Internal Revenue Bulletin 2009-15 (PDF rendition): IRS Announcements

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Bulletin No. 200
9-15
April 13, 2009
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.
SPECIAL ANNOUNCEMENT
Announcement 2009–28, page 760.
This document contains the annual report to the public con-
cerning Advance Pricing Agreements (APAs) and the experi-
ence of the APA Program during calendar year 2008. This
document does not provide guidance regarding the application
of the arm’s length standard. Instead, it reports on the struc-
ture and activities of the APA Program.
INCOME TAX
Notice 2009–25, page 758.
This notice invites public comments on how certain business
practices in the retail industry have changed since the promul-
gation of the uniform capitalization regulations under section
263A of the Code, and whether certain definitions under the
regulations should be modified in light of current business prac-
tices.
EXEMPT ORGANIZATIONS
Announcement 2009–32, page 799.
The IRS has revoked its determination that Financially Strong
America, Inc. (fka Consumer Debt Solutions, Inc.), of Highland,
NY, qualifies as an organizationdescribed in sections 501(c)(3)
and 170(c)(2) of the Code.
ADMINISTRATIVE
Announcement 2009–30, page 794.
This document contains corrections to final and temporary reg-
ulations (T.D. 9438, 2009–5 I.R.B. 387) under section 954 of
the Code as they relate to foreign base company sales income.
Announcement 2009–31, page 798.
This document contains corrections to proposed regulations
(REG–150066–08, 2009–5 I.R.B. 423) relating to foreign base
company sales income.
Announcement of Declaratory Judgment Proceedings Under Section 7428 begins on page 799.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
April 13, 20092009–15 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Request for Comments on
Certain Section 263A Rules
Relating to Property Acquired
for Resale
Notice 2009–25
PURPOSE
This notice invites public comments on
how certain business practices in the retail
industry have changed since the promulga-
tion of the uniform capitalization regula-
tions under § 263A of the Internal Revenue
Code in the 1990s and whether certain def-
initions under the regulations should be
modified in light of current business prac-
tices.
BACKGROUND
Section 263A, enacted by the Tax Re-
form Act of 1986, Public Law No. 99–514,
100 Stat. 2085, requires taxpayers to capi-
talize the direct and indirect costs properly
allocable to (1) certain real property and
tangible personal property produced by the
taxpayer; and (2) real property and certain
personal property that is acquired by the
taxpayer for resale. Section 1.263A–1(e)
of the Income Tax Regulations provides
that resellers must capitalize the acquisi-
tion cost of property acquired for resale, as
well as certain indirect costs that are prop-
erly allocable to property acquired for re-
sale. Section 1.263A–3 sets forth detailed
rules with respect to the proper treatment
of purchasing, handling, and storage costs,
which are the indirect costs most often in-
curred by resellers. Section 1.263A–3 was
promulgated in 1993 and last amended in
1994.
DISCUSSION
The IRS and Treasury Department rec-
ognize that the retail industry has changed
over the last fifteen years due to advance-
ments in technology and service innova-
tions. As a result of these changes, cer-
tain provisions in the regulations under
§ 263A, particularly in § 1.263A–3, may
not take into account some present-day re-
tail business practices; therefore, the exist-
ing regulations may have unintended con-
sequences for some retailers.
More specifically, a significant number
of retailers that sell merchandise directly
to retail customers in on-site sales also
sell merchandise from their sales facil-
ities over the internet and by fax. The
existing definitions of on-site storage fa-
cility, retail sales facility, on-site sales,
and dual-function storage facility under
§ 1.263A–3(c)(5)(ii) did not contemplate
the current volume and types of internet
and fax sales that retailers transact from
their sales facilities. An on-site storage
facility is defined as a storage or ware-
housing facility that is physically attached
to, and an integral part of, a retail sales
facility. A retail sales facility is defined
as a facility where a taxpayer sells mer-
chandise exclusively to retail customers
(final purchasers of the merchandise) in
on-site sales. On-site sales are defined
as sales made to retail customers physi-
cally present at a facility. A dual-function
storage facility is defined as (1) a storage
facility that serves as both an off-site stor-
age facility (a storage facility that is not an
on-site storage facility) and an on-site stor-
age facility, or (2) any facility where sales
are made to retail customers in on-site
sales and to either (a) retail customers in
sales that are not on-site sales, or (b) other
customers.
Using the above definitions, certain re-
tailers must treat facilities that would oth-
erwise be treated as retail sales facilities
and on-site storage facilities as dual-func-
tion storage facilities because internet and
fax sales generally are not made to re-
tail customers physically present at the fa-
cility and thus generally are not consid-
ered on-site sales. Retailers that oper-
ate dual-function storage facilities gener-
ally must capitalize a portion of their han-
dling and storage costs based on the ratio
of gross sales of the facility that are not
on-site sales to total gross sales of the fa-
cility. See § 1.263A–3(c)(5)(iii)(B).
Similarly, retailers that enter into ar-
rangements to lease their merchandise to
customers and then sell the merchandise in
conjunction with the underlying lease con-
tracts to third-party finance companies are
required to treat facilities that would other-
wise be treated as retail sales facilities and
on-site storage facilities as dual-function
storage facilities because the retailers sell
some merchandise to third-party finance
companies that are not retail customers.
Retailers that engage in these types of
transactions also may be required under
§ 1.263A–3(c)(5)(iii)(B) to capitalize a
portion of their handling and storage costs
based on the ratio of gross sales of the
facility that are not on-site sales to total
gross sales of the facility.
REQUEST FOR COMMENTS
The IRS and Treasury Department re-
quest comments concerning the following
issues:
1. How have changed retail busi-
ness practices, including those resulting
from technological advances and current
trends, affected the application and ad-
ministrability of the existing regulations
under § 263A to retailers that transact
both on-site sales and sales that are not
on-site sales from the same sales facility?
The IRS and Treasury Department would
like to receive descriptions of both com-
mon and unique retail business models,
operations, and practices, where retailers
conducton-sitesalesaswellasinternet
or fax sales at a sales facility. The IRS
and Treasury Department would also like
examples of other types of sales that do
not meet the existing definition of on-site
sales.
2. How, if at all, should the definitions
of on-site sales, a retail customer, a retail
sales facility, a dual-function storage facil-
ity, and other terms in § 1.263A–3(c)(5)(ii)
be modified to reflect current business
practices of retailers that transact both
on-site sales and sales that are not on-site
sales from the same sales facility?
Comments should be submitted in
writing on or before July 13, 2009,
and should include a reference to No-
tice 2009–25. Send submissions to:
CC:PA:LPD:PR (Notice 2009–25), Room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (Notice 2009–25),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC. Alternatively, comments may
be submitted electronically directly to
2009–15 I.R.B.758April 13, 2009

the IRS via the following e-mail address:
Notice.comments@irscounsel.treas.gov.
Please include “Notice 2009–25” in
the subject line of any electronic
communication. All materials submitted
will be available for public inspection and
copying.
DRAFTING INFORMATION
The principal author of this notice is
Kari Fisher of the Office of the Associate
Chief Counsel (Income Tax and Account-
ing). For further information concerning
this notice, contact Ms. Fisher at (202)
622–4970 (not a toll-free number).
April 13, 20097592009–15 I.R.B.

