
rterly
Mon
thly
Short-term
AFR4.04%4.00%3.98%3.97%
110% AFR4.45%4.40%4.38%4.36%
12
0% AFR
4.
86%
4.
80%
4.
77%
4.
75%
130% AFR5.27%5.20%5.17%5.14%
M
id-term
AFR4.23%4.19%4.17%4.15%
1
10% AFR
4
.66%
4
.61%
4
.58%
4
.57%
120% AFR5.09%5.03%5.00%4.98%
130% AFR5.52%5.45%5.41%5.39%
150% AFR6.39%6.29%6.24%6.21%
175% AFR7.46%7.33%7.26%7.22%
Long-term
AFR4.57%4.52%4.49%4.48%
110% AFR5.03%4.97%4.94%4.92%
120% AFR5.49%5.42%5.38%5.36%
130% AFR5.97%5.88%5.84%5.81%
2005–45 I.R.B.923November 7, 2005

REV. RUL. 2005–
71 TABLE 2
Adjusted AFR for November 2005
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted
AFR
2.87%2.85%2.84%2.83%
Mid-term adjusted AFR3.32%3.29%3.28%3.27%
Long-term ad
justed
AFR
4.22%4.18%4.16%4.14%
REV. RUL. 2005–71 TABLE 3
Rates Under Section 382 for November 2005
Adjusted federal long-term rate for the current month4.22%
Long-term tax-exempt rate for ownership changes during the current mon
th (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)4.24%
REV. RUL. 2005–71 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for November 2005
Appropriate percentage for the 70% present value low-income housing credit8.02%
Appropriate percentage for the 30% present value low-income housing credit3.44%
REV. RUL. 2005–71 TABLE 5
Rate Under Section 7520 for November 2005
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest5.0%
Se
ction 1288.—Treatment
of
Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
Section 7804.—Other
Personnel
26 CFR 801.1: Balanced performance measurement
system; in general.
T.D. 9227
DEPARTMENT OF
THE TREASURY
Internal Revenue Service
26 CFR Part 801
Balanced System for
Measuring Organizational
and Employee Performance
Within the Internal Revenue
Service
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains fi-
nal and temporary regulations relating to
the balanced system for measuring or-
ganizational and employee performance
within the IRS. The temporary regulations
prospectively amend the existing final
regulations in 26 CFR Part 801 to clarify
when quantity measures, which are not
tax enforcement results, may be used in
measuring organizational and employee
performance. The portions of this doc-
ument that are final regulations provide
necessary cross-references to the tempo-
rary regulations. These regulations affect
internal operations of the IRS and the
systems it employs to evaluate the perfor-
mance of organizations within the IRS.
The text of the temporary regulations also
serves as the text of proposed regulations
November 7, 20059242005–45 I.R.B.

(REG–114444–05) set forth in this issue
of the Bulletin.
DATES:Effective Date: These regulations
are effective on October 17, 2005.
Applicability Date: For dates of appli-
cability, see §§801.7 and 801.8T.
FOR FURTHER INFORMATION
CONTACT: Neil Worden, (202) 283–7900
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document amends final regu-
lations in 26 CFR Part 801 (the Final
Regulations) that implement the Balanced
System for Measuring Organizational and
Employee Performance within the IRS.
The Final Regulations were published
in theFederal Registeron August 6,
1999 (T.D. 8830, 1999–2 C.B. 430 [64
FR 42834–42837]). The Final Regula-
tions emanated from section 1201 of the
Internal Revenue Service Restructuring
and Reform Act of 1998, Public Law
105–206, 112 Stat. 685, 713 (1998) (the
Act), which required the IRS to estab-
lish a performance management system
for those employees covered by 5 U.S.C.
4302 that, among other things, establishes
“goals or objectives for individual, group,
or organizational performance (or any
combination thereof), consistent with the
IRS’ performance planning procedures,
including those established under the
Government Performance and Results Act
of 1993, division E of the Clinger-Cohen
Act of 1966 . . ., Revenue Procedure
64–22 . . ., and taxpayer service surveys.”
Section 1201 further required the IRS to
use “such goals and objectives to make
performance distinctions among employ-
ees or groups of employees,” and to use
“performance assessments as a basis for
granting employee awards, adjusting an
employee’s rate of basic pay, and other
appropriate personnel actions . . . .”
In addition, section 1201 of the Act
required that the IRS performance man-
agement system comply with section
1204, which prohibits the use of “records
of tax enforcement results” (ROTERs) in
the evaluation of IRS employees or to sug-
gest or impose production goals for such
employees. Section 1204, however, does
not prohibit the use of quantity measures
in evaluating organizational and employee
performance. The temporary regulations
in this document amend the existing regu-
lations in part 801 to clarify when quantity
measures may be used in measuring orga-
nizational and employee performance.
Explanation of Provisions
The final regulations provide guidance
and direction for the establishment of a
balanced performance measurement sys-
tem for the IRS. The three elements of this
balanced measurement system are (1) cus-
tomer satisfaction measures, (2) employee
satisfaction measures and (3) business re-
sults measures. These organizational mea-
sures may be used to evaluate the perfor-
mance of, or to impose or suggest produc-
tion goals for, any organizational unit.
The temporary regulations contained in
this document relate primarily to the busi-
ness results measures. Business results are
measured through quality measures and
quantity measures. Quality measures are
based on reviews of a statistically valid
sample of cases handled by certain orga-
nizational units such as examination, col-
lection and Automated Collection System
units. The quality review of other work
units is determined according to criteria es-
tablished by the Commissioner or his del-
egate.
The IRS and Treasury Department have
determined that the provisions of the exist-
ing Part 801 regulations that limit the use
of quantity measures in evaluating orga-
nizational units and imposing or suggest-
ing production goals for employees restrict
the IRS’ ability to monitor program per-
formance and track effectiveness of oper-
ations, and have caused confusion as to
what types of data or measures may be
discussed between managers and employ-
ees and reflected in manager and employee
goals. These temporary regulations re-
move the limitations on the use of quantity
measures in evaluatingthe performance of,
or imposing or suggesting goals for orga-
nizational units. These temporary regu-
lations also remove the limitations on the
use of quantity measures to impose or sug-
gest goals for employees. The regulations
continue to provide that performance mea-
sures based on quantity measures will not
be used to evaluate the performance of
such employees. The temporary regula-
tions do not affect the continuing prohibi-
tion on the use of ROTERS to evaluate em-
ployee performance or to impose or sug-
gest production quotas or goals for any em-
ployee.
Special Analyses
It has been determined that this is not
a significant regulatory action as defined
in Executive Order 12866. Therefore,
a regulatory assessment is not required.
It also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply to
these regulations. Forapplicability of the
Regulatory Flexibility Act, please refer
to the cross-reference notice of proposed
rulemaking published elsewhere in this
Bulletin. Pursuant to section 7805(f) of
the Internal Revenue Code, these tempo-
rary regulations will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of these regula-
tions is Karen F. Keller, Office of Asso-
ciate Chief Counsel (General Legal Ser-
vices). However, other personnel from the
IRS participated in their development.
*****
Amendments to the Regulations
Accordingly, 26 CFR Part 801 is
amended as follows:
PART 801—BALANCED SYSTEM FOR
MEASURING ORGANIZATIONAL
AND INDIVIDUAL PERFORMANCE
WITHIN THE INTERNAL REVENUE
SERVICE
Paragraph 1. The authority citation for
Part 801 continues to read in part as fol-
lows:
Authority:5U.S.C.9501***
Par. 2. Section 801.1 is amended by:
1. Adding the new center heading.
2. Removing and reserving paragraph
(b).
The addition reads as follows:
2005–45 I.R.B.925November 7, 2005

REGULATIONS APPLICABLE
BEFORE OCTOBER 17, 2005
§801.1 Balanced performance
measurement system; in general.
*****
Par. 3. Section 801.7 is added to read
as follows:
§801.7 Effective dates.
The provisions of §§801.1 through
801.6 apply before October 17, 2005.
For the applicable provisions on or after
October 17, 2005, see §§801.1T through
801.7T.
Par. 4. Sections 801.1T through 801.8T
and a new center heading are added to read
as follows:
REGULATIONS APPLICABLE ON OR
AFTER OCTOBER 17, 2005
§801.1T Balanced performance
measurement system; in general
(temporary).
(a)In general. (1) The regulations in
this part 801 implement the provisions of
sections 1201 and 1204 of the Internal
Revenue Service Restructuring and Re-
form Act of 1998 (Public Law 105–106,
112 Stat. 685, 715–716, 722) (the Act) and
provide rules relating to the establishment
by the Internal Revenue Service (IRS)
of a balanced performance measurement
system.
(2) Modern management practice and
various statutory andregulatory provisions
require the IRS to set performance goals
for organizational units and to measure the
results achieved by those units with respect
to those goals. To fulfill these require-
ments, the IRS has established a balanced
performance measurement system, com-
posed of three elements: Customer Satis-
faction Measures; Employee Satisfaction
Measures; and Business Results Measures.
The IRS is likewise required to establish
a performance evaluation system for indi-
vidual employees.
(b) [Reserved].
§801.2T Measuring organizational
performance (temporary).
The performance measures that com-
prise the balanced measurement system
will, to the maximum extent possible,
be stated in objective, quantifiable, and
measurable terms and will be used to mea-
sure the overall performance of various
operational units within the IRS. In ad-
dition to implementing the requirements
of the Act, the measures described here
will, where appropriate, be used in es-
tablishing performance goals and making
performance evaluations established,inter
alia, under Division E, National Defense
Authorization Act for Fiscal Year 1996
(the Clinger-Cohen Act of 1996) (Public
Law 104–106, 110 Stat. 186, 679); the
Government Performance and Results Act
of 1993 (Public Law 103–62, 107 Stat.
285); and the Chief Financial Officers Act
of 1990 (Public Law 101–576, 108 Stat.
2838). Thus, organizational measures
of customer satisfaction, employee sat-
isfaction, and business results (including
quality and quantity measures as described
in §801.6T) may be used to evaluate the
performance of or to impose or suggest
production goals for, any organizational
unit.
§801.3T Measuring employee
performance (temporary).
(a)In general. All employees of the
IRS will be evaluated according to the crit-
ical elements and standards or such other
performance criteria as may be established
for their positions. In accordance with
the requirements of 5 U.S.C. 4312, 4313,
and 9508 and section 1201 of the Act, the
performance criteria for each position as
are appropriate to that position, will be
composed of elementsthat support the or-
ganizational measures of Customer Satis-
faction, Employee Satisfaction, and Busi-
ness Results; however, such organizational
measures will not directly determine the
evaluation of individual employees.
(b)Fair and equitable treatment of tax-
payers. In addition to all other criteria re-
quired to be used in the evaluation of em-
ployee performance, all employees of the
IRS will be evaluated on whether they pro-
vided fair and equitable treatment to tax-
payers.
(c)Senior Executive Service and spe-
cial positions. Employees in the Senior
Executive Service will be rated in accor-
dance with the requirements of 5 U.S.C.
4312 and 4313 and employees selected
to fill positions under 5 U.S.C. 9503 will
be evaluated pursuant to workplans, em-
ployment agreements, performance agree-
ments, or similar documents entered into
between the IRS and the employee.
(d)General workforce. The perfor-
mance evaluation system for all other
employees will—
(1) Establish one or more retention
standards for each employee related to the
work of the employee and expressed in
terms of individual performance;
(2) Require periodic determinations of
whether each employee meets or does not
meet the employee’s established retention
standards;
(3) Require that action be taken in ac-
cordance with applicable laws and regu-
lations, with respect to employees whose
performance does not meet the established
retention standards;
(4) Establish goals or objectives for in-
dividual performance consistent with the
IRS’s performance planning procedures;
(5) Use such goals and objectives to
make performance distinctions among em-
ployees or groups of employees; and
(6) Use performance assessments as a
basis for granting employee awards, ad-
justing an employee’s rate of basic pay,
and other appropriate personnel actions, in
accordance with applicable laws and regu-
lations.
(e)Limitations. (1) No employee of the
IRS may use records of tax enforcement
results (as described in §801.6T) to eval-
uate any other employee or to impose or
suggest production quotas or goals for any
employee.
(i) For purposes of the limitation con-
tained in this paragraph (e),employee
has the meaning as defined in 5 U.S.C.
2105(a).
(ii) For purposes of the limitation con-
tained in this paragraph (e),evaluate
includes any process used to appraise or
measure an employee’s performance for
purposes of providing the following:
(A) Any required or requested perfor-
mance rating.
(B) A recommendation for an award
covered by Chapter 45 of Title 5; 5 U.S.C.
5384; or section 1201(a) of the Act.
(C) An assessment of an employee’s
qualifications for promotion, reassign-
ment, or other change in duties.
November 7, 20059262005–45 I.R.B.

