Internal Revenue Bulletin 2012-36 (PDF rendition): IRS Announcements

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Bulletin No. 201
2-36
September 4, 201
2
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2012–24, page 329.
Federal rates; adjusted federal rates; adjusted federal
long-term rate and the long-term exempt rate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for September 2012.
EMPLOYEE PLANS
Notice 2012–55, page 332.
This notice provides guidance on the 25-year average seg-
ment rates that are applied to adjust the otherwise applicable
24-month average segment rates that are used to compute the
funding target and other items under section 430 of the Code
and section 303 of the Employee Retirement Income Security
Act of 1974 (ERISA). The guidance reflects the changes made
to the Code and ERISA by the Moving Ahead for Progress in
the 21st Century Act (MAP–21), Pub. L. No.112–141.
ADMINISTRATIVE
Announcement 2012–34, page 334.
This announcement makes permanent fast track settlement
program for TE/GE taxpayers that is currently ongoing as a
pilot program. Announcement 2008–105 modified and super-
seded.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
September 4, 20122012–36 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 42.—L
ow-Income
Housing Credi
t
The adjusted a
pplicable federal short-term, mid-
term, and long
-term rates are set forth for the month
of September 2
012. See Rev. Rul. 2012-24, page
329.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of September 2012. See
Rev. Rul. 2012-24, page 329.
Section 382.—Limitation
on Net Operating Loss
Carryforwa
rds and Certain
Built-In Losses Following
Ownership Change
The adjusted applicable federal long-term rates is
set forth for the month of September 2012. See Rev.
Rul. 2012-24, page 329.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of September 2012. See Rev. Rul. 2012-24, page
329.
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 September 2012. See Rev. Rul. 2012-24, page
329.
Section 468.—Special
Rules for Mining and Solid
Waste
Reclamation and
Closi
ng Costs
The ad
justed applicable federal short-term, mid-
term,
and long-term rates are set forth for the month
of September 2
012. See Rev. Rul. 2012-24, page
329.
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 September 2012. See
Rev. Rul. 2012-24, page 329.
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 September 2012. See Rev. Rul. 2012-24, page
329.
Section 642.
—Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of September 2012. See
Rev. Rul. 2012-24, page 329.
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 September 2012. See Rev. Rul. 2012-24, page
329.
Section 84
6.—Discounted
Unpaid Los
ses Defined
The adjust
ed applicable federal short-term, mid-
term, and l
ong-term rates are set forth for the month
of Septem
ber 2012. See Rev. Rul. 2012-24, page
329.
Section 1274.
—Determi-
nation of Issu
ePriceinthe
Case of Certai
n Debt Instru-
ments Issued
for Property
(Also Section
s 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807
, 846, 1288, 7520, 7872.)
Federal rates
; adjusted federal rates;
adjusted fed
eral long-term rate and the
long-term ex
empt rate.For purposes of
sections 382
, 642, 1274, 1288, and other
sections of t
he Code, tables set forth the
rates for Se
ptember 2012.
Rev. Rul. 20
12–24
This revenu
e ruling provides various
prescribed
rates for federal income tax
purposes fo
r September 2012 (the current
month). Ta
ble 1 contains the short-term,
mid-term,
and long-term applicable fed-
eral rates
(AFR) for the current month
for purpos
es of section 1274(d) of the
Internal R
evenue Code. Table 2 contains
the short
-term, mid-term, and long-term
adjusted
applicable federal rates (ad-
justed AF
R) for the current month for
purposes
of section 1288(b). Table 3 sets
forth the
adjusted federal long-term rate
and the l
ong-term tax-exempt rate de-
scribed
in section 382(f). Table 4 contains
the appr
opriate percentages for deter-
mining t
he low-income housing credit
describ
ed in section 42(b)(1) for build-
ings pl
aced in service during the current
month.
However, under section 42(b)(2),
the app
licable percentage for non-feder-
ally su
bsidized new buildings placed in
servic
e after July 30, 2008, and before
Decem
ber 31, 2013, shall not be less than
9%. Fi
nally, Table 5 contains the federal
rate f
or determining the present value of
an ann
uity, an interest for life or for a term
of yea
rs, or a remainder or a reversionary
inte
rest for purposes of section 7520.
