Internal Revenue Bulletin 2024-40 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2024–40
September 30, 2024
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE, INCOME TAX
Notice 2024-66, page 682.
Notice 2024-66 provides relief from the addition to tax under
§ 6655 for underpayment of estimated income tax by a cor-
poration to the extent the amount of any underpayment is
attributable to the corporation’s corporate alternative mini-
mum tax (CAMT) liability under § 55. The notice also incorpo-
rates the relief provided in Notice 2024-33, 2024-18 I.R.B.
959, and Notice 2024-47, 2024-27 I.R.B. 1, and obsoletes
those notices.
ESTATE TAX
REG-119683-22, page 716.
The proposed regulations would modify regulations applica-
ble to qualified domestic trusts (QDOTs) under section 2056A
of the Internal Revenue Code (Code). The proposed regula-
tions would remove references to temporary regulations that
have been finalized and replace references to obsolete offi-
cial IRS titles, offices, office addresses, and an outdated pub-
lication with current references. The proposed regulations
would also update the procedure for filing required security
instruments and correct outdated information related to when
the value of assets passing to a QDOT is finally determined
for Federal estate tax purposes. The proposed regulations
primarily would affect the estates of decedents passing prop-
erty to or for the benefit of a noncitizen spouse in a QDOT
pursuant to section 2056A of the Code.
ESTATE TAX, INCOME TAX
T.D. 9991, page 646.
Generally, the initial basis of property in the hands of a person
acquiring the property from a decedent is the fair market of
the property at the date of the decedent’s death. These final
regulations provide guidance regarding when this initial basis
may not exceed the final value of the property as determined
for purposes of the estate tax imposed on the decedent’s
estate, or if not finally determined, the value reported on a
statement furnished to the person acquiring the property
(the consistent basis requirement). In addition, these final
regulations provide guidance on the basis reporting require-
ments that facilitate taxpayers’ compliance with the consis-
tent basis requirement. These reporting requirements are
applicable to executors and others required to file an estate
tax return, as well as to trustees who distribute property they
acquired from a decedent.
INCOME TAX
REG-106851-21, page 684.
This document contains proposed regulations regarding the
exclusion from gross income of certain Tribal general wel-
fare benefits. The proposed regulations address the require-
ments that would apply to determine whether the benefits
that an Indian Tribal government program provides qualify
as Tribal general welfare benefits. These proposed regu-
lations would affect Indian Tribal governments, agencies or
instrumentalities of such governments, Federally-recognized
Tribes, members of such Tribes, such members’ spouses
and dependents, and other Tribal program participants. This
document also requests comments on certain provisions and
provides a notice of a public hearing on the proposed reg-
ulations that will be in addition to Tribal consultation on the
proposed regulations.
REG-116787-23, page 709.
These proposed regulations would amend the definition of
“coverage month,” and amend certain other rules, in existing
income tax regulations regarding the computation of an indi-
vidual taxpayer’s premium tax credit (PTC). The proposed
coverage month amendment generally would provide that,
in computing a PTC, a month may be a coverage month for
Finding Lists begin on page ii.

an individual if the amount of the premium paid, including
by advance payments of the PTC (APTC), for the month for
the individual’s coverage is sufficient to avoid termination
of the individual’s coverage for that month. The proposed
regulations also would amend the rule in the existing regu-
lations relating to the amount of enrollment premiums a tax-
payer considers in computing the taxpayer’s monthly PTC if
a portion of the monthly enrollment premium for a coverage
month is unpaid. In addition, the proposed regulations would
clarify a rule in the existing regulations relating to when an
individual is considered to be ineligible for coverage under a
state’s Basic Health Program (BHP).
Rev. Rul. 2024-20, page 646.
Fringe benefits aircraft valuation formula. For purposes of
section 1.61-21(g) of the Income Tax Regulations, relating to
the rule for valuing non-commercial flights on employer-pro-
vided aircraft, the Standard Industry Fare Level (SIFL) cents-
per-mile rates and terminal charge in effect for the second
half of 2024 are set forth.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings 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.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
September 30, 2024 Bulletin No. 2024–40

Part I
Section 61. Gross Income
Defined
26 CFR 1.61-21: Taxation of Fringe Benefits
Rev. Rul. 2024-20
For purposes of the taxation of fringe
benefits under section 61 of the Inter-
nal Revenue Code, section 1.61-21(g)
of the Income Tax Regulations pro-
vides a rule for valuing noncommercial
flights on employer-provided aircraft.
Section 1.61-21(g)(5) provides an air-
craft valuation formula to determine
the value of such flights. The value of a
flight is determined under the base air-
craft valuation formula (also known as
the Standard Industry Fare Level for-
mula or SIFL) by multiplying the SIFL
cents-per-mile rates applicable for the
period during which the flight was
taken by the appropriate aircraft mul-
tiple provided in section 1.61-21(g)(7)
and then adding the applicable terminal
charge. The SIFL cents-per-mile rates
in the formula and the terminal charge
are calculated by the Department of
Transportation (DOT) and are reviewed
semi-annually.
The following chart sets forth the ter-
minal charge and SIFL mileage rates:
Period During Which the Flight Is TakenTerminal ChargeSIFL Mileage Rates
7/1/24 - 12/31/24$54.30Up to 500 miles
= $.2971 per mile
501-1500 miles
= $.2265 per mile
Over 1500 miles
= $.2178 per mile
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Kathleen Edmondson of the Office
of Associate Chief Counsel (Employee
Benefits, Exempt Organizations and
Employment Taxes). For further informa-
tion regarding this revenue ruling, contact
Ms. Edmondson at (202) 317-6798 (not a
toll-free number).
T.D. 9991
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
Consistent Basis Reporting
Between Estate and Person
Acquiring Property from
Decedent
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains
final regulations that provide guidance on
the statutory requirement that a recipient’s
basis in certain property acquired from a
decedent be consistent with the value of
the property as finally determined for Fed-
eral estate tax purposes. In addition, the
final regulations provide guidance on the
statutory requirements that executors and
other persons provide basis information
to the IRS and to the recipients of certain
property. The final regulations regarding
the statutory consistent basis requirement
affect recipients of property acquired from
a decedent if the inclusion of the value of
the property in the decedent’s gross estate
increases the Federal estate tax liability.
The final regulations regarding the stat-
utory basis reporting requirements affect
executors and other persons required to
file an estate tax return based on the value
of the decedent’s gross estate and the
amount of decedent’s lifetime adjusted
taxable gifts, as well as trustees making
in-kind distributions of property initially
acquired from a decedent that was subject
to the statutory basis reporting require-
ments.
DATES: Effective date: These regulations
are effective on September 17, 2024.
Applicability dates: For dates of appli-
cability, see §§1.1014-1(d), 1.1014-10(f),
1.6035-1(j), and 1.6662-9(c).
FOR FURTHER INFORMATION
CONTACT: Concerning section
1014(f), Donna Douglas at 202-317-
6859; concerning section 6035, Karen
Wozniak at 202-317-6844 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) under sections 1014(f) and 6035
of the Internal Revenue Code (Code)
relating to the statutory consistent basis
requirement and basis reporting require-
ments, and amendments to the Proce-
dure and Administration Regulations
(26 CFR part 301) under sections 6721
and 6722 of the Code relating to the
applicable penalties for failure to com-
ply with the statutory basis reporting
requirements.
September 30, 2024 646 Bulletin No. 2024–40

1. General Statutory Background and
Enactment of the 2015 Act
Section 2004 of the Surface Transpor-
tation and Veterans Health Care Choice
Improvement Act of 2015 (2015 Act),
Public Law 114-41, 129 Stat. 443, 454
(July 31, 2015), enacted sections 1014(f),
6035, 6662(b)(8), 6662(k), 6724(d)(1)
(D), and 6724(d)(2)(II) of the Code to
require consistency between a recipient’s
basis in certain property acquired from a
decedent and the value of the property as
finally determined for Federal estate tax
purposes. Section 1014(f) sets forth the
consistent basis requirement, while the
procedural rules in sections 6035, 6662,
and 6724 set forth the applicable reporting
requirements, penalties, and definitions.
On March 23, 2018, section 104 of Divi-
sion U of the Consolidated Appropriations
Act, 2018, Public Law 115-141, 132 Stat.
348, 1170, made a technical correction
to the definition of the term inconsistent
estate basis under section 6662(k) of the
Code, retroactive to the original date of
enactment of the 2015 Act. The technical
correction modified the definition to take
into account, for purposes of the accura-
cy-related penalty imposed under section
6662 of the Code, that the basis of prop-
erty determined under section 1014(f)
is only the initial basis of such property.
Thus, nothing in section 1014(f) prevents
post-death basis adjustments pursuant to
other sections of the Code.
2. Existing Regulatory and Administrative
Guidance under Sections 1014(f) & 6035
On March 4, 2016, the Department
of the Treasury (Treasury Department)
and the IRS published in the Federal
Register (81 FR 11486) a notice of pro-
posed rulemaking and notice of proposed
rulemaking by cross-reference to tem-
porary regulations (REG-127923-15).
The proposed regulations would provide
guidance on the consistent basis require-
ment under section 1014(f) applicable
to recipients of certain property from a
decedent and the reporting requirements
under section 6035 applicable to execu-
tors and other persons required to file an
estate tax return. Section 1.6035-2 of the
proposed regulations (proposed §1.6035-
2) cross-references temporary regulations
under §1.6035-2T (TD 9757), published
in the Federal Register (81 FR 11431)
on the same day, which provide transi-
tional relief on the due date for filing the
information return required by section
6035 (Information Return) and furnish-
ing the statement(s) required by section
6035 (Statement(s)). Specifically, the
temporary regulations extended the due
date for filing and furnishing the required
Information Return and Statement(s) to
March 31, 2016.
1
On March 23, 2016, in response to
requests from the public for an additional
extension of time for filing and furnishing
the required Information Return and State-
ment(s), the Treasury Department and the
IRS issued Notice 2016-27, 2016-15 IRB
576, extending the due date for both to
June 30, 2016. On December 2, 2016, the
Treasury Department and the IRS pub-
lished in the Federal Register (81 FR
86953) final regulations (TD 9797) con-
firming the extension until June 30, 2016,
to file and furnish the required Informa-
tion Return and Statement(s).
3. Public Hearing and Comments
On June 27, 2016, the Treasury Depart-
ment and the IRS held a public hearing on
the proposed regulations. In addition to
the comments received at the hearing, the
Treasury Department and the IRS received
approximately thirty written comments
on the proposed regulations. The written
comments are available for public inspec-
tion at https://www.regulations.gov or
upon request.
After consideration of all of the com-
ments, the Treasury Department and the
IRS are adopting the proposed regula-
tions with certain revisions. These revi-
sions substantially reduce the burden on
both the IRS and taxpayers and increase
administrability of the proposed rules.
The revisions include (1) removing the
zero basis rule for unreported property;
(2) adopting a suggested interpretation of
the term acquiring for purposes of sec-
tion 6035(a)(1) and thereby modifying the
reporting requirements applicable in the
case of property not acquired by a benefi-
ciary before the estate tax return due date;
(3) eliminating the subsequent transfer
reporting requirement for all beneficia-
ries other than trustees; and (4) excepting
additional types of property interests from
the consistent basis requirements and
the reporting requirements under section
6035. In addition, a number of requested
technical changes have been made to
the proposed regulations. Besides the
changes made in response to comments,
non-substantive revisions have been made
to clarify the language and improve the
organization of the proposed regulations.
The public comments and revisions are
discussed in the Summary of Comments
and Explanation of Revisions section of
this preamble.
Summary of Comments and
Explanation of Revisions
1. Section 1014(f) – Consistent Basis
Requirement
A. Proposed §1.1014-10(a)(1):
Consistent basis requirement – In
general.
Section 1014(f)(1) provides that the
basis of certain property acquired from
a decedent cannot exceed that property’s
final value for purposes of the Federal
estate tax imposed on the estate of the
decedent, or, if the final value has not
been determined, the value reported on a
required Statement. This statutory rule is
referred to as the consistent basis require-
ment. Section 1.1014-10 of the pro-
posed regulations (proposed §1.1014-10)
includes proposed rules that would imple-
ment the consistent basis requirement.
Proposed §1.1014-10(a)(1) provides
that a taxpayer’s initial basis in certain
property acquired from a decedent may
not exceed the property’s final value for
estate tax purposes within the meaning
of proposed §1.1014-10(c). Proposed
§1.1014-10(a)(1) additionally provides
that the consistent basis requirement
applies whenever the taxpayer reports a
taxable event to the IRS with respect to
1
Prior extensions of the due dates to file and furnish the required Information Return and Statement(s) were set forth in Notice 2015-57, 2015-36 IRB 24, and Notice 2016-19, 2016-09 IRB
362.
Bulletin No. 2024–40 647 September 30, 2024

September 30, 2024 648 Bulletin No. 2024–40
the property and continues to apply until
the entire property is sold, exchanged,
or otherwise disposed of in one or more
transactions that result in the recognition
of gain or loss for Federal income tax pur-
poses, regardless of whether the owner on
the date of the sale, exchange, or disposi-
tion is the same taxpayer who acquired the
property from the decedent or as a result
of the decedent’s death.
The final regulations retain the rule in
proposed §1.1014-10(a)(1) incorporat-
ing the consistent basis requirement as
it applies if a final value has been deter-
mined. However, proposed §1.1014-10(a)
(1) is revised in the final regulations to
incorporate the consistent basis require-
ment as it applies if no final value has
been determined (previously addressed
in proposed §1.1014-10(c)(2)). Proposed
§1.1014-10(a)(1) additionally is revised
in the final regulations to explain that the
property subject to the consistent basis
requirement is referred to as consistent
basis property, which now is described in
§1.1014-10(c)(1) of the final regulations.
A commenter inquired whether the
judicial doctrine of the duty of consistency
continues to apply if the consistent basis
requirement applies to property. For a dis-
cussion of the judicial doctrine of the duty
of consistency, see Van Alen v. Commis-
sioner, T.C. Memo, 2013-235 (Oct. 2013)
and Janis v. Commissioner, 461 F.3d 1080
(9th Cir. 2006). The final regulations do
not limit the arguments that may be appli-
cable under case law, including the judi-
cial doctrine of the duty of consistency in
appropriate cases.
With regard to the rule describing the
duration of the consistent basis require-
ment in proposed §1.1014-10(a)(1), sev-
eral comments were received. Comment-
ers asserted, and the Treasury Department
and the IRS agree, that the consistent basis
requirement should not continue to apply
to property that is sold at a price that is
equal to its basis because this sale is a rec-
ognition event even though no gain or loss
is recognized. Other commenters asserted,
and the Treasury Department and the IRS
agree, that the consistent basis require-
ment should not continue to apply to prop-
erty once that property is included in the
gross estate of another decedent. Finally,
commenters questioned whether substi-
tuted property obtained in an exchange
under section 1031 of the Code (that is, a
like-kind exchange) is subject to the con-
sistent basis requirement.
Accordingly, the rule in proposed
§1.1014-10(a)(1) describing the duration
of the consistent basis requirement, which
is moved to §1.1014-10(a)(3) of the final
regulations, is revised to clarify that the
consistent basis requirement applies until
the entire property is sold, exchanged,
or otherwise disposed of in a recogni-
tion transaction for income tax purposes
(whether or not any amount of gain or loss
is actually recognized) or the property
becomes includible in another decedent’s
gross estate. Under this rule, because a
like-kind exchange is not a recognition
event for income tax purposes, substituted
property obtained in such a transaction
is subject to the consistent basis require-
ment until the owner’s basis in every por-
tion of the substituted property no longer
is related, in whole or in part, to the final
value of the property that was acquired
from the decedent.
B. Proposed §1.1014-10(a)(2):
Subsequent basis adjustments.
Proposed §1.1014-10(a)(2) provides
that the final value of consistent basis
property is the taxpayer’s initial basis in
the property. Proposed §1.1014-10(a)(2)
further confirms that, in computing the
taxpayer’s basis in property acquired from
the decedent or as a result of the dece-
dent’s death, the taxpayer’s initial basis in
that property may be adjusted due to the
operation of other Code provisions that
govern basis without violating the consis-
tent basis requirement. Proposed §1.1014-
10(a)(2) also gives examples of such
adjustments, such as gain recognized by
the decedent’s estate or trust upon distri-
bution of the property, post-death capital
improvements and depreciation, and post-
death adjustments to the basis of an inter-
est in a partnership or an S corporation (as
defined in section 1361(a)(1) of the Code).
Proposed §1.1014-10(a)(2) states that the
existence of recourse or non-recourse debt
secured by property at the time of the
decedent’s death does not affect the prop-
erty’s basis, whether the gross value of
the property and the outstanding debt are
reported separately on the estate tax return
or the net value of the property is reported.
Therefore, the proposed regulations state
that post-death payments on recourse or
non-recourse debt secured by property do
not result in an adjustment to the proper-
ty’s basis.
Section 1.1014-10(a)(2) of the final
regulations maintains the rule identifying
the initial basis of consistent basis prop-
erty if a final value has been determined,
as well as the rule and examples regard-
ing acceptable adjustments to initial basis.
However, proposed §1.1014-10(a)(2) is
revised in the final regulations by identi-
fying the initial basis of consistent basis
property during the period before the final
value of such property is determined and
by moving the rule regarding recourse and
non-recourse debt secured by property to
§1.1014-10(b)(3)(i) of the final regula-
tions.
The rule regarding recourse and
non-recourse debt secured by property
is addressed separately in the final regu-
lations in order to address more specifi-
cally, in response to comments, the effect
of recourse and non-recourse debt on the
initial basis of consistent basis property. A
commenter requested that the final regula-
tions clarify that, if the decedent’s estate
includes property subject to non-recourse
debt and the executor reports the value of
the property on the decedent’s estate tax
return as the value of the property less the
debt (the net value or equity of redemption
value), then the final value of the property
is nevertheless the gross value of the prop-
erty undiminished by the debt. The Trea-
sury Department and the IRS adopt this
suggestion in §1.1014-10(b)(3)(i) of the
final regulations, which provides that the
final value or, if applicable, the reported
value, of property subject to recourse or
non-recourse debt is determined based
on the gross value of that property undi-
minished by debt, regardless of whether
the estate tax return reports the net value
(equity of redemption value) of the prop-
erty or separately reports the gross value
of the property and claims an estate tax
deduction for the outstanding debt.
Another commenter requested that the
final regulations clarify whether the exis-
tence of recourse or non-recourse debt
on partnership property reduces the final
value of a partnership interest includible
in the decedent’s gross estate. The exis-
tence of recourse or non-recourse debt on

Bulletin No. 2024–40 649 September 30, 2024
partnership property relates to the value
of the partnership and the gross value of
a decedent’s partnership interest, determi-
nations of which are outside the scope of
these final regulations. Accordingly, this
request is not adopted. However, the Trea-
sury Department and the IRS note that,
with respect to a deceased partner having
a loan secured by a partnership interest,
the same rule in §1.1014-10(b)(3)(i) of
the final regulations will apply so that the
final value of the partnership interest is
the gross value of the partnership interest
undiminished by the debt, regardless of
whether the estate tax return reports the
net value (equity of redemption value)
of the partnership interest or separately
reports the gross value of the partnership
interest and claims an estate tax deduction
for the outstanding debt.
C. Proposed §1.1014-10(b)(1): Property
subject to consistency requirement – In
general.
Section 1014(f)(2) provides that the
consistent basis requirement applies only
to property whose inclusion in the dece-
dent’s gross estate increased the estate
tax liability. Based on this rule, proposed
§1.1014-10(b)(1) provides that the prop-
erty subject to the consistent basis require-
ment is any property includible in the
decedent’s gross estate under section 2031
of the Code, any property subject to tax
under section 2106 of the Code, and any
other property the basis of which is deter-
mined in whole or in part by reference to
the basis of such property (for example,
as the result of a like-kind exchange or an
involuntary conversion) that generates an
estate tax liability in excess of allowable
credits, except for the credit for prepay-
ment of estate tax.
This rule is maintained in §1.1014-
10(c)(1)(i) of the final regulations with
certain modifications in response to
comments. First, the final regulations,
in §1.1014-10(c)(1)(i)(A), include the
preliminary criterion for the applicabil-
ity of the consistent basis requirement in
section 1014(f)(1) that only property to
which section 1014(a) applies is consis-
tent basis property. Second, the Treasury
Department and the IRS have corrected
the final regulations to reflect that sec-
tion 2103 of the Code, not section 2106,
defines the gross estate for purposes of the
estate tax on the estate of a nonresident
non-citizen. The correction is found in the
definition of the term included property in
§1.1014-10(d)(4) of the final regulations,
which term is referenced in §1.1014-10(c)
(1)(i)(B) of the final regulations. Finally,
the Treasury Department and the IRS
have corrected the final regulations in
§§1.1014-10(c)(1)(i)(C) and 1.1014-10(d)
(5) to remove the reference to the prepay-
ment of estate tax as a credit, because an
estate tax prepayment is not an identified
credit but instead is a payment of estate
tax.
Commenters inquired whether the
allowable credits referenced in proposed
§1.1014-10(b)(1) include credits provided
under treaties. One commenter inquired
whether, in order to treat the prorated
unified credit under section 2102(b)(3) of
the Code as an allowable credit, the exec-
utor is required to attach a Form 8833,
Treaty-Based Return Position Disclosure
Under Section 6114 or 7701(b), to the
nonresident non-citizen decedent’s Form
706-NA, United States Estate (and Gen-
eration-Skipping Transfer) Tax Return,
Estate of nonresident not a citizen of the
United States. In response to these com-
ments, §1.1014-10(d)(5) of the final regu-
lations defines the term allowable credits
to include both credits against the estate
tax allowable by any section of the Code
and credits against the estate tax allow-
able by any treaty obligation of the United
States, provided that the estate qualifies for
the credit and complies with all applicable
rules for claiming the credit, including fil-
ing all necessary forms or statements.
With regard to the applicability date of
the consistent basis requirement to prop-
erty, commenters requested clarification
on whether the filing after July 31, 2015,
of an estate tax return supplementing an
estate tax return filed on or before that
date would subject any of the assets in
the decedent’s gross estate to the consis-
tent basis requirement. Other commenters
requested clarification on whether the fil-
ing on or before July 31, 2015, of an estate
tax return that was due after July 31, 2015,
would subject any of the assets in the
decedent’s gross estate to the consistent
basis requirement. In response to these
comments, §1.1014-10(c)(1)(ii) of the
final regulations clarifies that neither the
supplementing of an estate tax return after
July 31, 2015, nor a due date of an estate
tax return after July 31, 2015, causes prop-
erty to be subject to the consistent basis
requirement if an estate tax return was
filed on or before July 31, 2015.
D. Proposed §1.1014-10(b)(2):
Exclusions.
Proposed §1.1014-10(b)(2) provides
that property that qualifies for an estate
tax charitable or marital deduction under
section 2055, 2056, or 2056A of the Code
does not generate a tax liability under
chapter 11 of the Code (chapter 11) and
therefore is excluded from the property
subject to the consistent basis require-
ment. Proposed §1.1014-10(b)(2) further
provides that tangible personal property
for which an appraisal is not required
under §20.2031-6(b) of the Estate Tax
Regulations (26 CFR part 20) is deemed
not to generate a tax liability under chap-
ter 11 and therefore also is excluded from
the property subject to the consistent basis
requirement.
With regard to the exclusion for prop-
erty qualifying for an estate tax charitable
or marital deduction under section 2055,
2056, or 2056A, multiple commenters
sought clarification on whether prop-
erty qualifying for only a partial marital
or charitable deduction is subject to the
consistent basis requirement. In the case
of property qualifying for only a partial
marital or charitable deduction, the prop-
erty increases the estate tax liability to the
extent that it does not qualify for a marital
or charitable deduction and, therefore, the
property is subject to the consistent basis
requirement. In such a case, applying the
consistent basis requirement only to the
partial interest not qualifying for a deduc-
tion is impractical and incompatible with
the uniform basis rules under §1.1014-4
of the Income Tax Regulations. Accord-
ingly, §1.1014-10(c)(2)(xi) of the final
regulations identifies only wholly deduct-
ible property, under any of sections 2055,
2056, 2056A, 2106(a)(2) and (3), as prop-
erty not subject to the consistent basis
requirement. Partially deductible property
(property that qualifies for only a partial
marital or charitable deduction) is out-
side the scope of this rule and, therefore,
is consistent basis property subject to the

September 30, 2024 650 Bulletin No. 2024–40
consistent basis requirement. Some exam-
ples of property qualifying for only a par-
tial marital or charitable deduction, and,
therefore, not excepted from the consis-
tent basis requirement, are: (1) a charitable
remainder trust, a charitable lead trust, or
a pooled income fund; (2) a trust subject
only to a partial QTIP election under sec-
tion 2056(b)(7); and (3) property divided
between the decedent’s surviving spouse
and a charity if the sum of the deductions
for the two interests given to those recip-
ients is less than the value of the property
included in the value of the gross estate.
With regard to the exclusion for tangi-
ble personal property, §1.1014-10(c)(2)
(ix) of the final regulations retains as an
exception to the consistent basis require-
ment tangible personal property for
which an appraisal is not required under
§20.2031-6(b). However, in response to
a comment, these items are described in
the final regulations as household and per-
sonal effects, rather than as tangible per-
sonal property, to conform more closely
with §20.2031-6(b).
Multiple commenters advocated for
additional exclusions from the consis-
tent basis requirement either because
certain property is not subject to the con-
sistent basis requirement under the plain
language of the statute or because cer-
tain property, in the commenters’ views,
should be excepted from the consistent
basis requirement by the exercise of reg-
ulatory authority. In response, §1.1014-
10(c)(2) of the final regulations provides
a list of property that is identified as prop-
erty excepted from or not subject to the
consistent basis requirement. A particular
property may be described in more than
one item on that list.
One commenter suggested that the final
regulations confirm that the consistent
basis requirement applies only to prop-
erty to which section 1014(a)(1) through
(3) applies, as only such property has a
basis that is adjusted to the property’s
Federal estate tax value as a result of the
decedent’s death. Specifically, the com-
menter requested that the final regulations
provide that, if the basis of property is
not determined under section 1014(a)(1)
through (3), then the property is not sub-
ject to the consistent basis requirement.
Under such a provision, the commenter
concluded that the following property
would be excluded from the consistent
basis requirement: (1) property subject to
a conservation easement resulting from
the section 2031(c) election (the subject of
section 1014(a)(4)); (2) income in respect
of a decedent (IRD) (the subject of sec-
tion 1014(c)); (3) DISC stock (the subject
of section 1014(d)); (4) pre-death gifts of
appreciated property (the subject of sec-
tion 1014(e)); (5) stock in a passive foreign
investment company (PFIC) by reason
of section 1291(e)(1); and (6) annuities
subject to section 72 (the subject of sec-
tion 1014(b)(9)(A)). Section 1014(f)(1)
applies the consistent basis requirement
to all property to which section 1014(a)
applies. The Treasury Department and the
IRS agree that section 1014(b)(9)(A), (c),
and (e) describes property not subject to
section 1014(a), and therefore property
that does not acquire a new basis based in
any way on the Federal estate tax value of
that property. Stock of a PFIC subject to
section 1296(i) also is property not subject
to section 1014(a), but only if the basis of
such stock is its adjusted basis in the hands
of the decedent immediately before the
decedent’s death. Accordingly, §1.1014-
10(c)(2)(x) of the final regulations clari-
fies that such interests are not subject to
the consistent basis requirement.
However, the adjustments to the basis
of property to be made pursuant to section
1014(a)(4) and (d) and otherwise under
section 1291(e)(1), do not make section
1014(a), and therefore section 1014(f),
inapplicable to the property described
in those sections. In each of these cases,
the property’s Federal estate tax value is
a factor used in determining the proper-
ty’s basis under these sections. Thus, the
consistent basis requirement applies to the
property described in these sections, even
though the basis of the property may dif-
fer from the Federal estate tax value of the
property.
Several commenters requested confir-
mation that certain property is not sub-
ject to the consistent basis requirement
because the value of that property is not
included in the decedent’s gross estate for
Federal estate tax purposes. For instance,
a commenter requested confirmation that
the consistent basis requirement does
not apply to property the basis of which
is adjusted in a manner similar to sec-
tion 1014(a) on the occurrence of a tax-
able termination that occurs on a person’s
death pursuant to section 2654(a)(2).
Such property generally becomes subject
to the generation-skipping transfer tax
on the death of a trust beneficiary and, as
long as the property is not includible in
a person’s gross estate for Federal estate
tax purposes, it is not property to which
section 1014(a) applies. Other comment-
ers requested confirmation that the consis-
tent basis requirement does not apply to
a surviving spouse’s interest in commu-
nity property to which section 1014(b)(6)
applies because, although this property is
deemed to have been acquired from the
decedent and thus is subject to section
1014(a), such property is not includible in
the decedent’s gross estate for estate tax
purposes. The Treasury Department and
the IRS agree with the commenters that,
in both cases, the property is not subject to
the consistent basis requirement because
it is not property includible in the gross
estate. Accordingly, §1.1014-10(c)(2)(xii)
and (xiii) of the final regulations clarify
that such interests are not subject to the
consistent basis requirement.
Finally, in addition, §1.1014-10(c)(2)
of the final regulations excepts certain
types of property whose basis generally
does not differ from the property’s face
value, such as United States dollars and
certain equivalents.
E. Proposed §1.1014-10(b)(3):
Application.
Proposed §1.1014-10(b)(3) provides
that, if an estate tax liability is payable
after the application of all available
credits (other than a credit for a prepay-
ment of estate tax), the consistent basis
requirement applies to the entire gross
estate (other than property excluded by
proposed §1.1014-10(b)(2)) because all
such property contributes to the estate
tax liability and therefore is treated as
generating an estate tax liability. Pro-
posed §1.1014-10(b)(3) clarifies that if,
after the application of all such available
credits, no tax under chapter 11 is pay-
able, the entire gross estate is excluded
from the application of the consistency
requirement. The final regulations in
§1.1014-10(c)(1)(ii) adopt the substance
of this proposed rule with minor lan-
guage changes.

Bulletin No. 2024–40 651 September 30, 2024
F. Proposed §1.1014-10(c)(1): Final
value – Finality of estate tax value.
Proposed §1.1014-10(c)(1) provides
that the final value of property reported
on an estate tax return is its value as
finally determined for purposes of the
estate tax. Proposed §1.1014-10(c)(1)
further provides that the finally deter-
mined value is (i) the value reported on
a return filed with the IRS pursuant to
section 6018 of the Code once the period
of limitations for assessment of the estate
tax has expired without that value hav-
ing been timely adjusted or contested by
the IRS, (ii) if the preceding rule in (i)
does not apply, the value determined or
specified by the IRS once the periods of
limitations for assessment and for claim
for refund or credit of the estate tax have
expired without that value having been
timely contested, (iii) if the preceding
rules in (i) and (ii) do not apply, the value
determined in an agreement, once that
agreement is final and binding on all par-
ties, or (iv) if the preceding rules in (i),
(ii), or (iii) do not apply, the value deter-
mined by a court, once the court’s deter-
mination is final.
The rules in proposed §1.1014-10(c)
(1) are adopted in redesignated §1.1014-
10(b)(1) of the final regulations, with
certain clarifications and other changes.
First, §1.1014-10(b)(1)(ii) of the final
regulations omits the reference to the
period of limitations on credit or refund,
which makes the rules defining the “final
value” of consistent basis property in the
final regulations more consistent with the
rules defining a final determination for gift
tax purposes. This is appropriate because
both regulatory definitions are based on
similar statutory language. Second, the
final regulations in §1.1014-10(d)(1) add
a definition of the term contested to clar-
ify that an executor cannot contest the
IRS’s determination of value with only a
“protective” statement generally contest-
ing the IRS’s determination of value. The
challenge must be specific to a particular
item of property, rather than a general
objection that would provide no meaning-
ful information respecting the value of the
property at issue. Thus, the challenge must
put at issue the value of property by pro-
viding to the IRS a written statement that
identifies the specific property, states that
the executor does not accept as correct
the value determined or specified by the
IRS, and provides the executor’s claimed
value for the property as determined in
accordance with the requirements of sec-
tion 2031, the regulations thereunder, and
other applicable guidance. In cases in
which the value of property is contested,
the final value will be determined either
by agreement between the executor and
the IRS, as described in §1.1014-10(b)(1)
(iii) of the final regulations, or by litiga-
tion, as described in §1.1014-10(b)(1)(iv)
of the final regulations.
G. Proposed §1.1014-10(c)(2): No
finality of estate tax value.
Proposed §1.1014-10(c)(2) of the pro-
posed regulations provides that, prior to
the determination of the final value of
property subject to the consistent basis
requirement, the recipient of that property
may not claim an initial basis in excess of
the value reported on the required State-
ment. Proposed §1.1014-10(c)(2) further
provides that, if the final value of the prop-
erty subsequently is determined (under
proposed §1.1014-10(c)(1)) and that value
differs from the value reported on the
required Statement, then the taxpayer may
not rely on the required Statement initially
furnished for the value of the property and
the taxpayer may have a deficiency and
underpayment resulting from this differ-
ence. The Treasury Department and the
IRS received several comments on these
proposed rules.
One commenter opined that the pro-
posed regulations unfairly hold a bene-
ficiary responsible for not using the final
value to determine initial basis if the bene-
ficiary sells property before its final value
is determined. The commenter asserted
that, in any event, if the final value of
property is determined after its sale, any
accuracy-related penalty imposed under
section 6662 should be waived if the bene-
ficiary acted in good faith. Similarly, com-
menters requested confirmation that no
income tax deficiency would result if the
final value of the property is determined
after the expiration of the period of lim-
itations on assessment applicable to the
beneficiary’s income tax return.
If a beneficiary uses the value reported
on the required Statement to calculate gain
or loss on the sale of property, the bene-
ficiary is using the value reported on the
estate tax return. This may or may not be
the final value of the consistent basis prop-
erty as determined under section 1014(f)
(3). Nevertheless, section 1014(f)(1)(A)
provides specifically that, in the case of
property the final value of which has been
determined, the beneficiary’s initial basis
is limited to that final value. It would be
inconsistent with the language of the stat-
ute to fail to provide that an income tax
deficiency and underpayment may result
if a value exceeding the final value is used
to determine initial basis.
Accordingly, the final regulations, in
redesignated §1.1014-10(b)(2), main-
tain the rules in proposed §1.1014-10(c)
(2), and add several clarifying provi-
sions. Section 1.1014-10(b)(2)(i) of
the final regulations clarifies that the
reported value is the value reported on
the Statement required under §1.6035-1
or, if supplemented, on the most recent
supplement to that Statement. That sec-
tion further clarifies that the value from
any Statement that reports either a value
from an estate tax return filed after the
expiration of the period of limitations
on assessment applicable to that return,
or a value for property not reported on
the estate tax return, is not a reported
value. In effect, before a final value is
determined, the value reported on the
estate tax return controls. This rule rec-
ognizes that section 1014(f)(3) requires
an assessment process to determine the
final value of property. The IRS cannot
assess tax on property reported only
on the required Information Return or
required Statement(s) because these
constitute only information returns and
payee statements as defined in section
6724(d)(1)(D) and (d)(2)(II), respec-
tively. Section 1.1014-10(b)(2)(ii) of the
final regulations clarifies that an income
tax deficiency can result if the final value
of property is determined before the
expiration of the period of limitations on
assessment for an income tax return that
reports a taxable event with regard to the
property. Section 1.1014-10(b)(2)(ii) of
the final regulations also includes a refer-
ence to section 6664 and the regulations
thereunder for rules relating to waivers of
penalties for certain failures due to rea-
sonable cause.

September 30, 2024 652 Bulletin No. 2024–40
H. Proposed §1.1014-10(c)(3): After-
discovered or omitted property.
Proposed §1.1014-10(c)(3) provides
basis rules for property that is discovered
after the filing of the estate tax return or
otherwise is omitted from the estate tax
return. Proposed §1.1014-10(c)(3)(i)(A)
provides that, if the executor reports the
after-discovered or omitted (unreported)
property on an estate tax return filed before
the expiration of the period of limitations
on assessment of the estate tax, the final
value of the property is determined under
proposed §1.1014-10(c)(1) or (2). Alter-
natively, proposed §1.1014-10(c)(3)(i)(B)
provides that, if the unreported property
is not reported before the period of lim-
itations on assessment expires, the final
value of that property is zero. Finally, to
address situations in which no estate tax
return was filed, proposed §1.1014-10(c)
(3)(ii) provides that the final value of all
property includible in the gross estate sub-
ject to the consistent basis requirement
is zero until the final value is determined
under proposed §1.1014-10(c)(1) or (2).
Because the application of proposed
§1.1014-10(c)(3)(i)(B) or §1.1014-10(c)
(3)(ii) results in the beneficiary having an
initial basis of zero in unreported property,
these proposed provisions are collectively
referred to as the zero basis rule.
Comments received on the zero basis
rule generally fall into two categories:
those relating to the statutory interpreta-
tion of section 1014(f) and the authority
to impose the zero basis rule; and those
relating to the practical effects of the zero
basis rule. With respect to the former,
many commenters contended that sec-
tion 1014(f), by its terms, applies only to
property that is reported on an estate tax
return. Therefore, the commenters con-
cluded that the basis of unreported prop-
erty, as determined under section 1014(a),
is not limited by the consistent basis
requirement in section 1014(f). Comment-
ers further contended that section 1014(f)
(4) limits the regulatory authority of the
Treasury Department and the IRS to pro-
viding exceptions to the application of
the consistent basis requirement, and that
expanding the consistent basis require-
ment to address unreported property
is beyond the scope of this regulatory
authority. Some commenters contended
that the Code does not support a regula-
tory interpretation that denies at least a
carryover basis for an inherited asset.
Commenters commenting on the prac-
tical effects of the zero basis rule con-
tended that the rule is onerous, unduly
harsh, and unfair. Commenters noted that
a beneficiary receiving unreported prop-
erty in many cases will not be the executor
or other person having the responsibility
to report the property and the beneficiary
may have no ability to compel the exec-
utor to report the property on the return.
Yet, under the zero basis rule, the bene-
ficiary receiving unreported property will
have an increased tax burden due to the
denial of basis, whether determined under
section 1014(a) (fair market value on the
decedent’s date of death) or, in the alterna-
tive, a carry-over basis of the decedent’s
adjusted basis in the property. Comment-
ers noted that unreported property is more
likely to arise by inadvertent omission
from the estate tax return or as a result of
being undiscovered, rather than willful
omission. Therefore, except in the case of
willful omission by a beneficiary who is
the executor or other person responsible
to report the property, commenters con-
tended that the zero basis rule is unduly
harsh and unfair because it creates a 100
percent taxable gain on the sale of the
property by the beneficiary.
The Treasury Department and the IRS
do not agree that providing a zero basis
rule for unreported property is beyond its
regulatory authority for implementing the
congressional mandate of section 1014(f).
See section 7805(a) and, more specifically,
section 1014(f)(3)(B) (referencing the
ability of the IRS to specify the value of
property not reported on a return required
by section 6018). However, the Treasury
Department and the IRS recognize that
such a rule primarily impacts the recip-
ients of unreported property, who may
have had no knowledge of or involvement
in the failure to report the property for
Federal estate tax purposes, but, neverthe-
less, have an increased tax burden under
the rule.
The Treasury Department and the IRS
additionally recognize that, under appli-
cable State law, an executor is personally
accountable to discharge its fiduciary duty
to seek out and collect every asset and to
acquire possession of the property of the
decedent. See 31 Am. Jur. 2d Executors
and Administrators § 369 (2018); Eger v.
Eger, 314 N.E.2d 394 (Ohio App. 1974);
Matter of Deutsch, 114 A.D.2d 413, 493
N.Y.S 884 (2d Dep’t 1985). Further, the
Treasury Department and the IRS recog-
nize that, in the absence of a zero basis rule
for unreported property, existing Federal
tax enforcement mechanisms under subti-
tle F of the Code, including criminal lia-
bility, serve to deter willful nonreporting
of property on the estate tax return. See,
e.g., section 6651(a)(3) of the Code for a
potential addition to tax; sections 6662(a),
(g), and (h), 6663, 6721, and 6722 of the
Code for potential accuracy-related, fraud,
and other penalties; section 6501(c)(1)
and (2), and (e)(2) of the Code for poten-
tial exceptions to the general three-year
period of limitations on assessment; and
sections 7203, 7206, and 7207 of the Code
for potential criminal liability and penal-
ties.
In view of these considerations, the
final regulations do not include the zero
basis rule. Instead, §1.1014-10(c)(1)(i) of
the final regulations clarifies that the con-
sistent basis requirement applies only to
included property, a term that is defined
in §1.1014-10(d)(4) of the final regu-
lations to refer to property, the value of
which is included in the value of the dece-
dent’s gross estate, as defined in section
2031 or 2103. Section 1.1014-10(d)(4)
of the final regulations explains that this
refers to property whose value is reported
on an estate tax return or otherwise is
included in the total value of the gross
estate so that a final value is or will be
determined for that property under chap-
ter 11. Consequently, the basis of prop-
erty acquired or passed from a decedent
that is not reported on an estate tax return
and not otherwise included in the gross
estate generally is determined under sec-
tion 1014(a), without regard to the rules
of section 1014(f). The rule identifying
property subject to the consistent basis
requirement in §1.1014-10(c)(1)(i) of the
final regulations, together with the defi-
nition of the term included property in
§1.1014-10(d)(4) of the final regulations,
is sufficient to clarify the scope of the
consistent basis requirement, and there-
fore these final regulations do not include
a specific rule on the basis of unreported
property.

Bulletin No. 2024–40 653 September 30, 2024
I. Proposed §1.1014-10(d): Executor.
Proposed §1.1014-10(d) provides that,
for purposes of proposed §1.1014-10, the
term executor has the same meaning as
in section 2203 of the Code and includes
any other person required under sec-
tion 6018(b) to file a return. In response
to comments or as needed for clarity, pro-
posed §1.1014-10(d) is expanded in the
final regulations to define several addi-
tional terms for purposes of §1.1014-10,
including the terms contested, estate tax
liability, included property, allowable
credits, and United States dollars.
J. Proposed §1.1014-10(e): Examples.
Proposed §1.1014-10(e) provides four
examples to illustrate the application of
proposed §1.1014-10. In general, the
examples illustrate rules applicable to the
final value of property, subsequent basis
adjustments, and reliance on a required
Statement. In particular, one example
illustrates the application of the zero basis
rule on the final value of unreported prop-
erty.
Section 1.1014-10(e) is revised in the
final regulations by reordering the exam-
ples and adding headings to provide clar-
ity. Because the zero basis rule from pro-
posed §1.1014-10(c)(3) is not included
in the final regulations, §1.1014-10(e)
is further revised in the final regulations
by removing the example illustrating the
zero basis rule. Finally, §1.1014-10(e) is
revised in the final regulations by adding
examples to illustrate rules regarding the
duration of the consistent basis require-
ment, the meaning of included property
that is subject to the consistent basis
requirement, and the treatment of partially
deductible property that is subject to the
consistent basis requirement.
K. Applicability date.
Proposed §1.1014-10(f) provides that,
upon publication of the Treasury Decision
adopting these rules as final in the Federal
Register, §1.1014-10(f) of the final regula-
tions will apply to property acquired from
a decedent or by reason of the death of a
decedent whose estate tax return is filed
after July 31, 2015. The final regulations
revise the applicability date of §1.1014-
10(f) of the proposed regulation consis-
tent with section 7805(b)(1). Accordingly,
§1.1014-10(f) of the final regulations does
not reference the July 31, 2015, effec-
tive date of section 1014(f), and provides
instead that §1.1014-10 of the final reg-
ulations applies to property described in
§1.1014-10(c)(1) of the final regulations
that is acquired from a decedent or by
reason of the death of a decedent if the
decedent’s estate tax return is filed after
the date of publication of these final regu-
lations in the Federal Register.
L. Comments requesting new process for
beneficiary to challenge value.
Several commenters expressed con-
cern that beneficiaries have no input in
the determination of final value even if
they believe the estate tax return reports
an incorrect or understated value. These
commenters posited that binding a ben-
eficiary’s initial basis to the final value
may deprive the beneficiary of due pro-
cess. Consequently, they requested a
procedure through which a beneficiary
may challenge the determination of final
value. Some commenters suggested that
the procedure allow the beneficiary an
opportunity to provide evidence of a dif-
ferent date-of-death value at the time of
examination by the IRS of the beneficia-
ry’s income tax return (on which a tax-
able event with respect to the property is
reported).
The Treasury Department and the IRS
considered and briefly responded to a
request to create a new process for chal-
lenging the value reported by the executor
in part 16 of the Summary of Comments
on Notice 2015-57 and Explanation of
Provisions section of the preamble of the
proposed regulations. In the proposed reg-
ulations, the Treasury Department and the
IRS declined to create a new Federal pro-
cess for challenging the value reported by
the executor. Administrability and other
concerns weigh against creating a new
Federal process for challenging the value
reported by the executor. Specifically, this
would leave the IRS in the same position
it held prior to the enactment of section
1014(f). During that time, the IRS was
forced to litigate valuation issues with a
beneficiary, often years after relevant mar-
ket information had ceased to be available,
and/or after having previously litigated
the same valuation issue with the estate.
In addition, regarding the suggestion to
create a procedure to allow the beneficiary
to provide evidence of value at the time of
examination by the IRS of the beneficia-
ry’s income tax return, such a procedure
would be contrary to the statutory rule in
section 1014(f)(1) limiting the basis of
property within its scope to the property’s
final value for Federal estate tax purposes
or, otherwise, to the value reported on a
required Statement.
In response to the commenters’ con-
cerns, however, the Treasury Department
and the IRS are considering issuing guid-
ance in the future that grants a beneficiary
of property subject to the consistent basis
requirement the opportunity to provide
certain credible evidence of value. Out of
administrability concerns, the Treasury
Department and the IRS further anticipate
such an opportunity might be available
only during some limited period of time
and only if the credible evidence of value
indicates that the reported value represents
a substantial understatement of value.
2. Section 6035 – Required Information
Return(s) and Statement(s)
Section 1.6035-1 of the proposed reg-
ulations (proposed §1.6035-1) includes
proposed rules that would address the
statutory basis reporting requirements
under section 6035 applicable to execu-
tors and other persons required to file an
estate tax return. As noted in part 3 of the
Background section of this preamble, the
Treasury Department and the IRS made
amendments to the proposed rules that
substantially reduce burden and increase
administrability for both taxpayers and
the IRS. In particular, the final regulations
(1) adopt a suggested interpretation of
the term acquiring in section 6035(a)(1),
thereby modifying the reporting require-
ments applicable in the case of property
not acquired by a beneficiary before the
estate tax return due date, (2) eliminate the
subsequent transfer reporting requirement
for all beneficiaries other than trustees,
and (3) except additional types of property
interests from the reporting requirements
under section 6035. These and other
amendments to proposed §1.6035-1 are
laid out in a reorganized final regulation.

September 30, 2024 654 Bulletin No. 2024–40
A. Overview of reporting requirements.
The final regulations under section
6035 add an overview paragraph in
§1.6035-1(a) to clarify the relationship
between the reporting requirements under
section 6035 and the consistent basis
requirement applicable to certain benefi-
ciaries under section 1014(f).
B. Applicability of section 6035 reporting
requirements.
In order to provide greater clarity,
the final regulations set forth in separate
paragraphs the provisions governing the
applicability of the section 6035 reporting
requirements and the rule for the identifi-
cation of the persons included as execu-
tors who are subject to them.
i. General rules regarding applicability of
section 6035 reporting requirements.
Section 1.6035-1(b)(1) sets forth the
rule in section 6035(a)(1) and proposed
§1.6035-1(a)(2) that only executors of an
estate who are required to file an estate
tax return (referred to as a required estate
tax return) under section 6018 are sub-
ject to the reporting requirements under
section 6035. In addition, §1.6035-1(b)
(1) sets forth the rule that the reporting
requirements apply only in the case of
a required estate tax return that is filed
after July 31, 2015, and sets forth the
rule in proposed §1.6035-1(a)(2) that
the reporting requirements do not apply
if no estate tax return is required to be
filed under section 6018 even if the exec-
utor files an estate tax return for other
purposes, including without limitation
to make a generation-skipping transfer
tax exemption allocation or election, a
portability election, or a protective fil-
ing to avoid a penalty if an asset value is
later determined to cause a return to be
required or otherwise.
Section 1.6035-1(b)(1) of the final
regulations also clarifies that whether an
estate tax return is a required estate tax
return depends on the date of death value
of property includible in the decedent’s
gross estate, the amount of adjusted tax-
able gifts, and the applicable filing thresh-
old under section 6018(a), so that an elec-
tion made under section 2032 or 2032A
of the Code to determine the value of
property includible in the gross estate in
accordance with either of those respective
provisions is not relevant to the determi-
nation of whether a return is a required
estate tax return. See section 6018(a) and
§20.6018-1(a).
Some commenters inquired whether
the reporting requirements apply in the
event estate tax returns are filed before
August 1, 2015, if either the due date for
the return is after July 31, 2015, or the
executor files a supplement to the return
after July 31, 2015. Section 1.6035-1(b)
(1) of the final regulations provides that
the reporting requirements do not apply
if a required estate tax return is filed on
or before July 31, 2015, even if the due
date of the return is after July 31, 2015,
or if one or more supplements to that
return are filed with the IRS after July
31, 2015.
ii. Executors subject to the section 6035
reporting requirements.
Section 1.6035-1(b)(2) of the final
regulations defines the term executor
consistent with the definition of that
term in proposed §1.6035-1(g)(1), but
includes further explanation in response
to comments. One commenter noted the
possibility that more than one person
may be considered an executor for pur-
poses of section 2203(a) and §20.2203-1
and asked for clarification of the filing
requirements in that situation. The com-
menter posited a scenario in which an
executor who is appointed, qualified,
and acting on behalf of the estate (an
appointed executor) files an estate tax
return, but is unable to make a complete
return as to a trust the value of which is
includible in the gross estate of the dece-
dent. In that case, the trustee of that trust,
upon notice from the IRS, is required
to file a return reporting the trust prop-
erty and the value thereof. See section
6018(b) and §20.6018-2. In response, the
final regulations provide that each person
required to file a return is subject to the
section 6035 reporting requirements, but
only with regard to the property reported
or required to be reported on the estate
tax return required to be filed by that
person. The commenter also suggested
clarifying the application of the section
6035 reporting requirements if no exec-
utor is appointed but multiple persons
are in actual or constructive possession
of property of the decedent. Under the
final regulations, each person in actual
or constructive possession of property of
the decedent is an executor and is sub-
ject to the section 6035 reporting require-
ments, but only with regard to the prop-
erty reported or required to be reported
on the estate tax return required to be
filed by that executor. Finally, the com-
menter suggested clarifying the applica-
tion of the reporting requirements in the
case of successor or co-executors. While
all co-executors are responsible for the
reporting, it is sufficient for only one of
the co-executors to file the Information
Return and to furnish the Statement(s).
Commenters questioned who is
required to comply with the reporting
requirements if a qualified revocable trust
makes a section 645 election and there is
a probate estate. Under section 645, the
trustee of a qualified revocable trust and
an appointed executor (if any) may elect
to treat the trust as part of the estate for
income tax purposes. The section 645
election relates only to the income tax lia-
bility of a qualified revocable trust. There-
fore, the section 645 election, by itself,
does not affect whether the trustee of a
qualified revocable trust is an executor
within the meaning of §1.6035-1(b)(2).
The expanded definition of the term exec-
utor in §1.6035-1(b)(2) of the final regula-
tions adequately clarifies who is subject to
the reporting requirements.
C. Required Information Return and
Statements.
Section 1.6035-1(c) of the final regu-
lations incorporates modifications to the
rules applicable to an executor’s duty
to file the required Information Return
(defined in §1.6035-1(c)(1) of the final
regulations) and furnish each required
Statement (defined in §1.6035-1(c)(2) of
the final regulations) and the due dates
for the satisfaction of those duties. The
modifications reflect the adoption of
comments relating to an executor’s duty
to furnish Statements to beneficiaries
who have not acquired property before
the due date (or earlier filing date) of the
estate tax return.