(D) An assessment of an employee’s
eligibility for incentives, allowances, or
bonuses.
(E) Ranking of employees for re-
lease/recall and reductions in force.
(2) Employees who are responsible for
exercising judgment with respect to tax en-
forcement results in cases concerning one
or more taxpayers may be evaluated on
work done on such cases only in the con-
text of their critical elements and stan-
dards.
(3) Performance measures based in
whole or in part on quantity measures (as
described in §801.6T) will not be used to
evaluate the performance of any non-su-
pervisory employee who is responsible
for exercising judgment with respect to
tax enforcement results (as described in
§801.6T).
§801.4T Customer satisfaction measures
(temporary).
The customer satisfaction goals and ac-
complishments of operating units within
the IRS will be determined on the basis
of information gathered through various
methods. For example, questionnaires,
surveys and other types of information
gathering mechanisms may be employed
to gather data regarding customer satisfac-
tion. Information to measure customer sat-
isfaction for a particular work unit will be
gathered from a statistically valid sample
of the customers served by that operating
unit and will be used to measure, among
other things, whether those customers be-
lieve that they received courteous, timely,
and professional treatment by the IRS per-
sonnel with whom they dealt. Customers
will be permitted to provide information
requested for these purposes under con-
ditions that guarantee them anonymity.
For purposes of this section, customers
may include individual taxpayers, orga-
nizational units, or employees within the
IRS and external groups affected by the
services performed by the IRS operating
unit.
§801.5T Employee satisfaction measures
(temporary).
The employee satisfaction numerical
ratings to be given operating units within
the IRS will be determined on the basis
of information gathered through various
methods. For example, questionnaires,
surveys, and other information gather-
ingmechanismsmaybeemployedto
gather data regarding satisfaction. The
informationgatheredwillbeusedtomea-
sure, among other factors bearing upon
employee satisfaction, the quality of su-
pervision and the adequacy of training
and support services. All employees of an
operating unit will have an opportunity to
provide information regarding employee
satisfaction within the operating unit under
conditions that guarantee them anonymity.
§801.6T Business results measures
(temporary).
(a)In general. The business results
measures will consist of numerical scores
determined under thequality measures and
the quantity measures described elsewhere
in this section.
(b)Quality measures. Quality mea-
sures will be determined on the basis of a
review by a specially dedicated staff within
the IRS of a statistically valid sample of
work items handled by certain functions
or organizational units determined by the
Commissioner or his delegate such as the
following:
(1)Examination and collection units
and Automated Collection System Units
(ACS). The quality review of the handling
of cases involving particular taxpayers will
focus on such factors as whether IRS per-
sonnel devoted an appropriate amount of
time to a matter, properly analyzed the
facts, and complied with statutory, regula-
tory, and IRS procedures, including time-
liness, adequacy of notifications, and re-
quired contacts with taxpayers.
(2)Toll-free telephone sites. The qual-
ity review of telephone services will focus
on such factors as whether IRS personnel
provided accurate tax law and account in-
formation.
(3)Other work units. The quality re-
view of other work units will be deter-
mined according to criteria prescribed by
the Commissioner or his delegate.
(c)Quantity measures. Quantity mea-
sures will consist of outcome-neutral pro-
duction and resource data that does not
contain information regarding the tax en-
forcement result reached in any case that
involves particular taxpayers. Examples
of quantity measures include, but are not
limited to—
(1) Cases started;
(2) Cases closed;
(3) Work items completed;
(4) Customer education, assistance, and
outreach efforts completed;
(5) Time per case;
(6) Direct examination time/out of of-
fice time;
(7) Cycle time;
(8) Number or percentage of overage
cases;
(9) Inventory information;
(10) Toll-free level of access; and
(11) Talk time.
(d)Definitions—(1)Tax enforcement
results. A tax enforcement result is the
outcome produced by an IRS employee’s
exercise of judgment in recommending
or determining whether or how the IRS
should pursue enforcement of the tax
laws. Examples of tax enforcement re-
sults include a lien filed, a levy served,
a seizure executed, the amount assessed,
the amount collected, and a fraud referral.
Examples of data that are not tax enforce-
ment results include a quantity measure
and data derived from a quality review or
from a review of an employee’s or a work
unit’s work on a case, such as the number
or percentage of cases in which correct
examination adjustments were proposed
or appropriate lien determinations were
made.
(2)Records of tax enforcement results.
Records of tax enforcement results are
data, statistics, compilations of informa-
tion or other numerical or quantitative
recordations of the tax enforcement re-
sults reached in one or more cases. Such
records may be used for purposes such as
forecasting, financial planning, resource
management, and the formulation of case
selection criteria. Records of tax en-
forcement results may be used to develop
methodologies and algorithms for use in
selecting tax returns to audit. Records of
tax enforcement results do not include tax
enforcement results of individual cases
when used to determine whether an em-
ployee exercised appropriate judgment
in pursuing enforcement of the tax laws
based upon a review of the employee’s
work on that individual case.
§801.7T Examples (temporary).
(a) The rules of §801.3T are illustrated
by the following examples:
2005–45 I.R.B.927November 7, 2005

Example 1. (i) Each year Division A’s Examina-
tion and Collection functions develop detailed work-
plans that set goals for specific activities (e.g., num-
ber of audits or accounts closed) and for other quan-
tity measures such as cases started, cycle time, over-
age cases, and direct examination time. These quan-
tity measure goals are developed nationally and by
Area Office based on budget allocations, available re-
sources, historical experience, and planned improve-
ments. These plans also include information on mea-
sures of quality, customer satisfaction, and employee
satisfaction. Results are updated monthly to reflect
how each organizational unit is progressing against
its workplan, and this information is shared with all
levels of management.
(ii) Although specific workplans are not devel-
oped at the Territory level, Headquarters management
expects the Area Directors to use the information in
the Area plans to guide the activity in their Territo-
ries. For 2005, Area Office 1’s workplan has a goal
to close 1,000 examinations of small business cor-
porations and 120,000 taxpayer delinquent accounts
(TDAs), and there are 10 Exam Territories and 12
Collection Territories in Area Office 1. While tak-
ing into account the mix and priority of workload,
and available staffing and grade levels, the Exami-
nation Area Director communicates to the Territory
Managers the expectation that, on average, each Ter-
ritory should plan to close about 100 cases. The Col-
lection Area Director similarly communicates to each
Territory the expectation that, on average, they will
close about 10,000 TDAs, subject to similar factors
of workload mix and staffing.
(iii) Similar communications then occur at the
next level of management between Territory Man-
agers and their Group Managers, and between Group
Managers and their employees. These communica-
tions will emphasize the overall goals of the organ-
ization and each employee’s role in meeting those
goals. The communications will include expectations
regarding the average number of case closures that
wouldhavetooccurtoreachthosegoals,takinginto
account the fact that each employee’s actual closures
will vary based upon the facts and circumstances of
specific cases.
(iv) Setting these quantity measure goals, and the
communication of those goals, is permissible because
case closures are a quantity measure. Case closures
are an example of outcome-neutral production data
that does not specify the outcome of any specific case
such as the amount assessed or collected.
Example 2. In conducting a performance evalua-
tion, a supervisor is permitted to take into considera-
tion information the supervisor has developed show-
ing that the employee failed to propose an appropri-
ate adjustment to tax liability in one of the cases the
employee examined, provided that information is de-
rived from a review of the work done on the case. All
information derived from such a review of individ-
ual cases handled by the employee, including time
expended, issues raised, and enforcement outcomes
reached should be considered and discussed with the
employeeandusedinevaluatingtheemployee.
Example 3. When assigning a case, a supervisor
is permitted to discuss with the employee the mer-
its, issues, and development of techniques of the case
based upon a review of the case file.
Example 4. A supervisor is not permitted to estab-
lish a goal for proposed adjustments in a future exam-
ination.
(b) [Reserved].
§801.8T Effective dates (temporary).
(a) The provisions of §§801.1T through
801.7T apply on or after October 17, 2005.
(b) The applicability of §§801.1T
through 801.7T expires on or before Oc-
tober 14, 2008.
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
Approved October 3, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary
(Tax Policy).
(Filed by the Office of the Federal Register on October 14,
2005, 8:45 a.m., and published in the issue of the Federal
Register for October 17, 2005, 70 F.R. 60214)
Section 7872.—Treatment
of Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2005. See Rev. Rul. 2005-71, page
923.
November 7, 20059282005–45 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
2006 Limitations Adjusted As
Provided in Section 415(d),
etc.
1
Notice 2005–75
Section 415 of the Internal Revenue
Code (the Code) provides for dollar lim-
itations on benefits and contributions un-
der qualified retirement plans. Section 415
also requires that the Commissioner annu-
ally adjust these limits for cost-of-living
increases. Other limitations applicable to
deferred compensation plans are also af-
fected by these adjustments. Many of the
limitations will change for 2006. For most
of the limitations, the increase in the cost-
of-living index met the statutory thresh-
olds that trigger their adjustment. Further-
more, several of these limitations, set by
the Economic Growth and Tax Relief Rec-
onciliation Act of 2001 (EGTRRA), are
scheduled to increase at the beginning of
2006. For example, under EGTRRA, the
limitation under § 402(g)(1) of the Code
on the exclusion for elective deferrals de-
scribed in § 402(g)(3) is increased from
$14,000 to $15,000. This limitation affects
elective deferrals to section 401(k) plans
and to the Federal Government’s Thrift
Savings Plan, among other plans.
Cost-of-Living limits for 2006
Effective January 1, 2006, the limita-
tion on the annual benefit under a defined
benefit plan under § 415(b)(1)(A) is in-
creased from $170,000 to $175,000. For
participants who separated from service
before January 1, 2006, the limitation for
defined benefit plans under § 415(b)(1)(B)
is computed by multiplying the partic-
ipant’s compensation limitation, as ad-
justed through 2005, by 1.0383.
The limitation for defined contribution
plans under § 415(c)(1)(A) is increased
from $42,000 to $44,000.
The Code provides that various other
dollar amounts are to be adjusted at the
same time and in the same manner as the
dollar limitation of § 415(b)(1)(A). These
dollar amounts and the adjusted amounts
are as follows:
The annual compensation limit under
§§ 401(a)(17), 404(l), 408(k)(3)(C),
and 408(k)(6)(D)(ii) is increased from
$210,000 to $220,000.
The dollar limitation under
§ 416(i)(1)(A)(i) concerning the
definition of key employee in a
top-heavy plan is increased from
$135,000 to $140,000.
Thedollaramountunder
§ 409(o)(1)(C)(ii) for determining
the maximum account balance in an
employee stock ownership plan sub-
ject to a 5-year distribution period is
increased from $850,000 to $885,000,
while the dollar amount used to de-
termine the lengthening of the 5-year
distribution period is increased from
$170,000 to $175,000.
The limitation used in the definition
of highly compensated employee un-
der § 414(q)(1)(B) is increased from
$95,000 to $100,000.
The annual compensation limitation
under § 401(a)(17) for eligible partic-
ipants in certain governmental plans
that, under the plan as in effect on July
1, 1993, allowed cost-of-living adjust-
ments to the compensation limitation
under the plan under § 401(a)(17) to be
taken into account, is increased from
$315,000 to $325,000.
The compensation amount under
§ 408(k)(2)(C) regarding simplified
employee pensions (SEPs) remains un-
changed at $450.
The compensation amounts under
§ 1.61–21(f)(5)(i) of the Income Tax
Regulations concerning the definition
of “control employee” for fringe benefit
valuation purposes remains unchanged
at $85,000. The compensation amount
under § 1.61–21(f)(5)(iii) is increased
from $170,000 to $175,000.
The limitation under § 408(p)(2)(E) re-
garding SIMPLE retirement accounts
remains unchanged at $10,000.
Limitations specified by statute
The Code, as amended by EGTRRA,
specifies the applicable dollar amount for
a particular year for certain limitations.
These applicable dollar amounts are as fol-
lows:
The limitation under § 402(g)(1) on
the exclusion for elective deferrals de-
scribed in § 402(g)(3) is increased from
$14,000 to $15,000.
The limitation on deferrals under
§ 457(e)(15) concerning deferred com-
pensation plans of state and local gov-
ernments and tax-exempt organizations
is increased from $14,000 to $15,000.
The dollar limitation under
§ 414(v)(2)(B)(i) for catch-up con-
tributions to an applicable employer
plan other than a plan described in
§ 401(k)(11) or 408(p) for individuals
aged 50 or over is increased from
$4,000 to $5,000. The dollar limitation
under § 414(v)(2)(B)(ii) for catch-up
contributions to an applicable em-
ployer plan described in § 401(k)(11)
or 408(p) for individuals aged 50
or over is increased from $2,000 to
$2,500.
Administrators of defined benefit or de-
fined contribution plans that have received
favorable determination letters should not
request new determination letters solely
because of yearly amendments to adjust
maximum limitations in the plans.
Drafting Information
The principal author of this notice is
John Heil of the Employee Plans, Tax
Exempt and Government Entities Divi-
sion. For further information regarding
the data in this notice, please contact
the Employee Plans’ taxpayer assistance
telephone service at 1–877–829–5500 (a
toll-free call) between the hours of 8 a.m.
and 6:30 p.m. Eastern time Monday
through Friday. For information regarding
themethodologyusedinarrivingatthe
data in this notice, please contact Mr. Heil
at 1–202–283–9888 (not a toll-free call).
1
Based on News Release IR–2005–120 dated October 14, 2005.
2005–45 I.R.B.929November 7, 2005