2012–36 I.R.B.329September 4, 2012

REV. RUL. 2012–24 TABLE 1
Applicable Federal Rates (AFR) for September 2012
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR.21%.21%.21%.21%
110% AFR.23%.23%.23%.23%
120% AFR
.25%.25%.25%.25%
130% AFR.27%.27%.27%.27%
Mid-term
AFR.84%.84%.84%.84%
110% AFR.92%.92%.92%.92%
120% AFR1.01%1.01%1.01%1.01%
130% AFR1.09%1.09%1.09%1.09%
150% AFR
1.26%1.26%1.26%1.26%
175% AFR
1.48%1.47%1.47%1.47%
Long-term
AFR2.18%2.17%2.16%2.16%
110% AFR2.40%2.39%2.38%2.38%
120% AFR2.62%2.60%
2.59%2.59%
130% AFR2.84%2.82%2.81%2.80%
REV. RUL. 2012–24 TABLE 2
Adjusted AFR for September 2012
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted
AFR
.23%.23%.23%.23%
Mid-term adjusted AFR
.95%.95%.95%.95%
Long-term adjusted
AFR
2.80%2.78%2.77%2.76%
REV. RUL. 2012–24 TABLE 3
Rates Under Section 382 for September 2012
Adjusted federal long-term rate for the current month2.80%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)3.02%
REV. RUL. 2012–24 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for September 2012
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after
July 30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-
income housing credit
7.35%
Appropriate percentage for the 30% present value low-income housing credit
3.15%
September 4, 20123302012–36 I.R.B.

REV. RUL. 2012–24 TABLE 5
Rate Under Section 7520 for September 2012
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 interest1.0%
Section 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 September 2012. See Rev. Rul. 2012-24, page
329.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of September 2012. See Rev. Rul. 2012-24, page
329.
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 September 2012. See Rev. Rul. 2012-24, page
329.
2012–36 I.R.B.331September 4, 2012

Part III. Administrative, Procedural, and Miscellaneous
25-Year Average Segment
Rates and Adjusted 24-Month
Average Segment Rates Used
for Pension Funding
Notice 2012–55
This notice provides guidance on the
25-year average segment rates that are
applied to adjust the otherwise applicable
24-month average segment rates that are
used to compute the funding target and
other items under § 430 of the Internal
Revenue Code (Code) and § 303 of the
Employee Retirement Income Security
Act of 1974 (ERISA). The guidance re-
flects the changes made to the Code and
ERISA by the Moving Ahead for Progress
in the 21st Century Act (MAP–21), Pub.
L. No.112–141, which was enacted July 6,
2012.
BACKGROUND
Section 430 specifies the minimum
funding requirements that generally apply
to single-employer defined benefit pen-
sion plans pursuant to § 412. Section
430(h)(2) specifies interest rates that are
used for purposes of calculating the mini-
mum required contribution. The interest
rates that are used for this purpose are
a set of three segment rates described in
§ 430(h)(2)(C)(i), (ii), and (iii), or, alter-
natively, a full yield curve as described in
§ 430(h)(2)(D)(ii).
Each segment rate described in
§ 430(h)(2)(C)(i), (ii), and (iii) is, for
any month, the single rate of interest de-
termined by the Secretary for the month
on the basis of the applicable corporate
bond yield curve for that month, taking
into account only that portion of the yield
curve applicable to that segment. Section
430(h)(2)(D)(i) provides that the Secre-
tary shall prescribe a corporate bond yield
curve applicable for each month. The
applicable corporate bond yield curve is,
with respect to any month, a yield curve
which reflects a 24-month average (the
average of the yield curve values for the
preceding month and the prior 23 months)
of the yields on investment grade corpo-
rate bonds with varying maturities that are
in the top 3 quality levels available. Under
§ 430(h)(2)(D)(ii), an employer may elect
to use the corporate bond yield curve de-
termined without regard to the 24-month
averaging, in lieu of the segment rates.
Section 40211(a) of MAP–21 adds
§ 430(h)(2)(C)(iv), generally effective for
plan years beginning on or after January 1,
2012. Section 430(h)(2)(C)(iv) provides
that, for a plan year, each of the three seg-
ment rates described in § 430(h)(2)(C)(i),
(ii), and (iii) is adjusted as necessary to fall
within a specified range that is determined
based on a percentage of the average of
the corresponding segment rates for the
25-year period ending on September 30
preceding the calendar year that includes
the first day of that plan year. Under
§ 430(h)(2)(C)(iv)(II), for plan years be-
ginning in 2012, each segment rate is
adjusted so that it is no less than 90% and
no more than 110% of the correspond-
ing 25-year average segment rate. For
later plan years, this range is gradually
increased, so that the segment rates for
plan years beginning after 2015 are no
less than 70% and no more than 130% of
the corresponding 25-year average seg-
ment rates. Section 430(h)(2)(C)(iv)(I)
provides that the Secretary may pre-
scribe equivalent rates for any years in the
25-year period for which segment rates
are not available.