Bulletin No. 2024–40 655 September 30, 2024
i. Furnishing Statements to beneficiaries
reporting property the beneficiaries have
not yet acquired.
Section 6035(a)(1) requires the exec-
utor to furnish Statements to each person
acquiring any interest in property included
in the decedent’s gross estate for Federal
estate tax purposes. Section 1.6035-1(c)
(2) of the final regulations defines State-
ment consistent with proposed §1.6035-
1(g)(3) and requires an executor to fur-
nish a Statement to each beneficiary who
acquires certain property. Section 1.6035-
1(c)(2) of the final regulations clarifies
that the value the executor reports on that
Statement is the value of the property as
reported on the estate tax return required
to be filed with the IRS.
Proposed §1.6035-1(d)(1), relying on
the language of section 6035(a)(3)(A),
requires that Statements be provided to all
beneficiaries on or before the earlier of the
date that is 30 days after the due date of
the estate tax return or the date that is 30
days after the date the estate tax return is
filed with the IRS. If, by this due date, the
executor has not determined what prop-
erty will be used to satisfy the interest
of each beneficiary, proposed §1.6035-
1(c)(3) requires executors to report on
the Statement for each beneficiary all of
the property that the executor could use
to satisfy that beneficiary’s interest. Pro-
posed §1.6035-1(c)(3) further provides
that, once the exact distribution has been
determined, the executor may, but is not
required to, file and furnish a supplemen-
tal Information Return and Statement.
The Treasury Department and the IRS
received numerous comments object-
ing to this proposed rule. Commenters
noted, and the Treasury Department and
the IRS agree, that proposed §1.6035-
1(c)(3) would result in duplicate report-
ing because a single item of property (or
interest in the property) would be reported
on the Statement of several beneficiaries,
even though some of these beneficiaries
will never receive an interest or a par-
tial interest in that property. According
to commenters, this duplicate reporting
may confuse beneficiaries by leading
them to expect to receive all of the prop-
erty reported on the Statements furnished
to them. In addition, commenters have
contended that this duplicate reporting is
burdensome and may violate a decedent’s
or beneficiary’s right to privacy, possibly
resulting in conflicts and litigation among
beneficiaries with competing interests in
the estate.
Commenters offered various sugges-
tions for revising the rule for property
not acquired before the due date of the
required reporting under section 6035.
One commenter suggested that, in lieu
of the rule requiring an executor to iden-
tify specific property the beneficiary may
receive from the estate, the final regula-
tions should permit executors to furnish
Statements indicating that a beneficiary is
to receive either (1) a certain percentage
of the estate’s property or (2) property val-
ued at a certain dollar amount. Under this
suggested alternative, the executor then
would be required to file a supplemental
Information Return and furnish a supple-
mental Statement within 30 days after the
executor distributes the property to the
beneficiary.
Most commenters requested that the
IRS extend the time for furnishing State-
ments to beneficiaries to allow execu-
tors more time to distribute property or
to determine which property will go to
which beneficiary. One commenter sug-
gested that the proper interpretation of
the language in section 6035(a)(1) requir-
ing an executor to furnish a Statement
“to each person acquiring any interest in
property included in the decedent’s gross
estate for Federal estate tax purposes” is
that it does not include beneficiaries until
they have received an interest in particular
property. The commenter supported this
recommendation by pointing out that the
meaning of the word “acquiring” in the
Code generally means already received.
The commenter identified sixty-four other
sections of the Code in which the word
“acquiring” appears and noted that, in
only two of those sections, does “acquir-
ing” refer to an event that has not yet
occurred. The commenter also pointed to
the description of earlier legislative pro-
posals using identical language in which
the descriptions refer to the beneficiary
“receiving” the property or the “recipi-
ents” of an interest. The commenter rea-
soned that section 6035(a) requires the
reporting of the value (as reported on the
estate tax return) to the beneficiary acquir-
ing that property, which assumes that the
property has already been identified by
having been received by the beneficiary.
In addition, the commenter suggested, in
effect, that this interpretation of the stat-
utory language would not violate the stat-
ute’s prohibition of any delay in reporting
to a recipient beyond the determination of
that value because reporting triggered by
the beneficiary’s receipt of the property
would still provide the required valua-
tion notice to the recipient as soon as the
recipient would have reason to use that
information. The commenter also noted
that section 6035(b) authorizes the Secre-
tary to prescribe regulations as necessary
to carry out section 6035, and stated the
commenter’s belief that this authority is
sufficient to allow the creation of a due
date for Statements based on the date
property is acquired by a beneficiary.
The commenter suggested two alterna-
tives for the due date for furnishing State-
ments reporting the value of property that
has not been acquired or received by the
beneficiary by the due date of the Informa-
tion Return: 30 days after distribution of
the property to the beneficiary or January
31 of the year following the year of distri-
bution of the property to the beneficiary.
The commenter acknowledged that the
first alternative appears to be consistent
with the 30-day concepts found in section
6035(a)(3) (due on or before 30 days after
the estate tax return due date or 30 days
after the estate tax return is filed, if filed
before the due date, and, in the case of an
adjustment, 30 days after the adjustment
is made), but the potential of multiple due
dates during a single year would be bur-
densome on both taxpayers and the IRS.
The commenter suggested that a due date
of January 31 of the year following dis-
tribution would minimize those burdens
while nevertheless ensuring that every
beneficiary acquiring property from the
decedent would have the information nec-
essary for filing a timely income tax return
reporting a sale or other relevant event
regarding this property.
One commenter requested that, if the
final regulations create a due date for
furnishing Statements that is based on
the date property is acquired by a bene-
ficiary, then executors nevertheless have
the option of furnishing all required State-
ments with the Information Return. Under
this suggestion, if an executor determines

September 30, 2024 656 Bulletin No. 2024–40
that it would be less burdensome, an exec-
utor would have the option to furnish a
Statement to a beneficiary even if the ben-
eficiary has not yet acquired the property.
The Treasury Department and the IRS
are sympathetic to the various concerns
raised by the commenters. Many estates
subject to the section 6035 reporting
requirements are complex and will require
a period of time well beyond the estate
tax return filing due date to determine the
appropriate distributions of property to
beneficiaries. In light of these concerns,
the final regulations adopt a suggested
interpretation of the term acquiring in sec-
tion 6035(a)(1) that modifies, and reduces
the burden of, the reporting requirements
applicable in the case of property not
acquired by a beneficiary before the estate
tax return due date (or earlier filing date).
With regard to property the beneficiaries
acquire after the estate tax return due date,
the Treasury Department and the IRS
agree with the commenters that a due date
for furnishing Statements to such benefi-
ciaries that is after the acquisition of prop-
erty would have several benefits. It would
eliminate the potential confusion and lack
of privacy that could result from giving
each beneficiary a Statement showing all
of the property that could be used to satisfy
their respective bequests. It also would be
consistent with the understanding of the
Treasury Department and the IRS of the
intent of section 6035 to provide accurate,
timely, and useful information to benefi-
ciaries and the IRS. After consideration of
the comments, the Treasury Department
and the IRS conclude that it is appropri-
ate to interpret the term acquiring consis-
tent with its most common meaning and
consistent with the discretionary author-
ity granted in section 6035(b) to provide
a due date, which is after the acquisition
of property, for furnishing Statements to
beneficiaries who acquire property after
the due date (or earlier filing date) of the
decedent’s estate tax return.
With regard to what the due date for
Statements with regard to this property
should be, the Treasury Department and
the IRS conclude that a due date of Janu-
ary 31 of the year following acquisition by
the beneficiary of this property is the most
administrable and least burdensome alter-
native. This alternative is the most admin-
istrable and least burdensome because a
January 31 due date would allow an exec-
utor to file the supplemental Information
Return on an annual basis with copies
of all Statements furnished to beneficia-
ries acquiring property in any given year,
rather than having to file multiple supple-
mental Information Returns each year on
a Statement-by-Statement basis as each
Statement is furnished to a beneficiary
within 30 days of acquisition.
Accordingly, §1.6035-1(c)(3) of the
final regulations provides that the due
date for furnishing a Statement to a bene-
ficiary who acquired property on or before
the due date or earlier filing of the estate
tax return is 30 days after the due date or
earlier filing of the estate tax return. The
due date for furnishing a Statement to a
beneficiary who acquires property at a
later date is January 31 of the calendar
year following the year of acquisition.
Section 1.6035-1(c)(4) of the final regula-
tions provides that a beneficiary acquires
property when title vests in the beneficiary
or when the beneficiary otherwise has suf-
ficient control over or connection with
the property that the beneficiary is able
to take action related to the property for
which basis is relevant for Federal income
tax purposes. Depending upon the partic-
ular property and how it was titled at the
decedent’s death, this could occur at the
moment of death, or upon distribution by
the executor or a trustee.
The Treasury Department and the IRS
further agree that providing executors the
option of furnishing all Statements within
30 days of filing the estate tax return,
regardless of whether all assets by then
have been acquired by the beneficiaries,
may reduce the burden associated with
these reporting requirements and is rea-
sonable if an executor has cause to believe
that a beneficiary will acquire certain
property. However, in the event that a dif-
ferent beneficiary acquires that property,
requiring supplemental reporting ensures
that beneficiaries receive the informa-
tion they need to satisfy the consistent
basis requirement of section 1014(f) and
otherwise. Accordingly, §1.6035-1(c)
(5) of the final regulations provides an
option to furnish Statement(s) prior to the
acquisition of property by a beneficiary.
Under this rule, an executor may satisfy
the requirement to furnish a Statement
to a beneficiary acquiring property from
the decedent or by reason of the death of
the decedent by furnishing the Statement
prior to the beneficiary’s acquisition of
the property, but only if the executor has
reason to believe that the beneficiary in
fact will acquire the property. The State-
ment must identify the property the ben-
eficiary is expected to acquire as well as
the value of that property and other infor-
mation prescribed by the Statement and
the instructions. A Statement described in
this paragraph also must include informa-
tion with respect to property that has been
acquired by that beneficiary as required
under §1.6035-1(c)(2) of the final regula-
tions. Also, under the rule in §1.6035-1(c)
(5) executors are required to update the
beneficiary information on a supplemen-
tal Information Return and Statement
if, after satisfying the requirements for
this optional reporting, the property is
acquired by a different beneficiary.
ii. Explanation of provisions regarding
the required Information Return and
Statement(s).
In light of the due date set forth in the
final regulations for the furnishing of State-
ments with regard to property acquired by
a beneficiary after the due date or earlier
filing of the estate tax return, §1.6035-1(c)
of the final regulations makes coordinat-
ing changes in the description of the Infor-
mation Return and the due dates of that
return and of any required supplements to
the Information Return.
In particular, §1.6035-1(c)(1) of the
final regulations defines Information
Return consistent with proposed §1.6035-
1(g)(2), with one exception, and requires
an executor to file the Information Return
by the due date set forth in §1.6035-
1(c)(3) of the final regulations. The one
change is that the required attachments
to the Information Return include only
a copy of each Statement reporting the
value of property acquired by a benefi-
ciary on or before the due date or earlier
filing of the Federal estate tax return, and
a copy of each Statement (if any) report-
ing the value of property that has not by
then been acquired by a beneficiary as
described in §1.6035-1(c)(5) of the final
regulations (the option to furnish State-
ment(s) prior to the acquisition of prop-
erty by a beneficiary). The Information

Bulletin No. 2024–40 657 September 30, 2024
Return must be timely filed even if there
are no Statements (as described in the pre-
ceding sentence) required to be attached
to that return.
As discussed in part 2.C.i. of this Sum-
mary of Comments and Explanation of
Revisions, a Statement reporting the value
of property acquired by a beneficiary sub-
sequent to the due date or earlier filing
date of the estate tax return must be fur-
nished to the beneficiary on or before Jan-
uary 31 of the calendar year following the
date of that acquisition. Under §1.6035-
1(c)(3)(ii) of the final regulations, a copy
of each Statement due by that January 31,
along with a copy of each Statement (if
any) provided to beneficiaries in advance
of their receipt of property as permitted
under §1.6035-1(c)(5) of the final regu-
lations, must be attached to a supplemen-
tal Information Return filed with the IRS
on or before that same January 31. Sec-
tion 1.6035-1(c)(3)(iii) of the final regu-
lations confirms the transition rule in pro-
posed §1.6035-1(d)(2), with an updated
reference to §1.6035-2 of the final regula-
tions. Finally, §1.6035-1(c)(6) of the final
regulations includes an example illustrat-
ing the application of §1.6035-1(c) of the
final regulations.
Several commenters requested that a
six-month extension of time (distinct from
the automatic six-month extension of time
for filing the estate tax return) be permit-
ted for filing and furnishing the Informa-
tion Return and Statements in order to
allow the executor sufficient time to accu-
rately determine which assets will be used
to satisfy the interests of the various bene-
ficiaries. The due date set forth in the final
regulations for furnishing Statements to
beneficiaries with regard to property they
acquire after the estate tax return due date
adequately addresses the concern identi-
fied by the commenters. Therefore, this
suggestion is not adopted.
D. Duty to supplement.
i. Duty to supplement and changes
requiring supplemental reporting.
Section 1.6035-1(d)(1) of the final reg-
ulations sets forth the rules in proposed
§1.6035-1(e)(1) that impose a supplemen-
tal reporting obligation (both to the IRS
and to the beneficiary) on an executor if
a change to the information required to
be reported on the Information Return or
Statement (or supplement to either) causes
the information as reported to be incorrect
or incomplete. Several examples of adjust-
ments requiring supplemental reporting
are identified in proposed §1.6035-1(e)
(2), and several comments were received
with regard to these examples. In response
to these comments, some of the examples
listed in §1.6035-1(d)(2) of the final regu-
lations differ from those proposed, and the
final regulations clarify some of the other
examples of adjustments.
Section 1.6035-1(d)(2)(i) of the final
regulations sets forth the rule in proposed
§1.6035-1(e)(2) imposing a duty to sup-
plement upon the executor’s receipt,
discovery, or acquisition of information
that changes the beneficiary to whom the
property is to be distributed (pursuant to
a death, disclaimer, bankruptcy, or other-
wise). However, the rule is clarified in the
final regulations to provide more detail
in response to comments. Commenters
asked how an executor is to comply with
the reporting requirements under sec-
tion 6035 if all of the required beneficiary
information is not available to the execu-
tor, for instance, if the beneficiary cannot
be located or the beneficiary is a trust not
as yet established. The final regulations
describe the requirements in these cir-
cumstances and include the requirement
to supplement the required reporting to
update the beneficiary information when
it becomes available to an executor. See
§1.6035-1(d) and (g) of the final regula-
tions. Accordingly, §1.6035-1(d)(2)(i) of
the final regulations includes, as a change
requiring supplemental reporting, the dis-
covery of any information that corrects or
completes other beneficiary information
originally reported.
In response to comments, §1.6035-
1(d)(2)(ii) of the final regulations clari-
fies the rule in proposed §1.6035-1(e)(2)
providing that a change in the value of
property pursuant to an examination or
litigation is a change requiring supple-
mental reporting. One commenter asked
for clarification as to whether supplemen-
tal reporting is required if, during exam-
ination or litigation, a settlement with the
IRS increases the estate tax liability but
the increase is not related to a particular
property. Another commenter requested
confirmation that only an adjustment in
value that represents the final value for
Federal estate tax purposes gives rise to
a duty to supplement. With respect to the
first comment, the Treasury Department
and the IRS observe that a settlement of
estate tax liability typically is related to
an adjustment to the value of particular,
identified property includible in the gross
estate, a claimed deduction or credit, gift
tax paid within three years before death,
adjusted taxable gifts, or gift tax paid and/
or payable. If a settlement does not change
the value of particular, identified property,
the settlement does not impact the final
value of the estate’s property and is not a
change requiring supplemental reporting
with respect to that specific property. With
respect to the second comment, an adjust-
ment representing the final value for estate
tax purposes undoubtedly gives rise to the
statutory duty to supplement. In addition,
an adjustment to value on a supplemen-
tal estate tax return becomes the reported
value for purposes of section 6035(a)(1)
and §1.1014-10(b)(2) of the final regu-
lations. Therefore, reporting a different
value on a supplemental estate tax return
also comes within the scope of an exec-
utor’s duty to supplement. In response to
these comments, §1.6035-1(d)(2)(ii) of
the final regulations clarifies that both a
final determination of value of property
for Federal estate tax purposes that differs
from the value identified on a Statement
or supplement to a Statement and an exec-
utor’s reporting of a change in value on a
supplemental estate tax return give rise to
a duty to supplement.
Commenters objected to the rule in
proposed §1.6035-1(e)(2) providing that
the discovery of unreported property is a
change requiring supplemental reporting;
they suggested that this is an impermis-
sible broadening of the estate tax filing
requirement. In response, the final regu-
lations instead provide that it is only the
supplementing of an estate tax return, to
report the value of previously unreported
property, that triggers a duty to supple-
ment the reporting under section 6035,
and not the mere discovery of unreported
property. Consistent with the definition
of included property in §§1.1014-10(d)
(4) and 1.6035-1(e)(1) of the final regu-
lations, §1.6035-1(d)(2)(iii) of the final
regulations sets forth the rule that prop-

September 30, 2024 658 Bulletin No. 2024–40
erty that is included in a decedent’s gross
estate, either by the filing of an estate tax
return, a supplemental estate tax return, or
pursuant to an examination by the IRS or
otherwise, will give rise to a duty to sup-
plement if the fair market value of that
property was not previously reported on
the estate tax return or is changed.
The rule in proposed §1.6035-1(e)(2)
relating to a change in the property to be
acquired by a beneficiary is updated in
the final regulations to conform with the
reporting requirements in the final reg-
ulations for property not acquired by a
beneficiary before the due date or earlier
filing date of the estate tax return. Sec-
tion 1.6035-1(d)(2)(iv) of the final regu-
lations provides that a change requiring
supplemental reporting includes an exec-
utor’s disposition of property in a trans-
action in which the basis of new prop-
erty received by the estate is determined
in whole or in part by reference to the
final value of property acquired from the
decedent or as a result of the death of the
decedent (for example, as the result of a
like-kind exchange or involuntary con-
version). However, §1.6035-1(d)(2)(iv) of
the final regulations also imposes a duty
to supplement if an executor furnishes a
Statement to a beneficiary prior to the ben-
eficiary’s acquisition of property pursuant
to the optional reporting afforded under
§1.6035-1(c)(5) of the final regulations
and the beneficiary ultimately acquires
property different than that identified on
that Statement.
ii. Changes not requiring supplemental
reporting.
Section 1.6035-1(d)(3)(i) of the final
regulations adopts the rule in proposed
§1.6035-1(e)(3)(i)(A) excluding from the
duty to supplement changes to correct an
inconsequential error or omission. How-
ever, the rule in proposed §1.6035-1(e)
(3)(i)(B) excluding from the duty to sup-
plement a change in the distribution of
property from that previously reported is
omitted from the final regulations because
it relates only to the proposed reporting
requirements for property not acquired by
a beneficiary before the estate tax return
due date. The reporting requirements for
such property have been modified in the
final regulations.
Section §1.6035-1(d)(3)(ii) of the
final regulations provides an exception
to the duty to supplement for a change in
value as the result of an event described
in section 2032A(c)(1) that triggers an
additional estate tax liability with regard
to property for which a special use elec-
tion was made, including a beneficiary’s
election to increase the beneficiary’s basis
in that property under section 1016(c) in
response to that event. Although such an
election by a beneficiary does result in a
change in value under the rule in §1.1014-
10(b)(3)(ii), the qualified heir is in a better
position than the executor to know this
information, so no supplemental reporting
is required of the executor. A commenter
requested an example illustrating the
adjustment to basis if there is a disposition
of property subject to section 2032A under
section 2032A(c)(1). Because an example
would serve the purpose of illustrating the
workings of section 1016(c), rather than
the reporting requirements under section
6035, the Treasury Department and the
IRS decline to include such an example in
these regulations under section 6035.
Section 1.6035-1(d)(3)(iii) of the final
regulations adopts the suggestion of a
commenter by excepting from the duty
to supplement any post-death or other
adjustment to the basis of property made
pursuant to sections of the Code other
than section 1014(f). The executor gen-
erally is required to provide only supple-
mental Statements that show a change
in the identification, value, or recipient
of property as reported on the estate tax
return. Therefore, section 6035 does not
require the reporting of adjustments in
basis attributable to the operation of Code
sections other than section 1014(f). That
commenter also suggested that the final
regulations provide a uniform method for
reporting post-death adjustments to the
beneficiary if the executor chooses to do
so. The Treasury Department and the IRS
understand that an executor may choose to
furnish a beneficiary information regard-
ing changes to basis that occur pursuant to
Code sections other than section 1014(f).
If the executor does so, and if the executor
chooses to use the Statement to provide
that information, that information must
be shown separately from the information
required to be reported on the beneficia-
ry’s Statement.
Finally, §1.6035-1(d)(3)(iv) of the
final regulations provides an exception
to the duty to supplement for any other
change that is identified as requiring no
supplemental reporting under this section
in guidance published in the future in the
Federal Register or in the Internal Reve-
nue Bulletin.
iii. Due date of supplemental reporting.
The rules in proposed §1.6035-1(e)(4)
(i) relating to the due date for supplemen-
tal reporting are updated in the final regu-
lations to align with the modified report-
ing requirements in the final regulations.
Section 1.6035-1(d)(4) of the final regula-
tions provides that supplemental reporting
is due on or before 30 days after the date
on which information becomes available
to the executor from which the executor
can conclude that a change to the earlier
reporting is required to be supplemented
in accordance with these final regulations.
Section 1.6035-1(d)(4) of the final regula-
tions clarifies that, for changes occurring
as a result of supplementing the estate tax
return, the date on which that information
becomes available to the executor is the
filing date of the supplement to that return
and, for changes occurring as a result of a
determination of final value, that date is
the date a value becomes the final value
under §1.1014-10(b)(1) of the final reg-
ulations. In the case of property not
acquired by a beneficiary before the due
date or earlier filing date of the estate tax
return, §1.6035-1(d)(4) of the final regula-
tions provides that, for property for which
a Statement has not been provided to the
beneficiary pursuant to the option to fur-
nish Statements prior to the acquisition of
property by a beneficiary in §1.6035-1(c)
(5) of the final regulations, the due date
of any required supplemental reporting
may be delayed until the due date for sup-
plemental reporting for subsequently-ac-
quired property in §1.6035-1(c)(3)(ii) of
the final regulations.
iv. Duration of duty to supplement.
Commenters inquired whether the
executor’s duty to file supplemental Infor-
mation Returns and furnish supplemental
Statements is limited in time. In response,
§1.6035-1(d)(5) of the final regulations is

Bulletin No. 2024–40 659 September 30, 2024
added to provide, in effect, that the duty
to supplement is limited to changes that
occur on or before the later of a benefi-
ciary’s acquisition of the property or the
determination of the final value of the
property under §1.1014-10(b)(1) of the
final regulations.
v. Illustration of duty to supplement.
Section 1.6035-1(d)(6) was added to
the final regulations to provide examples
to illustrate the application of the rules
regarding the duty to supplement as pro-
vided in §1.6035-1(d) of the final regula-
tions.
E. Property for which reporting is
required.
Proposed §1.6035-1(b)(1) provides in
part that the property to which the sec-
tion 6035 reporting requirements apply
is all property reported or required to be
reported on an estate tax return required
under section 6018. The reporting require-
ments also apply to any other property the
basis of which is determined in whole or in
part by reference to the property described
in the preceding sentence (for example,
as the result of a like-kind exchange or an
involuntary conversion).
As discussed in part 1.H of this Sum-
mary of Comments and Explanation of
Revisions, the final regulations do not
include the proposed zero basis rule for
unreported property to which numerous
commenters objected. Therefore, the final
regulations narrow the scope of property
for which reporting is required as com-
pared to the rule in proposed §1.6035-1(b)
(1) that would have subjected all property
reported or required to be reported on an
estate tax return under section 6018. Sec-
tion 1.6035-1(e)(1) of the final regulations
provides that only property whose value is
included in the value of a decedent’s gross
estate for Federal estate tax purposes (and
any other property the basis of which is
determined, in whole or in part, by refer-
ence to the basis of such included prop-
erty) is subject to the section 6035 report-
ing requirements. Section 1.6035-1(e)(1)
of the final regulations defines the term
included property consistently with the
definition of that term in §1.1014-10(d)(4)
of the final regulations to mean property
the value of which is included in the value
of the decedent’s gross estate as defined in
section 2031 or 2103. Section 1.6035-1(e)
(1) of the final regulations further clarifies
that included property does not include
property whose value is not reported on
an estate tax return and whose value is
not otherwise included in the value of the
decedent’s gross estate as finally deter-
mined for Federal estate tax purposes.
Some commenters suggested that prop-
erty subject to reporting should be limited
to property to which the consistent basis
requirement of section 1014(f) applies.
While both sections 6035 and 1014(f)
apply with respect to property includi-
ble in a decedent’s gross estate only if an
executor is required to file an estate tax
return under section 6018, section 1014(f)
(2) limits the application of the consis-
tent basis requirement to property whose
inclusion in the gross estate increases the
estate tax liability for the estate. Section
6035 includes no similar limitation and,
therefore, applies to a broader universe
of property than section 1014(f), and it
applies whether or not any estate tax must
be paid. Therefore, this comment is not
adopted.
Another commenter sought clarifica-
tion as to whether property for which a
marital or charitable deduction is claimed
is property for which reporting is required.
Property that qualifies, in whole or in
part, for a marital or charitable deduc-
tion for which a deduction is claimed is
included property as that term is defined
in §1.6035-1(e)(1) of the final regulations.
Accordingly, as §1.6035-1(e)(1) of the
final regulations also clarifies, such prop-
erty is subject to reporting. Consequently,
the executor is required to file an Infor-
mation Return and to furnish Statements
if the value of the estate is sufficient to
require the filing of an estate tax return,
even if no estate tax is due as a result of a
charitable and/or marital deduction.
Some commenters had questions about
the application of the reporting require-
ments to community property. Proposed
§1.6035-1(b)(1) provides that the report-
ing requirements are limited to only the
decedent’s one-half interest in community
property. Commenters asked for confir-
mation that the reporting requirements do
not apply to the surviving spouse’s one-
half interest in community property that is
subject to section 1014(b)(6). Under sec-
tion 1014(b)(6), the spouse’s interest also
is deemed to have been acquired from the
decedent and thus is subject to the basis
adjustment under section 1014(a). How-
ever, section 1014(a) and section 6035 are
different. The spouse’s interest is not inclu-
dible in the decedent’s gross estate and
thus is not required to be reported on the
estate tax return. Accordingly, §1.6035-
1(e)(1) of the final regulations sets forth
the rule that the reporting requirements do
not apply to the surviving spouse’s inter-
est in community property.
Some commenters asked whether there
is a reporting requirement if the executor
makes a non pro rata division and distri-
bution of community property authorized
by applicable State law. See, for exam-
ple, West’s Ann. Cal. Prob. Code sections
100(b) and 101(b). Under applicable State
law, an executor may distribute the sur-
viving spouse’s interest in community
property (property belonging to the sur-
viving spouse, in which the decedent has
no interest includible under section 2033)
to a beneficiary other than the surviving
spouse to satisfy a bequest. In lieu of the
surviving spouse’s interest in the commu-
nity property, the executor may distribute
to the surviving spouse all or any part of
decedent’s interest in other property inclu-
dible in the gross estate. The executor’s
distribution does not convert property
included in the gross estate into property
not included in the estate and, therefore,
does not eliminate the applicability of
the reporting requirements with regard to
the property distributed to the surviving
spouse. Accordingly, §1.6035-1(e)(1) of
the final regulations identifies, as property
subject to reporting, property included in
the decedent’s gross estate that is distrib-
uted to a decedent’s surviving spouse in
lieu of the surviving spouse’s interest in
community property pursuant to State law.
Section 1.6035-1(e)(2) of the final reg-
ulations adds two examples to illustrate
property subject to reporting under section
6035.
F. Excepted property requiring only
limited reporting.
The proposed regulations under
§1.6035-1(b)(1) list four types of property
proposed to be excepted from the report-

September 30, 2024 660 Bulletin No. 2024–40
ing requirements: (i) cash (other than
a coin collection or other bills or coins
with numismatic value); (ii) income in
respect of a decedent (as defined in section
691); (iii) tangible personal property for
which an appraisal is not required under
§ 20.2031-6(b); and (iv) property sold,
exchanged, or otherwise disposed of (and
therefore not distributed to a beneficiary)
by the estate in a transaction in which cap-
ital gain or loss is recognized.
Many commenters suggested additions
or modifications to this list of exceptions.
In response, the list in proposed §1.6035-
1(b)(1) is expanded in redesignated
§1.6035-1(f)(2) of the final regulations. A
particular property included in the dece-
dent’s gross estate may qualify under
more than one of these exceptions. In
addition, §1.6035-1(f)(1) of the final reg-
ulations explains the reporting require-
ments applicable to property described in
§1.6035-1(f)(2) of the final regulations,
referred to as excepted property, and
§1.6035-1(f)(4) of the final regulations
provides examples of excepted property
and illustrates the reporting requirements
applicable to this property. A discussion
of the comments and responses to the
comments follows.
i. Limited reporting of excepted property.
Some commenters noted that it is
unclear whether an executor is subject to
any reporting requirements under section
6035 if all distributions from the estate are
of property excepted from the reporting
requirements by proposed §1.6035-1(b)
(1). For example, commenters questioned
whether an executor is subject to any
reporting requirements under section 6035
if the executor has liquidated (or will liqui-
date) the estate so that all distributions will
be made in cash. In response, §1.6035-1(f)
(1) of the final regulations clarifies that
included property is subject to more lim-
ited reporting if the property is excepted
property (as identified in §1.6035-1(f)(2)
(i) through (xiv) of the final regulations).
Specifically, the requirement to file an
Information Return with the IRS pursuant
to §1.6035-1(c)(1) of the final regulations
remains the same even if all property is
excepted property. However, in the case of
excepted property, an executor is required
only to disclose on the Information Return
that some or all of the property included
in the decedent’s gross estate is excepted
from the full reporting requirements pur-
suant to §1.6035-1(f)(2) of the final regu-
lations; an executor is not required to iden-
tify the excepted property or to provide a
Statement to a beneficiary with regard to
excepted property.
ii. Exceptions for cash and other
property.
Proposed 1.6035-1(b)(1)(i) excepts
cash (other than a coin collection or
other bills or coins with numismatic
value) from the reporting requirements
under section 6035. To provide more
precision and clarity, §1.6035-1(f)(2)
(i) of the final regulations replaces the
exclusion for cash with an exclusion
for United States dollars. United States
dollars are defined in §1.6035-1(f)(3) of
the final regulations as the official cur-
rency of the United States. For purposes
of section 6035, the term United States
dollars includes physical bills and coins
if the value of each bill or coin is equiv-
alent to the face amount of that bill or
coin. This definition does not include
other physical United States bills or
coins with numismatic value because
these bills or coins typically do not have
a value equal to their face value.
Many commenters requested that the
exception for cash in the proposed regu-
lations be expanded to include cash equiv-
alents. In response to these comments,
§1.6035-1(f)(2) of the final regulations
expands the list of excepted property to
include property the value of which is
equal to its face value and that either is
expressed in United States dollars or will
be paid in United States dollars. This
excepted property includes: (1) United
States dollar-denominated demand depos-
its; (2) Cash collateral denominated in
United States dollars held by a third party
to secure a liability (such as a deposit of
purchase money or a security deposit);
(3) Life insurance proceeds on the life
of the decedent payable in a lump sum
in United States dollars; and (4) Federal,
State, and local tax refunds and other
refunds payable in United States dollars.
Certificates of deposit are excepted prop-
erty because their Federal estate tax value
generally equals their face value plus
interest accrued to the date of death. Sim-
ilarly, shares in money market funds are
excepted property under the final regula-
tions.
A commenter suggested that notes
having a Federal estate tax value equal to
the outstanding principal balance of the
note should be considered a cash equiv-
alent. Another commenter suggested that
such notes should be excepted because
the disposition of such property will
never be a recognition event. The Trea-
sury Department and the IRS decline to
adopt these suggestions because notes
have basis and the face value of the note
may not always equal the final value of
the note for Federal estate tax purposes.
See §20.2031-4. However, if a note is for-
given in full by the decedent at death, the
underlying indebtedness is discharged
and no property having basis remains for
distribution to a beneficiary. Accordingly,
excepted property also includes notes
that are forgiven in full by the decedent
at death, whether or not denominated in
United States dollars.
In further response to the aforemen-
tioned comments as well as additional
comments received regarding property
qualifying for limited reporting under the
cash exception, the Treasury Department
and the IRS note that the following items
do not fall within the list of excepted prop-
erty in §1.6035-1(f)(2) of the final regu-
lations: (1) currency other than in United
States dollars; (2) any payments not made
in United States dollars; (3) life insurance
policies not paid in United States dollars,
and life insurance policies payable to a
beneficiary in United States dollars annu-
ally or at some other interval for a period
of time after the decedent’s death; (4)
notes (other than an installment obligation
subject to section 453) that the decedent
did not forgive in full upon the decedent’s
death, whether or not expressed in United
States dollars; (5) U.S. Savings bonds;
and (6) accounts receivable (unless such
property consists entirely of the right to
receive an item of income in respect of a
decedent as defined in section 691 (IRD)).
This property generally has basis, its value
generally may not equal its face value and,
accordingly, this property is not excepted
from the reporting requirements in the
final regulations. For the same reasons,
digital assets as defined in section 6045(g)

Bulletin No. 2024–40 661 September 30, 2024
(3)(D), including virtual currency
2
or
cryptocurrency, do not fall within the list
of excepted property set forth in §1.6035-
1(f)(2) of the final regulations. Consistent
with all of the above, the list of excepted
property is expanded and clarified in
§1.6035-1(f)(2) of the final regulations.
With respect to future modifications to
property qualifying as excepted property,
§1.6035-1(f)(2)(xiv) of the final regula-
tions provides that excepted property will
include any other property that is iden-
tified as excepted property in published
guidance in the Federal Register or in the
Internal Revenue Bulletin.
The Treasury Department and the IRS
note that certain beneficiaries in receipt
of included property may have a basis in
that property different from the value of
that property as expressed in United States
dollars, and therefore may have to convert
the final value of that property into a cur-
rency other than United States dollars in
order to determine their initial basis in
that property. Such a beneficiary includes
a qualified business unit (within the mean-
ing of section 989) of a person that has a
functional currency other than the United
States dollar. See sections 985 through
989 for rules regarding the functional cur-
rency of a qualified business unit.
iii. Exception for household and personal
effects.
Proposed 1.6035-1(b)(1)(iii) excepts
from the reporting requirements tangible
personal property for which an appraisal is
not required under §20.2031-6(b). Section
20.2031-6(b) requires an appraisal if the
decedent’s household and personal effects
include articles having marked artistic or
intrinsic value with a total value in excess
of $3,000. In response to a comment, these
items are described in the final regulations
as household and personal effects, rather
than as tangible personal property, to con-
form more closely with §20.2031-6(b).
Commenters asked whether the $3,000
threshold applies to each article or to the
collective value of all the tangible personal
property includible in the gross estate.
In addition, one commenter asked how
to allocate the final value of articles of
household and personal effects appraised
as a single set or group if the estate dis-
tributes parts of that set or group among
different beneficiaries (for example, the
gross estate includes a 24-piece silver flat-
ware set with a final value of $4,000, and
the set is divided between two beneficia-
ries). The commenter suggested that the
executor be given the authority to use any
reasonable method to allocate the final
value (and thus the basis) of the parts of
the set or group among the beneficiaries.
Finally, commenters noted that the $3,000
threshold amount found in §20.2031-6(b)
has remained static since 1958 and asked
that it be increased.
The Treasury Department and the IRS
understand the need for clarity on how to
apply the exception in the proposed reg-
ulations for tangible personal property.
However, addressing this issue in the
final regulations necessarily would impact
determinations of whether an appraisal is
required under §20.2031-6(b) and how to
allocate the value of estate property among
beneficiaries. These issues, including any
change to the threshold amount under
§20.2031-6(b), are more appropriately
addressed in guidance under section 2031
related to the valuation of household and
personal effects. Accordingly, §1.6035-
1(f)(2)(ix) of the final regulations pre-
serves the exception and does not address
the commenters’ questions.
iv. Exceptions for property whose basis is
unrelated to the Federal estate tax value
of the property.
Because section 1014(a) does not apply
to the right to income in respect of a dece-
dent as defined in section 691 (IRD), the
Federal estate tax value of IRD does not
affect its basis in the hands of the benefi-
ciary acquiring that property. Accordingly,
proposed §1.6035-1(b)(1)(ii) excepts IRD
from the reporting requirements. The
Treasury Department and the IRS deem
it appropriate in the final regulations to
more generally except from full section
6035 reporting requirements property
having a basis that is determined without
reference to the property’s Federal estate
tax value, including IRD. A beneficiary
receiving such property has no need to
receive a Statement providing the Federal
estate tax value of such property. Several
types of IRD are listed separately in the
regulations. These assets, such as individ-
ual retirement accounts (IRAs), may have
an IRD component and a non-IRD com-
ponent of basis. The following paragraphs
discuss comments relating to reporting
exceptions or suggested exceptions for
property having a basis that is determined
without reference to the property’s Fed-
eral estate tax value.
Multiple commenters sought clarifica-
tion on whether certain IRD property hav-
ing a basis component is excepted from
the full section 6035 reporting require-
ments, particularly in the case of certain
retirement plans, annuities, installment
obligations, and interests in passthrough
entities holding an item of IRD.
With regard to annuity contracts sub-
ject to section 72 and installment obliga-
tions subject to section 453, commenters
suggested that the final regulations clarify
that, despite having a basis component,
such property be excepted because no
basis adjustment occurs with respect to
such property at the decedent’s death. The
Treasury Department and the IRS agree
and, accordingly, such property is identi-
fied in §1.6035-1(f)(2)(xi) of the final reg-
ulations as examples of property having a
basis that is determined without reference
to the property’s Federal estate tax value.
For the same reason, §1.6035-1(f)(2)(xi)
of the final regulations also includes, as an
example of such excepted property, any
amounts received under an annuity con-
tract, such as a lump sum payment paid
to terminate an annuity contract or a death
benefit paid under an annuity contract.
Multiple commenters sought clarifica-
tion as to whether IRAs and other retire-
ment plans and deferred compensation
plans come within the IRD exception in
the proposed regulations. Commenters
noted that, in certain scenarios, a dece-
dent will have basis in such an account or
plan, in addition to IRD. One commenter
asserted that the reporting typically
2
Virtual currency is defined for Federal income tax purposes as a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value other than
the United States dollar or a foreign currency. See Notice 2014-21, 2014-16 I.R.B. 938; Rev. Rul. 2019-24, 2019-44 I.R.B. 1004. Some digital assets are referred to as virtual currency or
cryptocurrency.

September 30, 2024 662 Bulletin No. 2024–40
required for these accounts or plans out-
side of the section 6035 reporting require-
ments is sufficient and suggested adding
an exception to the final regulations so
that the section 6035 reporting require-
ments will not apply to property in or dis-
tributions from retirement plans (whether
or not tax-deferred). Such property, when
acquired from a decedent, generally has a
basis that is determined without reference
to the property’s Federal estate tax value.
Therefore, distributions from retirement
plans and deferred compensation plans,
including individual retirement arrange-
ments as defined in sections 408 and
408A, are included as examples of prop-
erty coming within the exception from
full reporting in §1.6035-1(f)(2)(xi) of the
final regulations.
In other instances in which property
consists only in part of a right to receive
IRD, such as an interest in a passthrough
entity that holds an interest constituting
IRD, commenters sought clarification on
the scope of the IRD exception to section
6035 reporting. In most cases, the basis
of such property is determined under
section 1014(a), even though the basis
under section 1014(a) may be adjusted
to account for the items of IRD. Because
the Federal estate tax value of such prop-
erty is relevant to the determination of
the recipient’s basis in the property, such
property does not come within the excep-
tion for property having a basis deter-
mined without reference to the property’s
Federal estate tax value in §1.6035-1(f)
(2)(xi) of the final regulations. That
exception is limited to property that con-
sists entirely of IRD.
Finally, in response to other requests
for clarification, appreciated property
described in section 1014(e) that is
acquired by a decedent within 1 year of
death, for which basis is not adjusted
under section 1014(a), also is included as
an example of property coming within the
exception from full reporting in §1.6035-
1(f)(2)(xi) of the final regulations.
v. Exceptions for property sold,
exchanged, or disposed of prior to
distribution.
Proposed §1.6035-1(b)(1)(iv) excepts
property sold, exchanged, or otherwise
disposed of (and therefore not distrib-
uted to a beneficiary) by the estate in a
transaction in which capital gain or loss
is recognized. Commenters asserted
that this exception as proposed suggests
that the reporting requirements would
continue to apply to property sold,
exchanged, or otherwise disposed of by
the estate if no gain or loss is recognized
because the sales price equals the estate’s
basis in the property. Commenters sug-
gested, and the Treasury Department and
the IRS agree, that the reporting require-
ments should not apply to property dis-
posed of in a recognition transaction
for the estate for income tax purposes,
whether or not gain or loss is recognized,
because the basis of this property is no
longer related to the property’s Federal
estate tax value. The Treasury Depart-
ment and the IRS also agree with com-
menters that, for purposes of the report-
ing required under section 6035, it is
irrelevant whether any gain or loss the
estate recognizes is capital or ordinary.
The final regulations under §1.6035-1(f)
(2)(x) include these clarifying changes.
In addition, in response to requests for
additional clarification, §1.6035-1(f)
(2)(x)(A) through (E) of the final reg-
ulations include examples of excepted
property pursuant to this rule as follows:
(1) property distributed in satisfaction of
a pecuniary bequest on which the estate
recognizes any gain or loss pursuant to
§1.661(a)-2(f); (2) property for which an
election under section 643(e)(3) has been
made for the estate to recognize any gain
or loss; (3) interests in business entities
that are redeemed for United States dol-
lars prior to distribution to a beneficiary;
(4) property disposed of in a transaction
described in section 267(a) and (b)(13),
which disallows a loss from the sale or
exchange of property, directly or indi-
rectly, between the executor and the ben-
eficiary of the estate, except in a sale or
exchange in satisfaction of a pecuniary
bequest; and (5) property subject to the
mark to market accounting method at the
time of distribution from the estate or
from the decedent’s revocable trust.
Similarly, §1.6035-1(f)(2)(xii) of the
final regulations excepts bonds to the
extent that they are redeemed by the issuer
for United States dollars prior to being dis-
tributed to a beneficiary so that any gain or
loss is recognized by the estate.
vi. Exception for property included in the
gross estate of a beneficiary.
A commenter suggested that an excep-
tion to the reporting requirements should
apply if the beneficiary of property
acquired from a decedent dies shortly
after that decedent and that property then
is included in the deceased beneficiary’s
gross estate. In this case, the deceased ben-
eficiary does not need a Statement identi-
fying the value of that property because
the basis of that property will be deter-
mined as of the beneficiary’s date of death,
thus independently of the determination of
the final value of that property in the dece-
dent’s estate. Accordingly, §1.6035-1(f)
(2)(xiii) of the final regulations identifies
property included in the gross estate of a
beneficiary who died before the due date
of the Information Return as excepted
property subject to only limited reporting.
vii. Publicly traded securities.
Two commenters suggested that pub-
licly traded securities should be excepted
from the reporting requirements, both to
reduce burden and because §1.6045A-
1(b)(8) already requires basis reporting
for certain publicly traded securities. This
suggestion is not adopted in the final reg-
ulations because, while §1.6045A-1(b)(8)
requires basis reporting between brokers
if certain securities are transferred, it does
not always require reporting to the IRS
and the beneficiary. It would be burden-
some for both taxpayers and the IRS to
distinguish between those covered secu-
rities and others, including shares held
in certificate form, for purposes of com-
plying with these reporting requirements.
Further, the information to be transferred
between brokers might not always be
the final value of the security for Federal
estate tax purposes. Additional detailed
information regarding the reporting of
securities requested by commenters may
be provided in forms and instructions.
viii. Other.
One commenter requested a report-
ing exception for property transferred to
a charity or nonresident who is not a cit-
izen of the U.S. (nonresident noncitizen)
based on the assumption that charities and

Bulletin No. 2024–40 663 September 30, 2024
nonresident noncitizens have no need for
basis information. Basis information for
such property is relevant in certain cir-
cumstances, such as for the computation
of the excise tax on a private founda-
tion, and, therefore, this suggestion is not
adopted.
G. Identification of beneficiaries.
The proposed regulations under
§1.6035-1(c)(1) describe the reporting
requirements as they apply to different
beneficiaries, including a beneficiary
who is also an executor, a beneficiary of
a life estate, a beneficiary of a remainder
interest and a beneficiary of a contin-
gent interest. Proposed §1.6035-1(c)(2)
describes the reporting requirements as
they apply to a beneficiary that is a trust,
estate, or other entity. Proposed §1.6035-
1(c)(3) describes the reporting require-
ments applicable if the beneficiary of
particular included property has not been
identified by the due date of the required
reporting. Finally, proposed §1.6035-1(c)
(4) describes the reporting requirements
applicable if a beneficiary cannot be
located by the executor.
As discussed in part 2.C.i. of this Sum-
mary of Comments and Explanation of
Revisions, many commenters objected
to the proposed reporting requirements
under §1.6035-1(c)(3) that would have
applied in the case of an executor who has
not determined what property will be used
to satisfy the interest of each beneficiary
by the due date of the Information Return.
The section 6035 reporting requirements
have been modified in §1.6035-1(c) of the
final regulations to address the concerns
of the commenters. However, additional
comments were received on the other ben-
eficiary provisions in proposed §1.6035-
1(c). A discussion of these comments and
responses to these comments, as well as
a discussion of certain clarifying changes
made in §1.6035-1(g) of the final regula-
tions, follows.
i. Definition of beneficiaries.
Section 1.6035-1(g)(1) of the final
regulations defines the term beneficiary
to refer to a person who acquires (or
will acquire) property subject to report-
ing described in §1.6035-1(e) of the final
regulations. A beneficiary may be an indi-
vidual (including one who is the executor
as well as a beneficiary), the estate of a
deceased individual who survived the
decedent, a trust (referred to as a benefi-
ciary trust), or an entity other than a trust,
including without limitation a business
entity or an organization described in sec-
tion 501(c).
ii. Beneficiary trust.
Proposed §1.6035-1(c)(2) directs that,
if the beneficiary is a trust, estate, or other
entity, the executor is to furnish the ben-
eficiary’s Statement to the trustee of the
trust or similar representative of the estate
or other entity, rather than to the beneficia-
ries or other owners of that trust or other
entity. This provision generated several
comments. Some commenters questioned
whether the Statement should be given
to the trustee or to the trust’s beneficiary.
They noted that, because there are many
different types of trusts and varying cir-
cumstances, an inflexible rule is not nec-
essarily appropriate in this context. For
instance, some trusts terminate at death or
shortly thereafter and the trustee distrib-
utes the trust property in kind, while other
trusts continue in existence for many gen-
erations. In some cases, it may be unclear
when a trust terminates because an exist-
ing trust may be decanted or divided into
several trust shares or different trusts.
Some trusts are for the benefit of only one
beneficiary, such as a marital trust, but
other trusts may be for a class of different
beneficiaries. In addition, sometimes, the
executor may not be able to get informa-
tion about the provisions or beneficiaries
of an inter vivos trust, although the trust
property is includible in the decedent’s
gross estate for Federal estate tax pur-
poses.
After consideration of the comments,
the Treasury Department and the IRS
agree that there are circumstances under
which it would be appropriate for an exec-
utor to furnish the Statement to the trustee
of a beneficiary trust and different circum-
stances warranting the furnishing of the
Statement directly to the trust beneficia-
ry(s). Section 6035 contemplates that the
Statement will be received by a person or
entity that is likely to engage in an income
tax recognition event with respect to the
property. A trust that terminates at the
death of the decedent or shortly thereafter
is unlikely to have such an event, unlike a
trust that continues for many years. Any
rule attempting to distinguish between
these different circumstances would be
both complex and likely to fail to address
the entire universe of possibilities.
Accordingly, in order to respond to the
comments, and to avoid undue complexity
in regulations, the Treasury Department
and the IRS conclude that it is appropri-
ate to adopt a flexible rule for identify-
ing the beneficiary to whom the executor
must furnish the Statement in the case of
a beneficiary trust. Section 1.6035-1(g)(2)
(i) of the final regulations provides that
the executor must furnish the Statement
to the trustee, rather than to the beneficia-
ries of the trust, but allows the executor
instead to furnish the Statement directly to
the beneficiaries of the trust, with a copy
to the trustee, if the executor reasonably
believes that it is unlikely that the trust
will depreciate, sell, or otherwise dispose
of the property in a recognition event for
income tax purposes. For this purpose, a
trust’s beneficiaries include all potential
current income beneficiaries and each
remainderman who would have had a cur-
rent interest in the trust if one or more of
the income beneficiaries had died immedi-
ately before the decedent.
Commenters also requested clarifica-
tion of the executor’s obligation to furnish
a Statement regarding the property of an
inter vivos trust included in the decedent’s
gross estate for Federal estate tax pur-
poses. In this situation, the executor is not
distributing the trust property to the trustee
and, assuming the executor reported the
trust on the estate tax return, the trustee is
not the executor required to file that estate
tax return. If the trust property is reported
on the estate tax return filed by the exec-
utor of the estate, that executor is subject
to the reporting requirements as described
in this section with regard to the trust
property. Except for the reporting required
under §1.6035-1(h) of the final regula-
tions, it is only in the situations described
in §1.6035-1(b)(2) of the final regulations,
in which a trustee of a trust might be an
executor required to file an estate tax
return with regard to trust property, that
the trustee would be required to file the
Information Return and Statement(s) with

September 30, 2024 664 Bulletin No. 2024–40
regard to the trust property reported on the
estate tax return filed by that trustee.
Commenters requested guidance on
how to comply with the reporting require-
ments to a beneficiary trust if that trust is
not yet established by the due date of the
Information Return. In response, §1.6035-
1(g)(2)(ii) of the final regulations provides
that, if by the due date of the Information
Return, a beneficiary trust does not have
at least one trustee and a tax identification
number from the IRS, an executor must
report on the Information Return that the
beneficiary trust is not yet established in
accordance with the instructions. Supple-
mental reporting is required once the ben-
eficiary trust is established.
iii. Furnishing Statement to beneficiary of
split interest in property, not in trust.
Section 1.6035-1(g)(3) of the final
regulations retains and clarifies certain
aspects of the rules in proposed §1.6035-
1(c)(1) applicable to beneficiaries of split
interests in property not in trust. Under
§1.6035-1(g)(3) of the final regulations,
the beneficiary of a life estate not in trust
is the life tenant, and the beneficiary of
a remainder interest not in trust is each
remainderman, identified as if the life
tenant were to die immediately after the
decedent. For purposes of determining
the due date for furnishing Statements to
such beneficiaries under §1.6035-1(c)(3)
of the final regulations, each beneficiary
will be deemed to have acquired the prop-
erty subject to reporting on the date of the
decedent’s death. Section 1.6035-1(g)(3)
of the final regulations further provides
that the beneficiary of a contingent inter-
est not in trust is a beneficiary only if the
contingency occurs before the end of the
period during which the executor has an
obligation to supplement the reporting as
provided in §1.6035-1(d)(5) of the final
regulations. If the contingency occurs
during this period, §1.6035-1(g)(3) of the
final regulations provides that the exec-
utor must update the beneficiary infor-
mation on the Information Return and
furnish a Statement to that beneficiary
pursuant to the executor’s duty to sup-
plement to report a change in beneficiary
information as described in §1.6035-1(d)
of the final regulations. Section 1.6035-
1(g)(3) of the final regulations clarifies
that usufruct interests are treated in the
same manner.
Several commenters requested confir-
mation that, for purposes of complying
with the reporting requirements of section
6035(a), the executor is not required to
determine the allocation of uniform basis
among the beneficiaries with interests in
an asset for different periods of time. The
Treasury Department and the IRS agree
that nothing in section 6035(a) requires
the executor to report to a beneficiary of
such an interest that beneficiary’s share
of uniform basis as of the decedent’s date
of death. It is only the value of the entire
property that is the subject of the required
reporting. Therefore, §1.6035-1(c)(2) of
the final regulations provides that an exec-
utor is required to identify the property
acquired by the beneficiaries, the value of
the property as reported on the estate tax
return filed with the IRS, and such other
information prescribed by the Statement
and the instructions.
iv. Reporting for a missing beneficiary.
In response to comments, §1.6035-
1(g)(4) of the final regulations modifies
the rule in proposed §1.6035-1(c)(4) with
regard to the applicable reporting require-
ments if the executor cannot locate a
beneficiary. The proposed rule provides
that an executor must use reasonable due
diligence to identify and locate all bene-
ficiaries and, if the executor is unable to
locate a beneficiary by the due date of the
Information Return, the executor must
so report on the Information Return and
explain the efforts the executor has taken
to locate the beneficiary and to satisfy the
obligation of reasonable due diligence.
Commenters requested an explanation or
definition of “reasonable due diligence”
for this purpose. In referencing “reason-
able due diligence” in the proposed reg-
ulations, the Treasury Department and
the IRS intended only to reference an
executor’s responsibility as a fiduciary
under local law to identify and locate all
beneficiaries and did not intend to create
a new standard. Therefore, the require-
ment of due diligence is removed in the
final regulations. Instead, §1.6035-1(g)
(4) of the final regulations provides that,
if the executor is unable to locate a ben-
eficiary by the date required for filing the
Information Return with the IRS, then the
executor must report on the Information
Return the failure to locate the beneficiary
and the efforts the executor has made to
locate the beneficiary. The final regula-
tions retain the requirement to supplement
the Information Return and to furnish the
required Statement to the beneficiary once
the beneficiary has been located or, if the
beneficiary is not located, to report the
distribution of the property to a different
beneficiary.
H. Subsequent transfers of property
subject to reporting.
Proposed §1.6035-1(f) would impose
a reporting requirement with regard to
certain subsequent transfers of property
previously reported (or required to be
reported) on a Statement. Specifically,
it would require the recipient of prop-
erty to which section 6035 applies to file
with the IRS a supplemental Information
Return, and to furnish to a transferee of
the property a Statement, if the recipient
(who becomes the transferor) distributes
or transfers all or any portion of that prop-
erty in a transaction in which the trans-
feree determines its basis, in whole or in
part, by reference to the transferor’s basis.
Commenters asserted that section 6035
imposes reporting requirements on execu-
tors, but not on subsequent transferees and,
therefore, the Treasury Department and
the IRS lack authority to require reporting
under section 6035 by beneficiaries who
subsequently transfer property acquired
from a decedent. Commenters also noted
that this reporting requirement could con-
tinue for generations, and thus be impos-
sible for the IRS to monitor and enforce,
especially with respect to nonresident
non-citizen beneficiaries if the property is
no longer in the United States. Comment-
ers also noted that this subsequent report-
ing requirement creates uncertainty for
executors, estate tax return preparers, and
beneficiaries as to whether supplemental
reporting is required, and that the failure
to comply with the reporting requirement
is subject to penalties. They contended
this requirement is particularly unfair
with respect to unsophisticated individual
recipients who are likely to be unaware
of the reporting requirements and, as a
result, are more likely to become subject

