us-irs-notices-irb-2018-9-pdf•Internal Revenue Bulletin 2018-9 (PDF rendition): IRS Notices
Internal Revenue Bulletin 2018-9 (PDF rendition): IRS Notices
us-irs-notices-irb-2018-9-pdfInternal Revenue Bulletin 2018-9 (PDF rendition): IRS NoticesGuidance
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.
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 Rev. Proc. 2018–16, page 383. Thisrevenue procedure provides guidance to the Chief Executive Officers (CEOs) of any State, about how certain population census tracts may be designated as Qualified Opportunity Zones for purposes of §§ 1400Z–1 and 1400Z–2 of the Internal Revenue Code. Specifically, this revenue procedure clarifies the nomination process under § 1400Z–1 by informing the CEOs of each State which census tracts in their jurisdictions are eligible to be nomi- nated to be Qualified Opportunity Zones and by providing the requirements and due dates for the nomination, certification, and designation of the zones. Additionally, this revenue procedure provides a safe harbor for applying the 25 percent limitation to the number of population census tracts in a state that may be desig- nated as Qualified Opportunity Zones. EXEMPT ORGANIZATIONS Announcement 2018–01, page 387. Serves notice to potential donors of a stipulated decision by the United States Tax Court in declaratory judgment proceed- ings under Section 7428. Announcement 2018–02, page 387. Serves notice to potential donors of a stipulated decision by the United States Tax Court in declaratory judgment proceed- ings under Section 7428. Announcement 2018–03, page 387. Serves notice to potential donors of a stipulated decision by the United States Tax Court in declaratory judgment proceed- ings under Section 7428. Rev. Proc. 2018–15, page 379. The IRS generally will not require a new exemption application from a domestic section 501(c) organization that changes its form or place of organization. Rev. Rul. 67–390 and Rev. Rul. 77–469 are obsoleted. INCOME TAX Notice 2018–15, page 376. This Notice withdraws the solicitations in Notice 2015–12, 2015–10 I.R.B. 700, and Notice 2017–66, 2017–45 I.R.B. 487, for applications for the remaining unused national limitation of authority to issue new clean renewable energy bonds (New CREBs) under § 54C of the Internal Revenue Code (the Code). Section 54C of the Code was repealed by section 13404 of Public Law No. 115–97, 131 Stat 2138 (2017) (Public Law No. 115– 97), effective for bonds issued after December 31, 2017. Notice 2018–17, page 376. In response to the devastation caused by Hurricane Maria to the Commonwealth of Puerto Rico, this notice expands the relief provided in Rev. Proc. 2014–49, 2014–37 I.R.B. 535, and Rev. Proc. 2014–50, 2014–37 I.R.B. 540. The expanded relief in this notice is limited to the Hurricane Maria PR Major Disaster (as defined in the notice). This notice also solicits public comment regarding any desirable amendments to Rev. Proc. 2014–49 and Rev. Proc. 2014–50. Rev. Proc. 2018–14, page 378. This procedure modifies Rev. Proc. 2017–60, 2017–50 I.R.B. 559, to extend the time under the safe harbor for an individual to pay to repair damage to his or her personal residence resulting from deteriorating concrete foundations containing the mineral pyrrhotite. Rev. Proc. 2018–17, page 384. This revenue procedure amends Rev. Proc. 2002–39, 2002–22 I.R.B. 1046, and Rev. Proc. 2006–45, 2006–45 I.R.B. 451, so as to prohibit specified foreign corporations (for purposes of section 965) with taxable years that end on December 31, 2017 from changing their annual accounting periods. Finding Lists begin on page ii. Bulletin No. 2018–9 February 26, 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 26, 2018Bulletin No. 2018–9 Part III. Administrative, Procedural, and Miscellaneous New Clean Renewable Energy Bonds Notice 2018–15 SECTION 1. PURPOSE This Notice withdraws the solicitations in Notice 2015–12, 2015–10 I.R.B. 700, and Notice 2017– 66, 2017– 45 I.R.B. 487, for applications for the remaining unused national limitation of authority to issue new clean renewable energy bonds (New CREBs) under § 54C of the Internal Rev- enue Code (the Code). Section 54C of the Code was repealed by section 13404 of Public Law No. 115–97, 131 Stat 2138 (2017) (Public Law No. 115–97), effec- tive for bonds issued after December 31, 2017. SECTION 2. BACKGROUND Section 54C of the Code authorized the issuance of up to $2.4 billion (volume cap) of New CREBs for qualified renew- able energy facilities (as defined in § 54C(d)(1)) (projects). Section 54C(c)(2) provided that up to 1/3 of the volume cap is to be allocated to projects to be owned by public power providers, governmental bodies, and cooperative electric compa- nies, respectively. Notice 2015–12 solicits applications for allocations of the remaining available vol- ume cap of New CREBs for projects to be owned by public power providers, govern- mental bodies, and cooperative electric companies. Section 4.c. of Notice 2015–12 provides that applications for projects to be owned by governmental bodies or coopera- tive electric companies may be submitted beginning on March 5, 2015. Section 5.a.(ii) of Notice 2015–12 provides that, except as otherwise provided by section 5 of Notice 2015–12, the Internal Revenue Service (IRS) will allocate the remaining available volume cap designated for projects to be owned by governmental bodies or coopera- tive electric companies, respectively, on a first-come, first-served basis by order of submission date (as defined in section 4.a. of Notice 2015–12). Notice 2015–12 provides no deadline for applications for projects to be owned by governmental bodies or coop- erative electric companies. Under section 4.b. of Notice 2015–12, the deadline for applications for projects to be owned by public power providers is June 3, 2015. The IRS later identified $379,549,691.35 of remaining available volume cap desig- nated for projects to be owned by public power providers. Notice 2017– 66 solicits applications from qualified issuers of New CREBs for projects to be owned by public power providers, and sets forth June 19, 2018, as the due date for submitting appli- cations.SeeSection 3 of Notice 2017– 66. SECTION 3. STATUS OF ALLOCATIONS AND THE APPLICATION PROCESS Section 13404(a) of Public Law No. 115–97 provides, in part, that part IV of subchapter A of chapter 1 of the Code is amended by striking subpart I, which con- tained § 54C of the Code. Section 13404(d) of Public Law No. 115–97 pro- vides that the amendments made by sec- tion 13404 shall apply to bonds issued after December 31, 2017. Accordingly, no bond issued after December 31, 2017, un- der any allocation of volume cap issued by the IRS under Notice 2015–12, may be treated as a New CREB. In addition, the IRS will not be processing applications for, or issuing allocations of, New CREBs volume cap under Notice 2015–12 or No- tice 2017– 66. SECTION 4. EFFECT ON OTHER DOCUMENTS This Notice obsoletes Notice 2015–12 in part by withdrawing the solicitation of applications for, and discontinuing the al- location of, New CREBs volume cap un- der sections 3, 4, and 5 of Notice 2015– 12. All other provisions of Notice 2015–12 remain in effect for bonds issued on or prior to December 31, 2017. This Notice obsoletes Notice 2017– 66. SECTION 5. DRAFTING INFORMATION The principal author of this Notice is Zoran Stojanovic of the Office of Associ- ate Chief Counsel (Financial Institutions and Products). For further information re- garding this Notice, contact Mr. Sto- janovic at 202-317-6980 (not a toll-free number). Low-Income Housing Credit Disaster Relief for the Commonwealth of Puerto Rico Notice 2018–17 I.PURPOSE In response to the devastation caused by Hurricane Maria to the Commonwealth of Puerto Rico (hereinafter, Puerto Rico), this notice expands the relief that is pro- vided in Rev. Proc. 2014 – 49, 2014 –37 I.R.B. 535, and Rev. Proc. 2014 –50, 2014 –37 I.R.B. 540. The expanded relief in this notice is limited to the Hurricane Maria PR Major Disaster, as defined be- low. Except as expressly provided in this notice, all provisions of Rev. Procs. 2014 – 49 and 2014 –50 apply to the Hur- ricane Maria PR Major Disaster without modification. This notice also solicits public com- ment regarding any desirable modifica- tions to Rev. Procs. 2014 – 49 and 2014 – 50. II.BACKGROUND Rev. Procs. 