Internal Revenue Bulletin 2018-7 (PDF rendition): IRS Notices

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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.
Administrative, Income Tax, Special
Announcement
Notice 2018–08, page 352.
This Notice announces that the Treasury Department and IRS
are suspending withholding obligations under section 1446(f)
with respect to certain publicly traded partnership interests
pending further guidance. The notice further announces that
the Treasury Department and IRS intend to issue future regu-
lations or other guidance on how to withhold, deposit, and
report the tax withheld under section 1446(f) with respect to a
disposition of an interest in a publicly traded partnership.
Employment Tax
Notice 2018–14, page 353.
This notice (1) extends the effective period of Forms W-4
furnished for 2017 to claim exemption from income tax with-
holding under § 3402(n) for 2017 from February 15, 2018 until
February 28, 2018 and temporarily permits employees to
claim exemption from withholding under § 3402(n) for 2018 by
using 2017 Form W-4, (2) suspends the requirement that
employees must furnish their employers new Forms W-4 within
10 days of changes of status resulting in fewer withholding
allowances, (3) provides that the optional withholding rate on
supplemental wage payments is 22% for taxable years 2018
through 2025, and (4) provides that, for 2018, withholding on
annuities or similar periodic payments where no withholding
certificate is in effect is based on treating the payee as a
married individual claiming three withholding allowances under
§ 3405(a)(4).
Exempt Organizations
Rev. Proc. 2018–10, page 355.
The Revenue Procedure modifies Revenue Procedure 2018–5
by applying the procedures for Exempt Organizations determi-
nation letters to new Form 1024-A, Application for Recognition
of Exemption Under Section 501(c)(4) of the Internal Revenue
Code.
Administrative
Rev. Proc. 2018–13, page 356.
The revenue procedure sets forth the unpaid loss discount
factors for the 2017 accident year for purposes of section 846
of the Internal Revenue Code. The revenue procedure also
prescribes the salvage discount factors for the 2017 accident
year, which must be used to compute discounted estimated
salvage recoverable under section 832 of the Internal Revenue
Code.
Finding Lists begin on page ii.
Bulletin No. 2018–7
February 12, 2018

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.
February 12, 2018Bulletin No. 2018–7

Part III. Administrative, Procedural, and Miscellaneous
Revised Timeline and Other
Guidance Regarding the
Implementation of New
Section 1446(f)
Notice 2018–08
SECTION 1. OVERVIEW
This notice announces that the Depart-
ment of the Treasury (“Treasury Depart-
ment”) and the Internal Revenue Service
(“IRS”) are suspending the application of
new section 1446(f) of the Internal Reve-
nue Code (“Code”) in the case of a dispo-
sition of certain publicly traded partner-
ship interests. New section 1446(f) was
added by section 13501 of “An Act to
provide for reconciliation pursuant to ti-
tles II and V of the concurrent resolution
on the budget for fiscal year 2018,” P.L.
115–97 (the “Act”), which was enacted on
December 22, 2017. Section 13501 of the
Act also added new section 864(c)(8).
Section 2 of this notice provides back-
ground on new sections 864(c)(8) and
1446(f). Section 3 of this notice describes
the revised timeline for the application of
new section 1446(f) to a disposition of
certain interests in publicly traded partner-
ships. Section 4 of this notice requests
comments and provides contact informa-
tion.
SECTION 2. BACKGROUND
In general, new section 864(c)(8) pro-
vides that a nonresident alien individual’s
or foreign corporation’s gain or loss from
the sale, exchange, or other disposition of
a partnership interest is effectively con-
nected with the conduct of a trade or busi-
ness in the United States to the extent that
the person would have had effectively
connected gain or loss had the partnership
sold all of its assets at fair market value.
New section 864(c)(8) applies to sales,
exchanges, or other dispositions occurring
on or after November 27, 2017. See Rev-
enue Ruling 91–32, 1991–1 C.B. 107, for
the IRS’s position with respect to sales,
exchanges, or other dispositions of an in-
terest in a partnership occurring before
November 27, 2017.
In general, new section 1446(f)(1) pro-
vides that if any portion of the gain on any
disposition of an interest in a partnership
would be treated under new section
864(c)(8) as effectively connected with
the conduct of a trade or business within
the United States (“effectively connected
gain”), then the transferee must withhold a
tax equal to 10 percent of the amount
realized on the disposition. Under an ex-
ception in new section 1446(f)(2), how-
ever, withholding is generally not required
if the transferor furnishes an affidavit to
the transferee stating, among other things,
that the transferor is not a foreign person.
New section 1446(f)(6) authorizes the
Secretary to issue such regulations or
other guidance as may be necessary to
carry out the purposes of new section
1446(f), including regulations providing
for exceptions from the provisions of new
section 1446(f). Furthermore, new section
1446(g) authorizes regulations that are
necessary to carry out the purposes of new
section 1446 generally, including regula-
tions providing for the application of new
section 1446 in the case of publicly traded
partnerships. New section 1446(f) applies
to sales, exchanges, or other dispositions
occurring after December 31, 2017.
