Internal Revenue Bulletin 1996-51 (PDF rendition): IRS Revenue Procedures

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INCOME TAX
Rev. Rul. 96–60, page 4.
LIFO; price indexes; department stores.The October
1996 Bureau of Labor Statistics price indexes are
accepted for use by department stores employing the
retail inventory and last-in, first-out inventory methods
for valuing inventories for tax years ended on, or with
reference to, October 31, 1996.
EMPLOYEE PLANS
Rev. Proc. 96–56, page 11.
Section 457 “No Rule” revenue procedure.This proce-
dure provides that the Office of Associate Chief Counsel
(Employee Benefits and Exempt Organizations) will not
issue advance ruling letters on the tax effect of the
provisions of the Small Business Job Protection Act
(P. L. 104–188), affecting plans described in section
457 of the Code. Rev. Proc. 96–3 amplified.
Notice 96–63, page 8.
Notice requesting comments on proposed guidance
relating to section 457 plans.This notice invites public
comment on possible changes to procedures relating to
requests for private letter rulings under section 457 of
the Code.
Notice 96–64, page 8.
Qualified retirement plans; effective dates; govern-
ments and tax-exempt organizations.The effective
dates of certain nondiscrimination regulations for plans
maintained by governments and tax-exempt organiza-
tions, is being extended. In addition, guidance on
several related tax matters, including application of the
aggregation rules under section 414(b) and (c) for such
plans, is provided.
EXEMPT ORGANIZATIONS
Announcement 96–123, page 13.
A list is given of organizations now classified as private
foundations.
Announcement 96–128, page 14.
A list is provided of organizations that no longer qualify
as organizations to which contributions are deductible
under section 170 of the Code.
ADMINISTRATIVE
Notice 96–53, page 5.
Medical savings accounts.This notice provides certain
basic information about medical savings accounts. It
does not attempt to cover all of the specific rules that
apply.
Announcement 96–129, page 14.
The 1996 update of Publication 938, Real Estate
Mortgage Investment Conduits (REMICs) Reporting Infor-
mation (And Other Collateralized Debt Obligations
(CDOs)), is now available on the IRS Electronic Bulletin
Board (IRP-BBS).
Finding Lists begin on page 17.
Announcement of Disbarments and Suspensions begins on page 15.
Bulletin No. 1996–51
December 16, 1996
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.

Mission of the Service
The purpose of the Internal Revenue Service is to
collect the proper amount of tax revenue at the least
cost; serve the public by continually improving the
quality of our products and services; and perform in a
manner warranting the highest degree of public
confidence in our integrity, efficiency and fairness.
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to
administer the Internal Revenue Code. Tax policy
for raising revenue is determined by Congress.
With this in mind, it is the duty of the Service to
carry out that policy by correctly applying the laws
enacted by Congress; to determine the reasonable
meaning of various Code provisions in light of the
Congressional purpose in enacting them; and to
perform this work in a fair and impartial manner,
with neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the
Code. It is the responsibility of each person in the
Service, charged with the duty of interpreting the
law, to try to find the true meaning of the statutory
provision and not to adopt a strained construction in
the belief that he or she is ‘‘protecting the revenue.’’
The revenue is properly protected only when we as-
certain and apply the true meaning of the statute.
The Service also has the responsibility of applying
and administering the law in a reasonable,
practical manner. Issues should only be raised by
examining officers when they have merit, never
arbitrarily or for trading purposes. At the same
time, the examining officer should never hesitate
to raise a meritorious issue. It is also important
that care be exercised not to raise an issue or to
ask a court to adopt a position inconsistent with
an established Service position.
Administration should be both reasonable and
vigorous. It should be conducted with as little
delay as possible and with great courtesy and
considerateness. It should never try to overreach,
and should be reasonable within the bounds of law
and sound administration. It should, however, be
vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax
devices and fraud.
2

Introduction
The Internal Revenue Bulletin is the authoritative instru-
ment of the Commissioner of Internal Revenue for
announcing official rulings and procedures of the Inter-
nal Revenue Service and for publishing Treasury Deci-
sions, Executive Orders, Tax Conventions, legislation,
court decisions, and other items of general interest. It is
published weekly and may be obtained from the Superin-
tendent of Documents on a subscription basis. Bulletin
contents of a permanent nature are consolidated semi-
annually into Cumulative Bulletins, which are sold on a
single-copy basis.
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 otherwise indicated. Proce-
dures relating solely to matters of internal management
are not published; however, statements of internal
practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Ser-
vice on the application of the law to the pivotal facts
stated in the revenue ruling. In those based on positions
taken in rulings to taxpayers or technical advice to
Service field offices, identifying details and information
of a confidential nature are deleted to prevent unwar-
ranted 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 proce-
dures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be consid-
ered, 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 Subpart B, Legislation
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 Rulings. Bank Secrecy Act Administra-
tive Rulings are issued by the Department of the
Treasury’s Office of the Assistant Secretary (Enforce-
ment).
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemak-
ing and the disbarment and suspension list included in
this part, none of these announcements are consoli-
dated in the Cumulative Bulletins.
The first Bulletin for each month includes an index for
the matters published during the preceding month.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin
of the succeeding quarterly and semi-annual period,
respectively.
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.
For sale by the Superintendent of Documents U.S. Government Printing Office, Washington, D.C. 20402.
3

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 472.—Last-in, First-out
Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores.The October 1996 Bureau of
Labor Statistics price indexes are ac-
cepted for use by department stores
employing the retail inventory and last-
in, first-out inventory methods for valu-
ing inventories for tax years ended on,
or with reference to, October 31, 1996.
Rev. Rul. 96–60
The following Department Store In-
ventory Price Indexes for October 1996
were issued by the Bureau of Labor
Statistics on November 14, 1996. The
indexes are accepted by the Internal
Revenue Service, under § 1.472–1(k) of
the Income Tax Regulations and Rev.
Proc. 86–46, 1986–2 C.B. 739, for ap-
propriate application to inventories of
department stores employing the retail
inventory and last-in, first-out inventory
methods for tax years ended on, or with
reference to, October 31, 1996.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of
departments, (b) three special combina-
tions of the major groups—soft goods,
durable goods, and miscellaneous goods,
and (c) a store total, which covers all
departments, including some not listed
separately, except for the following:
candy, foods, liquor, tobacco, and con-
tract departments.
BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
GroupsOct. 1995Oct. 1996
Percent Change
from Oct. 1995
to Oct. 1996
1
1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .508.6561.010.3
2. Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .664.7641.023.6
3. Women’s and Children’s Shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .647.5661.82.2
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .930.1920.121.1
5. Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .633.8626.421.2
6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .522.6536.82.7
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .290.7285.721.7
8. Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .558.3557.520.1
9. Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . .430.5417.523.0
10. Men’s Clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .621.1621.90.1
11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .572.1581.71.7
12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .501.9490.722.2
13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1014.31043.62.9
14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .782.3797.31.9
15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .868.7901.43.8
16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .666.4667.50.2
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .567.4585.23.1
18. Housewares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .801.2808.10.9
19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .248.9246.221.1
20. Radio and Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80.677.823.5
21. Recreation and Education
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .114.0111.821.9
22. Home Improvements
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122.1125.62.9
23. Auto Accessories
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107.0107.40.4
Groups 1–15: Soft Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .603.0603.40.1
Groups 16–20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .469.3467.720.3
Groups 21–23: Misc. Goods
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113.9112.920.9
Store Total
3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .556.9556.120.1
1
Absence of a minus sign before percentage change in this column signifies price increase.
2
Indexes on a January 1986=100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, foods, liquor, tobacco, and contract
departments.
DRAFTING INFORMATION
The principal author of this revenue ruling is Stan Michaels of the Office of Assistant Chief Counsel (Income Tax and
Accounting). For further information regarding this revenue ruling, contact Mr. Michaels on (202) 622–4970 (not a toll-free
call).
4