2014 – 49 and 2014 –50 provide temporary relief from certain re- quirements of §§ 42 and 142(d) of the Internal Revenue Code in the context of a major disaster. Rev. Proc. 2014 – 49 pro- vides guidance and relief to the owners of qualified low-income housing projects (each such project,a§42Project) and to Agencies (as defined in section 5.01 of Rev. Proc. 2014 – 49) that are responsible for those § 42 Projects. Rev. Proc. 2014 –50 provides guidance to issuers of exempt facility bonds financing qualified residential rental projects under § 142(d) (each such issuer, an Issuer; each such project, a § 142(d) Project) and to opera- tors of those § 142(d) Projects. Various aspects of these revenue procedures apply with respect to § 42 Projects and § 142(d) Projects both inside and outside of the area in which the major disaster occurs. February 26, 2018Bulletin No. 2018–9 376 Sections 12 through 14 of Rev. Proc. 2014 – 49 and sections 5 through 7 of Rev. Proc. 2014 –50 facilitate emergency hous- ing relief for Displaced Individuals (as defined in section 5.02 of Rev. Proc. 2014 – 49 and in section 4.02 of Rev. Proc. 2014 –50). To achieve this end, these sec- tions give owners of § 42 Projects and operators of § 142(d) Projects the option to apply certain modifications to the rules of §§ 42 and 142(d), provided that the relevant Agency or Issuer authorizes the owner or operator to do so. Among these modifications is the ability to disregard the actual income of a Displaced Individ- ual housed ina§42Project or a § 142(d) Project, even if the Displaced Individual’s income exceeds the limitations on income provided in §§ 42 or 142(d). The option to apply these modified rules is limited to a period defined in the revenue procedures as the Temporary Housing Period.See section 5.08 of Rev. Proc. 2014 – 49 and section 4.13 of Rev. Proc. 2014 –50. The Temporary Housing Period begins on the first day of the incident period, as deter- mined by the Federal Emergency Man- agement Agency (FEMA), and ends on a date determined by the Agency or Issuer. Both revenue procedures provide a date beyond which the Temporary Housing Pe- riod may not extend.Seesection 12.02(1) of Rev. Proc. 2014 – 49 and section 5.02(1) of Rev. Proc. 2014 –50. On September 20, 2017, the President of the United States issued major disaster and emergency declarations with respect to Hurricane Maria under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121–5206 (the Stafford Act), and FEMA determined certain areas within Puerto Rico to be eligible for Public As- sistance or Public Assistance and Individ- ual Assistance under the Stafford Act (the Hurricane Maria PR Major Disaster).See 82 Fed. Reg. 46820 (2017). The incident period for the Hurricane Maria PR Major Disaster began on September 17, 2017, and closed on November 15, 2017.See82 Fed. Reg. 61768 (2017). Agencies must periodically review § 42 Projects for compliance with the af- fordability and habitability requirements of § 42. See §§ 42(m)(1)(B)(iii) and 142(d)(7); also see §§ 1.42–5 and 1.42–5T of the Income Tax Regulations. Under section 9 of Rev. Proc. 2014 – 49, an Agency may extend the due date for its scheduled compliance reviews for up to one calendar year from the date of a low- income building’s restoration and place- ment again into service. That revenue pro- cedure does not delay the compliance review due dates of buildings that do not require restoration and replacement into service. Ordinarily, even though an owner has received a carryover allocation of housing credit dollar amount for a building, the benefit of that allocation may be lost if the owner does not timely meet certain prog- ress benchmarks with respect to the build- ing. First, not later than the due date in § 42(h)(1)(E)(ii), the owner’s basis in the § 42 Project containing the building must be more than 10 percent of the owner’s reasonably expected eventual basis in the project. Second, the building must be placed in service not later than the due date in § 42(h)(1)(E)(i). However, in the case of certain buildings located in major disaster areas, sections 6 and 7 of Rev. Proc. 2014 – 49 authorize the Agency responsible for a building to extend these deadlines for limited periods. III.EMERGENCY HOUSING RELIEF Solely in connection with the Hurri- cane Maria PR Major Disaster, the second sentence of section 12.02(1) in Rev. Proc. 2014 – 49 and the second sentence of sec- tion 5.02(1) in Rev. Proc. 2014 –50 are revised to read: “The Temporary Housing Period cannot extend beyond the end of May 2019.” IV.COMPLIANCE MONITORING RELIEF Under this notice, the Puerto Rico Housing Finance Authority (PRHFA) may extend the date for its compliance review of low-income buildings located in Puerto Rico notwithstanding section 9 of Rev. Proc. 2014 – 49. For any such build- ing, this extension may not last beyond one calendar year from the later of— •November 15, 2017; or •In the case of a building that has suf- fered a casualty loss due to Hurricane Maria or has been taken out of service due to that hurricane, the date of the building’s restoration and placement again in service. This extension of dates for compliance review by the PRHFA does not, however, extend the compliance monitoring dead- lines for owners. If the PRHFA learns that an owner or operator has failed to comply with the rules of § 42, as applicable, the noncompliance must be reported timely to the Internal Revenue Service (Service), along with a description of whether and how Hurricane Maria contributed to the noncompliance. V.CARRYOVER ALLOCATION RELIEF Notwithstanding the limitations in sec- tions 6 and 7 of Rev. Proc. 2014 – 49, under this notice the PRHFA may grant extensions of the due date in § 42(h)(1)(E)(ii) (regard- ing basis) for up to 12 months after the later of— •The due date prior to any extension; or •November 15, 2017. Similarly, the PRHFA may grant ex- tensions of the due date in § 42(h)(1)(E)(i) (regarding placement into service) up to December 31 of the first calendar year following the calendar year containing the due date in § 42(h)(1)(E)(ii), taking into account any extension granted under the preceding paragraph. Except for the ability to extend these two due dates for longer periods, all other procedures and limitations in sections 6 and 7 continue to apply to buildings af- fected by the Hurricane Maria PR Major Disaster. As is the case for extensions under those sections, if an owner satisfies an extended due date prescribed by the PRHFA under this notice, the Service will not assert that the owner fails to satisfy § 42(h)(1)(E)(i) or (ii), as applicable. VI.REQUEST FOR COMMENTS REGARDING POSSIBLE IMPROVEMENTS TO REVENUE PROCEDURES 2014–49 AND 2014–50 The Department of the Treasury and the Service are considering whether to make any changes to Rev. Procs. 2014 – 49 and 2014 –50, and, in that regard, request com- ments from the public regarding possible changes to the two revenue procedures. Comments should be submitted by April 12, 2018. Comments may be mailed to: Bulletin No. 2018–9February 26, 2018 377 Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2018 –17) Room 5203 P.O. Box 7604 Ben Franklin Station Washington, D.C. 20044 or hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: Courier’s Desk Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2018 –17) 1111 Constitution Avenue, N.W. Washington, D.C. 20224 Alternatively, persons may submit com- ments electronically via e-mail to the fol- lowing address: Notice.Comments@irscounsel.treas.gov. Persons should include “Notice 2018 – 17” in the subject line. All comments sub- mitted by the public will be available for public inspection and copying in their en- tirety. VII.DRAFTING INFORMATION The principal author of this notice is James W. Rider of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information re- garding this notice contact Mr. Rider at (202) 317-4137 (not a toll-free number). 26 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability. (Also Part 1, §§ 165; 1.165–7(a)(2); 1.165–7(b).) Rev. Proc. 2018–14 SECTION 1. PURPOSE This revenue procedure modifies Rev. Proc. 2017– 60, 2017–50 I.R.B. 559, to extend the time for individuals to pay to repair damage to their personal resi- dences resulting from deteriorating con- crete foundations caused by the pres- ence of the mineral pyrrhotite. SECTION 2. BACKGROUND .01 Revenue Procedure 2017– 60 pro- vides a safe harbor method that allows a taxpayer who pays to repair damage to that taxpayer’s personal residence result- ing from a deteriorating concrete founda- tion that contains the mineral pyrrhotite to treat the amount paid as a casualty loss in the year of payment. .02 The safe harbor is available to a taxpayer who has obtained a written eval- uation from a licensed engineer indicating that the foundation was made with defec- tive concrete, and has requested and re- ceived a reassessment report that shows the reduced reassessed value of the resi- dential property based on the written eval- uation from the engineer and an inspec- tion pursuant to Connecticut Public Act No. 16 – 45. The safe harbor also is avail- able to a taxpayer whose personal resi- dence is either in Connecticut or outside of Connecticut, provided the taxpayer has obtained a written evaluation from a li- censed engineer indicating that the foun- dation was made with defective concrete containing the mineral pyrrhotite. 