Section 430(h)(2)(F) (as amended
by MAP–21) provides that each month
the Secretary shall publish the corporate
bond yield curve, the segment rates in
§ 430(h)(2)(C), and the 25-year average of
the segment rates. Section 430(h)(2)(F)
also provides that the Secretary shall pub-
lish a description of the methodology used
to determine the yield curve and the seg-
ment rates in sufficient detail to enable
plans to make reasonable predictions re-
garding the yield curveand rates for future
months. Notice 2007–81, 2007–2 C.B.
899, provides guidelines for determining
the monthly corporate bond yield curve
and the 24-month average corporate bond
segment rates.
DEVELOPMENT OF EQUIVALENT
RATES
Segment rates determined under
§ 430(h)(2)(C) (i), (ii) and (iii) are avail-
able as far back as October 2005. The
October 2005 segment rates are the av-
erage of the “spot” segment rates for
the 24 months beginning October 2003
and ending September 2005. In order
to determine equivalent rates for earlier
months, the Treasury Department used a
statistical regression analysis to combine
information about the relationship of the
spot segment rates, zero-coupon yields
for Treasury securities (“Treasury spot
rates”), corporate bond index values, and
Constant Maturity Treasury rates — using
monthly average rates for the period Oc-
tober 2003 through July 2011 — in order
to estimate spot segment rates for months
back to October 1984.
Specifically, the spot segment rates for
months before October 2003 were esti-
mated using regressions that compared,
for the period October 2003 through July
2011, the spreads between the spot seg-
ment rates and a corresponding average of
Treasury spot rates with spreads between
two corporate bond indices and Constant
Maturity Treasury rates (“corporate bond
spreads”). For the first segment regres-
sion, the corresponding average of Trea-
sury spot rates was the average over the
period of 1–5 years and the two corporate
bond spreads were the difference between
a Citigroup A bond index and the 7-year
Constant Maturity Treasury rate and the
difference between a Citigroup AA-AAA
bond index and the 7-year Constant Matu-
rity Treasury rate. For the second segment
regression, the corresponding average of
Treasury spot rates was the average of the
Treasury spot rates for the period of 6–20
years and the corporate bond spreads were
thesameasthosethatwereusedinthefirst
segment regression. For the third segment
regression, the corresponding average of
Treasury spot rates was the average of
the Treasury spot rates for the period of
21–60 years, assuming that the spot rates
for years after 30 was the same as for year
30, and the corporate bond spreads were
the same as those that were used in the
first and second segment regressions.
The result of the regressions was a se-
ries of coefficients that were applied to
the corporate bond spreads for months be-
fore October 2003 in order to estimate a
spread that can be added to the correspond-
ing average of Treasury spot rates for those
September 4, 20123322012–36 I.R.B.

months in order to estimate monthly spot
segment rates for each month before Oc-
tober 2003. The estimated monthly spot
segment rates were combined with the ac-
tual monthly spot segment rates for Oc-
tober 2003 and later months in order to
determine rates that are equivalent to the
segment rates for months before October
2005.
DETERMINATION OF THE 25-YEAR
AVERAGE OF SEGMENT RATES
Based on the calculation of equivalent
rates for months before October 2005 and
actual segment rates for later months, the
averages, for the 25 years ending Septem-
ber 30, 2011, of the first, second, and third
segment rates are 6.15, 7.61, and 8.35 per-
cent, respectively.