Bulletin No. 2024–40 665 September 30, 2024
to noncompliance penalties. Finally, com-
menters noted that, in many cases, the
obligation to report the basis of property
transferred is duplicative of other required
filings.
The Treasury Department and the IRS
carefully have reconsidered the bene-
fits and burdens of the proposed subse-
quent reporting requirement in light of
these comments. The enactment of sec-
tion 1014(f) created the consistent basis
requirement, and the enactment of section
6035 gave the IRS the ability to enforce
the provisions of section 1014(f) and the
related penalty under section 6662(k)
for use of an inconsistent estate basis for
income tax purposes. Without this pro-
posed reporting requirement, subsequent
ownership changes made through nonre-
alization events would erode the ability
of the IRS to enforce the consistent basis
requirement under section 1014(f) and the
penalty under section 6662(k) for viola-
tions of that requirement.
Nevertheless, the Treasury Department
and the IRS conclude that the burden of the
proposed subsequent reporting require-
ment, including the potential penalties for
noncompliance, is too heavy a burden to
impose on individual beneficiaries who,
as a practical matter, may have no way
of knowing of the existence of, or of how
to comply with, this subsequent reporting
requirement. The Treasury Department
and the IRS, however, also conclude that
trustees of trusts are one class of benefi-
ciaries for whom the subsequent report-
ing requirement would not be sufficiently
burdensome to outweigh the needs of, and
benefits to, the IRS and trust beneficiaries.
Generally, the trustee of a trust is likely
to be aware of applicable tax requirements
and to be both able and motivated to com-
ply with these requirements. In addition,
in discharging the trustee’s fiduciary obli-
gations to the trust beneficiaries, a trustee
is likely (even without a supplemental
reporting requirement) to provide certain
relevant information (such as basis) to the
beneficiary to whom the trustee is distrib-
uting a trust asset.
Accordingly, the final regulations
retain a reporting requirement for sub-
sequent transfers, but this requirement is
narrowed significantly. Under §1.6035-
1(h)(1) of the final regulations, reporting
requirements are imposed on trustees of
beneficiary trusts making a distribution of
property that was reported on a Statement
furnished to those trustees, or of any other
property the basis of which is determined,
in whole or in part, by reference to the
basis of this property. Such a trust distri-
bution includes, for example, a transfer of
trust property pursuant to the exercise or
lapse of a person’s power of appointment
(whether general or limited). That section
further provides that trustees of trusts that
receive a distribution of such property,
whether from a beneficiary trust or from
any other trust that has received such
property, either directly or indirectly, also
are subject to these reporting requirements
when making a distribution of that prop-
erty. This reporting obligation imposed on
trustees continues to apply for each sub-
sequent transfer or distribution until the
property is distributed to a beneficiary not
in trust. However, these reporting require-
ments do not apply if property is disposed
of by the trustee in a transaction that is a
recognition event for income tax purposes
(whether or not resulting in a gain or loss)
that results in the entire property having
a basis that no longer is related, in whole
or in part, to the property’s final value or,
if applicable, reported value (within the
meaning of §1.1014-10(b)(1) or (2) of the
final regulations, respectively).
By imposing a reporting obligation on
trustees of beneficiary trusts and certain
other recipient trusts, the final regulations
ensure that an individual or entity likely
to incur an income tax realization event
with respect to the trust property has the
necessary information to determine the
correct initial basis. This facilitates the
proper reporting of basis and compliance
with the consistent basis requirement if it
is applicable.
Finally, to reduce burden and improve
administrability, §1.6035-1(h)(2) of the
final regulations adopts the same due date
for the filing of the Information Return and
the furnishing of the Statement with regard
to distributions of property by trustees as
is required under §1.6035-1(c)(3)(ii) of
the final regulations, which is January
31 of the year following the distribution.
Section 1.6035-1(h)(3) of the final regu-
lations adds an example illustrating the
application of the reporting requirements
applicable to trustees making subsequent
transfers of property if the property is sub-
ject to reporting under §1.6035-1(e) of the
final regulations.
I. Penalties.
Section 1.6035-1(i) of the final reg-
ulations provides a cross-reference to
sections 6721 through 6724 and the reg-
ulations in part 301 under sections 6721
through 6724 that impose penalties on the
failure to timely file a correct Information
Return and the failure to timely furnish a
correct Statement as required by section
6035. Sections 301.6721-1(h)(2)(xii) and
301.6722-1(e)(2)(xxxv) of these final reg-
ulations clarify that the penalties under
those sections also apply to the failure
to report as required by section 6035. A
penalty applies separately to each initial
or supplemental Information Return that
the executor is required to file with the
IRS, and to each initial or supplemental
Statement that the executor is required
to furnish to a beneficiary. Accordingly,
only one penalty under section 6721 may
be imposed for filing an incorrect Infor-
mation Return, even if copies of multiple
required Statements are not attached to the
Information Return, but multiple penalties
under section 6722 may be imposed for
furnishing multiple incorrect Statements,
even if the Statements were filed with the
IRS as attachments to a single Information
Return. Section 1.6035-1(i) of the final
regulations also refers to section 6724 and
the regulations in part 301 under section
6724 for rules relating to waivers of these
penalties if it is shown that the failure was
due to reasonable cause and not to willful
neglect.
For purposes of applying these pen-
alties, commenters inquired whether an
appointed executor is relieved of the
reporting requirements if a successor
executor is appointed. The issue of an
executor’s continuing liability under the
Code if a successor executor is appointed
is not limited to the section 6035 reporting
requirements and may depend on varying
factors, including local law. Accordingly,
this issue is outside the scope of these reg-
ulations and is not addressed in these final
regulations.
Multiple commenters inquired about
how to complete the Information Return
and Statements in various scenarios, such
as cases in which a nonresident noncitizen

September 30, 2024 666 Bulletin No. 2024–40
is a beneficiary and has no tax identifica-
tion number, a partnership is a beneficiary,
an executor reports bulk assets and bro-
kerage accounts on an estate tax return,
and others. To the extent not otherwise
addressed in the final regulations or this
preamble, these comments are best con-
sidered in contemplation of necessary or
appropriate revisions to the Information
Return and its instructions.
J. Applicability date.
Proposed §1.6035-1(i) provides that,
upon publication of the Treasury Decision
adopting these rules as final in the Federal
Register, §1.6035-1 of the final regula-
tions will apply to property acquired from
a decedent or by reason of the death of a
decedent whose estate tax return is filed
after July 31, 2015. The final regulations
revise the applicability date of §1.6035-
1(i) of the proposed regulation consistent
with section 7805(b)(1). Accordingly,
§1.6035-1(j) of the final regulations does
not reference the July 31, 2015, effec-
tive date of section 6035, and provides
instead that §1.6035-1 of the final regula-
tions applies to executors of a decedent’s
estate who are required to file an estate tax
return under section 6018 if that return is
filed after the date of publication of these
final regulations in the Federal Register,
and to trustees receiving certain property
included in the gross estate of such a dece-
dent.
3. Section 6662 — Inconsistent Estate
Basis Reporting
Section 6662(a) and (b)(8) impose an
accuracy-related penalty on the portion of
any underpayment of tax relating to prop-
erty subject to the consistent basis require-
ment that is attributable to an inconsistent
estate basis. Proposed §1.6662-8(b) pro-
vides that there is an inconsistent estate
basis to the extent that a taxpayer claims
a basis, without regard to the adjustments
described in proposed §1.1014-10(a)
(2), in property described in proposed
§1.6662-8(c) that exceeds that property’s
final value as determined under proposed
§1.1014-10(c). Proposed §1.6662-8(c)
provides that proposed §1.6662-8(b)
applies to property described in proposed
§1.1014-10(b) that is reported or required
to be reported on an estate tax return filed
after July 31, 2015.
One commenter noted that the phrase
“without regard to the adjustments
described in §1.1014-10(a),” as used in
proposed §1.6662-8(b), eliminates adjust-
ments that correctly may be made by
other sections of the Code on or after the
decedent’s date of death. The comment-
er’s concern was that this language would
void the effects of, or disallow the adjust-
ments available under, other sections of
the Code.
Section 1.6662-9(b) of the final regu-
lations clarifies that there is an inconsis-
tent estate basis to the extent that a tax-
payer claims a basis that was determined
by using an initial basis as defined in
§1.1014-10(a)(2) of the final regula-
tions that exceeds the property’s final
value as determined under §1.1014-
10(b)(1) of the final regulations. The
property to which this section applies
is property described in §1.1014-10(c)
(1) of the final regulations. In addition,
§1.1014-10(a)(2) of the final regulations
confirms that the taxpayer may compute
basis at any time by adjusting the prop-
erty’s initial basis due to the operation
of other provisions of the Code without
violating the consistent basis require-
ment. Section 1.6662-9(b)(2) of the
final regulations provides an example
illustrating the provisions of §1.6662-
9(b) of the final regulations. The pro-
visions regarding the reasonable cause
exception to the penalty are contained in
section 6664 and the regulations in part
1 under section 6664.
In the final regulations, proposed
§1.6662-8 has been redesignated as
§1.6662-9. Section 1.6662-8 is being
reserved for future regulations to address
other provisions under section 6662.
Special Analyses
1. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
2. Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
approved by the Office of Management
and Budget (OMB) in accordance with
the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)) under control num-
ber 1545-2264. On March 4, 2016, pro-
posed regulations (REG-127923-15)
were published in the Federal Regis-
ter (81 FR 11486). The proposed reg-
ulations proposed amendments to the
Income Tax Regulations (26 CFR part
1) and the Procedure and Administra-
tion Regulations (26 CFR part 301).
Comments were specifically requested
concerning (1) whether the proposed
collection of information is necessary
for the proper performance of the func-
tions of the IRS, including whether the
information will have practical utility;
(2) the accuracy of the estimated burden
associated with the proposed collection
of information; (3) how the quality, util-
ity, and clarity of the information to be
collected may be enhanced; (4) how the
burden of complying with the proposed
collection of information may be min-
imized, including through the applica-
tion of automated collection techniques
or other forms of information tech-
nology; and (5) estimates of capital or
start-up costs and costs of operation,
maintenance, and purchase of service to
provide information.
During the comment period, the IRS
received 5 comments on the collection of
information. With respect to the neces-
sity and utility of the proposed collection
of information, a commenter contended
that the reporting requirements in sec-
tion 6035 are intended solely to imple-
ment and enforce the basis consistency
requirement under section 1014(f) and,
therefore, reporting should be limited to
property subject to section 1014(f). The
Treasury Department and the IRS did not
accept this recommendation because this
comment appears to be based on a budget
proposal rather than on section 6035 as
enacted and its history. See U.S. Dept. of
the Treasury, General Explanations of the
Administration’s Fiscal Year 2015 Reve-
nue Proposals, 160-161 (2014). Based
on the language of section 6035(a)(1)
and (2), Congress mandated that report-

Bulletin No. 2024–40 667 September 30, 2024
ing apply to a larger universe of property
than the universe of property subject to
the consistent basis requirement under
section 1014.
Regarding the accuracy of the esti-
mated burden associated with the col-
lection of information, commenters indi-
cated that the IRS estimate of the total
annual reporting burden per respondent
of 5.31 hours was too low. Commenters
estimated that the total annual reporting
burden per respondent should be 20 to 50
hours. Taking into account the input from
the commenters regarding the number of
hours needed to comply, as well as new
rules in the final regulations that reduce
certain reporting burdens, the Treasury
Department and the IRS increased the
estimated total annual reporting burden
per respondent from 5.31 hours to 20
hours.
With respect to how the burden of
complying with the proposed collec-
tion of information may be minimized, a
commenter suggested that the IRS could
minimize the burden of complying with
the proposed collection of information by
accepting Form 706, United States Estate
(and Generation-Skipping Transfer) Tax
Return, and Form 709, United States Gift
(and Generation-Skipping Transfer) Tax
Return, along with a statement identify-
ing the beneficiaries, rather than requiring
duplicative reporting on the 6035 Infor-
mation Return (currently, Form 8971,
Information Regarding Beneficiaries
Acquiring Property From a Decedent).
Another commenter suggested that, if the
executor is the only beneficiary required
to receive the Statement, the IRS could
reduce the cost of compliance by allowing
the executor to check a box on Form 706
certifying that fact. This commenter also
suggested that the reporting requirements
could be satisfied by giving beneficiaries
an appropriately redacted copy of the filed
Form 706.
The Treasury Department and the
IRS did not accept this recommendation
because the filing of Form 709 does not
trigger a section 6035 filing requirement
of Form 8971 and Schedule A. Further,
through its amendment of section 6724(d)
(1) and (2) and the enactment of section
6035, both pursuant to section 2004 of the
2015 Act, Congress identified the state-
ment required by section 6035(a)(1) and
(2) to be filed with the IRS as an infor-
mation return, and the statement required
by section 6035(a)(2) to be furnished to
a beneficiary as a payee statement. The
Treasury Department and the IRS con-
clude that replacing the information return
and payee statement identified in section
6724 with a beneficiary statement attached
to the Form 706, a redacted Form 706, or
the checking of a box on the Form 706
would be contrary to legislative intent and
the statutory language of section 6724(d)
(1)(D) and (d)(2)(II).
A commenter suggested that the
optional ability to electronically file
returns, including Forms 706 and 709,
would facilitate compliance with the
section 6035 reporting requirements and
enhance efficiency. The Treasury Depart-
ment and the IRS concur that the ability
to electronically file not only Forms 706
and 709, but also Form 8971 and Schedule
A, would facilitate compliance with the
section 6035 reporting requirements and
enhance efficiency. At this time, however,
taxpayers are unable to electronically file
Forms 706 and 709.
Several comments were received with
substantive recommendations that relate
to whether the collection of information
will have practical utility and how the
burden of compliance could be minimized
(including specific recommendations to
expand the exceptions to the section 6035
reporting requirements, modify the report-
ing requirements in certain circumstances,
and limit or eliminate the subsequent
transfer reporting requirement). These
comments are addressed in the Summary
of Comments and Explanation of Revi-
sions section of this preamble.
The collection of information in these
final regulations is in §1.6035-1(c)(1) and
(2), (d)(1) and (2), and (h)(1) and (2). The
collection of information is necessary to
comply with the reporting requirements
under section 6035(a). The likely respon-
dents are executors and other persons
required to file an estate tax return under
section 6018 and trustees making in-kind
distributions of property that was subject
to reporting under section 6035 when ini-
tially acquired by the trustee.
Estimated number of respondents:
10,000.
Estimated average annual burden per
respondent: 20 hours.
Estimated total annual reporting bur-
den: 200,000 hours.
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 assigned by the OMB.
3. Regulatory Flexibility Act
It is hereby certified that the collection
of information in these regulations will
not have a significant economic impact
on a substantial number of small entities.
This certification is based on the fact that
this rule primarily affects individuals (or
their estates) and trusts, which are not
small entities as defined by the Regulatory
Flexibility Act (5 U.S.C. 601). Although it
is anticipated that there may be an incre-
mental economic impact on executors
that are small entities, including entities
that provide tax and legal services that
assist individuals in preparing tax returns,
any impact would not be significant and
would not affect a substantial number of
small entities. Therefore, a Regulatory
Flexibility Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is not
required.
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ing this regulation was submitted to the
Chief Counsel for the Office of Advocacy
of the Small Business Administration for
comment on its impact on small business.
No comments were received from the
Chief Counsel for the Office of Advocacy
of the Small Business Administration.
4. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires that
agencies assess anticipated costs and ben-
efits and take certain other actions before
issuing a final rule that includes any Fed-
eral mandate that may result in expendi-
tures in any one year by a State, local, or
Tribal government, in the aggregate, or by
the private sector, of $100 million in 1995
dollars, updated annually for inflation.
The final regulations do not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector in excess of
that threshold.

September 30, 2024 668 Bulletin No. 2024–40
5. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute, or
preempts State law, unless the agency meets
the consultation and funding requirements
of section 6 of the Executive order. These
proposed regulations do not have federalism
implications and do not impose substantial
direct compliance costs on State and local
governments or preempt State law within
the meaning of the Executive order.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue Rul-
ings, Notices and other guidance cited in
this preamble are published in the Internal
Revenue Bulletin (or Cumulative Bulletin)
and are available from the Superintendent
of Documents, U.S. Government Publishing
Office, Washington, DC 20402, or by visit-
ing the IRS website at https://www.irs.gov.
Drafting Information
The principal authors of these final regu-
lations are Donna Douglas, Melissa Liquer-
man, and Karlene Lesho of the Office of
Associate Chief Counsel (Passthroughs and
Special Industries). However, other person-
nel from the Treasury Department and the
IRS participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise
taxes, Gift taxes, Income taxes, Penalties,
Reporting and recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS are amending 26 CFR parts 1
and 301 as follows:
PART 1 – INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by revising entries
for §§1.1014-1 and 1.1014-2, and adding
entries for §§1.1014-10, and 1.6035-1 in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1014-1 also issued under 26
U.S.C. 1014(f).
Section 1.1014-2 also issued under 26
U.S.C. 1014(f).
Section 1.1014-10 also issued under 26
U.S.C. 1014(f).
* * * * *
Section 1.6035-1 also issued under 26
U.S.C. 6035.
* * * * *
Par 2. Add § 1.1014-0 to read as fol-
lows:
§1.1014-0 Table of contents.
This section lists the captions con-
tained in §§1.1014-1 through 1.1014-10.
§1.1014-1 Basis of property acquired
from a decedent.
(a) General rule.
(b) Scope and application.
(c) Property to which section 1014
does not apply.
(d) Applicability date.
§1.1014-2 Property acquired from a
decedent.
(a) In general.
(b) Property acquired from a decedent
dying after December 31, 1953.
(1) In general.
(2) Rules for the application of para-
graph (b)(1) of this section.
(3) Exceptions to application of this
paragraph.
(c) Special basis rules with respect to
certain property acquired from a decedent.
(1) Stock or securities of a foreign per-
sonal holding company.
(2) Spouse’s interest in community
property of decedent dying after October
21, 1942, and on or before December 31,
1947.
§1.1014-3 Other basis rules.
(a) Fair market value.
(b) Property acquired from a decedent
dying before March 1, 1913.
(c) Reinvestments by a fiduciary.
(d) Reinvestments of property trans-
ferred during life.
(e) Alternate valuation dates.
§1.1014-4 Uniformity of basis;
adjustment to basis.
(a) In general.
(b) Multiple interests.
(c) Records.
(d) Effective/applicability date.
§1.1014-5 Gain or loss.
(a) Sale or other disposition of a life
interest, remainder interest, or other inter-
est in property acquired from a decedent.
(b) Sale or other disposition of certain
term interests.
(1) In general.
(2) Effective/applicability date.
(c) Sale or other disposition of a term
interest in a tax-exempt trust.
(1) In general.
(2) Tax-exempt trust defined.
(3) Taxable beneficiary defined.
(4) Effective/applicability date.
(d) Illustrations.
§1.1014-6 Special rule for adjustments to
basis where property is acquired from a
decedent prior to his death.
(a) In general.
(b) Multiple interests in property
described in section 1014(b)(9) and
acquired from a decedent prior to his death.
(c) Adjustments for deductions allowed
prior to the decedent’s death.
§1.1014-7 Example applying rules
§§1.1014-4 through 1.1014-6 to case
involving multiple interests.
§1.1014-8 Bequest, devise, or inheritance
of a remainder interest.
§1.1014-9 Special rule with respect to
DISC stock.
(a) In general.
(b) Portion of property acquired from
decedent before his death included in
decedent’s gross estate.
(1) In general.

Bulletin No. 2024–40 669 September 30, 2024
(2) Example.
(c) Estate tax valuation date.
(d) Examples.
§1.1014-10 Basis of property acquired
from a decedent must be consistent with
property’s Federal estate tax value.
(a) Consistent basis requirement.
(1) General rule.
(2) Initial basis in consistent basis
property and effect of basis adjustments.
(3) Duration of consistent basis
requirement.
(b) Final value and reported value.
(1) Final value.
(2) Reported value if no final value yet
determined.
(3) Special rules.
(c) Consistent basis property.
(1) Property subject to the consistent
basis requirement.
(2) Property excepted from or not sub-
ject to the consistent basis requirement.
(d) Definitions.
(e) Examples.
(f) Applicability date.
Par. 3. Section 1.1014-1 is amended by:
1. Adding two sentences after the
fourth sentence of paragraph (a).
2. Revising the last sentence and add-
ing two sentences after the last sentence
of paragraph (b).
3. Revising paragraphs (c) and (d).
The addition and revisions read as fol-
lows:
§1.1014-1 Basis of property acquired
from a decedent.
(a) * * *For certain property acquired
from a decedent, the initial basis of the
property must not exceed the property’s
final value for Federal estate tax pur-
poses. See section 1014(f) and §1.1014-10
for rules relating to the consistent basis
requirement. * * *
(b) * * *In §§1.1014-1 to 1.1014-6,
inclusive, and §1.1014-10, whenever the
words property acquired from a dece-
dent are used, they also mean property
passed from a decedent, and the phrase
person who acquired it from the decedent
includes the person to whom it passed
from the decedent. The consistent basis
rules in §1.1014-10 apply to property sub-
ject to the consistent basis requirement, as
described in §1.1014-10(c)(1). For prop-
erty subject to the consistent basis require-
ment, the rules in §1.1014-10 modify the
rules set forth in paragraphs (a) and (c)
of this section and in §§1.1014-2 through
1.1014-9.
(c) Property to which section 1014
does not apply. Section 1014 has no appli-
cation to property that constitutes a right
to receive an item of income in respect of
a decedent under section 691.
(d) Applicability date. This section
applies after September 17, 2024. For
rules on and before September 17, 2024,
see § 1.1014-1 as contained in 26 CFR
part 1 revised as of January 19, 2017.
Par. 4. Section 1.1014-2 is amended by
revising the second sentence of paragraph
(b)(2) as follows:
§1.1014-2 Property acquired from a
decedent.
* * * * *
(b) * * *
(2) * * *Except as provided in §1.1014-
10, it is not necessary for the application
of this paragraph (b)(2) that an estate tax
return be required to be filed for the estate
of the decedent or that an estate tax be
payable.* * *
* * * * *
Par. 5. Section 1.1014-10 is added to
read as follows:
§1.1014–10 Basis of property acquired
from a decedent must be consistent
with property’s Federal estate tax
value.
(a) Consistent basis requirement—(1)
General rule. The consistent basis require-
ment is the requirement that the initial basis
in certain property be equal to or less than
the property’s final value as determined
under paragraph (b)(1) of this section or, if
no final value has yet been determined, the
property’s reported value for Federal estate
tax purposes as described in paragraph (b)
(2) of this section. The property subject to
the consistent basis requirement is referred
to in this section as consistent basis prop-
erty and is described in paragraph (c)(1) of
this section.
(2) Initial basis in consistent basis
property and effect of basis adjustments.
The initial basis in consistent basis prop-
erty is the final value of the property, as
determined under paragraph (b)(1) of
this section, and, until the final value of
this property is determined, the proper-
ty’s initial basis is the reported value,
as described in paragraph (b)(2) of this
section. The initial basis in consistent
basis property may be adjusted pursuant
to the operation of section 1014 or other
provisions of the Internal Revenue Code
(Code) governing basis, as applicable, and
those adjustments will not violate the con-
sistent basis requirement in paragraph (a)
(1) of this section. For example, the initial
basis in consistent basis property may be
adjusted for gain recognized by the estate
upon distribution of the property and for
post-death capital improvements and
depreciation. It also may be adjusted in
the manner provided in section 1014(d) in
the case of DISC stock and in the man-
ner provided under subchapter K or S of
chapter 1 of the Code, respectively, in the
case of an interest in a partnership or S
corporation.
(3) Duration of consistent basis require-
ment. The consistent basis requirement
applies as long as the initial basis in con-
sistent basis property is related, in whole
or in part, to the property’s final value, as
determined under paragraph (b)(1) of this
section, or, if applicable, the property’s
reported value, as determined under para-
graph (b)(2) of this section. Therefore,
regardless of the number of successive
owners, the consistent basis requirement
continues to apply until the entire property
is sold, exchanged, or otherwise disposed
of in one or more transactions that result
in a recognition event for income tax pur-
poses (whether or not resulting in a gain or
loss) or until the entire property becomes
includible in another decedent’s gross
estate. The consistent basis requirement
applies whenever there is a taxable event
with respect to the property, such as, but
not limited to, a sale or exchange, depreci-
ation, or amortization of the property. The
expiration of the period of limitations on
assessment for an income tax return that
uses an incorrect basis in reporting a tax-
able event with respect to consistent basis
property has no effect on the duty to deter-
mine basis under the rules of this section
for purposes of reporting any subsequent
taxable event with respect to the property
if the consistent basis requirement contin-

September 30, 2024 670 Bulletin No. 2024–40
ues to apply under the rule of this para-
graph (a)(3).
(b) Final value and reported value—
(1) Final value. The final value of consis-
tent basis property is its fair market value
as finally determined for Federal estate tax
purposes. That value is—
(i) The value reported on an estate tax
return filed with the IRS, once the period
of limitations on assessment (see section
6501) of estate tax has expired without
that value having been timely adjusted by
the IRS; or
(ii) The value determined or specified
by the IRS that differs from the value
reported on an estate tax return filed with
the IRS and the value specified by the IRS
for other included property, as defined in
paragraph (d)(4) of this section, once the
period of limitations on assessment appli-
cable to the estate tax has expired without
that value having been timely contested by
the executor, as defined in paragraphs (d)
(1) and (2) of this section, respectively; or
(iii) The value determined in a writ-
ten agreement with the IRS, (whether
entered into in the course of the admin-
istrative proceedings between the estate
and the IRS or after the commencement
of litigation), once that written agreement
has been executed by both the executor
and the IRS and is binding on all parties
(including, but not limited to, the execu-
tor, the IRS, and the beneficiaries); or
(iv) The value determined by a court
for the purpose of determining the estate
tax liability of the estate, as defined in
paragraph (d)(3) of this section, once the
court’s determination no longer can be
appealed to any court.
(2) Reported value if no final value
yet determined—(i) In general. Prior to
the determination of the final value in
accordance with paragraph (b)(1) of this
section, a taxpayer may not claim an ini-
tial basis in consistent basis property in
excess of the property’s value as reported
on the Statement described in §1.6035-
1(c)(2) and required under §1.6035-1 (as
supplemented). This value is referred to in
this section as the reported value. A value
reported on a Statement (or a supplement
to the Statement) that either reports a
value from an estate tax return filed after
the expiration of the period of limitations
on assessment applicable to that return, or
a value reported for property not reported
on the estate tax return, is not a reported
value for purposes of this section. See
§1.6035-1(d) regarding an executor’s duty
to supplement the Statement.
(ii) Limit on reliance on Statement not
reporting final value. If the final value of
consistent basis property is determined (as
described in paragraph (b)(1) of this sec-
tion) before the expiration of the period
of limitations on assessment for a tax-
payer’s income tax return that reports a
taxable event with regard to the property,
the taxpayer’s reliance on a Statement (or
a supplement to the Statement) that does
not report the final value of the property
may result in an income tax deficiency
and underpayment. See, however, section
6664 and the corresponding regulations
for rules relating to waivers of penal-
ties for certain failures due to reasonable
cause.
(3) Special rules—(i) Property sub-
ject to debt. The final value or, if appli-
cable, the reported value of property sub-
ject to recourse or non-recourse debt is
determined based on the gross value of
that property undiminished by the debt,
regardless of whether the estate tax return
reports the net value (equity of redemp-
tion value) of the property or separately
reports the gross value of the property and
the outstanding debt.
(ii) Special use property. The final
value or, if applicable, the reported value
of special use property with regard to
which a recapture event (described in
section 2032A(c)(1)) has occurred is
increased as provided in section 1016(c) if
the qualified heir makes the election under
section 1016(c) and pays the amounts
required under that section.
(c) Consistent basis property—(1)
Property subject to the consistent basis
requirement—(i) In general. Except as
provided in paragraph (c)(2) of this sec-
tion, consistent basis property is any prop-
erty—
(A) To which section 1014(a) applies;
(B) That is included property, as
defined in paragraph (d)(4) of this section,
if the decedent’s Federal estate tax return
is filed after July 31, 2015, and any other
property the basis of which is determined,
in whole or in part, by reference to the
basis of included property (for example,
property acquired in a like-kind exchange
or an involuntary conversion); and
(C) Whose value increases the estate
tax liability, as defined in paragraph (d)
(3) of this section, that is payable after
the application of allowable credits, as
defined in paragraph (d)(5) of this section.
(ii) Application. If the decedent’s Fed-
eral estate tax return is filed on or before
July 31, 2015, no included property and no
other property described in paragraph (c)
(1)(i) of this section is subject to the con-
sistent basis requirement, even if the due
date of that return is after July 31, 2015, or
if one or more supplements to that return
are filed with the IRS after July 31, 2015.
If an estate tax liability is payable after
the application of allowable credits, all
property described in paragraphs (c)(1)(i)
(A) and (B) of this section is considered
property whose value increases the estate
tax liability for purposes of paragraph (c)
(1)(i)(C) of this section and, therefore,
is subject to the consistent basis require-
ment, except as provided in paragraph (c)
(2) of this section. If, after the application
of allowable credits, no estate tax liability
is payable, no such property is subject to
the consistent basis requirement.
(2) Property excepted from or not sub-
ject to the consistent basis requirement.
Notwithstanding paragraph (c)(1) of this
section, the following property either is
excepted from or is not subject to the con-
sistent basis requirement—
(i) United States dollars (as defined in
paragraph (d)(6) of this section).
(ii) United States dollar-denominated
demand deposits.
(iii) Certificates of deposit denomi-
nated in United States dollars.
(iv) Cash collateral denominated in
United States dollars held by a third party
to secure a liability (such as a deposit of
purchase money or a security deposit).
(v) Shares of a registered investment
company priced in United States dollars
that is a money market fund under Rule
2a-7 under the Investment Company Act
of 1940 (17 CFR 270.2).
(vi) Life insurance proceeds on the life
of the decedent payable in a lump sum in
United States dollars.
(vii) Federal, State, and local tax
refunds and other refunds payable entirely
in United States dollars.
(viii) Notes that are forgiven in full by
the decedent upon death, whether or not
denominated in United States dollars.

Bulletin No. 2024–40 671 September 30, 2024
(ix) Household and personal effects for
which an appraisal is not required under
§20.2031-6(b) of this chapter.
(x) Property the initial basis of which is
not in any way determined with regard to
or derived from the property’s final value
as determined under paragraph (b)(1) of
this section or its reported value as deter-
mined under paragraph (b)(2) of this sec-
tion, if applicable. Such property includes
but is not limited to—
(A) Annuity contracts subject to sec-
tion 72 and amounts received as an annu-
ity subject to section 72;
(B) An interest in property that consists
entirely of the right to receive an item of
income in respect of a decedent as defined
in section 691;
(C) Amounts received under install-
ment obligations arising from a transac-
tion for which the installment method
for determining gain under section 453
applies;
(D) Appreciated property described
in section 1014(e) that is acquired by the
decedent within 1 year of death;
(E) Stock of a passive foreign invest-
ment company subject to section 1296(i),
but only if the basis of such stock is the
adjusted basis in the hands of the decedent
immediately before the decedent’s death;
and
(F) Interests in and distributions from
retirement plans and deferred compensa-
tion plans, including individual retirement
arrangements as defined in sections 408
and 408A, that are expressed entirely in
United States dollars.
(xi) Any interest in property that qual-
ified for an estate tax marital deduction
under section 2056, 2056A, or 2106(a)(3)
for which such a deduction was properly
claimed, and/or any interest in property
that qualified for an estate tax charitable
deduction under section 2055 or 2106(a)
(2) for which such a deduction was prop-
erly claimed, provided that the value of the
decedent’s entire interest in the included
property is wholly deductible and equal
to the total amount qualifying for those
deductions.
(xii) Property that represents the sur-
viving spouse’s one-half share of com-
munity property to which section 1014(b)
(6) applies, regardless of whether this
property is included property as defined in
paragraph (d)(4) of this section.
(xiii) Property the basis of which
is adjusted in a manner similar to sec-
tion 1014(a) on the occurrence of a tax-
able termination that occurs on the death
of a trust beneficiary pursuant to section
2654(a)(2) (to the extent the property is
not then includible in the gross estate of
any person).
(xiv) Any other property that is not
described in paragraph (c)(1)(i) of this
section or that is identified as excepted
property in published guidance in the
Federal Register or in the Internal Reve-
nue Bulletin (see §601.601(d)(2)(ii)(b) of
this chapter).
(d) Definitions. The following defini-
tions apply for purposes of this section—
(1) Contested. The term contested
means to put at issue the value of property
in a written communication to the IRS that
identifies the specific property, states that
the executor does not accept as correct
the value of that property as determined
or specified by the IRS, and provides the
executor’s claimed value for that prop-
erty as determined in accordance with the
requirements of section 2031, the corre-
sponding regulations, and other applicable
guidance. An issue cannot be contested by
a general statement or written communi-
cation that does not include each of these
specified elements.
(2) Executor. The term executor
includes any person described in sec-
tion 2203, as expanded to include all per-
sons required under section 6018(b) to file
an estate tax return.
(3) Estate tax liability. The term estate
tax liability means the amount of tax
imposed under chapter 11 of the Code
(chapter 11).
(4) Included property. The term
included property means property the
value of which is included in the value
of the decedent’s gross estate as defined
in section 2031 or 2103. Generally, this
refers to property whose value is reported
on an estate tax return, but it also refers
to property whose value otherwise is
included in the total value of the gross
estate (for example, during examination
by the IRS) so that a final value is or will
be determined for that property under
chapter 11. However, solely for purposes
of this section, included property does not
refer to unreported property whose value
is not reported on an estate tax return and
whose value is not otherwise included in
the value of the decedent’s gross estate as
finally determined for Federal estate tax
purposes.
(5) Allowable credits. The term allow-
able credits includes any credit against the
estate tax liability allowable by any sec-
tion of the Code or by reason of any treaty
obligation of the United States, provided
the estate qualifies for and properly claims
the credit by complying with all appli-
cable rules for claiming the credit. For
instance, the prorated unified credit under
section 2102(b)(3) is an allowable credit
for qualifying estates if the estate files all
necessary forms or statements required by
the IRS to claim that credit.
(6) United States dollars. The term
United States dollars means the official
currency of the United States. The term
United States dollars includes physical
bills and coins for which the value of each
bill or coin is equivalent to the face amount
of that bill or coin. This definition does not
include other physical United States bills
or coins with numismatic value because
these bills and coins typically do not have
a value equal to their face value.
(e) Examples. The following examples
illustrate the application of this section. In
each case, the decedent D was a citizen
of the United States, the estate does not
elect the alternate valuation method under
section 2032, and an estate tax liability is
payable after the application of all allow-
able credits.
(1) Example 1—(i) Final value determined by
value on estate tax return. At D’s death, D owned
(among other assets) a private residence not sub-
ject to any debt. D’s sole beneficiary is D’s child C.
The value of the residence is reported on the estate
tax return at $300,000. The IRS accepts the return
as filed and the period of limitations on assessment
of estate tax expires. For purposes of the consistent
basis requirement applicable to C, the final value of
D’s residence is $300,000, and therefore, C’s initial
basis in the residence is $300,000. See paragraphs (a)
(2) and (b)(1)(i) of this section.
(ii) Adjustment of initial basis pursuant to
other Code provisions. Several years later, C adds
a master suite to the private residence at a cost of
$45,000. Pursuant to section 1016(a), C’s basis in
the residence is increased by $45,000 to $345,000.
Subsequently, C sells the residence to an unrelated
third party for $450,000. C claims a basis in the res-
idence of $345,000 and reports a gain of $105,000
($450,000 less $345,000). C has complied with the
consistent basis requirement, and C’s adjustment to
C’s initial basis does not violate the consistent basis
requirement. See paragraphs (a)(1) and (2) of this
section.

September 30, 2024 672 Bulletin No. 2024–40
(2) Example 2—(i) Final value determined on
examination. The facts are the same as in paragraph
(e)(1)(i) of this section (Example 1) except that, on
examination, the IRS adjusts the value of the resi-
dence to $290,000 and that value is not contested
before the period of limitations on assessment of
estate tax expires. For purposes of the consistent
basis requirement applicable to C, the final value of
the residence is $290,000, and therefore, C’s initial
basis in the residence, before taking into account C’s
subsequent renovations, is $290,000. See paragraphs
(a)(2) and (b)(1)(ii) of this section.
(ii) Reported value if no final value yet determined
and reliance on Statement required under §1.6035-1.
Prior to the determination of final value, C sells the
residence for $375,000. C reports a gain of $75,000
on C’s income tax return, relying on the reported
value in a Statement required under §1.6035-1 and
claiming an initial basis of $300,000. C has complied
with the consistent basis requirement because C did
not claim an initial basis in the residence in excess
of its reported value before the final value was deter-
mined. However, because C claimed an initial basis
in the residence that exceeds the final value, C may
have an income tax deficiency and underpayment for
the year of the sale if the applicable period of lim-
itations on assessment for C’s income tax return has
not expired when the final value is determined. See
paragraphs (b)(2)(i) and (ii) of this section.
(3) Example 3—(i) Final value determined by
agreement. At D’s death, D owned 50% of Partner-
ship P, whose sole asset was a rental building with a
fair market value of $10 million subject to non-re-
course debt of $2 million. D’s sole beneficiary is D’s
child C. The value of D’s interest in Partnership P is
reported on the estate tax return at $4 million (50%
of ($10 million less $2 million)). On examination,
the IRS timely adjusts the value of the partnership
interest to $5.25 million and the executor of D’s
estate timely contests that value before the period
of limitations on assessment of estate tax expires.
Subsequently, the IRS and the executor of D’s estate
enter into a settlement agreement that provides that
the value of D’s interest in Partnership P for pur-
poses of the estate tax is $4.5 million. For purposes
of the consistent basis requirement applicable to C,
the final value of the partnership interest is $4.5 mil-
lion, and therefore, C’s initial basis in the partnership
interest is $4.5 million. See paragraphs (a)(2) and (b)
(1)(iii) of this section.
(ii) Adjustment of initial basis pursuant to other
Code provisions. C’s share of Partnership P’s liabili-
ties at the date of D’s death is $1 million. Under sec-
tion 742 of the Internal Revenue Code and §1.742-1
of this part, C’s basis in the partnership interest is
$5.5 million ($4.5 million initial basis plus C’s $1
million share of Partnership P’s debt). C later sells
the partnership interest for $5 million at a time
when C’s basis has not changed and C’s share of the
debt remains $1 million. Under section 752(d), C’s
amount realized on the sale includes $1 million for
the reduction in C’s share of partnership liabilities.
Therefore, C’s total amount realized is $6 million.
C reports taxable gain of $0.5 million ($6 million
amount realized less $5.5 million basis). C has com-
plied with the consistent basis requirement because
C did not claim an initial basis in the partnership
interest that exceeds the final value of the interest,
as determined under paragraph (b)(1) of this section,
and C’s adjustment of the initial basis in the partner-
ship interest as reported does not violate the consis-
tent basis requirement. See paragraphs (a)(1) and (2)
of this section.
(4) Example 4—(i) Final value determined by
court decision. At D’s death, D owned (among other
assets) a rental property. D’s sole beneficiary is D’s
child C. The value of the rental property is reported
on the estate tax return at $1 million. On examina-
tion, the IRS determines the value of the rental prop-
erty to be $1.5 million. A court subsequently deter-
mines that the fair market value of the rental property
for purposes of the estate tax is $1.3 million and the
court’s decision becomes final. For purposes of the
consistent basis requirement, the final value of the
rental property is $1.3 million, and therefore, C’s ini-
tial basis is $1.3 million. See paragraphs (a)(2) and
(b)(1)(iv) of this section.
(ii) Reliance on Statement required under
§1.6035-1 and duration of consistent basis require-
ment. After the estate tax return is filed and before
the final value is determined, C receives a State-
ment required under §1.6035-1 showing a reported
value of $1 million for the rental property. C claims
a depreciation deduction on the first income tax
return C files after acquiring the property, relying on
the reported value in the Statement required under
§1.6035-1. C has complied with the consistent basis
requirement on that return because C did not claim
an initial basis in the rental property in excess of its
reported value before the final value was determined.
C may claim a credit or refund of income tax that
may result from the increased depreciation deduc-
tion based on the final value of the rental property,
but only if the period of limitations for a claim for a
credit or refund of income tax for that year has not
expired. C must use the final value of $1.3 million to
determine C’s unadjusted basis in the rental property
for all open taxable years. In this case and pursuant
to section 1016(a)(2), C’s adjusted basis is deter-
mined by reducing the rental property’s final value
of $1.3 million by the greater of the depreciation
deductions allowed or allowable based on the final
value of $1.3 million for all prior tax years (open and
closed). See paragraphs (a)(3), (b)(2)(i) and (ii) of
this section.
(5) Example 5—Final value for property sub-
ject to debt. At D’s death, D’s gross estate includes
a yacht valued at $750,000, subject to $150,000
non-recourse debt. D’s sole beneficiary is D’s child
C. Pursuant to the rule in §20.2053-7 of this chapter,
the executor of D’s estate reports the $600,000 net
value of the yacht on the estate tax return ($750,000
less $150,000 debt) and claims no other deduction
for the debt. The IRS accepts the return as filed and
the period of limitations on assessment of estate tax
expires. For purposes of the consistent basis require-
ment applicable to C, the final value of the yacht is
$750,000, and therefore, C’s initial basis in the yacht
is $750,000. See paragraph (b)(3) of this section.
(6) Example 6—Included property subject to
the consistent basis requirement. After exercising
due diligence to discover estate assets, the executor
of D’s estate reports the value of all known prop-
erty includible in D’s gross estate on a timely filed
estate tax return and pays the estate tax liability.
During examination of the return, the IRS becomes
aware of a piece of artwork in the possession of D’s
child C, the value of which is includible in D’s gross
estate but is not reported on the estate tax return. The
value of the artwork for Federal estate tax purposes
is $500,000. Pursuant to the examination, the IRS
includes the value of the artwork in the value of D’s
gross estate, which causes an increase in D’s estate
tax liability. Neither the inclusion of the artwork in
D’s gross estate nor the value at which the artwork is
included in D’s estate is contested by the executor of
D’s estate before the period of limitation on assess-
ment of estate tax expires. The artwork is subject to
the consistent basis requirement and the final value
of the artwork is $500,000. Therefore, C’s initial
basis in the artwork is $500,000. See paragraphs (a)
(2) and (c)(1)(i) of this section.
(7) Example 7—(i) Partially deductible
property subject to the consistent basis require-
ment. Pursuant to a bequest in D’s will, Trust is
established and funded with certain property, the
value of which is includible in the gross estate
under section 2031. Trust is a charitable remain-
der annuity trust described in section 664(d)(1).
Trust provides that, in each taxable year during
the lifetime of D’s surviving child C, the trustee
must pay to C an annuity of 5% of the initial
net fair market value of all property passing to
Trust as finally determined for Federal estate tax
purposes. Upon the death of C, the trustee must
distribute all of the then principal and income
of Trust to organizations described in sections
170(c), 2055(a), and 2522(a) of the Code as the
trustee selects, in the trustee’s sole discretion.
Although the executor of D’s estate properly
claims an estate tax charitable deduction under
section 2055(e)(2)(A) for the value of the remain-
der interest in Trust, D’s estate has an estate tax
liability after application of all allowable credits.
The property passing to Trust is subject to the
consistent basis requirement because the value of
the property is included in D’s gross estate, an
estate tax liability is payable after the application
of all allowable credits, and the property is not
described in paragraph (c)(2) of this section (in
particular, the property is not wholly deductible
property within the meaning of paragraph (c)(2)
(xi) of this section).
(ii) Wholly deductible property not subject to the
consistent basis requirement. The facts are the same
as in paragraph (e)(7)(i) of this section (Example 7),
except that the sole annuity beneficiary of Trust is
D’s surviving spouse S, and the executor of D’s estate
properly claims a deduction under section 2056(b)
(8) for the value of S’s annuity interest. Because the
value of D’s entire interest in the property passing to
Trust qualified for either a charitable deduction under
section 2055(e)(2) or a marital deduction under sec-
tion 2056(b)(8), none of the property passing to Trust
will be subject to the consistent basis requirement.
See paragraph (c)(2)(xi) of this section.
(iii) Property not wholly deductible property
if the sum of marital and charitable deductions
allowed for that property is less than the value of
the decedent’s entire interest in the property. At
the time of D’s death, D owned 80 shares of vot-
ing stock in a closely-held corporation that has 100
shares of voting stock outstanding. D’s will directed
the executor of D’s estate to distribute 40 shares

Bulletin No. 2024–40 673 September 30, 2024
of D’s stock to a marital trust and 40 shares of D’s
stock to a charitable trust. D’s executor included the
value of D’s 80 shares of stock in D’s gross estate at
$8,000,000 for purposes of the estate tax. Because
of discounts applicable in valuing each of the two
blocks of only 40 shares of the stock, D’s executor
correctly claimed a charitable deduction under sec-
tion 2055(e)(2) of only $3,000,000, and correctly
claimed a marital deduction under section 2056(b)
(7) of only $3,000,000. D’s executor determined that
an estate tax was due on D’s estate after the appli-
cation of all allowable credits. The IRS accepted
the return as filed and the period of limitations on
assessment of estate tax expired. The 40 shares of
stock owned by charitable trust and the 40 shares of
stock owned by marital trust are not wholly deduct-
ible property within the meaning of paragraph (c)(2)
(xi) of this section and are subject to the consistent
basis requirement.
(f) Applicability date. This section
applies to property described in paragraph
(c)(1) of this section that is acquired from
a decedent or by reason of the death of a
decedent if the decedent’s Federal estate
tax return is filed after September 17,
2024.
Par. 6. Add §1.6035-0 to read as fol-
lows:
§1.6035-0 Table of contents.
This section lists the captions con-
tained in §§1.6035-1 and 1.6035-2.
§1.6035-1 Basis information to persons
acquiring property from decedent.
(a) Overview.
(b) Applicability of section 6035
reporting requirements.
(1) In general.
(2) Executor(s) subject to section 6035
reporting requirements.
(3) Examples.
(c) Required Information Return and
Statement(s).
(1) Required Information Return.
(2) Required Statement(s).
(3) Due dates.
(4) Acquiring an interest in property.
(5) Option to furnish Statement(s) prior
to the acquisition of property by a benefi-
ciary.
(6) Example.
(d) Duty to supplement.
(1) Duty to supplement to report
changes to the information reported on the
Information Return or Statement(s).
(2) Changes requiring supplemental
reporting.
(3) Exceptions; no duty to supplement
despite certain changes.
(4) Due date of supplemental reporting.
(5) Duration of duty to supplement.
(6) Examples.
(e) Property for which reporting is
required.
(1) In general.
(2) Examples.
(f) Excepted property requiring only
limited reporting.
(1) Excepted property.
(2) List of excepted property.
(3) United States dollars defined.
(4) Examples.
(g) Beneficiaries.
(1) In general.
(2) Required Statement to beneficiary
trust.
(3) Required Statement to the holder of
a split interest in property, not in trust.
(4) Reporting for a missing beneficiary.
(h) Reporting requirements applicable
to trustees.
(1) Circumstances under which trust-
ees of beneficiary trusts and other trusts
are subject to reporting.
(2) Required reporting.
(3) Example.
(i) Penalties.
(j) Applicability date.
§1.6035-2 Transitional relief.
(a) Statements due before June 30,
2016.
(b) Applicability date.
Par. 7. Revise §1.6305-1 to read as fol-
lows:
§1.6035-1 Basis information to persons
acquiring property from decedent.
(a) Overview. This section implements
the reporting requirements under section
6035 of the Internal Revenue Code (Code)
applicable to executors and certain trust-
ees. In general, the reporting requirements
of this section require providing informa-
tion to the IRS on the identity of persons
acquiring property from a decedent and
providing basis information to persons
acquiring that property from the decedent.
Basis information is needed by certain
persons acquiring property from a dece-
dent in order to comply with the consistent
basis requirement of section 1014(f) of the
Code. See §1.1014-10 for rules applicable
to the consistent basis requirement.
(b) Applicability of section 6035
reporting requirements—(1) In general.
The reporting requirements under section
6035 of the Code apply only in the case of
an estate in which the executor is required
to file an estate tax return under section
6018 of the Code (determined without
regard to §20.2010-2(a)(1) of this chapter)
(required estate tax return) and the execu-
tor files that return after July 31, 2015. The
requirements do not apply in the case of
an estate whose required estate tax return
is filed on or before July 31, 2015, even
if the due date of the return is after July
31, 2015, or if one or more supplements to
that return are filed with the IRS after July
31, 2015. Whether an estate tax return is a
required estate tax return depends on the
relevant factors identified in section 6018
and the corresponding regulations, includ-
ing the date of death value of property
includible in the decedent’s gross estate,
the amount of adjusted taxable gifts, and
the applicable filing threshold. An elec-
tion under section 2032 or 2032A of the
Code to determine the value of the gross
estate in accordance with those respective
provisions is not relevant to whether an
executor is required to file an estate tax
return under section 6018. If an estate
tax return is not required to be filed under
section 6018 based on the relevant factors
identified in section 6018, then an estate
tax return filed for another purpose (such
as to make a portability election under
section 2010(c)(5) of the Code, an alloca-
tion or election under section 2632 of the
Code with regard to a decedent’s gener-
ation-skipping transfer tax exemption, or
a protective filing to avoid a penalty or
satisfy a State law requirement) is not a
required estate tax return for purposes of
this section.
(2) Executor(s) subject to section 6035
reporting requirements. For purposes of
this section, the term executor has the same
meaning as in section 2203 of the Code, as
expanded to include all persons required
under section 6018(b) to file an estate tax
return. Thus, more than one person may
be subject to the reporting requirements
for the same decedent’s estate. If one
executor is unable to file a complete estate
tax return (for example, if the executor has
insufficient information about property in