03. To claim a casualty loss under the safe harbor in Rev. Proc. 2017– 60, a tax- payer generally must have paid to repair damage caused by a deteriorating concrete foundation before January 1, 2018. 04. In view of the unique hardships caused by the extensive repairs necessary to remedy the deteriorating concrete foun- dations and the comments received ex- pressing concern that taxpayers need ad- ditional time to make the repairs, the Department of the Treasury and the Inter- nal Revenue Service have determined that it is appropriate to modify the safe harbor in Rev. Proc. 2017– 60 to extend the time for individual taxpayers to pay to repair the damage to their personal residences. SECTION 3. MODIFICATION TO REV. PROC. 2017–60 Section 4.01 of Rev. Proc. 2017– 60, is modified and as modified, this section reads in its entirety as follows: .01 If a taxpayer pays to repair damage to that taxpayer’s personal residence caused by a deteriorating concrete foun- dation during the taxpayer’s 2016 taxable year or earlier, the taxpayer may treat the amount paid as a casualty loss on a timely Amended U.S. Individual Income Tax Re- turn (Form 1040X) for the taxable year of payment. If a taxpayer pays to repair the damage during the taxpayer’s 2017 tax- ableyear or prior to a timely filed (including extensions) original U.S. Individual Income Tax Return (Form 1040, 1040A or 1040EZ) for the 2017 taxable year, the taxpayer may treat the amount paid as a casualty loss on the taxpayer’s original 2017 income tax re- turn (or a timely filed Form 1040X for the 2017 taxable year). If a taxpayer pays to repair the damage after filing an original 2017 income tax return and prior to the last day for filing a timely Form 1040X for the 2017 taxable year, the taxpayer may treat the amount paid as a casualty loss on a timely filed Form 1040X for the 2017 tax- able year. For purposes of this revenue pro- cedure, the term “deteriorating concrete foundation” means a concrete foundation that is damaged as a result of the presence of the mineral pyrrhotite in the concrete mix- ture used before January 1, 2018, in pouring the foundation. The safe harbor under this revenue procedure is available to a tax- payer who has obtained a written eval- uation from a licensed engineer indicat- ing that the foundation was made with defective concrete, and has requested and received a reassessment report that shows the reduced reassessed value of the residential property based on the written evaluation from the engineer and an inspection pursuant to Connecticut Public Act No. 16 – 45 (Act). The safe harbor also is available to a taxpayer whose personal residence is either in Connecticut or outside of Connecticut, provided the taxpayer has obtained a written evaluation from a licensed engi- neer indicating that the foundation was made with defective concrete containing the mineral pyrrhotite. SECTION 4. EFFECTIVE DATE This modification in this revenue pro- cedure will be treated as in effect as of the effective date of Rev. Proc. 2017– 60, which is for federal income tax returns (including amended federal income tax returns) filed after November 21, 2017. SECTION 5. EFFECT ON OTHER DOCUMENTS Rev. Proc. 2017– 60 is modified. SECTION 6. DRAFTING INFORMATION The principal author of this revenue procedure is Susie K. Bird of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information re- garding this revenue procedure contact February 26, 2018Bulletin No. 2018–9 378 Susie K. Bird on (202) 317-5100 (not a toll-free number). 26 CFR 1.501(a)–1: Exemption from taxation (Also: 26 CFR 1.505(c)–1T: Notification require- ment; 26 CFR 1.506 –1T: Notification requirement; 26 CFR 1.508 –1: Notices; 26 CFR 601.201: Rulings and determination letters) Rev. Proc. 2018–15 The IRS generally will not require a new exemption application from a domestic sec- tion 501(c) organization that changes its form or place of organization. Rev. Rul. 67–390 and Rev. Rul. 77– 469 are obso- leted. SECTION 1. PURPOSE This revenue procedure reduces com- pliance burdens on certain exempt organi- zations by providing the circumstances under which the Internal Revenue Service (IRS) generally will not require domestic business entities to file a new exemption application when they change their form or state of organization. This revenue pro- cedure obsoletes Rev. Rul. 67–390 and Rev. Rul. 77– 469. SECTION 2. BACKGROUND AND ANALYSIS Section 501(a) of the Internal Revenue Code (Code) provides that an organization described in section 501(c) shall be ex- empt from taxation under Subtitle A of the Code. Section 1.501(a)–1(a)(2) of the Trea- sury Regulations provides that it is neces- sary for an organization to file an applica- tion in order to establish its exemption. Section 1.501(a)–1(a)(3) of the Trea- sury Regulations provides that an organi- zation claiming exemption under section 501(a) and described in section 501(c) shall file the form of application pre- scribed by the Commissioner. Section 505 of the Code generally pro- vides that an organization shall not be treated as described in paragraph (9), (17), or (20) of section 501(c) unless it has given notice to the Secretary that it is applying for recognition of exemption. Section 506 of the Code generally pro- vides that an organization described in section 501(c)(4) shall, not less than 60 days after the organization is established, notify the Secretary that it is operating as such. Section 508 of the Code generally pro- vides that an organization organized after October 9, 1969 shall not be treated as described in section 501(c)(3) unless it has given notice to the Secretary that it is applying for recognition of exemption. Section 1.508 –1(a)(2) of the Treasury Regulations provides that an organization seeking exemption under section 501(c)(3) files the notice described in section 508(a) by submitting a properly completed and ex- ecuted Form 1023 (or, if applicable, Form 1023–EZ) exemption application. Section 6109(a) of the Code generally provides that any person required to make a return, statement or other document un- der subtitle A shall include its identifying number. Section 6109(c) of the Code provides that the Secretary or his delegate is autho- rized to require such information as may be necessary to assign an identifying num- ber to any person. Section 301.6109 –1(a)(1)(ii)(C) of the Treasury Regulations provides that any per- son other than an individual that is required to furnish a taxpayer identifying number must use a federal Employer Identification Number (EIN). Section 301.6109 –1(h)(1) of the Treasury Regulations generally pro- vides that any entity with an EIN will retain that EIN if its federal tax classification changes under § 301.7701–3 of the Trea- sury Regulations. For special EIN rules, see § 301.6109 –1(h)(2) of the Treasury Regu- lations (entities disregarded as separate from their owners) and (i) (qualified subchapter S subsidiaries). Section 301.7701–2(a) of the Treasury Regulations provides that a business en- tity is any entity recognized for federal tax purposes(including an entity with a sin- gle owner that may be disregarded as an entity separate from its owner under § 301.7701–3 of the Treasury Regula- tions) that is not properly classified as a trust under § 301.7701– 4 of the Trea- sury Regulations or otherwise subject to special treatment under the Code. It fur- ther provides that a business entity with two or more members is classified for federal tax purposes as either a corpora- tion or a partnership, and a business entity with only one owner is classified as a corporation or is disregarded. Section 301.7701–2(b)(1) of the Trea- sury Regulations provides that a business entity organized under a federal or state statute is a corporation if the statute de- scribes or refers to the entity as incorpo- rated or as a corporation, body corporate, or body politic. Section 301.7701–2(b)(2) of the Trea- sury Regulations provides that an associ- ation as determined in § 301.7701–3 of the Treasury Regulations is a corporation. Section 301.7701–3(a) of the Treasury Regulations provides that a business en- tity that is not classified as a corporation under § 301.7701–2(b)(1), (3), (4), (5), (6), (7), or (8) (an “eligible entity”) can elect its classification for federal tax pur- poses. An eligible