Part III. Administrative, Procedural, and Miscellaneous
Medical Savings Accounts
Notice 96–53
The Health Insurance Portability and
Accountability Act of 1996 added sec-
tion 220 to the Internal Revenue Code
to permit eligible individuals to establish
medical savings accounts (MSAs) under
a pilot project beginning on January 1,
1997.
This notice provides certain basic in-
formation about MSAs. It does not
attempt to summarize all of the specific
rules that apply.
The notice is divided into seven parts.
Part I of the notice explains what MSAs
are and who can have them. Part II
describes how MSAs can be established.
Parts III and IV cover contributions to
MSAs and distributions from MSAs.
Part V deals with the statutory limit on
the number of taxpayers who can use
MSAs. Part VI relates to information
reporting by MSA trustees and custodi-
ans, and Part VII addresses other mat-
ters relating to MSAs.
I. What Are MSAs and Who Can Have
Them?
Q–1. What is an MSA?
A–1. An MSA is a tax-exempt trust
or custodial account established for the
purpose of paying medical expenses in
conjunction with a high-deductible
health plan. A number of the rules that
apply to MSA are similar to rules that
apply to individual retirement arrange-
ments (IRAs). For example, like an
IRA, an MSA is established for the
benefit of an individual, and is ‘‘por-
table’’. Thus, if the individual is an
employee who later changes employers
or leaves the work force, the MSA does
not stay behind with the former em-
ployer, but stays with the individual.
However, because MSAs differ from
IRAs in some important respects, tax-
payers cannot use an IRA as an MSA,
and cannot combine an IRA and an
MSA in a single account.
Q–2. Who is eligible to have an
MSA?
A–2. Two types of individuals are
eligible to establish an MSA:
(1) an employee (or spouse of an
employee) of a ‘‘small employer’’ that
maintains an individual or family ‘‘high-
deductible health plan’’ covering that
individual (employee or spouse); or
(2) a self-employed person (or the
spouse of a self-employed person) main-
taining an individual or family ‘‘high-
deductible health plan’’ covering that
individual (self-employed person or
spouse).
See A–6 and A–7 for additional limita-
tions on who may establish MSAs.
Q–3. What is a ‘‘small employer’’ for
MSA purposes?
A–3. An employer is a ‘‘small em-
ployer’’ for a calendar year if the em-
ployer employed an average of 50 or
fewer employees on business days dur-
ing either of the two preceding calendar
years. Special rules apply to new em-
ployers, consolidated groups, and certain
employers that have added employees.
See Internal Revenue Code section
220(c)(4).
Q–4. What is a ‘‘high-deductible
health plan’’ that makes someone eli-
gible for an MSA?
A–4. A ‘‘high-deductible health plan’’
is a health plan that: (1) has an annual
deductible of at least $1,500, and not
more than $2,250, for individual (self-
only) coverage; or (2) has an annual
deductible of at least $3,000, and not
more than $4,500, for family coverage
(coverage of more than one individual).
In addition, the annual out-of-pocket
expenses under the plan cannot exceed
$3,000 for individual coverage and
$5,500 for family coverage. Out-of-
pocket expenses include deductibles, co-
payments and other amounts the partici-
pant must pay for covered benefits, but
do not include premiums.
Q–5. Can a health maintenance orga-
nization (HMO) offer a high-deductible
health plan?
A–5. Yes. A high-deductible health
plan may be offered by a variety of
entities, including insurance companies
and health maintenance organizations
(HMOs).
Q–6. What kind of other health cov-
erage makes an individual ineligible for
an MSA?
A–6. Except as described in A–7, an
individual is ineligible for an MSA if
the individual is covered under a health
plan (whether as an individual, spouse,
or dependent) that is not a high-
deductible health plan (including being
covered as a beneficiary under Medi-
care) as well as under a high-deductible
health plan.
Q–7. What other kinds of health cov-
erage may an individual maintain with-
out losing eligibility for an MSA?
A–7. An individual remains eligible
for an MSA if, in addition to a high-
deductible health plan, the individual
has coverage (whether provided through
insurance or otherwise) for accidents,
disability, dental care, vision care, long-
term care, insurance for a specified
disease or illness, insurance that pays a
fixed amount per day (or other period)
of hospitalization; or insurance under
which substantially all of the coverage
provided relates to liabilities from work-
ers’ compensation laws, torts, or owner-
ship or use of property (such as automo-
bile insurance).
Q–8. Are MSAs allowed under a caf-
eteria plan?
A–8. A high-deductible health plan
(described in A–4) can be provided as
part of a cafeteria plan. Such a high-
deductible health plan can be used in
conjunction with an MSA. However, the
MSA must be established outside the
cafeteria plan, because a cafeteria plan
is not permitted to provide for contribu-
tions to an MSA. Outside of the cafete-
ria plan context, an employee will not
be subject to taxation merely because
the employee has a choice between
employer contributions to an MSA and
other employer-provided accident or
health coverage.
II. How Can An MSA Be Established?
Q–9. How does an eligible individual
establish an MSA?
A–9. Beginning January 1, 1997, any
eligible individual (as described in A–2)
can establish an MSA with a qualified
MSA trustee or custodian, in much the
same way that individuals establish
IRAs with qualified IRA trustees or
custodians. No permission or authoriza-
tion from the Internal Revenue Service
(IRS) is necessary to establish an MSA.
Q–10. Who is a qualified MSA
trustee or custodian?
A–10. Any insurance company or any
bank (including a similar financial insti-
tution as defined in Internal Revenue
Code section 408(n)) can be a MSA
trustee or custodian. In addition, any
other persons already approved by the
IRS to be trustees or custodians of IRAs
are automatically approved to be MSA
trustees or custodians. Persons other
than banks, insurance companies, or
previously approved IRA trustees or
custodians may request approval to be a
trustee or custodian in accordance with
the procedures set forth in Treasury
Regulation § 1.408–2(e) (relating to
IRA nonbank trustees). An eligible indi-
5

vidual who is an employee may estab-
lish a MSA without any involvement of
the employer.
Q–11. How does an individual or
small employer sign up for or enroll in
the MSA pilot project?
A–11. Neither individuals nor small
employers ‘‘sign up for’’, ‘‘apply for’’,
or otherwise ‘‘enroll in’’ the MSA pilot
project. Rather, as described in A–9,
eligible individuals or small employers
can proceed to arrange for the establish-
ment of MSAs with qualified trustees or
custodians without awaiting permission
or authorization from the IRS. (Sections
V and VI, below, give further informa-
tion on the limits Congress imposed on
the number of taxpayers who can con-
tribute to MSAs, and reporting by trust-
ees and custodians.)
III. Contributions to MSAs.
Q–12. Who may contribute to an
MSA?
A–12. In the case of an MSA estab-
lished by an employee or by the spouse
of an employee, the account holder
(employee or spouse, respectively) may
contribute to the MSA. Alternatively, the
employee’s employer may contribute to
the employee’s or spouse’s MSA. How-
ever, if an employer makes a contribu-
tion to an MSA for a given year, the
account holder of that MSA may not
contribute to any MSA for that year.
(Additional restrictions apply if an em-
ployee’s spouse receives MSA contribu-
tions. See Internal Revenue Code sec-
tion 220(b)(5)(B).)
In the case of an MSA established by
a self-employed individual or spouse,
the account holder (the self-employed
individual or the spouse, respectively)
may contribute to the MSA.
Q–13. How much may be contributed
to an MSA?
A–13. The maximum annual amount
permitted to be contributed to an MSA
for a year is (1) for high-deductible
individual coverage, 65 percent of the
deductible; and (2) for high-deductible
family coverage, 75 percent of the de-
ductible. The same annual contribution
limit applies whether the contributions
are made by an employee, an employer,
or a self-employed person. The annual
contribution limit is the sum of the
limits determined separately for each
month, based on status, eligibility and
health plan coverage as of the first day
of the month. Although the annual limi-
tation is calculated using monthly data,
the contribution for the year can be
made in one or more payments, at the
convenience of the individual or the
employer, at any time within the dead-
line described in A–15.
For example, assume that an indi-
vidual has self-only coverage under a
high-deductible health plan with an an-
nual deductible of $1,800. The annual
contribution limit is 65 percent of
$1,800 ($1,170), and the monthly contri-
bution limit is $97.50 ($1,170/12). As-
sume further that the individual is an
eligible individual for each of the first
eight months of the year, but not there-
after. In that case, the contribution limit
for the year is $780 (8 x $97.50).
Q–14. In what form may contribu-
tions be made to an MSA?
A–14. Contributions to an MSA must
be made in cash. For example, contribu-
tions may not be made in the form of
stock or other property.
Q–15. What is the tax treatment of an
eligible individual’s MSA contributions?
A–15. Contributions by an eligible
individual to an MSA (which are subject
to the limits described in A–13) are
deductible in computing adjusted gross
income. Accordingly, the contributions
are deductible whether or not the eli-
gible individual itemizes deductions.
The tax deduction for an employee or
the employee’s spouse, however, cannot
exceed the individual’s compensation at-
tributable to the employer that sponsors
the high-deductible plan covering the
individual. For a self-employed indi-
vidual, in addition to the contribution
limits described in A–13, the tax deduc-
tion cannot exceed the individual’s
earned income from the trade or busi-
ness with respect to which the high-
deductible plan is established. In addi-
tion, the statute denies a tax deduction
to any individual who may be claimed
as a dependent on another taxpayer’s
return.
Q–16. What is the tax treatment of
employer contributions to an eligible
individual’s MSA?
A–16. Employer contributions to an
eligible individual’s MSA (which are
limited as described in A–13) are ex-
cludable from gross income, are not
subject to withholding for income tax,
and are not subject to other employment
taxes (i.e., Social Security and Medicare
taxes (FICA), federal unemployment tax
(FUTA) or railroad retirement tax).
Q–17. What is the tax treatment of
earnings on amounts in an MSA?
A–17. Earnings on amounts in an
MSA are not taxable prior to distribu-
tion from the MSA. See A–21 regarding
the taxation of distributions.
Q–18. When is the deadline for an
eligible individual to make contributions
to an MSA for any particular year?
A–18. An eligible individual may
make MSA contributions for a particular
tax year no later than the time pre-
scribed by law (without extensions) for
filing the individual’s federal income tax
return for that year. As in the case of
IRAs, for calendar year taxpayers, gen-
erally the deadline for contributions to
an MSA is April 15 following the year
for which the contributions are made.
Q–19. What happens when MSA con-
tributions exceed the amount that may
be deducted or excluded from gross
income?
A–19. Contributions by individuals
are not deductible to the extent that they
exceed the limits in A–13 or A–15 or if
they are made by an individual who is
not an eligible individual. Contributions
by employers are included in gross
income to the extent that they exceed
the limits in A–13 or if they are made
on behalf of an individual who is not an
eligible individual. In addition, under
the statute an excise tax of six percent
for each tax year is imposed on the
account holder for these excess indi-
vidual and employer contributions. If,
however, the excess contributions for a
tax year and the net income attributable
to these excess contributions are paid to
the account holder before the last day
prescribed by law, including extensions,
for filing the account holder’s tax return
for the tax year, then (1) the excise tax
does not apply; (2) the distribution of
the excess contributions is not taxed;
and (3) the net income attributable to
the excess contributions is included in
the account holder’s gross income for
the tax year in which the distribution is
made.
IV. Distributions From MSAs.
Q–20. When is an individual permit-
ted to receive distributions from an
MSA?
A–20. An individual is permitted to
receive a distribution from an MSA at
any time.
Q–21. How are distributions from an
MSA taxed?
A–21. Distributions from an MSA are
excludable from gross income if used
for medical expenses of the MSA ac-
count holder and the account holder’s
family, with certain exceptions, and are
includible in gross income if used for
6