SECTION 3. TIMING OF
APPLICATION OF NEW SECTION
1446(f) TO DISPOSITIONS OF
CERTAIN PUBLICLY TRADED
PARTNERSHIP INTERESTS
Stakeholders have indicated that, in the
case of a disposition of a publicly traded
partnership interest, applying new section
1446(f) without guidance presents signif-
icant practical problems. For example,
stakeholders stated that a transferee of an
interest in a publicly traded partnership
typically will not be able to determine
whether the transferor partner is foreign or
domestic or whether any portion of a
transferor partner’s gain would be treated
under new section 864(c)(8) as effectively
connected gain. This may be the case be-
cause publicly traded partnership interests
are generally held in street name by a
broker and transferred through a clearing-
house. Moreover, a particular sale may be
aggregated with other sales and purchases
of partnership interests by other customers
of the same broker. As a result, it may be
difficult for a transferee to determine
whether it must withhold under new sec-
tion 1446(f). Furthermore, although the
Conference Report suggests the Treasury
Department and the IRS provide guidance
providing that in the case of a publicly
traded partnership interest sold by a for-
eign partner through a broker, the broker
may deduct and withhold on behalf of the
transferee, H.R. Rep. No. 115–466, at 511
(2017), until guidance is provided and
new withholding and reporting systems
are developed, it would not be possible for
brokers to perform any such withholding.
In consideration of these concerns and
others raised by stakeholders, and to allow
for an orderly implementation of the re-
quirements of new section 1446(f), the
Treasury Department and the IRS have
determined that withholding under new
section 1446(f) should not be required
with respect to any disposition of an in-
terest in a publicly traded partnership
(within the meaning of section 7704(b))
until regulations or other guidance have
been issued under new section 1446(f).
This temporary suspension is limited to
dispositions of interests that are publicly
traded and does not extend to non-
publicly traded interests. The Treasury
Department and the IRS intend to issue
future regulations or other guidance on
how to withhold, deposit, and report the
tax withheld under new section 1446(f)
with respect to a disposition of an interest
in a publicly traded partnership. Future
guidance under new section 1446(f) with
respect to a disposition of an interest in a
publicly traded partnership will be pro-
spective and will include transition rules
to allow sufficient time to prepare systems
and processes for compliance.
The rules described in this notice sus-
pending withholding under new section
1446(f) do not extend to new section
864(c)(8), which remains applicable.
SECTION 4. REQUEST FOR
COMMENTS AND CONTACT
INFORMATION
The Treasury Department and the IRS
request comments on the rules to be is-
sued under new section 1446(f). Com-
ments are specifically requested regard-
February 12, 2018Bulletin No. 2018–7
352

ing: (i) the application of new section
1446(f) to interests in publicly traded part-
nerships, including the role of brokers in
collecting the tax; (ii) rules for determin-
ing the amount realized taking into ac-
count section 752(d); and (iii) procedures
for requesting a reduced amount required
to be withheld, including how to deter-
mine an appropriate reduced amount and
whether such procedures should be auto-
matic or require approval by the IRS. The
Treasury Department and the IRS also
request comments on whether a temporary
suspension of new section 1446(f) for
partnership interests that are not publicly
traded partnership interests is needed and
what additional guidance, or forms and
instructions, may be needed to assist tax-
payers in applying new sections 864(c)(8)
and 1446(f).
Written comments may be submitted to
the Office of Associate Chief Counsel (In-
ternational), Attention: Ronald M. Gootzeit,
Internal Revenue Service, IR-4569B, 1111
Constitution Avenue, NW, Washington,
DC 20224. Alternatively, taxpayers
may submit comments electronically to
Notice.comments@irscounsel.treas.gov.
Comments will be available for public
inspection and copying.
The principal author of this notice is
Mr. Gootzeit of the Office of Associate
Chief Counsel (International). For further
information regarding this notice, contact
Mr. Gootzeit at (202) 317-6937 (not a
toll-free number).
Guidance on Withholding
Rules
Notice 2018–14
I. PURPOSE
This notice: (1) extends the effective
period of Forms W-4, Employee’s With-
holding Allowance Certificate, furnished
to claim exemption from income tax with-
holding under section 3402(n) of the In-
ternal Revenue Code (Code) for 2017
until February 28, 2018, and permits em-
ployees to claim exemption from with-
holding for 2018 by temporarily using the
2017 Form W-4; (2) temporarily suspends
the requirement under section 3402(f)(2)
(B)
1
that employees must furnish their
employers new Forms W-4 within 10 days
of changes in status that reduce the with-
holding allowances they are entitled to
claim; (3) provides that the optional with-
holding rate on supplemental wage pay-
ments under Treas. Reg. § 31.3402(g)–1
is 22 percent for 2018 through 2025; and
(4) provides that, for 2018, withholding
under section 3405(a)(4) on periodic pay-
ments when no withholding certificate is
in effect is based on treating the payee as
a married individual claiming three with-
holding allowances.
Sections 11001 and 11041 of “An Act
to provide for reconciliation pursuant to
titles II and V of the concurrent resolution
on the budget for fiscal year 2018,” P.L.
115–97 (the “Act”), which was enacted on
December 22, 2017, made significant
changes to income tax rates, income tax
deductions and credits, and federal in-
come tax withholding. The Internal Rev-
enue Service (IRS) is currently working
on revising Form W-4 to reflect the
changes made by the Act, such as changes
in available itemized deductions, in-
creases in the child tax credit, the new
dependent credit, and the repeal of depen-
dent exemptions. As a result, the 2018
Form W-4 may not be released until after
February 15, 2018.
