Internal Revenue Bulletin 2017-42 (PDF rendition): IRS Notices

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

# INTERNAL REVENUE BULLETIN

4

IRS

Bulletin No. 2017-42
October 16, 2017

## 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

### Action On Decision 2017-07, page 311.

Nonacquiescence relating to the holdings that: 1) mere posses-
sion of a stock certificate, disregarding other conditions, restric-
tions or limitations on the possessor's rights regarding the stock,
constitutes ownership for purposes of § 469(c)(7)(D)(ii); and 2)
work performed by the taxpayer in a rental real estate activity for
purposes of § 469(c)(7)(A) may also constitute work performed by
the taxpayer in non-rental business activities of the taxpayer for
other purposes of § 469.

### Notice 2017-53, page 318.

This notice explains the circumstances under which the 4-year
replacement period under section 1033(e)(2) is extended for
livestock sold on account of drought. The Appendix to this
notice contains a list of counties that experienced exceptional,
extreme, or severe drought conditions during the 12-month
period ending August 31, 2017. Taxpayers may use this list to
determine if any extension is available.

### Notice 2017-54, page 321.

Optional special per diem rates. This notice provides the
2017-2018 special per diem rates for taxpayers to use in
substantiating the amount of ordinary and necessary business
expenses incurred while traveling away from home. The notice
includes (1) the special transportation industry rate, (2) the rate
for the incidental expenses only deduction, and (3) the rates
and list of high-cost localities for the high-low substantiation
method.

### Notice 2017-55, page 324.

This notice excludes from the definition of United States prop-
erty for purposes of section 956 certain property temporarily
stored in the United States following Hurricane Irma or Hurri-
cane Maria.

### Notice 2017-57, page 324.

This notice announces that Treasury and IRS intend to amend
regulations under section 987 to delay the applicability date of the
final section 987 regulations and certain temporary section 987
regulations by 1 year. The Treasury Department and the IRS
intend to amend §§1.861-9T, 1.985-5, 1.987-11, 1.987-1T
through 1.987-4T, 1.987-6T, 1.987-7T, 1.988-1, 1.988-1T,
1.988-4, and 1.989(a)-1 to provide that the final regulations and
the related temporary regulations will apply to taxable years
beginning on or after two years after the first date of the first
taxable year following December 7, 2016. Before the issuance of
the amendments to the final section 987 regulations and the
related temporary regulations, taxpayers may rely on the provi-
sions of this Notice regarding those proposed amendments.

### Notice 2017-58, page 326.

Notice 2017-58 extends the due date for participants to file
disclosures under § 1.6011-4(e)(2)(i) of the Income Tax Reg-
ulations pursuant to IRS Notice 2017-10, from October 2,
2017, until October 31, 2017.

### REG-128841-07, page 327.

Under §147(f) of the Code, a private activity bond is not
tax-exempt if it is not approved by both the governmental unit
issuing the bond and the governmental unit in which the fi-
nanced property will be located. This project proposes rules
that would update the existing regulations, located in §5f.103-
2, to address changes in the Code and to provide issuers of
private activity bonds additional flexibility in satisfying the ap-
proval requirement. This project also withdraws a notice of
proposed rulemaking on the same topic published in 2008.

Finding Lists begin on page ii.

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## ADMINISTRATIVE

Rev. Proc. 2017-54, page 336.

This procedure publishes the amounts of unused housing
credit carryovers allocated to qualified states under section
42(h)(3)(D) of the Code for calendar year 2017.

### T.D. 9824, page 312.

This document contains final regulations with respect to the
withholding from, and information reporting on, certain pay-
ments of gambling winnings from horse races, dog races, and
jai alai and on certain other payments of gambling winnings.
The final regulations affect both payers and payees of the
gambling winnings.

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## The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.

## Introduction

The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal 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, identify-
ing 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 .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal 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, Legisla-
tion and Related Committee Reports.

Part III .- Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury's Office of the Assistant Sec-
retary (Enforcement).

### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and 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 contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

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## Decisions of the Tax Court with Court Decisions

It is the policy of the Internal Revenue
Service to announce at an early date
whether it will follow the holdings in cer-
tain cases. An Action on Decision is the
document making such an announcement.
An Action on Decision will be issued at
the discretion of the Service only on un-
appealed issues decided adverse to the
government. Generally, an Action on De-
cision is issued where its guidance would
be helpful to Service personnel working
with the same or similar issues. Unlike a
Treasury Regulation or a Revenue Ruling,
an Action on Decision is not an affirma-
tive statement of Service position. It is not
intended to serve as public guidance and
may not be cited as precedent.

Actions on Decisions shall be relied
upon within the Service only as conclu-
sions applying the law to the facts in the
particular case at the time the Action on
Decision was issued. Caution should be
exercised in extending the recommenda-

tion of the Action on Decision to similar
cases where the facts are different. More-
over, the recommendation in the Action
on Decision may be superseded by new
legislation, regulations, rulings, cases, or
Actions on Decisions. Prior to 1991, the
Service published acquiescence or nonac-
quiescence only in certain regular Tax
Court opinions. The Service has expanded
its acquiescence program to include other
civil tax cases where guidance is deter-
mined to be helpful. Accordingly, the Ser-
vice now may acquiesce or nonacquiesce
in the holdings of memorandum Tax
Court opinions, as well as those of the
United States District Courts, Claims
Court, and Circuit Courts of Appeal. Re-
gardless of the court deciding the case, the
recommendation of any Action on Deci-
sion will be published in the Internal
Revenue Bulletin.

The recommendation in every Action on
Decision will be summarized as acquies-
cence, acquiescence in result only, or non-
acquiescence. Both "acquiescence" and "ac-
quiescence in result only" mean that the
Service accepts the holding of the court in a

case and that the Service will follow it in
disposing of cases with the same controlling
facts. However, "acquiescence" indicates
neither approval nor disapproval of the
reasons assigned by the court for its con-
clusions; whereas, "acquiescence in result
only" indicates disagreement or concern
with some or all of those reasons. "Non-
acquiescence" signifies that, although no
further review was sought, the Service
does not agree with the holding of the
court and, generally, will not follow the
decision in disposing of cases involving
other taxpayers. In reference to an opinion
of a circuit court of appeals, a "nonacqui-
escence" indicates that the Service will
not follow the holding on a nationwide
basis. However, the Service will recog-
nize the precedential impact of the opin-
ion on cases arising within the venue of
the deciding circuit.

The Commissioner does NOT ACQUI-
ESCE in the following decision:

Carol A. and Roy E. Stanley v. United
States, W.D. Ark. No.5:14-cv-5236
(2015).1

1Nonacquiescence relating to the holdings that: 1) mere possession of a stock certificate, disregarding other conditions, restrictions or limitations on the possessor's rights regarding the stock,
constitutes ownership for purposes of § 469(c)(7)(D)(ii); and 2) work performed by the taxpayer in a rental real estate activity for purposes of § 469(c)(7)(A) may also constitute work
performed by the taxpayer in non-rental business activities of the taxpayer for other purposes of § 469.

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### Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 T.D. 9824

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1

Withholding on Payments of
Certain Gambling Winnings

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Final regulations.

SUMMARY: This document contains fi-
nal regulations with respect to the with-
holding from, and the information report-
ing on, certain payments of gambling
winnings from horse races, dog races, and
jai alai and on certain other payments of
gambling winnings. The final regulations
affect both payers and payees of the gam-
bling winnings.

DATES: Effective date: These regulations
are effective on September 27, 2017.

Applicability Dates: For dates of ap-
plicability, see §§ 31.3402(q)-1(g) and
31.3406(g)-2(h).

FOR FURTHER INFORMATION CON-
TACT: David Bergman, (202) 317-6845
(not a toll-free number).

#### SUPPLEMENTARY INFORMATION:

##### Background

This document contains final regula-
tions in Title 26 of the Code of Federal
Regulations under section 3402 of the In-
ternal Revenue Code (Code). The final
regulations amend, update, and clarify the
existing withholding and information re-
porting requirements for certain gambling
winnings under § 31.3402(q)-1 of the
Employment Tax Regulations, and make
conforming changes to § 31.3406(g)-2.

On December 30, 2016, the Treasury
Department and the IRS published a no-
tice of proposed rulemaking (REG-
123841-16) in the Federal Register, 81
FR 96406, containing proposed regula-
tions that would provide a new rule regard-

ing how payers determine the amount of the
wager in parimutuel wagering transactions
with respect to horse races, dog races, and
jai alai, and that would update the existing
rules to reflect current law regarding the
withholding thresholds and certain informa-
tion reporting requirements.

Over 2,700 written public comments
were received in response to the notice of
proposed rulemaking. No public hearing
was requested. After careful consideration
of the written comments, the proposed
regulations are adopted as modified by
this Treasury Decision.

##### Explanation and Summary of Comments

All of the written comments on the no-
tice of proposed rulemaking were consid-
ered and are available at www.regulations.
gov or upon request. Many of these com-
ments addressed similar issues and ex-
pressed similar points of view. These com-
ments are summarized in this preamble.

Rule for Determining the Amount of the
Wager in the Case of Horse Races, Dog
Races, and Jai Alai

The proposed regulations contained a
new rule for determining the amount of
the wager in the case of horse races, dog
races, and jai alai to allow all wagers
placed in a single parimutuel pool and
represented on a single ticket to be aggre-
gated and treated as a single wager. Com-
menters largely supported the proposed
rules because they believe that the rules
accurately and fairly reflect parimutuel
wagering realities.

Some commenters raised concerns that
the single ticket requirement in the proposed
regulations did not address electronic wa-
gering. Commenters stated that in horse rac-
ing a paper ticket can only accommodate six
separate lines of bets. In contrast, electronic
wagering utilizes an "account wagering"
system that can accommodate dozens (or
even hundreds) of lines of bets in a single
parimutuel pool, allowing bettors to place
more, customized wagers. As a result, some
commenters requested a special rule for
electronic wagering.

The proposed rule at § 31.3402(q)-
1(c)(1)(ii) is specifically not limited to a
paper ticket, but also includes an electronic
record that is presented to collect proceeds
from a wager or wagers placed in a single
parimutuel pool. Therefore, the rule in pro-
posed § 31.3402(q)-1(c)(1)(ii) is not depen-
dent on the applicable industry's ticketing
format. Further, despite the commenters
concern regarding the limits on the number
of lines a paper ticket can accommodate, the
proposed regulations do not limit the num-
ber of bets on a single ticket nor do the
proposed regulations contain a rule govern-
ing the number of bets that can be contained
on a single, electronic record of a wagering
transaction.

Another commenter stated that the single
ticket requirement puts a person making an
electronic bet at a disadvantage because it
removes the opportunity to place bets in a
single parimutuel pool at multiple points in
time throughout the allotted time period for
wagering. The single ticket rule in the pro-
posed regulations does not differentiate be-
tween electronic betting and placing a bet
at a ticket window. Therefore, the pro-
posed rule does not put an electronic
bettor at a disadvantage. However, the
comment brings to light that there is
some confusion regarding how the rule
applies in the context of electronic bet-
ting.

The single-ticket requirement in the
proposed regulations allows aggregation
of wagers that are placed in the same
parimutuel pool if they are represented on
a single ticket. This is the case regardless
of whether the ticket is paper or elec-
tronic. This requirement was included in
the proposed regulations to limit the po-
tential for fraud, such as a winning bettor
collecting losing tickets from another bet-
tor or bettors who placed bets in the same
parimutuel pool to artificially increase the
amount of the wager. In addition, the
single-ticket requirement improves ad-
ministrability because it does not require
payers to collect information reflected on
multiple tickets. As the preamble to the
proposed regulations explains, the single
ticket requirement was not intended to
limit the amount of the wager to bets

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placed at a single point in time because a
ticket containing prior bets in a single
pool can be cancelled, and the original and
additional wagers in that pool can be placed
on a new ticket. The fraud and administra-
bility concerns that apply to paper tickets do
not apply equally to electronic records be-
cause each person's bets are reflected on a
single electronic wagering account. Accord-
ingly, electronic bettors may aggregate wa-
gers placed at different points in time with-
out having to cancel prior wagers and place
them on a new ticket as long as the wagers
meet the requirements in the proposed
rule-that is, they are placed in a single
parimutuel pool and are represented on a
single, electronic record.

Because the comments received in re-
sponse to the proposed rule do not justify
any change, the final regulations adopt the
proposed rule without modification.

###### Effective/Applicability Dates

The proposed regulations provided
that final regulations would apply to
payments made after the date they are
published in the Federal Register.
Some commenters requested a delayed
effective date to allow time for industry
stakeholders to update their systems and
seek any necessary state regulatory ap-
proval. One commenter specficially sug-
gested that 45 days following publica-
tion of the final regulations would be
sufficient time to perform such updates.
In addition, the commenters suggested
that the final rules be effective for wa-
gering transactions with respect to win-
ning events that occur after the date that
the final rules are published in the Fed-
eral Register. The Treasury Department
and IRS agree with these comments.
Therefore, the final regulations are ap-
plicable to reportable gambling win-
nings paid with respect to a winning
event that occurs on or after 45 days
from the date the final regulations are
published in the Federal Register. If
they so choose, payers may rely on the
provisions of the final regulations for
payments made after the date the final
regulations are published in the Federal
Register, regardless of when the related
winning event occurred.

Other Comments

Several commenters raised concerns
regarding the thresholds for information
reporting and withholding for certain
gambling winnings. Another commenter
requested that the regulations provide an
exception to withholding under section
3402(q). Neither the threshold for infor-
mation reporting with respect to gam-
bling winnings not subject to withhold-
ing nor exceptions to section 3402(q)
withholding were the focus of the pro-
posed regulations. In addition, the with-
holding thresholds are defined by stat-
ute. These comments are outside the
scope of the proposed regulations, and
therefore the comments have not been
adopted in the final regulations.

##### Special Analyses

Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
by Executive Order 13563. Therefore, a
regulatory assessment is not required.

It is hereby certified that this rule will not
have a significant economic impact on a
substantial number of small entities. Al-
though this rule may affect a substantial
number of small entities, the economic im-
pact is minimal because this rule merely
provides guidance as to the statutory with-
holding rules and filing of information re-
turns for payers who make reportable pay-
ments of certain gambling winnings and
who are required by sections 3402 and 6041
to withhold and make returns reporting
those payments. This rule reduces the exist-
ing burden on payers to comply with the
statutory requirement by simplifying the
process for payers to verify payees' identi-
ties with a broader range of documents that
are more readily available.

This rule also will result in a reduction
in the number of forms filed. Instead of
treating all components of a bet made by a
gambler in a single parimutuel pool as a
separate amount wagered, the rules treat
all amounts wagered in a single parimu-
tuel pool reflected on a single ticket as the
amount wagered for purposes of deter-
mining whether reporting or withholding
is needed. For the reasons stated, the final
rule will not have a significant economic
impact on a substantial number of small
entities. Accordingly, a regulatory flexi-

bility analysis under the Regulatory Flex-
ibility Act (5 U.S.C. Chapter 6) is not
required.

Pursuant to section 7805(f) of the In-
ternal Revenue Code, the notice of pro-
posed rulemaking preceding these regula-
tions was submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on the regula-
tions' impact on small businesses, and no
comments were received.

##### Drafting Information

The principal author of these regula-
tions is David Bergman of the Office of
the Associate Chief Counsel (Procedure
and Administration). However, other per-
sonnel from the Treasury Department and
the IRS participated in their development.
* * * * *

##### Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 31 is amended
as follows:

##### PART 31-EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

Par. 1. The authority citation for part
31 continues to read in part as follows:

26 U.S.C. 7805 * * *

Par. 2. Section 31.3402(q)-1 is amend-
ed:

1\. By revising paragraphs (a)(1), (b),
and (c)(1) and (4).

2\. By redesignating paragraphs (d), (e)
and (f) as paragraphs (f), (d), and (e),
respectively.

3\. By revising newly designated para-
graphs (d) and (e).

4\. By removing, in newly designated
paragraph (f), Example 3 and Example 11,
redesignating Examples 4 through 10 as
Examples 3 through 9, and adding exam-
ples 10 through 16.

5\. By removing, in newly designated
paragraph (f) the language "example 4" in
newly designated Example 4 and adding
in its place the language "example 3" and
by removing the language "example 6" in
newly designated Example 6 and adding
in its place the language "example 5"
wherever it appears.

6\. By adding paragraph (g).

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The revisions and additions read as fol-
lows:

§ 31.3402(q)-1 Extension of withholding
to certain gambling winnings.

(a) Withholding obligation-(1) Gen-
eral rule. Every person, including the
Government of the United States, a State,
or a political subdivision thereof, or any
instrumentality of any of the foregoing
making any payment of "winnings subject
to withholding" (defined in paragraph (b)
of the section) must deduct and withhold a
tax in an amount equal to the product of
the third lowest rate of tax applicable un-
der section 1(c) and the payment. The tax
must be deducted and withheld upon pay-
ment of the winnings by the person mak-
ing the payment ("payer"). See paragraph
(c)(5)(ii) of this section for a special rule
relating to the time for making deposits of
withheld amounts and filing the return
with respect to those amounts. Any person
receiving a payment of winnings subject
to withholding must furnish the payer a
statement as required in paragraph (d) of
this section. Payers of winnings subject to
withholding must file a return with the
Internal Revenue Service and furnish a
statement to the payee as required in para-
graph (e) of this section. With respect to
reporting requirements for certain pay-
ments of gambling winnings not subject to
withholding, see section 6041 and the reg-
ulations thereunder.

