Internal Revenue Bulletin 2010-3 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 201
0-3
January 19, 2010
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
Rev. Rul. 2010–2, page 272.
Section 1274A — inflation adjusted numbers for 2010.
This ruling provides the dollar amounts, increased by the 2010
inflation adjustment, for section 1274A of the Code. Rev. Rul.
2008–52 supplemented and superseded.
Rev. Rul. 2010–3, page 272.
Section 1256 contracts market to market.This ruling
holds that the London International Financial Futures and Op-
tions Exchange (LIFFE), which is a United Kingdom derivatives
market, is a qualified board or exchange within the meaning of
section 1256(g)(7)(C) of the Code.
Notice 2010–7, page 296.
This notice modifies Notice 2008–88, 2008–42 I.R.B. 933,
to extend the expiration dates from December 31, 2009 to
December 31, 2010 of certain temporary rules allowing state
and local government issuers to purchase and hold their own
tax-exempt bonds under special reissuance standards for tax-
exempt bonds. Notice 2008–88 amended and supplemented
Notice 2008–41, 2008–15 I.R.B. 742, regarding reissuance
standards for tax-exempt bonds to expand the circumstances
and time periods during which the Treasury Department and
the Service would treat a tax-exempt bond that is purchased
by its state or local governmentalissuer as continuing in effect
without resulting in a reissuance or retirement of the purchased
bond solely for purposes of section 103 and sections 141
through 150 of the Code, as amended. Notices 2008–41 and
2008–88 modified.
Notice 2010–10, page 299.
This notice provides guidance on the tax-exempt bond provi-
sions for the Midwestern and Hurricane Ike disaster areas un-
der the Heartland Disaster Tax Relief Act of 2008, the Tax Ex-
tenders and Alternative Minimum Tax Relief Act of 2008 (the
Act) and section 1400N(a) of the Code, as modified by the
Act. This notice also provides guidance on reimbursement ex-
penditures made with proceeds of tax-exempt bonds issued for
Midwestern and Hurricane Ike disaster areas and tax-exempt
“Qualified Gulf Opportunity Zone Bonds” issued under section
1400N(a).
Rev. Proc. 2010–10, page 300.
Maximum vehicle values.This procedure provides the max-
imum vehicle values for use with the special valuation rules un-
der regulations sections 1.61–21(d) and (e). These values are
adjusted for inflation and must be adjusted annually by refer-
ence to the Consumer Price Index.
Rev. Proc. 2010–12, page 302.
Section 305.Section 305 treatment of a stock distribution by
a publicly traded regulated investment company or real estate
investment trust in which the shareholders have an election to
receive money or stock, subject to an aggregate limitation on
the amount of money to be distributed. Rev. Proc. 2009–15
amplified and superseded.
(Continued on the next page)
Finding Lists begin on page ii.

EMPLOYEE PLANS
Notice 2010–6, page 275.
This notice provides rules governing the taxation of nonquali-
fied deferred compensation plans. Section 409A of the Code
requires that a nonqualified deferred compensation plan meet
certain plan document requirements, and that the plan be op-
erated in compliance with the plan document. Notice 2010–6
permits taxpayers to correct certain failures of a nonqualified
deferred compensation plan to comply with the plan document
requirements of section 409A, or in certain circumstances, to
limit the amount includible in income and additional taxes under
section 409A as a result of a plan document failure. Notices
2008–113 and 2008–115 modified.
ADMINISTRATIVE
Notice 2010–8, page 297.
This notice provides interim rules extending the period for sub-
mission to the IRS (or an agent or contractor of the IRS) of tax-
payer authorizations permitting disclosure of returns and return
information pursuant to section 6103(c) of the Code.
Notice 2010–9, page 298.
The notice clarifies that, for calendar year 2009, filers of
Form 1099–B, Form 1099–S, and certain information on Form
1099–MISC have until February 16, 2010, to report both the
information required on these forms and certain other tax
information furnished on the same date. Notice 2009–11
amplified.
Rev. Proc. 2010–10, page 300.
Maximum vehicle values.This procedure provides the max-
imum vehicle values for use with the special valuation rules un-
der regulations sections 1.61–21(d) and (e). These values are
adjusted for inflation and must be adjusted annually by refer-
ence to the Consumer Price Index.
January 19, 20102010–3 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.
2010–3 I.R.B.January 19, 2010

January 19, 20102010–3 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 301.—
Distributions
of Property
26 CFR 1.301–1
0: Rules applicable with respect to
distribution
s of money and other property.
This revenue p
rocedure provides temporary guid-
ance regardi
ng certain stock distributions by publicly
traded regul
ated investment companies (RICs) and
real estate i
nvestment trusts (REITs). See Rev. Proc.
2010-12, pag
e 302.
Section 305.—Distributions
of Stock and Stock Rights
26 CFR 1.305–1: Stock dividends.
This revenue procedure provides temporary guid-
ance regarding certain stock distributions by publicly
traded regulated investment companies (RICs) and
real estate investment trusts (REITs). See Rev. Proc.
2010-12, page 302.
Section 483.—Interest on
Certain Deferred Payments
This ruling provides the dollar amounts, increased
by the 2010 inflation adjustment, for section 1274A
of the Code. Rev. Rul. 2008–52 supplemented and
superseded. See Rev. Rul. 2010-2, page 272.
Section 125
6.—Section
1256 Contra
cts Marked
to Market
(Also: §§ 4
46, 481, 7805; 1.446–1, 301.7805–1.)
Section 12
56 contracts market to
market.Th
is ruling holds that the Lon-
don Intern
ational Financial Futures and
Options Ex
change (LIFFE), which is a
United Kin
gdom derivatives market, is
a qualifi
ed board or exchange within the
meaning o
fsection1256(g)(7)(C)ofthe
Code.
Rev. Rul.
2010–3
ISSUE
Is London
International Financial Fu-
tures and
Options Exchange (“LIFFE”),
which is a
regulated exchange of the
United K
ingdom, a qualified board or
exchang
e within the meaning of section
1256(g)
(7)(C) of the Internal Revenue
Code?
LAW AND ANALYS
IS
Section 1256(g)(7) provides that the
term “qualified board or exchange” means:
(A) a national securities exchange
which is registered with the Securities and
Exchange Commission,
(B) a domestic board of trade desig-
nated as a contract market by the Com-
modity Futures Trading Commission, or
(C) any other exchange, board of trade,
or other market which the Secretary deter-
mines has rules adequate to carry out the
purposes of section 1256.
HOLDING
The Internal Revenue Service deter-
mines that LIFFE, which is a regulated
exchange of the United Kingdom, is a
qualified board or exchange within the
meaning of section 1256(g)(7)(C).
EFFECTIVE DATE
Under the authority of section
7805(b)(8) of the Code, this revenue ruling
is effective for LIFFE Contracts (futures
contracts and futures contract options)
entered into on or after January 1, 2010.
CHANGE IN METHOD OF
ACCOUNTING
A change in t
he treatment of LIFFE
Contracts t
o comply with this revenue rul-
ing is a chan
ge in method of accounting
within the m
eaning of sections 446 and
481 and the r
egulations thereunder. The
Commissio
ner grants consent to taxpayers
to change t
othesection1256marktomar-
ket method
for the first taxable year dur-
ing which t
he taxpayer holds a LIFFE Con-
tract that
was entered into on or after Jan-
uary 1, 20
10. Such a taxpayer need not
file a For
m3115,Application for Change
in Accoun
ting Method, and LIFFE Con-
tracts th
at were entered into before January
1, 2010 wi
ll not be covered by the change
in metho
d for which consent is granted.
Because
the change is being made on a
“cut-of
f” basis, there is no potential omis-
sion or d
uplication of income or deduc-
tions, a
nd therefore no adjustment under
sectio
n 481 is required.
DRAFTING INFO
RMATION
The principal author of this revenue rul-
ing is Andrea Hoffenson of the Office of
Associate Chief Counsel (Financial Insti-
tutions & Products). For further informa-
tion regarding this revenue ruling, contact
Andrea Hoffenson at (202) 622–3930 (not
a toll-free call).
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments Issued for Property
This ruling provides the dollar amounts, increased
by the 2010 inflation adjustment, for section 1274A
of the Code. Rev. Rul. 2008–52 supplemented and
superseded. See Rev. Rul. 2010-2, page 272.
Section 1274A.—Special
Rules for Certain
Transactions Where Stated
Principal Amount Does Not
Exceed $2,800,000
26 CFR 1.1274A–1: Special rules for certain trans-
actions where stated principal amount does not ex-
ceed $2,800,000.
(Also §§ 483, 1274.)
Section 1274A — inflation adjusted
numbers for 2010.This ruling provides
the dollar amounts, increased by the 2010
inflation adjustment, for section 1274A of
the Code. Rev. Rul. 2008–52 supple-
mented and superseded.
Rev. Rul. 2010–2
This revenue ruling provides the dollar
amounts, increased by the 2010 inflation
adjustment, for § 1274A of the Internal
Revenue Code.
BACKGROUND
In general
, §§ 483 and 1274 determine
the princ
ipal amount of a debt instrument
given in c
onsideration for the sale or ex-
change of
nonpublicly traded property. In
addition
, any interest on a debt instrument
subject t
o § 1274 is taken into account un-
der the o
riginal issue discount provisions
of the Co
de. Section 1274A, however,
2010–3 I.R.B.272January 19, 2010

modifies the rules under §§ 483 and 1274
for certain types of debt instruments.
In the case of a “qualified debt instru-
ment,” the discount rate used for purposes
of §§ 483 and 1274 may not exceed 9 per-
cent, compounded semiannually. Section
1274A(b) defines a qualified debt instru-
ment as any debt instrument given in con-
sideration for the sale or exchange of prop-
erty (other than new § 38 property within
the meaning of § 48(b), as in effect on the
day before the date of enactment of the
Revenue Reconciliation Act of 1990) if the
stated principal amount of the instrument
does not exceed the amount specified in
§ 1274A(b). For debt instruments arising
out of sales or exchanges before January 1,
1990, this amount is $2,800,000.
In the case of a “cash method debt in-
strument,” as defined in § 1274A(c), the
borrower and lender may elect to use the
cash receipts and disbursements method
of accounting. In particular, for any cash
method debt instrument, § 1274 does not
apply, and interest on the instrument is ac-
counted for by both the borrower and the
lender under the cash method of account-
ing. A cash method debt instrument is
a qualified debt instrument that meets the
following additional requirements: (A) In
the case of instruments arising out of sales
or exchanges before January 1, 1990, the
stated principal amount does not exceed
$2,000,000; (B) the lender does not use an
accrual method of accounting and is not a
dealer with respect to the property sold or
exchanged; (C) § 1274 would have applied
to the debt instrument but for an election
under § 1274A(c); and (D) an election un-
der § 1274A(c) is jointly made with respect
to the debt instrument by the borrower and
lender. Section 1.1274A–1(c)(1) of the In-
come Tax Regulations provides rules con-
cerning the time for, and manner of, mak-
ing this election.
Section 1274A(d)(2) provides that, for
any debt instrument arising out of a sale
or exchange during any calendar year
after 1989, the dollar amounts stated in
§ 1274A(b) and § 1274A(c)(2)(A) are
increased by the inflation adjustment for
the calendar year. Any increase due to
the inflation adjustment is rounded to the
nearest multiple of $100 (or, if the increase
is a multiple of $50 and not of $100, the
increase is increased to the nearest mul-
tiple of $100). The inflation adjustment
for any calendar year is the percentage (if
any) by which the CPI for the preceding
calendar year exceeds the CPI for calendar
year 1988. Section 1274A(d)(2)(B) de-
fines the CPI for any calendar year as the
average of the Consumer Price Index as of
the close of the 12-month period ending
on September 30 of that calendar year.
INFLATION-ADJUSTED AMOUNTS
UNDER § 1274A
For debt instruments arising out of sales
or exchanges after December 31, 1989, the
inflation-adjusted amounts under § 1274A
areshowninTable1.
Rev. Rul. 2010–2 Table 1
Inflation-Adjusted Amounts Under § 1274A
Calendar Year
of Sale
o
rExchange
1274A(b) Amount
(qualified debt
i
nstrument)
1274A(c)(2)(A) Amount
(cash method debt
i
nstrument)
1990
$2,933,200$2,095,100
1991
$3,079,600$2,199,700
1992
$3,234,900$2,310,600
1993
$3,332,400$2,380,300
1994
$3,433,500$2,452,500
1995
$3,523,600$2,516,900
1996
$3,622,500$2,587,500
1997
$3,723,800$2,659,900
1998
$3,823,100$2,730,800
1999
$3,885,500$2,775,400
2000
$3,960,100$2,828,700
2001
$4,085,900$2,918,500
2002
$4,217,500$3,012,500
2003
$4,280,800$3,057,700
2004
$4,381,300$3,129,500
2005
$4,483,000$3,202,100
2006
$4,630,300$3,307,400
2007
$4,800,800$3,429,100
2008
$4,913,400$3,509,600
2009
$5,131,700$3,665,500
2010
$5,115,100$3,653,600
Note: These inflation adjustments were computed using the All-Urban, Consumer Price Index, 1982–1984 base, published
by the Bureau of Labor Statistics.
January 19, 20102732010–3 I.R.B.

EFFECT ON OTHER DOCUMENTS
Rev. Rul. 2008–52, 2008–49 I.R.B.
1233, is supplemented and superseded.
DRAFTING INFORMATION
The author of this revenue ruling is An-
drea M. Hoffenson of the Office of the As-
sociate Chief Counsel (Financial Institu-
tions and Products). For further informa-
tion regarding this revenue ruling, please
contact Ms. Hoffenson at (202) 622–3930
(not a toll-free call).
2010–3 I.R.B.274January 19, 2010

Part III. Administrative, Procedural, and Miscellaneous
Relief and Guidance on
Corrections of Certain
Failures of a Nonqualified
Deferred Compensation Plan
to Comply with § 409A(a)
Notice 2010–6
TABLE OF CONTENTS
I. Purpose
II. Background
III. Eligibility Requirements and Effect of Correction
A. In General
B. Correction of Plans Containing Substantially Similar Document Failures
C. Relief not Available to Service Providers and Certain Service Recipients Under Examination
D. Relief not Available for Intentional Failures or Listed Transactions
E. Amounts Included in Incomeas a Condition of Correction
F. Date of Correction; Determining Certain Periods
G. Linked Plans and Stock Rights not Eligible for Relief
H. New or Modified Payment Events Required as a Condition of Correction
I. Effect of Correction
J. References to the Internal Revenue Code; Certain Terms
IV. Application of § 409A(a) to Certain Ambiguous Plan Terms
A. Terms Providing for a Payment “As Soon as Practicable” or Substantially Similar Language Following a Permissible
Payment Event
B. Permissible Payment Event with no Definition or an Ambiguous Definition
C. Examp
les
V. Corre
ction of Impermissible Definition ofOtherwise Permissible Payment Events
A. Impermissible Definition of Separation from Service
B. Impermissible Definition of a Change in Control Event
C. Impe
rmissible Definition of Disability
D. Examples
VI. Correction of Impermissible Payment Periods followinga Permissible Payment Event
A. Payment Periods of Longer than 90 DaysFollowing a Permissible Payment Event
B. Pay
ment Periods Following a Permissible Payment Event Dependent upon the Service Provider Completing Certain
Emplo
yment-Related Actions
C. Examples
VII. Correction of Certain Impermissible Payment Events and Payment Schedules
A. Plans with Permissible and Impermissible Payment Events under § 409A
B. Plans with Only Impermissible Payment Events under § 409A
C. Certain Impermissible Alternative Payment Schedules
D. Impermissible Service Provider or Service Recipient Discretion with Respect to a Payment Schedule Following a
Permissible Payment Event (Including Impermissible Subsequent Deferral Elections)
E. Impermissible ServiceRecipient Discretion to Accelerate Payment Events
F. Impermissible Reimbursement or In-Kind Benefit Provisions
G. E
xamples
VIII
. Correction of Failure to Include Six-Month Delay of Payment for Specified Employees
IX. C
orrection of Provisions Providing for Impermissible Initial Deferral Elections
X. Am
endment Period Following a Service Recipient’s Initial Adoption of a Plan
XI. T
ransition Relief
A. Correction of Document Failures Described in this Notice
B. Correction of Impermissible Provisions Linking Nonqualified Deferred Compensation Plans
January 19, 20102752010–3 I.R.B.

C. Correction of Payment Schedules Determined by the Timing of Payments Received by the Service Recipient
D. Service Recipients Under Examination for Returns Covering Periods Beginning on or Before December 31, 2011
XII. Information and Reporting Requirements
A. Information Required for Correction of a Document Failure
B. Attachment to Service Recipient Tax Return for Failures Described in §§ V through XI of this Notice
C. Information to be Provided to Service Provider for Failures Described in §§ V through XI of this Notice
D. Attachment to Service Provider Tax Return for Failures Described in §§ V through XI of this Notice
XIII. Modifications to Notice 2008–113
XIV. Effect on Other Documents
XV. Request for Comments
XVI. Paperwork Reduction Act
XVII. Drafting Information
I. PURPOSE
This notice provides methods for tax-
payers to voluntarily correct many types
of failures to comply with the document
requirements applicable under § 409A of
the Internal Revenue Code (Code) to non-
qualified deferred compensation plans and
thereby avoid or reduce the current in-
come inclusion and additional taxes un-
der § 409A. This document correction pro-
gram is intended to encourage taxpayers
to review nonqualified deferred compen-
sation plans to identify provisions that fail
to comply with the requirements of § 409A
and § 1.409A–1(c) of the Income Tax Reg-
ulations (a document failure), and to cor-
rect those plan provisions promptly, while
also not providing an advantage to taxpay-
ers participating in plans that initially fail
to comply with § 409A over taxpayers par-
ticipating in plans drafted in compliance
with § 409A. Accordingly, this notice pro-
vides:
•Clarification that certain language
commonly included in plan documents
will not cause a document failure.
•Relief permitting correction of cer-
tain document failures without current
income inclusion or additional taxes
under § 409A, provided, in certain
circumstances, that the corrected plan
provision does not affect the operation
of the plan within one year following
the date of correction.
•Relief limiting the amount currently
includible in income and the additional
taxes under § 409A for certain docu-
ment failures if correction of the failure
affects the operation of the plan within
one year following the date of correc-
tion.
•Relief permitting correction of cer-
tain document failures without current
income inclusion or additional taxes
under § 409A, if the plan is the ser-
vice recipient’s first plan of that type
(disregarding any plans not subject
to § 409A or any plans under which
all deferred amounts have previously
been paid or forfeited) and the failure
is corrected within a limited period
following adoption of the plan.
•Transition relief permitting corrections
of certain document failures without
current income inclusion or additional
taxes under § 409A, if the document
failure is corrected by December 31,
2010, and any operational failures re-
sulting from the document failure are
also corrected in accordance with No-
tice 2008–113, 2008–51 I.R.B. 1305,
by December 31, 2010.
This notice also clarifies certain aspects
of Notice 2008–113, which addresses cer-
tain failures of nonqualified deferred com-
pensation plans to comply with § 409A in
operation (operational failures), including
clarification of:
•The application of the subsequent year
correction method to late payments of
amounts deferred.
•The calculation of the amount that
must be paid to the service provider
as a correction of a late payment of
an amount deferred under a plan if
the payment would have been made in
property, such as shares of stock.
•The calculation of the amount that
must be repaid by the service provider
as a correction of an early payment of
an amount deferred under a plan if the
early payment was made in property,
such as shares of stock.
II. BACKGROUND
Section 409A was added to the Code by
§ 885 of the American Jobs Creation Act
of 2004, Public Law 108–357 (118 Stat.
1418). Section 409A generally provides
that, unless certain requirements are met,
amounts deferred under a nonqualified de-
ferred compensation plan for all taxable
years are currently includible in gross in-
come to the extent not subject to a substan-
tial risk of forfeiture and not previously in-
cluded in gross income. Section 409A fur-
ther provides that amounts includible in in-
come under § 409A are subject to two ad-
ditional taxes, a 20% additional tax and an
additional tax calculated as the underpay-
ment interest determined at a premium in-
terest rate that would have been due had
the amounts deferred been includible in in-
come when first deferred or first no longer
subject to a substantialrisk of forfeiture,
whichever is later. Thus, a failure to com-
ply with the requirements of § 409A may
have severely adverse tax consequences.
Final regulations under § 409A were is-
sued by the IRS and the Treasury Depart-
ment on April 17, 2007 (T.D. 9321, 2007–1
C.B. 1123 [72 Fed. Reg. 19234]), effec-
tive for taxable years beginning on or af-
ter January 1, 2009 (see Notice 2007–86,
2007–2 C.B. 990).
A nonqualified deferred compensation
plan must comply with the requirements
of § 409A both in form and in opera-
tion. On December 3, 2008, the Treasury
Department and the IRS issued Notice
2008–113, setting forth guidance permit-
ting the correction of certain operational
failures, and providing transition relief
2010–3 I.R.B.276January 19, 2010

limiting the amount includible in income
under § 409A(a) for certain operational
failures involving limited amounts. Notice
2008–113 also provided guidance limiting
the amount includible in income under
§ 409A(a) for certain operational failures
involving amounts that exceeded the limit.
Notice 2008–113 requested comments
with respect to potential guidance permit-
ting the correction of document failures. In
response, the Treasury Department and the
IRS received various comments request-
ing that relief also be available for docu-
ment failures and containing suggestions
for corrections. The Treasury Department
and the IRS have reviewed all of the com-
ments submitted and are issuing this no-
tice to provide relief for numerous types of
document failures.
The Treasury Department and the IRS
are issuing this notice primarily to ad-
dress document failures. Notice 2008–113
remains in effect to address operational
failures. However, § XIII of this notice
provides certain modifications to Notice
2008–113, clarifying certain aspects of
that notice, that are effective for service
provider taxable years beginning on or
after January 1, 2010. For further infor-
mation regarding the effective dates, see
§ XIV of this notice.
III. ELIGIBILITY REQUIREMENTS
AND EFFECT OF CORRECTION
A.In General
A taxpayer is not eligible for the re-
lief provided in §§ V through XI of this
notice for a document failure unless the
taxpayer demonstrates that all of the fol-
lowing requirements have been met: (i)
the requirements of this § III applicable to
the document failure; (ii) the requirements
of the particular section in §§ V through
XI of this notice providing the correction
method and relief applicable to the docu-
ment failure; and (iii) the information and
reporting requirements of § XII of this no-
tice. The taxpayer claiming the relief has
the burden of demonstrating eligibility for
the relief and that each of the requirements
in the preceding sentence have been met.
A taxpayer’s eligibility for the relief pro-
vided in this notice is subject to examina-
tion by the IRS.
B.Correction of Plans Containing
Substantially Similar Document Failures
Thereliefprovidedin§§VthroughXI
of this notice is not available with respect
to a plan for which a document failure has
been identified and corrected unless, in ad-
dition to satisfying the requirements of the
applicable sections ofthis notice, the ser-
vice recipient takes commercially reason-
able steps to: (i) identify all other non-
qualified deferred compensation plans that
have a document failure that is substan-
tially similar to the document failure ini-
tially identified and corrected (regardless
of whether the other plan provides deferred
compensation for any of the same service
providers that participate in the plan with
the initially identified and corrected docu-
ment failure) and (ii) correct all such fail-
ures in a manner consistent with this no-
tice.
C.Relief not Available to Service
Providers and Certain Service Recipients
Under Examination
Except where specifically noted in
this notice, the relief provided in §§ V
through XI of this notice is not available
for a service provider participating in a
nonqualified deferred compensation plan
if a federal income tax return of the ser-
vice provider or a federal tax return of
the service recipient is under examination
with respect to nonqualified deferred com-
pensation for any taxable year in which
the document failure existed. For this
purpose, an individual service provider
or service recipient is treated as under
examination with respect to nonqualified
deferred compensation if the individual
is under examination with respect to the
individual’s federal income tax return (for
example, Form 1040) for the taxable year.
Any other type of service provider or ser-
vice recipient is treated as under examina-
tion with respect to nonqualified deferred
compensation if the service provider or
service recipient receives written notifica-
tion (for example, by examination plan,
information document request (IDR), or
notification of proposed adjustments or
income tax examination changes) from
the examining agent(s) specifically cit-
ing nonqualified deferred compensation
as an issue under consideration. See
§ XI.D for certain transition relief through
December 31, 2011, regarding federal
tax returns of non-individual service
recipients under examination.
A service provider and service recipient
will not fail to qualify for relief, however,
merely because the service provider or ser-
vice recipient becomes under examination
with respect to nonqualified deferred com-
pensation after the date of correction, if all
of the requirements of this notice for re-
lief are otherwise satisfied and the service
provider and the service recipient were not
under examination on the date of the cor-
rection. For example, assume a document
failure exists during 2010 and 2011, but
not in any prior years. The date of correc-
tion of the document failure is January 1,
2012, at which time the federal tax returns
of the service providerand service recipi-
ent for 2010 and 2011 are not under exam-
ination. Provided that the service recipient
and service provider otherwise satisfy the
requirements of this notice (including any
requirements of inclusion of income, pay-
ment of additional taxes, reporting and tak-
ing commercially reasonable steps to iden-
tify and correct all plans with substantially
similar document failures), the document
failure will remain eligible for the relief so
that for purposes of any subsequent exam-
ination of the service provider’s or the ser-
vice recipient’s federal tax returns for 2010
and 2011, the failure will be treated as cor-
rected.
D.Relief not Available for Intentional
Failures or Listed Transactions
Thereliefprovidedin§§VthroughXI
of this notice applies only to failures to
comply with the plan document require-
ments under § 409A(a) and § 1.409A–1(c)
that are inadvertent and unintentional. In
addition, the relief provided in this notice
is not available if the failure is directly
or indirectly related to participation in any
listed transaction under §1.6011–4(b)(2)).
E.Amounts Included in Income as a
Condition of Correction
If the applicable section of this notice
under which the correction is made re-
quires that the service provider include
an amount deferred in income under
§ 409A(a), the relief provided under such
section is conditioned upon (i) the ser-
vice provider including the amount in
income on the appropriate tax return and
January 19, 20102772010–3 I.R.B.