any other purpose. Under one such
exception, in any year for which an
MSA contribution is made, distributions
from an MSA of that account holder to
pay medical expenses are included in
gross income if, for the month in which
the expense was incurred, the individual
for whom the expense was incurred was
not covered under a high-deductible
health plan or had coverage that makes
a person ineligible for an MSA (see A–4
through A–7). If included in gross in-
come, distributions generally are subject
to an additional 15 percent tax. How-
ever, if distributions that are included in
gross income are made after the account
holder turns age 65, becomes disabled
or dies, the additional 15 percent tax
does not apply.
Q–22. What medical expenses are eli-
gible for tax-free distributions?
A–22. Medical expenses are defined
under section 213 of the Code, but do
not include expenses for insurance other
than long-term care insurance, premiums
for ‘‘COBRA’’-type health care continu-
ation coverage, or premiums for health
care coverage while an individual re-
ceives unemployment compensation.
Q–23. Must MSA trustees or custodi-
ans determine whether MSA distribu-
tions are used for medical expenses?
A–23. MSA trustees or custodians are
not required to determine whether MSA
distributions are used for medical ex-
penses; individuals who have MSAs
should make this determination.
V. Cap on Number of Taxpayers Using
MSAs.
Q–24. Does the law limit the number
of MSAs that can be established?
A–24. Yes. The statute authorizes
MSAs as a ‘‘pilot project’’. Under the
statute, the pilot project is scheduled to
end in the year 2000; however, the
ability to establish MSAs generally will
end earlier if the number of taxpayers
contributing (or receiving employer con-
tributions) to an MSA exceeds certain
statutory limits for 1997, 1998 or 1999.
In general, in determining whether the
limits are exceeded, certain previously
uninsured individuals will not be
counted.
Q–25. What happens after the pilot
project ends?
A–25. After the pilot project ends, all
eligible individuals (as described in
A–2) who previously made or received
MSA contributions (or who are em-
ployed by certain employers whose em-
ployees previously used MSAs) can
make or receive MSA contributions, if
they remain eligible individuals. In addi-
tion, individuals can continue to receive
distributions from MSAs as described in
A–20 through A–22.
Q–26. Do any special deadlines apply
if the ability to establish MSAs gener-
ally ends early?
A–26. If the statutory limits are
reached and therefore the ability to
establish MSAs ends early (as referred
to in A–24), an eligible individual who
is not covered by a high-deductible
health plan by a ‘‘cut-off date’’ specified
in the law will be unable to establish an
MSA, unless the individual’s employer
established a high-deductible health plan
for its employees before that date and
meets certain other requirements.
For employees of small employers,
the law specifies two potential cut-off
dates in 1997: September 1 and October
1. (For self-employed individuals, these
dates are October 1, and November 1,
1997, respectively.) For each of 1998
and 1999, the potential cut-off date is
October 1 of that year. If the employer’s
health plan has a regularly scheduled
enrollment period that occurs during the
period between the potential cut-off date
and the end of the relevant year, the
potential cut-off date is deferred to
December 31 of that year.
Q–27. How will a taxpayer know if
the ability to establish MSA generally
ends early?
A–27. If the statutory limits are
reached and therefore the ability to
establish MSAs generally ends early (as
described in A–24), the IRS will make
an announcement not later than October
1 of the relevant year stating the appli-
cable cut-off date. The ability to estab-
lish MSAs will not be cut off before the
announcement is made.
VI. Information Reporting by Trustees
and Custodians.
Q–28. How will the number of MSAs
be determined?
A–28. The statute requires MSA
trustees and custodians to report by
August 1 of each year (1997, 1998, and
1999) the number of MSAs established
before July 1 of the year, and also to
report by June 1, 1997, the number of
MSAs established before May 1, 1997
(together with additional information).
See Internal Revenue Code section
220(j). The IRS will release a form to
be used in making these reports.
Q–29. What other information report-
ing is required?
A–29. Information reporting required
for MSAs is similar to information
reporting for IRAs. The IRS will release
forms and instructions to report MSA
contributions, distributions and deduc-
tions. For further information, contact
the Information Reporting Call Site on
(304) 263–8700 (not a toll-free number).
VII. Other Matters.
MSAs are subject to a variety of
other statutory rules and provisions,
many of which are not addressed in this
notice. No inference should be drawn
regarding issues not expressly addressed
in this notice that may be suggested by
a particular question or answer, or by
the inclusion or exclusion of certain
questions.
Among the statutory provisions not
addressed in this notice are:
* The requirement that employers
make comparable MSA contributions for
all comparable participating employees.
* The investment restrictions on
MSAs.
* The rollover rules for MSAs.
* The special rules that apply upon
divorce or death of the account holder.
* The rules for allocating the deduc-
tion for MSA contributions between
married people.
* The Congressionally mandated
study as to the effects of MSAs in the
small group market on selection (includ-
ing adverse selection), health costs (in-
cluding the impact on premiums of
individuals with comprehensive cover-
age), use of preventive care, consumer
choice, the scope of coverage of high-
deductible plans purchased in conjunc-
tion with such accounts, and other is-
sues.
The statutory provisions governing
MSAs, including new section 220 of the
Internal Code are contained in section
301 of the Health Insurance Portability
and Accountability Act of 1996, P. L.
No. 104–191, 110 Stat. 1936.
VIII. Comments Invited.
Comments are invited on new section
220 of the Internal Revenue Code. Writ-
ten comments are requested by March
16, 1997. Send submissions to:
CC:DOM:CORP:R (Notice 96–53),
Room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand-delivered between the hours of 8
a.m. and 5 p.m. to: CC:DOM:CORP:R
(Notice 96–53), Courier’s Desk, Internal
Revenue Service, 1111 Constitution Av-
7

enue, NW, Washington, DC. Alterna-
tively, taxpayers may submit comments
electronically via the internet by submit-
ting comments directly to the IRS
internet site at htpi//www.irs.ustreas.gov/
prod/tax_regs/comments.html.
The principal author of this notice is
Felix Zech of the Office of Associate
Chief Counsel (Employee Benefits and
Exempt Organizations). For further in-
formation regarding this notice, call
(202) 622–4606 (not a toll-free call).
Request for Comments on the
Desirability of Guidance Relating to
Section 457 Nonqualified Deferred
Compensation Plans of State and
Local Government and Tax-Exempt
Employers
Notice 96–63
This notice invites public comment on
possible changes to procedures relating
to requests for private letter rulings
under § 457 of the Code. These changes
may include (1) the publication of
model amendments for existing § 457
plans in lieu of the issuance of rulings
on individual plan amendments reflect-
ing changes applicable to plans that
meet the requirements of § 457(b) un-
der the Small Business Job Protection
Act of 1996, P.L. 104–188 (‘‘SBJPA’’),
and (2) the creation of a Master and
Prototype plan program for plans that
meet the requirements of § 457(b).
BACKGROUND
Section 457 plans are nonqualified,
deferred compensation plans established
by state and local government and tax-
exempt employers. These employers
may establish either eligible plans that
meet the requirements of § 457(b) or
ineligible § 457(f) plans. The plans are
subject to the specific requirements and
deferral limitations of § 457 of the
Code. Under § 457(a), compensation
deferred pursuant to eligible plans that
meet the requirements of § 457(b) and
the income attributable to such deferred
compensation is not taxable until the
taxable year in which the deferred
amounts are actually paid or made avail-
able to the plan participant or other
beneficiary. In contrast, compensation
deferred under a plan described in
§ 457(f) is included in the participant’s
or beneficiary’s gross income for the
first taxable year in which there is no
substantial risk of forfeiture of the rights
to the compensation. In addition, prior
to the enactment of the SBJPA,
§ 457(b)(6) mandated that eligible plans
under § 457(b) be unfunded and that
plan assets not be set aside for the
exclusive benefit of participants.
The SBJPA changed certain require-
ments for plans under § 457(b). Section
457(g), added by § 1448 of the SBJPA,
now mandates that all assets and income
of eligible state and local government
plans (but not eligible plans of tax-
exempt entities) must be held in trust
for the exclusive benefit of participants
and their beneficiaries. The trust require-
ment applies immediately to eligible
plans established after August 20, 1996.
For government plans already in exist-
ence on that date, the effective date of
the § 457(g) requirement is January 1,
1999. However, a trust may be added to
existing government plans at any time.
In addition, all plans that meet the
requirements of § 457(b) may imple-
ment changes to § 457(e) made by
§ 1447 of the SBJPA. Section 457(e)(9)
provides that certain benefits will not be
treated as made available by reason of
certain elections with regard to distribu-
tions from eligible § 457(b) plans. Also,
§ 457(e)(15) provides a cost-of-living
adjustment for the maximum deferral
amount under § § 457(b)(2) and (c)(1)
of the Code. These amendments made
by § 1447 of the SBJPA apply to tax-
able years beginning after December 31,
1996.
The Service is considering issuing
model language that will provide plan
sponsors of eligible plans that meet the
requirements of § 457(b) with a stream-
lined method for amending their plans
to comply with the new requirements of
§ 457. This model language can be
adopted by existing eligible plans in lieu
of receiving a new ruling under
§ 457(b). This approach will provide
time and cost savings to employers who
have previously received favorable rul-
ing letters with respect to their § 457(b)
plans.
In addition, the Service is considering
the establishment of a ruling program
for master and prototype § 457(b) plans
that will consider the statutory changes
to § 457 under the SBJPA. The Service
believes that this type of program is
particularly well suited to ruling re-
quests under § 457(b). For example,
under such a program, if a state creates
a plan, it can then be adopted by the
political subdivisions, agencies and in-
strumentalities of that state, without the
need for individual rulings for each state
employer that adopts the same plan. In
addition, the prototype plan program
could be used by banks, insurance com-
panies and mutual fund companies, who
may be interested in receiving advance
rulings for plans that meet the require-
ments of § 457(b).
REQUEST FOR PUBLIC
COMMENT
The Service is now evaluating pos-
sible changes to the advance letter rul-
ing program for eligible § 457 plans.
Accordingly, the Service requests com-
ments concerning the usefulness of the
model language and master and proto-
type plan approaches, and welcomes
comments on any other useful ap-
proaches the Service might consider.
Comments can be addressed to
CC:DOM:CORP:R (Notice 96–63),
room 5228, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Alternatively, taxpay-
ers may transmit comments electroni-
cally via the IRS Internet site at http://
www.irs.ustreas.gov/prod/tax_regs/
comments.html. In the alternative,
comments may be hand delivered be-
tween the hours of 8 a.m. and 5 p.m. to
CC:DOM:CORP:R (Notice 96–63),
Courier’s Desk, Internal Revenue Build-
ing, 1111 Constitution Avenue NW.,
Washington, DC.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Cheryl Press of the Office
of the Associate Chief Counsel (Em-
ployee Benefits and Exempt Organiza-
tions). For further information regarding
this notice, contact Cheryl Press at (202)
622–6030 (not a toll-free number).
Nondiscrimination Rules for Plans
Maintained by Governments and
Tax-Exempt Organizations
Notice 96–64
I. PURPOSE
This notice addresses certain issues
relating to the nondiscrimination rules
that apply to qualified plans maintained
by governments and by organizations
exempt from taxation under § 501(a) of
the Internal Revenue Code (‘‘tax-exempt
organizations’’).
For governmental plans, this notice—
•Extends the date for applying the
regulations under § 401(k) and (m) until
the first plan year beginning on or after
October 1, 1997 (or, if later, 90 days
after the opening of the first legislative
session beginning on or after October 1,
8