The Act does not mandate that employ-
ees furnish new Forms W-4 for 2018 and
expressly permits the IRS to administer
income tax withholding under section
3402 for 2018 without regard to the
changes in the withholding rules and the
suspension of personal exemptions. Ac-
cordingly, and in order to minimize bur-
den on employees and employers, the IRS
and the Department of the Treasury (Trea-
sury Department) designed the 2018 with-
holding tables to work with the Forms
W-4 that employees have already fur-
nished their employers.SeeNotice 1036,
Early Release Copies of the 2018 Percent-
age Method Tables for Income Tax With-
holding, and Publication 15 (Circular E),
Employer’s Tax Guide, for use in 2018.
For employees with simpler tax situations,
the new tables are designed to produce the
correct amount of tax withholding. The
revisions are also aimed at avoiding over-
and under-withholding of tax as much as
possible. The IRS is also working on re-
vising the withholding calculator on
www.irs.govto reflect the changes made
by the Act. When released, the modified
calculator and 2018 Form W-4 can be
used by employees who wish to update
their withholding in response to the Act or
changes in their personal circumstances in
2018. Until a new Form W-4 is issued,
employees and employers should continue
to use the 2017 Form W-4.
Section II of this notice extends the
effective period of Forms W-4 furnished
to claim exemption from income tax with-
holding for 2017 to February 28, 2018,
and describes the procedures by which
employees may claim exemption from
withholding for 2018 under section
3402(n) using the 2017 Form W-4. These
procedures expire 30 days after the 2018
Form W-4 is released. They may be relied
upon for actions taken in 2017 with re-
spect to the 2018 tax year. Section III of
this notice temporarily suspends the re-
quirement that employees must furnish
employers new Forms W-4 within 10 days
after a change in status that results in
reduced withholding allowances under
section 3402(f)(2)(B) and Treas. Reg.
§ 31.3402(f)(2)–1. Section IV of this no-
tice clarifies that the optional withholding
rate for supplemental wages is 22 percent
for taxable years beginning after Decem-
ber 31, 2017 and before January 1, 2026.
Section V of this notice provides that, for
2018, the rules for default withholding
under section 3405(a)(4) parallel the rules
for prior years and treat the payee as a
married individual claiming three with-
holding allowances.
II. GUIDANCE FOR EMPLOYEES
EXEMPT FROM WITHHOLDING
Under section 3402(n), an employee
may claim exemption from income tax
withholding if the employee certifies on
Form W-4 that (1) the employee incurred
no liability for income tax for the preced-
ing taxable year; and (2) the employee
anticipates that he or she will incur no
liability for income tax for the current
taxable year.See alsoTreas. Reg.
§§ 31.3402(f)(4)–2 and 31.3402(n)–1.
1
All references to sections in this document are to Code sections unless specifically provided otherwise.
Bulletin No. 2018–7February 12, 2018
353

Under Treas. Reg. § 31.3402(f)(4)–2 (c),
Forms W-4 furnished to the employer
claiming exemption from withholding for
a taxable year are effective up to and
including February 15 of the following
year, and an employer may continue to
rely on employees’ Forms W-4 claiming
exemption from withholding until Febru-
ary 16 of the following year. Thus, the
effective period of Forms W-4 furnished
to claim exemption from withholding un-
der section 3402(n) for 2017 is scheduled
to expire on February 15, 2018. As noted
above, due to changes in the Code made
by the Act, the IRS may not release the
2018 Form W-4 until after February 15,
2018.
To provide additional time for employ-
ers and employees to implement the pro-
cedures in this notice, the Treasury De-
partment and the IRS have determined
that 2017 Forms W-4 claiming exemption
from withholding under section 3402(n)
for 2017 may be treated as effective
through February 28, 2018. The 2017
Forms W-4 claiming exemption from
withholding for 2017 are not effective for
wage payments made after February 28,
2018.
With respect to any claim for exemp-
tion from withholding for 2018 (whether
renewing a claim from 2017 or making a
new claim), the IRS will allow employ-
ees to claim exemption using the 2017
Form W-4 until 30 days after the 2018
Form W-4 is released in one of the fol-
lowing ways: (1) modifying the 2017
Form W-4 by striking “2017” in the text
on Line 7 of the Form W-4 and entering
“2018” in its place and signing the form
in 2018; (2) modifying the 2017 Form
W-4 by entering “Exempt 2018” on Line
7 of the 2017 Form W-4 and signing the
form in 2018; (3) using the 2017 Form
W-4 without modification and signing
the form in 2018, provided that the em-
ployer establishes and communicates to
employees a procedure under which an
employee signs and furnishes the 2017
Form W-4 in 2018 to certify both that
the employee incurred no income tax
liability for 2017 and that the employee
anticipates that he or she will incur no
income tax liability for 2018 and thus
claims exemption from withholding for
2018; or (4) any method substantially
similar to (1)–(3) that clearly conveys in
writing an employee’s intent to certify
his or her exemption from withholding
for 2018.
Employers that have established elec-
tronic systems for furnishing withhold-
ing allowance certificates under Treas.
Reg. § 31.3402(f)(5)–1(c) may make al-
terations to their electronic systems to
substantially conform with options (1)–
(4) above. An employer must keep re-
cords of all Forms W-4 furnished to the
employer by its employees.SeeTreas.
