Internal Revenue Bulletin 2012-9 (PDF rendition): IRS Notices

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Bulletin No. 201
2-9
February 27, 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
REG–109369–10, page 434.
Proposed regulations under section 469 of the Code provide
guidance regarding the definition of an “interest in a limited
partnership as a limited partner” for purposes of determining
whether a taxpayer materially participates in an activity.
Notice 2012–13, page 421.
This notice provides guidance for employers that seek to claim
the Work Opportunity Tax Credit (WOTC) for hiring veterans.
The notice also provides information on alternative methods
for filing Form 8850 with the Department of Labor/Designated
Local Agencies. Announcement 2002–44 supplemented.
Notice 2012–15, page 424.
This notice addresses the application of section 367 of the
Code to transfers of stock subject to section 304.
EMPLOYEE PLANS
Notice 2012–16, page 427.
Weighted average interest rate update; corporate bond
indices; 30-year Treasury securities; segment rates.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in February
2012; the 24-month average segment rates; the funding
transitional segment rates applicable for February 2012; and
the minimum present value transitional rates for January 2012.
EMPLOYMENT TAX
Notice 2012–13, page 421.
This notice provides guidance for employers that seek to claim
the Work Opportunity Tax Credit (WOTC) for hiring veterans.
The notice also provides information on alternative methods
for filing Form 8850 with the Department of Labor/Designated
Local Agencies. Announcement 2002–44 supplemented.
EXCISE TAX
Notice 2012–17, page 430.
This notice answers to frequently asked questions from em-
ployers regarding certain provisions of the Patient Protection
and Affordable Care Act, specifically the provisions dealing with
automatic enrollment, employer shared responsibility and wait-
ing periods.
Fi
nding Lists begin on page ii.
Index for January through February begins on page iv.

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.
February 27, 20122012–9 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Work Opportunity Tax Credit
Notice 2012–13
I. PURPOSE
This notice provides guidance on Re-
turning Heroes and Wounded Warriors
Work Opportunity Tax Credits, included
as § 261 of the VOW to Hire Heroes Act
of 2011, Tit. II, subtitle D, of Pub. L. No.
112–056 (Act), enacted on November 21,
2011. Section 261 of the Act amended
§§ 51, 52, and 3111 of the Internal Rev-
enue Code to provide a credit for hiring
certain qualified veterans. This notice
also provides employers who hire quali-
fied veterans additional time beyond the
28-day deadline in § 51(d)(13) for sub-
mitting Form 8850,Pre-screening Notice
and Certification Request for the Work
Opportunity Credit,to Designated Local
Agencies (DLAs)
This notice provides additional guid-
ance on electronic signature and electronic
submission of Form 8850 and also informs
all employers that the Internal Revenue
Service (IRS) will allow the signature and
submission of Form 8850 by facsimile to
DLAs that choose to accept such submis-
sions.
This notice also requests comments on
alternative methods for certification of a
veteran as a qualified veteran described in
clause (ii)(II), (iii), or (iv) of § 51(d)(3)(A),
II. BACKGROUND
Section 51 provides for a Work Oppor-
tunity Tax Credit (WOTC) for employers
who hire individuals who are members of
targeted groups. An employer must obtain
certification that an individual is a targeted
group member before the employer may
claim the credit. Certification of an indi-
vidual’s targeted group status is obtained
fromaDLA.ADLAisaStateemploy-
ment security agency established in accor-
dance with 29 U.S.C. §§ 49–49n. An em-
ployer must submit Form 8850 to the DLA
not later than the 28
th
day after the individ-
ual begins work for the employer.
The WOTC applies to certain wages
paid or incurred by employers with respect
to a member of a targeted group. Prior to
enactment of the Act, § 51(c)(4)(B) pro-
vided that wages paid or incurred with re-
spect to an individual who begins work for
the employer after December 31, 2011, are
not taken into account for purposes of the
WOTC. Thus, the credit is not available
with respect to wages for persons who be-
gin work after December 31, 2011, other
than qualified veterans. The Act extended
the credit only with respect to qualified
veterans who begin work for the employer
on or before December 31, 2012.
The Act amends § 51(d)(3) to add two
new categories to the qualified veteran tar-
geted group. Under new § 51(d)(3)(A)(iii)
and (iv), a qualified veteran is a veteran
certified as having aggregate periods of
unemployment of at least 4 weeks but less
than 6 months in the year prior to being
hired or certified as having aggregate peri-
ods of unemployment of 6 months or more
in the year prior to being hired.
The amount of wages that an employer
may take into account in computing the
credit differs for the various categories
of qualified veterans. The Act amends
§ 51(b)(3), which provides the amount of
qualified wages that an employer may take
into account in calculating the WOTC.
Section 51(b)(3), asamended, provides
that the amount of qualified wages taken
into account is limited to $6,000 per year
in the case of any individual who is a
qualified veteran by reason of subsection
(d)(3)(A)(i) (a veteran certified as being a
member of a family receiving assistance
under a supplemental nutrition assistance
program under the Food and Nutrition
Act of 2008 for at least a 3-month pe-
riod ending during the 12-month period
ending on the hiring date) and subsection
(d)(3)(A)(iii) (a veteran certified as having
aggregate periods of unemployment of at
least 4 weeks but less than 6 months in
the year prior to being hired); $12,000 per
year in the case of any individual who is a
qualified veteran by reason of subsection
(d)(3)(A)(ii)(I) (a disabled veteran who
is certified as having a hiring date which
is not more than 1 year after discharge
or release from active duty); $14,000 per
year in the case of any individual who is a
qualified veteran by reason of subsection
(d)(3)(A)(iv) (a veteran certified as having
aggregate periods of unemployment of 6
months or more in the year prior to being
hired); and $24,000 per year in the case of
any individual who is a qualified veteran
by reason of subsection (d)(3)(A)(ii)(II) (a
disabled veteran who is certified as having
aggregate periods of unemployment of 6
months or more in the year prior to being
hired).
The Act amends § 51(d)(13)(D) to pro-
vide that a veteran will be treated as being
certified as having therequisite aggregate
period of unemployment by the DLA if the
veteran is certified as being in receipt of
unemployment compensation for the ap-
plicable period. The Act also allows the
Secretary of the Treasury to provide, at the
Secretary’s discretion, alternative methods
for certification of a veteran as a qualified
veteran described in clause (ii)(II), (iii), or
(iv) of § 51(d)(3)(A).
The Act amends § 51(c)(4)(B) to extend
the credit and allow an employer to claim
the WOTC for qualified wages paid or in-
curred by the employer to a qualified vet-
eran who begins work on or before Decem-
ber 31, 2012.
The Act also amends § 52 and § 3111
to make a credit available to “qualified
tax-exempt organizations” that hire qual-
ified veterans for which the WOTC would
have been allowable under § 51 if the or-
ganization were not aqualified tax-exempt
organization. Specifically, the Act adds
new § 3111(e), which permits qualified
tax-exempt organizations that hire quali-
fied veterans on or after November 22,
2011, to claim a credit against the em-
ployer share of social security tax imposed
under § 3111(a).
The credit under § 3111(e)(1) is a credit
against the tax imposed by § 3111(a) on
wages paid by the qualified tax-exempt or-
ganization with respect to employment of
all employees of the organization during
the applicable period. Section 3111(e)(4)
defines the “applicable period” as the
1-year period beginning with the day the
qualified veteran begins work for the or-
ganization. The amount of the credit under
§ 3111(e) equals the amount of the credit
determined under § 51 (after application
of the modifications under § 3111(e)(3))
with respect to wages paid to the quali-
fied veteran during the applicable period.
However, under § 3111(e)(2), the aggre-
gate amount allowed as a credit under
2012–9 I.R.B.421February 27, 2012

§ 3111(e) for all qualified veterans for any
period with respect to which tax is im-
posed under § 3111(a) cannot exceed the
amount of the employer social security tax
imposedby§3111(a)onallwagespaid
by the employer during such period.
As indicated above, the amount of the
credit under § 3111(e) is determined under
§ 51 but is subject to modifications under
§ 3111(e)(3). Specifically, § 3111(e)(3)
modifies the amount of the credit available
to the qualified tax-exempt organization to
16.25 percent (rather than 25 percent) of
the qualified first-year wages for the ap-
plicable period if the veteran performs less
than 400 hours but at least 120 hours of ser-
vice, or 26 percent (rather than 40 percent)
of the qualified first-year wages for the ap-
plicable period if the veteran performs at
least 400 hours of service for the qualified
tax-exempt organization. Further, to cal-
culate the amount of the credit, the qual-
ified tax-exempt organization only takes
into account the wages paid to a quali-
fied veteran for services in furtherance of
activities related to the purpose or func-
tion constituting the basis of the organi-
zation’s exemption under § 501. For ex-
ample, wages for services in an unrelated
trade or business (as defined in § 513) are
not counted for purposes of the credit. Al-
though wages are defined for purposes of
the WOTC under § 51 as wages under the
Federal Unemployment Tax Act, for pur-
poses of the credit available to qualified
tax-exempt organizations under § 3111(e),
the term “wages” refers to wages under the
Federal Insurance Contributions Act.
New § 3111(e)(5)(A) defines “quali-
fied tax-exempt organization” as an em-
ployer that is an organization described in
§ 501(c) and exempt from taxation under
§ 501(a). Accordingly, an employer that
is an agency or instrumentality of the fed-
eral government, or of a state, local, or In-
dian tribal government, is not a qualified
tax-exempt organization unless it is an or-
ganization described in § 501(c) that is ex-
empt from tax under § 501(a).
The requirements for certification un-
der § 51, as amended by the Act, apply
to qualified tax-exempt organizations as
well as to taxable employers. Accordingly,
a qualified tax-exempt organization must
obtain certification, as required under § 51,
that an individual is a qualified veteran be-
fore it may claim the credit. The transi-
tion relief, guidance on filing Forms 8850
with electronic signatures, and allowance
of signature and submission of Form 8850
by facsimile provided for in this notice ap-
ply to all employers, including qualified
tax-exempt organizations.
III. TRANSITION RELIEF
Section 51(d)(13)(A) provides that an
individual shall not be treated as a mem-
berofatargetedgroupunless(1)onor
before the day the individual begins work,
the employer obtains certification from the
DLA that the individual is a member of a
targeted group; or (2) the employer com-
pletes a pre-screening notice (Form 8850)
on or before the day the individual is of-
fered employment and submits such notice
to the DLA to request certification not later
than 28 days after the individual begins
work. Because the credit, as amended, be-
came effective on the day after enactment,
the Treasury Department and the IRS be-
lieve it is appropriate to provide employ-
ers with additional time to file Form 8850
with a DLA. Accordingly, any employer
who hires any qualified veteran described
in § 51(d)(3) on or after November 22,
2011, and before May 22, 2012, will be
considered to satisfy the requirements of
§ 51(d)(13)(A)(ii) if the employer submits
the completed pre-screening notice to the
DLA to request certification not later than
June 19, 2012.
IV. FILING OF FORM 8850 WITH
ELECTRONIC SIGNATURES
Before any employer may claim the
WOTC for hiring any member of a targeted
group (or, for qualified tax-exempt orga-
nizations, the § 3111(e) credit for hiring a
qualified veteran), that individual must be
certified by the DLA as a member of a tar-
geted group. Section 51(d)(13)(A)(ii)(II)
requires that, not later than the 28
th
day
after the individual begins work for the
employer, the employer submit a notice,
signed by the employer and the individual
under penalties of perjury, to the DLA as
part of a written request for certification.
For purposes of this Section IV, “em-
ployer” refers to anyemployer required
to submit a Form 8850 in order to obtain
the WOTC under § 51 or the equivalent
credit under § 3111(e), or an authorized
representative of such an employer.
Employers may submit Form 8850 to
the DLA electronicallyif the employer’s
system satisfies the requirements in Ann.
2002–44, 2002–1 C.B. 809. This notice
makes available to employers two alter-
native methods of certification using elec-
tronic signatures in addition to the elec-
tronic submission of Form 8850 as pro-
vided in Ann. 2002–44. The alternative
methods are available to any employer re-
quired to submit a Form 8850 in order to
obtain the WOTC for any member of any
targeted group under § 51 or the equivalent
credit under § 3111(e).
First, an employer may print out a pa-
per copy of the Form 8850 that was signed
electronically by both the applicant and the
employer in accordance with the require-
ments of Ann. 2002–44, and transmit that
paper copy to the DLA (by mail or by fac-
similefollowingtherulesinSectionVof
this notice).
Second, an employer may file Form
8850 using a method under which the
applicant signs electronically but the em-
ployer signs in ink. More specifically, the
applicant signs Form8850 electronically
and the Form 8850 is transmitted electron-
ically to the employer in accordance with
the requirements detailed below. Once
received and printed out, the paper copy
of the Form 8850 shows “signed elec-
tronically” in the field for the applicant’s
signature. The employer signs that paper
copy of that Form 8850 in ink, complying
with the signature and jurat requirements
on Form 8850 and the Form 8850 instruc-
tions for the paper copy of Form 8850, and
transmits that paper copy to the DLA (by
mail or by facsimile following the rules
in Section V of this notice). Under this
second alternative method, the employer
must satisfy all five of the following re-
quirements with respect to the Form 8850
that is electronicallysignedbytheappli-
cant:
(i)In General.The electronic system
must ensure that the information received
is the information sent, and it must doc-
ument all occasions of access that result
in the transmission of a Form 8850. In
addition, the design and operation of the
electronic system, including access pro-
cedures, must make it reasonably certain
that the applicant signing the Form 8850,
accessing the system, and submitting the
Form 8850 is the applicant identified in the
form.
(ii)Same Information as Paper Form
8850. The electronically signed Form
February 27, 20124222012–9 I.R.B.