paying all applicable Federal taxes, in-
cluding the additional 20% tax under
§ 409A(a)(1)(B)(i)(II) but not the premium
interest tax under § 409A(a)(1)(B)(i)(I),
and (ii) the service recipient complying
with the information statement reporting
requirements set forth in the applicable
section of this notice (for example, Form
W–2 reporting). Provided that the service
provider has actually included the amount
in income under § 409A(a) pursuant to
the applicable section of this notice and
paid the additional tax due on such amount
under § 409A(a)(1)(B)(i)(II), the amount
included in income will be treated for all
subsequent periods as an amount previ-
ously included in income for purposes of
§ 409A(c) and the regulations thereunder.
If the applicable section of this notice
under which the correction is made re-
quires that the service provider include
an amount deferred in income under
§ 409A(a), such as 50% of the amount de-
ferred under the plan, the amount deferred
to which the income inclusion requirement
applies is only the amount deferred to
which the corrected plan provision applies,
and the calculation of the amount deferred
is based upon the plan provision in effect
immediately before the correction.
F.Date of Correction; Income Inclusion
Upon Correction of Multiple Failures
For purposes of this notice, the date of
correction of a document failure is the lat-
est of the date on which the correction is
adopted, the date on which the correction
is effective and the date on which the cor-
rectionissetforthinwritinginoneormore
documents. Under many sections of this
notice the most favorable relief is available
only if certain events do not occur within
one year following the date of the correc-
tion. For purposes of applying this notice,
one year following a date means the pe-
riod beginning on such date and ending on
the first anniversary of such date. For ex-
ample, one year following April 1, 2010,
means April 1, 2011.
Special rules apply if two or more doc-
ument failures that apply to the same de-
ferred amount under a plan are corrected,
and two or more of the sections of this no-
tice pursuant to which the corrections are
made with respect to that deferred amount
require as a condition of the correction that
the service provider include a percentage
of the amount deferred in income under
§ 409A. In that situation, if two or more
sections of this notice would require a per-
centage of the amount deferred to be in-
cluded in income in the same taxable year,
the service provider is only required to in-
clude in income, and the service recipient
is only required to report as income to the
service provider, the percentage of the de-
ferred amount required to be included in
income under the section of this notice pur-
suant to which a correction is made with
respect to that deferred amount that re-
quires the largest percentage to be included
in income for that taxable year. For exam-
ple, if application of each of two document
corrections to the same deferred amount
would require that the service provider in-
clude 50% of the deferred amount subject
to the corrected plan provision in income
under § 409A during the same taxable year
as a condition of each correction, the ser-
vice provider will only be required to in-
clude 50% of the deferred amount in in-
come under § 409A (and not 100%).
If, in the situation described in the first
sentence of the preceding paragraph, the
applicable sections of this notice would re-
quire a percentage of the amount deferred
to be included in income under § 409A as
a condition of correction in two or more
taxable years, then, solely for purposes of
determining the amount deferred that must
be included in income under § 409A as a
condition of correction in a taxable year
after the first taxable year in which such
an inclusion is required as a condition of
correction, the service provider may treat
two times the amount included in income
under § 409A as a condition of correction
in a prior taxable year with respect to the
amount deferred as previously included in
income. For example, assume that an em-
ployee is entitled to a payment upon a sep-
aration from service that includes any re-
duction in the level of services provided,
payable at the discretion of the employer
over a period not to exceed three years.
On April 1, 2011, the employer corrects
the definition of the term “separation from
service” but the employee has a reduc-
tion in services on June 1, 2011 (within
one year of the correction) so that the em-
ployee is required to include in income un-
der § 409A as a condition of correction
50% of the $100x deferred under the plan,
or $50x. On April 1, 2012, the employer
corrects the impermissible discretion with
respect to the payment schedule follow-
ing the permissible payment event. The
employee separates from service on Au-
gust 1, 2012 (within one year of the cor-
rection) so that the employee is required to
include in income under § 409A as a con-
dition of correction 50% of the amount de-
ferred under the plan subject to the provi-
sion. However, solely for this purpose, the
employee is entitled to treat two times the
$50x included in income during 2011, or
$100x, as previously included in income.
Assume that the amount deferred under the
plan for 2012 subject to the provision is
$150x. Solely for purposes of determining
the amount that must be included as a con-
dition of correction, the $150x is reduced
by the $100x deemed to be previously in-
cluded in income. Accordingly, the em-
ployee must include $25x (50% x 50x) in
income under § 409A as a condition of the
second correction.
G.Linked Plans and Stock Rights not
Eligible for Relief
Except as specifically provided in
§ XI.B of this notice, the relief provided
under this notice does not apply to a plan
to the extent that the document failure
is due to the amount deferred under the
plan being determined by, or the time or
form of payment being affected by, the
amount deferred under, or the payment
provisions of, one or more other non-
qualified deferred compensation plans or
one or more qualified plans (as defined in
§ 1.409A–1(a)(2)). In addition, the relief
provided under this notice does not apply
to a stock right. For certain relief with re-
spect to a stock right with an exercise price
that is less than the fair market value of
the underlying shares of stock at the date
of grant, see Notice 2008–113, §§ IV.D
and V.E.
H.New or Modified Payment Events
Required as a Condition of Correction
Many of the corrections available under
this notice are conditioned upon the plan
being amended to adopt a new or modi-
fied payment event for an amount deferred.
Nothing in these conditions is intended to
prohibit or alter the ability of the plan to
be modified at any time to include death,
disability or an unforeseeable emergency
as a payment event (see § 1.409A–3(i)(3)),
2010–3 I.R.B.278January 19, 2010

or to adopt any of the permissible excep-
tions to the rule prohibiting accelerated
payments (see § 1.409A–3(j)(4)). In ad-
dition, nothing in these conditions is in-
tended to prohibit or alter the ability to pro-
vide for a subsequent deferral election un-
der the plan that complies with the require-
ments of § 409A, provided that the subse-
quent deferral election requirements apply,
both in form and in operation, to the de-
ferred amount based upon the plan provi-
sions after correction under this notice.
I.Effect of Correction
If a document failure is eligible for cor-
rection under, and is fully corrected in ac-
cordance with, the requirements of this
§ III, the applicable provisions of §§ V
through XI of this notice (including any
requirement of a service recipient to re-
port, and a service provider to include an
amount in income under § 409A(a) and
pay all applicable taxes, including an ad-
ditional tax under § 409A(a)), and the re-
porting requirements of § XII of this no-
tice, then, except as otherwise provided in
this notice, the service recipient will not be
required to report, and the service provider
will not be required to include any amount
as income under § 409A(a) for any taxable
year of the service provider before the tax-
able year in which the document failure is
properly corrected, solely as a result of the
document failure being in the written plan
during any such earlier year. For purposes
of this notice, a plan provision is fully cor-
rected only if the plan provision, and any
substantially similar plan provision, has
been corrected in accordance with this no-
tice with respect to all deferred amounts
under the plan to which the plan provision,
or the substantially similar plan provision,
applies (other than deferred amounts not
subject to § 409A, such as grandfathered
amounts as defined under § 1.409A–6).
This notice does not address the appli-
cation of any other provision of the Code
or any other rule of law or tax doctrine,
including the constructive receipt doctrine
and the economic benefit doctrine, to a
nonqualified deferred compensation plan
due to the plan provisions either before or
as a result of the correction of a plan provi-
sion under this notice, or due to the opera-
tion of the plan either before or as a result
of the correction of a plan provision under
this notice.
J.References to the Internal Revenue
Code; Certain Terms
For purposes of this notice, references
to sections of the Code include references
to the regulations and any other applicable
guidance thereunder. For purposes of this
notice, the term “payment event” refers to
an event set forth in the applicable plan,
the occurrence of which will result in the
payment of compensation, the terms “per-
missible payment event” or “permissible
payment event under § 409A” refer to any
event the occurrence of which will result
in the payment of compensation that sat-
isfies the requirements of § 409A(a) and
§ 1.409A–3(a), and the terms “impermissi-
ble payment event” or “impermissible pay-
ment event under § 409A” refer to any
event the occurrence of which will result
in the payment of compensation that does
not satisfy the requirements of § 409A(a)
and § 1.409A–3(a).
As provided by § 1.409A–1(c)(3)(viii),
the plan aggregation rules of
§ 1.409A–1(c)(2)(i) do not apply
to the written plan requirements of
§ 1.409A–1(c)(3), so that deferrals of com-
pensation under an agreement, method,
program, or other arrangement that fails
to meet the requirements of § 409A solely
due to a failure to meet the written plan
requirements of § 1.409A–1(c)(3) are not
aggregated with deferrals of compensa-
tion under other agreements, methods,
programs, or other arrangements that
meet such requirements. Accordingly, for
purposes of this notice (other than § X and
§ XIII of this notice, and any references to
the correction of an operational failure),
the terms “arrangement”, “plan” and
“nonqualified deferred compensation
plan” refer to a plan or arrangement
subject to the requirements of § 409A(a),
without reference to the aggregation rules
of § 1.409A–1(c)(2)(i).
References in this notice to amounts
deferred under a plan in the context of
a dollar amount deferred (for example,
a requirement to include in income un-
der § 409A(a) a specified percentage of
the amount deferred under the plan) refer
to the dollar amount determined under
applicable guidance. As of January 5,
2010, the applicable guidance for this pur-
pose is Notice 2008–115, 2008–52 I.R.B.
1367, which also permits taxpayers to
rely upon the proposed regulations under
§ 1.409A–4, issued on December 8, 2008
(REG–148326–05, 2008–51 I.R.B. 1325
[73 Fed. Reg. 74380]). Under this guid-
ance, the amount deferred under a plan is
determined as of the last day of the service
provider’s taxable year. If an amount is
requiredtobeincludedinincomeasa
condition of a document correction with-
out regard to whethera subsequent event
occurs, the amount deferred under the plan
is determined as of the last day of the ser-
vice provider’s taxable year during which
the correction is made. If an amount is
requiredtobeincludedinincomeasa
condition of a document correction only
if an event occurs within a certain period
of time following the document correction
(generally one year),the amount deferred
under the plan is determined as of the last
day of the service provider’s taxable year
during which the event occurs.
References in this notice to the applica-
tion of a corrected plan provision refer to
the change in the operation of the plan that
results from compliance with the corrected
plan provision in lieu of the pre-correction
plan provision. Nothing in this notice is
intended to imply that compliance with a
corrected plan provision is elective or that
a failure to comply with a corrected plan
provision would not otherwise be an oper-
ational failure under § 409A(a).
IV. APPLICATION OF § 409A(a)
TO CERTAIN AMBIGUOUS PLAN
TERMS
A.Terms Providing for a Payment “As
Soon as Practicable” or Substantially
Similar Language Following a Permissible
Payment Event
1. Eligibility
This section applies to a plan provi-
sion that sets forth a permissible payment
event under § 409A(a) and § 1.409A–3(a),
but requires payment “as soon as reason-
ably practicable” following the permissi-
ble payment event, or under conditions
substantially similar to as soon as practi-
cable following the permissible payment
event.
2. Application of § 409A
Except as otherwise provided in this
§ IV.A, a plan provision does not fail to sat-
isfy the requirement to designate a permis-
January 19, 20102792010–3 I.R.B.

sible payment event under § 1.409A–3(b),
and does not otherwise result in a docu-
ment failure, merely because it includes a
phrase described in § IV.A.1 of this notice.
For purposes of § 1.409A–3(d) (rules re-
garding the timeliness of payments), and
the application of the subsequent defer-
ral rules and anti-acceleration rules under
§ 409A, the permissible payment event un-
der § 409A(a) is treated as the payment
date. Thus, if the payment is not made by
the later of the end of the service provider’s
taxable year in which the permissible pay-
ment event occurs or the fifteenth day of
the third calendar month following the per-
missible payment event, the failure to pay
will constitute an operational failure unless
the service provider can demonstrate that
the delay qualifies for a timeliness excep-
tion under the regulations (for example, the
payment would have jeopardized the abil-
ity of the service recipient to continue as a
going concern pursuant to § 1.409A–3(d)).
The resulting operational failure may qual-
ify for the correction of operational fail-
ures involving late payments pursuant to
Notice 2008–113 provided that all other
applicable requirements of that notice are
met. Notwithstanding the foregoing, if a
plan contains a provision otherwise eligi-
ble for this section and the service recipi-
ent has a pattern or practice of making late
payments that do not qualify for a timeli-
ness exception under the regulations, that
plan and any other plan of the service re-
cipient containing language similar to that
provision will be treated as having failed
to set forth a permissible payment date
(regardless of whether the other plan pro-
vides deferred compensation to any ser-
vice provider that participates in the plan
otherwise eligible for this section).
B.Permissible Payment Event with no
Definition or an Ambiguous Definition
1. Eligibility
This section applies to a plan provision
that designates a payment event but does
not define the payment event or has an am-
biguous definition of the payment event,
if the plan provision could reasonably be
interpreted to be compliant with § 409A,
but could also reasonably be interpreted to
include an impermissible payment event
under § 409A (or to not include events
that must be included in the definition of a
permissible payment event under § 409A).
For example, the use of the term “termina-
tion of employment” as a payment event
in a plan could be interpreted to mean only
events that constitute a separation from
service for purposes of § 1.409A–3(a)(1),
or also to include events that do not consti-
tute a separation from service for purposes
of § 1.409A–3(a)(1) (and to exclude events
that must be included in the definition of
a separation from service). Similarly, the
use of the term “acquisition” of the ser-
vice recipient as a payment event in a plan
could be interpreted to mean only events
that constitute a change in control event
under § 1.409A–3(a)(5), or also to include
events that do not constitute a change in
control event under § 1.409A–3(a)(5). If
the plan also contains a provision requir-
ing that the term be interpreted to comply
with the requirements of § 409A (or a plan
provision with the same effect), this sec-
tion does not apply because the provision
is not ambiguous and complies with the re-
quirements of § 409A and § 1.409A–3(a).
If the particular plan provision has been
interpreted by the service recipient, on or
after January 1, 2009, such that a pattern or
practice of the application of a specific in-
terpretation has been established that does
not satisfy the requirements of § 409A, the
plan provision will no longer be treated as
ambiguous either with respect to the plans
to which the service recipient has applied
the interpretation, or any other plan of the
service recipient with substantially similar
language (regardless of whether the plans
provide deferred compensation to the same
service provider or service providers), and
therefore will not be eligible for the relief
in this § IV.B (but see § V of this notice).
Similarly, if the particular plan provision
hasbeeninterpretedbyacourtwithjuris-
diction over the enforcement of the con-
tract, the term will no longer be treated
as ambiguous either with respect to the
plan at issue in the decision or with re-
spect to any other plan of the service re-
cipient with substantially similar language
over which the same court has jurisdiction
(regardless of whether the plans provide
deferred compensation to the same service
provider or service providers). If the defi-
nition of the payment event in the plan ex-
plicitly includes events that would not con-
stitute a permissible payment event under
§ 409A, or explicitly excludes events that
are required for the payment event to be
treated as a permissible payment event un-
der § 409A, this section does not apply (but
see § V of this notice).
2. Application of § 409A
Except as otherwise provided in this
§ IV.B, a payment provision eligible for
this section will not result in the plan
failing to satisfy the requirements of
§ 409A(a) and § 1.409A–3(a). If an
amount is paid pursuant to the provision
in a manner that is not compliant with the
requirements of § 409A(a) (or, pursuant
to the provision, the plan fails to make
a payment of an amount required to be
paid to comply with the requirements of
§ 409A(a)), that payment (or failure to
make a payment) may be treated as an
operational failure eligible for relief under
Notice 2008–113 despite the interpretation
of the written plan provision in a man-
ner that does not comply with § 409A(a),
provided that the plan is amended in accor-
dance with this section before the end of
the service provider’s taxable year during
which the operational failure is corrected
in accordance with Notice 2008–113.
Notwithstanding the foregoing, if the facts
and circumstances indicate that the ser-
vice recipient has intentionally used an
ambiguous term for a payment event in a
plan, the plan and any other plan of the
service recipient with the same or sub-
stantially similar language (regardless of
whether the plans include any of the same
service providers) will not be eligible for
relief under this section. An amendment
satisfies the requirements of this section if
the amendment either: (i) adds language
requiring that the terms of the plan be
interpreted as necessary to comply with
the requirements of § 409A(a), or (ii) sets
forth explicit definitions of the terms of the
plan that comply with the requirements of
§ 409A(a) (including by cross-reference to
the relevant regulations under § 409A(a)),
provided that in either case, except as
necessary to satisfy the requirements of
§ 1.409A–3(a), the amendment may not
have the effect of either expanding the
definition to include as a payment event
any event that was not a payment event
under the plan before the amendment,
or narrowing the definition to eliminate
as a payment event any event that was a
payment event under the plan before the
amendment. For purposes of applying the
2010–3 I.R.B.280January 19, 2010