Part IV. Items of General Interest
Notice of Proposed
Rulemaking
Disregarded Entities;
Employment and Excise
Taxes
REG–114371–05
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations under which qual-
ified subchapter S subsidiaries and sin-
gle-owner eligible entities that currently
are disregarded as entities separate from
their owners for federal tax purposes
would be treated as separate entities for
employment tax and related reporting re-
quirement purposes. These regulations
also propose to treat such disregarded
entities as separate entities for purposes
of certain excise taxes reported on Forms
720, 730, 2290, and 11-C; excise tax re-
funds or payments claimed on Form 8849;
and excise tax registrations on Form 637.
These proposed regulations would affect
disregarded entities and the owners and
employees of disregarded entities in the
payment and reporting of federal employ-
ment taxes. These regulations also would
affect disregarded entities and their own-
ers in the payment and reporting of certain
Federal excise taxes and in registration
and claims related to certain Federal ex-
cise taxes.
DATES: Written or electronic comments
and requests for a public hearing must be
received by January 17, 2006.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–114371–05), room
5203, Internal Revenue Service, P.O. Box
7604, 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–114371–05),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC. Alternatively, taxpayers may
submit electronic comments directly to
the IRS Internet site atwww.irs.gov/regs
or via the Federal eRulemaking Por-
tal atwww.regulations.gov(IRS and
REG–114371–05).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed reg-
ulations, John Richards at (202) 622–6040
(on the employment tax provisions) or
Susan Athy at (202) 622–3130 (on the
excise tax provisions); concerning the
submission of comments or requests for a
hearing, Robin Jones at (202) 622–7180
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
1.Disregarded Entities
Under the Internal Revenue Code
(Code) and its regulations, qualified
subchapter S subsidiaries (QSubs) (un-
der section 1361(b)(3)(B)) and certain
single-owner eligible entities (under
§§301.7701–1 through 301.7701–3 of
the Procedure and Administration Regula-
tions) are disregarded as entities separate
from their owners (“disregarded entities”).
The disregarded entity rules of section
1361(b)(3)(A) and §§301.7701–1 through
301.7701–3 apply for all purposes of the
Code, including employment and excise
taxes.
2.Employment Taxes
Employers are required to deduct and
withhold income and Federal Insurance
Contributions Act (FICA) taxes from their
employees’ wages under sections 3402(a)
and 3102(a), and are separately liable for
theirshareofFICAtaxesaswellasfor
Federal Unemployment Tax Act (FUTA)
taxes under sections 3111 and 3301 (the
withholding, FICA and FUTA taxes are
collectively referred to herein as employ-
ment taxes). Sections 3403, 3102(b),
3111, and 3301 provide that the employer
is the person liable for the withholding
and payment of employment taxes. In
addition, the employer is required to make
timely tax deposits, file employment tax
returns, and issue wage statements (Forms
W–2) to employees (collectively, other
employment tax obligations). An em-
ployer is generally defined as the person
for whom an individual performs ser-
vices as an employee. Sections 3401(d),
3121(d), and 3306(a). Because a disre-
garded entity is not recognized for Federal
tax purposes, the owner of the disregarded
entity is treated as the employer for pur-
poses of employment tax liabilities and all
other employment tax obligations related
to wages paid to employees performing
services for the disregarded entity.
If an entity is disregarded for Federal
tax purposes under section 1361(b)(3)(A)
or §§301.7701–1 through 301.7701–3,
Notice 99–6, 1999–1 C.B. 321, provides
that employment taxes and other em-
ployment tax obligations with respect to
employees performing services for the
disregarded entity may be satisfied in one
of two ways: (1) calculation and payment
of all employment taxes and satisfaction
of all other employment tax obligations
with respect to employees performing
services for the disregarded entity by its
owner under the owner’s name and em-
ployer identification number (EIN); or
(2) separate calculation and payment of
all employment taxes and satisfaction
of all other employment tax obligations
by the disregarded entity with respect to
employees performing services for the
disregarded entity by the disregarded en-
tity under its own name and EIN. The
notice states that ultimate liability for em-
ployment taxes remains with the owner of
the disregarded entity regardless of which
alternative is chosen.
3.Excise Taxes
A.Liability for excise taxes
Liability for federalexcise taxes is im-
posed on certain transactions and activities
under the following chapters of the Inter-
nal Revenue Code (Code).
Chapter 31 imposes retail excise taxes
on the sale or use of special fuels (sec-
tion 4041); the use of fuel in commercial
transportation on inland waterways (sec-
tion 4042); and the sale of heavy trucks and
trailers (section 4051).
Chapter 32 imposes manufacturers ex-
cise taxes on the sale of gas guzzler auto-
mobiles (section 4064); the sale of high-
way-type tires (section 4071); the removal,
November 7, 20059302005–45 I.R.B.

entry, or sale of taxable fuel (section 4081);
the sale of coal (section 4121); the sale of
vaccines (section 4131); and the sale of
sporting goods (section 4161).
Chapter 33 imposes excise taxes on
payments for communications facilities
and services (section 4251); payments for
transportation of persons by air (section
4261); and payments for transportation of
property by air (section 4271).
Chapter 34 imposes excise taxes on
policies issued by foreign insurers (section
4371).
Chapter 35 imposes excise taxes on wa-
gers (sections 4401 and 4411).
Chapter 36 imposes excise taxes on
transportation by water (section 4471) and
the use of heavy highway vehicles (section
4481).
Chapter 38 imposes excise taxes on the
sale of ozone-depleting chemicals and im-
ported taxable products (section 4681).
The IRS does not administer, and these
regulations have no effect on the chapter
32 tax on firearms (section 4181) or the
chapter 36 tax on port use (section 4461).
B.Excise tax registration
A person may be required to register
with the IRS for certain excise tax pur-
poses. Registration may be required un-
der section 4101 with respect to the taxes
imposed on motor fuels or under section
4412 in the case of persons subject to the
occupational tax on wagering. In addition,
section 4222 generally permits sales for
certain exempt purposes to be made on a
tax-free basis only if the sellers and pur-
chasers are registered.
C.Excise tax credits, refunds, and
payments
The Code allows excise taxpayers to
claim credits or refunds for overpayments,
including overpayments determined under
sections 4081(e), 6415, 6416, and 6419
(section 6402). The Code generally al-
lows non-excise taxpayers to claim cred-
itsorpaymentsforfuelsusedfornontax-
able purposes (sections 6420, 6421, and
6427) and allows blenders to claim credits
or payments for the production of alcohol
and biodiesel mixtures (sections 6426 and
6427(e)). Section 34 provides an income
tax credit for amounts payable for the non-
taxable use of fuels under sections 6420,
6421, and 6427, if these amounts have
not been previously claimed, and section
38 provides an income tax credit (general
business credit) for alcohol or biodiesel
used as a fuel (under sections 40 and 40A).
4.Reason for Change
Administrative difficulties have arisen
from the interaction of the disregarded en-
tity rules and the federal employment tax
provisions. Problems have arisen for both
taxpayers and the IRS with respect to re-
porting, payment and collection of em-
ployment taxes, particularly where state
employment tax law also sets requirements
for reporting, payment and collection that
may be in conflict with the federal disre-
garded entity rules. The Treasury Depart-
ment and the IRS believe that treating the
disregarded entity as the employer for pur-
poses of federal employment taxes will im-
prove the administration of the tax laws
and simplify compliance.
Difficulties also have arisen from the
interaction of the disregarded entity rules
and certain federal excise tax provisions.
Many of these provisions rely on state
law, rather than federal law, to determine
liability for an excise tax, attachment of
a tax, and allowance of a credit, refund,
or payment. For example, §48.0–2(b) of
the Manufacturers and Retailers Excise
Tax Regulations provides that such excise
taxes attach when title to an article passes
to the purchaser. In general, determining
when title passes depends on the intention
of the parties. Absent express intention,
however, the laws of the jurisdiction where
the sale is made govern this determination.
Such a determination is required also in
applying certain excise tax credit, refund,
and payment provisions that allow claims
by ultimate purchasers, ultimate vendors,
and producers.
Explanation of Provisions
These proposed regulations would treat
QSubs and single-owner eligible entities
that are disregarded entities for Federal
tax purposes as separate entities for pur-
poses of employment taxes and other re-
quirements of law arising under subtitle
C of the Code, certain excise taxes, and
the application of the rules under subtitle
F of the Code relating to matters such as
reporting, assessment, collection, and re-
funds regarding employment and certain
excise taxes. Under the proposed regula-
tions, these entities generally would con-
tinue to be treated as disregarded entities
for other federal tax purposes.
1.Employment Taxes
The proposed regulations would elimi-
nate disregarded entity status for purposes
of federal employment taxes. A dis-
regarded entity would be regarded for
employment tax purposes, and, accord-
ingly, become liable for employment taxes
on wages paid to employees of the dis-
regarded entity, and be responsible for
satisfying other employment tax obli-
gations (e.g., backup withholding under
section 3406, making timely deposits of
employment taxes, filing returns, and pro-
viding wage statements to employees on
FormsW–2). Theownerofthedisre-
garded entity would no longer be liable
for employment taxes or satisfying other
employment tax obligations with respect
to the employees of the disregarded entity.
The disregarded entity would continue to
be disregarded for other Federal tax pur-
poses. The proposed regulations contain
an example illustrating the interaction of
the income tax provisions and employ-
ment tax provisions. For example, the
proposed regulations illustrate that an in-
dividual owner of a disregarded entity
would continue to be treated as self-em-
ployed for purposes of Self Employment
Contributions Act (SECA) taxes (section
1401et sequitur), and not as an employee
of the disregarded entity for employment
tax purposes.
The employment tax provisions of
these regulations are proposed to apply to
wagespaidonorafterJanuary1following
the date these regulations are published
as final regulations in theFederal Regis-
ter. QSubs, single-owner eligible entities
disregarded under §§301.7701–1 through
301.7701–3, and the owners of such en-
tities may continue to use the procedures
permitted by Notice 99–6 to satisfy the
owners’ employment tax liabilities and
other employment tax obligations for pe-
riods before the effective date of these
regulations. As required by Notice 99–6,
if the owner currently satisfies the employ-
ment tax liabilities and other employment
tax obligations with respect to wages paid
to employees performing services for the
disregarded entity, then the owner must
2005–45 I.R.B.931November 7, 2005