September 30, 2024 674 Bulletin No. 2024–40
the decedent’s gross estate that is not in
the possession of that executor), each per-
son required to file a return is subject to
the reporting requirements of this section
only with regard to the property reported
(or required to be reported) on the estate
tax return required to be filed by that per-
son. Similarly, if no executor is appointed
by a court, each person in actual or con-
structive possession of any property of the
decedent is an executor for purposes of
this section and is subject to the reporting
requirements of this section, but only with
regard to the property reported or required
to be reported on the estate tax return
required to be filed by that executor under
section 6018(b).
(3) Examples. The following examples,
in which the decedent D was a United
States citizen at the time of the decedent’s
death, illustrates the application of this
paragraph (b).
(i) Example 1—Executor required to file a return
under section 6018. The value at death of property
includible in D’s gross estate exceeds the basic
exclusion amount in effect for the year of D’s death
under section 2010(c). On the timely-filed estate tax
return, D’s executor makes a valid alternate valua-
tion election under section 2032 to value the property
of D’s gross estate as of a date subsequent to the date
of death. As a result, the value of property includible
in D’s gross estate is decreased to a value that is less
than the basic exclusion amount in effect for the year
of D’s death. Because D’s executor is required to file
an estate tax return under section 6018, D’s execu-
tor also is subject to the reporting requirements of
section 6035. This is true even though no estate tax
liability was incurred, and the requirements of sec-
tion 1014(f) do not apply to any property includible
in D’s gross estate. See §1.1014-10(c)(1).
(ii) Example 2—Executor not required to file
a return under section 6018. The value at death
of property includible in D’s gross estate does not
exceed the basic exclusion amount in effect for the
year of D’s death under section 2010(c) of the Code.
In accordance with the terms of D’s will, D’s exec-
utor distributes D’s entire estate to D’s only child.
D’s executor files an estate tax return solely for the
purpose of making a portability election under sec-
tion 2010(c)(5). Because D’s executor is not required
to file an estate tax return under section 6018, D’s
executor is not subject to the reporting requirements
of section 6035.
(iii) Example 3—No executor appointed. The
value at death of property includible in D’s gross
estate exceeds the basic exclusion amount in effect
for the year of D’s death under section 2010(c) and
consists entirely of D’s interests in Property A and
Property B that D owned with Nephew A and Nephew
B, respectively, as joint tenants with rights of survi-
vorship. Pursuant to local law, Nephew A becomes
the sole owner of Property A and Nephew B becomes
the sole owner of Property B upon D’s death. No
executor or administrator is appointed, qualified, or
acting within the United States for D’s estate on the
due date of D’s estate tax return. Because Nephew A
has actual or constructive possession of Property A,
Nephew A is an executor described in paragraph
(b)(2) of this section with regard to D’s interest in
Property A. Because Nephew A is required to file an
estate tax return under section 6018 with regard to
D’s interest in Property A, Nephew A also is subject
to the reporting requirements of section 6035 with
respect to Property A. Similarly, because Nephew B
has actual or constructive possession of Property B
on the due date of D’s estate tax return, Nephew B
is an executor described in paragraph (b)(2) of this
section with regard to D’s interest in Property B.
Because Nephew B is required to file an estate tax
return under section 6018 with regard to D’s inter-
est in Property B, Nephew B also is subject to the
reporting requirements of section 6035 with respect
to Property B.
(iv) Example 4—Executor unable to make a
complete return. The value at death of property
includible in D’s gross estate exceeds the basic
exclusion amount in effect for the year of D’s death
under section 2010(c). E is appointed the executor of
D’s estate. During the administration of D’s estate,
E discovers that D has made transfers each year for
the past ten years to T as trustee of Trust. E contacts
T, but T refuses to provide E with any information
regarding Trust. E timely files D’s estate tax return
reporting the value of all of the property in D’s gross
estate except Trust. Pursuant to §20.6018-2 of this
chapter, E includes with the return a statement that
gives T’s name and contact information and the date
and amount of each transfer from D to T as trustee
of Trust, which is all the information E has about
Trust. The IRS provides notice to T of T’s obliga-
tion to make D’s estate return as to Trust. Because E
is required to file an estate tax return under section
6018, E is subject to the reporting requirements of
section 6035 as to the property reported on the estate
tax return filed by E. Because T is required to file
an estate tax return under section 6018, T is subject
to the reporting requirements of section 6035 as to
Trust.
(c) Required Information Return and
Statement(s)—(1) Required Information
Return. An executor required to file an
estate tax return under section 6018 must
file with the IRS an Information Return
by the date required under paragraph (c)
(3) of this section. The term Information
Return refers to the Form 8971, Informa-
tion Regarding Beneficiaries Acquiring
Property from a Decedent, and all required
attachments. Required attachments
include a copy of each Statement described
in paragraph (c)(2) of this section (if any)
required to be furnished to a beneficiary
who acquires property within the meaning
of paragraph (c)(4) of this section on or
before the due date of the estate tax return
or, if earlier, the date on which the estate
tax return is filed with the IRS. Required
attachments also include a copy of each
Statement (if any) furnished pursuant to
paragraph (c)(5) of this section before the
filing of the Information Return. The term
Information Return also refers to any suc-
cessor form or procedure designated by
the IRS for this purpose. The Information
Return must identify each beneficiary who
has acquired or will acquire property sub-
ject to reporting (under paragraph (e) of
this section), as well as other information
prescribed by the Information Return and
the instructions for that form. For the duty
to supplement the Information Return in
the event such property is acquired by a
beneficiary after the filing of the estate tax
return, see paragraph (c)(3)(ii) of this sec-
tion. For the duty to supplement the Infor-
mation Return in the event of a change to
the information required to be reported,
see paragraph (d) of this section.
(2) Required Statement(s). An executor
required to file an estate tax return under
section 6018 also must furnish a Statement
to each beneficiary who acquires property
subject to reporting under paragraph (e) of
this section. For purposes of this section,
the term Statement refers to the payee
statement described as Schedule A of the
Information Return to be furnished to a
beneficiary, or any successor form, sched-
ule, or procedure designated by the IRS
for this purpose. The Statement furnished
to a beneficiary must identify that benefi-
ciary’s acquired property and its value and
other information prescribed by the State-
ment and the instructions for that form.
For each property reported on a State-
ment, the value the executor reports on
that Statement is the value of the property
as reported on the estate tax return filed
with the IRS. Generally, this is the value of
the property on the date of the decedent’s
death, except in the case of an election
in which the value is determined under
section 2032 or 2032A, in which case it
is the value determined under the applica-
ble provision. If different interests in the
same property pass from the decedent to
one or more income beneficiaries or life
tenants and remaindermen, the value to be
reported is the value of the entire property
and each recipient will be responsible for
identifying his or her respective share of
uniform basis. For the duty to supplement
the Statement in the event of a change to
the information required to be reported,
including a change in the identified value

Bulletin No. 2024–40 675 September 30, 2024
of property reported on a Statement, see
paragraph (d) of this section.
(3) Due dates—(i) General rule.
Except as provided in paragraphs (c)(3)
(ii) and (iii) of this section and in §1.6035-
2, the executor must file the Information
Return with the IRS on or before the due
date specified in this paragraph (c)(3)(i).
In addition, each Statement, a copy of
which is required to be attached to the
Information Return, must be furnished to
the named beneficiary on or before this
same due date. The Information Return
must be filed, and each such Statement (if
any) must be furnished to its named bene-
ficiary, on or before the earlier of—
(A) The date that is 30 days after the
due date of the estate tax return required
under section 6018 (including extensions,
if any); or
(B) The date that is 30 days after the
date on which that estate tax return is filed
with the IRS.
(ii) Due date and applicable rules if
property is acquired subsequently by
beneficiary. If a beneficiary acquires
property subject to reporting after the
due date of the estate tax return (or the
earlier filing of the Information Return),
the executor must furnish a Statement
to that beneficiary with regard to that
acquired property on or before January
31 of the year following the beneficiary’s
acquisition of that property. By that same
January 31, the executor also must attach
a copy of the Statement to a supplement
to the Information Return (a supplemen-
tal Information Return) and must file the
supplemental Information Return with
the IRS. The supplemental Information
Return must include a copy of each State-
ment required to be furnished for that
year pursuant to this paragraph (c)(3)(ii),
as well as a copy of each Statement (if
any) furnished in accordance with para-
graph (c)(5) of this section that has not
already been filed with the IRS as an
attachment to the Information Return or
a supplement to the Information Return.
The requirements of this paragraph (c)(3)
(ii) do not apply if the property already
has been reported on a Statement fur-
nished pursuant to paragraph (c)(5) of
this section. See this paragraph (c)(3) and
paragraph (d)(4) of this section for the
due date of other required supplements to
this reporting.
(iii) Transition rule. If the due date of
an estate tax return required to be filed by
section 6018 is on or before July 31, 2015,
but the executor does not file the estate
tax return with the IRS until after July 31,
2015, then the Information Return and all
required Statements are due on or before
the date that is 30 days after the date on
which the estate tax return is filed, except
as provided in §1.6035-2.
(4) Acquiring an interest in property.
For purposes of this section, the term
acquired property refers to property sub-
ject to reporting under paragraph (e) of
this section that a beneficiary acquires. A
beneficiary acquires such property when,
under local law, title vests in the benefi-
ciary or when the beneficiary otherwise
has sufficient control over or connection
with the property that the beneficiary is
able to take action related to the property
for which basis is relevant for Federal
income tax purposes (such as, for exam-
ple, to sell or depreciate the property). In
many cases, a beneficiary’s acquisition
of property occurs upon an executor’s or
trustee’s distribution of the property. For
property passing by contract or by oper-
ation of law, the beneficiary’s acquisition
of that property generally occurs automat-
ically upon the death of the decedent.
(5) Option to furnish Statement(s)
prior to the acquisition of property by
a beneficiary. An executor may satisfy
the requirement in paragraph (c)(2) of
this section to furnish a Statement to a
beneficiary by furnishing the Statement
to the beneficiary prior to the beneficia-
ry’s acquisition of the property subject
to reporting under paragraph (e) of this
section, provided that the executor has
reason to believe that the beneficiary will
acquire that property. The Statement fur-
nished to such a beneficiary must identify
the property the beneficiary is expected to
acquire as well as the value of that prop-
erty and other information prescribed by
the Statement and the instructions for that
form (and must include information relat-
ing to other property actually acquired
by such beneficiary as may be required
under paragraph (c)(2) of this section). If,
after satisfying the requirements of this
paragraph (c)(5), the property is acquired
by a different beneficiary, the executor
must update the beneficiary information
in the Information Return and furnish a
Statement to that beneficiary pursuant to
the duty to supplement to report a change
in beneficiary information as described
in paragraph (d)(2)(i) of this section.
The executor additionally is subject to
the duty to supplement to report other
changes to the information required to be
reported as identified in paragraph (d) of
this section.
(6) Example. The following example
illustrates the application of this para-
graph (c).
(i) The decedent D was a United States
citizen at the time of D’s death and the
executor of D’s estate E is required to file
an estate tax return under section 6018.
The terms of D’s will provide for D’s
entire estate to be distributed to a marital
trust. Prior to timely filing the estate tax
return for D’s estate, E funded the mari-
tal trust with a portion of the property, the
value of which is included in D’s gross
estate. Under paragraph (c)(4) of this sec-
tion, the marital trust has acquired this
property upon the funding of the trust by
E. Under paragraphs (c)(1) and (c)(3)(i) of
this section, within 30 days of filing the
estate tax return, E must file with the IRS
the Information Return identifying the
marital trust as the beneficiary (as well as
other information prescribed by the Infor-
mation Return or instructions) and must
include with the Information Return all
required attachments. Under paragraphs
(c)(2) and (c)(3)(i) of this section, by the
same date, E must furnish to the marital
trust the Statement identifying the portion
of the property distributed to the marital
trust and its estate tax value (as well as
any other information prescribed by the
Statement or instructions). A copy of the
Statement is a required attachment to be
included with the Information Return.
Pursuant to paragraph (c)(5) of this sec-
tion, E may choose to expand the property
identified on the Statement to also include
the property the marital trust is expected
to acquire subsequently. If E so chooses,
the Statement to be furnished to the mari-
tal trust will identify all such property and
its value at the date of death and, except in
the case of any changes to the information
required to be reported, no further State-
ment will be required at the time of the
completion of the funding of the trust.
(ii) However, if E chooses not to
expand the reporting to property not yet

September 30, 2024 676 Bulletin No. 2024–40
acquired by the marital trust, then, once
the marital trust has acquired additional
property, E is subject to further reporting.
Under paragraph (c)(3)(ii) of this section,
in each year that E distributes additional
property to the marital trust, E must fur-
nish, by January 31 of the following year,
a Statement to the marital trust identify-
ing all of the property the marital trust has
acquired from D’s estate that year and the
property’s estate tax value (as well as any
other information prescribed by the State-
ment or instructions). By the same date,
E must file with the IRS a supplemental
Information Return and attach a copy
of that Statement as well as any other
required attachments.
(d) Duty to supplement—(1) Duty
to supplement to report changes to the
information reported on the Informa-
tion Return or Statement(s). An execu-
tor to whom the reporting requirements
of this section apply must file a supple-
mental Information Return with the IRS
and furnish a Statement or supplemental
Statement to each affected beneficiary if
a change to the information required to
be reported on the Information Return or
Statement (or supplement to either) causes
the information as reported to be incorrect
or incomplete. The executor must file the
supplemental Information Return with the
IRS, including copies of each Statement
or supplemental Statement furnished to
affected beneficiaries, and must furnish a
Statement or supplemental Statement to
each affected beneficiary, by the due date
described in paragraph (d)(4) of this sec-
tion.
(2) Changes requiring supplement.
This paragraph (d)(2) provides a nonex-
haustive list of changes that require sup-
plemental reporting under paragraph (d)
(1) of this section.
(i) Change in beneficiary information.
The receipt, discovery, or acquisition by
the executor of information that changes
the beneficiary to whom property is to
be distributed (pursuant to a death, dis-
claimer, bankruptcy, or otherwise), or cor-
rects or completes other beneficiary infor-
mation originally reported, will give rise
to a duty to supplement.
(ii) Change in the identified value of
property. The supplementing of an estate
tax return to report a corrected estate tax
value of property that was previously
reported on an estate tax return and a
Statement will give rise to a duty to sup-
plement. In addition, a final determination
of value of property for Federal estate tax
purposes (within the meaning of §1.1014-
10(b)(1)) that differs from the value pro-
vided on a Statement or supplement to a
Statement will give rise to a duty to sup-
plement.
(iii) Change or addition of property
subject to reporting. The supplementing
of an estate tax return to report the estate
tax value of property subject to reporting
under paragraph (e) of this section, if that
property and/or its value previously was
not reported on an estate tax return or
supplement to the estate tax return, will
give rise to a duty to supplement. A duty
to supplement also will arise if such prop-
erty or its value that previously was not
reported on an estate tax return or supple-
ment to the estate tax return is included in
the decedent’s gross estate pursuant to an
examination by the IRS or otherwise.
(iv) Change in property to be acquired
by beneficiary. A duty to supplement will
arise if an executor furnishes a Statement
to a beneficiary prior to the beneficiary’s
acquisition of property pursuant to para-
graph (c)(5) of this section and the ben-
eficiary ultimately acquires property dif-
ferent from the property identified on that
Statement. A beneficiary’s acquisition
of different property may occur for any
reason, including an executor’s receipt
of different property in a transaction
in which the basis of the new property
received by the executor is determined,
in whole or in part, by reference to the
final value of property acquired from or
as a result of the death of the decedent
(for example, as the result of a like-kind
exchange under section 1031 or an invol-
untary conversion).
(3) Exceptions; no duty to supplement
despite certain changes. Notwithstanding
paragraph (d)(2) of this section, no sup-
plemental reporting under this section is
required for:
(i) Inconsequential errors or omissions
within the meaning of §301.6722-1(b) of
this chapter;
(ii) Changes resulting from an event
that triggers an additional estate tax under
section 2032A, including changes in value
in the event of a beneficiary election under
section 1016(c) of the Code;
(iii) Adjustments to the basis of prop-
erty pursuant to sections of the Code other
than section 1014(f); and
(iv) Any other change that is identified
as requiring no supplemental reporting
under this section in published guidance
in the Federal Register or in the Internal
Revenue Bulletin (see §601.601(d)(2)(ii)
(b) of this chapter).
(4) Due date of supplemental report-
ing. The supplemental reporting required
by this paragraph (d) must be filed with
the IRS and furnished to each affected
beneficiary on or before 30 days after
the date on which information becomes
available to the executor from which the
executor can conclude that a change to
the information provided on the Informa-
tion Return or Statement (or supplement
to either) requires supplemental report-
ing. For changes occurring as a result of
supplementing the estate tax return, the
date on which the information becomes
available to the executor is deemed to be
the filing date of the supplemental infor-
mation. Therefore, for changes occurring
as a result of supplementing the estate
tax return, the due date of the supplemen-
tal reporting required by this paragraph
(d) is 30 days after the filing date of the
supplemental information. For changes
occurring as a result of a determination of
final value, the date on which the informa-
tion becomes available to the executor is
deemed to be the date a value becomes the
final value under §1.1014-10(b)(1). There-
fore, for changes occurring as a result of a
determination of final value, the due date
of the supplemental reporting required
by this paragraph (d) is 30 days after the
date a value becomes the final value under
§1.1014-10(b)(1). However, with regard
to property that has not been acquired by
a beneficiary on or before the due date
described in this paragraph (d)(4) and for
which a Statement was not provided to the
beneficiary pursuant to paragraph (c)(5) of
this section, the due date may be delayed
until the due date described in paragraph
(c)(3)(ii) of this section.
(5) Duration of duty to supplement. An
executor’s duty to supplement as described
in this section continues to apply until a
final determination of value for Federal
estate tax purposes (a final value within
the meaning of §1.1014-10(b)(1)) is deter-
mined for all property subject to report-

Bulletin No. 2024–40 677 September 30, 2024
ing (under paragraph (e) of this section)
or, if later, until such property has been
acquired by a beneficiary. Therefore, the
executor’s final supplemental reporting is
the reporting to the IRS and the furnishing
of Statements to beneficiaries with regard
to the last to occur of these two events,
assuming that either event would create a
change requiring supplemental reporting.
(6) Examples. The following exam-
ples illustrate the application of this para-
graph (d). In each case, the decedent D
was a U.S. citizen and D’s executor E
was required under section 6018 to file an
estate tax return.
(i) Example 1—Change in identified value of
property. D’s estate includes stock in a closely-held
corporation. E distributes the stock to a beneficiary
B of the estate before the due date of the estate tax
return. D’s executor reports the value of the stock at
$14 million on D’s estate tax return and on the State-
ment furnished to B. On examination of D’s estate
tax return, the IRS adjusts the value of the close-
ly-held stock to $18 million. A court subsequently
determines that the fair market value of the close-
ly-held stock for Federal estate tax purposes is $17
million and the court’s decision becomes final on
June 15th. On or before July 15
th
of the same year,
E must furnish a supplemental Statement to B show-
ing the final value of $17 million for the closely-held
stock, and must attach a copy of that supplemental
Statement to a supplemental Information Return and
file it with the IRS.
(ii) Example 2—Duration of the duty to supple-
ment. D’s gross estate includes stock in closely-held
corporation X, stock in closely-held corporation Y,
and cash. D’s will directs E to distribute 50% of the
value of D’s estate to A and 50% to B in any manner
to which A and B agree. A and B agree that A will
take the stock in corporation X and B will take stock
in corporation Y and they will divide the cash in such
amounts as to cause each to take an equal share of the
value D’s estate. E timely files D’s estate tax return
and furnishes a Statement to A and to B pursuant to
paragraph (c)(5) of this section. The IRS accepts the
return as filed and the period of limitations on assess-
ment of estate tax expires. Thereafter, A and B agree
to revise their agreement. E distributes the stock in
corporation X to B and the stock in corporation Y to
A in accordance with a revised agreement between A
and B. E’s final supplemental reporting is the filing
of a supplemental Information Return and furnish-
ing of a supplemental Statement to A describing the
shares and value of stock distributed to A and a sup-
plemental Statement to B describing the shares and
value of stock distributed to B.
(e) Property for which reporting is
required—(1) In general. Except for
excepted property subject to only limited
reporting as described in paragraph (f) of
this section, the property subject to report-
ing under this section is included prop-
erty and any other property the basis of
which is determined, in whole or in part,
by reference to the basis of the included
property (for example, property acquired
in a like-kind exchange or an involuntary
conversion). For purposes of this section,
included property is property the value
of which is included in the value of the
decedent’s gross estate as defined in sec-
tion 2031 or 2103. Generally, included
property refers to property whose value
is reported on an estate tax return, but it
also refers to property whose value other-
wise is included in the total value of the
gross estate (for example, during exam-
ination by the IRS). Thus, included prop-
erty includes property that qualified, in
whole or in part, for an estate tax marital
deduction under section 2056, 2056A, or
2106(a)(3) or for an estate tax charitable
deduction under section 2055 or 2106(a)
(2). It further includes property included in
the decedent’s gross estate that is distrib-
uted to a surviving spouse in satisfaction
of that surviving spouse’s interest in com-
munity property not included in the gross
estate that the executor has distributed to
a non-spouse pursuant to State law prop-
erly applied. However, included property
does not include property whose value is
not reported on an estate tax return and
whose value is not otherwise included in
the value of the decedent’s gross estate,
such as the property of a deceased non-
resident noncitizen that is not subject to
United States estate tax, and the surviv-
ing spouse’s share of community property
described in section 1014(b)(6).
(2) Examples. The following exam-
ples illustrate the application of this
paragraph (e). In each case, the decedent
D was a U.S. citizen and D’s executor E
was required under section 6018 to file an
estate tax return.
(i) Example 1—Included property. Pursuant
to the terms of D’s will, a trust is established and
funded with property, the value of which is includi-
ble in D’s gross estate under section 2031. The trust
is a charitable remainder annuity trust described in
section 664(d)(1). The terms of the trust provide that,
in each taxable year during the lifetime of D’s sur-
viving spouse S, the trustee must pay to S an annu-
ity of 5% of the initial net fair market value of all
property passing to the trust as finally determined
for Federal estate tax purposes. Upon the death of
S, the trustee must distribute all of the then-principal
and income of the trust to organizations described in
sections 170(c), 2055(a) and 2522(a) as the trustee
selects, in the trustee’s sole discretion. The property
used to fund the trust is included property and is
subject to the reporting requirements of this section.
This is true whether or not the requirements of sec-
tion 1014(f) apply to the property transferred to the
trust. See §1.1014-10(d)(4).
(ii) Example 2—Property the basis of which is
determined by reference to the basis of included
property. D’s gross estate includes the value of
Property A. Before the due date for filing the estate
tax return, E exchanges Property A for Property B
in a like-kind exchange pursuant to section 1031,
for which D’s estate recognizes no gain or loss.
Property B is property subject to reporting as pre-
scribed in this section. With respect to Property B,
the value E reports on the Statement is the value
reported for Property A on the estate tax return filed
with the IRS.
(f) Excepted property requiring only
limited reporting—(1) Excepted property.
Certain included property that is described
in paragraph (f)(2) of this section (excepted
property) is subject to more limited report-
ing than the reporting required under para-
graph (c) of this section. The requirement
to file an Information Return with the IRS
as described in paragraph (c)(1) of this
section remains the same even if all prop-
erty subject to reporting under paragraph
(e) of this section is excepted property.
However, the executor is not required to
identify or provide any other information
for excepted property on the Information
Return, and the executor is not required
to furnish a Statement to the beneficiary
with regard to that property. Instead, the
executor is required only to report on the
Information Return, in accordance with
the instructions for that form, that some
or all of the property subject to report-
ing is excepted property described in this
paragraph (f). Further, the executor is not
required to identify or provide any other
information for excepted property on any
Statement furnished to a beneficiary and,
if this property is the only property that a
beneficiary has acquired, an executor is
not required to furnish a Statement to that
beneficiary.
(2) List of excepted property. Excepted
property includes—
(i) United States dollars (as defined in
paragraph (f)(3) of this section).
(ii) United States dollar-denominated
demand deposits.
(iii) Certificates of deposit denomi-
nated in United States dollars.
(iv) Cash collateral denominated in
United States dollars held by a third party
to secure a liability (such as a deposit of
purchase money or a security deposit).
(v) Shares of a registered investment
company priced in United States dollars

September 30, 2024 678 Bulletin No. 2024–40
that is a money market fund under Rule
2a-7 under the Investment Company Act
of 1940 (17 CFR 270.2a).
(vi) Life insurance proceeds on the life
of the decedent payable in a lump sum in
United States dollars.
(vii) Federal, State, and local tax
refunds and other refunds payable in
United States dollars.
(viii) Notes that are forgiven in full by
the decedent upon the decedent’s death,
whether or not denominated in United
States dollars.
(ix) Household and personal effects for
which an appraisal is not required under
§20.2031-6(b) of this chapter.
(x) Property that, prior to distribution
from the estate or the decedent’s revoca-
ble trust, is completely sold, exchanged,
or otherwise disposed of in one or more
transactions that are recognition events for
Federal income tax purposes (whether or
not resulting in a gain or loss, and whether
or not any gain is capital or ordinary).
Such property includes, but is not limited
to—
(A) Property distributed in satisfaction
of a pecuniary bequest on which the estate
recognizes any gain or loss pursuant to
§1.661(a)-2(f);
(B) Property for which an election
under section 643(e)(3) has been made for
the estate to recognize any gain or loss;
(C) Interests in a business entity that
are redeemed for United States dollars
prior to being distributed to the benefi-
ciary;
(D) Property disposed of in a transac-
tion described in section 267(a) and (b)
(13); and
(E) Property subject to the mark to
market accounting method at the time of
distribution from the estate or from the
decedent’s revocable trust.
(xi) Other property having an initial
basis that is not in any way determined
with regard to or derived from the prop-
erty’s fair market value for Federal estate
tax purposes. For purposes of this section,
such property includes but is not limited
to—
(A) Annuity contracts subject to sec-
tion 72 and amounts received as an annu-
ity subject to section 72;
(B) An interest in property that consists
entirely of the right to receive an item of
income in respect of a decedent as defined
in section 691;
(C) Amounts received under install-
ment obligations arising from a transac-
tion for which the installment method
for determining gain under section 453
applies;
(D) Appreciated property described
in section 1014(e) that is acquired by the
decedent within 1 year of death;
(E) Stock of a passive foreign invest-
ment company subject to section 1296(i),
but only if the basis of such stock is the
adjusted basis in the hands of the decedent
immediately before the decedent’s death;
and
(F) Interests in and distributions from
retirement plans and deferred compensa-
tion plans, including individual retirement
arrangements as defined in sections 408
and 408A, that are expressed entirely in
United States dollars.
(xii) Bonds to the extent that they are
redeemed by the issuer for United States
dollars prior to being distributed to a ben-
eficiary so that any resulting gain or loss is
recognized by the estate.
(xiii) Property included in the gross
estate of a beneficiary who died before the
due date of the Information Return.
(xiv) Any other property that is iden-
tified as excepted property in published
guidance in the Federal Register or
in the Internal Revenue Bulletin (see
§601.601(d)(2)(ii)(b) of this chapter).
(3) United States dollars defined. For
purposes of this paragraph (f), the term
United States dollars means the official
currency of the United States. The term
United States dollars includes physical
bills and coins for which the value of each
bill or coin is equivalent to the face amount
of that bill or coin. This definition does not
include other physical United States bills
or coins with numismatic value because
these bills or coins typically do not have a
value equal to their face value.
(4) Examples. The following exam-
ples illustrate the application of this
paragraph (f). In each case, the decedent
D was a U.S. citizen and D’s executor E
is required under section 6018 to file an
estate tax return.
(i) Example 1—Reporting household and per-
sonal effects. Included in D’s gross estate are D’s
household and personal effects. The only item
included in D’s household and personal effects with
a value in excess of $3,000 is a painting. E attaches
to D’s estate tax return an appraisal of the painting
prepared in accordance with §20.2031-6(b) of this
chapter and a room-by-room itemization of D’s other
household and personal effects prepared in accor-
dance with §20.2031-6(a) of this chapter. E must
furnish to the beneficiary of the painting the State-
ment required by paragraph (c)(2) of this section.
E is not required to report on a Statement furnished
to any beneficiary any information about D’s other
household and personal effects. If a beneficiary of
D’s household effects, other than the beneficiary of
the painting, has acquired no other property, E is not
required to furnish a Statement to that beneficiary. E
is required to file the Information Return required by
section (c)(1) of this section and attach to that Infor-
mation Return a copy of the Statement furnished to
the beneficiary of the painting. E must disclose on
the Information Return that some or all of the prop-
erty included in D’s gross estate is excepted property
described in this paragraph (f).
(ii) Example 2—Reporting if property is dis-
posed of in taxable transaction. Included in D’s
estate are shares in X, a publicly traded company.
Shortly after D’s death but prior to the filing of the
estate tax return for D’s estate, X is acquired by T,
also a publicly traded company. In exchange for the
shares in X, the estate receives shares in T and cash
in a fully taxable transaction. E is required to report
on the Information Return required by paragraph (c)
(1) of this section that some or all of the property
included in D’s gross estate is excepted property
described in this paragraph (f). E is not required to
furnish a Statement to any recipient with respect to
the cash, X stock, or T stock.
(iii) Example 3—Reporting if estate is liqui-
dated prior to distribution. Property A is the only
property in D’s estate. Prior to filing the estate
tax return for D’s estate, E sells Property A for
$15,000,000. D’s estate recognizes gain on the
sale of Property A for income tax purposes. E dis-
tributes the $15,000,000 among the beneficiaries
of D’s estate. E must file the Information Return
required by paragraph (c)(1) of this section even
though all of the property included in D’s gross
estate is excepted property within the meaning of
this paragraph (f). E is not required to furnish to
the beneficiaries of D’s estate a Statement with
regard to Property A, and therefore is not required
to attach a copy of any Statement to the Informa-
tion Return. E is required to file an Information
Return with the IRS indicating that all of the
property included in D’s gross estate is excepted
property described in this paragraph (f), and must
provide other information as required by the Infor-
mation Return and the instructions.
(g) Beneficiaries—(1) In general. Each
person who acquires (or will acquire)
property from a decedent or by reason of
the decedent’s death that is subject to the
reporting described in paragraph (e) of this
section is a beneficiary for purposes of this
section and thus is a person to be listed on
the Information Return and, except with
respect to excepted property (described

Bulletin No. 2024–40 679 September 30, 2024
in paragraph (f) of this section), is a per-
son to whom the executor must furnish a
required Statement. Thus, a beneficiary
may be:
(i) An individual, including one who is
both the executor and a beneficiary, who
acquires (or will acquire) property subject
to reporting not in trust;
(ii) The estate of a deceased individual
who survived the decedent if such indi-
vidual or estate acquires (or will acquire)
property subject to reporting not in trust;
(iii) A trust, whether foreign or domes-
tic, including without limitation a grantor
retained annuity trust, charitable remain-
der trust, and charitable lead trust (each
referred to in this section as beneficiary
trusts); or
(iv) An entity other than a trust, includ-
ing without limitation a business entity
or an organization described in section
501(c).
(2) Required Statement to beneficiary
trust—(i) In general. If a beneficiary
trust is the beneficiary to be identified on
the Information Return pursuant to para-
graph (g)(1) of this section, the executor
must furnish the Statement described in
paragraph (c)(2) of this section to the
trustee rather than to the beneficiaries of
the trust. However, if the executor rea-
sonably believes that it is unlikely that
the beneficiary trust will depreciate, sell,
or otherwise dispose of the property sub-
ject to reporting in a recognition event
for income tax purposes but instead will
distribute the property in kind to the
trust beneficiaries, the executor instead
may furnish the Statement described in
paragraph (c)(2) of this section to each
of the trust beneficiaries, with copies of
the Statements to the trustee. For this
purpose, the trust beneficiaries include
all potential current income beneficiaries
and each remainderman who would have
had a current interest in the trust if one
or more of the income beneficiaries had
died immediately after the decedent. For
purposes of determining the due date of
such Statements, each trust beneficiary
will be deemed to have acquired the trust
property when the trust acquired that
property.
(ii) Beneficiary trust not yet estab-
lished. If, by the date required for filing
the Information Return with the IRS, a
beneficiary trust does not have at least one
trustee and a tax identification number, an
executor must report on the Information
Return that the beneficiary trust has not
yet been established in accordance with
the instructions. Once the beneficiary trust
has been established and the trust infor-
mation becomes available to the executor,
the executor must supplement the required
reporting as described in paragraph (d)
of this section to update the beneficiary
information on the Information Return
and Statement.
(3) Required Statement to the holder
of a split interest in property, not in trust.
The beneficiary of a life estate not in trust,
and thus the beneficiary to whom the exec-
utor is to furnish any required Statement,
is the life tenant. Similarly, the benefi-
ciary of a remainder interest not in trust is
each remainderman identified as if the life
tenant were to die immediately after the
decedent. For purposes of determining the
due date of the Statements reporting these
interests under paragraph (c)(3) of this
section, each beneficiary will be deemed
to have acquired the property subject to
reporting on the date of the decedent’s
death. The beneficiary of a contingent
interest, not in trust, is a beneficiary only
if the contingency occurs before the end of
the period during which the executor has
an obligation to supplement the reporting
as provided in paragraph (d)(5) of this
section. If the contingency occurs during
this period, the executor must update the
beneficiary information on the Informa-
tion Return and furnish a Statement to
that beneficiary pursuant to the executor’s
duty to supplement to report a change in
beneficiary information as described in
paragraph (d) of this section. Usufruct
interests are treated in the same manner.
(4) Reporting for a missing benefi-
ciary. If the executor is unable to locate a
beneficiary by the date required for filing
the Information Return with the IRS, the
executor must report on the Information
Return the failure to locate the beneficiary
and the efforts the executor has made to
locate the beneficiary. The executor must
supplement the Information Return and
must furnish the required Statement, as
provided in paragraph (d) of this section,
to report the subsequent location of the
beneficiary or, if the beneficiary is not
located, to report the distribution of the
property subject to reporting to a different
beneficiary.
(h) Reporting requirements appli-
cable to trustees—(1) Circumstances
under which trustees of beneficiary trusts
and other trusts are subject to reporting.
Trustees of beneficiary trusts making a
distribution of property that was reported
on a Statement furnished to those trust-
ees, or of any other property the basis of
which is determined, in whole or in part,
by reference to the basis of property sub-
ject to reporting under paragraph (e) of
this section, are subject to the reporting
requirements described in paragraph (h)
(2) of this section and the supplemen-
tal reporting requirements described
in paragraph (d) of this section (to the
extent applicable) with respect to such
property. In addition, trustees of trusts
that receive a distribution of such prop-
erty, whether from a beneficiary trust or
from any other trust that has received
such property, either directly or indi-
rectly, also are subject to these report-
ing requirements when making a distri-
bution of that property. This reporting
obligation imposed on trustees continues
to apply for each subsequent transfer or
distribution until the property is distrib-
uted to a beneficiary not in trust. How-
ever, no trustee of a beneficiary trust or
of a subsequent recipient trust is subject
to the reporting requirements described
in paragraph (h)(2) of this section for a
disposition of property in a transaction
that is a recognition event for income
tax purposes (whether or not resulting in
a gain or loss) that results in the entire
property having a basis that no longer is
related, in whole or in part, to the proper-
ty’s final value or, if applicable, reported
value (within the meaning of §1.1014-
10(b)(1) or (2), respectively).
(2) Required reporting. On or before
January 31 of the calendar year imme-
diately following the year during which
occurs a distribution of property subject
to reporting under this paragraph (h), the
trustee making the distribution must file
an Information Return in accordance with
the instructions for that form and must fur-
nish a Statement to each recipient of the
distribution. For purposes of this section,
each recipient is a beneficiary.

September 30, 2024 680 Bulletin No. 2024–40
(3) Example. The following example
illustrates the application of this para-
graph (h). Decedent D was a U.S. citizen
and D’s executor E was required under
section 6018 to file an estate tax return.
Pursuant to the will of D, E distributed
100 shares of publicly traded stock in
Company X to a trust (Children’s Trust)
for the benefit of D’s two children A and
B and their respective issue. E provided
a Statement to the trustee of Children’s
Trust in accordance with the require-
ments of paragraph (c)(2) of this section.
Shortly thereafter, pursuant to the terms
of Children’s Trust, Children’s Trust ter-
minates with the 100 shares of Company
X stock being distributed in equal shares
between Trust A, for the benefit of A and
A’s issue, and Trust B, for the benefit of
B and B’s issue. Pursuant to paragraph
(h)(2) of this section, the trustee of Chil-
dren’s Trust files an Information Return
with the IRS and furnishes a Statement
to the trustees of Trust A and Trust B.
Several years later, the trustee of Trust
A distributes its 50 shares of Company
X stock to C, the only child of A. Pur-
suant to this paragraph (h), the trustee
of Trust A files an Information Return
with the IRS and furnishes a Statement
to C. Shortly thereafter, C gives the 50
shares of Company X stock, outright, to
C’s nephew N. C has no obligation to
file an Information Return with the IRS
or furnish a Statement to N to report the
distribution of the 50 shares of Com-
pany X stock to N.
(i) Penalties. For the penalties appli-
cable to the filing of Information Returns
and the furnishing of Statements required
by this section, including waivers for rea-
sonable cause, see sections 6721 through
6724 and the regulations in part 301 under
sections 6721 through 6724.
(j) Applicability date. This section
applies to executors of the estate of a
decedent who are required to file a Federal
estate tax return under section 6018 if that
return is filed after September 17, 2024,
and to trustees receiving certain property
included in the gross estate of such a dece-
dent.
Par. 8. Section 1.6662-9 is added to
read as follows:
§1.6662-9 Inconsistent estate basis
reporting.
(a) In general. Section 6662(a) and (b)
(8) impose an accuracy-related penalty on
the portion of any underpayment of tax
required to be shown on an income tax
return that is attributable to an inconsis-
tent estate basis.
(b) Inconsistent estate basis—(1) In
general. There is an inconsistent estate
basis in property under section 6662(k)
to the extent that a taxpayer claims a
basis that was determined by using an ini-
tial basis as defined in §1.1014-10(a)(2)
that exceeds the property’s final value as
determined under §1.1014-10(b)(1). The
property to which this section applies is
the property described in §1.1014-10(c)
(1).
(2) Example. The following exam-
ple illustrates the provisions of para-
graph (b)(1) of this section. In year 1,
taxpayer (T), a citizen of the United
States, inherited a house, property
described in §1.1014-10(c)(1) and not
described in §1.1014-10(c)(2). The
final value and thus initial basis of the
house as determined under §1.1014-
10(b) was $300,000. In year 5, T spent
$85,000 on an addition to the house,
which is added to T’s initial basis in the
house under section 1016(a). In year
11, T sold the house to an unrelated
third party for $650,000. On T’s return,
T claims an initial basis of $400,000
and the $85,000 spent on the addi-
tion to the house, for a total claimed
basis of $485,000. T’s claimed initial
basis exceeds the allowable basis by
$100,000. Because this amount is due
to T claiming an initial basis as defined
in §1.1014-10(a)(2) that exceeds the
property’s final value as determined
under §1.1014-10(b), T is liable for
the 20% accuracy-related penalty for
the portion of any underpayment that
is attributable to the reporting of an
inconsistent basis.
(c) Applicability date. This section
applies to property described in §1.1014-
10(c)(1) that is reported on an estate tax
return required under section 6018 that is
filed after September 17, 2024.
PART 301--PROCEDURE AND
ADMINISTRATION
Par. 9. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805.
Par. 10. Section 301.6721-1 is amended
by revising paragraph (h)(2)(xii) and para-
graph (j) to read as follows:
§301.6721-1 Failure to file correct
information returns.
* * * * *
(h) * * *
(2) * * *
(xii) Section 6035 (relating to basis
information with respect to property
acquired from a decedent, generally Form
8971, Information Regarding Beneficia-
ries Acquiring Property from a Decedent),
whether an initial or supplemental infor-
mation return.
* * * * *
(j) Applicability dates—(1) In general.
Except as provided in paragraph (j)(2) of
this section, this section applies with respect
to information returns required to be filed
on or after January 1, 2024. See 26 CFR
301.6721-1, as revised April 1, 2023, for
rules applicable prior to January 1, 2024.
(2) Exception. Paragraph (h)(2)(xii) of
this section applies with respect to infor-
mation returns required to be filed after
September 17, 2024.
Par. 11. Section 301.6722-1 is amended
by revising paragraph (e)(2)(xxxv) and
paragraph (g) to read as follows:
§301.6722-1 Failure to furnish correct
payee statements.
* * * * *
(e) * * *
(2) * * *
(xxxv) Section 6035 (relating to
basis information with respect to prop-
erty acquired from a decedent, generally
Schedule A of Form 8971, Information
Regarding Beneficiaries Acquiring Prop-
erty from a Decedent), other than an infor-
mation return described in section 6724(d)
(1)(D), whether an initial or supplemental
payee statement;

Bulletin No. 2024–40 681 September 30, 2024
* * * * *
(g) Applicability dates—(1) In general.
Except as provided in paragraph (g)(2)
of this section, this section applies with
respect to payee statements required to be
furnished on or after January 1, 2024. See
26 CFR 301.6722-1, as revised April 1,
2023, for rules applicable prior to January
1, 2024.
(2) Exception. Paragraph (e)(2)(xxxv)
of this section applies with respect to
payee statements required to be furnished
after September 17, 2024.
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: August 16, 2024
Aviva R. Aron-Dine,
Acting Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register Septem-
ber 16, 2024, 8:45 a.m., and published in the issue
of the Federal Register for September 17, 2024, 89
FR 76356)

September 30, 2024 682 Bulletin No. 2024–40
Part III
Relief from Certain
Additions to Tax
for Corporation’s
Underpayment of
Estimated Income Tax
under Section 6655
Notice 2024-66
SECTION 1. OVERVIEW
This notice provides relief from the
addition to tax under § 6655 of the Internal
Revenue Code (Code)
1
for underpayment
of estimated income tax by a corporation
to the extent the amount of any under-
payment is attributable to the corpora-
tion’s corporate alternative minimum tax
(CAMT) liability under § 55, as amended
by § 10101 of Public Law 117-169, 136
Stat. 1818 (August 16, 2022), commonly
referred to as the Inflation Reduction Act
of 2022 (IRA). This notice also incorpo-
rates the relief provided in Notice 2024-
33, 2024-18 I.R.B. 959, and Notice 2024-
47, 2024-27 I.R.B. 1, and obsoletes those
notices.
SECTION 2. SCOPE
The relief provided in this notice
applies for the purpose of calculating any
installment of estimated income tax of a
corporate taxpayer with respect to a tax-
able year that begins after December 31,
2023, and before January 1, 2025 (Cov-
ered CAMT Year). This notice waives any
addition to tax under § 6655 with respect
to a corporation’s CAMT liability under §
55 for any Covered CAMT Year.
SECTION 3. BACKGROUND
.01 CAMT under the IRA. Section
10101 of the IRA amended § 55 to impose
the CAMT based on the “adjusted finan-
cial statement income” (AFSI) of an
applicable corporation for taxable years
beginning after December 31, 2022. Pur-
suant to § 59(k)(1), in general, a corpora-
tion is an applicable corporation subject to
the CAMT for a taxable year if it meets an
average annual AFSI test for one or more
taxable years that (i) are before that tax-
able year and (ii) end after December 31,
2021 (Applicable Corporation). Section
55(a) provides that, for the taxable year of
an Applicable Corporation, the amount of
CAMT imposed by § 55 equals the excess
(if any) of (i) the tentative minimum tax
for the taxable year, over (ii) the sum of the
regular tax, as defined in § 55(c), for the
taxable year plus the tax imposed under
§ 59A. Section 55(b)(2)(A) provides that,
in the case of an Applicable Corporation,
the tentative minimum tax for the taxable
year is the excess of (i) 15 percent of AFSI
for the taxable year (as determined under
§ 56A), over (ii) the CAMT foreign tax
credit for the taxable year (as determined
under § 59(l)). In the case of any corpora-
tion that is not an Applicable Corporation,
§ 55(b)(2)(B) provides that the tentative
minimum tax for the taxable year is zero.
Notice 2023-7, 2023-3 I.R.B. 390,
announced that the Department of the
Treasury (Treasury Department) and the
Internal Revenue Service (IRS) intend to
issue forthcoming proposed regulations
addressing the application of the CAMT.
Notice 2023-7 also provided interim guid-
ance intended to clarify the application of
certain aspects of the CAMT. Notice 2023-
20, 2023-10 I.R.B. 523, Notice 2023-64,
2023-40 I.R.B. 974, and Notice 2024-10,
2024-3 I.R.B. 406, provided additional
interim guidance that is intended to fur-
ther clarify the application of the CAMT.
Taxpayers may generally rely on the
interim guidance provided in the afore-
mentioned notices for any taxable year
that begins before January 1, 2024, and
any taxable year that begins on or after
January 1, 2024, and ends on or before the
date proposed regulations addressing the
application of the CAMT are published
in the Federal Register. Special reliance
rules are provided in section 5 of Notice
2024-10 for the interim guidance provided
in that notice.
.02 Estimated Taxes. Section 6655(a)
imposes an addition to tax for failure by
a corporation to make a sufficient and
timely payment of estimated income tax.
Section 6655(c) and (d)(1)(A) gener-
ally provide that, in the case of a corpo-
ration, estimated income tax is required
to be paid in four installments and the
amount of any required installment is 25
percent of the required annual payment.
Generally, under § 6655(d)(1)(B), the
required annual payment is the lesser of
two amounts described in § 6655(d)(1)
(B)(i) and (ii). The amount described in §
6655(d)(1)(B)(i) is 100 percent of the tax
shown on the return for the taxable year.
The amount described in § 6655(d)(1)(B)
(ii) is 100 percent of the tax shown on the
taxpayer’s return for the preceding taxable
year, so long as the preceding taxable year
was a full twelve months long and the
return for such year showed a liability for
tax. However, pursuant to § 6655(d)(2), in
the case of a large corporation (as defined
under § 6655(g)(2)), the amount described
in § 6655(d)(1)(B)(ii) may not be used
to reduce the amount of an installment
payment other than the first installment
payment for the taxable year. In special
circumstances, other rules specified in §
6655 or elsewhere may also apply.
On June 7, 2023, the Treasury Depart-
ment and the IRS issued Notice 2023-42,
2023-26 I.R.B. 1085, which provided a
waiver of the addition to tax under § 6655
with respect to a corporation’s CAMT
liability under § 55 for any taxable year
that begins after December 31, 2022, and
before January 1, 2024.
On April 15, 2024, the Treasury
Department and the IRS issued Notice
2024-33, 2024-18 I.R.B. 959, which pro-
vided a limited waiver of the addition to
tax under § 6655 to the extent the amount
of any underpayment is attributable to a
portion of a corporation’s CAMT liabil-
ity. The relief provided in Notice 2024-33
applied only for the purpose of calculating
the installment of estimated tax by a cor-
porate taxpayer that was due on or before
April 15, 2024, or May 15, 2024 (in the
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code.

Bulletin No. 2024–40 683 September 30, 2024
case of a fiscal year taxpayer with a tax-
able year beginning in February 2024),
with respect to a taxable year that began
in 2024.
On June 13, 2024, the Treasury Depart-
ment and the IRS issued Notice 2024-47,
2024-27 I.R.B. 1, which extended the
relief provided in Notice 2024-33. Under
Notice 2024-47, the limited waiver of the
addition to tax under § 6655 provided by
Notice 2024-33 was extended to apply for
the purpose of calculating any installment
of estimated tax by a corporate taxpayer
that was due on or before August 15,
2024, with respect to a taxable year that
began in 2024.
SECTION 4. LIMITED WAIVER OF
ADDITION TO TAX
.01 Waiver. In light of the continuing
challenges associated with determining
whether a corporation is an Applicable
Corporation and the amount of a corpo-
ration’s CAMT liability under § 55 for a
Covered CAMT Year, and in the interest
of sound tax administration, the IRS will
waive the addition to tax under § 6655
with respect to a corporation’s CAMT lia-
bility under § 55 for any Covered CAMT
Year. Accordingly, for a Covered CAMT
Year, a corporation’s required installments
of estimated tax need not include amounts
attributable to its CAMT liability under §
55 to prevent the imposition of an addition
to tax under § 6655. If a corporation fails
to timely pay its CAMT liability under §
55 when due, other sections of the Code
may apply; for example, additions to tax
could be imposed under § 6651 if payment
of the CAMT liability is not made by the
due date (without regard to any extension)
of the corporation’s return.
.02 Instructions to be modified. The
instructions to Form 2220, Underpayment
of Estimated Tax by Corporations, will
be modified, as necessary, to clarify that
no addition to tax will be imposed under
§ 6655 based on a corporation’s failure
to make an estimated tax payment of its
CAMT liability under § 55 for any Cov-
ered CAMT Year, and that a taxpayer may
exclude such amounts when calculating
the amount of its required annual payment
on Form 2220. If necessary, the modified
instructions will be posted on https://www.
irs.gov.
.03 Instructions to avoid penalty
notice. Affected taxpayers must file Form
2220 with their Federal income tax return,
even if they owe no estimated tax penalty.
The Form 2220 must be completed with-
out including the CAMT liability from
Schedule J of Form 1120, U.S. Corpora-
tion Income Tax Return (or other appro-
priate line of the corporation’s income tax
return in the Form 1120 series). Affected
taxpayers must also include an amount of
estimated tax penalty on Line 34 of their
Form 1120 (or other appropriate line of
the corporation’s income tax return in the
Form 1120 series), even if that amount is
zero. Failure to follow these instructions
could result in affected taxpayers receiv-
ing a penalty notice that will require an
abatement request to apply the relief pro-
vided by this notice.
SECTION 5. APPLICABILITY DATE
The waiver of the addition to tax
imposed by § 6655 described in section
4.01 of this notice applies for any Covered
CAMT Year.
SECTION 6. EFFECT ON OTHER
DOCUMENTS
Notice 2024-33 and Notice 2024-47
are obsoleted.
SECTION 7. DRAFTING AND
CONTACT INFORMATION
The principal author of this notice is
Alexander Wu of the Office of the Associ-
ate Chief Counsel (Procedure and Admin-
istration). Other personnel from the Trea-
sury Department and the IRS participated
in its development. For further informa-
tion, please contact Alexander Wu at (202)
317-6845 (not a toll-free number).

September 30, 2024 684 Bulletin No. 2024–40
Part IV
Notice of Proposed
Rulemaking
Tribal General Welfare
Benefits
REG-106851-21
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed regulations regarding the exclu-
sion from gross income of certain Tribal
general welfare benefits. The proposed
regulations address the requirements that
would apply to determine whether the
benefits that an Indian Tribal govern-
ment program provides qualify as Tribal
general welfare benefits. These proposed
regulations would affect Indian Tribal
governments, agencies or instrumentali-
ties of such governments, Federally-rec-
ognized Tribes, members of such Tribes,
such members’ spouses and dependents,
and other Tribal program participants.
This document also requests comments on
certain provisions and provides a notice
of a public hearing on the proposed reg-
ulations that will be in addition to Tribal
consultation on the proposed regulations.
DATES: Comments: Electronic or written
comments on this proposed rule from the
public must be received by December 16,
2024.
Public Hearing: The public hear-
ing is scheduled to be held on January
13, 2025, at 10 a.m. Eastern time (ET).
Requests to speak and outlines of topics
to be discussed at the public hearing must
be received by December 16, 2024. If no
outlines are received by December 16,
2024, the public hearing will be cancelled.
Requests to attend the public hearing must
be received by 5 p.m. ET on January 9,
2025. Requests for special assistance
during the hearing must be received by 5
p.m. ET on January 8, 2025. See the Com-
ments and Public Hearing section of the
SUPPLEMENTARY INFORMATION
for additional information.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submis-
sions via the Federal eRulemaking Portal
at https://www.regulations.gov (indicate
IRS and REG-106851-21) by following
the online instructions for submitting
comments. Once submitted to the Federal
eRulemaking Portal, comments cannot be
edited or withdrawn. The Department of
the Treasury (Treasury Department) and
the IRS will publish any comments to the
IRS’s public docket. Send paper submis-
sions to: CC:PA:PR:01 (REG-106851-
21), Room 5203, Internal Revenue Ser-
vice, P.O. Box 7604, Ben Franklin Station,
Washington, D.C. 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Jonathan A. Dunlap of
the Office of Associate Chief Counsel
(Income Tax and Accounting), (202)
317-4718 (not a toll-free number); con-
cerning submissions of comments or
outlines, the hearing, or any questions
to attend the hearing by teleconferenc-
ing, Publication and Regulations Sec-
tion at (202) 317-6901 (not a toll-free
number) or preferably by email to pub-
lichearings@irs.gov. If emailing, please
include the following information in the
subject line: Attend, Testify, or Question
and REG-106851-21.
SUPPLEMENTARY INFORMATION:
Authority
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) under section 139E
of the Internal Revenue Code (Code). Sec-
tion 139E(c)(3) provides an express dele-
gation of authority for the Secretary of the
Treasury or her delegate (Secretary) to,
“in consultation with the Tribal Advisory
Committee (as established under section
3(a) of the Tribal General Welfare Exclu-
sion Act of 2014), establish guidelines
for what constitutes lavish or extravagant
benefits with respect to Indian tribal gov-
ernment programs.” The proposed regula-
tions are also issued under the express del-
egation of authority under section 7805(a)
of the Code.
Background
This notice of proposed rulemaking
contains proposed amendments to the
Income Tax Regulations (26 CFR part 1)
to implement section 139E of the Internal
Revenue Code (Code).
Section 61 of the Code provides that,
except as otherwise provided by law, the
term “gross income” means all income
from whatever source derived. The term
“income” is broadly defined as “instances
of undeniable accessions to wealth, clearly
realized, and over which the taxpayers
have complete dominion.” Commissioner
v. Glenshaw Glass Co., 348 U.S. 426, 431
(1955). As a general rule, exclusions from
income are construed narrowly, and tax-
payers must bring themselves within the
clear scope of the exclusion for the exclu-
sion to apply. Commissioner v. Schleier,
515 U.S. 323, 328-329 (1995). Tribal
members are subject to the same require-
ment to pay Federal income taxes as non-
Tribal members, unless exempted by a
treaty or agreement between the United
States and the Tribal member’s Tribe or
an Act of Congress dealing with Indian
affairs. Squire v. Capoeman, 351 U.S. 1,
6 (1956).
Generally, if the provision of a benefit
satisfies the requirements of section 139E
(discussed in part IV of this Background),
section 139E will apply to exclude the
value of the benefit from the recipient’s
gross income. If section 139E does not
apply to exclude a benefit from a recip-
ient’s gross income, the benefit may,
depending on the facts and circumstances,
separately qualify for exclusion from the
recipient’s gross income under another
Code provision or the administrative gen-
eral welfare exclusion (discussed in part
I of this Background), which pre-dates
the enactment of section 139E. See Notice
2015-34 (2015-18 I.R.B. 942), discussed
in part V of this Background.