ADJUSTED 24-MONTH AVERAGE
SEGMENT RATES
In prior notices, the Treasury and the
Service issued 24-month average segment
rates that did not reflect the adjustment
required by § 430(h)(2)(C)(iv) (as added
by MAP–21). Table 1 contains previously
issued 24-month average segment rates
without adjustment, and, for plan years
beginning in 2012, the adjusted 24-month
average segment rates taking into account
the 90–110% corridor around the 25-year
average segment rates:
Table 1: Adjusted 24-Month Average Segment Rates
24-Month Average Segment Rates
not Adjusted
Adjusted 24-Month Average Segment
Rates, For Plan Years Beginning
in 2012, Using 25-Year Average
Segment Rate Corridors
ApplicableFirstSecondThirdFirstSecondThird
YearMonth
SegmentSegmentSegmentSegmentSegmentSegment
2011September2.06
5.25
6.32
5.546.857.52
2011October2.03
5.20
6.30
5.546.857.52
2011November2.01
5.16
6.28
5.546.857.52
2011December1.99
5.12
6.24
5.546.857.52
2012January1.98
5.07
6.19
5.546.857.52
2012February1.96
5.01
6.13
5.546.857.52
2012March1.93
4.95
6.07
5.546.857.52
2012April1.904.906.01
5.546.857.52
2012May1.874.84
5.965.546.857.52
2012June1.844.79
5.905.546.857.52
2012July1.814.73
5.855.546.857.52
2012August1.774.67
5.785.546.857.52
POSSIBLE CHANGE IN
METHODOLOGY FOR FUTURE
YEARS AND FUTURE GUIDANCE
ON OTHER ISSUES
The methodology described in this no-
tice that was used for determining equiv-
alent rates for months prior to October
2005 reflects a balance between the goal
of a timely determination and publication
of the 25-year average segment rates and
the goal of having the equivalent rates
be as close as possible to the segment
rates that would result from application
of the method currently used to determine
the monthly corporate bond yield curve
and the related spot segment rates. The
Treasury Department is considering re-
placing the methodology for determining
the equivalent rates for months before
October 2005, including possibly by ap-
plying the method — based on bond price
data — that is currently used to determine
the monthly corporate bond yield curve
and the related spot segment rates. In
no event would any such change in the
methodology apply for purposes of plan
years beginning in 2012.
The Treasury and the Service intend to
issue additional guidance in the near fu-
ture on other issues relating to the applica-
tion of the MAP–21 amendments, includ-
ing guidance relating to benefit restrictions
and transition issues.
DRAFTING INFORMATION
The principal author of this notice is
Tony Montanaro of the Employee Plans,
Tax Exempt and Government Entities
Division. However, other personnel from
the Service and the Treasury Department
participated in preparing this notice.
Mr. Montanaro may be e-mailed at
RetirementPlanQuestions@irs.gov.
2012–36 I.R.B.333September 4, 2012

Part IV. Items o
fGeneralInterest
Fast Track Set
tlement for
TE/GE Taxpaye
rs
Announcement 2012–34
This announce
ment provides an oppor-
tunity for tax
payers (entities or individ-
uals) with iss
ues under examination by
the Tax Exemp
t and Government Enti-
ties Divisio
n (TE/GE) to use Fast Track
Settlement (
FTS) to expedite case resolu-
tion within t
he TE/GE organization. The
TE/GE FTS wil
l enable TE/GE taxpayers
that curren
tly have unagreed issues in at
least one op
en period under examination
to work toge
ther with TE/GE and the
Office of Ap
peals (Appeals) to resolve
outstandi
ng disputed issues while the case
is still in
TE/GE jurisdiction.
DESCRIPTION OF TE/GE FAST
TRACK SETTLEMENT
TE/GE and A
ppeals jointly administer
the TE/GE F
TS process. TE/GE FTS is
used to res
olve factual and legal issues, and
it may be in
itiated at any time after an issue
has been fu
lly developed,but before the is-
suance of
a 30-day letter (or its equivalent).
TE/GE FTS
is available to taxpayers na-
tionwide
.
BACKGROUND
The pilot
program for TE/GE FTS was
announce
d in Announcement 2008–105,
2008–2 C.
B. 1219, to extend fast track set-
tlement t
o TE/GE cases and provide for di-
rect over
sight of the program by TE/GE
and Appe
als. The pilot program officially
expired
on November 30, 2010; however,
TE/GE an
d Appeals have continued to of-
fer FTS o
nanunofficialbasis. Thisan-
nouncem
ent establishes TE/GE FTS as a
perman
ent program based on the determi-
nation
that it supports the Service-wide ini-
tiativ
e of reducing the time and cost of
examin
ation and case resolution. TE/GE
FTS is c
onsistent with the pilot program
with t
he exception of an additional level of
revie
w for TE/GE FTS applications to ac-
commo
date the management structure of
TE/GE
. The key features of TE/GE FTS
are:
•The TE/
GE Group Manager coordi-
nates
preparation and submission of
the applicati
on package to the Appeals
FTS Program Ma
nager. The Appeals
Team Manager r
esponsible for TE/GE
programs serv
es as the Appeals FTS
Program Manag
er.
