Internal Revenue Bulletin 2008-34 (PDF rendition): IRS Revenue Procedures

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.

Bulletin No. 200
8-34
August 25, 2008
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
T.D. 9411, page 398.
REG–164965–04, page 450.
Final, temporary, and proposed regulations under sections
195, 248, and 709 of the Code provide guidance for making
elections to amortize expenses.
T.D. 9413, page 404.
Final regulations under section 468B of the Code provide
rules relating to the taxation of the income earned on escrow
accounts, trusts, and other funds used during deferred ex-
changes of like-kind property. The regulations also provide
rules under section 7872 regarding below-market loans to
facilitators of these exchanges.
REG–142040–07, page 451.
Proposed regulations under sections 401(a)(9) and 403(b) of
the Code permit a governmental plan to comply with the re-
quired minimum distribution rules by using a reasonable and
good faith interpretation of the statute.
Notice 2008–68, page 418.
This notice provides guidance relating to the energy credit un-
der section 48 of the Code for fuel cells (fuel cell credit) and
microturbines (microturbine credit).
EMPLOYEE PLANS
Rev. Rul. 2008–45, page 403.
Exclusive benefit rule; transfer of plan sponsorship; con-
trolled groups.This ruling provides that the exclusive benefit
rule of section 401(a) of the Code is violated if the sponsorship
of a qualified retirement plan is transferred from an employer
to an unrelated taxpayer and the transfer is not in connection
withatransferofbusinessassetsoroperationsfromtheem-
ployer to the unrelated taxpayer.
REG–142040–07, page 451.
Proposed regulations under sections 401(a)(9) and 403(b) of
the Code permit a governmental plan to comply with the re-
quired minimum distribution rules by using a reasonable and
good faith interpretation of the statute.
Notice 2008–69, page 419.
Weighted average interest rate update; corporate bond
indices; 30-year Treasury securities; segment rates.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in August 2008;
the 24-month average segment rates; the funding transitional
segment rates applicable for August 2008; and the minimum
present value transitional rates for July 2008.
ADMINISTRATIVE
T.D. 9410, page 414.
Final regulations relating to the discharge of liens under section
7425 of the Code and return of wrongfully levied-upon property
under section 6343 clarify that such notices and claims should
be sent to the IRS official and office specified in the relevant
IRS publications.
Rev. Proc. 2008–49, page 423.
This procedure contains the latest revision of Publication 1516,
Specifications for Filing Form 8596, Information Return for Fed-
eral Contracts, Electronically. Rev. Proc. 2005–29 super-
seded.
(Continued on the next page)
Fi
nding Lists begin on page ii.
Index for July through August begins on page iv.

Announcement 2008–78, page 453.
This document contains a correction to an announcement pub-
lished in I.R.B. 2008–32 (Announcement 2007–72, 2008–32
I.R.B. 321) for section 7428(c) validation of certain contribu-
tions made during pendency of declaratory judgment proceed-
ings. The announcement number should read:Announce-
ment 2008–72.
August 25, 20082008–34 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax 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 and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2008–34 I.R.B.August 25, 2008

August 25, 20082008–34 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 48.—E
nergy Credit
A notice provi
des guidance under section 48 of
the Internal R
evenue Code for property qualifying for
the fuel cell c
redit and the microturbine credit. See
Notice 2008-6
8, page 418.
Section 195.—Start-up
Expenditures
26 CFR 1.195–1: Election to amortize start-up ex-
penditures.
T.D. 9411
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Elections Regarding
Start-up Expenditures,
Corporation Organizational
Expenditures, and Partnership
Organizational Expenses
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: T
his document contains fi-
nal and te
mporary regulations relating to
election
s to deduct start-up expenditures
under sec
tion 195 of the Internal Revenue
Code (Cod
e), organizational expenditures
of corpor
ations under section 248, and or-
ganizat
ional expenses of partnerships un-
der sect
ion 709. The American Jobs Cre-
ation Ac
t of 2004 amended these three sec-
tions of
the Code to provide similar rules
for dedu
cting these types of expenses that
are pai
d or incurred after October 22, 2004.
The reg
ulations affect taxpayers that pay
or incu
r these expenses and provide guid-
ance on
how to elect to deduct the expenses
in acco
rdance with the new rules. The
text o
f these temporary regulations also
serve
s as the text of the proposed regu-
latio
ns (REG–164965–04) set forth in the
notic
e of proposed rulemaking on this sub-
ject i
n this issue of the Bulletin.
DATES:Effect
ive Date:These regulations
are effective
on July 8, 2008.
Applicabilit
yDates:For dates of appli-
cability, see
§§1.195–1T(d), 1.248–1T(f),
and 1.709–1T(
b)(5).
FOR FURTHER I
NFORMATION
CONTACT: Gra
ce Matuszeski, (202)
622–7900 (no
t a toll-free number).
SUPPLEMENTA
RY INFORMATION:
Background
This documen
tamendstheIncomeTax
Regulations
(26 CFR Part 1) under sec-
tions 195, 24
8, and 709 of the Code to re-
flect amend
ments made by section 902 of
the America
n Jobs Creation Act of 2004
(Public Law
108–357, 118 Stat. 1418) (the
Act). The am
endments made by section
902 of the A
ct are effective for amounts
paid or inc
urred after October 22, 2004, the
date of the
enactment of the Act.
As amended
bysection902(a)ofthe
Act, secti
on 195(b) allowsan electing tax-
payer to de
duct, in the taxable year in
which the
taxpayer begins an active trade
or busine
ss, an amount equal to the lesser
of (1) the
amount of the start-up expen-
ditures t
hat relate to the active trade or
business
, or (2) $5,000, reduced (but not
below ze
ro) by the amount by which the
start-u
p expenditures exceed $50,000. The
remaind
er of the start-up expenditures is
deducti
ble ratably over the 180-month pe-
riod beg
inning with the month in which the
active t
rade or business begins.
As amend
ed by section 902(b) of the
Act, se
ction 248(a) allows an electing
corpor
ation to deduct, in the taxable year
in whic
h the corporation begins business,
an amou
nt equal to the lesser of (1) the
amount
of the organizational expenditures
of the c
orporation, or (2) $5,000, reduced
(but n
ot below zero) by the amount by
which
the organizational expenditures
excee
d $50,000. The remainder of the
organ
izational expenditures is deductible
ratab
ly over the 180-month period begin-
ning
with the month in which the corpora-
tion
begins business.
As am
endedbysection902(c)ofthe
Act,
section 709(b) allows an electing
partnership t
o deduct, in the taxable year
in which the pa
rtnership begins business,
an amount equa
l to the lesser of (1) the
amount of the
organizational expenses of
the partners
hip, or (2) $5,000, reduced
(but not belo
w zero) by the amount by
which the org
anizational expenses exceed
$50,000. Th
e remainder of the organiza-
tional expe
nses is deductible ratably over
the 180-mon
th period beginning with the
month in whi
ch the partnership begins
business.
Explanatio
nofProvisions
This Treasu
ry decision revises the reg-
ulations un
der sections 195, 248, and 709
to reflect t
he amendments made by section
902 of the Ac
t. This Treasury decision also
updates th
e manner in which taxpayers
elect to de
duct costs under sections 195,
248, and 70
9. Under these regulations,
taxpayers
arenolongerrequiredtofilea
separate e
lection statement to deduct costs
under sec
tions 195, 248, and 709. The
manner of
filing these elections is changed
because o
f various electronic return filing
initiati
ves and in acknowledgment that the
vast majo
rity of taxpayers that incur costs
that may
be deducted under sections 195,
248, and
709 elect to deduct those costs.
The chan
ge also reduces the administrative
burden o
f making the elections.
The temp
orary regulations under sec-
tions 19
5, 248, and 709 apply to expendi-
tures p
aid or incurred after September 8,
2008. H
owever, taxpayers may apply all
the pro
visions of these regulations to ex-
pendit
ures paid or incurred under sections
195, 24
8, and 709 after October 22, 2004,
provi
ded the period of limitations on as-
sessm
ent of tax has not expired for the year
the el
ection under section 195, 248, or 709
is dee
med made.Expenditures paid or in-
curre
d on or before October 22, 2004, may
be amo
rtized over a period of not less than
60 mo
nths as provided for under prior law.
Tempo
rary Regulations Under Section
195
Secti
on 195(a) provides that, except
as oth
erwise provided in section 195, no
deduc
tion shall be allowed for start-up ex-
2008–34 I.R.B.398August 25, 2008

penditures. Under section 195(b)(1), a tax-
payer may elect to deduct start-up expendi-
tures as provided in sections 195(b)(1)(A)
and (B). Section 195(b)(1)(A) allows an
electing taxpayer to deduct start-up ex-
penditures in the year in which the active
trade or business to which the expendi-
tures relates begins. The amount that may
be deducted under section 195(b)(1)(A)
in that year is the lesser of the amount of
the start-up expenditures or $5,000, re-
duced (but not below zero) by the amount
by which the start-up expenditures ex-
ceed $50,000. Any start-up expenditures
that are not deductible under section
195(b)(1)(A) may be deducted by the tax-
payer under section 195(b)(1)(B) ratably
over the 180-month period beginning with
the month in which the active trade or
business begins. All start-up expenditures
incurred by the taxpayer that relate to
the active trade or business are consid-
ered in determining whether the start-up
expenditures exceed$50,000, including
expenditures incurred on or before Octo-
ber 22, 2004.
For start-up expenditures as defined in
section 195(c)(1) paid or incurred after
September 8, 2008, the temporary regula-
tions under section 195 provide that a tax-
payer is deemed to make an election un-
der section 195(b) to deduct start-up ex-
penditures for the taxable year in which the
active trade or business to which the ex-
penditures relates begins. Therefore, un-
der the temporary regulations a taxpayer
is no longer required to attach a statement
to the return or specifically identify the
deducted amount as start-up expenditures
for the election under section 195(b) to
be effective. A taxpayer may choose to
forgo the deemed election by clearly elect-
ing to capitalize its start-up expenditures
on a timely filed Federal income tax re-
turn (including extensions) for the taxable
year in which the active trade or business
begins. The election to capitalize start-up
expenditures is made in accordance with
the form and instructions used by the tax-
payer to file its Federal income tax return.
An election either to deduct start-up ex-
penditures under section 195(b) or to cap-
italize start-up expenditures is irrevocable
and applies to all start-up expenditures of
the taxpayer that are related to the active
trade or business.
In general, a change in the character-
ization of an item as a start-up expendi-
ture, or a change in the determination of
the taxable year in which the active trade
or business begins, will be treated as a
change in method of accounting with a sec-
tion 481(a) adjustment.
Temporary Regulations Under Section
248
In general, the organizational expendi-
tures of a corporation are not deductible
except as provided in section 248. Un-
der section 248(a), a corporation may
elect to deduct organizational expendi-
tures as provided in sections 248(a)(1)(A)
and (B). Section 248(a)(1)(A) allows an
electing corporation to deduct organiza-
tional expenditures in the year in which
the corporation begins business. The
amount that may be deducted under sec-
tion 248(a)(1)(A) in that year is the lesser
of the amount of the organizational expen-
ditures of the corporation or $5,000, re-
duced (but not below zero) by the amount
by which the organizational expenditures
exceed $50,000. Any organizational ex-
penditures that are not deductible under
section 248(a)(1)(A) may be deducted by
the corporation under section 248(a)(1)(B)
ratably over the 180-month period begin-
ning with the month in which the corpo-
ration begins business. All organizational
expenditures incurred by the corporation
are considered in determining whether
the organizational expenditures exceed
$50,000, including expenditures incurred
on or before October 22, 2004.
For organizational expenditures as de-
fined in section 248(b) and §1.248–1(b)
paid or incurred after September 8, 2008,
the temporary regulations under section
248 provide that a corporation is deemed
to make an election under section 248(a) to
deduct organizational expenditures for the
taxable year in which the corporation be-
gins business. Therefore, under the tempo-
rary regulations a corporation is no longer
required to attach a statement to the re-
turn or specifically identify the deducted
amount as organizational expenditures for
the election under section 248(a) to be ef-
fective. A corporation may choose to forgo
the deemed election by clearly electing to
capitalize its organizational expenditures
on a timely filed Federal income tax re-
turn (including extensions) for the taxable
year in which the corporation begins busi-
ness. The election to capitalize organiza-
tional expenditures is made in accordance
with the form and instructions used by
the corporation to file its Federal income
tax return. An election either to deduct
organizational expenditures under section
248(a) or to capitalize organizational ex-
penditures is irrevocable and applies to all
organizational expenditures of the corpo-
ration.
In general, a change in the characteri-
zation of an item as an organizational ex-
penditure, or a change in the determination
of the taxable year inwhich the corpora-
tion begins business, will be treated as a
change in method of accounting with a sec-
tion 481(a) adjustment.
Temporary Regulations Under Section
709
Section 709(a) provides that, except
as otherwise provided in section 709(b),
no deduction shall be allowed for or-
ganizational expenses. Under section
709(b), a partnership may elect to deduct
organizational expenses as provided in
section 709(b)(1)(A) and (B). Section
709(b)(1)(A) allowsan electing partner-
ship to deduct organizational expenses
in the year in which the partnership be-
gins business. The amount that may be
deducted under section 709(b)(1)(A) in
that year is the lesser of the amount of the
organizational expenses of the partnership
or $5,000, reduced (but not below zero)
by the amount by which the organizational
expenses exceed $50,000. Any organi-
zational expenses that are not deductible
under section 709(b)(1)(A) may be de-
ducted by the partnership under section
709(b)(1)(B) ratably over the 180-month
period beginning with the month in which
the partnership begins business. All or-
ganizational expenses incurred by the
partnership are considered in determining
whether the organizational expenses ex-
ceed $50,000, including expenses incurred
on or before October 22, 2004.
For organizational expenses as defined
in section 709(b)(3) and §1.709–2(a) paid
or incurred after September 8, 2008, the
temporary regulations under section 709
provide that a partnership is deemed to
make an election under section 709(b) to
deduct organizational expenses for the tax-
able year in which the partnership begins
business. Therefore, under the tempo-
rary regulations a partnership is no longer
August 25, 20083992008–34 I.R.B.

required to attach a statement to the re-
turn or specifically identify the deducted
amount as organizational expenses for the
election under section 709(b) to be effec-
tive. A partnership may choose to forgo
the deemed election by clearly electing to
capitalize its organizational expenses on
a timely filed Federal income tax return
(including extensions) for the taxable year
in which the partnership begins business.
The election to capitalize organizational
expenses is made in accordance with the
form and instructions used by the partner-
ship to file its Federal income tax return.
An election either to deduct organiza-
tional expenses under section 709(b) or
to capitalize organizational expenses is ir-
revocable and applies to all organizational
expenses of the partnership.
In general, a change in the characteri-
zation of an item as an organizational ex-
pense, or a change in the determination
of the taxable year in which the partner-
ship begins business, will be treated as a
change in method of accounting with a sec-
tion 481(a) adjustment.
Examples
The temporary regulations under sec-
tions 195, 248, and 709 contain examples
that illustrate how the election is made,
how to calculate the amount of the deduc-
tion that is allowed in the year in which the
election is made, and how to effect sub-
sequent redeterminations in the character-
ization of an item or the year in which the
trade or business begins.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations. Please re-
fer to the cross-referenced notice of pro-
posed rulemaking published elsewhere in
this issue of the Bulletin for applicability
of the Regulatory Flexibility Act (5 U.S.C.
chapter 6). Pursuantto section 7805(f) of
the Code, these final and temporary reg-
ulations have been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on their
impact on small business.
Drafting Information
The principal author of these regula-
tions is Grace Matuszeski of the Office of
the Associate Chief Counsel (Income Tax
& Accounting). However, other person-
nel from the IRS and Treasury Department
participated in their development.
*****
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.195–1 is revised to
read as follows:
§1.195–1 Election to amortize start-up
expenditures.
[Reserved]. For further guidance, see
§1.195–1T.
Par. 3. Section 1.195–1T is added to
read as follows:
§1.195–1T Election to amortize start-up
expenditures (temporary).
(a)In general. Under section 195(b), a
taxpayer may elect to amortize start-up ex-
penditures as defined in section 195(c)(1).
In the taxable year in which a taxpayer
begins an active trade or business, an
electing taxpayer may deduct an amount
equal to the lesser of the amount of the
start-up expenditures that relate to the ac-
tive trade or business, or $5,000 (reduced
(but not below zero) by the amount by
which the start-upexpenditures exceed
$50,000). The remainder of the start-up
expenditures is deductible ratably over
the 180-month period beginning with the
month in which the active trade or busi-
ness begins. All start-up expenditures that
relate to the active trade or business are
considered in determining whether the
start-up expenditures exceed $50,000, in-
cluding expenditures incurred on or before
October 22, 2004.
(b)Time and manner of making elec-
tion. A taxpayer is deemed to have made
an election under section 195(b) to amor-
tize start-up expenditures as defined in sec-
tion 195(c)(1) for the taxable year in which
the active trade or business to which the
expenditures relates begins. A taxpayer
may choose to forgo the deemed election
by clearly electing to capitalize its start-up
expenditures on a timely filed Federal in-
come tax return (including extensions) for
the taxable year in which the active trade or
business to which the expenditures relates
begins. The election either to amortize
start-up expenditures under section 195(b)
or to capitalize start-up expenditures is ir-
revocable and applies to all start-up expen-
ditures that are related to the active trade
or business. A change in the characteriza-
tion of an item as a start-up expenditure is a
change in method of accounting to which
sections 446 and 481(a) apply if the tax-
payer treated the item consistently for two
or more taxable years. A change in the de-
termination of the taxable year in which
the active trade or business begins also is
treated as a change in method of account-
ing if the taxpayer amortized start-up ex-
penditures for two or more taxable years.
(c)Examples. The following examples
illustrate the application of this section:
Example 1.Expenditures of $5,000 or less.Cor-
poration X, a calendar year taxpayer, incurs $3,000 of
start-up expenditures after October 22, 2004, that re-
late to an active trade or business that begins on July
1, 2009. Under paragraph (b) of this section, Corpo-
ration X is deemed to have elected to deduct start-up
expenditures under section 195(b) in 2009. There-
fore, Corporation X may deduct the entire amount of
the start-up expenditures in 2009, the taxable year in
which the active trade or business begins.
Example 2.Expenditures of more than $5,000
but less than or equal to $50,000. The facts are the
same as inExample 1except that Corporation X in-
curs start-up expenditures of $41,000. Under para-
graph (b) of this section, Corporation X is deemed
to have elected to deduct start-up expenditures un-
der section 195(b) in 2009. Therefore, Corporation X
may deduct $5,000 and the portion of the remaining
$36,000 that is allocable to July through December of
2009 ($36,000/180 x 6 = $1,200) in 2009, the taxable
year in which the active trade or business begins.
Example 3.Subsequent change in the charac-
terization of an item. The facts are the same as in
Example 2except that Corporation X determines in
2011 that Corporation X incurred $10,000 for an ad-
ditional start-up expenditure erroneously deducted in
2009 under section 162 as a business expense. Un-
der paragraph (b) of this section, Corporation X is
deemed to have elected to amortize start-up expen-
ditures under section 195(b) in 2009, including the
additional $10,000 of start-up expenditures. Corpora-
tion X is using an impermissible method of account-
ing for the additional $10,000 of start-up expenditures
and must change its method under §1.446–1(e) and
the applicable general administrative procedures in
effect in 2011.
Example 4.Subsequent redetermination of year
in which business begins. The facts are the same
2008–34 I.R.B.400August 25, 2008

as inExample 2except that, in 2010, Corporation
X deducted the start-up expenditures allocable to
January through December of 2010 ($36,000/180 x
12 = $2,400). In addition, in 2011 it is determined
that Corporation X actually began business in 2010.
Under paragraph (b) of this section, Corporation X
is deemed to have elected to deduct start-up expen-
ditures under section 195(b) in 2010. Corporation
X impermissibly deductedstart-up expenditures in
2009, and incorrectly determined the amount of
start-up expenditures deducted in 2010. Therefore,
Corporation X is using an impermissible method of
accounting for the start-up expenditures and must
change its method under §1.446–1(e) and the appli-
cable general administrative procedures in effect in
2011.
Example 5.Expenditures of more than $50,000
but less than or equal to $55,000. The facts are the
same as inExample 1except that Corporation X
incurs start-up expenditures of $54,500. Under para-
graph (b) of this section, Corporation X is deemed
to have elected to deduct start-up expenditures under
section 195(b) in 2009. Therefore, Corporation X
may deduct $500 ($5,000 - 4,500) and the portion
of the remaining $54,000 that is allocable to July
throughDecemberof2009($54,000/180x6=
$1,800) in 2009, the taxable year in which the active
trade or business begins.
Example 6.Expenditures of more than $55,000.
The facts are the same as inExample 1except
that Corporation X incurs start-up expenditures
of $450,000. Under paragraph (b) of this sec-
tion, Corporation X is deemed to have elected to
deduct start-up expenditures under section 195(b)
in 2009. Therefore, Corporation X may deduct the
amounts allocable to July through December of 2009
($450,000/180 x 6 = $15,000) in 2009, the taxable
year in which the active trade or business begins.
(d)Effective/applicability date.This
section applies to start-up expenditures
paid or incurred after September 8, 2008.
However, taxpayers may apply all the
provisions of this section to start-up ex-
penditures paid or incurred after October
22, 2004, provided that the period of lim-
itations on assessment of tax for the year
the election under paragraph (b) of this
section is deemed made has not expired.
Otherwise, for start-up expenditures paid
or incurred prior to September 8, 2008,
see§1.195–1ineffectpriortothatdate
(§1.195–1 as contained in 26 CFR part 1
edition revised as of April 1, 2008).
(e)Expiration date. This section ex-
pires on July 6, 2011.
Par. 4. Section 1.248–1 is amended by
revising paragraphs (a) and (c), and adding
paragraphs (d), (e), (f), and (g) to read as
follows:
§1.248–1 Election to amortize
organizational expenditures.
(a) [Reserved]. For further guidance,
see §1.248–1T(a).
*****
(c) through (g) [Reserved]. For further
guidance, see §1.248–1T(c) through (g).
Par. 5. Section 1.248–1T is added to
read as follows:
§1.248–1T Election to amortize
organizational expenditures (temporary).
(a)In general. Under section 248(a),
a corporation may elect to amortize or-
ganizational expenditures as defined in
section 248(b) and §1.248–1(b). In the
taxable year in which a corporation be-
gins business, an electing corporation may
deduct an amount equal to the lesser of the
amount of the organizational expenditures
of the corporation, or $5,000 (reduced (but
not below zero) by the amount by which
the organizational expenditures exceed
$50,000). The remainder of the organi-
zational expenditures is deducted ratably
over the 180-month period beginning with
the month in which the corporation begins
business. All organizational expendi-
tures of the corporation are considered in
determining whether the organizational
expenditures exceed$50,000, including
expenditures incurred on or before Octo-
ber 22, 2004.
(b) [Reserved]. For further guidance,
see §1.248–1(b).
(c)Time and manner of making elec-
tion. A corporation is deemed to have
made an election under section 248(a) to
amortize organizational expenditures as
defined in section 248(b) and §1.248–1(b)
for the taxable year in which the corpora-
tion begins business. A corporation may
choose to forgo the deemed election by
clearly electing to capitalize its organi-
zational expenditures on a timely filed
Federal income tax return (including ex-
tensions) for the taxable year in which the
corporation begins business. The election
either to amortize organizational expendi-
tures under section 248(a) or to capitalize
organizational expenditures is irrevocable
and applies to all organizational expendi-
tures of the corporation. A change in the
characterization of an item as an organiza-
tional expenditure is a change in method
of accounting to which sections 446 and
481(a) apply if the corporation treated the
item consistently for two or more taxable
years. A change in the determination of
the taxable year in which the corporation
begins business also is treated as a change
in method of accounting if the corporation
amortized organizational expenditures for
two or more taxable years.
(d)Determination of when corporation
begins business. The deduction allowed
under section 248 must be spread over a
period beginning with the month in which
the corporation begins business. The de-
termination of the date the corporation be-
gins business presents a question of fact
which must be determined in each case in
light of all the circumstances of the partic-
ular case. The words “begins business,”
however, do not have the same meaning
as “in existence.” Ordinarily, a corpora-
tion begins business when it starts the busi-
ness operations for which it was organized;
a corporation comes into existence on the
date of its incorporation. Mere organiza-
tional activities, such as the obtaining of
the corporate charter, are not alone suffi-
cient to show the beginning of business. If
the activities of the corporation have ad-
vanced to the extent necessary to establish
the nature of its business operations, how-
ever, it will be deemed to have begun busi-
ness. For example, the acquisition of op-
erating assets which are necessary to the
type of business contemplated may consti-
tute the beginning of business.
(e)Examples. The following examples
illustrate the application of this section:
Example 1.Expenditures of $5,000 or less.Cor-
poration X, a calendar year taxpayer, incurs $3,000 of
organizational expenditures after October 22, 2004,
and begins business on July 1, 2009. Under para-
graph (c) of this section, Corporation X is deemed
to have elected to deduct organizational expenditures
under section 248(a) in 2009. Therefore, Corporation
X may deduct the entire amount of the organizational
expenditures in 2009, the taxable year in which Cor-
poration X begins business.
Example 2.Expenditures of more than $5,000 but
less than or equal to $50,000. The facts are the same
as inExample 1except that Corporation X incurs or-
ganizational expenditures of $41,000. Under para-
graph (c) of this section, Corporation X is deemed
to have elected to deduct organizational expenditures
under section 248(a) in 2009. Therefore, Corporation
X may deduct $5,000 and the portion of the remaining
$36,000 that is allocable to July through December of
2009 ($36,000/180 x 6 = $1,200) in 2009, the taxable
year in which Corporation X begins business.
Example 3.Subsequent change in the charac-
terization of an item. The facts are the same as in
August 25, 20084012008–34 I.R.B.