8850 must provide the DLA with exactly
the same information as the paper Form
8850.
(iii)Jurat and Signature Requirements.
The Form 8850 must be signed electron-
ically by the applicant under penalties of
perjury.
(A)Jurat.The jurat (perjury statement)
must contain the language that appears on
the paper Form 8850 for the applicant. The
electronic system must inform the appli-
cant that he or she must make the declara-
tion contained in the jurat and that the dec-
laration is made by signing the Form 8850.
The instructions and the language of the ju-
rat must immediately follow the informa-
tion provided by the applicant, and must
immediately precede the applicant’s elec-
tronic signature.
(B)Electronic Signature.The elec-
tronic signature must (1) identify the appli-
cant whose name is on the Form 8850 and
the employer submitting the Form 8850,
and (2) authenticate and verify the form.
For this purpose, the terms “authenticate”
and “verify” have the same meaning as
they do when applied to a written signa-
ture on a paper Form 8850. An electronic
signature can be in any form that satisfies
the foregoing requirements.
(iv)Copies of Form 8850.The em-
ployer must be able to supply and, upon
request by the IRS, the employer must sup-
ply (1) a paper copy of the Form 8850 sub-
mitted to the DLA, and (2) a statement that,
to the best of the employer’s knowledge,
the Form 8850 was submitted by the em-
ployer with respect to the named applicant.
The paper copy of the electronically signed
Form 8850 must provide exactly the same
information as, but need not be a facsimile
of, the paper Form 8850.
(v)Retention of Forms 8850 by the
DLAs and Employers.Forms 8850 with
an applicant’s electronic signature have
the same status as paper Forms 8850.
Therefore, guidance that applies to paper
Forms 8850 also applies to these Forms
8850. For example, as is the case for paper
Forms 8850, electronic Forms 8850 are
required to be retained by employers under
their established record-keeping systems.
For further information, see Rev. Proc.
98–25, 1998–1 C.B. 689, on information
regarding the retention of records within
an Automatic Data Processing System.
V. ALTERNATIVE METHOD OF
FILING OR SIGNING FORM
8850—FILING OR SIGNING BY
FACSIMILE
In addition to the electronic signature
method of filing Form 8850 described in
Section IV, the IRS will also allow the fac-
simile transmission of applicant and em-
ployer signatures on a Form 8850 if the ap-
plicable DLA accepts Form 8850 via fac-
simile, the applicant and employer intend
the signatures on the faxed copy to be their
signatures for purposes of the document,
and the requirements of paragraphs (1) and
(2) below are satisfied:
(1)Same Information as Paper Form
8850.The facsimile submission is a re-
production of Form 8850 that provides the
DLA with exactly the same information as
the paper Form 8850.
(2)Signature and Transmission Re-
quirements.The Form 8850 is signed
by the applicant and the employer, under
penalties of perjury, and transmitted to the
DLA in the following manner:
(i) An original Form 8850 is completed
in paper copy and then signed in ink by the
applicant;
(ii) The original Form 8850, signed by
the applicant, is delivered to the employer
either in person or by facsimile;
(iii) The employer signs in ink either the
paper copy of Form 8850 that was signed
by the applicant or the facsimile of that
paper copy; and
(iv) The employer mails or faxes the
signed Form 8850 to the DLA within the
time prescribed by § 51(d)(13)(A)(ii) (or
within the period authorized under Section
IIIofthisnotice).
For purposes of this Section V, “em-
ployer” refers to any employer required to
submit a Form 8850 in order to obtain the
WOTC for any member of any targeted
group under § 51 or the equivalent credit
under § 3111(e), or an authorized represen-
tative of such an employer.
VI. GUIDANCE FOR TAX-EXEMPT
ORGANIZATIONS
Qualified tax-exempt organizations en-
titled to a credit under § 3111(e) must use
Form 5884–C,Work Opportunity Credit
for Qualified Tax-Exempt Organizations
Hiring Qualified Veterans,toclaimthe
credit. Although the credit under § 3111(e)
is applied against the employer social se-
curity tax liability for the employment
taxperiodinwhichthecreditisclaimed,
the liability reported on the qualified
tax-exempt organization’s employment
tax return (e.g., Form 941) is not reduced
when that return is filed. Rather, the IRS
will process Form 5884–C separately and
refund the amount properly claimed on
Form 5884–C to the qualified tax-ex-
empt organization, subject to the limit of
the amount of employer social security
tax liability for the period in which the
credit is claimed. Because Form 5884–C
will generally not be processed simul-
taneously with the qualified tax-exempt
organization’s employment tax return, it
is recommended that qualified tax-exempt
organizations not reduce their required
deposits in anticipation of any credit. A
qualified tax-exempt organization that
reduces its required employment tax de-
posits in anticipation of a credit under
§ 3111(e) may receive a system-generated
notice; however, the balance due, includ-
ing any related penalties and interest,
resulting from the reduction in deposits to
reflect the credit under § 3111(e), will be
abated when the credit is applied, gener-
ally without any taxpayer action.
Form 5884–C is filed separately and
should not be attached to any other return
filed by the qualified tax-exempt organiza-
tion. Form 5884–C should be filed after
the qualified tax-exempt organization files
its employment tax return for the tax pe-
riod for which the credit is claimed and in
accordance with the Form 5884–C instruc-
tions. Form 5884–C can be filed immedi-
ately after the qualified tax-exempt organ-
ization files its employment tax return and
it must be filed within 2 years from the
date the tax reported on the employment
tax return was paid, or 3 years from the
date the employment tax return was filed,
whichever is later.
The qualified tax-exempt organization
using Form 5884–C must calculate the
cumulative credit to which the qualified
tax-exempt organization is entitled under
§ 3111(e) for all qualified veterans hired on
or after November 22, 2011. The qualified
tax-exempt organization must reduce the
cumulative credit by any credits claimed
on any Forms 5884–C filed for prior tax
periods. The amount refunded will be
limited to the amount of employer social
security tax reported on the employment
2012–9 I.R.B.423February 27, 2012

taxreturnfiledbythequalifiedtax-ex-
empt organization for the employment tax
period for which the credit is claimed.
Any excess credit (i.e., any credit that
exceeds the employer social security tax
for the period the credit is claimed) may
be carried forward and will be included
in the qualified tax-exempt organization’s
cumulative calculation on Form 5884–C
filed for a subsequent tax period to the
extent provided in the instructions to Form
5884–C.
VII. REQUEST FOR COMMENTS
The Treasury Department and the IRS
request comments on alternative methods
for certification of a veteran as a qualified
veterandescribedin§51(d)(3)inaddition
to the methods of signing and filing elec-
tronically or by facsimile described in this
notice. In particular, comments related
to certification of a veteran as a qualified
veteran described in clause (ii)(II), (iii), or
(iv) of § 51(d)(3)(A) are requested. Com-
ments are also requested on alternative
methods of filing Form 8850. Comments
must be submitted by April 12, 2012. All
materials submitted will be available for
public inspection and copying. Comments
should be submitted to Internal Rev-
enue Service, CC:PA:LPD:RU (Notice
2012–13), Room 5203, PO Box 7604, Ben
Franklin Station, Washington, DC 20224.
Submissions may also be hand-delivered
Monday through Friday between the hours
of 8 a.m. and 4 p.m. to the Courier’s Desk,
1111 Constitution Avenue, NW, Washing-
ton, DC 20224, Attn: CC:PA:LPD:RU
(Notice 2012–13), Room 5203. Submis-
sions may also be sent electronically via
the internet to the following email address:
Notice.comments@irscounsel.treas.gov.
Include the notice number (Notice
2012–13) in the subject line.
VIII. EFFECT ON OTHER
DOCUMENTS
This notice supplements Ann.
2002–44, 2002–1 C.B. 809.
EFFECTIVE DATE
Amendments made to § 51, § 52, and
§ 3111 by the Act are effective for individ-
uals who begin work for the employer on
or after November 22, 2011. As described
in Section III, any employer who hires any
qualified veteran described in § 51(d)(3)
on or after November 22, 2011, and before
May 22, 2012, will be considered to sat-
isfy the requirements of § 51(d)(13)(A)(ii)
if the employer submits the completed pre-
screening notice to the DLA to request cer-
tification not later than June 19, 2012. The
alternative methods of signing and filing
Forms 8850, as described in Sections IV
and V, are effective for Forms 8850 filed
with a DLA on or after March 10, 2012.
DRAFTING INFORMATION
The principal authors of this no-
tice are Robin Ehrenberg and Ligeia
Donis of the Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities). For
further information on the submission of
comments or the comments submitted,
contact Regina Johnson at (202) 622–7180
(not a toll-free number). For further
information regarding the WOTC for
qualified veterans, electronic filing,
and facsimile submissions, contact
Ms. Ehrenberg at (202) 622–6080 (not a
toll-free number). For further information
on how to claim the WOTC on behalf
of tax-exempt organizations, contact
Ligeia Donis at (202) 622–6040 (not a
toll-free number).
Application of Section 367 to
Section 304 Transactions
Notice 2012–15
SECTION 1. OVERVIEW
This notice provides guidance under
section 367(a) and (b) of the Internal Rev-
enue Code (Code) in the case of certain
transfers of stock to foreign corporations
in exchange for property under section
304. The Internal Revenue Service (IRS)
and the Department of the Treasury (Trea-
sury Department) will amend the regu-
lations under section 367 to incorporate
the guidance described in this notice.
The amendments to the regulations will
apply to transfers occurring on or after
February 10, 2012.
SECTION 2. BACKGROUND
.01 Section 367(a)
Section 367(a)(1) generally provides
that if a United States person transfers
property to a foreign corporation in an
exchange described in section 332, 351,
354, 356, or 361, the foreign corpora-
tion shall not be considered a corporation
for purposes of determining the extent to
which the United States person recognizes
gain on such transfer. Section 367(a)(2)
and (3) provide specific exceptions to the
general rule, and the Secretary has author-
ity under section 367(a)(6) to promulgate
regulations providing exceptions for other
transfers.
Section 1.367(a)–3provides exceptions
to the general rule of section 367(a)(1)
for certain transfers by a U.S. person of
stock or securities to a foreign corporation.
In some cases, these exceptions require
the U.S. person to file a gain recognition
agreement (GRA) and other related docu-
ments under the provisions of § 1.367(a)–8
(GRA regulations). The GRA regulations
were revised in 2009 (T.D. 9446, 2009–1
C.B. 607) to provide further guidance,
including examples addressing when a
GRA needs to be filed, when it will be
triggered, and when exceptions to these
triggering events apply. The triggering
event exceptions address distributions in
redemption of stock, including by reason
of the application of section 304(a)(1).
See § 1.367(a)–8(n)(1) and (q)(2),Exam-
ple 14. The GRA regulations also include
a general exception that, under certain
circumstances, applies to dispositions or
other events not otherwise specifically
excepted. See § 1.367(a)–8(k)(14).
.02 Section 367(b)
Section 367(b)(1) provides that in the
case of an exchange described in section
332, 351, 354, 355, 356, or 361 in con-
nection with which there is no transfer of
property described in section 367(a)(1), a
foreign corporation shall be considered to
be a corporation except to the extent pro-
vided in regulations prescribed by the Sec-
retary which are necessary or appropriate
to prevent the avoidance of Federal in-
come taxes. Section 367(b)(2) provides
that the regulations prescribed pursuant to
section 367(b)(1) shall include (but shall
not be limited to) regulations dealing with
February 27, 20124242012–9 I.R.B.