•The TE/GE Grou
p Manager notifies
the taxpayer o
f acceptance into or re-
jection from
the FTS program, partic-
ipates in the
FTS Session on behalf
of the govern
ment, and is primarily
responsible
for accepting or rejecting
any settlem
entproposalthatarisesasa
result of th
eFTS.
•The TE/GE FT
S Application will be
reviewed by
both the TE/GE Group
Manager and
an operating division of-
ficial (e.g
., a Director of Examination)
before it i
s sent to the Appeals FTS
Program Ma
nager for final approval.
•In managin
g cases eligible for TE/GE
FTS, the Ap
peals FTS Program Man-
ager may co
nsult with the TE/GE
Group Mana
ger.
•The TE/GE F
TS process is designed to
be complet
ed within 60 days of accep-
tance of t
he TE/GE FTS Application.
CASE ELIGIBILITY AND
EXCLUSIONS
Generally, TE/GE FTS is available for
cases involving income tax; exclusion of
income from interest paid on municipal
obligations; employment tax; estate and
gift taxes; excise tax; exemption, founda-
tion or qualification issues; or other such
TE/GE functional issues as appropriate
when:
•Issues are fully developed;
•The taxpayer has stated a position in
writing; and
•There are a limited number of una-
greed issues.
TE/GE FTS will not be available for:
•Issues t
hat can be resolved through
other es
tablished settlement initiatives,
such as
, but not limited to, the Self
Correc
tion Program “SCP,” the Audit
Closin
g Agreement Program “Audit
CAP,” o
r other programs described
in Rev.
Proc. 2008–50, 2008–2 C.B.
464;
•Corres
pondence examination cases;
•Cases in which
the taxpayer has failed
to respond to I
RS communications or
no documentat
ion has been previously
submitted for
consideration by TE/GE;
•Cases in which
Appeals does not have
jurisdiction
(including determination
of penalties u
nder § 6700 of the Code);
•Cases involv
ing Listed Transactions
or Abusive Ta
x Avoidance Transac-
tions (ATAT)
defined in I.R.M. Exhibit
4.32.1–1;
•Cases involv
ing potential for civil or
criminal fra
ud;
•Rebate claim
cases;
•Tax Equity an
d Fiscal Responsibility
Act (TEFRA) p
artnership cases;
•Issues desig
nated for litigation;
•Issues under
consideration for designa-
tion for liti
gation;
•Frivolous is
sues, such as, but not
limited to, t
hose identified in Notice
2010–33, 201
0–17 I.R.B. 609, or any
successor g
uidance;
•“Whipsaw” is
sues,i.e., issues for
which resol
ution with respect to one
party might
result in inconsistent treat-
ment in the a
bsence of the participation
of another p
arty; or
•Issues that
have been identified in a
Chief Couns
el Notice, or equivalent
publicati
on, as excluded from the FTS
process.
If an issue
is determined to be ineli-
gible for t
he FTS program, all issues in
the case ar
e ineligible for the FTS pro-
gram. TE/G
E FTS may not be the ap-
propriate
dispute resolution process for all
cases invo
lving TE/GE taxpayers. The
TE/GE Gro
up Manager and the taxpayer
will eval
uate the individual circumstances
of the cas
e to determine if this process
meets the
ir needs.
APPLICAT
ION PROCESS
A taxpaye
r that is interested in partici-
pating i
n TE/GE FTS, or that has questions
about th
e program and its suitability for the
taxpaye
r’s case, may contact the TE/GE
Group Ma
nager or the Examiner conduct-
ing the a
udit for the period(s) currently un-
der exa
mination. The taxpayer, the Exam-
iner, o
r the TE/GE Group Manager may
consid
er using the TE/GE FTS process at
any tim
e after an issue has been fully de-
September 4, 20123342012–36 I.R.B.

veloped but before a 30-day letter (or its
equivalent) is issued.
To apply for the TE/GE FTS
program, the taxpayer should sub-
mit Form 14017,Application for
Fast Track Settlement, available at
http://www.irs.gov/pub/irs-pdf/f14017.pdf
(TE/GE FTS Application). A Form 5701,
Notice of Proposed Adjustment,orapre-
liminary report of findings, as appropriate,
and a written response from the taxpayer
must be included with the TE/GE FTS
Application to facilitate the understanding
of the parties’ opposing views. If the Form
5701 has not previously been prepared,
the TE/GE Examiner should prepare one
for submission with the Form 14017. The
TE/GE FTS Application will be reviewed
by both the TE/GE Group Manager and an
operating division official before it is sent
to the Appeals FTS Program Manager for
final approval.