Example 2except that Corporation X determines in
2011 that Corporation X incurred $10,000 for an ad-
ditional organizational expenditure erroneously de-
ducted in 2009 under section 162 as a business ex-
pense. Under paragraph (c) of this section, Corpo-
ration X is deemed to have elected to amortize orga-
nizational expenditures under section 248(a) in 2009,
including the additional $10,000 of organizational ex-
penditures. Corporation X is using an impermissi-
ble method of accounting for the additional $10,000
of organizational expenditures and must change its
method under §1.446–1(e) and the applicable general
administrative procedures in effect in 2011.
Example 4.Subsequent redetermination of year
in which business begins. The facts are the same as
inExample 2except that, in 2010, Corporation X
deducted the organizational expenditures allocable
to January through December of 2010 ($36,000/180
x 12 = $2,400). In addition, in 2011 it is determined
that Corporation X actually began business in 2010.
Under paragraph (c) of this section, Corporation X is
deemed to have elected to deduct organizational ex-
penditures under section 248(a) in 2010. Corporation
X impermissibly deducted organizational expendi-
tures in 2009, and incorrectly determined the amount
of organizational expenditures deducted in 2010.
Therefore, Corporation Xis using an impermissible
method of accounting for the organizational expendi-
tures and must change its method under §1.446–1(e)
and the applicable general administrative procedures
in effect in 2011.
Example 5.Expenditures of more than $50,000
but less than or equal to $55,000. The facts are
the same as inExample 1except that Corporation
X incurs organizational expenditures of $54,500.
Under paragraph (c) of this section, Corporation X is
deemed to have elected to deduct organizational ex-
penditures under section 248(a) in 2009. Therefore,
Corporation X may deduct $500 ($5,000 - 4,500) and
the portion of the remaining $54,000 that is allocable
to July through December of 2009 ($54,000/180
x 6 = $1,800) in 2009, the taxable year in which
Corporation X begins business.
Example 6.Expenditures of more than $55,000.
ThefactsarethesameasinExample 1except that
Corporation X incurs organizational expenditures
of $450,000. Under paragraph (c) of this section,
Corporation X is deemed to have elected to deduct
organizational expenditures under section 248(a)
in 2009. Therefore, Corporation X may deduct the
amounts allocable to July through December of 2009
($450,000/180 x 6 = $15,000) in 2009, the taxable
year in which Corporation X begins business.
(f)Effective/applicability date.This
section applies to organizational expen-
ditures paid or incurred after September
8, 2008. However, taxpayers may apply
all the provisions of this section to orga-
nizational expenditures paid or incurred
after October 22, 2004, provided that the
period of limitations on assessment of tax
for the year the election under paragraph
(c) of this section is deemed made has
not expired. Otherwise, for organizational
expenditures paid or incurred prior to
September 8, 2008, see §1.248–1 in effect
prior to that date (§1.248–1 as contained in
26 CFR part 1 edition revised as of April
1, 2008).
(g)Expiration date. This section ex-
pires on July 6, 2011.
Par. 6. Section 1.709–1 is amended
by revising paragraph (b) and removing
paragraph (c) to read as follows:
§1.709–1 Treatment of organization and
syndication costs.
*****
(b) [Reserved]. For further guidance,
see §1.709–1T.
Par. 7. Section 1.709–1T is added to
read as follows:
§1.709–1T Treatment of organizational
expenses and syndication costs
(temporary).
(a) [Reserved]. For further guidance,
see §1.709–1(a).
(b)Election to amortize organizational
expenses—(1)In general. Under section
709(b), a partnership may elect to amor-
tize organizational expenses as defined in
section 709(b)(3) and §1.709–2(a). In the
taxable year in which a partnership be-
gins business, an electing partnership may
deduct an amount equal to the lesser of
the amount of the organizational expenses
of the partnership, or $5,000 (reduced
(but not below zero) by the amount by
which the organizational expenses exceed
$50,000). The remainder of the organiza-
tional expenses is deductible ratably over
the 180-month period beginning with the
month in which the partnership begins
business. All organizational expenses of
the partnership are consideredindetermin-
ing whether the organizational expenses
exceed $50,000, including expenses in-
curred on or before October 22, 2004.
(2)Time and manner of making elec-
tion. A partnership is deemed to have
made an election under section 709(b) to
amortize organizational expenses as de-
fined in section 709(b)(3) and §1.709–2(a)
for the taxable year in which the partner-
ship begins business. A partnership may
choose to forgo the deemed election by
clearly electing to capitalize its organiza-
tional expenses on a timely filed Federal
income tax return (including extensions)
for the taxable year in which the partner-
ship begins business. The election either
to amortize organizational expenses under
section 709(b) or to capitalize organiza-
tional expenses is irrevocable and applies
to all organizational expenses of the part-
nership. A change in the characterization
of an item as an organizational expense is
a change in method of accounting to which
sections 446 and 481(a) apply if the part-
nership treated the item consistently for
two or more taxable years. A change in
the determination of the taxable year in
which the partnership begins business also
is treated as a change in method of ac-
counting if the partnership amortized or-
ganizational expenses for two or more tax-
able years.
(3)Liquidation of partnership.Ifthere
is a winding up and complete liquidation of
the partnership prior to the end of the amor-
tization period, the unamortized amount
of organizational expenses is a partnership
deduction in its final taxable year to the ex-
tent provided under section 165 (relating
to losses). However, there is no partner-
ship deduction with respect to its capital-
ized syndication expenses.
(4)Examples. The following examples
illustrate the application of this section:
Example 1.Expenditures of $5,000 or less.Part-
nership X, a calendar year taxpayer, incurs $3,000 of
organizational expenses after October 22, 2004, and
begins business on July 1, 2009. Under paragraph
(b)(2) of this section, Partnership X is deemed to have
elected to deduct organizational expenses under sec-
tion 709(b) in 2009. Therefore, Partnership X may
deduct the entire amount of the organizational ex-
penses in 2009, the taxable year in which Partnership
X begins business.
Example 2.Expenditures of more than $5,000
but less than or equal to $50,000. The facts are the
same as inExample 1except that Partnership X in-
curs organizational expenses of $41,000. Under para-
graph (b)(2) of this section, Partnership X is deemed
to have elected to deduct organizational expenses un-
der section 709(b) in 2009. Therefore, Partnership X
may deduct $5,000 and the portion of the remaining
$36,000 that is allocable to July through December of
2009 ($36,000/180 x 6 = $1,200) in 2009, the taxable
year in which Partnership X begins business.
Example 3.Subsequent change in the character-
ization of an item. The facts are the same as inEx-
ample 2except that Partnership X realizes in 2011
that Partnership X incurred $10,000 for an additional
organizational expense erroneously deducted in 2009
under section 162 as a business expense. Under para-
graph (b)(2) of this section, Partnership X is deemed
to have elected to amortize organizational expenses
under section 709(b) in 2009, including the additional
$10,000 of organizational expenses. Partnership X
isusinganimpermissiblemethodofaccountingfor
the additional $10,000 of organizational expenses and
must change its method under §1.446–1(e) and the
applicable general administrative procedures in effect
in 2011.
2008–34 I.R.B.402August 25, 2008

Example 4.Subsequent redetermination of year
in which business begins. The facts are the same as
inExample 2except that, in 2010, Partnership X de-
ducted the organizational expenses allocable to Jan-
uary through December of 2010 ($36,000/180 x 12
= $2,400). In addition, in 2011 it is determined that
Partnership X actually began business in 2010. Un-
der paragraph (b)(2) of this section, Partnership X is
deemed to have elected to deduct organizational ex-
penses under section 709(b) in 2010. Partnership X
impermissibly deducted organizational expenses in
2009, and incorrectly determined the amount of or-
ganizational expenses deducted in 2010. Therefore,
Partnership X is using an impermissible method of
accounting for the organizational expenses and must
change its method under §1.446–1(e) and the appli-
cable general administrative procedures in effect in
2011.
Example 5.Expenditures of more than $50,000
but less than or equal to $55,000. The facts are
thesameasinExample 1except that Partnership X
incurs organizational expenses of $54,500. Under
paragraph (b)(2) of this section, Partnership X is
deemed to have elected to deduct organizational
expenses under section 709(b) in 2009. Therefore,
Partnership X may deduct $500 ($5,000 - 4,500) and
the portion of the remaining $54,000 that is allocable
to July through December of 2009 ($54,000/180
x 6 = $1,800) in 2009, the taxable year in which
Partnership X begins business.
Example 6.Expenditures of more than $55,000.
ThefactsarethesameasinExample 1except that
Partnership X incurs organizational expenses of
$450,000. Under paragraph (b)(2) of this section,
Partnership X is deemed to have elected to deduct
organizational expenses under section 709(b) in
2009. Therefore, Partnership X may deduct the
amounts allocable to July through December of 2009
($450,000/180 x 6 = $15,000) in 2009, the taxable
year in which Partnership X begins business.
(5)Effective/applicability date.This
section applies to organizational expenses
paid or incurred after September 8, 2008.
However, taxpayers may apply all the pro-
visions of this section to organizational ex-
penses paid or incurred after October 22,
2004, provided that the period of limita-
tions on assessment of tax for the year the
election under paragraph (b)(2) of this sec-
tion is deemed made has not expired. Oth-
erwise, for organizational expenses paid
or incurred prior to September 8, 2008,
see§1.709–1ineffectpriortothatdate
(§1.709–1 as contained in 26 CFR part 1
edition revised as of April 1, 2008).
(6)Expiration date. This section ex-
pires on July 6, 2011.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved June 30, 2008.
Eric Solomon,
Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on July 7, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 8, 2008, 73 F.R. 38910)
Section 248.—Organiza-
tional Expenditures
Final, temporary, and proposed regulations pro-
vide guidance for making elections to amortize ex-
penses under sections 195, 248, and 709 of the Code.
See T.D. 9411, page 398.
Final, temporary, and proposed regulations pro-
vide guidance for making elections to amortize ex-
penses under sections 195, 248, and 709 of the Code.
See REG-164965-04, page 450.
Section 401.—Qualified
Pension, Profit-Sharing,
and Stock Bonus Plans
A subsidiary will no longer be treated as an em-
ployer with respect to employees of the controlled
group when it is no longer a member of the controlled
group. See Rev. Rul. 2008-45, page 403.
Proposed regulations under sections 401(a)(9) and
403(b) of the Code permit a governmental plan to
comply with the required minimum distribution rules
by using a reasonable and good faith interpretation of
the statute. See REG-142040-07, page 451.
26 CFR 1.401–1: Qualified pension, profit-sharing,
and stock bonus plans.
(Also, § 414.)
Exclusive benefit rule; transfer of
plan sponsorship; controlled groups.
This ruling provides that the exclusive
benefit rule of section 401(a) of the Code
is violated if the sponsorship of a quali-
fied retirement plan is transferred from an
employer to an unrelated taxpayer and the
transfer is not in connection with a transfer
of business assets or operations from the
employer to the unrelated taxpayer.
Rev. Rul. 2008–45
ISSUE
Is the exclusive benefit rule of § 401(a)
of the Internal Revenue Code (“Code”) vi-
olated if the sponsorship of a qualified re-
tirement plan is transferred from an em-
ployer to an unrelated taxpayer and the
transfer of the sponsorship of the plan is
not in connection with a transfer of busi-
ness assets, operations, or employees from
the employer to the unrelated taxpayer?
FACTS
Corporation A maintains an under-
funded defined benefit plan with no on-
going accrual of benefits. Corporation
A transfers sponsorship of the plan to
Subsidiary B, a wholly-owned subsidiary
of Corporation A. Subsidiary B does not
maintain any trade or business, has no
employees, and has nominal assets. As
part of the transfer, the plan document is
amended to substitute Subsidiary B as the
plan sponsor and to provide for Subsidiary
B to assume Corporation A’s responsibili-
ties under the plan.
In connection with the transfer of the
plan sponsorship, Corporation A also
transfers cash and marketable securities
to Subsidiary B. The amount of the trans-
ferred assets is equal to the amount of the
plan’s underfunding, as determined with
reference to specified actuarial assump-
tions, plus an additional margin.
Shortly after the sponsorship of the plan
and these assets are transferred to Sub-
sidiary B, ownership of at least 80% of
Subsidiary B’s stock is transferred to Cor-
poration C, an unrelated corporation. Af-
ter this transaction, Subsidiary B is no
longer a member of the Corporation A
controlled group, within the meaning of
§ 414(b) of the Code, but instead is a mem-
ber of the Corporation C controlled group.
The transaction is not in connection with
the transfer of business assets (other than
cash or marketable securities transferred
to Subsidiary B), operations, or employ-
ees from Corporation A’s controlled group
to Corporation C’s controlled group. The
only business risk or opportunity in the
transaction for Corporation C is to profit
from the acquisition and operation of the
plan.
LAW
Section 401(a) provides that, in order
to be qualified under that section, a stock
bonus, pension, or profit-sharing plan of an
employer must be for the exclusive ben-
efit of its employees or their beneficia-
ries. Consistent with this exclusive ben-
efit rule of § 401(a), § 1.401–1(a)(2)(i)
of the Income Tax Regulations provides,
August 25, 20084032008–34 I.R.B.

in part, that a qualified pension plan is a
definite written program and arrangement
which is established and maintained by an
employer to provide for the livelihood of
employees or their beneficiaries after the
retirement of the employees. Similarly,
§ 1.401–1(a)(3)(ii) requires that a qualified
plan be established by an employer for the
exclusive benefit of its employees or their
beneficiaries in order to be qualified.
Section 414(a) provides that, in the case
in which the employer maintains a plan of
a predecessor employer, service for such
predecessor is treated as service for the
employer.
Section 414(b) provides that, for speci-
fied purposes, including § 401, all employ-
ees of all corporations which are members
of a controlled group of corporations are
treated as employed by a single employer.
ANALYSIS
Unlike other situations where the spon-
sorship of a plan is transferred in connec-
tion with the acquisition of business assets
or operations, Subsidiary B does not main-
tain a business and its assets only compen-
sate Corporation C for assuming Corpo-
ration A’s responsibility under the plan to
make contributions to the plan. Therefore,
any profit or loss to Corporation C result-
ing from the transaction would be solely
from the use of the assets that are trans-
ferred to its controlled group in connection
with the acquisition and operation of the
plan.
In accordance with § 414(b), all em-
ployees of all corporations which are
members of a controlled group of corpo-
rations are treated as employed by a single
employer. Accordingly, even though Sub-
sidiary B has no employees of its own, it is
treated as an employer with respect to the
employees of the Corporation A controlled
group while it is part of that controlled
group. For purposes of the exclusive ben-
efit rule of § 401(a), however, Subsidiary
B will no longer be treated as an employer
with respect to the employees of the Cor-
poration A controlled group when it is no
longer a member of that controlled group.
This result is not affected by § 414(a).
Section 414(a) provides that if an em-
ployer maintains a plan of a predecessor
employer, then service for such predeces-
sor is treated as service for the employer.
By its terms, § 414(a) applies only to an
“employer” and does not create employer
status for a taxpayer that is not otherwise
an employer.
Accordingly, when Subsidiary B is no
longer a member of the Corporation A
controlled group, the plan does not sat-
isfy the exclusive benefit rule of § 401(a)
because it is not maintained by an em-
ployer to provide retirement benefits for
its employees and their beneficiaries. This
conclusion would be the same even if the
new controlled group has some employ-
ees covered by the plan after the transac-
tion, or some business assets or operations
are transferred, where substantially all the
business risks and opportunities under the
transaction are those associated with the
transfer of the sponsorship of the plan.
HOLDING
The exclusive benefit rule of § 401(a)
is violated if the sponsorship of a quali-
fied retirement plan is transferred from an
employer to an unrelated taxpayer and the
transfer of the sponsorship of the plan is
not in connection with a transfer of busi-
ness assets, operations, or employees from
the employer to the unrelated taxpayer.
This ruling does not address any federal
income tax consequences other than those
specifically addressed herein.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Robert M. Walsh of the Em-
ployee Plans, Tax Exempt and Govern-
ment Entities Division. For further in-
formation regarding this revenue ruling,
please call the Employee Plans taxpayer
assistance number between 8:30 a.m.
and 4:30 p.m. Eastern time, Monday
through Friday at (877) 829–5500 (a
toll-free number) or email Mr. Walsh at
RetirementPlanQuestions@irs.gov.
Section 403.—Taxation of
Employee Annuities
Proposed regulations under sections 401(a)(9) and
403(b) of the Code permit a governmental plan to
comply with the required minimum distribution rules
by using a reasonable and good faith interpretation of
the statute. See REG-142040-07, page 451.
Section 414.—Definitions
and Special Rules
A subsidiary will no longer be treated as an em-
ployer with respect to employees of the controlled
group when it is no longer a member of the controlled
group. See Rev. Rul. 2008-45, page 403.
Section 468B.—Special
Rules for Designated
Settlement Funds
26 CFR 1.468B–6: Escrow accounts, trusts, and
other funds used during deferred exchanges of
like-kind property under section 1031(a)(3).
T.D. 9413
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR part 1
Escrow Accounts, Trusts, and
Other Funds Used During
Deferred Exchanges of
Like-Kind Property
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations under section 468B of the
Internal Revenue Code (Code). The reg-
ulations provide rules regarding the taxa-
tion of income earned on escrow accounts,
trusts, and other funds used during de-
ferred like-kind exchanges of property, and
final regulations under section 7872 re-
garding below-market loans to facilitators
of these exchanges. The regulations affect
taxpayers that engage in deferred like-kind
exchanges and escrow holders, trustees,
qualified intermediaries, and others that
hold funds during deferred like-kind ex-
changes.
DATES:Effective Date:These regulations
are effective July 10, 2008.
Applicability Dates:For dates of appli-
cability, see §§1.468B–6(f), 1.7872–5(d),
and 1.7872–16(g).
FOR FURTHER INFORMATION
CONTACT: Concerning the final
regulations under section 468B,
Jeffrey T. Rodrick, (202) 622–4930;
2008–34 I.R.B.404August 25, 2008

concerning the final regulations under
section 7872, David B. Silber, (202)
622–3930 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to
the Income Tax Regulations (26 CFR part
1) regarding the taxation of qualified es-
crow accounts, qualified trusts, and other
escrow accounts, trusts, or funds used dur-
ing section 1031 deferred exchanges of
like-kind property, and of below-market
loans to facilitators of these exchanges, un-
der sections 468B(g) and 7872.
On February 7, 2006, a partial with-
drawal of notice of proposed rulemaking,
a notice of proposed rulemaking, and no-
tice of public hearing were published in
theFederal Register(REG–209619–93
and REG–113365–04, 2006–1 C.B. 580
[71 FR 6231]). A public hearing was
held on June 6, 2006. A revised Initial
Regulatory FlexibilityAnalysis(IRFA)
for REG–113365–04 was published in
theFederal Registeron March 20, 2007
(72 FR 13055). Written and electronic
comments responding to the notice of pro-
posed rulemaking and the revised IRFA
were received. After consideration of all
the comments, the proposed regulations
are adopted as amended by this Treasury
decision. The comments and amendments
are discussed below.
Explanation of Provisions and
Summary of Comments
1.Definitions
The proposed regulations defineex-
change fundsas relinquished property,
cash, or cash equivalent that secures an
obligation of the transferee to transfer re-
placement property, or proceeds from a
transfer of relinquished property. A com-
mentator suggested that the definition of
exchange funds as relinquished property,
cash, or cash equivalent that secures an
obligation of the transferee to transfer
replacement property should be deleted
as confusing and unnecessary, because it
is irrelevant whether amounts held in a
qualified account or fund secure or are
intended to secure the obligations of the
transferee. The final regulations do not
adopt this comment. This definition of
exchange funds is necessary because it
encompasses transactions contemplated
in §1.1031(k)–1(g)(3) in which, for ex-
ample, a transferee of the relinquished
property pays a deposit before the prop-
erty is transferred, or a transferee of the
relinquished property agrees to transfer
replacement property and deposits funds
to secure the obligations of the transferee
(see §1.468B–6(e),Example 1). The defi-
nition is an alternative to the definition of
exchange funds as proceeds from a trans-
fer of relinquished property, and does not
create a requirement that exchange funds
must secure the obligations of a transferee.
The proposed regulations definetrans-
actional expensesas the usual and custom-
ary expenses paid or incurred in connec-
tion with a deferred exchange, including
the cost of land surveys, appraisals, ti-
tle examinations, termite inspections,
transfer taxes and recording fees. A
commentator suggested that transactional
expenses should be defined by reference
to §1.1031(k)–1(g)(7), which provides
that “transactional items” are those items
that relate to the disposition of the re-
linquished property or to the acquisition
of replacement property and appear un-
der local standards in the typical closing
statements as the responsibility of a buyer
or seller, such as commissions, prorated
taxes, recording or transfer taxes, and title
company fees. Therefore, for consistency,
the final regulations provide thattransac-
tional expensesmeans transactional items
described in §1.1031(k)–1(g)(7)(ii). The
final regulations retain special rules to de-
termine whether fees paid to an exchange
facilitator are transactional expenses.
2.Taxable Year of Receipt of Income
The proposed regulations omit an ex-
ample in proposed regulations issued in
1999 that concluded that interest on a tax-
payer’s exchange funds is taxable in the
year earned or credited rather than in a later
year when the interest is paid. A commen-
tator requested that the final regulations in-
clude a similar example. An example in
the final regulations has been revised to il-
lustrate this result.
Commentators suggested that the ex-
ample in §1.7872–16 of the proposed
regulations conflicts with the construc-
tive receipt rules of§1.1031(k)–1(g)(6)
because it posits that amounts are paid as
compensation to the exchange facilitator,
and are retransferred as imputed interest
to the taxpayer, before the end of the ex-
change period. The final regulations do
not adopt this comment. The example
illustrates the mechanics of section 7872
in imputing interest and treating a corre-
sponding amount as deemed compensation
in the case of a compensation-related loan.
This treatment is not inconsistent with
§1.1031(k)–1(g), which merely provides
rules of administrative convenience under
which, if certain requirements are satis-
fied, a taxpayer is deemed not to actually
or constructively receive exchange funds
or to have an agency relationship with an
exchange facilitator solely for purposes
of obtaining nonrecognition treatment
under section 1031. For other taxation
purposes, such as determining the timing
for including earnings or imputed amounts
in income, general tax principles apply,
including timing principles under sections
7872 and 451. See §1.1031(k)–1(n).
3.Earnings Attributable to Exchange
Funds
The proposed regulations provide that
exchange funds are treated, generally, as
loaned by a taxpayer to an exchange fa-
cilitator, and the exchange facilitator takes
into account all items of income, deduc-
tion, and credit. If, however, the escrow
agreement, trust agreement, or exchange
agreement specifies that all the earnings at-
tributable to exchange funds are payable
to the taxpayer, the exchange funds are
not treated as loaned from the taxpayer
to the exchange facilitator, and the tax-
payer takes into account all items of in-
come, deduction, and credit attributable to
the exchange funds. If an exchange fa-
cilitator commingles taxpayers’ exchange
funds (whether or not a taxpayer’s funds
are held in a separate account) all earnings
attributable to a taxpayer’s exchange funds
are treated as paid to the taxpayer if all of
the earnings of the commingled funds, al-
locable on apro ratabasis to a taxpayer,
are paid to the taxpayer.
a.Separately identified accounts
Commentators noted that many ex-
change facilitators have a corporate rela-
tionship with the institution in which the
exchange facilitator deposits exchange
August 25, 20084052008–34 I.R.B.

funds on behalf of taxpayers and ques-
tioned whether, in addition to the stated
earnings of the account in which the ex-
change funds are deposited, a portion of
the earnings the depository institution re-
ceives in the ordinary course of investing
customer deposits as part of its trade or
business operations should be treated as
earnings attributable to exchange funds
if the depository institution is part of the
same corporate group as the exchange
facilitator. One group of commentators
noted that it is common business practice
for a depository institution in the same
corporate group as an exchange facili-
tator to credit a portion of its revenues
to the exchange facilitator based on the
amount of exchange funds deposited by
the exchange facilitator with the deposi-
tory institution, and suggested that these
types of internal credits should be treated
as earnings attributable to exchange funds.
However, other commentators argued that
these internal credits are similar to pay-
ments a depository institution may make
to an unrelated exchange facilitator for
depositing funds with the depository insti-
tution and therefore, should not be treated
as earnings attributable to exchange funds
solely because the exchange facilitator is
related to the depository institution. Some
commentators noted that an exchange fa-
cilitator that maintains a master account
that includes individual sub-accounts in
taxpayers’ names and taxpayer identifica-
tion numbers (TIN) may earn additional
interest in excess of the interest paid on
the sub-accounts, based on the amounts
the exchange facilitator deposits. To clar-
ify what constitutes earnings attributable
to the exchange funds, one commentator
recommended that the final regulations
provide that if exchange funds are held in
a segregated account for the benefit of the
taxpayer, only the earnings on the segre-
gated account will be considered earnings
attributable to the exchange funds. The
commentator suggested that this rule
would provide a simple, clear definition.
In response to these comments, the final
regulations provide that, if exchange funds
are held with a depository institution in
an account (including a sub-account) that
is separately identified with a taxpayer’s
name and TIN, only the earnings on the ac-
count are treated as earnings attributable to
the exchange funds. The final regulations
provide examples to illustrate the applica-
tion of this rule to exchange facilitators re-
latedtodepositoryinstitutionsandtomas-
ter/sub-account arrangements.
b.Commingled accounts
A commentator opined that the pro-
posed rules for allocating earnings in a
commingled account are confusing be-
cause the rules apply “whether or not the
taxpayer’s funds are in a segregated ac-
count.” The commentator stated that, as
a result, it is unclear whether all funds
an exchange facilitator deposits in a spe-
cific depository institution constitute one
commingled account, even if the funds are
maintained in separate accounts and de-
rive from financial transactions unrelated
to exchange funds. The final regulations
clarify that separate accounts maintained
in the names and TINs of unrelated tax-
payers do not constitute a commingled
account.
c.Administrative fees
Commentators suggested that fees paid
by a bank to a related exchange facilita-
tor should be treated as earnings attribut-
able to exchange funds. Other commenta-
tors stated that these fees are compensation
for administrative services provided and
are not earnings attributable to the funds.
The final regulations do not treat these fees
as earnings attributable to exchange funds.
Fees for administrative services provided
by exchange facilitators to depository in-
stitutions represent compensation for ser-
vices provided by the exchange facilitator
as opposed to earnings on the exchange
funds.
4.Loan Treatment
a.Characterization as loan
Commentators opined that exchange
funds should not be treated as loaned
from the taxpayer to the exchange facil-
itator because an exchange facilitator’s
relationship with the taxpayer is primar-
ily that of a fiduciary. A commentator
suggested that exchange facilitators are
similar to mortgage or payroll processing
servicers that maintain interest-bearing
escrow accounts. The commentator also
argued that the receipt of exchange funds
by an exchange facilitator is not a com-
pensation-related loan because the amount
of interest required to be imputed would
be higher for a greater amount of funds
or longer exchange period, although the
exchange facilitator would provide no ad-
ditional services. Another commentator
noted that other transactions in which pay-
ment is made before services are provided,
such as pre-payments to contractors, are
not treated as loans. The commentator
asserted that the transaction between an
exchange facilitator and its customer is an
installment sale rather than a loan. Other
commentators argued that treating ex-
change funds as loanedis inconsistent with
the regulations under section 1031, which
generally require that a taxpayer must not
have any benefit of the exchange funds
during the exchange period to avoid actual
or constructive receipt. Other commenta-
tors agreed that an exchange facilitator’s
use of exchange funds properly may be
characterized as a compensation-related
loan.
The final regulations retain the general
rulethatmoneyheldbyanexchangefa-
cilitator in a deferred exchange is treated
as loaned by the taxpayer to the exchange
facilitator. When anexchange facilitator
benefits from the use of the taxpayer’s ex-
change funds, characterizing the exchange
funds as having been loaned from the tax-
payer to the exchange facilitator is con-
sistent with the substance of the transac-
tion and with the definition of loan in the
legislative history of section 7872. See
H.R. Rep. 98–861 at 1018 (1984).
b.Application of section 7872
Under the proposed regulations, an ex-
change facilitator loan must be tested un-
der section 7872 to determine whether it is
a below-market loan for purposes of that
section. The proposed regulations further
provide that a taxpayer must use a special
182-day applicable Federal rate (AFR) to
test whether an exchange facilitator loan is
a below-market loan. If an exchange facil-
itator loan is a below-market loan, the loan
is treated as a compensation-related loan
that is not exempt from section 7872 as a
loan without significant tax effect.
Commentators opined that these trans-
actions should not be subject to section
7872 for reasons including the lack of a
significant tax effect, exceptions provided
under sections 483 and 1274 for short-term
loans, the general exemption from section
2008–34 I.R.B.406August 25, 2008

7872 for certain accounts or withdrawable
shares with a bank, the costs of comply-
ing with section 7872, and the lack of a tax
avoidance purpose.
One suggestion submitted by commen-
tators to mitigate the impact of section
7872 on smaller transactions was the adop-
tion of a rule that would exempt certain ex-
change facilitator loans from section 7872.
The final regulations include an exemption
from section 7872 for exchange facilitator
loans of $2 million or less while preserving
the application of section 7872 for larger
transactions. This exemption amount may
be increased in future published guidance.
The exemption is limited to loans that are
6 months or less in duration.
c.Special AFR
One group of commentators believed
that the special AFR in the proposed regu-
lations is unreasonably high and suggested
a more appropriate test rate would be a de-
mand deposit rate. Other commentators
suggested that the special AFR rate in the
proposed regulations was appropriate.
For purposes of section 7872, the test
rate allowed under section 1274(d)(1)(D)
must be calculated by reference to United
States Treasury obligations, not demand
deposit rates. See footnote 5 of H.R. Conf.
Rep. No. 99–250 at 15 (1985). However,
in response to these comments, the final
regulations use a 91-day rate, which is
the investment rate on a 13-week (gen-
erally, 91-day) Treasury bill determined
on the issue date that is the same as the
date the exchange facilitator loan is made
or, if the two dates are not the same, the
issue date that most closely precedes the
date that the exchange facilitator loan is
made. This rate is based on semi-an-
nual compounding and may be found at
www.treasurydirect.gov/RI/OFBills.Also,
in recognition that the short-term AFR
may be lower than the 91-day rate, the final
regulations provide that taxpayers must
apply the lower of the 91-day rate or the
short-term AFR when testing or imputing
payments on an exchange facilitator loan
under section 7872.
5.Effective/Applicability Date
Commentators requested that the final
regulations apply to exchange agreements
entered into, rather than transfers of prop-
erty made, after the publication of final
regulations. Alternatively, commentators
requested that the applicability of the final
regulations be deferred to allow exchange
facilitators sufficient time to make changes
to accounting, control, and reporting sys-
tems and to revise exchange agreements to
comply with the final regulations.
In response to these comments, the fi-
nal regulations apply to transfers of relin-
quishedpropertymade,andtoexchange
facilitator loans issued, on or after Octo-
ber 8, 2008. For transfers of relinquished
property made by taxpayers after August
16, 1986, but before October 8, 2008, the
IRS will not challenge a reasonable, con-
sistently applied method of taxation for
earnings attributable to exchange funds.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. A final regulatory flexi-
bility analysis has been prepared for this
final regulation under 5 U.S.C. 604. The
analysis is set forth below under the head-
ing “Final Regulatory Flexibility Analy-
sis.” Pursuant to section 7805(f) of the
Code, the notice of proposed rulemaking
that preceded these final regulations was
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration
for comment on its impact on small busi-
ness.
Final Regulatory Flexibility Analysis
Succinct Statement of the Need for, and
Objectives of, the Final Regulations
These final regulations are issued under
the authority of sections 7805, 468B(g),
and 7872. Section 468B(g) provides that
nothing in any provision of law shall be
construed as providing that an escrow ac-
count, settlement fund, or similar fund is
not subject to current income tax and that
the Secretary shall prescribe regulations
providing for the taxation of such accounts
or funds whether as a grantor trust or oth-
erwise.
The final regulations provide that ex-
change funds are treated, generally, as
loaned by a taxpayer to an exchange fa-
cilitator, and the exchange facilitator takes
into account all items of income, deduc-
tion, and credit. If, however, the escrow
agreement, trust agreement, or exchange
agreement specifies that all the earnings
attributable to exchange funds are payable
to the taxpayer, the exchange funds are
not treated as loanedfrom the taxpayer to
the exchange facilitator, and the taxpayer
takes into account all items of income,
deduction, and credit attributable to the
exchange funds. The final regulations
are intended to provide greater certainty,
enhance administrability, and ensure con-
sistent treatment of taxpayers. The final
regulations contain amendments to ease
the economic impact of the final regula-
tions on small businesses.
Summary of Significant Issues Raised
by Public Comments in Response to the
Initial Regulatory Flexibility Analysis,
Assessment of Issues, and Statement
of Changes Made to the Proposed
Regulations as a Result of Comments
a.Administrative burden resulting from
loan characterization
Under the final regulations, if exchange
funds are treated as loaned by the taxpayer
to an exchange facilitator, interest gener-
ally is imputed to the taxpayer under sec-
tion 7872 unless the exchange facilitator
pays sufficient interest. If a loan between
the taxpayer and the exchange facilitator
does not provide for sufficient interest and
the loan is not otherwise exempt from sec-
tion 7872, interest income is imputed to the
taxpayer. Therefore, exchange facilitators
must keep records of the amount of income
paid to a taxpayer and may be required to
report the income on Forms 1099. The re-
vised IRFA estimated that most small busi-
nesses subject to the proposed regulations
currently maintain records of the amount
of income paid to the taxpayer and report
the payments on Forms 1099. The revised
IRFA concluded that the proposed regula-
tions should not increase significantly the
compliance burden associated with keep-
ing records and reporting income paid to
the taxpayer, based on the expectation that
the proposed regulations may have the ef-
fect of increasing the amount exchange fa-
cilitators report, but not result in a signifi-
cant increase in the number of forms gen-
erated. The revised IRFA requested ad-
ditional comments to assist in quantifying
any additional recordkeeping burdens and
accounting costs that may result.
August 25, 20084072008–34 I.R.B.