Part IV. Items o
fGeneralInterest
Announcement a
nd Report Concerning Advance Pricing Agreements
Announcement
2009–28
March 27, 2009
This Announcement is issued pursuant to § 521(b) of Pub. L. 106–170, the Ticket to Work and Work Incentives Improvement Act
of 1999, which requires the Secretary of the Treasury to report annually to the public concerning Advance Pricing Agreements
(APAs) and the APA Program. The first report covered calendar years 1991 through 1999. Subsequent reports covered separately
each calendar year 2000 through 2007. This tenth report describes the experience, structure, and activities of the APA Program
during calendar year 2008. It does not provide guidance regarding the application of the arm’s length standard.
Craig A. Sharon
Director, Advance Pricing Agreement Program
Background
Internal Revenue Code (IRC) § 482 providesthat the Secretary may distribute, apportion, or allocate gross income, deductions,
credits, or allowances between or among two or more commonly controlled businesses if necessary to reflect clearly the income
of such businesses. Under the § 482 regulations, the standard to beapplied in determining the true taxable income of a controlled
business is that of a business dealing at arm’s length with an unrelated business. The arm’s length standard has also been
adopted by the international community and is incorporated intothe transfer pricing guidelines issued by the Organization for
Economic Cooperation and Development (OECD). OECD,TRANSFER PRICING GUIDELINES FOR MULTINATIONAL
ENTERPRISES AND TAX ADMINISTRATORS (1995). Transfer pricing issues by their nature are highly factual and have
traditionally been one of the largest issues identified by the IRS in its audits of multinational corporations. The APA Program
is designed to resolve actual or potentialtransfer pricing disputes in a principled, cooperative manner, as an alternative to
the traditional examination process. An APA is a binding contract between the IRS and a taxpayer by which the IRS agrees
not to seek a transfer pricing adjustment under IRC § 482 for a covered transaction if the taxpayer files its tax return for a
covered year consistent with the agreed transfer pricing method(TPM).In2008,theIRSandtaxpayersexecuted68APAsand
amended 12 APAs.
Since 1991
, with the issuance of Rev. Proc. 91–22, 1991–1 C.B. 526, the IRS has offered taxpayers, through the APA Program,
the opport
unity to reach an agreement in advance of filing a tax return on the appropriate TPM to beapplied to related party
transacti
ons. In 1996, the IRS issued internal procedures for processing APA requests. Chief Counsel Directives Manual
(CCDM), ¶¶
42.10.10 — 42.10.16 (November 15, 1996).
1
Also in 1996, the IRS updated Rev. Proc. 91–22 with the release of
Rev. Proc.
96–53, 1996–2 C.B. 375.
2
In 1998, the IRS published Notice 98–65, 1998–2 C.B. 803,
3
which set forth streamlined
APA proce
dures for small business taxpayers. Then on July 1, 2004, the IRS updated and superseded both Rev. Proc. 96–53 and
Notice 98
–65 by issuing Rev. Proc. 2004–40, 2004–2 C.B. 50,
4
effective for all APA requests filed on or after August 19, 2004.
On December 19, 2005, the IRS again updatedthe procedural rules for processing and administering APAs with the release of
Rev. Proc. 2006–9, 2006–1 C.B. 278.
5
Rev. Proc. 2006–9 supersedes Rev. Proc. 2004–40 and is effective for all APA requests
filed on or after February 1, 2006. On May 21, 2008, the IRS released Rev. Proc. 2008–31, 2008–23 I.R.B. 1133, which revised
Rev. Proc. 2006–9 to describe further the types of issues that may be resolved in the APA process.
6
Specifically, Rev. Proc.
2008–31 added a new sentence to Section 2.01 of Rev. Proc. 2006–9, to advise that the APA process may be used to resolve any
issue for which transfer pricing principlesmay be relevant, such as attribution of profit to a permanent establishment under certain
U.S. income tax treaties, the amount of income effectively connected with the conduct of a U.S. trade or business, and the amount
of income derived from sources partly within and partly without the United States.
1
Current CCDM provisions regardingAPA procedures are available athttp://www.irs.gov/irm/part32/ch04s01.html.
2
Available athttp://www.irs.gov/pub/irs-irbs/irb96–49.pdf.
3
Available athttp://www.irs.gov/pub/irs-irbs/irb98–52.pdf.
4
Available athttp://www.irs.gov/pub/irs-irbs/irb04–29.pdf.
5
Available athttp://www.irs.gov/irb/2006–02_IRB/ar12.html.
6
Available athttp://www.irs.gov/pub/irs-irbs/irb08–31.pdf.
2009–15 I.R.B.760April 13, 2009

Advance Pricing Agreements
An APA generally combines an agreement between a taxpayer andthe IRS on an appropriate TPM for the transactions at issue
(Covered Transactions) with an agreement between the U.S. andone or more foreign tax authorities (under the authority of the
mutual agreement process of our income tax treaties) that the TPM is correct. With such a“bilateral” APA, the taxpayer ordinarily
is assured that the income associated with the Covered Transactions will not be subject to double taxation by both the U.S. and
the foreign jurisdiction. The policy of the United States, as reflected in §§ 2.08 and 7 of Rev. Proc. 2006–9, is to encourage
taxpayers that enter the APA Program to seek bilateral or multilateral APAs when competent authority procedures are available
with respect to the foreign country or countries involved. However, the IRS may execute an APA with a taxpayer without
reaching a competent authority agreement (a “unilateral” APA).
A unilateral APA is an agreement between a taxpayer and the IRS establishing an approved TPM for U.S. tax purposes. A
unilateral APA binds the taxpayer and the IRS, but does not prevent foreign tax administrations fromtaking different positions on
the appropriate TPM for a transaction. As stated in § 7.07 of Rev. Proc. 2006–9, should a transaction covered by a unilateral
APA be subject to double taxation as the result of an adjustment by a foreign tax administration, the taxpayer may seek relief
by requesting that the U.S. Competent Authority consider initiating a mutual agreement proceeding pursuant to an applicable
income tax treaty (if any).
When a unilateral APA involves taxpayers operating in a countrythat is a U.S. treaty partner, information relevant to the APA
(including a copy of the APA and APA annual reports) may be provided to the treaty partner under normal rules and principles
governing the exchange of information under income tax treaties.
The APA Program
An IRS team headed by an APA team leader is responsible for the consideration of each APA. As of December 31, 2008, the
APA Program had 15 team leaders. The team leader is responsible for organizing the IRS APA team. The IRS APA team leader
arranges meetings with the taxpayer, secures whatever informationis necessary from the taxpayer to analyze the taxpayer’s related
party transactions and the available facts under the arm’s lengthstandard of IRC § 482 and the regulations thereunder, and leads
the discussions with the taxpayer.
The APA team generally includes an economist, an international examiner, LMSB field counsel, and, in a bilateral case, a
U.S. Competent Authority analyst who leads the discussions with the treaty partner. The economist may be from the APA
Program or the IRS field organization. As of December 31,2008, the APA Program had six economists on staff, plus one
economist manager. The APA team may also include an LMSB International Technical Advisor, other LMSB exam personnel,
and/or an Appeals Officer.
The APA Process
The APA process is voluntary. Taxpayers submit an application for an APA, together with a user fee as set forth in Rev. Proc.
2006–9, § 4.12. The APA process can be broken into five phases: (1)application; (2) due diligence; (3) analysis; (4) discussion
and agreement; and (5) drafting, review, and execution.
(1)A
pplication
In many APA cases, the taxpayer’s application is preceded by a pre-file conference with the APAstaff in which the taxpayer can
solicit the informal views of the APA Program. Pre-file conferences can occur on an anonymous basis, although a taxpayer must
disclose its identity when it applies for an APA. The APA Program has been requiring taxpayers interested in an APA under Rev.
Proc. 2008–31 to schedule a pre-file conference before submitting a formal APA application.
As part of a taxpayer’s APA application, the taxpayer must file the appropriate user fee on or before the due date, including
extensions, of the tax return for the first taxable year that the taxpayer proposes to be covered by the APA. (If the taxpayer
receives an extension to file its tax return, it must file its user fee no later than the actual filing date of the return.) Many taxpayers
file a user fee first and then follow up with a full application later. The procedures for pre-file conferences, user fees, and
applications can be found in §§ 3 and 4 of Rev. Proc. 2006–9.
The APA application can be a relatively modest document for small businesses. Section 9 of Rev. Proc. 2006–9 describes
the special APA procedures for small business taxpayers. For most taxpayers, however, the APA application is a substantial
document filling several binders. APA applications must be accompanied by a declaration, signed by an authorized corporate
officer, attesting to the accuracy and completeness of the information presented.
April 13, 20097612009–15 I.R.B.

The application is assigned to an APA team leader who is responsible for the case. The APA team leader’s first responsibility is to
organize the APA team. This involves contacting the appropriate LMSB International Territory Manager to secure the assignment
of an international examiner to the APA case and the LMSB Counsel’s office to secure a field counsel lawyer. In a bilateral case,
the U.S. Competent Authority will assign a U.S. Competent Authority analyst to the team. In a large APA case, the international
examiner may invite his or her manager and other LMSB personnel familiar with the taxpayer to join the team. If the APA may
affect taxable years in Appeals, the appropriate appellate conferee will be invited to join the team. In cases involving cost-sharing
arrangements, other complex intangibles and services transactions, or novel issues, the APA team leader contacts the Manager,
LMSB International Technical Advisors, to determine whether or not to include a technical advisor on the team.
The APA team leader distributes copies of the APA application to all team members, makes initial contact with the taxpayer to
confirm the APA Program’s receipt of the taxpayer’s application, and sets up an opening conference with the taxpayer. Under
APA case management procedures revised in September 2008, theAPA office strives to (i) make initial contact with the taxpayer
within 21 days of its receipt of the APA application and (ii) holdthe opening conference within45 days from the date that the
APA team expects to begin actively working the case — the “Start Date” under the revised case management procedures. On
or about the opening conference, the APA team leader proposes a case plan appropriate for the case. Case plans are generally
targeted to complete a unilateral APA or, in the case of a bilateral APA, the recommended U.S. negotiating position within 12
months from the date the full application is filed. The targeted completion date in a particular case, however, may vary from the
12-month benchmark, depending on the complexity of the case, APA team workloads, taxpayer schedules, and other factors. Case
plans are signed by both an APA manager and an authorized official of the taxpayer and, under the new APA case management
procedures, will generally be adhered to except in unforeseen orexceptional circumstances. Theactual median and average times
for completing unilateral and bilateral APAs, recommended negotiating positions for bilateral APAs, and APAs for small business
taxpayers are shown below in Tables 2, 5, and 11, respectively.
(2)D
ueDiligence
The APA team must satisfy itself that the relevant facts submittedby the taxpayer are complete and accurate. This due diligence
aspect of the APA is vital to the process.It is because of this due diligence that the IRS can reachadvance agreements with
taxpayers in the highly factual setting of transfer pricing.Due diligence can proceed in a number of ways. Typically, the APA
team leader will submit in advance of the opening conference a list of questions to the taxpayer for discussion at the conference.
The opening conference may result in additional questions and an agreement to meet one or more times in the future. These
questions and meetings are not an audit and are focused on the transfer pricing issues associated with the transactions in the
taxpayer’s application, or other transactionsthat the taxpayer and the IRS may agree to add.
(3)A
nalysis
A significant part of the analytical work associated with anAPA is done typically by the APA economist and/or an IRS field
economist assigned to the case. The analysis may result in the need for additional information. Once the IRS APA team has
completed its due diligence and analysis, it begins discussions with the taxpayer over the various aspects of the APA including the
covered transactions, the TPM, the selection of comparable transactions, asset intensity and otheradjustments, the appropriate
critical assumptions, the APA term, and other key issues. The APA team leader will discuss particularly difficult issues with his or
her managers, but generally the APA teamleader is empowered to negotiate the APA.
(4)D
iscussionandAgreement
The discussion and agreement phase differs for bilateral and unilateral cases. In a bilateral case, the discussions proceed in two
parts and involve two IRS offices — the APA Program and the U.S. Competent Authority. In thefirst part, the APA team will
attempt to reach a consensus with the taxpayer regarding the recommended position that the U.S.Competent Authority should
take in negotiations with its treaty partner. This recommended U.S. negotiating position is a paper drafted by the APA team leader,
reviewed by APA management, and signed by the APA Directorthat provides the APA Program’s view of the best TPM for
the Covered Transactions, taking into account IRC § 482 and the regulations thereunder, the relevant tax treaty, and the U.S.
Competent Authority’s experience with the treaty partner.
The experience of the APA office and the U.S. Competent Authority is that APA negotiations are likely to proceed more rapidly
with a foreign competent authority if the U.S. negotiating position is fully supported by the taxpayer. Consequently, the APA
office works together with the taxpayer in developing the recommended U.S. negotiating position. On occasion, the APA team
will agree to disagree with a taxpayer. In these cases, the APA office will send a recommended U.S. negotiating position to the
U.S. Competent Authority thatincludes elements with which the taxpayer does not agree. This disagreement is noted in the
paper. The APA team leader also solicits the views of the field members of the APA team, and, in the vast majority of APA
cases, the international examiner, LMSB field counsel, and other IRS field team members concur in the position prepared by
the APA team leader.
2009–15 I.R.B.762April 13, 2009