If the case is not accepted for inclusion
in TE/GE FTS, the TE/GE or Appeals rep-
resentative will discuss other dispute reso-
lution opportunities with the taxpayer, in-
cluding 30-day letter procedures contained
in IRS Publication 1,Your Rights as a Tax-
payer,or Publication 5,Your Appeal Rights
and How To Prepare a Protest If You Don’t
Agree. The decision not to accept a case
into the TE/GE FTS program is not subject
to administrative appeal or judicial review.
SETTLEMENT PROCESS
TE/GE FTS employs various alterna-
tive dispute resolution techniques to pro-
mote case or issue resolution. An FTS
Appeals Official will serve as a neutral
party. A TE/GE Appeals Officer trained
in mediation or, in limited cases, a medi-
ation-trained Appeals Team Case Leader,
serves as the neutral FTS Appeals Offi-
cial. The FTS Appeals Official does not
perform in a traditional Appeals role, but
uses dispute resolution techniques to facil-
itate settlement between the parties.
During TE/GE FTS, the taxpayer and
TE/GE representatives meet with the FTS
Appeals Official (the FTS Session). The
taxpayer and TE/GE representatives at the
FTS Session should include individuals
with decision-making authority and the
information and expertise necessary to
assist the parties and the FTS Appeals Of-
ficial during the settlement process. The
FTS Appeals Official may ask the parties
to limit the number of participants at the
FTS Session to facilitate the process. A
taxpayer is not required to have a repre-
sentative to participate in TE/GE FTS. If
the taxpayer is represented by a person
engaged in practice before the Service,
however, this individual must have a
power of attorney from the taxpayer (Form
2848,Power of Attorney and Declaration
of Representative).
The FTS Appeals Official will hold
the FTS Session at the date and location
agreed to by both parties. Prior to the FTS
Session, the FTS Appeals Official will ad-
vise the participants of the procedures and
establish ground rules. The FTS Appeals
Official may modify the rules and proce-
dures during the FTS Session to adapt to
changes in circumstances. The FTS Ses-
sion may include joint sessions with all
parties, separate meetings, or both, as de-
termined appropriate in the sole judgment
of the FTS Appeals Official.
The FTS Appeals Official will use an
FTS Session Report to assist in planning
the FTS Session and to report on develop-
ments during the FTS Session. The FTS
Session Report will include a list of all is-
sues approved for the FTS program, a de-
scription of the issues, the amounts in dis-
pute, conference dates, a plan of action
for the FTS Session and other information
useful to the process as determined by the
parties and the FTS Appeals Official. The
FTS Appeals Official will prepare and up-
date an agenda to guide the communica-
tion, set the order of issue discussion, and
pose questions to clarify the issues. Dur-
ing the FTS Session, the FTS Appeals Of-
ficial will provide decision makers from
both parties with copies of the agenda and
the FTS Session Report.
Generally, the FTS Appeals Official
will consider only those issues outlined
in the FTS Session Report, except by
mutual agreement of the parties. If the tax-
payer presents information during the FTS
Session that the taxpayer had not previ-
ously presented during the audit, the FTS
Appeals Official will adjust the targeted
completion date to give the appropriate
IRS officials time to evaluate the informa-
tion.
During the FTS Session, the FTS Ap-
peals Official may propose settlement
terms for any or all issues and may con-
sider settlement terms proposed by either
party. If the taxpayer accepts the FTS Ap-
peals Official’s settlement proposal, but
the TE/GE Group Manager rejects it, the
TE/GE Area Manager with jurisdiction
for the case must review the rejection of
the settlement proposal and either concur
in writing with the rejection or accept the
settlement proposal on behalf of TE/GE.
If the TE/GE Area Manager concurs with
the rejection of the settlement proposal,
and an acceptable alternative settlement
cannot be reached, the issue will be closed
out of the FTS program as unagreed.
If the parties resolve any of the disputed
issues at the conclusion of the FTS Ses-
sion, the parties and the FTS Appeals Of-
ficial shall sign the FTS Session Report
acknowledging acceptance of the terms of
settlement for purposes of preparing com-
putations or making other determinations.