Bulletin No. 2024–40 685 September 30, 2024
I. Administrative General Welfare
Exclusion
The IRS generally has determined that
payments made to or on behalf of individ-
uals by governmental units under legis-
latively provided social benefit programs
for the promotion of the general welfare
are not includible in an individual recipi-
ent’s Federal gross income; this concept is
referred to in this preamble as the “admin-
istrative general welfare exclusion.” See,
e.g., Rev. Rul. 78-170, 1978-1 C.B. 24
(concluding that amounts paid under the
laws of the State of Ohio to low-income
elderly and disabled persons to help alle-
viate their cost of winter energy con-
sumption are made for the promotion of
general welfare, and are not includible in
the recipients’ gross income for Federal
income tax purposes); see also Rev. Rul.
76-395, 1976-2 C.B. 16 (applying the
general welfare exclusion to home reha-
bilitation grants to low-income families to
correct substandard conditions).
To qualify under the administrative
general welfare exclusion, payments must
(1) be paid from a governmental fund,
(2) be for the promotion of the general
welfare (that is, based on the need of the
individual or family receiving such pay-
ments), and (3) not represent compensa-
tion for services absent a specific Federal
income tax exclusion. See Notice 2023-
56, 2023-38 I.R.B. 824.
Payments that are based on some cri-
teria other than individual or family need
do not qualify for the administrative gen-
eral welfare exclusion. Compare Rev. Rul.
76-395, 1976-2 C.B. 16 (home rehabilita-
tion grants received by low-income home-
owners residing in a defined area of a city
under the city’s community development
program funded under the Housing and
Community Development Act of 1974 are
in the nature of general welfare and are not
includible in their gross income) with Rev.
Rul. 76-131, 1976-1 C.B. 16 (payments
made by the State of Alaska to individuals
at least 65 years of age who have main-
tained an Alaska domicile for at least 25
years to encourage them to continue their
residence in the State did not qualify under
the general welfare exclusion because the
payments were made to residents regard-
less of financial status, health, educational
background, or employment status).
The administrative general welfare
exclusion does not generally apply to per-
mit a business to exclude payments from
gross income because such payments are
not based on individual or family need.
See Bailey v. Commissioner, 88 T.C. 1293,
1300-1301 (1987), acq. 1989-2 C.B. 1;
Revenue Ruling 2005-46 (2005-2 C.B.
120).
II. Application of the Administrative
General Welfare Exclusion to Indian
Tribal Governments
Indian Tribal governments have a
unique legal status. They have sover-
eignty that pre-dates the United States
and therefore have a government-to-gov-
ernment relationship with the United
States. Indian Tribal governments have
developed a broad range of programs to
address their unique social, cultural, and
economic issues. The administrative gen-
eral welfare exclusion applies to benefits
provided by Indian Tribal governments
no less favorably than it applies to ben-
efits provided by Federal, State, or local
governments. Thus, benefits provided by
Indian Tribal governments qualify for the
administrative general welfare exclusion
if the benefits are (1) made pursuant to a
governmental program of the Tribe; (2)
for the promotion of general welfare (that
is, based on individual or family need);
and (3) not compensation for services.
III. Revenue Procedure 2014-35
In 2014, the Treasury Department
and the IRS issued Revenue Procedure
2014-35 (2014-26 I.R.B. 1110),
1
which
provides safe harbors under which the
IRS conclusively presumes that the indi-
vidual need requirement of the adminis-
trative general welfare exclusion is met
for benefits provided under Indian Tribal
governmental programs that meet the
safe harbor requirements. The revenue
procedure provides that the IRS will not
assert that recipients of benefits under
a safe harbor must include the value of
those benefits in gross income or that the
benefits are subject to the information
reporting requirements of section 6041
of the Code. The safe harbors apply if
the following requirements are met: (1)
the benefit is provided pursuant to a spe-
cific Indian Tribal government program,
(2) the program has written guidelines
specifying how the individual qualifies
for the benefit; (3) the benefit is avail-
able to any Tribal member and certain
other individuals who satisfy the pro-
gram’s guidelines; (4) the program does
not discriminate in favor of members of
the governing body; (5) the benefit is
not lavish or extravagant under the cir-
cumstances, and (6) the benefit is not
compensation for services. See section
5.02(1) of Revenue Procedure 2014-35.
Categories of qualifying benefits include
housing, education, elder and disabled
person care, and cultural activities. See
section 5.02(2) of Revenue Procedure
2014-35. In addition, nominal cash hon-
oraria and items of cultural significance
that are not lavish or extravagant provided
to religious or spiritual officials or leaders
in connection with their participation in
cultural, religious, and social events, are
not treated as compensation for services
(and therefore are not gross income) under
the revenue procedure. See section 5.03 of
Revenue Procedure 2014-35.
IV. The Tribal General Welfare Exclusion
Act of 2014
On August 2, 2013, H.R. 3043, 113
th

Cong. (2013), whose short title was the
Tribal General Welfare Exclusion Act of
2013, was introduced in the United States
House of Representatives and referred to
the Committee on Ways and Means. On
that same date, an identical bill was intro-
duced in the United States Senate and
referred to the Committee on Finance. On
September 16, 2014, after its short title
was revised to the “Tribal General Welfare
Exclusion Act of 2014,” H.R. 3043 was
passed by the House of Representatives
after a floor debate (House Debate). See
Cong. Rec. H7599-7603 (September 16,
2014). On September 17, 2014, after being
received by the Senate, H.R.3043 was the
1
Revenue Procedure 2014-35 was preceded by Notice 2012-75 (2012-51 I.R.B. 715). The IRS received over 40 comments in response to Notice 2012-75, which informed the drafting of
Revenue Procedure 2014-35.

September 30, 2024 686 Bulletin No. 2024–40
subject of a colloquy (Senate Colloquy).
See Cong. Rec. S5686-5687 (September
17, 2014). On September 18, 2024, H.R.
3043 was passed by the Senate by unan-
imous consent. See Cong. Rec. S5862
(September 18, 2014). On September 26,
2014, the President of the United States
approved the United States Congress’s
enactment of the Tribal General Welfare
Exclusion Act of 2014 (Act), Public Law
113-168, 128 Stat. 1883 (2014).
The Act, among other things, amended
the Code by adding section 139E. Under
section 139E, gross income does not
include the value of any “Indian gen-
eral welfare benefit,” which this notice
of proposed rulemaking refers to as a
“Tribal General Welfare Benefit.” Section
139E(b) defines a Tribal general welfare
benefit as any payment made or services
provided to or on behalf of a member of a
Tribe (or any spouse or dependent of such
a member) pursuant to an Indian Tribal
government program, but only if: (1) the
program is administered under specified
guidelines and does not discriminate in
favor of members of the governing body
of the Tribe, and (2) the benefits provided
under such program are (A) available to
any Tribal member who meets such guide-
lines, (B) for the promotion of general
welfare, (C) not lavish or extravagant, and
(D) not compensation for services. Fur-
ther, section 139E(c)(5) provides that any
items of cultural significance, reimburse-
ment of costs, or cash honorarium for par-
ticipation in cultural or ceremonial activ-
ities for the transmission of Tribal culture
“shall not be treated as compensation for
services.”
Section 2(c) of the Act provides that
ambiguities in section 139E are to be
resolved in favor of Indian Tribal gov-
ernments. Section 2(c) of the Act also
requires that deference be given to Indian
Tribal governments for the programs
administered and authorized by the Tribe
to benefit the general welfare of the Tribal
community.
Section 2(d)(1) of the Act provides
that section 139E shall apply to taxable
years for which the period of limitation
on refund or credit under section 6511 of
the Code of 1986 has not expired. Sec-
tion 2(d)(2) of the Act provides that if the
period of limitation on a credit or refund
resulting from the enactment of section
139E expires before the end of the 1–year
period beginning on the date of the enact-
ment of the Act, refund or credit of such
overpayment (to the extent attributable to
such amendments) may, nevertheless, be
made or allowed if claim therefor is filed
before the close of such 1–year period.
Section 3 of the Act requires the Sec-
retary of the Treasury to establish a Tribal
Advisory Committee. The Department of
the Treasury Tribal Advisory Commit-
tee (TTAC) held its inaugural meeting
on June 20, 2019. Under section 3(b) of
the Act, the TTAC’s mandate is to advise
the Secretary of the Treasury on matters
relating to the taxation of Indians, and
the Secretary of the Treasury is required
to consult with the TTAC to establish and
require training and education for inter-
nal revenue field agents who administer
and enforce internal revenue laws. This
includes (A) training and education with
respect to Federal Indian law and the Fed-
eral Government’s unique legal treaty and
trust relationship with Indian Tribal gov-
ernments, and (B) training of such inter-
nal revenue field agents, and provision of
training and technical assistance to Tribal
financial officers, about implementation
of the Act and the amendments made by
the Act.
Section 4(a) of the Act requires the
Secretary of the Treasury to temporarily
suspend “all audits and examinations of
Indian Tribal governments and members
of Tribes (or any spouse or dependent of
such a member), to the extent such an audit
or examination relates to the exclusion of
a payment or benefit from an Indian Tribal
government under the general welfare
exclusion” until the training and educa-
tion described above is completed. Sec-
tion 4(a) further provides that the period
of limitation under section 6501 of the
Code is suspended during the period of
suspension.
V. Notice 2015-34
Following the addition of section 139E
to the Code, the IRS published Notice
2015-34 (2015-18 I.R.B. 942), provid-
ing guidance to taxpayers regarding the
effect of section 139E on Revenue Pro-
cedure 2014-35. Notice 2015-34 provides
that section 139E codifies (but does not
supplant) the administrative general wel-
fare exclusion for certain benefits pro-
vided under Indian Tribal government
programs. Notice 2015-34 provides that
taxpayers can rely on Revenue Procedure
2014-35 for the safe harbors under which
certain benefits provided by Indian Tribal
government programs may be excluded
from gross income under the administra-
tive general welfare exclusion. Addition-
ally, Notice 2015-34 requested comments
on (1) what guidelines may be helpful to
Indian Tribal governments to determine
whether benefits are lavish or extravagant
under section 139E(b); (2) what Tribal
customs or government practices may
establish an Indian Tribal government pro-
gram administered through specific guide-
lines under section 139E(b)(1) and (c)(4)
and how such programs may be identified;
and (3) how items of cultural significance,
cash honoraria, and cultural or ceremonial
activities for the transmission of Tribal
culture under section 139E(c)(5) should
be defined.
VI. TTAC Report and Tribal
Consultations on Section 139E
Members of the TTAC formed a Sub-
committee on the Act’s General Welfare
Exclusion (GWE Subcommittee) in 2019
to provide the TTAC with technical exper-
tise on recommendations for the imple-
mentation of the Act. On June 16, 2021,
the GWE Subcommittee submitted to the
TTAC a report (TTAC Report) containing
the GWE Subcommittee’s interpretation
of the core principles underlying section
139E, and an Appendix containing draft
proposed regulations interpreting section
139E (TTAC draft proposed regulations),
consistent with those core principles. On
October 26, 2022, the TTAC formally
recommended and approved the TTAC
Report to be submitted for the record and
published for Tribal comment.
The Treasury Department sent a Tribal
consultation letter, dated October 27, 2022
(Dear Tribal Leader Letter), to Tribal lead-
ers to request consultation on the Act and
the TTAC Report. The Dear Tribal Leader
Letter announced consultation meetings
to be held on December 14, 15, and 16,
2022 (December 2022 Consultations), to
discuss the Act and the TTAC Report. The
Dear Tribal Leader Letter also requested
responses to certain questions related to

Bulletin No. 2024–40 687 September 30, 2024
the interpretation of particular provisions
of section 139E, as well as comments
on the TTAC Report. In response to the
Dear Tribal Leader Letter, and after the
December 2022 Consultations, the Trea-
sury Department received 65 written com-
ments from Tribes and two Tribal organi-
zations (collectively, Tribal Comments).
The Tribal Comments were broadly
supportive of the recommendations in the
TTAC Report,
2
including the TTAC draft
proposed regulations. In general, the Tribal
Comments emphasized that the Act, par-
ticularly section 2(c) of the Act, requires
the Treasury Department to recognize the
sovereignty of Tribes by granting broad
deference to Indian Tribal governments
in the design and implementation of their
general welfare programs, as well as with
respect to any ambiguities in the statute.
Deference to Indian Tribal governments
was a guiding principle in the Tribal
Comments addressing each of the ques-
tions for which the Treasury Department
requested comment. For example, many
Tribal Comments stated that any Treasury
Department and IRS guidance imposing
specific requirements for a general welfare
program, such as what constitutes “the
promotion of the general welfare,” what is
a “lavish or extravagant” benefit, or what
are “cultural or ceremonial activities,”
would infringe upon Indian Tribal sover-
eignty. Many Tribal Comments urged that
section 2(c) of the Act be expressly cited
in the proposed regulations.
Another area of significant concern
raised in the Tribal Comments was ensur-
ing that the regulations under section
139E do not presumptively treat benefits
as outside the scope of section 139E solely
because the benefits are provided to all eli-
gible recipients in an equal amount, or that
the benefits are funded from gaming reve-
nues. This concern was primarily raised in
relation to amounts that are set aside and
paid from net gaming revenues to provide
for the general welfare of the Indian Tribe
and its members. See 25 U.S.C. 2710(b).
Finally, the Tribal Comments addressed
various other issues, including the effec-
tive date of the proposed regulations, train-
ing of IRS agents, and coordination with
other Federal agencies. After considering
these and other Tribal Comments and the
TTAC Report, and after consultation with
the TTAC and the GWE Subcommittee,
the Treasury Department and the IRS pro-
pose to adopt new §1.139E-1 to provide
guidance under section 139E (proposed
§1.139E-1). The following Explanation of
Provisions discusses the Tribal Comments
in more detail in relation to each proposed
provision in proposed §1.139E-1.
Explanation of Provisions
The proposed regulations would pro-
vide that the gross income of a Tribal
program participant does not include the
value of any Tribal general welfare benefit
provided by an Indian Tribal government
program.
The provisions of proposed §1.139E-1
would provide (1) definitions of terms
used in section 139E and proposed
§1.139E-1 (see proposed §1.139E-1(b));
(2) requirements for a program to qual-
ify as an “Indian Tribal Government
Program” (see proposed §1.139E-1(c));
(3) requirements for a benefit to qualify
as a “Tribal General Welfare Benefit” (see
proposed §1.139E-1(d)); (4) special rules
related to cultural or ceremonial activities
(see proposed §1.139E-1(e)); (5) clarifi-
cation of the audit suspension required by
section 4(a) of the Act (proposed §1.139E-
1(f)); and (6) the proposed date of appli-
cability of the final regulations (see
proposed §1.139E-1(g)). The Treasury
Department and the IRS will publish final
regulations under section 139E after con-
sideration of oral and written comments
received in connection with Tribal consul-
tation on these proposed regulations, con-
sideration of any other comments received
in response to the proposed regulations,
and further consultation with the TTAC,
including through the GWE Subcommit-
tee.
I. Section 139E Definitions
Section 139E(a) provides that gross
income does not include the value of any
Tribal general welfare benefit. Section
139E(b) defines a Tribal general welfare
benefit, in relevant part, as any payment
made or services provided to or on behalf
of a member of a Tribe (or any spouse or
dependent of such a member) pursuant to
a program that is established by an Indian
Tribal government and that satisfies speci-
fied requirements. Proposed §1.139E-1(b)
would define an Indian Tribal government,
a Tribe, and the individuals, including a
Tribal member, spouse, and dependent,
who may be determined by the Indian
Tribal government to be eligible for a gen-
eral welfare benefit under section 139E.
A. Definition of Indian Tribal government
Section 139E(c)(1) provides that the
term “Indian Tribal government” includes
any agencies or instrumentalities of an
Indian Tribal government and any Alaska
Native regional or village corporation,
as defined in, or established pursuant to,
the Alaska Native Claims Settlement
Act (ANCSA) (43 U.S.C. 1601 et seq.)
(Alaska Native Corporations). Revenue
Procedure 2014-35 provides that the term
“Indian Tribal government” has the same
meaning as in section 7701(a)(40)(A) but
for purposes of the revenue procedure
includes agencies or instrumentalities of
the Indian Tribal government. The TTAC
Report and the Tribal Comments did not
provide any recommendations on the defi-
nition of Indian Tribal government and
did not specifically address Alaska Native
Corporations.
If used in a provision of the Code and
not otherwise distinctly expressed or
manifestly incompatible with the intent
thereof, section 7701(a)(40)(A) defines the
term “Indian Tribal government” to mean
the governing body of any Tribe, band,
community, village, or group of Indians,
or (if applicable) Alaska Natives, which is
determined by the Secretary, after consul-
tation with the Secretary of the Interior, to
exercise governmental functions. Under
the Federally Recognized Indian Tribe
List Act of 1994, Public Law 103-454,
108 Stat. 4791 (List Act), the Secretary of
the Interior is required to publish annually
a list of all Federally-recognized Tribes.
In Revenue Procedure 2008-55 (2008-39
I.R.B. 768), after consultation with the
Department of Interior (DOI), the Trea-
2
However, a few Tribal Comments argued that Congress has not specifically directed the Treasury Department and the IRS to publish regulations under section 139E.

September 30, 2024 688 Bulletin No. 2024–40
sury Department and the IRS determined
that the Indian Tribal entities that appear
on the current or future lists of Federal-
ly-recognized Tribes published annually
under the List Act by the DOI, Bureau of
Indian Affairs, are designated as Indian
Tribal governments for purposes of sec-
tion 7701(a)(40). See 89 FR 944 (January
8, 2024) for the most current list published
by the DOI, Bureau of Indian Affairs.
Proposed §1.139E-1(b)(4) would
define the term “Indian Tribal Govern-
ment” by reference to section 7701(a)(40).
In addition, in accordance with section
139E(c)(1), the definition of Indian Tribal
government for purposes of proposed
§1.139E-1(b)(4) also would include agen-
cies and instrumentalities of the Indian
Tribal government. This definition is con-
sistent with Revenue Procedure 2014-35.
Although the definition of Indian
Tribal government under section 139E(c)
(1) includes Alaska Native Corporations,
these proposed regulations would not
include Alaska Native Corporations in
the definition of Indian Tribal government
for purposes of these rules and instead
reserve proposed §1.139E-2 for the rules
to apply section 139E to benefits provided
by Alaska Native Corporations. The Trea-
sury Department and the IRS intend on
holding consultation before issuing future
guidance on issues related to the applica-
tion of section 139E to benefits provided
by Alaska Native Corporations.
B. Definition of Tribe
Section 139E does not define the term
“Indian Tribe,” but section 4(c)(2) of the
Act defines it by cross-reference to that
term as defined in section 45A(c)(6) of the
Code. Revenue Procedure 2014-35 also
defines “Indian Tribe” by cross-reference
to section 45A(c)(6). The TTAC Report
and the Tribal Comments did not provide
any recommendations on the definition
of “Indian Tribe,” which, for purposes of
these proposed regulations, is referred to
as simply ”Tribe.”
Section 45A relates to the Indian
employment credit, which was applicable
for taxable years prior to January 1, 2022.
Section 45A(c)(6) defines “Indian Tribe”
to mean any Indian Tribe, band, nation,
pueblo, or other organized group or com-
munity, including any Alaska Native vil-
lage, or regional or village corporation,
as defined in, or established pursuant to,
ANCSA that is recognized as eligible
for the special programs and services
provided by the United States to Indians
because of their status as Indians.
Proposed §1.139E-1(b)(7) generally
would define “Tribe” using the defini-
tion of Indian Tribe in section 45A(c)(6).
However, for ease of readability and to
prevent confusion arising from citing to
an expired Code provision, the proposed
regulations would recite the language of
section 45A(c)(6) rather than incorporat-
ing the definition by cross-reference. As
noted, proposed §1.139E-2 is reserved
because the Treasury Department and
the IRS intend to issue future guidance
under section 139E applicable to benefits
provided by Alaska Native Corporations.
Accordingly, the proposed regulations
would exclude section 45A(c)(6)’s refer-
ence to Alaska Native regional and village
corporations as defined in and established
pursuant to ANCSA for purposes of these
rules.
C. Definition of Tribal program
participant
Section 139E(b) provides that a Tribal
general welfare benefit means any pay-
ment made or services provided to or on
behalf of a member of the Tribe (or any
spouse or dependent of such a member)
pursuant to a program that satisfies spec-
ified requirements. Revenue Procedure
2014-35 allows benefits to be provided to
a member of the Tribe, as well as a “qual-
ified nonmember,” meaning a spouse, for-
mer spouse, legally recognized domestic
partner or former domestic partner, ances-
tor, descendant, or dependent of a member
of a Tribe.
The TTAC Report and many Tribal
Comments recommend that the pro-
posed regulations provide that individ-
uals eligible for benefits not be limited
to Tribal members and their spouses and
dependents, instead supporting the use
of the more expansive term “qualified
nonmember” from Revenue Procedure
2014-35. The TTAC Report and many
Tribal Comments state that using this
more expansive definition of “qualified
nonmember” would be consistent with
the House Debate and Senate Colloquy
that explain the Act, and that section 139E
should be viewed no less favorably than
Revenue Procedure 2014-35. Moreover,
several Tribal Comments suggest that the
language “to or on behalf of” in section
139E(b) is ambiguous and thus supports
the proposed regulations adopting the
definition of “qualified nonmember” from
Revenue Procedure 2014-35. In addition,
the TTAC Report explains that depending
on Tribal culture, custom, or tradition, a
member of a Tribe may have obligations
to care for extended family, and that exist-
ing Tribal general welfare programs may
provide assistance to these extended fam-
ily members.
The Treasury Department and the IRS
have considered the TTAC Report and
the Tribal Comments and agree that an
expansive definition of eligible individu-
als is appropriate. Accordingly, proposed
§1.139E-1(b)(8) would define the term
“Tribal Program Participant” to mean a
Tribal member, spouse of a Tribal member
(including a spouse of a Tribal member
within the meaning of §301.7701-18, or
a spouse of a Tribal member under appli-
cable Tribal law), dependent of a Tribal
member, or other individual who has been
determined by the Indian Tribal govern-
ment to be eligible for a Tribal general
welfare benefit because such individual is,
with respect to a Tribal member, an ances-
tor, descendant, former spouse, widow or
widower, or legally recognized domestic
partner or former domestic partner. This
definition is intended to encompass the
categories of “qualified nonmember” that
are covered by Revenue Procedure 2014-
35, with the clarification that a spouse may
be a spouse under applicable Tribal law.
The Treasury Department and the
IRS note that the phrase “on behalf of”
in section 139E(b) does not make the
section 139E exclusion applicable to the
direct recipient of a payment which was
made by the Indian Tribal government
“on behalf of” the Tribal program par-
ticipant. For example, a Tribal program
participant who receives a Tribal general
welfare benefit from an Indian Tribal gov-
ernment program to provide rental assis-
tance can exclude the payment from the
Tribal program participant’s gross income
under section 139E regardless of whether
the assistance is paid directly to the Tribal
program participant or paid to the land-

Bulletin No. 2024–40 689 September 30, 2024
lord on behalf of the Tribal program par-
ticipant. In either case, however, section
139E does not apply to permit the landlord
to exclude the rental assistance payment
from the landlord’s gross income.
D. Definition of Tribal member
Section 139E does not define who is a
“member of an Indian Tribe” or “Tribal
member.” Revenue Procedure 2014-35
defines who is a member of a Tribe by
cross-reference to 25 CFR 290.2, which
defines a member of a Tribe as an indi-
vidual who meets the requirements estab-
lished by applicable Tribal law for enroll-
ment in the Tribe and (1) is listed on the
Tribal rolls of that Tribe if such rolls are
kept, or (2) is recognized as a member by
the Tribal governing body if Tribal rolls
are not kept. The TTAC Report and the
Tribal Comments did not provide any rec-
ommendations on the definition of a mem-
ber of a Tribe.
Proposed §1.139E-1(b)(9) would
define the term “Tribal Member” in a
manner similar to Revenue Procedure
2014-35’s definition of “member of an
Indian Tribe.” The proposed regulations
would adopt the same definition but, for
ease of readability, would incorporate the
language from 25 CFR 290.2 rather than
providing a cross-reference. Thus, the
proposed regulations would define “Tribal
Member” as an individual who is a mem-
ber or citizen of the Tribe that establishes
or maintains the Indian Tribal government
program because the individual meets the
requirements established by applicable
Tribal law for enrollment in the Tribe and
(1) is listed on the Tribal rolls of that Tribe
if such rolls are kept, or (2) is recognized
as a member by the Tribal governing body
if Tribal rolls are not kept. In addition,
the Treasury Department and the IRS are
aware that some Tribes temporarily close
their rolls for enrollment or do not enroll
children until they reach a certain age.
These Tribes may provide benefits to an
individual on the basis that the individual
may be eligible for benefits, even though
not formally a Tribal member. In partic-
ular, Tribes may provide benefits to an
Indian child under the Indian Child Wel-
fare Act of 1978, Public Law 95-608, 92
Stat. 3069 (1978), codified at 25 U.S.C.
1903(4). The Indian Child Welfare Act
defines “Indian child” as any unmarried
person who is under age eighteen and is
either (a) a member of a Tribe or (b) is eli-
gible for membership in a Tribe and is the
biological child of a member of a Tribe.
To ensure that Indian Tribal governments
may provide general welfare benefits to an
Indian child under section 139E, the pro-
posed regulations also would include in
the definition of Tribal member an “Indian
child” as defined in 25 U.S.C. 1903.
The Treasury Department and the
IRS recognize that an Indian Tribal gov-
ernment generally develops programs
with the intention of providing general
welfare benefits to or for the benefit of
its own Tribal members. The Treasury
Department and the IRS interpret section
139E(b) as providing a relationship nexus
between the Indian Tribal government
providing the general welfare benefit and
the individual receiving the benefit. Thus,
the proposed regulations would define the
term Tribal member to mean a member
of the Tribe that establishes or maintains
the Indian Tribal government program.
However, solely for purposes of the rule
in section 139E(c)(5) relating to benefits
provided for participation in ceremonial
or cultural activities, proposed §1.139E-
1(b)(8)(ii) would provide that the recipi-
ent of such benefits may be a member of a
Tribe that is different from the Tribe that
establishes or maintains the program.
E. Definition of spouse
Section 139E does not define the term
“spouse,” nor does Revenue Procedure
2014-35. The TTAC Report and the Tribal
Comments did not provide any recom-
mendations on the definition of spouse for
purposes of section 139E.
Section 301.7701-18(a) of the Proce-
dure and Administration Regulations (26
CFR part 301) provides that, for Federal
tax purposes, the term spouse means an
individual lawfully married to another
individual. Section 301.7701-18(b) gener-
ally provides that a marriage of two indi-
viduals is recognized for Federal tax pur-
poses if the marriage is recognized by the
state, possession, or territory of the United
States in which the marriage is entered
into, regardless of domicile. Section
301.7701-18(a) does not specifically refer
to a marriage recognized under Tribal law
because Tribal lands are not states, pos-
sessions or territories of the United States
or foreign jurisdictions. However, the
term “spouse” would include individuals
married under Tribal law if the marriage
would be recognized under the laws of
any state, possession, or territory of the
United States. See also 1 U.S.C. 7.
Because §301.7701-18(a) defines
spouse for Federal tax purposes, that
definition applies for purposes of section
139E and would apply by default under
proposed regulations. However, as noted
in part I.C. of this Explanation of Provi-
sions section, the proposed regulations
would include in the definition of Tribal
program participant the spouse of a Tribal
member, as determined under applicable
Tribal law, whether or not recognized
under §301.7701-18(a) and 1 U.S.C. 7.
F. Definition of dependent
Section 139E(c)(2) defines the term
“dependent” to mean a dependent as
defined in section 152 of the Code, deter-
mined without regard to section 152(b)
(1), (b)(2), and (d)(1)(B). Revenue Proce-
dure 2014-35 does not define dependent,
and the TTAC Report and the Tribal Com-
ments did not provide any recommenda-
tions on the definition of dependent for
purposes of section 139E.
Section 152(a) defines dependent to
mean an individual who is a qualifying
child or qualifying relative of the taxpayer.
Section 152(b) provides that an individual
who is a qualifying child or a qualifying
relative of a taxpayer is not a taxpayer’s
dependent in certain circumstances. Sec-
tion 152(b)(1) provides that if an indi-
vidual is a dependent of a taxpayer, that
individual is treated as having no depen-
dents. Section 152(b)(2) provides that, to
be a dependent of a taxpayer, an individ-
ual must not have filed a joint return with
his or her spouse. Section 152(d)(1)(B)
provides that qualifying relative does not
include an individual whose income is not
less than the exemption amount set forth
in section 151(d) of the Code.
3
For pur-
3
For taxable years in which the exemption amount is zero, the section 151(d) exemption amount is generally the inflation-adjusted section 152(d)(1)(B) exemption amount in the annual
revenue procedure setting forth inflation-adjusted items that is published in the Internal Revenue Bulletin.

September 30, 2024 690 Bulletin No. 2024–40
poses of section 139E, an individual who
for the year is a dependent of a taxpayer
who is him or herself a dependent, who
files a joint return with the individual’s
spouse, or whose income is not less than
the applicable limit for section 152(d)(1)
(B) ($5,050 for 2024) is a dependent of a
Tribal member if the other requirements
of section 152 are satisfied, pursuant to
section 139E(c)(2).
Proposed §1.139E-1(b)(10) would
define the term “dependent” in accordance
with the definition in section 139E(c)
(2). However, for ease of readability, the
proposed regulations would not cite the
specific Code sections, but instead would
describe the rules for determining who is
a dependent under section 152 without
regard to section 152(b)(1), (b)(2), and (d)
(1)(B).
II. Indian Tribal Government Program
Under section 139E(b), a benefit is a
Tribal general welfare benefit if it meets
certain requirements and is provided pur-
suant to an Indian Tribal government pro-
gram, but only if the program is adminis-
tered under specified guidelines and does
not discriminate in favor of members of
the governing body of the Tribe. Section
139E(c)(4) provides that a program will
not fail to be treated as an Indian Tribal
government program solely by reason of
the program being established by Tribal
custom or government practice. Revenue
Procedure 2014-35 provides that, to qual-
ify for the safe harbors provided therein,
there must be a specific Tribal program,
the program must have written guidelines
specifying how an individual qualifies for
the benefit, and the program cannot dis-
criminate in favor of members of the gov-
erning body.
Some Tribal Comments suggest that
programs established by Tribal custom
or government practice without written
documentation (that is, programs estab-
lished under oral and unwritten customs
or traditions) should satisfy the statutory
requirement in section 139E(b)(1) that the
program be administered under specified
guidelines. These Tribal Comments recom-
mend that the proposed regulations allow
Indian Tribal governments to demonstrate
the existence of “specified guidelines” for
these programs through statements, affi-
davits, or declarations that describe how
the Tribe has operated the program in the
past. Other Tribal Comments argue that
section 139E(b)(1) neither specifies who
establishes the “specified guidelines” nor
defines the term “specified,” and that the
proposed regulations should presume that
a program administered by or pursuant
to Tribal resolution or other action by a
Tribe’s governing body is “administered
under specified guidelines.” The TTAC
Report and the Tribal Comments did not
specifically address the requirement that
the program not discriminate in favor of
members of the governing body.
The Treasury Department and the IRS
read section 139E(b) as requiring both
that a program be established by an Indian
Tribal government, and that the program
be administered under specified guide-
lines. This reading is similar to the require-
ments in Revenue Procedure 2014-35 that
there must be a specific Tribal program,
and that the program must have guidelines
specifying how an individual qualifies for
the benefit. Proposed §1.139E-1(c) gener-
ally would adopt these two requirements
and would explain how an Indian Tribal
government program can meet these
requirements. The proposed regulations
also would address the requirement that
the program not discriminate in favor of
members of the governing body.
A. Program must be established
Proposed §1.139E-1(c)(2) would pro-
vide that a program must be established
by an Indian Tribal government and that
the program may be established by Tribal
custom, government practice, or formal
action of the Indian Tribal government
under applicable Tribal law. The proposed
regulations also would provide that to the
extent permitted by applicable Tribal law,
an Indian Tribal government may delegate
authority to establish general welfare pro-
grams to a designated individual or entity
of the Indian Tribal government.
While an Indian Tribal government
may find it helpful to set forth the creation
of a program through a written document,
the proposed regulations would not spe-
cifically require a written document to
memorialize the establishment of the pro-
gram. However, the proposed regulations
would refer to applicable Tribal law to
determine whether a writing is required
for formal actions of the Indian Tribal
government. For example, if Tribal law
requires all formal actions of the Indian
Tribal government to be in writing, then
proposed §1.139E-1(c)(2) would also
require the establishment of the program
to be in writing. If written documentation
of the Indian Tribal government program
is not required under Tribal law, and the
Indian Tribal government does not provide
written documentation of the Indian Tribal
government program, the use of affidavits
or Indian Tribal government declarations,
whether oral or written, may be used to
substantiate the establishment of the pro-
gram. For example, the transcript of the
minutes of an Indian Tribal government
session that describe the creation of the
program may be sufficient to establish an
Indian Tribal government program under
these proposed regulations.
B. Program must be administered under
specified guidelines
Proposed §1.139E-1(c)(3) would pro-
vide the requirements for the administra-
tion of the program under specified guide-
lines. In general, the specified guidelines
of the program represent the framework
for the program’s operations. Thus, the
proposed regulations would provide that
the specified guidelines of the program
must include, at a minimum, a description
of the program to provide Tribal general
welfare benefits, the benefits provided
by the program (including how benefits
are determined), the eligibility require-
ments for the program, and the process for
receiving benefits under the program.
The Treasury Department and the
IRS agree with the TTAC Report and the
Tribal Comments that section 139E does
not require the specified guidelines of the
program to be memorialized in a written
document. However, Indian Tribal gov-
ernments are encouraged to set forth the
specified guidelines in writing to assist
recipients in determining whether a benefit
received under the program is excludable
from gross income under section 139E.
In particular, recipients of Tribal general
welfare benefits who are contacted by
the IRS will need to substantiate that the
benefit is excludable from gross income
under section 139E and may not have any

Bulletin No. 2024–40 691 September 30, 2024
written documentation in their possession
to do so. If the Indian Tribal government
has documented in writing the specific
guidelines of the program, the individual
recipient of the benefit may use the writ-
ten documentation to substantiate that the
benefit received is intended to be a Tribal
general welfare benefit that is excludable
from gross income under section 139E.
C. Program cannot discriminate in favor
of members of the governing body
In accordance with section 139E(b)
(1), proposed §1.139E-1(c)(4) would pro-
vide that one of the requirements for an
Indian Tribal government program is that
the program not discriminate in favor of
members of the governing body of the
Tribe (non-discrimination requirement).
Proposed §1.139E-1(c)(4)(i) would gener-
ally define a governing body as the legis-
lative body of the Tribe, such as the Tribal
Council, or the representative equivalent
of the legislative body of the Tribe. How-
ever, the Treasury Department and the IRS
are aware that the form and membership
of the governing body of a Tribe may vary
between Tribes. For example, a Tribe may
form its governing body to include all
Tribal members, known as a general coun-
cil Tribe. To ensure that a general council
Tribe is not prevented from satisfying this
requirement, proposed §1.139E-1(c)(4)(ii)
would provide that a program is treated as
being in compliance with the non-discrim-
ination requirement if the governing body
of the Tribe consists of the entire adult
membership of the Tribe.
Proposed §1.139E-1(c)(4)(iii) would
provide a facts and circumstances test to
determine whether a program, either by
its terms or in its administration, discrim-
inates in favor of members of the govern-
ing body of the Tribe. For example, the
administration of a program would dis-
criminate in favor of members of the gov-
erning body if, based on the facts and cir-
cumstances, the benefits provided during
the taxable year disproportionately favor
members of the governing body of the
Tribe because of their status as members
of the governing body. Thus, for example,
a program established to provide benefits
solely to the children of members of the
governing body of the Tribe (unless the
Tribe is a general council Tribe) and thus
defrays costs otherwise borne by members
of the governing body would fail to satisfy
the non-discrimination requirement.
D. No limitation on source of funds
Section 139E does not provide restric-
tions on how an Indian Tribal government
may fund an Indian Tribal government
program. Section 2.03 of Revenue Proce-
dure 2014-35 provides that revenues that
the Indian Tribal government derives from
levies, taxes, service fees, tribally-owned
businesses, or other sources are permissi-
ble to fund a Tribal general welfare pro-
gram.
The TTAC Report and the Tribal Com-
ments argue that the source of funds used
for general welfare benefits does not mat-
ter for compliance with section 139E. The
TTAC Report and the Tribal Comments
request that the proposed regulations con-
firm that the source of funding is irrele-
vant and, in particular, that a Tribe’s gam-
ing revenues may be used to fund Tribal
general welfare benefits under an Indian
Tribal government program.
The Treasury Department and the
IRS agree with the TTAC Report and the
Tribal Comments that section 139E does
not prohibit an Indian Tribal government
from funding a general welfare program
with net gaming revenues, or revenues
from any other particular source. Thus,
proposed §1.139E-1(c)(5) would provide
that benefits under the Indian Tribal gov-
ernment program may be funded by any
source of revenue or funds, including net
gaming revenues. However, an Indian
Tribal government is permitted to restrict
the source and amount of funds available
to provide benefits under an Indian Tribal
government program.
E. Benefits funded by net gaming
revenues
Under the Indian Gaming Regulatory
Act, 25 U.S.C. 2701-2721 (IGRA), a Fed-
erally-recognized Tribe is permitted to
engage in gaming activities and provide
net gaming revenues to its members.
See 25 U.S.C. 2710(b). Section 25 CFR
502.16 defines “net gaming revenue”
as gross gaming revenues of an “Indian
gaming operation” less: (a) amounts
paid out as, or paid for, prizes; and (b)
total gaming-related operating expenses,
including all those expenses of the
gaming operation commonly known as
operating expenses and non-operating
expenses consistent with professional
accounting pronouncements, excluding
management fees. IGRA allows Tribes
to use their net gaming revenues consis-
tent with one or more of the following
purposes: (1) to fund Tribal government
operations or programs; (2) to provide
for the general welfare of the Tribe or its
members; (3) to promote Tribal economic
development; (4) to donate to charitable
organizations; or (5) to help fund opera-
tions of local government.
IGRA also allows Tribes to use their
net gaming revenues to distribute per
capita payments. See 25 U.S.C. 2710(b)
(3). Under 25 CFR 290.2, “per capita pay-
ment” means the distribution of money or
other thing of value to all members of the
Tribe, or to identified groups of members,
which is paid directly from the net reve-
nues of any Tribal gaming activity, but
does not include payments that have been
set aside by a Tribe for special purposes
or programs, such as payments made for
social welfare, medical assistance, educa-
tion, housing, or other similar, specifically
identified needs.
Under IGRA, a Tribe cannot distrib-
ute per capita payments unless it has a
Revenue Allocation Plan (RAP) that
is approved by the DOI prior to dis-
tributing per capita payments. See 25
U.S.C. 2710(b)(3) and 25 CFR 290.11.
A Tribe does not need a RAP if no per
capita payments are made or planned
to be made to its members. See 25 CFR
290.10. Thus, no RAP is required if a
Tribe intends to use its gaming revenues
solely for special purposes or programs,
such as payments made for social welfare,
medical assistance, education, housing, or
other similar, specifically identified needs.
These types of payments are not per capita
payments as defined under IGRA.
Section 25 U.S.C. 2710(b)(3)(D) pro-
vides that net revenues may be used to
make per capita payments to members
of the Tribe only if the per capita pay-
ments are subject to Federal taxation and
Tribes notify members of such tax lia-
bility when payments are made. Under
section 6041 and §1.6041-1, the Tribe
generally is required to report per capita

September 30, 2024 692 Bulletin No. 2024–40
payments of $600 or more in any taxable
year on Form 1099-MISC, Miscella-
neous Information.
Section 3402(r)(1) requires every
person, including an Indian Tribe, mak-
ing a payment to a member of an Indian
Tribe from the net revenues of any class
II or class III gaming activity conducted
or licensed by such tribe to deduct and
withhold from such payment a tax in an
amount equal to such payment’s propor-
tionate share of the annualized tax. A
payment that constitutes a per capita pay-
ment under IGRA is gross income under
section 61 and continues to be subject to
withholding under section 3402(r)(1) to
the extent not otherwise excepted. See 25
U.S.C. 2701-2721 and 25 CFR part 290.
These provisions, which are intended to
ensure adequate withholding on gross
income arising from the distribution of
class II and class III gaming activity, are
not intended to and do not extend the
scope of what is gross income. Thus,
withholding under section 3402(r) is not
imposed merely by reason of the payment
being sourced in class II or class III gam-
ing activities but rather by reason of the
payment being gross income and made
in the form described in section 3402(r).
Accordingly, if a payment is made under
an Indian Tribal government program and
meets the requirements to qualify as an
excludable Tribal general welfare benefit
under section 139E and these proposed
regulations, then such payment is not sub-
ject to the withholding requirements of
section 3402(r).
Section 139E does not address IGRA
or the Federal tax treatment of per capita
payments. Revenue Procedure 2014-35,
however, specifically provides that per
capita payments are gross income under
section 61, and are subject to the infor-
mation reporting and withholding require-
ments of sections 6041 and 3402(r). Thus,
under the revenue procedure, per capita
payments are not excludable from income
under the administrative general welfare
exclusion.
The TTAC Report argues that a dis-
tribution with a general welfare purpose
under IGRA should be presumed to be a
Tribal general welfare benefit under sec-
tion 139E and not be treated as a taxable
per capita payment under IGRA. In addi-
tion, the TTAC Report provides that a
Tribe’s RAP should be relied upon when
determining whether a payment is a per
capita payment or a general welfare pay-
ment under section 139E. Finally, the
TTAC Report states that the IRS should
not be allowed to challenge an approved
RAP with respect to any perceived con-
flict with IGRA and section 139E. Rather,
the TTAC Report argues, the IRS must
engage in consultation with the Tribe to
resolve the perceived conflict. Finally, the
TTAC Report requests that any enforce-
ment by the IRS contrary to the RAP be
prospective only, and that Tribes be given
time to amend their RAPs with the DOI.
Some Tribal Comments argue that
IGRA makes clear that not all equal dis-
tributions of gaming revenue are neces-
sarily “per capita payments” to the extent
that they are set aside for social welfare,
medical assistance, education, housing, or
similar purposes. Some Tribal Comments
recommend that the proposed regulations
focus on the purpose and methodology
used to calculate the distributions, rather
than the source of the funding or the
value of the benefit. Finally, some Tribal
Comments request that the IRS defer to a
Tribe’s RAP and not recharacterize gen-
eral welfare payments as per capita pay-
ments.
The Treasury Department and the IRS
are of the view that IGRA defines per cap-
ita payments and provides that those pay-
ments are includible in gross income for
Federal income tax purposes. However,
the Treasury Department and the IRS
agree with the TTAC Report and the Tribal
Comments noting that IGRA distinguishes
between taxable per capita payments and
other types of payments, such as general
welfare payments. The Treasury Depart-
ment and the IRS also are of the view that
Indian Tribal governments are in the best
position to determine whether net gaming
revenues should be used to fund per capita
payments or general welfare payments.
The Treasury Department and the IRS
do not agree with the TTAC Report that
a distribution with a general welfare pur-
pose under IGRA should be presumed to
be a Tribal general welfare benefit under
section 139E. Even if a payment is treated
as having a general welfare purpose under
IGRA, as designated in a RAP or other-
wise, that purpose, by itself, is not suf-
ficient to conclude that the payment is
excludable from gross income under sec-
tion 139E. Instead, the Indian Tribal gov-
ernment program must satisfy the require-
ments of section 139E (or other exclusion
provision) for the payment to be excluded
from the recipient’s gross income.
Accordingly, proposed §1.139E-1(c)
(5)(ii) would provide that benefits under
the Indian Tribal government program
may be funded by net gaming revenues as
permitted under IGRA. However, per cap-
ita payments, as defined under IGRA, are
subject to Federal taxation under IGRA
and are not excludable from gross income
under section 139E or these proposed
regulations. Proposed §1.139E-1(c)(5)(ii)
would further provide that, for purposes
of section 139E and the proposed regula-
tions, a payment is a per capita payment if
it is identified by the Indian Tribal govern-
ment as a per capita payment in a RAP that
is approved by the DOI. This language is
intended to mean that, if the Indian Tribal
government has an approved RAP, the
provisions of the RAP determine whether
a payment is a per capita payment for pur-
poses of Federal income taxation. In con-
trast, if the Indian Tribal government does
not have a RAP, the determination of the
Indian Tribal government that payments
are not per capita payments is controlling
for Federal income tax purposes. Whether
or not the Indian Tribal government has
a RAP, deference will be given to the
Indian Tribal government’s determina-
tion of whether net gaming revenues are
being used to make payments. The DOI
is the Federal agency with sole authority
to approve the use of net gaming revenues
by an Indian Tribal government, including
whether per capita payments may be made
under a RAP.
In drafting these proposed regulations,
the Treasury Department and the IRS have
considered recent litigation addressing per
capita payments made by one Tribe to its
members. In United States v. Jim, 891 F.3d
1242 (2018), the 11th Circuit affirmed the
district court’s conclusion that section
139E did not apply to exclude per capita
payments from a Tribal member’s gross
income. The court held that per capita pay-
ments are taxable under IGRA, a specific
statute addressing Tribal net gaming reve-
nues. The court also held that section 139E,
a more general statute, does not control or
nullify IGRA. The Treasury Department

Bulletin No. 2024–40 693 September 30, 2024
and the IRS agree that section 139E does
not control or nullify IGRA, and that per
capita payments under IGRA cannot be
excluded from gross income under section
139E. However, as noted in parts II.D and
III.A.3 of this Explanation of Provisions,
there is no prohibition in section 139E on
Tribal general welfare benefits being paid
from net gaming revenues, nor is there is a
prohibition on Tribal general welfare ben-
efits being paid in equal amounts to Tribal
members. Thus, an Indian Tribal govern-
ment may use net gaming revenues to
provide benefits, whether or not uniform,
to Tribal members. Further, those bene-
fits may be excluded from gross income
as Tribal general welfare benefits if (1)
they are not designated, including under a
RAP, as per capita payments by the Indian
Tribal government, and (2) they otherwise
meet the requirements in section 139E.
For example, to be an excludable Tribal
general welfare benefit, the benefit cannot
be lavish or extravagant and must be pro-
vided under a program that is established
by the Indian Tribal government and
administered under specified guidelines.
III. Tribal General Welfare Benefits
Under section 139E(b), benefits pro-
vided under an Indian Tribal government
program are Tribal general welfare bene-
fits only if the benefits (1) are for the pro-
motion of general welfare; (2) are avail-
able to any Tribal member who meets the
guidelines; (3) are not lavish or extrava-
gant; and (4) are not compensation for
services. Proposed §1.139E-1(d) would
describe each of these requirements.
A. Benefits must be for the promotion of
general welfare
1. Deference to Tribes in Determining
Promotion of General Welfare
Section 139E(b)(2)(B) requires that a
benefit provided under an Indian Tribal
government program be for the promo-
tion of general welfare but does not define
“promotion of general welfare.” The
TTAC Report recommends that promotion
of general welfare should be presumed
when the Indian Tribal government can
substantiate that the benefit meets general
welfare needs or purpose, and the method
of distributing the benefit is expected to
achieve program goals. Further, the TTAC
Report states that an Indian Tribal govern-
ment may substantiate that benefits meet
general welfare needs or purposes by rely-
ing on data or studies corroborating the
expenses. In addition, the TTAC Report
recommends that an Indian Tribal gov-
ernment may show that the method of dis-
tribution is expected to achieve program
goals by establishing Indian Tribal gov-
ernment-approved verification procedures
such as direct pay arrangements, applica-
tions in which recipients agree to speci-
fied program requirements, or end-of-year
certifications. Finally, the TTAC Report
states that Indian Tribal governments must
be afforded flexibility with regard to sub-
stantiating expenses that relate to Tribal
cultural traditions, religious expenses, or
historical need (such as benefits paid to
elders to make up for historic economic
deprivation and shorter life expectancy).
Many Tribal Comments request that
deference be given to Tribes and Indian
Tribal governments on whether the types
and amounts of benefits are for the promo-
tion of general welfare. These Tribal Com-
ments state that the Indian Tribal govern-
ment is best suited to address the unique
needs of its members, with many insisting
that such discretion should be unfettered.
The Tribal Comments noted that many
programs may not reflect how the Trea-
sury Department and the IRS would tra-
ditionally view general welfare, including
benefits such as wellness centers, health
coaches, and access to dieticians.
Other Tribal Comments state that an
official determination by the Indian Tribal
government, such as a Tribal resolution or
other formal action, should be sufficient
to demonstrate that a benefit or program
is for the promotion of general welfare.
With respect to benefits provided, some
Tribal Comments request that the regula-
tions defer to Indian Tribal governments
on determining whether benefits provided
to Tribal members are considered “for the
promotion of general welfare,” particu-
larly when the Indian Tribal government
relies on its own data or other empiri-
cal data (for example, private studies, or
based on Federal or state statistics). Many
Tribal Comments argue that the Treasury
Department and the IRS should avoid list-
ing specific criteria required for a benefit
to satisfy the promotion of general welfare
requirement.
The Treasury Department and the
IRS agree with the TTAC Report and the
Tribal Comments that deference should be
given to the Indian Tribal government in
determining whether a benefit is for the
promotion of the general welfare of its
Tribal members or other eligible individu-
als. The Indian Tribal government is in the
best position to determine which general
welfare benefits are best suited to meet
the needs of its Tribal members and other
eligible individuals. As a result, these
proposed regulations would not define
the term “for the promotion of general
welfare” or specifically provide require-
ments that a benefit must meet in order
to satisfy section 139E(b)(2)(B). Instead,
proposed §1.139E-1(d)(2) would provide
deference to the Indian Tribal government
to determine, at the time the program is
established, whether a benefit is for the
promotion of general welfare of its Tribal
members or other eligible individuals.
Proposed §1.139E-1(d)(2) would provide
further that an Indian Tribal Government
has sole discretion to determine whether
a benefit is for the promotion of general
welfare and that the IRS will defer to the
Indian Tribal Government’s determination
that a benefit is for the promotion of gen-
eral welfare. These proposed rules would
be consistent with the specific language in
section 2(c) of the Act, which requires that
deference be given to Indian Tribal gov-
ernments for the programs administered
and authorized by the Tribe to benefit the
general welfare of the Tribal community.
2. No Need Requirement
The administrative general welfare
exclusion requires that payments be for
the promotion of general welfare, which
the IRS has interpreted to require a show-
ing of individual or family need, notably
financial need. This interpretation gener-
ally applies regardless of whether the ben-
efits are provided by a Federal, State, or
local government or by an Indian Tribal
government. However, Revenue Proce-
dure 2014-35 provides that the individual
need criterion of the administrative gen-
eral welfare exclusion is presumed to be
met for certain benefits provided under an
Indian Tribal government program. Sec-

September 30, 2024 694 Bulletin No. 2024–40
tion 139E(b)(2)(B) requires that a benefit
be for the promotion of general welfare
but does not specifically define that term
nor mention whether it incorporates a
needs-based requirement.
The TTAC Report and majority of the
Tribal Comments contend that the pro-
posed regulations should not incorporate
a needs-based requirement for the promo-
tion of general welfare requirement in sec-
tion 139E(b). The Tribal Comments note
that section 139E is silent on an individual
need requirement. Also, the Tribal Com-
ments point to the language in Revenue
Procedure 2014-35, which conclusively
presumed individual need was satisfied,
as support for not including a requirement
for the showing of individual need in sec-
tion 139E.
As noted in part III.A.1 of this Expla-
nation of Provisions, proposed §1.139E-
1(d)(2) would provide that an Indian
Tribal Government has sole discretion
to determine whether a benefit is for the
promotion of general welfare and that the
IRS will defer to the Indian Tribal Gov-
ernment’s determination that a benefit
is for the promotion of general welfare.
Consistent with this approach, Indian
Tribal Governments thus would have sole
discretion as to whether to consider indi-
vidual need or not in designing a general
welfare program. In addition, the Treasury
Department and the IRS agree with the
TTAC Report and the Tribal Comments
that section 139E was intended by Con-
gress to generally codify Revenue Pro-
cedure 2014-35, which conclusively pre-
sumed that individual need was satisfied
if the program met certain requirements.
This conclusion is also consistent with
the legislative history of section 139E.
See House Debate, at H7601 (Represen-
tative Devin Nunes stating “that the IRS
will not interpret the statute as requiring
individualized determinations of financial
need where a tribal government has estab-
lished a program consistent with the stat-
ute”); see also Senate Colloquy, at S5686
(Senator Jerry Moran asking Senator Ron
Wyden, and Senator Wyden agreeing,
that the IRS will “in no event require an
individualized determination of financial
need” if a Tribal program meets the other
requirements of section 139E).
Accordingly, proposed §1.139E-1(d)
(2) specifically states that Tribal general
welfare benefits may be provided with-
out regard to the financial or other need
of Tribal program participants. However,
Indian Tribal governments have broad dis-
cretion to establish and administer general
welfare programs and may choose to limit
a program or its benefits to Tribal program
participants based on a showing of indi-
vidual need.
3. Benefits may be in Equal Amounts
Section 139E does not address whether
Tribal general welfare benefits may be
provided to recipients in equal amounts.
However, in considering the enactment
of section 139E, Representative Nunes
expressed an intent that section 139E
apply to pro rata payments. In address-
ing the IRS’s frequent insistence that
Tribal benefits be based on a stipulation
based on individualized financial need, he
stated, “This stipulation prevents the gen-
eral welfare exclusion from covering pro-
grams designed to provide substantially
equal benefits to all qualifying members
of a tribe or to provide benefits based
on determinations of needs that are not
financial in nature.” See House Debate,
at H7601. Revenue Procedure 2014-35
does not directly address this issue of
whether general welfare benefits under
its safe harbors could be provided equally
to all eligible individuals, but states that
per capita payments to Tribal members of
Tribal gaming revenues that are subject to
IGRA are gross income under section 61,
are subject to the information reporting
and withholding requirements of sections
6041 and 3402(r), and are not excludable
from gross income.
The TTAC Report correctly notes that
section 139E does not prohibit general
welfare benefits from being distributed in
uniform amounts. The Tribal Comments
recommend that the Treasury Department
and the IRS defer to Tribes in determin-
ing whether pro rata payments (that is,
uniform payments to each recipient) are
appropriate. In general, several Tribal
Comments, when referring to net gaming
revenues under IGRA, argue that IGRA
does not treat all pro rata payments as tax-
able, but instead looks to the purpose and
methodology used to calculate the pay-
ments.
4
The Tribal Comments also request
that the proposed regulations permit pro
rata payments under an Indian Tribal gov-
ernment program, as several Tribal Com-
ments emphasized that distributing ben-
efits in equal amounts is often the most
efficient method to provide benefits, such
as for health and wellness and broadband
internet access.
The Treasury Department and the
IRS agree with the TTAC Report and the
Tribal Comments that section 139E does
not prohibit an Indian Tribal government
program from providing Tribal general
welfare benefits to recipients in equal
amounts. Accordingly, proposed §1.139E-
1(d)(2) would provide that Tribal general
welfare benefits may be provided on a uni-
form or pro-rata basis to Tribal program
participants.
4. Specific Types of Benefits
The TTAC Report and the Tribal Com-
ments recommend clarification on whether
payment of benefits for disaster relief and
similar assistance qualify under section
139E. In addition, both the TTAC Report
and many Tribal Comments request that
an Indian Tribal government disaster dec-
laration qualify to establish the existence
of a disaster for purposes of identifying
relief payments under section 139E.
Section 139 generally provides an
exclusion from gross income for quali-
fied disaster relief payments. Qualified
disaster relief payments generally include
certain amounts paid to or for the bene-
fit of an individual in connection with a
qualified disaster, including a Federally
declared disaster. Specifically, section
139(b)(4) includes as a qualified disaster
relief payment an amount paid by a Fed-
eral, State, or local government, or agency
or instrumentality thereof, in connection
with a qualified disaster in order to pro-
mote the general welfare. Section 139(b)
(4) was enacted to codify the administra-
tive general welfare exclusion for certain
disaster relief payments, but does not sup-
plant it. See Notice 2002-76 (2002-2 C.B.
917). Thus, benefits paid by Indian Tribal
governments to individuals affected by a
4
See part II.E. of this Explanation of Provisions for a fuller discussion of IGRA and general welfare payments made from net gaming revenues.