* * * * *

(b) Winnings subject to withholding-
(1) In general. Winnings subject to with-
holding means any payment from-

(i) A wager placed in a State-conducted
lottery (defined in paragraph (c)(2) of this
section) but only if the proceeds from the
wager exceed $5,000;

(ii) A wager placed in a sweepstakes,
wagering pool, or lottery other than a
State-conducted lottery but only if the
proceeds from the wager exceed $5,000;
or

(iii) Any other wagering transaction (as
defined in paragraph (c)(3) of this section)
but only if the proceeds from the wager:
(A) Exceed $5,000; and

(B) Are at least 300 times as large as
the amount of the wager.

(2) Total proceeds subject to withhold-
ing. If proceeds from the wager qualify as

winnings subject to withholding, then the
total proceeds from the wager, and not
merely amounts in excess of $5,000, are
subject to withholding.

(c) Definitions; special rules-(1)
Rules for determining amount of proceeds
from a wager-(i) In general. The amount
of proceeds from a wager is the amount
paid with respect to the wager, less the
amount of the wager.

(ii) Amount of the wager in the case of
horse races, dog races, and jai alai. In the
case of a wagering transaction with re-
spect to horse races, dog races, or jai alai,
all wagers placed in a single parimutuel
pool and represented on a single ticket are
aggregated and treated as a single wager
for purposes of determining the amount of
the wager. A ticket in the case of horse
races, dog races, or jai alai is a written or
electronic record that the payee must pres-
ent to collect proceeds from a wager or
wagers.

(iii) Amount paid with respect to a wa-
ger-(A) Identical wagers. Amounts paid
with respect to identical wagers are
treated as paid with respect to a single
wager for purposes of calculating the
amount of proceeds from a wager. Two or
more wagers are identical wagers if win-
ning depends on the occurrence (or non-
occurrence) of the same event or events;
the wagers are placed with the same pay-
er; and, in the case of horse races, dog
races, or jai alai, the wagers are placed in
the same parimutuel pool. Wagers may be
identical wagers even if the amounts wa-
gered differ as long as the wagers are
otherwise treated as identical wagers un-
der this paragraph (c)(1)(iii)(A). Tickets
purchased in a lottery generally are not
identical wagers, because the designation
of each ticket as a winner generally would
not be based on the occurrence of the
same event, for example, the drawing of a
particular number.

(B) Non-monetary proceeds. In deter-
mining the amount paid with respect to a
wager, proceeds which are not money are
taken into account at the fair market value.

(C) Periodic payments. Periodic pay-
ments, including installment payments or
payments which are to be made periodi-
cally for the life of a person, are aggre-
gated for purposes of determining the
amount paid with respect to the wager.
The aggregate amount of periodic pay-

ments to be made for a person's life is
based on that person's life expectancy.
See §§ 1.72-5 and 1.72-9 of this chapter
for rules used in computing the expected
return on annuities. For purposes of deter-
mining the amount subject to withholding,
the first periodic payment must be reduced
by the amount of the wager.
* * * * *

(4) Certain payments to nonresident
aliens or foreign corporations. A payment
of winnings that is subject to withholding
tax under section 1441(a) (relating to
withholding on nonresident aliens) or
1442(a) (relating to withholding on for-
eign corporations) is not subject to the
tax imposed by section 3402(q) and this
section when the payee is a foreign per-
son, as determined under the rules of sec-
tion 1441(a) and the regulations thereun-
der. A payment is treated as being subject
to withholding tax under section 1441(a)
or 1442(a) notwithstanding that the rate of
such tax is reduced (even to zero) as may
be provided by an applicable treaty with
another country. However, a reduced or
zero rate of withholding of tax must not be
applied by the payer in lieu of the rate
imposed by sections 1441 and 1442 unless
the person receiving the winnings has pro-
vided to the payer the documentation re-
quired by § 1.1441-6 of this chapter to
establish entitlement to treaty benefits.
* * * * *

(d) Statement furnished by payee-(1)
In general. Each person who is making a
payment subject to withholding under this
section must obtain from the payee a
statement described in paragraph (d)(2) of
this section.

(2) Contents of statement. Each person
who is to receive a payment of winnings
subject to withholding under this section
must furnish the payer a statement on
Form W-2G or 5754 (whichever is appli-
cable) made under the penalties of perjury
containing-

(i) The name, address, and taxpayer
identification number of the winner ac-
companied by a declaration that no other
person is entitled to any portion of such
payment, or

(ii) The name, address, and taxpayer
identification number of the payee and of
every person entitled to any portion of the
payment.

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(3) Multiple payments. If more than
one payment of winnings subject to with-
holding is to be made with respect to a
single wager, for example in the case of an
annuity, the payee is required to furnish
the payer a statement with respect to the
first payment only, provided that the other
payments are taken into account in a re-
turn required by paragraph (e) of this
section.

(4) Reliance on statement for identical
wagers. If the payee furnishes the state-
ment which may be required pursuant to
§ 1.6011-3 of this chapter (regarding the
requirement of a statement from payees of
certain gambling winnings), indicating
that the payee (and any other persons en-
titled to a portion of the winnings) is en-
titled to winnings from identical wagers,
as defined in paragraph (c)(1)(iii)(A) of
this section, and indicating the amount
of the winnings, if any, then the payer
may rely upon the statement in deter-
mining the total amount of proceeds
from the wager under paragraph (c)(1)
of this section.

(e) Return of payer-(1) In general.
Every person making payment of win-
nings for which a statement is required
under paragraph (d) of this section must
file a return on Form W-2G at the Internal
Revenue Service location designated in
the instructions to the form on or before
February 28 (March 31 if filed electroni-
cally) of the calendar year following the
calendar year in which the payment of
winnings is made. The return required by
this paragraph (e) need not include the
statement by the payee required by para-
graph (d) of this section and, therefore,
need not be signed by the payee, provided
the statement is retained by the payer as
long as its contents may become mate-
rial in the administration of any internal
revenue law. In addition, the return re-
quired by this paragraph (e) need not
contain the information required by
paragraph (e)(1)(v) of this section pro-
vided the information is obtained with
respect to the payee and retained by the
payer as long as its contents may be-
come material in the administration of
any internal revenue law. For payments
to more than one winner, a separate
Form W-2G, which in no event need be
signed by the winner, must be filed with

respect to each such winner. Each Form
W-2G must contain the following:

(i) The name, address, and taxpayer
identification number of the payer;

(ii) The name, address, and taxpayer
identification number of the winner;

(iii) The date, amount of the payment,
and amount withheld;

(iv) The type of wagering transaction;

(v) Except with respect to winnings
from a wager placed in a State-conducted
lottery, a general description of the two
types of identification (as described in
paragraph (e)(2) of this section), one of
which must have the payee's photograph
on it (except in the case of tribal member
identification cards in certain circum-
stances as described in paragraph (e)(3) of
this section), that the payer relied on to
verify the payee's name, address, and tax-
payer identification number;

(vi) The amount of winnings from
identical wagers; and

(vii) Any other information required by
the form, instructions, or other applicable
guidance published in the Internal Reve-
nue Bulletin.

(2) Identification. The following items
are treated as identification for purposes
of paragraph (e)(1)(v) of this section-

(i) Government-issued identification
(for example, a driver's license, passport,
social security card, military identification
card, tribal member identification card is-
sued by a federally-recognized Indian
tribe, or voter registration card) in the
name of the payee; and

(ii) A Form W-9, "Request for Tax-
payer Identification Number and Certifi-
cation," signed by the payee that includes
the payee's name, address, taxpayer iden-
tification number, and other information
required by the form. A Form W-9 is not
acceptable for this purpose if the payee
has modified the form (other than pursu-
ant to instructions to the form) or if the
payee has deleted the jurat or other similar
provisions by which the payee certifies or
affirms the correctness of the statements
contained on the form.

(3) Special rule for tribal member
identification cards. A tribal member
identification card need not contain the
payee's photograph to meet the identifica-
tion requirement described in paragraph
(e)(1)(v) of this section if-

(i) The payee is a member of a
federally-recognized Indian tribe;

(ii) The payee presents the payer with a
tribal member identification card issued
by a federally-recognized Indian tribe
stating that the payee is a member of such
tribe; and

(iii) The payer is a gaming establishment
(as described in § 1.6041-10(b)(2)(iv) of
this chapter) owned or licensed (in accor-
dance with 25 U.S.C. 2710) by the tribal
government that issued the tribal member
identification card referred to in paragraph
(e)(3)(ii) of this section.

(4) Transmittal form. Persons making
payments of winnings subject to with-
holding must use Form 1096 to transmit
Forms W-2G to the Internal Revenue Ser-
vice.

(5) Furnishing a statement to the
payee. Every payer required to make a
return under paragraph (e)(1) of this sec-
tion must also make and furnish to each
payee, with respect to each payment of
winnings subject to withholding, a written
statement that contains the information
that is required to be included on the re-
turn under paragraph (e)(1) of this section.
The payer must furnish the statement to
the payee on or before January 31st of the
year following the calendar year in which
payment of the winnings subject to with-
holding is made. The statement will be
considered furnished to the payee if it is
provided to the payee at the time of pay-
ment or if it is mailed to the payee on or
before January 31st of the year following
the calendar year in which payment was
made.

(f) * * *

Example 10. (i) B places a $15 bet at the cashier
window at the racetrack for horse A to win the fifth
race at the racetrack that day. After placing the first
bet, B gains confidence in horse A's prospects to win
and places an additional $40 bet at the cashier win-
dow at the racetrack for horse A to win the fifth race,
receiving a second ticket for this second bet. Horse
A wins the fifth race, and B wins a total of $5,500
(100 to 1 odds) on those bets. The $15 bet and the
$40 bet are identical wagers under paragraph
(c)(1)(iii)(A) of this section because winning on
both bets depended on the occurrence of the same
event and the bets are placed in the same parimu-
tuel pool with the same payer. This is true regard-
less of the fact that the amount of the wager differs
in each case.

(ii) B cashes the tickets at different cashier win-
dows. Pursuant to paragraph (d) of this section and
§ 1.6011-3, B completes a Form W-2G indicating
that the amount of winnings is from identical wagers

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and provides the form to each cashier. The payments
by each cashier of $1,500 and $4,000 are less than
the $5,000 threshold for withholding, but under para-
graph (c)(1)(iii)(A) of this section, identical wagers
are treated as paid with respect to a single wager
for purposes of determining the proceeds from a
wager. The payment is not subject to withholding
or reporting because although the proceeds from
the wager are $5,445 ($1,500 + $4,000 - $55), the
proceeds from the wager are not at least 300 times
as great as the amount wagered ($55 x 300 =
$16,500).

Example 11. B makes two $1,000 bets in a
single "show" pool for the same jai alai game, one
bet on Player X to show and one bet on Player Y
to show. A show bet is a winning bet if the player
comes in first, second, or third in a single game.
The bets are placed at the same time at the same
cashier window, and B receives a single ticket
showing both bets. Player X places second in the
game, and Player Y does not place first, second, or
third in the game. B wins $8,000 from his bet on
Player X. Because winning on both bets does
not depend on the occurrence of the same event,
the bets are not identical bets under paragraph
(c)(1)(iii)(A) of this section. However, pursuant to
the rule in paragraph (c)(1)(ii) of this section, the
amount of the wager is the aggregate amount of
both wagers ($2,000) because the bets were placed
in a single parimutuel pool and reflected on a
single ticket. The payment is not subject to with-
holding or reporting because although the pro-
ceeds from the wager are $6,000 ($8,000 -
$2,000), the proceeds from the wager are not at
least 300 times as great as the amount wagered
($2,000 x 300 = $600,000).

Example 12. B bets a total of $120 on a three-
dog exacta box bet ($20 for each one of the six
combinations played) at the dog racetrack and
receives a single ticket reflecting the bet from the
cashier. B wins $5,040 from one of the selected
combinations. Pursuant to the rule in paragraph
(c)(1)(ii) of this section, the amount of the wager
is $120, not $20 for the single winning combina-
tion of the six combinations played. The payment
is not subject to withholding under section
3402(q) because the proceeds from the wager are
$4,920 ($5,040-$120), which is below the section
3402(q) withholding threshold.

Example 13. B makes two $12 Pick 6 bets at the
horse racetrack at two different cashier windows
and receives two different tickets each represent-
ing a single $12 Pick 6 bet. In his two Pick 6 bets,
B selects the same horses to win races 1-5 but
selects different horses to win race 6. All Pick 6
bets on those races at that racetrack are part of a
single parimutuel pool from which Pick 6 winning
bets are paid. B wins $5,020 from one of his Pick
6 bets. Pursuant to the rule in paragraph (c)(1)(ii)
of this section, the bets are not aggregated for
purposes of determining the amount of the wager
because the bets are reflected on separate tickets.
Assuming that the applicable rate is 25%, the
racetrack must deduct and withhold $1,252
(($5,020-$12) x 25%) because the amount of the
proceeds of $5,008 ($5,020 - $12) is greater than
$5,000 and is at least 300 times as great as the
amount wagered ($12 x 300 = $3,600). The race-

track also must report B's winnings on Form
W-2G pursuant to paragraph (e) of this section
and furnish a copy of the Form W-2G to B.

Example 14. C makes two $50 bets in two dif-
ferent parimutuel pools for the same jai alai game.
One bet is an "exacta" in which C bets on player M
to win and player N to "place." The other bet is a
"trifecta" in which C bets on player M to win, player
N to "place," and player O to "show." C wins both
bets and is paid $2,000 with respect to the bet in the
"exacta" pool and $3,100 with respect to the bet in
the "trifecta" pool. Under paragraph (c)(1)(iii)(A) of
this section, the bets are not identical bets. Under
paragraph (c)(1)(ii) of this section, the bets are not
aggregated for purposes of determining the amount
of the wager for either payment because they are not
wagers in the same parimutuel pool. No section
3402(q) withholding is required on either payment
because neither payment separately exceeds the
$5,000 withholding threshold.

Example 15. C makes two $100 bets for the same
dog to win a particular race. C places one bet at the
racetrack and one bet at an off-track betting estab-
lishment, but the two pools constitute a single pool.
C receives separate tickets for each bet. C wins both
bets and is paid $4,000 from the racetrack and
$4,000 from the off-track betting establishment. Un-
der paragraph (c)(1)(ii) of this section, the bets are
not aggregated for purposes of determining the
amount of the wager because the wager placed at the
racetrack and the wager placed at the off-track bet-
ting establishment are reflected on separate tickets,
despite being placed in the same parimutuel pool. No
section 3402(q) withholding is required because nei-
ther payment separately exceeds the $5,000 with-
holding threshold.

Example 16. C places a $200 Pick 6 bet for a
series of races at the racetrack on a particular day
and receives a single ticket for the bet. No wager
correctly picks all six races that day, so that portion
of the pool carries over to the following day. On the
following day, C places an additional $200 Pick 6
bet for that day's series of races and receives a new
ticket for that bet. C wins $100,000 on the second
day. Pursuant to the rule in paragraph (c)(1)(ii) of
this section, the bets are on two separate tickets, so
C's two Pick 6 bets are not aggregated for purposes
of determining the amount of the wager. Assuming
that the applicable rate is 25%, the racetrack must
deduct and withhold $24,950 (($100,000 - $200) x
25%) because the amount of the proceeds of $99,800
($100,000 - $200) is greater than $5,000, and is at
least 300 times as great as the amount wagered ($200
x 300 = $60,000). The racetrack also must report
C's winnings on Form W-2G pursuant to paragraph
(e) of this section and furnish a copy of the Form
W-2G to C.

(g) Applicability date. The rules in this
section apply to payments made with re-
spect to a winning event that occurs after
November 13, 2017. For rules that apply
to payments made with respect to a win-
ning event on or before that date, see
§ 31.3402(q)-1 as contained in 26 CFR
part 31, revised April 1, 2017.

Par. 3. Section 31.3406-0 is amended
by adding an entry for paragraph (h) to
§ 31.3406(g)-2 to read as follows:

§ 31.3406-0 Outline of the backup
withholding regulations.

* * * * *

§ 31.3406(g)-2 Exception for reportable
payments for which backup withholding
is otherwise required.

* * * * *

(h) Applicability date.
* * * * *

Par. 4. Section 31.3406(g)-2 is amended
by revising paragraphs (d)(2) and (3) and
adding paragraph (h) to read as follows:

§ 31.3406(g)-2 Exception for reportable
payment for which withholding is
otherwise required.

** * * * *

(d) * * *

(2) Definition of a reportable gambling
winning and determination of amount sub-
ject to backup withholding. For purposes of
withholding under section 3406, a report-
able gambling winning is any gambling
winning subject to information reporting un-
der section 6041. A gambling winning
(other than a winning from bingo, keno, or
slot machines) is a reportable gambling win-
ning only if the amount paid with respect to
the wager is $600 or more and if the pro-
ceeds are at least 300 times as large as the
amount wagered. See § 1.6041-10 of this
chapter to determine whether a winning
from bingo, keno, or slot machines is a
reportable gambling winning and thus sub-
ject to withholding under section 3406. The
amount of a reportable gambling winning is-

(i) The amount paid with respect to the
amount of the wager reduced, at the op-
tion of the payer; by

(ii) The amount of the wager.