the sale or exchange of stock or securi-
ties in a foreign corporation by a United
States person, including regulations pro-
viding the circumstances under which gain
is recognized or deferred, amounts are in-
cludedingrossincomeas a dividend, ad-
justments are made to earnings and prof-
its, or adjustments are made to the basis of
stock or securities.
Regulations under section 367(b) gen-
erally provide that if the potential applica-
tion of section 1248 cannot be preserved
following the acquisition of the stock or
assets of a foreign corporation (foreign ac-
quired corporation) by another foreign cor-
poration in an exchange subject to section
367(b), including an exchange described
in section 351, then certain exchanging
shareholders of the foreign acquired cor-
poration must include in income as a divi-
dend the section 1248 amount (as defined
in § 1.367(b)–2(c)) attributable to the stock
of the foreign acquired corporation. See
§ 1.367(b)–4(b).
.03 Section 304
Section 304(a)(1) generally provides
that, for purposes of sections 302 and 303,
if one or more persons are in control of
each of two corporations and in return for
property one of the corporations (the ac-
quiring corporation) acquires stock in the
other corporation (the issuing corporation)
from the person (or persons) so in control,
then such property shall be treated as a
distribution in redemption of the stock of
the acquiring corporation. To the extent
section 301 applies to the distribution, the
transferor and the acquiring corporation
are treated as if (1) the transferor trans-
ferred the stock of the issuing corporation
to the acquiring corporation in exchange
for stock of the acquiring corporation in
a transaction to which section 351(a) ap-
plies, and (2) the acquiring corporation
then redeemed the stock it is deemed to
have issued in the transaction.
.04 Application of Section 367 to Section
304 Transactions
On February 21, 2006, the IRS and the
Treasury Department issued final regula-
tions (T.D. 9250, 2006–1 C.B. 588) pro-
viding that section 367(a) and (b) shall not
apply to certain transfers of stock of a for-
eign or domestic corporation to a foreign
acquiring corporation to which section 351
applies (deemed section 351 exchange) by
reason of section 304(a)(1) (2006 regula-
tions).
The preamble to the 2006 regulations
stated that the policies underlying sec-
tion 367(a) and (b) are preserved even
if a deemed section 351 exchange is not
subject to section 367(a) and (b) because
generally the income recognized by the
transferor in the transaction (dividend
income, capital gain, or both) should
equal or exceed the built-in gain in the
transferred stock. The preamble further
explained that the application of section
367 to deemed section 351 exchanges re-
sults in complexity and uncertainty.
Comments were received, however,
stating that the transferor may not recog-
nize income equal to or greater than the
built-in gain in the transferred stock if,
under section 301(c)(2), the transferor is
permitted to recover the basis of shares
of the foreign acquiring corporation held
before (and after) the transaction. In re-
sponse to these comments, temporary reg-
ulations were published on February 11,
2009 (T.D. 9444, 2009–1 C.B. 603)
(2009 regulations), which modified the
treatment of section 304 transactions
provided by the 2006 regulations. The
2009 regulations retain the general rule
that the deemed section 351 exchange will
not be a transfer to a foreign corporation
subject to section 367(a). However, the
2009 regulations provide an exception
if a U.S. person reduces its basis under
section 301(c)(2), in whole or in part, in its
stock of the foreign acquiring corporation
other than the stock deemed issued to the
U.S. person in the deemed section 351
exchange. In such case, the U.S. person
recognizes gain under section 367(a)(1)
equal to the amount by which the gain
realized by the U.S. person exceeds the
amount of the distribution that is treated
as a dividend under section 301(c)(1)
and included in gross income of the U.S.
person. Furthermore, the 2009 regulations
provide that a U.S. person cannot avoid
such gain by entering into a GRA.
The 2009 regulations made similar revi-
sions to the 2006 regulations under section
367(b). Specifically, the 2009 regulations
provide that § 1.367(b)–4(b) applies to
a deemed section 351 exchange only to
the extent the distribution received by the
exchanging shareholder in redemption of
the stock deemed issued by the foreign
acquiring corporation is applied against
and reduces, pursuant to section 301(c)(2),
the basis of stock of the foreign acquir-
ing corporation held by the exchanging
shareholder other than the stock deemed
issued to the exchanging shareholder in
the deemed section 351 exchange.
.05 Section 1248(a)
Section 1248(a) generally provides that
if a U.S. person that satisfies certain own-
ership requirements sells or exchanges
stock in a controlled foreign corporation
(or a foreign corporation that was a con-
trolled foreign corporation within the past
five years), then the gain recognized on
the sale or exchange is included in gross
income of such person as a dividend to
the extent of the earnings and profits of
the foreign corporation (and in certain
cases, earnings and profits of foreign sub-
sidiaries of such foreign corporation) that
are attributable to such stock. The 2009
regulations provide that for purposes of
section 1248(a), gain recognized by a
shareholder under section 301(c)(3) in
connection with a distribution of property
by a foreign corporation with respect to
its stock is treated as gain from the sale or
exchange of stock of such corporation.
SECTION 3. REVISED APPROACH TO
SECTION 304 TRANSACTIONS
After consideration of the comments re-
ceived and the underlying policies of sec-
tion 367(a) and (b), the IRS and the Trea-
sury Department believe that the amount
of income taken into account as a result of
a section 304 distribution generally should
not affect the application of section 367 to
the deemed section 351 exchange. Fur-
thermore, in the case of a transfer of stock
by a U.S. person to a foreign corporation,
the revised GRA regulations should sub-
stantially reduce the complexity and uncer-
tainty resulting from the filing of a GRA
in connection with a deemed section 351
exchange. Accordingly, the IRS and the
Treasury Department believe it is appro-
priate to revise the approach to the inter-
action of sections 367 and 304 under the
2006 regulations and 2009 regulations by
providing that section 367(a) and (b) apply
fully to the deemed section 351 exchange.
2012–9 I.R.B.425February 27, 2012

SECTION 4. APPLICATION OF
SECTION 367 TO SECTION 304
TRANSACTIONS
The IRS and the Treasury Department
will amend the section 367 regulations to
provide that the section 351 exchange that
is deemed to occur in a section 304 trans-
action is subject to section 367(a) and (b)
in the manner described below.
.01 Application of Section 367(a)
To the extent that, pursuant to sec-
tion 304(a)(1), a U.S. person is treated as
transferring stock of a domestic or foreign
corporation to a foreign corporation (for-
eign acquiring corporation) in a deemed
section 351 exchange, the transfer is sub-
ject to section 367(a) and the regulations
thereunder, including the exceptions de-
scribed in § 1.367(a)–3(b)(1) and (c)(1),
as applicable. Thus, a transferor in a sec-
tion 304 transaction that is a U.S. person
may, in certain cases, be permitted to enter
into a GRA pursuant to § 1.367(a)–8 to
avoid the recognition of gain under section
367(a)(1).
If the U.S. person (referred to in the
GRA regulations as the U.S. transferor)
enters into a GRA with respect to a deemed
section 351 exchange, the deemed redemp-
tion of the stock of the foreign acquiring
corporation deemed issued to the U.S. per-
son pursuant to section 304(a)(1) consti-
tutes a disposition of the transferee for-
eign corporation stock under § 1.367(a)–8.
See § 1.367(a)–8(b)(1)(iii) and (n)(1). As
a result, the deemed redemption is gen-
erally treated as a triggering event within
the meaning of § 1.367(a)–8(j). However,
consistent with the redemption rules pro-
vided in § 1.367(a)–8(n)(1), the redemp-
tion will not be treatedas a triggering event
if the U.S. person that transfers the stock
in the deemed section 351 exchange (or a
U.S. person that is treated as a successor
U.S. transferor as a result of the deemed
redemption) enters into a new GRA that
includes appropriate provisions to account
for the redemption, provided the principles
of § 1.367(a)–8(k)(14)(ii) and (iii) are sat-
isfied. Generally, the requirement to file
an initial GRA for the deemed section 351
exchange and a new GRA by reason of the
deemed redemption will be satisfied if the
U.S. person that transfers the stock in the
deemed section 351 exchange files a single
GRA with respect to the entire section 304
transaction. See § 1.367(a)–8(d)(2)(ii).
.02 Application of Section 367(b)
To the extent that, pursuant to section
304(a)(1), a foreign corporation (foreign
acquiring corporation) acquires the stock
of a foreign corporation in a deemed
section 351 exchange, such exchange is
subject to section 367(b) and the regula-
tions thereunder, including § 1.367(b)–4.
Thus, for example, if a deemed section
351 exchange results in the loss of status
as a section 1248 shareholder as provided
in § 1.367(b)–4(b)(1)(i), the exchanging
shareholder must include in income as a
deemed dividend the section 1248 amount
attributable to the foreign stock that is
transferred in the deemed section 351 ex-
change.
.03 Example
Example.(i)Facts. USP, a domestic corporation,
owns all of the outstanding stock of FT and FA, each
a foreign corporation. USP’s tax basis in the FT stock
is $50x, and the FT stock has a fair market value of
$100x. The section 1248 amount (within the mean-
ing of § 1.367(b)–2(c)) with respect to the FT stock
is $10x. FA has earnings and profits of $200x, all
of which are available for distribution taking into ac-
count section 304(b)(5). In a transaction to which
section 304(a)(1) applies, USP transfers all of its FT
stock to FA in exchange for $100x cash.
(ii)Application of section 304(a)(1). Under sec-
tion 304(a)(1), USP and FA are treated as if USP
transferred its FT stock to FA in a section 351(a) ex-
change solely for FA stock, and then FA redeemed its
deemed issued stock in exchange for the cash. The
redemptionoftheFAstockdeemedissuedbyFAto
USP is treated as a distribution to which section 301
applies. The entire distribution is treated under sec-
tion 301(c)(1) as a dividend (as defined in section
316) out of the earnings and profits of FA.
(iii)Application of section 367(a).Undersec-
tion 4.01 of this notice, § 1.367(a)–3(b) applies to
USP’s transfer of the FT stock to FA in exchange
for FA stock. As a result, USP recognizes gain on
the transfer under section 367(a)(1) unless USP en-
ters into a GRA with respect to the transfer pursuant
to § 1.367(a)–3(b)(1)(ii) and § 1.367(a)–8. How-
ever, the deemed redemption by FA of the stock it
is deemed to issue to USP would constitute a trig-
gering event with respect to such GRA as described
in § 1.367(a)–8(j). The redemption will not consti-
tute a triggering event, however, if USP enters into a
new GRA that includes appropriate provisions to ac-
count for the redemption and that is consistent with
the principles of § 1.367(a)–8(k)(14)(ii) and (iii). Af-
ter the redemption, USP owns at least 5% of the total
voting power and the total value of the outstanding
stock of FA. Thus, if USP enters into a new GRA that
satisfies the requirements of § 1.367(a)–8(k)(14)(iii),
the deemed redemption will not constitute a trigger-
ing event. In this case, the requirement that an initial
GRA be filed for the deemed section 351 exchange
andanewGRAbefiledbyreasonofthedeemedre-
demption will be satisfied if USP files a single GRA
pursuant to § 1.367(a)–8(d)(2)(ii).
(iv)Application of section 367(b).Undersec-
tion 4.02 of this notice, § 1.367(b)–4 applies to
USP’s transfer of the FT stock to FA in exchange
for FA stock. Under § 1.367(b)–2(a) and (b), USP
is a section 1248 shareholder with respect to FT, a
controlled foreign corporation, immediately before
the exchange. Section 1.367(b)–4(b)(1)(i) does not
apply to require USP to include in income the $10x
section 1248 amount with respect to the FT stock
because each of FA and FT is a controlled foreign
corporation as to which USP is a section 1248 share-
holder immediately after the exchange.
SECTION 5. FINALIZATION OF
THE 2009 REGULATIONS UNDER
SECTION 1248
The IRS and the Treasury Department
will finalize the portions of the 2009 reg-
ulations that address the application of
section 1248 to gain recognized with re-
spect to stock upon distributions, including
gain under section 301(c)(3), in separate
published guidance effective February 10,
2009.
SECTION 6. EFFECTIVE DATE
The regulations described in this no-
tice shall apply to section 304 transactions
occurring on or after February 10, 2012.
Pending the issuance of the regulations de-
scribedinthisnotice,theIRSwillnot
challenge reasonable interpretations of the
application of section 367(a) and (b) to
deemed section 351 exchanges and related
deemed redemptions completed on or after
February 10, 2012, including reasonable
interpretations of the GRA rules as applied
to such deemed section 351 exchanges and
deemed redemptions under the principles
of § 1.367(a)–8(k)(14)(ii) and (iii).
SECTION 7. COMMENTS
The IRS and the Treasury Department
request comments on the regulations to be
issued under this notice.
SECTION 8. PAPERWORK
REDUCTION ACT
The collections of information in this
notice were previously reviewed and ap-
proved by the Office of Management
and Budget in connection with Trea-
sury Decision 9446 in accordance with
the Paperwork Reduction Act of 1995
February 27, 20124262012–9 I.R.B.