Bulletin No. 2024–40 695 September 30, 2024
disaster may be excluded from the indi-
viduals’ gross income if the requirements
of the administrative general welfare
exclusion are met. Similarly, these disas-
ter relief benefits may be excluded from
gross income if they qualify as Tribal gen-
eral welfare benefits under section 139E.
The Treasury Department and the IRS
recognize that Indian Tribal governments
have broad discretion to provide bene-
fits to individuals who are affected by a
disaster or other emergency situation that
does not meet the requirements of a qual-
ified disaster under section 139. Thus,
proposed §1.139E-1(d)(2) would include
as a permissible general welfare purpose
“assistance for disasters or emergency sit-
uations.” The Indian Tribal government
need not make a specific Tribal disaster
declaration.
In addition, the TTAC Report requests
that the proposed regulations specifically
provide that wellness and health-related
programs may be Tribal general welfare
benefits. The TTAC Report acknowledges
that section 139D applies to certain health
care expenses but requests clarification
that section 139E operates independent
of, and is not limited by, section 139D of
the Code. In particular, the concern is that
wellness and health-related programs may
not fall within the section 139D exclusion.
Section 139D generally provides an
exclusion from gross income for any qual-
ified Indian health care benefit. Qualified
Indian health care benefits include med-
ical care provided by an Indian Tribe or
Tribal organization, or coverage under
insurance or a plan provided by an Indian
Tribe or Tribal organization for medical
care. See section 139D(b)(2)-(4). For pur-
poses of section 139D, “medical care” has
the same meaning as when used in section
213 of the Code. Amounts paid for bene-
fits that are merely beneficial to the gen-
eral health of an individual, such as cer-
tain wellness and health-related programs,
as well as care by an unlicensed spouse or
relative, are not amounts paid for medical
care and thus are not excluded under sec-
tion 139D. See section 213(d) and §1.213-
1(e)(1)(ii).
The Treasury Department and the IRS
agree that section 139E operates inde-
pendently of, and is not limited by, sec-
tion 139D. Thus, in accordance with the
deference provided to Indian Tribal Gov-
ernments in proposed §1.139E-1(d)(2), an
Indian Tribal Government may determine
that wellness and health-related programs
are for the promotion of general welfare
under section 139E.
B. Benefits must be available to any
Tribal program participant
Section 139E(b)(2) provides, in rele-
vant part, that a benefit provided under the
program must be available to any Tribal
member who meets the specified guide-
lines of the program. Revenue Procedure
2014-35 requires that the benefit be avail-
able to any eligible individual who sat-
isfies the program guidelines, subject to
budgetary constraints. The TTAC Report
and the Tribal Comments do not specifi-
cally address this requirement.
The Treasury Department and the IRS
have determined that this requirement
should be interpreted in a manner simi-
lar to Revenue Procedure 2014-35. Thus,
proposed §1.139E-1(d)(3) would provide
that a benefit under the Indian Tribal gov-
ernment program must be available to any
Tribal program participant who meets the
specified guidelines of the program, sub-
ject to budgetary constraints.
C. Benefits cannot be lavish or
extravagant
Section 139E(b)(2) provides, in rel-
evant part, that benefits provided under
the program cannot be lavish or extrava-
gant. Section 139E(c)(3) provides that the
Secretary, in consultation with the TTAC,
must establish guidelines for what consti-
tutes lavish or extravagant benefits with
respect to Indian Tribal government pro-
grams. The Treasury Department and the
IRS have consulted with the TTAC during
the drafting of these proposed regulations.
In addition, the Treasury Department
and the IRS will hold Tribal consultation
before finalizing the proposed regulations.
Like section 139E, Revenue Procedure
2014-35 prohibits benefits that are lavish
or extravagant. It does not define “lavish
or extravagant” but does provide that the
benefits cannot be “lavish or extravagant
under the facts and circumstances.”
The TTAC Report recommends that
the term “lavish or extravagant” be
defined as a relative term that depends on
the unique circumstances of the Tribe, and
also depends on the type of benefit being
provided (such as, one-time payment or
monthly assistance). The TTAC Report
sets forth a non-exclusive list of circum-
stances that should be considered when
determining if a benefit is lavish or extrav-
agant: an Indian Tribal government’s eco-
nomic circumstances or factors, culture
and cultural practices, history, geographic
area, traditions, and resources. The TTAC
Report recommends deference to Indian
Tribal governments and proposes a rebut-
table presumption that the benefit is not
lavish or extravagant if the Indian Tribal
government program meets general wel-
fare needs or purposes, and the method
of distribution is expected to achieve pro-
gram goals.
Several Tribal Comments recommend
that the proposed regulations defer to the
Tribes or their Indian Tribal governments
for determining whether a benefit is lavish
or extravagant. Most Tribal Comments pro-
vide that the term is relative and depends
on the unique circumstances of each Tribe
and the type of benefit provided. Some
Tribal Comments recommend deference
to an Indian Tribal government’s defi-
nition of lavish or extravagant as estab-
lished by official actions, such as Tribal
ordinances, resolutions, and policies. In
addition, some Tribal Comments propose
that a facts and circumstances standard,
similar to Revenue Procedure 2014-35,
be applied to define lavish or extravagant.
Under such a standard, a benefit would
not be lavish or extravagant if based upon
a particular Tribe’s political, socio-eco-
nomic and cultural facts and circum-
stances as determined by that Tribe. Some
Tribal Comments argue that the definition
should be subject to the Tribal canon, as
opposed to the traditional canons of statu-
tory construction, and that any ambiguity
be construed in favor of the Tribe.
Some Tribal Comments describe what
the proposed regulations should not do
when defining lavish or extravagant. For
example, some Tribal Comments urge that
the proposed regulations should define
lavish or extravagant in a way that tar-
gets egregious abuse but otherwise does
not affect Indian Tribal government pro-
grams that are designed and administered
in good faith. Other Tribal Comments sug-
gest that the term lavish or extravagant not

September 30, 2024 696 Bulletin No. 2024–40
be defined by reference to dollar amounts,
and specifically highlighted cost of living
variations (for example, geographic dif-
ferences). Some Tribal Comments empha-
size that the proposed regulations should
not use examples that may suggest limita-
tions on the eligibility of program benefits.
Specifically, these commenters suggest
that it would be more helpful to include
examples of benefits that are not consid-
ered lavish or extravagant. Finally, some
Tribal Comments argue that the Treasury
Department and the IRS should not refer
to other Code provisions for guidance on
interpreting the phrase “lavish or extrava-
gant” under section 139E.
The Treasury Department and the IRS
generally agree with the TTAC Report and
the Tribal Comments. Accordingly, pro-
posed §1.139E-1(d)(4) would provide a
facts and circumstances test to determine
whether a Tribal general welfare benefit is
lavish or extravagant under section 139E.
Under proposed §1.139E-1(d)(4), whether
a benefit is lavish or extravagant would be
based on the facts and circumstances at the
time the benefit is provided. Relevant facts
and circumstances would include a Tribe’s
culture and cultural practices, history,
geographic area, traditions, resources, and
economic conditions or factors. A facts
and circumstances test is consistent with
Revenue Procedure 2014-35, as well as
the TTAC Report and the Tribal Com-
ments suggesting that the Tribe’s unique
circumstances should be considered when
evaluating whether the Indian Tribal gov-
ernment determined a Tribal general wel-
fare benefit to be lavish or extravagant at
the time the benefit is provided. However,
proposed §1.139E-1(d)(4) also would
provide a presumption that a benefit is
not lavish or extravagant if it is described
in, and provided in accordance with, the
written specified guidelines of the Indian
Tribal government program.
The TTAC Report and some Tribal
Comments mention that the frequency
of benefit (for example, lump sum or
monthly payment) should be considered
when evaluating whether a program’s
benefit is lavish or extravagant. The
Treasury Department and the IRS agree
that the frequency of payment should be
considered when determining whether
a Tribal general welfare benefit is lavish
or extravagant. Under a facts and circum-
stances test, an Indian Tribal government
may establish a program that provides the
types of benefits, including frequency of
payment, that best meet the needs of its
Tribal members.
D. Benefits cannot be compensation for
services
Section 139E(b)(2)(D) provides that a
Tribal general welfare benefit paid under
an Indian Tribal government program
cannot be compensation for services,
with exceptions discussed in part IV of
this Explanation of Provisions.
5
Section
139E(b)(2)(D) does not provide a spe-
cific definition for the term compensation
for services for purposes of section 139E.
Revenue Procedure 2014-35 also provides
that benefits under the safe harbors cannot
be compensation for services but does not
specifically define compensation for ser-
vices. The prohibition on compensation
for services is a long-standing core prin-
ciple of the administrative general welfare
exclusion. See Revenue Ruling 75-246
(1975-1 C.B. 24).
The TTAC Report acknowledges that
section 139E prohibits compensation for
services from being treated as Tribal gen-
eral welfare benefits. The TTAC Report
and the Tribal Comments do not recom-
mend a specific definition of compensa-
tion for services, but the TTAC Report
recommends that the proposed regulations
confirm that (1) a benefit in connection
with Tribal custom or tradition regarding
community service is not compensation
for services; (2) compensation for services
does not include cultural or ceremonial
gifts and payments, as determined by the
Tribe; and (3) payments as part of training
programs are not compensation for ser-
vices. Similar to this third issue, one Tribal
Comment argues that on-the-job training,
apprenticeships, and other classes for job
skills for which participants receive pay-
ment should not be treated as compen-
sation for services. Finally, one Tribal
Comment argues that the rule in section
139E(b)(2)(D) should be read narrowly to
cover services that are traditionally pro-
vided under an employment or contract-
ed-vendor relationship.
The first two issues raised in the TTAC
Report overlap with the rules in section
139E(c)(5), which provides that cer-
tain benefits provided for participation
in cultural or ceremonial activities are
not treated as compensation for services.
These issues from the TTAC Report are
addressed in part IV of this Explanation
of Provisions. The third issue, relating to
whether payments made to individuals
in various types of training programs are
compensation for services, is addressed
under section 61 and current law relating
to gross income generally.
Section 61(a) generally provides that,
except as otherwise provided in the Code,
gross income means all income from
whatever source derived, and this includes
compensation for services, including fees,
commissions, fringe benefits, and similar
items, whether paid in money or property.
Section 1.61-2(a)(1) of the Income Tax
Regulations provides additional examples
of payments that are included in gross
income because they are compensation
for services, such as wages, salaries, and
commissions paid salesmen. However,
compensation for services also includes
amounts that are not paid in an employ-
ment or contracted-vendor relationship.
Thus, the proposed regulations do not
adopt the Tribal Comment arguing that
compensation for services should be read
narrowly to cover only services that are
traditionally provided under an employ-
ment or contracted-vendor relationship.
In the context of training, apprentice-
ships, and other skills training programs,
existing IRS guidance on the administra-
tive general welfare exclusion provides
assistance on how to distinguish whether
a payment is a general welfare payment
or is compensation for services. See Rev-
enue Ruling 63-136 (1963-2 C.B. 19)
(excluding from income the payments for
on-the-job career training or retraining
where such payments are “intended to aid
the recipients in their efforts to acquire
5
Section 139E(c)(5) provides an exception under which any items of cultural significance, reimbursement of costs, or cash honorarium for participation in cultural or ceremonial activities
for the transmission of Tribal culture “shall not be treated as compensation for services.” This exception to the general prohibition on compensation for services is addressed in part IV of this
Explanation of Provisions.

Bulletin No. 2024–40 697 September 30, 2024
new skills that would enable them to
obtain better employment opportunities”);
Revenue Ruling 65-139 (1965-1 C.B. 31)
(as clarified by Revenue Ruling 66-240
(1966-2 C.B. 19)). In general, the deter-
mination as to whether payments under
training programs are includible in a par-
ticipant’s gross income rests on whether
the activity for which the payments are
received is in exchange for the perfor-
mance of services (compensation for ser-
vices) or is for participation in a training
program that promotes the general welfare
(general welfare payment). Revenue Rul-
ing 75-246 (1975-1 C.B. 24).
Because existing guidance addresses
the long-standing distinction between
compensation for services and general
welfare payments, the Treasury Depart-
ment and the IRS have determined that the
proposed regulations should define com-
pensation for services by reference to cur-
rent law. Thus, proposed §1.139E-1(d)(5)
would define the term compensation for
services by referring to the rules in sec-
tion 61(a). These rules encompass all the
regulations and other IRS guidance under
section 61(a) that interpret the meaning of
compensation for services.
IV. Exception to Prohibition on
Compensation for Services
As noted in part III.D. of this Explana-
tion of Provisions, section 139E(b)(2)(D)
generally provides that a Tribal general
welfare benefit cannot be compensation
for services. However, section 139E(c)(5)
contains an exception to that general rule
and provides that any items of cultural sig-
nificance, reimbursement of costs, or cash
honorarium for participation in cultural
or ceremonial activities for the transmis-
sion of Tribal culture will not be treated as
compensation for services. Accordingly,
such items may, if the other requirements
of section 139E are satisfied, be Tribal
general welfare benefits that are excluded
from gross income.
Revenue Procedure 2014-35 contains
a similar exception. Specifically, section
5.03 of the revenue procedure provides
that the safe harbors apply to “benefits
provided under an Indian Tribal govern-
mental program that are items of cultural
significance that are not lavish or extrav-
agant under the facts and circumstances,
or nominal cash honoraria provided to
religious or spiritual officials or leaders. . .
to recognize their participation in cultural,
religious, and social events.”
A. Participation in cultural or
ceremonial activities
The exception in section 139E(c)(5)
applies only if specific benefits are “for
participation in cultural or ceremonial
activities for the transmission of tribal
culture.” Revenue Procedure 2014-35
contains a similar exception, but that
exception is limited to specific benefits
“provided to religious or spiritual offi-
cials or leaders (including but not limited
to medicine men, medicine women, and
shamans) to recognize their participation
in cultural, religious, and social events
(including but not limited to pow-wows
[sic], rite of passage ceremonies, funerals,
wakes, burials, other bereavement events,
and honoring events).” As the TTAC
Report points out, Revenue Procedure
2014-35 refers only to event participation
by religious or spiritual leaders and does
not describe larger Indian Tribal-wide
cultural, ceremonial, and community ser-
vice general welfare programs. The TTAC
Report recommends that the proposed reg-
ulations provide that the IRS must defer
to Tribal determinations on what it means
to participate in cultural or ceremonial
activities for the transmission of Tribal
culture. Some Tribal Comments request
that the exclusion apply to attendance
at Tribal gatherings and participation in
community service or tribal meetings.
Some Tribal Comments provide examples
of services that should not be considered
compensation for services, such as bless-
ings provided by Tribal members, prepa-
ration of traditional foods at events, sup-
port for sponsoring Tribal events, and the
activities of traditional healers performed
at or for official Tribal events like cere-
monial or traditional gatherings. Finally,
some Tribal Comments state that the pro-
posed regulations should apply the section
139E(c)(5) exception to services that are
traditionally provided through employ-
ment or contracted-vendor arrangements.
The Treasury Department and the IRS
recognize that the language in section
139E(c)(5) is broader than Revenue Pro-
cedure 2014-35 in that the section 139E(c)
(5) exception is not limited to religious or
spiritual officials or leaders. The Treasury
Department and the IRS also agree with
the TTAC Report that Tribes are in the
best position to determine what it means to
participate in cultural or ceremonial activ-
ities for the transmission of Tribal culture.
Thus, proposed §1.139E-1(e) would pro-
vide that the Indian Tribal government
determines what it means to participate
in cultural or ceremonial activities for the
transmission of Tribal culture and would
include the list of examples from Reve-
nue Procedure 2014-35 (powwows, rite
of passage ceremonies, funerals, wakes,
burials, other bereavement events, and
honoring events). It would further provide
that the IRS will defer to the Indian Tribal
government’s determination of whether an
activity is a cultural or ceremonial activity
for the transmission of Tribal culture.
The Treasury Department and the
IRS do not agree with the Tribal Com-
ments stating that the exception in section
139E(c)(5) broadly applies to services
that are traditionally provided under an
employment or contracted-vendor rela-
tionship because section 139E is an exclu-
sion from gross income for individuals
and families, not businesses. For example,
a corporation owned by a Tribal member
that contracts with the Indian Tribal gov-
ernment to cater a Tribal ceremony is not
within the section 139E(c)(5) exception.
In this case, any payment received by
the corporation from the Tribe to provide
catered food at a Tribal ceremony is busi-
ness income. However, a Tribal member
that volunteers to make traditional foods
for a Tribal ceremony and receives an item
of cultural significance, cash honorarium,
or reimbursement of costs is within the
exception of section 139E(c)(5).
B. Items of cultural significance
Section 139E(c)(5) provides, in part,
that “items of cultural significance” that
are provided for participation in cultural
or ceremonial activities for the transmis-
sion of Tribal culture are not treated as
compensation for services. Revenue Pro-
cedure 2014-35 also contains an exception
for items of cultural significance that are
not lavish or extravagant under the facts
and circumstances. The term “items of
cultural significance” is not defined in sec-

September 30, 2024 698 Bulletin No. 2024–40
tion 139E or in Revenue Procedure 2014-
35. The TTAC Report and the Tribal Com-
ments recommend that deference should
be given to Indian Tribal governments
and Tribes to determine what are items of
cultural significance for their Tribe. One
Tribal Comment provides a list of exam-
ples of items with cultural significance,
including blankets, cash, food, regalia
items, fabric, beads, drums, pelts, feath-
ers, artwork, baskets, clothing, household
items, tobacco, gift cards, animals, and
vehicles.
The Treasury Department and the IRS
agree that Indian Tribal governments are
in the best position to determine items
of cultural significance. Thus, proposed
§1.139E-1(e)(2) would provide that the
Indian Tribal government determines
items of cultural significance and that the
IRS will defer to the Indian Tribal govern-
ment’s determination. Unlike the similar
rule in Revenue Procedure 2014-35, the
proposed regulations would not limit the
items of cultural significance to those that
are not lavish or extravagant. However, the
prohibition on lavish or extravagant bene-
fits in proposed §1.139E-1(d)(4) would
apply broadly to all Tribal general welfare
benefits, including those that are provided
under section 139E(c)(5) for participa-
tion in cultural or ceremonial activities.
In addition, the Treasury Department and
the IRS do not view cash, gift cards, or
vehicles themselves as items with cultural
significance, although such items may be
used to reimburse costs for participation
in cultural or ceremonial activities with-
out being considered compensation for
services.
C. Cash honorarium
Section 139E(c)(5) provides, in part,
that cash honoraria provided for partici-
pation in cultural or ceremonial activities
for the transmission of Tribal culture is
not treated as compensation for services.
Revenue Procedure 2014-35 contains a
similar exception, although it is limited to
nominal cash honoraria. The term “cash
honoraria” is not defined in section 139E
or in Revenue Procedure 2014-35. The
TTAC Report and the Tribal Comments
request that the proposed regulations rec-
ognize Congress’s decision to eliminate
the qualifier that honoraria be “nominal”
and provide that a Tribe’s determination
of the proper amount of the honorarium
should be presumed to be reasonable and
fair.
The Treasury Department and the
IRS agree with the TTAC Report and the
Tribal Comments that section 139E is
broader than Revenue Procedure 2014-
35 by not limiting the exception to the
compensation for services requirement to
nominal cash honoraria. Thus, proposed
§1.139E-1(e) would not provide that the
compensation for services exception in
section 139E(c)(5) is limited to nominal
cash honoraria.
D. Reimbursement of costs
Section 139E(c)(5) provides, in part,
that reimbursement of costs provided for
participation in cultural or ceremonial
activities for the transmission of Tribal
culture is not treated as compensation
for services. Revenue Procedure 2014-35
does not contain a similar exception. Sec-
tion 139E(c)(5) does not define the term
“reimbursement of costs.” However, the
Treasury Department and the IRS expect
that the usual usage of the term applies
for purposes of section 139E. Thus, the
reimbursement of costs generally would
include amounts paid by the Indian Tribal
government to an individual to reimburse
specific amounts paid by the individual to
participate in the cultural or ceremonial
activity.
E. Members of other Tribes
As noted in part I.D. of this Explana-
tion of Provisions, the proposed regu-
lations generally would define the term
Tribal member to mean a member of
the Tribe that establishes or maintains
the Indian Tribal government program.
Some Tribal Comments highlight that
some Tribes may provide benefits to
individuals who are Tribal members of a
different Tribe than the one establishing
the general welfare program. For exam-
ple, an Indian Tribal government may
provide benefits to a cultural, spiritual, or
ceremonial leader of another Tribe who
teaches shared Tribal cultural practices or
ceremonial functions.
The Treasury Department and the
IRS agree that, solely for purposes of the
exception in section 139E(c)(5) relating to
benefits provided for participation in cere-
monial or cultural activities, the recipient
may be a member of a Tribe that is dif-
ferent from the Tribe that establishes or
maintains the program. Thus, proposed
§1.139E-1(b)(8)(ii) would provide that,
solely for purposes of proposed §1.139E-
1(e), the definition of Tribal program
participant may include a member of a
Tribe that is different from the Tribe that
establishes the Indian Tribal government
program and provides the Tribal general
welfare benefit. For example, if a cultural
leader from one Tribe performs at another
Tribe’s powwow, a cash honorarium given
to the cultural leader is not compensation
for services under section 139E(c)(5).
V. Issues Not Addressed in Proposed
Regulations
A. Interaction with other Federal
programs
The TTAC Report requests that the
proposed regulations provide that individ-
ual need be presumed for all Tribal gen-
eral welfare benefits that meet the require-
ments of section 139E. Moreover, the
TTAC Report and many Tribal Comments
request that the Treasury Department
and the IRS coordinate with other Fed-
eral agencies, including the Social Secu-
rity Administration, to ensure that Tribal
general welfare benefits are not treated
as income or a disqualifying resource
for purposes of program eligibility, such
as supplemental security income benefits
under 42 U.S.C. 1381 et seq.
The Treasury Department and the IRS
have authority to interpret and provide
rules under section 139E to determine
whether a benefit is excludible from gross
income for Federal income tax purposes.
However, the issue of whether a Tribal
general welfare benefit is taken into
account for purposes of determining other
Federal benefits is outside the authority of
the Treasury Department and the IRS, and
therefore beyond the scope of these pro-
posed regulations. The Treasury Depart-
ment and the IRS are willing to work with
the TTAC and Tribes to confer with other
Federal agencies and provide advice on
how the Federal tax law applies to Tribal
general welfare benefits.

Bulletin No. 2024–40 699 September 30, 2024
B. Grants to Indian-owned enterprises
The TTAC Report requests that the
proposed regulations provide that grants
to establish or expand Indian-owned
enterprises are excludible from gross
income under section 139E. The TTAC
Report cites Revenue Ruling 77-77
(1977-1 C.B. 11), for the proposition that
non-reimbursable grants made under the
Indian Financing Act of 1974 to Indians
to expand profit-making Indian-owned
economic enterprises on or near reserva-
tions are excludable from gross income
under the administrative general welfare
exclusion. The TTAC Report also requests
that the guidance clarify that “expanding”
a business includes assistance to help a
business remain in operation or recover
from losses, and also to allow the Tribe
to be able to determine what it means to
be an Indian-owned enterprise. One Tribal
Comment also requests that grants for
establishing and assisting Indian-owned
enterprises should be excluded from gross
income.
The administrative general welfare
exclusion generally does not apply to
payments made to businesses, including
sole proprietors. Instead, the exclusion
is intended to address benefits that pro-
mote the general welfare of families and
individuals. See also Revenue Procedure
2014-35, which applies only to individuals
and not to businesses. Section 139E also
applies only to individuals and not to busi-
nesses. Thus, these proposed regulations
do not address grants to Indian-owned
enterprises. However, these proposed
regulations do not affect the validity of
Revenue Ruling 77-77, which provides
a limited exception to the rule that the
administrative general welfare doctrine
does not apply to businesses. Under that
revenue ruling, a grant made by an Indian
Tribal government to a Tribal member to
expand an Indian-owned business on or
near a reservation is excluded from the
Tribal member’s gross income under the
administrative general welfare exclusion.
C. Trust arrangements and deferred
benefits
The TTAC Report states that an Indian
Tribal government program may distrib-
ute general welfare benefits from trust
arrangements, including payments that
are set aside for the health, education, and
welfare of trust beneficiaries under IGRA.
The TTAC Report recommends that the
proposed regulations provide that the
determination of whether a payment is a
general welfare benefit is made at the time
the trust distributes the payment to the
beneficiary from the trust. Some Tribal
Comments asked that the proposed reg-
ulations expressly recognize that health,
education, and welfare payments under a
minor’s trust can be structured in a way
to qualify payments for exclusion under
section 139E.
The TTAC Report requests that the pro-
posed regulations provide that an Indian
Tribal government program may permit
Tribal members and other recipients to
defer and accumulate benefits for future
payment. The TTAC Report suggests that
if the amount is not lavish or extravagant
at the time the beneficiary defers receipt of
the payment, then section 139E is satisfied
at the time the Indian Tribal government
distributes the funds to the beneficiary.
The TTAC Report also recommends that
section 139E not be limited by construc-
tive receipt and economic benefit restric-
tions on the deferral of taxable income or
benefits. Many Tribal Comments support
the TTAC Report on the issue of deferred
benefits, and request that the proposed
regulations provide examples of deferred
benefits.
Section 139E does not specifically
address trust arrangements or deferred
benefits. Section 139E addresses whether
a benefit that is generally includible in
gross income under section 61 may be
excluded from gross income under sec-
tion 139E. It does not address the taxable
year in which a benefit may be includible
in gross income, in particular if a benefit
is put into a trust or its receipt is deferred
through some other arrangement. Most
individuals use the cash receipts and dis-
bursements method of accounting, which
incorporates numerous rules addressing
when amounts must be included in gross
income. Those rules generally apply
in determining when a benefit must be
included in the gross income and include
the concepts of constructive receipt and
economic benefit. In addition, there is
existing authority addressing trusts under
IGRA that is not affected by these pro-
posed regulations. See Revenue Procedure
2011-56 (2011-49 I.R.B. 834), which pro-
vides a safe harbor under which the IRS
treats a Tribe as the grantor and owner of a
trust for the receipt of Tribal gaming reve-
nues under IGRA for the benefit of minors
and certain other individuals. However,
as described in the Comments and Pub-
lic Hearing section of this preamble, the
Treasury Department and the IRS request
comments on whether additional guidance
is needed under section 139E or other
Code sections to address the tax treatment
of deferred benefits or benefits paid from
trust arrangements and, if so, what spe-
cific fact patterns should be addressed.
D. Advance rulings
Some Tribal Comments propose that
the Treasury Department and the IRS
allow Tribes to request advance rulings at
the option of the Tribe to address the tax
status of general welfare programs. These
comments request, however, that any pro-
cedure involving advance rulings requests
must be implemented with narrow param-
eters to avoid becoming a de facto audit of
Tribal programs. In addition, these Tribal
Comments suggest that these advance rul-
ings be binding on states and other Fed-
eral agencies. The Treasury Department
and the IRS appreciate that Indian Tribal
governments have been awaiting guidance
under section 139E and have concerns
about how the IRS may view existing
general welfare programs. The IRS has a
general process in place for entities and
individuals to request a letter ruling on the
tax treatment of a particular transaction or
program, but that process generally does
not apply if the request presents an issue
that cannot be readily resolved before a
regulation or any other published guidance
is issued. See Revenue Procedure 2024-1
(2024-1 I.R.B. 1). If an Indian Tribal gov-
ernment or a Tribal member receives a
letter ruling from the IRS, the ruling gen-
erally is binding on the IRS. However, a
letter ruling would address only Federal
tax law and would not be binding in any
way on any other Federal agency or any
state agency.
As discussed in part VIII of this Expla-
nation of Provisions, section 4(a) of the
Act requires the IRS to suspend all audits
or examinations to the extent the audit or

September 30, 2024 700 Bulletin No. 2024–40
examination relates to the exclusion from
gross income of benefits under the general
welfare exclusion. After soliciting public
comments and holding Tribal consultation
on these proposed regulations, the Trea-
sury Department and the IRS intend to
issue final regulations that provide clear
and helpful guidance on Tribal general
welfare benefits. Further, in accordance
with section 3(b)(2) of the Act, the Secre-
tary of the Treasury, in consultation with
the TTAC, will establish certain training
and education, which specifically includes
the provision of training and technical
assistance to Tribal financial officers
about implementation of section 139E.
The Treasury Department and the IRS
will continue to work with the TTAC and
Tribes throughout this rulemaking process
to ensure that the final rules are compre-
hensive and provide as much clarity and
certainty as possible within the parameters
of the section 139E.
VI. Safe Harbors and Examples
The Tribal Comments were not uniform
on whether it would be helpful for the pro-
posed regulations to provide examples of
benefits that qualify as Tribal general wel-
fare benefits. Some Tribal Comments rec-
ommend examples to help Indian Tribal
governments identify what types of bene-
fits would be considered for promotion of
general welfare. In contrast, some Tribal
Comments express concern that a list of
examples of permissible benefits would
over time be viewed as an exhaustive list
of permissible benefits.
The TTAC Report requests that Indian
Tribal governments be given the ability to
rely on programs that meet the safe harbor
requirements of Revenue Procedure 2014-
35. Some Tribal Comments argue that the
safe harbors in Revenue Procedure 2014-
35 were arbitrarily limiting and state that
the proposed regulations should refrain
from using safe harbors to avoid estab-
lishing similar limitations under section
139E. However, many other Tribal Com-
ments recommend incorporating the safe
harbors from Revenue Procedure 2014-35
into the proposed regulations or expand-
ing the safe harbors to include payments
from net gaming revenue, payments under
section 139E(c)(5), and programs devel-
oped pursuant to official determinations
by Indian Tribal governments. The Tribal
Comments also request that the proposed
regulations expressly state that a safe har-
bor is not intended to limit the types of
general welfare programs otherwise per-
mitted under section 139E.
Revenue Procedure 2014-35 contains
numerous safe harbors under which the
IRS will conclusively presume that the
individual need requirement of the admin-
istrative general welfare exclusion is met.
As a revenue procedure, this guidance
represents an official statement of a pro-
cedure by the IRS that affects the rights or
duties of taxpayers under Federal tax law,
rather than an official statement of IRS
position on a substantive tax issue like the
administrative general welfare exclusion.
See §601.601 of the Statement of Pro-
cedural Rules (25 CFR part 601). Thus,
the safe harbors in Revenue Procedure
2014-35 do not represent examples of the
application of the administrative general
welfare exclusion, but instead are fact
patterns for which the IRS is required to
presume that the need requirement of the
administrative general welfare exclusion
is met. Accordingly, taxpayers may rely
upon the safe harbors in Revenue Proce-
dure 2014-35, but the revenue procedure
does not have the force and effect of Trea-
sury regulations.
The enactment of section 139E pro-
vides authority for the Treasury Depart-
ment and the IRS to issue regulations to
interpret section 139E. Regulations are
the most authoritative form of published
guidance and generally include substan-
tive rules interpreting the statute. Treasury
regulations often include examples in the
regulatory text to illustrate specific provi-
sions of the regulation. These examples
describe how the regulatory rule applies
to a set of facts, but examples cannot be
the source of the rule itself.
The proposed regulations would pro-
vide examples of benefits that are for the
promotion of general welfare under sec-
tion 139E(b)(2)(B). The Treasury Depart-
ment and the IRS agree that the examples
in these proposed regulations are illustra-
tions of benefits that are for the promotion
of general welfare and are not intended to
represent an exhaustive list of qualifying
benefits. The examples in the proposed
regulations also would incorporate the
safe harbors in Revenue Procedure 2014-
35. Section 139E was intended generally
to codify Revenue Procedure 2014-35, and
these proposed regulations are intended to
be no less favorable than Revenue Proce-
dure 2014-35, consistent with the intent of
Congress reflected in the House Debate
and Senate Colloquy in enacting the Act.
Therefore, the general welfare programs
described as safe harbors in Revenue Pro-
cedure 2014-35 would also be programs
that satisfy the promotion of general wel-
fare requirement under section 139E(b)
(2)(B). Thus, these proposed regula-
tions would include the list of programs
described in section 5.02(2) of Revenue
Procedure 2014-35 as a non-exhaustive
list of the types of programs that would
satisfy the general welfare requirement
in section 139E and these proposed reg-
ulations. As described in the Comments
and Public Hearing section of this pream-
ble, the Treasury Department and the IRS
request comments on whether additional
examples are necessary.
VII. Proposed Obsolescence of Revenue
Procedure 2014-35
Revenue Procedure 2014-35 gener-
ally provides principles for applying the
administrative general welfare exclusion
and provides safe harbors under which
the IRS conclusively presumes that the
individual need requirement of the admin-
istrative general welfare exclusion is met
for benefits provided under Indian Tribal
government programs that are described
under section 5.02 or 5.03 of the revenue
procedure. In Notice 2015-34, the Trea-
sury Department and the IRS announced
that section 139E codified (but does not
supplant) the administrative general wel-
fare exclusion for certain benefits pro-
vided under Indian Tribal government
programs, and that “Revenue Procedure
2014-35 may be broader than section
139E in some instances.”
Many Tribal Comments argue that the
safe harbors in Revenue Procedure 2014-
35 were superseded by section 139E.
Some Tribal Comments express the pref-
erence that Revenue Procedure 2014-35
be expanded to explicitly incorporate the
concept of deference to the Tribe.
The Treasury Department and the IRS
are of the view that the proposed regula-
tions, if finalized, generally would provide

Bulletin No. 2024–40 701 September 30, 2024
rules that are at least as favorable as the
safe harbors provided under Revenue Pro-
cedure 2014-35 and therefore, that Indian
Tribal governments may have no further
need to rely on Revenue Procedure 2014-
35. In addition, the Treasury Department
and the IRS expect that Indian Tribal gov-
ernments would benefit by having a single
set of rules that apply specifically to their
general welfare benefit programs, rather
than having to analyze their programs
under both Revenue Procedure 2014-35
and the section 139E final regulations.
Thus, the Treasury Department and the
IRS propose to obsolete and supersede
Revenue Procedure 2014-35 after the final
regulations are applicable. As described in
the Comments and Public Hearing section
of this preamble, the Treasury Department
and the IRS request comments on this
issue.
VIII. Audit Suspension and IRS Training
Section 4 of the Act directs the Secre-
tary of the Treasury to suspend all audits
and examinations of Indian Tribal gov-
ernments and members of Tribes (or any
spouse or dependent of such a member)
to the extent such an audit or examination
relates to the exclusion of a payment or
benefit from an Indian Tribal government
under the general welfare exclusion, until
the education and training prescribed by
section 3(b)(2) of the Act is completed.
Section 3(b)(2) of the Act directs the
Secretary of the Treasury, in consultation
with the TTAC, to establish and require
(A) training and education for internal
revenue field agents who administer and
enforce internal revenue laws with respect
to Tribes on Federal Indian law and the
Federal Government’s unique legal treaty
and trust relationship with Indian Tribal
governments, and (B) training of such
internal revenue field agents, and provi-
sion of training and technical assistance
to Tribal financial officers, about imple-
mentation of the Act and the amendments
made thereby.
The TTAC Report requests that the
proposed regulations refer to the audit sus-
pension provided in section 4 of the Act.
Specifically, the TTAC Report requests
that the proposed regulations provide
that all audits and examinations of Indian
Tribal governments, Tribal members, and
qualified nonmembers (as defined in Rev-
enue Procedure 2014-35) to the extent
that an audit or examination relates to the
reporting or exclusion of a Tribal general
welfare benefit are suspended until a spec-
ified time related to prospective enforce-
ment of the final regulations. The TTAC
Report further requests that enforcement
of the final regulations be delayed for
one year after the training and guidance
required by section 3(b)(2) of the Act is
completed (the compliance date), and
that when examinations commence, they
relate only to the periods beginning on
or after the one-year period beginning on
or after the compliance date. The TTAC
Report further states that guidance under
section 139E must be applied prospec-
tively and that Tribes and Tribal citizens
who have developed and administered
programs in good faith will not be audited
retroactively once the audit suspension is
lifted. Many Tribal Comments agree with
the TTAC Report.
The Treasury Department and the
IRS acknowledge that section 4 of the
Act provides a temporary suspension of
audits and examinations of Indian Tribal
governments and Tribal members (or any
spouse or dependent of such member) to
the extent that the audit or examination
relates to the exclusion of a payment or
benefit from an Indian Tribal government
under the general welfare exclusion. The
Treasury Department and the IRS expect
that the audit suspension described in sec-
tion 4 of the Act will continue until all the
requirements of section 3(b)(2) of the Act
are satisfied. In particular, the Treasury
Department and the IRS contemplate that
the education and training described in
section 3(b)(2) of the Act, which requires
training to the Internal revenue field agents
and to Tribal financial officers about
implementation of section 139E, cannot
and will not take place until final regula-
tions are issued under section 139E. Thus,
once final regulations under section 139E
are issued, the Treasury Department and
the IRS, in consultation with the TTAC,
will conduct the required education and
training under section 3(b)(2) of the Act.
Only after that education and training is
complete will the audit suspension be
lifted. These proposed regulations do not
address the education and training that
will be required to be complete before the
audit suspension is lifted, but the Treasury
Department and the IRS will consult with
the TTAC on the requirements of section
3(b)(2) of the Act before the commence-
ment of the required education and train-
ing and will provide further guidance after
that consultation.
IX. Information Reporting
If section 139E applies to exclude the
value of a benefit from the Tribal program
participant’s gross income, then there is
no requirement to file with the IRS or fur-
nish to the Tribal program participant an
information return on Form 1099-MISC,
Miscellaneous Information, for that ben-
efit. Indian Tribal governments should
not include the amount of any benefit that
qualifies for exclusion under section 139E
on a Form 1099-MISC that is filed with the
IRS and furnished to the Tribal program
participant. Including such amounts on a
Form 1099-MISC when such amounts are
not required to be reported on the Tribal
program participant’s individual tax return
could result in IRS compliance activity,
such as inquiries from the IRS automated
underreporting (AUR) program.
X. Tribal Consultation
Some Tribal Comments request that the
Treasury Department and the IRS engage
in consultation with Tribes throughout
the development and implementation of
the regulations, and any additional guid-
ance. In addition, several of these Tribal
Comments request additional consultation
before the proposed regulations are pub-
lished in the Federal Register.
The Treasury Department and the IRS
agree with the Tribal Comments and expect
that consultation will continue throughout
the rulemaking process that will culminate
with the publication of final regulations
in the Federal Register. As noted in the
Background section of this preamble, the
Treasury Department and the IRS held con-
sultation on the Act and the TTAC Report
on December 14, 15, and 16, 2022, and
also received comments pursuant to that
consultation. These proposed regulations
reflect the input from the TTAC Report
and the comments received through con-
sultation. The Treasury Department and
the IRS also plan to hold consultation after

September 30, 2024 702 Bulletin No. 2024–40
these proposed regulations are issued and
will consider comments from that consul-
tation when drafting final regulations. This
consultation is in addition to the standard
notice and comment process for proposed
regulations, which will include the oppor-
tunity to participate in a public hearing
and to provide comments through https://
www.regulations.gov. Comments received
during these processes will be considered
and addressed in the final regulations.
Finally, the Treasury Department and the
IRS expect to continue discussions with the
GWE Subcommittee and the TTAC on all
aspects of section 139E.
Proposed Applicability Date
These regulations are proposed to
apply to taxable years of Tribal Program
Participants that begin on or after the date
of publication of the final regulations in
the Federal Register.
Comments and Public Hearing
Before these proposed amendments to
the regulations are adopted as final regu-
lations, consideration will be given to any
comments that are submitted timely to the
IRS as prescribed in the preamble under
the ADDRESSES section. The Treasury
Department and the IRS request com-
ments on all aspects of the proposed reg-
ulations. In addition, the Treasury Depart-
ment and the IRS request comments on
the following specific issues:
(1) Should additional examples be
included in the final regulations, and if so,
what specific fact patterns or rules should
be addressed by the additional examples?
(2) Should Revenue Procedure 2014-
35 be obsoleted when the final regulations
become applicable? If not, why is there a
continuing need for it after the publication
of final regulations?
(3) Do Indian Tribal governments
anticipate needing any transition relief to
adjust existing general welfare programs
to satisfy these proposed regulations
before they are finalized? If yes, please
explain the nature of the transition relief
needed and provide recommendations as
to what relief would be helpful to Indian
Tribal governments.
(4) Is additional guidance needed under
section 139E or other Code sections to
address the tax treatment of deferred ben-
efits or benefits paid from trust arrange-
ments, and, if so, what specific fact pat-
terns should be addressed?
Any comments submitted will be made
available at https://www.regulations.gov
or upon request. Once submitted to the
Federal eRulemaking Portal, comments
cannot be edited or withdrawn.
A public hearing will be held on Jan-
uary 13, 2025, beginning at 10 a.m. ET,
in the Auditorium at the Internal Revenue
Building, 1111 Constitution Avenue, NW.,
Washington, DC. Due to building security
procedures, visitors must enter at the Con-
stitution Avenue entrance. In addition, all
visitors must present photo identification
to enter the building. Because of access
restrictions, visitors will not be admit-
ted beyond the immediate entrance area
more than 30 minutes before the hearing
starts. Pursuant to Announcement 2023-
16, 2023-20 I.R.B. 854 (May 15, 2023),
the public hearing is scheduled to be con-
ducted in person, but the IRS will provide
a telephonic option for individuals who
wish to attend or testify at the hearing by
telephone.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish to
present oral comments at the hearing must
submit an outline of the topics to be dis-
cussed as well as the time to be devoted
to each topic by December 16, 2024. A
period of ten minutes will be allocated to
each person for making comments. After
the deadline for receiving outlines has
passed, the IRS will prepare an agenda
containing the schedule of speakers. Cop-
ies of the agenda will be made available
free of charge at the hearing. If no outlines
of the topics to be discussed at the hear-
ing are received by December 16, 2024,
the public hearing will be cancelled. If the
public hearing is cancelled, a notice of
cancellation of the public hearing will be
published in the Federal Register.
Individuals who want to testify in per-
son at the public hearing must send an
email to publichearings@irs.gov to have
your name added to the building access
list. The subject line of the email must
contain the regulation number REG-
106851-21 and the language TESTIFY In
Person. For example, the subject line may
say: “Request to TESTIFY In Person at
Hearing for REG-106851-21.”
Individuals who want to testify by
telephone at the public hearing must send
an email to publichearings@irs.gov to
receive the telephone number and access
code for the hearing. The subject line
of the email must contain the regulation
number REG-106851-21 and the language
TESTIFY Telephonically. For example,
the subject line may say: “Request to
TESTIFY Telephonically at Hearing for
REG-106851-21.”
Individuals who want to attend the
public hearing in person without testify-
ing must also send an email to publichear-
ings@irs.gov to have your name added to
the building access list. The subject line
of the email must contain the regulation
number (REG-106851-21) and the lan-
guage ATTEND In Person. For example,
the subject line may say: “Request to
ATTEND Hearing In Person for REG-
106851-21.” Requests to attend the public
hearing must be received by 5 p.m. ET on
January 9, 2025.
Individuals who want to attend the
public hearing telephonically without tes-
tifying must send an email to publichear-
ings@irs.gov to receive the telephone
number and access code for the hearing.
The subject line of the email must contain
the regulation number (REG-106851-21)
and the language ATTEND Hearing Tele-
phonically. For example, the subject line
may say: “Request to ATTEND Hearing
Telephonically for REG-106851-21.”
Requests to attend the public hearing must
be received by 5 p.m. ET on January 9,
2025.
The hearing will be made accessible to
people with disabilities. To request spe-
cial assistance during the hearing, contact
the Publications and Regulations Branch
of the Office of Associate Chief Counsel
(Procedure and Administration) by send-
ing an email to publichearings@irs.gov
(preferred) or by telephone at (202) 317-
6901 (not a toll-free number) at least Jan-
uary 8, 2025.
Special Analyses
I. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
Executive Order 13175 (Consultation
and Coordination With Indian Tribal Gov-

Bulletin No. 2024–40 703 September 30, 2024
ernments) prohibits an agency from pub-
lishing any rule that has Tribal implica-
tions if the rule either imposes substantial,
direct compliance costs on Indian Tribal
governments and is not required by stat-
ute, or preempts Tribal law, unless the
agency meets the consultation and fund-
ing requirements of section 5 of the Exec-
utive order. These proposed regulations
have a substantial direct effect on one or
more Federally-recognized Indian Tribes
and do impose substantial direct compli-
ance costs on Indian Tribal governments
within the meaning of the Executive
order. As a result, the Treasury Depart-
ment intends to comply with section 5(b)
(2)(A)-(B) of Executive Order 13175. In
compliance with section 5(b)(2)(A) of
Executive Order 13175 and in response to
Tribal leader requests for proposed regu-
lations, the Treasury Department and the
IRS held consultations with Tribal lead-
ers on December 14, 15, and 16, 2022,
requesting assistance in addressing ques-
tions related to the Act and the TTAC
Report, which informed the development
of these proposed regulations. The Trea-
sury Department and the IRS also intend
to conduct Tribal consultation on these
proposed regulations.
II. Regulatory Planning and Review
Pursuant to the Memorandum of Agree-
ment, Review of Treasury Regulations
under Executive Order 12866 (June 9,
2023), tax regulatory actions issued by the
IRS are not subject to the requirements of
section 6(b) of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
III. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) generally requires
that a Federal agency obtain the approval
of the Office of Management and Bud-
get (OMB) before collecting information
from the public, whether such collection
of information is mandatory, voluntary,
or required to obtain or retain a benefit.
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.
These proposed regulations would
include third-party disclosures and record-
keeping requirements that are required
to substantiate that the value of a Tribal
General Welfare Benefit is excluded from
a recipient’s gross income. These col-
lections of information would generally
be used by the IRS for tax compliance
purposes and by taxpayers to facilitate
proper substantiation of the gross income
exclusion. The likely respondents to these
collections are Indian Tribal governments
and individuals.
The recordkeeping requirements in
proposed §1.139E-1(c)(3) would provide
that Indian Tribal government programs
must be administered under specified
guidelines and would provide general
requirements on the content of those
guidelines. Under proposed §1.139E-
1(c)(3), the specified guidelines would
need to, at a minimum, describe the pro-
gram, the benefits provided, the eligibility
requirements of the program, and the pro-
cess for receiving benefits. Written spec-
ified guidelines would not be required.
However, Indian Tribal governments may
keep records of affidavits or declarations
of how the program operates. These pro-
posed regulations would not prescribe the
specific method of keeping these records.
Indian Tribal governments should keep
these records in the manner they deem
appropriate in order to substantiate that
the program qualifies as an Indian Tribal
government program under section 139E
and these proposed regulations, and to
assist Tribal program participants with
determining that a Tribal general wel-
fare benefit may be excluded from gross
income under section 139E and these pro-
posed regulations. Additionally, Indian
Tribal governments should keep records
they deem appropriate to substantiate
that the Tribal general welfare benefits
are distributed without discriminating in
favor of the governing body of the Tribe,
as described in proposed §1.139E-1(c)(4),
are not lavish or extravagant, as described
in proposed §1.139E-1(d)(4), and are not
compensation for services, as described
in proposed §1.139E-1(d)(5). This infor-
mation will generally be used by the IRS
for tax compliance purposes to ensure that
Indian Tribal governments are distributing
Tribal general welfare benefits in accor-
dance with proposed §1.139E-1.
The recordkeeping requirements in
proposed §1.139E-1(d)(4) would provide
that whether a benefit is lavish or extrav-
agant is based on the facts and circum-
stances at the time the benefit is provided.
Proposed §1.139E-1(d)(4) would provide
that a benefit will be presumed not to be
lavish or extravagant if the Indian Tribal
government establishes the program in
writing and provides the benefit in accor-
dance with the program’s written specified
guidelines. This presumption in proposed
§1.139E-1(d)(4) for a benefit provided in
accordance with the program’s written
specified guidelines would be an optional
rule and an Indian Tribal government may
choose not to apply such rule. This infor-
mation will generally be used by the IRS
for tax compliance purposes to ensure that
Indian Tribal governments are distributing
Tribal general welfare benefits in accor-
dance with proposed §1.139E-1(d)(4).
The third-party disclosure requirement
may apply to Indian Tribal governments
that choose to provide notification to Tribal
program participants that an Indian Tribal
government program exists for which
Tribal program participants may apply
for benefits. These proposed regulations
would not prescribe a specific method that
Indian Tribal governments must use to
announce the existence of a program. An
Indian Tribal government may announce
Indian Tribal government programs in any
manner it deems appropriate.
These proposed regulations would
not impose any additional recordkeeping
requirements on Tribal program partici-
pants. However, Tribal program partic-
ipants are required to maintain records
under section 6001 sufficient to show that
the value of a Tribal general welfare ben-
efit received from an Indian Tribal gov-
ernment program is excludible from gross
income. These records are required for the
IRS to validate that taxpayers have met
the regulatory requirements for a Tribal
general welfare benefit, and that taxpay-
ers are entitled to exclude the value of the
benefit from gross income. The burden
associated with maintaining tax records
is already approved under OMB number
1545-0074 that is used for Form 1040,
Individual Tax Return. These proposed
regulations would not create or change the
general recordkeeping requirement under
section 6001.