(3) Special rules. For special rules for
determining the amount of the wager in a
wagering transaction with respect to horse
racing, dog racing, and jai alai, or amounts
paid with respect to identical wagers, see
§ 31.3402(q)-1(c).

* * * * *

(h) Applicability date. The rules apply
to reportable gambling winnings paid with
respect to a winning event that occurs

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after November 13, 2017. For rules that
apply to payments made with respect to a
winning event on or before that date, see
§ 31.3406(g)-2 as contained in 26 CFR
part 31, revised April 1, 2017.

Kirsten Wielobob,
Deputy Commissioner for
Services and Enforcement.

Approved: August 21, 2017.

David J. Kautter,
Assistant Secretary for Tax Policy.

(Filed by the Office of the Federal Register on September
25, 2017, 4:15 a.m., and published in the issue of the Federal
Register for September 27, 2017, 82 F.R. 44925)

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## Part III. Administrative, Procedural, and Miscellaneous

### Extension of Replacement Period for Livestock Sold on Account of Drought

#### Notice 2017-53

##### SECTION 1. PURPOSE

This notice provides guidance regard-
ing an extension of the replacement period
under § 1033(e) of the Internal Revenue
Code for livestock sold on account of
drought in specified counties.

##### SECTION 2. BACKGROUND

.01 Nonrecognition of Gain on Invol-
untary Conversion of Livestock. Section
1033(a) generally provides for nonrecog-
nition of gain when property is involun-
tarily converted and replaced with prop-
erty that is similar or related in service or
use. Section 1033(e)(1) provides that a
sale or exchange of livestock (other than
poultry) held by a taxpayer for draft, breed-
ing, or dairy purposes in excess of the num-
ber that would be sold following the taxpay-
er's usual business practices is treated as an
involuntary conversion if the livestock is
sold or exchanged solely on account of
drought, flood, or other weather-related con-
ditions.

.02 Replacement Period. Section
1033(a)(2)(A) generally provides that
gain from an involuntary conversion is
recognized only to the extent the amount
realized on the conversion exceeds the
cost of replacement property purchased
during the replacement period. If a sale or
exchange of livestock is treated as an in-
voluntary conversion under § 1033(e)(1)
and is solely on account of drought, flood,
or other weather-related conditions that
result in the area being designated as eli-
gible for assistance by the federal govern-
ment, § 1033(e)(2)(A) provides that the
replacement period ends four years after
the close of the first taxable year in which
any part of the gain from the conversion is
realized. Section 1033(e)(2)(B) provides
that the Secretary may extend this replace-
ment period on a regional basis for such
additional time as the Secretary deter-
mines appropriate if the weather-related
conditions that resulted in the area being

designated as eligible for assistance by the
federal government continue for more
than three years. Section 1033(e)(2) is ef-
fective for any taxable year with respect to
which the due date (without regard to ex-
tensions) for a taxpayer's return is after
December 31, 2002.

## SECTION 3. EXTENSION OF REPLACEMENT PERIOD UNDER § 1033(e)(2)(B)

Notice 2006-82, 2006-2 C.B. 529,
provides for extensions of the replacement
period under § 1033(e)(2)(B). If a sale or
exchange of livestock is treated as an invol-
untary conversion on account of drought
and the taxpayer's replacement period is
determined under § 1033(e)(2)(A), the re-
placement period will be extended under
§ 1033(e)(2)(B) and Notice 2006-82 until
the end of the taxpayer's first taxable year
ending after the first drought-free year for
the applicable region. For this purpose, the
first drought-free year for the applicable re-
gion is the first 12-month period that (1)
ends August 31; (2) ends in or after the last
year of the taxpayer's 4-year replacement
period determined under § 1033(e)(2)(A);
and (3) does not include any weekly period
for which exceptional, extreme, or severe
drought is reported for any location in the
applicable region. The applicable region is
the county that experienced the drought con-
ditions on account of which the livestock
was sold or exchanged and all counties that
are contiguous to that county.

A taxpayer may determine whether ex-
ceptional, extreme, or severe drought is
reported for any location in the applicable
region by reference to U.S. Drought Mon-
itor maps that are produced on a weekly
basis by the National Drought Mitigation
Center. U.S. Drought Monitor maps are
archived at http://droughtmonitor.unl.edu/
Maps/MapArchive.aspx.

In addition, Notice 2006-82 provides
that the Internal Revenue Service will
publish in September of each year a list
of counties, districts, cities, or parishes
(hereinafter "counties") for which excep-
tional, extreme, or severe drought was re-
ported during the preceding 12 months.
Taxpayers may use this list instead of
U.S. Drought Monitor maps to determine
whether exceptional, extreme, or severe

drought has been reported for any location
in the applicable region.

The Appendix to this notice contains
the list of counties for which exceptional,
extreme, or severe drought was reported
during the 12-month period ending Au-
gust 31, 2017. Under Notice 2006-82, the
12-month period ending on August 31,
2017, is not a drought-free year for an
applicable region that includes any county
on this list. Accordingly, for a taxpayer
who qualified for a four-year replacement
period for livestock sold or exchanged on
account of drought and whose replace-
ment period is scheduled to expire at the
end of 2017 (or, in the case of a fiscal year
taxpayer, at the end of the taxable year
that includes August 31, 2017), the re-
placement period will be extended under
§ 1033(e)(2) and Notice 2006-82 if the
applicable region includes any county on
this list. This extension will continue until
the end of the taxpayer's first taxable year
ending after a drought-free year for the
applicable region.

## SECTION 4. DRAFTING INFORMATION

The principal author of this notice is
Innessa Glazman of the Office of Asso-
ciate Chief Counsel (Income Tax & Ac-
counting). For further information re-
garding this notice, please contact Ms.
Glazman at (202) 317-7006 (not a toll-
free number).

### APPENDIX

#### Alabama

Counties of Autauga, Baldwin, Barbour,
Bibb, Blount, Bullock, Butler, Calhoun,
Chambers, Cherokee, Chilton, Choctaw,
Clarke, Clay, Cleburne, Coffee, Colbert,
Conecuh, Coosa, Covington, Crenshaw,
Cullman, Dale, Dallas, DeKalb, Elmore, Es-
cambia, Etowah, Fayette, Franklin, Geneva,
Greene, Hale, Henry, Houston, Jackson, Jef-
ferson, Lamar, Lauderdale, Lawrence, Lee,
Limestone, Lowndes, Macon, Madison,
Marengo, Marion, Marshall, Mobile, Mon-
roe, Montgomery, Morgan, Perry, Pickens,
Pike, Randolph, Russell, Saint Clair,
Shelby, Sumter, Talladega, Tallapoosa,

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Tuscaloosa, Walker, Washington, Wilcox,
Winston.

##### Arizona

Counties of Cochise, La Paz, Pima,
Santa Cruz, Yuma.

##### Arkansas

Counties of Arkansas, Ashley, Baxter,
Benton, Boone, Bradley, Calhoun, Car-
roll, Chicot, Clark, Cleburne, Cleveland,
Conway, Craighead, Crawford, Crit-
tenden, Cross, Dallas, Desha, Drew,
Faulkner, Franklin, Fulton, Garland,
Grant, Greene, Hempstead, Hot Spring,
Howard, Independence, Izard, Jackson,
Jefferson, Johnson, Lafayette, Lawrence,
Lee, Lincoln, Little River, Logan,
Lonoke, Madison, Marion, Miller, Missis-
sippi, Monroe, Montgomery, Nevada,
Newton, Ouachita, Perry, Phillips, Pike,
Poinsett, Polk, Pope, Prairie, Pulaski,
Saint Francis, Saline, Scott, Searcy, Se-
bastian, Sevier, Sharp, Stone, Union, Van
Buren, Washington, White, Woodruff,
Yell.

#### California

Counties of Alameda, Alpine, Amador,
Calaveras, Colusa, Contra Costa, El Do-
rado, Fresno, Imperial, Inyo, Kern, Kings,
Lake, Lassen, Los Angeles, Madera,
Mariposa, Merced, Mono, Monterey, Ne-
vada, Orange, Placer, Plumas, Riverside,
Sacramento, San Benito, San Bernardino,
San Diego, San Joaquin, San Luis Obispo,
Santa Barbara, Santa Clara, Santa Cruz,
Sierra, Solano, Stanislaus, Tulare, Tuol-
umne, Ventura, Yolo.

#### Colorado

Counties of Adams, Arapahoe, Baca,
Boulder, Broomfield, Cheyenne, Denver,
Douglas, Elbert, Jefferson, Kiowa, La-
rimer, Lincoln, Prowers, Weld.

#### Connecticut

Counties of Fairfield, Hartford, Litch-
field, Middlesex, New Haven, New Lon-
don, Tolland, Windham.

District of Columbia

District of Columbia.

Florida

Counties of Alachua, Baker, Bay, Bre-
vard, Calhoun, Charlotte, Citrus, Collier,
Columbia, DeSoto, Dixie, Duval, Escam-
bia, Franklin, Gadsden, Glades, Gulf,
Hamilton, Hardee, Hendry, Hernando,
Highlands, Hillsborough, Holmes, Indian
River, Jackson, Jefferson, Lake, Lee,
Leon, Levy, Liberty, Madison, Manatee,
Marion, Martin, Monroe, Nassau, Oka-
loosa, Okeechobee, Orange, Osceola,
Palm Beach, Pasco, Pinellas, Polk, Saint
Lucie, Santa Rosa, Sarasota, Seminole,
Sumter, Volusia, Wakulla, Walton, Wash-
ington.

#### Georgia

Counties of Appling, Atkinson, Bacon,
Baker, Baldwin, Banks, Barrow, Bartow,
Ben Hill, Berrien, Bibb, Bleckley, Brant-
ley, Brooks, Burke, Butts, Calhoun, Cam-
den, Carroll, Catoosa, Charlton, Chatta-
hoochee, Chattooga, Cherokee, Clarke,
Clay, Clayton, Clinch, Cobb, Coffee,
Colquitt, Columbia, Cook, Coweta, Craw-
ford, Crisp, Dade, Dawson, Decatur,
DeKalb, Dodge, Dooly, Dougherty,
Douglas, Early, Echols, Elbert, Emanuel,
Fannin, Fayette, Floyd, Forsyth, Franklin,
Fulton, Gilmer, Glascock, Glynn, Gordon,
Grady, Greene, Gwinnett, Habersham,
Hall, Hancock, Haralson, Harris, Hart,
Heard, Henry, Houston, Irwin, Jackson,
Jasper, Jeff Davis, Jefferson, Johnson,
Jones, Lamar, Lanier, Laurens, Lee, Lin-
coln, Lowndes, Lumpkin, Macon, Madison,
Marion, McDuffie, McIntosh, Meriwether,
Miller, Mitchell, Monroe, Montgomery,
Morgan, Murray, Muscogee, Newton,
Oconee, Oglethorpe, Paulding, Peach, Pick-
ens, Pierce, Pike, Polk, Pulaski, Putnam,
Quitman, Rabun, Randolph, Richmond,
Rockdale, Schley, Seminole, Spalding, Ste-
phens, Stewart, Sumter, Talbot, Taliaferro,
Taylor, Telfair, Terrell, Thomas, Tift,
Towns, Treutlen, Troup, Turner, Twiggs,
Union, Upson, Walker, Walton, Ware,
Warren, Washington, Wayne, Webster,
Wheeler, White, Whitfield, Wilcox, Wilkes,
Wilkinson, Worth.

Hawaii

Counties of Hawaii, Kauai, Maui.

Idaho

Counties of Bonner, Boundary, Clear-
water, Idaho, Shoshone.

Illinois

Counties of Alexander, Hardin, Mas-
sac, Pope, Pulaski.

Indiana

Counties of Clark, Floyd, Harrison,
Jefferson, Scott, Switzerland, Washing-
ton.

### Iowa

Counties of Adair, Appanoose, Buena
Vista, Calhoun, Cherokee, Clarke, Davis,
Decatur, Jefferson, Keokuk, Lucas, Mad-
ison, Mahaska, Marion, Monroe, O'Brien,
Plymouth, Pocahontas, Ringgold, Sac,
Union, Van Buren, Wapello, Warren,
Wayne, Woodbury.

### Kansas

Counties of Clark, Comanche, Finney,
Ford, Grant, Gray, Hamilton, Haskell,
Hodgeman, Kearny, Lane, Meade, Mor-
ton, Ness, Scott, Seward, Stanton, Ste-
vens, Wichita.

### Kentucky

Counties of Adair, Allen, Anderson,
Ballard, Barren, Bath, Bell, Boone, Bour-
bon, Boyle, Bracken, Breathitt, Breckin-
ridge, Bullitt, Butler, Caldwell, Calloway,
Carlisle, Carroll, Carter, Casey, Christian,
Clark, Clay, Clinton, Crittenden, Cumber-
land, Daviess, Edmonson, Elliott, Estill,
Fayette, Fleming, Floyd, Franklin, Fulton,
Gallatin, Garrard, Grant, Graves, Gray-
son, Green, Greenup, Hancock, Hardin,
Harlan, Harrison, Hart, Henry, Hickman,
Hopkins, Jackson, Jefferson, Jessamine,
Johnson, Knott, Knox, Larue, Laurel,
Lawrence, Lee, Leslie, Letcher, Lewis,
Lincoln, Livingston, Logan, Lyon, Madi-
son, Magoffin, Marion, Marshall, Martin,
Mason, McCracken, McCreary, McLean,

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Meade, Menifee, Mercer, Metcalfe, Mon-
roe, Montgomery, Morgan, Muhlenberg,
Nelson, Nicholas, Ohio, Oldham, Owen,
Owsley, Pendleton, Perry, Pike, Powell,
Pulaski, Robertson, Rockcastle, Rowan,
Russell, Scott, Shelby, Simpson, Spencer,
Taylor, Todd, Trigg, Trimble, Union,
Warren, Washington, Wayne, Webster,
Whitley, Wolfe, Woodford.

#### Louisiana

Parishes of Acadia, Allen, Ascension,
Avoyelles, Beauregard, Bienville, Boss-
ier, Caddo, Calcasieu, Caldwell, Cam-
eron, Catahoula, Claiborne, Concordia,
De Soto, East Baton Rouge, East Carroll,
East Feliciana, Evangeline, Franklin,
Grant, Iberia, Iberville, Jackson, Jefferson
Davis, Jefferson, La Salle, Lafayette, Lin-
coln, Livingston, Madison, Morehouse,
Natchitoches, Orleans, Ouachita, Plaqu-
emines, Pointe Coupee, Rapides, Red
River, Richland, Sabine, Saint Bernard,
Saint Charles, Saint Helena, Saint James,
Saint John the Baptist, Saint Landry, Saint
Martin, Saint Tammany, Tangipahoa,
Tensas, Union, Vermilion, Vernon, Wash-
ington, Webster, West Baton Rouge, West
Carroll, West Feliciana, Winn Parish.

### Maine

Counties of Androscoggin, Aroostook,
Cumberland, Franklin, Hancock, Kenne-
bec, Knox, Lincoln, Oxford, Penobscot,
Piscataquis, Sagadahoc, Somerset, Waldo,
Washington, York.

### Maryland

Counties of Anne Arundel, Howard,
Montgomery, Prince George's.

Massachusetts

Counties of Barnstable, Berkshire,
Bristol, Dukes, Essex, Franklin, Hamp-
den, Hampshire, Middlesex, Norfolk,
Plymouth, Suffolk, Worcester.

### Mississippi

Counties of Adams, Alcorn, Amite, At-
tala, Benton, Bolivar, Calhoun, Carroll,
Chickasaw, Choctaw, Claiborne, Clarke,
Clay, Coahoma, Copiah, Covington, DeSoto,

Forrest, Franklin, George, Greene, Gre-
nada, Hancock, Harrison, Hinds, Holmes,
Humphreys, Issaquena, Itawamba, Jack-
son, Jasper, Jefferson, Jefferson Davis,
Jones, Kemper, Lafayette, Lamar, Lauder-
dale, Lawrence, Leake, Lee, Leflore, Lin-
coln, Lowndes, Madison, Marion, Mar-
shall, Monroe, Montgomery, Neshoba,
Newton, Noxubee, Oktibbeha, Panola,
Pearl River, Perry, Pike, Pontotoc, Pren-
tiss, Quitman, Rankin, Scott, Sharkey,
Simpson, Smith, Stone, Sunflower, Tal-
lahatchie, Tate, Tippah, Tishomingo,
Tunica, Union, Walthall, Warren,
Washington, Wayne, Webster, Wilkin-
son, Winston, Yalobusha, Yazoo.

### Missouri

Counties of Audrain, Benton, Boone,
Butler, Callaway, Carroll, Chariton, Cole,
Cooper, Dunklin, Howard, Johnson,
Lafayette, Livingston, Macon, Missis-
sippi, Moniteau, Monroe, Morgan, New
Madrid, Pemiscot, Pettis, Randolph, Ray,
Saline, Scott, Stoddard, Wayne.