Reg. § 31.6001–5(a)(13). If an employer
uses options (3) or (4) above, the em-
ployer must clearly identify 2017 Forms
W-4 furnished by employees to claim
exemption from withholding in 2017
and those furnished to claim exemption
from withholding in 2018. Employees
and employers may also rely on these
procedures for 2017 Forms W-4 that
employees signed and furnished in 2017
to claim exemption from withholding
for 2018.
Employees are reminded to furnish
employers Forms W-4 in good faith and
claim exemption from withholding for
2018 only if they did not have tax liability
in 2017 and do not anticipate any tax
liability in 2018. Any alteration or unau-
thorized addition to a 2017 Form W-4,
other than the ones described in this notice
to indicate the certificate is for exemption
in 2018, will cause the altered 2017 Form
W-4 to be invalid.SeeTreas. Reg.
§ 31.3402 (f)(2)–1(e). Moreover, any oral
or written statement clearly indicating
that an employee’s Form W-4 is false
that is made by the employee to the
employer on or before the date on which
the employee furnishes the Form W-4
also will cause the employee’s Form
W-4 to be invalid.SeeTreas. Reg.
§ 31.3402(f)(2)–1(e). Employees who
claimed exemption from withholding
for 2017 and are renewing claims for
exemption from withholding for 2018
need to furnish their Forms W-4 claim-
ing exemption from withholding for
2018 by February 28, 2018, under the
revised rule of this notice. Employees
who claim exemption from withholding
for 2018 using the 2017 Form W-4 as
permitted by this notice do not need to
furnish a 2018 Form W-4 after the 2018
Form W-4 is released.
III. TEMPORARY SUSPENSION OF
10-DAY REQUIREMENT TO
FURNISH NEW FORMS W-4 TO
EMPLOYERS
Section 3402(f)(2)(B) and Treas. Reg.
§ 31.3402(f)(2)–1(b) provide that if a
change in status occurs that reduces the
number of withholding allowances to
which employees are entitled, employees
must, within 10 days, furnish the em-
ployer with a new Form W-4 claiming the
proper number of withholding allow-
ances.
The Treasury Department and the IRS
have determined that employees experi-
encing a change in status that causes a
reduction in the number of withholding
allowances are not required to furnish em-
ployers new withholding allowance certif-
icates until 30 days after the 2018 Form
W-4 is released. Moreover, because the
2018 withholding tables are designed to
work with the Forms W-4 that employees
have already furnished their employers,
employees who have a reduction in the
number of withholding allowances solely
due to the changes made by the Act are
not required to furnish employers new
withholding allowance certificates during
2018. However, employees may update
their withholding at any time in response
to the Act. Employees who choose to up-
date their withholding may use the 2017
Form W-4 instead of the 2018 Form W-4
to report changes in withholding allow-
ances until 30 days after the 2018 Form
W-4 is released. Likewise, new hires may
continue to claim allowances by using the
2017 Form W-4 until 30 days after the
2018 Form W-4 is released. Employees
who furnish new Forms W-4 using a 2017
Form W-4 do not need to furnish a 2018
Form W-4 after the 2018 Form W-4 is
released.
IV. OPTIONAL FLAT RATE FOR
WITHHOLDING ON
SUPPLEMENTAL WAGES
Under certain circumstances, employ-
ers may withhold income tax from supple-
mental wage payments at an optional flat
rate.SeeTreas. Reg. § 31.3402(g)–1. Sec-
tion 904(a) of the American Jobs Creation
Act of 2004 (AJCA, P.L. 108–357),
which is not included in the Code, pro-
vides that for purposes of optional flat rate
February 12, 2018Bulletin No. 2018–7
354

withholding, the “rate to be used in deter-
mining the amount to be so deducted and
withheld shall not be less than 28 percent
(or the corresponding rate in effect under
section 1(i)(2) of the Internal Revenue
Code of 1986 for taxable years beginning
in the calendar year in which the pay-
ment is made).” Accordingly, Treas.
Reg. § 31.3402(g)–1(a)(7)(iii)(F) pro-
vides that employers using the optional
flat rate withhold “[f]rom supplemental
wages paid after December 31, 2004, by
using a flat percentage rate of 28 percent
(or the corresponding rate in effect un-
der section 1(i)(2) for taxable years be-
ginning in the calendar year in which the
payment is made).” Under Treas. Reg.
§ 31.3402(g)–1(a)(7)(iii)(F), the op-
tional withholding rate for supplemental
wage payments made in 2005 through
2017 was 25 percent because that was
“the corresponding rate in effect under
section 1(i)(2).”
2
The Act changed the income tax rate
tables effective under section 1 by adding
section 1(j) to the Code. Section 1(j)(1)
provides that “[i]n the case of a taxable
year beginning after December 31, 2017,
and before January 1, 2026—(A) subsec-
tion (i) shall not apply, and (B) this sec-
tion (other than subsection (i)) shall be
applied as provided in paragraphs (2)
through (6).” Section 1(j)(2) provides the
income tax rate tables that are to be ap-
plied for taxable years beginning after De-
cember 31, 2017, and before January 1,
2026. Based on the change in the rate
tables under added section 1(j), the op-
tional flat rate changed from 25 percent to
22 percent for wages paid during 2018
and the remainder of the period to which
section 1(j) of the Code applies.SeeNo-
tice 1036.