A commentator responded that the pro-
posed regulations impose new and differ-
ent reporting requirements than those that
currently apply to qualified intermediaries
(QI) because QIs must determine if the
regulations apply to a particular transac-
tion and may be required to report imputed
interest. The commentator provided a
study (updated in a follow-up submis-
sion) that concludes that the incremental
workload to comply with the proposed
regulations is substantial and the software
needed to comply withthe recordkeeping
requirements is not available at a cost af-
fordable to many small businesses. The
study offers suggestions to mitigate these
effects that include providing an exception
to section 7872 for certain transactions,
revising the special AFR, and including
a transition period. The final regulations
incorporate all of these suggestions.
The study also suggested that the av-
erage daily balance calculations required
under the proposed regulations create sub-
stantial administrative burdens and should
be deleted. The final regulations do not
adopt this comment. The final regulations
do not require average daily balance cal-
culations, but provide an example utiliz-
ing an average daily balance calculation as
only one acceptable method to determine
the earnings of a commingled account that
are attributable to a taxpayer’s exchange
funds. No other comments were received
quantifying a compliance burden resulting
from the proposed regulations. A com-
mentator advised that the amount of ad-
ditional time or expense that would result
from the application of the proposed regu-
lations could not be quantified yet. How-
ever, commentators requested that the ap-
plicability of the final regulations be de-
layed to allow exchange facilitators suf-
ficient time to make required changes to
accounting, control, and reporting systems
and to revise exchange agreements. In re-
sponse to these comments, the final reg-
ulations apply to transfers of relinquished
property made, and to exchange facilitator
loans issued, on or after October 8, 2008.
b.Economic impact of loan
characterization
Commentators on the proposed regu-
lations asserted that the loan characteri-
zation rules will cause a large number of
small businesses to suffer a substantial rev-
enue loss and to fail or reduce their work-
forces. They claimed that small business
QIs would be disproportionately affected
because these QIs predominantly apply a
business model that would place them at
a disadvantage under the proposed regula-
tions. Commentators stated that if busi-
nesses are required to impute interest on
exchange funds, taxpayers will demand
that this interest be paid to them. To com-
pensate for this loss of revenue, these com-
mentators claim that small businesses will
be required to change their business prac-
tices to pay all income to the taxpayer and
to charge higher fees, while large, bank-af-
filiated QIs generally will be unaffected.
The revised IRFA requested specific com-
ments to assist in quantifying the number
of businesses that would change their busi-
ness model as a result of the proposed reg-
ulations and the effect a change in business
model would have on revenues or profits.
No comments quantifying this effect were
received.
The revised IRFA also requested spe-
cific comments on the appropriateness
and nature of a rule that would reduce
the economic impact of the regulations
on small businesses by exempting certain
exchange transactions most likely to be
engaged in by small businesses from loan
treatment. For this purpose, the revised
IRFA requested information on the aver-
age duration of exchange transactions and
the average dollar amount of exchange
funds.
A commentator responded that in its QI
business 76 percent of exchange transac-
tions closed within 60 days and 80 percent
of exchange transactions involved less
than $250,000 of exchange funds. This
commentator advocated rules that would
exempt from section 7872 transactions
that either involved exchange funds of less
than $250,000 or remained open for less
than 60 days.
Another commentator cited the mini-
mal revenue impact of allowing interest
retainedbyaQItoescapeincomeinclu-
sion to the taxpayer as a reason supporting
exempting certain deferred like-kind ex-
change transactions. Because compensa-
tion paid to a QI must be capitalized as an
acquisition cost of the replacement prop-
erty, the commentator asserted that there is
only a timing mismatch for the taxpayer if
current exclusion is not allowed, and that
given the relatively short time period dur-
ing which interest accrues in typical sec-
tion 1031 transactions, any revenue impact
of the proposed regulations would be out-
weighed by the increased compliance bur-
den on taxpayers. This commentator sug-
gested that two separate rules, one which
exempts transactions of a certain amount
($1 million) and another which exempts
transactions of short duration (less than
90 days), are necessary because the avail-
able data suggests that there is no correla-
tion between the size of the deposited ex-
change funds and the length of time the
funds stay on deposit. This commentator
also requested that any exemption amounts
be adjusted for inflation.
In response to these comments, the
final regulations provide an exemption
from section 7872 for exchange transac-
tions in which the amount of exchange
funds treated as loaned does not exceed
$2 million and the funds are held for 6
months or less. This exemption amount
may be increased in future published guid-
ance. Based upon comments received the
$2 million amount is expected to exempt
from the application of section 7872 most
deferred exchange transactions handled by
small business exchange facilitators.
c.Special AFR
The proposed regulations provide a
special AFR, equal to the investment
rate on a 182-day Treasury bill, to test
whether an exchange facilitator loan pays
sufficient interest as required by section
7872. The special AFR was expected to
result in fewer transactions requiring the
imputation of interest to taxpayers than
the short-term AFR, thus reducing the
economic impact on small businesses.
However, comments on the proposed reg-
ulations claimed that the special AFR is
unrealistically high and inappropriate for
these transactions. In order to determine
an appropriate rate for testing exchange
facilitator loans for sufficient interest, the
revised IRFA requested specific comments
identifying the rate of return typically
earned by small business QIs on exchange
funds and the interest rate QIs typically
pay to taxpayers, and solicited suggestions
for an appropriate rate.
A commentator responded that the rate
of return earned by a QI will vary depend-
ing on the total amount of funds the QI
aggregates, the market in which the QI
2008–34 I.R.B.408August 25, 2008

operates, the QI’s reputation and relation-
ship with a depository institution, and the
QI’s choice of investment vehicle. Thus,
the commentator advised that it is difficult
to ascertain the rate of return earned by a
small business QI on exchange funds. The
commentator stated that quantifying the
interest rate that QIs typically pay to tax-
payers likewise is difficult because many
factors influence it.
Another commentator responding to the
revised IRFA argued that the 182-day rate
is inappropriate to test whether exchange
facilitator loans bear sufficient interest un-
der section 7872 because exchange funds
held by a depository institution are de-
mand deposits and rarely are held for 180
days. This commentator identified three
potential alternative rates to the 182-day
rate for a special AFR: (1) a rate based
on national demand deposit rates; (2) a
rate that is 10 percent of an established
rate such as the Federal Funds rate; and
(3) an average of the minimum demand
deposit savings rates offered by several
banks in a QI’s home office region. Al-
though this commentator recognized the
administrative burdens of publishing one
of these alternative rates, the commenta-
tor believed these alternatives more readily
reflected the economic reality of exchange
fund transactions than the 182-day rate.
In response to these comments and
comments on the proposed regulations, in
lieu of the 182-day rate, the final regu-
lations provide a special AFR that is the
investment rate on a 13-week (generally,
91-day) Treasury bill. In addition, because
the short-term AFR may be lower than the
91-day rate, the final regulations provide
that taxpayers must apply the lower of the
91-day rate or the short-term AFR when
testing for sufficient interest under section
7872.
d.Earnings attributable to exchange
funds
The proposed regulations provide that a
taxpayer’s exchange funds are not treated
as loaned if all the earnings attributable
to the exchange funds are paid to the tax-
payer but do not define the term “earn-
ings attributable to the exchange funds.”
Commentators have asserted that the lack
of specificity results in disparate treatment
of bank-affiliated QIs and independent QIs
because of their different business models
and places the independent QIs, many of
which are small businesses, at an economic
disadvantage.
Commentators advised that a portion
of the earnings of a depository institution
may be credited to an exchange facilitator
based on the total amount of exchange
funds the exchange facilitator deposits
when the exchange facilitator and the
depository institution (generally large
businesses) are part of the same corporate
group. The commentators opined that the
proposed regulations do not, but should,
treat this credit as earnings attributable to
the exchange funds on which it is calcu-
lated.
Another commentator noted that de-
pository institutions also may pay fees to
unrelated exchange facilitators, including
small businesses, for depositing exchange
funds. Furthermore, other commentators
described a business model used by some
independent QIs, including some small
businesses, in which a QI deposits the
exchange funds of multiple taxpayers in
sub-accounts under a master account that
earns interest in addition to the interest
credited to the sub-accounts. The amount
of the additional interest credited to the QI
is based on the total amount of exchange
funds the QI deposits. Commentators
have expressed concern that the proposed
regulations treat this additional interest
as earnings attributable to the individual
taxpayers’ exchange funds, but do not
similarly treat earnings credited to a re-
lated QI based on total amount deposited.
The commentators claim that as a result
of this treatment independent QIs will be
forced to pay the additional interest that is
attributable to exchange funds to taxpay-
ers to avoid loan treatment, and thus will
be required to correspondingly raise fees
to compensate for lost profits. They as-
sert that because bank-affiliated QIs earn
profits by means of credits that are not at-
tributed to exchange funds, bank-affiliated
QIs will not be required to raise fees, cre-
ating an economic disparity between simi-
larly situated bank-affiliated QIs and inde-
pendent QIs.
In response to these comments, the fi-
nal regulations provide a definitive test for
determining earnings attributable to a tax-
payer’s exchange funds when an exchange
facilitator holds all of the taxpayer’s ex-
change funds in a separately identified
account (or sub-account) under that tax-
payer’s name and TIN. Under this rule,
the earnings attributable to the taxpayer’s
exchange funds include only the earnings
on the separately identified account. This
rule equalizes the treatment of indepen-
dent, small business exchange facilitators
and large exchange facilitators by provid-
ing that neither earnings of a depository
institution that are credited to a related
exchange facilitator nor the additional
interest paid in connection with a master
account are treated as earnings attribut-
able to exchange funds when a taxpayer’s
exchange funds are held in a separately
identified account(or sub-account).
Description and Estimate of the Number
of Small Businesses to Which the Final
Regulations Will Apply
The final regulations affect exchange
facilitators that hold exchange funds for
taxpayers engaging in deferred exchanges
of like-kind property. The revised IRFA
concludes that the applicable size standard
for determining what constitutes a small
business for purposes of the proposed reg-
ulations is $2 million in annual gross re-
ceipts, the SBA’s definition of a small busi-
ness for North American Industry Classifi-
cation System (NAICS) code 531390, and
estimates that there are approximately 325
businesses (mostly QIs) that are full-time
exchange facilitators.
The revised IRFA requested additional
information on the number of small busi-
nesses engaged in the QI industry, and re-
quested specific comments from QIs en-
gaged exclusively in that business indicat-
ing whether their annual gross receipts are
$2 million or less, or more than $2 mil-
lion. A commentator advised that the num-
ber of QIs is very large, but many QIs do
not identify themselves as such or engage
in that business full-time. The commenta-
tor reported that the annual gross receipts
of its QI business are well below $2 mil-
lion. Another commentator opined that the
information requested could not be quan-
tified. No other comments were received
on the number of small businesses in the
industry or the general appropriateness of
the size standard. Therefore, the estimate
of approximately 325 businesses that are
full-time exchange facilitators, the appli-
cable size standard for determining what
constitutes a small business with respect to
these regulations of $2 million in annual
August 25, 20084092008–34 I.R.B.

gross receipts, and the conclusion that a
significant portion of the QI industry con-
sists of small businesses under this stan-
dard, are unchanged.
Description of Compliance Requirements
and Estimate of the Classes of Small
Businesses That Will Be Subject to the
Compliance Requirements
As discussed, under current law ex-
change facilitatorsmust keep records of
the amount of income paid to taxpayers
and may be required to report the income
on Forms 1099. The final regulations pro-
vide that if the exchange funds are treated
as loaned from the taxpayer to the QI and
the loan is a below-market loan that does
not qualify for an exemption from section
7872, income is deemed transferred to the
exchange facilitator as compensation and
retransferred to the taxpayer as interest.
The exchange facilitator has income from
the imputed compensation and an offset-
ting deduction for the interest deemed paid
to the taxpayer.
The final regulations provide an exemp-
tion from section 7872 for exchange facil-
itator loans that do not exceed $2 million
and provide that this exemption amount
may be increased in future published guid-
ance. Based on available data, this ex-
emption from section 7872 is expected to
apply to the majority of exchange trans-
actions engaged in by small business ex-
change facilitators. Additionally, the final
regulations revise the special AFR that de-
termines whether a loan pays sufficient in-
terest, which should reduce the number of
transactions in which interest is imputed.
Therefore, for most small businesses the fi-
nal regulations are not expected to increase
significantly the compliance burden asso-
ciated with keeping records and reporting
income paid to the taxpayer.
Actions to Minimize the Significant
Economic Impact on Small Businesses
and Reasons for Selecting Alternatives
Reflected in the Final Regulations and for
Rejecting Other Significant Alternatives
The final regulations provide a rea-
sonable balance between the statutory
requirements of sections 468B and 7872,
the economic impact of a strict applica-
tion of those provisions, and the need to
provide clear and administrable rules. The
inclusion of a $2 million exemption from
section 7872, the adjustment of the special
AFR, and the delayed applicability date
reflect a judgment that the revenue ef-
fects are small and are outweighed by the
compliance burden and other economic
impacts of the regulations on small busi-
nesses.
Drafting Information
The principal authors of these regula-
tions are Jeffrey T. Rodrick of the Office
of Associate Chief Counsel (Income Tax &
Accounting) and David B. Silber of the Of-
fice of Associate Chief Counsel (Financial
Institutions & Products). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.468B–6 also issued under
26 U.S.C. 468B(g). * * *
Section1.7872–5alsoissuedunder
26 U.S.C. 7872. * * *
Section 1.7872–16 also issued under
26 U.S.C. 7872. * * *
Par. 2. Section 1.468B–0 is amended
by adding entries for §1.468B–6 to read as
follows:
§1.468B–0 Table of Contents
*****
§1.468B–6 Escrow accounts, trusts,
and other funds used during deferred
exchanges of like-kind property under
section 1031(a)(3).
(a) Scope.
(b) Definitions.
(1) In general.
(2) Exchange funds.
(3) Exchange facilitator.
(4) Transactional expenses.
(i) In general.
(ii) Special rule for certain fees for ex-
change facilitator services.
(c) Taxation of exchange funds.
(1) Exchange funds generally treated as
loaned to an exchange facilitator.
(2) Exchange funds not treated as
loaned to an exchange facilitator.
(i) Scope.
(ii) Earnings attributable to the tax-
payer’s exchange funds.
(A) Separately identified account.
(B) Allocation of earnings in commin-
gled accounts.
(C) Transactional expenses.
(iii) Treatment of the taxpayer.
(d) Information reporting requirements.
(e) Examples.
(f) Effective/applicability dates.
(1) In general.
(2) Transition rule.
*****
Par. 3. Section 1.468B–6 is added to
read as follows:
§1.468B–6 Escrow accounts, trusts,
and other funds used during deferred
exchanges of like-kind property under
section 1031(a)(3).
(a)Scope. This section provides rules
under section 468B(g) relating to the cur-
rent taxation of escrow accounts, trusts,
and other funds used during deferred ex-
changes.
(b)Definitions. The definitions in this
paragraph (b) apply for purposes of this
section.
(1)In general.Deferred exchange,
escrow agreement,escrow holder,ex-
change agreement,qualified escrow ac-
count,qualified intermediary,qualified
trust,relinquished property,replacement
property,taxpayer,trust agreement,and
trusteehave the same meanings as in
§1.1031(k)–1; deferred exchange also in-
cludes any exchange intended to qualify
as a deferred exchange, and qualified in-
termediary also includes any person or
entity intended by a taxpayer to be a qual-
ified intermediary within the meaning of
§1.1031(k)–1(g)(4).
(2)Exchange funds
.Exchange funds
means relinquished property, cash, or cash
equivalent that secures an obligation of
a transferee to transfer replacement prop-
erty, or proceeds from a transfer of relin-
quished property, held in a qualified es-
crow account, qualified trust, or other es-
crow account, trust, or fund in a deferred
exchange.
2008–34 I.R.B.410August 25, 2008

(3)Exchange facilitator.Exchange fa-
cilitatormeans a qualified intermediary,
transferee, escrow holder, trustee, or other
party that holds exchange funds for a tax-
payer in a deferred exchange pursuant to
an escrow agreement, trust agreement, or
exchange agreement.
(4)Transactional expenses—(i)In gen-
eral. Except as provided in paragraph
(b)(4)(ii) of this section,transactional ex-
pensesmeans transactional items within
the meaning of §1.1031(k)–1(g)(7)(ii).
(ii)Special rule for certain fees for ex-
change facilitator services. The fee for the
services of an exchange facilitator is not
a transactional expense unless the escrow
agreement, trust agreement, or exchange
agreement, as applicable, provides that—
(A) The amount of the fee payable to
the exchange facilitator is fixed on or be-
fore the date of the transfer of the relin-
quished property by the taxpayer (either by
stating the fee as a fixed dollar amount in
the agreement or determining the fee by a
formula, the result of which is known on
or before the transfer of the relinquished
property by the taxpayer); and
(B) The amount of the fee is payable
by the taxpayer regardless of whether the
earnings attributable to the exchange funds
are sufficient to pay the fee.
(c)Taxation of exchange funds—(1)Ex-
change funds generally treated as loaned
to an exchange facilitator. Except as pro-
vided in paragraph (c)(2) of this section,
exchange funds are treated as loaned from
a taxpayer to an exchange facilitator (ex-
change facilitator loan). If a transaction is
treated as an exchangefacilitator loan un-
der this paragraph (c)(1), the exchange fa-
cilitator must take into account all items
of income, deduction, and credit (includ-
ing capital gains and losses) attributable to
the exchange funds. See §1.7872–16 to de-
termine if an exchange facilitator loan is
a below-market loan for purposes of sec-
tion 7872 and §1.7872–5(b)(16) to deter-
mine if an exchange facilitator loan is ex-
empt from section 7872.
(2)Exchange funds not treated as
loaned to an exchange facilitator—(i)
Scope. This paragraph (c)(2) applies if,
in accordance with an escrow agreement,
trust agreement, or exchange agreement,
as applicable, all the earnings attributable
to a taxpayer’s exchange funds are paid to
the taxpayer.
(ii)Earnings attributable to the tax-
payer’s exchange funds—(A)Separately
identified account. If an exchange facili-
tator holds all of the taxpayer’s exchange
funds in a separately identified account,
the earnings credited to that account are
deemed to be all the earnings attributable
to the taxpayer’s exchange funds for pur-
poses of paragraph (c)(2)(i) of this section.
In general, a separately identified account
is an account established under the tax-
payer’s name and taxpayer identification
number with a depository institution. For
purposes of paragraph (c)(2)(i) of this sec-
tion, a sub-account willbe treated as a sep-
arately identified account if the master ac-
count under which thesub-account is cre-
ated is established with a depository insti-
tution, the depository institution identifies
the sub-account by the taxpayer’s name
and taxpayer identification number, and
the depository institution specifically cred-
its earnings to the sub-account.
(B)Allocation of earnings in commin-
gled accounts. If an exchange facilitator
commingles (for investment or otherwise)
the taxpayer’s exchange funds with other
funds or assets, all the earnings attribut-
able to the taxpayer’s exchange funds are
paid to the taxpayer if all of the earnings at-
tributable to the commingled funds or as-
sets that are allocable on apro-ratabasis
(using a reasonable method that takes into
account the time that the exchange funds
are in the commingledaccount, actual rate
or rates of return, and the respective ac-
count balances) to the taxpayer’s exchange
funds either are paid to the taxpayer or are
treated as paid to the taxpayer under para-
graph (c)(2)(ii)(C) of this section.
(C)Transactional expenses. Any pay-
ment from the taxpayer’s exchange funds,
or from the earnings attributable to the
taxpayer’s exchange funds, for a trans-
actional expense of the taxpayer (as de-
fined in paragraph (b)(4) of this section) is
treated as first paid to the taxpayer and then
paid by the taxpayer to the recipient.
(iii)Treatment of the taxpayer.Ifthis
paragraph (c)(2) applies, exchange funds
are not treated as loaned from a taxpayer to
an exchange facilitator. The taxpayer must
take into account all items of income, de-
duction, and credit (including capital gains
and losses) attributable to the exchange
funds.
(d)Information reporting requirements.
A payor (as defined in §1.6041–1) must
report the income attributable to exchange
funds to the extent required by the infor-
mation reporting provisions of subpart B,
Part III, subchapter A, chapter 61, Subti-
tle F of the Internal Revenue Code, and
the regulations under those provisions.
See §1.6041–1(f) for rules relating to the
amount to be reported when fees, expenses
or commissions owed by a payee to a third
party are deducted from a payment.
(e)Examples. The provisions of this
section are illustrated by the following ex-
amples in which T is a taxpayer that uses a
calendar taxable year and the cash receipts
and disbursements method of accounting.
The examples are as follows:
Example 1.All earnings attributable to exchange
funds paid to taxpayer. (i) T enters into a deferred
exchange with R. The salesagreement provides that
T will transfer property (the relinquished property)
to R and R will transfer replacement property to T.
R’s obligation to transfer replacement property to T
is secured by cash equal to the fair market value of
the relinquished property, which R will deposit into a
qualified escrow account that T establishes with B, a
depository institution. T enters into an escrow agree-
ment with B that provides that all the earnings attrib-
utable to the exchange funds will be paid to T.
(ii) On November 1, 2008, T transfers property to
R and R deposits $2,100,000 in T’s qualified escrow
account with B. Between November 1 and December
31, 2008, B credits T’s account with $14,000 of inter-
est. During January 2009, B credits T’s account with
$7,000 of interest. On February 1, 2009, R transfers
replacement property worth $2,100,000 to T and B
pays $2,100,000 from the qualified escrow account
to R. Additionally, on February 1, 2009, B pays the
$21,000 of interest to T.
(iii) Under paragraph (b) of this section, the
$2,100,000 deposited with B constitutes exchange
funds and B is an exchange facilitator. Because all
the earnings attributable to the exchange funds are
paid to T in accordance with the escrow agreement,
paragraph (c)(2) of this section applies. The ex-
change funds are not treated as loaned from T to B. T
must take into account in computing T’s income tax
liability for 2008 the $14,000 of earnings credited to
the qualified escrow account in 2008 and for 2009 the
$7,000 of earnings credited to the qualified escrow
account in 2009.
Example 2.Payment of transactional expenses
from earnings. (i) The facts are the same as inExam-
ple 1, except that the escrow agreement provides that,
prior to paying the earnings to T, B may deduct any
amounts B has paid to third parties for T’s transac-
tional expenses. B pays a third party $350 on behalf
of T for a survey of the replacement property. Af-
ter deducting $350 from the earnings attributable to
T’s qualified escrow account, B pays T the remainder
($20,650) of the earnings.
(ii) Under paragraph (b)(4) of this section, the cost
of the survey is a transactional expense. Under para-
graph (c)(2)(ii)(C) of this section, the $350 that B
pays for the survey is treated as first paid to T and then
from T to the third party. Therefore, all the earnings
attributable to T’s exchange funds are paid or treated
August 25, 20084112008–34 I.R.B.

as paid to T in accordance with the escrow agreement,
and paragraph (c)(2) of this section applies. The ex-
change funds are not treated as loaned from T to B,
and T must take into account in computing T’s in-
come tax liability the $21,000 of earnings credited to
the qualified escrow account.
Example 3.Earnings retained by exchange fa-
cilitator as compensation for services. (i) The facts
are the same as inExample 1, except that the escrow
agreement provides that B also may deduct any out-
standing fees owed by T for B’s services in facilitat-
ing the deferred exchange. In accordance with para-
graph (b)(4)(ii) of this section, the escrow agreement
provides for a fixed fee of $1,200 for B’s services,
which is payable by T regardless of the amount of
earnings attributable to the exchange funds. Because
the earnings on the exchange funds in this case ex-
ceed $1,200, B retains $1,200 as the unpaid portion
of its fee and pays T the remainder ($19,800) of the
earnings.
(ii) Under paragraph (b)(4) of this section, B’s fee
is treated as a transactional expense. Under paragraph
(c)(2)(ii)(C) of this section, the $1,200 that B retains
for its fee is treated as first paid to T and then from
T to B. Therefore, all the earnings attributable to T’s
exchange funds are paid or treated as paid to T in ac-
cordance with the escrow agreement, and paragraph
(c)(2) of this section applies. The exchange funds are
not treated as loaned from T to B, and T must take
into account in computing T’sincome tax liability the
$21,000 of earnings credited to the qualified escrow
account.
Example 4.Exchange funds deposited by ex-
change facilitator with related depository institution
in account in taxpayer’s name. (i) The facts are
thesameasinExample 1except that, instead of
entering into an escrow agreement, T enters into an
exchange agreement with QI, a qualified intermedi-
ary. The exchange agreement provides that R will
pay $2,100,000 to QI, QI will deposit $2,100,000
into an account with a depository institution under
T’s name and taxpayer identification number (TIN),
and all the earnings attributable to the account will
be paid to T.
(ii) On May 1, 2008, T transfers property to QI,
QI transfers the property to R, R delivers $2,100,000
to QI, and QI deposits $2,100,000 into a money mar-
ket account with depository institution B under T’s
name and TIN. B and QI are members of the same
consolidated group of corporations within the mean-
ing of section 1501. Between May 1 and September
1, 2008, the account earns $28,000 of interest at the
stated rate established by B. During the period May 1
to September 1, 2008, B invests T’s exchange funds
and earns $40,000. On September 1, 2008, QI uses
$2,100,000 of the funds in the account to purchase re-
placement property identified by T and transfers the
replacement property to T. B pays to T the $28,000
of interest earned on the money market account at the
stated rate.
(iii) Under paragraph (b) of this section, the
$2,100,000 QI receives from R for the relinquished
property is exchange funds and QI is an exchange
facilitator. B is not an exchange facilitator. T has not
entered into an escrow agreement, trust agreement,
or exchange agreement with B, and QI, not B, holds
the exchange funds on behalf of T. Under paragraph
(c)(2)(ii)(A) of this section, the $40,000 B earns
from investing T’s exchange funds are not treated as
earnings attributable to T’s exchange funds. Because
all the earnings attributable to T’s exchange funds
are paid to T in accordance with the exchange agree-
ment, paragraph (c)(2) ofthis section applies. The
exchange funds are not treated as loaned from T to
QI, and T must take into account in computing T’s
income tax liability for 2008 the $28,000 of interest
earned on the money market account.
Example 5.Earnings of related depository insti-
tution credited to exchange facilitator. (i) The facts
are the same as inExample 4, except that at the end of
each taxable year, B credits a portion of its earnings
on deposits to QI. The amount credited is based on
the total amount of exchange funds QI has deposited
with B during the year. At the end of the 2008 taxable
year, B credits $152,500 of B’s earnings to QI.
(ii) Under paragraph (c)(2)(ii)(A) of this section,
no part of the $152,500 credited by B to QI is earn-
ings attributable to T’s exchange funds. Therefore, all
of the earnings attributable to the exchange funds are
paid to T in accordance with the exchange agreement,
and paragraph (c)(2) of this section applies. The ex-
change funds are not treated as loaned from T to QI,
and T must take into account in computing T’s in-
come tax liability for 2008 the $28,000 of interest
earned on T’s account.
Example 6. Exchange funds deposited by ex-
change facilitator with unrelated depository institu-
tion in sub-account in taxpayer’s name. (i) The facts
are the same as inExample 4, except that QI and
B are unrelated and the money market account in
which QI deposits the $2,100,000 received from T is
a sub-account within a master account QI maintains
with B in QI’s name and TIN. The master account
includes other sub-accounts, each in the name and
TIN of a taxpayer that has entered into an exchange
agreement with QI, into which QI deposits each tax-
payer’s exchange funds. Each month, B transfers to
QI’s master account an additional amount of interest
based upon the average daily balance of all exchange
funds within the master account during the month.
At the end of the 2008 taxable year, B has credited
$152,500 of additional interest to QI.
(ii) Under paragraph (c)(2)(ii)(A) of this section,
no part of the $152,500 credited by B to QI is earn-
ings attributable to T’s exchange funds. Therefore, all
of the earnings attributable to the exchange funds are
paid to T in accordance with the exchange agreement,
and paragraph (c)(2) of this section applies. The ex-
change funds are not treated as loaned from T to QI,
and T must take into account in computing T’s in-
come tax liability for 2008 the $28,000 of interest
earned on T’s account.
Example 7.Marketing fee paid to exchange fa-
cilitator. (i) The facts are the same as inExample 4,
except that at the end of each taxable year, B pays a
marketing fee to QI for using B as its depository in-
stitution for exchange funds. The amount of the fee is
based on the total amount of exchange funds QI has
deposited with B during the year.
(ii) Under paragraph (c)(2)(ii)(A) of this section,
no part of the marketing fee that B pays to QI is earn-
ings attributable to T’s exchange funds. Therefore, all
of the earnings attributable to the exchange funds are
paid to T in accordance with the exchange agreement,
and paragraph (c)(2) of this section applies. The ex-
change funds are not treated as loaned from T to QI,
and T must take into account in computing T’s in-
come tax liability for 2008 the $28,000 of interest
earned on T’s account.
Example 8. Stated rate of interest on account less
than earnings attributable to exchange funds.(i)The
facts are the same as inExample 4, except that the
exchange agreement provides only that QI will pay
T a stated rate of interest. QI invests the exchange
funds and earns $40,000. The exchange funds earn
$28,000 at the stated rate of interest, and QI pays the
$28,000 to T.
(ii) Paragraph (c)(1) of this section applies and the
exchange funds are treated as loaned from T to QI.
QI must take into account in computing QI’s income
tax liability all items of income, deduction, and credit
(including capital gains and losses) attributable to the
exchange funds. Paragraph (c)(2) of this section does
not apply because QI does not pay all the earnings at-
tributable to the exchange funds to T. See §§1.7872–5
and 1.7872–16 for rules relating to exchange facilita-
tor loans.
Example 9.All earnings attributable to commin-
gled exchange funds paid to taxpayer.(i) The facts are
thesameasinExample 4, except that the exchange
agreement does not specify how the $2,100,000 QI
receives from R must be invested.
(ii) On May 1, 2008, QI deposits the $2,100,000
with B in a pre-existing interest-bearing account un-
der QI’s name and TIN. The account has a total bal-
ance of $5,275,000 immediately thereafter. On the
last day of each month between May and September,
2008, the account earns interest as follows: $17,583
in May, $17,642 in June, $18,756 in July, and $17,472
in August. On July 11, 2008, QI deposits $500,000
in the account. On August 15, 2008, QI withdraws
$1,175,000 from the account.
(iii) QI calculates T’spro-ratashare of the earn-
ings allocable to the $2,100,000 based on the actual
return, the average dailyprincipal balances, and a
30-day month convention, as follows:
2008–34 I.R.B.412August 25, 2008