1997, of the governing body with au-
thority to amend the plan, if that body
does not meet continuously);
•Clarifies that deemed satisfaction
of the § 401(a)(4) and § 410(b) nondis-
crimination and minimum coverage
rules also applies for purposes of the
references to those sections under
§ 401(k) and (m);
•Provides a special option for ap-
plying the § 401(k) and (m) nondis-
crimination tests for years before 1999;
and
•Allows governments until the 2001
plan year to apply, for nondiscrimination
purposes, a reasonable, good faith inter-
pretation of existing law in determining
which entities must be aggregated, with
any further guidance applying prospec-
tively for plan years beginning in or
after 2001.
For plans maintained by tax-exempt
organizations, this notice—
•Extends the date for applying the
regulations under §§ 401(a)(4), 401(a)-
(5), 401(l), 410(b), 414(r), and 414(s)
until the first plan year beginning on or
after October 1, 1997;
•Extends the remedial amendment
period and other administrative relief
until the last day of the first plan year
beginning on or after October 1, 1997;
•Extends through the 1997 plan
year the relief under existing regulations
permitting employees of certain tax-
exempt entities to be disregarded in
applying § 410(b) to a § 401(k) plan
maintained by a taxable entity; and
•Allows tax-exempt organizations
until the 2001 plan year to apply, for
nondiscrimination purposes, a reason-
able, good faith interpretation of existing
law in determining which entities must
be aggregated, with any further guidance
applying prospectively for plan years
beginning in or after 2001.
II. BACKGROUND
A. Governmental Plans
Announcement 95–48, 1995–23 I.R.B.
13, provides that, in the case of govern-
mental plans described in § 414(d), the
regulations under § 401(k) and (m) ap-
ply to plan years beginning on or after
the later of January 1, 1997, or 90 days
after the opening of the first legislative
session beginning on or after January 1,
1997, of the governing body with au-
thority to amend the plan, if that body
does not meet continuously. The regula-
tions under §§ 401(a)(4), 401(a)(26),
410(b), and 414(s) apply to plan years
beginning on or after the later of Janu-
ary 1, 1999, or 90 days after the
opening of the first legislative session
beginning on or after January 1, 1999,
of the governing body with authority to
amend the plan, if that body does not
meet continuously (‘‘1999 legislative
date’’). For plan years beginning before
the applicable effective date, govern-
mental plans are deemed to satisfy
§§ 401(a)(4), 401(a)(26), 401(k), 401-
(m), 410(b), and 414(s).
Announcement 95–48 also provides
that the remedial amendment period un-
der § 401(b) for governmental plans
extends to the last day of the first plan
year beginning on or after the later of
January 1, 1999, or the 1999 legislative
date. During the remedial amendment
period, additional administrative relief
provided under Notice 92–36, 1992–2
C.B. 364, continues to be available.
Announcement 95–48 solicited com-
ments on the application of the nondis-
crimination requirements to governmen-
tal plans. Comments included discussion
of state law restrictions on modifying
benefits for current employees and noted
that it may be difficult to identify the
appropriate governmental entity to be
treated as the employer for purposes of
nondiscrimination testing. For example,
in the case of a state-wide plan covering
members of a particular occupation
(such as public school teachers), ques-
tions have been raised whether the em-
ployers for testing purposes would be
the special districts (such as the school
districts), the local governments, or
other governmental entities. Comments
also raised the issue of whether deemed
satisfaction of § 401(a)(4) and § 410(b)
by a governmental plan applies for
purposes of certain requirements under
§ 401(k) and (m).
B. Plans Maintained by Tax-
Exempt Organizations
Announcement 95–48 provides that,
in the case of plans maintained by
tax-exempt organizations, other than
church plans described in § 410(c)(1)-
(B) (‘‘nonelecting church plans’’), the
regulations under §§ 401(a)(4), 401(a)-
(5), 401(l), 410(b), 414(r), and 414(s)
apply to plan years beginning on or
after January 1, 1997. For plan years
beginning before that effective date, a
plan maintained by a tax-exempt organi-
zation must be operated in accordance
with a reasonable, good faith interpreta-
tion of §§ 401(a)(4), 401(a)(5), 401(l),
410(b), 414(r), and 414(s). The remedial
amendment period for plans maintained
by tax-exempt organizations was ex-
tended in Announcement 95–48 to the
last day of the first plan year beginning
on or after January 1, 1997. During the
remedial amendment period, additional
administrative relief provided under No-
tice 92–36 continues to be available.
(See section V of Notice 92–36, and
section IV of Rev. Proc. 94–13, 1994–1
C.B. 566, for the definition of ‘‘plan
maintained by a tax-exempt organiza-
tion.’’)
Announcement 95–48 solicited com-
ments on the issue of which entities
must be aggregated under § 414(b) and
(c) (relating to the definition of em-
ployer) and on any other related nondis-
crimination issues affecting tax-exempt
organizations. No comments were sub-
mitted on behalf of tax-exempt organi-
zations in response to Announcement
95–48, and the Treasury and the Service
have not identified any other unique
characteristics of tax-exempt organiza-
tions that require special rules for apply-
ing §§ 401(a)(4), 401(a)(5), 401(l),
410(b), 414(r), or 414(s) to plans main-
tained by tax-exempt organizations
(other than nonelecting church plans).
C. Nonelecting Church Plans
Under Announcement 95–48, in the
case of nonelecting church plans, the
regulations under §§ 401(a)(4), 401(a)-
(5), 401(l), and 414(s) apply to plan
years beginning on or after January 1,
1999. For plan years beginning before
that effective date, a nonelecting church
plan must be operated in accordance
with a reasonable, good faith interpreta-
tion of §§ 401(a)(4), 401(a)(5), 401(l),
and 414(s). The remedial amendment
period for nonelecting church plans was
extended in Announcement 95–48 to the
last day of the first plan year beginning
on or after January 1, 1999. During the
remedial amendment period, additional
administrative relief provided under No-
tice 92–36 continues to be available.
III. EXTENSION OF EFFECTIVE
DATES
A. Governmental Plans
Under the extension provided by this
notice, in the case of governmental
plans, the regulations under § 401(k)
and (m) apply only to plan years begin-
ning on or after the later of October 1,
1997, or 90 days after the opening of
the first legislative session beginning on
or after October 1, 1997, of the govern-
ing body with authority to amend the
plan, if that body does not meet continu-
ously. For plan years beginning before
9