(44 U.S.C. 3507(d)) under control number
1545–2056.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information, unless the
collection of information displays a valid
control number.
The collections of information are in
sections 4.01 and 4.02 of this notice. Re-
sponses to the collections of information
are required to avoidrecognizing gain un-
der section 367, including under an ex-
isting gain recognition agreement, and to
facilitate electronic filing. The likely re-
spondents are large corporations.
The estimated burden will change as
follows:
The estimated total annual reporting
burden will increase by 100 hours.
The estimated annual burden per re-
spondent remains 2 hours. The estimated
number of respondents will increase by 50.
The estimated annual frequency of re-
sponses remains once per year.
Books and records relating to these col-
lections of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and tax
return information are confidential, as re-
quired by 26 U.S.C. 6103.
SECTION 9. DRAFTING
INFORMATION
The principal author of this notice is
Ryan A. Bowen of the Office of Associate
Chief Counsel (International). However,
other personnel from the IRS and the
Treasury Department participated in its
development. For further information
regarding this notice, contact Mr. Bowen
at (202) 622–3860 (not a toll-free call).
Update for Weighted Average
Interest Rates, Yield Curves,
and Segment Rates
Notice 2012–16
This notice provides guidance as to the
corporate bond weighted average interest
rate and the permissible range of interest
rates specified under § 412(b)(5)(B)(ii)(II)
of the Internal Revenue Code as in ef-
fect for plan years beginning before 2008.
It also provides guidance on the cor-
porate bond monthly yield curve (and
the corresponding spot segment rates),
and the 24-month average segment rates
under § 430(h)(2). In addition, this no-
tice provides guidance as to the interest
rate on 30-year Treasury securities un-
der § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008, the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the min-
imum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007.
CORPORATE BOND WEIGHTED
AVERAGE INTEREST RATE
Sections412(b)(5)(B)(ii)and
412(l)(7)(C)(i), as amended by the Pen-
sion Funding Equity Act of 2004 and by
the Pension Protection Act of 2006 (PPA),
provide that the interest rates used to cal-
culate current liability and to determine
the required contribution under § 412(l)
for plan years beginning in 2004 through
2007 must be within a permissible range
based on the weighted average of the rates
of interest on amounts invested conser-
vatively in long term investment grade
corporate bonds during the 4-year period
ending on the last day before the beginning
of the plan year.
Notice 2004–34, 2004–1 C.B. 848, pro-
vides guidelines for determining the cor-
porate bond weighted average interest rate
and the resulting permissible range of in-
terest rates used to calculate current liabil-
ity. That notice establishes that the corpo-
rate bond weighted average is based on the
monthly composite corporate bond rate de-
rived from designated corporate bond in-
dices. The methodology for determining
the monthly composite corporate bond rate
as set forth in Notice 2004–34 continues to
apply in determining that rate. See Notice
2006–75, 2006–2 C.B. 366.
The composite corporate bond rate for
January 2012 is 4.56 percent. Pursuant
to Notice 2004–34, the Service has de-
termined this rate as the average of the
monthly yields for the included corporate
bond indices for that month.
The following corporate bond weighted
average interest rate was determined for
plan years beginning in the month shown
below.
For Plan Years
Beginning inPermissible Range
MonthYear
Corporate
Bond Weighted
Average90%to100%
February2012
5.675.105.67
YIELD CURVE AND SEGMENT
RATES
Generally for plan years beginning
after 2007 (except for delayed effective
dates for certain plans under sections 104,
105, and 106 of PPA), § 430 of the Code
specifies the minimum funding require-
ments that apply to single employer plans
pursuant to § 412. Section 430(h)(2) spec-
ifies the interest rates that must be used
to determine a plan’s target normal cost
and funding target. Under this provision,
present value is generally determined us-
ing three 24-month average interest rates
(“segment rates”), each of which applies
to cash flows during specified periods.
However, an election may be made under
§ 430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates. Sec-
tion 430(h)(2)G) set forth a transitional
rule applicable to plan years beginning in
2008 and 2009 under which the segment
rates were blended with the corporate bond
weighted average described above, includ-
ing an election under § 430(h)(2)(G)(iv)
for an employer to use the segment rates
without the transitional rule.
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 used to compute the tar-
get normal cost and the funding target.
2012–9 I.R.B.427February 27, 2012

Pursuant to Notice 2007–81, the monthly
corporate bond yield curve derived from
January 2012 data is in Table I at the end
of this notice. The spot first, second, and
third segment rates for the month of Jan-
uary 2012 are, respectively, 1.84, 4.36,
and 5.19. The three 24-month average
corporate bond segment rates applicable
for February 2012 are as follows:
First
Segment
Second
Segment
Third
Segment
1.96
5.01
6.13
The transitional rule of § 430(h)(2)(G)
does not apply to plan years beginning
after December 31, 2009. Therefore, for a
plan year beginning after 2009 with a look-
back month to February 2012, the funding
segment rates are the three 24-month
average corporate bond segment rates ap-
plicable for February 2012, listed above
without blending for any transitional pe-
riod.
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 417(e)(3)(A)(ii)(II) (prior to
amendment by PPA) defines the appli-
cable interest rate, which must be used
for purposes of determining the minimum
present value of a participant’s benefit
under § 417(e)(1) and (2), as the annual
rate of interest on 30-year Treasury se-
curities for the month before the date
of distribution or such other time as the
Secretary may by regulations prescribe.
Section 1.417(e)–1(d)(3) of the Income
Tax Regulations provides that the applica-
bleinterestrateforamonthistheannual
rate of interest on 30-year Treasury secu-
rities as specified by the Commissioner
for that month in revenue rulings, notices
or other guidance published in the Internal
Revenue Bulletin.
The rate of interest on 30-year Treasury
securities for January 2012 is 3.03 percent.
The Service has determined this rate as
the average of the daily determinations of
yield on the 30-year Treasury bond matur-
ing in November 2041.
Generally for plan years beginning
after 2007, § 431 specifies the mini-
mum funding requirements that apply to
multiemployer plans pursuant to § 412.
Section 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation
described in section 431(c)(6)(A), based
on the plan’s current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 percent
below the weighted average of the rates of
interest on 30-year Treasury securities dur-
ing the four-year period ending on the last
day before the beginning of the plan year.
Notice 88–73, 1988–2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The following rates
were determined for plan years beginning
in the month shown below.
For Plan Years
Beginning inPermissible Range
MonthYear
30-Year
Treasury
Weighted
Average90%to105%
February20124.043.64
4.25
MINIMUM PRESENT VALUE
SEGMENT RATES
Generally for plan years beginning af-
ter December 31, 2007, the applicable in-
terest rates under § 417(e)(3)(D) are seg-
ment rates computed without regard to a
24-month average. For plan years begin-
ning in 2008 through 2011, the applica-
ble interest rates are the monthly spot seg-
ment rates blended with the applicable rate
under § 417(e)(3)(A)(ii)(II) as in effect
for plan years beginning in 2007. Notice
2007–81 provides guidelines for determin-
ing the minimum present value segment
rates. Pursuant to that notice, the min-
imum present value transitional segment
rates determined for January 2012, tak-
ing into account the January 2012 30-year
Treasury rate of 3.03 stated above, are as
follows:
For Plan Y
ears
Beginni
ng in
First
Segment
Second
Segment
Third
Segment
20112.084.094.76
20121.844.36
5.19
DRAFTING INFORMATION
The principal author of this notice is
Tony Montanaro of the Employee Plans,
Tax Exempt and Government Entities Di-
vision. Mr. Montanaro may be e-mailed at
RetirementPlanQuestions@irs.gov.
February 27, 20124282012–9 I.R.B.

Table I
Monthly Yield Curve for January 2012
Derived from January 2012 Data
Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield
0.50.5520.5
4.99
40.55.2160.5
5.29
80.55.34
1.0
0.94
21.05.0041.05.2161.05.3081.05.34
1.5
1.30
21.55.0141.55.2261.55.3081.55.34
2.01.6122.0
5.02
42.0
5.22
62.0
5.30
82.0
5.34
2.5
1.86
22.55.0242.55.2262.55.3082.55.34
3.02.0823.0
5.03
43.0
5.23
63.0
5.30
83.0
5.34
3.5
2.27
23.55.0443.55.2363.55.3083.55.34
4.02.4424.05.0544.05.2364.05.3084.05.34
4.5
2.61
24.55.0544.55.2364.55.3084.55.34
5.0
2.78
25.05.0645.05.2465.05.3185.05.34
5.5
2.94
25.55.0745.55.2465.55.3185.55.34
6.03.1026.0
5.07
46.0
5.24
66.0
5.31
86.0
5.34
6.5
3.26
26.55.0846.55.2466.55.3186.55.34
7.03.4127.05.0947.05.2567.05.3187.05.34
7.53.5627.5
5.09
47.55.2567.55.3187.55.35
8.03.7028.0
5.10
48.0
5.25
68.0
5.31
88.0
5.35
8.5
3.83
28.55.1148.55.2568.55.3188.55.35
9.0
3.95
29.0
5.11
49.0
5.25
69.0
5.31
89.0
5.35
9.5
4.05
29.5
5.12
49.5
5.26
69.5
5.32
89.5
5.35
10.04.1630.05.1250.05.2670.05.32
90.0
5.35
10.5
4.26
30.55.1350.55.2670.55.32
90.5
5.35
11.0
4.35
31.0
5.1351.05.26
71.0
5.32
91.0
5.35
11.5
4.43
31.55.1451.55.2671.55.32
91.5
5.35
12.0
4.50
32.0
5.1452.05.27
72.0
5.32
92.0
5.35
12.54.5632.55.1552.55.2772.55.32
92.5
5.35
13.04.6233.05.1553.05.2773.05.32
93.0
5.35
13.5
4.67
33.55.1653.55.2773.55.32
93.5
5.35
14.04.7134.0
5.1654.05.27
74.0
5.32
94.0
5.35
14.54.7534.55.1754.55.2874.55.33
94.5
5.35
15.0
4.79
35.05.1755.05.2875.05.33
95.0
5.35
15.5
4.82
35.55.1855.55.2875.55.33
95.5
5.36
16.04.8436.05.1856.05.2876.05.33
96.0
5.36
16.5
4.87
36.55.1856.55.2876.55.33
96.5
5.36
17.0
4.89
37.05.19
57.05.28
77.0
5.33
97.0
5.36
17.5
4.91
37.5
5.19
57.5
5.29
77.55.33
97.5
5.36
18.0
4.92
38.05.19
58.0
5.2978.0
5.33
98.0
5.36
18.5
4.94
38.55.2058.5
5.29
78.55.33
98.5
5.36
19.0
4.95
39.0
5.2059.05.29
79.0
5.33
99.0
5.36
19.54.9739.5
5.20
59.55.2979.5
5.33
99.5
5.36
20.0
4.98
40.0
5.21
60.05.2980.0
5.33
100.0
5.36
2012–9 I.R.B.429February 27, 2012