entity with at least two members can elect to be classified as ei- ther an association (and thus a corporation under § 301–7701–2(b)(2) of the Treasury Regulations) or a partnership, and an eli- gible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner. Section 301.7701–3(c)(1)(v)(A) of the Treasury Regulations provides that an eligible entity that has been determined to be, or claims to be, exempt from taxation under section 501(a) is treated as having made an election to be classified as an association (and thus a corporation under § 301.7701–2(b)(2) of the Treasury Reg- ulations). Rev. Proc. 2018 –5, 2018 –1 I.R.B. 233, as modified by Rev. Proc. 2018 –10, 2018 –7 I.R.B. 355, sets forth procedures for issuing determination letters on ex- empt status (in response to applications for recognition of exemption from federal income tax under section 501) under the jurisdiction of the Director, Exempt Orga- nizations (EO) Rulings and Agreements. Section 3.01 of Rev. Proc. 2018 –5 pro- vides that EO Determinations issues de- termination letters on initial qualification for exempt status of organizations de- scribed in section 501, and updated ex- empt status letters (affirmation letters) to reflect changes to an organization’s name or address. Section 3.02 of Rev. Proc. 2018 –5 provides that EO Determinations will not issue a determination letter if an organization currently recognized as ex- empt under section 501(c) seeks a new determination letter confirming that the organization is still recognized under the Bulletin No. 2018–9February 26, 2018 379 same Code section under the currently extant facts. Section 4 of Rev. Proc. 2018 –5 provides that organizations seek- ing recognition of exemption under sec- tion 501(c)(3) must submit a completed Form 1023 or Form 1023–EZ (if applica- ble), organizations seeking recognition of exemption under section 501(c)(4) must submit a completed Form 1024 –A, orga- nizations seeking recognition of exemp- tion under sections 501(c)(2), (5), (6), (7), (8), (9), (10), (12), (13), (15), (17), (19), and (25) mustsubmit a completed Form 1024, and organizations seeking recognition of exemption under sections 501(c)(11), (14), (16), (18), (21), (22), (23), (26), (27), (28), or (29), or under section 501(d) must submit a letter application. Section 11.02 of Rev. Proc. 2018 –5 provides that an organi- zation may not rely on its determination letter if there is a material change of facts, inconsistent with exemption, in the charac- ter, purpose, or method of operation of the organization. Rev. Rul. 67–390, 1967–2 C.B. 179, holds that a new exemption application is required in four cases where an organiza- tion previously recognized as exempt from federal income tax under section 501(a) makes certain changes in its struc- ture. The four structural changes are: (1) incorporation of a trust; (2) incorporation of an association; (3) reincorporation by an Act of Congress; and (4) reincorpora- tion under the laws of another state. The ruling states that each of these cases cre- ates a new legal entity and, accordingly, each new organization must file an appli- cation for exemption to establish that the new entity qualifies for exemption under the Code and applicable regulations. Rev. Rul. 77– 469, 1977–2 C.B. 196, holds that an unincorporated association which incorporated after the enactment of section 508 is a new legal entity and therefore is required to file an applica- tion to be recognized as exempt under section 501(c)(3). Accordingly, the IRS in the past has specified in forms and publications that a new exemption application is required if an exempt organization changes its legal structure, such as from a trust to a corpo- ration, or it dissolves in one state and incorporates in another.See, e.g., Publica- tion 557, Tax Exempt Status for Your Organization (Rev. Jan. 2018) and 2017 Instructions for Form 990 Return of Or- ganization Exempt from Income Tax (Jan. 18, 2018). These IRS forms and publica- tions also specify that organizations are required to report new significant program services or significant changes in how they conduct program services, and sig- nificant changes to their organizational documents, on their Forms 990 rather than in letters to EO Determinations.Id. However, other rules generally provide that in many of these circumstances a new EIN is not required for federal tax pur- poses. For example, when one corporation merges into another corporation under state law and the latter corporation sur- vives, a new EIN is not required for the surviving corporation. Similarly, a new EIN is not required if a corporation incor- porated under the laws of one state rein- corporates as a corporation incorporated under the laws of another state.SeeRev. Rul. 73–526, 1973–2 C.B. 404. Publication 1635, Employer Identifica- tion Number, Understanding your EIN (February 2014), provides further instruc- tion regarding when a new EIN is neces- sary. Specifically, Publication 1635 spec- ifies that a new EIN is not required in the following cases: •After a corporate merger, the surviving corporation uses its existing EIN. •After a corporate reorganization, a cor- poration only changes its identity, form, or place of organization. Publication 1635 also specifies that a new EIN is required in the following cases: •A corporation creates a new corpora- tion after a statutory merger. •A trust changes to an estate or other non-trust. In 2015, the Department of the Trea- sury (Treasury Department) and the IRS announced they are studying how to as- sign (or reassign) EINs to taxpayers fol- lowing a reorganization under section 368(a)(1)(F) of the Code, including in cases in which the transferor corporation remains in existence as a disregarded en- tity, and requested public comments. T.D. 9739, 80 F.R. 56904, 56911 (Sept. 21, 2015). The IRS rules for new exemption ap- plications generally are more burdensome than the rules for new EINs described above. Specifically, Rev. Ruls. 67–390 and 77– 469 require new exemption appli- cations in the following cases in which IRS rules generally do not require a new EIN: •Incorporation of an exempt associa- tion. •Reincorporation under an Act of Con- gress. •Reincorporation of an exempt corpo- ration in a different state. Moreover, the Treasury Department and the IRS have not published guidance on whether a new exemption application is required in the following circumstances in which the IRS may not require a new EIN: •Continuation of a surviving corpora- tion after a statutory merger of exempt organizations. •Filing articles of domestication in a different state by an exempt organiza- tion. Requiring a new exemption application after a corporate restructuring often is un- necessary and duplicative, because the IRS requires exempt organizations to re- port significant organizational changes on their annual Forms 990. Moreover, any possible exemption issues with a corpo- rate restructuring are less burdensome for the IRS to administer when the surviving organization can continue to use the same EIN on its Form 990 as the restructuring organization. Accordingly, this revenue procedure generally eliminates the re- quirement for domestic business entities classified as corporations for federal tax purposes to file a new exemption applica- tion after a corporate restructuring, if cer- tain conditions are met, to better align the requirements for new exemption applica- tions with the requirements for obtaining new EINs in common restructuring situa- tions. In light of the pending Treasury De- partment and IRS study on assigning and reassigning EINs in certain reorganiza- tions under section 368(a)(1)(F), and the lack of published guidance explaining how exemption requirements apply to limited liability companies organized un- der various state laws, this revenue proce- dure does not apply to corporate restruc- turing transactions with limited liability companies or foreign business entities. February 26, 2018Bulletin No. 2018–9 380 SECTION 3. SCOPE This revenue procedure applies to cor- porate restructurings of domestic business entities that are classified as corporations under § 301.7701–2(b)(1) or (2) of the Treasury Regulations and are recognized as exempt under section 501(a) as organi- zations described in section 501(c). SECTION 4. DEFINITIONS. The following definitions apply for purposes of this revenue procedure. .01Business entityhas the meaning specified in § 301.7701–2(a) of the Trea- sury Regulations. .02Corporate restructuringmeans in- corporation under the laws of a state, re- incorporation of a corporation incorpo- rated under the laws of one state under the laws of a different state, filing articles of domestication