Employers and other entities paying
supplemental wages should implement the
22 percent optional flat rate for withhold-
ing on supplemental wages as soon as
possible, but not later than February 15,
2018. Employers using optional flat rate
withholding that withheld at a higher rate
than 22 percent (for example, employers
that withheld at the 2017 optional flat rate
of 25 percent) may, but are not required
to, correct such withholding on supple-
mental wages paid on or after January 1,
2018, and before February 15, 2018, un-
der the rules applicable to corrections of
overcollections of federal income tax.See
Treas. Reg. §§ 31.6413(a)–1(b) and
31.6413(a)–2(c).
V. WITHHOLDING UNDER
SECTION 3405 FOR PERIODIC
PAYMENTS IF NO WITHHOLDING
CERTIFICATE IS IN EFFECT
Under section 3405, the payor of cer-
tain periodic payments for pensions, an-
nuities, and other deferred income gener-
ally is required to withhold from the
payments as if they were wages unless an
individual elects not to have withholding
apply to the periodic payment. (The elec-
tion is unavailable with respect to certain
payments to be made outside of the
United States or its possessions.Seesec-
tion 3405(e)(13).) The withholding elec-
tion generally is made using Form W-4P,
Withholding Certificate for Pension or
Annuity Payments.
Under the law in effect before 2018,
section 3405(a)(4) provided that, in the
case of a payee entitled to periodic pay-
ments with respect to which a withholding
certificate has not been furnished, the
amount to be withheld from each such
payment “shall be determined by treating
the payee as a married individual claim-
ing 3 withholding exemptions.” The Act
amended section 3405(a)(4) to provide
that the withholding rate when no with-
holding certificate is furnished “shall be
determined under rules prescribed by
the Secretary.”Seesection 11041(c)(2)
(G) of the Act. For 2018, the rules for
withholding when no withholding certif-
icate is furnished with respect to peri-
odic payments under section 3405(a)
will parallel the rules for prior years and
be based on treating the payee as a mar-
ried individual claiming three withhold-
ing allowances.
DRAFTING INFORMATION
The principal authors of this notice are
A.G. Kelley and Mikhail Zhidkov of the
Office of Associate Chief Counsel (Tax
Exempt and Government Entities). How-
ever, other personnel from the Treasury
Department and the IRS participated in its
development. For further information re-
garding this notice, contact Mikhail Zhid-
kov at (202) 317-4774 (not a toll-free
number).
26 CFR 601.201: Rulings and determination letters.
Rev. Proc. 2018–10
SECTION 1. PURPOSE
This revenue procedure modifies Rev-
enue Procedure 2018–5, 2018–1 I.R.B.
233, by applying the procedures for Ex-
empt Organizations determination letters
to new Form 1024-A,Application for
Recognition of Exemption Under Section
501(c)(4) of the Internal Revenue Code.
SECTION 2. BACKGROUND
.01 Section 506, added to the Code on
December 18, 2015, by the Protecting
Americans from Tax Hikes Act of 2015
(Pub. L. No. 114–113, div. Q) (the PATH
Act), requires a section 501(c)(4) organi-
zation, no later than 60 days after the
organization is established, to notify the
Commissioner that it is operating as a
section 501(c)(4) organization. Section
506(f) provides that an organization may
separately request a determination of its
tax-exempt status. In discussing section
506(f), the Joint Committee on Taxation
states that it is intended that such a request
for a determination be submitted on a new
form (separate from Form 1024,Applica-
tion for Recognition of Exemption Under
Section 501(a)) that clearly states that
such a request is optional. See Staff
of Joint Committee on Taxation, 114th
Cong., 1st Sess., Technical Explanation of
the Protecting Americans from Tax Hikes
Act of 2015, House Amendment #2 to the
Senate Amendment to H.R. 2029 (Rules
Committee Print 114–40), at 241 (Dec.
17, 2015). In response, the IRS created
new Form 1024-A, available at IRS.gov,
for use by an organization choosing to
apply for recognition of exempt status un-
der section 501(a) as an organization de-
scribed in section 501(c)(4).
.02 Form 1024 will continue to be used
by an organization seeking recognition of
exempt status under section 501(a) as
an organization described in section
2
Section 1(i)(2)(A) provides that the rate tables under sections 1(a), 1(b), 1(c), 1(d), and 1(e) shall be applied “by substituting ‘25%’ for ‘28%’ each place it appears . . . .”
Bulletin No. 2018–7February 12, 2018
355

501(c)(2), (5), (6), (7), (8), (9), (10),
(12), (13), (15), (17), (19), or (25).
.03 Submitting Form 1024-A does not
satisfy an organization’s requirement to
notify the Commissioner that it is operat-
ing under section 501(c)(4), as required by
section 506. See IRS.gov for information
on satisfying the notification requirement
using Form 8976,Notice of Intent to Op-
erate Under Section 501(c)(4).
SECTION 3. MODIFICATIONS TO
REVENUE PROCEDURE 2018–5
.01 The first paragraph of section
4.02(3) of Rev. Proc. 2018–5 is modified
to read as follows:
(3)Form 1024 application.An orga-
nization seeking a determination letter
from the Service recognizing exemption
under § 501(c)(2), (5), (6), (7), (8), (9),
(10), (12), (13), (15), (17), (19), or (25)
must submit a completed Form 1024,Ap-
plication for Recognition of Exemption
Under Section 501(a), along with Form
8718,User Fee for Exempt Organization
Determination Letter Request.