Month
Account’s
Avg. Daily Bal.
T’s
Avg. Daily Bal.T’s Share*
Monthly
InterestT’s End. Bal.**
May
$5,275,000$2,100,000
39.8%
$17,583$2,106,998
June
$5,292,583$2,106,998
39.8%
$17,642$2,114,020
July
$5,643,558$2,114,020
37.5%
$18,756$2,121,054
August
$5,035,647$2,121,054
42.1%
$17,472$2,128,410
* T’s Average Daily Balance ÷ Account’s Average Daily Balance
**T’s beginning balance + [(T’s share)(Monthly Interest)]
(iv) On September 1, 2008, QI uses $2,100,000 of
the funds to purchase replacement property identified
by T and transfers the property to T. QI pays $28,410,
the earnings of the account allocated to T’s exchange
funds, to T.
(v) Because QI uses a reasonable method to calcu-
late thepro-ratashare of account earnings allocable
to T’s exchange funds in accordance with paragraph
(c)(2)(ii)(B) of this section, and pays all those earn-
ings to T, paragraph (c)(2) of this section applies. The
exchange funds are not treated as loaned from T to QI.
T must take into account in computing T’s income tax
liability for 2008 the $28,410 of earnings attributable
to T’s exchange funds.
(f)Effective/applicability dates—(1)In
general. This section applies to transfers
of relinquished property made by taxpay-
ers on or after October 8, 2008.
(2)Transition rule. With respect to
transfers of relinquished property made by
taxpayers after August 16, 1986, but be-
fore October 8, 2008, the Internal Revenue
Service will not challenge a reasonable,
consistently applied method of taxation for
income attributable to exchange funds.
Par. 4. Section 1.1031(k)–1 is amended
by adding a sentence at the end of para-
graph (h)(2) to read as follows:
§1.1031(k)–1 Treatment of deferred
exchanges.
*****
(h) * * *
(2)***Forrulesundersection
468B(g) relating to the current taxation
of qualified escrow accounts, qualified
trusts, and other escrow accounts, trusts,
and funds used during deferred exchanges
of like-kind property, see §1.468B–6.
*****
Par. 5. Section 1.7872–5 is added to
read as follows:
§1.7872–5 Exempted loans.
(a)In general—(1)General rule.Ex-
cept as provided in paragraph (a)(2) of this
section, notwithstanding any other provi-
sion of section 7872 and the regulations
under that section, section 7872 does not
apply to the loans listed in paragraph (b)
of this section because the interest arrange-
ments do not have a significant effect on
the Federal tax liability of the borrower or
the lender.
(2)No exemption for tax avoidance
loans. If a taxpayer structures a transac-
tion to be a loan described in paragraph
(b) of this section and one of the principal
purposes of so structuring the transaction
is the avoidance of Federal tax, then the
transaction will be recharacterized as a
tax avoidance loan as defined in section
7872(c)(1)(D).
(b)List of exemptions. Except as pro-
vided in paragraph (a) of this section, the
following transactions are exempt from
section 7872:
(1) through (15) [Reserved]. For further
guidance, see §1.7872–5T(b)(1) through
(15).
(16) An exchange facilitator loan
(within the meaning of §1.468B–6(c)(1))
if the amount of the exchange funds (as
defined in §1.468B–6(b)(2)) treated as
loaned does not exceed $2,000,000 and
the duration of the loan is 6 months or
less.The Commissioner may increase
this $2,000,000 loan exemption amount in
published guidance of general applicabil-
ity, see §601.601(d)(2) of this chapter.
(c) [Reserved]. For further guidance,
see §1.7872–5T(c).
(d)Effective/applicability date.This
section applies to exchange facilitator
loans issued on or after October 8, 2008.
Par. 6. Section 1.7872–16 is added to
read as follows:
§1.7872–16 Loans to an exchange
facilitator under §1.468B–6.
(a)Exchange facilitator loans.This
section provides rules in applying sec-
tion 7872 to an exchange facilitator loan
(within the meaning of §1.468B–6(c)(1)).
For purposes of this section, the terms
deferred exchange,exchange agreement,
exchange facilitator,exchange funds,
qualified intermediary,replacement prop-
erty,andtaxpayerhave the same meanings
as in §1.468B–6(b).
(b)Treatment as demand loans.For
purposes of section 7872, except as pro-
vided in paragraph (d) of this section, an
exchange facilitator loan is a demand loan.
(c)Treatment as compensation-re-
lated loans. If an exchange facilitator
loan is a below-market loan, the loan is a
compensation-related loan under section
7872(c)(1)(B).
(d)Applicable Federal rate (AFR) for
exchange facilitator loans. For purposes
of section 7872, in the case of an exchange
facilitator loan, the applicable Federal rate
is the lower of the short-term AFR in ef-
fect under section 1274(d)(1) (as of the
day on which the loan is made), com-
pounded semiannually, or the 91-day rate.
For purposes of the preceding sentence, the
91-day rate is equal to the investment rate
on a 13-week (generally 91-day) Treasury
bill with an issue date that is the same as
the date that the exchange facilitator loan is
made or, if the two dates are not the same,
with an issue date that most closely pre-
cedes the date that the exchange facilitator
loan is made.
(e)Use of approximate method permit-
ted. The taxpayer and exchange facilitator
may use the approximate method to deter-
mine the amount of forgone interest on any
exchange facilitator loan.
(f)Exemption for certain below-market
exchange facilitator loans. If an exchange
facilitator loan is a below-market loan, the
loan is not eligible for the exemptions from
section7872listedunder§1.7872–5T.
However, the loan may be eligible for
the exemption from section 7872 under
§1.7872–5(b)(16) (relating to exchange fa-
cilitator loans in which the amount treated
as loaned does not exceed $2,000,000).
August 25, 20084132008–34 I.R.B.

(g)Effective/applicability date.This
section applies to exchange facilitator
loans issued on or after October 8, 2008.
(h)Example. The provisions of this sec-
tion are illustrated by the following exam-
ple:
Example. (i) T enters into a deferred exchange
with QI, a qualified intermediary. The exchange is
governed by an exchange agreement. The exchange
fundsheldbyQIpursuantto the exchange agreement
are treated as loaned to QI under §1.468B–6(c)(1).
The loan between T and QI is an exchange facilita-
tor loan. The exchange agreement between T and QI
provides that no earnings will be paid to T. On De-
cember 1, 2008, T transfers property to QI, QI trans-
fers the property to a purchaser for $2,100,000, and
QI deposits $2,100,000 in a money market account.
On March 1, 2009, QI uses $2,100,000 of the funds
in the account to purchase replacement property iden-
tified by T, and transfers the replacement property to
T. The amount loaned for purposes of section 7872
is $2,100,000 and the loan is outstanding for three
months. For purposes of section 7872, under para-
graph (d) of this section, T uses the 91-day rate, which
is 4 percent, compounded semi-annually. T uses the
approximate method for purposes of section 7872.
(ii) Under paragraphs (b) and (c) of this section,
the loan from T to QI is a compensation-related
demand loan. Because there is no interest payable
on the loan from T to QI, the loan is a below-market
loan under section 7872. The loan is not exempt
under §1.7872–5(b)(16) because the amount treated
as loaned exceeds $2,000,000. Under section
7872(e)(2), the amount of forgone interest on the loan
for 2008 is $7000 ($2,100,000*.04/2*1/6). Under
section 7872(e)(2), the amount of forgone interest
for 2009 is $14,000 ($2,100,000*.04/2*2/6). The
$7,000 for 2008 is deemed transferred as compensa-
tion by T to QI and retransferred as interest by QI to
T on December 31, 2008. The $14,000 for 2009 is
deemed transferred as compensation by T to QI and
retransferred as interest by QI to T on March 1, 2009.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved July 2, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 9, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 10, 2008, 73 F.R. 39614)
Section 709.—Treatment
of Organization and
Syndication Fees
Final, temporary, and proposed regulations pro-
vide guidance for making elections to amortize ex-
penses under sections 195, 248, and 709 of the Code.
See T.D. 9411, page 398.
Final, temporary, and proposed regulations pro-
vide guidance for making elections to amortize ex-
penses under sections 195, 248, and 709 of the Code.
See REG-164965-04, page 450.
Section 1031.—Exchange
of Property He
ld for
Productive Use or
Investment
26 CFR 1.1031(k)–1: Treatment of deferred ex-
changes.
Final regulations provide rules relating to the cur-
rent taxation of qualified escrow accounts, qualified
trusts, and other escrow accounts, trusts, and funds
used during deferred exchanges of like-kind property.
See T.D. 9413, page 404.
Section 6343.—Authority
to Release Levy and
Return Property
26 CFR 301.6343–2: Return of wrongfully levied
upon property.
T.D. 9410
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 301
Change to Office to Which
Notices of Nonjudicial Sale
and Requests for Return of
Wrongfully Levied Property
Must Be Sent
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and removal of temporary
regulations.
SUMMARY: This document contains fi-
nal regulations relating to the discharge
of liens under section 7425 and return of
wrongfully levied upon property under
section 6343 of the Internal Revenue Code
(Code) of 1986. These regulations revise
regulations currently published under sec-
tions 7425 and 6343. These regulations
clarify that such notices and claims should
be sent to the IRS official and office spec-
ified in the relevant IRS publications.
The regulations will affect parties seek-
ing to provide the IRS with notice of a
nonjudicial foreclosure sale and parties
making administrative requests for return
of wrongfully levied property.
DATES:Effective Date:These regulations
are effective on July 8, 2008.
Applicability Date:See §§301.6343–2
and 301.7425–3.
FOR FURTHER INFORMATION
CONTACT: Robin M. Ferguson, (202)
622–3630 (not a toll-free call).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regula-
tions amending the Procedure and Ad-
ministration Regulations (26 CFR part
301) relating to the giving of notice of
nonjudicial sales under section 7425(b) of
the Code. This document also contains
final regulations amending the Procedure
and Administration Regulations relat-
ing to requests for return of wrongfully
levied property under section 6343(b)
of the Code. On July 20, 2007, tem-
porary regulations (T.D. 9344, 2007–36
I.R.B. 535) were published in theFed-
eral Register(72 FR 39737). A notice of
proposed rulemaking (REG–148951–05,
2007–36 I.R.B. 550) cross-referencing
the temporary regulations was published
in theFederal Registeronthesameday
(72 FR 39771). No written comments
were received from the public in response
tothenoticeofproposedrulemaking. No
public hearing was requested, scheduled
or held. The proposed regulations are
adopted as amended by this Treasury
decision, and the corresponding temporary
regulations are removed.
For notices of nonjudicial foreclosure
sale under Section 7425(b) and requests
for return of property wrongfully levied
upon under Section 6343(b), the existing
regulations direct the notices and requests
to be sent to the “district director (marked
for the attention of the Chief, Special Pro-
cedures Staff).” The offices of the district
director and Special Procedures were elim-
inated by the IRS reorganization imple-
mented pursuant to the IRS Restructur-
ing and Reform Act of 1998, Public Law
105–206 (RRA 1998), creating uncertainty
as to the timeliness of notices and requests
under these provisions.
2008–34 I.R.B.414August 25, 2008

Comments on the Proposed Regulations
None.
Modifications of the Proposed
Regulations
None, other than minor grammatical re-
visions.
Effective/Applicability Date
These regulations are effective on July
8, 2008.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and because
the regulations do not impose a collection
of information on small entities, the Regu-
latory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f)
of the Internal Revenue Code, these reg-
ulations have been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on their
impact on small business.
Drafting Information
The principal author of these regula-
tions is Robin M. Ferguson, Office of As-
sociate Chief Counsel (Procedure and Ad-
ministration).
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6343–2 is amended
as follows:
1. Paragraphs (a)(1) introductory text
and (b) introductory text are revised.
2. Paragraph (e) is revised.
The revisions read as follows:
§301.6343–2 Return of wrongfully levied
upon property.
(a)Return of property—(1)General
rule. If the Internal Revenue Service (IRS)
determines that property has been wrong-
fully levied upon, the IRS may return—
*****
(b)Request for return of property.A
written request for the return of property
wrongfully levied upon must be given to
the IRS official, office and address spec-
ified in IRS Publication 4528,“Making
an Administrative Wrongful Levy Claim
Under Internal Revenue Code (IRC) Sec-
tion 6343(b),”or any successor publica-
tion. The relevant IRS publications may
be downloaded from the IRS internet site
atwww.irs.gov. Under this section, a re-
quest for the return of property wrongfully
levied upon is not effective if it is given to
an office other than the office listed in the
relevant publication. The written request
must contain the following information—
*****
(e)Effective/applicability date.These
regulations are effective on July 8, 2008.
§301.6343–2T [REMOVED].
Par. 3. Section 301.6343–2T is re-
moved.
Par. 4. Section 301.7425–3 is amended
as follows:
1. Paragraphs (a)(1), (b)(1), (b)(2),
(c)(1), (d)(2), (d)(3), and (d)(4) are re-
vised.
2. Paragraph (a)(2)(iii)Example 2is
amended by removing the language “dis-
trict director” and adding the language
“IRS” in its place wherever it appears.
3. Paragraph (e) is revised.
The revisions and additions read as fol-
lows:
§301.7425–3 Discharge of liens; special
rules.
(a)Notice of sale requirements—(1)In
general. Except in the case of the sale
of perishable goods described in paragraph
(c) of this section, a notice (as described in
paragraph (d) of this section) of a nonjudi-
cial sale shall be given, in writing by reg-
istered or certified mail or by personal ser-
vice, not less than 25 days prior to the date
of sale (determined under the provisions of
§301.7425–2(b)), to the Internal Revenue
Service (IRS) official, office and address
specified in IRS Publication 786,“Instruc-
tions for Preparing a Notice of Nonjudi-
cial Sale of Property and Application for
Consent to Sale,”or any successor publi-
cation. The relevant IRS publications may
be downloaded from the IRS internet site
atwww.irs.gov. Under this section, a no-
tice of sale is not effective if it is given
to an office other than the office listed in
the relevant publication. The provisions of
sections 7502 (relating to timely mailing
treated as timely filing) and 7503 (relating
to time for performance of acts where the
last day falls on Saturday, Sunday, or a le-
gal holiday) apply in the case of notices re-
quired to be made under this paragraph.
*****
(b)Consent to sale—(1)In general.
Notwithstanding the notice of sale provi-
sions of paragraph (a) of this section, a
nonjudicial sale of property shall discharge
or divest the property of the lien and title
of the United States if the IRS consents
to the sale of the property free of the lien
or title. Pursuant to section 7425(c)(2),
where adequate protection is afforded the
lien or title of the United States, the IRS
may, in its discretion, consent with respect
to the sale of property in appropriate cases.
Such consent shall be effective only if
given in writing and shall be subject to
such limitations and conditions as the IRS
may require. However, the IRS may not
consent to a sale of property under this
section after the date of sale, as determined
under §301.7425–2(b). For provisions re-
lating to the authority of the IRS to release
a lien or discharge property subject to a
tax lien, see section 6325 and the section
6325 regulations.
(2)Application for consent
.Anyper-
son desiring the IRS’s consent to sell prop-
erty free of a tax lien or a title derived from
the enforcement of a tax lien of the United
States in the property shall submit to the
IRS, at the office and address specified in
the relevant IRS publications, a written ap-
plication, in triplicate, declaring that it is
made under penalties of perjury, and re-
questing that such consent be given. The
August 25, 20084152008–34 I.R.B.

application shall contain the information
required in the case of a notice of sale, as
set forth in paragraph (d)(1) of this section,
and, in addition, shallcontain a statement
of the reasons why the consent is desired.
(c)Sale of perishable goods.—(1)In
general. A notice (as described in para-
graph (d) of this section) of a nonjudi-
cial sale of perishable goods (as defined
in paragraph (c)(2) of this section) shall
be given in writing, by registered or certi-
fied mail or delivered by personal service,
at any time before the sale, to the IRS of-
ficial and office specified in the relevant
IRS publications, at the address specified
in such publications. Under this section, a
notice of sale is not effective if it is given to
an office other than the office listed in the
relevant publication. If a notice of a non-
judicial sale is timely given in the manner
described in this paragraph, the nonjudicial
sale shall discharge or divest the tax lien,
or a title derived from the enforcement of
a tax lien, of the United States in the prop-
erty. The provisions of sections 7502 (re-
lating to timely mailing treated as timely
filing) and 7503 (relating to time for per-
formance of acts where the last day falls on
Saturday, Sunday, or a legal holiday) apply
in the case of notices required to be made
under this paragraph. The seller of the per-
ishable goods shall hold the proceeds (ex-
clusive of costs) of the sale as a fund, for
not less than 30 days after the date of the
sale, subject to the liens and claims of the
United States, in the same manner and with
the same priority as the liens and claims of
the United States had with respect to the
property sold. If the seller fails to hold the
proceeds of the sale in accordance with the
provisions of this paragraph and if the IRS
asserts a claim to the proceeds within 30
days after the date of sale, the seller shall
be personally liable to the United States for
an amount equal to the value of the inter-
est of the United States in the fund. How-
ever, even if the proceeds of the sale are
not so held by the seller, but all the other
provisions of this paragraph are satisfied,
the buyer of the property at the sale takes
the property free of the liens and claims of
the United States. In the event of a post-
ponement of the scheduled sale of perish-
able goods, the seller is not required to no-
tify the IRS of the postponement. For pro-
visions relating to the authority of the IRS
to release a lien or discharge property sub-
ject to a tax lien, see section 6325 and the
regulations.
*****
(d) * * *
(2)Inadequate no
tice. Except as other-
wise provided in t
his paragraph, a notice of
sale described in
paragraph (a) of this sec-
tion that does no
t contain the information
described in par
agraph (d)(1) of this sec-
tion shall be con
sidered inadequate by the
IRS. If the IRS de
termines that the notice is
inadequate, the
IRS will give written noti-
fication of the
items of information which
are inadequate
to the person who submit-
ted the notice.
A notice of sale that does
not contain the
name and address of the
person submit
ting such notice shall be con-
sideredtobei
nadequate for all purposes
without notif
ication of any specific inade-
quacy. In any c
asewhereanoticeofsale
does not cont
ain the information required
under paragr
aph(d)(1)(ii)ofthissection
with respect
to a Notice of Federal Tax
Lien, the IRS
may give written notifica-
tion of such o
mission without specification
of any other
inadequacy and such notice of
sale shall b
e considered inadequate for all
purposes. I
n the event the IRS gives no-
tification
thatthenoticeofsaleisinade-
quate, a not
ice complying with the provi-
sions of th
is section (including the require-
ment that t
henoticebegivennotlessthan
25 days pri
ortothesaleinthecaseofa
notice des
cribed in paragraph (a) of this
section)
must be given. However, in ac-
cordance
with the provisions of paragraph
(b)(1) of
this section, in such a case the
IRS may, i
n its discretion, consent to the
sale of th
e property free of the lien or ti-
tle of th
e United States even though notice
of the sa
leisgivenlessthan25daysprior
to the sa
le. In any case where the person
who subm
itted a timely notice, which in-
dicates
his name and address, does not re-
ceive m
ore than 5 days prior to the date of
sale wr
itten notification from the IRS that
the not
ice is inadequate, the notice shall be
consid
ered adequate for purposes of this
sectio
n.
(3)Ack
nowledgment of notice.Ifano-
tice of
sale described in paragraph (a) or
(c) of this section is submitted in duplicate
to the IRS with a written request that re-
ceipt of the notice be acknowledged and
returned to the person giving the notice,
this request will be honored by the IRS.
The acknowledgment by the IRS will in-
dicate the date and time of the receipt of
the notice.
(4)Disclosure of adequacy of notice.
The IRS is authorized to disclose, to any
person who has a proper interest, whether
an adequate notice of sale was given un-
der paragraph (d)(1) of this section. Any
person desiring this information should
submit to the IRS a written request that
clearly describes the property sold or to
be sold, identifies the applicable notice
of lien, gives the reasons for requesting
the information, and states the name and
address of the person making the request.
The request should be submitted to the
IRS official, office and address specified
in IRS Publication 4235,“Collection Ad-
visory Group Addresses,”or any successor
publication. The relevant IRS publications
may be downloaded from the IRS internet
site atwww.irs.gov.
(e)Effective/applicability date.These
regulations are effective on July 8, 2008.
§301.7425–3T [REMOVED].
Par. 5. Section 301.7425–3T is re-
moved.
LindaE.Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved June 30, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 7, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 8, 2008, 73 F.R. 38915)
Section 7425.—Discharge
of Liens
Final regulations clarify that notices of nonjudicial
sale should be sent to the IRS official and office spec-
ified in current IRS publications. See T.D. 9410, page
414.
2008–34 I.R.B.416August 25, 2008

Section 7872.—Treatment
of Loans With Below-Market
Interest Rates
26 CFR 1.7872–5: Exempted loans.
26 CFR 1.7872–16: Loans to an exchange facilitator
under §1.468B–6.
Final regulations provide rules relating to the treat-
ment of exchange facilitator loans as below-market
loans. See T.D. 9413, page 404.
August 25, 20084172008–34 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Energy Credit for Qualified
Fuel Cell Property and
Qualified Microturbine
Property
Notice 2008–68
SECTION 1. PURPOSE
This notice sets forth interim guidance
pending the issuance of regulations relat-
ing to the energy credit under § 48 of
the Internal Revenue Code (Code) for fuel
cells (fuel cell credit) and microturbines
(microturbine credit).
SECTION 2. BACKGROUND
Section 46 of the Code provides that
the amount of the investment credit for
any taxable year includes the energy credit.
Section 48(a)(1) of the Code provides that
the energy credit for a taxable year is the
energy percentage of the basis of each en-
ergy property placed in service during the
taxable year.
Section 1336 of the Energy Policy Act
of 2005, Pub. L. No. 109–58, amended
§ 48 to add qualified fuel cell property
and qualified microturbine property to the
list of property thatcan qualify for the en-
ergy credit. The amendment also provides
that the energy percentage is 30 percent for
qualified fuel cell property and 10 percent
for qualified microturbine property.
SECTION 3. DEFINITIONS, ETC.
.01Definitions. The following defini-
tions apply for purposes of this notice:
(1)Qualified fuel cell property.Quali-
fied fuel cell property is a fuel cell power
plant that satisfies the following condi-
tions:
(a) The plant has a nameplate capacity
of at least 0.5 kilowatt of electricity using
an electrochemical process.
(b) The plant has an electricity-only
generation efficiency greater than 30 per-
cent.
(c) The plant is within the credit period
as determined under section 3.03 of this
notice.
(2)Qualified fuel cell energy property.
Qualified fuel cell energy property is qual-
ified fuel cell property that satisfies the re-
quirements of section 3.02 of this notice.
(3)Qualified microturbine property.
Qualified microturbine property is a sta-
tionary microturbine power plant that
satisfies the following conditions:
(a) The plant has a nameplate capacity
of less than 2,000 kilowatts.
(b) The plant has an electricity-only
generation efficiency of not less than 26
percent at International Standard Organi-
zation (ISO) conditions.
(c) The plant is within the credit period
as determined under section 3.03 of this
notice.
(4)Qualified microturbine energy prop-
erty. Qualified microturbine energy prop-
erty is qualified microturbine property that
satisfies the requirements of section 3.02
of this notice.
(5)Fuel cell power plant. A fuel cell
power plant is an integrated system com-
prised of a fuel cell stack assembly and
associated balance of plant components
which converts a fuel into electricity using
electrochemical means.
(6)Stationary microturbine power
plant. A stationary microturbine power
plant is an integrated system comprised
of a gas turbine engine, a combustor, a
recuperator or regenerator, a generator or
alternator, and associated balance of plant
components that converts a fuel into elec-
tricity and thermal energy. A stationary
microturbine power plant also includes all
secondary components located between
the existing infrastructure for fuel de-
livery and the existing infrastructure for
power distribution, including equipment
and controls for meeting relevant power
standards, such as voltage, frequency and
power factors.
(7)Nameplate capacity. Nameplate ca-
pacity is the maximum electrical output of
a generator as rated by the manufacturer.
In the case of a fuel cell power plant, name-
plate capacity is determined at the nor-
mal operating conditions designated by the
manufacturer. In the case of a stationary
microturbine power plant, nameplate ca-
pacity is determined at ISO conditions.
.02Qualification as Energy Property.
Qualified fuel cell property and qualified
microturbine property are energy property
for which an energy credit is allowable
only if the following conditions are satis-
fied:
(1) Depreciation (or amortization in lieu
of depreciation) is allowable to the tax-
payer with respect to the property.
(2) The construction, reconstruction, or
erection of the property is completed by
the taxpayer or the property is acquired by
and its original use begins with the tax-
payer.
(3) The property meets all applicable
quality and performance standards in regu-
lations prescribed under § 48 after consul-
tation with the Secretary of Energy. Any
such standard will not apply to property ac-
quired before the date on which the stan-
dard is published in the Federal Register.
(4) Except as otherwise provided in this
section 3.02(4), the property is not public
utility property (as defined in § 46(f)(5) as
in effect on November 4, 1990). This con-
dition does not apply to qualified fuel cell
property or qualified microturbine prop-
erty that is used predominantly in the trade
or business of the furnishing or sale of tele-
phone service or telegraph service (other
than international telegraph service) and
such property may qualify for the energy
credit even if it is public utility property,
.03Credit period. The credit period for
purposes of sections 3.01(1) and 3.01(3)
of this notice is the period after Decem-
ber 31, 2005, and before January 1, 2009.
The extent to which a fuel cell power plant
or a stationary microturbine power plant is
within the credit period is determined un-
dertherulesof§48(m)asineffecton
November 4, 1990.
.04Cross References to Applicable
Regulations. The following provisions of
the Income Tax Regulations (26 CFR Part
1) apply for purposes of this notice:
(1)Original use. Whether the origi-
nal use of property begins with the tax-
payer is determined under the principles of
§ 1.48–2.
(2)Depreciation. Whether deprecia-
tion (or amortization in lieu of deprecia-
tion) is allowable to the taxpayer with re-
spect to property is determined under the
principles of § 1.48–1(b).
(3)Placed in service. The year in which
property is placed in service is determined
under the principles of § 1.46–3(d).
2008–34 I.R.B.418August 25, 2008

(4)Basis of property. The basis of prop-
erty is determined under the principles of
§ 1.46–3(a) and (c).
SECTION 4. COMPUTATION OF
CREDIT
.01In General. The fuel cell credit for
a taxable year is 30 percent of the basis
of the qualified fuel cell energy property
placed in service during the tax year. The
microturbine credit for a taxable year is 10
percent of the basis of the qualified micro-
turbine energy property placed in service
during the tax year.
.02Limitation of the Credit.Thefuel
cell credit for a taxable year cannot exceed
$500 for each 0.5 kilowatt of capacity of
qualified fuel cell energy property placed
in service during the tax year. The mi-
croturbine credit for a taxable year cannot
exceed an amount equal to $200 for each
kilowatt of capacity of qualified microtur-
bine energy property placed in service dur-
ing the tax year.
.03Coordination with Other Credits.
The fuel cell credit and the microturbine
credit are not allowed for that portion of
the basis of a fuel cell power plant or sta-
tionary microturbine power plant which
also qualifies for the rehabilitation credit
under § 47(a). In addition, the credits
are not allowed with respect to a fuel cell
power plant or a stationary microturbine
power plant for a taxable year if a credit
under section 45 is allowed for the taxable
year or any prior year for the electricity
produced by such power plant.
.04Reduction for Subsidized Energy Fi-
nancing and Private Activity Bonds.The
fuel cell credit and microturbine credit are
reduced if the property qualifying for the
credit is financed by subsidized energy fi-
nancing or private activity bonds. Section
48(a)(4) provides rules for determining the
amount of such reduction. For purposes
of § 48(a)(4), subsidized energy financing
does not include a grant includible in gross
income under § 61, a nontaxable govern-
ment grant, or a credit against state or local
taxes.
SECTION 5. RULES RELATING TO
THE AVAILABILITY OF THE FUEL
CELL CREDIT
.01Leased Facility. The fuel cell credit
is allowed to the lessor of qualified fuel
cell energy property if depreciation (or
amortization in lieu of depreciation) is
allowable to the lessor with respect to the
property. The lessee of qualified fuel cell
property generally may not claim the fuel
cell credit for such property.
.02Mobile Plant. The fuel cell credit is
allowed with respect to a taxpayer’s mo-
bile fuel cell power plant if the plant satis-
fies the conditions of sections 3.01(1) and
section 3.02 of this notice.
.03Generation Efficiency. The electric-
ity-only generation efficiency of a fuel cell
power plant may be determined in accor-
dance with the standards of ANSI/ASME
PTC 50–2002 Fuel Cell Power Systems
Performance or equivalent testing proce-
dures under normal operating conditions
using the lower heating value of the pri-
mary fuel.
SECTION 6. RULES RELATING
TO THE AVAILABILITY OF THE
MICROTURBINE CREDIT
.01Leased Facility. The microturbine
credit is allowed to the lessor of qualified
microturbine energyproperty if deprecia-
tion (or amortization in lieu of deprecia-
tion) is allowable to the lessor with respect
to the property. The lessee of qualified fuel
cell property generally may not claim the
microturbine credit for such property.
.02Installation Costs. Installation costs
included in the basis of qualified microtur-
bine energy property under the principles
of § 1.46–3(a) and (c) are eligible for the
microturbine credit.
.03Generation Efficiency. The electric-
ity-only generation efficiency of a station-
ary microturbine power plant may be de-
termined in accordance with the standards
of ASME PTC 22–2005 Gas Turbines or
equivalent testing procedures under ISO
conditions using the lower heating value of
the primary fuel.
.04ISO Conditions. ISO conditions for
purposes of determining the generation ef-
ficiency and nameplate capacity of a sta-
tionary microturbine power plant are 59
degrees Fahrenheit, 60 percent relative hu-
midity, and 14.696 psia.
SECTION 7. RECORDKEEPING
Section 6001 provides that every per-
son liable for any tax imposed by the
Code, or for the collection thereof, must
keep such records, render such statements,
make such returns, and comply with such
rules and regulations as the Secretary may
from time to time prescribe. The books
and records required by § 6001 must be
kept at all times available for inspection
by authorized internal revenue officers
or employees, and must be retained so
long as the contents thereof may become
material in the administration of any in-
ternal revenue law. In order to satisfy the
recordkeeping requirements of § 6001 and
the regulations thereunder, a taxpayer that
claims the fuel cell credit or the microtur-
bine credit must retain adequate books and
records so that, for any taxable year, it can
be verified from those books and records
that the property with respect to which the
credit is claimed satisfies the applicable
requirements of § 48 and this notice.
SECTION 8. EFFECTIVE DATE
This notice is effective for property
placed in service after August 25, 2008.
Taxpayers may apply the provisions of
this notice with respect to property placed
in service after December 31, 2005, and
on or before January 1, 2009.
SECTION 9. DRAFTING AND
CONTACT INFORMATION
The principal author of this notice is
Philip Tiegerman of the Office of Asso-
ciate Chief Counsel (Passthroughs and
Special Industries). However, other per-
sonnel from the IRS and Treasury par-
ticipated in its development. For further
information regarding this notice, contact
Mr. Tiegerman at (202) 622–3110.
Update for Weighted Average
Interest Rates, Yield Curves,
and Segment Rates
Notice 2008–69
This notice provides guidance as to the
corporate bond weighted average interest
rate and the permissible range of interest
rates specified under §412(b)(5)(B)(ii)(II)
of the Internal Revenue Code as in ef-
fect for plan years beginning before 2008.
It also provides guidance on the corpo-
rate bond monthly yield curve (and the
corresponding spot segment rates), the
August 25, 20084192008–34 I.R.B.