The signature of the parties on the FTS
Session Report does not constitute a final
settlement, nor does it waive restrictions
on assessment, terminate consents to ex-
tend periods of limitation, start the running
of any periods of limitation, or constitute
agreement to close the case. Post-settle-
ment procedures are described below.
The TE/GE FTS process is confiden-
tial. IRS employees involved in any way
with the TE/GE FTS process are subject
to the confidentiality and disclosure pro-
visions of the Internal Revenue Code. To
participate in TE/GE FTS, the taxpayer
must consent, pursuant to section 6103(c),
to the disclosure of the taxpayer’s returns
and return information pertaining to the is-
sues being considered in the TE/GE FTS
process to those persons named on the
Form 14017 as participants in the process.
IRS employees, the taxpayer, and persons
invited to participate by the IRS or the
taxpayer shall not voluntarily disclose in-
formation regarding any communication
made during the FTS Session, except as
provided by statute.
The prohibition againstex partecom-
munications between Appeals Officers
and other IRS employees provided by
§ 1001(a) of the Internal Revenue Service
Restructuring and Reform Act of 1998
does not apply to the communications
arising in the TE/GE FTS process because
the Appeals personnel are facilitating
an agreement between the taxpayer and
TE/GE and are not acting in their tradi-
tional Appeals settlement role. Rev. Proc.
2012–18, 2012–10 I.R.B. 455.
2012–36 I.R.B.335September 4, 2012

Any recommended settlement by the
FTS Appeals Official of an issue in TE/GE
FTS shall be subject to the procedures in
the Internal Revenue Manual and pub-
lished guidance existing at the time of the
recommendation that would be applica-
ble if the issue was being considered by
Appeals. FTS therefore creates no special
authority for settlement by the FTS Ap-
peals Official. For example, if the FTS
issue is coordinated in either the Technical
Advisor Program or the Appeals Technical
Guidance program, the proposed settle-
ment of that issue is subject to established
procedures, including submission of the
proposed settlement to the Appeals Coor-
dinator for review and concurrence.
If the parties fail to resolve any issue in
TE/GE FTS, the taxpayer retains the op-
tion of requesting that the issue be heard
through the traditional Appeals process.
Except as specifically provided above,
both parties retain the right to withdraw
throughout the entire TE/GE FTS process.
A party wishing to withdraw should pro-
vide written notice to the FTS Appeals Of-
ficial and the other party.
POST-SETTLEMENT PROCEDURE
If the parties reach an agreement on all
or some issues through the TE/GE FTS
process, the TE/GE representative, or FTS
Appeals Official, as appropriate, will use
established issue or case closing proce-
dures and applicable agreement forms, in-
cluding preparation of a Form 906,Closing
Agreement on Final Determination Cover-
ing Specific Matters, if appropriate.
If applicable, the IRS will report a
proposed resolution reached as a result
of TE/GE FTS to the Joint Committee
on Taxation in accordance with section
6405. The IRS may reconsider a proposed
settlement, as reflected in a signed FTS
Session Report, upon receipt of comments
on the proposed settlement from the Joint
Committee on Taxation. If the taxpayer
declines to agree with any changes by the
IRS upon reconsideration, TE/GE will
close the case unagreed, and the taxpayer
will retain all the usual rights to request
Appeals consideration of any unagreed
issues.
UNRESOLVED CASES
With respect to TE/GE FTS cases that
are returned for traditional Appeals con-
sideration for any reason,ex parterestric-
tions will not be imposed on intra-Ap-
peals communications.SeeRev. Proc.
2012–18, 2012–10 I.R.B. 455. Appeals
management will take appropriate mea-
sures to ensure these cases are handled im-
partially.
PRECEDENTIAL VALUE OF
SETTLEMENT AGREEMENTS
A resolution reached by the parties
through the TE/GE FTS process will not
bind the parties for taxable periods or is-
sues not covered by the settlement, unless
such taxable periods or issues are ad-
dressedexpresslyinaclosingagreement
reached as part of the TE/GE FTS process.
DELEGATION OF AUTHORITY
This announcement constitutes a del-
egation by the Commissioner of Internal
Revenue of settlement authority to Grade
14, 13, and 12 Appeals Officers who are
assigned to be FTS Appeals Officials for
TE/GE FTS cases described in this an-
nouncement. This delegation of settle-
ment authority includes the responsibility
for arriving at the final disposition from
the Government’s perspective, approving
the final settlement in accordance with the
delegated authority, and executing the ap-
propriate closing documents. This author-
ity may not be redelegated.