.02 Section 4.02 of Rev. Proc. 2018–5
is modified by adding new paragraph (7)
to read as follows:
(7)Form 1024-A application.An or-
ganization seeking a determination letter
from the Service recognizing exemption
under § 501(c)(4) must submit a com-
pleted Form 1024-A,Application for Rec-
ognition of Exemption Under Section
501(c)(4) of the Internal Revenue Code,
along with Form 8718. In the case of an
organization that provides credit counsel-
ing services and seeks recognition of ex-
emption under § 501(c)(4), see § 501(q).
Section 501(c)(4) organizations may
choose to seek a determination letter rec-
ognizing exemption under § 501(c)(4) by
filing Form 1024-A, but are not required
to do so except in certain cases (see, for
example, § 6033(j)(2) regarding failures
to file annual information returns or an-
nual electronic notifications required un-
der § 6033(a) or (i)).
.03 Section 4.04(3) of Rev. Proc.
2018–5 is renumbered to paragraph
4.04(4) and is modified to read as follows:
(4)Authorized representatives for
all other requests.Except as provided in
section 4.04(1), (2), and (3), to sign the
request, or to appear before the Service in
connection with the request, the represen-
tative must be listed in Appendix B.
.04 Section 4.04 of Rev. Proc. 2018–5
is modified by adding new paragraph (3)
to read as follows:
(3)Individual or representative au-
thorized to sign Form 1024-A.In the
case of a request for a determination letter
made by filing Form 1024-A, an officer, a
director, a trustee who is authorized to sign,
or a representative authorized by a power of
attorney (see section 4.05 of this revenue
procedure), must sign the application.
.05 Section 4.06(1) of Rev. Proc.
2018–5 is modified to read as follows:
(1)Penalty of perjury statement re-
quirements for requests for determina-
tion letters made on Form 1023, 1023-
EZ, 1024, 1024-A, or 8940.The signature
of an individual described in section
4.04(1), (2), or (3) of this revenue proce-
dure meets the penalty of perjury state-
ment signature requirements for requests
on Form 1023, 1023-EZ, 1024, 1024-A,
or 8940, as applicable.
.06 The third paragraph of section
4.06(2) of Rev. Proc. 2018–5 is modified
to read as follows:
This declaration must be signed and
dated by the taxpayer, not the taxpayer’s
representative authorized by a power of
attorney. The signature of an individual
described in section 4.04(1) is the signa-
ture of the taxpayer for purposes of the
penalty of perjury statement. The signa-
ture of an authorized representative de-
scribed in section 4.04(2), (3), or (4) will
not meet the penalty of perjury statement
requirements (except as otherwise pro-
vided in Appendix B). See the instructions
to the relevant form for additional detail.
Neither a stamped signature nor a faxed
signature is permitted.
.07 Section 15.01(1)(a) of Rev. Proc.
2018–5 is modified to read as follows:
(a) applications for recognition of tax
exemption on Form 1023, Form 1024,
Form 1024-A, and Form 1028;
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2018–5 is modified.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
January 16, 2018.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Chelsea Rubin of the Office
of Associate Chief Counsel (Tax Exempt
and Government Entities). For additional
information, please contact Ms. Rubin at
202-317-5800 (not a toll-free number).
26 CFR 601.201: Rulings and determination letters.
(Also: Part I, Sections 832, 846; 1.832–4, 1.846–1.)
Rev. Proc. 2018–13
SECTION 1. PURPOSE
This revenue procedure prescribes the
unpaid loss discount factors and salvage
discount factors for the 2017 accident year
for use in taxable years beginning on or
before December 31, 2017. These dis-
count factors will be used to compute dis-
counted unpaid losses under § 846 of the
Internal Revenue Code and discounted es-
timated salvage recoverable under § 832,
respectively.
This revenue procedure also alerts tax-
payers to amendments made to § 846 by
section 13523 of “An Act to provide for
reconciliation pursuant to titles II and V of
the concurrent resolution on the budget
for fiscal year 2018” (H.R. 1, P.L. 115–
97) (the “Act”). These amendments are
effective for taxable years beginning after
December 31, 2017.
SECTION 2. BACKGROUND
.01 Discounted Unpaid Losses
Section 846 provides that discounted
unpaid losses must be separately deter-
mined for each accident year of each line
of business by applying an interest rate
determined under § 846(c) and the appro-
priate loss payment pattern to the amount
of unpaid losses as measured at the end of
the tax year.
Section 846(d) directs the Secretary to
use the most recent aggregate loss pay-
ment data of property and casualty insur-
ance companies to determine and publish
a loss payment pattern for each line of
business every five years. This payment
pattern is used to discount unpaid losses
for the accident year ending with a deter-
mination year and for each of the four
succeeding accident years.
February 12, 2018Bulletin No. 2018–7
356

For taxable years beginning on or be-
fore December 31, 2017, § 846(e) allows
a taxpayer to make an election in each
determination year to use its own histori-
cal loss payment pattern instead of the
pattern published by the Secretary. This
election does not apply to any interna-
tional insurance or reinsurance line of
business.