24-month average segment rates, and
the funding transitional segment rates
under § 430(h)(2). In addition, this no-
tice provides guidance as to the interest
rate on 30-year Treasury securities un-
der § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008, the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the min-
imum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007.
CORPORATE BOND WEIGHTED
AVERAGE INTEREST RATE
Sections412(b)(5)(B)(ii)and
412(l)(7)(C)(i), as amended by the Pen-
sion Funding Equity Act of 2004 and by
the Pension Protection Act of 2006 (PPA),
provide that the interest rates used to cal-
culate current liability and to determine
the required contribution under § 412(l)
for plan years beginning in 2004 through
2007 must be within a permissible range
based on the weighted average of the rates
of interest on amounts invested conser-
vatively in long term investment grade
corporate bonds during the 4-year period
ending on the last day before the beginning
of the plan year.
Notice 2004–34, 2004–1 C.B. 848, pro-
vides guidelines for determining the cor-
porate bond weighted average interest rate
and the resulting permissible range of in-
terest rates used to calculate current liabil-
ity. That notice establishes that the corpo-
rate bond weighted average is based on the
monthly composite corporate bond rate de-
rived from designated corporate bond in-
dices. The methodology for determining
the monthly composite corporate bond rate
as set forth in Notice 2004–34 continues to
apply in determining that rate. See Notice
2006–75, 2006–2 C.B. 366.
The composite corporate bond rate for
July 2008 is 6.79 percent. Pursuant to No-
tice 2004–34, the Service has determined
this rate as the average of the monthly
yields for the included corporate bond in-
dices for that month.
The following corporate bond weighted
average interest rate was determined for
plan years beginning in the month shown
below.
For Plan Years
Beginning inPermissible Range
MonthYear
Corporate
Bond Weighted
Average90%to100%
August20086.07
5.46
6.07
YIELD CURVE AND SEGMENT
RATES
Generally for plan years beginning
after 2007 (except for delayed effective
dates for certain plans under sections 104,
105, and 106 of PPA), § 430 of the Code
specifies the minimum funding require-
ments that apply to single employer plans
pursuant to § 412. Section 430(h)(2) spec-
ifies the interest rates that must be used
to determine a plan’s target normal cost
and funding target. Under this provision,
present value is generally determined us-
ing three 24-month average interest rates
(“segment rates”), each of which applies
to cash flows during specified periods.
However, an election may be made under
§ 430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates. For
plan years beginning in 2008 and 2009, a
transitional rule under § 430(h)(2)(G) pro-
vides that the segment rates are blended
with the corporate bond weighted average
as specified above. An election may be
made under § 430(h)(2)(G)(iv) to use the
segment rates without applying the transi-
tional rule.
Notice 2007–81, 2007–44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, the
24-month average corporate bond segment
rates, and the funding transitional segment
rates used to compute the target normal
cost and the funding target. Pursuant to
Notice 2007–81, the monthly corporate
bond yield curve derived from July 2008
data is in Table I at the end of this notice.
The spot first, second, and third segment
rates for the month of July 2008 are, re-
spectively, 5.16, 6.88, and 7.04. The three
24-month average corporate bond segment
rates applicable for August 2008 under
the election of § 430(h)(2)(G)(iv) are as
follows:
First
Segment
Second
Segment
Third
Segment
5.08
6.06
6.55
The transitional segment rates under
§ 430(h)(2)(G) applicable for August
2008, taking into account the corporate
bond weighted average of 6.07 stated
above, are as follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
2008
5.74
6.076.23
2008–34 I.R.B.420August 25, 2008

30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 417(e)(3)(A)(ii)(II) (prior to
amendment by PPA) defines the appli-
cable interest rate, which must be used
for purposes of determining the minimum
present value of a participant’s benefit
under § 417(e)(1) and (2), as the annual
rate of interest on 30-year Treasury se-
curities for the month before the date
of distribution or such other time as the
Secretary may by regulations prescribe.
Section 1.417(e)–1(d)(3) of the Income
Tax Regulations provides that the applica-
ble interest rate for a month is the annual
rate of interest on 30-year Treasury secu-
rities as specified by the Commissioner
for that month in revenue rulings, notices
or other guidance published in the Internal
Revenue Bulletin.
The rate of interest on 30-year Trea-
sury securities for July 2008 is 4.57 per-
cent. The Service has determined this rate
as the monthly average of the daily deter-
mination of yield on the 30-year Treasury
bond maturing in February 2038.
Generally for plan years beginning
after 2007, § 431 specifies the mini-
mum funding requirements that apply to
multiemployer plans pursuant to § 412.
Section 431(c)(6)(B)specifies a minimum
amount for the full-funding limitation
described in section 431(c)(6)(A), based
on the plan’s current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 percent
below the weighted average of the rates of
interest on 30-year Treasury securities dur-
ing the four-year period ending on the last
day before the beginning of the plan year.
Notice 88–73, 1988–2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The following rates
were determined for plan years beginning
in the month shown below.
For Plan Year
s
Beginning inPermissible
Range
MonthYear
30-Year
Treasury
Weighted
Average
90%to
105%
August20084.73
4.25
4.96
MINIMUM PRESENT VALUE
SEGMENT RATES
Generally for plan years beginning af-
ter December 31, 2007, the applicable in-
terest rates under § 417(e)(3)(D) are seg-
ment rates computed without regard to a
24-month average. For plan years begin-
ning in 2008 through 2011, the applica-
ble interest rate is the monthly spot seg-
ment rate blended with the applicable rate
under § 417(e)(3)(A)(ii)(II) as in effect
for plan years beginning in 2007. Notice
2007–81 provides guidelines for determin-
ing the minimum present value segment
rates. Pursuant to that notice, the min-
imum present value transitional segment
rates determined for July 2008, taking into
account the July 2008 30-year Treasury
rate of 4.57 stated above, are as follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
20084.69
5.035.06
DRAFTING INFORMATION
The principal author of this notice is
Tony Montanaro of the Employee Plans,
Tax Exempt and Government Entities Di-
vision. Mr. Montanaro may be e-mailed at
RetirementPlanQuestions@irs.gov.
August 25, 20084212008–34 I.R.B.

Table I
Monthly Yield Curve for July 2008
Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield
0.5
3.63
20.5
7.09
40.5
7.03
60.5
7.02
80.5
7.01
1.04.1621.0
7.09
41.07.0361.07.0281.07.01
1.54.6221.57.0841.57.0361.57.0281.57.01
2.0
5.00
22.07.0842.07.0362.07.0282.07.01
2.55.2822.5
7.08
42.5
7.03
62.5
7.02
82.5
7.01
3.05.4923.07.0743.07.0363.07.0283.07.01
3.55.6523.5
7.07
43.5
7.03
63.5
7.02
83.5
7.01
4.05.7924.07.0744.07.0364.07.0284.07.01
4.55.9124.57.0644.57.0364.57.0284.57.01
5.0
6.02
25.0
7.06
45.0
7.03
65.0
7.02
85.0
7.01
5.5
6.12
25.5
7.06
45.5
7.03
65.5
7.02
85.5
7.01
6.06.2226.07.0646.07.0366.07.0286.07.01
6.5
6.32
26.57.0546.5
7.03
66.5
7.02
86.5
7.01
7.06.4127.0
7.05
47.07.0367.07.0287.07.01
7.5
6.49
27.57.0547.57.0367.57.0287.57.01
8.0
6.57
28.0
7.05
48.07.0368.07.0288.07.01
8.56.6528.57.0548.5
7.03
68.5
7.02
88.5
7.01
9.0
6.71
29.0
7.05
49.0
7.03
69.0
7.02
89.0
7.01
9.56.7829.5
7.05
49.57.0369.57.0289.57.01
10.06.8330.0
7.0550.0
7.0370.07.02
90.0
7.01
10.56.8830.57.0450.57.0370.57.0290.57.01
11.06.9231.07.04
51.0
7.0271.07.0291.07.01
11.5
6.96
31.5
7.04
51.5
7.02
71.5
7.0291.57.01
12.0
6.99
32.07.04
52.0
7.0272.07.02
92.0
7.01
12.5
7.02
32.5
7.04
52.5
7.02
72.5
7.0292.57.01
13.07.0433.07.04
53.0
7.0273.07.02
93.0
7.01
13.57.0633.57.0453.57.0273.57.0293.57.01
14.07.0834.07.04
54.0
7.0274.07.0294.07.01
14.5
7.09
34.5
7.04
54.5
7.02
74.5
7.0294.57.01
15.0
7.10
35.0
7.04
55.0
7.02
75.0
7.0295.07.01
15.5
7.10
35.5
7.04
55.5
7.02
75.5
7.0295.57.01
16.07.1136.07.04
56.0
7.0276.07.02
96.0
7.01
16.57.1136.57.0456.57.0276.57.0296.57.01
17.07.1137.07.04
57.0
7.0277.07.0197.07.01
17.5
7.11
37.5
7.04
57.5
7.02
77.5
7.0197.57.01
18.07.1138.07.04
58.0
7.0278.07.01
98.0
7.01
18.5
7.10
38.5
7.03
58.5
7.02
78.5
7.0198.57.01
19.0
7.10
39.0
7.0359.07.02
79.0
7.01
99.0
7.01
19.57.1039.57.0359.57.0279.57.0199.57.01
20.07.0940.07.0360.07.0280.07.01100.07.01
2008–34 I.R.B.422August 25, 2008

Note.This revenue procedure will be reproduced as the next revision of IRS Publication 1516, Specifications for Filing Form 8596,
Information Return for Federal Contracts, Electronically.
Use this revenue procedure to prepare Tax Year 2008 and prior year information returns for submission to Internal Revenue Service
(IRS) electronically using theFiling Information Returns Electronically (FIRE) System.
Rev. Proc. 2008–49
TABLE OF CONTENTS
Part A. General
SEC. 1. PURPOSE................................................................................................. 424
SEC. 2. NATURE OF CHANGES..................................................................................... 424
SEC. 3. WHERE TO FILE AND HOW TO CONTACT THE IRS ENTERPRISE COMPUTING
CENTER-MARTINSBURG
.............................................................................. 424
SEC. 4. FORM 4419, APPLICATION FOR FILING INFORMATION RETURNS ELECTRONICALLY
(FIRE)
................................................................................................ 425
SEC. 5. FILING REQUIREMENTS.................................................................................. 425
SEC. 6. FILING OF INFORMATION RETURNS FOR FEDERAL CONTRACT
S
.........................
.................. 427
SEC. 7. FILING DATES............................................................................................ 427
SEC. 8. HOW TO FILE CORRECTED RETURNS...................................................................... 427
SEC. 9. TAXPAYER IDENTIFICATION NUMBERS.................................................................... 430
SEC. 10. STATE ABBREVIATIONS.................................................................................. 430
Part B. Electronic Filing Specifications
SEC. 1. GENERAL................................................................................................ 431
SEC. 2. ELECTRONIC FILING APPROVAL PROCEDURE............................................................. 432
SEC. 3. ELECTRONIC SUBMISSIONS............................................................................... 432
SEC. 4. PIN REQUIREMENTS...................................................................................... 432
SEC. 5. ELECTRONIC FILING SPECIFICATIONS.................................................................... 433
SEC. 6
. CONNECTING TO THE FIRE SYSTEM
.....................................................
.................. 433
SEC. 7. COMMON PROBLEMS AND QUESTIONS ASSOCIATED WITH ELECTRONIC FILING........................... 435
Part C. Record Format Specifications and Record Layouts
SEC. 1. GENERAL................................................................................................. 436
SEC. 2. TRANSMITTER “T” RECORD — GENERAL FIELD DESCRIPTIONS............................................ 436
SEC. 3 TRANSMITTER “T” RECORD — RECORD LAYOUT.......................................................... 438
SEC. 4. PAYER “A” RECORD — GENERAL FIELD DESCRIPTIONS.................................................... 438
SEC. 5. PAYER “A” RECORD — RECORD LAYOUT.................................................................. 440
SEC. 6. PAYEE “B” RECORD — GENERAL FIELD DESCRIPTIONS.................................................... 440
August 25, 20084232008–34 I.R.B.

SEC. 7. PAYEE “B” RECORD — RECORD LAYOUT................................................................... 446
SEC. 8. END OF PAYER “C” RECORD — GENERAL FIELD DESCRIPTIONS AND RECORD LAYOUT.................... 447
SEC. 9. END OF TRANSMISSION “F” RECORD — GENERAL FIELD DESCRIPTIONS AND RECORD
LAYOUT
............................................................................................. 448
SEC. 10. FILE RECORD LAYOUT................................................................................... 449
Part A. General
Sec. 1. Purpose
.01Section 6050M of the Internal Revenue Code, which was addedby section 1522 of the Tax Reform Act of 1986 (Public Law
99–514) and amended by section 1015(f) of the Technical and Miscellaneous Revenue Act of 1988 (Public Law 100–647), requires
Federal Executive Agencies to file an information return with the Internal Revenue Service (IRS) reporting the name, address and Tax-
payer Identification Number (TIN) of each person and/or corporation with whom the agency enters into a contract, together with any
other information required by Treasury regulations. Such reporting is required when the contract amount equals or exceeds $25,000.00
including any amendments to the original contract.
.02The purpose of this revenue procedure is to provide the specifications for filing Form 8596, Information Return for Federal
Contracts, Electronically, and Form 8596-A, Quarterly Transmittal of Information Returnsfor Federal Contracts, with IRS Enterprise
Computing Center-Martinsburg (IRS/ECC-MTB) electronically through the Filing Information Returns Electronically (FIRE) Sys-
tem.
.03This revenue procedure applies to Federal Executive Agencies, United States Postal Service and the Postal Rate Commission
with respect to reporting their contracts and contract amendments where the net value of the contract exceeds $25,000.00. Federal
Executive Agencies generally must report contracts in excess of $25,000.00 to the Federal Procurement Data Center (FPDC) and
therefore are permitted to make an election to have the FPDC file withthe Internal Revenue Service on their behalf. If the election is
made by the Federal Executive Agency, it must be made by the headof the Agency (or his or her delegate). The agency must not file
directly with IRS. See Part A, Section 5. Please read this Revenue Procedure carefully.
.04This Revenue Procedure supersedes Rev. Proc. 2005–29, reprinted as Publication 1516 (Rev. 5–2005), Specifications for
Filing Forms 8596, Information Return for Federal Contracts, Electronically. Use this Revenue Procedure for filing Forms 8596
electronically for the quarter beginning January 2009.
Sec. 2. Nature of Changes
.01IRS/ECC-MTB no longer accepts any form of magnetic media. Electronic filing through the FIRE System is the only method
to report information returns to IRS/ECC-MTB.
.02Form 4804, Transmittal of Information Returns Reported Magnetically, is obsolete. This form was only required for magnetic
media reporting which is no longer a valid method of reporting information returns.
.03Three fields were deleted from the Transmitter “T” Record and are no longer required, The deleted fields are Replacement
Alpha Character, positions 21–22, Electronic File Name for a Replacement File, positions 396–410 and Transmitter’s Media Number,
411–416. Contact E-mail Address was expanded to fifty positions, 359–408. Positions 21–29 and 409–416 are blank.
.04Three fields were deleted from the Payer “A” Record and are no longer required. The deleted fields are Original File Indicator,
position 48, Replacement File Indicator, position 49, and Correction File Indicator, position 50. Positions 48–50 are blank.
Sec. 3. Where to File and How to Contact the IRS Enterprise Computing Center-Martinsburg
.01All information returns filed electronically are processed at IRS/ECC-MTB. Files containing information returns and requests
for IRS electronic filing information should be sent to the following address:
IRS-Enterprise Computing Center-MTB
Information Reporting Program
230 Murall Drive
Kearneysville, WV 25430
.02Telephone inquiries for the Information Reporting Program Customer Service Section may be made between 8:30 a.m. and
4:30 p.m. Eastern time, Monday through Friday.
.03The telephone numbers for electronic submissions inquiries are:
2008–34 I.R.B.424August 25, 2008

Information Reporting Program Customer Service Section
TOLL-FREE 1–86
6–455–7438 or outside the U.S. 1–304–263–8700
e-mail at m
ccirp@irs.gov
304–267–3367
—TDD
(Telecommunication Device for the Deaf)
Toll-free — 8
77–477–0572 — Fax Machine
Outside the U.S. use 304–264–5602
Electronic
Filing — FIRE system
http://fire.irs.gov
TO OBTAIN F
ORMS:
1–800–TAX–FORM (1–800–829–3676)
w
ww.irs.gov—IRS website access to forms
Sec. 4. Form 4419, Application for Filing Information Returns Electronically (FIRE)
.01Transmitters are required to submit Form 4419, Application forFiling Information Returns Electronically (FIRE), to request
authorization to file information returns with IRS/ECC-MTB. A single Form 4419 should be filed no matter how many types of returns
the transmitter will be submitting electronically. For example,if a transmitter plans to file Forms 8596, one Form 4419 should be
submitted. If, at a later date, another type of form (Forms 1098, 1099, 5498 and W–2G) is to be filed, the transmitter does not need to
submit a new Form 4419.
Note: EXCEPTIONS — An additional Form 4419 is required for filing each of the following types of returns: Form 1042-S,
Foreign Person’s U.S. Source Income Subject to Withholding, and Form 8027, Employer’s Annual Information Return of Tip
Income and Allocated Tips. See the back of Form 4419 for detailed instructions.
.02Electronically filed returns may not be submitted to IRS/ECC-MTB until the application has been approved. Please read the
instructions on the back of Form 4419 carefully. Forms may be obtained by calling1–800–TAX–FORM (1–800–829–3676).The
form is also available on the IRS website atw
ww.irs.gov. This form may be photocopied.
.03Upon approval, a five-character alpha/numeric Transmitter Control Code (TCC) will be assigned and included in an approval
letter. The TCCmustbe coded in the Transmitter “T” Record. IRS/ECC-MTB uses the TCC to identify payers/transmitters and to
track their files through the processing system.
.04Form 4419 may be submitted anytime during the year; however, itmustbe submitted to IRS/ECC-MTB at least 30 days before
the due date of the return(s) for current year processing. This will allow IRS/ECC-MTB the minimum amount of time necessary to
process and respond to applications.
.05Once a transmitter is approved to file electronically, it is not necessary to reapplyunless:
(a)The payer has discontinued filing electronically for twoconsecutive years. The payer’s TCC may have been reassigned
by IRS/ECC-MTB. Payers who are aware that their TCC will no longer be used are requested to notify IRS/ECC-MTB so
these numbers may be reassigned.
(b)The payer’s files were transmitted in the past by a service bureau using the service bureau’s TCC, but now the payer has
computer equipment compatible with that of IRS/ECC-MTB and wishes to prepare his or her own files. The payer must
request a TCC by filing Form 4419.
.06Ifanyof the information (name, TIN or address) on Form 4419changes, please notify IRS/ECC-MTB in writing so the
IRS/ECC-MTB database can be updated. The transmitter should include the TCC in all correspondence.
.07Approval to file does not imply endorsementby IRS/ECC-MTB of any computer software or of the quality of tax preparation
services provided by a service bureau or software vendor.
Sec. 5. Filin
gRequirements
.01The requirements for Federal Contracts are governed by section 6011(e)(2)(A) and section 6050M of the Internal Revenue Code
and Regulation section 1.6050M–1. The term Federal Executive Agency means: (1) any Executive Agency (as defined in Section
105 of title 5, United States Code) other than the General Accounting Office; (2) any military department as defined in section 102
of such title; and (3) the United States Postal Service and the Postal Rate Commission. AFederal Executive Agency that files 250 or
more reportable contracts during a one yearperiod, must file Form 8596 on an electronic file for each quarter of that one year period.
August 25, 20084252008–34 I.R.B.

.02The information returns required by this section with respect tocontracts of a Federal Executive Agency entered into on or
after January 1, 1989, must be filed on a quarterly basis for the calendar quarters ending on the last day of March, June, September,
and December, on or before the last day of the month following that quarter for which the returns are being made.
.03The information returns required by this section may be made in one submission or in multiple submissions.
.04If a Federal Executive Agency has reasonable expectations to enter into fewerthan 250 reportable contracts during a one year
period, the agency may file paper Forms 8596 and 8596-A with the IRS Kansas City Service Center, Kansas City, MO 64999–2222.
.05 Election to have the Director of the Federal Procurement Data Center file returns on behalf of an agency.Except for
the U.S. Postal Service and the Postal RateCommission, a Federal Executive Agency may elect to have the Director of the Federal
Procurement Data Center (FPDC) file the required returns withIRS on behalf of the agency. Theagency must comply with the re-
quirements of the Federal Procurement Data System (FPDS) in submitting the information and must not file with the Internal Revenue
Service.
.06In order to make this election, the head of a Federal Executive Agency (or his or her delegate) shall attach a signed statement
to its submission to the FPDC for that quarter stating the following:
(a)The Director of the FPDC (or his or her delegate) is authorizedto submit the required returns on behalf of the agency for
contracts for that quarter in accordance with an election under 26 CFR, section 1.6050M–1(d)(5).
(b)Under the penalties of perjury, the official has examined the information submitted by the agency to the FPDC who will
submit the returns to IRS. The official certifies that information to be, to the best of his or her knowledge and belief, an
accurate compilation of agency records maintained in the normalcourse of business for the purpose of making true, correct,
and complete returns as required by section 6050M.
.07An agency that elects to have the FPDC file its returns must not submit those same returns to the IRS.
.08If a contract is increased by more than $25,000.00 under one action,the action should be treated asa new contract and reported
to IRS for the calendar quarter in which theincrease occurs. This could occur through theexercise of an option contained in a basic or
initial contract or under any other rule of contract law, expressed or implied, when the amount of money or other property obligated
under the contract is increased by $25,000.00
.09 Special rules to filing requirements are as follows:
(a)If a subcontract is entered into by the Small Business Administration (SBA) under a prime contract between SBA and a
procuring Federal agency pursuant to section 8(a) of the Small Business Act, the procuring agency, not the SBA, will be
required to file Forms 8596 and 8596-A.
(b)A Federal Supply Schedule Contract or an Automated Data Processing Schedule Contract entered into by the General Ser-
vices Administration (GSA), or a scheduled contract entered into by the Department of Veterans Affairs (VA) on behalf of
one or more Federal Executive Agencies, is not to be reported by the GSA or VA at the time of execution. When a Federal
Executive Agency, including the GSA or the VA, places an order under a schedule contract, the Federal Executive Agency
must file Forms 8596 and 8596-A.
.10 Exceptions:The following are not required to be reported under section 6050M:
(a)Any contract action of $25,000.00 or less;
(b)Any contract which provides that all amounts payable underthe contract by a Federal ExecutiveAgencywillbepaidonor
before the 120th day following the date of the contract action and for which it is reasonable to expect that all amounts will
be so paid;
(c)A license granted by a Federal Executive Agency;
(d)An obligation of a contractor (other than a Federal Executive Agency) to a subcontractor;
(e)Debt instruments of the U.S. Government or a Federal agency, such as Treasury Notes, Treasury Bonds, Treasury Bills,
U.S. Savings Bonds, or similar instruments;
(f)An obligation of a Federal Executive Agency to lend money, lease property to someone, or sell property;
(g)
A blanket purchase agreement. However, when an order is placed under a blanket purchase agreement, a contract then
exists and Forms 8596 and 8596-A must be filed;
(h)Any contract with a contractor who, in making the agreement,is acting in his or her capacity as an employee of a Federal
Executive Agency (e.g., any contract of employment under which the employee is paid wages subject to Federal income
tax withholding);
(i)Any contract between a Federal Executive Agency and another Federal Governmental unit or any subsidiary agency;
(j)Any contract with a foreign government or agency or any subsidiary agency;
(k)Any contract with a state or local government or agency or any subsidiary agency;
(l)Any contract with a person who is not required to have a Taxpayer Identification Number (TIN), such as a nonresident alien,
foreign corporation or foreign partnership, any of which does not have income effectively connected with the conduct of
a trade or business in the United States and does not have anoffice or place of business as a fiscal or paying agent in the
United States;
(m)Certain confidential or classified contracts that meet the requirements of section 6050M(e);
2008–34 I.R.B.426August 25, 2008

(n)Any contract that provides that all payments made after the120th day after the date of the contract action will be made by
someone other than a Federal Executive Agency or an agent ofsuch an agency. For example, a contract under which the
contractor will collect amounts owed to aFederal Executive Agency for the agency’s debtor and will remit to the Federal
Executive Agency the money collectedless an amount for the contractor’sconsideration under the contract;
(o)Contracts entered into using nonappropriated funds.
.11All paper Forms 8596 and 8596-A for both original and corrected returns should be filed with the IRS Kansas City Service
Center, Kansas City, MO 64999–2222. Forms 8596 and 8596-A may be obtained by calling 1–800–TAX–FORM (1–800–829–3676).
Sec. 6. Filing of Information Returns For Federal Contracts
.01Paper information returns must be sent to the IRS KansasCity Service Center using Form 8596 and Form 8596-A.Returns
filed on paper forms must not be sent to the IRS/ECC-MTB.
.02If a Federal Executive Agency elects to have the FPDC make returns on its behalf, the FPDC shall mail or fax a copy of that
agency’s signed statement, making the election, to IRS/ECC-MTB for that agency for that quarter. (See Part A, Sec. 3.)
.03Thetransmittermustnotreportthesameinformation on paper forms that isreported electronically.If parts of the
returns are reported on paper and part electronically, the transmitter must be sure that duplicate information is not included on both.
This does not mean that corrected documents should not be filed. If a return has been prepared and submitted improperly, a corrected
return must be filed as soon as possible. See Part A, Sec. 8 for requirements and instructions on filing corrected returns.
.04Agencies are required to retain a copy oftheinformationreturnsfiledwithIRSfor at least three years or have the ability to
reconstruct the data.
Sec. 7. Filing Dates
.01The i
nformation returns required by this section must be filed ona quarterly basis for the calendar quarters as follows:
Q
UARTERDUEDATE
January, February, MarchApril 30
April, May, JuneJuly 31
July, August, SeptemberOctober 31
October, November, DecemberJanuary 31
.02The director of the FPDC (or his or her delegate) shall submit the required return quarterly to IRS on or before the earlier date
of:
(a)45 days following the date that the contract information is required to be submitted to the FPDC, or
(b)90 days following the end of the calendar quarter for which the election is made, except that, if the calendar quarter ends
September 30, 105 days following the end of that quarter.
.03If any due date falls on a Saturday, Sunday, or legal holiday, the filing deadline is extended to the next day that is not a Saturday,
Sunday, or legal holiday.
Sec. 8. How to File Corrected Returns
•Acorrectionis an information return submitted by the transmitter to correct an information return that was previously submit-
tedtoandprocessedbyIRS/ECC-MTB,butcontainederroneousinformation.
•DO NOT SEND YOUR ENTIRE FILE AGAIN.Onlysendtheinformationreturns in need of correction.
•Information returns omitted from the original filemust notbe coded as corrections. Submit them under a separate Payer “A”
Record as original returns.
•Before creating your correction file, reviewthe following guidelines chart carefully.
.01When corrections are necessary, they must be filed in the next filing quarter. If the entire file that was submitted electronically
was in error, the IRS/ECC-MTB should be contactedimmediately. (See Part A, Sec. 3 for the address.)
.02Corrections should be filedas soon as possible. All fields must be completed with the correct information, not just the data
fields needing correction. Submit corrections only for the returns filed in error, not the entire file. Furnish corrected statements to
recipients as soon as possible.
Note: Do NOT resubmit your entire file as corrections. This willresult in duplicate filing and erroneous notices may be sent
to payees. Submit only those returns which need to be corrected.
August 25, 20084272008–34 I.R.B.