Once the APA Program completes the recommended U.S. negotiating position, the APA process shifts from the APA Program
to the U.S. Competent Authority. The U.S. Competent Authority analyst assigned to theAPA takes the recommended U.S.
negotiating position and prepares the final U.S. negotiating position, which is then transmitted to the foreign competent authority.
The negotiations with the foreign competent authority are conducted by the U.S. Competent Authority analyst, most often in
face-to-face negotiating sessions conducted periodicallythroughout the year. At the request of the U.S. Competent Authority,
APA Program staff may assist in the negotiations.
In unilateral APA cases, the discussions proceed solely betweenthe APA Program and the taxpayer. In a unilateral case, the
taxpayer and the APA Program must reachagreement to conclude an APA. As in bilateral cases, the APA team leader almost
always will achieve a consensus with the IRS field personnelassigned to the APA team regarding the final APA. Under APA
Program procedures, IRS field personnel assigned to a case are solicited formally for their concurrence in the final APA. This
concurrence, or any item in disagreement, is noted in a memorandum prepared by the APA team leader that accompanies the final
APA sent forward for review and execution.
(5)D
rafting,Review,andExecution
Once the IRS and the taxpayer reach agreement, the final APA is drafted. The APA Program has developed standard language
that is incorporated into every APA. Thecurrent version of this language is found in Attachment A. APAs are reviewed by the
APA Branch Chief and the APA Director. In addition, the teamleader prepares a summary memorandum for approval by the
Associate Chief Counsel (International) (ACC(I)). On March 1, 2001, the ACC(I) delegated to the APA Director the authority
to execute APAs on behalf of the IRS.SeeChief Counsel Notice CC–2001–016. The APA is executed for the taxpayer by an
appropriate corporate officer.
Model APA at Attachment A
[§ 521(b)(2)(B)]
Attachment A contains the current version of the model APA language.
The Current APA Office Structure, Composition, and Operation
In 2008, the APA office consisted of four branches, with Branches 1 and 3 staffed with APA team leaders and Branch 2 staffed
with economists based in Washington, D.C. Branch 4, the APA West Coast branch, is headquartered in Laguna Niguel, California,
with an additional office in San Francisco, and is staffed with both team leaders and economists.
Overall, the APA staff decreased from 37 at the end of 2007 to33 at the end of 2008. The decrease of four resulted from the
departure of five team leaders, a branch chief, and the APA Director, along with the addition of one team leader, an economist,
and a paralegal.
As of December 31, 2008, the APA staff was as follows:
April 13, 20097632009–15 I.R.B.

Consistent with the decrease in APA headcount from the end of 2007 to the end of 2008, total APA staffing measured by hours fell
in 2008 compared to 2007. Such decrease was in proportion, however, to the decrease in the number of total staff (approximately
10%). The change in APA professional staffing levelsover the last six years is reflected in the table below.
Hours of APA attorneys, economists, and paralegal staff by year (excluding holiday and leave):
APAIssue/I
ndustryCoordinationTeams
In May 2005, the IRS Chief Counsel announced a series of initiatives to improve APA Program performance. One initiative was
to increase specialization within the office by creating teams of select individuals to handle all cases of a particular type. The
purpose was to increase efficiency, quality, and consistency.
The APA Program selected five categories of cases for specialization — cases involving cost sharing arrangements, financial
products, the semiconductor industry, the automotive industry, and the pharmaceutical industry. These categories were selected
because they each had a sufficient number of cases and commonality of issues to warrant their assignment to teams. Cases falling
within these five categories have historically accounted for about 40 percent of the APA Program’s case load and about half of its
total case time. At the end of 2008, cases within these five categories accounted for 64 of the 161 cases pending in the office that
were either unilateral APAs or bilateral APAs that had not yet been forwarded to Competent Authority.
2009–15 I.R.B.764April 13, 2009

Staffing of the coordination teams at the end of 2008 is indicated below:
The APA Program is mindful that the purpose of the coordination effort is not to impose the same transfer pricing method on all
taxpayers in an industry. The appropriate transfer pricing method remains a case-by-case determination, influenced by numerous
factors that are not common to all companies operating in a particular industry. While the coordination effort may result in the
APA Program promoting a commonapproach on some issues where appropriate, the Program expects that the greater industry
familiarity developed through the coordination effort will also allow it to develop a more sophisticated understanding of issues
that will permit more tailored approaches, thereby promoting more (appropriately) varied results than might otherwise be the case.
A
PATraining
In 2008, the APA office continued its trainingactivities. Training sessions addressed APA-related current developments, regulatory
developments, new APA office practices and procedures, and international tax law issues. The training materials used for new hires
are available to the public through the APA internet site athttp://www.irs.gov/businesses/corporations/article/0,,id=96221,00.html.
These materials do not constitute guidance on the application of the arm’s length standard and are not to be relied upon or cited
as precedent. Also available to the publicis a spreadsheet model that performs calculations in a Comparable Profits Method
(CPM) analysis, which APA economists developed in 2007 and which is now routinely used by the APA office when performing
APA analyses. An electronic version of the model may be obtained by contacting the APA office in Washington, D.C. at (202)
435–5220 (not a toll-free number).
April 13, 20097652009–15 I.R.B.

APA Program Statistical Data
[§ 521(b)(2)(C) and (E)]
The statistical information required under § 521(b)(2)(C) is contained in Tables 1 and 10 below; the information required under
§ 521(b)(2)(E) is contained in Tables 2 and 3 below. The 123 APA applications during 2008 were a record one-year high for the
Program, with no previous yearreaching 110 applications.
TABLE 1: APA APPLICATIONS, EXECUTED APAs, AND PENDING APAs
UnilateralBilateralMultilateral
Year
Total
Cumulative
Total
APA applications filed during 2008
35
88123
1,252
All APAs executed
7
Year 200814
51
368841
1991–2007
350
41310773
APA renewals executed during 2008
5
1924233
APAs revised or amended during
2008
6612
53
Pending requests for APAs
54
249303
Pending requests for new APAs44167211
Pending requests for renewal APAs108292
APAs canceled or revoked0119
APAs withdrawn336132
TABLE 2: MONTHS TO COMPLETE APAs
Months to Complete Advance Pricing Agreements in 2008
All NewAll RenewalsAll Combined
Average38.6Average27.6Average34.7
Median37.1Median26.0Median29.4
Unilateral
New
Unilateral
Renewals
Unilateral
Combined
Average23.7Average17.6Average
21.5
Median18.1Median20.2Median19.2
Bilateral/Multilateral
New
Bilateral/Multilateral
Renewals
Bilateral/Multilateral
Combined
Average42.4Average30.2Average38.1
Median38.4Median26.0Median
35.9
7
“All APAs executed” includes APA renewals, but not APAs revised or amended.
2009–15 I.R.B.766April 13, 2009

TABLE 3: APA COMPLETION TIME – MONTHS PER APA
Months
Number
of APAsMonths
Number
of APAsMonths
Number
of APAs
126
6
51
227
1
52
328
3
53
1
429
3
54
5
30
1552
6
1
3156
2
71
32
2571
83358
93459
10
1
3560
11
2
36
3
61
12
2
3762
13
1
38
3
63
143964
1
1540
1
65
164166
1742
4
67
18
2
43
2
68
19
1
4469
20
2
45
2
70
21
3
46
1
71
22
1
4772
2348
1
73
3
24
1
49
2
74
25
4
50110–120
1
TABLE 4: RECOMMENDED NEGOTIATING POSITIONS
Recommended Negotiating Positions Completed in 200849
Table 5: MONTHS TO COMPLETE RECOMMENDED NEGOTIATING POSITIONS
NewRenewal
Combined
Average18.7Average18.4Average18.6
Median19.7Median14.0Median19.4
April 13, 20097672009–15 I.R.B.