previous sentence, it is assumed that no
permissible alternative definitions were
designated under the plan (for example, a
permissible alternative definition of sepa-
ration from service under § 1.409A–1(h))
other than those designations timely made
and explicitly provided in the plan before
the correcting amendment.
C.Examples
The following examples illustrate the
provisions of this § IV.
Example 1 (as soon as reasonably practicable
payment provision). Employee A is an employee of
Employer who participates in a plan that provides for
a lump sum payment “as soon as reasonably practi-
cable” following the earliest of separation from ser-
vice, death, disability or a change in control of Em-
ployer, but does not specify any other time limit for
when payment must be completed. The definitions
of the payment events under the plan satisfy the re-
quirements of § 1.409A–3(a). A change in control
event occurs with respect to Employer on December
1, 2010, resulting in Employee A being entitled to a
lump sum payment under the plan.
Conclusion: The plan provision providing for
payment “as soon as reasonably practicable” follow-
ing the payment event does not cause the plan to
fail to designate a permissible payment date under
§ 409A and § 1.409A–3(b). However, if the amount
is not actually paid to Employee A by the later of the
end of the 2010 calendar year or the fifteenth day
of the third calendar month following the change in
control event (in this case, March 15, 2011), and the
late payment does not satisfy the requirements of a
timeliness exception under the § 409A regulations,
the plan will have an operational failure with respect
to the payment to Employee A that may be eligible
for correction under Notice 2008–113.
Example 2 (ambiguous definition of payment
event).Employee B is an employee of Employer
whose employment agreement with Employer pro-
vides for payment of $100x upon Employee B’s
“termination of employment.” The employment
agreement does not define what events constitute a
“termination of employment” and does not include
a provision that the terms of the agreement must
be interpreted in a manner consistent with § 409A.
To date, employees of Employer with substantially
similar plan provisions have never reduced their
employment to part-time and have only been paid
upon an event that constitutes a complete cessation
of services to Employer with no anticipated return to
providing services to Employer. Consequently, there
is no pattern or practice of paying amounts upon
payment events that would not constitute separations
from service under § 409A or § 1.409A–3(a)(1), or
not paying amounts upon payment events that would
constitute separations from service under § 409A(a)
and § 1.409A–3(a)(1). There is no indication that
the term was intentionally left vague. On April 1,
2010, before any amendment of the employment
agreement, Employee B ceases providing services to
Employer with no anticipated return and Employer
determines that Employee B has become entitled to
the payment of $100x. Employer pays Employee B
the $100x on April 1, 2010.
Conclusion: The plan provision providing for
payment upon a “termination of employment” will
not cause the employment agreement to fail to sat-
isfy the document requirements of § 409A(a) and
§ 1.409A–3(a) to the extent the term is not inter-
preted to provide for payment under circumstances
that would cause the employment agreement to
fail to satisfy the requirements of § 409A(a) and
§ 1.409A–3(a) in operation. The agreement may be
amended at any time to provide either (i) the plan
provision must be interpreted to comply with the
requirements of § 409A, or (ii) an explicit definition
of termination of employment that qualifies as a
separation from service under § 1.409A–3(a)(1),
provided that in either case the amendment may not
have the effect of either expanding the definition to
include as a payment event any event that was not a
payment event under the plan before the amendment,
or narrowing the definition to eliminate as a payment
event any event that was a payment event under the
plan before the amendment, except as necessary to
satisfy the requirements of § 1.409A–3(a)(1) (applied
as if no alternative definition of separation from ser-
vice permitted under § 1.409A–1(h) was designated
under the plan other than a designation timely-made
and explicitly provided in the pre-correction plan
provision). The payment of $100x on April 1, 2010,
will not be an operational failure and will not re-
sult in the employment agreement being treated as
failing to satisfy the requirements of § 409A(a) and
§ 1.409A–3(a)(1).
Example 3 (ambiguous definition of payment
event):ThesamefactsasinExample 2, except that
the employment agreement is between Employer
and Employee C. Employee C provided, on average,
40 hours of service to Employer over the 36-month
period ending on April 1, 2010. On April 1, 2010,
before any amendment of the agreement, Employee
C changes status from an employee to an indepen-
dent contractor and is expected to provide 20 hours
of service per week to Employer, which would not
be a separation from service under § 1.409A–3(a)(1).
Employer determines that under the agreement
Employee C is not entitled to a payment of $100x
because Employee C has not had a separation of
service from Employer.
Conclusion: The plan provision providing for
payment upon “termination of employment” will
not cause the employment agreement to fail to sat-
isfy the document requirements of § 409A(a) and
§ 1.409A–3(a) to the extent the term is not interpreted
to provide for payment under circumstances that
would cause the employment agreement to fail to sat-
isfy the requirements of § 409A(a) and § 1.409A–3(a)
in operation. The agreement may be amended at any
time to provide either (i) that the plan provision must
be interpreted to comply with the requirements of
§ 409A, or (ii) an explicit definition of termination
of employment that qualifies as a separation from
service under § 1.409A–3(a)(1), provided that the
definition does not add a payment event that would
not have been a payment event under the pre-cor-
rection plan provision, or remove a payment event
that would have been a payment event under the
pre-correction plan provision, except as necessary to
satisfy the requirements of § 1.409A–3(a)(1) applied
as if no alternative definition of separation from ser-
vice permitted under § 1.409A–1(h) was designated
under the plan, other than a designation timely made
and explicitly provided in the pre-correction plan
provision.
V. CORRECTION OF
IMPERMISSIBLE DEFINITIONS
OF OTHERWISE PERMISSIBLE
PAYMENT EVENTS
A.Impermissible Definition of Separation
from Service
1. Eligibility
This section applies to a plan provi-
sion that provides for a payment upon an
event involving a change in the relation-
ship between the service provider and the
service recipient related to the level of
services provided bythe service provider
(for example, a change from full-time to
part-time employment), the capacity in
which the service provider provides the
services to the service recipient (for exam-
ple, a change in status from an employee
to an independent contractor), or the re-
cipient of the services provided by the
service provider (for example, a change
from employment by one subsidiary to
employment by another subsidiary) that
does not qualify as a separation from ser-
vice under § 1.409A–3(a)(1) but is treated
as a payment event under the plan. This
section also applies to a plan provision
that fails to provide for a payment upon
an event that is a separation from ser-
vice under § 1.409A–3(a)(1) (without
reference to any permissible alternative
definition of separation from service un-
der § 1.409A–1(h) that may be designated
under a plan).
2. Correction
A plan provision eligible for this sec-
tion may be corrected in accordance with
this section before the date an event occurs
that would not be a separation from service
under § 1.409A–3(a)(1) but is a payment
event under the plan, or the date an event
occurs that is a separation from service un-
der § 1.409A–3(a)(1) but is not a payment
event under the plan. The plan may be
corrected by amending the plan to provide
for a payment event that satisfies the re-
quirements of § 1.409A–3(a)(1), provided
that the amendment may not have the
effect of either expanding the definition
January 19, 20102812010–3 I.R.B.

to include as a payment event any event
that was not a payment event under the
plan before the amendment, or narrowing
the definition to eliminate as a payment
event any event that was a payment event
under the plan before the amendment,
except as necessary to satisfy the re-
quirements of § 1.409A–3(a)(1) (without
reference to any permissible alternative
definition of separation from service un-
der § 1.409A–1(h) that may be designated
under a plan). The amendment must be
effective immediately. If, within one year
following the date of correction, an event
occurs that is not a separation from service
under § 1.409A–3(a)(1) but would have
required payment under the pre-correc-
tion plan provision, or that is a separation
from service under § 1.409A–3(a)(1) but
would not have required payment under
the pre-correction plan provision, and re-
sults in the corrected plan provision being
applied to avoid a payment that would
have been due under the pre-correction
plan provision, or to make a payment
that would not have been due under the
pre-correction plan provision, 50% of the
amount deferred under the plan to which
the pre-correction plan provision applied
must be included in income under § 409A
by the affected service provider in the ser-
vice provider’s taxable year within which
the event occurs.
B.Impermissible Definition of a Change
in Control Event
1. Eligibility
This section applies to a provision of a
plan of a service recipient that provides, for
a service provider with respect to whom
that service recipient satisfies the require-
ments of § 1.409A–3(i)(5)(ii) (identifica-
tion of relevant corporations), for a pay-
ment upon the sale of some or all of the
equity or assets of the service recipient
(other than specifically identified assets or
a specifically identified type of assets), or
a change in the effective control of the ser-
vice recipient, but thatincludes events that
would not qualify as a change in control
event under § 1.409A–3(a)(5). For this
purpose, with respect to a parent corpo-
ration or other parent entity, a payment
event based upon the sale of an identified
subsidiary constitutes the sale of a speci-
fied asset, and accordingly employees of
the parent corporation would not be eligi-
ble for the relief provided in this section
(though employees of the subsidiary cor-
poration may be eligible for the relief). In
addition, the requirement of a public offer-
ing of securities, securing of financing, or
similar event does not constitute a sale of
some or all of the equity or assets of a ser-
vice recipient, or a change in effective con-
trol of a service recipient, for purposes of
this section.
1
2. Correction
A plan provision eligible for this sec-
tion may be corrected in accordance with
this section before the date an event occurs
that is not a change in control event under
§ 1.409A–3(a)(5) but is a payment event
under the plan. The plan may be corrected
by amending the plan to provide for a
change in control event that satisfies the
requirements of § 1.409A–3(a)(5), pro-
vided that the amendment may not cause
an event that was not a payment event
under the original terms of the plan to
become a payment event under the plan.
The amendment must be effective imme-
diately. If, within one year following the
date of correction, a transaction occurs
that is not a change in control event un-
der § 1.409A–3(a)(5) and results in the
corrected plan provision being applied to
avoid a payment that would have been due
under the pre-correction plan provision,
25% of the amount deferred under the plan
to which the pre-correction plan provi-
sion applied must be included in income
under § 409A(a) by the affected service
provider in the service provider’s taxable
year within which the event occurs.
C.Impermissible Definition of Disability
1. Eligibility
This section applies to a plan provision
that provides for a payment event related
to the service provider’s illness or other
incapacity and resulting inability to per-
form the service provider’s duties as a ser-
vice provider to the service recipient, but
that does not qualify as disabled within
the meaning of §§ 409A(a)(2)(A)(ii) and
409A(a)(2)(C) and §§ 1.409A–3(a)(2) and
1.409A–3(i)(4).
2. Correction
A plan provision eligible for this sec-
tion may be treated by the service recipient
and service provider as not failing to sat-
isfy the requirements of § 409A(a) and
§ 1.409A–3(a)(2) before an event oc-
curs that is not a disability within the
meaning of §§ 409A(a)(2)(A)(ii) and
409A(a)(2)(C) and § 1.409A–3(a)(2)
but is a payment event under the plan.
The plan may be corrected by amend-
ing the plan provision either to remove
the payment event or to define the pay-
ment event as a disability within the
meaning of §§ 409A(a)(2)(A)(ii) and
409A(a)(2)(C) and § 1.409A–3(a)(2). The
amendment must be effective immedi-
ately. The plan may be corrected in the
same manner after an event occurs that
is not a disability within the meaning of
§§ 409A(a)(2)(A)(ii) and 409A(a)(2)(C)
and § 1.409A–3(a)(2) but is a payment
event under the plan, but only if the entire
amount, if any, paid under the plan due
to the event would be eligible for correc-
tion under Notice 2008–113 if the plan
were treated as having had a compliant
plan provision regarding the disability
payment, and the payment is treated as an
operational failure and is corrected under
Notice 2008–113.
D.Examples
The following examples illustrate the
provisions of this § V. For each example,
assume that the employee and employer
are eligible to correct the impermissible
provision under § III of this notice at all
relevant times.
Example 1 (impermissible definition of separa-
tion from service). Employer consists of one parent
corporation and two 80%-owned subsidiaries. Em-
ployee D is an employee of the parent corporation
who participates in a plan providing for $100x when
Employee D separates from service from the parent
corporation, defined to be a separation from service
under § 1.409A–3(a)(1) except that the term also in-
cludes a transfer from employment by the parent cor-
poration to employment by either of the subsidiaries.
On January 10, 2011, Employee D transfers from the
parent corporation to a subsidiary corporation.
Conclusion: Because the plan provision was not
corrected before EmployeeD transferred from the
1
However, until further guidance is issued, for purposes of identifying and correcting failures eligible for thissection, taxpayers may apply the guidance provided in Section III.G of the
Preamble to the final regulations issued under § 409A regarding application of change in control events by analogy to partnerships.
2010–3 I.R.B.282January 19, 2010

parent corporation to a subsidiary corporation, re-
gardless of whether Employee D is paid $100x, the
plan fails to satisfy the requirements of § 409A(a) and
§ 1.409A–3(a)(1) for 2011 and all previous years in
which the plan contained that plan provision, and Em-
ployee D must include amounts in income and pay the
additional taxes under § 409A(a) accordingly.
Example 2 (impermissible definition of separa-
tion from service). The same facts as inExample 1,
except that the plan is with Employee E, instead of
Employee D, and Employee E does not transfer em-
ployment on January 10, 2011. On March 1, 2011,
Employer amends the plan to remove a transfer from
the parent corporation to either of the subsidiaries as
a separation from service payment event under the
plan. On July 1, 2011, Employee E transfers employ-
ment from the parent corporation to one of the sub-
sidiary corporations.
Conclusion: Employer and Employee E corrected
the provision before Employee E transferred from
the parent corporation to one of the subsidiary cor-
porations, but Employee E transferred from the par-
ent corporation to a subsidiary corporation within one
year following the date of correction. Provided that
Employer does not pay Employee E any amount un-
der the plan due to the event, Employer reports 50%
of the amount deferred under the plan to which the
pre-correction plan provision applied as an amount
includible in income under § 409A(a) for 2011 on
the Form W–2, Box 1 and Box 12 using Code Z,
for Employee E, and Employee E includes 50% of
the amount deferred in income under § 409A(a) and
pays all applicable Federal taxes, including the ad-
ditional 20% tax on such amount (but not the addi-
tional premium interest tax), Employee E will not be
required to include in income under § 409A(a) any
further amount solely as a result of the pre-correction
plan provision.
Example 3 (impermissible definition of separa-
tion from service). The same facts as inExample 2,
except that the plan is with Employee F, instead of
Employee E, and Employee F does not transfer em-
ployment on July 1, 2011. On May 1, 2012, Em-
ployee F transfers employment from the parent cor-
poration to one of the subsidiary corporations.
Conclusion: Employer and Employee F corrected
the provision before Employee F transferred from the
parent corporation to one of the subsidiary corpora-
tions, and Employee F did not transfer from the par-
ent corporation to a subsidiary corporation within one
year following the date of correction. Provided that
Employer does not pay Employee E any amount un-
der the plan due to the event, Employee F will not
be required to include any amount in income under
§ 409A(a) solely as a result of the pre-correction plan
provision.
Example 4 (impermissible definition of a change
in control payment event).Employee G is an em-
ployee of Employer. Employee G participates in a
plan that provides for a payment of $100x to Em-
ployee G upon the earliest of Employee G attaining
age 65, death, or a “change in control” of Employer.
The definition of “change in control” under the plan
does not satisfy the definition of a change in con-
trol event under § 1.409A–3(a)(5) solely because the
definition includes an initial public offering of more
than 30% of the stock of Employer. On February 15,
2011, at which time Employee G is age 50, Employer
amends the definition of change in control under the
plan to delete the occurrence of an initial public of-
fering of Employer stock as a “change in control” of
Employer and does not add any other change in con-
trol events that would cause a payment under the plan,
regardless of whether the additional event is permis-
sible under § 1.409A–3(a)(5). Employer has an initial
public offering of 33% of Employer stock on July 1,
2011.
Conclusion: Employer and Employee G cor-
rected the provision before the initial public offering,
but the initial public offering occurred within one
year following the date of correction. Provided that
Employer does not pay Employee G any amount un-
der the plan due to the event, Employer reports 25%
of the amount deferred under the plan to which the
pre-correction plan provision applied as an amount
includible in income under § 409A(a) for 2011 on
the Form W–2, Box 1 and Box 12 using Code Z, for
Employee G, and Employee G includes 25% of the
amount deferred in income under § 409A(a) and pays
all applicable Federal taxes, including the additional
20% tax on such amount (but not the additional pre-
mium interest tax), Employee G will not be required
to include in income under § 409A(a) any further
amount solely as a result of the pre-correction plan
provision.
Example 5 (impermissible definition of a dis-
ability provision).Employee H is an employee of
Employer who participates in a plan that provides
for payments of $100x to Employee H upon the
earlier of Employee H’s separation from service (as
defined under § 1.409A–1(h)), death or disability.
The definition of disability requires only that the
employee be unable to continue for a period of six
months his or her duties in the employee’s position
of employment at the time of the disability. On
July 1, 2011, Employee H suffers an illness that
qualifies as a disability under the plan but does not
qualify as a disability under § 1.409A–3(a)(2). On
July 15, 2011, Employee H receives a payment of
$100x. On August 1, 2011, the plan is amended so
that the definition of disability under the plan would
qualify as a disability under § 1.409A–3(a)(2). On
September 15, 2011, Employer and Employee H
treat the $100x as an operational failure under Notice
2008–113 and Employee H repays Employer the
$100x and meets all the other requirements of Notice
2008–113.
Conclusion: Because the plan provision defining
disability was corrected and all payments received
under the plan due to the impermissible payment
event were treated as operational failures and
corrected under Notice 2008–113, Employer and
Employee H are not required to treat the plan as
failing to satisfy the requirements of § 409A(a) and
§ 1.409A–3(a)(2) solely due to the plan provision
defining disability.
Example 6 (impermissible definition of a disabil-
ity provision).ThesamefactsasinExample 6, except
that the plan is between Employer and Employee J,
and on July 1, 2011, Employee J does not suffer an
illness but instead is injured in a manner that quali-
fies as a disability under the plan and as a disability
under § 1.409A–3(a)(2).
Conclusion: Because the injury to Employee J
qualifies as both a payment event under the plan and a
disability under § 1.409A–3(a)(2), Employee J must
be paid $100x. A failure to pay the $100x would be an
operational failure that may be eligible for correction
under Notice 2008–113.
VI. CORRECTION OF
IMPERMISSIBLE PAYMENT
PERIODS FOLLOWING A
PERMISSIBLE PAYMENT EVENT
A.Payment Periods of Longer than 90
Days Following a Permissible Payment
Event
1. Eligibility
This section applies to a plan provision
that provides that payment will be made
following a permissible payment event un-
der § 409A, but designates the period im-
mediately following such payment event
during which payment may be made or
commenced as later than 90 days and ear-
lier than 366 days following such payment
event.
2. Correction
A plan provision eligible for this section
may be corrected by amending the plan
to either remove the period following the
permissible payment event during which
payment may be made or commenced, or
to set forth a period immediately following
the permissible payment event that com-
plies with § 409A(a) and § 1.409A–3(b)
(so that it is a period not exceeding 90 days
and the service provider does not have a
right to designate the taxable year of pay-
ment). If the plan is not so amended before
the occurrence of the permissible payment
event with respect to any service provider,
but is so amended within a reasonable
time thereafter, the plan may be treated as
not failing to comply with § 409A(a) and
§ 1.409A–3(b) (so that the amount is paid
within 90 days of the payment event and
the service provider does not have a right
to designate the taxable year of payment)
for the affected service provider solely
due to the impermissible payment periods,
provided that upon the occurrence of the
permissible payment event the plan com-
plies in operation with § 1.409A–3(b) with
respect to the affected service provider,
and 50% of the amount deferred under
the plan to which the pre-correction plan
provision applied is included in income
under § 409A(a) by the affected service
January 19, 20102832010–3 I.R.B.

provider in the service provider’s taxable
year within which the permissible pay-
ment event occurs.
B.Payment Periods Following a
Permissible Payment Event Dependent
Upon the Service Provider Completing
Certain Employment-Related Actions
1. Eligibility
This section applies to a plan provision
that provides for payment upon a permissi-
ble payment event under § 409A, but con-
ditions the payment on an employment-re-
lated action of the service provider such
as the execution and submission of a non-
competition agreement, a nonsolicitation
agreement, or a release of claims.
2. Correction
A plan provision eligible for this sec-
tion may be corrected in accordance with
this section before the date an event oc-
curs that would be a permissible payment
event under § 409A to which the provi-
sion applies. The plan may be corrected
by amending the plan to remove the abil-
ity of the service provider to delay or accel-
erate the timing of the payment as a result
of the service provider’s actions; provided,
however, that if the plan provides for pay-
ment (subject to the service provider’s ac-
tion) within a designated period follow-
ing the permissible payment event under
§ 409A that complies with § 1.409A–3(b),
the amendment must provide for payment
only on the last day of such designated pe-
riod, and if the plan does not provide for
payment (subject to the service provider’s
action) within a designated period follow-
ing the permissible payment event under
§ 409A that complies with § 1.409A–3(b),
the amendment must provide for payment
only upon a fixed date either 60 or 90 days
following the occurrence of the permissi-
ble payment event. The amendment may
not otherwise change the time or form of
payment.
C.Examples
The following examples illustrate the
provisions of this § VI. For each example,
assume that the employee and employer
are eligible to correct the impermissible
provision under § III of this notice at all
relevant times.
Example 1 (Payment Period in Excess of 90 Days
Following Permissible Payment Event). Employee
K is an employee of Employer whose employment
agreement entitles Employee K to $100x upon a
separation from service (defined to comply with
§ 1.409A–1(h)), payable within 180 days following
the separation from service and the exact timing
within the 180 days is in the discretion of Employer.
On February 1, 2011, Employee K has a separa-
tion from service from Employer. Employer pays
Employee K $100x on March 1, 2011, provides
Employee K no election regarding the timing of the
payment and amends the employment agreement
to comply with § 1.409A–3(b) within a reasonable
period of time following February 1, 2011.
Conclusion: Employer paid Employee K $100x
within 90 days following Employee K’s separation
from service, Employer provided Employee K no
election regarding the timing of the payment and
Employer amended the employment agreement to
comply with § 1.409A–3(b) within a reasonable
period of time following Employee K’s separation
from service. Provided that Employer reports 50%
of the amount deferred under the plan to which the
pre-correction plan provision applied as an amount
includible in income under § 409A(a) for 2011 on
the Form W–2, Box 1 and Box 12 using Code Z, for
Employee K, and Employee K includes the amount
in income under § 409A(a) and pays all applicable
Federal taxes, including the additional 20% tax on
such amount (but not the additional premium interest
tax), Employee K will not be required to include in
income under § 409A(a) any further amount solely
as a result of the plan provision providing a 180-day
payment period.
Example 2 (impermissible payment period fol-
lowing a permissible payment event).Thesame
factsasinExample 1, except that the agreement is
between Employer and Employee L, and Employee
L does not separate from service on March 1, 2011.
On March 15, 2011, Employer amends Employee
L’s employment agreement to provide for payment
within 90 days of Employee L’s separation from
service with the exact timing within the 90 days at
the discretion of the employer. On April 1, 2011,
Employee L has a separation from service from
Employer and Employer pays Employee L $100x on
April 15, 2011, without providing Employee L any
election regarding the timing of the payment.
Conclusion: Because Employer corrected Em-
ployee L’s employment agreement before Employee
L’s separation from service, Employee L will not
be required to include any amount in income under
§ 409A(a) solely as a result of the 180-day payment
period under the pre-correction plan provision.
Example 3 (impermissible payment provision
making timing of payment after a permissible pay-
ment event dependent upon service provider action).
Employee M is an employee of Employer whose
employment agreement entitles Employee M to
$100x upon a separation from service (defined to
comply with § 1.409A–1(h)). Employee M’s em-
ployment agreement provides that the amount is
payable within 90 days of Employee M’s separation
from service, but not until Employee M executes and
submits a release of claims and any period during
which Employee M may revoke the release pursuant
to applicable law has expired before the end of the
90-day period. If Employee M fails to execute the
release the amount is forfeited. On April 1, 2011,
Employer and Employee M amend Employee M’s
employment agreement to provide for payment of
the amount on the 90
th
day following Employee M’s
separation from service provided that Employee M
has executed and submitted a release of claims and
the statutory period during which Employee M is
entitled to revoke the release of claims has expired
on or before that 90
th
day. Employee M has a sepa-
ration from service with Employer on June 1, 2011
and Employee M executes and submits a release of
claims on June 30, 2011. Employer pays Employee
$100x on August 30, 2011.
Conclusion: Because Employer and Employee M
corrected the amendment before Employee M’s sep-
aration from service, andbecause Employer paid the
amount in compliance with the amended plan pro-
vision, Employee M is not required to include any
amount in income under § 409A solely due to the
pre-correction plan provision.
Example 4 (payment provision making timing of
payment after a permissible payment event depen-
dent upon service provider action). Employee N is
an employee of Employer whose employment agree-
ment entitles Employee N to $100x upon a separation
from service (defined to comply with § 1.409A–1(h)).
Employee N’s employment agreement provides that
the amount is payable upon Employee N executing
and submitting a release of claims and after any pe-
riod during which Employee N may revoke the re-
lease pursuant to applicable law has expired, but the
agreement does not include any time limit for pay-
ment. On April 1, 2011, Employer and Employee N
amend Employee N’s employment agreement to pro-
vide for payment of $100x on the 60
th
day follow-
ing Employee N’s separation from service, provided
that Employee N has executed and submitted a re-
lease of claims and the statutory period during which
Employee N is entitled to revoke the release of claims
has expired on or before that 60
th
day. Employee N
has a separation from service with Employer on June
16, 2011. Employee N executes and submits a release
of claims on July 1, 2011. Employer pays Employee
N $100x on August 15, 2011.
Conclusion: Because Employer and Employee N
corrected the provision before Employee N’s separa-
tion from service, Employee N is not required to in-
clude any amount in income under § 409A(a) solely
due to the pre-correction plan provision.
VII. CORRECTION OF CERTAIN
IMPERMISSIBLE PAYMENT
EVENTS AND PAYMENT
SCHEDULES
A.Plans with Permissible and
Impermissible Payment Events under
§ 409A
1. Eligibility
This section applies to a plan provision
that, with respect to a deferred amount,
provides both for one or more permissible
payment events under § 409A, and one or
more impermissible payment events under
2010–3 I.R.B.284January 19, 2010