Frequently-Asked-Questions
From Employers Regarding
Automatic Enrollment,
Employer Shared
Responsibility, and Waiting
Periods
Notice 2012–17
INTRODUCTION
Many provisions of the Patient Protec-
tion and Affordable Care Act (Affordable
Care Act) that becomeeffective beginning
in 2014 are designed to expand access
to affordable health coverage. These in-
clude provisions for automatic enrollment
of full-time employees in an employer’s
health plan, shared responsibility of em-
ployers regarding health coverage, cov-
erage to be offered through State-based
Affordable Insurance Exchanges (Ex-
changes), premium tax credits to assist in-
dividuals in purchasing coverage through
Exchanges, and other related provisions.
The Departments of Labor, Health and
Human Services, and the Treasury (the
Departments) are working together to de-
velop regulations and other administrative
guidance that will respond to questions
and assist stakeholders with implementa-
tion.
This notice, which is being issued in
substantially identical form by the other
two Departments, provides information on
questions from employers and other stake-
holders regarding the provisions of the Af-
fordable Care Act governing automatic en-
rollment, employer shared responsibility,
and the 90-day limitation on waiting pe-
riods. Also outlined below are various
approaches that the Departments are con-
sidering proposing in future regulations or
other guidance. Comments and input are
welcome on all intended proposals below.
BACKGROUND
Automatic Enrollment
Section 18A of the Fair Labor Stan-
dards Act (FLSA), as added by section
1511 of the Affordable Care Act, directs an
employer to which the FLSA applies, and
that has more than 200 full-time employ-
ees, to automatically enroll new full-time
employees in one of the employer’s health
benefits plans (subject to any waiting pe-
riod authorized by law), and to continue
the enrollment of current employees in a
health benefits plan offered through the
employer. Section 18A further requires
adequate notice and the opportunity for an
employee to opt out of any coverage in
which the employee was automatically en-
rolled.
On December 22, 2010, the Depart-
ments issued frequently asked questions
(FAQ)onsection18AoftheFLSA,which
noted that the statute provides that em-
ployer compliance with the automatic en-
rollment provisions of section 18A shall
be carried out “[i]n accordance with reg-
ulations promulgated by the Secretary [of
Labor].”
1
That FAQ also stated that it is
the view of the Department of Labor that,
until such regulations are issued, employ-
ers are not required to comply with section
18A. Finally, the FAQ indicated that the
Department of Labor intends to complete
this rulemaking by 2014.
Employer Shared Responsibility
The employer shared responsibility
provisions, contained in section 4980H of
the Internal Revenue Code (Code), pro-
vide that an applicable large employer
(for this purpose, an employer with 50
or more full-time equivalent employees)
could be subject to an assessable payment
if any full-time employee is certified to
receive an applicable premium tax credit
or cost-sharing reduction payment. Gen-
erally, this may occur where either:
(1) The employer does not offer to
its full-time employees (and their depen-
dents) the opportunity to enroll in mini-
mum essential coverage under an eligible
employer-sponsored plan; or
(2) The employer offers its full-time
employees (and their dependents) the op-
portunity to enroll in minimum essential
coverage under an eligible employer-spon-
sored plan that either is unaffordable rela-
tive to an employee’s household income or
does not provide minimum value.
For purposes of section 4980H, a “full-
time employee” is an employee who is em-
ployed on average at least 30 hours per
week.
The Treasury Department and the Inter-
nal Revenue Service (IRS) have requested
and received comments on a number of
issues and potential approaches to inter-
preting and applying the employer shared
responsibility provisions. In particular,
IRS Notice 2011–36, 2011–21 I.R.B.
792
2
, described and requested comments
on a possible approach that would use a
“look-back/stability period safe harbor”
method that employers might use in deter-
mining whether current employees (those
who are not newly-hired or transferred)
are full-time employees for purposes of
the employer shared responsibility provi-
sions. Comments were also requested on
potential rules for determining full-time
status of new employees and employees
who move into full-time status mid-year.
In addition, Treasury and the IRS
have described (in IRS Notice 2011–73,
2011–40 I.R.B. 474)
3
, a safe harbor al-
lowing employers, forpurposesofdeter-
mining whether they owe an assessable
payment under section 4980H(b), to use
an employee’s Form W–2 wages (as re-
ported in Box 1) instead of household
income in determining whether coverage
offered is affordable. Treasury and the
IRS requested and received comments on
the safe harbor.
90-Day Limitation on Waiting Periods
Public Health Service (PHS) Act sec-
tion 2708, as added by the Affordable Care
Act, provides that, in plan years begin-
ning on or after January 1, 2014, a group
health plan or group health insurance is-
suer shall not apply any waiting period
that exceeds 90 days.
4
PHS Act section
2704(b)(4), ERISA section 701(b)(4), and
Code section 9801(b)(4) define a waiting
period to be the period that must pass with
respect to the individual before the individ-
ual is eligible to be covered for benefits un-
der the terms of the plan. In previous regu-
1
Available at:www.dol.gov/ebsa/faqs/faq-aca5.html.
2
Available at:www.irs.gov/pub/irs-drop/n-11-36.pdf.
3
Available at:www.irs.gov/pub/irs-drop/n-11-73.pdf.
4
The Affordable Care Act also added section 715(a)(1) to the Employee Retirement Income Security Act (ERISA) and section 9815(a)(1) to the Code to incorporate various provisions of the
PHS Act into the Code and ERISA, including the provisions of section 2708 of the PHS Act.
February 27, 20124302012–9 I.R.B.

lations, the Departments defined a waiting
period to mean the period that must pass
before coverage for an employee or depen-
dent who is otherwise eligible to enroll un-
der the terms of a group health plan can
become effective.
5
Unlike Code section
4980H, PHS Act section 2708 does not dis-
tinguish between full-time and part-time
employees.
In addition to requesting comments on
the employer shared responsibility pro-
visions, IRS Notice 2011–36 requested
comments on behalf of the Departments
regarding the 90-day waiting period lim-
itation under PHS Act section 2708,
including how rules relating to the poten-
tial look-back/stability period safe harbor
method for determining the number of
full-time employees under Code section
4980H should be coordinated with the
90-day waiting period limitation.
DISCUSSION
The following questions and answers
respond to inquiriesthe Departments are
receiving regarding automatic enroll-
ment, employer shared responsibility, and
the 90-day limitation on waiting peri-
ods. As discussed above, the questions
and answers below provide information
and identify various approaches that the
Departments are considering proposing
in future regulations or other guidance.
Guidance that employers may rely upon
with respect to the issues addressed below
will be provided with sufficient lead time
for employers to comply. Comments are
requested on these approaches.
Q1. What is the current timeline for
issuing guidance on automatic enroll-
ment under FLSA section 18A?
A1.The Department of Labor has been
working with stakeholders to ensure that it
has the necessary information and data to
develop regulations relating to automatic
enrollment, and is sensitive to stakeholder
concerns regarding the need for adequate
time to comply with any regulations that
are ultimately issued. In addition, the De-
partment of Labor is aware of the need to
coordinate the work it will be undertak-
ing to develop guidance relating to auto-
matic enrollment with the guidance being
developed regarding other related Afford-
able Care Act provisions, including the
employer shared responsibility provision
and the 90-day limitation on waiting peri-
ods, described above.
In view of the need for coordinated
guidance and a smooth implementation
process, including an applicability date
that gives employers sufficient time to
comply, the Department of Labor has
concluded that its automatic enrollment
guidance will not be ready to take effect
by 2014. It remains the Department of
Labor’s view that, until final regulations
under FLSA section 18A are issued and
become applicable, employers are not re-
quired to comply with FLSA section 18A.
Q2.Do Treasury and the IRS intend
to issue proposed regulations or other
guidance permitting employers to use
an employee’s W–2 wages as a safe har-
bor in determining the affordability of
employer coverage, as outlined in IRS
Notice 2011–73?
A2.Yes. As described in Notice
2011–73, Treasury and the IRS intend
to issue proposed regulations or other
guidance permitting employers to use an
employee’s Form W–2 wages (as reported
in Box 1) as a safe harbor in determining
the affordability of employer coverage.
Q3.DoTreasuryandtheIRSintend
to issue proposed regulations or other
guidance addressing how the employer
shared responsibility provisions under
Code section 4980H and the 90-day
waiting period limitation under PHS
Act section 2708 are coordinated?
A3.Yes. Treasury and the IRS intend to
issue proposed regulations or other guid-
ance under Code section 4980H (which
imposes shared responsibility on large em-
ployers with respect to coverage of full-
time employees). That guidance is ex-
pected to address the intersection of the
Code section 4980H rules and the PHS
Act section 2708 rulesapplicable to the
90-day waiting period limitation and will
be coordinated with upcoming tri-Depart-
ment proposed rules under PHS Act sec-
tion 2708 (discussed below). Treasury
and the IRS are mindful of employers’ re-
quests for safe harbors and simplicity and
will seek to accommodate those requests to
the extent feasible and consistent with the
terms of the statute.
The upcoming guidance is expected to
provide that, at least for the first three
months following an employee’s date of
hire, an employer that sponsors a group
health plan will not, by reason of failing
to offer coverage to the employee under
its plan during that three-month period, be
subject to the employer responsibility pay-
ment under Code section 4980H.
Q4. For purposes of determining
whetheranemployee(otherthana
newly-hired employee) is a full-time
employee for purposes of Code section
4980H, do Treasury and the IRS intend
to issue proposed regulations or other
guidance allowing employers to use a
look-back/stabilityperiod safe harbor,
basedontheapproachoutlinedinIRS
Notice 2011–36?
A4. Yes. Having reviewed the com-
ments in response to IRS Notice 2011–36,
Treasury and the IRS intend to issue pro-
posed regulations or other guidance that
would allow employers to use a “look-
back/stability period safe harbor” method
based on the approach outlined in the no-
tice for purposes of determining whether
an employee (other than a newly-hired em-
ployee) is a full-time employee. Accord-
ingly, it is anticipated that the guidance
will allow look-back and stability periods
not exceeding 12 months.
For a description of anticipated guid-
ance regarding newly-hired employees,
see Q&A–5.
Q5. For purposes of determining
whether a newly-hired employee is a
full-time employee, do Treasury and
the IRS intend to issue proposed regu-
lations or other guidance under Code
section 4980H?
A5.Yes. Treasury and the IRS also in-
tend to issue proposed regulations or other
guidance that will address how to deter-
mine whether a newly-hired employee is
a full-time employee for purposes of Code
section 4980H.
As stated in Q&A–3, the upcoming
guidance is expectedto provide that, at
least for the first three months following
an employee’s date of hire, an employer
that sponsors a group health plan will
not, by reason of failing to offer cover-
age to the employee under its plan during
that three-month period, be subject to the
employer responsibility payment under
Code section 4980H. The guidance is also
expected to provide that, in certain cir-
5
26 CFR 54.9801–3(a)(3)(iii), 29 CFR 2590.701–3(a)(3)(iii), 45 CFR 146.111(a)(3)(iii).
2012–9 I.R.B.431February 27, 2012

cumstances, employers have six months
to determine whether a newly-hired em-
ployee is a full-time employee for pur-
poses of section 4980H and will not be
subject to a section 4980H payment dur-
ing that six-month period with respect to
that employee. Treasury and the IRS in-
tend to propose an approach under which
the period of time that an employer will
have to determine whether a newly-hired
employee is a full-time employee (within
the meaning of section 4980H) will de-
pend upon whether, based on the facts
and circumstances, (a) the employee is
reasonably expected as of the time of hire
to work an average of 30 or more hours
per week on an annual basis and (b) the
employee’s first three months of employ-
ment are reasonably viewed, as of the end
of that period, as representative of the
average hours the employee is expected to
work on an annual basis.
Specifically, it is intended that the
upcoming proposed regulations or other
guidance would provide, for purposes of
section 4980H, that:
•If a newly-hired employee is reason-
ably expected to work full-time on an
annual basis and does work full-time
during the first three months of em-
ployment, the employee must be of-
fered coverage under the employer’s
group health plan as of the end of that
period in order to avoid the possibility
that the employer would be subject to
a section 4980H payment after the end
of that three-month period.
•If, based on the facts and circum-
stances as of the time of hire, it can-
not reasonably be determined that a
newly-hired employee is expected to
work full-time, the following rules
will apply for purposes of determining
whether the newly-hired employee is
considered a full-time employee in ap-
plying section 4980H with respect to
the employer’s group health plan:
•If the employee works full-time
during the first three months of
employment, and the employee’s
hours during that period are rea-
sonably viewed, as of the end of
that period, as representative of the
average hours the employee is ex-
pected to work on an annual basis,
theemployeewillfirstbeconsid-
ered a full-time employee for pur-
poses of section 4980H as of the
end of that three-month period. (If
the employee works part-time dur-
ing the first three months of em-
ployment, then no section 4980H
penalty applies during the first or
second three-month period.)
•If the employee works full-time
during the first three months of
employment, but the employee’s
hours during that period are rea-
sonably viewed, as of the end of
that period, as not representative
of the average hours the employee
is expected to work on an annual
basis, the plan is permitted an
additional three-month period to
determine the employee’s status,
and no section 4980H payment
would be required with respect
to that employee during the first
or second three-month periods.
(If the employee works part-time
during the second three months
of employment, then no section
4980H penalty applies during the
first, second, or third three-month
period.)
This policy describes the applicability
of a potential section 4980H payment with
respect to newly-hired employees. Forth-
coming guidance is expected also to coor-
dinate the rules for newly-hired employees
with those applicable to other employees
(including employees who are transferred
from one employment classification or sta-
tus to another).
The following examples illustrate the
intended approach described above:
Example 1: Newly-hired employee
expected to work full time.
Facts:Employer D, an applicable large
employer (i.e.,an employer with at least
50 full-time equivalent employees), hires
Employee X as a computer programmer
on December 1. Employee X is expected
to work full-time on an annual basis and
does work full-time for the months of De-
cember, January, and February. Employer
D offers health coverage to its full-time
workers (and their dependents).
Conclusion:Employee X must be
able to enroll in coverage beginning in
March or the employer potentially would
be subject to a section 4980H payment.
However, failure to offer coverage to Em-
ployee X during the first three months
(December–February) would not subject
Employer D to a potential section 4980H
payment.
Example 2: Newly-hired employee
who seasonally works full-time
Facts:Same as Example 1 except that
Employer D hires Employee Y as a sales-
person who is expected to work full-time
during the holiday season and part-time the
rest of the year. Employee Y works an
average of 35 hours per week in Decem-
ber, January, and February and 20 hours
per week in March, April, and May.
Conclusion:If, based on the facts
and circumstances at the end of the pe-
riod, the three-month period of December
through February is reasonably viewed
as not representative of the average hours
Employee Y is reasonably expected to
work on an annual basis, Employer D
may use a second three-month period
(March–May) as a look-back period. Fail-
ure to offer coverage under Employer D’s
group health plan to Employee Y during
the first (December-February) and the
second (March–May) three-month peri-
ods would not subject Employer D to a
potential section 4980H payment. (Fail-
ure to offer coverage to Employee Y for
June also would not subject Employer
D to a potential section 4980H payment
because Employee Y was determined
to be part-time during the March–May
look-back period.)
Q6. When PHS Act section 2708
(which imposes a 90-day limitation on
waiting periods) becomes effective in
2014, will it require an employer to
offer coverage to part-time employees
or to any other particular category of
employees?
A6.No. Many employers make dis-
tinctions in eligibility for coverage based
on full-time or part-time status, as de-
fined by the employer’s group health plan
(which may differ from the standard under
Code section 4980H). PHS Act section
2708 does not require the employer to
offer coverage to any particular employee
or class of employees, including part-time
employees. PHS Act section 2708 merely
prohibits requiring an otherwise eligible
employee to wait more than 90 days be-
fore coverage is effective. Furthermore,
nothing in the Affordable Care Act penal-
izes small employers for choosing not to
offer coverage to any employee, or large
employers for choosing to limit their offer
February 27, 20124322012–9 I.R.B.