for a corporation incorpo- rated under the laws of one state under the laws of a different state, or a statutory merger of one corporation with and into another corporation. .03Disregarded Entityis an entity that is disregarded as an entity separate from its owner described in § 301.7701–2(c) (2)(i) of the Treasury Regulations. .04Domestic business entityis a business entity that is domestic under § 301.7701–5(a) of the Treasury Regu- lations. .05Domestic trustis a trust that is domestic under § 301.7701–7(a)(1) of the Treasury Regulations. .06Eligible entityhas the meaning specified in § 301.7701–3(a) of the Trea- sury Regulations. .07Employer identification numberhas the meaning specified in § 301.7701–12 of the Treasury Regulations. .08Exemption Applicationmeans Form 1023, Form 1023–EZ, Form 1024, Form 1024 –A, or letter application, as applicable. .09Foreign business entityis a business entity that is foreign under § 301.7701–5(a) of the Treasury Regulations. .10Limited liability companymeans an entity formed under a state limited liabil- ity company act. .11Restructuring organizationmeans any organization exempt under section 501(a) as an organization described in section 501(c) that enters into a corporate restructuring. .12Surviving organizationmeans a surviving or resulting entity of a corporate restructuring. SECTION 5. EXEMPTION APPLICATION REQUIREMENTS FOR SURVIVING ORGANIZATIONS OF CORPORATE RESTRUCTURINGS .01 In general Subject to the requirements and limita- tions in section 5.02, 5.03 and 5.04 of this revenue procedure, in the case of a corpo- rate restructuring of a domestic business entity that is classified as a corporation under § 301.7701–2(b)(1) or (2) of the Treasury Regulations and is recognized as exempt under section 501(a) as an orga- nization described in section 501(c), the surviving organization will not be re- quired to file a new exemption application to be exempt under section 501(a) as an organization described in the same para- graph of section 501(c) if such surviving organization is— (1) a domestic business entity; (2) classified as a corporation under § 301.7701–2(b)(1) or (2) of the Treasury Regulations; and (3) carrying out the same purposes as the exempt organization that engaged in the corporate restructuring. .02 Good standing requirement For purposes of this section 5, the re- structuring organization (or all restructur- ing organizations in the case of a statutory merger) must be in good standing with the state in which it was incorporated (or formed in the case of unincorporated as- sociations). .03 Additional requirement for section 501(c)(3) organizations For purposes of this section 5, if the restructuring organization is exempt under section 501(a) as an organization de- scribed in section 501(c)(3), the articles of organization of the surviving organization must continue to meet the organizational test of § 1.501(c)(3)–1(b) of the Treasury Regulations, including § 1.501(c)(3)– 1(b)(4) (regarding dedication of assets to exempt purposes). .04 Excluded corporate restructurings Section 5 of this revenue procedure does not apply to any corporate restruc- turing in which (1) the restructuring orga- nization or the surviving organization is a disregarded entity, limited liability com- pany, partnership, or foreign business en- tity; or (2) the surviving organization ob- tains a new EIN. .05 Exemption application procedures for organizations not meeting requirements of section 5 of this revenue procedure. Surviving organizations that do not meet the requirements of section 5 of this revenue procedure and that want to be recognized as exempt under section 501(a) should refer to Rev. Proc. 2018 –5 for the procedures to apply for a determi- nation letter. SECTION 6. REPORTING REQUIREMENTS The surviving organization must report the corporate restructuring on any required Form 990 for the applicable taxable year. In the case of a domestication or reincorpora- tion in a different state, the surviving orga- nization must also report a change of ad- dress as prescribed by the Commissioner. SeeForm 8822–B; Form 990;https://www. irs.gov/charities-non-profits/other-non-profits/ change-of-address-exempt-organizations. SECTION 7. EXAMPLES The application of this revenue proce- dure is demonstrated in the following ex- amples. In the examples, each restructur- ing organization is recognized as exempt under section 501(a) and is in good stand- ing in its state of incorporation or forma- tion, the surviving organization continues to carry out the same purposes as the restructuring organization, and (for sec- tion 501(c)(3) organizations) the articles of incorporation of the surviving organi- zation continue to meet the organizational test of § 1.501(c)(3)–1(b) of the Treasury Regulations, including § 1.501(c)(3)– 1(b)(4) (regarding dedication of assets to exempt purposes). Bulletin No. 2018–9February 26, 2018 381 .01 Incorporation of an association A is an unincorporated nonprofit orga- nization that was formed on Date 1 under the laws of State M. On Date 2, the IRS recognized A as exempt under section 501(c)(3). A is a domestic business entity and is treated under § 301.7701–3(c)(1) (v)(A) as having made an election to be classified as anassociation (and thus a corporation under § 301.7701–2(b)(2)). On Date 3, A incorporates in State M, and is classified as a corporation under § 301.7701–2(b)(1).Because A, as both the restructuring organization and the sur- viving organization, is a domestic business entity classified as a corporation, pursuant to section 5.01 of this revenue procedure, A continues to be recognized as exempt under section 501(c)(3) and is not required to file a new Form 1023. .02 Incorporation of a trust B is a charitable trust that was formed on Date 1 under the laws of State N. B is a domestic trust. B is not a business entity. On Date 2, the IRS recognized B as ex- empt under section 501(c)(3). On Date 3, B incorporates in State N. Because the restructuring organization B is not a busi- ness entity, pursuant to section 5.01 of this revenue procedure, B is required to file a new Form 1023 to be recognized as ex- empt under section 501(c)(3).SeeRev. Proc. 2018 –5, § 3.01(1). .03 Reincorporation in a different state C is a corporation formed on Date 1 under the laws of State O. C is a domestic business entity classified as a corporation under § 301.7701–2(b)(1). On Date 2, the IRS recognized C as exempt under section 501(c)(4). On Date 3, C reincorporates in State P. Because C, as both the restructur- ing organization and the surviving organi- zation, is a domestic business entity clas- sified as a corporation, pursuant to section 5.01 of this revenue procedure, C contin- ues to be recognized as exempt under sec- tion 501(c)(4) without filing a new appli- cation for recognition of exemption. .04 Domestication D is a corporation formed on Date 1 under the laws of State Q. D is a domestic business entity classified as a corporation under § 301.7701–2(b)(1). On Date 2, the IRS recognized D as exempt under section 501(c)(3). On Date 3, D files articles of domestication with the corporation gov- erning agency of State R and a certificate of conversion with the corporation gov- erning agency of State Q. Under the laws of State Q and State R, D continues to exist as the same corporation. Because D, as both the restructuring organization and the surviving organization, is a domestic business entity classified as a corporation, pursuant to section 5.01 of this revenue procedure, D continues to be recognized as exempt under section 501(c)(3) and is not required to file a new Form 1023. .05 Restructuring as a limited liability company E is a corporation formed on Date 1 under the laws of State S. E is a domestic business entity classified as a corporation under § 301.7701–2(b)(1). On Date 2, the IRS recognized E as exempt under section 501(c)(3). On Date 3, E converts into a limited liability company under the laws of State T.Because the surviving organiza- tion E is a limitedliability company, pur- suant to section 5.04 of this revenue procedure, E is required to file a new Form 1023 to be recognized as exempt under section 501(c)(3).SeeRev. Proc. 2018 –5, § 3.01(1). .06 Reincorporation of a foreign entity F is a corporation formed on Date 1 under the laws of Country U. F is a for- eign business entity classified as a corpo- ration under § 301.7701–2(b)(8). On Date 2, the IRS recognized F as exempt under section 501(c)(3). On Date 3, F reincor- porates in State V. Because the restructur- ing organization F is a foreign business entity, pursuant to section 5.04 of this revenue procedure, F is required to file a new Form 1023 to be recognized as