TABLE 6: RECOMMENDED NEGOTIATING POSITIONS COMPLETION TIME – MONTHS PER APA
MonthsNumberMonthsNumberMonthsNumberMonthsNumber
112
4
23
4
34
1
213
2
24
2
35
314
7
25
3
36
415
1
2637
5
16
1
27
1
38
6172839
71
18
1
29
1
40
8
2
19
3
3041
9
1
20
1
3142
1
1021
4
32
1
43
11
3
22
4
3344
Tables 7 and 8 below show how long each APA request pending at the end of 2008 has been in the system as measured from
the filing date of the APA submission. The numbers for pending unilateral and bilateral cases differ from the numbers
in Table 1 because Tables 7 and 8 reflect only cases for which submissions have been received, while Table 1 includes
any case for which a user fee has been paid.
TABLE 7: UNILATERAL APAs – TIME IN INVENTORY – MONTHS PER APA
Months
Number
of APAsMonths
Number
of APAsMonths
Number
of APAsMonths
Number
of APAs
1
472
13
3
19
2
1
8
1
1420
3
2
9
4
15
1
21
4
2
10
2
1622
52
11
2
1723–29
3
6512518
1
30+
4
TABLE 8: BILATERAL APAs – TIME IN INVENTORY – MONTHS PER APA
Months
Number
of APAsMonths
Number
of APAsMonths
Number
of APAsMonths
Number
of APAs
1
10
25
3
49
1
73
1
2
4
265074
3
4
27
1
51
3751
4
7
28
6
5276
59
29
2
53
177
2009–15 I.R.B.768April 13, 2009

Months
Number
of APAsMonths
Number
of APAsMonths
Number
of APAsMonths
Number
of APAs
6
6
30
1
5478
79
31
255
79
2
8
3
32
4
56
2
80
9
13
33
257
81
10
8
34
1
58
3
82
1
11
6
35
2
5983
1
12
8
36
6
6084
13
7
37
2
6185
14
4
38
3
62
1
86
1553956387
16
4
40
1
6488
17
4
41
2
6589
18
4
42
1
6690
19543
1
6791
1
20
3
44
1
6892
21
10
45
4
6993
22
3
46
2
7094
23
6
47
3
71
1
95
1
24
7
48
2
7296+
2
Of the 272 cases in the APA Program’s inventory shown in Tables 7 and 8, 111 cases (all of which are reflected in Table 8) are
bilateral cases that have been forwarded to the Competent Authority office for discussion with a treaty partner. This leaves 161
cases in the APA Program’s active inventory at the end of 2008 thatare either unilateral APAs (44 cases) or bilateral APAs for
which the APA Program has not yet completed a recommended negotiating position (117 cases).
The table below shows the average age (in months) of the 161 active cases in inventory at the end of 2008, along with a
comparison of the number of active cases and their average ageat year-end for each year back to 2003. The table also shows the
same information for cases that were at least 6-months old or 1-year old (the latter being a subset of the former) at the end of each
year to allow comparison withoutpotential distortions caused by year-to-year variations in the number of cases received in the
latter half or during the course of the year. The build-up in inventory during 2008 primarily reflects the high turnover in APA
personnel combined with the record number of new APA applications during the year.
TABLE 9: NUMBER AND AVERAGE AGE OF ACTIVE CASES IN INVENTORY AT YEAR-END
200320042005200620072008
Active cases106130133110
105
161
Average age (months)
15.115.2
13.210.69.110.2
Active cases 6+ months78106878166110
Average age (months)19.417.8
18.5
13.013.0
13.5
April 13, 20097692009–15 I.R.B.

200320042005200620072008
Active cases 1+ year4660
55
3227
51
Average age (months)26.824.223.319.4
18.5
18.7
TABLE 10: SMALL BUSINESS TAXPAYER APAs
Small Business Taxpayer APAs Completed in 200815
New12
Renewals3
Unilateral4
Bilateral11
TABLE 11: MONTHS TO COMPLETE SMALL BUSINESS TAXPAYER APAs
Months to Complete Small Business Taxpayer APAs in 2008
NewRenewal
Combined
Average30.2Average16.0Average27.4
Median28.3Median20.8Median
25.9
TABLE 12: INDUSTRIES COVERED
8
Industry Involved – NAICS CodesNumber
Wholesale trade, durable goods – 42116–18
Computer and electronic product manufacturing – 33410–12
Miscellaneous manufacturing – 33910–12
Electronic equipment, appliance and component manufacturing – 335
7–9
Transportation equipment manufacturing – 3364–6
Chemical manufacturing – 325
4–6
Professional, scientificand technical services – 545
4–6
Food manufacturing – 3111–3
Securities, commodity contracts and other intermediary and related activities – 523
1–3
Motor vehicle and parts dealers – 4411–3
General merchandise stores – 452
1–3
Beverage and tobacco manufacturing – 3121–3
Apparel manufacturing – 315
1–3
Air transportation – 4811–3
Machinery manufacturing – 3331–3
Plastics and rubber products manufacturing – 3261–3
8
The categories in this table are drawn from the North American Industry Classification System (NAICS), which has replaced the U.S. Standard Industrial Classification (SIC) system. NAICS
was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America.
2009–15 I.R.B.770April 13, 2009

Industry Involved – NAICS CodesNumber
Health and personal care stores – 4461–3
Oil and gas extraction – 2121–3
Accommodation – 7211–3
Trades or Businesses
[§ 521(b)(2)(D)(i)]
The nature of the relationships between the related organizations, trades, or businesses covered by APAs executed in 2008 is
set forth in Table 13 below:
TABLE 13: NATURE OF RELATIONSHIPS BETWEEN RELATED ENTITIES
RelationshipNumber of APAs
Foreign Parent – U.S. Subsidiary (-ies)
52
Unilateral13
Bilateral39
U.S. Parent – Foreign Subsidiary (-ies)≤17
Unilateral≤3
Bilateral14
Foreign Company and U.S. branch(es)≤3
Unilateral≤3
Bilateral≤3
Covered Transactions
[§ 521(b)(2)(D)(ii)]
The controlled transactions covered by APAs executedin2008aresetforthinTables14and15below:
TABLE 14: TYPES OF COVERED TRANSACTIONS
Transaction TypeNumber
Sale of tangible property into the U.S.44
Performance of services by U.S. entity19
Performance of services by Non-U.S. entity12
Use of intangible property by Non-U.S. entity11
Use of intangible property by U.S. entity10
Sale of tangible property from the U.S.
5
R&D cost sharing≤3
Financial products — U.S. branch of foreign company≤3
April 13, 20097712009–15 I.R.B.

TABLE 15: TYPES OF SERVICES INCLUDED IN COVERED TRANSACTIONS
Intercompany Services Involved in the Covered TransactionsNumber
Distribution26
Marketing23
Technical support services20
Logistical support16
Research and development13
Purchasing11
Sales support10
Product support9
Administrative9
Warranty services9
Management7
Headquarters costs7
Contract research and development
5
Assembly
5
Accounting≤3
Communication service≤3
Legal≤3
Billing services≤3
Testing and installation services≤3
Other≤3
Business Functions Performed and Risks Assumed
[§ 521(b)(2)(D)(ii)]
The general descriptions of the business functions performed and risks assumed by the organizations, trades, or businesses whose
results are tested in the Covered Transactions in the APAs executed in 2008 are set forth in Tables 16 and 17 below:
TABLE 16: FUNCTIONS PERFORMED BY THE TESTED PARTY
Functions PerformedNumber
Distribution functions61
Marketing functions39
Manufacturing
35
Transportation and warehousing22
Managerial, legal, accounting, finance, personnel, and other support services21
Purchasing and materials management18
Product service (repairs, etc.)12
Research and development11
2009–15 I.R.B.772April 13, 2009

Functions PerformedNumber
Product assembly and/or packaging11
Licensing of intangibles9
Product testing and quality control9
Technical training and tech support for salesstaff (including sub-distributors)9
Product design and engineering8
Training and support6
Process engineering
5
Engineering and construction related services≤3
Consulting services≤3
Mining and extraction≤3
Trading and risk management of financial products≤3
TABLE 17: RISKS ASSUMED BY THE TESTED PARTY
Risks AssumedNumber
Market risks, including fluctuations in costs, demand, pricing, and inventory87
Credit and collection risks64
General business risks (e.g., related to ownership of PP&E)
59
Financial risks, including interest rates and currency36
Product liability risks23
R&D risks7
Discussion
The majority of APAs have Covered Transactions that involve numerous business functions and risks. For instance, with respect
to functions, multinational groups that manufacture products typically conduct research and development, engage in product
design and engineering, manufacture the product, market and distribute the product, and perform support functions such as legal,
finance, and human resources services. Regarding risks, these groups are subject to market risks, R&D risks, financial risks,
credit and collection risks, product liability risks, and general business risks. In the APA evaluation process, a significant
amount of time and effort is devoted to understanding how the functions and risks are allocated among the controlled group of
companies that are party to the Covered Transactions.
In its APA submission, the taxpayer must provide a functional analysis. The functional analysis identifies the economic activities
performed, the assets employed, the economic costs incurred, and the risks assumed by each of the controlled parties. The
importance of the functional analysis derives from the economic theory positing that there is a positive relationship between risk
and expected return and that different functions provide different value and have different opportunity costs associated with them.
It is important that the functional analysis go beyond simply categorizing the tested party as, say, a distributor. It should provide
more specific information because, in the example of distributors, not all distributors undertake similar functions and risks.
April 13, 20097732009–15 I.R.B.