of coverage to full-time employees, as de-
fined in the employer shared responsibility
provisions.
Q7. How do the Departments intend
to address the application of the 90-day
waiting period limitation in PHS Act
section 2708 to an offer of coverage by
an employer?
A7.Having reviewed the comments in
response to IRS Notice 2011–36, the De-
partments intend to retain, for purposes of
PHS Act section 2708, the definition in ex-
isting regulations that the 90-day waiting
period begins when an employee is other-
wise eligible for coverage under the terms
of the group health plan. This is the defi-
nition of waiting period used for purposes
of Title XXVII of the PHS Act, Part 7 of
ERISA, and chapter 100 of the Code.
6
Un-
der this approach, if a plan were to pro-
vide that full-time employees are eligible
for coverage without satisfying any other
condition, and an employee were hired as
a full-time employee, the waiting period
(if the employer were to choose to impose
one) for that employee would begin on the
date of hire and could not exceed 90 days.
Consistent with PHS Act section 2708, eli-
gibility conditions that are based solely on
the lapse of a time period would be permis-
sible for no more than 90 days.
Other conditions for eligibility under
the terms of a group health plan would gen-
erally be permissible under PHS Act sec-
tion 2708, unless the condition is designed
to avoid compliance with the 90-day wait-
ing period limitation. For example, eligi-
bility conditions such as full-time status, a
bona fidejob category, or receipt of a li-
cense would be permissible.
The upcoming guidance under section
2708 is also expectedto address situations
in which, under the terms of an employer’s
plan, employees (or certain classes of em-
ployees) are eligible for coverage once
they complete a specified cumulative
number of hours of service within a spec-
ified period (such as 12 months). It is
anticipated that, under the upcoming guid-
ance, such eligibility conditions will not
be treated as designed to avoid compliance
with the 90-day waiting period limitation
so long as the required cumulative hours
of service do not exceed a number of hours
to be specified in that guidance.
Comments are requested on how this
possible approach would apply to plans
that credit hours of service from multi-
ple different employers and plans that use
hours banks.
Example 3: Employee ineligible un-
der terms of plan by reason of job clas-
sification
Facts:Same as Example 1 except that
Employer D’s plan does not cover com-
puter programmers.
Conclusion:Unlike Code section
4980H, in which the determination of
full-time status is governed by a statutory
standard (working an average of 30 hours
per week), the waiting period limitation
under PHS Act 2708 applies only to em-
ployees who are otherwise eligible under
the terms of the plan. Because Employee
X is excluded under the plan’s eligibility
criteria, and the plan’s terms are not de-
signed to avoid compliance with PHS Act
section 2708, the plan’s eligibility pro-
vision does not violate PHS Act section
2708.
Example 4: Part-time employee,
hours of service requirement
Facts:Employer E hires Employee Z
to work 20 hours per week. Employer E’s
plan requires part-time employees to com-
plete 750 hours of service in order to par-
ticipate. Solely for purposes of illustration
in this example, it is assumed that upcom-
ing guidance under PHS Act section 2708
permits plans to require part-time employ-
ees to complete up to, but no more than,
750 hours of service in order to participate.
Conclusion:Part-time employees who
work 20 hours per week will complete 750
hours of service in 37
1
/2weeks or just un-
der 9 months. The waiting period un-
der PHS Act section 2708 begins when
Employee Z satisfies the cumulative ser-
vice requirement, thereby becoming eligi-
ble (but for the waiting period) for cover-
age under the plan. Employer E must pro-
vide coverage to Employee Z no later than
90 days after Employee Z completes 750
hours of service, which is about one year
after Employee Z is hired and begins work-
ing part-time. (No Code section 4980H
payment applies because Employee Z is
part-time.)
REQUEST FOR COMMENTS
Comments are requested by April 9,
2012. WARNING: Do not include any per-
sonally identifiable information (such as
name, address, or other contact informa-
tion) or confidential business information
that you do not want publicly disclosed.
All comments are posted on the Internet as
received, and can be retrieved by most In-
ternet search engines. Comments may be
submitted anonymously. Comments will
be shared by the Departments.
Comments may be sent electronically
to:e-ohpsca-er.ebsa@dol.gov.Alterna-
tively, comments may be sent via mail or
hand delivery to: Office of Health Plan
Standards and Compliance Assistance,
Employee Benefits Security Administra-
tion, Room N–5653, U.S. Department
of Labor, 200 Constitution Avenue, NW,
Washington, DC 20210.
FOR FURTHER INFORMATION
The Departments have coordinated on
the information contained in this notice
and are publishing substantively identical
issuances. Questions concerning the infor-
mation contained herein may be directed
to the Department of Labor’s Office of
Health Plan Standards and Compliance
Assistance at 202–693–8335; the Internal
Revenue Service at 202–927–9639; or the
Department of Health and Human Services
at 410–786–1565 orphig@cms.hhs.gov.
Additional information for employers
regarding the Affordable Care Act is
available atwww.healthcare.govand
www.dol.gov/ebsa/healthreform.
6
26 CFR 54.9801–3(a)(3)(iii), 29 CFR 2590.701–3(a)(3)(iii), 45 CFR 146.111(a)(3)(iii).
2012–9 I.R.B.433February 27, 2012

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Passive Activ
ity Losses and
Credits Limit
ed
REG–109369–
10
AGENCY: Inte
rnal Revenue Service
(IRS), Treas
ury.
ACTION: Noti
ce of proposed rulemaking.
SUMMARY: Thi
s document contains pro-
posed regul
ations regarding the definition
of an “inter
est in a limited partnership as a
limited par
tner” for purposes of determin-
ing whether
a taxpayer materially partici-
pates in an a
ctivity under section 469 of the
Internal R
evenue Code (Code). These pro-
posed regu
lations affect individuals who
are partne
rs in partnerships.
DATES: Wri
tten or electronic comments
and reques
ts for a public hearing must be
received
by February 27, 2012.
ADDRESSE
S: Send submissions to:
CC:PA:LP
D:PR (REG–109369–10), room
5203, Int
ernal Revenue Service, PO Box
7604, Ben
Franklin Station, Washing-
ton, DC 2
0044. Submissions may be
hand-de
livered Monday through Friday
between
the hours of 8 a.m. and 4 p.m.
to: CC:P
A:LPD:PR (REG–109369–10),
Courier
’s Desk, Internal Revenue Ser-
vice, 1
111 Constitution Avenue, NW,
Washin
gton, DC, or sent electroni-
cally,
via the Federal eRulemaking Por-
tal ath
ttp://www.regulations.gov/(IRS
REG–10
9369–10).
FOR FUR
THER INFORMATION
CONTA
CT: Concerning the proposed
regul
ations, Michala Irons, (202)
622–3
050; concerning submissions of
comme
nts and requests for public hearing,
Oluwa
funmilayo Taylor, (202) 622–7180
(not
toll-free numbers).
SUPP
LEMENTARY INFORMATION:
Back
ground
Sect
ion 469(a)(1) limits the ability of
cert
ain taxpayers to deduct losses from
passive activ
ities. Section 469(b) permits
passive losse
s disallowed in one year to
be carried ove
r to the next year. Section
469(c)(1) pro
vides that a passive activity
means any acti
vity which involves the con-
duct of any tr
ade or business, and in which
the taxpayer
does not materially partici-
pate. Sectio
n 469(h)(1) provides that a tax-
payer shall b
e treated as materially partic-
ipating in a
n activity only if the taxpayer
is involved
in the operations of the activ-
ityonabasi
s which is regular, continuous,
and substan
tial. The Treasury Department
and the IRS
promulgated temporary regu-
lations un
der section 469 in 1988. See T.D.
8175, 1998
–1 C.B. 191, 53 FR 5686 (Feb-
ruary 25, 1
988). Section 1.469–5T(a) pro-
vides that
an individual taxpayer shall be
treated a
s materially participating in an ac-
tivity fo
r the taxable year if and only if:
(1) The in
dividual participates in the ac-
tivity fo
r more than 500 hours during such
year;
(2) The in
dividual’s participation in the
activity
for the taxable year constitutes
substant
ially all of the participation in
such act
ivity of all individuals (including
individ
uals who are not owners of interests
in the ac
tivity) for such year;
(3) The i
ndividual participates in the ac-
tivity f
or more than 100 hours during the
taxable
year, and such individual’s partici-
pation
in the activity for the taxable year is
not les
s than the participation in the activ-
ity of a
ny other individual (including indi-
vidual
s who are not owners of interests in
the act
ivity) for such year;
(4) The
activity is a significant par-
ticipa
tion activity (within the meaning of
§1.46
9–5T(c)) for the taxable year, and the
indiv
idual’s aggregate participation in all
signi
ficant participation activities during
such y
ear exceeds 500 hours;
(5) Th
e individual materially partici-
pated
in the activity (determined without
regar
d to §1.469–5T(a)(5)) for any five
taxa
ble years (whether or not consecutive)
duri
ng the ten taxable years that immedi-
atel
y precede the taxable year;
(6) T
he activity is a personal ser-
vice
activity (within the meaning of
§1.4
69–5T(d)), and the individual mate-
rial
ly participated in the activity for any
thre
e taxable years (whether or not con-
sec
utive) preceding the taxable year; or
(7) Based on al
l of the facts and circum-
stances (taki
ng into account the rules in
§1.469–5T(b)
), the individual participates
in the activit
y on a regular, continuous, and
substantial b
asis during such year.
Section 469(h
)(2) presumptively treats
losses from in
terests in limited part-
nerships as p
assive. Section 469(h)(2)
provides tha
t, except as provided in regu-
lations, no i
nterest in a limited partnership
as a limited p
artner shall be treated as
an interest
with respect to which a tax-
payer mater
ially participates. Section
1.469–5T(e
)(2) permits an individual tax-
payer to est
ablish material participation
in a limite
d partnership but constrains the
individua
l taxpayer to only three of the
seven regu
latory tests in §1.469–5T(a),
(§1.469–5
T(a)(1), (a)(5), or (a)(6)).
Section 1.
469–5T(e)(3)(i) generally
provides t
hat a partnership interest shall
be treate
d as a limited partnership interest
if (A) suc
h interest is either designated as
a limited
partnership interest in the limited
partners
hip agreement or the certificate
of limite
d partnership, without regard to
whether
the liability of the holder of such
interes
t for obligations of the partnership
is limit
ed under applicable State law; or
(B) the l
iability of the holder of such in-
terest f
or obligations of the partnership is
limite
d, under the law of the State in which
the par
tnership is organized, to a deter-
minabl
e fixed amount (for example, the
sum of t
he holder’s capital contributions to
the par
tnership and contractual obligations
to mak
e additional capital contributions
to the
partnership). However, even if the
inter
est is characterized as a limited part-
nersh
ip interest under §1.469–5T(e)(3)(i),
an exc
eption under §1.469–5T(e)(3)(ii)
appl
ies if the individual is a general part-
ner i
n the partnership at all times during
the p
artnership’s taxable year ending with
or wi
thin the individual’s taxable year (or
port
ion of the partnership’s taxable year
dur
ing which the individual (directly or
ind
irectly) owns such limited partnership
int
erest) (the “general partner exception”).
If t
he general partner exception applies,
the
limited partnership interest will not be
tre
ated as such for the year in which the
in
dividual taxpayer is a general partner in
th
e partnership. This allows the individual
ta
xpayer to demonstrate material partici-
February 27, 20124342012–9 I.R.B.