§ 409A. This section does not apply to a
payment event the occurrence of which is
in the discretion of the service recipient,
such as the right of the service recipient
to use its discretion to pay some or all of
an amount upon a different payment event
(for example, service recipient discretion
to terminate and liquidate the plan), or the
service provider, such as the right of the
service provider to an accelerated payment
upon an agreement to forfeit a portion of
the amount deferred (a haircut provision).
2. Correction
With respect to a service provider, a
plan provision eligible for this section may
be corrected in accordance with this sec-
tion before the date a payment event that
is impermissible under § 409A has been
elected as a payment event by the service
provider participating in the plan or oth-
erwise applies to an amount deferred by
the service provider. The plan may be cor-
rected by amending the plan to remove
such impermissible payment event. For
this purpose, an impermissible payment
event will not be treated as elected until the
service provider’s election is irrevocable
under the terms of the plan. (Note that al-
though this relief is available for a service
provider who has not elected an impermis-
sible payment event even though other ser-
vice providers under a substantially similar
plan have elected an impermissible pay-
ment event, eligibility for any correction
under this notice for the service providers
who have elected an impermissible pay-
ment event generally requires that the ser-
vice recipient take commercially reason-
able steps to identify and correct all sub-
stantially similar language in other plans
sponsored by the servicerecipient, includ-
ing with respect to those who have not
elected an impermissible payment event.
See § III.B of this notice).
With respect to a service provider, to
the extent one or more impermissible
payment events under a plan provision el-
igible for this section has been elected by
the service provider, or otherwise has be-
come applicable to the service provider’s
deferred amount, a plan provision eligible
for this section may be corrected in ac-
cordance with this section before the date
any of the impermissible payment events
occurs. The plan may be corrected by
amending the plan to remove such imper-
missible payment events. The amendment
must be effective immediately, and if any
of the impermissible payment events that
would have required payment under the
pre-correction plan provision occur within
one year following the date of correction,
50% of the amount deferred under the plan
to which the pre-correction plan provision
applied must be included in income under
§ 409A(a) by the affected service provider
for the service provider’s taxable year
within which the event occurs.
B.Plans with Only Impermissible
Payment Events under § 409A
1. Eligibility
This section applies to a plan provision
that, with respect to a deferred amount,
provides for payment only upon one or
more impermissible payment events under
§ 409A and does not include any permissi-
ble payment events under § 409A.
2. Correction
A plan provision eligible for this sec-
tion may be corrected in accordance with
this section before the date one or more
of the impermissible payment events oc-
curs to which the provision applies. The
plan may be corrected by amending the
plan to remove the provision providing for
the impermissible payment events before
any impermissible payment event occurs,
and replacing that provision with a provi-
sion providing for payment upon the later
of the service provider’s separation from
service (as defined under § 1.409A–1(h)
without reference to any permissible alter-
native definition that may be designated in
the plan) and the sixth anniversary of the
date of correction. In addition, the affected
service provider must include 50% of the
amount deferred under the plan to which
the pre-correction plan provision applied
in income under § 409A(a) in the service
provider’s taxable year within which the
date of correction occurs.
C.Certain Impermissible Alternative
Payment Schedules
1. Eligibility
This section applies to a plan provision
that, with respect to a deferred amount,
provides for more than one time or form
of payment upon the occurrence of a sin-
gle type of permissible payment event un-
der § 409A in a manner that fails to sat-
isfy the requirements of § 409A(a) and
§ 1.409A–3(c).
2. Correction
To the extent the multiple times or
forms of payment relate to the occurrence
of a service provider’s voluntary and invol-
untary separation from service (as defined
under § 1.409A–1(n)), a plan provision
eligible for this section may be corrected
in accordance with this section before the
date a separation from service occurs that
could result in the impermissible multiple
times or forms of payment for that ser-
vice provider. The plan may be corrected
by amending the plan to provide that the
time or form of payment upon a voluntary
separation from service will be the same
time or form of payment that the pre-cor-
rection plan provision provided for upon
an involuntary separation from service (as
defined under § 1.409A–1(n)), subject to
the requirements of § 409A(a)(2)(B)(i), if
applicable (the six-month delay require-
ment). The amendment must be effective
immediately, and if a service provider has
a voluntary separation from service within
one year following the date of correction
which results in the corrected plan pro-
vision being applied to avoid a time or
form of payment that would have been due
under the pre-correction plan provision,
50% of the amount deferred under the plan
to which the pre-correctionplanprovi-
sion applied must be included in income
under § 409A(a) by the affected service
provider in the service provider’s taxable
year within which the event occurs.
To the extent the multiple times or
forms of payment result from an al-
ternative payment schedule relating to
some factor other than whether a service
provider’s separation from service is vol-
untary or involuntary, a plan provision
eligible for this section may be corrected
in accordance with this section before the
date a payment event occurs that could re-
sult in the impermissible multiple times or
forms of payment for that service provider.
Until that time, the plan may be corrected
by amending the plan to remove the times
or forms of payment, in accordance with
the next sentence, until the remaining
times or forms of payment no longer cause
January 19, 20102852010–3 I.R.B.

theplantofailtosatisfytherequirements
§ 409A and § 1.409A–3(c). In determining
which of two times or forms of payment
should be removed, the remaining time or
form of payment must be the time or form
of payment resulting in, or potentially re-
sulting in, the latest final payment date,
and if two times or forms of payment result
in, or potentially result in, the same latest
final payment date, the time or form of
payment commencing, or potentially com-
mencing, at the latest possible date, and if
those two dates are the same, the time or
form of payment generally anticipated to
result in the amount deferred being paid
at later dates. The amendment must be
effective immediately, and if a payment
event corrected under this provision oc-
curs within one year following the date of
correction, 50% of the amount deferred
under the plan to which the pre-correction
plan provision applied must be included
in income under § 409A(a) by the affected
service provider in the service provider’s
taxable year within which the event oc-
curs. If a time or form of payment has
no possibility of applying to a service
provider because the service provider is
not eligible and can never become eligible,
or is no longer eligible and cannot again
become eligible, for such a time or form of
payment, that time or form of payment is
not required to be removed from the plan
with respect to that service provider and
the service recipient and service provider
may treat the plan as not failing to sat-
isfy the requirements of § 409A(a) and
§ 1.409A–3(c) with respect to that service
provider merely because of the inclusion
of that time or form of payment in the plan.
D.Impermissible Service Provider or
Service Recipient Discretion with Respect
to a Payment Schedule Following a
Permissible Payment Event (Including
Subsequent Deferral Elections)
1. Eligibility
This section applies to a plan provision
that provides a service provider or a ser-
vice recipient with discretion to change the
time or form of payment of an amount
due under the plan following a permissi-
ble payment event, causing the plan to fail
to satisfy the requirements of § 409A(a),
§ 1.409A–2(b) or § 1.409A–3(j). How-
ever, this section does not apply to a plan
provision that provides a service provider
or service recipient discretion to change or
modify payment events, such as the discre-
tion to terminate the plan.
2. Correction
A plan provision to which this sec-
tion applies that provides a default time
or form of payment that would be in
effect if the service provider or service
recipient did not exercise its discretion to
change the time or form of payment, and
that does not provideany discretion to
change the time or form of payment after
the payment event has occurred, will not
be treated as failing to meet the require-
ments of § 409A(a) and § 1.409A–3(a),
§ 1.409A–3(j) or § 1.409A–2(b) if the
service provider and service recipient do
not exercise their discretion, or revoke
any discretion exercised and the revoca-
tion occurs more thanone year before the
payment event occurs. However, if a ser-
vice provider to the same service recipient
participates in a plan with a substantially
similar provision, and either the service
provider or service recipient exercises its
discretion under the plan to change the
time or form of payment under the plan
and does not revoke that exercise of discre-
tion at least one year before the payment
event occurs, then, to be eligible to correct
that plan provision under this section the
service recipient is required to take com-
mercially reasonable steps to identify and
correct all substantially similar provisions
in other plans, including substantially sim-
ilar provisions with respect to which the
discretion has not been exercised by the
service provider or service recipient or
whose exercises of that discretion have
been revoked.
In all other cases, a plan provision eligi-
ble for this section may be corrected in ac-
cordance with this section before the date a
payment event occurs that is the subject of
the plan provision eligible for this section.
The plan may be corrected by amending
the plan in accordance with this section.
To the extent that the plan has a de-
fault time or form of payment that would
be in effect if the service provider or ser-
vice recipient did not exercise its discre-
tion to change the time or form of pay-
ment, the plan may be amended to remove
the service provider’s or service recipient’s
discretion to change the time or form of
payment. If the plan does not have a de-
fault time or form of payment that would
be in effect if the service provider or ser-
vice recipient did not exercise its discre-
tion to change the time or form of pay-
ment, the plan may be amended to re-
move the service provider’s or service re-
cipient’s discretion to change the time or
form of payment, and to provide that the
time or form of payment will be that po-
tential time or form of payment under the
terms of the plan in place immediately
prior to the amendment that would result
in the latest final payment date, and if two
forms of payment result in, or potentially
result in, the same latest final payment
date, the form of payment commencing, or
potentially commencing, at the latest pos-
sible date, and if those two dates are the
same the form of payment generally re-
sulting in the amount deferred being paid
at later dates. In each case the amend-
ment must be effective immediately. If
a payment event to which the correction
applies occurs within one year following
the date of correction (including where a
service provider or service recipient had
exercised its discretion before the correc-
tion and had revoked the discretion within
one year of the occurrence of the payment
event), 50% of the amount deferred under
the plan to which the pre-correction plan
provision applied must be included in in-
come under § 409A(a) by the affected ser-
vice provider in the service provider’s tax-
able year within which the event occurs.
E.Impermissible Service Recipient
Discretion to Accelerate Payment Events
1. Eligibility
This section applies to a plan pro-
vision that does not comply with
§ 1.409A–3(j)(4) that provides a service
recipient with the discretion to accelerate
and make a payment regardless of whether
a payment event has occurred, such as the
discretion to terminate the plan and im-
mediately pay all amounts deferred, and
thus does not comply with § 409A(a) and
§ 1.409A–3(a) or § 1.409A–3(j).
2. Correction
With respect to a service provider, a
plan provision eligible for this section may
be corrected in accordance with this sec-
tion before the earlier of the date the ser-
2010–3 I.R.B.286January 19, 2010

vice recipient exercises its discretion to ac-
celerate a payment under the plan and such
discretion is irrevocable, or the date a pay-
ment has been made under the plan pur-
suant to the exercise of discretion. The
plan may be corrected by amending the
plan to remove the service recipient’s dis-
cretion to accelerate the payment or to oth-
erwise make the acceleration permissible
under § 1.409A–3(j)(4).
F.Impermissible Reimbursement or
In-Kind Benefit Provisions
1. Eligibility
This section applies to a plan provi-
sion that provides for a reimbursement or
in-kind benefits subject to § 409A that
does not comply with the requirements of
§ 409A(a) and § 1.409A–3(i)(1)(iv).
2. Correction
A plan provision eligible for this sec-
tion may be corrected in accordance
with this section before the date an event
occurs that would result in the service
provider becoming eligible to receive a
reimbursement or in-kind benefits subject
to § 409A. The plan may be corrected
by amending the plan to provide for re-
imbursement or in-kind benefits that sat-
isfy the requirements of § 409A(a) and
§ 1.409A–3(i)(1)(iv), provided that any
amendment required to satisfy the require-
ments of § 1.409A–3(i)(1)(iv)(A)(3) must
cause the amount eligible for reimburse-
ment or in-kind benefits to be allocatedpro
ratato the number of years during which
the service provider may be eligible to
receive the reimbursement or in-kind ben-
efits (which may not be amended as part of
the plan correction). If the pre-correction
reimbursement or in-kind benefits were
available for the service provider’s or other
individual’s lifetime, the period for pur-
poses of the proration requirement must
be established based upon that service
provider’s or individual’s life expectancy
under reasonable actuarial assumptions.
If the pre-correction reimbursement or
in-kind benefits were available for a period
ending with an event, the period for pur-
poses of the proration requirement must
be established based upon reasonable as-
sumptions and may not be less than three
years. The amendment must be effective
immediately, and if an event occurs that
would have made the service provider
eligible for payment of reimbursement or
in-kind benefits underthe pre-correction
plan provision within one year following
the date of correction and results in the
corrected plan provision being applied to
avoid or reduce the availability or payment
of reimbursement or in-kind benefits, 50%
of the amount deferred under the plan to
which the pre-correction plan provision
applied must be included in income under
§ 409A in the service provider’s taxable
year within which the event occurs.
G.Examples
The following examples illustrate the
provisions of this § VII. For each example,
assume that the employee and employer
are eligible to correct the impermissible
provision under § III of this notice at all
relevant times.
Example 1 (plan with permissible and impermis-
sible payment events). Employee P is an employee
of Employer whose employment agreement entitles
Employee P to $100x payable upon the earlier of sep-
aration from service or an initial public offering of
Employer stock. On January 1, 2011, Employer and
Employee P amend the employment agreement to re-
move the payment event related to an initial public of-
fering, so that the amount is payable solely upon Em-
ployee P’s separation from service. An initial public
offering of Employer stock occurs on September 1,
2011.
Conclusion: Employer and Employee P corrected
the employment agreement before the initial public
offering of Employer stock, but the initial public of-
fering occurred within one year following the date
of correction. Provided that Employer reports 50%
of the amount deferred under the plan to which the
pre-correction plan provision applied as an amount
includible in income under § 409A(a) for 2011 on
the Form W–2, Box 1 and Box 12 using Code Z, for
Employee P, and Employee P includes 50% of the
amount deferred in income under § 409A and pays
all applicable Federal taxes, including the additional
20% tax on such amount (but not the premium interest
tax), Employee P will not be required to include any
further amounts in income under § 409A(a) solely as
a result of the pre-correction plan provision.
Example 2 (plan with permissible and impermis-
sible payment events). Employee Q is an employee
of Employer whose employment agreement entitles
Employee Q to $100x payable upon the earlier of
separation from service or an initial public offering
of Employer stock. On July 1, 2011, Employer and
Employee Q amend the employment agreement to re-
move the payment event related to an initial public of-
fering, so that the amount is payable solely upon Em-
ployee Q’s separation from service. An initial public
offering of Employer stock occurs on September 1,
2012.
Conclusion: Employer and Employee Q cor-
rected the employment agreement more than one year
before the initial public offering of Employer stock.
Provided that Employer does not pay Employee Q
any amount pursuant to this plan provision due to
the initial public offering, Employee Q will not be
required to include any amount under § 409A(a)
solely as a result of the pre-correction plan provision.
Example 3 (plan with only impermissible pay-
ment events). Employee R is an employee of Em-
ployer who participates in a plan providing for pay-
ment of $100x to a service provider upon the service
provider’s child enrolling in an institution providing
post-secondary education. On August 15, 2011, Em-
ployee R’s child enrolls in an institution providing
post-secondary education.
Conclusion: Because Employee R’s child en-
rolled in an institution providing post-secondary
education before the provision was corrected, regard-
less of whether Employee R is paid $100x, the plan
is not eligible for correction, and Employee R must
include amounts in income and pay the additional
taxes under § 409A(a) accordingly.
Example 4 (plan with only impermissible payment
events). Employee S is an employee of Employer
who participates in a plan providing for payment
of $100x to a service provider upon the service
provider’s child enrolling in an institution providing
post-secondary education. On October 1, 2011,
Employer and Employee S amend the plan to re-
place the provision providing for payment upon a
service provider’s child enrolling in an institution
providing post-secondary education with a provision
providing for payment upon the later of the service
provider’s separation from service (as defined under
§ 1.409A–1(h) without reference to any permissible
alternative definition that may be designated in a
plan) and October 1, 2017.
Conclusion: Employer and Employee S corrected
the plan provision before a child of Employee S en-
rolled in an institution providing post-secondary ed-
ucation. Provided that Employer reports 50% of the
amount deferred under the plan to which the pre-cor-
rection plan provision applied as an amount includi-
ble in income under § 409A(a) for 2011 on the Form
W–2, Box 1 and Box 12 using Code Z, for Employee
S, and Employee S includes 50% of the amount de-
ferred in income under § 409A(a) and pays all appli-
cable Federal taxes, including the additional 20% tax
on such amount (but not the additional premium in-
terest tax), Employee S will not be required to include
any further amount in income under § 409A(a) solely
due to the pre-correction plan provision.
Example 5 (plan with impermissible alternative
payment schedules). Employee T is an employee of
Employer whose employment agreement with Em-
ployer provides for payment of $100x in the form
of a lump sum payment if Employee T has an invol-
untary separation from service with Employer, and
$100x in the form of ten annual installments if Em-
ployee T has a voluntary separation from service with
Employer. On October 1, 2011, Employer amends
the agreement to replace the provision providing for
payment in the form of installments upon a volun-
tary separation from service with a provision provid-
ing for payment in the form of a lump sum upon a
voluntary separation from service. Employee T has a
voluntary separation from service with Employer on
June 1, 2015.
Conclusion: Because Employee T and Employer
corrected the plan provision before Employee T sep-
arated from service with Employer, and Employee
January 19, 20102872010–3 I.R.B.

T separated from servicemore than one year fol-
lowing the date of correction, Employee T will not
be required to include any amount in income under
§ 409A(a) solely due to the pre-correction plan pro-
vision.
Example 6 (plan with impermissible alternative
payment schedules). All of Employer’s employees
are classified as either Level 1 or Level 2 employ-
ees, depending upon the position in which they work
and the division at which they work. Employee U is
an employee of Employer whose employment agree-
ment with Employer provides for a payment of $100x
in the form of a lump sum if Employee U separates
from service at a time that Employee U is a Level
1 employee, or for payment of $100x in the form of
ten annual installments if Employee U separates from
service at a time that Employee U is a Level 2 em-
ployee. On October 1, 2011, Employer amends the
agreement to replace the provision providing for pay-
ment in the form of a lump sum payment upon a sepa-
ration from service at the time Employee U is a Level
1 employee with a provision providing for payment
in the form of ten annual installments upon Employee
U’s separation from service(regardless of Employee
U’s classification at the time). Employee U has a sep-
aration from service with Employer on June 1, 2012
at which time Employee U is a Level 2 employee.
Conclusion: Employer and Employee U cor-
rected the plan provision before Employee U sepa-
rated from service, and Employee U separated from
service within a year of the correction. Provided that
Employer pays $100x to Employee U in ten annual
installments, Employer reports 50% of the amount
deferred under the plan to which the pre-correction
plan provision applied as an amount includible in
income under § 409A(a) for 2012 on the Form W–2,
Box1andBox12usingCodeZ,forEmployeeU,
and Employee U pays all applicable Federal taxes,
including the additional 20% tax on such amount (but
not the additional premium interest tax), Employee
U will not be required to include any further amount
in income under § 409A(a) solely as a result of the
pre-correction plan provision.
Example 7 (plan with impermissible service
provider or service recipient discretion with respect
to payment schedules following permissible payment
events). Employee V is an employee of Employer
who participates in a plan providing for payment of
$100x to Employee V upon Employee V attaining
age 65 in the form of ten annual installments, unless
Employer otherwise determines in its sole discre-
tion to pay the amount in the form of a lump sum
payment. On February 1, 2011, Employer amends
the plan with Employee V to remove Employer’s
discretion to change the time or form of payment, so
that the amount is payable in the form of ten annual
installments. Employee V attains age 65 on July 1,
2012.
Conclusion: Because Employer and Employee V
corrected the provision before Employee V attained
age 65, and because more than one year passed after
thedateofcorrectionbeforeEmployeeVattainedage
65, Employee V will not be required to include an
amount in income under § 409A(a) solely due to the
pre-correction plan provision.
Example 8 (plan with impermissible service
provider or service recipient discretion with respect
to payment schedules following permissible payment
events). Employee W is an employee of Employer
who participates in a plan providing for payment of
$100x to Employee W upon Employee W attaining
age 65 in the form of a lump sum payment or annual
installments not to exceed ten years, determined at
the sole discretion of Employer. On February 1,
2011, Employer amends the plan with Employee W
to remove Employer’s discretion to change the time
or form of payment upon Employee W attaining age
65, so that the amount is payable in the form of ten
annual installments upon Employee W attaining age
65. Employee W attains age 65 on January 2, 2012.
Conclusion: Employer and Employee W cor-
rected the plan provision before Employee W attained
age 65, but less than one year before Employee W
attained age 65. Provided that Employer reports 50%
of the amount deferred under the plan to which the
pre-correction plan provision applied as an amount
includible in income under § 409A(a) for 2012 on
the Form W–2, Box 1 and Box 12 using Code Z,
for Employee W, and Employee W includes 50%
of the amount deferred in income under § 409A(a)
and pays all applicable Federal taxes, including the
additional 20% tax on such amount (but not the
additional premium interest tax), Employee W will
not be required to include any further amount in
income under § 409A(a) solely as a result of the
pre-correction plan provision.
Example 9 (plan with impermissible service
provider or service recipient discretion with respect
to payment schedules following permissible payment
events). Employee X is an employee of Employer
who participates in a plan providing for payment of
$100x to Employee X upon Employee X’s separation
from service, provided that Employer may delay
that payment for up to three years if certain cash
flow targets are not met. On July 1, 2011, Employer
amends the plan to remove its discretion to delay
payment, and to remove any delay on payment due
to a failure to meet prescribed cash flow targets. It
replaces those provisions with a provision stating
that payment will be delayed to the extent a payment
would jeopardize the ability of the service recipient
to continue as a going concern, but only until such
time as the making of the payment would not have
such effect. Employee X separates from service on
January 1, 2013.
Conclusion: Because Employer and Employee X
corrected the plan provision more than one year be-
fore Employee X separated from service, Employee
X will not be required to include an amount in income
under § 409A(a) solely as a result of the pre-correc-
tion plan provision. Note that this correction required
not only the removal of the discretion, but also the
provision that payment would be delayed if certain
cash flow targets were not met. The addition of the
language providing for a delay if the payment would
jeopardize the ability of the service recipient to con-
tinue as a going concern is not required as a condi-
tion of the correction, but may be added because the
provision complies with the operational provisions of
§ 1.409A–3(d) (permitting delayed payments under
certain circumstances, regardless of whether such cir-
cumstances are described in the plan).
Example 10 (plan permitting impermissible sub-
sequent deferral election).
Employee Y is an employee of Employer who
participates in a plan providing for payment at age 65.
The plan further providesthat an employee may elect
at any time before 30 days before reaching age 65 to
defer the payment for a period of at least 12 months.
Employee Y never makes a subsequent deferral elec-
tion under the plan, attains age 65 on March 1, 2011,
and is paid the amount deferred under the plan.
Conclusion: BecauseEmployeeYwasonlyal-
lowed to apply Employee Y’s discretion to further de-
fer the payment before the payment event occurred,
and has never applied the subsequent deferral election
provision, Employee Y will not be required to include
an amount in income under § 409A(a) solely due to
the impermissible subsequent deferral plan provision.
Example 11 (plan permitting impermissible sub-
sequent deferral election). ThesamefactsasinEx-
ample 10, except that the participant is Employee Z
who makes a subsequent deferral election to defer the
payment to age 70 on June 1, 2011, when Employee
Z is age 63. On July 1, 2011, Employee Z revokes the
subsequent deferral election.
Conclusion: Because Employee Z was only al-
lowed to apply Employee Z’s discretion to further de-
fer the time or form of payment before the payment
event occurred, and revoked the subsequent defer-
ral election more than one year before the payment
event occurred (attaining age 65), Employee Z will
not be required to include an amount in income under
§ 409A solely due to the pre-correction plan provi-
sion.
Example 12 (plan permitting impermissible sub-
sequent deferral election). ThesamefactsasinEx-
ample 10, except that the participant is Employee AA
who makes a subsequent deferral election to defer
the payment to age 67 on March 1, 2010, when Em-
ployee AA is age 63 and two months. Employee AA
revokes the subsequent deferral election on Septem-
ber 1, 2011, when Employee AA is age 64 and eight
months. Employee AA attains age 65 on January 1,
2012, and is not paid the amount deferred under the
plan.
Conclusion: Because Employee AA exercised
Employee AA’s discretion to make a subsequent
deferral election under the plan, but did not revoke
the subsequent deferral election more than one year
before the payment event occurred (Employee AA
attaining age 65), and the plan provision was not
corrected before Employee AA attained age 65, Em-
ployee AA must include the amount deferred under
the plan in income under § 409A(a).
Example 13 (plan permitting impermissible sub-
sequent deferral election). ThesamefactsasinEx-
ample 10, except that the participant is Employee BB
who makes a subsequent deferral election to defer the
payment to age 68 on March 1, 2010, when Employee
BB is age 63 and six months. On June 1, 2011, when
Employee BB is age 64 and eight months, the plan is
amended to remove the subsequent deferral election
provision and Employee BB’s election is revoked.
Conclusion: Employee BB exercised Employee
BB’s discretion to make a subsequent deferral elec-
tion under the plan and did not revoke the subse-
quent deferral election more than one year before the
payment event occurred (Employee BB attaining age
65), but the plan provision was corrected before Em-
ployee BB attained age 65. Provided that Employer
reports 50% of the amount deferred under the plan
to which the pre-correction plan provision applied as
an amount includible in income under § 409A(a) for
2011 on the Form W–2, Box 1 and Box 12 using Code
Z, for Employee BB, and Employee BB includes 50%
of the amount deferred in income under § 409A(a)
2010–3 I.R.B.288January 19, 2010