ex- empt under section 501(c)(3).SeeRev. Proc. 2018 –5, § 3.01(1). .07 Merger into an existing corporation G is a corporation formed on Date 1 under the laws of State W. G is a domestic business entity classified as a corporation under § 301.7701–2(b)(1). On Date 2, the IRS recognized G as exempt under section 501(c)(3). H is a corporation formed on Date 1 under the laws of State X. H is a domestic business entity classified as a corporation under § 301.7701–2(b)(1). On Date 3, the IRS recognized H as exempt under section 501(c)(3). On Date 4, G merged into H in accordance with the applicable state merger statutes and H was the surviving organization. After the cor- porate restructuring, H carries out the same purposes that G and H carried out prior to the corporate restructuring. Be- cause both G and H are domestic business entities classified as corporations, pursu- ant to section 5.01 of this revenue proce- dure, H continues to be recognized as exempt under section 501(c)(3) and is not required to file a new Form 1023. .08 Merger into a disregarded entity I is a corporation formed on Date 1 under the laws of State Y. I is a domestic business entity classified as a corporation under § 301.7701–2(b)(1). On Date 2, the IRS recognized I as exempt under section 501(c)(3). On Date 3, J is formed as a State Z corporation. J is a domestic busi- ness entity classified as a corporation un- der § 301.7701–2(b)(1). On Date 4, the IRS recognized J as exempt under section 501(c)(3). On Date 5, J forms a new State Z limited liability company K that is a disregarded entity. On Date 6, I merges into K under the applicable state laws. After the corporate restructuring, J, di- rectly and through K, carries out the same purposes that I and J carried out prior to the corporate restructuring. Because K is a limited liability company, section 5 of this revenue procedure does not apply. K is required to file a new Form 1023 if it wants to be recognized as exempt under section 501(c)(3).SeeRev. Proc. 2018 –5, § 3.01(1). J should not file a new Form 1023.SeeRev. Proc. 2018 –5, § 3.02(6). SECTION 8. APPLICABILITY .01This revenue procedure specifies the circumstances under which organizations recognized as exempt under section 501(c) are not required to file new exemption ap- plications under the same subsection of sec- tion 501(c) for federal income tax purposes after a corporate restructuring. .02For purposes of section 508, a sur- viving section 501(c)(3) organization that meets the requirements of sections 5.01 February 26, 2018Bulletin No. 2018–9 382 through 5.04 of this revenue procedure will not be treated as a new organization. .03For purposes of section 506, a sur- viving section 501(c)(4) organization that meets the requirements of sections 5.01, 5.02, and 5.04 of this revenue procedure will not be treated as a newly established organization. .04For purposes of section 505, a sur- viving section 501(c)(9), (17) or (20) or- ganization that meets the requirements of sections 5.01, 5.02, and 5.04 of this reve- nue procedure will not be treated as a new organization. .05Even when the surviving organiza- tion of a corporate restructuring is not required to file a new exemption applica- tion pursuant to section 5 of this revenue procedure, the surviving organization may not rely on the determination letter of the restructuring organization if there has been a material change of facts, inconsis- tent with exemption, in the character, pur- pose, or method of operation of the re- structuring organization.SeeRev. Proc. 2018 –5, section 11.02. .06This revenue procedure does not apply to a corporate restructuring in which the surviving organization seeks a deter- mination that it is exempt under a differ- ent paragraph of section 501(c) than its prior determination. .07This revenue procedure does not affect or provide guidance on the rules for EINs under section 6109 or the require- ments for a reorganization under section 368(a)(1)(F). .08This revenue procedure does not affect any state law requirements, includ- ing any state law reporting, filing, or no- tice requirements for corporate restructur- ings. SECTION 9. EFFECT ON OTHER DOCUMENTS Rev. Rul. 67–390, 1967–2 C.B. 179, and Rev. Rul. 77– 469, 1977–2 C.B. 196, are obsoleted. SECTION 10. EFFECTIVE DATE This revenue procedure is effective for tax years beginning on or after January 1, 2018. SECTION 11. DRAFTING INFORMATION The principal authors of this revenue procedure are Obinna Chukwuanu and Don Spellmann of the Office of Associate Chief Counsel (Tax Exempt and Govern- ment Entities). For further information re- garding this revenue procedure contact Obinna Chukwuanu or Don Spellmann on (202) 317-4086 (not a toll-free number). 26 CFR 601.601: Rules and regulations. (Also Part 1, §§ 45D, 1400Z–1, 1400Z–2.) Rev. Proc. 2018–16 SECTION 1. PURPOSE This revenue procedure provides guid- ance to the Chief Executive Officers of any State, any possession of the United States, and the District of Columbia re- garding the procedure for designating population census tracts as Qualified Opportunity Zones for purposes of §§ 1400Z–1 and 1400Z–2 of the Internal Revenue Code (Code). SECTION 2. BACKGROUND .01Enactment. Section 13823 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent reso- lution on the budget for fiscal year 2018,” P.L. 115–97, which was enacted on De- cember 22, 2017, amended the Code by adding §§ 1400Z–1 and 1400Z–2 to the Code. .02Tax incentives. Section 1400Z–2 of the Code allows the temporary deferral of inclusion in gross income for certain real- ized gains to the extent that corresponding amounts are timely invested in a qualified opportunity fund. Investments in a quali- fied opportunity fund may also be eligible for additional tax benefits. .03Qualified Opportunity Fund. Sec- tion 1400Z–2(d)(1) of the Code provides that a qualified opportunity fund is an investment vehicle that is organized as a partnership or a corporation for the pur- pose of investing in Qualified Opportunity Zone property. .04Designations, in general. Section 1400Z–1 of the Code allows the Chief Executive Officer (CEO) of each State to nominate a limited number of population census tracts to be designated as Qualified Opportunity Zones (QOZs). For purposes of §§ 1400Z–1 and 1400Z–2 and this rev- enue procedure, the term “State” means any State, any possession of the United States, and the District of Columbia.See §§ 1400Z–1(c)(3) and 7701(a)(10) of the Code. Under § 1400Z–1(c)(1), a popula- tioncensus tract is eligible for designa- tion as a QOZ if it satisfies the definition of “low-income community” (LIC) in § 45D(e) of the Code. .05Tracts Contiguous with LICs.In addition, under § 1400Z–1(e) of the Code, a tract that is not an LIC is eligible for designation if both of the following con- ditions are met: (1) The non-LIC tract is contiguous with an LIC that is designated as a QOZ (the contiguous LIC QOZ need not be in the same State.); and (2) The median family income of the non-LIC tract does not exceed 125 percent of the median family in- come of that contiguous LIC QOZ. .06Determination Period and Exten- sion. Pursuant to § 1400Z–1(b)(1)(A) and (c)(2)(B) of the Code, the CEO of the State in which a tract is located may nom- inate the tract to be a QOZ, and any such nomination must be made no later than March 21, 2018. Under § 1400Z–1(b)(2), however, the State CEO may request, and receive, a 30-day extension of this dead- line. .07Consideration Period and Exten- sion. In general, not later than the end of a 30-day period beginning on the date that the Secretary of the Treasury (Secretary) receives notice of a nomination, the Secretary may certify the nomination and designate the nominated tract as a QOZ. Under § 1400Z–1(b)(2) of the Code, how- ever, the State CEO may request, and re- ceive, a 30-day extension of the Secre- tary’s deadline. .08Qualified Opportunity Zone. Sec- tion 1400Z–1 of the Code defines a QOZ as any population census tract (either a nominated LIC or a nominated non-LIC, contiguous census tract) that is designated as a QOZ. .09Number of Designations. (1) In general, § 1400Z–1(d)(1) of the Code provides that the number of popula- tion census tracts in a State that may be designated as QOZs may not exceed 25 Bulletin No. 2018–9February 26, 2018 383 percent of the number of population cen- sus tracts in the State that are LICs. If the number of LICs in a State is not evenly divisible by 4, the 25 percent limitation is determined by rounding the fractional quotient up to the next whole number. For example, if a State contains 197 LICs, the maximum number of designations is 50, even though 25 percent of 197 is 49.25. (2) Section 1400Z–1(d)(2) of the