The functional analysis is critical in determining the appropriate TPM (including the selection of comparables, tested party, and
profit level indicator (PLI)). In conjunction with evaluating thefunctional analysis, the APA Program considers contractual terms
between the controlled parties, the allocation of risk betweenthe parties, the relevant economic conditions, and the type of
property or services at issue. In assessing contractual terms and risk allocations, the APA Program considers not only written
agreements between the parties, but also the economic substance of the transactions as indicated by the conduct of the parties over
time, the financial capacity of each party to fund losses arising from risks, and the managerial or operational control each party
exercises over activities giving rise to risk. Relevant economic conditions reviewed often include the geographic market and level
of market in which the functions are performed, and the businesscycle or general economic condition of the industry under review.
The APA Program’s evaluation of the functional analysis also considers the assets or other resources employed by each controlled
party. In this evaluation, each party’s ownership or investment in valuable intangible assets is often an important consideration.
Related Organizations, Trades, or Businesses Whose Prices or Results are Tested to Determine
Compliance with APA Transfer Pricing Methods
[§ 521(b)(2)(D)(iii)]
The related organizations, trades, or businesses whose prices or results are tested to determine compliance wit
h TPMs prescribed
in APAs executed in 2008 are set forth in Table 18 below:
TABLE 18: RELATED ORGANIZATIONS, TRADES, OR BUSINESSES WHOSE PRICES OR RESULTS ARE TESTED
9
Type of OrganizationNumber
U.S. distributor44
Multiple tested parties
15
U.S. provider of services12
U.S. manufacturer12
Non-U.S. provider of services12
Non-U.S. distributor8
U.S. licensee of intangible property≤3
U.S. licensor of intangible property≤3
Non-U.S. manufacturer≤3
Non-U.S. licensor of intangible property≤3
Transfer Pricing Methods and the Circumstances Leading to the Use of Those Methods
[§ 521(b)(2)(D)(iv)]
TheTPMsusedinAPAsexecutedin2008aresetforthinTables19and20below:
TABLE 19: TRANSFER PRICING METHODS USED FOR TRANSFERS OF
TANGIBLE AND INTANGIBLE PROPERTY
10
TPM UsedNumber
CPM: PLI is operating margin38
CPM: PLI is Berry ratio9
9
“Multiple tested parties” includes covered transactions that utilize profit splits, CUPs, and CUTs.
10
PLIs used with the Comparable Profit Method of Treas. Reg. § 1.482–5, and as used in these TPM tables, are as follows: (1) operating margin (ratio of operating profit to sales); (2) Berry
ratio (ratio of gross profit to operating expenses); (3) gross margin (ratio of gross profit to sales); (4) markup on total costs (percentage markup ontotal costs); and (5) rate of return on assets
or capital employed (ratio of operating profit to operating assets).
2009–15 I.R.B.774April 13, 2009

TPM UsedNumber
CUT (intangibles only)8
CPM: PLI is markup on total costs6
Other
5
Residual profit split≤3
CPM: PLI is gross margin≤3
CPM: PLI is return on assets or capital employed≤3
CPM: PLI is other PLI≤3
Comparable profit split≤3
Cost with no markup≤3
Cost Plus Method (tangibles only)≤3
Resale Price Method (tangibles only)≤3
CUP (tangibles only) — based on published market data≤3
CUP (tangibles only) — not based on published market data≤3
TABLE 20: TRANSFER PRICING METHODS USED FOR SERVICES
TPM UsedNumber
Cost plus a markup9
CPM: PLI is markup on total costs8
CPM: PLI is operating margin
5
Other
5
CPM: PLI is Berry ratio≤3
Cost with no markup≤3
CPM: PLI is operating margin≤3
PM: PLI is return on assets≤3
Discussion
The TPMs used in APAs completed during 2008 were based on the section 482 regulations. Under Treas. Reg. § 1.482–3, the
arm’s length amount for controlled transfers of tangible property may be determined using the Comparable Uncontrolled Price
(CUP) Method, the Resale Price Method, the Cost Plus Method,the Comparable Profits Method (CPM), or the Profit Split
Method. Under Treas. Reg. § 1.482–4, the arm’s length amount for controlled transfers of intangible property may be determined
using the Comparable Uncontrolled Transaction (CUT) Method, the CPM, or the Profit Split Method. An “Unspecified Method”
may be used for transfers of either tangible or intangible property if it provides a more reliable result than the enumerated
methods under the best method rule of Treas. Reg. § 1.482–1(c).
For transfers involving the provision of services, Treas. Reg. § 1.482–2(b) provided that services performed for the benefit of
another member of a controlled group should bear an arm’s length charge, either deemed to be equal to the cost of providing the
services or an amount that would have been charged between independent parties. Generally effective beginning 2007, Temp.
Reg. § 1.482–9T provides that the arm’s length charge for controlled services transactions may be determined under the Services
Cost Method, the Comparable Uncontrolled Services Price (CUSP) Method, the Gross Services Margin Method, the Cost of
Services Plus Method, the CPM, the Profit Split Method, oran Unspecified Method. In addition, Treas. Reg. § 1.482–2(a)
provides rules concerning the proper treatment of loans or advances.
April 13, 20097752009–15 I.R.B.

Treas. Reg. § 1.482–7 provides rules for qualified cost sharing arrangements under which the parties agree to share the costs of
developing intangibles in proportion to their shares of reasonably anticipated benefits. APAs involving cost sharing arrangements
generally address both the method of allocating costs among the parties as well as determining the appropriate amount of the
“buy-in” payment due for the transfer of pre-existing intangibles to the controlled participants. In 2008, the APA Program
completed its recommendations on three or fewer bilateral cost sharing/buy-in cases and sent thoseon to Competent Authority. The
buy-in cases included bothinitial and subsequent buy-in/buy-out transactions. The methods used in the completed and pending
buy-in cases included valuations based on discounted cash flowsand other types of analyses. In addition, the APA Program is
currently working on nearly ten cases involving cost sharing/buy-ins, split almost evenly between bilateral and unilateral.
In reviewing the TPMs applicable to transfers of tangible and intangible property reflected in Table 19, the majority of the APAs
followed the specified methods. However,several points should be made. The section 482 regulations note that for transfers
of tangible property, the CUP Method will generally be the mostdirect and reliable measure of an arm’s length price for the
controlled transaction if sufficiently reliable comparable transactions can be identified. Treas. Reg. § 1.482–3(b)(2)(ii)(A). As in
earlier years, it was the experience of the APA Program in 2008, that in the cases thatcame into the APA Program, sufficiently
reliable CUP transactions were difficult to find.
Similar to the CUP Method, for transfers of intangible property the CUT Method will generally provide the most reliable measure
of an arm’s length result if sufficiently reliable comparablesmay be found. Treas. Reg. § 1.482–4(c)(2)(ii). It has generally been
difficult to identify external comparables, and APAs using the CUT Method tend to rely on internal transactions between the
taxpayer and unrelated parties. In 2008, nine Covered Transactions utilized the CUT TPM.
The Resale Price Method was applied in 2008 in three or fewer APAs. See Treas. Reg. § 1.482–3(c), (d).
The CPM is frequently applied in APAs. That is because reliable public data on comparable business activities of independent
companies may be more readily available than potential CUP data, and comparability of resources employed, functions, risks, and
other relevant considerations are more likely to exist than comparability of product. The CPM also tends to be less sensitive than
other methods to differences in accounting practices between the tested party and comparable companies,e.g., classification of
expenses as cost of goods sold or operating expenses. Treas. Reg. §1.482–3(c)(3)(iii)(B) and –3(d)(3)(iii)(B). In addition, the
degree of functional comparability required to obtain a reliableresult under the CPM is generally less than that required under
the Resale Price or Cost Plus Methods. Lesser functional comparability is required because differences in functions performed
often are reflected in operating expenses, and thus taxpayers performing different functions may have very different gross profit
margins but earn similar levels of operating profit. Treas. Reg. § 1.482–5(c)(2).
Table 19 reflects 87 uses of the CPM (with varying PLIs) in Covered Transactions involving tangible or intangible property. In
some APAs, the CPM was also used concurrently with other methods.
The CPM has proven to be versatile in partbecause of the various PLIs that can be used in connection with the method. Reaching
agreement on the appropriate PLI has beenthe subject of much discussion in many ofthe cases, and it depends heavily on the
facts and circumstances. Some APAs have called for different PLIs to apply to different parts of the Covered Transactions or
applied a secondary PLI as a check against the primary PLI.
The CPM was also used regularly with services as the Covered Transactions in APAsexecuted in 2008. There were at least 19
services Covered Transactions using the CPM Method with various PLIs according to thespecific facts of the taxpayers involved.
A small number of the services-related APAs completed in 2008 applied the new Services Cost Method under the § 1.482–9T
regulations. Table 20 reflects the methods used to determine the arm’s length results for APAs involving services transactions.
In 2008, 11 APAs involving tangible or intangible property used the Residual Profit Split Method. Treas. Reg. § 1.482–6(c)(3). In
residual profit split cases, routine contributions by the controlled parties are allocated routine market returns, and the residual
income is allocated among the controlled taxpayers based upon the relative value of their contributions of non-routine intangible
property to the relevant business activity.
Profit splits have also been used in a number of financial product APAs in which the primary income-producing functions
are performed in more than one jurisdiction.
2009–15 I.R.B.776April 13, 2009