and pays all applicable Federal taxes, including the
additional 20% tax on such amount (but not the addi-
tional premium interest tax), Employee BB will not
be required to include any further amount in income
under § 409A(a) solely as a result of the pre-correc-
tion plan provision.
Example 14 (plan with impermissible service re-
cipient discretion to accelerate payment events).Em-
ployee CC is an employee of Employer who partici-
pates in a plan that provides for payment of $100x to
Employee CC upon Employee CC’s separation from
service, unless Employer otherwise elects in its sole
discretion to pay all or a portion of such amount on
an earlier date. On January 1, 2011, Employer ex-
ercises its discretion to accelerate payment to Em-
ployee CC and makes a $50x lump sum payment on
March 1, 2011. On July 1, 2011, Employer amends
the plan to remove its discretion to pay all or a por-
tion of the remaining amount on an earlier date, and
to provide only that it may exercise discretion to ter-
minate and pay amounts under the plan in compliance
with 1.409A–3(j).
Conclusion: Because Employer exercised its dis-
cretion and made a payment before the correction of
the plan provision, regardless of whether Employee
CC returns the payment the plan fails to meet the re-
quirements of § 409A(a) for periods during which
the plan contained the provision, and Employee CC
must include amounts in income and pay the addi-
tional taxes under § 409A(a) accordingly.
Example 15 (plan with impermissible service re-
cipient discretion to accelerate payment events).Em-
ployee DD is an employee of Employer who partici-
pates in a plan that provides for payment of $100x to
Employee DD upon Employee DD’s separation from
service, unless Employer otherwise elects in its sole
discretion to pay all or a portion of such amount on
an earlier date. On March 1, 2011, Employer amends
the plan to remove its discretion to pay all or a por-
tion of such amount on an earlier date, and to pro-
vide only that it may exercise discretion to terminate
and pay amounts under the plan in compliance with
1.409A–3(j). Employee DD has a separation from
service on March 15, 2011.
Conclusion: Because Employer and Employee
DD corrected the plan provision before Employer
exercised its discretion, Employee DD will not be
required to include any amount in income under
§ 409A(a) solely as a result of the pre-correction plan
provision.
Example 16 (plan with impermissible reimburse-
ment or in-kind benefits provision).EmployeeEE
is an employee of Employer who participates in
a plan providing that Employee EE is eligible for
reimbursement of country club dues for five years,
up to an aggregate of $100x, following Employee
EE’s separation from service with Employer after
attaining age 65 and ten years of service. Employee
EE attained age 65 and ten years of service during
2009. On April 1, 2011, Employer amends the plan
to specify that Employee EE is only eligible for
reimbursement of up to $20x during each of the five
years following the Employee EE’s separation from
service. Employee EE has a separation from service
with Employer on December 15, 2011.
Conclusion: Employer and Employee EE cor-
rected the plan provision before Employee EE sep-
arated from service with Employer but less than one
year passed between the date of correction and Em-
ployee EE’s separation from service. Provided that
Employer reports 50% of the amount deferred un-
der the plan to which the pre-correction plan provi-
sion applied as an amount includible in income under
§ 409A(a) for 2011 on the Form W–2, Box 1 and Box
12 using Code Z, for Employee EE, and Employee EE
includes 50% of the amount deferred in income under
§ 409A(a) and pays all applicable Federal taxes, in-
cluding the additional 20% tax on such amount (but
not the additional premium interest tax), Employee
EE will not be required to include any further amount
in income under § 409A(a) solely as a result of the
pre-correction plan provision.
Example 17 (plan with impermissible reimburse-
ment or in-kind benefits provision).Thesamefactsas
inExample 16, except that the plan is with Employee
FF and Employee FF has a separation from service
with Employer on October 1, 2012.
Conclusion: Because Employer and Employee
FF corrected the plan provision before Employee FF
separated from service with Employer, and because
more than one year passed between the date of correc-
tion and Employee FF’s separation from service, Em-
ployee FF will not be required to include any amount
in income under § 409A(a) solely as a result of the
pre-correction plan provision.
VIII. CORRECTION OF FAILURE
TO INCLUDE SIX-MONTH DELAY
OF PAYMENT FOR SPECIFIED
EMPLOYEES
1. Eligibility
This section applies to a plan that fails
to include a provision providing for a
six-month delay of payment for a speci-
fied employee, to the extent required by
§ 409A(a)(2)(B)(i) and § 1.409A–1(c)(3).
2. Correction
A plan eligible for this section may
be corrected in accordance with this sec-
tion before the date an event occurs that
would be subject to the requirements of
§ 409A(a)(2)(B)(i) by amending the plan
to add the requirements set forth under
§409A(a)(2)(B)(i)andtofurtherpro-
vide that an amount payable under the
plan that is subject to the requirements
of § 409A(a)(2)(B)(i) may not be paid
before the later of (i) 18 months fol-
lowing the date of correction, or (ii) six
months following the date of the payment
event. The amendment must be effective
immediately. Provided that the require-
ments of this section are otherwise met,
the correction will not constitute a sub-
sequent change in the time or form of
payment under § 1.409A–2(b). If a service
provider subject to the requirements of
§ 409A(a)(2)(B)(i) participates in the plan
that is so amended and has a separation
from service within one year following
the date of correction that results in the
corrected plan provision being applied to
avoid a payment that would have been due
under the pre-correction plan provision,
50% of the amount deferred under the plan
to which the pre-correction plan provision
applied (and that thus is delayed due to the
amendment) must be included in income
under § 409A(a) by the service provider in
the service provider’s taxable year within
which the separation from service occurs.
3. Example
Employee GG is the chief executive officer of
Employer, a corporation whose stock is publicly
traded. Employee GG participates in a plan provid-
ing for a payment of $100x in ten annual installments
of $10x commencing immediately when Employee
GG separates from service from Employer but the
plan does not include the six-month delay in payment
as required by § 409A(a)(2)(B)(i). On September 1,
2011, Employer and Employee GG amend the plan
to include the requirements under § 409A(a)(2)(B)(i)
and to provide further that no amount will be payable
before March 1, 2013 (18 months after September 1,
2011). Employee GG has a separation from service
with Employer on December 1, 2011.
Conclusion: Employer and Employee GG cor-
rected the plan provisionbefore Employee GG sep-
arated from service, but Employee GG has a sep-
aration from service within one year following the
date of correction, which results in a payment be-
ing delayed that would have been due under the pre-
correction plan provision. Provided that Employer
does not pay Employee GG any amount under the
plan until March 1, 2013 (except, as provided by
the plan due to death, disability (as defined under
§ 1.409A–3(i)(4)) or a permissible acceleration under
§ 1.409A–3(j)(4)), Employer reports as an amount in-
cludible in income under § 409A(a) for 2011 on the
Form W–2, Box 1 and Box 12 using Code Z, for Em-
ployee GG 50% of the amount deferred under the plan
to which the pre-correction plan provision applied,
and Employee GG includes 50% of the amount de-
ferred in income under § 409A(a) and pays all appli-
cable Federal taxes, including the additional 20% tax
on such amount (but not the additional premium inter-
est tax), Employee GG will not be required to include
any further amount in income under § 409A solely as
a result of the pre-correction plan provision.
IX. CORRECTION OF PROVISIONS
PROVIDING FOR IMPERMISSIBLE
INITIAL DEFERRAL ELECTIONS
1. Eligibility
This section applies to a plan provision
that provides for an initial election to defer
compensation that does not comply with
§ 409A(a) and § 1.409A–2(a). Notwith-
standing the foregoing, this section does
January 19, 20102892010–3 I.R.B.

not apply to any plan provision that is el-
igible for correction under § VII.D of this
notice. Accordingly, this section generally
applies to plan provisions providing elec-
tions to defer compensation that would not
otherwise be deferred compensation, and
not elections as to the time or form of pay-
ment of a deferred amount.
2. Correction
A service provider is not required
to include an amount in income under
§ 409A(a) solely because a plan includes
a provision that provides for an ini-
tial election to defer compensation that
does not comply with § 409A(a) and
§ 1.409A–2(a), if the provision has not
been applied by the service provider or
the service recipient with respect to the
service provider. If the service provider
or service recipient takes the action nec-
essary to make an election under the
provision before theapplicable deadline
under § 1.409A–2(a), the provision will
be treated as applied on the date of such
applicable deadline unless the service
provider or service recipient has revoked
the election before the applicable dead-
line under the regulations. If the service
provider or service recipient takes the ac-
tion necessary to make an election under
the provision after the applicable deadline
under § 1.409A–2(a), the provision will be
treated as applied on the date the necessary
action is taken. Note that if a substan-
tially similar provision under a plan has
been applied by another service provider
to the same service recipient, or by the
same service recipient with respect to an-
other service provider, to be eligible for
correction the service recipient would be
required to take commercially reasonable
steps to identify and correct the provisions
in all such plans. See § III.B of this notice.
A plan provision that is eligible for
correction under this section that has been
applied may be corrected in accordance
with this section provided that the cor-
rection is made no later than the end of
the service provider’s second taxable year
immediately following the taxable year
during which occurs the applicable dead-
line for making an initial deferral election
under § 409A(a) and § 1.409A–2(a). The
plan may be corrected by amending the
plan to remove the ability to make the
impermissible initial deferral election,
provided that any amounts that were not
paid during one or more of the service
provider’s taxable years due to the im-
permissible initial deferral election are
corrected in accordance with the pro-
visions of Notice 2008–113 (including
any income inclusion under § 409A(a)
required by the applicable provision of
Notice 2008–113). Notwithstanding § III
of this notice, this correction will not have
any retroactive effect on amounts deferred
under the same provision in any previous
year if the deferral was not corrected under
this section for such previous year by the
applicable deadline under this section, so
that the plan provision will remain a plan
document failure for the previous year
and any resulting deferral will remain an
operational failure.
3. Examples
Example 1 (plan permitting impermissible initial
deferral election). Employee HH is an employee
of Employer who participates in an annual bonus
plan under which employees are awarded bonuses
based on a calendar year of service, payable on
March 15 of the following year. The bonus plan is
not a performance-based compensation arrangement
under § 1.409A–2(a)(8). The bonus plan provides
that employees may make initial deferral elections
to defer the bonus until separation from service (as
defined under § 1.409A–1(h)), provided that the
election is made no later than June 30 of the year
in which the bonus is earned. Employee HH is not
a new participant in the plan so that the applicable
deadline under 1.409A–2(a) for the deferral of the
bonus earned during 2012 (the 2012 annual bonus)
is December 31, 2011. On November 1, 2011,
Employee HH submits an election form electing to
defer the 2012 annual bonus. On December 31, 2011,
Employee HH revokes the deferral election for the
2012 annual bonus.
Conclusion: Because Employee HH revoked the
impermissible deferral election on or before the ap-
plicable deadline for a permissible deferral election
under §1.409A–2(a), the plan provision permitting
the impermissible initial deferral election has not
been applied. Accordingly, Employee HH will not
be required to include any amount in income under
§ 409A(a) for the 2012 annual bonus solely due to
the plan provision.
Example 2 (plan permitting impermissible initial
deferral election). ThesamefactsasinExample 1,
except that the participant is Employee JJ who also
makes an election to defer the 2012 annual bonus on
November 1, 2011, but does not revoke her defer-
ral election for the 2012 annual bonus on or before
December 31, 2011. On May 15, 2012, the defer-
ral election provision is removed from the plan and
Employee JJ’s deferral election for the 2012 annual
bonus is revoked.
Conclusion: Because Employee JJ did not re-
voke the impermissible deferral election until after
the deadline for making an initial deferral election un-
der § 1.409A–2(a), the provision has been applied.
Because Employee JJ took the actions necessary to
make the election on or before the applicable dead-
line under § 1.409A–2(a) for making an initial de-
ferral election, the provision is treated as applied on
the date of the deadline, December 31, 2011. Be-
cause the provision was removed from the plan be-
fore December 31, 2013, and because no amount had
failed to be paid due to the application of the imper-
missible deferral election, no operational failure oc-
curred, and Employee JJ will not be required to in-
clude an amount in income under § 409A(a). Note
that to be eligible to make this correction, Employer
would be required to take commercially reasonable
steps to identify and remove any substantially simi-
lar provision in any plan of the Employer, including
plans of other service providers and including plans
under which the plan provision permitting an imper-
missible initial deferral election had not been applied.
Note further that the correction of the provision with
respect to the 2012 annual bonus will have no effect
on the impermissible deferral of an annual bonus or
other amounts earned in 2011 or any earlier year, so
that, for example, if a 2011 annual bonus were earned
by Employee JJ and Employee JJ made an impermis-
sible deferral election with respect to the 2011 bonus
that was not corrected in accordance with this section,
that amount would be subject to income inclusion and
the additional taxes under § 409A(a) for the taxable
year 2011 (the year in which Employee JJ’s right to
the bonus was first no longer subject to a substantial
risk of forfeiture), regardless of whether Employee
JJ’s deferral election with respect to the 2011 annual
bonus was subsequently revoked and Employee JJ
was paid the bonus on or before March 15, 2012.
Example 3 (plan permitting impermissible initial
deferral election). Employee KK is an employee of
Employer who has been an employee of Employer
for several years. Employee KK has been eligible for,
but has not participated in, a plan under which an em-
ployee may elect to defer all or part of his salary to
be payable at separation from service (as defined in
§ 1.409A–1(h)), provided that the election may only
be applied to salary earned on or after the first day
of the second month immediately subsequent to the
date the employee makes an election to defer. For
example, under the plan terms an election made in
April may only apply to salary earned for June 1 or
later. On April 15, 2011, Employee KK makes an
election to defer 10% of any salary earned on or after
June 1, 2011. The deferral election remains in effect
through December 1, 2012, at which time Employer
removes the provision from the plan and revokes Em-
ployee KK’s election. Employer treats the failures
to pay Employee KK 10% of Employee KK’s salary
earned from June 1, 2011, through December 1, 2012,
as operational failures under Notice 2008–113 and
corrects the failures during 2012 (treating the salary
that would have been paid during 2011 as a correction
made during the taxable year after the taxable year of
the operational failure, and the salary that would have
been paid during 2012 as a correction made during
the taxable year in which the operational failure oc-
curred).
Conclusion: Because Employee KK took the
actions necessary to make a deferral election under
the plan provision before the applicable deadline for
making an initial deferral election under 1.409A–2(a)
(in this case, December 31, 2010), the provision is
2010–3 I.R.B.290January 19, 2010

treated as applied on the date the actions were taken
(April 15, 2011). Because Employer removed the
plan provision on or before December 31, 2012, and
revoked Employee KK’s election and corrected the
resulting operational failures under Notice 2008–113,
Employee KK will not be required to include an
amount in income under § 409A(a) solely as a result
of the pre-correction plan provision. However, Em-
ployee KK may still be required to include an amount
in income under § 409A(a) as a condition of correc-
tion under Notice 2008–113. Note that to be eligible
to make this correction, Employer would be required
to take commercially reasonable steps to identify and
remove any substantially similar provision in any
plan of Employer, including plans of other service
providers and including plans under which the plan
provision permitting an impermissible initial deferral
election had not been applied.
X. AMENDMENT PERIOD
FOLLOWING A SERVICE
RECIPIENT’S INITIAL ADOPTION
OF A PLAN
1. Eligibility and Correction
This section applies to a plan provi-
sion that is eligible for correction under
any other section of this notice, but only
to the extent that the document failure is
corrected no later than the later of the end
of the calendar year in which, or the 15
th
day of the third calendar month follow-
ing, the date the first legally binding right
to deferred compensation arose under that
plan and all other plans of the service re-
cipient that would be treated as the same
plan under § 1.409A–1(c)(2) if a single
service provider participated in all of such
plans (for example, all nonaccount balance
plans of the service recipient). For pur-
poses of determining whether a service re-
cipient has an additional plan to the one
under which the legally binding right has
first arisen, a taxpayer may disregard any
plan not subject to § 409A (for exam-
ple, a grandfathered plan as defined under
§ 1.409A–6) and any plan under which all
amounts have been paid or forfeited such
that the service recipient did not retain any
obligation to make a payment under that
plan at the time the legally binding right
arises under the plan at issue. Provided
that the plan is corrected in accordance
with the applicable section of this notice by
such deadline (including the requirement
that all commercially reasonable steps to
identify and correctany other plans with
substantially similar language is met), any
amounts paid that would not have been
paid under the corrected plan provision if
that provision had always been the plan
provision are treated as operational fail-
ures and corrected under Notice 2008–113
by the end of the calendar year in which
the document failure is corrected (and any
amounts not paid that would have been
paid under the corrected plan provision if
that provision had always been the plan
provision are treated as operational fail-
ures and corrected under Notice 2008–113
by the end of the calendar year in which
the document failure is corrected), the ap-
plicable section of this notice may be ap-
plied without applying any requirement in
that section that an amount be includible in
income under § 409A(a) if an event occurs
within one year following the date of cor-
rection.
2. Example
On April 1, 2011, Employer establishes its first
nonqualified deferred compensation plan that is a
nonaccount balance plan. Employee LL, an em-
ployee of Employer, becomes eligible for a payment
under the plan of $100x by Employer upon the earlier
of an initial public offering of Employer stock or
separation from service. On September 15, 2011,
Employer and Employee LL amend the plan in ac-
cordance with § VII.A of this notice to delete the
payment event related to an initial public offering
of Employer stock, so that the plan provides that
the amount will only be paid upon Employee LL’s
separation from service. Because the amendment
occurred by the end of the calendar year in which the
first legally binding right arose under any nonaccount
balance plan of Employer, Employer and Employee
LL may apply the provisions of § VII.A of this notice
without applying any requirements that Employee
LL include an amount in income if certain events oc-
cur within one year following the date of correction.
Accordingly, Employee LL will not be required to
include any amount in income under § 409A(a) as a
result of the pre-correction plan provision regarding
payment upon an initial public offering even if there
is a public offering of Employer stock on or before
December 15, 2012 (provided that if there had been
an initial public offering of Employer stock before
September 15, 2011, and Employee LL had been
paid an amount under the plan, the payment would
be required to be treated as an operational failure and
corrected under Notice 2008–113 by December 31,
2012).
XI. TRANSITION RELIEF
A.Correction of Document Failures
DescribedinthisNotice
1. Relief for Corrections Made on or
Before December 31, 2010
Solely for purposes of applying this no-
tice, if a plan fails to satisfy the require-
ments of § 409A(a) in a manner that is
eligible for correction under this notice,
and the plan is corrected in accordance
with this notice on or before December 31,
2010, the plan may be treated as having
been corrected on January 1, 2009, for pur-
poses of applying the relief provided un-
der the applicable section of this notice,
and any requirement of an income inclu-
sion under § 409A as a condition of the
relief will not apply (for example, an in-
come inclusion under § 409A due to an
event occurring within one year follow-
ing the date of correction), provided that
any payment made before December 31,
2010 that would not have been made under
the amended provision (or any payment
not made before December 31, 2010 that
would have been made under the amended
provision) is treated as an operational fail-
ure and corrected under Notice 2008–113
on or before December 31, 2010. Noth-
inginthissectionisintendedtomodifythe
requirements of Notice 2008–113, so that,
for example, a service provider that was
an insider with respect to a service recip-
ient may be required to include an amount
in income under § 409A to satisfy the re-
quirements of Notice 2008–113 and be eli-
gible for relief under this section. See No-
tice 2008–113, § VII.
2. Examples
The following examples illustrate the
provisions of this § XI.A. For each ex-
ample, assume that the employee and em-
ployer are eligible to correct the impermis-
sible provision under § III of this notice.
Example 1. Employee MM is an employee of
Employer who participates in a plan that provides for
a payment of $100x upon a separation from service
that was defined to include transition from employee
to independent contractor status and to exclude any
reduction in the hours of employment. In all other
respects, the plan complies with § 409A(a). On July
1, 2009, Employee MM became an independent con-
tractor and was paid $100x. On April 1, 2010, Em-
ployer amends the plan in accordance with § V.A of
this notice to define separation from service as a sepa-
ration from service in accordance with § 1.409A–1(h)
(designating no permissible alternative definition of
separation from service under § 1.409A–1(h)).
Conclusion: Because Employer and Employee
MM amended the plan before December 31, 2010
in accordance with § V.A ofthis notice, if the pay-
ment of $100x is treated as an operational failure and
corrected in accordance with the provisions of Notice
2008–113 on or before December 31, 2010, the plan
may be treated as corrected under § V.A without ap-
plication of the requirement of income inclusion un-
der § 409A if an event occurs that would have been
January 19, 20102912010–3 I.R.B.