### Montana

Counties of Big Horn, Blaine, Broadwa-
ter, Carbon, Carter, Cascade, Chouteau,
Custer, Daniels, Dawson, Deer Lodge, Fal-
lon, Fergus, Flathead, Gallatin, Garfield,
Glacier, Golden Valley, Granite, Hill, Jef-
ferson, Judith Basin, Lake, Lewis and Clark,
Liberty, Lincoln, McCone, Meagher, Mineral,
Missoula, Musselshell, Park, Petroleum,
Phillips, Pondera, Powder River, Powell,
Prairie, Ravalli, Richland, Roosevelt, Rose-
bud, Sanders, Sheridan, Stillwater, Sweet
Grass, Teton, Toole, Treasure, Valley,
Wheatland, Wibaux, Yellowstone.

### Nebraska

Counties of Adams, Brown, Cedar,
Cherry, Dakota, Dixon, Kearney, Keya
Paha, Knox, Pierce, Rock, Wayne.

### Nevada

City of Carson City. Counties of Churchill,
Douglas, Esmeralda, Humboldt, Lander,
Lyon, Mineral, Nye, Pershing, Storey,
Washoe.

New Hampshire

Counties of Belknap, Carroll, Cheshire,
Grafton, Hillsborough, Merrimack, Rock-
ingham, Strafford, Sullivan.

New Jersey

Counties of Bergen, Essex, Hudson,
Hunterdon, Mercer, Middlesex, Morris,
Passaic, Somerset, Sussex, Union, Warren.

New York

Counties of Allegany, Bronx, Cattarau-
gus, Cayuga, Chautauqua, Chemung, Clin-
ton, Columbia, Cortland, Dutchess, Erie,
Essex, Franklin, Genesee, Greene, Hamil-
ton, Jefferson, Lewis, Livingston, Monroe,
Nassau, New York, Niagara, Onondaga,
Ontario, Orange, Orleans, Oswego, Putnam,
Queens, Richmond, Rockland, Saratoga,
Schuyler, Seneca, Steuben, Suffolk, Sulli-
van, Tioga, Tompkins, Ulster, Warren,
Washington, Wayne, Westchester, Wyo-
ming, Yates.

### North Carolina

Counties of Alexander, Ashe, Avery,
Buncombe, Burke, Caldwell, Catawba,
Cherokee, Clay, Cleveland, Gaston, Gra-
ham, Haywood, Henderson, Jackson, Lin-
coln, Macon, Madison, McDowell, Mitch-
ell, Polk, Rutherford, Swain, Transylvania,
Watauga, Wilkes, Yancey.

#### North Dakota

Counties of Adams, Barnes, Benson,
Billings, Bottineau, Bowman, Burke, Bur-
leigh, Dickey, Divide, Dunn, Emmons,
Golden Valley, Grant, Hettinger, Kidder,
LaMoure, Logan, McHenry, McIntosh,
Mckenzie, McLean, Mercer, Morton,
Mountrail, Oliver, Pierce, Ransom, Ren-
ville, Sargent, Sheridan, Sioux, Slope,
Stark, Stutsman, Ward, Wells, Williams.

#### Ohio

Counties of Adams, Brown, Scioto.

Oklahoma

Counties of Adair, Alfalfa, Atoka, Bea-
ver, Beckham, Blaine, Bryan, Canadian,

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Cherokee, Choctaw, Cimarron, Cleve-
land, Coal, Craig, Creek, Delaware,
Dewey, Ellis, Garfield, Garvin, Grady,
Grant, Greer, Harmon, Harper, Haskell,
Hughes, Johnston, Kay, Kingfisher, La-
timer, Le Flore, Lincoln, Logan, Major,
Mayes, McClain, McCurtain, McIntosh,
Murray, Muskogee, Noble, Nowata, Okfus-
kee, Oklahoma, Okmulgee, Osage, Pawnee,
Payne, Pittsburg, Pontotoc, Pottawatomie,
Pushmataha, Roger Mills, Rogers, Semi-
nole, Sequoyah, Texas, Tulsa, Wagoner,
Washington, Woods, Woodward.

Oregon

Counties of Baker, Grant, Harney, Mal-
heur, Morrow, Umatilla, Union, Wallowa.

### Pennsylvania

Counties of Berks, Bucks, Cameron,
Carbon, Centre, Clearfield, Clinton, Elk,
Erie, Lehigh, Lycoming, Monroe, Montgom-
ery, Northampton, Pike, Potter, Tioga.

Rhode Island

Counties of Bristol, Kent, Newport,
Providence, Washington.

South Carolina

Counties of Abbeville, Anderson,
Cherokee, Chester, Edgefield, Fairfield,
Greenville, Greenwood, Laurens, McCor-
mick, Newberry, Oconee, Pickens, Sa-
luda, Spartanburg, Union, York.

#### South Dakota

Counties of Aurora, Beadle, Bennett,
Brown, Brule, Buffalo, Butte, Campbell,
Charles Mix, Clay, Corson, Custer, Davi-
son, Dewey, Douglas, Edmunds, Fall River,
Faulk, Gregory, Haakon, Hand, Hanson,
Harding, Hughes, Hyde, Jackson, Jerauld,
Jones, Lawrence, Lyman, McPherson, Meade,
Mellette, Pennington, Perkins, Potter, San-
born, Shannon, Spink, Stanley, Sully, Todd,
Tripp, Union, Walworth, Yankton, Ziebach.

### Tennessee

Counties of Anderson, Bedford, Ben-
ton, Bledsoe, Blount, Bradley, Campbell,
Cannon, Carroll, Carter, Cheatham, Ches-

ter, Claiborne, Clay, Cocke, Coffee,
Crockett, Cumberland, Davidson, Deca-
tur, DeKalb, Dickson, Dyer, Fayette, Fen-
tress, Franklin, Gibson, Giles, Grainger,
Greene, Grundy, Hamblen, Hamilton,
Hancock, Hardeman, Hardin, Hawkins,
Haywood, Henderson, Henry, Hickman,
Houston, Humphreys, Jackson, Jefferson,
Johnson, Knox, Lake, Lauderdale, Law-
rence, Lewis, Lincoln, Loudon, Macon,
Madison, Marion, Marshall, Maury, Mc-
Minn, McNairy, Meigs, Monroe, Mont-
gomery, Moore, Morgan, Obion, Overton,
Perry, Pickett, Polk, Putnam, Rhea, Roane,
Robertson, Rutherford, Scott, Sequatchie,
Sevier, Shelby, Smith, Stewart, Sullivan,
Sumner, Tipton, Trousdale, Unicoi, Union,
Van Buren, Warren, Washington, Wayne,
Weakley, White, Williamson, Wilson.

### Texas

Counties of Anderson, Angelina, Archer,
Bastrop, Baylor, Bexar, Blanco, Bowie,
Brooks, Caldwell, Cameron, Camp, Carson,
Cass, Chambers, Cherokee, Childress, Col-
lingsworth, Comal, Cottle, Delta, Dickens,
Fannin, Foard, Franklin, Freestone, Gray-
son, Gregg, Hansford, Hardeman, Hardin,
Harris, Harrison, Haskell, Hays, Hemphill,
Henderson, Hidalgo, Hill, Hopkins, Hunt,
Hutchinson, Jasper, Kendall, Kenedy, King,
Kleberg, Knox, Lamar, Liberty, Limestone,
Lipscomb, Marion, McLennan, Morris,
Motley, Nacogdoches, Navarro, Newton,
Nueces, Ochiltree, Orange, Panola, Polk,
Rains, Red River, Roberts, Rusk, Sabine,
San Augustine, Shackelford, Shelby, Sher-
man, Smith, Starr, Stephens, Throckmorton,
Titus, Tyler, Upshur, Van Zandt, Wheeler,
Wichita, Willacy, Wood, Young.

Utah

Counties of Carbon, Emery, Juab, San-
pete, Utah, Wasatch.

Vermont

Counties of Addison, Chittenden,
Franklin, Grand Isle, Orange, Rutland,
Washington, Windsor.

#### Virginia

Cities of Alexandria, Fairfax, Falls
Church, Manassas, Manassas Park, Norton.

Counties of Arlington, Buchanan, Cul-
peper, Dickenson, Fairfax, Fauquier, Lee,
Loudoun, Louisa, Madison, Orange, Prince
William, Russell, Scott, Spotsylvania, Staf-
ford, Wise.

Wyoming

Counties of Big Horn, Campbell, Crook,
Niobrara, Park, Sheridan, Teton, Weston.

##### 2017-2018 Special Per Diem Rates

Notice 2017-54

## SECTION 1. PURPOSE

This annual notice provides the 2017-
2018 special per diem rates for taxpayers
to use in substantiating the amount of or-
dinary and necessary business expenses
incurred while traveling away from home,
specifically (1) the special transportation
industry meal and incidental expenses
(M&IE) rates, (2) the rate for the incidental
expenses only deduction, and (3) the rates
and list of high-cost localities for purposes
of the high-low substantiation method.

## SECTION 2. BACKGROUND

Rev. Proc. 2011-47, 2011-42 I.R.B.
520, provides rules for using a per diem rate
to substantiate, under § 274(d) of the Inter-
nal Revenue Code and § 1.274-5 of the
Income Tax Regulations, the amount of or-
dinary and necessary business expenses
paid or incurred while traveling away from
home. Taxpayers using the rates and list of
high-cost localities provided in this notice
must comply with Rev. Proc. 2011-47. No-
tice 2016-58, 2016-41 I.R.B. 438, pro-
vides the rates and list of high-cost localities
for the period October 1, 2016, to Septem-
ber 30, 2017.

Section 3.02(3) of Rev. Proc. 2011-47
provides that the term "incidental ex-
penses" has the same meaning as in the
Federal Travel Regulations, 41 C.F.R.
300-3.1, and that future changes to the
definition of incidental expenses in the
Federal Travel Regulations would be an-
nounced in the annual per diem notice.
Subsequent to the publication of Rev.
Proc. 2011-47, the General Services Ad-
ministration published final regulations re-

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vising the definition of incidental expenses
under the Federal Travel Regulations to in-
clude only fees and tips given to porters,
baggage carriers, hotel staff, and staff on
ships. Transportation between places of
lodging or business and places where meals
are taken, and the mailing cost of filing
travel vouchers and paying employer-
sponsored charge card billings, are no lon-
ger included in incidental expenses. Accord-
ingly, taxpayers using the per diem rates
may separately deduct or be reimbursed for
transportation and mailing expenses.

## SECTION 3. SPECIAL M&IE RATES FOR TRANSPORTATION INDUSTRY

The special M&IE rates for taxpayers
in the transportation industry are $63 for
any locality of travel in the continental

United States (CONUS) and $68 for any
locality of travel outside the continental
United States (OCONUS). See section
4.04 of Rev. Proc. 2011-47.

## SECTION 4. RATE FOR INCIDENTAL EXPENSES ONLY DEDUCTION

The rate for any CONUS or OCONUS
locality of travel for the incidental ex-
penses only deduction is $5 per day. See
section 4.05 of Rev. Proc. 2011-47.

### SECTION 5. HIGH-LOW SUBSTANTIATION METHOD

1\. Annual high-low rates. For purposes
of the high-low substantiation method, the
per diem rates in lieu of the rates de-
scribed in Notice 2016-58 (the per diem
substantiation method) are $284 for travel

to any high-cost locality and $191 for
travel to any other locality within CO-
NUS. The amount of the $284 high rate
and $191 low rate that is treated as paid
for meals for purposes of § 274(n) is $68
for travel to any high-cost locality and
$57 for travel to any other locality within
CONUS. See section 5.02 of Rev. Proc.
2011-47. The per diem rates in lieu of the
rates described in Notice 2016-58 (the
meal and incidental expenses only sub-
stantiation method) are $68 for travel to
any high-cost locality and $57 for travel to
any other locality within CONUS.

2\. High-cost localities. The following
localities have a federal per diem rate of
$238 or more, and are high-cost localities
for all of the calendar year or the portion
of the calendar year specified in parenthe-
ses under the key city name.

Key city

County or other defined location

California

Mill Valley/San Rafael/Novato (October 1-October 31 and June 1-September 30)

Marin

Monterey (July 1-August 31)

Monterey

Napa (October 1-October 31 and May 1-September 30)

Napa

Oakland

Alameda

(October 1-October 31 and January 1-September 30)

San Francisco

San Francisco

San Mateo/Foster City/Belmont

San Mateo

Santa Barbara

Santa Barbara

Santa Monica

City limits of Santa Monica

Sunnyvale/Palo Alto/San Jose

Santa Clara

Colorado

Aspen

Pitkin

Denver/Aurora

Denver, Adams, Arapahoe, and Jefferson

Grand Lake (December 1-March 31)

Grand

Silverthorne/Breckenridge (December 1-March 31)

Summit

Steamboat Springs

Routt

(December 1-March 31)

Telluride

San Miguel

Vail

Eagle

(December 1-March 31 and July 1-August 31)

Delaware

Lewes (July 1-August 31)

Sussex

District of Columbia

Washington D.C. (also the cities of Alexandria, Falls Church, and Fairfax, and the counties of Arlington and Fairfax, in Virginia; and the counties of Montgomery and Prince George's in Maryland) (See also Maryland and Virginia)

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Key city

County or other defined location

Florida

Boca Raton/Delray Beach/Jupiter (January 1-April 30)

Palm Beach and Hendry

Fort Lauderdale

Broward

(January 1-April 30)

Fort Myers

Lee

(February 1-March 31)

Fort Walton Beach/De Funiak Springs (June 1-July 31)

Okaloosa and Walton

Key West

Monroe

Miami

Miami-Dade

(December 1-March 31)

Naples

Collier

(December 1-April 30)

Illinois

Chicago (October 1-November 30 and April 1-September 30)

Cook and Lake

Maine

Bar Harbor

Hancock

(October 1-October 31 and July 1-September 30)

Maryland

Ocean City

Worcester

(July 1-August 31)

Washington, DC Metro Area

Montgomery and Prince George's

Massachusetts

Boston/Cambridge

Suffolk, city of Cambridge

Falmouth

City limits of Falmouth

(July 1-August 31)

Hyannis

Barnstable less the city of Falmouth

(July 1-August 31)

Martha's Vineyard (June 1-September 30)

Dukes

Nantucket

Nantucket

(June 1-September 30)

Michigan

Petoskey

Emmet

(July 1-August 31)

Traverse City/Leland (July 1-August 31)

Grand Traverse and Leelanau

New York

Lake Placid

Essex

(July 1-August 31)

New York City

Bronx, Kings, New York, Queens, and Richmond Saratoga and Schenectady

Saratoga Springs/Schenectady (July 1-August 31)

Oregon

Portland

Multnomah

(October 1-October 31 and March 1-September 30)

Seaside (July 1-August 31)

Clatsop

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Key city

County or other defined location

Pennsylvania

Hershey (June 1-August 31)

Hershey

Philadelphia (October 1-November 30 and April 1-September 30) Rhode Island

Philadelphia

Jamestown/Middletown/Newport (October 1-October 31 and June 1-September 30)

Newport

South Carolina

Charleston (October 1-November 30 and March 1-September 30)

Charleston, Berkeley and Dorchester

Utah

Park City

Summit

(December 1-March 31)

Virginia

Virginia Beach (June 1-August 31)

City of Virginia Beach

Wallops Island (July 1-August 31)

Accomack

Washington, DC Metro Area

Cities of Alexandria, Fairfax, and Falls Church; counties of Arlington and Fairfax

Washington

Seattle

King

Vancouver (October 1-October 31 and March 1-September 30) Wyoming

Clark, Cowlitz, and Skamania

Jackson/Pinedale (June 1-September 30)

Teton and Sublette

3\. Changes in high-cost localities. The
list of high-cost localities in this notice
differs from the list of high-cost localities
in section 5 of Notice 2016-58.

a. The following localities have been
added to the list of high-cost localities:
Oakland, California; Lewes, Dela-
ware; Fort Myers, Florida; Hyannis,
Massachusetts; Petoskey, Michigan;
Portland, Oregon; Vancouver, Wash-
ington.

b. The following localities have changed
the portion of the year in which they
are high-cost localities: Aspen, Colo-
rado; Denver/Aurora, Colorado; Tel-
luride, Colorado; Vail, Colorado; Bar
Harbor, Maine; Ocean City, Mary-
land; Nantucket, Massachusetts; Phil-
adelphia, Pennsylvania; Jamestown/
Middletown/Newport, Rhode Island;
Jackson/Pinedale, Wyoming.

c. The following localities have been re-
moved from the list of high-cost local-
ities: Sedona, Arizona; Los Angeles,

California; Vero Beach, Florida; Kill
Devil, North Carolina.

## SECTION 6. EFFECTIVE DATE

This notice is effective for per diem
allowances for lodging, meal and inciden-
tal expenses, or for meal and incidental
expenses only, that are paid to any em-
ployee on or after October 1, 2017, for
travel away from home on or after Octo-
ber 1, 2017. For purposes of computing
the amount allowable as a deduction for
travel away from home, this notice is ef-
fective for meal and incidental expenses
or for incidental expenses only paid or
incurred on or after October 1, 2017. See
sections 4.06 and 5.04 of Rev. Proc.
2011-47 for transition rules for the last 3
months of calendar year 2017.

## SECTION 7. EFFECT ON OTHER DOCUMENTS

Notice 2016-58 is superseded.

## DRAFTING INFORMATION

The principal author of this notice is
Elizabeth Binder of the Office of Asso-
ciate Chief Counsel (Income Tax & Ac-
counting). For further information re-
garding this notice contact Ms. Binder at
(202) 317-7005 (not a toll-free number).