Section 846(f)(4) defines the term “line
of business” as a category for the report-
ing of loss payment patterns on the annual
statement for fire and casualty companies
approved by the National Association of
Insurance Commissioners, except that the
multiple peril lines shall be treated as a
single line of business. Section 846(f)(5)
states that the term “multiple peril lines”
means the lines of business relating to
farmowners multiple peril, homeowners
multiple peril, commercial multiple peril,
ocean marine, aircraft (all perils), and
boiler and machinery.
.02 Discounted Estimated Salvage Re-
coverable
Section 832(b)(5)(A) requires that all es-
timated salvage recoverable (including that
which cannot be treated as an asset for state
accounting purposes) be taken into account
in computing the deduction for losses in-
curred. Under § 832(b)(5)(A), paid losses
are reduced by salvage and reinsurance
recovered during the taxable year. This
amount is adjusted to reflect changes in dis-
counted unpaid losses on nonlife insurance
contracts and in unpaid losses on life insur-
ance contracts. An adjustment is then made
to reflect any changes in discounted esti-
mated salvage recoverable and in reinsur-
ance recoverable.
Pursuant to § 832(b), the amount of
estimated salvage is determined on a dis-
counted basis in accordance with proce-
dures established by the Secretary.
.03 Modification of Discounting Rules
Section 13523 of the Act amended
§ 846 for taxable years beginning after
December 31, 2017. Section 13523
amended the annual rate under § 846(c)
and the computational rules for loss pay-
ment patterns under § 846(d). Section
13523 also repealed the § 846(e) election
to use the taxpayer’s own historical loss
payment pattern instead of the pattern
published by the Secretary. The transition
rule set forth in section 13523 provides
that, for the first taxable year beginning
after December 31, 2017, the unpaid
losses and the expenses unpaid (as defined
in § 832(b)(5)(B) and (6)) at the end of the
preceding taxable year, and the unpaid
losses (as defined in §§ 805(a)(1) and
807(c)(2)) at the end of the preceding tax-
able year, shall be determined as if the
amendments made by section 13523 had
applied to such unpaid losses and ex-
penses unpaid in the preceding taxable
year and by using the interest rate and loss
payment patterns applicable to accident
years ending with calendar year 2018, and
any adjustment shall be taken into account
ratably in such first taxable year and the 7
succeeding taxable years. For subsequent
taxable years, such amendments shall be
applied with respect to unpaid losses and
expenses unpaid for accident years ending
with or before calendar year 2018 by us-
ing the interest rate and loss payment pat-
terns applicable to accident years ending
with calendar year 2018.
.04 Discount Factors for 2017
Pursuant to § 846(d), the Secretary has
determined a loss payment pattern for
each property and casualty line of busi-
ness for the 2017 determination year for
taxable years beginning on or before De-
cember 31, 2017. The loss payment pat-
terns for the 2017 determination year are
based on the aggregate loss payment in-
formation reported on the 2015 annual
statements of property and casualty insur-
ance companies and compiled by A.M.
Best and Co. The lines of business for the
2017 determination year are the same as
the lines of business for the 2012 deter-
mination year. See Rev. Proc. 2012–44,
2012–49 I.R.B. 645. Because section
13523 of the Act amended § 846(d), this
revenue procedure provides only the 2017
discount factors for each property and ca-
sualty line of business for the 2017 acci-
dent year.
.05 Discount Factors for 2018 and Sub-
sequent Years
In accordance with the transition rule
provided by section 13523 of the Act, for
purposes of taxable years beginning after
December 31, 2017, the Department of
Treasury and the Internal Revenue Ser-
vice intend to publish for each property
and casualty line of business a revised loss
payment pattern and discount factors for
the 2017 determination year.
SECTION 3. SCOPE
This revenue procedure applies to any
taxpayer that is required to discount un-
paid losses under § 846 for a line of busi-
ness using the discount factors published
by the Secretary, and applies to any tax-
payer that is required to discount esti-
mated salvage recoverable under § 832.
This revenue procedure applies to taxable
years beginning on or before December
31, 2017, with respect to losses incurred
in the 2017 accident year.
SECTION 4. TABLE OF DISCOUNT
FACTORS
The following table presents separately
for each line of business the unpaid loss
discount factor under § 846 for the 2017
accident year and the salvage recoverable
discount factor under § 832 for the 2017
accident year for use in taxable years be-
ginning on or before December 31, 2017.
All the discount factors presented in this
table were determined by using the appli-
cable interest rate under § 846(c) for 2017,
which is 1.46 percent.
1
All the unpaid loss
discount factors presented in this table
were determined by assuming all loss pay-
ments occur in the middle of the calendar
year. All the salvage recoverable discount
factors presented in this table were deter-
mined by assuming all estimated salvage
is recovered in the middle of the calendar
year. The salvage recoverable discount
factors presented in this table must be
used by taxpayers irrespective of whether
they elected to discount unpaid losses us-
ing their own experience under § 846(e).
1
See Table 6 in Rev. Rul. 2016–27, 2016–49 I.R.B. 781. For taxable years beginning on or before December 31, 2017, the annual rate under § 846(c)(2) for 2017 was the average of the
applicable Federal mid-term rates (as defined in § 1274(d) but based on annual compounding) effective as of the beginning of each of the calendar months in the 60-calendar-month period
ending before the beginning of the 2017 calendar year. Section 13523 of the Act amended § 846(c)(2) for taxable years beginning after December 31, 2017. The annual rate under § 846(c)(2),
as amended, will be a rate determined on the basis of the corporate bond yield curve (as defined in § 430(h)(2)(D)(i), determined by substituting ‘60-month period’ for ‘24-month period’
therein).