pation through any of the seven regulatory
tests in §1.469–5T(a).
Courts have concluded, in certain in-
stances, that the holder of a limited liabil-
ity company (LLC) interest is not treated
as holding an interest in a limited part-
nership as a limited partner for purposes
of applying the section 469 material par-
ticipation tests. InGregg v. U.S.,186
F.Supp.2d 1123 (D. Or. 2000), an Ore-
gon district court concluded that, in the ab-
sence of regulations to the effect that an
LLC member should be treated as a lim-
ited partner, the limited partner exception
in section 469(h)(2) was not applicable to
LLC members. InGarnett v. Comm’r,132
T.C. 368 (2009), the Tax Court found that
the taxpayers’ ownership interests in lim-
ited liability partnerships and LLCs were
not interests in limited partnerships be-
cause their interests fit within the general
partner exception in §1.469–5T(e)(3)(ii).
Shortly thereafter, inThompson v. U.S.,
87 Fed. Cl. 728 (2009), the Court of Fed-
eral Claims concluded that the regulations
under section 469(h)(2) require the tax-
payer’s ownership interest to be in a part-
nership under State law rather than a part-
nership under Federal income tax law. Ac-
cordingly, because an LLC member is not
a limited partner under State law, the court
concluded that section 469(h)(2) did not
apply to an LLC member. Most recently,
the Tax Court inNewell v. Comm’r,T.C.
Memo. 2010–23, concluded that section
469(h)(2) did not apply to the managing
member of an LLC and that the member
fell within the general partner exception in
§1.469–5T(e)(3)(ii). On April 5, 2010, the
IRS issued an Action on Decision acqui-
escing in the result only inThompson v.
U.S., AOD 2010–02, 2010–14 I.R.B. 515.
Explanation of Provisions
The proposed regulations provide that
an interest in an entity will be treated as
an interest in a limited partnership under
section 469(h)(2) if (A) the entity in which
such interest is held is classified as a part-
nership for Federal income tax purposes
under §301.7701–3; and (B) the holder of
such interest does not have rights to man-
age the entity at all times during the en-
tity’s taxable year under the law of the
jurisdiction in which the entity was or-
ganized and under the governing agree-
ment. Rights to manage include the power
to bind the entity. The proposed regula-
tions provide rules concerning an interest
in a limited partnership based on the pur-
poses for which section 469 was enacted,
and the manner in which the provision is
structured and operates within the Code.
Accordingly, the rules concerning an in-
terest in a limited partnership in the pro-
posed regulations are provided solely for
purposes of section 469 and no inference
is intended that the same rules would ap-
ply for any other provisions of the Code
requiring a distinction between a general
partner and a limited partner.
InGarnett v. Comm’r,supra,theTax
Court noted that Congress enacted section
469(h)(2) to address the limitations on a
limited partner’s ability to participate in
the control of the partnership’s business.
Under the Uniform Limited Partnership
Act of 1916, limited partners could lose
their limited liability protection if they par-
ticipated in the control of the partnership.
The regulations under section 469(h)(2)
were drafted with these constraints in
mind. Today, many states have adopted a
variation of the Revised Uniform Limited
Partnership Act of 1985 (RULPA). Under
RULPA, limited partners may participate
in the management and control of the
partnership without losing their limited
liability. As a consequence, limited part-
ners under RULPA are now more akin to
general partners and LLC members with
respect to their rights in the management
of the entity. Under the Uniform Lim-
ited Liability Company Act of 1996, LLC
members of member-managed LLCs do
not lose their limited liability by partic-
ipating in the management and conduct
of the company’s business. InNewell v.
Comm’r,supra, the Tax Court noted that
the managing member of the LLC at issue
managed the day-to-day operations of the
LLC and was the “substantial equivalent”
of a general partner. Recognizing that
the original presumptions regarding the
limitations on a limited partner’s partici-
pation in the activities of the entity are no
longer valid today, and also recognizing
the emergence of LLCs, the proposed reg-
ulations eliminate the current regulations’
reliance on limited liability for purposes
of determining whether an interest is an
interest in a limited partnership as a lim-
ited partner under section 469(h)(2) and
instead adopt an approach that relies on
the individual partner’s right to participate
in the management of the entity.
The regulations are proposed to apply
to taxable years beginning on or after the
date of publication of the Treasury de-
cision adopting these regulations as final
regulations in theFederal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866, as supplemented by Execu-
tive Order 13563. Therefore, a regulatory
assessment is not required. It has also been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to this regulation, 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 sec-
tion 7805(f) of the Code, these regulations
will be submitted to the Chief Counsel for
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business.
Comments and Requests Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies)orelectroniccom-
ments that are submitted timely to the IRS.
All comments will be available for public
inspection and copying. A public hearing
will be scheduled if requested in writing
by any person that timely submits written
comments. If a public hearing is sched-
uled, notice of the date, time, and place for
the public hearing will be published in the
Federal Register.
Drafting Information
The principal author of these proposed
regulations is Michala Irons, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the Treasury Department
and the IRS participated in their develop-
ment.
*****
2012–9 I.R.B.435February 27, 2012

Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.469–0 is amended by:
1. Revising the entries for §1.469–5(a),
(b), (c), (d), and (e).
2.Removing the entries for
§1.469–5T(e)(1), (e)(2), and (e)(3).
The revisions read as follows:
§1.469–0 Table of contents.
*****
§1.469–5 Material participation.
(a) through (d) [Reserved].
(e) Treatment of an interest in a limited
partnership as a limited partner.
(1) In general.
(2) Exceptions.
(3) Interest in a limited partnership as a
limited partner.
(i) In general.
(ii) Individual holding an interest other
than an interest in a limited partnership as
a limited partner.
(4) Effective/applicability date.
*****
Par. 3. In §1.469–5, paragraphs (a),
(b), (c), (d), and (e) are revised to read as
follows:
§1.469–5 Material Participation.
(a) through (d) [Reserved].
(e)Treatment of an interest in a limited
partnership as a limited partner—(1)In
general. Except as otherwise provided in
this paragraph (e), an individual shall not
be treated as materially participating in any
activity in which the individual owns an
interest in a limited partnership as a limited
partner (as defined in paragraph (e)(3)(i)
of this section) for purposes of applying
section 469 and the regulations thereunder
to—
(i) The individual’s share of any in-
come, gain, loss, deduction, or credit from
such activity that is attributable to an in-
terest in a limited partnership as a limited
partner; and
(ii)Anygainorlossfromsuchactivity
recognized upon a sale or exchange of such
an interest.
(2)Exceptions. Paragraph (e)(1) of this
section shall not apply to an individual’s
share of income, gain, loss, deduction, and
credit for a taxable year from any activity
in which the individual would be treated
as materially participating for the taxable
year under paragraphs (a)(1), (a)(5), or
(a)(6) of §1.469–5T if the individual did
not own an interest in a limited partnership
as a limited partner (as defined in para-
graph (e)(3)(i) of this section) for such tax-
able year.
(3)Interest in a limited partnership as a
limited partner—(i)In general. Except as
provided in paragraph (e)(3)(ii) of this sec-
tion, for purposes of section 469(h)(2) and
this paragraph (e), an interest in an entity
shall be treated as an interest in a limited
partnership as a limited partner if—
(A) The entity in which such inter-
est is held is classified as a partnership
for Federal income tax purposes under
§301.7701–3; and
(B) The holder of such interest does not
have rights to manage the entity at all times
during the entity’s taxable year under the
law of the jurisdiction in which the entity is
organized and under the governing agree-
ment.
(ii)Individual holding an interest other
than an interest in a limited partnership as
a limited partner. An individual shall not
be treated as holding an interest in a lim-
ited partnership as a limited partner for the
individual’s taxable year if such individual
also holds an interest in the partnership that
is not an interest in a limited partnership
as a limited partner (as defined in para-
graph (e)(3)(i) of this section), such as a
state-law general partnership interest, at all
times during the entity’s taxable year end-
ing with or within the individual’s taxable
year (or the portion of the entity’s taxable
year during which the individual (directly
or indirectly) owns such interest in a lim-
ited partnership as a limited partner).
(4)Effective/applicability date.This
section applies to taxable years beginning
on or after the date of publication of the
Treasury decision adopting these rules as
a final regulation in theFederal Register.
*****
Par. 4. Section 1.469–5T paragraph (e)
is revised to read as follows:
§1.469–5T Material Participation
(Temporary).
*****
(e)Treatment of Limited Partners.[Re-
served]. See §1.469–5(e) for rules relating
to this paragraph (e).
*****
Par. 5. Section 1.469–9 paragraph
(f)(1) is revised to read as follows:
§1.469–9 Rules for certain rental real
estate activities.
*****
(f)Limited partnership interests in
rental real estate activities—(1)In gen-
eral. If a taxpayer elects under paragraph
(g) of this section to treat all interests in
rental real estate as a single rental real
estate activity, and at least one interest in
rental real estate is held by the taxpayer
as an interest in a limited partnership as
a limited partner (within the meaning
of §1.469–5(e)(3)), the combined rental
real estate activity of the taxpayer will be
treated as an interest in a limited partner-
ship as a limited partner for purposes of
determining material participation. Ac-
cordingly, the taxpayer will not be treated
under this section as materially partici-
pating in the combined rental real estate
activity unless the taxpayer materially
participates in the activity under the tests
listed in §1.469–5(e)(2) (dealing with the
tests for determining the material partici-
pation of a limited partner).
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on November 25,
2011, 8:45 a.m., and published in the issue of the Federal
Register for November 28, 2011, 76 F.R. 72875)
February 27, 20124362012–9 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.
2012–9 I.R.B.iFebruary 27, 2012