Treatment Under Section
956(c) of Certain Property
Temporarily Stored in the
United States Following
Hurricane Irma or
Hurricane Maria

Notice 2017-55

## SECTION 1. OVERVIEW

Section 956(c) of the Internal Reve-
nue Code defines United States property
generally to include tangible property

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located in the United States. In response
to the damage caused by Hurricane Irma
and Hurricane Maria, including in the
Commonwealth of Puerto Rico and the
U.S. Virgin Islands, certain controlled
foreign corporations (within the mean-
ing of section 957(a)) ("CFCs") may
need to transport property described in
section 1221(a)(1) ("section 1221(a)(1)
property") located in affected areas to
the United States (as defined in section
7701(a)(9)) for safekeeping. This notice
provides relief for certain such section
1221(a)(1) property that would other-
wise constitute United States property.

## SECTION 2. TREATMENT OF CERTAIN SECTION 1221(a)(1) PROPERTY UNDER SECTION 956(c)

The damage caused by Hurricane
Irma and Hurricane Maria has imperiled
section 1221(a)(1) property located in
affected areas. To facilitate necessary
safekeeping of such section 1221(a)(1)
property, this notice announces that, for
purposes of section 956, a CFC will not
be treated as holding United States
property as a result of holding section
1221(a)(1) property located in the
United States, if such section 1221(a)(1)
property was located, on or before Sep-
tember 5, 2017, in an area identified by
the Federal Emergency Management
Agency ("FEMA") as subject to a major
disaster or emergency declaration, and
such section 1221(a)(1) property was
transported to the United States for tem-
porary storage for safekeeping in antic-
ipation of, or as a result of, Hurricane
Irma. Furthermore, for purposes of sec-
tion 956, a CFC will not be treated as
holding United States property as a re-
sult of holding section 1221(a)(1) prop-
erty located in the United States, if such
section 1221(a)(1) property was located,
on or before September 17, 2017, in an
area identified by FEMA as subject to a
major disaster or emergency declara-
tion, and such section 1221(a)(1) prop-
erty was transported to the United States
for temporary storage for safekeeping in
anticipation of, or as a result of, Hurri-
cane Maria.

## SECTION 3. RELIANCE ON NOTICE

This notice shall only apply to taxable
year quarters of a CFC ending on or after
September 5, 2017, and on or before Jan-
uary 31, 2018.

## SECTION 4. DRAFTING INFORMATION

The principal author of this notice is
Rose E. Jenkins of the Office of Associate
Chief Counsel (International). For further
information regarding this notice, contact
Ms. Jenkins at (202) 317-6934 (not a toll-
free number).

## Foreign Currency Guidance under Section 987 Notice 2017-57

### I. PURPOSE

This Notice announces that the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) intend to amend the regulations un-
der section 987 to defer the applicability
date of the final regulations under section
987, as well as certain provisions of the
temporary regulations under section 987,
by one year.

The final regulations under section 987
were identified in Notice 2017-38, 2017-30
I.R.B. 147 (July 24, 2017), as significant tax
regulations requiring additional review pur-
suant to Executive Order 13789. As part of
that review, the Treasury Department and
the IRS are considering changes to the final
regulations that would allow taxpayers to
elect to apply alternative rules for transition-
ing to the final regulations and alternative
rules for determining section 987 gain or
loss.

## II. BACKGROUND

### A. FINAL AND TEMPORARY REGULATIONS

On January 9, 2017, the Treasury De-
partment and the IRS published Treasury
Decision 9794, which contains final regu-
lations relating to the determination of the
taxable income or loss of a taxpayer with
respect to a qualified business unit (QBU)

subject to section 987 (a section 987
QBU); the timing, amount, character, and
source of any section 987 gain or loss; and
other regulations (the final regulations).
On that same date, the Treasury Depart-
ment and the IRS also published Treasury
Decision 9795, which contains temporary
regulations under section 987, including
the following: rules relating to the recog-
nition and deferral of foreign currency
gain or loss under section 987 in connec-
tion with certain QBU terminations and
certain other transactions; an annual
deemed termination election for a section
987 QBU; an elective method, available to
taxpayers that make the annual deemed
termination election, for translating all
items of income or loss with respect to a
section 987 QBU at the yearly average
exchange rate; rules regarding the treat-
ment of section 988 transactions of a sec-
tion 987 QBU; rules regarding QBUs with
the U.S. dollar as their functional cur-
rency; rules regarding combinations and
separations of section 987 QBUs; rules
regarding the translation of income used
to pay creditable foreign income taxes;
and rules regarding the allocation of assets
and liabilities of aggregate partnerships
for purposes of section 987 (the temporary
section 987 regulations). Treasury Deci-
sion 9795 also contains temporary regula-
tions under section 988 requiring the de-
ferral of certain section 988 loss that
arises with respect to related-party loans
(the temporary section 988 regulations,
and with the temporary section 987 regu-
lations, the temporary regulations).

## B. APPLICABILITY DATES

The final and temporary regulations
were effective on December 7, 2016.
Dates of applicability for §§ 1.987-1
through 1.987-10 are provided in
§ 1.987-11. Specifically, § 1.987-11(a)
states that, except as otherwise provided
in § 1.987-11, §§ 1.987-1 through
1.987-10 apply to taxable years begin-
ning on or after one year after the first
day of the first taxable year following
December 7, 2016. Corresponding pro-
visions under sections 861, 985, 988, and
989 also apply to taxable years beginning on
or after one year after the first day of the first
taxable year following December 7, 2016.
See §§ 1.861-9T(g)(2)(vi); 1.985-5(g);

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1.988-1(i); 1.988-4(b)(2)(ii); 1.989(a)-
1(b)(4); 1.989(a)-1(d)(4).

Similarly, §§ 1.987-1T (other than
§§ 1.987-1T(g)(2)(i)(B) and (g)(3)(i)(H))
through 1.987-4T, 1.987-6T, 1.987-7T,
and 1.988-1T (the related temporary reg-
ulations) apply to taxable years beginning
on or after one year after the first day of
the first taxable year following December
7, 2016. See §§ 1.987-1T(h); 1.987-
2T(e); 1.987-3T(f); 1.987-4T(h); 1.987-
6T(d); 1.987-7T(d); 1.988-1T(j). All
other provisions in the temporary regula-
tions, including the provisions relating to
the deferral of section 987 gain or loss and
the temporary section 988 regulations, are
subject to different applicability dates. See
§§ 1.987-1T(h) (concerning §§ 1.987-
1T(g)(2)(i)(B) and (g)(3)(i)(H)); 1.987-
8T(g); 1.987-12T(j); 1.988-2T(j).

A taxpayer may apply the final regula-
tions and the related temporary regula-
tions to taxable years beginning after De-
cember 7, 2016, provided the taxpayer
consistently applies those regulations to
such taxable years with respect to all sec-
tion 987 QBUs directly or indirectly
owned by the taxpayer on the transition
date as well as all section 987 QBUs di-
rectly or indirectly owned on the transi-
tion date by members that file a consoli-
dated return with the taxpayer or by any
controlled foreign corporation, as defined
in section 957, in which a member owns
more than 50 percent of the voting power
or stock value, as determined under sec-
tion 958(a). Sections 1.987-11(b); 1.987-
1T(h); 1.987-2T(e); 1.987-3T(f); 1.987-
4T(h); 1.987-6T(d); 1.987-7T(d). The
transition date is the first day of the first
taxable year to which §§ 1.987-1 through
1.987-10 are applicable with respect to a
taxpayer under § 1.987-11. Section
1.987-11(c).

## III. AMENDED APPLICABILITY

DATE

The Treasury Department and the IRS
intend to amend §§ 1.861-9T, 1.985-5,
1.987-11, 1.987-1T through 1.987-4T,
1.987-6T, 1.987-7T, 1.988-1, 1.988-1T,
1.988-4, and 1.989(a)-1 to provide that
the final regulations and the related tem-
porary regulations will apply to taxable

years beginning on or after two years after
the first date of the first taxable year fol-
lowing December 7, 2016. Thus, for a
taxpayer whose first taxable year after De-
cember 7, 2016, begins on January 1,
2017, the final regulations and the related
temporary regulations will apply for the
taxable year beginning on January 1,
2019.

A taxpayer may, however, elect un-
der § 1.987-11(b) to apply the final reg-
ulations and the related temporary reg-
ulations to taxable years beginning after
December 7, 2016 (subject to the con-
ditions in § 1.987-11(b)), including tax-
able years beginning on or after one year
after the first day of the first taxable year
following December 7, 2016 (the origi-
nal applicability date in § 1.987-11(a)).

The intended amendments would not
affect the applicability date of the tempo-
rary regulations other than the related
temporary regulations.

## IV. TAXPAYER RELIANCE

Before the issuance of the amendments
to the final regulations and the related
temporary regulations described in section
III of this Notice, taxpayers may rely on
the provisions of this Notice regarding
those proposed amendments.

## V. DRAFTING INFORMATION

The principal author of this Notice is
Anthony J. Marra of the Office of Asso-
ciate Chief Counsel (International). For
further information regarding this Notice,
contact Anthony J. Marra at (202) 317-
6938 (not a toll-free number).

### Extended Due Date under Notice 2017-10 for Participants Affected by Hurricanes Harvey, Irma, or Maria

Notice 2017-58

On December 23, 2016, the IRS re-
leased Notice 2017-10, 2017-4 I.R.B.
544, identifying syndicated conservation
easement transactions described in section

2 of that notice and substantially similar
transactions as listed transactions for pur-
poses of § 1.6011-4(b)(2) of the Income
Tax Regulations and §§ 6111 and 6112 of
the Internal Revenue Code. Section 3 of
Notice 2017-10 provides that, in the case
of a participant with a disclosure obliga-
tion with respect to these transactions un-
der § 1.6011-4(e)(2)(i) (regarding subse-
quently listed transactions), the disclosure
was due to the IRS Office of Tax Shelter
Analysis on June 21, 2017.

On April 27, 2017, the IRS released No-
tice 2017-29, 2017-20 I.R.B. 1243, modi-
fying Notice 2017-10. Notice 2017-29 ex-
tended the due date for participants filing
disclosures under § 1.6011-4(e)(2)(i) from
June 21, 2017, until October 2, 2017.

In response to Hurricane Harvey, Hur-
ricane Irma, and Hurricane Maria, this
notice further extends the due date for
affected participants to file disclosures un-
der § 1.6011-4(e)(2)(i) from October 2,
2017, until October 31, 2017.

An affected participant is any partici-
pant whose principal residence or princi-
pal place of business was located in a
Hurricane Harvey, Hurricane Irma, or
Hurricane Maria covered disaster area, as
defined in § 301.7508A-1(d)(2), or whose
records necessary to meet the disclosure
obligation were maintained in such a cov-
ered disaster area.

Taxpayers who believe they are enti-
tled to this extended due date should mark
"Hurricane Harvey", "Hurricane Irma", or
"Hurricane Maria" on the top of their
Form 8886, Reportable Transaction Dis-
closure Statement.

## EFFECT ON OTHER DOCUMENTS

Notice 2017-10 and Notice 2017-29
are modified.

## DRAFTING INFORMATION

The principal authors of this notice are
Zachary King and Charles Gorham of the
Office of the Associate Chief Counsel (In-
come Tax and Accounting). For further
information regarding this notice contact
Mr. King or Mr. Gorham at (202) 317-
7003 (not a toll-free number).

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## Part IV. Items of General Interest

Public Approval of Tax-
Exempt Private Activity
Bonds

REG-128841-07

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Withdrawal of notice of pro-
posed rulemaking and notice of proposed
rulemaking.

SUMMARY: This document contains pro-
posed regulations to update and streamline
the public approval requirement provided in
section 147(f) of the Internal Revenue Code
applicable to tax-exempt private activity
bonds issued by State and local govern-
ments. The proposed regulations would up-
date the existing regulations on the public
approval requirement to reflect statutory
changes, to streamline the public approval
process, and to reduce burden on State and
local governments that issue tax-exempt pri-
vate activity bonds. This document also
withdraws two previous notices of proposed
rulemaking on this topic. The proposed reg-
ulations affect State and local governments
that issue tax-exempt private activity bonds.

DATES: Comments and requests for a
public hearing must be received by De-
cember 27, 2017.

ADDRESSES: Send submissions to CC:
PA:LPD:PR (REG-128841-07), Room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG-128841-07),
Courier's Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue NW.,
Washington, DC 20224, or sent elec-
tronically via the Federal eRulemaking
Portal at www.regulations.gov (IRS
REG-128841-07).

FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Spence Hanemann at (202) 317-6980;
concerning submissions of comments
and requesting a hearing, Regina John-

son at (202) 317-6901 (not toll-free
numbers).

SUPPLEMENTARY INFORMATION:

### Paperwork Reduction Act

The collection of information con-
tained in this notice of proposed rulemak-
ing has been submitted to the Office of
Management and Budget for review under
OMB Control Number 1545-2185 in ac-
cordance with the Paperwork Reduction
Act of 1995 (44 U.S.C. 3507(d)). The
collection of information in this pro-
posed regulation is the requirement in
§ 1.147(f)-1 that certain information be
contained in a public notice or public ap-
proval and, consequently, disclosed to the
public. This information is required to meet
the statutory public approval requirement
provided in section 147(f). The likely re-
spondents are the governmental units re-
quired to approve an issue of private activity
bonds under section 147(f).

Estimated total annual burden: 2,600
hours.

Estimated average annual burden per
respondent: 1.3 Hours.

Estimated number of respondents:
2,000.

Estimated frequency of responses: Annual.

Comments on the collection of informa-
tion should be sent to the Office of Manage-
ment and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of Infor-
mation and Regulatory Affairs, Washing-
ton, DC 20503, with copies to the Internal
Revenue Service, Attn: IRS Reports Clear-
ance Officer, SE:CAR:MP:T:T:SP, Wash-
ington, DC 20224. Comments on the collec-
tion of information should be received by
November 27, 2017.

Comments are specifically requested
concerning:

Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the IRS, in-
cluding whether the information will have
practical utility;

The accuracy of the estimated burden
associated with the proposed collection of
information;

How the quality, utility, and clarity of
the information to be collected may be
enhanced;

How the burden of complying with the
proposed collection of information may
be minimized, including through the ap-
plication of automated collection tech-
niques or other forms of information tech-
nology; and

Estimates of capital or start-up costs and
costs of operation, maintenance, and pur-
chase of services to provide information.

An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information un-
less it displays a valid control number
assigned by the Office of Management
and Budget.

Books or records relating to a collec-
tion 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
required by 26 U.S.C. 6103.

### Background

This document contains proposed
amendments to 26 CFR part 1 under sec-
tion 147(f) of the Internal Revenue Code
of 1986 (the Code) and 26 CFR part 5f
under section 103(k) of the Internal Rev-
enue Code of 1954 (the 1954 Code). In the
Tax Equity and Fiscal Responsibility Act
of 1982 (TEFRA), Public Law 97-248, 96
Stat. 324, Congress added section 103(k)
to the 1954 Code to impose a public ap-
proval requirement on tax-exempt indus-
trial development bonds. On May 11,
1983, the Department of the Treasury (Trea-
sury Department) and the IRS published in
the Federal Register (48 FR 21117) tem-
porary regulations under section 103(k) of
the 1954 Code (TD 7892) (the Existing
Regulations). See § 5f.103-2. A notice of
proposed rulemaking (LR-221-82) by
cross-reference to the temporary regulations
was published in the Federal Register (48
FR 21166) on the same day.

In the Tax Reform Act of 1986 (1986
Tax Act), Public Law 99-514, 100 Stat.
2085, Congress reorganized the tax-
exempt bond provisions and carried for-
ward the public approval requirement of
section 103(k) of the 1954 Code in ex-
panded form in section 147(f) of the Code.
In section 147(f), Congress extended the

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public approval requirement to apply to all
types of tax-exempt private activity bonds,
as provided in section 141(e). The legisla-
tive history of the 1986 Tax Act indicates
that "[t]he conferees intend that, to the ex-
tent not amended, all principles of present
law continue to apply under the reorganized
provisions." H.R. Rep. No. 99-841, at II-
686 (1986) (Conf. Rep.). Thus, the Existing
Regulations in § 5f.103-2 remain in effect.

On September 9, 2008, the Treasury
Department and the IRS published a no-
tice of proposed rulemaking (REG-
128841-07) in the Federal Register (73
FR 52220) that proposed regulations to
amend and supplement the Existing Reg-
ulations (the 2008 Proposed Regulations).
The Treasury Department and the IRS re-
ceived public comments on the 2008 Pro-
posed Regulations and held a public hearing
on January 26, 2009. As discussed more
fully in the Explanation of Provisions sec-
tion of this preamble, the Treasury Depart-
ment and the IRS have decided to withdraw
the 2008 Proposed Regulations in full and to
propose new regulations. This document
contains those new proposed regulations
(the Proposed Regulations).

### Explanation of Provisions

#### 1. Introduction

In general, pursuant to section 103 of
the Code, interest received by investors on
eligible State and local bonds is tax-
exempt for Federal income tax purposes.
Interest on private activity bonds qualifies
for this tax-exempt treatment only if the
bonds meet the requirements for "quali-
fied bonds" as defined in section 141(e)
and other applicable requirements pro-
vided in section 103. Section 141(e) of the
Code requires, among other things, that
qualified bonds meet the public approval
requirement of section 147(f).