continue to satisfy such liabilities and
obligations until these regulations become
final and effective, at which time Notice
99–6 will be obsoleted.
2.Excise Taxes
The proposed regulations would elimi-
nate disregarded entity status for purposes
of certain excise taxes. An entity that is
disregarded for other federal tax purposes
would be required to pay and report ex-
cise taxes, required and allowed to regis-
ter, and allowed to claim any credits (other
than income tax credits), refunds, and pay-
ments. The excise tax provisions that are
excluded from the proposed regulations
are specified. Because a disregarded en-
tity does not file an income tax return, the
credit on Form 4136 under section 34 is
claimed on the owner’s income tax return
and appropriate identification of the sin-
gle-owner entity and its taxpayer identi-
fication number is required. The income
taxcreditundersection38(includingany
credit under sections 40 and 40A) is not af-
fected by these proposed regulations.
The excise tax provisions in these reg-
ulations are proposed to apply to liabilities
imposed and actions first required or per-
mitted in periods beginning on or after Jan-
uary 1 following the date these regulations
are published as final regulations in the
Federal Register. For periods beginning
before the effective date of these regula-
tions, the IRS will treat payments made by
a disregarded entity, or other actions taken
by a disregarded entity, with respect to the
excise taxes affected by these regulations
as having been made or taken by the sole
owner of that entity. Thus, for such peri-
ods, the owner of a disregarded entity will
be treated as satisfying the owner’s obli-
gations with respect to the excise taxes af-
fected by these regulations, provided that
those obligations are satisfied either (i) by
the owner itself or (ii) by the disregarded
entity on behalf of the owner.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these proposed reg-
ulations, and because these proposed reg-
ulations do not impose a collection of in-
formation 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 notice of proposed rulemak-
ing will be submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on their impact
on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and (8) copies) or electronic comments
that are submitted timely to the IRS. The
IRS and the Treasury Department request
comments on the clarity of the proposed
regulations and how they may be made
easier to understand. In addition, com-
ments are requested specifically on any
transition issues that might arise with re-
spect to employment taxes, and any transi-
tion relief that should be provided with re-
spect to employment tax obligations. All
comments will be available for public in-
spection 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 sched-
uled, notice of the date, time, and place for
the hearing will be published in theFed-
eral Register.
Drafting Information
The principal authors of these regula-
tions are Susan Athy, Office of Associate
Chief Counsel (Passthroughs and Special
Industries), and John Richards, Office of
Associate Chief Counsel (Tax Exempt and
Government Entities). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 301
are proposed to be amended as follows:
PART 1—INCOME TAX
Paragraph 1. The authority citation for
part 1 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.34–1 is revised to read
as follows:
§1.34–1 Special rule for owners of certain
business entities.
Amounts payable under sections 6420,
6421, and 6427 to a business entity that
is treated as separate from its owner un-
der §1.1361–4(a)(8) (relating to certain
qualified subchapter S subsidiaries) or
§301.7701–2(c)(2)(v) of this chapter (re-
lating to certain wholly-owned entities)
are, for purposes of section 34, treated as
payable to the owner of that entity.
§§1.34–2 through 1.34–6 [Removed]
Par. 3. Sections 1.34–2 through 1.34–6
are removed.
Par. 4. Section 1.1361–4 is amended as
follows:
1. In paragraph (a)(1), the language
"Except as otherwise provided in para-
graphs (a)(3) and (a)(6)" is removed, and
"Except as otherwise provided in para-
graphs (a)(3), (a)(6), (a)(7), and (a)(8)" is
added in its place.
2. Paragraphs (a)(7) and (a)(8) are
added.
The additions read as follows:
§1.1361–4 Effect of QSub election.
(a) * * *
(7)Treatment of QSubs for purposes
of employment taxes—(i)In general.A
QSub is treated as a separate corporation
for purposes of Subtitle C — Employ-
ment Taxes and Collection of Income Tax
(Chapters 21, 22, 23, 23A, 24, and 25 of
the Internal Revenue Code).
(ii)Effective date. This paragraph
(a)(7) applies with respect to wages paid
on or after January 1 following the date
these regulations are published as final
regulations in theFederal Register.
(8)Treatment of QSubs for purposes of
certain excise taxes—(i)In general.A
QSub is treated as a separate corporation
for purposes of—
(A) Federal tax liabilities imposed by
Chapters 31, 32 (other than section 4181),
November 7, 20059322005–45 I.R.B.

33, 34, 35, 36 (other than section 4461),
and 38 of the Internal Revenue Code, or
any floor stocks tax imposed on articles
subject to any of these taxes;
(B) Collection of tax imposed by Chap-
ter 33 of the Internal Revenue Code;
(C) Registration under sections 4101,
4222, and 4412; and
(D) Claims of a credit (other than a
credit under section 34), refund, or pay-
ment related to a tax described in para-
graph (a)(8)(A) of this section.
(ii)Effective date. This paragraph
(a)(8) applies to liabilities imposed and ac-
tions first required or permitted in periods
beginning on or after January 1 following
the date these regulations are published as
final regulations in theFederal Register.
Par. 5. Section 1.1361–6 is amended as
follows:
The language “Except as other-
wise provided in §§1.1361–4(a)(3)(iii),
1.1361–4(a)(5)(i), and 1.1361–5(c)(2)"
is removed, and "Except as provided in
§§1.1361–4(a)(3)(iii), 1.1361–4(a)(5)(i),
1.1361–4(a)(6)(iii), 1.1361–4(a)(7)(ii),
1.1361–4(a)(8)(ii), and 1.1361–5(c)(2)" is
added in its place.
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 6. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 7. Section 301.7701–2 is amended
as follows:
1. In paragraph (a), a sentence is added
at the end.
2. In paragraph (c)(2)(i), the language
“A business” is removed, and “Except as
otherwise provided in this paragraph (c), a
business” is added in its place.
3. Paragraphs (c)(2)(iv), (c)(2)(v),
(e)(3), and (e)(4) are added.
The additions read as follows:
§301.7701–2 Business entities;
definitions.
(a) * * * But see paragraphs (c)(2)(iv)
and (v) of this section for special employ-
ment and excise tax rules that apply to an
eligible entity that is otherwise disregarded
as an entity separate from its owner.
*****
(c) * * *
(2) * * *
(iv)Special rule for employment tax
purposes—(A)In general. Paragraph
(c)(2)(i) of this section (relating to certain
wholly owned entities) does not apply to
taxes imposed under Subtitle C — Em-
ployment Taxes and Collection of Income
Tax (Chapters 21, 22, 23, 23A, 24, and 25
of the Internal Revenue Code).
(B)Example. The following example
illustrates the application of paragraph
(c)(2)(iv) of this section:
Example. (i) LLCA is an eligible entity owned
by individual A and is generally disregarded as an
entity separate from its owner for federal tax pur-
poses. However, LLCA is treated as an entity sep-
arate from its owner for purposes of subtitle C of the
Internal Revenue Code. LLCA has employees and
pays wages as defined in sections 3121(a), 3306(b),
and 3401(a).
(ii) LLCA is subject to the provisions of subtitle C
of the Internal Revenue Code and related provisions
under 26 CFR subchapter C, Employment Taxes and
Collection of Income Tax at Source, parts 31 through
39. Accordingly, LLCA is required to perform such
acts as are required of an employer under those pro-
visions of the Code and regulations thereunder that
apply. All provisions of law (including penalties)
and the regulations prescribed in pursuance of law
applicable to employers in respect of such acts are
applicable to LLCA. Thus, for example, LLCA is
liable for income tax withholding, Federal Insurance
Contributions Act (FICA) taxes, and Federal Un-
employment Tax Act (FUTA) taxes. See sections
3402 and 3403 (relating to income tax withhold-
ing); 3102(b) and 3111 (relating to FICA taxes), and
3301 (relating to FUTA taxes). In addition, LLCA
must file under its name and EIN the applicable
Forms in the 94X series, for example, Form 941,
“Employer’s Quarterly Federal Tax Return,” Form
940, “Employer’s Annual Federal Unemployment
(FUTA) Tax Return;” file with the Social Security
Administration and furnish to LLCA’s employees
statements on Forms W–2, “Wage and Tax State-
ment;” and make timely employment tax deposits.
See §§31.6011(a)–1, 31.6011(a)–3, 31.6051–1,
31.6051–2, and 31.6302–1 of this chapter.
(iii) A is self-employed for purposes of subtitle A,
chapter 2, Tax on Self-Employment Income, of the
Internal Revenue Code. Thus, A is subject to tax un-
der section 1401 on A’s net earnings from self-em-
ployment with respect to LLCA’s activities. A is not
an employee of LLCA for purposes of subtitle C of
the Code. Because LLCA is treated as a sole pro-
prietorship of A for income tax purposes, A is enti-
tled to deduct trade or business expenses paid or in-
curred with respect to activities carried on through
LLCA, including the employer’s share of employ-
ment taxes imposed under sections 3111 and 3301,
on A’s Form 1040, Schedule C, “Profit or Loss From
Business (Sole Proprietorship).”
(v)Special rule for certain excise tax
purposes—(A)In general. Paragraph
(c)(2)(i) of this section (relating to certain
wholly owned entities) does not apply for
purposes of—
(1) Federal tax liabilities imposed by
Chapters 31, 32 (other than section 4181),
33, 34, 35, 36 (other than section 4461),
and 38 of the Internal Revenue Code, or
any floor stocks tax imposed on articles
subject to any of these taxes;
(2)CollectionoftaximposedbyChap-
ter 33 of the Internal Revenue Code;
(3) Registration under sections 4101,
4222, and 4412; and
(4) Claims of a credit (other than a
credit under section 34), refund, or pay-
ment related to a tax described in para-
graph (c)(2)(v)(A)(1) of this section.
(B)Example. The following example
illustrates the provisions of this paragraph
(c)(2)(v).
Example. (i) LLCB is an eligible entity that has
a single owner, B. LLCB is generally disregarded as
an entity separate from its owner. However, under
paragraph (c)(2)(v) of this section, LLCB is treated as
an entity separate from its owner for certain purposes
relating to excise taxes.
(ii) LLCB mines coal from a coal mine
located in the United States. Section 4121
of chapter 32 of the Internal Revenue Code
imposes a tax on the producer’s sale of
such coal. Section 48.4121–1(a) of this
chapter defines a "producer" generally as
the person in whom is vested ownership of
the coal under state law immediately af-
ter the coal is severed from the ground.
LLCB is the person that owns the coal un-
der state law immediately after it is sev-
ered from the ground. Under paragraph
(c)(2)(v)(A)(1) of this section, LLCB is the
producer of the coal and is liable for tax on
its sale of such coal under chapter 32 of the
Internal Revenue Code. LLCB must re-
port and pay tax on Form 720, “Quarterly
Federal Excise Tax Return,” under its own
name and taxpayer identification number.
(iii) LLCB uses undyed diesel fuel in
an earthmover that is not registered or re-
quired to be registered for highway use.
Such use is an off-highway business use
of the fuel. Under section 6427(l), the
ultimate purchaser is allowed to claim an
income tax credit or payment related to
thetaximposedondieselfuelusedinan
off-highway business use. Under para-
graph (c)(2)(v) of this section, for pur-
poses of the credit or payment allowed un-
der section 6427(l), LLCB is the person
that could claim the amount on its Form
720 or on a Form 8849, “Claim for Refund
of Excise Taxes.” Alternatively, if LLCB
did not claim a payment during the time
prescribed in section 6427(i)(2) for mak-
2005–45 I.R.B.933November 7, 2005