treated as a separation from service under the pre-cor-
rection provision but not under the corrected plan pro-
vision (or an event occurs that would not have been
treated as a separation from service under the pre-cor-
rection plan provision but would be so treated under
the corrected plan provision) within one year follow-
ing the date of correction.
Example 2. Same facts asExample 1, except that
the plan is with Employee NN, who reduced her hours
from 40 hours per week to 10 hours per week on
September 1, 2009 and was not paid any amount.
Conclusion: Because Employer and Employee
NN amended the plan between Employer and Em-
ployee NN before December 31, 2010, in accordance
with § V.A of this notice, if the failure to pay $100x
during 2009 is treated as an operational failure and
corrected in accordance with the provisions of No-
tice 2008–113 on or before December 31, 2010, the
plan may be treated as corrected under § V.A without
application of the requirement of an income inclusion
under § 409A if an event occurs that would have been
treated as a separation from service under the pre-cor-
rection provision but not under the corrected plan pro-
vision (or an event occurs that would not have been
treated as a separation from service under the pre-cor-
rection provision but would be so treated under the
corrected plan provision) within one year following
the date of correction.
Example 3. ThesamefactsasinExample 1,ex-
cept that the plan is with Employee PP who continues
providing services of 40 hours per week for Employer
at all relevant times and received no payment.
Conclusion: For purposes of this notice the plan
may be treated as corrected under § V.A without ap-
plication of the requirement of an income inclusion
under § 409A if an event occurs that would have been
treated as a separation from service under the pre-cor-
rection provision but not under the corrected plan pro-
vision (or an event occurs that would not have been
treated as a separation from service under the pre-cor-
rection provision but would be so treated under the
corrected plan provision) within one year following
the date of correction.
B.Correction of Impermissible
Provisions Linking Nonqualified Deferred
Compensation Plans
1. Relief for Corrections Made on or
Before December 31, 2011
This section applies to a nonqualified
deferred compensation plan if the amount
deferred under the plan is determined by,
or the time or form of payment is affected
by, the amount deferred under, or the pay-
ment provisions of, another nonqualified
deferred compensation plan such that one
or both of the plans fails to satisfy the re-
quirements of § 409A(a). Provided that
the plans are corrected in accordance with
this section on or before December 31,
2011, the plans will not be treated as failing
to satisfy the requirements of § 409A(a)
solely due to the effect of the linkage be-
tween the two plans (so that one or both
plans may continue to fail to satisfy the
requirements of § 409A(a) due to a fail-
ure unrelated to the linkage between the
two plans, in which case that failure would
need to be addressed separately if eligible
for correction under this notice). To cor-
rect under this section, the time or form of
payment under the two plans must be made
identical. For this purpose, any permissi-
ble payment event under § 409A that is a
payment event under either plan must be
retained. If the two plans contain the same
permissible payment events under § 409A,
but the payment events are defined dif-
ferently, the amended payment event for
the two plans must be the narrower def-
inition (meaning the definition resulting
in the smaller scope of events that would
constitute payment events). If the two
plans contain the same permissible pay-
ment event under § 409A, but the schedule
of payments following the payment event
are different, the amended schedule of pay-
ments must be the payment schedule re-
sulting in, or potentially resulting in, the
latest final payment date, and if two pay-
ment schedules result in, or potentially re-
sult in, the same latest final payment date,
the payment schedule commencing, or po-
tentially commencing, at the latest possi-
ble date, and if those two dates are the
same the payment schedule generally re-
sulting in the amount deferred being paid
at later dates. If any amounts have been
paid under one or more of the plans in
a manner that would not have been con-
sistent with the amended payment provi-
sions had those payment provisions been
the payment provisions since January 1,
2009, or have failed to be paid in a manner
that would not have been consistent with
the amended payment provisions, the pay-
ments must be treated as operational fail-
ures and corrected under Notice 2008–113
on or before December 31, 2011 to be eli-
gible for the relief under this section.
2. Example
Employee QQ is an employee of Employer. Em-
ployee QQ participates in a nonqualified deferred
compensation plan that is a nonaccount balance plan
providing for ten annual installments beginning at
the earlier of separation from service or a change in
control of Employer, with a change in control of Em-
ployer defined to include only a sale of the majority
of the stock of Employer. The amount payable under
the nonaccount balance plan is offset by the amount
deferred under a nonelective account balance plan
providing for a lump sum payment at the earliest of
death, disability, unforeseeable emergency, change in
control of Employer (defined to include all permissi-
ble change in control events under §1.409A–3(i)(5))
or separation from service. The plan fails to meet the
requirement of designating a permissible payment
event under § 1.409A–3(a)(1) due to the linkage be-
tween the plans because, for example, a contribution
to the nonelective account balance plan would reduce
the deferred amount under the nonaccount balance
plan, causing an amount previously deferred under
the nonaccount balance plan to become payable at
the different times and forms of payment applicable
under the nonelective account balance plan. The
plans are amended on or before December 31, 2011,
so that both plans provide payment upon the earliest
of a change of control of Employer (defined to in-
clude only a sale of the majority of the stock of the
employer), a separation from service, death, disabil-
ity or unforeseeable emergency, and provide that a
payment upon a change of control of Employer or a
separation from service will be made in ten annual
installments beginning on the date of the payment
event, and that a payment upon death, disability or
unforeseeable emergency will be made as a lump
sum payment on the date of the payment event.
Conclusion: Provided that any payments that
were made before the amendment of the plan that
would not have been made if the amended provi-
sion had been the payment provision under the plan
on and after January 1, 2009, or any failures to
make payments that would have been due before
the amendment of the plan if the amended provision
had been the payment provision under the plan on
and after January 1, 2009, are treated as operational
failures and corrected under Notice 2008–113 on
or before December 31, 2011, Employee QQ and
Employer may treat the two plans as not failing to
satisfy the requirements of § 409A(a) solely due to
the effect of the linkage of the two plans on the time
or form of payment of deferred amounts under the
plans.
C.Correction of Payment Schedules
Determined by the Timing of Payments
Received by the Service Recipient
1. Relief for Corrections Made on or
Before December 31, 2011
If a nonqualified deferred compen-
sation plan contains a payment provi-
sion that would satisfy the requirement
for a fixed schedule of payments under
§1.409A–3(i)(1)(iii) but for a failure to
satisfy either one or both of the condi-
tions set forth in §1.409A–3(i)(1)(iii)(C)
or (D), the payment provision will not be
treated as causing the plan to fail to be
a fixed schedule of payments if the plan
is amended to satisfy such conditions on
or before December 31, 2011, and any
payments made under the plan that would
not have been made if the amended pro-
vision had been the payment provision
2010–3 I.R.B.292January 19, 2010

under the plan since January 1, 2009, or
any failures to make payments that would
have been due before the amendment of
the plan if the amended provision had al-
ways been the payment provision under
the plan, are treated as operational failures
and corrected under Notice 2008–113 on
or before December 31, 2011.
2. Example
Employee RR is an employee of Employer who
participates in a nonqualified deferred compensa-
tion plan under which Employee RR is entitled to
a payment of 20% of the amounts collected on any
outstanding accounts receivable for which Employee
RR was the primary contact at the time of Employee
RR’s separation from service, to the extent such
amounts are collected on or before the third anniver-
sary of Employee RR’s separation from service. The
accounts receivable arise from bona fide and rou-
tine transactions in the ordinary course of business
of Employer. Employee RR does not at any time
have effective control of Employer, of any customer
from whom the accounts receivable are due, or of
the collection of any of the accounts receivable.
Employee RR separated from service on March 1,
2008. On February 1, 2009, Employee RR received
a payment of 20% of the amount collected on the
identified accounts receivable through December 31,
2008. The plan satisfies all of the requirements of
§ 1.409A–3(i)(1)(iii) except § 1.409A–3(i)(1)(iii)(D),
the requirement that the payment schedule provide
an objective nondiscretionary schedule under which
the payments will be made to the service provider.
On October 1, 2009, Employee RR and Employer
amend the agreement to provide that each January 15
Employer will pay Employee RR an amount equal
to 20% of the amounts collected on the identified
accounts receivable during the previous calendar
year. Because the payment to Employee RR on
February 1, 2009, would not have failed to satisfy
the operational requirements of § 409A(a) had
the amended payment provision been the payment
provision of the plan since January 1, 2009, the
payment is not required to be treated as an operational
failure and corrected under Notice 2008–113.
Employee RR and Employer may treat the plan as
not failing to have a fixed schedule of payments for
purposes of § 409A(a) for all periods prior to the
amendment.
D.Service Recipients Under Examination
for Returns Covering Periods Beginning
on or Before December 31, 2011
Solely for purposes of applying § III.C
of this notice, for corrections made on
or before December 31, 2011, a non-in-
dividual service recipient that is under
examination for periods beginning on or
before December 31, 2011, will only be
treated as under examination with respect
to any specific document failure that has
been identified as an issue in the exam-
ination (including any other plan of the
service recipient with a substantially sim-
ilar document failure). Therefore, for any
document failure that has not yet been
specifically identified, the requirements
that the non-individual service recipient
not be under examination with respect to
the plan will be treated as satisfied and the
document failure may be eligible for cor-
rection under the applicable section of this
notice provided that all other eligibility
requirements are met. For this purpose, a
document failure will be treated as specif-
ically identified in an examination of a
federal tax return for a taxable year begin-
ning before January 1, 2009, if the plan
provision is identified as a provision that
will have resulted in a document failure
if the provision was not amended before
the beginning of the first taxable year
beginning on or after January 1, 2009.
XII. INFORMATION AND
REPORTING REQUIREMENTS
A.Information and Reporting Required
for Correction of a Document Failure
A service recipient described in any
of §§ V through XI of this notice must
attach to its timely-filed (including exten-
sions) original federal income tax return
for its taxable year in which it corrects
the failure, a statement entitled Ҥ 409A
Document Correction under § [INSERT
APPROPRIATE SECTION(S)]ofNotice
2010–6” setting out the information re-
quired by § XII.B of this notice. This
statement must also be attached to the
service recipient’s timely-filed (including
extensions) original federal income tax re-
turn for the service recipient’s taxable year
subsequent to the taxable year in which
the failure was corrected, but only to the
extent that a service provider is required to
include an amount in income during such
subsequent year to be eligible for the relief
under this notice. In addition, not later
than the date (with extensions) on which
it is required to provide an information
return (Form W–2 or 1099) to a service
provider who is affected by such failure
(or if no information return is required for
such service provider, not later than the
January 31 following the calendar year
in which it corrects such failure) for the
calendar year in which it corrects such
failure, and for the subsequent calendar
year to the extent the service provider is
required to include an amount in income
during such subsequent year to be eligible
for relief under this notice, a service recip-
ient described in any of §§ V through XI of
this notice must provide to each such ser-
vice provider a statement entitled Ҥ 409A
Document Correction under § [INSERT
APPROPRIATE SECTION(S)]ofNotice
2010–6” setting out the information re-
quired by § XII.C of this notice. A service
provider who is relying on the relief pro-
vided in §§ V through XI of this notice for
a failure to comply with § 409A(a) must at-
tach to the service provider’s timely-filed
(including extensions) original federal
income tax return for the year in which
such failure was corrected the information
required by § XII.D of this notice. This
information must also be attached to the
service provider’s timely-filed (including
extensions) original federal income tax
return for the year subsequent to the year
in which the failure was corrected, but
only if the service provider is required to
include an amount in income during that
year to be eligible for the relief in this no-
tice. In addition, each taxpayer relying on
the relief provided in any of §§ V through
XI of this notice must make reasonable
efforts to provide notice to the examining
agent upon the commencement of an ex-
amination of such taxpayer’s federal tax
return that the taxpayer was relying upon
the relief provided under this notice for
years covered by the examination. For
purposes of this section, a section of this
notice refers to each separate section of
this notice, such that § VI.A and § VI.B
are separate sections, and includes any use
of the transition relief in § XI.
B.Attachment to Service Recipient Tax
Return for Failures Described in §§ V
through XI of this Notice
The service recipient must attach a
statement to its return setting out the
following information for each failure de-
scribed in any of §§ V through XI of this
notice:
(1) The name and taxpayer identifi-
cation number of each service provider
affected by the document failure. If the
same or a substantially similar document
failure has occurred for multiple service
providers, the information required in
§§ XII.B.(2) and (3) of this notice may be
January 19, 20102932010–3 I.R.B.

supplied only once for each such document
failure, provided that the identification of
each service provider affected by the doc-
ument failure references such information.
(2) Identification of the nonqualified
deferred compensation plan with respect to
which such failure occurred.
(3) A statement that the document fail-
ure is eligible for the correction under the
terms of this notice and identifying the sec-
tion of this notice under which the docu-
ment failure is corrected, that the service
recipient has taken all actions required and
otherwise met all requirements for such
correction as of the last day of the service
recipient’s taxable year in which the cor-
rection is made, and also as of the last day
of any subsequent taxable year of the ser-
vice recipient during which an amount is
required to be included in income under
§ 409A by a service provider as part of the
correction, and providing the date of cor-
rection and the date of any event causing
the inclusion of an amount in income under
§ 409A by the affected service provider.
(4) For each failure described in §§ V
through XI of this notice, the amount in-
volved in each document failure, and to
the extent applicable, the amount reported
by the service recipient as includible in in-
come under § 409A(a) as part of the cor-
rection and the percentage of the amount
involved in each document failure required
to be included in income under § 409A(a)
as part of the correction.
C.InformationtobeProvidedtoService
Provider for Failures Described in §§ V
through XI of this Notice
The service recipient must provide
the following information to each service
provider affected by a failure to comply
with § 409A who is entitled to relief under
§§ V through XI of this notice with respect
to such failure:
(1) A statement that the service provider
is entitled to the relief provided in §§ V
through XI of this notice (identifying the
applicable section of this notice under
which the document failure is corrected)
with respect to a failure to comply with
§ 409A, and that the service provider
must attach a copy of the statement to the
service provider’s income tax return for
the taxable year in which the failure was
corrected and also to the extent applica-
ble, any subsequent taxable year in which
an amount is included in income under
§ 409A by the service provider as part of
the correction.
(2) The information described in
§ XII.B.(1) through (4) of this notice, but
only to the extent that the information re-
lates to a deferred amount of that service
provider.
D.Attachment to Service Provider Tax
Return for Failures Described in §§ V
through XI of this Notice
The service provider must attach to the
service provider’s income tax return a copy
of the statement the service provider re-
ceived from the service recipient with re-
spect to each such failure. If a service
provider has included an amount in income
to be eligible for relief under this notice,
and that inclusion in income occurs in a
year subsequent to the year the plan was
corrected, the service provider must in-
clude the statement with the return for the
year of the correction as well as the return
for the year of income inclusion.
XIII. MODIFICATIONS TO NOTICE
2008–113 AND NOTICE 2008–115
A.The following sections are added as
§§ III.K and III.L of Notice 2008–113:
“K.Required Repayments by the Service
Provider
If to qualify for any applicable relief a
service provider is required to repay to the
service recipient an amount erroneously
paid or made available to the service
provider,suchasrequiredin§§IV.A,
IV.B, V.B, V.C, VII.B and VII.C, the
amount erroneously paid or made avail-
able to the service provider refers to the
gross amount paid to, or on behalf of, the
service provider, before the application
of any withholding requirements such as
the Federal employment tax withholding
requirements. The service provider may
satisfy the requirement to repay the service
recipient the amount erroneously paid to
the service provider and interest (if ap-
plicable) by paying the service recipient
the equivalent amount on or before the
applicable deadline. The service provider
will only be required to pay the service
recipient the net amount received after
any withholding to the extent the service
recipient has made a tax correction (e.g.,
an adjustment made on Form 941–X,Ad-
justed Employer’s QUARTERLY Federal
Tax Return or Claim for Refund)to re-
cover the amount of taxes withheld on the
amount erroneously paid. For purposes of
this notice, a correction made by the ser-
vice recipient to recover Federal or state
taxes withheld on the amount erroneously
paid shall be considered repayment by the
service provider of an amount equal to
the amount of taxes for which a tax cor-
rection is made by the service recipient.
Alternatively, in lieu of repayment, the
service recipient may reduce the service
provider’s compensation that otherwise
would have been paid on or before the ap-
plicable deadline by an equivalent amount.
To the extent that, in lieu of repayment,
the service recipient reduces other com-
pensation that would have been paid to the
service provider, the other compensation
that would have been paid to the service
provider, but instead is used to repay the
erroneous payment or interest (if applica-
ble), is includible in income (and wages if
the service provider is an employee).
The amount will not be treated as re-
paid by the service provider if, in connec-
tion with such payment, the service recipi-
ent pays the service provider, or otherwise
provides a benefit (including the provision
of a loan to the service provider or an obli-
gation to pay an amount or provide a ben-
efit in the future), intended as a substitute
for all or part of the amount the service
provider is required to repay the service re-
cipient.
L.Determination of Amount Erroneously
Paid or Amount Erroneously Deferred
and the Date an Amount was Otherwise
Payable
Generally if an amount has been er-
roneously paid to a service provider, the
amount must be repaid by the service
provider to the service recipient to qual-
ify for the relief. For this purpose, if the
amount erroneously paid to the service
provider was paid in the form of prop-
erty (such as stock), the amount that must
be repaid equals the fair market value of
the property at the time of the erroneous
payment. Any difference between the fair
market value of the property at the time of
the erroneous payment and the fair market
value of the property at the time of the
repayment is treated as earnings or losses
2010–3 I.R.B.294January 19, 2010

in accordance with the applicable section
of this notice. If the amount erroneously
paid to the service provider was paid in
the form of property (such as stock), upon
repayment of that amount, earnings and
losses may be credited by otherwise ad-
justing the amount of property due to the
service provider under the terms of the
plan. For example, a service recipient er-
roneously distributesto a service provider
100sharesofstockworth$5pershare
on the date of distribution and the distri-
bution fails to satisfy the requirements of
§ 409A because the shares are not payable
under the terms of the plan until a future
date. At the time of the correction under
the terms of the applicable section of No-
tice 2008–113 (as modified), the service
recipient’s stock is worth $10 per share.
To satisfy the repayment requirement, the
service provider must pay the service re-
cipient $500 (the amount of shares equal
to the fair market value of the shares on
the date of the erroneous payment) which
may be accomplished through the return
of 50 shares. If the applicable section of
this notice does not allow for the crediting
of earnings, or the service recipient does
not otherwise credit earnings, one method
by which the service recipient may adjust
for the earnings is by reducing the number
of shares due to the service provider under
thetermsoftheplanto50shares.
Generally if an amount has been erro-
neously deferred on behalf of a service
provider, the service recipient must pay the
amount erroneously deferred to the service
provider to qualify for the relief. If the
amount of the erroneous deferral was set
as a dollar amount, the amount of the erro-
neous deferral equals the dollar amount re-
gardless of whether the erroneous deferral
was invested in, or subsequently denomi-
nated as, an amount of property (such as a
number of shares of stock). If the amount
of the erroneous deferral was based on cer-
tain property (for example, a certain num-
ber of shares of stock), the amount of the
erroneous deferral equals the fair market
value of the property at the time it would
otherwise have been payable to the ser-
vice provider had theerroneous deferral
not occurred. For this purpose, the date
the amount of the erroneous deferral is
payable to the service provider is the first
date under the plan during the taxable year
that the amount became payable under the
plan (disregarding any ability to pay up to
30 days early under §1.409A–3(d)).”
B.The following section replaces section
V.D.2(a) of Notice 2008–113:
“(a) A failure is described in this
§ V.D.2(a) if, under the terms of a plan
and an applicable deferral election, and
§ 409A, an amount that should not have
been deferred compensation under the
planiserroneouslycreditedtotheservice
provider’s account or otherwise treated
as deferred compensation under the plan,
and such excess amount otherwise would
have been paid to the service provider
during the service provider’s taxable year
in which the excess amount was incor-
rectly credited to the service provider’s
account or otherwise treated as deferred
compensation under the plan. A failure
is also described in this § V.D.2(a) if, un-
der the terms of a plan and an applicable
deferral election, and § 409A, an amount
that should have been paid under the plan
is not paid to the service provider during
the taxable year in which falls the pay-
ment date (as determined under § III.K of
this notice), and the failure to make such
payment results in an operational failure
under § 409A(a).”
C.Modification of Notice 2008–115
For service recipients and service
providers who are entitled to relief under
this notice, Notice 2008–115, 2008–52
I.R.B. 1367 (relating to reporting and
wage withholding for 2008 and subse-
quent years), is modified to conform to
the provisions of this notice (including
the modifications to Notice 2008–113
contained in § XIII.A and B of this no-
tice) with respect to (i) the amount that
is required to be included in income by a
service provider under § 409A(a), and (ii)
the amount that is required to be reported
by the service recipient as an amount in-
cludible in income under § 409A(a) on
Form W–2, Box 1 and Box 12 using Code
Z, or Form 1099–MISC, Box 7 and Box
15b, as applicable.
XIV. EFFECT ON OTHER
DOCUMENTS
Taxpayers may rely on this Notice
2010–6 for taxableyears beginning on
or after January 1, 2009. The modi-
fications to Notice 2008–113 (relating
to operational corrections) contained in
§ XIII.A and B of this notice are effec-
tive for service provider taxable years
beginning on or after January 1, 2010,
but may be relied upon by taxpayers for
service provider taxable years beginning
before January 1, 2010; this notice does
not otherwise affect the guidance provided
in Notice 2008–113. The modifications to
Notice 2008–115 (relating to reporting and
wage withholding for 2008 and subsequent
years) described in § XIII.C of this
notice are generally effective for service
provider taxable years beginning on or
after January 1, 2009; provided, however,
that the modifications to Notice 2008–115
as a result of the guidance modifying
Notice 2008–113 (relating to operational
corrections) contained in § XIII.A and
B of this notice are effective for service
provider taxable years beginning on or
after January 1, 2010, but may be relied
upon by taxpayers for service provider
taxable years beginning before January 1,
2010.
XV. REQUEST FOR COMMENTS
The Treasury Department and the IRS
request comments regarding other docu-
ment failures that commonly occur and
methods to correct them. Comments must
be submitted by April 5, 2010. All mate-
rials submitted will be available for public
inspection and copying. Comments may
be submitted to Internal Revenue Service,
CC:PA:LPD:RU (Notice 2010–6), Room
5203, PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
also be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4
p.m. to the Courier’s Desk at 1111 Con-
stitution Avenue, NW, Washington, DC
20224, Attn: CC:PA:LPD:RU (Notice
2010–6), Room 5203. Submissions may
also be sent electronically via the inter-
net to the following email address:No-
tice.comments@irscounsel.treas.gov.In-
clude the notice number (Notice 2010–6)
in the subject line.
XVI. PAPERWORK REDUCTION
ACT
The collection of information contained
in this notice has been reviewed and ap-
proved by the Office of Management and
January 19, 20102952010–3 I.R.B.