.03There are numerous types of errors, and in some cases, more than one transaction may be required to correct the initial error.
If the original return was filed as an aggregate, the filers must consider this in filing corrected returns.
.04Corrected returns may be included on the samefile as original returns; however, separate Payer “A” Records are required. If
filers discover that certain information returns were omitted on their original file, they must not code these documents as corrections.
The file must be coded and submitted as originals.
.05Review the chart that follows. Errors normally fall under oneof the two categories listed. Next to each type of error is a list of
instructions on how to file the corrected return.
Guidelines for Filing Corrected Returns Electronically
Error Made on the Original ReturnHow To File the Corrected Return
One transaction is required to make the following corrections properly. (See Note.)
E
RRORTYPE1CORRECTION
1.
Original return was filed with one or more of the
following errors:
A.
Prepare a new file. The first record on the file will be
the Transmitter “T” Record.
B.Make a separate “A” Record for each payer being
reported. The information in the “A” Record will be
exactlythesameasitwasintheoriginalsubmission.
C.
The Payee “B” Records must show the correct record
information as well as a Corrected Return Indicator
Code of “G” in Field Position 6.
D.Corrected returns submitted to IRS/ECC-MTB using
“G” coded “B” Records may be on the same file
as those returns submitted without the “G” coded
“B” Records; however, separate “A” Records are
required.
E.Prepare a separate “C” Record for each payer being
reported.
(a)Incorrect dollar amountin the Payee “B” Record
(b)Incorrect payee address
F.The last record on the file will be the End of
Transmission “F” Record.
File layout one step corrections
Transmitter
“T”
Record
Payer
“A”
Record
“G”
coded
Payee “B”
Record
“G”
coded
Payee “B”
Record
End of Payer
“C”
Record
End of
Transmission
“F” Record
2008–34 I.R.B.428August 25, 2008

Guidelines for Filing Corrected Returns Electronically
Error Made on the Original ReturnHow To File the Corrected Return
Two (2) separate transactions are required to make the following corrections properly. Follow the directions for both
Transactions 1 and 2. DO NOT use the two step correction process to correct money amounts.
ERRORTYPE2CORRECTION
1.
Original return was filed with one or more of the
following errors:
Transaction 1: Identify incorrect returns
A.
Prepare a new file. The first record on the file will
be the Transmitter “T” Record. Make a separate “A”
Record for each type of return and each payer being
reported. The information in the “A” Record will be
exactlythesameasitwasintheoriginalsubmission.
B.The Payee “B” Records must containexactly the
sameinformation as submitted previously,except,
insert a Corrected Return Indicator Code of “G” in
Field Position 6 of the “B” Records, and enter “0”
(zeros) in all payment amounts.
(a)No payee TIN (SSN, EIN, ITIN)
(b)Incorrect payee TIN
(c)Incorrect payee nameand address
C.
Corrected returns submitted to IRS/ECC-MTB using
“G” coded “B” Records may be on the same file as
those returns submitted with a “C” code;however,
separate “A” Records are required.
D.Prepare a separate “C” Record for each type of return
and each payer being reported.
E.Continue with Transaction 2 to complete the
correction.
Transaction 2: Report the correct information.
A.
Make a separate “A” Record for each type of return
and each payer being reported.
B.The Payee “B” Records must show the correct
information as well as a Corrected Return Indicator
Code of “C” in Field Position 6.
C.
Corrected returns submitted to IRS/ECC-MTB using
“C” coded “B” Records may be on the same file as
those returns submitted with “G” codes;however,
separate “A” Records are required.
D.Prepare a separate “C” Record for each type of return
and each payer being reported.
E.The last record on the file will be the End of
Transmission “F” Record.
August 25, 20084292008–34 I.R.B.

File layouttwostep corrections
Transmitter
“T”
Record
Payer
“A”
Record
“G”
coded
Payee “B”
Record
“G”
coded
Payee “B”
Record
End of Payer
“C”
Record
Payer
“A”
Record
“C”
coded
Payee “B”
Record
“C”
coded
Payee “B”
Record
End of Payer
“C”
Record
End of
Transmission
“F” Record
Note : If a filer is correcting the name and/or TIN in addition to any errors listed in item 2 of the chart, two transactions will be
required. If a filer is reporting “G” coded, “C” coded, and/or “Non-coded” (original) returns on the same file, each category
must be reported under separate “A” Records.
Sec. 9. Taxpayer Identification Numbers
.01Contractors are required to furnish Taxpayer Identification Numbers (TINs) to the agency under section 6109 of the Internal
Revenue Code.
.02The contractor’s TIN and name combination is used to associate information returns reported to IRS with corresponding infor-
mation on tax returns. It is imperative that thecorrectSocial Security Number (SSN) or Employer Identification Number (EIN) for
contractors be provided to IRS.Do not enter hyphens or alpha characters. Entering all zeros, ones, twos, etc., will have the effect
of an incorrect TIN.
.03IRS validates the SSN by using the Name Control of the surname of the individual who has been assigned this number. For this
reason, the surname should be provided in the Payee Name Line and/or the Name Control in positions 7–10 of the Payee “B” Record.
It is imperative to provide correct information for IRS to validate the SSN. IRS validates an EIN by using the name control of the
business to which the EIN has been assigned. If an EIN is reportedfor a contractor, the correct business name should be provided in
the First Payee Name Line and/or Name Control in positions 7–10 of the Payee “B” Record.
.04For sole proprietors, the owner’s name (not the doing business as (DBA) name) must appear in the Payee Name Line. The TIN
for a sole proprietor may be either an EIN or SSN.
.05The TIN to be furnished to IRS depends primarily upon the manner in which the account is maintained or set up on the agency’s
record. The payer and payee names and TINs should be consistentwith the names and numbers used on other tax returns. The TIN
must be that of the contractor. If the contract is recorded in more than one name, the transmitter must furnish the TIN and name of
one of the contractors. The TIN provided must be associated with the name of the contractor provided in the First Payee Name Line
of the Payee “B” Record.
Sec. 10. State Abbreviations
.01The following state and U.S. territory abbreviations are to be used when developing the state code portion of address fields.
2008–34 I.R.B.430August 25, 2008

StateCodeStateCodeStateCode
AlabamaALKentuckyKYNo. Mariana IslandsMP
AlaskaAKLouisianaLAOhioOH
American SamoaASMaineMEOklahomaOK
ArizonaAZMarshall IslandsMHOregonOR
ArkansasARMarylandMDPennsylvaniaPA
CaliforniaCAMassachusettsMAPuerto RicoPR
ColoradoCOMichiganMIRhode IslandRI
ConnecticutCTMinnesotaMNSouth Caroli
na
SC
DelawareDEMississippiMSSouth DakotaSD
District of ColumbiaDCMissouriMOTennesseeTN
Federated States of Micronesia FMMontanaMTTexasTX
FloridaFLNebraskaNEUtahUT
GeorgiaGANevadaNVVermontVT
GuamGUNew Hampsh
ire
NHVirginiaVA
HawaiiHINew JerseyNJ(U.S.) Virgin IslandsVI
IdahoIDNew MexicoNMWashingtonWA
IllinoisILNew YorkNYWest VirginiaWV
IndianaINNorth CarolinaNCWisconsinWI
IowaIANorth DakotaNDWyomingWY
KansasKS
.02Filers must adhere to the city, state, and ZIP Code format for U.S. addresses in the “B” Record. This also includes American
Samoa, Federated States of Micronesia, Guam, Marshall Islands, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands.
.03For foreign country addresses, filers may use a 51 position free format which should include city, province or state, postal code,
and name of country in this order. This is allowable only if a “1” (one) appears in the Foreign Country Indicator, Field Position 247
of the “B” Record.
.04When reporting APO/FPO addresses use the following format:
EXAMPLE:
Payee NamePVT Willard J. Doe
Mailing AddressCompany F, PSC Box 100
167 Infantry REGT
Payee CityAPO (or FPO)
Payee S
tate
AE, AA,
or AP*
Payee ZIP Code098010100
*AE is the designation for ZIPs beginning with 090–098, AA for ZIP 340, and AP for ZIPs 962–966.
Part B. Electronic Filing Specifications
Sec. 1. General
.01Electronic filing of Form 8596 returns, originals, corrections, and replacements isoffered as an alternative to paper filing. There
is no minimum of number of forms filing requirement; therefore, any number of forms may be filed electronically. Payers who are
under the filing threshold requirement are encouraged to file electronically.
.02All electronic filing of information returns are received at IRS/ECC-MTB via the FIRE (Filing Information Returns Elec-
tronically) System. To connect to the FIRE System, point your browser to h
ttp://fire.irs.gov. The system is designed to support the
electronic filing of information returns only.
.03The electronic filing of information returns is not affiliated with any other IRS electronic filing programs. Filers must obtain
separate approval to participate in each of them. Only inquiries concerning electronic filing of information returns should be directed
to IRS/ECC-MTB.
.04Files submitted to IRS/ECC-MTB electronically must be in standard ASCII code.
August 25, 20084312008–34 I.R.B.

.05If a Federal Executive Agency elects to have the FPDC make returns on its behalf, the FPDC shall mail or fax a copy of that
agency’s signed statement,making the election, to IRS/ECC-MTB (see Part A, Sec. 3.)
.06See Part C, Record Format Specifications and Record Layouts.
Sec. 2. Electronic Filing Approval Procedure
.01Filers must obtain a Transmitter Control Code (TCC) prior to submitting files electronically. Filers who currently have a TCC
may use their assigned TCC for electronic filing. Refer to Part A, Sec. 4, for information on how to obtain a TCC.
.02Once a TCC is obtained, electronic filers assign their own userID, password and Personal Identification Number (PIN) and do
not need prior or special approval. See Part B, Sec. 4 for more information on the PIN.
.03If a filer is submitting files for more than one TCC, it is notnecessary to create a separate logon and password for each TCC.
.04For all passwords, it is the user’s responsibility to rememberthe password and not allow the password to be compromised.
Passwords are user assigned at first logon and must be 8 alpha/numeric characters consisting of at least 1 uppercase, 1 lowercase, and
1 numeric. However, filers who forget their password or PIN, can calltoll-free 1–866–455–7438for assistance. The FIRE System
may require users to change their passwords on a yearly basis. However, users can change their passwords at any time from the Main
Menu.
Sec. 3. Electronic Submissions
.01Electronically filed information may be submitted to IRS/ECC-MTB 24 hours a day, 7 days a week. Technical assistance will
be available Monday through Friday between 8:30 a.m. and 4:30 p.m. Eastern time by callingtoll-free at 1–866–455–7438.
.02 The FIRE System will be down from the last week of December through the first week of January.This allows IRS/ECC-
MTB to update its system to reflect current year changes.
.03If you are sending files larger than 10,000 records electronically, data compression is encouraged. If you are considering
sending files larger than 5 million records, please contact IRS/ECC-MTB for specifics. WinZip and PKZip are the only acceptable
compression packages. IRS/ECC-MTB cannot accept self-extracting zip files or compressed files containing multiple files. The time
required to transmit information returns electronically will vary depending upon the type of connection to the Internet and if data
compression is used.The time required to transmit a file can be reduced by as much as 95 percent by using compression.
.04Transmitters may create files using self assigned file name(s). Files submitted electronically will be assigned a new unique
file name by the FIRE System. The file name assigned by the FIRE System will consist of submission type (ORIG [original], CORR
[correction], and REPL [replacement]), the filer’s TCC and a four-digit number sequence. The sequence number will be incremented
for every file sent. For example, if it is your first original file for the calendar year and your TCC is 44444, the IRS assigned file
name would be ORIG.44444.0001.Record the file name.This information will be needed by IRS/ECC-MTB to identify the file, if
assistance is required.
.05If a file was submitted timely, but is unacceptable, the filer willhave up to 60 days from the day the file was transmitted to send
an acceptable file. If an acceptable file is not received within 60 days, then the payer could be subject to late filing penalties.
.06The following definitions have been provided to help distinguish between a correction and a replacement:
•Acorrectionis an information return submitted by the transmitter to correct an information return that was previously submit-
ted to and successfully processed by IRS/ECC-MTB, but contained erroneous information.(See Note.)
Note:Corrections should only be made torecords that have been submitted incorrectly, not the entire file.
•Areplacementis an information return file sent by the filer because the CHECK FILE STATUS option on the FIRE System
indicated the original file was bad. After the necessary changes have been made, the file must be transmitted through the FIRE
System. (See Note.)
Note: Filers should never transmit an
ything to IRS/ECC-MTB as a “Replacement” file unless the CHECK FILE STATUS
option on the FIRE System indicates th
efileisbad.
.07TheTCCintheTransmitter“T”Rec
ord must be the TCC used to transmit the file; otherwise, the file will be considered an
error.
Sec. 4. PIN Requirements
.01The user will be prompted to create a PIN consisting of 10 numeric characters when establishing their initial logon name and
password.
.02The PIN is required each time an ORIGINAL, CORRECTION, or REPLACEMENT file is sent electronically and is permis-
sion to release the file. An authorized agent may enter their PIN,however, the payer is responsible for the accuracy of the returns.
The payer will be liable for penalties for failure to comply with filing requirements. If you forget your PIN, please calltoll-free at
1–866–455–7438for assistance.
2008–34 I.R.B.432August 25, 2008

.03If the file is good, it is released for mainline processing after 10 calendar days from receipt. Contact ustoll-free at
1–866–455–7438within this 10-day period if there is a reason the file should not be released for further processing. If the file is
unacceptable, follow normal replacement procedures.
Sec. 5. Electronic Filing Specifications
.01The FIRE System is designed exclusively for the filing of Forms 1042-S, 1098, 1099, 5498, 8027, 8596, and W-2G.
.02A transmitter must have a TCC (see Part A,Sec. 4) before a file can be transmitted.
.03After 1–2 business days, the results of the electronic transmission will be e-mailed to you providing you supply an accurate
e-mail address on the “Verify Your Filing Information” screen. If you are using e-mail filtering software, configure your software to
accept e-mail from f
ire@irs.govand irs.e-helpmail@irs.gov. If after receiving the e-mail it indicates that your file is bad, you must
logintotheFIRESystemandgototheCHECKFILESTATUS area to determine what the errors are in your file.
Sec. 6. Connecting to the FIRE System
.01Point your browser to http://fire.irs.govto connect to the FIRE System.
.02Filers should turn off their pop-up blockingsoftware before transmitting their files.
.03Before connecting, have your TCC and TIN available.
.04Your browser must support SSL 128-bit encryption.
.05Your browser must be set to receive “cookies”. Cookies are used to preserve your User ID status.
F
irsttimeconnectiontotheFIRESystem(If you have logged on previously, skip to Subsequent Connections to the FIRE
System.)
Click“Create New Account”.
Fill out the registration form and click“Submit”.
Enter yourUser ID(most users logon with their first and last name).
Enter and ver
ify yourpassword(the password is user assigned and must be 8 alpha/numerics,
containing a
t least 1 uppercase, 1 lowercase, and 1 numeric). FIRE may require you to change
the password
once a year.
Click“Create”.
If you receive the message“Account Created”,click“OK”.
Enter and verify your 10-digit self-assigned PIN (Personal Identification Number).
Click“Submit”.
If you rece
ive the message“Your PIN has been successfully created!”,click“OK”.
Read the bulletin(s) and/or“Click here to continue”.
S
ubsequentconnectionstotheFIRESystem
Click“Log
On”.
Enter yourUser ID(most users logon with their first and last name).
Enter yourpassword(the password is user assigned and is case sensitive).
Read the bulletin(s) and/or“Click here to continue”.
U
ploadingyourfiletotheFIRESystem
At Menu Options:
Click“S
end Information Returns”
Enter yourTCC:
Enter yourTIN:
Click“Submit”.
The system will then display the company name, address, city, state, ZIP Code, telephone
number, contact, and e-mail address. This information will be used to e-mail transmitters
regarding their transmission. Update as appropriate and/or Click“Accept”.
August 25, 20084332008–34 I.R.B.

Uploadingyourf
iletotheFIRESystem
Note: Please ensure that the e-mail is accurate so that the correct person receives the e-mail
and it does not return to us undeliverable. If you are using SPAM filtering software, please
configure it to allow an e-mail from f
ire@irs.govand irs.e-helpmail@irs.gov.
Click one of the following:
Original File
Correction File
Replacement
File(Click on the file to be replaced.)
•Electronic Replacement(file was originally transmitted on this system)
Click the file to be replaced.
•Mag Media Replacement(file was originally sent on some type of magnetic media)
Enter the alpha character from the letter (L–2494) that was returned. It is located on the top
right on the letter under “Refer Reply To:” For example, if the letter indicates TCC 44444A,
the alpha code that would be entered is “A”. Click “Submit”.
Enter your 10-digit PIN.
Click“Submit”.
Click“Browse”to locate the file and open it.
Click“Up
load”.
When the upload is complete, the screenwill display the total bytes received and tell you the name of the file you just
uploaded.
If you have more files to upload for that TCC:
Click“File Another?”;otherwise,
Click“Main Menu”.
It is your responsibility to check the acceptability of your file; therefore, be sure to check back into the system in 1–2
business days using the CHECK FILE STATUS option.
CheckingyourFILESTATUS
If the correct e-mail address was provided on the “Verify Your Filing Information” screen when the file was sent, an e-mail will be
sent regarding your FILE STATUS. If the results in the e-mail indicate “Good, not Released” and you agree with the “Count of
Payees”, then you are finished with this file. If you have any other results, please follow the instructions below.
At the M
ain Menu:
Click“Check File Status”.
Enter yourTCC:
Enter yourTIN:
Click“Search”.
If “
Results” indicate:
“Good, Not Released”and you agree with the “Count of Payees”, you
are finished with this file. The file will automatically be released after 10
calendar days unless you contact us within this timeframe.
“Good, Released”— File has been released to our mainline processing.
“Bad”— Correct the errors and timely resubmit the file as a “replacement”.
2008–34 I.R.B.434August 25, 2008

CheckingyourFILESTATUS
“Not yet processed”— File has been received, but we do not have results
available yet. Please check back in a few days.
Click on the desired file for a detailed report of your transmission.
When you are finished, click onMain Menu.
Click“Log Out”.
Close your Web Browser.
Sec. 7. Common Problems and Questions Associated with Electronic Filing
IRS/ECC-MTB encourages filers to verify the format and content of each type of record to ensure the accuracy of the data. This
may eliminate the need for IRS/ECC-MTB to request replacement files. This may be important for those payers who have either had
their files prepared by a service bureau orwho have purchased software packages.
Filers who engage a service bureau to transmit their files on their behalf should be careful not to report duplicate data,
which may generate penalty notices.
This section lists some of the problems most frequently encountered with electronic files submitted to IRS/ECC-MTB. These
problems may result in IRS/ECC-MTB requesting replacement files.
1. Transmitter does not check the FIRE System to determine file acceptability.
The results
of your file transfer are posted to the FIRE System within two business days. If the correcte-mail address was provided
on the “Veri
fy Your Filing Information” screen when the file was sent, an e-mail will be sent regarding your FILE STATUS. If the
results in
the e-mail indicate “Good, not Released” and you agree withthe “Count of Payees”, then you are finished with this file.
If you have
any other results, please follow the instructions in the Check File Status option.If the file contains errors, you can get
an online l
isting of the errors. Date received andnumber of payee records are also displayed. If the file is good, but you do not
want the fi
le processed, you must contact IRS/ECC-MTB within10 calendar days from the transmission of your file.
2. SPAM filters are not set to receive e-mail from f
ire@irs.govand irs.e-helpmail@irs.gov.
If you want to receive e-mails concerning your files, processingresults, reminders and notices, set your SPAM filter to receive
e-mail from f
ire@irs.govand irs.e-helpmail@irs.gov.
3. Incorrect e-mail provided.
When the “
Verify Your Filing Information” screen is displayed, make sure your correct e-mail is listed. If not, please update
with the c
orrect e-mail.
4. Incorrect file is not replaced timely.
If your file is bad, correct the file and timely resubmit as a replacement.
5. Transmitter compresses several files into one.
Only compress one file at a time. For example, if you have 10 uncompressed files to send, compress each file separately and
send 10 separate compressed files.
6. Transmitter sends a file and CHECK FILE STATUS indicates that the file is good, but the transmitter wants to send a
replacement or correction file to replace the original/correction/replacement file.
Once a file has been transmitted, you cannot send a replacement file unless CHECK FILE STATUS indicates the file is bad
(1–2 business days after file was transmitted). If you donot want us to process the file, you must first contact ustoll-free at
1–866–455–7438to see if this is a possibility.
7. Transmitter sends an original file that is good, and then sends a correction file for the entire file even though there are
only a few changes.
The correction file, containing the proper coding, should only contain the records needing correction, not the entire file.
8. File i
s formatted as EBCDIC.
All files submitted electronicallymust be in standard ASCII code.
August 25, 20084352008–34 I.R.B.

9. Transmitter has one TCC number, but is filing for multiple companies, which EIN should be used when logging
into the system to send the file?
When sending the file electronically, you will need to enter theEIN of the company assigned to the TCC. When you upload the
file, it will contain the TINs for the other companies that you are filing for. This is the information that will be passed forward.
10. Transmitter sent the wrong file, what should be done?
Call us as soon as possibletoll-free at 1–866–455–7438.We may be able to stop the file before it has been processed.Please do
not send a replacement for a file that is marked as a good file.
Part C. Record Format Specifications and Record Layouts
Sec. 1. General
.01The specifications contained in this part of the Revenue Procedure define the required formation and contents of the records to
be included in the electronic files.
.02A provision is made in the “B” Records for entries which are optional. If the field is not used, enter blanks to maintain a fixed
record length of 750 positions. Each field descriptionexplains the intended use of specific field positions.
Sec. 2. Transmitter “T” Record — General Field Descriptions
.01The Transmitter “T” Record identifies the entity transmitting the electronic file and contains information which is critical if it
is necessary for IRS/ECC-MTB to contact the filer.
.02The Transmitter “T” Record is the first record on each file and is followed by a Payer “A” Record. A file format diagram is
located at the end of Part C. A replacement file will be requested by IRS/ECC-MTB if the “T” Record is not present.
.03For all fields marked“Required”, the transmitter must provide the information described under Description and Remarks.
For those fields not marked“Required”, a transmitter must allow for the field, but may be instructed to enter blanks or zeros in the
indicated field positions and for the indicated length.
.04All records must be a fixed length of 750 positions.
.05All alpha characters entered in the “T” Record must be upper-case, except e-mail addresses which may be case sensitive.Do
notuse punctuation in the name and address fields.
Record Name: Transmitter “T” Record
Field
Position
Field Title
Length
Description and Remarks
1Record Type1
Required.Enter “T”.
2–5
Payment Year4
Required.Enter the 4-digit year in which the contract is signed.
6TypeofReturn1
Required. Enter “G”.
7–15
Transmitter’s TIN9
Required. Must be the valid nine-digit number TIN assigned by IRS to the
Federal Executive Agency. Do not enter hyphens or alpha characters. Entering
all zeros, ones, twos, etc., will have the effect of an incorrect TIN.
16–20Transmitter Control
Code
5Required.Enter the five-character alpha/numeric Transmitter Control Code
(TCC) assigned by IRS/ECC-MTB. A TCC must be obtained to file data within
this program.
21–29Blank9Enter blanks.
30–69Transmitter Name40
Required.Enter the name of the transmitter in the manner in which it is used in
normal business. If someone other than the Federal Agency is transmitting data,
enter the name of the transmitter. The name of the transmittermustbe consistent
through the entire file. Left-justify and fill unused positions with blanks.
2008–34 I.R.B.436August 25, 2008

Record Name: Transmitter“T” Record (Continued)
Field
Position
Field Title
Length
Description and Remarks
70–109Transmitter Name
(Continuation)
40Enter any additional information that may be part of the name. Left-justify
information and fill unused positions with blanks.
Note: All the information “Required” in Field Positions 110 thru 280 MUST contain the address information where corre-
spondence relating to problems can be sent.
110–149Agency Name40
Required.Enter the name of the agency to be associated with the address where
correspondence should be sent.
150–189
Agency Name
(Continuation)
40Enter any additional information that may be part of the name of the company
where correspondence should be sent.
190–229Agency Mailing
Address
40
Required.Enter the mailing address where correspondence should be sent.
230–269Agency City40
Required.Enter the city, town, or post office where correspondence should
be sent.
270–271Agency State2
Required.Enter the valid U.S. Postal Service state abbreviation for states. Refer
to the chart of valid state codes in Part A, Sec. 10.
272–280Agency ZIP Code9
Required.Enter the valid nine-digit ZIP Code assigned by the U.S. Postal
Service. If only the first five digits are known, left-justify information and fill
unused positions with blanks.
281–303Blank23Enter blanks.
304–343Contact Name40
Required.Enter the name of the person to be contacted if IRS/ECC-MTB
encounters problems with the file.
344–358
Contact Phone
Number & Extension
15Required.Enter the telephone number of the person to contact regarding
electronic files. Omit extension hyphens. If no extension is available,
left-justify information and fill unused positions with blanks. For example, the
IRS/ECC-MTB Customer Service Section telephone number of 866–455–7438
with an extension of 52345 would be 866455743852345.
359–408
Contact E-mail
Address
50Required if available.Enter the e-mail address of the person to contact
regarding electronic files. Left-justify information. If no e-mail address is
available, enter blanks.
409–499Blank91Enter blanks.
500–507
Record Sequence
Number
8
Required.Enter the number of the record as it appears within your file. The
record sequence number for the “T” record will always be “1” (one), since it is
the first record on your file and you can have only one “T” record in a file.
Each record, thereafter, must be incremented by one in ascending numerical
sequence, i.e., 2, 3, 4, etc. Right-justify numbers with leading zeros in the field.
For example, the “T” record sequence number would appear as “00000001”
in the field, the first “A” record would be “00000002”, the first “B” record,
“00000003”, the second “B” record, “00000004” and so on until you reach the
final record of the file, the “F” record.
508–748
Blank241 Enter blanks.
749–750
Blank2Enter blanks, or carriage return/line feed (CR/LF) characters.
August 25, 20084372008–34 I.R.B.

Sec. 3 Transmitter “T” Record — Record Layout
Record
Type
Payment
Year
Type of
Return
Transmitter’s
TIN
Transmitter
Control
Code
Blank
1
2–5
6
7–15
16–2021–29
Transmitter
Name
Transmitter
Name
(Contd.)
Agency
Name
Agency
Name
(Contd.)
Agency
Mailing Address
30–6970–109110–149
150–189
190–229
Agency
City
Agency
State
Agency
ZIP Code
BlankContact
Name
Contact
Phone
Number &
Extension
Contact
E-mail
Address
230–269270–271272–280281–303304–343
344–358359–408
BlankRecord Sequence NumberBlankBlank or CR/LF
409–499
500–507508–748749–750
Sec. 4. Payer “A” Record — General Field Descriptions
.01The Payer “A” Record identifies the payer of the file and provides parameters for the succeeding Payee “B” Records. IRS
computer programs rely on the absolute relationship between the parameters and data fields in the “A” Record and the data fields in
the “B” Record to which they apply.
.02All records must be a fixed length of 750 positions.
.03An “A” Record may be blocked with “B” Records; however, the initial record on a file must be a Transmitter “T” Record
followed by a Payer “A” Record. IRS/ECC-MTB will accept an “A” Record after a “C” Record.
.04The number of “A” Records appearing on the file will depend on the number of agencies being reported. A separate “A” Record
is required for each agency followed by the Payee “B” Records forthe agency. Each set of “B” Records is followed by a summary
“C” Record. If more than one agency is being reported on a file, an “A” Record may follow a “C” Record (i.e., The “A”, “B”, and
“C” Records for one agency may be followed by “A”, “B”, and “C” Records for the next agency, etc.).
.05All alpha characters entered in the “A” Record must be uppercase.
.06For all fields marked“Required”, the transmitter must provide the information described under Description and Remarks.
For those fields not marked“Required”, a transmitter must allow for the field, but may be instructed to enter blanks or zeros in the
indicated file position(s) and for the indicated length.
Record Name: Payer “A” Record
Field
Position
Field Title
Length
Description and Remarks
1Record Type1
Required.Enter “A”.
2–5
Payment Year4
Required. Enter the 4-digit year in which the contract is signed.
6–11Blank6Enter blanks.
12–20Payer’s
Taxpayer
Identification
Number (TIN)
9
Required.Must be thevalidnine-digit Taxpayer Identification Number assigned to
the Federal Executive Agency.Do not enter blanks, hyphens, or alpha characters.
All zeros, ones, twos, etc., will have the effect of an incorrect TIN.
2008–34 I.R.B.438August 25, 2008

Record Name: Payer “A” Record (Continued)
Field
Position
Field Title
Length
Description and Remarks
21–24Payer Name
Control
4Generally, the Name Control is the first four characters of the payer’s name. The
word “the” should be disregarded when itis the first word of the name, unless the
name contains only two words. This field should be left blank if the name control is
not determinable.
25–26
Blank2Enter blanks.
27Type of Return1
Required. Enter “G”.
28Amount
Indicator
1
Required.Enter “8”.
29–51
Blank23 Enter blanks.
52
Foreign Entity
Indicator
1Enter a “1” (one) if the payer is a foreign entity and income is paid by the foreign
entity to a U.S. resident. If the payer is not a foreign entity, enter a blank.
53–92
First Payer
Name Line
40
Required. Enter the name of the Federal Agency whose TIN appears in positions
12–20 of the “A” Record. The name of the agency must be entered in the manner in
which it is used in normal business. Any extraneous information must be deleted.
Left-justify information, and fill unused positions with blanks.
93–132Second Payer
Name Line
40
Required. Enter the name and title of the person to whom requests for an offset
against any unpaid tax liability of the contractor can be sent. If necessary, please
abbreviate.
133Blank1Enter blank.
134–173Payer Shipping
Address
40
Required. Enter the address of the person to whom requests for an offset against any
unpaid tax liability of the contract can besent. The street address should include
number, street, apartment or suite number (or P.O. Box if mail is not delivered to a
street address). Left-justify and fill with blanks.
For U.S. addresses, the payer city, state, and ZIP Code must be reported as a 40, 2, and 9 position field, respectively.Filers must
adhere to the correct format for the payer city, state, and ZIP Code.
For foreign addresses, filers may use the payer city, state, and ZIP Code as a continuous 51 position field. Enter information
inthefollowingorder:city,provinceorstate,postalcode,and the name of the country. When reporting a foreign address, the
Foreign Entity Indicator in position 52 must contain a “1” (one).
174–213Payer City40
Required. Enter the city of the person to whom requests for an offset against any
unpaid tax liability of the contractor can be sent. Left-justify and fill with blanks.
214–215
Payer State2
Required. Enter the valid U.S. Postal Service state abbreviations for states. Refer to
the chart of valid state abbreviations in Part A, Sec. 10.
216–224Payer ZIP Code9
Required. Enter the valid nine-digit ZIP Code assigned by the U.S. Postal Service.
If only the first five digits are known, left-justify information and fill the unused
positions with blanks.
225–239
Payer’s Phone
Number &
Extension
15
Enter the payer’s telephone number and extension.
240–499Blank260 Enter blanks.
August 25, 20084392008–34 I.R.B.