ing a claim under section 6427, §1.34–1 of
this chapter provides that B, the owner of
LLCB, could claim the income tax credit
allowed under section 34 for the nontax-
ableuseofdieselfuelbyLLCB.
*****
(e) * * *
(3) Paragraph (c)(2)(iv) of this section
applies with respect to wages paid on or af-
ter January 1 following the date these reg-
ulations are publishedas final regulations
in theFederal Register.
(4) Paragraph (c)(2)(v) of this section
applies to liabilities imposed and actions
first required or permitted in periods be-
ginning on or after January 1 following the
date these regulations are published as fi-
nal regulations in theFederal Register.
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on October 17,
2005, 8:45 a.m., and published in the issue of the Federal
Register for October 18, 2005, 70 F.R. 60475)
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
Balanced System for
Measuring Organizational
and Employee Performance
Within the Internal Revenue
Service
REG–114444–05
AGENCY: Internal Revenue Ser
vice
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
(T.D. 9227) designed to modify 26 CFR
Part 801, the regulations governing the
IRS Balanced System for Measuring Orga-
nizational and Employee Performance, to
clarify when quantity measures, which are
not tax enforcement results, may be used
in measuring organizational and employee
performance. The temporary regulations
affect internal operations of the IRS and
the systems it employs to evaluate the per-
formance of organizations within the IRS.
The text of the temporary regulations also
serves as the text of these proposed regu-
lations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by December 16, 2005.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–114444–05),
Room 5203, PO Box 7604, Ben Franklin
Station, Washington, DC 20044. Sub-
missions may be hand delivered Monday
through Friday between the hours of
8 a.m. and 4 p.m. to: CC:PA:LPD:PR
(REG–114444–05), Courier’s Desk,
1111 Constitution Avenue, NW, Wash-
ington, DC 20224, or sent electron-
ically via the IRS Internet site at
www.irs.gov/regsor via the Federal eRule-
making Portal atwww.regulations.gov
(IRS REG–114444–05).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed reg-
ulations, Neil Worden, (202) 283–7900;
concerning submissions of comments,
Robin Jones, Publications and Regulations
Branch, (202) 622–3521 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
Temporary regulations in this issue of
the Bulletin amend 26 CFR Part 801. The
temporary regulations amend Part 801 to
clarify when quantity measures, which are
not tax enforcement results, may be used
in measuring organizational and employee
performance. The text of those regulations
also serves as the text of these regulations.
The “Explanation of Provisions” section
of the temporary regulations explains the
temporary regulations and these proposed
regulations.
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 also has
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 Inter-
nal Revenue Code, this notice of proposed
rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written or electronic
comments that are timely submitted to the
IRS. The IRS and the Treasury Department
specifically request comments on the clar-
ity of the proposed regulations and how
they can be made easier to understand. All
comments will be available for public in-
spection and copying. A public hearing
may be scheduled if requested by any per-
son who timely submits comments. If a
public hearing is scheduled, notice of the
date, time and place for the hearing will be
published in theFederal Register.
Drafting Information
The principal author of these regula-
tions is Karen F. Keller, Office of Asso-
ciate Chief Counsel (General Legal Ser-
vices). However, other personnel from the
IRS participated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR Part 801 is pro-
posed to be amended as follows:
PART 801—BALANCED SYSTEM FOR
MEASURING ORGANIZATIONAL
AND INDIVIDUAL PERFORMANCE
WITHIN THE INTERNAL REVENUE
SERVICE
Paragraph 1. The authority citation for
Part 801 continues to read in part as fol-
lows:
Authority:5U.S.C.9501***
Par. 2. Section 801.1T is redesignated
as §801.1 and amended by revising the sec-
tion heading to read as follows:
November 7, 20059342005–45 I.R.B.

§801.1 Balanced performance
measurement system; in general.
[The text of proposed §801.1 is the
same as the text of §801.1T published
elsewhere in this issue of the Bulletin].
Par. 3. Section 801.2T is redesignated
as §801.2 and amended by revising the sec-
tion heading to read as follows:
§801.2 Measuring organizational
performance.
[The text of proposed §801.2 is the
same as the text of §801.2T published
elsewhere in this issue of the Bulletin.]
Par. 4. Section 801.3T is redesignated
as §801.3 and amended by revising the sec-
tion heading to read as follows:
§801.3 Measuring employee performance.
[The text of proposed §801.3 is the
same as the text of §801.3T published
elsewhere in this issue of the Bulletin].
Par. 5. Section 801.4T is redesignated
as §801.4 and amended by revising the sec-
tion heading to read as follows:
§801.4 Customer satisfaction measures.
[The text of proposed §801.4 is the
same as the text of §801.4T published
elsewhere in this issue of the Bulletin].
Par. 6. Section 801.5T is redesignated
as §801.5 and amended by revising the sec-
tion heading to read as follows:
§801.5 Employee satisfaction measures.
[The text of proposed §801.5 is the
same as the text of §801.5T published
elsewhere in this issue of the Bulletin].
Par. 7. Section 801.6T is redesignated
as §801.6 and amended by revising the sec-
tion heading to read as follows:
§801.6 Business results measures.
[The text of proposed §801.6 is the
same as the text of §801.6T published
elsewhere in this issue of the Bulletin].
Par. 8. Section 801.7T is redesignated
as §801.7 and amended by revising the sec-
tion heading to read as follows:
§801.7 Examples.
[The text of the proposed §801.7 is the
same as the text of §801.7T published else-
where in this issue of the Bulletin.]
Par. 9. Section 801.8T is redesignated
as §801.8 and revised to read as follows:
§801.8 Effective dates.
[The text of proposed §801.8 is the
same as the text of §801.8T(a) published
elsewhere in this issue of the Bulletin].
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on October 14,
2005, 8:45 a.m., and published in the issue of the Federal
Register for October 17, 2005, 70 F.R. 60256)
Announcement of Disciplinary Actions Involving
Attorneys, Certified Public Accountants, Enrolled Agents,
and Enrolled Actuaries — Suspensions, Censures,
Disbarments, and Resignations
Announcement 2005-76
Under Title 31, Code of Federal Regu-
lations, Part 10, attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries may not accept assistance from,
or assist, any person who is under disbar-
ment or suspension from practice before
the Internal Revenue Service if the assis-
tance relates to a matter constituting prac-
tice before the Internal Revenue Service
and may not knowingly aid or abet another
person to practice before the Internal Rev-
enue Service during a period of suspen-
sion, disbarment, or ineligibility of such
other person.
To enable attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries to identify persons to whom
these restrictions apply, the Director, Of-
fice of Professional Responsibility, will
announce in the Internal Revenue Bulletin
their names, their city and state, their pro-
fessional designation, the effective date
of disciplinary action, and the period of
suspension. This announcement will ap-
pear in the weekly Bulletin at the earliest
practicable date after such action and will
continue to appear in the weekly Bulletins
for five successive weeks.
Consent Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, an attorney, certified pub-
lic accountant, enrolled agent, or enrolled
actuary, in order to avoid the institution
or conclusion of a proceeding for his or
her disbarment or suspension from prac-
tice before the Internal Revenue Service,
may offer his or her consent to suspension
from such practice. The Director, Office
of Professional Responsibility, in his dis-
cretion, may suspend an attorney, certified
public accountant, enrolled agent, or en-
rolled actuary in accordance with the con-
sent offered.
2005–45 I.R.B.935November 7, 2005

The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
vice:
NameAddressDesignationDate of Suspension
Reagan, JohnCortland, NYCPAIndefinite
from
June 24, 2005
Harris, Alexander W.Chicago, ILAttorneyJuly 1, 2005
to
December 31, 2005
Belush, Glen J.Monroe, CTCPAIndefinite
from
July 15, 2005
Lamont, AliceAtlanta, GACPAIndefinite
from
July 15, 2005
Morse, Kyle K.Bedford, TXCPAIndefinite
from
July 22, 2005
Duggan Jr., Joseph A.Jacksonville, OREnrolled AgentIndefinite
from
August 1, 2005
Harper, IvanBrooklyn, NYCPAIndefinite
from
August 15, 2005
Bandy, Robert M.Tyler, TXAttorneyIndefinite
from
August 24, 2005
Peterson, StanleySpringfield, PACPAIndefinite
from
August 26, 2005
Shorten, JudyVacaville, CAEnrolled AgentIndefinite
from
September 1, 2005
Watkins, David E.Shelbyville, INEnrolled AgentIndefinite
from
September 1, 2005
Expedited Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, the Director, Office of Pro-
fessional Responsibility, is authorized to
immediately suspend from practice before
the Internal RevenueService any practi-
tioner who, within five years from the date
the expedited proceeding is instituted (1)
has had a license to practice as an attor-
ney, certified public accountant, or actuary
suspended or revoked for cause or (2) has
been convicted of certain crimes.
The following individuals have been
placed under suspension from practice be-
fore the Internal Revenue Service by virtue
of the expedited proceeding provisions:
November 7, 20059362005–45 I.R.B.