Budget in accordance with the Paperwork
Reduction Act (44 USC. 3507) under con-
trol number 1545–2164.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number.
The collection of information in this no-
tice is in § XII. This information is required
to determine whether the taxpayers claim-
ing the relief are eligible for the relief and
that the applicable requirements for relief
are met. The likely respondents are corpo-
rations and individuals.
The estimated annual reporting and/or
recordkeeping burden is 5,000 hours.
The estimated annual burden per re-
spondent/recordkeeper is .5 hours.
The estimated number of respondents is
10,000.
The estimated annual frequency of re-
sponse is on occasion.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax return and tax return
information are confidential, as required
by § 6103.
XVII. DRAFTING INFORMATION
The principal author of this notice is
Keith Ranta of the Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities), al-
though other Treasury and IRS officials
participated in its development. For fur-
ther information on the provisions of
this notice, contact Keith Ranta at (202)
927–9639 (not a toll-free number).
Extension of Temporary
Rules Allowing Governmental
Issuers to Purchase and Hold
Their Own Tax-Exempt Bonds
Notice 2010–7
SECTION 1. PURPOSE
This notice modifies Notice 2008–88,
2008–42 I.R.B. 933 (October 20, 2008),
to extend the expiration dates from De-
cember 31, 2009 to December 31, 2010
of certain temporary rules allowing state
and local governmental issuers to purchase
and hold their own tax-exempt bonds un-
der special reissuance standards for tax-ex-
empt bonds. The intent of the extensions
of these temporary rules is to facilitate liq-
uidity and stability in the tax-exempt bond
market in recognition of some continu-
ing credit enhancement and liquidity con-
straints in this market.
Notice 2008–88 amended and supple-
mented Notice 2008–41, 2008–15 I.R.B.
742 (April 14, 2008), regarding reissuance
standards for tax-exempt bonds to expand
the circumstances and time periods dur-
ing which the Treasury Department and the
Internal Revenue Service (“IRS”) would
treat a tax-exempt bond that is purchased
by its state or local governmental issuer as
continuing in effect without resulting in a
reissuance or retirement of the purchased
bond solely for purposes of § 103 and
§§ 141 through 150 of the Internal Rev-
enue Code, as amended (“Code”). (Except
as noted, section references in this notice
are to the Code and the Income Tax Regu-
lations). Defined terms in Notice 2008–41
and Notice 2008–88 shall have the same
meanings when used in this notice.
SECTION 2. BACKGROUND
A debt instrument generally is treated
as retired or extinguished when an issuer
acquires its own debt because a merger of
the interests of the issuer and the holder oc-
curs. Notice 2008–41 provides that under
certain rules for qualified tender bonds, a
bondpurchasedbyoronbehalfofagov-
ernmental issuer pursuant to a qualified
tender right is not retired until the end of
the 90-day period from and after the date
of such purchase. In response to liquidity
constraints in the tax exempt bond market,
§ 3.2(3)(b) of Notice 2008–41 extended
the 90-day period to 180-days for any pur-
chase by or on behalf of a governmental
issuer pursuant to a qualified tender right
as long as such purchase occurred before
October 1, 2008.
In response to auction failures in the
auction rate bond sector of the tax-exempt
bond market, Notice 2008–41 provided
other temporary rules. Section 4 of Notice
2008–41 allowed governmental issuers
to purchase their own tax-exempt auction
rate bonds on a temporary basis without
resulting in a reissuance or retirement of
the purchased tax-exempt bonds solely for
purposes of § 103 and §§ 141 to 150 if the
governmental issuer purchased the tax-ex-
empt auction rate bonds before October 1,
2008, and held those bonds for not more
than a 180-day period from the date of
purchase. Section 6.2 of Notice 2008–41
allowed temporary waivers of interest rate
caps on auction rate bonds to be disre-
garded in determining whether there was
a significant modification of such bonds
under § 1.1001–3(e)(2) if the agreement
to waive such a cap and the period during
which such waiver was in effect both were
within the period between November 1,
2007 and October 1, 2008.
In light of the then-continuing liquid-
ity constraints in the tax-exempt bond mar-
ket, Notice 2008–88 expanded the types
of bonds eligible for relief under Notice
2008–41 and extended the time period for
such relief provisions to apply. Section 3.1
of Notice 2008–88 provided that tax-ex-
empt qualified tender bonds and tax-ex-
empt commercial paper purchased by a
governmental issuer would continue in ef-
fect without resulting in a reissuance or re-
tirement of such bonds if, irrespective of
when the governmental issuer purchased
such bonds, the governmental issuer held
the bonds until not later than December 31
2009. In addition, § 3.1 of Notice 2008–88
clarified that, in the case of the purchase
of any particular obligation of tax-exempt
commercial paper, including a purchase at
maturity, a refinancing of that purchased
tax-exempt commercial paper during the
permitted holding period would be treated
as part of the same issue as that of the pur-
chased tax-exempt commercial paper.
Section 3.2 of Notice 2008–88 ex-
tended the application of the special
180-day holding period (in lieu of the
general 90-day holding period) for quali-
fied tender bonds to those qualified tender
bonds purchased pursuant to qualified
tender rights until December 31, 2009.
In addition, § 3.2 of Notice 2008–88 ex-
tended the application of § 6.2 of Notice
2008–41 to disregard certain waivers of
interest rate caps on tax-exempt auction
rate bonds until December 31, 2009.
2010–3 I.R.B.296January 19, 2010

SECTION 3. INTERIM GUIDANCE
AND RELIANCE
3.1 In General
Pending the promulgation and effective
date of future administrative or regulatory
guidance, taxpayers may rely on the in-
terim guidance provided in this notice.
3.2 Extension of Certain Temporary
Rules
Section 3.1 of Notice 2008–88 regard-
ing purchases by a governmental issuer
of qualified tender bonds or tax-exempt
commercial paper is amended to extend
the final date for a governmental issuer
to purchase or hold such tax-exempt
bonds without resulting in a reissuance
or retirement of the purchased bonds
until December 31, 2010. In addition,
refinancing of purchased tax-exempt
commercial paper during this extended
period will continue to be treated as
part of the same issue as the purchased
tax-exempt commercial paper.
The provision of § 3.2 of Notice
2008–88 that extended § 3.2(3)(b) of No-
tice 2008–41 regarding the purchase of
bonds pursuant to qualified tender rights
for which the special 180-day holding pe-
riod applies is amended to extend the final
date for such purchases to December 31,
2010.
The provision of § 3.2 of Notice
2008–88 that extended § 6.2 of Notice
2008–41 regarding the treatment of certain
waivers of interest rate caps on tax-exempt
auction rate bonds isamended to extend
the final date on which covered waivers
are disregarded to December 31, 2010.
SECTION 4. EFFECT ON OTHER
DOCUMENTS
This notice modifies Notice 2008–88
and Notice 2008–41.
SECTION 5. EFFECTIVE DATE
This notice is effective as of March 25,
2008, which is the effective date of Notice
2008–88 and Notice 2008–41. Issuers of
tax-exempt bonds may apply and rely on
this notice to the same extent and in the
same manner as provided in § 8 of Notice
2008–41.
SECTION 6. DRAFTING
INFORMATION
The principal author of this notice
is Aviva M. Roth, Office of the Chief
Counsel (Financial Institutions and Prod-
ucts). However, other personnel from the
IRS and the Treasury Department par-
ticipated in its development. For further
information regarding this notice, contact
Aviva M. Roth at (202) 622–3980 (not a
toll-free call).
Extension of the Timeframe
for Disclosures to Persons
Designated in a Written
Request or Consent Pursuant
to Section 6103(c)
Notice 2010–8
This notice provides interim rules ex-
tending the period for submission to the
IRS (or an agent or contractor of the IRS)
of taxpayer authorizations permitting dis-
closure of returns and return information
pursuant to section 6103(c). Specifically,
this notice extends from 60 days to 120
days the period within which a signed and
dated authorization must be received by
the IRS in order for it to be effective. The
IRS will apply the interim rules in this no-
tice until the Treasury Department and the
IRS amend the regulation under section
6103(c).
BACKGROUND
Section 6103(c) provides that, sub-
ject to the requirements and conditions
set forth by the Secretary in the regula-
tion, returns and return information may
be disclosed to persons designated by
the taxpayer in a request for or consent
to disclosure. The Treasury Regulation
under section 6103(c) sets out the require-
ments for such disclosures to designees.
26 C.F.R. 301.6103(c)–1(b). An autho-
rization for disclosure must include the
following items in a written document
pertaining solely to the authorization: (1)
the taxpayer’s identity (name, address,
taxpayer identifying number) that enables
the IRS to clearly identify the taxpayer;
(2) the identity of the person to whom dis-
closure is to be made; (3) the type of return
or return information to be disclosed; and
(4) the taxable year or years covered by
the return or return information. 26 C.F.R.
301.6103(c)–1(b)(1). The taxpayer must
sign and date the written document.
The regulation bars disclosure of a re-
turn or return information unless the writ-
ten request for or written consent to dis-
closure is received by the IRS (or an agent
or contractor of the IRS) within 60 days
following the date upon which the written
request was signed and dated by the tax-
payer. 26 C.F.R. 301.6103(c)–1(b)(2).
INTERIM GUIDANCE
The IRS recognizes the importance of
limiting the effective period of authoriza-
tions provided pursuant to section 6103(c).
Reasonable limitation on the effective pe-
riod of written authorizations helps ensure
the currency of the authorization and pro-
tects taxpayer privacy. The current 60 day
period, however, has proven problematic.
Some institutions charged with assisting
taxpayers in their financial dealings have
encountered difficulty in obtaining written
authorizations and submitting the autho-
rizations to the IRS within the 60 days al-
lowed by the existing regulation. To re-
duce burdens on taxpayers and the institu-
tions and professionals assisting them, the
IRS will amend the regulation under sec-
tion 6103(c) to extend from 60 days to 120
days the effective period of taxpayer-pro-
vided authorizations.Intheinterim,dis-
closures otherwise permitted under section
6103(c) will be made provided the IRS re-
ceives the written authorization within 120
days following the date upon which the re-
quest or consent was signed and dated by
the taxpayer. This interim rule will apply
to all authorizationsexecuted on or after
the date that is sixty days prior to the pub-
lication of this notice.
COMMENTS
Interested parties are invited to sub-
mit comments on this notice by Jan-
uary 25, 2010. Written comments
should be submitted to: Internal Rev-
enue Service; CC:PA:LPD:PR (No-
tice 2010–8); Room 5203; P.O. Box
7604; Ben Franklin Station; Washing-
ton, DC 20044. Alternatively, com-
ments may be hand delivered between
the hours of 8:00 a.m. and 4:00 p.m.
January 19, 20102972010–3 I.R.B.

Monday to Friday to: CC:PA:LPD:PR
(Notice 2010–8); Courier’s Desk; Internal
Revenue Service; 1111 Constitution
Avenue, NW; Washington, DC. Comments
may also be transmitted electronically
via the following e-mail address:
Notice.Comments@irscounsel.treas.gov.
Please include “Notice 2010–8” in
the subject line of any electronic
communications. All comments will
be available for public inspection and
copying in their entirety.
EFFECTIVE DATE FOR INTERIM
GUIDANCE
These interim rules regarding the ef-
fective period for authorizations of disclo-
sures to third-party designees are applica-
ble from the date of publication of this no-
tice. Forthcoming changes to the exist-
ing regulation under section 6103(c) will
be applicable, once promulgated, as of the
publication date of this notice.
DRAFTING INFORMATION
The principal author of this notice is
Mark E. Cottrell of the Office of Asso-
ciate Chief Counsel (Procedure & Admin-
istration). For further information regard-
ing this notice, contact Mark E. Cottrell at
(202) 622–4570 (not a toll-free call).
Certain Annual Tax Reporting
Statements May be Furnished
by February 16, 2010,
Without Penalty
Notice 2010–9
PURPOSE
This notice provides additional time
for furnishing certain annual tax reporting
statements for reportable items from cal-
endar year 2009.
BACKGROUND
Section 403 of the Energy Improve-
ment and Extension Act of 2008, Div. B
of Pub. L. No. 110–343, 122 Stat. 3765,
enacted on October 3, 2008, amended sec-
tion 6045(b) to change from January 31 to
February 15 the deadline for furnishing to
customers the information statements re-
quired by section 6045. These statements
are Form 1099–B, “Proceeds From Broker
and Barter Exchange Transactions”; Form
1099–S, “Proceeds From Real Estate
Transactions”; and, when reporting pay-
ments to attorneys or substitute payments
by brokers in lieu of dividends or inter-
est, Form 1099–MISC, “Miscellaneous
Income.” Because February 15, 2010, is
a Federal holiday, filers of these state-
ments will meet the deadline under section
6045(b) for reportable items from calendar
year 2009 if they furnish the statements
by February 16, 2010.Seesection 7503.
Section6722imposesapenaltyonany
reporting entity that fails to furnish any
required payee statement by its deadline.
The Act also added language to sec-
tion 6045(b) to permit reporting entities, in
the case of a “consolidated reporting state-
ment (as defined in regulations),” to fur-
nish by February 15 a statement that oth-
erwisewouldberequiredbyJanuary31.
Because January 31, 2010, is a Sunday, in-
formation returns that are ordinarily due on
January31willbetimelyiftheyarefur-
nished by February 1, 2010.Seesection
7503. There is not yet a regulatory defi-
nition of the term “consolidated reporting
statement.”
On February 2, 2009, the IRS published
Notice 2009–11, 2009–5 I.R.B. 420, which
provided that, for reportable items from
calendar year 2008, brokers had until Feb-
ruary 17, 2009, to report all items that they
customarily reported on their annual com-
posite form recipient statements. Notice
2009–11 applied to reportable items from
calendar year 2008 only.
DEADLINE FOR REPORTING ITEMS
FROM 2009
This notice applies to reporting enti-
ties that are required to furnish informa-
tion statements undersection 6045. This
notice provides that such reporting entities
have until February 16, 2010, to report any
item that they would otherwise be required
to report by February 1, 2010, if the report-
ing entity furnishes the reporting statement
to the same recipient or same group of re-
cipients on the same date as a statement re-
porting items required by section 6045 (re-
gardless of whether the statements relate to
the same or different accounts or transac-
tions). This additional time applies only to
items that a reporting entity must report to
a recipient based on the same relationship
between the reporting entity and the recip-
ient as the items required by section 6045
(for example, broker, payor, or real estate
settlement agent to customer), and not as
a result of any other relationship between
the parties such as debtor to creditor or em-
ployer to employee.
Accordingly, the additional time pro-
vided by this notice applies to the follow-
ing forms if the requirements of this notice
are met: Form 1099–DIV, “Dividends and
Distributions”; Form 1099–INT, “Interest
Income”; Form 1099–MISC, “Miscella-
neous Income”; Form 1099–OID, “Orig-
inal Issue Discount”; Form 1099–PATR,
“Taxable Distributions Received From
Cooperatives”; Form 1099–Q, “Payments
From Qualified Education Programs (Un-
der Sections 529 and 530)”; Form 1099–R,
“Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc.”; and Form
5498, “IRA Contribution Information.”
This notice also provides that, if a cus-
tomer has an account with a securities bro-
ker for which a Form 1099–B would be re-
quired to be furnished under section 6045
if a sale had occurred during the year, the
additional time permitted by this notice ap-
plies to other items the broker must re-
port to the customer based on the bro-
ker-to-customer relationship regardless of
whether the customer’s transactional his-
tory for 2009 triggered an obligation to fur-
nish Form 1099–B to that customer, pro-
vided that the statement reporting the other
items is furnished on the same date as the
date on which the Form 1099–B would
have been furnished.
This notice modifies the 2009General
Instructions for Forms 1099, 1098, 3921,
3922, 5498, and W–2Gand applies to the
reporting of items from calendar year 2009
only.
EXAMPLE
This notice is illustrated by the follow-
ing example:
Broker, a securities broker, customarily furnishes
an annual composite form recipient statement (as
described in Section 4.2 of Rev. Proc. 2008–36,
2008–33 I.R.B. 340) to its customers in order to
report dividends as required by section 6042(c) and
the gross proceeds of the sale of securities and other
items as required by section 6045(b). To report inter-
est or original issue discount as required by section
2010–3 I.R.B.298January 19, 2010

6049(c), Broker customarily furnishes separate Form
1099–INT and Form 1099–OID statements to its
customers instead of reporting these items on the
composite form recipient statement.
For calendar year 2009, Broker furnished annual
composite form recipient statements on February
11, 2010, to all customers with taxable accounts
that received reportable dividends or sold securities
or other items in 2009. Because only 80 percent
of the customers receiving these composite form
recipient statements sold securities or other items
in 2009, only 80 percent of the annual composite
form recipient statements contained information that
section 6045(b) requires to be reported, whereas the
remaining 20 percent of the annual composite form
recipient statements contained only dividend infor-
mation required to be reported by section 6042(c).
Broker also furnished Form 1099–INT and Form
1099–OID statements on February 11, 2010, to all
customers with taxable accounts with interest or orig-
inal issue discount required to be reported under sec-
tion 6049(c). To certain customers, Broker furnished
only Form 1099–INT or Form 1099–OID or both and
did not furnish a composite form recipient statement
because these customers did not receive reportable
dividends and did not sell securities or other items in
2009.
As set forth in this notice, the IRS will treat Bro-
ker as having met its reporting deadline requirements
under sections 6042(c) and 6049(c) for items from
calendar year 2009 because: (1) sections 6042(c)
and 6049(c) otherwise require Broker to furnish
statements for these items on or before February 1,
2010; (2) Broker reported these items on a statement
furnished on or before February 16, 2010; (3) Broker
reported these items on a statement furnished to each
customer on the same date that Broker either: (a)
furnished to the customer a statement reporting items
required by section 6045, or (b) would have fur-
nished Form 1099–B to the customer if the customer
had sold securities during the year; and (4) Broker
was required to report these items to the customer as
a result of the same broker-to-customer relationship
as its obligation under section 6045. The IRS will
therefore not assess any penalties under section 6722
based on the date that Broker furnished the state-
ments reporting the items required under sections
6042(c) and 6049(c) even though some customers
received a composite form recipient statement that
reported no sales and other customers received no
composite form recipient statement.
EFFECT ON OTHER DOCUMENTS
Notice 2009–11 is amplified.
DRAFTING INFORMATION
The principal author of this notice
is Stephen Schaeffer of the Office of
Associate Chief Counsel (Procedure &
Administration). For further informa-
tion regarding this notice, please contact
Stephen Schaeffer at (202) 622–4910 (not
a toll-free call).
Tax-Exempt Bonds in Certain
Disaster Areas
Notice 2010–10
SECTION 1. PURPOSE
This notice provides guidance on the
tax-exempt bond provisions for the Mid-
western and Hurricane Ike disaster areas
under the Heartland Disaster Tax Relief
Act of 2008, Subtitle A of Title VII of
the Tax Extenders and Alternative Mini-
mum Tax Relief Act of 2008 (Division C
of Public Law 110–343, 122 Stat. 3765,
enacted on October 3, 2008) (Act) and
§ 1400N(a) of the Internal Revenue Code
(Code), as modified by the Act. This no-
tice also provides guidance on reimburse-
ment expenditures made with proceeds of
tax-exempt bonds issued for Midwestern
and Hurricane Ike disaster areas and tax-
exempt “Qualified Gulf Opportunity Zone
Bonds” issued under § 1400N(a) of the
Code. (Except as noted, section references
in this Notice are to the Code and the In-
come Tax Regulations.)
SECTION 2. BACKGROUND
Section 1400N(a) of the Code permits
certain tax-exempt bond financing in a
Gulf Opportunity Zone, which includes
areas in the States of Alabama, Louisiana
and Mississippi affected by Hurricane Ka-
trina.
The Act authorizes certain tax-exempt
bond financing in a Midwestern disaster
area as defined under § 702(b) of the Act
which includes certain counties in cer-
tain Midwestern States affected by severe
storms, tornados, or flooding (Midwestern
Disaster Area), and in a Hurricane Ike
disaster area as defined under § 704(c) of
the Act which includes certain counties in
Texas and parishes in Louisiana affected
by Hurricane Ike (Hurricane Ike Disas-
ter Area). These disasters are sometimes
referred to in this Notice as “Midwestern
Disaster” and “Hurricane Ike,” respec-
tively.
Sections 702 and 704 of the Act pro-
vide generally that the special provisions
for tax-exempt bond financing in the Gulf
Opportunity Zone under § 1400N(a) of
the Code apply with certain modifica-
tions to tax-exempt bond financing in the
Midwestern and Hurricane Ike Disaster
Areas. Tax-exempt bonds that meet these
modified requirements are referred to
as “Qualified Midwestern Disaster Area
Bonds” or “Qualified Hurricane Ike Dis-
aster Area Bonds” in relevant provisions
of§1400N(a),asmodifiedbytheAct.
Previously, in Notice 2008–109,
2008–50 I.R.B. 1282 (December 15,
2008), the Internal Revenue Service (IRS)
provided guidance on the counties in-
cluded within the Midwestern and Hurri-
cane Ike Disaster Areas and the relevant
State population information needed to
determine the State volume caps applica-
ble to these disaster area bonds.
Sections702(d)(1)(A)(i)and
704(a)(1)(A) of the Act generally provide
a modified definition of qualified project
costs under § 1400N(a)(2)(A)(i) that may
be financed with Qualified Midwestern
Disaster Area Bonds and Qualified Hur-
ricane Ike Disaster Area Bonds that treat
costs as qualified project costs only if: (1)
in the case of a project involving a private
business use (as defined in § 141(b)(6)),
either the person using the property
suffered a loss in a trade or business
attributable to a Midwestern Disaster or
Hurricane Ike or is a person designated for
purposes of this section by the Governor
of the State in which the project is located
as a person carrying on a trade or business
replacing a trade or business with respect
to which another person suffered such
a loss, and, (2) in the case of a project
relating to public utility property, the
project involves repair or reconstruction
of public utility property damaged by a
Midwestern Disaster or Hurricane Ike.
Sections 702(d)(1)(C) and 704(a)(3)
of the Act modify § 1400N(a)(2)(C) to
require that Qualified Midwestern Disas-
ter Area Bonds and Qualified Hurricane
Ike Disaster Area Bonds be “designated”
for volume cap allocation purposes on the
basis of providing assistance to areas in
the order in which such assistance is most
needed.
Certain interpretive questions have
arisen under the Act regarding determina-
tions of qualified project costs, designa-
tions of areas of greatest need, the scope
of gubernatorial discretion on these mat-
ters, and the scope of eligible financing by
public utilities with Qualified Midwestern
Disaster Area Bonds and Qualified Hurri-
cane Ike Disaster Area Bonds. In addition,
certain interpretive questions have arisen
January 19, 20102992010–3 I.R.B.