Record Name: Payer “A” Record (Continued)
Field
Position
Field Title
Length
Description and Remarks
500–507
Record
Sequence
Number
8
Required.Enter the number of the record as it appears within your file. The record
sequence number for the “T” record will always be “1” (one), since it is the first
record on your file and you can have onlyone “T” record in a file. Each record,
thereafter, must be incremented by one inascending numerical sequence, i.e., 2, 3,
4, etc. Right-justify numbers with leading zeros in the field. For example, the “T”
record sequence number would appear as “00000001” in the field, the first “A” record
would be “00000002”, the first “B” record, “00000003”, the second “B” record,
“00000004” and so on until you reach the final record of the file, the “F” record.
508–748
Blank241 Enter blanks.
749–750
Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Sec. 5. Payer “A” Record — Record Layout
Record
Type
Payment
Year
BlankPayer’s
TIN
Payer Name
Control
Blank
1
2–5
6–1112–2021–24
25–26
Type of
Return
Amount
Indicator
BlankForeign
Entity
Indicator
First Payer
Name Line
2728
29–515253–92
Second Payer
Name
Line
BlankPayer
Shipping
Address
Payer
City
Payer
State
Payer
ZIP Code
Payer’s
Phone &
Extension
93–132133134–173174–213
214–215
216–224
225–239
BlankRecord
Sequence
Number
BlankBlank or
CR/LF
240–499
500–
507
508–
748
749–
750
Sec. 6. Payee “B” Record — General Field Descriptions
.01The Payee “B” Record contains payment information from the individual contracts. When filinginformationdocuments elec-
tronically, the format for the Payee “B” Records will remain constant.
.02All records must be a fixed length of 750 positions.
.03The following specifications include a field in the payee records called “NameControl” in which the first four characters of
the payee’s surname are to be entered by the filer.
(a)If filers are unable to determine the first four characters of the surname, the Name Control Field may be left blank. Com-
pliance with the following will facilitate IRS computer programs in identifying the correct name control:
(1)The surname of the payee whose TIN is shown in the “B” Recordshould always appear first. If, however, the records
have been developed using the first name first, the filer must leave a blank space between the first and last names.
(2)In the case of multiple payees, only the surname of the payee whose TIN (SSN, EIN or ITIN) is shown in the “B” Record
must be present in the First Payee Name Line. Surnames of any other payees may be entered in the Second Payee Name
Line.
2008–34 I.R.B.440August 25, 2008

.04For all fields marked“Required”, the transmitter must provide the information described under Description and Remarks. For
those fields not marked“Required”, the transmitter must allow for the field, but may be instructed to enter blanks or zeros in the
indicated field position(s)and for the indicated length.
.05All alpha characters entered in the “B” Record must be uppercase.
.06Decimal points (.) cannot be used to indicate dollars and cents.
.07 IRS strongly encourages filers to review data for accuracy before submission tofacilitate the collection of delinquent
federal tax liabilities from contractors. Filers should be especially careful that names, TINs, and income amounts are correct.
Record Name: Payee “B” Record
Field
Position
Field Title
Length
Description and Remarks
1Record Type1
Required. Enter “B”.
2–5
Payment Year4
Required. Enter the 4-digit year in which the contract is signed.
6Corrected Return Indicator
(See Note.)
1
Required for corrections only.Indicates a corrected return.
CodeDefinition
GIf this is a one-transactioncorrectionorthefirstof
a two-transaction correction.
CIf this is the second transaction of a two transaction
correction.
BlankIf this is not a return being submitted to correct
information already processed by IRS.
Note: C, G, and non-coded records must be reported using separate Payer “A” Records. Refer to Part A, Sec. 8, for specific
instructions on how to file corrected returns.
7–10Name Control4If determinable, enter thefirst four (4) characters of the surname of
the person whose TIN is being reported in positions 12–20 of the
“B” Record; otherwise, enter blanks. This usually is the contractor.
Surnames of less than four (4) characters should be left-justified,
filling the unused positions withblanks. Special characters and
imbedded blanks should be removed. In the case of a business, other
than a sole proprietorship, use the first four significant characters
of the business name. Disregard the word “the” when it is the first
word of the name, unless there are only two words in the name.
A dash (-) and an ampersand (&) are the only acceptable special
characters. Surname prefixes are considered part of the surname,
e.g., for Van Elm, the name control would be VANE.
Note:Imbedded blanks, extraneous words, titles, and special characters (i.e., Mr., Mrs., Dr., period [.], apostrophe [’]) should
be removed from the Payee Name Lines. This information may be dropped during subsequent processing at IRS/ECC-MTB. A
dash (-) and an ampersand (&) are the only acceptable special characters.
The following examples may be helpful to filers in developing the Name Control:
N
ame
NameControl
Individuals:
JaneB
rownBROW
John A.L
eeLEE*
James P.E
n,Sr.EN*
JohnO
’Ne
il
ONEI
August 25, 20084412008–34 I.R.B.

Record Name: Payee “B” Record (Continued)
Field
Position
Field Title
Length
Description and Remarks
Name
NameControl
Individuals:
MaryV
anBurenVANB
JuanD
eJesusDEJE
Gloria A.E
l-RoyEL-R
Mr. JohnS
mith
SMIT
JoeM
cCarthy
MCCA
PedroT
orres-Lopes**TORR
MariaL
opez Moreno**LOPE
Binh ToL
aLA*
Nhat ThiP
hamPHAM
MarkD
’Allesandro
DALL
Corporations:
TheF
irstNationalBank
FIRS
T
heHideawayTHEH
A
&BCafe
A&BC
1
1THStreet Inc.
11TH
Sole Proprietor:
MarkH
emlock
DBA The Sunshine Club
HEML
Partnership:
RobertA
spen
and Bess
Willow
ASPE
HaroldF
ir,BruceElm,
and Joyce Spruce et al Ptr
FIR*
Estate:
FrankW
hiteEstate
WHIT
Estate of SheilaB
lueBLUE
Trusts and Fiduciaries:
D
aisy Corporation Employee
Benefit Trust
DAIS
Trust FBO The
C
herryblossom
Society
CHER
Exem
pt Organizations:
L
aborer’s Union, AFL-CIOLABO
S
t.Bernard’s Methodist
Church Bldg. Fund
STBE
*Name Controls of less than four (4) significant characters must be left-justified and blank-filled.
**For Hispanic names, when two last names are shown for an individual, derive the name control from the first last name.
11Type of TIN1This field is used to identify the Taxpayer Identification Number
(TIN) in positions 12–20 as either an Employer Identification
Number (EIN), a Social Security Number (SSN), or an Individual
Taxpayer Identification Number (ITIN). Enter the appropriate code
from the following table:
2008–34 I.R.B.442August 25, 2008

Record Name: Payee “B” Record (Continued)
Field
Position
Field Title
Length
Description and Remarks
CodeTypeofTINTypeofAccount
1EINA business, organization, sole
proprietor, or other entity
2SSNAn individual, including a sole
proprietor or
2ITINAn individual required to have a
taxpayer identification number,
but who is not eligible to obtain
an SSN
BlankN/AIf the type of TIN is not
determinable, enter a blank.
12–20Contractor’s Taxpayer
Identification Number (TIN)
9
Required. Enter the nine-digit Taxpayer Identification Number
of the contractor (SSN, ITIN, or EIN). If an identification number
has been applied for but not received,enter blanks.Do not enter
hyphens or alpha characters.All zeros, ones, twos, etc., will have
the effect of an incorrect TIN. If the TIN is not available, enter
blanks.
21–29Common Parent’s Taxpayer
Identification Number (TIN)
9
Required.If applicable, enter the valid nine-digit number assigned
to the contractor’s common parent; otherwise,enter blanks.Do not
enter hyphens or alpha characters.All zeros, ones, twos, etc.,
will have the effect of an incorrect TIN.
30–54
Blank
25
Enter blanks.
55–138
Zero84
Required.
Enter zeros.
139–150
Total Amou
nt Obligated Under
Contract
12
Required.The amount reported in this field represents Total
Amount Obligated Under the Contract. The Under Contract amount
must be entered inU.S. dollars and cents. Dollar signs, commas,
decimal points, or negative payments are not acceptable. Amount
obligated must be right-justified and unused positions must be zero
filled.
151–198
Zero48
Required.Enter zeros.
199–246 Blank48Enter blanks.
247Foreign Country Indicator1
If the add
ress of the payee is in a foreign country, enter a “1”
(one) in
this field; otherwise, enter blank. When filers use this
indicat
or, they may use a free format for the payee city, state, and
ZIP Code
. Address information must not appear in the First or
Second P
ayee Name Lines.
248–287 First Pa
yeeNameLine
40
Required. Enter the name of the contractor (preferably surname
first) whose Taxpayer Identification Number (TIN) was provided
in positions 12–20 of the “B” Record. Left-justify and fill unused
positions with blanks. If more space is required for the name, utilize
the Second Payee Name Line Field. If there are multiple payees,
only the name of the payee whose TIN has been provided should be
entered in this field. The names of the other payees may be entered
in the Second Payee Name Line Field. If reporting information for a
sole proprietor, the individual’s namemust alwaysbe present on
theFirstPayeeNameLine.Theuseofthebusinessnameisoptional
intheSecondPayeeNameLineField.
August 25, 20084432008–34 I.R.B.

Record Name: Payee “B” Record (Continued)
Field
Position
Field Title
Length
Description and Remarks
288–327 Second Payee Name Line40If there are multiple payees, (e.g., partners or joint owners), use
this field for those names not associated with the TIN provided
in positions 12–20 of the “B” Record or if not enough space
was provided in the First Payee Name Line, continue the name
in this field (See Notes).Do not enter address information.
It is important that filers provide as much payee information to
IRS/ECC-MTB as possible to identify the payee associated with the
TIN. Left-justify and fill unused positions with blanks.
Note 1: End First Payee Name Line with a full word. Do not split words. Begin Second Payee Name Line with the next
sequential word.
Note 2: If applicable, enter the business name of the sole proprietor in this field.
328–367 Blank40Enter blanks.
368–407 Payee Mailing Address40
Required. Enter the mailing address of the contractor. The street
address should include number, street, apartment or suite number
(or P.O. Box if mail is not deliveredto street address). Left-justify
information and fill unused positions with blanks. This fieldmust
notcontain any data other than the payee’s mailing address.
ForU.S.addresses, the payee city, state, and ZIP Code must be reported as a 40, 2, and 9 position field, respectively.Filers must
adhere to the correct format for the payee city, state, and ZIP Code.
For foreign addresses,filers may use the payee city, state, and ZIP Code as acontinuous 51 position field. Enter information
in the following order: city, province or state, postal code, and the name of the country. When reporting a foreign address, the
Foreign Country Indicator in position 247 must contain a “1” (one).
408–447 Blank40Enter blanks.
448–487 Payee City40
Required.Enter the city, town, or post office. Left-justify
information and fill the unused positions with blanks. Enter APO
or FPO if applicable. Do not enter state and ZIP Code information
in this field.
488–489 Payee State2
Required. Enter the valid U.S. Postal Service state abbreviations
for states or the appropriate postal identifier (AA, AE, or AP)
described in Part A, Sec. 10.
490–498 Payee ZIP Code9
Required.Enter the valid nine-digit ZIP Code assigned by the U.S.
Postal Service. If only the first five digits are known, left-justify
information and fill the unused positions with blanks. For foreign
countries, alpha characters areacceptable as long as the filer has
entered a “1” (one) in the Foreign Country Indicator, located in
position 247 of the “B” Record.
499Blank1Enter blank.
2008–34 I.R.B.444August 25, 2008

Record Name: Payee “B” Record (Continued)
Field
Position
Field Title
Length
Description and Remarks
500–507
Record Sequence Number8
Required.Enter the number of the record as it appears within
your file. The record sequencenumber for the “T” record will
always be “1” (one), since it is the first record on your file and you
can have only one “T” record in a file. Each record, thereafter,
must be incremented by one in ascending numerical sequence,
i.e., 2, 3, 4, etc. Right-justify numbers with leading zeros in
the field. For example, the “T”record sequence number would
appear as “00000001” in the field, the first “A” record would be
“00000002”, the first “B” record, “00000003”, the second “B”
record, “00000004” and so on until you reach the final record of
the file, the “F” record.
508–544
Blank37Enter blanks.
545
Filing Quarter1
Required.Enter quarter; i.e., 1, 2, 3, or 4. See the chart below to
determine the appropriate quarter.
Quarter
1.....January, February, March
2.....April, May, June
3.....July, August, September
4.....October, November, December
546–553
Blank8Enter blanks.
554–568
Contract Number
15Required(if available). Enter the contract number assigned by the
Federal Executive Agency. Left-justify and fill the unused positions
with blanks.
569
Blank1Enter blank.
570–573
Contract Modification Number4
Required(if available). Enter the number assigned to the contract
or order to designate a modification or termination. If this field is
not utilized, enter blanks.
574
Blank1Enter blank.
575–589
Contract Office Order Number
15Required(if available). Enter the number assigned by the
contracting office. Left-justify and fill the unused positions with
blanks.
590
Blank1Enter blank.
591–594
Reporting Agency Code4
Required.Enter the four-digit agency and sub-agency code.
595
Blank1Enter blank.
596–600
Contract Office Number
5Required(if available). Enter the number assigned by the Federal
Executive Agency that identifies the purchasing or contracting
office.
601Blank1Enter blank.
602–609 Date of Contract Action8
Required.Enter the date of the action. Use YYYYMMDD (e.g.,
20080214).
610Blank1Enter blank.
611–618 Contract Completion Date8
Required.Enter the expected date of completion of contract such
as the contract delivery date under the contract schedule. Use
YYYYMMDD. If completion date is not available, enter blanks.
August 25, 20084452008–34 I.R.B.

Record Name: Payee “B” Record (Continued)
Field
Position
Field Title
Length
Description and Remarks
619–658
Name of Common Parent40
Required(if applicable). If the contractor is a member of an
affiliated group of corporationsthat files its income tax returns
on a consolidated basis, enter the name of the common parent of
the affiliated group. The name entered should match the EIN in
positions 21–29. If this field is not utilized, enter blanks.
659–748
Blank90Enter blanks.
749–750
Blank2Enter blanks or carriage return line feed (CR/LF) characters.
Sec. 7. Payee “B” Record — Record Layout
Record
Type
Payment
Year
Corrected
Return
Indicator
Name ControlType of
TIN
Contractor’s
Taxpayer
Identification
Number (TIN)
1
2–5
67–101112–20
Common
Parent’s
Taxpayer
Identification
Number (TIN)
BlankZeroTotal
Amount
Obligated
Under
Contract
ZeroBlankForeign
Country
Indicator
21–29
30–5455–138139–150151–198
199–246247
First
Payee
Name
Line
Second
Payee
Name
Line
BlankPayee
Mailing
Address
BlankPayee
City
Payee
State
Payee
ZIP
Code
248–287288–327328–367368–407408–447448–487488–489490–498
BlankRecord
Sequence
Number
BlankFiling
Quarter
BlankContract
Number
BlankContract
Modification
Number
499
500–507508–544545546–553554–568569570–573
BlankContract
Office
Order
Number
BlankReporting
Agency
Code
BlankContract
Office
Number
Blank
574575–589590591–594595596–600
601
2008–34 I.R.B.446August 25, 2008

Date of
Contract
Action
BlankContract
Completion
Date
Name of
Common
Parent
BlankBlank or
CR/LF
602–609610611–618
619–658659–748749–750
Sec. 8. End of Payer “C” Record — General Field Descriptions and Record Layout
.01The End of Payer “C” Record is a fixed record length of 750 positions.
.02The control total field is 18 positions in length.
.03The End of Payer “C” Record is a summary record for a given payer.
.04The “C” Record will contain the total number of payees and total of the payment amounts of a given payer. The “C” Record
must be written after the last Payee “B” Record for a given payer. For each “A” Record and group of “B” Records on the file, there
must be a corresponding “C” Record.
.05Payers/Transmitters should verify theaccuracy of the totals since data with missing or incorrect “C” Records will require a
replacement.
Record Name: End of Payer “C” Record
Field
Position
Field Title
Length
Description and Remarks
1Record Type1
Required.Enter “C”.
2–9Number of Payees8
Required.Enter the total number of “B” Records covered by the
preceding “A” Record. Right-justify information and fill unused
positions with zeros.
10–15
Blank6Enter blanks.
16–141Zero126Enter zeros.
142–159
Control Total18
Required.Enter the total amount paid to contractors for all contracts
present in the preceding Payee“B” Records. The Control Total
must be entered inU.S. dollars and cents. Dollar signs, commas,
decimal points, or negative payments are not acceptable. Total must
be right-justified and unused positions must be zero filled.
160–231 Zero72Enter zeros.
232–499 Blank268Enter blanks.
500–507
Record Sequence Number8
Required.Enter the number of the record as it appears within
your file. The record sequencenumber for the “T” record will
always be “1” (one), since it is the first record on your file and you
can have only one “T” record in a file. Each record, thereafter,
must be incremented by one inascending numerical sequence,
i.e., 2, 3, 4, etc. Right-justify numbers with leading zeros in
the field. For example, the “T” record sequence number would
appear as “00000001” in the field, the first “A” record would be
“00000002”, the first “B” record, “00000003”, the second “B”
record, “00000004” and so on until you reach the final record of
the file, the “F” record.
508–748
Blank241Enter blanks.
749–750
Blank2Enter blanks, or carriage return/line feed (CR/LF) characters.
August 25, 20084472008–34 I.R.B.

End of Payer “C” Record — Record Layout
Record TypeNumber of
Payees
BlankZeroControl TotalZero
12–9
10–15
16–141
142–159
160–231
BlankRecord
Sequence
Number
BlankBlank or
CR/LF
232–499
500–507508–748749–750
Sec. 9. End of Transmission “F” Record — General Field Descriptions and Record Layout
.01The end of transmission “F” record is a fixed record length of 750 positions.
.02The“F”Recordisasummaryofthenumber of payers in the entire file.
.03This record should be written after the last “C” Record of the entire file.
Record Name: End of Transmission “F” Record
Field
Position
Field Title
Length
Description and Remarks
1Record Type1
Required. Enter “F”.
2–9Number of “A” Records8Enter the total number of Payer “A” Records in the entire file
(right-justify and zero fill) or enter all zeros.
10–30Zero21Enter zeros.
31–499Blank469Enter blanks.
500–507
Record Sequence Number8
Required.Enter the number of the record as it appears within
your file. The record sequencenumber for the “T” record will
always be “1” (one), since it is the first record on your file and you
can have only one “T” record in a file. Each record, thereafter,
must be incremented by one inascending numerical sequence,
i.e., 2, 3, 4, etc. Right-justify numbers with leading zeros in
the field. For example, the “T” record sequence number would
appear as “00000001” in the field, the first “A” record would be
“00000002”, the first “B” record, “00000003”, the second “B”
record, “00000004” and so on until you reach the final record of
the file, the “F” record.
508–748
Blank241Enter blanks.
749–750
Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
End of Transmission “F” Record — Record Layout
Record
Type
Number of
“A”
Records
ZeroBlankRecord
Sequence
Number
BlankBlank or
CR/LF
12–910–3031–499
500–507508–748749–750
2008–34 I.R.B.448August 25, 2008

Sec. 10. File Record Layout
August 25, 20084492008–34 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking by
Cross-Refere
nce to
Temporary Re
gulations
Elections Re
garding
Start-up Exp
enditures,
Corporatio
n Organizational
Expenditur
es, and Partnership
Organizat
ional Expenses
REG–16496
5–04
AGENCY: In
ternal Revenue Service
(IRS), Tre
asury.
ACTION: No
tice of proposed rulemaking
by cross-r
eference to temporary regula-
tions.
SUMMARY:
In this issue of the Bulletin,
the IRS is
issuing temporary regulations
(T.D. 941
1) relating to the elections to
deduct st
art-up expenditures under section
195 of the
Internal Revenue Code (Code),
organiz
ational expenditures of corpora-
tions un
der section 248, and organizational
expense
s of partnerships under section
709. The
American Jobs Creation Act of
2004 ame
nded these three sections of the
Code to
provide similar rules for deduct-
ing the
se types of expenses that are paid
or incu
rred after October 22, 2004. The
regula
tions affect taxpayers that pay or
incur t
hese expenses and provide guidance
on how
to elect to deduct the expenses in
accor
dance with the new rules. The text
of tho
se temporary regulations also serves
as the
text of these proposed regulations.
DATES
: Comments or a request for a pub-
lic he
aring must be received by October 6,
2008
.
ADDR
ESSES: Send submissions to:
CC:P
A:LPD:PR(REG–164965–04),
room
5203, Internal Revenue Service,
POB 7
604, Ben Franklin Station, Wash-
ingt
on, DC 20044. Submissions may be
hand
delivered Monday through Friday
bet
ween the hours of 8 a.m. and 4 p.m.
to:
CC:PA:LPD:PR (REG–164965–04),
Cou
rier’s Desk, Internal Revenue
Ser
vice, 1111 Constitution Avenue, NW,
Was
hington, DC, or sent electronically
viatheFedera
leRulemaking
Portal atwww.
regulations.gov(IRS
REG–164965–0
4).
FOR FURTHER INFORMATION
CONTACT: Concerning the pro-
posed regulations, Grace Matuszeski,
(202) 622–7900; concerning submis-
sion of comments or a request for
a public hearing, Richard Hurst, at
Richard.A.Hurst@irscounsel.treas.govor
(202) 622–7180 (not toll-free numbers).
SUPPLEMENT
ARY INFORMATION:
Background and Explanation of
Provisions
Temporary r
egulations in this issue of
the Bulleti
n amend the Income Tax Regu-
lations (2
6 CFR Part 1) to implement the
changes to
sections 195, 248, and 709 of
theCodema
de by section 902 of the Amer-
ican Jobs C
reation Act of 2004, Public
Law 108–3
57 (118 Stat. 1418). The text
of those t
emporary regulations also serves
as the tex
t of these proposed regulations.
The pream
ble to the temporary regulations
explains
the amendments.
Special Analyses
This noti
ce of proposed rulemaking is
not a sig
nificant regulatory action as de-
fined in
Executive Order 12866. There-
fore, a r
egulatory assessment is not re-
quired.
It also has been determined that
sectio
n553(b)oftheAdministrativePro-
cedure
Act (5 U.S.C. chapter 5) does not
apply t
o these regulations. Because the
regula
tions do not impose a collection of
inform
ation on small entities, the Regula-
tory F
lexibility Act (5 U.S.C. chapter 6)
does n
ot apply. Pursuant to section 7805(f)
of the
Code, this regulation has been sub-
mitte
d to the Chief Counsel for Advocacy
of the
Small Business Administration for
comme
nt on its impact on small business.
Comments and Requests for a Public
Hearing
Befo
re these proposed regulations are
adop
ted as final regulations, consideration
will
be given to any written comments
(a si
gned original and eight (8) copies)
or el
ectronic comments that are submitted
timely to the I
RS. The IRS and the Trea-
sury Departme
nt request comments on the
clarity of the
proposed rules and how they
can be made eas
ier to understand. All
comments will
be available for public in-
spection and
copying.
A public heari
ng will be scheduled if
requested in
writing by any person that
timely submi
ts comments. If a public hear-
ing is schedu
led, notice of the date, time
and place for
the hearing will be published
in theFeder
al Register.
Drafting Information
The principal author of these regula-
tions is Grace Matuszeski of the Office of
the Associate Chief Counsel (Income Tax
& Accounting). However, other person-
nel from the IRS and Treasury Department
participated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—I
NCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.195–1 is revised to
read as follows:
§1.195–1Electiontoamortizestart-up
expenditures.
[The text of this section is the same as
the text of §1.195–1T(a) through (d) pub-
lished elsewhere in this issue of the Bul-
letin.]
Par. 3. Section 1.248–1 is amended by
revising paragraphs (a) and (c), and adding
paragraphs (d) through (f), to read as fol-
lows:
§1.248–1Electiontoamortize
organizational expenditures.
(a) [The text of this proposed amend-
ment to §1.248–1(a) is the same as the
text of §1.248–1T(a) published elsewhere
in this issue of the Bulletin.]
***
**
2008–34 I.R.B.450August 25, 2008

(c) through (f) [The text of these pro-
posed amendments to §1.248–1(c) through
(f) are the same as the text of §1.248–1T(c)
through (f) published elsewhere in this is-
sue of the Bulletin.]
Par. 4. Section 1.709–1 is amended by
revising the section heading and paragraph
(b) to read as follows:
§1.709–1 Treatment of organizational
expenses and syndication costs.
*****
(b) [The text of this proposed amend-
ment to §1.709–1(b) is the same as the
text of §1.709–1T(b)(1) through (b)(5)
published elsewhere in this issue of the
Bulletin.]
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 7, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 8, 2008, 73 F.R. 38940)
Notice of Proposed
Rulemaking
Reasonable Good Faith
Interpretation of Required
Minimum Distribution Rules
by Governmental Plans
REG–142040–07
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed regulations undersections 401(a)(9)
and 403(b) of the Internal Revenue Code
(Code) to permit a governmental plan to
comply with the required minimum dis-
tribution rules by using a reasonable and
good faith interpretation of the statute.
These proposed regulations will affect
administrators of, employers maintaining,
participants in, and beneficiaries of gov-
ernmental plans.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 8, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–142040–07), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, D.C. 20044. Submissions may be
hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to: CC:PA:LPD:PR (REG–142040–07),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, N.W.,
Washington, D.C., or sent electroni-
cally via the Federal eRulemaking Por-
tal athttp://www.regulations.gov(IRS
REG–142040–07).
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Cathy V. Pastor or Michael P. Brewer
at (202) 622–6090 (not a toll-free num-
ber); concerning submission of com-
ments or to request a public hearing,
Richard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to regulations under sec-
tions 401(a)(9) and 403(b) of the Code.
Section 401(a)(9) provides required min-
imum distribution rules for a qualified
trust under section 401(a). In general,
under these rules, distribution of each
participant’s entire interest must begin by
April 1 of the calendar year following
the later of (1) the calendar year in which
the participant attains age 70
1
/2or (2) the
calendar year in which the participant re-
tires (“the required beginning date”). If
the entire interest of the participant is not
distributed by the required beginning date,
then section 401(a)(9)(A) provides that
the entire interest of the participant must
be distributed beginning not later than the
required beginning date, in accordance
with regulations, over the life of the par-
ticipant or lives of the participant and a
designated beneficiary (or over a period
not extending beyond the life expectancy
of the participant or the life expectancy
of the participant and a designated benefi-
ciary). Section 401(a)(9)(B) provides the
required minimum distribution rules after
the death of the participant.
IRAs described in section 408, sec-
tion 403(b) plans, and eligible deferred
compensation plans under section 457(b),
also are subject to the required minimum
distribution rules of section 401(a)(9) pur-
suant to sections 408(a)(6) and (b)(3),
403(b)(10), and 457(d)(2), respectively,
and the regulations under those sections.
In 2002, the IRS and the Treasury
Department published final regulations
under sections 401(a)(9), 403(b), and
408 in theFederal Register(T.D. 8987,
2002–1 C.B. 852 [67 FR 18987]). Sec-
tion 1.401(a)(9)–1, A–2(a), provides that
the final regulations apply for purposes
of determining required minimum dis-
tributions for calendar years beginning
on or after January 1, 2003. The rules
for defined benefit plans and annuities
were included in a temporary regulation,
§1.401(a)(9)–6T, as well as in a proposed
regulation (67 FR 18834) in order to allow
taxpayers to comment on the rules.
In 2004, the IRS and the Treasury
Department replaced the temporary reg-
ulations with final regulations under
§1.401(a)(9)–6 (T.D. 9130, 2004–1 C.B.
1082 [69 FR 33288]). The final regu-
lations contain a “grandfather rule” in
Q&A–16, which provides that annuity
distribution options provided under the
terms of a governmental plan (within the
meaning section 414(d)) as in effect on
April 17, 2002, are treated as satisfying
the requirements of section 401(a)(9) if
they satisfy a reasonable and good faith
interpretation of the provisions of section
401(a)(9). In addition, Q&A–17 provides
that, for distributions from any defined
benefit plan or annuity contract during
2003, 2004, and 2005, the payments could
satisfy a reasonable and good faith inter-
pretation of section 401(a)(9) in lieu of
§1.401(a)(9)–6. For governmental plans,
§1.401(a)(9)–6, Q&A–17, extended this
reasonable good faith standard to the end
of the calendar year that contains the 90
th
day after the opening of the first legislative
session of the legislative body with the
authoritytoamendtheplanthatbeginson
or after June 15, 2004, if such 90th day is
later than December 31, 2005.
In 2003, the IRS and the Treasury De-
partment published final regulations un-
der section 457(b) in theFederal Reg-
ister(T.D. 9075, 2003–2 C.B. 608 [68
FR 41230]). These regulations included
§1.457–6(d), which provides that a section
457(b) eligible plan must meet the require-
ments of section 401(a)(9) and the regula-
tions under that section.
August 25, 20084512008–34 I.R.B.