NameAddressDesignationDate of Suspension
Leong, Thomas S.Honolulu, HIAttorneyIndefinite
from
July 11, 2005
Clark, Mark S.Tucson, AZAttorneyIndefinite
from
July 11, 2005
Hudspeth, George E.St. Louis, MOAttorneyIndefinite
from
July 11, 2005
Dodd, Alan F.Westborough, MAAttorneyIndefinite
from
July 11, 2005
Crews, James F.Tipton, MOAttorneyIndefinite
from
July 11, 2005
Luparella, JosephHoboken, NJCPAIndefinite
from
July 13, 2005
Deu
tchman, Murray
Bar
nesville, MD
Att
orney
Ind
efinite
fro
m
Jul
y 13, 2005
Cozier, Clifford G.Englewood, COAttorneyIndefinite
from
July 13, 2005
Segall, Steven M.Denver, COAttorneyIndefinite
from
July 14, 2005
Richardson, BruceReisterstown, MDAttorneyIndefinite
from
July 15, 2005
Parsley, Jeffrey A.Englewood, COAttorneyIndefinite
from
July 15, 2005
Wyrick, Richard L.Hanford, CAAttorneyIndefinite
from
July 15, 2005
Coates, Marsden S.Baltimore, MDAttorneyIndefinite
from
July 15, 2005
McCampbell, DanielChico, CAAttorneyIndefinite
from
July 15, 2005
Ralston, Ronald G.Fairmount, GACPAIndefinite
from
July 18, 2005
2005–45 I.R.B.937November 7, 2005

NameAddressDesignationDate of Suspension
Friemann, Robert F.Huntington Bay, NYCPAIndefinite
from
July 18, 2005
Friedman, Milton G.Ft. Lauderdale, FLCPAJuly 25, 2005
to
January 24, 2007
Acheampong, RobertColumbus, OHCPAIndefinite
from
July 26, 2005
Elias, Robert F.Canfield, OHAttorneyIndefinite
from
July 27, 2005
Stover, Kathy A.Topeka, KSAttorneyIndefinite
from
July 29, 2005
Leffler, Fredric D.Columbia, MDAttorneyIndefinite
from
July 29, 2005
Harmon, Anthony N.Batavia, ILAttorneyIndefinite
from
July 29, 2005
Hames, David H.Dallas, TXCPAIndefinite
from
August 2, 2005
Au, Ronald G.S.Honolulu, HIAttorneyIndefinite
from
August 9, 2005
Tilton Jr., George H.Denver, COAttorneyIndefinite
from
August 12, 2005
Spalsbury Jr., ClarkEstes Park, COAttorneyIndefinite
from
August 12, 2005
Brockman, Louis R.Dallas, TXCPAIndefinite
from
August 12, 2005
Hill, Richard B.Kernersville, NCCPAIndefinite
from
August 12, 2005
Rosenberg, Jeffrey P.Morgan Hill, CAAttorneyIndefinite
from
August 12, 2005
Link, Robert A.Waupaca, WICPAIndefinite
from
August 15, 2005
November 7, 20059382005–45 I.R.B.

NameAddressDesignationDate of Suspension
Halcrow, David S.Taft, CACPAIndefinite
from
September 9, 2005
Lieber, Daniel M.Edna, MOAttorneyIndefinite
from
September 9, 2005
Kirchoff, William W.Jefferson City, MOAttorneyIndefinite
from
September 9, 2005
Lauby, Gregory C.Lexington, NEAttorneyIndefinite
from
September 9, 2005
Early, Michael J.Newburyport, MAAttorneyIndefinite
from
September 9, 2005
Mickiewicz, RobertDorchester, MAAttorneyIndefinite
from
September 9, 2005
Conant, Jon F.Gloucester, MAAttorneyIndefinite
from
September 9, 2005
Pennington, JillChevy Chase, MDAttorneyIndefinite
from
September 9, 2005
Randolph, Robert E.Denham Springs, LAAttorneyIndefinite
from
September 9, 2005
Carillo, DonaldChicago, ILAttorneyIndefinite
from
September 9, 2005
Sloan Jr., DeweySioux City, IAAttorneyIndefinite
from
September 9, 2005
Vogel, GarrettDallas, TXCPAIndefinite
from
September 13, 2005
Becker, JosephHouston, TXCPAIndefinite
from
September 13, 2005
Winick, Robert M.Sarasota, FLAttorneyIndefinite
from
September 19, 2005
Hunsaker Jr., WilliamGolden, COAttorneyIndefinite
from
September 19, 2005
Wheatley, Jay D.Boca Raton,FLAttorneyIndefinite
from
September 19, 2005
2005–45 I.R.B.939November 7, 2005

NameAddressDesignationDate of Suspension
Clark, Carroll A.Mesa, AZAttorneyIndefinite
from
September 19, 2005
Suspensions From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Reg-
ulations, Part 10, after notice and an op-
portunity for a proceeding before an ad-
ministrative law judge, the following indi-
viduals have been placed under suspension
from practice before the Internal Revenue
Service:
NameAddressDesignationEffective Date
Sobel, Herbert L.Elkins Park, PACPAMay 4, 2005
to
February 3, 2007
Rubesh, LelandGillette, WYCPAAugust 1, 2005
to
January 31, 2007
Gregory, Carolyn S.Cathedral City, CAEnrolled AgentAugust 12, 2005
to
November 11, 2007
Censure Issued by Consent
Under Title 31, Code of Federal Reg-
ulations, Part 10, in lieu of a proceeding
being instituted or continued, an attorney,
certified public accountant, enrolled agent,
or enrolled actuary, may offer his or her
consent to the issuance of a censure. Cen-
sure is a public reprimand.
The following individuals have con-
sented to the issuance of a Censure:
NameAddressDesignationDate of Censure
Pugno, ThomasRockwood, MIEnrolled AgentJune 29, 2005
Barrett, RichardTyler, TXCPAAugust 1, 2005
Kelly, Michael G.Odessa, TXAttorneyAugust 1, 2005
Volstad, Paul S.Plymouth, MNCPAAugust 18, 2005
Quackenbush, Gary A.San Diego, CAAttorneySeptember 2, 2005
Flores, Fred A.Laredo, TXCPASeptember 2, 2005
Velasquez, FelixLaredo, TXCPASeptember 2, 2005
November 7, 20059402005–45 I.R.B.

Carryforward of Credit From
Form 8884
Announcement 2005–79
Form 8884,New York Liberty Zone
Business Employee Credit, is obsolete for
tax years beginning after December 31,
2004. As a result, any carryforward of this
credit to tax years beginning after 2004
will be reported onForm 8835,Renew-
able Electricity, Refined Coal, and Indian
Coal Production Credit. The credit carry-
forward to 2005 is the excess of line 10 of
the 2004 Form 8884 over line 23 of that
form, to the extent not used in carrying
back the credit. For tax years beginning in
2005, the credit carryforward is reported
on Form 8835, Section B, line 28. See
the 2005 Form 8835 for details on how to
report this carryforward.
IRS and The George
Washington University Law
School To Sponsor Institute on
International Tax Issues
Announcement 2005–81
The Internal Revenue Service an-
nounces the Eighteenth Annual Institute
on Current Issues in International Tax-
ation, jointly sponsored by the Internal
Revenue Service and The George Wash-
ington University Law School, to be held
on December 8 and 9, 2005, at the J.W.
Marriott Hotel in Washington, DC. Reg-
istration is currently underway for the
Institute, which is intended for interna-
tional tax professionals.
The program will present a unique op-
portunity for top IRS and Treasury offi-
cials and tax experts, and leading private
sector specialists, to address breaking is-
sues and present key perspectives on new
developments. The first day will feature
sessions on the following:
•Current Competent Authority Issues;
•Intellectual Priority Issues;
•Foreign Tax Credits;
•Financially Troubled International
Ventures;
•Dual ConsolidatedLosses/Arbitrage
Issues; and
•Updates on Outbound Issues.
The Honorable Donald L. Korb, Chief
Counsel, Internal Revenue Service, will
deliver the luncheon address.
The second day will focus on the fol-
lowing topics:
•Latest IRS Transfer Pricing Guidance;
•Real world Advice on Transfer Pric-
ing;
•Updates on Inbound Issues; and
•Circular 230/Tax Shelter/Ethics.
The second day will also include an
“Ask the IRS” panel featuring senior offi-
cials from the Service.
Those interested in attending or ob-
taining more information should contact
The George Washington University Law
School, athttp://www.law.gwu.edu/ciit.
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2005–82
The names of organizations that no
longer qualify as organizations described
in section 170(c)(2) of the Internal Rev-
enue Code of 1986 are listed below.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on November 7,
2005, and would end on the date the court
first determines that the organization is
not described in section 170(c)(2) as more
particularly set forth in section 7428(c)(1).
For individual contributors, the maximum
deduction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were
the basis for revocation.
Delta Regional Transit System, Inc.
Greenville, MS
Gibson Trust, Inc. Hollywood, FL
Housing Development Group, Inc.
Providence, RI
National Credit Education and Review
Canton, MI
Foundations Status of Certain
Organizations
Announcement 2005–83
The following organizations have failed
to establish or have been unable to main-
tain their status as public charities or as op-
erating foundations. Accordingly, grantors
and contributors maynot, after this date,
rely on previous rulings or designations
in the Cumulative List of Organizations
(Publication 78), or on the presumption
arising from the filing of notices under sec-
tion 508(b) of the Code. This listing does
notindicate that the organizations have lost
their status as organizations described in
section 501(c)(3), eligible to receive de-
ductible contributions.
Former Public Charities.The follow-
ing organizations (which have been treated
as organizations that are not private foun-
dations described in section 509(a) of the
Code) are now classified as private foun-
dations:
4-Scor, Inc., Saylorsburg, PA
ABZ Art Foundation, Inc., New York, NY
Africana Literature Archives, Inc.,
New York, NY
Albemarle Fire Safety Committee,
Elizabeth City, NC
All-Sports Hall of Fame Charitable
Foundation, Inc., New York, NY
2005–45 I.R.B.941November 7, 2005