on the use of proceeds of Qualified Mid-
western Disaster Area Bonds, Qualified
Hurricane Ike Disaster Area Bonds and
Qualified Gulf Opportunity Zone Bonds
issued under § 1400N(a) to finance “re-
imbursements” of original expenditures
previously paid from other sources of
funds after the date of the occurrence
of the applicable disaster under the gen-
eral reimbursement expenditure rules for
tax-exempt bonds.
SECTION 3. INTERIM GUIDANCE
AND RELIANCE
3.1 In General
Pending the promulgation and effective
date of future administrative or regulatory
guidance, taxpayers may rely on the in-
terim guidance provided in this notice.
3.2 Certain Determinations of Qualified
Project Costs for Projects Involving
Private Business Use
In the case of a project involving pri-
vate business use under § 141(b)(6), for
purposes of determining qualified project
costs that may be financed with proceeds
of Qualified Midwestern Disaster Area
Bonds and Qualified Hurricane Ike Disas-
ter Area Bonds under § 1400N(a)(2)(A)(i),
as modified by the Act, the determination
of whether a loss in a trade or business
has been suffered and whether a person is
carrying on a trade or business replacing
a trade or business with respect to which
anotherpersonsufferedsuchalossmaybe
made by the Governor of the State in which
the project is located in any reasonable
manner as the Governor shall determine in
good faith in such Governor’s discretion.
In addition, a duly authorized designee of
such Governor under applicable State law
may make these determinations.
Section 3.3 Qualified Project Costs for
Public Utility Property
In the case of a project relating to public
utility property, qualified project costs that
may be financed with proceeds of Qual-
ified Midwestern Disaster Area Bonds
and Qualified Hurricane Ike Disaster Area
Bonds include the repair or reconstruction
of public utility property (as defined in
§ 168(i)(10)) damaged by a Midwestern
Disaster or Hurricane Ike, as applicable, as
provided in § 1400N(a)(2)(A)(i), as modi-
fied by the Act. In addition, public utilities
may also use proceeds of Qualified Mid-
western Disaster Area Bonds and Quali-
fied Hurricane Ike Disaster Area Bonds to
finance qualified project costs of projects
involving private business use under the
first prong of the definition of qualified
project costs under § 1400N(a)(2)(A)(i),
as modified by the Act, as more particu-
larly described in § 3.2 of this Notice.
Section 3.4 Designations of Areas of
Greatest Need
For purposes of the requirement to
designate allocations of Qualified Mid-
western Disaster Area Bonds and Quali-
fied Hurricane Ike Disaster Area Bonds
to provide assistance to areas in the order
in which such assistance is most needed
under § 1400N(a)(2)(C), as modified by
the Act, the Governor of the State in which
the Qualified Midwestern Disaster Area
Bonds and Qualified Hurricane Ike Dis-
aster Area Bonds are issued or the Bond
Commission of such State required to
approve such bonds,as applicable under
§1400N(a)(2)(C),maymakesuchdesig-
nations in any reasonable manner as such
Governor or Bond Commission shall de-
termine in good faith in the discretion of
such Governor or Bond Commission, as
applicable. In addition, a duly authorized
designee of such Governor or Bond Com-
mission under applicable State law may
make these determinations.
Section 3.5 Certain Reimbursement
Expenditures
The reimbursement expenditure rules
under § 1.150–2 of the Income Tax Reg-
ulations apply to Qualified Midwestern
Disaster Area Bonds, Hurricane Ike Dis-
aster Area Bonds, and Qualified Gulf
Opportunity Zone Bonds in the same
manner as they apply to exempt facility
bonds under § 1.142–4, except that, in the
case of these disaster area bonds, issuers
are treated as having met the official in-
tent requirement under § 1.150–2(e) for
original expenditures paid on or after the
date of the occurrence of the applicable
disaster (i.e., the Midwestern Disaster,
Hurricane Ike, or Hurricane Katrina) and
before December 31, 2009. Further, in
the case of Qualified Midwestern Disaster
Area Bonds, Hurricane Ike Disaster Area
Bonds, and Gulf Opportunity Zone Bonds,
the maximum reimbursement period un-
der § 1.150–2(d)(2) is treated as ending no
earlier than December 31, 2010.
SECTION 4. EFFECTIVE DATE
This Notice is effective on December
18, 2009. This notice applies to Qual-
ified Midwestern Disaster Area Bonds
and Qualified Hurricane Ike Disaster Area
Bonds issued after October 3, 2008. In
addition, § 3.5 of this notice on reim-
bursement expenditures also applies to
Qualified Gulf Opportunity Zone Bonds
issued after December 21, 2005.
SECTION 5. DRAFTING
INFORMATION
The principal authors of this notice
are Carla A. Young and James A. Polfer,
Office of the Associate Chief Counsel
(Financial Institutions and Products).
However, other personnel from the IRS
and the Treasury Department partici-
pated in its development. For further
information regarding this notice, contact
James A. Polfer at (202) 622–3980 (not a
toll-free call).
26 CFR 1.61–21: Taxation of Fringe Benefits.
(Also: §§ 61, 280F.)
Rev. Proc. 2010–10
SECTION 1. PURPOSE
.01 This revenue procedure provides:
(1) the maximum value of employer-pro-
vided vehicles first made available to em-
ployees for personal use in calendar year
2010 for which the vehicle cents-per-mile
valuation rule provided under section
1.61–21(e) of the Income Tax Regula-
tions may be applicable is $15,300 for a
passenger automobile and $16,000 for a
truck or van; (2) the maximum value of
employer-provided vehicles first made
available to employees for personal use in
calendar year 2010 for which the fleet-av-
erage valuation rule provided under sec-
tion 1.61–21(d) of the regulations may
be applicable is $20,300 for a passenger
automobile and $21,000 for a truck or van.
2010–3 I.R.B.300January 19, 2010

SECTION 2. BACKGROUND
.01 If an employer provides an em-
ployee with a vehicle that is available
to the employee for personal use, the
value of the personal use must generally
be included in the employee’s income
and wages. Internal Revenue Code § 61;
Treas. Reg. § 1.61–21.
.02 For employer-provided passen-
ger automobiles (including trucks and
vans) made available to employees for
personal use that meet the requirements
of section 1.61–21(e)(1) of the regula-
tions, generally the value of the personal
use may be determined under the vehicle
cents-per-mile valuation rule of section
1.61–21(e). However, regulations section
1.61–21(e)(1)(iii)(A) provides that for a
passenger automobile first made avail-
able after 1988 to any employee of the
employer for personal use, the value of
the personal use may not be determined
under the vehicle cents-per-mile valuation
rule for a calendar year if the fair market
value of the passenger automobile (de-
termined pursuant to regulations section
1.61–21(d)(5)(i) through (iv)) on the first
date the passenger automobile is made
available to the employee exceeds a spec-
ified dollar limit.
.03 For employer-provided vehicles
available to employees for personal use for
an entire year, generally the value of the
personal use may be determined under the
automobile lease valuation rule of section
1.61–21(d) of the regulations. Under this
valuation rule, the value of the personal
use is the Annual Lease Value. Provided
the requirements of regulation section
1.61–21(d)(5)(v) are met, an employer
with a fleet of 20 or more automobiles
may use a fleet-average value for purposes
of calculating the Annual Lease Values of
the automobiles in the employer’s fleet.
The fleet-average value is the average
of the fair market values of all the auto-
mobiles in the fleet. However, section
1.61–21(d)(5)(v)(D) of the regulations
provides that for an automobile first made
available after 1988 to an employee of the
employer for personal use, the value of the
personal use may not be determined under
the fleet-average valuation rule for a cal-
endar year if the fair market value of the
automobile (determined pursuant to reg-
ulations section 1.61–21(d)(5)(i) through
(v)) on the first date the passenger auto-
mobile is made available to the employee
exceeds a specified dollar limit.
.04 The maximum passenger automo-
bile values for applying the vehicle cents-
per-mile and the fleet-average value rules
reflect the automobile price inflation ad-
justment of Code section 280F(d)(7). The
method of calculating this price inflation
amount for automobiles other than trucks
and vans uses the “new car” component of
the CPI “automobile component”. When
calculating this price inflation adjustment
for trucks and vans, the “new trucks” com-
ponent of the CPI is used. This results
in somewhat higher maximum values for
trucks and vans. This change reflects the
higher rate of price inflation that trucks and
vans have been subject to since 1988, and
is consistent with the change announced in
Rev. Proc. 2003–75, 2003–2 C.B. 1018,
for purposes of calculating depreciation
deductions.See alsoRev. Proc. 2009–24,
2009–17 I.R.B. 885. For purposes of this
revenue procedure, the term “trucks and
vans” refers to passenger automobiles that
are built on a truck chassis, including mini-
vans and sport utility vehicles (SUVs) that
are built on a truck chassis.
SECTION 3. PROCEDURE
.01 Maximum Automobile Value for
Using the Vehicle Cents-per-mile Val-
uation Rule. An employer providing a
passenger automobile for the first time in
calendar year 2010 for the personal use
of any employee may determine the value
of the personal use by using the vehicle
cents-per-mile valuation rule in section
1.61–21(e) of the regulations if its fair
market value on the date it is first made
available does not exceed $15,300 for a
passenger automobile other than a tuck
or van, or $16,000 for a truck or van. If
the fair market value of the passenger
automobile exceeds this amount, the em-
ployer may determine the value of the
personal use under the general valuation
rules of regulations section 1.61–21(b) or
under the special valuation rules of section
1.61–21(d) (Automobile lease valuation)
or section 1.61–21(f) (Commuting valu-
ation) if the applicable requirements are
met.SeeRev. Proc. 2008–13, 2008–6
I.R.B. 407, as modified by Announcement
2008–15, 2008–9 I.R.B. 511, for guidance
on determining the maximum value of
passenger automobiles first made avail-
able during calendar year 2008, and Rev.
Proc. 2009–12, 2009–3 I.R.B. 321, for
guidance on determining the maximum
value of passenger automobiles first made
available during calendar year 2009.
.02 Maximum Automobile Value for
Using the Fleet-Average Valuation Rule.
An employer with a fleet of 20 or more
automobiles providing an automobile for
the first time in calendar year 2010 for
the personal use of any employee for an
entire year may determine the value of
the personal use by using the fleet-aver-
age valuation rule in regulations section
1.61–21(d)(5)(v) to calculate the Annual
Lease Values of the automobiles in the
fleet. The fleet-average valuation rule may
not be used to determine the Annual Lease
Value of any automobile if its fair market
value on the date it is first made available
exceeds $20,300 for a passenger automo-
bile other than a truck or van, or $21,000
for a truck or van. If all other appli-
cable requirements are met, an employer
with a fleet of 20 or more vehicles consist-
ing of passenger automobiles other than
trucks or vans as well as trucks and vans
may use the fleet-average valuation rule
as long as none of the vehicles exceed
their respective maximum allowable val-
ues. If the fair market value of any passen-
ger automobile in the fleet exceeds these
amounts, the employer may determine the
value of the personal use under regulations
section 1.61–21(f) (Commuting valuation)
or the general valuation rules of section
1.61–21(b) or may determine the Annual
Lease Value of such automobile separately
under the automobile lease valuation rule
of section 1.61–21(d)(2) if the applicable
requirements are met.
SECTI
ON 4. EFFECTIVE DATE
This revenue procedure applies to em-
ployer-provided passenger automobiles
first made available to employees for per-
sonal use in calendar year 2010.
SECTION 5. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Don M. Parkinson of the
Office of the Division Counsel/Associate
Chief Counsel (Tax Exempt & Govern-
ment Entities). For further information
regarding the maximum automobile val-
January 19, 20103012010–3 I.R.B.

ues for applying the valuation rules of
regulations section 1.61–21(e)(1)(iii)(A)
(the vehicle cents-per-mile valuation
rule), and section 1.61–21(d)(5)(v)(D)
(the fleet average valuation rule), contact
Don M. Parkinson at (202) 622–6040 (not
a toll-free call).
26 CFR 601.601: Rules and regulations.
(Also: Part I, §§ 301, 305.)
Rev. Proc. 2010–12
SECTION 1. PURPOSE
Rev. Proc. 2009–15, 2009–4 I.R.B.
356, amplifying and superseding Rev.
Proc. 2008–68, 2008–52 I.R.B. 1373,
provides temporary guidance regarding
certain stock distributions by publicly
traded real estate investment trusts (RE-
ITs) and regulated investment companies
(RICs). This revenue procedure amplifies
and supersedes Rev. Proc. 2009–15.
SECTION 2. BACKGROUND
.01 Section 305(a) of the Internal Rev-
enue Code (“Code”) provides that, except
as otherwise provided in section 305, gross
income does not include the amount of any
distribution of the stock of a corporation
made by such corporation to its sharehold-
ers with respect to its stock.
.02 Section 305(b)(1) provides that sec-
tion 305(a) shall not apply to a distribution
by a corporation of its stock, and the distri-
bution shall be treated as a distribution of
property to which section 301 applies, if
the distribution is, at the election of any of
the shareholders (whether exercised before
or after the declaration thereof), payable
either in its stock or in property.
.03 Section 305(b)(2) provides that sec-
tion 305(a) shall not apply to a distribution
by a corporation of its stock, and the distri-
bution shall be treated as a distribution of
property to which section 301 applies, if
the distribution (or a series of distributions
of which such distribution is one) has the
result of the receipt of property by some
shareholders, and an increase in the pro-
portionate interests of other shareholders
in the assets or earnings and profits of the
corporation.
.04 Section 1.305–2(a) of the Income
Tax Regulations provides that under sec-
tion 305(b)(1), if any shareholder has the
righttoanelectionoroptionwithrespect
to whether a distribution shall be made ei-
ther in money or any other property, or in
stock or rights to acquire stock of the dis-
tributing corporation, then, with respect to
all shareholders, thedistribution of stock
or rights to acquire stock is treated as a dis-
tributionofpropertytowhichsection301
applies regardless of—
(1) Whether the distribution is actually
made in whole or in part in stock or in stock
rights;
(2) Whether the election or option is
exercised or exercisable before or after the
declaration of the distribution;
(3) Whether the declaration of the dis-
tribution provides that the distribution will
be made in one medium unless the share-
holder specifically requests payment in the
other;
(4) Whether the election governing the
nature of the distribution is provided in the
declaration of the distribution or in the cor-
porate charter or arises from the circum-
stances of the distribution; or
(5) Whether all or part of the sharehold-
ers have the election.
.05 Section 1.305–1(b)(2) provides that
where a corporation which regularly dis-
tributes its earnings and profits, such as a
RIC, declares a dividend pursuant to which
the shareholders may elect to receive either
money or stock of the distributing corpora-
tion of equivalent value, the amount of the
distribution of the stock received by any
shareholder electing to receive stock will
be considered to equal the amount of the
money which could have been received in-
stead.
.06 Section 852(a) provides, in part, that
except for section 852(c), the provisions of
part I of subchapter M of Chapter 1 shall
not apply to a RIC for a taxable year un-
less the deduction for dividends paid (as
defined in section 561 with certain modifi-
cations) for the taxable year equals or ex-
ceeds a specified amount.
.07 Section 857(a) provides, in part, that
except for subsection (d) of section 857
and subsection (g) of section 856, the pro-
visionsofpartIIofsubchapterMofChap-
ter 1 shall not apply to a REIT for a tax-
able year unless the deduction for divi-
dends paid during the year (as defined in
section 561 with certain modifications) for
the taxable year equals or exceeds a speci-
fied amount.
.08 Section 562(c) provides that the
amount of any distribution shall not be
considered as a dividend for purposes of
computing the dividends paid deduction
under section 561, unless such distribution
ispro rata,withnopreferencetoanyshare
of stock as compared with other shares
of the same class, and with no preference
to one class of stock as compared with
another class except to the extent that the
former is entitled (without reference to
waivers of their rights by shareholders) to
such preference.
.09 Section 852(b)(7) provides that any
dividend declared by a RIC in October,
November, or December of any calendar
year and payable to shareholders of record
on a specified date in such a month shall
be deemed to have been received by each
shareholder on December 31 of such cal-
endar year, and to have been paid by the
RIC on December 31 of such calendar year
(or, if earlier, as provided in section 855).
The preceding sentence shall apply only if
such dividend is actually paid by the RIC
during January of the following calendar
year.
.10 Section 855 provides, in relevant
part, that if a RIC declares a dividend prior
to the time prescribed by law for the filing
of its return for a taxable year (including
the period of any extension of time granted
for filing such return), and distributes the
amountofsuchdividendtoshareholders
in the 12-month period following the close
of such taxable year and not later than the
date of the first regular dividend payment
made after such declaration, the amount so
declared and distributed shall, to the ex-
tent the RIC elects in such return, be gener-
ally considered as having been paid during
such taxable year. Except as provided in
section 852(b)(7), the amounts distributed
pursuant to this section shall be treated as
received by the shareholder in the taxable
year in which the distribution is made.
.11 Section 857(b)(9) provides that any
dividend declared by a REIT in October,
November, or December of any calendar
year and payable to shareholders of record
on a specified date in such a month shall
be deemed to have been received by each
shareholder on December 31 of such cal-
endar year, and to have been paid by the
REIT on December 31 of such calendar
year (or, if earlier, as provided in section
858). The preceding sentence shall apply
only if such dividend is actually paid by
2010–3 I.R.B.302January 19, 2010

the REIT during January of the following
calendar year.
.12 Section 858 provides, in relevant
part, that if a REIT declares a dividend
before the time prescribed by law for the
filing of its return for a taxable year (in-
cluding the period of any extension of time
granted for filing such return), and dis-
tributes the amount of such dividend to
shareholders in the 12-month period fol-
lowing the close of such taxable year and
not later than the date of the first regu-
lar dividend payment made after such dec-
laration, the amount so declared and dis-
tributed shall, to the extent the REIT elects
in such return, be generally considered as
having been paid during such taxable year.
Except as provided in section 857(b)(9),
the amounts distributed pursuant to sec-
tion 858 shall be treated as received by the
shareholder in the taxable year in which
the distribution is made.
.13 If there is a determination with re-
spect to a RIC or a REIT that results in an
adjustment that produces a tax deficiency
for any taxable year, there are procedures
under section 860 that enable the RIC or
REIT to make a current distribution to
its shareholders (a “deficiency dividend”)
that increases the RIC’s or REIT’s divi-
dends-paid deduction for the earlier year of
the deficiency.
SECTION 3. SCOPE AND
APPLICATION
.01In general. If a corporation qual-
ifies as a RIC or as a REIT under part I
or II, respectively, of subchapter M of the
Code and makes a distribution that meets
all of the requirements of section 3.02 of
this revenue procedure—
(1) The Internal Revenue Service will
treat the distribution of stock as a distribu-
tion of property to which section 301 ap-
plies by reason of section 305(b), and the
amount of such distribution of stock will
be considered to equal the amount of the
money which could have been received in-
stead; and
(2) If some shareholders receive a com-
bination of stock and money that differs
from the combination received by other
shareholders and if the fair market value of
the stock on the date of distribution differs
from the amount of money which could
have been received instead, those differ-
ences do not cause the distribution to be a
preferential dividend under section 562(c).
.02Requirements for distribution.
(1) The distribution is made by the cor-
poration to its shareholders with respect to
its stock;
(2) Stock of the corporation is publicly
traded on an established securities market
in the United States;
(3) The distribution is declared on or be-
fore December 31, 2012, with respect to a
taxable year ending on or before Decem-
ber 31, 2011, whether declared and dis-
tributed prior to the close of the taxable
year or whether declared and distributed
pursuant to the provisions of sections 855,
852(b)(7), 858, 857(b)(9), or 860;
(4) Pursuant to such declaration each
shareholder may elect to receive the share-
holder’s entire entitlement under the decla-
ration in either money or stock of the dis-
tributing corporation of equivalent value
subject to a limitation on the amount of
money to be distributed in the aggregate to
all shareholders (the “Cash Limitation”),
provided that—
(a) such Cash Limitation is not less than
10% of the aggregate declared distribution,
and
(b) if too many shareholders elect to
receive money, each shareholder electing
to receive money will receive apro rata
amount of money corresponding to the
shareholder’s respective entitlement under
the declaration, but in no event will any
shareholder electing to receive money re-
ceive less than 10% of the shareholder’s
entire entitlement under the declaration in
money;
(5) The calculation of the number of
shares to be received by any shareholder
will be determined, over a period of up
to two weeks ending as close as practi-
cable to the payment date, based upon a
formula utilizing market prices that is de-
signed to equate in value the number of
shares to be received with the amount of
money that could be received instead. For
purposes of applying subsection (4) of this
Section 3.02, the value of the shares to be
distributed shall be determined by using
the formula described in the preceding sen-
tence; and
(6) With respect to any shareholder par-
ticipating in a dividend reinvestment plan
(“DRIP”), the DRIP applies only to the ex-
tent that, in the absence of the DRIP, the
shareholder would have received the dis-
tribution in money under subsection (4) of
this Section 3.02.
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2009–15 is amplified and
superseded.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
with respect to distributions declared on
or after January 1, 2008.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is T. Ian Russell of the Office of
Associate Chief Counsel (Corporate). For
further information regarding this revenue
procedure, contact T. Ian Russell at (202)
622–7550 (not a toll-free call).
January 19, 20103032010–3 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.
2010–3 I.R.B.iJanuary 19, 2010

Numerical Finding List
1
Bulletins 2010–1 through 2010–3
Announcements:
2010-2, 2010-2 I.R.B.271
Notices:
2010-1, 2010-2 I.R.B.251
2010-2, 2010-2 I.R.B.251
2010-3, 2010-2 I.R.B.253
2010-4, 2010-2 I.R.B.253
2010-5, 2010-2 I.R.B.256
2010-6, 2010-3 I.R.B.275
2010-7, 2010-3 I.R.B.296
2010-8, 2010-3 I.R.B.297
2010-9, 2010-3 I.R.B.298
2010-10, 2010-3 I.R.B.299
Revenue Procedures:
2010-1, 2010-1 I.R.B.1
2010-2, 2010-1 I.R.B.90
2010-3, 2010-1 I.R.B.110
2010-4, 2010-1 I.R.B.122
2010-5, 2010-1 I.R.B.165
2010-6, 2010-1 I.R.B.193
2010-7, 2010-1 I.R.B.231
2010-8, 2010-1 I.R.B.234
2010-9, 2010-2 I.R.B.258
2010-10, 2010-3 I.R.B.300
2010-11, 2010-2 I.R.B.269
2010-12, 2010-3 I.R.B.302
Revenue Rulings:
2010-1, 2010-2 I.R.B.248
2010-2, 2010-3 I.R.B.272
2010-3, 2010-3 I.R.B.272
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin
2009–52, dated December 28, 2009.
January 19, 2010ii2010–3 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–1 through 2010–3
Notices:
2008-41
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-55
Modified by
Notice 2010-3, 2010-2 I.R.B.253
2008-88
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-113
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2008-115
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2009-11
Amplified by
Notice 2010-9, 2010-3 I.R.B.298
2009-38
Amplified and superseded by
Notice 2010-2, 2010-2 I.R.B.251
Revenue Procedures:
80-59
Modified and superseded by
Rev. Proc. 2010-11, 2010-2 I.R.B.269
87-35
Obsoleted by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-1
Superseded by
Rev. Proc. 2010-1, 2010-1 I.R.B.1
2009-2
Superseded by
Rev. Proc. 2010-2, 2010-1 I.R.B.90
2009-3
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-4
Superseded by
Rev. Proc. 2010-4, 2010-1 I.R.B.122
2009-5
Superseded by
Rev. Proc. 2010-5, 2010-1 I.R.B.165
Revenue Procedures— Continued:
2009-6
Superseded by
Rev. Proc. 2010-6, 2010-1 I.R.B.193
2009-7
Superseded by
Rev. Proc. 2010-7, 2010-1 I.R.B.231
2009-8
Superseded by
Rev. Proc. 2010-8, 2010-1 I.R.B.234
2009-9
Superseded by
Rev. Proc. 2010-9, 2010-2 I.R.B.258
2009-15
Amplified and superseded by
Rev. Proc. 2010-12, 2010-3 I.R.B.302
2009-25
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
Revenue Rulings:
2008-52
Supplemented and superseded by
Rev. Rul. 2010-2, 2010-3 I.R.B.272
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,
2009.
2010–3 I.R.B.iiiJanuary 19, 2010

January 19, 20102010–3 I.R.B.

2010–3 I.R.B.January 19, 2010

January 19, 20102010–3 I.R.B.

INTERNAL REVENUE BULLETIN
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