The Proposed Regulations would update
the Existing Regulations to address subse-
quent statutory changes and to streamline
the public approval process. The Proposed
Regulations provide greater flexibility to
State and local governments with respect to
the public approval process to reduce ad-
ministrative burdens associated with the
public approval requirement. The Proposed
Regulations recognize advances in technol-
ogy and electronic communication that may
facilitate more streamlined procedures for

providing reasonable public notice of a pub-
lic hearing.

#### 2. The 2008 Proposed Regulations

The 2008 Proposed Regulations pro-
posed to update, clarify, and simplify dis-
crete aspects of the Existing Regulations
regarding the public approval require-
ment. The 2008 Proposed Regulations fo-
cused on the scope, information content,
methods, and timing for the public ap-
proval process, and generally did not fo-
cus on the governmental entities from
which public approval is required. Over-
all, the public comments on the 2008 Pro-
posed Regulations were favorable.

The Proposed Regulations generally
incorporate the amendments proposed in
the 2008 Proposed Regulations with mod-
ifications in response to the public com-
ments. One comment focused on the
structure of the 2008 Proposed Regula-
tions. The 2008 Proposed Regulations
would have revised the Existing Regula-
tions by amending existing rules and add-
ing new rules. The 2008 Proposed Regu-
lations further provided that the Existing
Regulations would remain in effect to the
extent not inconsistent with the final ver-
sion of the 2008 Proposed Regulations.
Commenters expressed concern about po-
tential confusion over two distinct and
partially inconsistent regulation sections
governing the public approval require-
ment. The Treasury Department and the
IRS understand this concern. Accordingly,
the Proposed Regulations consolidate the
guidance in the Existing Regulations and the
2008 Proposed Regulations, with modifica-
tions in response to the public comments
and other recent developments, into new
proposed guidance and provide a further
opportunity for public comment.

The Treasury Department and the IRS
also received numerous comments regard-
ing the level of specificity of information
required to be contained in reasonable
public notice of a public hearing or a
public approval. Generally, the 2008 Pro-
posed Regulations proposed to allow the
issuer to provide streamlined information
about projects to be financed, and the Ex-
isting Regulations require a greater level
of specificity of information about such
projects. The 2008 Proposed Regulations
also proposed to afford issuers more

flexibility regarding the effect of post-
issuance changes from the reasonably ex-
pected facts provided in the reasonable
public notice or public approval. Com-
menters expressed differing views on
whether these proposed amendments in
the 2008 Proposed Regulations should be
adopted. Commenters in favor of these
amendments generally applauded the re-
duced burden that issuers would bear un-
der the 2008 Proposed Regulations and
suggested ways in which that burden
could be reduced further. Commenters op-
posed to these amendments generally ar-
gued that reducing the amount of public
information would limit the public's abil-
ity to approve or oppose on an informed
basis new private activity bonds and pro-
posed projects to be financed. The legis-
lative history of the public approval re-
quirement emphasizes the importance of
"a reasonable opportunity for persons
with differing views on both issuance of
the bonds and the location and nature of
the proposed facility to be heard." S. Rep.
No. 97-494, at 171 (1982). With respect
to these proposed amendments, the Trea-
sury Department and the IRS have deter-
mined that the information that would
have been required by the 2008 Proposed
Regulations is sufficient to permit the
public to evaluate the merits of both the
issuance of the bonds and the location and
nature of the financed facility. Thus, the
burden imposed by the Existing Regula-
tions may be reduced as provided in the
2008 Proposed Regulations without sig-
nificantly impairing the public's consid-
eration of new private activity bonds.
Accordingly, the Proposed Regulations
generally retain the streamlined infor-
mation and post-issuance flexibility pro-
posed in the 2008 Proposed Regulations
and provide for additional post-issuance
flexibility. (See section 6 of this Expla-
nation of Provisions.)

Commenters also provided differing
views on the amendments in the 2008
Proposed Regulations that proposed
changes to the procedures for providing
reasonable public notice of a public hear-
ing. The Existing Regulations generally
permit an issuer to publicize notice by
newspaper, radio, or television, and pre-
sume notice to be reasonable if published
at least 14 days prior to the date of the
public hearing. The 2008 Proposed Regu-

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lations proposed to expand the permitted
methods of providing public notice to in-
clude notice by newspaper, radio, televi-
sion, Web site, or other permitted methods
of giving public notice under State law,
and would have shortened the presump-
tively reasonable notice period to seven
days in advance of the hearing. Comment-
ers in favor of these amendments gener-
ally stated that the proposed amendments
would ease the burden of providing the
public notice. Commenters opposed to
these amendments generally expressed
concern that seven days' notice of a public
hearing would not provide the public suf-
ficient time to make an informed decision
and to make arrangements to be present at
the hearing. The legislative history of TE-
FRA indicates that Congress expected no-
tice to be published no fewer than 14 days
before the scheduled date of the hearing.
See S. Rep. No. 97-494, at 171 (1982). In
response to these comments, the Proposed
Regulations adopt and expand the permit-
ted methods for giving notice of a public
hearing that were proposed in the 2008
Proposed Regulations, but retain the 14-
day notice period presumed reasonable
under the Existing Regulations consistent
with the expectations of Congress.

#### 3. Host Approval and Issuer Approval

Section 147(f) generally requires that
both the governmental unit that issues the
bonds (or on behalf of which the bonds are
issued) and a governmental unit with juris-
diction over the location of the financed
project approve an issue of private activity
bonds (and the approvals are referred to as
the issuer approval and the host approval,
respectively). The Proposed Regulations
generally carry forward the rules on issuer
approval and host approval from the Exist-
ing Regulations, with limited revisions to
address statutory changes that affect the ap-
plication of these rules to certain types of
private activity bonds. Thus, for example,
the Proposed Regulations include guidance
to address subsequent statutory changes in
section 147(f)(3) and (4) that added special
provisions regarding the issuer approval and
host approval requirements for certain fi-
nancings involving airports, high-speed rail
facilities, qualified scholarship funding cor-
porations, and volunteer fire departments.

The 1986 Tax Act extended the public
approval requirement beyond the tradi-
tional, facility-focused industrial develop-
ment bonds subject to the requirement under
the 1954 Code to include certain special
types of financings that are not facility-
specific, including "qualified mortgage
bonds" as defined in section 143(a), "qual-
ified veterans' mortgage bonds" as defined
in section 143(b), "qualified student loan
bonds" as defined in section 144(b), and
"qualified 501(c)(3) bonds" as defined in
section 145. For these types of bonds, ob-
taining a host approval may be impractical
or unworkable. For example, for qualified
mortgage bonds, the locations of many of
the homes to be financed with qualified
mortgage loans generally are unknown at
the time of issuance of the bonds and thus it
may be difficult to identify appropriate gov-
ernmental units to provide host approval.
Moreover, for qualified student loan bonds
and for qualified 501(c)(3) bonds used to
finance working capital expenditures, the
application of the host approval requirement
is unworkable because the assets and expen-
ditures financed have no physical location.
In recognition of the practical difficulties
faced by issuers of these types of bonds
under the Existing Regulations, the Pro-
posed Regulations provide that no host ap-
proval is necessary for mortgage revenue
bonds (defined as qualified mortgage bonds,
qualified veterans' mortgage bonds, and cer-
tain refundings of bonds issued to finance
mortgages of owner-occupied residences
under the law prior to enactment of section
143), qualified student loan bonds, or qual-
ified 501(c)(3) bonds used to finance work-
ing capital expenditures.

#### 4. Reasonable Public Notice and Public Hearing

The Existing Regulations generally
provide that an applicable elected repre-
sentative of the approving governmental
unit may approve an issue following a
public hearing for which there was rea-
sonable public notice. The Existing Reg-
ulations provide guidance on permitted
methods for giving reasonable public no-
tice and holding public hearings. The Pro-
posed Regulations would expand these
methods to provide greater flexibility to
State and local governments for providing
reasonable public notice.

The Existing Regulations provide gen-
erally that reasonable public notice must
be published in a newspaper of general
circulation available to residents of the
relevant locality or announced by radio or
television broadcast to those residents.
The Proposed Regulations would expand
the permitted methods of providing rea-
sonable public notice to provide greater
flexibility and to recognize advances in
technology and electronic communica-
tions. Thus, the Proposed Regulations
would allow reasonable public notice by
newspaper publication, radio or television
broadcast, postings on a governmental
unit's public Web site, or alternative
methods permitted under a general State
law for public notices for public hearings
of a governmental unit. The Treasury De-
partment and the IRS solicit comment on
other possible methods of providing rea-
sonable public notice to foster flexibility
and to reduce administrative burdens.

#### 5. Content of Reasonable Public Notice and Public Approval

A. General Rules for Content of
Reasonable Public Notice and Public
Approval

The Existing Regulations generally re-
quire that the reasonable public notice and
the public approval contain the following
information: A general, functional de-
scription of the type and use of the facility
to be financed; the maximum aggregate
face amount of the bonds to be issued for
the facility; the initial owner, operator, or
manager of the facility; and the location of
the facility by street address or, if none, by
a general description designed to inform
readers of the specific location. The re-
quired level of specificity of information
for the public approval process under the
Existing Regulations has proven to be un-
duly limiting and burdensome in certain
respects. The Proposed Regulations gener-
ally retain the requirements that information
(public approval information) be provided
for the public approval process but refine the
required public approval information to re-
duce burden and enhance flexibility.

Initially, the Existing Regulations fo-
cus on an individual "facility" as the unit
of financed property for which the issuer
must provide the relevant information.

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The definition of "facility" in the Existing
Regulations includes facilities on multiple
tracts of land only if the facilities are used
in an integrated operation. Whether facil-
ities are part of an "integrated operation"
has proven difficult to determine.

The Proposed Regulations use the term
"project" in lieu of the term "facility" be-
cause "project" more clearly indicates that
financed property may consist of multiple
buildings and multiple sites. The Proposed
Regulations define the term "project" gen-
erally to mean one or more capital projects
or facilities, including land, buildings,
equipment, and other property, to be fi-
nanced with an issue, that are located on the
same site, or adjacent or proximate sites
used for similar purposes. In addition, to
address certain special types of loan financ-
ings, the definition of a project under the
Proposed Regulations also includes mort-
gage loans financed by mortgage revenue
bonds, student loans financed by qualified stu-
dent loan bonds, and working capital expen-
ditures financed by qualified 501(c)(3) bonds.

The Proposed Regulations would con-
tinue to require a general functional descrip-
tion of the type and use of the financed
project. The Proposed Regulations, how-
ever, would mitigate the required level of
specificity of that information. Thus, the
Proposed Regulations would allow an issuer
of exempt facility bonds to satisfy this re-
quirement through a statement that identifies
the category of exempt facility bond (for
example, bonds financing an airport or a
mass commuting facility). Similarly, an is-
suer of other types of private activity bonds
may satisfy this requirement through a state-
ment that identifies the type of bonds and
the type and use of the project (for example,
qualified small issue bonds for a manufac-
turing facility).

The Proposed Regulations would con-
tinue to require that the public approval
information include the name of the ex-
pected initial owner or the principal user
of the project. The Proposed Regulations,
however, would permit an issuer to name
the true beneficial party of interest as an
alternative to naming a legal owner or
user (for example, the name of a nonprofit
hospital organization instead of a limited
liability company that serves as the legal
owner of a hospital).

The Proposed Regulations would
continue to require that the public ap-

proval information include the location
of the project by street address. The
Proposed Regulations, however, would
clarify that a description by boundary
streets or other geographic boundaries
suffices to meet this location require-
ment. The Proposed Regulations would
allow a consolidated description of the
location of a project on the same site or
on adjacent or proximate sites (for ex-
ample, a college campus).

#### B. Special Rules for Mortgage Revenue Bonds, Qualified Student Loan Bonds, and Certain Qualified 501(c)(3) Bonds

The 1986 Tax Act extended the pub-
lic approval requirement to mortgage
revenue bonds, qualified student loan
bonds, and qualified 501(c)(3) bonds.
The Existing Regulations were promul-
gated before the 1986 Tax Act and thus
provide no guidance tailored to the ap-
plication of the public approval require-
ment to these types of bonds. In the
General Explanation of the 1986 Tax
Act, the Staff of the Joint Committee on
Taxation stated that, "[i]n extending
this requirement to all private activity
bonds, Congress intended that the appli-
cable Treasury regulations will be
amended for student loan bonds (where
no facilities are financed), mortgage rev-
enue bonds (where the exact residences
to be financed may not be identified
before issuance of the bonds), and qual-
ified 501(c)(3) bonds that qualify for the
special exception to the maturity limita-
tion for pooled financings (where the
facilities need not be identified before
issuance of the bonds)." Joint Commit-
tee on Taxation, General Explanation of
the Tax Reform Act of 1986 (JCS-10-
87), at 1219 (May 4, 1987). Accord-
ingly, the Proposed Regulations provide
special rules for public approval of
mortgage revenue bonds, qualified stu-
dent loan bonds, and qualified 501(c)(3)
bonds issued for pooled financings as
described in section 147(b)(4).

For mortgage revenue bonds, the Pro-
posed Regulations would require the pub-
lic approval information to state that the
bonds will finance residential mortgages,
provide the maximum stated principal
amount of the bonds, and generally de-
scribe the issuer's geographic jurisdiction

in which the residences to be financed
with the mortgage loans are expected to
be located. Similarly, for qualified student
loan bonds, the Proposed Regulations
would require the public approval infor-
mation to state that the bonds will finance
student loans and provide the maximum
stated principal amount of the bonds. For
these two types of bonds, the Proposed
Regulations would not require the names
of borrowers to be included in the public
approval information.

For qualified 501(c)(3) bonds that fi-
nance loans described in the special provi-
sion for pooled loan financings in section
147(b)(4), the Proposed Regulations would
permit the issuer to choose to apply a two-
stage public approval process if the issuer
has insufficient information at the time of
the reasonable public notice or public ap-
proval to meet the general public approval
information requirements. To apply this
special rule, the issuer must first obtain pub-
lic approval within the time specified in the
Proposed Regulations for public approval
generally. For this first-stage public ap-
proval, the public approval information
must state that the bonds will be qualified
501(c)(3) bonds used to finance loans de-
scribed in section 147(b)(4)(B), provide the
maximum stated principal amount of the
bonds, generally describe the type of project
to be financed with such loans (for example,
loans for hospital facilities or college facil-
ities), and state that the issuer will obtain an
additional public approval with specific
project information before origination of
any such loans. In addition, before loan
origination, the issuer must obtain a supple-
mental public approval of that loan contain-
ing all of the project-specific information
that the public approval information rules
generally require.

6\. Deviations From the Information in
the Reasonable Public Notice and Public
Approval

Differences or "deviations" between
information regarding a proposed project
to be financed with a proposed issuance of
private activity bonds that serves as the
basis for a public approval and the actual
project financed with the bonds may affect
the validity of the public approval. The
Existing Regulations and the Proposed
Regulations provide that insubstantial de-

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viations do not invalidate a public ap-
proval. The Proposed Regulations provide
additional guidance concerning differ-
ences that constitute insubstantial devia-
tions and also allow remedial actions to
cure certain substantial deviations.

The Proposed Regulations provide that
whether a deviation is substantial gener-
ally depends on all of the facts and cir-
cumstances. The Proposed Regulations,
however, would always treat a change in
the fundamental nature or type of a project
as a substantial deviation.

The Proposed Regulations would treat
certain specified deviations from the public
approval information provided as insubstan-
tial deviations. For example, a deviation
from the size of a proposed bond issue for a
proposed project specified in public ap-
proval information is an insubstantial devi-
ation if the stated principal amount of bonds
actually issued and used for the project is no
more than ten percent (10%) greater than the
maximum stated principal amount publicly
approved for the project or is any amount
less than that maximum stated principal
amount. Furthermore, if an issuer applies
proceeds of an issue approved for use on
one project to pay working capital expendi-
tures directly associated with any project
approved in the same public approval, that
deviation is an insubstantial deviation. Fi-
nally, a deviation between the initial owner
or principal user of the project identified in
the public approval information and the ac-
tual initial owner or principal user of the
project is an insubstantial deviation if the
parties are related on the issue date.

The Proposed Regulations would allow
supplemental post-issuance public approv-
als to cure certain substantial deviations that
result from unexpected events or unforeseen
changes in circumstances that occur after
the issuance of the bonds. This remedial
action is similar to a permitted post-issuance
public approval under § 1.141-12(e)(2) and
(f) used for remedial actions for purposes of
the private business restrictions.

#### 7. Applicability Dates and Reliance

The Proposed Regulations are pro-
posed to apply to bonds issued pursuant to
a public approval that occurs on or after
the date that is 90 days after publication of
a Treasury decision adopting these rules
as final regulations in the Federal Regis-

ter. Issuers may apply the Proposed Reg-
ulations, in whole but not in part, to bonds
that are issued pursuant to a public ap-
proval that occurs on or after September
28, 2017 and before the applicability date
provided in a Treasury decision adopting
these rules as final regulations in the Fed-
eral Register.

In addition, the Treasury Department
and the IRS propose to remove the Exist-
ing Regulations under § 5f.103-2 from 26
CFR part 5f effective on the general ap-
plicability date of the final regulations,
which is proposed to be the date that is 90
days after publication of a Treasury deci-
sion adopting these rules as final regula-
tions in the Federal Register.