this extended effective date, governmen-
tal plans are deemed to satisfy § 401(k)
and (m). The special rule in § 1.402(a)–
1(d)(3)(v) of the Income Tax Regula-
tions (providing an income tax deferral
for certain elective contributions) is ex-
tended for the same period. The Trea-
sury and the Service do not anticipate
issuing any further guidance on the
application of the regulations under
§ 401(k) and (m) to governmental plans
prior to the effective date.
B. Plans Maintained by Tax-
Exempt Organizations
Under the extension provided by this
notice, in the case of plans maintained
by tax-exempt organizations (other than
nonelecting church plans), the regula-
tions under §§ 401(a)(4), 401(a)(5),
401(l), 410(b), 414(r), and 414(s) apply
only to plan years beginning on or after
October 1, 1997. For plan years begin-
ning before this extended effective date,
such plans must be operated in accor-
dance with a reasonable, good faith
interpretation of these sections. The
Treasury and the Service do not antici-
pate issuing any further guidance on the
application of the regulations under
these sections to plans maintained by
tax-exempt organizations prior to the
effective date.
C. Nonelecting Church Plans
As noted above, under Announcement
95–48, in the case of nonelecting church
plans, the regulations under §§ 401(a)-
(4), 401(a)(5), 401(l), and 414(s) do not
apply until the 1999 plan year.
IV. EXTENSION OF REMEDIAL
AMENDMENT PERIOD AND
ADMINISTRATIVE RELIEF
A. Remedial Amendment Period
Notice 92–36 and Announcement
95–48 set forth the remedial amendment
period described in § 401(b) applicable
to governmental plans and plans main-
tained by tax-exempt organizations. The
remedial amendment period is the pe-
riod during which a plan may be
amended retroactively to comply with
certain plan qualification requirements.
Notice 92–36 makes additional adminis-
trative relief available during the reme-
dial amendment period. For example,
the transition relief under Alternative II
D of Notice 88–131, 1988–2 C.B. 546,
applies. This permits, during the reme-
dial amendment period, the continued
accrual of certain benefits under a plan
that would otherwise fail to comply with
§ 401(a)(4) until the plan is amended to
comply with that section. In addition,
for purposes of testing benefits, rights
and features for the first plan year in
which the regulations under § 401(a)(4)
are effective, Notice 92–36 provides that
any amendment made during the plan
year regarding eligibility for a benefit,
right or feature may be treated as if it
had been in effect for the entire plan
year.
B. Governmental Plans and
Nonelecting Church Plans
As noted above, under Announcement
95–48, administrative relief under No-
tice 92–36, including the remedial
amendment period, extends to the last
day of the first plan year beginning on
or after the later of January 1, 1999, or
the 1999 legislative date in the case of
governmental plans, and to the last day
of the first plan year beginning on or
after January 1, 1999, in the case of
nonelecting church plans.
C. Plans Maintained by Tax-
Exempt Organizations
Under this notice, the remedial
amendment period for plans maintained
by tax-exempt organizations (other than
nonelecting church plans) is extended to
the last day of the first plan year
beginning on or after October 1, 1997.
The additional administrative relief pro-
vided under Notice 92–36 also applies
through this extended remedial amend-
ment period. Thus, in the case of a plan
with a plan year of October 1 through
September 30, any amendments required
to comply with the regulations under
§§ 401(a)(4), 401(a)(5), 401(l), 410(b),
414(r), and 414(s) for the plan year
beginning October 1, 1997, must be
made by September 30, 1998. In the
case of a plan using a calendar plan
year, these regulations are first effective
for the 1998 plan year, and any amend-
ments required to comply with these
regulations for that year must be made
by December 31, 1998.
V. SPECIAL RULES FOR § 401(k)
AND (m) PLANS
A. Governmental Plans
1. Application of §§ 401(a)(4) and
410(b)
As noted above, for governmental
plans, the regulations under §§ 401(a)-
(4), 401(a)(26), 410(b), and 414(s) apply
to plan years beginning on or after the
later of January 1, 1999, or the 1999
legislative date. For plan years begin-
ning before the applicable effective date,
governmental plans are deemed to sat-
isfy these provisions. Certain provisions
of § 401(k) and (m) and the regulations
thereunder separately require that a plan,
or certain aspects of a plan, satisfy
§ 401(a)(4) or 410(b). For example,
§ 401(k)(3)(A)(i) requires that the em-
ployees eligible to benefit under a cash
or deferred arrangement satisfy § 410-
(b)(1). This notice clarifies that, for plan
years beginning before the later of Janu-
ary 1, 1999, or the 1999 legislative date,
a governmental plan is deemed to sat-
isfy § 401(a)(4) and § 410(b) for all
purposes, including for purposes of
§ 401(k) and (m). Thus, for example, a
governmental plan that is subject to
§ 401(k) is deemed to satisfy § 401(k)-
(3)(A)(i) without regard to whether the
group of eligible employees satisfies
§ 410(b)(1), and a governmental plan
that is subject to § 401(m) is deemed to
satisfy § 401(a)(4) and § 410(b) for
purposes of § 1.401(m)–1(a)(2) and
(e)(4).
2. Special Testing Rule
Under §§ 1.410(b)–7(c)(4)(ii)(C),
1.401(k)–1(g)(11), and 1.401(m)–1(f)-
(14), in the case of a plan that covers
employees of more than one employer,
the tests under § 401(k)(3) and
§ 401(m)(2) must be applied on an
employer-by-employer basis. As dis-
cussed above, comments have noted that
it may be difficult to identify the appro-
priate employer for purposes of testing a
plan that covers employees of different
governmental entities. Under this notice,
for plan years beginning before the later
of January 1, 1999, or the 1999 legisla-
tive date, in applying the tests under
§ 401(k)(3) and § 401(m)(2) to a gov-
ernmental plan the employees covered
by the plan may be treated as employed
by a single governmental employer.
Thus, the tests under § 401(k)(3) and
§ 401(m)(2) may be applied to a gov-
ernmental plan on a plan-wide basis,
notwithstanding the fact that the plan
may cover employees of more than one
governmental employer.
B. Plans Maintained by Controlled
Groups Consisting of Tax-
Exempt and Taxable Entities
Some employers consist of tax-
exempt entities and taxable entities that
must be aggregated under § 414(b) or
(c) in determining whether a plan is
qualified. Under § 401(k)(4)(B), prior to
its amendment by § 1426 of the Small
Business Job Protection Act of 1996
10

(‘‘SBJPA’’), tax-exempt organizations
were precluded from establishing plans
that included qualified cash or deferred
arrangements under § 401(k). Thus, an
employer that included both taxable and
tax-exempt entities was only permitted
to maintain a plan that included a
qualified cash or deferred arrangement
under § 401(k) for the taxable entities.
However, the SBJPA amended § 401(k)-
(4)(B) to repeal this prohibition and
permit tax-exempt entities to establish
such plans for plan years beginning after
1996.
Special rules are provided in
§§ 1.401(a)(26)–1(b)(4) and 1.410(b)–
6(g) for a qualified cash or deferred
arrangement under § 401(k) for the em-
ployees of a taxable entity that must be
aggregated with a tax-exempt entity.
Under these special rules, if certain
requirements are met, the employees of
the tax-exempt entity that are precluded
from being covered in the qualified cash
or deferred arrangement may be disre-
garded when determining whether the
arrangement maintained by the taxable
entity satisfies § 401(a)(26) or
§ 410(b). The special rules apply only
to employees whose employer is pre-
cluded under § 401(k)(4)(B) from main-
taining a qualified cash or deferred
arrangement.
Beginning in 1997, these special rules
would no longer apply because employ-
ees of a tax-exempt entity are permitted
to be covered by a qualified cash or
deferred arrangement. The Treasury and
the Service recognize that this change
presents practical issues for employers
consisting of both tax-exempt and tax-
able entities as they consider possible
redesign of their retirement programs in
light of § 1426 of the SBJPA. Conse-
quently, this notice extends the relief
provided under § 1.410(b)–6(g) for
these employers through the 1997 plan
year. Through the 1997 plan year only,
these employers may continue to disre-
gard employees of tax-exempt entities
when testing a qualified cash or deferred
arrangement maintained by a taxable
entity in accordance with § 1.410(b)–
6(g).
Section 1432 of the SBJPA provides
that, beginning in the 1997 plan year,
§ 401(a)(26) applies only to defined
benefit plans. Accordingly, it is not
necessary to extend the relief provided
by § 1.401(a)(26)–1(b)(4) with respect
to § 401(a)(26).
VI. 403(b) PLANS
Notice 89–23, 1989–1 C.B. 654, dis-
cusses the nondiscrimination require-
ments under § 403(b)(12)(A) for annu-
ity contracts, custodial accounts, or
retirement income accounts purchased
under plans eligible for favorable tax
treatment under § 403(b) (‘‘403(b)
plans’’). Section 403(b)(12)(A)(i) pro-
vides that, with respect to nonelective
contributions, a 403(b) plan must meet
the requirements of §§ 401(a)(4), (5),
(17) and (26), 401(m), and 410(b). No-
tice 89–23 provides that § 403(b)(12) is
satisfied if an employer operates its
403(b) plan in accordance with a rea-
sonable, good faith interpretation of
§ 403(b)(12). As provided in Announce-
ment 95–48, until further guidance is
issued, employers maintaining 403(b)
plans may continue to rely on Notice
89–23. However, employers maintaining
403(b) plans may not continue to rely
on a reasonable, good faith interpreta-
tion of § 401(a)(17), but must comply
with the regulations under § 401(a)(17)
as of the applicable effective dates set
forth in § 1.401(a)(17)–1(d). Of course,
for the period for which a qualified plan
is deemed to satisfy any particular statu-
tory nondiscrimination requirement, the
nonelective contributions under a gov-
ernmental 403(b) plan also are deemed
to satisfy that requirement.
VII. APPLICATION OF § 414(b)
AND (c)
Until further guidance is issued, gov-
ernments and tax-exempt organizations
(including churches) may apply a rea-
sonable, good faith interpretation of ex-
isting law in determining which entities
must be aggregated under § 414(b) and
(c). Any further guidance will be applied
on a prospective basis only and will not
be effective before plan years beginning
in 2001.
The Treasury and the Service invite
specific suggestions for an aggregation
standard or standards appropriate for
tax-exempt organizations under § 414-
(b), (c) and (o). In particular, comments
are requested on the appropriateness of
the standard described in Section
V.B.2.a of Notice 89–23, under which
two entities are in the same controlled
group if at least 80% of the directors,
trustees or other individual members of
one entity’s governing body are either
representatives of or directly or indi-
rectly control, or are controlled by, the
other entity. However, because questions
have arisen as to whether this
standard would be appropriate and suffi-
cient in all circumstances, the Treasury
and the Service intend to consider alter-
native and additional standards as well.
VIII. COMMENTS
Comments or suggestions in response
to this notice should be submitted by
April 30, 1997, and should be addressed
to: CC:DOM:CORP:T:R (Notice 96–64),
Room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, D.C. 20044. Alternatively, tax-
payers may hand-deliver comments be-
tween the hours of 8 a.m. and 5 p.m. to:
CC:DOM:CORP:T:R (Notice 96–64),
Courier’s desk, Internal Revenue Ser-
vice, 1111 Constitution Ave., NW, Wash-
ington, DC, or may submit comments
electronically via the IRS internet site at
http://www.irs.ustreas.gov/prod/tax_regs/
comments.html.
IX. EFFECT ON OTHER
DOCUMENTS
Notice 89–23 and Notice 92–36 are
modified.
DRAFTING INFORMATION
The principal author of this notice is
Diane S. Bloom of the Employee Plans
Division. For further information regard-
ing this notice, please contact the Em-
ployee Plans Division’s taxpayer assis-
tance telephone service at (202) 622–
6074 or (202) 622–6075, between the
hours of 1:30 p.m. and 4 p.m. Eastern
Time, Monday through Thursday, or Ms.
Bloom at (202) 622–6214. Alternatively,
please contact Patricia McDermott of
the Office of the Associate Chief Coun-
sel (Employee Benefits and Exempt Or-
ganizations) at (202) 622–6030. (These
telephone numbers are not toll-free.)
26 CFR 601.201: Rulings and determinations
letters.
Rev. Proc. 96–56
Section 1. PURPOSE
This revenue procedure amplifies Rev.
Proc. 96–3, 1996–1 I.R.B. 82, which
sets forth areas of the Internal Revenue
Code (‘‘Code’’) under the jurisdiction of
the Associate Chief Counsel (Employee
Benefits and Exempt Organizations) in
which the Internal Revenue Service will
not issue advance rulings.
Section 2. BACKGROUND
Rev. Proc. 96–3, section 5, lists spe-
cific areas in which rulings or determi-
11