Alpha Corporation, Atlanta, GA
American Family Care and Immigration
Services, Little Falls, NJ
American Friends of Maccabi Health
Services, New York, NY
American Veterans Friendship Society,
Inc., New Orleans, LA
Angies Angels, Donaldsonville, LA
Arc of Yadkin County, Inc.,
Yadkinville, NC
Artists Betwixt and Between, Inc.,
New York, NY
Arts America, Inc., Dumont, NJ
Artspace at Tri-Main, Inc., Buffalo, NY
Asian Culinary Society, Inc.,
New York, NY
Basically Using Better Solutions,
Incorporated, Northport, NY
Big Piney Bluegrass Association, Inc.,
Houston, MO
Blacks for Life, Milwaukee, WI
Calumet Region Cluster Org., Chicago, IL
Center for Brazilian Church Planting,
New York, NY
Chasdi Nissim Fund, Monsey, NY
Chelsea Art Museum, West Orange, NJ
Chien-Shiung Wu and Luke C L Yuan
Natural ScienceFoundation, Inc.,
New York, NY
Child Health Net, Inc., Mount Vernon, NY
Children Living With Aids, Inc.,
Bronx, NY
Church Upon This Rock, Houston, TX
Citizens in Charge Foundation,
Woodbridge, VA
Cobblestone Productions, Incorporated,
New York, NY
Colorado Jesus Video Project,
Colorado Springs, CO
Columbus Archiver and History Center,
Inc., Columbus, GA
Costas Cure, New York, NY
Costin Adoption Foundation,
Norwich, NY
Cumberland Island Conservancy, Inc.,
Atlanta, GA
Delta Dawn Productions, Inc.,
New York, NY
Dose, Inc., New York, NY
Dynamic Empowerment, Inc.,
New York, NY
ECDO Housing Development Fund
Company, Inc., New York, NY
Educational Opportunity Fund, Inc.,
New York, NY
Exploring the Arts, Inc., New York, NY
Families and Community Enrichment of
Michigan, Inc., Detroit, MI
Family Reunification Justice Project, Inc.,
New York, NY
Flagler Volunteer Services, Inc.,
Flagler Beach, FL
Forums Children Foundation,
New York, NY
Foundation for Tomorrows Leaders,
New York, NY
Foundation for Treatment of
Mitochondrial Disorders, Inc.,
Silver Spring, MD
Fowler Video Foundation,
West Rockport, ME
Fresh Start Women’s Center,
Memphis, TN
Friendly Fifty Club, Inc.,
Mount Vernon, NY
Friends of Kings Hill, Wallkill, NY
Friends of the Dorothy Day Cottages,
Inc., Staten Island, NY
Friends of the Union County Animal Care
and Education Center, Plainfield, NJ
Friends of the West Orange Library, Inc.,
Winter Garden, FL
Friendship House of India, Redford, MI
GeneralDanielChappieJamesCh
1288 Experimental Aircraft Assoc.,
Valkaria, FL
Genesis Life Center, Inc., Albany, GA
Giving World Foundation, Inc.,
Williston, VT
Givingwell Org., Inc., New York, NY
Great American Duck Race of Deming,
Inc., Deming, NM
Grey Fox Foundation, Inc.,
Greenwich, CT
Hands of Hope Development Corporation,
Richmond, VA
Hastings Waterfront Watch, Inc.,
Hastings Hudson, NY
Healing Source, Rialto, CA
Higher Education Opportunity Programs,
Inc., New York, NY
Historic Synagogue Restoration, Inc.,
New Rochelle, NY
HOYA Human Development Corporation,
Inc., Cypress, TX
IABS Charities, Inc., New York, NY
Independent Heights Park Community
Redevelopment Corporation,
Houston, TX
Inner City Perception, Inc.,
New Kensington, PA
Inspire, Inc., Indianapolis, IN
Interfaith Housing Development Fund
Corp., Suffern, NY
International Anti-Poverty Law Center,
Inc., New York, NY
International Atlanta Ministries,
Jonesboro, GA
Irish Rail and Transport Heritage
Foundation, Ltd., New York, NY
Jasper County Historical Society,
Bay Springs, MS
Jeff County Conservancy Charitable
Trust, Brookville, PA
Jewish Alumni of Binghamton, Inc.,
New York, NY
Jewish Center of the Hamptons,
East Hampton, NY
Jubillenium Foundation, Inc.,
New York, NY
Karenina Dance Masters Intensive, Inc.,
New York, NY
Kedma USA, Inc., Bronx, NY
Kids Nutritional Services, Slidell, LA
Klein Intermediate Parent Teacher
Organization, Inc., Houston, TX
Korean War Memorial of WNY,
Buffalo, NY
Last Witness Declaration Project,
New York, NY
Life Works Theatre, Inc., Rochester, NY
Light of the Trinity Montessori School,
Inc., West Orange, NJ
Liza Barbieri Foundation, New York, NY
Main Stage Coffeehouse Foundation,
Yorktown Heights, NY
Mars 2112 Education Outreach Program,
Inc., New York, NY
Matthew S. Hisiger Film Foundation,
New York, NY
McKinnleyleif Ericson Park Alliance,
Ltd., Brooklyn, NY
McMillans Helping Hands, Inc.,
Mineola, NY
Meadowridge Ponds & Wetlands
Preservation Association,
Long Grove, IL
Metro Wildlife Management Base, Inc.,
Brighton, MI
Michael & Rochel Wolfe Charity Fund,
Inc., New York, NY
Mike Bright Basketball Camp, Inc.,
Bronx, NY
Millenium Minds, Inc., Queens, NY
Moazz Jazz Dance Ensemble, Seattle, WA
Muse of Fire Theatre Co., Inc.,
New York, NY
National Association of Blessed
Billionaires, New Rochelle, NY
No Walls Foundation, Inc., New York, NY
Noble Heart Service, Gardena, CA
Nonprofit Training Institute, Inc.,
Stone Mountain, GA
November 7, 20059422005–45 I.R.B.

Northern Burlington Soccer Club,
Wrightstown, NJ
Our Lady of Mercy Senior Manor Housing
Development Fund Corporation,
Bronx, NY
Ox-Sheptyckyj Foundation, Inc.,
Yonkers, NY
Paloverde Center for Behavioral Research
and Education, La Verne, CA
Palyul Changchub Dargyeling,
Mill Valley, CA
Panamerican Nikkei Association USA
East, Inc., New York, NY
Paradi, Inc., Mineola, NY
Pendulum Dance Theater, Portland, OR
Pennsylvania Station Arts Foundation,
Inc., New York, NY
Persuaders, Inc., Memphis, TN
Photorelief Com, Inc., New York, NY
Refuge, Inc., New York, NY
Robert A. Patterson Memorial Scholarship
Fund, Novato, CA
Robert P. Joyce Scholarship Fund, Ltd.,
New Windsor, NY
Rockland Business Association
Foundation, Inc., Pearl River, NY
Rockland County Jewish Childrens
Museum, Inc., Pomona, NY
Salve Regina, Inc., Staten Island, NY
Sandra Brand Torah Distribution Fund,
Inc., New York, NY
Scripts Up, Inc., New York, NY
Senior Care & Life Styles, Inc.,
Staten Island, NY
SIKA, Inc., New York, NY
Soma Partnership, Inc., San Francisco, CA
Southeast Texas Fellowship of Churches,
Beaumont, TX
Spirit of Faith Community Development
Corporation, N. Miami Beach, FL
Stage of Learning, Inc., New York, NY
Tell the Story Ministries, Inc.,
Deerfield Beach, FL
Third Space Project, Inc., New York, NY
Third World Records, New York, NY
Topkid, Grosse Pointe, MI
Tunnel Vision Writers Project, Inc.,
Montclair, NJ
Tzidkas Rivka Memorial Fund Dankona,
Inc., New Square, NY
Zionist Information and Interment
Organization of North America, Inc.,
New York, NY
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as
a private operating foundation, the Inter-
nalRevenueServicewillissuearulingor
determinationletterwiththerevisedclas-
sification as to foundation status. Grantors
and contributors may thereafter rely upon
such ruling or determination letter as pro-
videdinsection1.509(a)–7oftheIncome
Tax Regulations. It is not the practice of
the Service to announce such revised clas-
sification of foundation status in the Inter-
nal Revenue Bulletin.
2005–45 I.R.B.943November 7, 2005

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 rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
November 7, 2005i2005–45 I.R.B.

Numerical Finding List
1
Bulletins 2005–27 through 2005–45
Announcements:
2005-46, 2005-27 I.R.B.63
2005-47, 2005-28 I.R.B.71
2005-48, 2005-29 I.R.B.111
2005-49, 2005-29 I.R.B.119
2005-50, 2005-30 I.R.B.152
2005-51, 2005-32 I.R.B.283
2005-52, 2005-31 I.R.B.257
2005-53, 2005-31 I.R.B.258
2005-54, 2005-32 I.R.B.283
2005-55, 2005-33 I.R.B.317
2005-56, 2005-33 I.R.B.318
2005-57, 2005-33 I.R.B.318
2005-58, 2005-33 I.R.B.319
2005-59, 2005-37 I.R.B.524
2005-60, 2005-35 I.R.B.455
2005-61, 2005-36 I.R.B.495
2005-62, 2005-36 I.R.B.495
2005-63, 2005-36 I.R.B.496
2005-64, 2005-37 I.R.B.537
2005-65, 2005-38 I.R.B.587
2005-66, 2005-39 I.R.B.613
2005-67, 2005-40 I.R.B.678
2005-68, 2005-39 I.R.B.613
2005-69, 2005-40 I.R.B.681
2005-70, 2005-40 I.R.B.682
2005-71, 2005-41 I.R.B.714
2005-72, 2005-41 I.R.B.692
2005-73, 2005-41 I.R.B.715
2005-74, 2005-42 I.R.B.764
2005-75, 2005-42 I.R.B.764
2005-76, 2005-42 I.R.B.765
2005-77, 2005-44 I.R.B.855
2005-78, 2005-44 I.R.B.918
2005-79, 2005-45 I.R.B.941
2005-81, 2005-45 I.R.B.941
2005-82, 2005-45 I.R.B.941
2005-83, 2005-45 I.R.B.941
Notices:
2005-48, 2005-27 I.R.B.9
2005-49, 2005-27 I.R.B.14
2005-50, 2005-27 I.R.B.14
2005-51, 2005-28 I.R.B.74
2005-52, 2005-28 I.R.B.75
2005-53, 2005-32 I.R.B.263
2005-54, 2005-30 I.R.B.127
2005-55, 2005-32 I.R.B.265
2005-56, 2005-32 I.R.B.266
2005-57, 2005-32 I.R.B.267
2005-58, 2005-33 I.R.B.295
2005-59, 2005-35 I.R.B.443
Notices— Continued:
2005-60, 2005-39 I.R.B.606
2005-61, 2005-39 I.R.B.607
2005-62, 2005-35 I.R.B.443
2005-63, 2005-35 I.R.B.448
2005-64, 2005-36 I.R.B.471
2005-65, 2005-39 I.R.B.607
2005-66, 2005-40 I.R.B.620
2005-67, 2005-40 I.R.B.621
2005-68, 2005-40 I.R.B.622
2005-69, 2005-40 I.R.B.622
2005-70, 2005-41 I.R.B.694
2005-71, 2005-44 I.R.B.863
2005-73, 2005-42 I.R.B.723
2005-74, 2005-42 I.R.B.726
2005-75, 2005-45 I.R.B.929
Proposed Regulations:
REG-106030-98, 2005-42 I.R.B.739
REG-144615-02, 2005-40 I.R.B.625
REG-150088-02, 2005-43 I.R.B.774
REG-150091-02, 2005-43 I.R.B.780
REG-131739-03, 2005-36 I.R.B.494
REG-130241-04, 2005-27 I.R.B.18
REG-138362-04, 2005-33 I.R.B.299
REG-138647-04, 2005-41 I.R.B.697
REG-149436-04, 2005-35 I.R.B.454
REG-156518-04, 2005-38 I.R.B.582
REG-158080-04, 2005-43 I.R.B.786
REG-104143-05, 2005-41 I.R.B.708
REG-111257-05, 2005-42 I.R.B.759
REG-114371-05, 2005-45 I.R.B.930
REG-114444-05, 2005-45 I.R.B.934
REG-121584-05, 2005-37 I.R.B.523
REG-122857-05, 2005-39 I.R.B.609
REG-129782-05, 2005-40 I.R.B.675
REG-133578-05, 2005-39 I.R.B.610
Revenue Procedures:
2005-35, 2005-28 I.R.B.76
2005-36, 2005-28 I.R.B.78
2005-37, 2005-28 I.R.B.79
2005-38, 2005-28 I.R.B.81
2005-39, 2005-28 I.R.B.82
2005-40, 2005-28 I.R.B.83
2005-41, 2005-29 I.R.B.90
2005-42, 2005-30 I.R.B.128
2005-43, 2005-29 I.R.B.107
2005-44, 2005-29 I.R.B.110
2005-45, 2005-30 I.R.B.141
2005-46, 2005-30 I.R.B.142
2005-47, 2005-32 I.R.B.269
2005-48, 2005-32 I.R.B.271
2005-49, 2005-31 I.R.B.165
2005-50, 2005-32 I.R.B.272
2005-51, 2005-33 I.R.B.296
Revenue Procedures— Continued:
2005-52, 2005-34 I.R.B.326
2005-53, 2005-34 I.R.B.339
2005-54, 2005-34 I.R.B.353
2005-55, 2005-34 I.R.B.367
2005-56, 2005-34 I.R.B.383
2005-57, 2005-34 I.R.B.392
2005-58, 2005-34 I.R.B.402
2005-59, 2005-34 I.R.B.412
2005-60, 2005-35 I.R.B.449
2005-61, 2005-37 I.R.B.507
2005-62, 2005-37 I.R.B.507
2005-63, 2005-36 I.R.B.491
2005-64, 2005-36 I.R.B.492
2005-65, 2005-38 I.R.B.564
2005-66, 2005-37 I.R.B.509
2005-67, 2005-42 I.R.B.729
2005-68, 2005-41 I.R.B.694
2005-69, 2005-44 I.R.B.864
Revenue Rulings:
2005-38, 2005-27 I.R.B.6
2005-39, 2005-27 I.R.B.1
2005-40, 2005-27 I.R.B.4
2005-41, 2005-28 I.R.B.69
2005-42, 2005-28 I.R.B.67
2005-43, 2005-29 I.R.B.88
2005-44, 2005-29 I.R.B.87
2005-45, 2005-30 I.R.B.123
2005-46, 2005-30 I.R.B.120
2005-47, 2005-32 I.R.B.261
2005-48, 2005-32 I.R.B.259
2005-49, 2005-30 I.R.B.125
2005-50, 2005-30 I.R.B.124
2005-51, 2005-31 I.R.B.163
2005-52, 2005-35 I.R.B.423
2005-53, 2005-35 I.R.B.425
2005-54, 2005-33 I.R.B.289
2005-55, 2005-33 I.R.B.284
2005-56, 2005-35 I.R.B.427
2005-57, 2005-36 I.R.B.466
2005-58, 2005-36 I.R.B.465
2005-59, 2005-37 I.R.B.505
2005-60, 2005-37 I.R.B.502
2005-61, 2005-38 I.R.B.538
2005-62, 2005-38 I.R.B.557
2005-63, 2005-39 I.R.B.603
2005-64, 2005-39 I.R.B.600
2005-65, 2005-41 I.R.B.684
2005-66, 2005-41 I.R.B.686
2005-67, 2005-43 I.R.B.771
2005-68, 2005-44 I.R.B.853
2005-69, 2005-44 I.R.B.852
2005-70, 2005-45 I.R.B.919
2005-71, 2005-45 I.R.B.923
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2005–1 through 2005–26 is in Internal Revenue Bulletin
2005–26, dated June 27, 2005.
2005–45 I.R.B.iiNovember 7, 2005