Numerical Finding List
1
Bulletins 2012–1 through 2012–9
Announcements:
2012-1, 2012-1 I.R.B.249
2012-2, 2012-2 I.R.B.285
2012-3, 2012-4 I.R.B.335
2012-4, 2012-4 I.R.B.335
2012-5, 2012-5 I.R.B.348
2012-6, 2012-6 I.R.B.366
2012-7, 2012-6 I.R.B.367
2012-8, 2012-7 I.R.B.373
2012-9, 2012-7 I.R.B.377
Notices:
2012-1, 2012-2 I.R.B.260
2012-3, 2012-3 I.R.B.289
2012-4, 2012-3 I.R.B.290
2012-5, 2012-3 I.R.B.291
2012-6, 2012-3 I.R.B.293
2012-7, 2012-4 I.R.B.308
2012-8, 2012-4 I.R.B.309
2012-9, 2012-4 I.R.B.315
2012-10, 2012-5 I.R.B.343
2012-11, 2012-5 I.R.B.346
2012-12, 2012-6 I.R.B.365
2012-13, 2012-9 I.R.B.421
2012-14, 2012-8 I.R.B.411
2012-15, 2012-9 I.R.B.424
2012-16, 2012-9 I.R.B.427
2012-17, 2012-9 I.R.B.430
Proposed Regulations:
REG-109369-10, 2012-9 I.R.B.434
REG-130302-10, 2012-8 I.R.B.412
REG-149625-10, 2012-2 I.R.B.279
REG-102988-11, 2012-4 I.R.B.326
REG-124627-11, 2012-8 I.R.B.417
REG-130777-11, 2012-5 I.R.B.347
Revenue Procedures:
2012-1, 2012-1 I.R.B.1
2012-2, 2012-1 I.R.B.92
2012-3, 2012-1 I.R.B.113
2012-4, 2012-1 I.R.B.125
2012-5, 2012-1 I.R.B.169
2012-6, 2012-1 I.R.B.197
2012-7, 2012-1 I.R.B.232
2012-8, 2012-1 I.R.B.235
2012-9, 2012-2 I.R.B.261
2012-10, 2012-2 I.R.B.273
2012-11, 2012-7 I.R.B.368
2012-12, 2012-2 I.R.B.275
2012-13, 2012-3 I.R.B.295
2012-14, 2012-3 I.R.B.296
Revenue Procedures— Continued:
2012-15, 2012-7 I.R.B.369
Revenue Rulings:
2012-1, 2012-2 I.R.B.255
2012-2, 2012-3 I.R.B.286
2012-3, 2012-8 I.R.B.383
2012-4, 2012-8 I.R.B.386
2012-5, 2012-5 I.R.B.337
2012-6, 2012-6 I.R.B.349
2012-7, 2012-6 I.R.B.362
Treasury Decisions:
9559, 2012-2 I.R.B.252
9560, 2012-4 I.R.B.299
9561, 2012-5 I.R.B.341
9562, 2012-5 I.R.B.339
9563, 2012-6 I.R.B.354
9565, 2012-8 I.R.B.378
9566, 2012-8 I.R.B.389
9567, 2012-8 I.R.B.395
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–27 through 2011–52 is in Internal Revenue Bulletin
2011–52, dated December 27, 2011.
February 27, 2012ii2012–9 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–1 through 2012–9
Announcements:
2002-44
Supplemented by
Notice 2012-13, 2012-9 I.R.B.421
2011-63
Corrected by
Ann. 2012-9, 2012-7 I.R.B.377
Notices:
2010-88
As modified by Ann. 2011-40, is superseded by
Notice 2012-1, 2012-2 I.R.B.260
2011-28
Superseded by
Notice 2012-9, 2012-4 I.R.B.315
Revenue Procedures:
2003-61
Superseded by
Notice 2012-8, 2012-4 I.R.B.309
2007-44
Modified by
Ann. 2012-3, 2012-4 I.R.B.335
2011-1
Superseded by
Rev. Proc. 2012-1, 2012-1 I.R.B.1
2011-2
Superseded by
Rev. Proc. 2012-2, 2012-1 I.R.B.92
2011-3
Superseded by
Rev. Proc. 2012-3, 2012-1 I.R.B.113
2011-4
Superseded by
Rev. Proc. 2012-4, 2012-1 I.R.B.125
2011-5
Superseded by
Rev. Proc. 2012-5, 2012-1 I.R.B.169
2011-6
Superseded by
Rev. Proc. 2012-6, 2012-1 I.R.B.197
2011-7
Superseded by
Rev. Proc. 2012-7, 2012-1 I.R.B.232
2011-8
Superseded by
Rev. Proc. 2012-8, 2012-1 I.R.B.235
Revenue Procedures— Continued:
2011-9
Superseded by
Rev. Proc. 2012-9, 2012-2 I.R.B.261
2011-10
Superseded by
Rev. Proc. 2012-10, 2012-2 I.R.B.273
2011-40
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-49
Modified by
Ann. 2012-3, 2012-4 I.R.B.335
2011-50
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-51
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2012-8
Corrected by
Ann. 2012-7, 2012-6 I.R.B.367
Revenue Rulings:
92-19
Supplemented in part by
Rev. Rul. 2012-6, 2012-6 I.R.B.349
2008-40
Modified by
Notice 2012-6, 2012-3 I.R.B.293
2011-1
Modified by
Notice 2012-6, 2012-3 I.R.B.293
Treasury Decision:
9517
Corrected by
Ann. 2012-4, 2012-4 I.R.B.335
Ann. 2012-5, 2012-5 I.R.B.348
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–27 through 2011–52 is in Internal Revenue Bulletin 2011–52, dated December 27,
2011.
2012–9 I.R.B.iiiFebruary 27, 2012

INDEX
Internal Revenue Bulletins 2012–1 through
2012–9
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parentheses refer to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Determination letters, issuing procedures (RP 6) 1,197
Full funding limitations, weighted average interest rates, seg-
ment rates for:
January 2012 (Notice 10) 5,343
February 2012 (Notice 16) 9,427
Letter rulings:
And determination letters, areas which will not be issued
from:
Associates Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,113
Associate Chief Counsel (International) (RP 7) 1,232
And general information letters, procedures (RP 4) 1,125
User fees, request for letter rulings (RP 8) 1,235; correction
(Ann 7) 6,367
Qualified plans:
Accrued benefits (RR 4) 8,386
Determination letters (Ann 3) 4,335
Group trusts (Notice 6) 3,293
Qualified joint and survivors annuities (RR 3) 8,383
Retirement plans, covered compensation, permitted disparity
(RR 5) 5,337
Technical advice to IRS employees (RP 5) 1,169
EMPLOYMENT TAX
Employer’s annual federal tax return and modifications to the
deposit rules (TD 9566) 8,389
Interim guidance for cost of health care coverage reporting on
Form W-2 (Notice 9) 4,315
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
EMPLOYMENT TAX—Cont.
Regulations:
26 CFR 31.6011(a)–1, –4, amended; 31.6011(a)–1T, –4T, re-
moved; 31.6071(a)–1, amended; 31.6302–0, –1, amended;
31.6302–0T, –1T, removed; employer’s annual federal tax
return and modifications to the deposit rules (TD 9566) 8,
389
Technical Advice Memoranda (RP 2) 1,92
Work opportunity tax credit (WOTC) (Notice 13) 9,421
ESTATE TAX
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Technical Advice Memoranda (RP 2) 1,92
EXCISE TAX
Frequently asked questions, Patient Protection and Affordable
Care Act (Notice 17) 9,430
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Technical Advice Memoranda (RP 2) 1,92
EXEMPT ORGANIZATIONS
Annual notice to donors regarding pending and settled declara-
tory judgment suits (Ann 1) 1,249
Certain filing changes for tax-exempt organizations (Notice 4) 3,
290
Letter rulings:
And determination letters:
Areas which will not be issued from Associates Chief
Counsel and Division Counsel (TE/GE) (RP 3) 1,113
Qualified nonprofit health insurance issuers, procedures
(RP 11) 7,368
And general information letters, procedures (RP 4) 1,125
Exemption application determination letter rulings under sec-
tions 501, 509, 4940, and 4942 (RP 10) 2,273
Exemption application determination letter rulings under sec-
tions 501 and 521 (RP 9) 2,261
User fees, request for letter rulings (RP 8) 1,235; correction
(Ann 7) 6,367
Technical advice to IRS employees (RP 5) 1,169
GIFT TAX
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,92
February 27, 2012iv2012–9 I.R.B.

INCOME TAX
Adequate notice revenue procedure renewal (RP 15) 7,369
Application of the segregation rules to small shareholders
(REG–149625–10) 2,279
Basis reporting by securities brokers and basis determination for
debt instruments and options (REG–102988–11) 4,326
Changes affecting tax year 2011 filing of information returns
(Ann 6) 6,366
Conduit financing arrangements (TD 9562) 5,339
Continuing education provider and accrediting organization (RP
12) 2,275
Corporate reorganization, guidance on the measurement of con-
tinuity of interest (TD 9565) 8,378; (REG–124627–11) 8,417
Credits:
Iowa credit disaster relief (Notice 7) 4,308
New markets tax credit (TD 9560) 4,299
Work opportunity tax credit (WOTC) (Notice 13) 9,421
Current refundings of tax-exemptbonds in certain disaster relief
bond programs (Notice 3) 3,289
Disciplinary actions involvingattorneys, certified public ac-
counts, enrolled agents, and enrolled actuaries (Ann 8) 7,373
Equitable relief under section 66(c) or section 6015(f) (Notice 8)
4,309
Forms:
1097, 1098, 3921, 3922, 5498, 8935, and W-2, requirements
for filing electronically; correction to Rev. Proc. 2011–40
(Ann 2) 2,285
Gross income, exclusions, restitution payments under the Traf-
ficking Victims Protection Act of 2000 (Notice 12) 6,365
Guidance regarding foreign base company sales income (TD
9563) 6,354
Health savings accounts (HSAs), Indian health service (Notice
14) 8,411
Insurance tax, insurance companies, interest rate tables (RR 6) 6,
349
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
January (RR 2) 3,286
February (RR 7) 6,362
Letters rulings:
And determination letters, areas which will not be issued
from:
Associate Chief Counsel andDivision Counsel (TE/GE)
(RP 3) 1,113
Associate Chief Counsel (International) (RP 7) 1,232
And information letters issued by Associate Offices, determi-
nation letters issued by Operating Divisions (RP 1) 1,1
Maximum vehicle values, specialvaluation rules, 2012 (RP 13)
3,295
Passive activity losses and credits limited (REG–109369–10) 9,
434
Proposed Regulations:
26 CFR 1.275–7, revised; treasury inflation-protected securi-
ties issued at a premium (REG–130777–11) 5,347
INCOME TAX—Cont.
26 CFR 1.368–1, amended; corporate reorganizations,
guidance on the measurement of continuity of interest
(REG–124627–11) 8,417
26 CFR 1.382–3, amended; application of section 382 seg-
regation rules to small shareholders (REG–149625–10) 2,
279
26 CFR 1.469–0, amended; 1.469–5, –5T, –9, revised; passive
activity losses and credits limited (REG–109369–10) 9,434
26 CFR 1.6038D–0 thru –8, added; reporting of specified for-
eign financial assets (REG–130302–10) 8,412
26 CFR 1.6045–1, amended; 1.6045A–1, amended;
1.6045B–1, amended; basis reporting by securities brokers
and basis determination for debt instruments and options
(REG–102988–11) 4,326
Publications:
1187, specifications for filing Form 1040-S, foreign person’s
U.S. source income subject to withholding, electronically;
correction (Ann 6) 6,366
1220, specifications for filing Forms 1097, 1098, 3921, 3922,
5498, 8935, and W-2 electronically; correction to Rev.
Proc. 2011–40 (Ann 2) 2,285; correction (Ann 6) 6,366
1239, specifications for filing Form 8027, employer’s annual
information return of tip income and allocated tips, elec-
tronically; correction (Ann 6) 6,366
Recurring item exception (RR 1) 2,255
Regulations:
26 CFR 1.45D–1, added; 1.45D–1, amended; new markets
tax credit (TD 9560) 4,299
26 CFR 1.275–7T, added; treasury inflation-protected securi-
ties issued at a premium (TD 9561) 5,341
26 CFR 1.368–1, amended; 1.368–1T, removed; corporate
reorganizations, guidance on the measurement of continuity
of interest (TD 9565) 8,378
26 CFR 1.881–3, amended; conduit financing arrangements
(TD 9562) 5,339
26 CFR 1.954–3, amended; 1.954–3T, removed; guidance re-
garding foreign base company sales income (TD 9563) 6,
354
26 CFR 300.0, amended; 300.12, revised; 300.13, added; user
fee to take the registered tax return preparer competency
examination (TD 9559) 2,252
26 CFR 901.11, amended; regulations governing the perfor-
mance of actuarial services under the Employee Retirement
Income Security Act (ERISA)of 1974; correction (Ann 4)
4,335;correction(Ann5)5,348
26 CFR 1.6038D–0T, thru –8T, added; reporting of specified
foreign financial assets (TD 9567) 8,395
Regulations governing the performance of actuarial services un-
der the Employee Retirement Income Security Act (ERISA) of
1974; correction (Ann 4) 4,335; correction (Ann 5) 5,348
Reporting of specified foreign financial assets (TD 9567) 8,395;
(REG–130302–10) 8,412
Safe harbor reporting:
Eligible REMICs required to report on Schedule Q informa-
tion with respect to REMIC assets (Notice 5) 3,291
2012–9 I.R.B.vFebruary 27, 2012

INCOME TAX—Cont.
Guidance for REIT investing in certain REMIC regular and
residual interests (RP 14) 3,296
Section 304 transactions (Notice 15) 9,424
Standard mileage rates, 2012 (Notice 1) 2,260
Technical Advice Memoranda (TAMs) (RP 2) 1,92
Transitional relief for section 6045B issuer returns and state-
ments for 2011 organizational actions (Notice 11) 5,346
Treasury inflation-protected securities issued at a premium (TD
9561) 5,341; (REG–130777–11) 5,347
User fee to take the registered tax return preparer competency
examination (TD 9559) 2,252
SELF-EMPLOYMENT TAX
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,92
February 27, 2012vi2012–9 I.R.B.

2012–9 I.R.B.February 27, 2012

February 27, 20122012–9 I.R.B.

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