nation letters will not be issued because
the areas are under extensive study. This
revenue procedure adds a subparagraph
for certain rulings involving § 457
nonqualified deferred compensation
plans of state and local government
and tax-exempt entities. The Small Busi-
ness Job Protection Act of 1996, P.L.
104–188 (‘‘SBJPA’’) has substantially
changed the requirements for state and
local government plans that meet the
requirements of § 457(b) by mandating
that all assets and income of these plans
be held in trust for the exclusive benefit
of the participants and their beneficia-
ries. The SBJPA has also added other
provisions which are now available for
use in all plans that meet the require-
ments of § 457(b).
Section 3. PROCEDURE
Rev. Proc. 96–3 is amplified by add-
ing to section 5 the following: Section
457. Deferred Compensation Plans of
State and Local Government and Tax-
Exempt Organizations. The tax effect of
provisions under the Small Business Job
Protection Act affecting plans described
in § 457. Taxpayers may, however, still
receive advance rulings on § 457 plans
based on the law in effect prior to
enactment of the Small Business Job
Protection Act.
Section 4. EFFECTIVE DATE
This revenue procedure applies to all
ruling requests, including any pending in
the National Office before December 16,
1996. In pending cases, taxpayers may
withdraw their ruling request from con-
sideration and obtain a refund of their
user fee. If the ruling request is not
withdrawn, the ruling will analyze the
taxpayer’s plan under the law in effect
before the enactment of the SBJPA.
Section 5. EFFECTS ON OTHER
REVENUE PROCEDURES
Rev. Proc. 96–3 is amplified.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Cheryl Press of the Office
of the Associate Chief Counsel (Em-
ployee Benefits and Exempt Organiza-
tions). For further information regarding
this revenue procedure, contact Cheryl
Press at (202) 622–6030 (not a toll-free
number).
12

Part IV. Items of General Interest
Foundations Status of Certain
Organizations
Announcement 96–123
The following organizations have
failed to establish or have been unable
to maintain their status as public chari-
ties or as operating foundations. Accord-
ingly, grantors and contributors may not,
after this date, rely on previous rulings
or designations in the Cumulative List
of Organizations (Publication 78), or on
the presumption arising from the filing
of notices under section 508(b) of the
Code. This listing doesnotindicate that
the organizations have lost their status
as organizations described in section
501(c)(3), eligible to receive deductible
contributions.
Former Public Charities. The follow-
ing organizations (which have been
treated as organizations that are not
private foundations described in section
509(a) of the Code) are now classified
as private foundations:
Abba Koval Perpetual Fund
Corporation, Cleveland, OH
Academic Freedom Lecture Fund, Ann
Arbor, MI
ACCHA, Inc., Columbus, OH
Action Group to Save America’s
Economy, Willoughby, OH
African American Math Science
Coalition, Cincinnati, OH
Albion Volunteer Service Organization,
Albion, MI
American Against Corruption in
Government, New Richmond, IN
American Foundation for Vision
Awareness Michigan Affiliate,
Lansing, MI
Anchor Bay Soccer Organization, New
Baltimore, MI
Apex Capital, Inc., Cleveland, OH
Arbor Health Associates, Manchester,
MI
Association of Black Automotive
Employees, Inc., Detroit, MI
A Star is Born Foundation, Inc., Kings
Mills, OH
Attendance Plus, Detroit, MI
Back to Christ Ministry BTC, Detroit,
MI
Balanced Scale, Inc., Cleveland Hts.,
OH
Ben Davis Girls Basketball Association,
Inc., Indianapolis, IN
Bethune Community Council Non-Profit
Housing Corporation, Detroit, MI
Boy Scouts of America Troop 97, Inc.,
Mt. Clemens, MI
Bridge to Russia, Cleveland, OH
Buckeye Babes Girls Fast Pitch, Inc.,
Uniontown, OH
Canton Dry Times Club, Canton, OH
Center for Corrections Development,
Inc., Indianapolis, IN
Champaign County Preservation
Alliance, Urbana, OH
Charisma, Inc., Portland, IN
Charterhouse Academies, Inc., Detroit,
MI
Children’s Policy Institute of West
Virginia, Inc., Charleston, WV
Christian Family Bible Fellowship, Inc.,
Marion, OH
Cleveland Foundation for Architecture,
Inc., Cleveland, OH
Clothe-A-Child, Newark, OH
Cloverville Community Center, Inc.,
Muskegon, MI
Columbus Babe Ruth Baseball, Inc.,
Columbus, OH
Concerned Ministries, Inc., Fruitport, MI
Council of Minority Business
Organizations 401k Plan, Lansing, MI
Creation Expeditions, Inc., Indianapolis,
IN
Dancers Studio, Inc. of Columbus,
Columbus, OH
Delta Tau Delta Scholarship Fund,
Cincinnati, OH
Dennis D. Mclain Charitable
Foundation, Inc., Brighton, MI
Doulos Ministries, Cincinnati, OH
Dozier Scholarship Fund of Peace and
Goodwill MBC, Detroit, MI
DUCC, Inc., Camden, IN
East Chicago Centennial Committee,
Inc., East Chicago, IN
Elisha Community Redevelopment
Corporation, Cincinnati, OH
Elkins Main Street Project, Inc., Elkins,
WV
Lambda Chi Alpha/Sigma Chapter
Education Foundation, Inc., St. Clair
Shores, MI
Lansing Crusader Booster Club,
Incorporated, Lansing, MI
Lawrence Township Boys Basketball
League, Inc., Indianapolis, IN
Lectonia-Washingtonville Baseball
Association, Lectonia, OH
Licking Youth Life Center, Newark, OH
Life and Greer Home, Inc., Detroit, MI
Life in the Mainstream, Euclid, OH
Lift ICO UCO Community
Development Corporation, East
Chicago, IN
Lithotech of Owensboro Kentucky, Inc.,
Owensboro, KY
Little Buns, Inc., Carmel, IN
Lion of Judah Ministries, Inc., Galena,
OH
The Loft, Benton Harbor, MI
Lost Creek Volunteer Fire Department,
Inc., Dice, KY
Lowell Main Street Association Inc.,
Lowell, IN
Making Opportunities Very Exciting,
Jackson, KY
The Manger, Conneaut, OH
Marion Noon Kiwanis Foundation, Inc.,
Marion, OH
Matteson Institute, Inc., Berrien Springs,
MI
Mednotes 1995, Columbus, OH
Mentor Soccer Club, Mento, OH
Metro East Chamber of Commerce
Childrens Medical Trust Fund, St.
Clair Shores, MI
Metropolitan Childrens Museum, Inc.,
Mt. Pleasant, MI
Midwest Hispanic Coalition, Toledo, OH
Mitchell Swim Club, Mitchell, IN
Mr. Residential Services Fourth
Housing, Inc., Lima, OH
Mr. Residential Services—Fifth Housing
Corporation, Inc., Lima, OH
New Ohio Volunteer Advocates, Inc.,
Akron, OH
New Start Ministries, Akron, OH
Northwest Ohio Leadership Foundation,
Sylvania, OH
Ohio AIDS Coalition, Columbus, OH
Ohio Area Service Committee of
Cocaine Anonymous, Toledo, OH
Ohio Cardinal, Akron, OH
Ohio Chiropractic Foundation,
Columbus, OH
Olentangy Youth Athletic Association,
Powell, OH
Open Gate Shelter, Cleveland, OH
Overeaters Anonymous Western
Michigan Inter Group, Newaygo, MI
Parents of Teen Parents, Akron, OH
Positive Peer Plus, Inc., Detroit, OH
Potawatomi Creative Playground
Project, Inc., South Bend, IN
Progressive Action Council, Cleveland,
OH
Property Development Engineers, Inc.,
Detroit, MI
Pulmonary Rehabilitation Organization
of Northern Ohio, Parma, OH
Quality Community Housing
Corporation, Pontiac, MI
Quin Centennial Redevelopment
Corporation, Columbus, OH
Reasonable Choices, Inc., Springfield,
OH
Re-Connect of Michigan, Ann Arbor, MI
13