Critical Assumptions
[§ 521(b)(2)(D)(v)]
Critical Assum
ptions used in APAs executed in 2008 are described in Table 21 below:
TABLE 21: CRITICAL ASSUMPTIONS
Critical Assumptions involving the following:Number of APAs
Material changes to the business67
Material changes to tax and/or financial accounting practices67
Assets will remain substantially same18
Changes in affiliated companies≤3
Minimum sales volume≤3
Currency fluctuations≤3
Sales territories substantially same≤3
Sales projections or expectations≤3
Returns based on accurate financial data≤3
Changes involving anti-dumping/countervailing duties≤3
Major regulatory changes≤3
Major technological changes≤3
Changes in market shares≤3
Use of mark-to-market method≤3
Interest rate changes≤3
Other≤3
Discussion
APAs include critical assumptions upon which their respective TPMs depend. A critical assumption is any fact (whether or not
within the control of the taxpayer) related to the taxpayer, a third party, an industry, or business and economic conditions, the
continued existence of which is material to the taxpayer’s proposed TPM. Critical assumptions might include, for example, a
particular mode of conducting business operations, a particularcorporate or business structure, or a range of expected business
volume. Rev. Proc. 2006–9, § 4.05. Failure to meet a critical assumption may render an APA inappropriate or unworkable. Most
APAs contain only the standard criticalassumption language set forth in Appendix B of the Model APA (Attachment A to this
Announcement and Report). Where appropriate, additional critical assumption language may be added but the APA Program
generally seeks to limit additionalcritical assumption language to objective, measurable benchmarks.
A critical assumption may change or fail to materialize due to changes in economic circumstances, such as a fundamental and
dramatic change in the economic conditions of a particular industry. In addition,a critical assumption may change or fail to
materialize due to a taxpayer’s actions that are initiated for good faith business reasons, such as a change in business strategy,
mode of conducting operations, or the cessation or transfer of a business segment or entity covered by the APA.
If a critical assumption has not been met, the APA may be revisedby agreement of the parties. If such an agreement cannot be
achieved, the APA is canceled. If a critical assumption has not beenmet, the taxpayer must notify and discuss the APA terms with
the Service, and, in the case of a bilateral APA, competent authority consideration is initiated. Rev. Proc. 2006–9, § 11.05, 11.06.
April 13, 20097772009–15 I.R.B.

Sources of Comparables, Selection Criteria, and the Nature of Adjustments to Comparables and Tested Parties
[§ 521(b)(2)(D)(v), (vi), and (vii)]
The sources of comparables, selection criteria, and rationale used in determining the selection criteria for APAs executed in
2008 are described in Tables 22 through 24 below. Various formulas for making adjustments to comparables are included as
Attachment B.
TABLE 22: SOURCES OF COMPARABLES
Comparable Sources
Number of Times This
Source Used
Compustat61
Disclosure
15
No Comparables used13
Mergent9
Worldscope6
Taxpayer’s information on competition6
Moody’s4
Other4
Taxpayer’s other information≤3
Japanese Accounts and Data on Enterprises (“JADE”)≤3
Osiris≤3
Standard and Poor’s≤3
Compact D≤3
Korean KIS Line≤3
Amadeus≤3
Bloomberg≤3
Sources of comparables unknown or unidentified≤3
Japan Company Handbook≤3
TABLE 23: COMPARABLES SELECTION CRITERIA
Selection Criteria Considered
Number of Times This
Criterion Used
Comparable functions
85
Comparable risks
59
Comparable industry49
Comparable intangibles39
Comparable products37
Comparable terms17
2009–15 I.R.B.778April 13, 2009

TABLE 24: ADJUSTMENTS TO COMPARABLES OR TESTED PARTIES
AdjustmentNumber of Times Used
Balance sheet adjustments
Inventory
51
Payables
50
Receivables
50
Property, plant, equipment4
Other≤3
Accounting adjustments
LIFO to FIFO inventory accounting33
Other20
Accounting reclassifications (e.g., from COGS to operating expenses)6
Profit level indicator adjustments (used to “back into” one PLI from another PLI)
Operating expense≤3
Miscellaneous adjustments
Goodwill value or amortization6
Other6
Foreign exchange≤3
Discussion
At the core of most APAs are comparables. The APA Program works closely with taxpayers to find the best and most reliable
comparables for each Covered Transaction. In some cases, CUPs or CUTs can be identified. In other cases, profit data on
comparable business activities of independent companies areused in applying the CPM or a Profit Split Method. Generally,
in the APA Program’s experience since 1991, CUPs and CUTs have been most often derived from the internal transactions of
the taxpayer.
For profit-based methods in which comparable business activities or functions of independent companies are sought, the APA
Program typically has selected them using a three-part process. First, a pool of companies with potentially comparable business
activities has been identified through broadsearches. From this pool, companies performing business activities that are clearly
not comparable to those of the tested party have been eliminatedthrough the use of quantitative and qualitative analyses,i.e.,
quantitative screens and review of business descriptions. Then,based on a review of available descriptive and financial data,
a set of comparable independent companies has been finalized. The comparability of the final set has then been enhanced by
adjusting their financial data.
S
ourcesofComparables
Comparables used in APAs can be U.S. or foreign, depending on the relevant market, the type of transaction being evaluated,
the availability of relevant data, and the results of the functional and risk analyses. In general, comparables have been located
by searching a variety of databases that provide data on U.S. publicly traded companies and on a combination of public and
private non-U.S. companies. Table 22 shows the various databases and other sources used in selecting comparables for
the APAs executed in 2008.
Although comparables were most often identified from the databases cited in Table 22, in some cases, comparables were found
from other sources, such as comparables derived internally from taxpayer transactions with third parties.
S
electingComparables
Initial pools of potential comparables generally are derived from the databases using a combination of industry and keyword
identifiers. Then, the pool is refined using a variety of selection criteria specific to the transaction or business activity being
tested and the TPM being used.
April 13, 20097792009–15 I.R.B.

The listed databases allow for searches byindustrial classification, by keywords, or by both. These searches can yield a number of
companies whose business activities may or may not be comparable to those of the entity being tested. Therefore, comparables
based solely on industry classification or keyword searches are rarely used in APAs. Instead, the pool of comparables is examined
closely, and companies are selected based on a combination of screens, business descriptions, and other information such as
that found in the companies’ Annual Reports to shareholders and filings with the U.S. Securities and Exchange Commission
(SEC), company websites, and investment analyst reports.
Business activities of independent companies generally mustmeet certain basic comparability criteria to be considered
comparable. The independent company’s functions, risks, and economic conditions, and the property (product or intangible) and
services associated with the company’s business activities, must be comparable to those involved in the Covered Transaction.
Determining comparability requires judgment — the goal has been touse comparability criteria restrictive enough to eliminate
business activities that are not comparable, but yet not so restrictive as to leave no comparables remaining. The APA Program
normally has begun with relatively strict comparability criteria and then has relaxed them slightly if necessary to derive a pool
of reliable comparables. A determination on the appropriate size of the comparables set, as well as the business activities that
comprise the set, is highly fact-specific anddepends on the reliability of the results.
In addition, the APA Program, consistent with the section 482 regulations, generally has looked at the results of comparables over
a multi-year period. Often thishas been a three-year or a five-year period, but other periods are sometimes used depending on the
circumstances of the controlled transaction. Using a shorter period might result in the inclusion of comparables in different stages
of economic development or use of atypical years of a comparable due to cyclical fluctuations in business conditions.
Many Covered Transactions have been tested with comparables that have been chosen using additional criteria and/or screens.
These include sales level criteria and testsfor financial distress and product comparability. These common selection criteria and
screens have been used to increase the overall comparability of a group of companies and as a basis for further research. The sales
level screen, for example, has been used to remove companies that,due to their smaller size, might face fundamentally different
economic conditions from those of the transaction or business activities being tested. In addition, APA analyses have incorporated
selection criteria designed to identify andremove companies experiencing “financial distress” because of concerns that companies
in financial distress face unusual circumstances and operational constraints that render them not comparable to the business
activity being tested. These “financial distress” criteria may include an unfavorable auditor’s opinion, bankruptcy, failure to
comply with financial obligations (e.g., debt covenants), and, in certain circumstances, operating losses in a given number of years.
An additional important class of selection criteria is the development and ownership of intangible property. Most often,
comparables are sought to test the results of a business activity that does not employ significant intangible assets or engage in
intangible development. Thus, for example, in some cases in which the tested business activity is manufacturing conducted by
a controlled entity that does not own significant manufacturing intangibles or conduct research and development (R&D),
several criteria have been used to ensurethat the comparables similarly do not own significant intangibles or conduct R&D.
These selection criteria have included determining the importance of patents to a company or screening for R&D expenditures
as a percentage of sales. Similar selection criteria may be applied to ensure, where appropriate, that the comparables do not
own or develop significant marketing intangibles such as valuable trademarks. Again, quantitative screens related to identifying
comparables with significant intangible property generally have been used in conjunction with an understanding of the comparable
derived from publicly available business information.
Selection criteria relating to asset comparability and operating expense comparability have also been used at times. A screen of
property, plant, and equipment (PP&E) as a percentage of sales or assets, combined with a reading of a company’s SEC filings,
has been used to help ensure that distributors (generally lower PP&E) were not compared with manufacturers (generally higher
PP&E), regardless of their industry classification. Similarly, a test involving the ratio of operating expenses to sales has helped to
determine whether a company undertakes a significant marketing and distribution function.
Table 25 shows the number of times various screens were used in APAs executed in 2008:
TABLE 25: COMPARABILITY SCREENS
Comparability/Financial Distress ScreenTimes Used
Comparability screens used
R&D/ sales42
Sales33
Other22
2009–15 I.R.B.780April 13, 2009