### Special Analyses

Certain IRS regulations, including
these, are exempt from the requirements
of Executive Order 12866, as supple-
mented and reaffirmed by Executive Or-
der 13563. Therefore, a regulatory impact
assessment is not required. It is hereby
certified that these regulations will not
have a significant economic impact on a
substantial number of small entities. The
Existing Regulations provide guidance on
the minimum informational content, pro-
cedures, and timing for the statutorily re-
quired public notices, public hearings, and
public approvals. Although the Proposed
Regulations are expected to affect a sig-
nificant number of small State or local
governmental units that issue tax-exempt
private activity bonds, the Proposed
Regulations are not expected to have a
significant economic effect on those
governmental units because the Proposed
Regulations generally would streamline
and simplify the Existing Regulations in
various respects to reduce the administra-
tive burdens of meeting the statutory pub-
lic approval requirement. For example,
the Proposed Regulations would permit
publication of public notice by Web site to
reduce costs associated with print publi-
cation or radio or television broadcast,
reduce the information required to be con-
tained in public notice and public approval
for certain types of bonds, liberalize the
consequences of insubstantial changes in
project information, and permit curative ac-
tions to address certain circumstances in
which finished projects differ from descrip-
tions provided in the public notice or public

approval. Accordingly, a regulatory flexibil-
ity analysis is not required. Pursuant to sec-
tion 7805(f) of the Code, this notice of pro-
posed rulemaking will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on its
impact on small entities.

### Comments and Requests for Public Hearing

Before the Proposed Regulations are ad-
opted as final regulations, consideration will
be given to any comments that are submit-
ted timely to the IRS as prescribed in this
preamble under the ADDRESSES heading.
The Treasury Department and the IRS re-
quest comments on all aspects of the pro-
posed rules. All comments will be available
at www.regulations.gov or upon request. A
public hearing will be scheduled if re-
quested in writing by any person that timely
submits written comments. If a public hear-
ing is scheduled, notice of the date, time,
and place for the hearing will be published
in the Federal Register.

### Drafting Information

The principal authors of these regula-
tions are Spence Hanemann and Vicky
Tsilas, Office of Associate Chief Counsel
(Financial Institutions and Products).
However, other personnel from the Trea-
sury Department and the IRS participated
in their development.

* * * * *

### Withdrawal of Notice of Proposed Rulemaking

Accordingly, under the authority of 26
U.S.C. 7805, the notice of proposed rule-
making (REG-128841-07) that was pub-
lished in the Federal Register (73 FR
52220) on September 9, 2008, is with-
drawn. Also, under the authority of 26
U.S.C. 7805, § 1.103-17 of the notice of
proposed rulemaking (LR-221-82) pub-
lished in the Federal Register (48 FR
21166) on May 11, 1983, is withdrawn.

### Proposed Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 5f are
proposed to be amended as follows:

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### 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 1.147(f)-1 is added to
read as follows:

#### § 1.147(f)-1 Public approval of private activity bonds.

(a) In general. Interest on a private
activity bond is excludable from gross in-
come under section 103(a) only if the
bond meets the requirements for a quali-
fied bond as defined in section 141(e) and
other applicable requirements provided in
section 103. In order to be a qualified
bond as defined in section 141(e), among
other requirements, a private activity bond
must meet the requirements of section
147(f). A private activity bond meets the
requirements of section 147(f) only if the
bond is publicly approved pursuant to
paragraph (b) of this section or the bond
qualifies for the exception for refunding
bonds in section 147(f)(2)(D).

(b) Public approval requirement-(1)
In general. Except as otherwise provided
in this section, a bond meets the require-
ments of section 147(f) if, before the issue
date, the issue of which the bond is a part
receives issuer approval and host approval
(each a public approval) as defined in
paragraphs (b)(2) and (3) of this section in
accordance with the method and process
set forth in paragraphs (c) through (f) of
this section.

(2) Issuer approval. Except as other-
wise provided in this section, issuer ap-
proval means an approval that meets the
requirements of this paragraph (b)(2). Ei-
ther the governmental unit that issues the
issue or the governmental unit on behalf
of which the issue is issued must approve
the issue. For this purpose, § 1.103-1 ap-
plies to the determination of whether an
issuer issues bonds on behalf of another
governmental unit. If an issuer issues
bonds on behalf of more than one govern-
mental unit (for example, in the case of an
authority that acts for two counties), any
one of those governmental units may pro-
vide the issuer approval.

(3) Host approval. Except as otherwise
provided in this section, host approval
means an approval that meets the require-

ments of this paragraph (b)(3). Each gov-
ernmental unit the geographic jurisdiction
of which contains the site of a project to
be financed by the issue must approve the
issue. If, however, the entire site of a
project to be financed by the issue is
within the geographic jurisdiction of more
than one governmental unit within a State
(counting the State as a governmental unit
within such State), then any one of those
governmental units may provide host ap-
proval for the issue for that project. For
purposes of the host approval, if a project
to be financed by the issue is located
within the geographic jurisdiction of two
or more governmental units but not en-
tirely within any one of those governmen-
tal units, each portion of the project that is
located entirely within the geographic ju-
risdiction of the respective governmental
units may be treated as a separate project.
The issuer approval provided pursuant to
paragraph (b)(2) of this section may be
treated as a host approval if the govern-
mental unit providing the issuer approval
is also a governmental unit eligible to
provide the host approval pursuant to this
paragraph (b)(3).

(4) Special rule for host approval of
airports or high-speed intercity rail facil-
ities. Pursuant to a special rule in section
147(f)(3), if the proceeds of an issue are to
be used to finance a project that consists of
either facilities located at an airport (within
the meaning of section 142(a)(1)) or high-
speed intercity rail facilities (within the
meaning of section 142(a)(11)) and the is-
suer of that issue is the owner or operator of
the airport or high-speed intercity rail facil-
ities, the issuer is the only governmental unit
that is required to provide the host approval
for that project.

(5) Special rule for issuer approval of
scholarship funding bond issues and vol-
unteer fire department bond issues. In the
case of a qualified scholarship funding
bond as defined in section 150(d)(2), the
governmental unit that made a request de-
scribed in section 150(d)(2)(B) with re-
spect to the issuer of the bond is the gov-
ernmental unit on behalf of which the
bond was issued for purposes of the issuer
approval. If more than one governmental
unit within a State made a request de-
scribed in section 150(d)(2)(B), the State
or any such requesting governmental unit
may be treated as the governmental unit

on behalf of which the bond was issued
for purposes of the issuer approval. In the
case of a bond of a volunteer fire depart-
ment treated as a bond of a political sub-
division of a State under section 150(e),
the political subdivision described in sec-
tion 150(e)(2)(B) with respect to that vol-
unteer fire department is the governmental
unit on behalf of which the bond is issued
for purposes of the issuer approval.

(6) Host approval not required for issues
of mortgage revenue bonds, student loan
bonds, and certain qualified 501(c)(3)
bonds. In the case of a mortgage revenue
bond (as defined in paragraph (g)(5) of this
section), a qualified student loan bond as
defined in section 144(b), and the portion of
an issue of qualified 501(c)(3) bonds as de-
fined in section 145 that finances working
capital expenditures, the issue or portion of
the issue must receive an issuer approval but
no host approval is necessary.

(c) Method of public approval. The
method of public approval of an issue
must satisfy either paragraph (c)(1) or (2)
of this section. An approval may satisfy
the requirements of this paragraph (c)
without regard to the authority under State
or local law for the acts constituting that
approval.

(1) Applicable elected representative.
An applicable elected representative of
the approving governmental unit approves
the issue following a public hearing for
which there was reasonable public notice.
(2) Voter referendum. A voter referen-
dum of the approving governmental unit
approves the issue.

(d) Public hearing and reasonable
public notice-(1) Public hearing. Public
hearing means a forum providing a rea-
sonable opportunity for interested individ-
uals to express their views, orally or in
writing, on the proposed issue of bonds
and the location and nature of the pro-
posed project to be financed.

(2) Location of the public hearing. The
public hearing must be held in a location
that, based on the facts and circumstances,
is convenient for residents of the approv-
ing governmental unit. The location of the
public hearing is presumed convenient for
residents of the unit if the public hearing
is located in the approving governmental
unit's capital or seat of government. If
more than one governmental unit is re-
quired to hold a public hearing, the hear-

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ings may be combined as long as the
combined hearing affords the residents of
all of the participating governmental units
a reasonable opportunity to be heard. The
location of any combined hearing is pre-
sumed convenient for residents of each
participating governmental unit if it is no
farther than 100 miles from the seat of
government of each participating govern-
mental unit beyond whose geographic ju-
risdiction the hearing is conducted.

(3) Procedures for conducting the pub-
lic hearing. In general, a governmental
unit may select its own procedure for a
public hearing, provided that interested
individuals have a reasonable opportunity
to express their views. Thus, a govern-
mental unit may impose reasonable re-
quirements on persons who wish to
participate in the hearing, such as a re-
quirement that persons desiring to speak
at the hearing make a written request to
speak at least 24 hours before the hear-
ing or that they limit their oral remarks
to a prescribed time. For this purpose, it
is unnecessary, for example, that the
applicable elected representative of the
approving governmental unit be present
at the hearing, that a report on the hear-
ing be submitted to that applicable
elected representative, or that State ad-
ministrative procedural requirements for
public hearings be observed. Except to
the extent State procedural requirements
for public hearings are in conflict with a
specific requirement of this section, a
public hearing performed in compliance
with State procedural requirements sat-
isfies the requirements for a public hear-
ing in this paragraph (d). A public hear-
ing may be conducted by an individual
appointed or employed to perform such
function by the governmental unit or its
agencies, or by the issuer. Thus, for
example, for bonds to be issued by an
authority that acts on behalf of a county,
the hearing may be conducted by the
authority, the county, or an appointee of
either.

(4) Reasonable public notice. Reason-
able public notice means notice that is
reasonably designed to inform residents of
an approving governmental unit, includ-
ing the issuing governmental unit and the
governmental unit in whose geographic
jurisdiction a project is to be located, of
the proposed issue. The notice must state

the time and place for the public hearing
and contain the information required by
paragraph (f)(2) of this section. Notice is
presumed to be reasonably designed to
inform residents of an approving govern-
mental unit if it satisfies the requirements
of this paragraph (d)(4) and is given no
fewer than fourteen (14) calendar days
before the public hearing in one or more
of the ways set forth in paragraphs
(d)(4)(i) through (iv) of this section.

(i) Newspaper publication. Public no-
tice may be given by publication in one or
more newspapers of general circulation
available to the residents of the govern-
mental unit.

(ii) Radio or television broadcast. Pub-
lic notice may be given by radio or tele-
vision broadcast to the residents of the
governmental unit.

(iii) Governmental unit Web site post-
ing. Public notice may be given by elec-
tronic posting on the approving govern-
mental unit's public Web site used to
inform its residents about events affecting
the residents (for example, notice of pub-
lic meetings of the governmental unit). In
the case of public notice provided as de-
scribed in the first sentence of this para-
graph (d)(4)(iii), the governmental unit
must offer a reasonable, publicly known
alternative method for obtaining the infor-
mation contained in the public notice for
residents without access to the Internet
(such as telephone recordings).

(iv) Alternative State law public notice
procedures. Public notice may be given in
a way that is permitted under a general
State law for public notices for public
hearings for the approving governmental
unit.

(e) Applicable elected representative-
(1) In general-(i) Definition of applica-
ble elected representative. The applicable
elected representative of a governmental
unit means-

(A) The governmental unit's elected
legislative body;

(B) The governmental unit's chief
elected executive officer;

(C) In the case of a State, the chief
elected legal officer of the State's execu-
tive branch of government; or

(D) Any official elected by the voters
of the governmental unit and designated
for purposes of this section by the govern-
mental unit's chief elected executive offi-

cer or by State or local law to approve
issues for the governmental unit.

(ii) Elected officials. For purposes of
paragraphs (e)(1)(i)(B), (C), and (D) of
this section, an official is considered
elected only if that official is popularly
elected at-large by the voters of the
governmental unit. If an official popularly
elected at-large by the voters of a govern-
mental unit is appointed or selected pur-
suant to State or local law to be the chief
executive officer of the unit, that official is
deemed to be an elected chief executive
officer for purposes of this section but for
no longer than the official's tenure as an
official popularly elected at-large.

(iii) Legislative bodies. In the case of
a bicameral legislature that is popularly
elected, both chambers together constitute
an applicable elected representative. Absent
designation under paragraph (e)(1)(i)(D) of
this section, however, neither such chamber
independently constitutes an applicable
elected representative. If multiple elected
legislative bodies of a governmental unit
have independent legislative authority, the
body with the more specific authority relat-
ing to the issue is the only legislative body
that is treated as an elected legislative body
under paragraph (e)(1)(i)(A) of this section.

(2) Governmental unit with no applica-
ble elected representative-(i) In general.
The applicable elected representatives of a
governmental unit with no applicable
elected representative (but for this para-
graph (e)(2) and section 147(f)(2)(E)(ii))
are the applicable elected representatives
of the next higher governmental unit (with
an applicable elected representative) from
which the governmental unit derives its
authority. Except as otherwise provided in
this section, any governmental unit from
which the governmental unit with no ap-
plicable elected representative derives its
authority may be treated as the next higher
governmental unit without regard to the
relative status of such higher governmen-
tal unit under State law. A governmental
unit derives its authority from another
governmental unit that-

(A) Enacts a specific law (for example,
a provision in a State constitution, charter,
or statute) by or under which the govern-
mental unit is created;

(B) Otherwise empowers or approves
the creation of the governmental unit; or

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(C) Appoints members to the govern-
ing body of the governmental unit.

(ii) Host approval. For purposes of a
host approval, a governmental unit may be
treated as the next higher governmental
unit only if the project is located within its
geographic jurisdiction and eligible resi-
dents of the unit are entitled to vote for its
applicable elected representatives.

(3) On behalf of issuers. In the case of
an issuer that issues bonds on behalf of a
governmental unit, the applicable elected
representative is any applicable elected
representative of the governmental unit on
behalf of which the bonds are issued.

(f) Public approval process-(1) In
general. The public approval process for
an issue, including scope, content, and
timing of the public approval, must meet
the requirements of this paragraph (f). A
governmental unit must timely approve
either each project to be financed with
proceeds of the issue or a plan of financ-
ing for each project to be financed with
proceeds of the issue.

(2) General rule on information re-
quired for a reasonable public notice and
public approval. Except as otherwise pro-
vided in this section, a project to be fi-
nanced with proceeds of an issue is within
the scope of a public approval under sec-
tion 147(f) if the reasonable public notice
of the public hearing, if applicable, and
the public approval (together the notice
and approval) include the information set
forth in paragraphs (f)(2)(i) through (iv)
of this section.

(i) The project. The notice and ap-
proval must include a general functional
description of the type and use of the
project to be financed with the issue. For
this purpose, a project description is suf-
ficient if it identifies the project by refer-
ence to a particular category of exempt
facility bond to be issued (for example, an
exempt facility bond for an airport pursu-
ant to section 142(a)(1)) or by reference to
another general category of private activ-
ity bond together with information on the
type and use of the project to be financed
with the issue (for example, a qualified
small issue bond as defined in section
144(a) for a manufacturing facility or a
qualified 501(c)(3) bond as defined in sec-
tion 145 for a hospital facility and work-
ing capital expenditures).

(ii) The maximum stated principal
amount of bonds. The notice and approval
must include the maximum stated princi-
pal amount of the issue of private activity
bonds to be issued to finance the project.
If an issue finances multiple projects (for
example, facilities at different locations
on non-proximate sites that are not treated
as part of the same project), the notice and
approval must specify separately the max-
imum stated principal amount of bonds to
be issued to finance each separate project.

(iii) The name of the initial owner or
principal user of the project. The notice
and approval must include the name of the
expected initial owner or principal user
(within the meaning of section 144(a)) of
the project. The name provided may be
either the name of the legal owner or
principal user of the project or, alterna-
tively, the name of the true beneficial
party of interest for such legal owner or
user (for example, the name of a 501(c)(3)
organization that is the sole member of a
limited liability company that is the legal
owner).

(iv) The location of the project. The
notice and approval must include a gen-
eral description of the prospective loca-
tion of the project by street address, ref-
erence to boundary streets or other
geographic boundaries, or other descrip-
tion of the specific geographic location
that is reasonably designed to inform
readers of the location. For a project in-
volving multiple capital projects or facil-
ities located on the same site, or on adja-
cent or reasonably proximate sites with
similar uses, a consolidated description of
the location of those capital projects or
facilities provides a sufficient description
of the location of the project. For exam-
ple, a project for a section 501(c)(3) edu-
cational entity involving multiple build-
ings on the entity's main urban college
campus may describe the location of the
project by reference to the outside street
boundaries of that campus with a refer-
ence to any noncontiguous features of that
campus.

(3) Special rule for mortgage revenue
bonds. Mortgage loans financed by mort-
gage revenue bonds are within the scope
of a public approval if the notice and
approval state that the bonds are to be
issued to finance residential mortgages,
provide the maximum stated principal

amount of mortgage revenue bonds ex-
pected to be issued, and provide a general
description of the geographic jurisdiction
in which the residences to be financed
with the proceeds of the mortgage revenue
bonds are expected to be located (for ex-
ample, residences located throughout a
State for an issuer with a statewide juris-
diction or residences within a particular
local geographic jurisdiction, such as
within a city or county, for a local issuer).
For this purpose, in the case of mortgage
revenue bonds, no information is required
on specific names of mortgage loan bor-
rowers or specific locations of individual
residences to be financed.