Responsible Social Values Program of
Muskingum County, Inc., Zanesville,
OH
Rhea House, Inc., Ripley, WV
If an organization listed above sub-
mits information that warrants the re-
newal of its classification as a public
charity or as a private operating founda-
tion, the Internal Revenue Service will
issue a ruling or determination letter
with the revised classification as to
foundation status. Grantors and contribu-
tors may thereafter rely upon such rul-
ing or determination letter as provided
in section 1.509(a)–7 of the Income Tax
Regulations. It is not the practice of the
Service to announce such revised classi-
fication of foundation status in the Inter-
nal Revenue Bulletin.
Deletions From Cumulative List of
Organizations Contributions to
Which Are Deductible Under
Section 170 of the Code
Announcement 96–128
The names of organizations that no
longer qualify as organizations described
in section 170(c)(2) of the Internal Rev-
enue Code of 1986 are listed below.
Generally, the Service will not disal-
low deductions for contributions made
to a listed organization on or before the
date of announcement in the Internal
Revenue Bulletin that an organization
no longer qualifies. However, the Ser-
vice is not precluded from disallowing a
deduction for any contributions made
after an organization ceases to qualify
under section 170(c)(2) if the organiza-
tion has not timely filed a suit for
declaratory judgment under section 7428
and if the contributor (1) had knowledge
of the revocation of the ruling or deter-
mination letter, (2) was aware that such
revocation was imminent, or (3) was in
part responsible for or was aware of the
activities or omissions of the organiza-
tion that brought about this revocation.
If on the other hand a suit for de-
claratory judgment has been timely
filed, contributions from individuals and
organizations described in section
170(c)(2) that are otherwise allowable
will continue to be deductible. Protec-
tion under section 7428(c) would begin
on December 16, 1996, and would end
on the date the court first determines
that the organization is not described in
section 170(c)(2) as more particularly
set forth in section 7428(c)(1). For indi-
vidual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any
individual who was responsible, in
whole or in part, for the acts or omis-
sions of the organization that were the
basis for revocation.
Society of Separationists, Inc.
Austin, TX
Charles E. Stevens American Atheist
Library and Archives, Inc.
Austin, TX
Availability of Publication 938 on
IRS Electronic Bulletin Board
(IRP–BBS)
Announcement 96–129
The 1996 update of Publication 938,
Real Estate Mortgage Investment Con-
duits (REMICs) Reporting Information
(And Other Collateralized Debt Obliga-
tions (CDOs)), is now available on the
IRS Electronic Bulletin Board (IRP–
BBS). It contains information received
by the Service during the period Sep-
tember 16, 1995, through August 31,
1996. You can download the publication
if you have a computer with a modem.
Dial 1–304–264–7070 and follow the
instructions. If you have problems
downloading the publication, call the
help line at 1–304–263–8700 and ask
for the bulletin board. (These are not
toll-free calls.)
14

Announcement of the Disbarment, Suspension, or Consent to Voluntary
Suspension of Attorneys, Certified Public Accountants, Enrolled Agents, and
Enrolled Actuaries From Practice Before the Internal Revenue Service
Under 31 Code of Federal Regula-
tions, Part 10, an attorney, certified pub-
lic accountant, enrolled agent, or en-
rolled actuary, in order to avoid the
institution or conclusion of a proceeding
for his disbarment or suspension from
practice before the Internal Revenue Ser-
vice, may offer his consent to suspension
from such practice. The Director of
Practice, in his discretion, may suspend
an attorney, certified public accountant,
enrolled agent, or enrolled actuary in
accordance with the consent offered.
Attorneys, certified public accoun-
tants, enrolled agents, and enrolled actu-
aries are prohibited in any Internal Rev-
enue Service matter from directly or
indirectly employing, accepting assis-
tance from, being employed by or shar-
ing fees with, any practitioner disbarred
or suspended from practice before the
Internal Revenue Service.
To enable attorneys, certified public
accountants, enrolled agents, and en-
rolled actuaries to identify practitioners
under consent suspension from practice
before the Internal Revenue Service, the
Director of Practice will announce in the
Internal Revenue Bulletin the names and
addresses of practitioners who have
been suspended from such practice, their
designation as attorney, certified public
accountant, enrolled agent, or enrolled
actuary, and date or period of suspen-
sion. This announcement will appear in
the weekly Bulletin at the earliest practi-
cable date after such action and will
continue to appear in the weekly Bulle-
tins for five successive weeks or for as
many weeks as is practicable for each
attorney, certified public accountant, en-
rolled agent, or enrolled actuary so
suspended and will be consolidated and
published in the Cumulative Bulletin.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue
Service:
NameAddressDesignationDate of Suspension
Sherman, Richard M.Crystal Lake, ILCPAOctober 18, 1996 to July 17, 1997
Hunter, LewisJacksonville, FLCPAOctober 25, 1996 to January 24, 1997
Hisken, DonaldRed Bluff, CACPANovember 1, 1996 to March 31, 1997
Byrne, Steven P.Arcadia, CAAttorneyNovember 1, 1996 to January 31, 1997
Mulrey, Robert M.Milton, MACPANovember 1, 1996 to October 31, 1997
Edwards, Ronald A.Plymouth, MICPANovember 1, 1996 to April 30, 1998
Hart Jr., Charles E.Wilmington, OHAttorneyNovember 1, 1996 to October 31, 1998
Willner, Peter D.Stowe, VTCPANovember 1, 1996 to April 30, 1997
May, GaryMadison, WIAttorneyNovember 1, 1996 to October 31, 1998
Josephson, ElliottNorthbrook, ILCPANovember 1, 1996 to October 31, 1998
Capwill Jr., James A.Solon, OHCPANovember 1, 1996 to February 28, 1997
Hazel, John J.Ridgefield, CTEnrolled AgentNovember 1, 1996 to January 31, 1997
Jacobs, PatrickSt. Paul, MNCPANovember 1, 1996 to December 31, 1996
Lau, WilliamCrete, ILCPANovember 1, 1996 to June 30, 1997
Franklin, Gene L.Lees Summit, MOEnrolled AgentNovember 1, 1996 to January 31, 1997
Winterhalter, Charles L.Cincinnati, OHCPANovember 1, 1996 to April 30, 1998
Cremer, Patricia L.Roundup, MTCPANovember 5, 1996 to May 4, 1997
Gardner, Stephen A.Dallas, TXAttorneyNovember 7, 1996 to May 6, 1999
Masini, DavidWheat Ridge, COCPANovember 12, 1996 to November 11, 1997
Cunningham, MichaelLafayette, INCPANovember 12, 1996 to August 11, 1997
Smith, RobertChicago, ILCPAJanuary 1, 1997 to December 31, 1997
15

Announcement of the Expedited Suspension of Attorneys, Certified Public
Accountants, Enrolled Agents, and Enrolled Actuaries From Practice Before the
Internal Revenue Service
Under title 31 of the Code of Federal
Regulations, section 10.76, the Director
of Practice is authorized to immediately
suspend from practice before the Internal
Revenue Service any practitioner who,
within five years, from the date the
expedited proceeding is instituted, (1)
has had a license to practice as an
attorney, certified public accountant, or
actuary suspended or revoked for cause;
or (2) has been convicted of any crime
under title 26 of the United States Code
or, of a felony under title 18 of the
United States Code involving dishonesty
or breach of trust.
Attorneys, certified public accoun-
tants, enrolled agents, and enrolled actu-
aries are prohibited in any Internal Rev-
enue Service matter from directly or
indirectly employing, accepting assis-
tance from, being employed by, or shar-
ing fees with, any practitioner disbarred
or suspended from practice before the
Internal Revenue Service.
To enable attorneys, certified public
accountants, enrolled agents, and en-
rolled actuaries to identify practitioners
under expedited suspension from prac-
tice before the Internal Revenue Service,
the Director of Practice will announce in
the Internal Revenue Bulletin the names
and addresses of practitioners who have
been suspended from such practice, their
designation as attorney, certified public
accountant, enrolled agent, or enrolled
actuary, and date or period of suspen-
sion. This announcement will appear in
the weekly Bulletin at the earliest practi-
cable date after such action and will
continue to appear in the weekly Bulle-
tins for five successive weeks or for as
many weeks as is practicable for each
attorney, certified public accountant, en-
rolled agent, or enrolled actuary so
suspended and will be consolidated and
published in the Cumulative Bulletin.
The following individuals have been
placed under suspension from practice
before the Internal Revenue Service by
virtue of the expedited proceeding pro-
visions of the applicable regulations:
NameAddressDesignationDate of Suspension
Pacchiana, PaulChappaqua, NYAttorneyIndefinite from October 9, 1996
Rosenberger, David H.Centerville, OHEnrolled AgentIndefinite from October 21, 1996
Gudes, GeraldW. Bloomfield, MICPAIndefinite from October 22, 1996
Donnelly, Richard S.Asheville, NCCPAIndefinite from October 22, 1996
Burrows, William D.Dallas, TXAttorneyIndefinite from November 13, 1996
Klausner, JuliusScarsdale, NYCPAIndefinite from November 13, 1996
Glessner, RandyOmak, WACPAIndefinite from November 13, 1996
Aspland, Frieda R.Greenville, SCCPAIndefinite from November 13, 1996
16

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 de-
scribe the effect:
Amplifieddescribes a situation where
no change is being made in a prior
published 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 applied to A, and the new
ruling holds that the same principle also
applies to B, the earlier ruling is ampli-
fied. (Compare withmodified, 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
published ruling and points out an es-
sential 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 pub-
lished position. (Compare withamplified
andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered de-
terminative with respect to future trans-
actions. This term is most commonly
used in a ruling that lists previously
published rulings that are obsoleted be-
cause of changes in law or regulations.
A ruling may also be obsoleted because
the substance has been included in regu-
lations subsequently adopted.
Revokeddescribes situations where
the position in the previously published
ruling is not correct and the correct
position is being stated in the 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 previ-
ously published over a period of time in
separate rulings. If the new ruling does
more than restate the substance of a
prior ruling, a combination of terms is
used. For example,modifiedandsuper-
sededdescribes a situation where the
substance of a previously published rul-
ing 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 su-
perseded.
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 rulings in the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and
formerly used will appear in material 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 Contribution 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.—Statements 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.
15