Comparability/Financial Distress ScreenTimes Used
Foreign sales/ total sales9
PP&E/ sales
5
Operating expenses/ sales≤3
Non-startup or start-up≤3
PP&E/ total assets≤3
Financial distress
Bankruptcy38
Unfavorable auditor’s opinion37
Losses in one or more years19
Other9
AdjustingComparables
After the comparables have been selected, theregulations require that “[i]f there are material differences between the controlled
and uncontrolled transactions, adjustments must be made if the effect of such differences on prices or profits can be ascertained
with sufficient accuracy to improve the reliability of the results.” Treas. Reg. § 1.482–1(d)(2).In almost all cases involving
income-statement-based PLIs used in the CPM or the Residual Profit Split Method, certain “asset intensity” or “balance sheet”
adjustments for factors that have generallyagreed-upon effects on profits are calculated. In addition, in specific cases, additional
adjustments are performed to improve reliability.
The most common balance sheet adjustments used in APAs are adjustments for differences in accounts receivable, inventories,
and accounts payable. The APA Program generally has required adjustments for receivables, inventory, and payables based on the
principle that there is an opportunity cost for holding assets. For these assets, it is generally assumed that the cost is appropriately
measured by the interest rate on short-term debt.
To compare the profits of two business activities with different relative levels of receivables, inventory, or payables, the APA
Program estimates the carrying costs of eachitem and adjusts profits accordingly. Although different formulas have been used in
specific APA cases, Attachment B presents one set of formulas used in many APAs. Underlying these formulas are the notions
that (1) balance sheet items normally should be expressed as mid-year averages, (2) formulas should try to avoid using data items
that are being tested by the TPM (for example, if sales are controlled, then the denominator of the balance sheet ratio should not
be sales), (3) a short term interest rate should be used, and (4) an interest factor should recognize the average holding period of the
relevant asset. As in 2007, during the course of 2008, the APA Program used an interest rate equal to LIBOR (3 months) plus 200
basis points for purposes of calculatingadjustments for accounts receivable and accounts payable for U.S. companies in many
cases. In addition, the APA Program often used an interest rate equal to the Corporate Bonds (Moody’s) Baa rate for purposes
of calculating inventory adjustments for U.S. companies. However, the facts and circumstances surrounding a given case will
ultimately determine the reliability of making balance sheet adjustments and the selection of the most reliable interest rate.
The APA Program also requires that financial data be compared on a consistent accounting basis. For example, although financial
statements may be prepared on a first-in first-out (FIFO) basis, cross-company comparisons are less meaningful if one or more of
the comparables use last-in first-out (LIFO) inventory accounting methods. This adjustment directly affects costs of goods sold
and inventories, and therefore affects both profitability measures and inventory adjustments.
In some cases, the APA Program has made an adjustment to accountfor differences in relative levels of PP&E between a tested
business activity and the comparables. Ideally, comparables and the business activity being tested will have fairly similar relative
levels of PP&E, since major differences can be a sign of fundamentally different functions and risks. Typically, the PP&E
adjustment is made using a medium-term interest rate. Duringthe course of 2008, the APA Program often used the Corporate
Bonds (Moody’s) Baa rate as the interest rate for purposes of calculating adjustments for inventory and PP&E for U.S. companies.
Again, however, the facts and circumstancessurrounding a given case will ultimately determine the reliability of making balance
sheet adjustments and the selection of the most reliable interest rate.
Additional adjustments used less frequently include those for differences in other balance sheet items, operating expenses, R&D,
or currency risk. Accounting adjustments, such as reclassifying items from cost of goods sold to operating expenses, are also
made when warranted to increase reliability. Often, data are not available for both the controlled and uncontrolled transactions
in sufficient detail to allow for these types of adjustments.
April 13, 20097812009–15 I.R.B.

The adjustments made to comparables or tested parties inAPAsexecutedin2008arereflectedinTable24above.
Ranges, Targets, and Adjustment Mechanisms
[§ 521(b)(2)(D)(viii)–(ix)]
The types of ranges, targets, and adjustment mechanisms usedin APAs executed in 2008 are described in Tables 26 and 27 below.
TABLE 26: RANGES AND TARGETS
11
Type of RangeNumber
Interquartile range62
Specific point (royalty)11
Other9
Full range≤3
Other range≤3
Specific point within CPM range (not floor or ceiling)≤3
Specific point (CUP)≤3
Specific point (gross profit split)≤3
Floor (i.e., result must be no less than x) or ceiling (i.e., result must be no more than x)≤3
TABLE 27: ADJUSTMENTS WHEN OUTSIDE THE RANGE
Adjustment mechanismNumber
Taxpayer makes an adjustment: to closest edge of multi-year average43
Taxpayer makes an adjustment: to specified point or royalty rate23
Taxpayer makes an adjustment: to closest edge of single year21
Taxpayer makes an adjustment: to median of current year≤3
Taxpayer makes an adjustment:to median of multi-year average≤3
Taxpayer makes an adjustment: to a specific dollar amount≤3
Other≤3
Discussion
Treas. Reg. § 1.482–1(e)(1)states that sometimes a pricing method will yield “asingle result that is the most reliable measure of
an arm’s length result.” Sometimes, however, a method may yield“a range of reliable results,” called the “arm’s length range.” A
taxpayer whose results fall within the arm’s length range will not be subject to adjustment.
11
The numbers do not include TPMs with cost or cost-plus methodologies.
2009–15 I.R.B.782April 13, 2009

Under Treas. Reg. § 1.482–1(e)(2)(i), such a range is normally derived by considering a set of more than one comparable
uncontrolled transaction of similar comparability and reliability. If these comparables are of very high quality, as defined in the
section 482 regulations, then under Treas. Reg. § 1.482–1(e)(2)(iii)(A), the arm’s length range includes the results of all of the
comparables (from the least to the greatest). However, the APA Program has only rarely identifiedcases meeting the requirements
for the full range. If the comparables are of lesser quality, then under Treas. Reg. § 1.482–1(e)(2)(iii)(B), “the reliability of the
analysis must be increased, when it is possible to do so, by adjusting the range through application of a valid statistical method to
the results of all of the uncontrolled comparables.” One such method, the “interquartile range,” is ordinarily acceptable, although
a different statistical method “may be applied if it provides a more reliable measure.” The “interquartile range” is defined as,
roughly, the range from the 25th to the 75th percentile of the comparables’ results. See Treas. Reg. § 1.482–1(e)(2)(iii)(C). The
interquartile range was used 62 times in 2008.
Up to 20 Covered Transactions reflected on Table 26 were tested against a single, specific result. Some APAs — deliberately
infrequent — specify not a point or a range, but a “floor” or a “ceiling.” When a floor is used, the tested party’s result must be
greater than or equal to some particular value. When a ceiling is used, the tested party’s result must be less than or equal to some
particular value. Three or fewer APAs executed in 2008 used a floor or a ceiling.
Some APAs look to a tested party’s results over a period of years (multi-year averaging) to determine whether a taxpayer has
complied with the APA. In 2008, rolling multi-year averaging was used for 11 Covered Transactions. Six of those used three-year
averages. Fourteen Covered Transactions used a cumulative multi-year average, while 35 Covered Transactions used term
averages and four Covered Transactions used partial-term averages.
A
djustments
Where a taxpayer’s actual transactions do not produce results that conform to the TPM, a taxpayer must nonetheless report its
taxable income in an amount consistent with the TPM (an APA primary adjustment), as further discussed in § 11.02 of Rev.
Proc. 2006–9. When the TPM specifies an arm’s length range, an APA primary adjustment is necessary only if the taxpayer’s
actual transactional result falls outside the specified range.
Under Treas. Reg. § 1.482–1(e)(3), if a taxpayer’s results fall outside the arm’s length range, theService may adjust the result “to
any point within the arm’s length range.” Accordingly, an APA may permit or require a taxpayer to make an adjustment after the
year’s end to put the year’s results within the range, or at the point specified by the APA. Similarly, to enforce the terms of an
APA, the Service may make such an adjustment. When the APA specifies a range, the adjustment is sometimes to the closest
edge of the range, and sometimes to another point such as the median of the interquartile range. Depending on the facts of each
case, automatic adjustments are not always permitted. APAs mayspecify that in such a case there will be a negotiation between
the competent authorities involved to determine whether and to what extent an adjustment should be made. APAs may permit
automatic adjustments unless the result is far outside the range specified in the APA. Thus, APAs provide flexibility and efficiency,
permitting adjustments when normal business fluctuations and uncertainties push the result somewhat outside the range.
APA Term and Rollback Lengths
[§ 521(b)(2)(D)(x)]
The various term lengths for APAs executed in 2008 are set forth in Table 28 below:
TABLE 28: TERMS OF APAs
APA Term in YearsNumber of APAs
2≤3
3≤3
4≤3
5
42
613
7≤3
8≤3
9≤3
10 or more
5
April 13, 20097832009–15 I.R.B.