Bulletin No. 2018–7February 12, 2018
357

Discount Factors for Unpaid Losses and Salvage Recoverable Accident Year 2017
For use in taxable years beginning on or before December 31, 2017
Line of BusinessUnpaid Losses
Discount
Factor (%)
Salvage
Recoverable
Discount
Factor (%)
Accident and Health (Other Than Disability Income or Credit Disability Insurance)99.277999.2779
Auto Physical Damage99.195899.1075
Commercial Auto/Truck Liability/Medical96.962597.7515
Composite96.146596.8248
Fidelity/Surety97.980597.8563
Financial Guaranty/Mortgage Guaranty97.860997.2545
International (Composite)96.146596.8248
Medical Professional Liability — Claims-Made95.681996.4032
Medical Professional Liability — Occurrence93.155195.7628
Miscellaneous Casualty98.684898.8340
Multiple Peril Lines (Homeowners/Farmowners, Commercial Multiple Peril,
and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery))
97.597797.6281
Other (Including Credit)98.543797.9256
Other Liability — Claims-Made95.237995.7937
Other Liability — Occurrence94.265694.5979
Private Passenger Auto Liability/Medical97.789698.1755
Products Liability — Claims-Made93.151594.8192
Products Liability — Occurrence93.203894.7412
Reinsurance — Nonproportional Assumed Property97.256895.0813
Reinsurance — Nonproportional Assumed Liability93.325292.8718
Reinsurance — Nonproportional Assumed Financial Lines94.290892.6863
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary and Theft)98.752397.7029
Warranty99.097399.2527
Workers’ Compensation93.664593.5726
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Table 6 of Rev. Rul. 2017–24,
2017–49 I.R.B. 556, is obsolete.
2
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue pro-
cedure is Kathryn M. Sneade of the Office
of Associate Chief Counsel (Financial Insti-
tutions & Products). For further information
regarding this revenue procedure contact
Ms. Sneade at (202) 317-6995 (not a toll-
free number).
Section 846.—Discounted
unpaid losses defined.
26 C.F.R. 1.846–1: Application of discount fac-
tors. Applicable unpaid loss discount factors for the
2017 accident year for purposes of section 846. See
Rev. Proc. 2018–13, page 356.
Section 832.—Insurance
company taxable income.
26 C.F.R. 1.832–4: Gross income. Applicable
salvage discount factors for the 2017 accident year,
which must be used to compute discounted estimated
salvage recoverable under section 832. See Rev.
Proc. 2018–13, page 356.
2
Table 6 of Rev. Rul. 2017–24 provides the applicable interest rate for 2018 for purposes of §§ 846 and 807; this rate was based on the applicable Federal mid-term rates. However, sections
13523 and 13517 of the Act changed the rates to be used for purposes of §§ 846 and 807 for taxable years beginning after December 31, 2017; the rates are no longer based on the applicable
Federal mid-term rates.
Bulletin No. 2018–7February 12, 2018
1

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:
Amplifieddescribes 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).
Clarifiedis 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.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Supersededdescribes 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,modifiedand
supersededdescribes 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.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
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.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The 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.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—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.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
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.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Bulletin No. 2018–7February 12, 2018
i

Numerical Finding List
1
Bulletin 2018–1 through 2018–7
Notices:
2018-01, 2018-3 I.R.B.285
2018-02, 2018-2 I.R.B.281
2018-03, 2018-2 I.R.B.285
2018-05, 2018-6 I.R.B.341
2018-06, 2018-3 I.R.B.300
2018-07, 2018-4 I.R.B.317
2018-08, 2018-7 I.R.B.352
2018-13, 2018-6 I.R.B.341
2018-14, 2018-7 I.R.B.353
Proposed Regulations:
REG-119514-15, 2018-04 I.R.B.325
Revenue Procedures:
2018-1, 2018-1 I.R.B.1
2018-2, 2018-1 I.R.B.106
2018-3, 2018-1 I.R.B.130
2018-4, 2018-1 I.R.B.146
2018-5, 2018-1 I.R.B.244
2018-7, 2018-1 I.R.B.282
2018-8, 2018-2 I.R.B.286
2018-9, 2018-2 I.R.B.290
2018-10, 2018-7 I.R.B.355
2018-11, 2018-5 I.R.B.334
2018-12, 2018-6 I.R.B.349
2018-13, 2018-7 I.R.B.356
Revenue Rulings:
2018-01, 2018-2 I.R.B.275
2018-02, 2018-2 I.R.B.277
2018-03, 2018-2 I.R.B.278
2018-04, 2018-4 I.R.B.304
2018-05, 2018-6 I.R.B.339
Treasury Decisions:
9829, 2018-04 I.R.B.308
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017–27 through 2017–52 is in Internal Revenue Bulletin
2017–52, dated December 27, 2017.
February 12, 2018Bulletin No. 2018–7
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletin 2018–1 through 2018–7
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017–27 through 2017–52 is in Internal Revenue Bulletin
2017–52, dated December 27, 2017.
Bulletin No. 2018–7February 12, 2018
iii

INTERNAL REVENUE BULLETIN
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