Tax Conventions:
2005-47, 2005-28 I.R.B.71
2005-72, 2005-41 I.R.B.692
2005-77, 2005-44 I.R.B.855
Treasury Decisions:
9208, 2005-31 I.R.B.157
9209, 2005-31 I.R.B.153
9210, 2005-33 I.R.B.290
9211, 2005-33 I.R.B.287
9212, 2005-35 I.R.B.429
9213, 2005-35 I.R.B.440
9214, 2005-35 I.R.B.435
9215, 2005-36 I.R.B.468
9216, 2005-36 I.R.B.461
9217, 2005-37 I.R.B.498
9218, 2005-37 I.R.B.503
9219, 2005-38 I.R.B.538
9220, 2005-39 I.R.B.596
9221, 2005-39 I.R.B.604
9222, 2005-40 I.R.B.614
9223, 2005-39 I.R.B.591
9224, 2005-41 I.R.B.688
9225, 2005-42 I.R.B.716
9226, 2005-43 I.R.B.772
9227, 2005-45 I.R.B.924
November 7, 2005iii2005–45 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2005–27 through 2005–45
Announcements:
84-26
Obsoleted by
REG-149436-04, 2005-35 I.R.B.454
2004-72
Updated and superseded by
Ann. 2005-59, 2005-37 I.R.B.524
2005-36
Modified by
Rev. Proc. 2005-66, 2005-37 I.R.B.509
2005-53
Corrected by
Ann. 2005-61, 2005-36 I.R.B.495
Notices:
89-111
Amplified by
Notice 2005-61, 2005-39 I.R.B.607
2001-42
Modified by
Rev. Proc. 2005-66, 2005-37 I.R.B.509
2005-4
Modified by
Notice 2005-62, 2005-35 I.R.B.443
2005-10
Clarified by
Notice 2005-64, 2005-36 I.R.B.471
2005-38
Modified by
Notice 2005-64, 2005-36 I.R.B.471
2005-51
Modified and superseded by
Notice 2005-57, 2005-32 I.R.B.267
Proposed Regulations:
REG-108524-00
Corrected by
Ann. 2005-68, 2005-39 I.R.B.613
REG-142686-01
Withdrawn by
Ann. 2005-55, 2005-33 I.R.B.317
REG-100420-03
Corrected by
Ann. 2005-57, 2005-33 I.R.B.318
REG-102144-04
Corrected by
Ann. 2005-56, 2005-33 I.R.B.318
Revenue Procedures:
64-54
Obsoleted by
Rev. Rul. 2005-43, 2005-29 I.R.B.88
66-33
Obsoleted by
Rev. Rul. 2005-43, 2005-29 I.R.B.88
69-13
Obsoleted by
Rev. Rul. 2005-43, 2005-29 I.R.B.88
70-8
Modified by
Rev. Proc. 2005-46, 2005-30 I.R.B.142
71-1
Obsoleted by
Rev. Rul. 2005-43, 2005-29 I.R.B.88
72-22
Obsoleted by
Rev. Rul. 2005-43, 2005-29 I.R.B.88
83-77
Superseded by
Rev. Proc. 2005-63, 2005-36 I.R.B.491
87-8
Obsoleted by
Rev. Proc. 2005-44, 2005-29 I.R.B.110
87-9
Obsoleted by
Rev. Proc. 2005-44, 2005-29 I.R.B.110
89-20
Superseded by
Rev. Proc. 2005-52, 2005-34 I.R.B.326
90–11
Modified by
Rev. Proc. 2005-40, 2005-28 I.R.B.83
90-30
Section4supersededby
Rev. Proc. 2005-54, 2005-34 I.R.B.353
Section5supersededby
Rev. Proc. 2005-55, 2005-34 I.R.B.367
Section6supersededby
Rev. Proc. 2005-56, 2005-34 I.R.B.383
Section7supersededby
Rev. Proc. 2005-58, 2005-34 I.R.B.402
Section8supersededby
Rev. Proc. 2005-59, 2005-34 I.R.B.412
90-31
Section4supersededby
Rev. Proc. 2005-52, 2005-34 I.R.B.326
Section5supersededby
Rev. Proc. 2005-54, 2005-34 I.R.B.353
Section6supersededby
Rev. Proc. 2005-55, 2005-34 I.R.B.367
Revenue Procedures— Continued:
Section7supersededby
Rev. Proc. 2005-56, 2005-34 I.R.B.383
Section8supersededby
Rev. Proc. 2005-58, 2005-34 I.R.B.402
Section9supersededby
Rev. Proc. 2005-59, 2005-34 I.R.B.412
93-22
Obsoleted by
Rev. Proc. 2005-44, 2005-29 I.R.B.110
98-18
Obsoleted by
Rev. Proc. 2005-45, 2005-30 I.R.B.141
99-39
Superseded by
Rev. Proc. 2005-60, 2005-35 I.R.B.449
2000-27
Modified and superseded by
Rev. Proc. 2005-66, 2005-37 I.R.B.509
2000-31
Superseded by
Rev. Proc. 2005-60, 2005-35 I.R.B.449
2000-49
Superseded by
Rev. Proc. 2005-41, 2005-29 I.R.B.90
2001-9
Superseded by
Rev. Proc. 2005-60, 2005-35 I.R.B.449
2001-16
Superseded by
Rev. Proc. 2005-42, 2005-30 I.R.B.128
2002-9
Modified and amplified by
Rev. Rul. 2005-42, 2005-28 I.R.B.67
Rev. Proc. 2005-35, 2005-28 I.R.B.76
Rev. Proc. 2005-43, 2005-29 I.R.B.107
Rev. Proc. 2005-47, 2005-32 I.R.B.269
2002-49
Modified, amplified, and superseded by
Rev. Proc. 2005-62, 2005-37 I.R.B.507
2004-50
Superseded by
Rev. Proc. 2005-49, 2005-31 I.R.B.165
2004-54
Superseded by
Rev. Proc. 2005-65, 2005-38 I.R.B.564
2004-58
Superseded by
Rev. Proc. 2005-69, 2005-44 I.R.B.864
2004-64
Modified by
Ann. 2005-71, 2005-41 I.R.B.714
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2005–1 through 2005–26 is in Internal Revenue Bulletin 2005–26, dated June 27, 2005.
2005–45 I.R.B.ivNovember 7, 2005

Revenue Procedures— Continued:
2005-1
Amplified by
Rev. Proc. 2005-68, 2005-41 I.R.B.694
2005-3
Amplified by
Rev. Proc. 2005-61, 2005-37 I.R.B.507
Rev. Proc. 2005-68, 2005-41 I.R.B.694
2005-6
Modified by
Rev. Proc. 2005-66, 2005-37 I.R.B.509
2005-10
Superseded by
Rev. Proc. 2005-67, 2005-42 I.R.B.729
2005-16
Modified by
Rev. Proc. 2005-66, 2005-37 I.R.B.509
2005-65
Corrected by
Ann. 2005-78, 2005-44 I.R.B.918
Revenue Rulings:
65-109
Obsoleted by
Rev. Rul. 2005-43, 2005-29 I.R.B.88
68-549
Obsoleted by
Rev. Rul. 2005-43, 2005-29 I.R.B.88
74-203
Revoked by
Rev. Rul. 2005-59, 2005-37 I.R.B.505
82-29
Modified and clarified by
Rev. Proc. 2005-39, 2005-28 I.R.B.82
2005-41
Corrected by
Ann. 2005-50, 2005-30 I.R.B.152
Treasury Decisions:
9149
Removed by
T.D. 9221, 2005-39 I.R.B.604
9186
Corrected by
Ann. 2005-53, 2005-31 I.R.B.258
9193
Corrected by
Ann. 2005-62, 2005-36 I.R.B.495
9205
Corrected by
Ann. 2005-63, 2005-36 I.R.B.496
9206
Corrected by
Ann. 2005-49, 2005-29 I.R.B.119
Treasury Decisions— Continued:
9207
Corrected by
Ann. 2005-52, 2005-31 I.R.B.257
9210
Corrected by
Ann. 2005-64, 2005-37 I.R.B.537
November 7, 2005v2005–45 I.R.B.
U.S. GPO: 2005—320–797/20030