September 30, 2024 704 Bulletin No. 2024–40
There is limited data to calculate the
burden estimates for these proposed regu-
lations. The Treasury Department and the
IRS estimate the burden based on the list
of 574 Federally-recognized Tribes pub-
lished by the Department of Interior, and
estimate an upper bound of 2,296 Indian
Tribal governments, including their agen-
cies or instrumentalities. The estimate is
based on an upper bound assumption that
Indian Tribal government programs are
set up by each Indian Tribal government
of a Federally-recognized Tribe and by 3
separate agencies or instrumentalities of
each such Indian Tribal government. A
summary of the Paperwork Reduction Act
burden estimates for the collections are as
follows:
Indian Tribal governments (third-party
disclosure and recordkeeping burden for
Tribal entities):
Estimated Number of Respondents:
2,296
Estimated Time per Response: 2 hours
Estimated Frequency of Response:
Once or on occasion
Estimated Total Burden Hours: 4,592
hours
The collections of information con-
tained in this notice of proposed rulemak-
ing has been submitted to the Office of
Management and Budget for review in
accordance with the Paperwork Reduction
Act. Commenters are strongly encouraged
to submit public comments electronically.
Written comments and recommendations
for the proposed information collection
should be sent to www.reginfo.gov/public/
do/PRAMain, with copies to the Internal
Revenue Service. Find this particular infor-
mation collection by selecting “Currently
under Review - Open for Public Com-
ments” then by using the search function.
Submit electronic submissions for the pro-
posed information collection to the IRS
via email at pra.comments@irs.gov (indi-
cate REG-106851-21 on the subject line).
Comments on the collection of information
should be received by December 16, 2024.
Comments are specifically requested con-
cerning: Whether the proposed collection
of information is necessary for the proper
performance of the functions of the IRS,
including whether the information will
have practical utility; the accuracy of the
estimated burden associated with the pro-
posed collection of information; how the
quality, utility, and clarity of the informa-
tion to be collected may be enhanced; how
the burden of complying with the proposed
collection of information may be mini-
mized, including through the application
of automated collection techniques or other
forms of information technology; and esti-
mates of capital or start-up costs and costs
of operation, maintenance, and purchase of
services to provide information. The Paper-
work Reduction Act of 1995 (44 U.S.C.
3501-3520) (PRA) generally requires that
a Federal agency obtain the approval of
OMB before collecting information from
the public, whether such collection of infor-
mation is mandatory, voluntary, or required
to obtain or retain a benefit. An agency may
not conduct or sponsor, and a person is not
required to respond to, a collection of infor-
mation unless the collection of information
displays a valid control number.
IV. Regulatory Flexibility Act
The Secretary of the Treasury hereby
certifies that the proposed regulations
would not have a significant economic
impact on a substantial number of small
entities pursuant to the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6). These
proposed regulations would affect Indian
Tribal governments that establish and
administer Tribal general welfare pro-
grams and that distribute Tribal general
welfare benefits to certain individuals.
The Treasury Department and the IRS
have no reliable data to determine whether
Tribal general welfare programs may be
established and administered through
small entities, such as not-for-profit enti-
ties. Although data is not readily available
about the number of small entities that
would potentially be affected by these
proposed regulations, it is possible that a
substantial number of small entities may
be affected. However, any impact on those
entities would not be economically signif-
icant and therefore a regulatory flexibility
analysis under the Regulatory Flexibility
Act is not required.
The impact of these proposed regula-
tions can be described in the following
categories. First, proposed § 1.139E-1(c)
would provide guidance on what criteria
a program must meet in order to be an
“Indian Tribal Government Program.”
Specifically, proposed §1.139E-1(c)
would provide that the program must
be established by the Indian Tribal gov-
ernment; administered under specified
guidelines; and not discriminate in favor
of members of the governing body of the
Tribe. Even assuming that these provisions
would affect a substantial number of small
entities, they would not have a signifi-
cant economic impact. Section 139E(b)
imposes the burden of what is needed to
create an Indian Tribal government pro-
gram. These proposed regulations would
provide deference to Indian Tribal govern-
ments on the types of general welfare pro-
grams established, and generally defer to
Indian Tribal governments on the form of
the program’s specified guidelines and the
specific records they should maintain. As
such, it is expected that the proposed reg-
ulations would have a minimal economic
impact on Indian Tribal governments.
Second, proposed §1.139E-1(d) would
provide guidance on whether a benefit is
a “Tribal General Welfare Benefit” that
is excluded from an individual’s gross
income. Specifically, proposed §1.139E-
1(d) would require that the benefit be
provided pursuant to an Indian Tribal
government program; be for the promo-
tion of general welfare; be available to
any eligible Tribal program participant;
not be lavish or extravagant; and, except
as provided in section 139E(c)(5), not be
for compensation for services. Proposed
§1.139E-1(d) would provide deference to
Indian Tribal governments on the types of
benefits that promote the general welfare,
the individuals who are eligible for bene-
fits, and whether benefits are provided in
exchange for participation in certain cul-
tural or ceremonial activities under section
139E(c)(5) and these proposed regulations.
It would also provide that a benefit is pre-
sumed to not be lavish or extravagant if it
is described in, and provided in accordance
with, the written specified guidelines of
an Indian Tribal government program. As
such, it is expected that the proposed reg-
ulations would have a minimal economic
impact on Indian Tribal governments.
Third, proposed § 1.139E-1(e) would
permit an Indian Tribal government pro-
gram to provide to Tribal program par-
ticipant benefits that are items of cultural
significance, reimbursement of costs, or
cash honoraria for their participation in
certain cultural or ceremonial activities.

Bulletin No. 2024–40 705 September 30, 2024
Indian Tribal governments have broad dis-
cretion to determine whether or not these
benefits are provided. Even assuming that
this provision affects a substantial num-
ber of small entities, it would not have a
significant economic impact because ben-
efits that are items of cultural significance,
reimbursement of costs, and cash hono-
raria are only a few types of the benefits
that are permitted to be provided under
section 139E and proposed §1.139E-1. An
Indian Tribal government is not required
to provide these types of benefits.
For the reasons stated, a regulatory
flexibility analysis under the Regulatory
Flexibility Act is not required. The Trea-
sury Department and the IRS invite com-
ments on the impact of the proposed regu-
lations on small entities.
Pursuant to section 7805(f), this notice
of proposed rulemaking has been submit-
ted to the Chief Counsel for the Office of
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Indian Tribal government, in the
aggregate, or by the private sector, of $100
million (updated annually for inflation).
These proposed regulations do not include
any Federal mandate that may result in
expenditures by State, local, or Indian
Tribal governments, or by the private sec-
tor in excess of that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Execu-
tive Order. These proposed regulations do
not have federalism implications and do
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
Statement of Availability of IRS
Documents
Guidance cited in this preamble is pub-
lished in the Internal Revenue Bulletin
and is available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The principal authors of these pro-
posed regulations are Lisa Mojiri-Azad,
Jonathan Dunlap, and Dominic DiMat-
tia, Office of Associate Chief Counsel
(Income Tax & Accounting). However,
other personnel from the Treasury Depart-
ment and the IRS participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding an entry
for §§ 1.139E-1 and 1.139E-2 in numeri-
cal order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Sections 1.139E-1 and 1.139E-2 also
issued under 26 U.S.C. 139E.
* * * * *
Par. 2. Sections 1.139E-0 through
1.139E-2 are added to read as follows:
* * * * *
Sec.
1.139E-0 Table of contents.
1.139E-1 Tribal general welfare bene-
fits.
1.139E-2 [Reserved]
* * * * *
§1.139E-0 Table of contents.
This section lists the major captions for
§§1.139E-1 and 1.139E-2.
§1.139E-1 Tribal general welfare
benefits.
(a) Overview.
(b) Definitions.
(1) Act.
(2) Benefit.
(3) Code.
(4) Indian Tribal Government.
(5) Indian Tribal Government Program.
(6) Tribal General Welfare Benefit.
(7) Tribe.
(8) Tribal Program Participant.
(9) Tribal Member.
(10) Dependent.
(c) Indian Tribal Government Program.
(1) In general.
(2) Program must be established.
(3) Program must be administered
under specific guidelines.
(4) Program cannot discriminate in
favor of members of the governing body
of the Tribe.
(5) No limitation on source of funds.
(d) Tribal General Welfare Benefits.
(1) In general.
(2) Benefits must be for the promotion
of general welfare.
(3) Benefits must be available.
(4) Benefits cannot be lavish or extrav-
agant.
(5) Benefits cannot be compensation
for services.
(e) Cultural or ceremonial activities.
(1) In general.
(2) Application
(3) Examples.
(f) Audit suspension.
(g) Applicability date.
§1.139E-2 [Reserved]
§1.139E-1 Tribal general welfare
benefits.
(a) Overview. Under section 139E
of the Code and this section, the gross
income of a Tribal Program Participant

September 30, 2024 706 Bulletin No. 2024–40
for the taxable year does not include the
value of any Tribal General Welfare Ben-
efit provided by an Indian Tribal Govern-
ment Program during the year to or on
behalf of the Tribal Program Participant.
Paragraph (b) of this section provides
definitions that apply for purposes of this
section. Paragraph (c) of this section pro-
vides the requirements that any program
must satisfy to qualify as an Indian Tribal
Government Program for purposes of this
section. Paragraph (d) of this section pro-
vides the requirements that any benefit
provided to or on behalf of a Tribal Pro-
gram Participant must satisfy to qualify
as a Tribal General Welfare Benefit for
purposes of this section. Paragraph (e) of
this section provides special rules related
to cultural or ceremonial activities solely
for purposes of this section. Paragraph (f)
of this section describes the audit suspen-
sion provisions in section 4(a) of the Act.
Paragraph (g) of this section provides the
date of applicability of this section.
(b) Definitions. The following defini-
tions apply for purposes of this section—
(1) Act. The term Act means the Tribal
General Welfare Exclusion Act of 2014,
Public Law 113–168, 128 Stat. 1883
(2014).
(2) Benefit. The term benefit means any
money, property, services, or other item of
value provided to or on behalf of an indi-
vidual.
(3) Code. The term Code means the
Internal Revenue Code.
(4) Indian Tribal Government. The
term Indian Tribal Government means
an Indian Tribal Government as defined
by section 7701(a)(40) of the Code and
includes any agencies or instrumentalities
of such an Indian Tribal Government.
(5) Indian Tribal Government Pro-
gram. The term Indian Tribal Government
Program means a program that satisfies
the requirements of paragraph (c) of this
section.
(6) Tribal General Welfare Benefit.
The term Tribal General Welfare Ben-
efit means any benefit provided to or on
behalf of a Tribal Program Participant that
satisfies the requirements of paragraph (d)
of this section for exclusion from gross
income as an “Indian general welfare ben-
efit” under section 139E of the Code.
(7) Tribe. The term Tribe means any
Indian Tribe, band, nation, pueblo, or other
organized group or community, including
any Alaska Native village as defined in 43
U.S.C. 1602(c), that is recognized as eligi-
ble for the special programs and services
provided by the United States to Indians
because of their status as Indians.
(8) Tribal Program Participant--(i) In
general. The term Tribal Program Partic-
ipant means a Tribal Member, spouse of
a Tribal Member within the meaning of
§301.7701-18 of this chapter, spouse of
a Tribal Member under applicable Tribal
law, dependent of a Tribal Member, or
other individual who has been determined
by the Indian Tribal Government to be eli-
gible for a Tribal General Welfare Benefit
because such individual is, with respect
to a Tribal Member, an ancestor, descen-
dant, former spouse, widow or widower,
or legally recognized domestic partner or
former domestic partner.
(ii) Special rule for ceremonial or
cultural activities. Solely for purposes
of paragraph (e) of this section, the term
Tribal Program Participant may include
a member or citizen of a Tribe that is dif-
ferent from the Tribe that establishes or
maintains the Indian Tribal Government
Program that provides the Tribal General
Welfare Benefit.
(9) Tribal Member. The term Tribal
Member means an individual who is a
member or citizen of the Tribe that estab-
lishes or maintains the Indian Tribal Gov-
ernment Program because the individual
meets the requirements established by
applicable Tribal law for enrollment in the
Tribe, and:
(i) Is listed on the Tribal rolls of the
Tribe if such rolls are kept;
(ii) Is recognized as a member by the
Tribe if Tribal rolls are not kept; or
(iii) Is an Indian child as defined in 25
U.S.C. 1903.
(10) Dependent. The term dependent
means an individual who—
(i) Is a qualifying child, as defined in
section 152 of the Code, of a Tribal Mem-
ber for the taxable year;
(ii) Is a qualifying relative, as defined
in section 152, of a Tribal Member for the
taxable year;
(iii) Is a qualifying child or qualifying
relative of a Tribal Member described in
paragraph (b)(10)(i) or (ii) of this section
for the taxable year of the Tribal Mem-
ber beginning in a calendar year without
regard to whether the Tribal Member was
a qualifying child or qualifying relative,
each as defined in section 152, of another
taxpayer for a taxable year of the other
taxpayer beginning in that calendar year;
(iv) Is a qualifying child or qualifying
relative of a Tribal Member described in
paragraph (b)(10)(i) or (ii) of this section
for the taxable year of the Tribal Mem-
ber beginning in a calendar year without
regard to whether the individual filed a
joint return with the individual’s spouse
(as defined in section 6013 of the Code)
for the taxable year beginning in that cal-
endar year; or
(v) Is a qualifying relative of a Tribal
Member described in paragraph (b)(10)
(ii) of this section for the taxable year of
the Tribal Member beginning in a calen-
dar year without regard to the individu-
al’s gross income for the calendar year in
which the individual’s taxable year begins.
(c) Indian Tribal Government Pro-
gram--(1) In general. A program is an
Indian Tribal Government Program only
if the program:
(i) Is established by the Indian Tribal
Government, as described in paragraph (c)
(2) of this section;
(ii) Is administered under specified
guidelines, as described in paragraph (c)
(3) of this section; and
(iii) Does not discriminate in favor of
members of the governing body of the
Tribe, as described in paragraph (c)(4) of
this section.
(2) Program must be established--(i)
In general. A program must be estab-
lished by an Indian Tribal Government. A
program established by Tribal custom or
government practice, or by formal action
of the Indian Tribal Government, is a
program established by the Indian Tribal
Government. Formal action means autho-
rization of the program pursuant to appli-
cable Tribal law. The formal action must
be in writing to the extent such writing
is required under applicable Tribal law.
For example, written documentation that
evidences the formal action of the Indian
Tribal Government to establish the pro-
gram is required if such written documen-
tation is required under applicable Tribal
law. Similarly, no written documentation
of the formal action of the Indian Tribal
Government to establish the program is
required if, under applicable Tribal law,

Bulletin No. 2024–40 707 September 30, 2024
no written documentation of such action is
required. As an additional example, a pro-
gram may be established by a voice vote
if such voice vote would otherwise con-
stitute formal action of the Indian Tribal
Government under applicable Tribal law.
To the extent permitted under applicable
Tribal law, an Indian Tribal Government
may delegate the authority for establish-
ing a program to a designated individual
or entity of the Indian Tribal Government.
(ii) Examples. The requirements of
paragraph (c)(2) of this section are illus-
trated by the following examples:
(A) Example 1. A, a Tribe, operates under the
direction of its Indian Tribal Government (the Coun-
cil). According to the laws of A, all expenditures of A
must be approved by a majority of the Council at the
Council’s annual meeting or by written unanimous
consent if the action is taken without a meeting.
During the annual meeting of A’s Council, a majority
of the Council vote to approve establishing a pro-
gram. A’s Council has established the program under
paragraph (c)(2)(i) of this section.
(B) Example 2. Same facts as in paragraph (c)(2)
(ii)(A) of this section (Example 1), except that, based
on a recommendation from the Tribal Education
office, A’s Council determines to provide funding
for a scholarship program to pay 100% of education
related expenses for any Tribal Member who gradu-
ates from high school or receives a GED during the
calendar year. Because the next Council meeting is
scheduled in December 2024, and to avoid potential
impact on eligible students, in February 2024, Coun-
cil adopts by unanimous written consent the follow-
ing education program:
(1) Approving $X of funding for the 2024 year
for the scholarship program; and
(2) Authorizing the director of the Tribal Educa-
tion office to use the approved funds for the schol-
arship program. A’s Council has established the
education program under paragraph (c)(2)(i) of this
section.
(C) Example 3. Same facts as in paragraph (c)
(2)(ii)(B) of this section (Example 2) except that A’s
Council approves $X of annual funding to be pro-
vided for the education program, and delegates to
the Tribal Education office authority to establish a
scholarship program. A’s Council has established the
education program under paragraph (c)(2)(i) of this
section.
(3) Program must be administered
under specified guidelines. A program
must be administered under specified
guidelines. The specified guidelines must
include, at a minimum, a description of
the program to provide Tribal General
Welfare Benefits, the benefits provided
by the program (including how benefits
are determined), the eligibility require-
ments for the program, and the process
for receiving benefits under the program.
A program is administered under specified
guidelines if the program is operated in
accordance with such guidelines. Indian
Tribal Governments may choose to, but
are not required to, set forth the specified
guidelines of the program in writing.
(4) Program cannot discriminate in
favor of members of the governing body
of the Tribe--(i) In general. Except in the
case of a program described in paragraph
(c)(4)(ii) of this section, a program cannot
discriminate in favor of members of the
governing body of the Tribe. For the pur-
poses of this paragraph (c)(4), a governing
body means the legislative body of the
Tribe, such as the Tribal Council, or the
representative equivalent of the legislative
body of the Tribe.
(ii) General council Tribes. A program
is treated as being in compliance with this
paragraph (c)(4) if the governing body of
a Tribe consists of the entire adult mem-
bership of the Tribe.
(iii) Facts and circumstances test.
Except in the case of a program described
in paragraph (c)(4)(ii) of this section, a
program fails to satisfy the requirements
of this paragraph (c)(4) if based on all
the facts and circumstances the program
either by its terms or in its administration
discriminates in favor of members of the
governing body of the Tribe. Accordingly,
a program discriminates in favor of the
members of the governing body of the
Tribe if the program by its terms is avail-
able only to members of the governing
body. Additionally, the administration of
a program discriminates in favor of mem-
bers of the governing body of the Tribe if,
based on the facts and circumstances, the
benefits provided during the year dispro-
portionately favor members of the govern-
ing body. Thus, for example, a program
established to provide benefits solely to
the children of members of the govern-
ing body of the Tribe (unless the Tribe is
a general council Tribe) and thus defrays
costs otherwise borne by members of the
governing body fails to satisfy the require-
ments of this paragraph (c)(4).
(5) No limitation on source of funds—
(i) In general. Benefits under the Indian
Tribal Government Program may be
funded by any source of revenue or funds.
For example, an Indian Tribal Govern-
ment may use funds derived from levies,
taxes, and service fees; settlements; rev-
enues from tribally-owned businesses,
including casino revenues; funds from
Federal, State, or local governments; and
funds from other sources, including grants
and loans, to provide benefits under an
Indian Tribal Government Program.
(ii) Benefits funded by net gaming rev-
enues. Benefits under the Indian Tribal
Government Program may be funded by
net gaming revenues as permitted under
the Indian Gaming Regulatory Act, 25
U.S.C. 2701-2721 (IGRA). However,
per capita payments, as defined under
IGRA, are subject to Federal taxation
under IGRA and are not excludable from
gross income under section 139E or this
section. For purposes of section 139E and
this section, a payment is a per capita pay-
ment if it is identified by the Indian Tribal
Government as a per capita payment in a
Revenue Allocation Plan that is approved
by the Department of the Interior. See 25
U.S.C. 2710(b)(3) and 25 CFR 290.11.
(d) Tribal General Welfare Benefits--(1)
In general. A benefit does not qualify as a
Tribal General Welfare Benefit unless the
benefit is:
(i) Provided pursuant to an Indian
Tribal Government Program, as described
in paragraph (c) of this section;
(ii) Provided for the promotion of gen-
eral welfare, as described in paragraph (d)
(2) of this section;
(iii) Available to any eligible Tribal
Program Participant, as described in para-
graph (d)(3) of this section;
(iv) Not lavish or extravagant, as
described in paragraph (d)(4) of this sec-
tion; and
(v) Not compensation for services, as
described in paragraph (d)(5) of this sec-
tion.
(2) Benefits must be for the promotion
of general welfare--(i) In general. Tribal
General Welfare Benefits must be for the
promotion of general welfare. For pur-
poses of section 139E and this paragraph
(d)(2), the Indian Tribal Government
determines that a benefit is for the promo-
tion of general welfare at the time it estab-
lishes the Tribal General Welfare Program
meeting the requirements of paragraph
(c) of this section. An Indian Tribal Gov-
ernment has sole discretion to determine
whether a benefit is for the promotion of
general welfare and the Internal Revenue
Service will defer to the Indian Tribal
Government’s determination that a bene-

September 30, 2024 708 Bulletin No. 2024–40
fit is for the promotion of general welfare.
Benefits may be provided without regard
to the financial or other need of Tribal Pro-
gram Participants and may be provided
on a uniform or pro-rata basis to Tribal
Program Participants. Thus, for example,
an Indian Tribal Government determines
whether benefits are for the promotion
of general welfare under programs such
as cultural programs, housing assistance
programs, programs to provide education
benefits, programs for training or retrain-
ing to acquire new skills or to obtain better
employment opportunities, programs to
provide assistance for disasters or emer-
gency situations, funeral or burial assis-
tance programs, legal aid programs, well-
ness and health-related programs, or any
programs that provide benefits to specific
categories of individuals, such as elderly
individuals or minors.
(ii) Examples. The requirements of
paragraph (d)(2)(i) of this section are
illustrated by the following examples. For
the examples in this paragraph (d)(2)(ii),
assume the Indian Tribal Government has
determined that the benefits provided are
for the promotion of general welfare.
(A) Example 1: Housing programs. Indian Tribal
Government A administers a program, B, pursuant to
which the following benefits are provided in connec-
tion with A’s Tribal Members’ principal residences
and ancillary structures which are not used in any
trade or business: payments for Tribal Members to
use to make mortgage payments, down payments, and
rent payments (including but not limited to security
deposits); payments for Tribal Members to enhance
habitability of housing, such as by remedying water,
sewage, sanitation service, safety (including but not
limited to mold remediation), and heating or cool-
ing issues; payments for Tribal Members to provide
for basic housing repairs or rehabilitation (including
but not limited to roof repair and replacement); and
payments to Tribal Members to pay utility bills and
charges (including but not limited to water, electric-
ity, gas, and basic communications services such as
phone, internet, and cable). The payments made by A
under B are for the promotion of general welfare as
described in paragraph (d)(2)(i) of this section.
(B) Example 2: Educational programs. Indian
Tribal Government C administers a program, D, pur-
suant to which the following benefits are provided:
provision to students (including but not limited to
post-secondary students) of transportation to and
from school, tutors, and supplies (including but not
limited to clothing, backpacks, laptop computers,
musical instruments, and sports equipment) for use
in school activities and extracurricular activities;
tuition payments for students (including but not
limited to allowances for room and board on or off
campus for the student, spouse, domestic partner,
and dependents) to attend preschool, school, col-
lege or university, online school, educational sem-
inars, vocational education, technical education,
adult education, continuing education, or alternative
education; provision of care of children away from
their homes to help their parents or other relatives
responsible for their care to be gainfully employed
or to pursue education; and provision of job counsel-
ing and programs for which the primary objective is
job placement or training, including but not limited
to allowances for expenses for interviewing or train-
ing away from home (including but not limited to
travel, auto expenses, lodging, and food), tutoring,
and appropriate clothing for a job interview or train-
ing (including but not limited to an interview suite or
a uniform required during a period of training). The
payments made by C under D are for the promotion
of general welfare as described in paragraph (d)(2)
(i) of this section.
(C) Example 3: Elder and disabled programs.
Indian Tribal Government E administers a program,
F, pursuant to which the following benefits are pro-
vided to Tribal Members who have attained age 55
or are mentally or physically disabled (as defined
under applicable law, including but not limited to an
Indian Tribal Government’s disability laws): meals
through home-delivered meals programs or at a com-
munity center or similar facility; home care such as
assistance with preparing meals or doing chores, or
day care outside the home; local transportation assis-
tance; and improvements to adapt housing to special
needs (including but not limited to grab bars and
ramps). The payments made by E under F are for the
promotion of general welfare as described in para-
graph (d)(2)(i) of this section.
(D) Example 4: Transportation programs. Indian
Tribal Government G administers a program, H,
pursuant to which the following benefits are pro-
vided: payment of transportation costs such as rental
cars, substantiated mileage, and fares for bus, taxi,
and public transportation between an Indian reser-
vation (as defined in section 168(j)), service area
(as defined in 25 CFR 20.100), or service unit area
(meaning an area designated for purposes of admin-
istration of Indian Health Service programs under 42
CFR 136.21(1)) and facilities that provide essential
services to the public (such as medical facilities and
grocery stores). The payments made by G under H
are for the promotion of general welfare as described
in paragraph (d)(2)(i) of this section.
(E) Example 5: Medical programs. Indian Tribal
Government J administers a program, K, pursuant to
which the following benefits are provided: payments
for the cost of transportation, temporary meals,
and lodging of a Tribal Program Participant while
the individual is receiving medical care away from
home, or to pay the cost of nonprescription drugs
(including but not limited to traditional Tribal medi-
cines). The payments made by J under K are for the
promotion of general welfare as described in para-
graph (d)(2)(i) of this section.
(F) Example 6: Emergency programs. Indian
Tribal Government L administers a program, M, pur-
suant to which the following benefits are provided:
assistance to individuals in exigent circumstances
(including but not limited to victims of abuse),
including but not limited to the costs of food, cloth-
ing, shelter, transportation, auto repair bills, and
similar expenses; payment of costs for temporary
relocation and shelter for individuals involuntarily
displaced from their homes (including but not lim-
ited to situations in which a home is destroyed by
a fire or natural disaster); and assistance for trans-
portation emergencies (for example, when stranded
away from home) in the form of transportation costs,
a hotel room, and meals. The payments made by L
under M are for the promotion of general welfare as
described in paragraph (d)(2)(i) of this section.
(G) Example 7: Cultural and religious pro-
grams. Indian Tribal Government N administers a
program, P, pursuant to which the following benefits
are provided: payment of expenses (including but
not limited to admission fees, transportation, food,
and lodging) to attend or participate in a Tribe’s cul-
tural, social, religious, or community activities, such
as powwows, ceremonies, and traditional dances;
payment of expenses (including but not limited to
admission fees, transportation, food, and lodging) to
visit sites that are culturally or historically signifi-
cant for the Tribe, including but not limited to other
Indian reservations (as defined in section 168(j));
payment of the costs of receiving instruction about
a Tribe’s culture, history, and traditions (including
but not limited to traditional language, music, and
dances); payment of funeral and burial expenses and
expenses of hosting or attending wakes, funerals,
burials, other bereavement events, and subsequent
honoring events; and payment of transportation costs
and admission fees to attend educational, social, or
cultural programs offered or supported by the Tribe
or another Tribe. The payments made by N under P
are for the promotion of general welfare as described
in paragraph (d)(2)(i) of this section.
(3) Benefits must be available. The
benefits provided under an Indian Tribal
Government Program must be available to
any Tribal Program Participant who meets
the specified guidelines of the program
required under paragraph (c)(3) of this
section, subject to budgetary constraints.
However, the Indian Tribal Government
has discretion to determine the category of
individuals who are Tribal Program Par-
ticipants under the Indian Tribal Govern-
ment Program, provided that such deter-
mination is consistent with the specified
guidelines described in paragraph (c)(3)
of this section and subject to the prohibi-
tion on discrimination under paragraph (c)
(4) of this section. Thus, for example, an
Indian Tribal Government is permitted to
limit eligibility for an Indian Tribal Gov-
ernment Program to dependents of Tribal
Members who have attained a specified
age, or, as another example, to a Tribal
Member’s household.
(4) Benefits cannot be lavish or extrav-
agant. The benefit provided by an Indian
Tribal Government Program cannot be
lavish or extravagant. Whether a benefit
is lavish or extravagant for purposes of
this section is based on the facts and cir-

Bulletin No. 2024–40 709 September 30, 2024
cumstances at the time the benefit is pro-
vided. Relevant facts and circumstances
include a Tribe’s culture and cultural prac-
tices, history, geographic area, traditions,
resources, and economic conditions or
factors. A benefit will be presumed to not
be lavish or extravagant if it is described
in, and provided in accordance with, the
written specified guidelines of an Indian
Tribal Government Program.
(5) Benefits cannot be compensation
for services. Except as provided in para-
graph (e) of this section, a Tribal General
Welfare Benefit does not include benefits
that are provided as compensation for ser-
vices to any person. Under section 61(a)
of the Code, compensation for services
includes fees, commissions, fringe ben-
efits, and similar items, whether paid in
money or property.
(e) Cultural or ceremonial activi-
ties--(1) In general. For purposes of sec-
tion 139E and paragraph (d)(5) of this
section, a benefit is not compensation for
services if:
(i) The benefit is provided to a Tribal
Program Participant for their participation
in cultural or ceremonial activities for the
transmission of Tribal culture as deter-
mined by the Indian Tribal Government
(including, but not limited to, powwows,
rite of passage ceremonies, funerals,
wakes, burials, other bereavement events,
and honoring events); and
(ii) The benefit consists of an item of
cultural significance as determined by the
Indian Tribal Government, the reimburse-
ment of costs, or a cash honorarium.
(2) Application. Except as otherwise
provided in this paragraph (e)(2), an Indian
Tribal Government has sole discretion to
determine whether an item is an item of
cultural significance and whether an activ-
ity is a cultural or ceremonial activity, and
the Internal Revenue Service will defer to
these determinations by the Indian Tribal
Government. However, cash, gift cards, or
vehicles are generally not items of cultural
significance.
(3) Examples. The application of this
paragraph (e) is illustrated by the follow-
ing examples:
(i) Example 1: Benefits for cultural or ceremo-
nial activities not compensation for services. Tribe
B regularly holds a gathering during the fall season
to celebrate its cultural traditions. During the gather-
ing, Tribal Members of B, as well as Tribal members
of other Tribes from around the region, are invited
to participate. The Indian Tribal Government of B
(ITG-B) allocates funds for the gathering, some of
which are used for the following payments:
(A) Tribal Member of B. Individual 1, a Tribal
Member of B, provides traditional blessings on the
first and final days of the gathering. ITG-B gives
Individual 1 a cash honorarium in recognition of
providing the blessings. The cash honorarium that
Individual 1 receives from ITG-B is not compensa-
tion for services under this paragraph (e).
(B) Tribal Member of different Tribe. Individ-
ual 2, a Tribal Member of Tribe C, participates as a
drummer for a ceremonial dance on the second day
of the gathering. ITG-B gives Individual 2 a piece of
culturally significant jewelry. Under paragraph (a)(7)
(ii) of this section, Individual 2 is a Tribal Program
Participant solely for purposes of this paragraph (e).
The jewelry that Individual 2 receives from ITG-B is
not compensation for services under this paragraph
(e).
(ii) Example 2: Benefits for cultural or ceremo-
nial activities not compensation for services. Tribe
C operates a language preservation center in which
Individual 3, a Tribal Member of C, who speaks the
traditional language that is common to C and other
regional Tribes, volunteers to come in every Sat-
urday to discuss and teach the traditional language
of C to other Tribal Members of C. The Indian
Tribal Government of C (ITG-C), reimburses Indi-
vidual 3 for travel expenses and teaching supplies
used in Individual 3’s language lessons. The reim-
bursement of costs that Individual 3 receives from
ITG-C is not compensation for services under this
paragraph (e).
(f) Audit suspension. After [date of
publication of the final regulations in the
Federal Register], the Department of the
Treasury and the Internal Revenue Service
(IRS) will, in consultation with the Trea-
sury Tribal Advisory Committee, establish
and require the education and training pre-
scribed in section 3(b)(2) of the Act. The
temporary suspension of audits and exam-
inations described in section 4(a) of the
Act will not be lifted until the education
and training prescribed by section 3(b)(2)
of the Act is completed.
(g) Applicability date. This section
applies to taxable years of Tribal Program
Participants that begin on or after [date of
publication of the final regulations in the
Federal Register].
§1.139E-2 [Reserved]
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register Septem-
ber 13, 2024, 8:45 a.m., and published in the issue
of the Federal Register for September 17, 2024, 89
FR 75990)
Notice of Proposed
Rulemaking
Definition of the Term
“Coverage Month” for
Computing the Premium
Tax Credit
REG-116787-23
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing and public hearing.
SUMMARY: This document contains
proposed regulations that would amend
the definition of “coverage month” and
amend certain other rules in existing
income tax regulations regarding the
computation of an individual taxpayer’s
premium tax credit (PTC). The proposed
coverage month amendment generally
would provide that, in computing a PTC,
a month may be a coverage month for an
individual if the amount of the premium
paid, including by advance payments of
the PTC (APTC), for the month for the
individual’s coverage is sufficient to avoid
termination of the individual’s coverage
for that month. The proposal also would
amend the existing regulations relating to
the amount of enrollment premiums used
in computing the taxpayer’s monthly PTC
if a portion of the monthly enrollment
premium for a coverage month is unpaid.
Finally, the proposed regulations would
clarify when an individual is considered to
be ineligible for coverage under a State’s
Basic Health Program (BHP). The pro-
posed regulations would affect taxpayers
who enroll themselves, or enroll a family
member, in individual health insurance
coverage through a Health Insurance
Exchange (Exchange) and may be allowed
a PTC for the coverage. This document
also provides a notice of a public hearing
on these proposed regulations.
DATES: Electronic or written comments
must be received by November 1, 2024.
A public hearing on this proposed regula-
tion has been scheduled for December 13,

September 30, 2024 710 Bulletin No. 2024–40
2024, at 10:00 a.m. ET. Requests to speak
and outlines of topics to be discussed at
the public hearing must be received by
November 1, 2024. If no outlines are
received by November 1, 2024, the public
hearing will be cancelled.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submis-
sions via the Federal eRulemaking Portal
at https://www.regulations.gov (indicate
IRS and REG-116787-23) by following
the online instructions for submitting
comments. Once submitted to the Federal
eRulemaking Portal, comments cannot be
edited or withdrawn. The Department of
the Treasury (Treasury Department) and
the IRS will publish for public availability
any comments to the IRS’s public docket.
Send paper submissions to: CC:PA:01:PR
(REG-116787-23), Room 5203, Inter-
nal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, D.C.
20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Clara Raymond at (202) 317-
4718; concerning submission of com-
ments or outlines, or requests for a public
hearing, Vivian Hayes at (202) 317-6901
(not toll-free numbers) or publichear-
ings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Authority
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) under section 36B
of the Internal Revenue Code (Code).
Section 36B(h) provides an express del-
egation of authority for the Secretary of
the Treasury or her delegate to prescribe
regulations as may be necessary to carry
out section 36B, including regulations that
provide for the coordination of the credit
allowed under 36B with the program for
advance payment of the credit under sec-
tion 1412 of the Affordable Care Act.
1
The
proposed regulations are also issued under
the express delegation of authority under
section 7805 of the Code.
Background
I. Definition of “Coverage Month” and
Computation of PTC
Section 36B provides a PTC for appli-
cable taxpayers who meet certain eli-
gibility requirements, including that a
member of the taxpayer’s family enrolls
in a qualified health plan (QHP) through
an Exchange for one or more “coverage
months.”
Section 1.36B-3(c)(1) provides that a
month is a coverage month for an individ-
ual if (i) as of the first day of the month,
the individual is enrolled in a QHP through
an Exchange; (ii) the taxpayer pays the
taxpayer’s share of the premium for the
individual’s coverage under the plan for
the month by the unextended due date for
filing the taxpayer’s income tax return for
that taxable year, or the full premium for
the month is paid by APTC; and (iii) the
individual is not eligible for the full calen-
dar month for minimum essential cover-
age (within the meaning of §1.36B-2(c))
other than coverage described in section
5000A(f)(1)(C) of the Code (relating to
coverage in the individual market).
Section 1.36B-3(d)(1) provides that the
PTC (also called the premium assistance
amount) for a coverage month is the lesser
of (i) the premiums for the month, reduced
by any amounts that were refunded, for
one or more QHPs in which a taxpayer or
a member of the taxpayer’s family enrolls
(enrollment premiums); or (ii) the excess
of the adjusted monthly premium for the
applicable benchmark plan over 1/12 of
the product of a taxpayer’s household
income and the applicable percentage
for the taxable year. Family is defined in
§1.36B-1(d), and the applicable percent-
age is defined in §1.36B-3(g).
Section 36B(f)(3) and §1.36B-5 require
Exchanges to report to QHP enrollees and
the IRS certain information, including
monthly enrollment premiums, needed to
compute the PTC allowed for the enrollee.
This information is reported to enroll-
ees on IRS Form 1095-A, Health Insur-
ance Marketplace Statement. The Cen-
ters for Medicare & Medicaid Services
(CMS), part of the Department of Health
and Human Services (HHS), is respon-
sible for the Form 1095-A reporting for
Exchanges that use the Federal eligibility
and enrollment platform (Federally-fa-
cilitated Exchanges, or FFEs, and State-
based Exchanges on the Federal platform,
or SBE-FPs). State Exchanges with their
own platforms (State Exchanges) are
responsible for the Form 1095-A reporting
for individuals who enroll in their State
Exchange.
HHS regulations at 45 CFR 156.270(d)
implement section 1412(c)(2)(B)(iv)(II)
of the Affordable Care Act to require issu-
ers of QHPs to allow a “grace period”
for enrollees for whom APTC is paid
but who fail to timely pay their share of
the premium for the coverage. In gen-
eral, a QHP issuer must provide a grace
period of 3 consecutive months for such
an enrollee before the issuer may termi-
nate the enrollee’s coverage. During the
first month of the grace period, the QHP
issuer must pay all appropriate claims for
services rendered, and, during the second
and third months of the grace period, the
QHP issuer may pend claims.
HHS regulations at 45 CFR 155.400(g)
allow issuers to implement a premium
payment threshold policy under which
issuers can consider enrollees to have paid
all amounts due if the enrollees pay an
amount sufficient to maintain a percent-
age of total premium paid out of the total
premium owed equal to or greater than a
level prescribed by the issuer, provided
that the level and the policy are applied
in a uniform manner to all enrollees. If
an enrollee satisfies these conditions, the
issuer may provide coverage even though
the full enrollment premium is not paid.
In certain States, issuers also may pro-
vide coverage without payment of the full
enrollment premium if a State department
of insurance prohibits an issuer from ter-
minating QHP coverage during a declared
emergency.
For a month for which a taxpayer’s
share of the enrollment premium is not
1
The Affordable Care Act (or ACA) refers to the Patient Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010), as amended by the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March 30, 2010).

Bulletin No. 2024–40 711 September 30, 2024
paid in full, the current instructions for
Form 1095-A require Exchanges to report
$0 on Form 1095-A as the enrollment
premium for that month, which signals
to the taxpayer and the IRS that no PTC
is allowed for that month (non-payment
month) because a month in which the pre-
mium is not paid in full is not a coverage
month. Thus, if an individual is enrolled
in a QHP with APTC for a month but does
not pay the full amount of the monthly
premium as permitted under 45 CFR
156.270(d), 45 CFR 155.400(g), or appli-
cable State law, $0 should be reported as
the enrollment premium for the month,
and a PTC is not allowed for that month
for the coverage.
CMS has informed the Treasury Depart-
ment and the IRS that, because CMS is not
the entity that collects premium payments
from an enrollee, implementing the sec-
tion 36B definition of coverage month is
challenging for CMS in situations in which
the taxpayer’s share of the premium is not
paid in full but the taxpayer (or the tax-
payer’s enrollee) nevertheless may remain
enrolled in a QHP with APTC, if applica-
ble, under 45 CFR 156.270(d), 45 CFR
155.400(g), or applicable State law. An
audit by the HHS Office of Inspector Gen-
eral
2
found that CMS currently reports to
FFE and SBE-FP enrollees and the IRS on
Form 1095-A the full enrollment premium
for the first month of a grace period, not-
withstanding that the taxpayer’s share of
the full premium for that month may never
have been paid. Similarly, CMS currently
reports to FFE and SBE-FP enrollees and
the IRS on Form 1095-A the full enroll-
ment premium (1) for months for which
an issuer provides coverage to enrollees
who satisfy the premium payment thresh-
old, and (2) for months for which an issuer
has been ordered by a State department of
insurance, during a declared emergency,
not to terminate an enrollee’s coverage for
the month even though the full premium
has not been paid. Consequently, for
these two scenarios as well as the grace
period scenario, FFEs and SBE-FPs treat
a month as a coverage month for which
APTC is allowed, and the IRS would not
have information to disallow a PTC for
the month because the full enrollment pre-
mium is reported for the month.
In contrast, some State Exchanges have
been reporting $0 as the enrollment pre-
mium for the first month of a grace period
and for certain other months for which
coverage was provided without the tax-
payer’s share of the full premium being
paid. Consequently, taxpayers in these
State Exchanges generally are unable to
claim a PTC for those months.
II. Determination of Ineligibility for a
State’s BHP
As noted in section I of this Background,
§1.36B-3(c)(1) provides that a month is a
coverage month for an individual only if,
among other requirements, the individual
is not eligible for the full calendar month
for minimum essential coverage (within
the meaning of §1.36B-2(c)) other than
coverage described in section 5000A(f)
(1)(C) of the Code (relating to coverage
in the individual market). Under section
5000A(f)(1)(A) and §1.5000A-2, the term
“minimum essential coverage” includes
coverage under government-sponsored
programs such as Medicaid, Children’s
Health Insurance Program (CHIP), and a
State’s BHP.
3
Section 1.36B-2(c)(2)(i) provides that,
for purposes of determining whether a
given month is a coverage month for an
individual, an individual generally is
considered eligible for government-spon-
sored minimum essential coverage if the
individual meets the criteria for coverage
under a government-sponsored program
described in section 5000A(f)(1)(A) as
of the first day of the first full month the
individual may receive benefits under the
program.
Section 1.36B-2(c)(2)(v) provides that
an individual is treated as not eligible for
Medicaid, CHIP, or a similar program for a
period of coverage under a QHP if, when the
individual enrolls in the QHP, an Exchange
determines or considers (within the mean-
ing of 45 CFR 155.302(b)) the individual to
be not eligible for Medicaid or CHIP.
Under 42 U.S.C. 18051 and the imple-
menting regulations at 42 CFR part 600,
a State is allowed to establish a BHP for
eligible individuals. Section 18051(e) pro-
vides that a resident of a State cannot be
an eligible individual unless the individ-
ual is not eligible to enroll in the State’s
Medicaid program under title XIX of the
Social Security Act for benefits that at a
minimum consist of the essential health
benefits described in 42 U.S.C. 18022(b).
The Treasury Department and the
IRS have become aware that the rule in
§1.36B-2(c)(2)(v) relating to an individ-
ual being considered ineligible for cover-
age under a Medicaid, CHIP, or a similar
program, is ambiguous as it applies to a
State’s BHP and should be clarified.
Explanation of Provisions
I. Change to the Definition of “Coverage
Month” and Conforming Amendments to
PTC Computation
As explained in the Background section of
this preamble, a PTC generally is allowed
for a taxpayer for months that are cov-
erage months for the taxpayer and other
individuals in the taxpayer’s family. Fur-
ther, under §1.36B-3(c)(1)(ii), a month is
not a coverage month for an individual
unless the taxpayer pays the taxpayer’s
full share of the premium for the individu-
al’s coverage under the plan for the month
by the unextended due date for filing
the taxpayer’s income tax return for that
taxable year, or the full premium for the
month is paid by APTC.
Under HHS regulations at 45 CFR
156.270(d), issuers must provide cover-
age to enrollees for whom APTC is paid
in the first month of a grace period, even if
the enrollee’s share of the premium for the
coverage is unpaid. Thus, in that situation,
the amount of the total premium paid by
APTC is sufficient to allow for enrollees
to remain covered. In addition, as noted
in the Background section, Exchanges are
not consistent in the manner they report
enrollment premiums for the first month
of a grace period, with some reporting the
2
CMS AUTHORIZED HUNDREDS OF MILLIONS OF DOLLARS IN ADVANCED PREMIUM TAX CREDITS ON BEHALF OF ENROLLEES WHO DID NOT MAKE THEIR
REQUIRED PREMIUM PAYMENTS (A-02-19-02005), OIG, March 2021, accessed at https://oig.hhs.gov/oas/reports/region2/21902005.pdf.
3
Under the authority in section 5000A(f)(1)(A) and §1.5000A-2(f)(1)(E), coverage through a BHP standard health plan has been recognized as minimum essential coverage. See 42 CFR
600.5.

September 30, 2024 712 Bulletin No. 2024–40
full premium for the month and others
reporting $0. This inconsistent reporting
may lead to disparate treatment among
taxpayers, with some being allowed to
claim a PTC for the first month of a grace
period and others being denied PTC for
such a month. The Treasury Department
and the IRS are of the view that amending
the coverage month rule would promote
reporting consistency and thus would
achieve more consistent treatment among
taxpayers. Moreover, because HHS regu-
lations require issuers to provide coverage
for the first month of a grace period to
enrollees for whom APTC is paid for that
month, it is reasonable to provide consis-
tent treatment for tax purposes. Thus, the
proposed regulations would treat the first
month of a grace period as a coverage
month for PTC purposes if the other cov-
erage month requirements in §1.36B-3(c)
are satisfied. These proposed regulations
are consistent with the express delegation
of authority in section 36B(h)(1) to pro-
vide regulations that provide for coordina-
tion of the section 36B credit allowed with
the APTC program.
In addition to addressing the first month
of a grace period, the proposed regula-
tions would address two other scenarios
in which an issuer provides coverage even
though the full enrollment premium is not
paid as permitted under applicable law.
In the first scenario, some issuers provide
coverage for a month as long as at least a
certain portion of the enrollee’s premium
for the month is paid, as permitted under
CMS’s premium payment threshold pol-
icy. The Treasury Department and the IRS
are of the view that a month for which
coverage is provided because a premium
payment threshold is met should not fail
to be a coverage month solely because
the full premium has not been paid. Oth-
erwise, a taxpayer could have monthly
PTC disallowed due to a relatively small
amount of unpaid premium, resulting in a
tax liability that far exceeds the amount of
the unpaid premium, for a month in which
the amount paid for the coverage met the
threshold for the provision of coverage
permitted by HHS.
The second scenario involves a State
department of insurance prohibiting an
issuer from terminating QHP coverage
during a declared emergency. In this sce-
nario, if the issuer provides coverage for a
month even though the enrollee’s portion
of the premium has not been fully paid,
the Treasury Department and the IRS are
of the view that the month should not fail
to be a coverage month solely because
the full premium has not been paid. This
month should be treated as a coverage
month because the portion, if any, of the
premium that was paid is sufficient to
provide coverage to the enrollees during
an emergency situation under applicable
State law.
Consequently, pursuant to the express
delegations of authority in sections 36B(h)
and 7805, the proposed regulations would
provide that, under these three scenarios, a
month may be a coverage month for a tax-
payer irrespective of whether the full pre-
mium for the month is paid by the unex-
tended due date of the taxpayer’s return
for the year of coverage. The Treasury
Department and the IRS request com-
ments on whether there are other scenar-
ios in which an issuer does not terminate
coverage for a month for which the full
premium has not been paid and whether
such a month should be treated as a cov-
erage month.
The proposed amendment to the defini-
tion of “coverage month” in §1.36B-3(c)
(1) would require a conforming change
to the calculation of the monthly PTC
amount under §1.36B-3(d)(1)(i), which
provides, in effect, that monthly PTC
for a coverage month cannot exceed the
premiums for the month, reduced by any
amounts that were refunded in the same
taxable year as the premium liability. If
a month in which a portion of the enroll-
ment premiums is unpaid is a coverage
month, the premium used to compute the
PTC for the month should not include the
unpaid portion. Otherwise, a taxpayer
could receive a monthly PTC for coverage
that exceeds the amount of the premium
paid for the coverage, which would result
in an undue windfall to the taxpayer. In
addition, as noted previously, existing
regulations require, in computing monthly
PTC, enrollment premiums to be reduced
by amounts refunded in the year of cover-
age. Consistent with the existing rule for
computing monthly PTC, the premiums
used for computing monthly PTC under
the proposed rule also should be reduced
by unpaid amounts. Thus, pursuant to the
express delegations of authority in sec-
tions 36B(h) and 7805, the proposed reg-
ulations would provide that the premium
for a month to be considered in determin-
ing PTC for an individual’s coverage must
be reduced by amounts refunded in the
same taxable year as the premium liabil-
ity is incurred and by any portion of the
premium that is unpaid as of the unex-
tended due date for filing the taxpayer’s
income tax return for the taxable year
that includes the month. Taxpayers would
be instructed to comply with this rule by
reducing their enrollment premiums on
Form 8962, Premium Tax Credit (PTC),
for a coverage month by any amount that
remains unpaid as of the unextended due
date of their return.
II. Determination of Ineligibility for
Medicaid, CHIP, or a Similar Program
As discussed in the Background sec-
tion of this preamble, §1.36B-2(c)(2)
(v) provides that an individual is treated
as not eligible for Medicaid, CHIP, or
a similar program for a period of cov-
erage under a QHP if, when the indi-
vidual enrolls in the QHP, an Exchange
determines or assesses the individual to
be not eligible for Medicaid or CHIP.
The first part of the sentence references
“Medicaid, CHIP or similar program,”
which includes a State’s BHP. See 81 FR
91755, 91756. However, the second part
of the sentence references only Medicaid
or CHIP determinations under 45 CFR
155.302(b) and says nothing about deter-
minations of eligibility under similar
programs such as State BHPs. The unin-
tended consequence of this language is
that an individual who meets the criteria
for coverage under a State BHP could be
considered ineligible for the BHP cover-
age if the Exchange determines that the
individual is ineligible for Medicaid or
CHIP. Based on the Exchange determina-
tion of ineligibility for Medicaid or CHIP,
the individual could enroll in a QHP and
be allowed a PTC for the QHP coverage.
Consequently, pursuant to the express
delegations of authority in sections
36B(h) and 7805, the proposed regula-
tions would clarify that an individual
is treated as not eligible for Medicaid,
CHIP, or a similar program such as a
State BHP, for a period of coverage under
a QHP if, when the individual enrolls in

Bulletin No. 2024–40 713 September 30, 2024
the QHP, an Exchange conducts an eli-
gibility determination or, if applicable,
eligibility assessment (within the mean-
ing of 45 CFR 155.302(b)) for Medicaid,
CHIP, or a similar program and deter-
mines or assesses the individual to be not
eligible for coverage under the program.
Thus, under the proposed revision, an
individual’s determination of ineligibility
for Medicaid or CHIP would not affect
whether the individual is treated as inel-
igible for BHP coverage for purposes of
determining whether a PTC is allowed.
III. Severability
If any provision in this rulemaking
is held to be invalid or unenforceable
facially, or as applied to any person or
circumstance, it shall be severable from
the remainder of this rulemaking, and
shall not affect the remainder thereof, or
the application of the provision to other
persons not similarly situated or to other
dissimilar circumstances.
Statement of Availability of IRS
Documents
Guidance cited in this preamble is pub-
lished in the Internal Revenue Bulletin
and is available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Proposed Applicability Dates
The proposed regulations under
§§1.36B-2 and 1.36B-3 are proposed to
apply for taxable years beginning on or
after the first date of the calendar year that
begins after the date these regulations are
published as final regulations in the Fed-
eral Register.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
These proposed regulations do not
impose any additional information collec-
tion requirements in the form of reporting,
recordkeeping requirements, or third-party
disclosure statements. Taxpayers who
claim PTC on their income tax returns are
required to file Form 8962, which is the
sole collection of information requirement
imposed by section 36B and the regula-
tions under section 36B. The rules in these
proposed regulations, if finalized, would
require the IRS to revise the instructions
for Form 8962. For purposes of the Paper-
work Reduction Act of 1995 (44 U.S.C.
3507(c)), the reporting burden associated
with the collection of information for
Form 8962 will be reflected in the PRA
submission associated with income tax
returns under the OMB control number
1545-0074. To the extent there is a change
in burden because of these proposed reg-
ulations, the change in burden will be
reflected in the updated burden estimates
for Form 8962.
III. Regulatory Flexibility Act
When an agency issues a proposed
rulemaking, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) (RFA) requires
the agency to “prepare and make avail-
able for public comment an initial regula-
tory flexibility analysis” that “describe[s]
the impact of the proposed rule on small
entities.” See 5 U.S.C. 603(a). The term
“small entities” is defined in 5 U.S.C.
601 to mean “small business,” “small
organization,” and “small governmental
jurisdiction,” which are also defined in 5
U.S.C. 601. Small business size standards
define whether a business is “small” and
have been established for types of eco-
nomic activities, or industry, generally
under the North American Industry Clas-
sification System (NAICS). See title 13,
part 121 of the Code of Federal Regula-
tions (Small Business Size Regulations).
The size standards look at various fac-
tors, including annual receipts, number of
employees, and amount of assets, to deter-
mine whether the business is small. See
title 13, § 121.201 of the Code of Federal
Regulations for the Small Business Size
Standards by NAICS Industry.
Section 605 of the RFA provides an
exception to the requirement to prepare
an initial regulatory flexibility analysis
if the agency certifies that the proposed
rulemaking will not have a significant
economic impact on a substantial number
of small entities. The Treasury Depart-
ment and the IRS hereby certify that these
proposed regulations will not have a sig-
nificant economic impact on a substantial
number of small entities. This certification
is based on the fact that the majority of
the effect of the proposed regulations falls
on individual taxpayers, and entities will
experience only small changes.
Pursuant to section 7805(f) of the
Code, these proposed regulations have
been submitted to the Chief Counsel for
the Office of Advocacy of the Small Busi-
ness Administration for comment on their
impact on small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in
any one year by a State, local, or Tribal
government, in the aggregate, or by the
private sector, of $100 million (updated
annually for inflation). This proposed rule
does not include any Federal mandate that
may result in expenditures by State, local,
or Tribal governments, or by the private
sector in excess of that threshold.
V. Executive Order 13132: Federalism
E.O. 13132 (Federalism) prohibits an
agency from publishing any rule that has
federalism implications if the rule either
imposes substantial, direct compliance
costs on State and local governments, and
is not required by statute, or preempts
State law, unless the agency meets the
consultation and funding requirements of
section 6 of the E.O. This proposed rule
does not have federalism implications and
does not impose substantial direct compli-
ance costs on State and local governments
or preempt State law within the meaning
of the E.O.