In 2007, the IRS and the Treasury
Department published final regulations
under section 403(b) in theFederal Reg-
ister(T.D. 9340, 2007–36 I.R.B. 487
[72 FR 41128]). These regulations, which
become effective for tax years beginning
after December 31, 2008, included
§1.403(b)–6(e)(1), which provides that
a section 403(b) contract must meet the
requirements of section 401(a)(9). Section
1.403(b)–6(e)(2) provides, with certain
exceptions, that section 403(b) contracts
apply the section 401(a)(9) required
minimum distribution rules in accordance
with §1.408–8.
Section 1.408–8, Q&A–1, provides,
with certain exceptions, that in order to
satisfy section 401(a)(9) for purposes of
determining required minimum distribu-
tions, the rules of §§1.401(a)(9)–1 through
1.401(a)(9)–9 must be applied.
Section 823 of the Pension Protec-
tion Act of 2006, Public Law 109–280
(120 Stat. 780), instructs the Secretary
of the Treasury to issue regulations un-
der which, for all years to which section
401(a)(9) applies, a governmental plan,
within the meaning of section 414(d), shall
be treated as having complied with sec-
tion 401(a)(9) if such plan complies with
a reasonable good faith interpretation of
section 401(a)(9).
Explanation of Provisions
The proposed regulations would amend
the regulations under section 401(a)(9)
to treat a governmental plan, within the
meaning of section 414(d), as having com-
pliedwiththerulesofsection401(a)(9)
if the governmental plan applies a rea-
sonable and good faith interpretation of
section 401(a)(9). The same rule would
apply to an eligible 457(b) plan maintained
by a government. In addition, this rule
would apply to a section 403(b) contract
that is part of a governmental plan, and the
regulations under section 403(b) would
be amended accordingly. The proposed
regulations would also make conforming
amendments to the regulations under sec-
tion 401(a)(9) that eliminate other special
rules for governmental plans which would
be rendered superfluous with this change.
Proposed Effective/Applicability Date
These regulations are proposed to be
applied to all years for which section
401(a)(9) applies.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866. Therefore, a regula-
tory assessment is not required. It also has
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regu-
lations, and, because §§1.401(a)(9)–1 and
1.403(b)–6 would not impose a collection
of information on small entities, the Reg-
ulatory Flexibility Act (5 U.S.C. chapter
6) does not apply. Pursuant to section
7805(f) of the Code, this notice of pro-
posed rulemaking will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (one signed
and eight (8) copies) or electronic com-
ments that are submitted timely to the IRS.
All comments will be available for public
inspection and copying. A public hearing
will be scheduled if a request to speak is
submitted in writing by any person who
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place of the public hearing
will be published in theFederal Register.
Drafting Information
The principal authors of these reg-
ulations are Michael P. Brewer and
Cathy V. Pastor, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development of these regulations.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.401(a)(9)–1 is
amended by adding a new paragraph (d)
to A–2 as follows:
§1.401(a)(9)–1 Minimum distribution
requirement in general.
*****
A–2. ***(d)Special rule for gov-
ernmental plans. Notwithstanding any-
thing to the contrary in this A–2, a govern-
mental plan (within the meaning of section
414(d)), or an eligible governmental plan
described in §1.457–2(f), is treated as hav-
ingcompliedwithsection401(a)(9)forall
years to which section 401(a)(9) applies to
the plan if the plan complies with a reason-
able and good faith interpretation of sec-
tion 401(a)(9).
§1.401(a)(9)–6 [Amended]
Par. 3. Section 1.401(a)(9)–6 is
amended by:
1. Removing Q&A–16.
2.Redesignating Q&A–17 as
Q&A–16.
3. Removing the word “A–16” and
adding “A–15” in the newly-designated
A–16.
4. Removing the last sentence of the
newly-designated A–16.
Par. 4. Section 1.403(b)–6 is amended
by:
1. Revising the last sentence of para-
graph (e)(2).
2. Adding a new paragraph (e)(8).
The revisions and addition are as fol-
lows:
§1.403(b)–6 Timing of distributions and
benefits.
*****
(e)Minimum required distributions for
eligible plans.
*****
(2)***Consequently,exceptasoth-
erwise provided in this paragraph (e), the
2008–34 I.R.B.452August 25, 2008

distribution rules in section 401(a)(9) are
applied to section 403(b) contracts in ac-
cordance with the provisions in §1.408–8
for purposes of determining required min-
imum distributions.
*****
(8)Special rule for governmental plans.
A section 403(b) contract that is part of a
governmental plan (within the meaning of
section 414(d)) is treated as having com-
plied with section 401(a)(9) for all years
to which section 401(a)(9) applies to the
contract, if the contract complies with a
reasonable and good faith interpretation of
section 401(a)(9).
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 9, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 10, 2008, 73 F.R. 39630)
Section 7428(c) Validation
of Certain Contributions
Made During Pendency
of Declaratory Judgment
Proceedings; Correction
Announcement 2008–78
ACTION: Correction to an announcement
regarding section 7428(c).
SUMMARY: This document contains a
correction to the announcement regard-
ing section 7428(c) Validation of Certain
Contributions Made During Pendency of
Declaratory Judgment Proceedings, on
page 321 of I.R.B. 2008–32, dated August
11, 2008.
FOR FURTHER INFORMATION
CONTACT: Harrel Johnson (816)
503–4265.
SUPPLEMENTARY INFORMATION:
Need for Correction
As published, an announcement con-
tains an error that may prove to be mislead-
ing and is in need of clarification.
Correction of Publication
Accordingly, the publication of an an-
nouncement is corrected as follows:
On page 321, the announcement head-
ing should read:
Section 7428(c) Validation of
Certain Contributions Made
During Pendency of Declaratory
Judgment Proceedings
Announcement 2008–72
August 25, 20084532008–34 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2008–34 I.R.B.iAugust 25, 2008

Numerical Finding List
1
Bulletins 2008–27 through 2008–34
Announcements:
2008-62, 2008-27 I.R.B.74
2008-63, 2008-28 I.R.B.114
2008-64, 2008-28 I.R.B.114
2008-65, 2008-31 I.R.B.279
2008-66, 2008-29 I.R.B.164
2008-67, 2008-29 I.R.B.164
2008-68, 2008-30 I.R.B.244
2008-69, 2008-32 I.R.B.318
2008-70, 2008-32 I.R.B.318
2008-71, 2008-32 I.R.B.321
2008-72, 2008-32 I.R.B.321
2008-73, 2008-33 I.R.B.391
2008-74, 2008-33 I.R.B.392
2008-75, 2008-33 I.R.B.392
2008-76, 2008-33 I.R.B.393
2008-77, 2008-33 I.R.B.394
2008-78, 2008-34 I.R.B.453
Notices:
2008-55, 2008-27 I.R.B.11
2008-56, 2008-28 I.R.B.79
2008-57, 2008-28 I.R.B.80
2008-58, 2008-28 I.R.B.81
2008-59, 2008-29 I.R.B.123
2008-60, 2008-30 I.R.B.178
2008-61, 2008-30 I.R.B.180
2008-62, 2008-29 I.R.B.130
2008-63, 2008-31 I.R.B.261
2008-64, 2008-31 I.R.B.268
2008-65, 2008-30 I.R.B.182
2008-66, 2008-31 I.R.B.270
2008-67, 2008-32 I.R.B.307
2008-68, 2008-34 I.R.B.418
2008-69, 2008-34 I.R.B.419
Proposed Regulations:
REG-164965-04, 2008-34 I.R.B.450
REG-143453-05, 2008-32 I.R.B.310
REG-129243-07, 2008-27 I.R.B.32
REG-138355-07, 2008-32 I.R.B.311
REG-142040-07, 2008-34 I.R.B.451
REG-149405-07, 2008-27 I.R.B.73
REG-100464-08, 2008-32 I.R.B.313
REG-101258-08, 2008-28 I.R.B.111
REG-102122-08, 2008-31 I.R.B.278
REG-115457-08, 2008-33 I.R.B.390
REG-121698-08, 2008-29 I.R.B.163
Revenue Procedures:
2008-32, 2008-28 I.R.B.82
2008-33, 2008-28 I.R.B.93
Revenue Procedures— Continued:
2008-34, 2008-27 I.R.B.13
2008-35, 2008-29 I.R.B.132
2008-36, 2008-33 I.R.B.340
2008-37, 2008-29 I.R.B.137
2008-38, 2008-29 I.R.B.139
2008-39, 2008-29 I.R.B.143
2008-40, 2008-29 I.R.B.151
2008-41, 2008-29 I.R.B.155
2008-42, 2008-29 I.R.B.160
2008-43, 2008-30 I.R.B.186
2008-44, 2008-30 I.R.B.187
2008-45, 2008-30 I.R.B.224
2008-46, 2008-30 I.R.B.238
2008-47, 2008-31 I.R.B.272
2008-49, 2008-34 I.R.B.423
Revenue Rulings:
2008-32, 2008-27 I.R.B.6
2008-33, 2008-27 I.R.B.8
2008-34, 2008-28 I.R.B.76
2008-35, 2008-29 I.R.B.116
2008-36, 2008-30 I.R.B.165
2008-37, 2008-28 I.R.B.77
2008-38, 2008-31 I.R.B.249
2008-39, 2008-31 I.R.B.252
2008-40, 2008-30 I.R.B.166
2008-41, 2008-30 I.R.B.170
2008-42, 2008-30 I.R.B.175
2008-43, 2008-31 I.R.B.258
2008-44, 2008-32 I.R.B.292
2008-45, 2008-34 I.R.B.403
Treasury Decisions:
9401, 2008-27 I.R.B.1
9402, 2008-31 I.R.B.254
9403, 2008-32 I.R.B.285
9404, 2008-32 I.R.B.280
9405, 2008-32 I.R.B.293
9406, 2008-32 I.R.B.287
9407, 2008-33 I.R.B.330
9408, 2008-33 I.R.B.323
9409, 2008-29 I.R.B.118
9410, 2008-34 I.R.B.414
9411, 2008-34 I.R.B.398
9413, 2008-34 I.R.B.404
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin
2008–26, dated June 30, 2008.
August 25, 2008ii2008–34 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–27 through 2008–34
Announcements:
2008-64
Corrected by
Ann. 2008-71, 2008-32 I.R.B.321
2008-72
Corrected by
Ann. 2008-78, 2008-34 I.R.B.453
Notices:
99-48
Superseded by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2000-9
Obsoleted by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
2004-2
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2004-50
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2006-88
Modified and superseded by
Notice 2008-60, 2008-30 I.R.B.178
2007-22
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
Proposed Regulations:
REG-129243-07
Corrected by
Ann. 2008-75, 2008-33 I.R.B.392
REG-151135-07
Hearing scheduled by
Ann. 2008-64, 2008-28 I.R.B.114
REG-101258-08
Corrected by
Ann. 2008-73, 2008-33 I.R.B.391
Revenue Procedures:
92-25
Superseded by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
92-83
Obsoleted by
Rev. Proc. 2008-37, 2008-29 I.R.B.137
2001-42
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
Revenue Procedures— Continued:
2002-9
Modified and amplified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
2005-29
Superseded by
Rev. Proc. 2008-49, 2008-34 I.R.B.423
2006-29
Superseded by
Rev. Proc. 2008-34, 2008-27 I.R.B.13
2006-34
Superseded by
Rev. Proc. 2008-44, 2008-30 I.R.B.187
2007-19
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2007-42
Superseded by
Rev. Proc. 2008-32, 2008-28 I.R.B.82
2007-43
Superseded by
Rev. Proc. 2008-33, 2008-28 I.R.B.93
2007-50
Superseded by
Rev. Proc. 2008-36, 2008-33 I.R.B.340
2007-70
Modified by
Ann. 2008-63, 2008-28 I.R.B.114
2007-72
Amplified and superseded by
Rev. Proc. 2008-47, 2008-31 I.R.B.272
2008-12
Modified and superseded by
Rev. Proc. 2008-35, 2008-29 I.R.B.132
Revenue Rulings:
67-213
Amplified by
Rev. Rul. 2008-40, 2008-30 I.R.B.166
71-234
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
77-480
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
91-17
Amplified by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
Rev. Proc. 2008-42, 2008-29 I.R.B.160
Superseded in part by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
Revenue Rulings— Continued:
2005-6
Amplified by
Rev. Proc. 2008-38, 2008-29 I.R.B.139
2008-12
Amplified by
Rev. Rul. 2008-38, 2008-31 I.R.B.249
Clarified by
Ann. 2008-65, 2008-31 I.R.B.279
Treasury Decisions:
9391
Corrected by
Ann. 2008-74, 2008-33 I.R.B.392
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin 2008–26, dated June 30, 2008.
2008–34 I.R.B.iiiAugust 25, 2008

INDEX
Internal Revenue Bulletins 2008–27 through
2008–34
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parenthesis refers to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Application of section 457(f) tocertain arrangements regarding
part-year compensation (Notice 62) 29,130
Definition of “outside director” (RR 32) 27,6
Full funding limitations, weighted average interest rates, seg-
ment rates for:
July 2008 (Notice 65) 30,182
August 2008 (Notice 69) 34,419
Mortality tables for determining present value
(REG–100464–08) 32,313
Multiemployer plan funding guidance, hearing scheduled for
REG–151135–07 (Ann 64) 28,114;correction(Ann71)32,
321
Proposed Regulations:
26 CFR 1.401(a)(9)–1, –6, amended; 1.403(b)–6,
amended; reasonable good faith interpretation of re-
quired minimum distribution rules by governmental plans
(REG–142040–07) 34,451
26 CFR 1.411(b)–1, amended; accrual rules for defined ben-
efit plans (REG–100464–08) 32,313
26 CFR 1.432; multiemployer planfunding guidance, hearing
scheduled for REG–151135–07 (Ann 64) 28,114; correc-
tion (Ann 71) 32,321
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0, –1, –2, revised; 1.6694–3, –4,
amended; 1.6695–1, revised; 1.6695–2, amended;
1.6696–1, revised; 301.7701–15, amended; tax re-
turn preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Qualified retirement plans, qualification, plan sponsorship (RR
45) 34,403
EMPLOYEE PLANS—Cont.
Reasonable good faith interpretation of required minimum dis-
tribution rules by governmental plans (REG–142040–07) 34,
451
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Trusts, qualification, Puerto Rico (RR 40) 30,166
EMPLOYMENT TAX
Interest-free adjustments and claims for refund of employment
taxes (TD 9405) 32,293
Proposed Regulations:
31.6060–1, added; 31.6107–1, added; 31.6109–2, added;
31.6694–1 thru –4, added; 31.6695–1, added; 31.6696–1,
added; 31.7701–1, added; tax return preparer penalties
under sections 6694 and 6695 (REG–129243–07) 27,32
Publications:
1141, General Rules and Specifications for Substitute Forms
W-2 and W-3, revised (RP 33) 28,93
4436, General Rules and Specifications for Substitute Form
941 and Schedule B (Form 941), revised (RP 32) 28,82
Regulations
26 CFR 31.6011(a)–1, –4, –5, amended; 31.6205–1,
amended; 31.6302–0, –1, amended; 31.6402(a)–1,
–2, amended; 31.6413(a)–1, –2, amended; 31.6414–1,
amended; 602.101, amended; employment tax adjustments
(TD 9405) 32,293
Substitute forms:
W-2 and W-3, general rules and specifications (RP 33) 28,93
941 and Schedule B (Form 941), general rules and specifica-
tions (RP 32) 28,82
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
ESTATE TAX
Charitable lead unitrust (CLUT):
Inter vivos, sample forms (RP 45) 30,225
Testamentary, sample form (RP 46) 30,238
Interest rates for 2008, farm real property, special use value (RR
44) 32,292
Proposed Regulations:
20.6060–1, added; 20.6107–1, added; 20.6109–1, added;
20.6694–1 thru –4, added; 20.6695–1, added; 20.6696–1,
added; 20.7701–1, added; tax return preparer penalties
under sections 6694 and 6695 (REG–129243–07) 27,32
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Transfer tax valuation of interest in a restricted management ac-
count (RMA) (RR 35) 29,116
Trust, private trust company (Notice 63) 31,261
August 25, 2008iv2008–34 I.R.B.

EXCISE TAX
Charitable remainder trusts (CRTs), division into two or more
separate and equal CRTs (RR 41) 30,170
Proposed Regulations:
40.6060–1, added; 40.6107–1, added; 40.6109–1, added;
40.6694–1 thru –4, added; 40.6695–1, added; 40.6696–1,
added; 40.7701–1, added; 41.6060–1, added; 41.6107–1,
added; 41.6109–2, added; 41.6694–1 thru –4, added;
41.6695–1, added; 41.6696–1, added; 41.7701–1,
added; 44.6060–1, added; 44.6107–1, added; 44.6109–1,
added; 44.6694–1 thru –4, added; 44.6695–1, added;
44.6696–1, added; 44.7701–1, added; 53.6060–1, added;
53.6107–1, added; 53.6109–1, added; 53.6694–1 thru –4,
added; 53.6695–1, added; 53.6696–1, added; 53.7701–1,
added; 54.6060–1, added; 54.6107–1, added; 54.6109–1,
added; 54.6694–1 thru –4, added; 54.6695–1, added;
54.6696–1, added; 54.7701–1, added; 55.6060–1, added;
55.6107–1, added; 55.6109–1, added; 55.6694–1 thru –4,
added; 55.6695–1, added; 55.6696–1, added; 55.7701–1,
added; 56.6060–1, added; 56.6107–1, added; 56.6109–1,
added; 56.6694–1 thru –4, added; 56.6695–1, added;
56.6696–1, added; 56.7701–1, added; 156.6060–1, added;
156.6107–1, added; 156.6109–1, added; 156.6694–1
thru –4, added; 156.6695–1, added; 156.6696–1, added;
156.7701–1, added; 157.6060–1, added; 157.6107–1,
added; 157.6109–1, added; 157.6694–1 thru –4, added;
157.6695–1, added; 157.6696–1, added; 157.7701–1,
added; 301.7701–15, amended; tax return preparer penal-
ties under sections 6694 and 6695 (REG–129243–07) 27,
32
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
EXEMPT ORGANIZATIONS
Declaratory judgment suits (Ann 67)29, 164;(Ann72)32,321;
correction (Ann 78) 34,453
List of organizations classifiedas private foundations (Ann 70)
32,318
Proposed Regulations:
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0, –1, –2, revised; 1.6694–3, –4,
amended; 1.6695–1, revised; 1.6695–2, amended;
1.6696–1, revised; 301.7701–15, amended; tax re-
turn preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Regulations
26 CFR 1.664–1, amended; 602.101, amended; guidance un-
der section 664 regarding the effect of unrelated business
taxable income on charitable remainder trusts (TD 9403)
32,285
Revocations (Ann 62) 27,74; (Ann 66) 29,164; (Ann 69) 32,
318; (Ann 76) 33,393
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
EXEMPT ORGANIZATIONS—Cont.
Trusts:
Charitable remainder trusts (CRTs):
Calculation of excise tax on unrelated business taxable in-
come (UBTI) (TD 9403) 32,285
Division into two or more separate and equal CRTs (RR
41) 30,170
GIFT TAX
Charitable lead unitrust (CLUT), inter vivos, sample forms (RP
45) 30,225
Proposed Regulations:
25.6060–1, added; 25.6107–1, added; 25.6109–1, added;
25.6694–1 thru –4, added; 25.6695–1, added; 25.6696–1,
added; 25.7701–1, added; 26.6060–1, added; 26.6107–1,
added; 26.6109–1, added; 26.6694–1 thru –4, added;
26.6695–1, added; 26.6696–1, added; 26.7701–1, added;
tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Transfer tax valuation of interest in a restricted management ac-
count (RMA) (RR 35) 29,116
Trust, private trust company (Notice 63) 31,261
INCOME TAX
Accounting methods, rolling average inventory (RP 43) 30,186
Bonds, procedures for requesting a refund of arbitrage rebate and
similar payments on tax-exempt bonds (RP 37) 29,137
Bonus depreciation for the Kansas disaster area (Notice 67) 32,
307
Capital costs incurred to comply with EPA sulfur regulations (TD
9404) 32,280; (REG–143453–05) 32,310
Change to office to which notices of nonjudicial sale and re-
quests for return of wrongfully levied property must be sent
(TD 9410) 34,414
Charitable lead unitrust (CLUT):
Inter vivos, sample forms (RP 45) 30,225
Testamentary, sample form (RP 46) 30,238
Charitable remainder trusts (CRTs), division into two or more
separate and equal CRTs (RR 41) 30,170
Corporations, accumulated adjustments account (AAA) and key-
man life insurance (RR 42) 30,175
Credits:
Electricity produced from certain renewable resources, sec-
tion 45 tax credit (Notice 60) 30,178
Increasing research activities (TD 9401) 27,1;
(REG–149405–07) 27,73
Low-income housing credit:
Emergency housing relief, Wisconsin severe storms, tor-
nadoes, and flooding (Notice 61) 30,180
Indiana severe storms and flooding (Notice 56) 28,79
Iowa severe storms, tornadoes, and flooding (Notice 58)
28,81
2008–34 I.R.B.vAugust 25, 2008

INCOME TAX—Cont.
Missouri severe storms and flooding, disaster relief (Notice
66) 31,270
Satisfactory bond, “bond factor” amounts for the period:
January through September 2008 (RR 36) 30,165
Section 48 tax credit for qualifying fuel cell property and qual-
ifying microturbine property (Notice 68) 34,418
Declaratory judgment suits (Ann 67)29, 164;(Ann72)32,321;
correction (Ann 78) 34,453
Definition of “outside director” (RR 32) 27,6
Dependent child of divorced or separated parents or parents who
live apart (TD 9408) 33,323
Disaster relief, China earthquake, qualified disaster (Notice 57)
28,80
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 68) 30,245;
(Ann 77) 33,394
Disclosure of taxpayer groupings for purposes of the passive ac-
tivity loss provisions under section 469 (Notice 64) 31,268
Disclosure or use of information by preparers of returns (TD
9409) 29,118; (REG–121698–08) 29,163
Escrow accounts used in like-kind exchanges (TD 9413) 34,404
Expenses:
Elections regarding start-up expenditures, corporation orga-
nizational expenditures, and partnership organizational ex-
penses (TD 9411) 34,398; (REG–164965–04) 34,450
Optional standard mileage rates, update (Ann 63) 28,114
Extension of time for filing returns (TD 9407) 33,330;
(REG–115457–08) 33,390
Forms:
1042-S, Foreign Person’s U.S. Source Income Subject to
Withholding, specifications for filing electronically (RP
44) 30,187
1096, 1098, 1099, 5498, W-2G, and 1042-S, substitute form
specifications (RP 36) 33,340
8027, Employer’s Annual Information Return of Tip Income
and Allocated Tips, specifications for filing electronically
(RP 34) 27,13
8596, Information Return for Federal Contracts, specifica-
tions for filing electronically (RP 49) 34,423
Guidance to tax return preparers:
Consents to disclose and consents to use tax return in-
formation in the Form 1040 series (TD 9409) 29,118;
(REG–121698–08) 29,163
Consents to disclose and consents to use tax return informa-
tion in the Form 1040 series, update to Rev. Proc. 2008-12
(RP 35) 29,132
Guidance under section 956 for determining the basis of property
acquired in certain nonrecognition transactions (TD 9402) 31,
254; (REG–102122–08) 31,278
Health Savings Accounts (HSAs), additional guidance (Notice
59) 29,123
Insurance companies:
Life insurance contracts:
Automatic waiver (RP 42) 29,
160
Closing agreement (RP 40) 29,151
INCOME TAX—Cont.
Modified endowment contracts (MECs), closing agree-
ments (RP 39) 29,143
Qualified additional benefits (QABs), closing agreement
(RP 38) 29,139
Variable contracts, closing agreement (RP 41) 29,155
Interest:
Characterization of management fees paid by an upper tier
investment partnership and lower tier trader partnerships
(RR 39) 31,252
Investment:
Federal short-term, mid-term, and long-term rates for:
July 2008 (RR 33) 27,8
August 2008 (RR 43) 31,258
Treatment of interest expense attributable to indebtedness al-
locable to property held for investment described in section
163(d)(5)(A)(ii):
Investment interest deduction (RR 38) 31,249
Trader partnership (Ann 65) 31,279
Law school Loan Repayment Assistance Program (LRAP), ex-
clusion from gross income (RR 34) 28,76
Liens, return of wrongfully levied property and discharge of
liens, special rules (TD 9410) 34,414
Life insurance:
Premiums by S corporation, effect on accumulated adjust-
ments account (AAA) (RR 42) 30,175
Statutory reserves, meaning formulti-state taxpayers (RR 37)
28,77
Private foundations, organizations now classified as (Ann 70) 32,
318
Proposed Regulations:
26 CFR 1.41–6, –8, amended; 1.41–9, added; alternative sim-
plified credit under section 41(c)(5) (REG–149405–07) 27,
73
26 CFR 1.179B–1, added; capital costs incurred to comply
with EPA sulfur regulations (REG–143453–05) 32,310
26 CFR 1.195–1, revised; 1.248–1, amended; 1.709–1,
amended; elections regarding start-up expenditures, cor-
poration organizational expenditures, and partnership
organizational expenses (REG–164965–04) 34,450
26 CFR 1.367(a)–2, –4, –5, added; 1.954–2(c), revised;
1.956–2(b), –2(e), revised, modifications to subpart
F treatment of aircraft and vessel leasing income
(REG–138355–07) 32,311
26 CFR 1.401(a)(9)–1, –6, amended; 1.403(b)–6,
amended; reasonable good faith interpretation of re-
quired minimum distribution rules by governmental plans
(REG–142040–07) 34,451
26 CFR 1.642(c)–3, amended; 1.643(a)–5, amended; guid-
ance under sections 642 and 643 (income ordering rules)
(REG–101258–08) 28,111; correction (Ann 73) 33,391
26 CFR 1.956–1, amended; guidance under section 956 for
determining the basis of property acquired in certain non-
recognition transactions (REG–102122–08) 31,278
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0, –1, –2, revised; 1.6694–3, –4,
amended; 1.6695–1, revised; 1.6695–2, amended;
August 25, 2008vi2008–34 I.R.B.

INCOME TAX—Cont.
1.6696–1, revised; 301.7701–15, amended; tax re-
turn preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32; corrections (Ann 75) 33,392
26 CFR 1.6081–2, –6, added; 54.6081–1, added; extension of
time for filing returns (REG–115457–08) 33,390
26 CFR 301.7216–3, amended; disclosure or use of informa-
tion by preparers of returns (REG–121698–08) 29,163
Publications:
1141, General Rules and Specifications for Substitute Forms
W-2 and W-3, revised (RP 33) 28,93
1179, General Rules and Specifications for Substitute Forms
1096, 1098, 1099, 5498, W-2G, and 1042-S, update (RP
36) 33,340
1187, Specifications for Filing Form 1042-S, Foreign Per-
son’s U.S. Source Income Subject to Withholding, Elec-
tronically, revised (RP 44) 30,187
1239, Specifications for Filing Form 8027, Employer’s An-
nual Information Return of Tip Income and Allocated Tips,
Electronically (RP 34) 27,13
1516, Specifications for Filing Form 8596, Information Re-
turn for Federal Contracts,Electronically (RP 49) 34,423
4436, General Rules and Specifications for Substitute Form
941 and Schedule B (Form 941), revised (RP 32) 28,82
Reasonable good faith interpretation of required minimum dis-
tribution rules by governmental plans (REG–142040–07) 34,
451
Regulations:
26 CFR 1.41–0, –1, –6, –8, amended; 1.41–0T, –6T, –8T,
–9, –9T added; alternative simplified credit under section
41(c)(5) (TD 9401) 27,1
26 CFR 1.152–4, revised; 1.152–4T, removed; dependent
child of divorced or separated parents or parents who live
apart (TD 9408) 33,323
26 CFR 1.179B–1T, added; 602.101, amended; capital costs
incurred to comply with EPA sulfur regulations (TD 9404)
32,280
26 CFR 1.195–1, revised; 1.195–1T, added; 1.248–1,
amended; 1.248–1T, added; 1.709–1, amended; 1.709–1T,
added; elections regarding start-up expenditures, cor-
poration organizational expenditures, and partnership
organizational expenses (TD 9411) 34,398
26 CFR 1.367(a)–2T, –4T, –5T, amended; 1.954–2, amended;
1.954–2T, added; 1.956–2, –2T, amended; modifications to
subpart F treatment of aircraft and vessel leasing income
(TD 9406) 32,287
26 CFR 1.468B–0, amended; 1.468B–6, added; 1.1031(k)–1,
amended; 1.7872–5, –16, added; escrow accounts, trusts,
andotherfundsusedduringdeferred exchanges of like-kind
property (TD 9413) 34,404
26 CFR 1.664–1, amended; 602.101, amended; guidance un-
der section 664 regarding the effect of unrelated business
taxable income on charitable remainder trusts (TD 9403)
32,285
26CFR1.881–5T,removed;correctiontoTD9391(Ann74)
33,392
INCOME TAX—Cont.
26 CFR 1.911–7, amended; 1.6081–1, –3, –5, amended;
1.6081–2T, –6T, revised; 1.6081–3T, –4T, –5T, –7T,
–10T, –11T, removed; 1.6081–4, –7, –10, –11, added;
25.6081–1, added; 25.6081–1T, removed; 26.6081–1,
added; 26.6081–1T, removed; 53.6081–1, added;
53.6081–1T, removed; 55.6081–1, added; 55.6081–1T,
removed; 156.6081–1, added; 156.6081–1T, removed;
157.6081–1, added; 157.6081–1T, removed; 301.6081–2,
added; 301.6081–2T, removed; extension of time for filing
returns (TD 9407) 33,330
26 CFR 1.956–1, –1T, amended; guidance under section 956
for determining the basis ofproperty acquired in certain
nonrecognition transactions (TD 9402) 31,254
26 CFR 301.6343–2, amended; 301.6343–2T, removed;
301.7425–3, amended; 301.7425–3T, removed; change to
office to which notices of nonjudicial sale and requests
for return of wrongfully levied property must be sent (TD
9410) 34,414
26 CFR 301.7216–3, amended; 301.7216–3T, added; disclo-
sure or use of information by preparers of returns (TD 9409)
29,118
Revocations, exempt organizations (Ann 62) 27,74; (Ann 66)
29,164; (Ann 69) 32,318; (Ann 76) 33,393
Stocks, auction rate preferred stock, regulated investment com-
panies RICs), debt instruments (Notice 55) 27,11
Subprime mortgage loans, modifications held by certain securi-
tization vehicles (RP 47) 31,272
Substitute forms:
W-2 and W-3, general rules and specifications (RP 33) 28,93
941 and Schedule B (Form 941), general rules and specifica-
tions (RP 32) 28,82
1096, 1098, 1099, 5498, W-2G, and 1042-S, rules and speci-
fications (RP 36) 33,340
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32; corrections (Ann 75) 33,392
Treatment of aircraft and vessel leasing income (TD 9406) 32,
287; (REG–138355–07) 32,311
Trusts:
Charitable remainder trust, calculation of excise tax on unre-
lated business taxable income (UBTI) (TD 9403) 32,285
Ordering of distributions from charitable lead trusts
(REG–101258–08) 28,111; correction (Ann 73) 33,391
Private trust company (Notice 63) 31,261
U.S. territories, American Samoa, Guam, The Northern Mariana
Islands, Puerto Rico, U.S. Virgin Islands, source of income,
filing requirements; correction to TD 9391 (Ann 74) 33,392
2008–34 I.R.B.viiAugust 25, 2008

August 25, 20082008–34 I.R.B.

2008–34 I.R.B.August 25, 2008

August 25, 20082008–34 I.R.B.

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-
tendent of Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly
Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET
You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Under information for: select Businesses. Under
related topics, select More Topics. Then select Internal Revenue Bulletins.
INTERNAL REVENUE BULLETINS ON CD-ROM
Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be
purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, P.O. Box 371954, Pittsburgh PA, 15250–7954. Please allow two to
six weeks, plus mailing time, for delivery.
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 e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224
Internal Revenue Service
W
ashington,DC20224
Official Business
Penalty for Private Use, $300