Numerical Finding List
1
Bulletins 1996–27 through 1996–50
Announcements:
96–61, 1996–27 I.R.B.72
96–62, 1996–28 I.R.B.55
96–63, 1996–29 I.R.B.18
96–64, 1996–29 I.R.B.18
96–65, 1996–29 I.R.B.18
96–66, 1996–29 I.R.B.19
96–67, 1996–30 I.R.B.27
96–68, 1996–31 I.R.B.45
96–69, 1996–32 I.R.B.38
96–70, 1996–32 I.R.B.40
96–71, 1996–33 I.R.B.16
96–72, 1996–33 I.R.B.16
96–73, 1996–33 I.R.B.18
96–74, 1996–33 I.R.B.19
96–75, 1996–34 I.R.B.29
96–76, 1996–34 I.R.B.29
96–77, 1996–35 I.R.B.15
96–78, 1996–35 I.R.B.15
96–79, 1996–35 I.R.B.15
96–80, 1996–35 I.R.B.16
96–81, 1996–36 I.R.B.13
96–82, 1996–36 I.R.B.14
96–83, 1996–36 I.R.B.14
96–84, 1996–36 I.R.B.14
96–85, 1996–37 I.R.B.20
96–86, 1996–37 I.R.B.21
96–87, 1996–37 I.R.B.21
96–88, 1996–38 I.R.B.150
96–89, 1996–37 I.R.B.22
96–90, 1996–37 I.R.B.22
96–91, 1996–37 I.R.B.23
96–92, 1996–38 I.R.B.151
96–93, 1996–38 I.R.B.151
96–94, 1996–38 I.R.B.153
96–96, 1996–39 I.R.B.41
96–97, 1996–39 I.R.B.41
96–98, 1996–39 I.R.B.42
96–99, 1996–39 I.R.B.42
96–100, 1996–40 I.R.B.10
96–101, 1996–40 I.R.B.10
96–102, 1996–40 I.R.B.11
96–103, 1996–40 I.R.B.12
96–104, 1996–41 I.R.B.10
96–105, 1996–42 I.R.B.19
96–106, 1996–42 I.R.B.23
96–107, 1996–42 I.R.B.27
96–108, 1996–44 I.R.B.15
96–109, 1996–43 I.R.B.76
96–110, 1996–43 I.R.B.77
96–111, 1996–44 I.R.B.16
96–112, 1996–45 I.R.B.7
96–113, 1996–44 I.R.B.18
96–114, 1996–45 I.R.B.7
96–115, 1996–45 I.R.B.9
96–116, 1996–46 I.R.B.12
96–117, 1996–46 I.R.B.12
96–118, 1996–46 I.R.B.12
96–119, 1996–46 I.R.B.13
96–120, 1996–47 I.R.B.12
96–121, 1996–47 I.R.B.12
96–122, 1996–47 I.R.B.13
96–124, 1996–49 I.R.B.22
96–125, 1996–48 I.R.B.21
96–126, 1996–50 I.R.B.12
96–127, 1996–50 I.R.B.12
Court Decisions:
2058, 1996–34 I.R.B.13
2059, 1996–34 I.R.B.10
2060, 1996–34 I.R.B.5
Delegation Orders:
155 (Rev. 4), 1996–40 I.R.B.9
Notices:
96–36, 1996–27 I.R.B.11
96–37, 1996–31 I.R.B.29
96–38, 1996–31 I.R.B.29
96–39, 1996–32 I.R.B.8
96–40, 1996–33 I.R.B.11
96–41, 1996–35 I.R.B.6
96–42, 1996–35 I.R.B.6
96–43, 1996–36 I.R.B.7
96–44, 1996–36 I.R.B.7
96–45, 1996–39 I.R.B.7
96–46, 1996–39 I.R.B.7
96–47, 1996–39 I.R.B.8
96–48, 1996–39 I.R.B.8
96–49, 1996–41 I.R.B.6
96–50, 1996–41 I.R.B.6
96–51, 1996–42 I.R.B.6
96–52, 1996–42 I.R.B. 8
96–54, 1996–44 I.R.B.13
96–55, 1996–47 I.R.B.7
96–56, 1996–47 I.R.B.7
96–57, 1996–47 I.R.B.9
96–58, 1996–49 I.R.B.7
96–59, 1996–48 I.R.B.10
96–60, 1996–49 I.R.B.7
96–61, 1996–49 I.R.B.8
96–62, 1996–49 I.R.B.8
Proposed Regulations:
CO–9–96, 1996–34 I.R.B.20
CO–24–96, 1996–30 I.R.B.22
CO–25–96, 1996–31 I.R.B.30
CO–26–96, 1996–31 I.R.B.31
FI–59–94, 1996–30 I.R.B.23
FI–32–95, 1996–34 I.R.B.21
FI–48–95, 1996–31 I.R.B.36
FI–28–96, 1996–31, I.R.B.33
GL–7–96, 1996–33 I.R.B.13
IA–292–84, 1996–28 I.R.B.38
IA–26–94, 1996–30 I.R.B.24
IA–42–95, 1996–49 I.R.B.21
IA–29–96, 1996–33 I.R.B.14
INTL–4–95, 1996–36 I.R.B.8
PS–39–93, 1996–34 I.R.B.27
PS–22–96, 1996–33 I.R.B.15
REG–208215–91, 1996–38 I.R.B.145
REG–209803–95, 1996–44 I.R.B.14
REG–209826–96, 1996–42 I.R.B.10
REG–209827–96, 1996–37 I.R.B.19
REG–245562–96, 1996–41 I.R.B.8
REG–251520–96, 1996–48 I.R.B.15
Public Laws:
104–117, 1996–34 I.R.B.19
104–134, 1996–38 I.R.B.7
104–168, 1996–38 I.R.B.8
104–191, 1996–43 I.R.B.7
104–193, 1996–46 I.R.B.4
Railroad Retirement Quarterly Rate
1996–29 I.R.B.14
Revenue Procedures:
96–36, 1996–27 I.R.B.11
96–37, 1996–29 I.R.B.16
96–39, 1996–33 I.R.B.11
96–40, 1996–32 I.R.B.8
96–41, 1996–32 I.R.B.9
96–42, 1996–32 I.R.B.14
96–43, 1996–35 I.R.B.6
96–44, 1996–35 I.R.B.7
96–45, 1996–35 I.R.B.12
96–46, 1996–38 I.R.B.144
96–47, 1996–39 I.R.B.10
96–48, 1996–39 I.R.B.10
96–49, 1996–43 I.R.B.74
96–50, 1996–47 I.R.B.10
96–51, 1996–47 I.R.B.10
96–52, 1996–48 I.R.B.10
96–53, 1996–49 I.R.B.9
96–54, 1996–50 I.R.B.9
96–55, 1996–50 I.R.B.10
Revenue Rulings:
96–33, 1996–27 I.R.B.4
96–34, 1996–28 I.R.B.4
96–35, 1996–31 I.R.B.4
96–36, 1996–30 I.R.B.6
96–37, 1996–32 I.R.B.4
96–38, 1996–33 I.R.B.4
96–39, 1996–34 I.R.B.4
96–41, 1996–45 I.R.B.4
96–42, 1996–35 I.R.B.4
96–43, 1996–36 I.R.B.4
96–44, 1996–38 I.R.B.4
96–45, 1996–39 I.R.B.5
96–46, 1996–39 I.R.B.5
96–47, 1996–40 I.R.B.7
96–48, 1996–40 I.R.B.4
96–49, 1996–41 I.R.B.4
96–50, 1996–42 I.R.B.4
96–51, 1996–43 I.R.B.5
96–52, 1996–45 I.R.B.5
96–53, 1996–47 I.R.B.4
96–54. 1996–47 I.R.B.5
96–55, 1996–49 I.R.B.4
96–56, 1996–50 I.R.B.7
96–57, 1996–50 I.R.B.5
96–58, 1996–50 I.R.B.4
96–59, 1996–50 I.R.B.4
Tax Conventions:
1996–28 I.R.B. 36
1996–36 I.R.B.6
1996–40 I.R.B.8
1996–50 I.R.B.8
Treasury Decisions:
8673, 1996–27 I.R.B.4
8674, 1996–28 I.R.B.7
8675, 1996–29 I.R.B.5
8676, 1996–30 I.R.B.4
8677, 1996–30 I.R.B.7
8678, 1996–31 I.R.B.11
8679, 1996–31 I.R.B.4
8680, 1996–33 I.R.B.5
8681, 1996–37 I.R.B.17
8682, 1996–37 I.R.B.4
8683, 1996–44 I.R.B.9
8684, 1996–44 I.R.B.4
8685, 1996–48 I.R.B. 4
1
A cumulative list of all Revenue Rulings, Rev-
enue Procedures, Treasury Decisions, etc., pub-
lished in Internal Revenue Bulletins 1996–1
through 1996–26 will be found in Internal Rev-
enue Bulletin 1996–27, dated July 1, 1996.
17

Finding List of Current Action on
Previously Published Items
1
Bulletins 1996–27 through 1996–50
*Denotes entry since last publication
Revenue Procedures:
67–396
Modified by
96–56, 1996–50 I.R.B.7
80–27
Modified by
96–40, 1996–32 I.R.B.8
87–32
Modified by
TD 8680, 1996–33 I.R.B.5
91–22
Superseded by
96–53, 1996–49 I.R.B.9
92–20
Modified by
TD 8680, 1996–33 I.R.B.5
95–16
Superseded by
96–48, 1996–39 I.R.B.10
95–29
Superseded by
96–36, 1996–27 I.R.B.11
95–29A
Superseded by
96–36, 1996–27 I.R.B.11
95–30
Superseded by
96–42, 1996–32 I.R.B.14
95–46
Superseded by
96–48, 1996–39 I.R.B.10
96–25
Modified by
96–58, 1996–50 I.R.B.4
96–41
Modified by
Notice 96–49, 1996–41 I.R.B.6
96–46
Supplemented by
96–51, 1996–47 I.R.B.10
1
A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1996–1 through 1996–26 will be found in Internal
Revenue Bulletin 1996–27, dated July 1, 1996.
18