September 30, 2024 714 Bulletin No. 2024–40
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consider-
ation will be given to comments that are
submitted timely to the IRS as prescribed
in this preamble in the ADDRESSES
section. The Treasury Department and
the IRS request comments on all aspects
of the proposed regulations, including
the economic impact of the proposed
regulations. Any electronic comments
submitted, and to the extent practicable
any paper comments submitted, will be
made available at www.regulations.gov
or upon request.
A public hearing is being held on
December 13, 2024, beginning at 10:00
a.m. ET, in the Auditorium at the Internal
Revenue Service Building, 1111 Constitu-
tion Avenue, NW, Washington, DC. Due
to building security procedures, visitors
must enter at the Constitution Avenue
entrance. In addition, all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. Partic-
ipants may alternatively attend the public
hearing by telephone.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish to
present oral comments at the hearing must
submit an outline of the topics to be dis-
cussed as well as the time to be devoted to
each topic by November 1, 2024. A period
of ten minutes will be allocated to each
person for making comments. After the
deadline for receiving outlines has passed,
the IRS will prepare an agenda contain-
ing the schedule of speakers. Copies of
the agenda will be made available free of
charge at the hearing. If no outlines of the
topics to be discussed at the hearing are
received by November 1, 2024, the pub-
lic hearing will be cancelled. If the public
hearing is cancelled, a notice of cancel-
lation of the public hearing will be pub-
lished in the Federal Register.
Individuals who want to testify in
person at the public hearing must send
an email to publichearings@irs.gov to
have their name added to the building
access list. The subject line of the email
must contain the regulation number REG-
116787-23 and the language TESTIFY In
Person. For example, the subject line may
say: Request to TESTIFY In Person at
Hearing for REG-116787-23.
Individuals who want to testify by
telephone at the public hearing must send
an email to publichearings@irs.gov to
receive the telephone number and access
code for the hearing. The subject line
of the email must contain the regulation
number REG-116787-23 and the language
TESTIFY Telephonically. For example,
the subject line may say: Request to TES-
TIFY Telephonically at Hearing for REG-
116787-23.
Individuals who want to attend the pub-
lic hearing in person without testifying must
also send an email to publichearings@irs.
gov to have their name added to the build-
ing access list. The subject line of the email
must contain the regulation number REG-
116787-23 and the language ATTEND In
Person. For example, the subject line may
say: Request to ATTEND Hearing in Per-
son for REG-116787-23. Requests to attend
the public hearing must be received by 5:00
p.m. ET on December 11, 2024.
Individuals who want to attend the pub-
lic hearing telephonically without testify-
ing must also send an email to publichear-
ings@irs.gov to receive the telephone
number and access code for the hearing.
The subject line of the email must con-
tain the regulation number REG-116787-
23 and the language ATTEND Hearing
Telephonically. For example, the subject
line may say: Request to ATTEND Hear-
ing Telephonically for REG-116787-23.
Requests to attend the public hearing must
be received by 5:00 p.m. ET on Decem-
ber 11, 2024.
Hearings will be made accessible to
people with disabilities. To request spe-
cial assistance during the hearing, contact
the Publications and Regulations Branch
of the Office of Associate Chief Counsel
(Procedure and Administration) by send-
ing an email to publichearings@irs.gov
(preferred) or by telephone at (202) 317-
6901 (not a toll-free number) by at least
December 10, 2024.
Statement of Availability of IRS
Documents
Guidance cited in this preamble is pub-
lished in the Internal Revenue Bulletin
and is available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The principal author of these pro-
posed regulations is Clara L. Raymond
of the Office of Associate Chief Counsel
(Income Tax and Accounting). However,
other personnel from the Treasury Depart-
ment and the IRS participated in the
development of the regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries
in numerical order for §§1.36B-1 through
1.36B-3, and 1.36B-6, and revising the
entries for §§1.36B-0, 1.36B-4, and
1.36B-5 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.36B-0 also issued under 26
U.S.C. 36B(h).
Section 1.36B-1 also issued under 26
U.S.C. 36B(h).
Section 1.36B-2 also issued under 26
U.S.C. 36B(h).
Section 1.36B-3 also issued under 26
U.S.C. 36B(h).
Section 1.36B-4 also issued under 26
U.S.C. 36B(h).
Section 1.36B-5 also issued under 26
U.S.C. 36B(h).
Section 1.36B-6 also issued under 26
U.S.C. 36B(h).
* * * * *
Par. 2. Section 1.36B-2 is amended by:
1. Revising the first sentence in para-
graph (c)(2)(v);
2. Revising paragraph (e)(1); and
3. Adding paragraph (e)(6).

Bulletin No. 2024–40 715 September 30, 2024
The revisions and addition read as fol-
lows:
§1.36B-2 Eligibility for premium tax
credit.
* * * * *
(c) * * *
(2) * * *
(v) * * * An individual is treated as not
eligible for Medicaid, CHIP, or a similar pro-
gram such as a Basic Health Program, for a
period of coverage under a qualified health
plan if, when the individual enrolls in the
qualified health plan, an Exchange conducts
an eligibility determination or, if applicable,
eligibility assessment (within the meaning
of 45 CFR 155.302(b)) for Medicaid, CHIP,
or a similar program and determines or
assesses the individual to be not eligible for
coverage under the program. * * *
* * * * *
(e) * * *
(1) Except as provided in paragraphs
(e)(2) through (6) of this section, this sec-
tion applies to taxable years ending after
December 31, 2013.
* * * * *
(6) The first sentence of paragraph (c)
(2)(v) of this section applies to taxable
years beginning on or after [insert the first
date of the calendar year that begins after
the date of publication of the final regu-
lations in the Federal Register]. The first
sentence of paragraph (c)(2)(v) of this
section, as contained in 26 CFR part I edi-
tion revised as of April 1, 2024, applies to
taxable years ending after December 31,
2013, and beginning before [insert the first
date of the calendar year that begins after
the date of publication of the final regula-
tions in the Federal Register].
Par. 3. Section 1.36B-3 is amended by:
1. Revising paragraph (c)(1)(ii);
2. Redesignating paragraphs (c)(4)
and (c)(5) as paragraphs (c)(5) and (c)(6),
respectively, and adding new paragraph
(c)(4);
3. Revising paragraph (d)(1)(i);
4. Revising paragraph (n).
The revisions and additions read as fol-
lows:
§1.36B-3 Computing the premium
assistance credit amount.
* * * * *
(c) * * *
(1) * * *
(ii) The taxpayer pays the taxpayer’s
share of the premium for the individual’s
coverage under the plan for the month by
the unextended due date for filing the tax-
payer’s income tax return for that taxable
year, the full premium for the month is
paid by advance credit payments, or the
amount of the premium paid (including by
advance credit payments) for the month is
sufficient to avoid termination of the indi-
vidual’s coverage for that month under
one of the scenarios described in para-
graph (c)(4) of this section; and
* * * * *
(4) Scenarios for payments sufficient
to avoid coverage termination. The sce-
narios under which the amount of the pre-
mium paid (including by advance credit
payments) for the month is sufficient to
avoid termination of an individual’s cov-
erage for that month under paragraph (c)
(1)(ii) of this section are the following:
(i) The first month of a grace period
described in 45 CFR 156.270(d) for the
individual.
(ii) A month for which a premium pay-
ment threshold under 45 CFR 155.400(g)
has been met and for which month the
issuer of the individual’s qualified health
plan provides coverage.
(iii) A month for which a State depart-
ment of insurance has, during a declared
emergency, issued an order prohibiting
the issuer of the individual’s qualified
health plan from terminating the individ-
ual’s coverage for the month irrespective
of whether the full premium for the month
is made.
* * * * *
(d) * * *
(1) * * *
(i) The enrollment premiums, which
are the premiums for the month for one
or more qualified health plans in which
a taxpayer or a member of the taxpayer’s
family enrolls, reduced by any amounts—
(A) Refunded in the same taxable year
as the premium liability is incurred; or
(B) Unpaid as of the unextended due
date for filing the taxpayer’s income tax
return for the taxable year that includes
the month, or
* * * * *
(n) Applicability dates. (1) Except as
provided in paragraphs (n)(2) through
(4) of this section, this section applies to
taxable years ending after December 31,
2013.
(2) Paragraphs (d)(1) (except for para-
graph (d)(1)(i)) and (d)(2) of this section
apply to taxable years beginning after
December 31, 2016. Paragraph (f) of this
section applies to taxable years beginning
after December 31, 2018. Paragraphs (d)
(1) and (d)(2) of §1.36B–3, as contained
in 26 CFR part I edition revised as of April
1, 2016, apply to taxable years ending
after December 31, 2013, and beginning
before January 1, 2017. Paragraph (f) of
§1.36B–3, as contained in 26 CFR part I
edition revised as of April 1, 2016, applies
to taxable years ending after December
31, 2013, and beginning before January 1,
2019.
(3) Paragraphs (c)(4) through (6) of
this section apply to taxable years begin-
ning on or after [insert the first date of the
calendar year that begins after the date
of publication of final regulations in the
Federal Register]. Paragraph (c)(4) of this
section, as contained in 26 CFR part I edi-
tion revised as of April 1, 2024, applies to
taxable years beginning after December
31, 2016, and beginning before [insert the
first date of the calendar year that begins
after the date of publication of the final
regulations in the Federal Register]. Para-
graph (c)(5) of this section, as contained
in 26 CFR part I edition revised as of April
1, 2024, applies to taxable years ending
after December 31, 2013, and beginning
before [insert the first date of the calendar
year that begins after the date of publica-
tion of the final regulations in the Federal
Register].
(4) Paragraph (d)(1)(i) of this section
applies to taxable years beginning on or
after [insert the first date of the calendar
year that begins after the date of publica-
tion of the final regulations in the Federal
Register]. Paragraph (d)(1)(i) of §1.36B–
3, as contained in 26 CFR part I edition
revised as of April 1, 2016, applies to
taxable years ending after December 31,
2013, and beginning before January 1,
2017. Paragraph (d)(1)(i) of § 1.36B–3, as
contained in 26 CFR part I edition revised
as of April 1, 2022, applies to taxable
years beginning after December 31, 2016,
and beginning before January 1, 2023.
Paragraph (d)(1)(i) of §1.36B–3, as con-
tained in 26 CFR part I edition revised as

September 30, 2024 716 Bulletin No. 2024–40
of April 1, 2024, applies to taxable years
beginning after December 31, 2022, and
beginning before [insert the first date of
the calendar year that begins after the date
of publication of the final regulations in
the Federal Register].
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register Septem-
ber 16, 2024, 8:45 a.m., and published in the issue
of the Federal Register for September 17, 2024, 89
FR 75984)
Notice of Proposed
Rulemaking
Revising Qualified Domestic
Trust Regulations under
Section 2056A to Update
Outdated References and
Procedures
REG-119683-22
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed amendments to the Federal
estate tax regulations applicable to estates
of decedents passing property to or for the
benefit of a noncitizen spouse in a domes-
tic trust for which the executor of the
decedent’s estate has made an election to
be a qualified domestic trust and the trust
satisfies all of the requirements for such
treatment under applicable Federal tax
law and regulations. The proposed regu-
lations would modify those regulations to
update outdated references, information,
and procedures. The proposed regulations
primarily would affect the estates of dece-
dents passing property to or for the benefit
of a noncitizen spouse in such a trust pur-
suant to applicable Federal tax law.
DATES: Written or electronic comments
as well as requests for a public hearing
must be received by October 21, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemak-
ing Portal at https://www.regulations.gov
(indicate IRS and REG-119683-22) by
following the online instructions for sub-
mitting comments. Requests for a public
hearing must be submitted as prescribed
in the “Comments and Requests for a
Public Hearing” section. Once submitted
to the Federal eRulemaking Portal, com-
ments cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comment submit-
ted to the IRS’s public docket. Send paper
submissions to: CC:PA:01:PR (REG-
119683-22), Room 5203, Internal Reve-
nue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Donna Douglas, (202) 317-
6859 (not a toll-free number); concern-
ing the submission of comments and/
or requests for a public hearing, Vivian
Hayes by email at publichearings@irs.
gov or by phone at (202) 317-6901 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Estate Tax Regulations
(26 CFR part 20) under section 2056A of
the Internal Revenue Code (Code).
I. Statutory Overview
Although section 2056(d)(1) of the
Code generally disallows a marital deduc-
tion for the value of property passing to a
noncitizen spouse of a decedent or donor,
section 2056(d)(2)(A) allows a marital
deduction for such property passing to the
decedent’s surviving spouse in a qualified
domestic trust (QDOT), as defined in sec-
tion 2056A. Section 2056A of the Code
was added by the Technical and Miscel-
laneous Revenue Act of 1988 (Public
Law 100-647) and further amended by the
Revenue Reconciliation Act of 1989 (Pub-
lic Law 101-239), the Revenue Reconcil-
iation Act of 1990 (Public Law 101-508),
the Taxpayer Relief Act of 1997 (Public
Law 105-34), and the Economic Growth
and Tax Relief Reconciliation Act of 2001
(Public Law 107-16).
Generally, for purposes of sections
2056 and 2056A, section 2056A(a)
defines the term “qualified domestic
trust,” with respect to any decedent, as any
trust if (1) its trust instrument meets cer-
tain requirements regarding the identity
and powers of the trustee, (2) such trust
meets such requirements as the Secretary
of the Treasury or her delegate (Secretary)
may by regulations prescribe to ensure the
collection of any tax imposed by section
2056A(b), and (3) an election under sec-
tion 2056A by the executor of the dece-
dent’s estate applies to such trust. Sec-
tion 2056A(b) generally prescribes rules
relating to a deferred estate tax on distri-
butions of corpus from the QDOT during
the spouse’s lifetime and on the balance
of the corpus held in the QDOT on the
date of the spouse’s death (section 2056A
estate tax). Section 2056A(c) provides
definitions of certain relevant terms, and
section 2056A(d) provides rules regard-
ing the section 2056A election. Finally,
section 2056A(e) directs the Secretary to
prescribe regulations as may be necessary
or appropriate to carry out the purposes of
section 2056A.
II. Regulatory Overview
Regulations addressing the application
of sections 2056(d) and 2056A were pub-
lished in the Federal Register (58 FR 305)
as proposed regulations on January 5,
1993 (1993 proposed regulations). The
1993 proposed regulations included pro-
posed rules under §§20.2056A-1 through
20.2056A-13. Relevant to these proposed
regulations, §20.2056A-2 of the 1993 pro-
posed regulations sets forth the proposed
qualification requirements for a QDOT;
§20.2056A-4 of the 1993 proposed regu-
lations sets forth the proposed procedures
for conforming marital trust and nontrust
marital transfers to the requirements of a
QDOT; and §20.2056A-11 of the 1993
proposed regulations sets forth the pro-
posed rules relating to filing requirements
and payment of the section 2056A estate
tax.
On August 22, 1995, after consider-
ation of all written comments and public

Bulletin No. 2024–40 717 September 30, 2024
hearing testimony, the 1993 proposed
regulations were adopted as final regu-
lations by the publication of TD 8612 in
the Federal Register (60 FR 43531), with
one exception: section 20.2056A-2(d)
of the 1993 proposed regulations, which
had proposed additional requirements to
ensure collection of the section 2056A
estate tax, was not finalized. On the same
date, the Treasury Department and the IRS
published TD 8613 in the Federal Register
(60 FR 43554), which included temporary
regulations under §20.2056A-2T(d) (1995
temporary regulations). The text of the
1995 temporary regulations also served,
by cross-reference, as the text of reissued
proposed regulations published on the
same date in the Federal Register (60 FR
43574) to address and solicit further com-
mentary on the additional requirements
necessary to ensure collection of the
section 2056A estate tax (1995 proposed
regulations). On November 29, 1996, the
Treasury Department and the IRS pub-
lished TD 8686 in the Federal Register
(61 FR 60551) to adopt §20.2056A-2(d)
of the 1995 proposed regulations as final
regulations (1996 final regulations). In
an apparent oversight, the 1996 final reg-
ulations did not update the references to
§20.2056A-2T(d) found in §§20.2056A-
2, 20.2056A-4, and 20.2056A-11.
Explanation of Provisions
The Treasury Department and the
IRS have determined that an update
of §§20.2056A-2, 20.2056A-4, and
20.2056A-11 of the Estate Tax Regula-
tions is required to remove outdated ref-
erences to §20.2056A-2T(d). An update
of §20.2056A-2 is also required to correct
outdated references to a publication, to
IRS officials and offices, and to proce-
dures and addresses to be used by certain
trustees to provide a security instrument
to satisfy the requirements of a QDOT.
In addition, an update to the definition of
“finally determined” in §20.2056A-2(d)
(1)(iii) is needed because the current defi-
nition of that term includes an outdated
reference to the issuance of an estate tax
closing letter. An update of §§20.2056A-4
and 20.2056A-11 is required to properly
identify the titles of IRS officials autho-
rized to enter into agreements with respect
to the section 2056A estate tax and to
grant extensions of time to file a Form
706-QDT, U.S. Estate Tax Return for
Qualified Domestic Trusts, or to pay any
section 2056A estate tax.
The Treasury Department and the IRS
are aware that other matters in the current
regulations under section 2056A may be
outdated, but these matters do not cause
the current regulations to be substantively
inaccurate. For instance, the examples
in §20.2056A-6 use outdated figures but
accurately illustrate the application of the
rules of the regulations. Modifications to
update information that does not impede
the ability of taxpayers and their represen-
tatives to comply with the regulations, or
the ability of the IRS to process informa-
tion provided by taxpayers or their repre-
sentatives, are outside the scope of these
proposed regulations.
I. Section 20.2056A-2 – Qualification
Requirements for QDOT
A. Updating references to the 1995
temporary regulations in §20.2056A-2(a)
and (b)
Current §20.2056A-2(a) and (b)(2) and
(3) refer to §20.2056A-2T(d) in describ-
ing certain qualification requirements for
QDOTs. Because the 1995 proposed reg-
ulations have been finalized, the Treasury
Department and the IRS propose to update
these paragraphs to reference §20.2056A-
2(d) instead of §20.2056A-2T(d).
B. Updating the definition of finally
determined in §20.2056A-2(d)(1)(iii)
Current §20.2056A-2(d)(1)(i) and
(ii) provide alternate additional require-
ments, one of which will apply to a
QDOT depending upon the fair market
value, as finally determined for Federal
estate tax purposes, of the assets passing
to the QDOT. Current §20.2056A-2(d)
(1)(iii) provides the definition of “finally
determined” for purposes of §20.2056A-
2(d)(1)(i) and (ii). This definition relies
in part on the issuance by the IRS of an
estate tax closing letter, an IRS practice
that was routine prior to June 1, 2015,
for every Federal estate tax return filed.
Estate tax closing letters are no longer
routinely issued by the IRS. The Treasury
Department and the IRS propose to update
§20.2056A-2(d)(1)(iii) to conform to cur-
rent IRS procedures for establishing the
final value of an asset for Federal estate
tax purposes.
C. Updating the name of offices,
addresses, titles of officials, reference to
the Uniform Customs and Practice for
Documentary Credits, and procedure for
filing required security instruments set
forth in §20.2056A-2(d)(1)(i)(B) and (C)
Current §20.2056A-2(d)(1)(i) requires
that QDOTs with assets whose value
exceeds $2 million must satisfy one of
three alternative security arrangements
to secure the payment of the section
2056A estate tax. Paragraphs (B) and (C)
of §20.2056A-2(d)(1)(i), respectively,
describe the requirements and form of
the bond and the letter of credit that may
be used as the required security arrange-
ment. Both the provisions describing the
requirements for each type of security,
and the forms themselves, detail the noti-
fications that must be given to the IRS
of a decision not to renew the security
arrangement and of the establishment of
a replacement arrangement, if any. Precise
addresses and IRS officials are identified
in these paragraphs as the recipients of
these notices but, as a result of changes
in the titles of various IRS officials and
the identification and location of the IRS
offices responsible for the functions rele-
vant to these security arrangements, this
information is no longer accurate. Specif-
ically, with respect to decedents who are
residents of the United States, the required
forms refer to the District Director of the
District Office for Estate and Gift Tax
Examination Group at the address of the
District Office of the IRS that has exam-
ination jurisdiction over the decedent’s
estate. With respect to decedents who are
nonresident noncitizens and U.S. citizens
who die domiciled outside the United
States, the current regulations direct these
notices to the Estate Tax Group, Assis-
tant Commissioner (International) at 950
L’Enfant Plaza, CP:IN:D:C:EX:HQ:1114,
Washington, DC 20241. Neither of these
tax examination groups currently exists,
and the examination of estate and gift tax
returns is now part of a specialty examina-
tion group that keeps a national inventory.
The Estate Tax Advisory Group currently

September 30, 2024 718 Bulletin No. 2024–40
is the collection advisory office of the IRS
tasked with monitoring the bond or letter
of credit until there is a taxable disposi-
tion of the QDOT’s assets or until the
IRS determines that no tax will be owed
(for example, when a noncitizen spouse
becomes a citizen and the requirements of
section 2056A(b)(12) are met). Accord-
ingly, to correct the outdated references
and to avoid future obsolescence if an
office is moved, renamed, or eliminated,
the Treasury Department and the IRS pro-
pose to update §20.2056A-2(d)(1)(i)(B)
(1) and (2), and §20.2056A-2(d)(1)(i)(C)
(1) and (2) to direct trustees, taxpayers,
and their representatives to IRS Publica-
tion 4235, Collection Advisory Offices
Contact Information, or as otherwise pro-
vided in IRS forms and instructions or on
https://www.irs.gov, to determine the cor-
rect address to use when submitting the
notices required in these sections of the
regulations.
The text required by current §20.2056A-
2(d)(1)(i)(C)(2) and (3) to be included in
certain documents includes a reference
to the Uniform Customs and Practice for
Documentary Credits, 1993 Revision, ICC
Publication No. 500 (Publication 500),
which is published by the International
Chamber of Commerce. The 1993 revision
of Publication 500 is no longer the most
recent edition of that publication. Accord-
ingly, to correct the outdated references and
to avoid any future obsolete references, the
Treasury Department and the IRS propose
to update these regulations to include lan-
guage directing trustees, taxpayers, and
their representatives to the most recent
revision of Publication 500, which can be
found on www.iccwbo.org.
Current §20.2056A-2(d)(1)(i)(B)(4)
and (C)(5), respectively, provide that
the bond or letter of credit is to be filed
with the decedent’s Federal estate tax
return (Form 706, United States Estate
(and Generation-Skipping Transfer) Tax
Return, or Form 706-NA, United States
Estate (and Generation-Skipping Trans-
fer) Tax Return, Estate of nonresident not
a citizen of the United States). Security
instruments attached to a decedent’s Fed-
eral estate tax return are not easily identi-
fied, which hinders prompt forwarding to
the Estate Tax Advisory Group. Accord-
ingly, the Treasury Department and the
IRS propose to update these paragraphs
to provide that a security instrument pro-
vided in compliance with §20.2056A-2(d)
is not to be attached to the decedent’s
Federal estate tax return (Form 706 or
Form 706-NA), but instead is to be filed
by submitting it directly to the Estate Tax
Advisory Group. In addition, the Treasury
Department and the IRS propose to update
these paragraphs to direct trustees, taxpay-
ers, and their representatives to IRS Pub-
lication 4235, Collection Advisory Offices
Contact Information, or as otherwise pro-
vided in IRS forms and instructions or on
https://www.irs.gov, to determine the cor-
rect address that must be used to submit
a security instrument provided in compli-
ance with §20.2056A-2(d).
II. Section 20.2056A-4 – Procedures for
Conforming Marital Trusts and Nontrust
Marital Transfers to the Requirements of
a QDOT
A. Updating references to the 1995
temporary regulations in §20.2056A-4(a)
(1), (2), and (c)(1)
Current §20.2056A-4(a)(1) applies
the requirements of §20.2056A-2T(d) in
setting out the procedures for conform-
ing marital trusts and nontrust marital
transfers to the requirements of a QDOT.
Current §20.2056A-4(a)(2) refers to
§20.2056A-2T(d)(1) in describing the con-
sequences of failing to comply with appli-
cable requirements in the case of a judicial
reformation, and to §20.2056A-2T(d)(3)
with regard to the required annual state-
ment. Current §20.2056A-4(c)(1) refers
to §20.2056A-2T(d) in describing the
circumstances under which property pass-
ing to a surviving spouse under a plan,
annuity, or other arrangement which is not
assignable or transferable (or is treated as
such) can be treated as passing to the sur-
viving spouse in the form of a QDOT. The
Treasury Department and the IRS propose
to update current §20.2056A-4(a)(1), (2),
and (c)(1) to reference §20.2056A-2(d)
instead of §20.2056A-2T(d) to reflect the
publication of the 1996 final regulations.
B. Updating titles of officials in
§20.2056A-4(c)(6) and (7)
Current §20.2056A-4(c)(2) and (3)
describe alternative procedures the exec-
utor may use to cause a plan, annuity, or
other arrangement which is not assignable
or transferable (or is treated as such) to be
treated as passing to the surviving spouse
in the form of a QDOT. To conform a non-
assignable annuity or other payment under
current §20.2056A-4(c)(2) or (3), current
§20.2056A-4(c)(6) requires the executor
to file with the Federal estate tax return an
Agreement to Pay Section 2056A Estate
Ta x, whose required language is included
in this paragraph. Alternatively, current
§20.2056A-4(c)(7) requires an Agreement
to Roll Over Annuity Payments, whose
required language is included in that para-
graph. The required agreement under cur-
rent §20.2056A-4(c)(6) refers to the District
Director, and the required agreement under
current §20.2056A-4(c)(7) refers to the
Assistant Commissioner (International).
As discussed in part I.C. of this Expla-
nation of Provisions, the examination of
estate and gift tax returns is now han-
dled by a specialty examination group
that keeps a national inventory, and the
Estate Tax Advisory Group is tasked with
monitoring the bond or letter of credit
until there is a taxable disposition of the
QDOT’s assets or until the IRS deter-
mines that no tax will be owed (for exam-
ple, when a noncitizen spouse becomes
a citizen and the requirements of section
2056A(b)(12) are met). Accordingly, the
Treasury Department and the IRS pro-
pose to update current §20.2056A-4(c)(6)
and (7) by replacing each reference to the
District Director and Assistant Commis-
sioner (International) with a reference to
the Chief Tax Compliance Officer, IRS (or
their delegate or designee or as otherwise
provided in IRS forms and instructions or
on https://www.irs.gov).
III. Section 20.2056A-11 – Filing
Requirements and Payment of the Section
2056A Estate Tax
A. Updating references to the
1995 temporary regulations in
§20.2056A-11(a)
Current §20.2056A-11(a) provides
guidance on the due date of the section
2056A estate tax and on obtaining an
extension of time for filing a Form 706-
QDT. That paragraph also directs the
reader to §20.2056A-2T(d)(3) regarding

Bulletin No. 2024–40 719 September 30, 2024
the requirements for filing Form 706-QDT
in the case of the required annual statement.
The Treasury Department and the IRS pro-
pose to update current §20.2056A-11(a)
to reference §20.2056A-2(d)(3) instead of
§20.2056A-2T(d)(3) to reflect the publica-
tion of the 1996 final regulations.
B. Updating titles of officials in
§20.2056A-11(c)(1) and (2)
Current §20.2056A-11(c)(1) and (2)
provide guidance on obtaining an exten-
sion of time for paying the section 2056A
estate tax, and states that an extension
may be granted by the District Director
or the Director of the service center where
the Form 706-QDT is filed. The Trea-
sury Department and the IRS propose to
update current §20.2056A-11(c)(1) and
(2) by replacing each reference to “the
district director or director of the service
center where the Form 706-QDT is filed”
with a reference to “the Advisory Group
Managers (or their delegate or designee or
as otherwise provided in IRS forms and
instructions or on https://www.irs.gov).”
IV. Section 20.2056A-13 – Applicability
Dates
Current §20.2056A-13 provides the
effective dates for all of the provisions
of §20.2056A. Because these regulations
propose applicability dates that are spe-
cific to the sections in which changes are
being proposed, the Treasury Department
and the IRS propose to make a coordi-
nating change to §20.2056A-13 to reflect
these specific exceptions.
Proposed Applicability Date
The regulations are proposed to apply
with respect to estates of decedents
dying on or after the date of publication
of final regulations in the Federal Reg-
ister. For dates of applicability, see pro-
posed §§20.2056A-2(e), 20.2056A-4(e),
20.2056A-11(e), and 20.2056A-13.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) requires
that a Federal agency obtain the approval
of the Office of Management and Bud-
get (OMB) before collecting information
from the public, whether such collection
of information is mandatory, voluntary,
or required to obtain or retain a benefit. A
Federal agency may not conduct or spon-
sor, and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number.
The proposed regulations would update
the current regulations under section
2056A by modifying and replacing out-
dated references, information, and proce-
dures, such as references to IRS officials,
offices, and addresses that no longer exist
and references to temporary regulations.
The collections of information within
these proposed regulations include report-
ing and third-party disclosure require-
ments imposed by the IRS to ensure that
the IRS has been provided with adequate
security for the collection of the section
2056A estate tax, to allow marital trusts
and nontrust marital transfers to be con-
formed to the requirements of a QDOT,
and to provide extensions of time for the
payment of section 2056A estate tax.
The proposed regulations include
third-party disclosure and reporting
requirements under proposed §20.2056A-
2(d)(1)(i) for surety and banks to notify
trustees and the IRS of the failure to renew
a bond or letter of credit. These collec-
tion requirements are already approved
by OMB under 1545-1443 for all filers.
These proposed regulations would not
change the already approved collection
requirements, and only would modify the
location of where to file. An update to the
filing location does not change the already
approved burden.
The proposed regulations include
reporting requirements related to a secu-
rity instrument used to meet the qualifica-
tions of a QDOT and filed at the time the
executor of an estate files a Form 706 or
706-NA. The proposed regulations also
include reporting requirements related
to Form 706-QDT used to calculate and
report the section 2056A estate tax due or
to notify the IRS that the trust is exempt
from future filing because a noncitizen
spouse has become a citizen. These report-
ing requirements are already approved by
OMB under 1545-1443 for all filers. These
proposed regulations would not substan-
tively change the collection requirements,
and only would modify the location of
where to file the security instruments and
arrangements. An update to the filing loca-
tion does not change the already approved
burden.
The proposed regulations include
reporting requirements related to request-
ing extensions using Form 4768 to file
Form 706-QDT, Form 706, and Form 706-
NA. These reporting requirements are
already approved by OMB under 1545-
0181 for all filers. These proposed regula-
tions would not substantively change the
collection requirements, and only would
modify the location of where to file the
extension. An update to the filing location
does not change the already approved bur-
den.
Books and records relating to a collec-
tion of information must be retained as
long as their contents might become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by section 6103 of the Code.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby cer-
tified that the proposed regulations would
not have a significant economic impact on
a substantial number of small entities. This
rule primarily affects individuals (or their
estates) and trusts, which are not small
entities for purposes of the Regulatory
Flexibility Act. Although it is anticipated
that there may be an incremental eco-
nomic impact on executors that are small
entities, including entities that provide tax
and legal services that assist individuals in
preparing tax returns, any impact would
not be significant and would not affect
a substantial number of small entities.

September 30, 2024 720 Bulletin No. 2024–40
Therefore, a Regulatory Flexibility Anal-
ysis under the Regulatory Flexibility Act
(5 U.S.C. chapter 6) is not required.
IV. Section 7805(f)
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for the Office of Advocacy
of the Small Business Administration for
comment on its impact on small business.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Tribal government, in the aggre-
gate, or by the private sector, of $100 mil-
lion in 1995 dollars, updated annually for
inflation. This rule does not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector in excess of
that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments and is not required by statute,
or preempts State law unless the agency
meets the consultation and funding
requirements of section 6 of the execu-
tive order. These proposed regulations do
not have federalism implications and do
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the executive order.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the ADDRESSES
heading. In addition to requesting com-
ments on all aspects of the proposed reg-
ulations, the Treasury Department and the
IRS request comments on whether other
rules in the current regulations under sec-
tion 2056A require revision or removal to
update information that is outdated (e.g.,
as a result of amendments to the Code,
regulations, or local laws made after such
rules were promulgated). All comment-
ers are strongly encouraged to submit
comments electronically. The Treasury
Department and the IRS will publish for
public availability any comment submit-
ted electronically or on paper to its public
docket at https://www.regulations.gov.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
encouraged to be made electronically. If
a public hearing is scheduled, a notice of
the date and time for the public hearing
will be published in the Federal Register.
Drafting Information
The principal author of these proposed
regulations is Donna Douglas of the Office
of Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the Treasury Department
and the IRS participated in their develop-
ment.
List of Subjects in 26 CFR Part 20
Estate taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 20 as follows:
PART 20 – ESTATE TAX; ESTATES
OF DECEDENTS DYING AFTER
AUGUST 16, 1954
Paragraph 1. The authority citation
for part 20 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805.
* * * * *
Par. 2. Section 20.2056A-0 is amended
by:
1. Revising the entry for paragraph (d)
(6) of §20.2056A-2;
2. Adding an entry for paragraph (e) of
§20.2056A-2;
3. Adding an entry for paragraph (e) of
§20.2056A-4; and
4. Adding an entry for paragraph (e) of
§20.2056A-11.
The revision and additions read as fol-
lows:
§20.2056A-0 Table of contents.
* * * * *
§20.2056A-2 Requirements for qualified
domestic trust.
* * * * *
(d) * * *
(6) Special rules.
(e) Applicability date.
* * * * *
§20.2056A-4 Procedures for conforming
marital trusts and nontrust marital
transfers to the requirements of a
qualified domestic trust.
* * * * *
(e) Applicability date.
* * * * *
§20.2056A-11 Filing requirements and
payment of the section 2056A estate tax.
* * * * *
(e) Applicability date.
* * * * *
Par. 3. Section 20.2056A-2 is amended
by:
1. Revising the first sentence of para-
graph (a);
2. Revising paragraph (b)(2);
3. Revising the first sentence of para-
graph (b)(3);
4. Removing the fourth sentence of
paragraph (d)(1)(i)(B)(1) and adding in its
place two new sentences;
5. Revising the ninth and tenth sen-
tences of paragraph (d)(1)(i)(B)(2);
6. Revising the first sentence of para-
graph (d)(1)(i)(B)(4), and adding a new
sentence at the end of the paragraph;
7. Removing the fourth sentence of
paragraph (d)(1)(i)(C)(1) and adding in its
place two new sentences;

Bulletin No. 2024–40 721 September 30, 2024
8. Revising the first, fourteenth, and
fifteenth sentences of paragraph (d)(1)(i)
(C)(2);
9. Revising the first, tenth, and eleventh
sentences of paragraph (d)(1)(i)(C)(3);
10. Revising the first sentence of para-
graph (d)(1)(i)(C)(5), and adding a new
sentence at the end of the paragraph;
11. Revising paragraph (d)(1)(iii);
12. Revising the paragraph heading of
paragraph (d)(6);
13. Deleting paragraph (d)(6)(i);
14. Redesignating paragraphs (d)(6)(ii)
and (iii) as paragraphs (d)(6)(i) and (ii)
respectively; and
15. Adding paragraph (e).
The revisions and addition read as fol-
lows:
§20.2056A-2 Requirements for
qualified domestic trust.
(a) In general. To qualify as a qualified
domestic trust (QDOT), the requirements
of paragraphs (b) through (d) of this sec-
tion must be satisfied. * * *
(b) * * *
(2) Property passing outright to spouse.
If property does not pass from a decedent
to a QDOT, but passes to a noncitizen
surviving spouse in a form that meets
the requirements for a marital deduction
without regard to section 2056(d)(1)(A),
and that is not described in paragraph (b)
(1) of this section, the surviving spouse
must either actually transfer the property,
or irrevocably assign the property, to a
trust (whether created by the decedent, by
the decedent’s executor, or by the surviv-
ing spouse) that meets the requirements
of paragraphs (c) and (d) of this section
(pertaining, respectively, to statutory
requirements and regulatory requirements
imposed to ensure collection of tax) prior
to the filing of the estate tax return for the
decedent’s estate and on or before the last
date prescribed by law that the QDOT
election may be made (see §20.2056A-
3(a)).
(3) * * * If property does not pass from
a decedent to a QDOT, but passes under
a plan or other arrangement that meets
the requirements for a marital deduction
without regard to section 2056(d)(1)(A)
and whose payments are not assignable
or transferable (see §20.2056A-4(c)), the
property is treated as meeting the require-
ments of this section, and the requirements
of §20.2056A-2(d), if the requirements of
§20.2056A-4(c) are satisfied. * * *
* * * * *
(d) * * *
(1) * * *
(i) * * *
(B) * * *
(1) * * * Any notice of failure to renew
is required to be sent to the Estate Tax
Advisory Group of the Internal Revenue
Service. See IRS Publication 4235, Col-
lection Advisory Offices Contact Infor-
mation, or as otherwise provided in IRS
forms and instructions or on https://www.
irs.gov, to determine the correct address to
use when submitting the required docu-
mentation. * * *
(2) * * * All notices required to be sent
to the Internal Revenue Service under this
instrument should be sent to the Estate
Tax Advisory Group of the Internal Rev-
enue Service. See IRS Publication 4235,
Collection Advisory Offices Contact Infor-
mation, or as otherwise provided in IRS
forms and instructions or on https://www.
irs.gov, to determine the correct address to
use when submitting the required docu-
mentation. * * *
* * * * *
(4) * * * The bond is to be filed (sep-
arately from the decedent’s Federal estate
tax return) by submitting it directly to the
Estate Tax Advisory Group of the Internal
Revenue Service on or before the later of
the filing date or due date of the decedent’s
Federal estate tax return (Form 706 or
706-NA) unless an extension for filing the
bond is granted under §301.9100 of this
chapter. * * * See IRS Publication 4235,
Collection Advisory Offices Contact Infor-
mation, or as otherwise provided in IRS
forms and instructions or on https://www.
irs.gov, to determine the correct address
to use when submitting the required doc-
umentation.
(C) * * *
(1) * * * Any notice of failure to renew
or closure of a U.S. branch of a foreign
bank required to be sent to the Inter-
nal Revenue Service must be sent to the
Estate Tax Advisory Group of the Internal
Revenue Service. See IRS Publication
4235, Collection Advisory Offices Con-
tact Information, or as otherwise provided
in the IRS forms and instructions or on
https://www.irs.gov, to determine the cor-
rect address to use when submitting the
required documentation. * * *
(2) * * * The letter of credit must be
made in the following form (or in the form
that is the same as the following form in
all material respects), or an alternative
form that the Commissioner prescribes by
guidance published in the Internal Reve-
nue Bulletin (see §601.601(d)(2) of this
chapter):
[Issue Date]
To: Internal Revenue Service
Attention: Estate Tax Advisory Group.
(See IRS Publication 4235, Collection
Advisory Offices Contact Information, or
as otherwise provided in IRS forms and
instructions or on https://www.irs.gov, to
determine the correct address to use when
submitting the required documentation). *
* *
Except where otherwise stated herein,
this Letter of Credit is subject to the most
recent revision of the Uniform Customs
and Practice for Documentary Credits
published by the International Chamber of
Commerce (ICC), which can be found on
https://www.iccwbo.org. If we notify you
of our election not to consider this Letter
of Credit renewed and the expiration date
occurs during an interruption of business
described in the most recent revision of
that publication, unless you had consented
to cancellation prior to the expiration
date, the bank hereby specifically agrees
to effect payment if this Letter of Credit
is drawn against within 30 days after the
resumption of business. * * *
(3) Form of confirmation. If the
requirements of this paragraph (d)(1)(i)
(C) are satisfied by the issuance of a let-
ter of credit by a foreign bank with con-
firmation by a bank as defined in section
581, the confirmation must be made in the
following form (or in a form that is the
same as the following form in all mate-
rial respects), or an alternative form that
the Commissioner prescribes by guidance
published in the Internal Revenue Bulletin
(see §601.601(d)(2) of this chapter):
[Issue Date]
To: Internal Revenue Service
Attention: Estate Tax Advisory Group.
(See IRS Publication 4235, Collection
Advisory Offices Contact Information, or
as otherwise provided in IRS forms and
instructions or on https://www.irs.gov, to
determine the correct address to use when

September 30, 2024 722 Bulletin No. 2024–40
submitting the required documentation). *
* *
Except where otherwise stated herein,
this Confirmation is subject to the most
recent version of the Uniform Customs
and Practice for Documentary Credits
published by the International Chamber of
Commerce (ICC), which can be found on
https://www.iccwbo.org. If we notify you
of our election not to consider this Con-
firmation renewed and the expiration date
occurs during an interruption of business
described in the most recent version of
that publication, unless you had consented
to cancellation prior to the expiration
date, the bank hereby specifically agrees
to effect payment if this Confirmation is
drawn against within 30 days after the
resumption of business. * * *
* * * * *
(5) Procedure. The letter of credit
(and confirmation, if applicable) is to be
filed separately from the decedent’s Fed-
eral estate tax return (Form 706 or Form
706-NA) by submitting it directly to the
Estate Tax Advisory Group of the Internal
Revenue Service on or before the later of
the filing date or the due date of the dece-
dent’s Federal estate tax return (unless an
extension for filing the letter of credit is
granted under §301.9100 of this chapter).
* * * See IRS Publication 4235, Collection
Advisory Offices Contact Information, or
as otherwise provided in IRS forms and
instructions or on https://www.irs.gov, to
determine the correct address to use when
submitting the required documentation.
* * * * *
(iii) Definition of finally deter-
mined―(A) In general. For purposes of
§20.2056A-2(d)(1)(i) and (ii), the fair
market value of assets is the fair market
value of those assets as finally determined
for Federal estate tax purposes. That value
is--
(1) The value reported on an estate
tax return filed with the Internal Revenue
Service, once the period of limitations on
assessment (see section 6501) of estate
tax has expired without that value having
been timely adjusted by the Internal Rev-
enue Service;
(2) The value determined or specified
by the Internal Revenue Service for unre-
ported property, or for reported property
where the value determined or specified
by the Internal Revenue Service differs
from the value reported on an estate tax
return filed with the Internal Revenue
Service, once the period of limitations on
assessment applicable to the estate tax has
expired without that value having been
timely contested by the executor;
(3) The value determined in a writ-
ten agreement with the Internal Revenue
Service (whether entered into during the
course of the administrative proceedings
between the estate and the Internal Reve-
nue Service or after the commencement of
litigation) once that written agreement has
been executed by both the executor and
the Internal Revenue Service and is bind-
ing on all parties (including, but not lim-
ited to, the executor, the Internal Revenue
Service, and the beneficiaries); or
(4) The value determined by a court
for the purpose of determining the estate
tax liability of the estate, once the court’s
determination no longer can be appealed
to any court.
(B) Contested and Executor defined.
For purposes of this paragraph (d)(1)
(iii), the term contested means to put at
issue the value of property in a written
communication to the Internal Revenue
Service that identifies the specific prop-
erty, states that the executor does not
accept as correct the value of that prop-
erty as determined or specified by the
Internal Revenue Service, and provides
the executor’s claimed value for that
property as determined in accordance
with the requirements of section 2031,
the corresponding regulations, and other
applicable guidance. An issue cannot be
contested by a general protective state-
ment or written communication that does
not include each of these specified ele-
ments. For purposes of this paragraph
(d)(1)(iii), the term executor includes
any person described in section 2203, as
expanded to include all persons required
under section 6018(b) to file an estate tax
return.
* * * * *
(6) Special rules.
* * * * *
(e) Applicability date. This section
applies with respect to estates of dece-
dents dying on or after [the date of pub-
lication of final regulations in the Federal
Register].
Par. 4. Section 20.2056A-4 is amended
by:
1. Revising the second sentence of
paragraph (a)(1).
2. Revising the fifth and sixth sentences
of paragraph (a)(2).
3. Revising the sixth sentence of para-
graph (c)(1).
4. Revising the final sentence of (c)(6)
(ii).
5. Revising the final sentence of (c)(7)
(ii).
6. Revising paragraph (e).
The revisions read as follows:
§20.2056A-4 Procedures for
conforming marital trusts and nontrust
marital transfers to the requirements
of a qualified domestic trust.
(a) * * *
(1) * * * For this purpose, the require-
ments of a QDOT include all of the appli-
cable requirements set forth in §20.2056A-
2. * * *
(2) * * * Thus, the trustee of the trust is
responsible for filing the Form 706-QDT,
paying any section 2056A estate tax that
becomes due, and filing the annual state-
ment required under §20.2056A-2(d)
(3), if applicable. Failure to comply with
these requirements may cause the trust
to be subject to the anti-abuse rule under
§20.2056A-2(d)(1)(v). * * *
* * * * *
(c) * * *
(1) * * * In the case of a plan, annuity,
or other arrangement which is not assign-
able or transferable (or is treated as such),
the property passing under the plan from
the decedent is treated as meeting the
requirements of §20.2056A-2 (pertain-
ing to the general requirements, qualified
marital interest requirements, statutory
requirements, and requirements to ensure
collection of the tax) if the requirements
of either paragraph (c)(2) or (3) of this
section are satisfied. * * *
* * * * *
(6) * * *
(ii) * * * I agree, at the request of the
Chief Tax Compliance Officer, IRS (or
their delegate or designee or as otherwise
provided in IRS forms and instructions
or on https://www.irs.gov), to enter into
a security agreement to secure my under-
takings under this agreement.
(7) * * *

Bulletin No. 2024–40 723 September 30, 2024
(ii) * * * I agree, at the request of the
Chief Tax Compliance Officer, IRS (or
their delegate or designee or as otherwise
provided in IRS forms and instructions
or on https://www.irs.gov), to enter into
a security agreement to secure my under-
takings under this agreement.
* * * * *
(e) Applicability date. This section
applies with respect to estates of dece-
dents dying on or after [the date of publi-
cation of the final regulations in the Fed-
eral Register].
Par. 5. Section 20.2056A-11 is
amended by:
1. Revising the final sentence of para-
graph (a);
2. Revising the final sentence of para-
graph (c)(1);
3. Revising paragraph (c)(2); and
4. Adding paragraph (e).
The revisions and addition read as fol-
lows:
§20.2056A-11 Filing requirements and
payment of the section 2056A estate
tax.
(a) * * * See also §20.2056A-5(c)(1)
regarding the requirements for filing a
Form 706-QDT in the case of a distribu-
tion to the surviving spouse on account of
hardship, and §20.2056A-2(d)(3) regard-
ing the requirements for filing Form 706-
QDT in the case of the required annual
statement.
* * * * *
(c) * * *
(1) * * * Such extension may be granted
by the Advisory Group Managers (or their
delegate or designee or as otherwise pro-
vided in IRS forms and instructions or on
https://www.irs.gov).
(2) Extension of time for paying tax
under section 6161(a)(1). An extension of
time beyond the due date to pay any part
of the estate tax imposed on lifetime dis-
tributions under section 2056A(b)(1)(A),
or imposed at the death of the surviving
spouse under section 2056A(b)(1)(B), or
imposed at the termination of the QDOT
(such as on the death or resignation of the
U.S. trustee), may be granted for a reason-
able period of time, not to exceed 6 months
(12 months in the case of the estate tax
imposed under section 2056A(b)(1)(B)
at the surviving spouse’s death), by the
Advisory Group Managers (or their dele-
gate or designee or as otherwise provided
in IRS forms and instructions or on https://
www.irs.gov).
* * * * *
(e) Applicability date. This section
applies with respect to estates of dece-
dents dying on or after [the date of publi-
cation of the final regulations in the Fed-
eral Register].
Par. 6. Section 20.2056A-13 is
amended by revising the section heading
and the first sentence to read as follows:
§20.2056A-13 Applicability dates.
Except as provided in this section
and in §§20.2056A-2(e), 20.2056A-4(e),
and 20.2056A-11(e), the provisions of
§§20.5056A-1 through 20.2056A-12 are
applicable with respect to estates of dece-
dents dying on or after August 22, 1995.
* * *
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register August
20, 2024, 8:45 a.m., and published in the issue of the
Federal Register for August 21, 2024, 89 FR 67580)

Bulletin No. 2024–40 i September 30, 2024
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is 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
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings 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.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

September 30, 2024 ii Bulletin No. 2024–40
Numerical Finding List
1
Bulletin 2024–40
Announcements:
2024-26, 2024-27 I.R.B. 14
2024-27, 2024-27 I.R.B. 14
2024-28, 2024-28 I.R.B. 39
2024-29, 2024-29 I.R.B. 71
2024-31, 2024-34 I.R.B. 533
2024-32, 2024-35 I.R.B. 535
2024-30, 2024-36 I.R.B. 581
2024-39, 2024-39 I.R.B. 639
Notices:
2024-47, 2024-27 I.R.B. 1
2024-52, 2024-27 I.R.B. 2
2024-53, 2024-27 I.R.B. 4
2024-54, 2024-28 I.R.B. 24
2024-55, 2024-28 I.R.B. 31
2024-56, 2024-29 I.R.B. 64
2024-57, 2024-29 I.R.B. 67
2024-58, 2024-30 I.R.B. 120
2024-59, 2024-32 I.R.B. 348
2024-60, 2024-34 I.R.B. 515
2024-61, 2024-34 I.R.B. 520
2024-62, 2024-36 I.R.B. 570
2024-63, 2024-36 I.R.B. 573
2024-64, 2024-39 I.R.B. 632
2024-65, 2024-39 I.R.B. 633
2024-66, 2024-40 I.R.B. 682
Proposed Regulations:
REG-124593-23, 2024-28 I.R.B. 40
REG-109032-23, 2024-31 I.R.B. 332
REG-120137-19, 2024-31 I.R.B. 336
REG-119283-23, 2024-32 I.R.B. 351
REG-102161-23 2024-33 I.R.B. 502
REG-103529-23, 2024-33 I.R.B. 512
REG-105128-23, 2024-35 I.R.B. 536
REG-108920-24, 2024-38 I.R.B. 607
REG-111629-23, 2024-39 I.R.B. 640
REG-106851-21, 2024-40 I.R.B. 684
REG-116787-23, 2024-40 I.R.B. 709
REG-119683-22, 2024-40 I.R.B. 716
Revenue Procedures:
2024-26, 2024-27 I.R.B. 7
2024-29, 2024-30 I.R.B. 121
2024-30, 2024-30 I.R.B. 183
2024-27, 2024-31 I.R.B. 300
2024-28, 2024-31 I.R.B. 326
2024-32, 2024-34 I.R.B. 523
2024-34, 2024-38 I.R.B. 604
2024-35, 2024-39 I.R.B. 638
Revenue Rulings:
2024-13, 2024-28 I.R.B. 18
2024-14, 2024-28 I.R.B. 18
2024-15, 2024-32 I.R.B. 340
2024-16, 2024-35 I.R.B. 534
2024-17, 2024-36 I.R.B. 568
2024-18, 2024-37 I.R.B. 584
2024-20, 2024-40 I.R.B. 646
Treasury Decisions:
10002, 2024-29 I.R.B. 56
9999, 2024-30 I.R.B. 72
10000, 2024-31 I.R.B. 185
10003, 2024-32 I.R.B. 342
10001, 2024-33 I.R.B. 412
10004, 2024-33 I.R.B. 489
9998, 2024-34 I.R.B. 412
10005, 2024-34 I.R.B. 510
9991, 2024-40 I.R.B. 646
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 30, 2024.

Bulletin No. 2024–40 iii September 30, 2024
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2024–40
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 30, 2024.

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Official Business
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