Code further provides that, notwithstanding the 25 percent limitation, if a State contains fewer than 100 LICs, then a total of 25 tracts may be designated. (3) Section 1400Z–1(e)(2) of the Code provides that not more than 5 percent of the tracts designated in a State may be non-LIC, contiguous tracts designated un- der § 1400Z–1(e)(1). Thus, designations under § 1400Z–1(d)(1) and (d)(2) may include a limited number of non-LIC con- tiguous tracts. If the number of designated QOZs in a State is not evenly divisible by 20, the 5 percent limitation is determined by rounding the fractional quotient up to the next whole number. For example, sup- pose that State B has 80 LICs. Under § 1400Z–1(d)(2), State B is allowed to nominate 25 tracts for QOZ designation because State B has fewer than 100 LICs. If State B nominates all 25 of the QOZs allowed, then of the 25 nominated tracts, only 2 (5 percent of 25 or 1.25, rounded up to 2) nominated tracts may be non-LIC contiguous tracts. But if State B nomi- nated only 18 LICs, then it could nomi- nate only 1 (5 percent of 19 or 0.95, rounded up to 1) additional non-LIC con- tiguous tract. SECTION 3. IDENTITY OF LICs AND OF THE CONTIGUOUS TRACTS THAT ARE ALSO ELIGIBLE FOR DESIGNATION AS QOZs .01 Based on the 2011–2015 American Community Survey (ACS) 5-Year data from the Census Bureau, a public, on-line resource (Information Resource) identifies over 41,000 population census tracts that are eligible for designation as a QOZ: (1) 31,680 population census tracts that are LICs eligible for designation as QOZs; and (2) 9,453 non-LIC population census tracts that are eligible for designation if a particular LIC contiguous to the non-LIC tract is designated as a QOZ. .02 This Information Resource in- cludes detailed mapping, which makes it possible to see the exact location of every tract and to view a variety of demographic information for each eligible tract. .03 In the case of each tract described in section 3.01(2) of this revenue proce- dure, the Information Resource includes one or more LIC tracts on whose desig- nation as a QOZ the non-LIC tract’s eli- gibility depends. .04 The Information Resource can be accessed athttps://www.cdfifund.gov/Pages/ Opportunity-Zones.aspx. .05 In the fall of 2017, the Census Bureau released the 2012–2016 ACS 5-Year data. Because of the March 21, 2018, deadline for State CEOs to nom- inate tracts for designation as QOZs, the maximum aggregate number of designa- tions in a State is determined on the basis of the 2011–2015 ACS, as re- flected in the Information Resource de- scribed above. .06 In addition, the Information Re- source is a “safe harbor.” That is, if the Information Resource identifies a census tract as being either an eligible LIC or an eligible non-LIC contiguous tract, a State CEO’s nomination of that tract will not fail to be certified on the grounds that the tract is no longer eligible under more re- cent census data. .07 On the other hand, in many cases, if a tract is eligible under the most recent available ACS 5-Year data, the tract is eligible to be nominated for designation. If the Information Resource, however, does not identify the tract as eligible, the nomination must be accompanied by an analysis demonstrating that eligibility, in- cluding appropriate supporting data from that ACS. SECTION 4. SCOPE This revenue procedure applies to the CEO of any State that desires to nominate for designation as QOZs population cen- sus tracts that are either LICs that qualify under § 1400Z–1(c)(1) of the Code or non-LIC contiguous tracts that qualify un- der § 1400Z–1(e)(1) of the Code. SECTION 5. PROCEDURE .01 A Nomination Tool, which can be accessed online, has been developed for the benefit of State CEOs that are making nominations of census tracts for designa- tion as QOZs. .02 Further information on the nomi- nation process under § 1400Z–1 of the Code, including how to access the on- line Nomination Tool and how to re- quest an extension of the determination period, will be sent individually to all State CEOs. SECTION 6. EFFECTIVE DATE This revenue procedure is effective on February 8, 2018. SECTION 7. DRAFTING INFORMATION The principal author of this revenue procedure is Erika Reigle of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information re- garding this revenue procedure contact Erika Reigle at (202) 317-7006 (not a toll-free number). For further information regarding the Information Resource, con- tact the CDFI Fund Help Desk at (202) 653– 0421 (not a toll-free number). 26 CFR 601.204: Changes in accounting periods and in methods of accounting. (Also: Part I, §§ 442, 898, 965; 1.442–1) Rev. Proc. 2018–17 SECTION 1. PURPOSE This revenue procedure modifies the circumstances under which the Internal Revenue Service (“IRS”) grants approval of certain requests by certain foreign cor- porations for changes in annual account- ing periods filed under Rev. Proc. 2002– 39, 2002–22 I.R.B. 1046, and Rev. Proc. 2006 – 45, 2006 – 45 I.R.B. 851. This rev- enue procedure is issued pursuant to sec- tion 965(o) to prevent the avoidance of the purposes of section 965 through changes in the taxable years of certain specified February 26, 2018Bulletin No. 2018–9 384 foreign corporations (within the meaning of section 965(e)). 1 SECTION 2. BACKGROUND .01 Section 442 and § 1.442–1(a) gen- erally provide that a taxpayer seeking to change its annual accounting period and use a new taxable year must obtain the approval of the Commissioner. .02 In general, under § 1.442–1(b)(2), a change in annual accounting period will be approved when a taxpayer agrees to the Commissioner’s prescribed terms, condi- tions, and adjustments for effecting the change. .03 Section 1.442–1(b)(3) provides that the Commissioner will prescribe the ad- ministrative procedures for a taxpayer to be allowed to adopt, change, or retain an annual accounting period. .04 Rev. Proc. 2002–39 provides the general procedures under section 442 and § 1.442–1(b) for obtaining the approval of the Commissioner to adopt, change, or retain an annual accounting period for federal income tax purposes. .05 Rev. Proc. 2006 – 45, as a successor to Rev. Proc. 2002–37, 2002–22 I.R.B. 1030, provides the exclusive procedures for certain corporations to obtain auto- matic approval of the Commissioner to change their annual accounting periods, including a section 898 specified foreign corporation that is changing to a one- month deferral year or to a 52–53-week taxable year that references the one-month deferral year.Seesection 4.02(8) of Rev. Proc. 2006 – 45. .06 Section 898(a) provides that the taxable year of any section 898 specified foreign corporation is the required year determined under section 898(c). In con- trast, a foreign corporation other than a section 898 specified foreign corporation generally does not have a required year. .07 In general, section 898(b) defines a section 898 specified foreign corporation as any controlled foreign corporation (as defined in section 957) (“CFC”) with re- spect to which a United States shareholder (as defined in section 951(b), subject to certain modifications) owns, on certain testing days, more than 50 percent of ei- ther the total voting power of all classes of stock of such corporation entitled to vote or the total value of all classes of stock of such corporation. The rules of section 958(a) and (b) apply for purposes of de- termining ownership. A United States shareholder that meets this more-than-50- percent ownership threshold is referred to in this revenue procedure as a “majority U.S. shareholder.” .08 The required year determined under section 898(c) is the majority U.S. share- holder year (as defined in section 898(c)(3)), or, if there is no majority U.S. shareholder year, the taxable year prescribed under reg- ulations. Section 898(c)(2) provides that a section 898 specified foreign corporation may elect, in lieu of the required year, a taxable year beginning one month earlier than the majority U.S. shareholder year. .09 Section 965(a) provides that for the last taxable year of a deferred foreign in- come corporation (“DFIC”) that begins before January 1, 2018, the subpart F in- come of the corporation (as otherwise de- termined for such taxable year under sec- tion 952) shall be increased by the greater of the accumulated post-1986 deferred foreign income of such corporation deter- mined as of November 2, 2017, or De- cember 31, 2017 (each such date, a “mea- surement date”). .10 For purposes of section 965, a DFIC is, with respect to any United States shareholder, any section 965 specified for- eign corporation of such United States shareholder that has accumulated post- 1986 deferred foreign income (as