EFFECTIVE DATE
This program is effective beginning
September 4, 2012.
EFFECT ON OTHER DOCUMENTS
Announcement 2008–105 is modified
and superseded.
CONTACT INFORMATION
The principal author of this announce-
ment is Debra Kohn, Office of Associate
Chief Counsel (Procedure & Administra-
tion). For further information regarding
this announcement, contact Joan T. Hirsch,
Program Manager, TE/GE Entities at (562)
400–1801 (not a toll-free call), or by email
atJoan.T.Hirsch@irs.gov.
September 4, 20123362012–36 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2012–36 I.R.B.iSeptember 4, 2012

Numerical Finding List
1
Bulletins 2012–27 through 2012–36
Announcements:
2012-26, 2012-27 I.R.B.8
2012-27, 2012-27 I.R.B.10
2012-28, 2012-27 I.R.B.10
2012-30, 2012-34 I.R.B.314
2012-31, 2012-34 I.R.B.315
2012-32, 2012-35 I.R.B.325
2012-33, 2012-35 I.R.B.325
2012-34, 2012-36 I.R.B.334
Notices:
2012-39, 2012-31 I.R.B.95
2012-44, 2012-28 I.R.B.45
2012-45, 2012-29 I.R.B.59
2012-46, 2012-30 I.R.B.86
2012-47, 2012-31 I.R.B.98
2012-48, 2012-31 I.R.B.102
2012-49, 2012-31 I.R.B.119
2012-50, 2012-31 I.R.B.121
2012-51, 2012-33 I.R.B.150
2012-52, 2012-35 I.R.B.317
2012-53, 2012-35 I.R.B.317
2012-55, 2012-36 I.R.B.332
Proposed Regulations:
REG-101812-07, 2012-34 I.R.B.311
REG-134042-07, 2012-27 I.R.B.5
REG-153627-08, 2012-29 I.R.B.60
REG-136491-09, 2012-35 I.R.B.321
REG-125570-11, 2012-30 I.R.B.93
REG-130266-11, 2012-32 I.R.B.126
REG-134935-11, 2012-29 I.R.B.64
REG-141832-11, 2012-28 I.R.B.54
REG-107889-12, 2012-28 I.R.B.53
REG-113738-12, 2012-29 I.R.B.66
Revenue Procedures:
2012-28, 2012-27 I.R.B.4
2012-29, 2012-28 I.R.B.49
2012-30, 2012-33 I.R.B.165
2012-31, 2012-33 I.R.B.256
2012-32, 2012-34 I.R.B.267
2012-33, 2012-34 I.R.B.272
2012-34, 2012-34 I.R.B.280
Revenue Rulings:
2012-19, 2012-28 I.R.B.16
2012-20, 2012-27 I.R.B.1
2012-21, 2012-32 I.R.B.123
2012-24, 2012-36 I.R.B.329
Treasury Decisions:
9591, 2012-28 I.R.B.32
9592, 2012-28 I.R.B.41
9593, 2012-28 I.R.B.17
9594, 2012-29 I.R.B.57
9595, 2012-30 I.R.B.71
9596, 2012-30 I.R.B.84
9597, 2012-34 I.R.B.258
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin
2012–26, dated June 25, 2012.
September 4, 2012ii2012–36 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–27 through 2012–36
Announcements:
83-196
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
85-141
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
2008-105
Modified and superseded by
Ann. 2012-34, 2012-36 I.R.B.334
Notices:
2009-24
Amplified by
Notice 2012-51, 2012-33 I.R.B.150
2012-51
Amplified by
Notice 2012-51, 2012-33 I.R.B.150
Proposed Regulations:
REG-100276-97
Withdrawn by
Ann. 2012-27, 2012-27 I.R.B.10
Revenue Procedures:
95-15
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
98-32
Modified and superseded by
Rev. Proc. 2012-33, 2012-34 I.R.B.272
2007-38
Modified and superseded by
Rev. Proc. 2012-32, 2012-34 I.R.B.267
2011-40
Superseded by
Rev. Proc. 2012-30, 2012-33 I.R.B.165
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin 2012–26, dated June 25, 2012.
2012–36 I.R.B.iiiSeptember 4, 2012

September 4, 20122012–36 I.R.B.

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