(4) Special rule for qualified student
loan bonds. Qualified student loans fi-
nanced by qualified student loan bonds as
defined in section 144(b) are within the
scope of a public approval if the notice and
approval state that the bonds will be is-
sued to finance student loans and state the
maximum stated principal amount of
qualified student loan bonds expected to
be issued for qualified student loans. For
this purpose, in the case of qualified stu-
dent loan bonds, no information is re-
quired with respect to names of specific
student loan borrowers.

(5) Special rule for certain qualified
501(c)(3) bonds. Loans financed by qual-
ified 501(c)(3) bonds issued pursuant to
section 145 and described in section
147(b)(4)(B) (without regard to any
election under section 147(b)(4)(A)) are
within the scope of a public approval if
the requirements of paragraphs (f)(5)(i)
and (ii) of this section are met.

(i) Pre-issuance general public ap-
proval. Within the time period required by
paragraph (f)(7) of this section, public ap-
proval is obtained after reasonable public
notice of a public hearing is provided and
a public hearing is held. For this purpose,
a project is treated as described in the
notice and approval if the notice and ap-
proval provide that the bonds will be
qualified 501(c)(3) bonds to be used
to finance loans described in section
147(b)(4)(B), state the maximum stated
principal amount of bonds expected to
be issued to finance loans to 501(c)(3)
organizations or governmental units as
described in section 147(b)(4)(B), pro-
vide a general description of the type of
project to be financed with such loans

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(for example, loans for hospital facili-
ties or college facilities), and state that
an additional public approval that in-
cludes specific project information will
be obtained before any such loans are
originated.

(ii) Post-issuance public approval for
specific loans. Except as provided in para-
graph (f)(5)(iii) of this section, before a
loan described in section 147(b)(4)(B) is
originated, a supplemental public ap-
proval for the bonds to be used to finance
that loan is obtained that meets all the
requirements of section 147(f) and the
requirements for a public approval in
paragraph (b) of this section. This post-
issuance supplemental public approval re-
quirement applies by treating the bonds to
be used to finance such loan as if they
were reissued for purposes of section
147(f) (without regard to paragraph (f)(5)
of this section). For this purpose, proceeds
to be used to finance such loan do not
include the portion of the issue used to
finance a common reserve fund or com-
mon costs of issuance.

(iii) Exception to post-issuance public
approval requirement. A post-issuance
supplemental public approval pursuant to
paragraph (f)(5)(ii) of this section is un-
necessary for the initial use of proceeds to
finance one or more loans if the pre-
issuance notice and approval pursuant to
paragraph (f)(5)(i) of this section include
the information required by paragraphs
(f)(2)(i) through (iv) of this section for the
projects to be financed by those loans.

(6) Deviations in public approval in-
formation-(i) In general. Except as oth-
erwise provided in this section, a substan-
tial deviation between the stated use of
proceeds of an issue included in the infor-
mation required to be provided in the no-
tice and approval (public approval infor-
mation) and the actual use of proceeds of
the issue causes that issue to fail to meet
the public approval requirement. Con-
versely, insubstantial deviations between
the stated use of proceeds of an issue
included in the public approval informa-
tion and the actual use of proceeds of the
issue do not cause such a failure. In gen-
eral, the determination of whether a devi-
ation is substantial is based on all the facts
and circumstances. In all events, however,
a change in the fundamental nature or type
of a project is a substantial deviation.

(ii) Certain insubstantial deviations in
public approval information. The follow-
ing deviations from the public approval
information in the notice and approval are
treated as insubstantial deviations:

(A) Size of bond issue and use of pro-
ceeds. A deviation between the maximum
stated principal amount of a proposed is-
suance of bonds to finance a project that is
specified in public approval information
and the actual stated principal amount of
bonds issued and used to finance that proj-
ect is an insubstantial deviation if that
actual stated principal amount is no more
than ten percent (10%) greater than that
maximum stated principal amount or is
any amount less than that maximum stated
principal amount. In addition, the use of
proceeds to pay working capital expendi-
tures directly associated with any project
specified in the public approval informa-
tion is an insubstantial deviation.

(B) Initial owner or principal user. A
deviation between the initial owner or
principal user of the project named in the
notice and approval and the actual initial
owner or principal user of the project is an
insubstantial deviation if such parties are
related parties on the issue date of the
issue.

(iii) Supplemental public approval to
cure certain substantial deviations in pub-
lic approval information. A substantial
deviation between the stated use of pro-
ceeds of an issue included in the public
approval information and the actual use of
the proceeds of the issue does not cause
that issue to fail to meet the public ap-
proval requirement if all of the following
requirements are met:

(A) Original public approval and rea-
sonable expectations. The issue met the
requirements for a public approval in
paragraph (b) of this section. In addition,
on the issue date of the issue, the issuer
reasonably expected there would be no
substantial deviations between the stated
use of proceeds of an issue included in the
public approval information and the actual
use of the proceeds of the issue.

(B) Unexpected events or unforeseen
changes in circumstances. As a result
of unexpected events or unforeseen
changes in circumstances that occur af-
ter the issue date of the issue, the issuer
determines to use proceeds of the issue

in a manner or amount not provided in a
public approval.

(C) Supplemental public approval. Be-
fore using proceeds of the bonds in a
manner or amount not provided in a pub-
lic approval, the issuer obtains a supple-
mental public approval for those bonds
that meets the public approval require-
ment in paragraph (b) of this section. This
supplemental public approval requirement
applies by treating those bonds as if they
were reissued for purposes of section
147(f).

(7) Certain timing requirements. Pub-
lic approval of an issue is timely only if
the issuer obtains the public approval
within one year before the issue date of
the issue. Public approval of a plan of
financing is timely only if the issuer ob-
tains public approval for the plan of fi-
nancing within one year before the issue
date of the first issue issued under the plan
of financing and the issuer issues all issues
under the plan of financing within three
years after the issue date of such first
issue.

(g) Definitions. The definitions in this
paragraph (g) apply for purposes of this
section. In addition, the general defini-
tions in § 1.150-1 apply for purposes of
this section.

(1) Geographic jurisdiction means the
area encompassed by the boundaries pre-
scribed by State or local law for a govern-
mental unit or, if there are no such bound-
aries, the area in which a unit may
exercise such sovereign powers that make
that unit a governmental unit for purposes
of § 1.103-1 and this section.

(2) Governmental unit has the meaning
of "State or local governmental unit" as
defined in § 1.103-1. Thus, a govern-
mental unit is a State, territory, a pos-
session of the United States, the District
of Columbia, or any political subdivi-
sion thereof.

(3) Host approval is defined in para-
graph (b)(3) of this section.

(4) Issuer approval is defined in para-
graph (b)(2) of this section.

(5) Mortgage revenue bonds mean
qualified mortgage bonds as defined in
section 143(a), qualified veterans' mort-
gage bonds as defined in section 143(b), or
refunding bonds issued to finance mort-
gages of owner-occupied residences pursu-

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ant to applicable law in effect prior to en-
actment of section 143(a) or section 143(b).

(6) Proceeds means "proceeds" as de-
fined in § 1.141-1(b), except that it does
not include disposition proceeds.

(7) Project generally means one or more
capital projects or facilities, including land,
buildings, equipment, and other property, to
be financed with an issue, that are located on
the same site, or adjacent or proximate sites
used for similar purposes, and that are sub-
ject to the public approval requirement of
section 147(f). For an issue of mortgage
revenue bonds or an issue of qualified stu-
dent loan bonds as defined in section 144(b),
the term project means the mortgage loans
or qualified student loans to be financed
with the proceeds of the issue. For an issue
of qualified 501(c)(3) bonds as defined in
section 145, the term project means a proj-
ect as defined in the first sentence of this
definition, and also is deemed to include
working capital expenditures to be financed
with proceeds of the issue.

(8) Public approval information is de-
fined in paragraph (f)(6)(i) of this section.

(9) Public hearing is defined in para-
graph (d)(1) of this section.

(10) Reasonable public notice is de-
fined in paragraph (d)(4) of this section.

(11) Voter referendum means a vote by
the voters of the affected governmental
unit conducted in the same manner and
time as voter referenda on matters relating
to governmental spending or bond issu-
ances by the governmental unit under ap-
plicable State and local law.

(h) Applicability date. This section ap-
plies to bonds issued pursuant to a public
approval occurring on or after the date
that is 90 days after publication of the
Treasury decision adopting these rules as
final regulations in the Federal Register.
For bonds issued pursuant to a public ap-
proval occurring before that date, see
§ 5f.103-2 as contained in 26 CFR part 5f,
revised as of the date of the most recent
annual revision.

#### PART 5f-TEMPORARY INCOME TAX REGULATIONS UNDER THE TAX EQUITY AND FISCAL RESPONSIBILITY ACT OF 1982

Par. 3. The authority citation for part 5f
continues to read in part as follows:
Authority: 26 U.S.C. 7805 * *

§5f.103-2 [Removed]

Par. 4. Section 5f.103-2 is removed.
Kirsten Wielobob,
Deputy Commissioner for Services
and Enforcement.

(Filed by the Office of the Federal Register on September
27, 2017, 8:45 a.m., and published in the issue of the Federal
Register for September 28, 2017, 82 F.R. 45233)

## Rev. Proc. 2017-54

### SECTION 1. PURPOSE

This revenue procedure publishes the
amounts of unused housing credit carry-
overs allocated to qualified states under
§ 42(h)(3)(D) of the Internal Revenue
Code for calendar year 2017.

### SECTION 2. BACKGROUND

Rev. Proc. 92-31, 1992-1 C.B. 775,
provides guidance to state housing credit
agencies of qualified states on the proce-
dure for requesting an allocation of un-
used housing credit carryovers under
§ 42(h)(3)(D). Section 4.06 of Rev. Proc.
92-31 provides that the Internal Revenue
Service will publish in the Internal Reve-
nue Bulletin the amount of unused hous-
ing credit carryovers allocated to qualified
states for a calendar year from a national
pool of unused credit authority (the Na-
tional Pool). This revenue procedure pub-
lishes these amounts for calendar year
2017.

### SECTION 3. PROCEDURE

The unused housing credit carryover
amount allocated from the National Pool
by the Secretary to each qualified state for
calendar year 2017 is as follows:

Qualified State

Amount Allocated

Alabama

52,860

California

426,613

Connecticut

38,873

Delaware

10,348

Florida

224,039

Idaho

18,294

Illinois

139,141

Kansas

31,600

Kentucky

48,226

Qualified State

Amount Allocated

Maryland

65,393

Massachusetts

74,038

Michigan

107,912

Minnesota

59,997

Montana

11,331

Nebraska

20,729

New Hampshire

14,508

New Jersey

97,218

New Mexico

22,619

New York

214,614

North Carolina

110,287

Ohio

126,238

Oklahoma

42,646

Oregon

44,492

Pennsylvania

138,953

South Dakota

9,407

Texas

302,842

Utah

33,164

Vermont

6,789

Virginia

91,429

Washington

79,214

West Virginia

19,902

Wisconsin

62,809

## EFFECTIVE DATE

This revenue procedure is effective for
allocations of housing credit dollar amounts
attributable to the National Pool component
of a qualified state's housing credit ceiling
for calendar year 2017.

## DRAFTING INFORMATION

The principal author of this revenue
procedure is James A. Holmes of the Of-
fice of Associate Chief Counsel (Pass-
throughs and Special Industries). For fur-
ther information regarding this revenue
procedure, contact Mr. Holmes at (202)
317-4137 (not a toll-free number).

## Section 42 .- Low-Income Housing Credit

26 CFR 1.42-14. Allocation rules for post-1989
State housing credit ceiling amounts. Guidance is
provided to state housing credit agencies of qualified
states that request an allocation of unused housing
credit carryover under section 42(h)(3)(D) of the
Internal Revenue Code. See Rev. Proc. 2017-54,
page 336.

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# 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
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the 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 with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is 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
with amplified and clarified, above).

Obsoleted describes 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.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes 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
published ruling is first modified and then,
as modified, is superseded.

Supplemented is 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
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is 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 following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

TFE-Transferee.

TFR-Transferor.

CI-City.

GR-Grantor.

IC-Insurance Company.

I.R.B .- Internal Revenue Bulletin.

TR-Trust.

CY-County.

LE-Lessee.

TT-Trustee.

D-Decedent.

LP-Limited Partner.

U.S.C .- United States Code.

DC-Dummy Corporation.

LR-Lessor.

X-Corporation.

DE-Donee.

Del. Order-Delegation Order.

Nonacq .- Nonacquiescence.

O Organization.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

T.D .- Treasury Decision.

C.B .- Cumulative Bulletin.

CFR-Code of Federal Regulations.

GP-General Partner.

T.I.R .- Technical Information Release.

COOP-Cooperative.

TP-Taxpayer.

Ct.D .- Court Decision.

M-Minor.

Y-Corporation.

Z-Corporation.

DISC-Domestic International Sales Corporation.

DR-Donor.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

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## Numerical Finding List1

Bulletin 2017-27 through 2017-42

### Action on Decision:

2017-5, 2017-27 I.R.B. 1
2017-6, 2017-33 I.R.B. 194
2017-7, 2017-42 I.R.B. 311

### Announcements:

2017-05, 2017-27 I.R.B. 5
2017-08, 2017-28 I.R.B. 9
2017-09, 2017-35 I.R.B. 219
2017-10, 2017-33 I.R.B. 210
2017-11, 2017-39 I.R.B. 255
2017-12, 2017-38 I.R.B. 238
2017-13, 2017-40 I.R.B. 271

### Notices:

2017-36, 2017-33 I.R.B. 208
2017-37, 2017-29 I.R.B. 89
2017-38, 2017-30 I.R.B. 147
2017-39, 2017-31 I.R.B. 150
2017-40, 2017-32 I.R.B. 190
2017-41, 2017-34 I.R.B. 211
2017-42, 2017-34 I.R.B. 212
2017-43, 2017-36 I.R.B. 224
2017-44, 2017-36 I.R.B. 226
2017-45, 2017-38 I.R.B. 232
2017-46, 2017-41 I.R.B. 275
2017-47, 2017-38 I.R.B. 232
2017-48, 2017-39 I.R.B. 254
2017-49, 2017-40 I.R.B. 258
2017-50, 2017-41 I.R.B. 280
2017-51, 2017-40 I.R.B. 260
2017-52, 2017-40 I.R.B. 262
2017-53, 2017-42 I.R.B. 318
2017-54, 2017-42 I.R.B. 321
2017-55, 2017-42 I.R.B. 324
2017-57, 2017-42 I.R.B. 325
2017-58, 2017-42 I.R.B. 326

### Proposed Regulations:

REG-128841-07, 2017-42 I.R.B. 327
REG-139633-08, 2017-31 I.R.B. 175

REG-128483-15, 2017-32 I.R.B. 191

REG-136118-15, 2017-28 I.R.B. 9
REG-105004-16, 2017-41 I.R.B. 295
REG-125374-16, 2017-41 I.R.B. 300

### Revenue Procedures:

2017-41, 2017-29 I.R.B. 92
2017-42, 2017-29 I.R.B. 124

2017-43, 2017-31 I.R.B. 153
2017-44, 2017-35 I.R.B. 216

2017-45, 2017-35 I.R.B. 216
2017-47, 2017-38 I.R.B. 233

### Revenue Procedures :- Continued

2017-48, 2017-36 I.R.B. 229
2017-50, 2017-37 I.R.B. 230
2017-52, 2017-41 I.R.B. 283
2017-53, 2017-40 I.R.B. 263
2017-54, 2017-42 I.R.B. 336

### Revenue Rulings:

2017-14, 2017-27 I.R.B. 2
2017-15, 2017-32 I.R.B. 176
2017-16, 2017-35 I.R.B. 215
2017-17, 2017-36 I.R.B. 222
2017-18, 2017-39 I.R.B. 239
2017-19, 2017-40 I.R.B. 257
2017-20, 2017-41 I.R.B. 273

Treasury Decisions:

9819, 2017-29 I.R.B. 85
9820, 2017-32 I.R.B. 178

9821, 2017-32 I.R.B. 181
9822, 2017-33 I.R.B. 195
9823, 2017-33 I.R.B. 206
9824, 2017-42 I.R.B. 312

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017-01 through 2017-26 is in Internal Revenue Bulletin
2017-26, dated June 27, 2017.

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## Finding List of Current Actions on Previously Published Items1

Bulletin 2017-27 through 2017-42

Notices:

2015-77
Amplified by
Notice 2017-40, 2017-32 I.R.B. 190

2017-10
Modified by
Notice 2017-58, 2017-42 I.R.B. 326
2017-29
Modified by
Notice 2017-58, 2017-42 I.R.B. 326

### Revenue Procedures:

2016-27
Modified by
Rev. Proc. 2017-43, 2017-31 I.R.B. 153

2016-27
Superseded by
Rev. Proc. 2017-43, 2017-31 I.R.B. 153

2016-48
Superseded by
Rev. Proc. 2017-48, 2017-36 I.R.B. 232

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017-01 through 2017-26 is in Internal Revenue Bulletin
2017-26, dated June 27, 2017.

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# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

# We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.