of a measurement date) greater than zero. Sec- tion 965(d)(1). The term “section 965 specified foreign corporation” means (A) any CFC, and (B) any foreign corporation with respect to which one or more domes- tic corporations is a United States share- holder (“10-percent corporation”). Sec- tion 965(e)(1). For purposes of sections 951 and 961, a 10-percent corporation is treated as a CFC solely for purposes of taking into account the subpart F income of such corporation under section 965(a). Section 965(e)(2). However, if a passive foreign investment company (as defined in section 1297) with respect to the share- holder is not a CFC, then such corporation is not a section 965 specified foreign cor- poration. Section 965(e)(3). .11 Section 965(o) provides that the Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of section 965, including regulations or other guidance to prevent the avoidance of the purposes of such section, including through a reduction in earnings and prof- its, through changes in entity classification or accounting methods, or otherwise. The Conference Report accompanying the Act states, “The conferees are also aware that certain taxpayers may have engaged in tax strategies designed to reduce the amount of post-1986 earnings and profits in order to decrease the amount of the inclusion required under this provision. Such tax strategies may include a change in entity classification, accounting method,and taxable year....”H.R. Rep. No. 115– 466, at 619 (2017) (emphasis added). .12 A section 965 specified foreign cor- poration with a taxable year ending on December 31, 2017, could avoid the pur- poses of section 965 by changing its tax- able year. For example, if a DFIC with the calendar year as its taxable year elected, effective for its taxable year beginning January 1, 2017, a taxable year closing on November 30, the election could defer by as much as 11 months a United States shareholder’s inclusion with respect to the DFIC under section 965. Further, the elec- tion could, depending on the facts, reduce the amount of the tax liability of a United States shareholder of the DFIC by reason of section 965, including through the re- duction of the post-1986 earnings and profits of the DFIC. SECTION 3. SCOPE This revenue procedure applies to a section 965 specified foreign corporation seeking to change its taxable year that ends on December 31, 2017. For purposes of applying this revenue procedure, a 52– 53-week taxable year is deemed to begin on the first day of the calendar month nearest to the first day of the 52–53-week taxable year, and is deemed to end or 1 The term “specified foreign corporation” is defined differently in sections 898(b) and 965(e). In order to avoid confusion, this revenue procedure refers to a specified foreign corporation within the meaning of section 898(b) as a “section 898 specified foreign corporation” and to a specified foreign corporation within the meaning of section 965(e) as a “section 965 specified foreign corporation.” Bulletin No. 2018–9February 26, 2018 385 close on the last day of the calendar month nearest to the last day of the 52–53-week taxable year, as the case may be.See § 1.441–2(c). SECTION 4. MODIFICATIONS .01Inapplicability of Rev. Proc. 2006 – 45. Section 4.02 of Rev. Proc. 2006 – 45 is modified to add a new paragraph (15) to read as follows: “(15)Certain specified foreign corpo- rations.Notwithstanding any other provi- sion in this section 4, a specified foreign corporation (as defined in section 965(e)) if each of the following conditions is sat- isfied: (a) The specified foreign corporation’s taxable year (determined without regard to the requested change) ends on Decem- ber 31; (b) If the requested change were per- mitted, the first effective year of the cor- poration would begin on January 1, 2017, and would end on a date before December 31, 2017; and (c) The specified foreign corporation has one or more United States sharehold- ers that must include an amount in gross income under section 951(a)(1) by reason of section 965 with respect to the specified foreign corporation or any other specified foreign corporation (with such amount de- termined without regard to the requested change).” .02Inapplicability of Rev. Proc. 2002– 39.Section 3 of Rev. Proc. 2002–39 is modified to add a new subsection 3.03 to read as follows: “.03Inapplicability for certain speci- fied foreign corporations. Notwithstand- ing any other provision of this revenue procedure, a request to change the annual accounting period of a specified foreign corporation (as defined in section 965(e)) pursuant to this revenue procedure will not be approved if: (a) The specified foreign corporation’s taxable year (determined without regard to the requested change) ends on Decem- ber 31; (b) If the requested change were per- mitted, the first effective year of the cor- poration would begin on January 1, 2017, and would end on a date before December 31, 2017; and (c) The specified foreign corporation has one or more United States sharehold- ers that must include an amount in gross income under section 951(a)(1) by reason of section 965 with respect to the specified foreign corporation or any other specified foreign corporation (with such amount de- termined without regard to the requested change).” SECTION 5. EFFECT ON OTHER DOCUMENTS Rev. Proc. 2002–39 and Rev. Proc. 2006 – 45 are modified. SECTION 6. EFFECTIVE DATE This revenue procedure applies with respect to any request to change an annual accounting period that ends on December 31, 2017, regardless of when such request was filed. SECTION 7. DRAFTING INFORMATION The principal author of this revenue procedure is Leni C. Perkins of the Office of Associate Chief Counsel (Interna- tional). For further information regarding this revenue procedure, contact Ms. Per- kins on (202) 317-6934 (not a toll-free number). February 26, 2018Bulletin No. 2018–9 386 Part IV. Items of General Interest Notice of Disposition of Declaratory Judgment Proceedings under Section 7428 Announcement 2018–01 This announcement serves notice to do- nors that on September 20, 2017, the United States Tax Court entered a stipulated deci- sion that, as of September 19, 1980, the organization listed below is qualified as an organization described in section 501(c)(3), is exempt from taxation under section 501(a),andisdescribedinsection 170(c)(2), and, as of August 31, 1990, the organization is a private foundation. Conservation Endowment Fund Ojai, CA Notice of Disposition of Declaratory Judgment Proceedings under Section 7428 Announcement 2018–02 This announcement serves notice to do- nors that on September 14, 2017, the United States Tax Court entered a stipulated deci- sion that, as of May 5, 1994, the organiza- tion listed below is qualified as an organi- zation described in section 501(c)(3), is exempt from taxation under section 501(a), and is described in section 170(c)(2). International Center for Earth Concerns Ojai, CA Notice of Disposition of Declaratory Judgment Proceedings under Section 7428 Announcement 2018–03 This announcement serves notice to donors that, on September 13, 2017, the United States Tax Court entered a stipu- lated decision stating that, effective Janu- ary 1, 2008, the organization listed below is not qualified as an organization de- scribed in I.R.C. § 501(c)(3), is not ex- empt from taxation under I.R.C. § 501(a), and is not an organization described in I.R.C. § 170(c)(2). Taft Foundation Ojai, CA Bulletin No. 2018–9February 26, 2018 387 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. 2018–9February 26, 2018 i Numerical Finding List 1 Bulletin 2018 –1 through 2018 –9 Announcements: 2018-01, 2018-9 I.R.B.387 2018-02, 2018-9 I.R.B.387 2018-03, 2018-9 I.R.B.387 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 2018-10, 2018-8 I.R.B.359 2018-13, 2018-6 I.R.B.341 2018-14, 2018-7 I.R.B.353 2018-15, 2018-9 I.R.B.376 2018-17, 2018-9 I.R.B.376 Proposed Regulations: REG-119514-15, 2018-04 I.R.B.325 REG-118067-17, 2018-08 I.R.B.360 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 2018-14, 2018-9 I.R.B.378 2018-15, 2018-9 I.R.B.379 2018-16, 2018-9 I.R.B.383 2018-17, 2018-9 I.R.B.384 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 26, 2018Bulletin No. 2018–9 ii Finding List of Current Actions on Previously Published Items 1 Bulletin 2018 –1 through 2018 –9 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. 2018–9February 26, 2018 iii 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 atwww.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. Internal Revenue Service Washington, DC 20224 Official Business Penalty for Private Use, $300
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