The number of rollback years to which an APA TPM was applied in 2008 is set forth in Table 29 below:
TABLE 29: NUMBER OF YEARS COVERED BY ROLLBACK OF APA TPM
Number of Rollback YearsNumber of APAs
14
2
5
3≤3
4≤3
5ormore
≤3
Nature of Documentation Required
[§ 521(b)(2)(D)(xi)]
APAs executed in 2008 required that taxpayers provide various documents with their annual reports. These documents are
described in Table 30 below:
TABLE 30: NATURE OF DOCUMENTATION REQUIRED
Documentation
Number of
Times
Required
Statement identifying all material differences between Taxpayer’s business operations during APA Year
and description of Taxpayer’s business operations contained in Taxpayer’s request for APA, or if there
have been no such material differences, a statement to that effect
68
Description of any failure to meet Critical Assumptions or, if there have been none, a statement to
that effect
68
Statement identifying all material changes in Taxpayer’s accounting methods and classifications,
and methods of estimation, from those described or used in Taxpayer’s request for APA, or if there
have been none, statement to that effect
68
Copy of the APA68
Financial analysis demonstrating Taxpayer’s compliance with TPM
65
Organizational chart
65
Description of, reason for, and financial analysis of, any Compensating Adjustments with respect to
APA Year, including means by which any Compensating Adjustment has been or will be satisfied
64
Financial statements as prepared in accordance with U.S. GAAP60
Certified public accountant’s opinion that financial statements present fairly financial position of
Taxpayer and the results of its operations, in accordance with U.S. GAAP
57
Book-to-tax reconciliations11
Financial statements as prepared in accordance with a foreign GAAP10
Certified public accountant’s opinion that financial statements present fairly financial position of
Taxpayer and the results of its operations, in accordance with a foreign GAAP
7
Other4
Certified public accountant’s review of financial statements≤3
Profit & loss statement≤3
2009–15 I.R.B.784April 13, 2009

Documentation
Number of
Times
Required
Pertinent intercompany agreements≤3
Cash flow statement≤3
Form 5471 or 5472
≤3
Description of any matters economically or substantively related to the covered transactions, but that
are not subject to the APA
≤3
Foreign tax return≤3
Narrative description of taxpayer’s business≤3
Various work papers≤3
U.S. income tax return≤3
Approaches for Sharing of Currency or Other Risks
[§ 521(b)(2)(D)(xii)]
During 2008, there were 37 tested parties that faced financial risks, including interest rate and currency risks. In appropriate cases,
APAs may provide specific approaches for dealing with currency risk, such as adjustment mechanisms and/or critical assumptions.
Efforts to Ensure Compliance with APAs
[§ 521(b)(2)(F)]
As described in Rev. Proc. 2006–9, § 11.01, APA taxpayers are required to file annual reports to demonstrate compliance with the
terms and conditions of the APA. The filing and review of annual reports is a critical part of the APA process. Through annual
report review, the APA Program monitors taxpayer compliance with the APA on a contemporaneous basis. Annual report review
provides current information on the success or problems associated with the various TPMs adopted in the APA process.
All reports received by the APA Program are assigned to a designated APA team leader. Whenever possible, annual report reviews
are assigned to the team leader who negotiated the case, since that person will already be familiar with the relevant facts and terms
of the agreement. Other team leaders andeconomists may assist the assigned team leader as well. Once received by the APA
Program, the annual report is also sent to the field personnel with exam jurisdiction over the taxpayer.
The statistics for the review of APA annual reports are reflected in Table 31 below. As of December 31, 2008, there were 305
pending annual reports. In 2008, 336 reports were closed.
TABLE 31: STATISTICS OF ANNUAL REPORTS
Number of APA annual reports pending as of December 31, 2008
305
Number of APA annual reports closed in 2008336
Number of APA annual reports requiring adjustment in 2008
15
Number of taxpayers involved in adjustments9
Number of APA annual report cases over one-year old231
April 13, 20097852009–15 I.R.B.

Attachment A
Model APA — Based on Revenue Procedure 2006–9
ADVANCE PRICING AGREEMENT
between
[Insert Taxpayer’s Name]
and
THE INTERNAL REVENUE SERVICE
PARTIES
The Parties to this Advance Pricing Agreement (APA) are the Internal Revenue Service (IRS) and [Insert Taxpayer’s Name],
EIN
.
RECITALS
[Insert Taxpay
er Name] is the common parent of an affiliated group filing consolidated U.S. tax returns (collectively referred to
as “Taxpayer”)
, and is entering into this APA on behalf of itself and other members of its consolidated group.
Taxpayer’s pri
ncipal place of business is [City, State]. [Insert general description of taxpayer and other relevant parties].
This APA contai
ns the Parties’ agreement on the best method for determining arm’s-length prices of the Covered Transactions
under I.R.C. se
ction 482, any applicable tax treaties, and the Treasury Regulations.
{If renewal, add}[Taxpayer and IRS previously entered into an APA covering taxable years ending
to,
executed on
.]
AGREEMENT
The Parties agree as follows:
1.Covered Transactions.This APA applies to the Covered Transactions, as defined in Appendix A.
2.Transfer Pricing Method.Appendix A sets forth the Transfer Pricing Method (TPM) for the Covered Transactions.
3.Term. This APA applies to Taxpayer’s taxable years ending
through(APA Term).
4.Operation.
a. Revenue Procedure 2006–9 governs the interpretation, legal effect, and administration of this APA.
b. Nonfactual o
ral and written representations, within the meaning of sections 10.04 and 10.05 of Revenue Procedure 2006–9
(including any
proposals to use particular TPMs), made in conjunction with the APA Request constitute statements made in
compromise neg
otiations within the meaning of Rule 408 of the Federal Rules of Evidence.
5.Compliance.
a. Taxpayer must report its taxable income in an amount that isconsistent with Appendix A and all other requirements of this
APA on its timely filed U.S. Return. However, if Taxpayer’s timely filed U.S. Return for an APA Year is filed prior to, or no later
than 60 days after, the effective date of this APA, then Taxpayer must report its taxable income for that APA Year in an amount that
is consistent with Appendix A and all other requirements of this APA either on the original U.S. Return or on an amended U.S.
Return filed no later than 120 days after the effective date of this APA, or through such other means as may be specified herein.
b. {Insert when U.S. Group or Foreign Group contains more than one member.}[This APA addresses the arm’s-length
nature of prices charged or received in theaggregate between Taxpayer and ForeignParticipants with respect to the Covered
Transactions. Except as explicitly provided, this APA does notaddress and does not bind the IRS with respect to prices charged
or received, or the relative amounts of income or loss realized, by particular legal entities that are members of U.S. Group or
that are members of Foreign Group.]
c. For each taxable year covered by this APA (APA Year), if Taxpayer complies with the terms and conditions of this APA, then
the IRS will not make or propose any allocation or adjustment under I.R.C. section 482 to the amounts charged in the aggregate
between Taxpayer and Foreign Participant[s]with respect to the Covered Transactions.
2009–15 I.R.B.786April 13, 2009

d. If Taxpayer does not comply with the terms and conditions of this APA, then the IRS may:
i. enforce the terms and conditions of this APA and make or propose allocations or adjustments under I.R.C. section 482
consistent with this APA;
ii. cancel or revoke this APA under section 11.06 of Revenue Procedure 2006–9; or
iii. revise this APA, if the Parties agree.
e. Taxpayer must timely file an Annual Report (an original and four copies) for each APA Year in accordance with Appendix C
and section 11.01 of Revenue Procedure 2006–9. Taxpayer must file the Annual Report for all APA Years through the APA Year
ending [insert year] by [insert date]. Taxpayer must file the Annual Report for each subsequent APA Year by [insert month and
day] immediately following the close of that APA Year. (If any date falls on a weekend or holiday, the Annual Report shall be
due on the next date that is not a weekend or holiday.) The IRS may request additional information reasonably necessary to
clarify or complete the Annual Report. Taxpayer will provide such requested information within 30 days. Additional time may
be allowed for good cause.
f. The IRS will determine whether Taxpayer has complied with this APA based on Taxpayer’s U.S. Returns, Financial
Statements, and other APA Records, for the APA Term and any other year necessary to verifycompliance. For Taxpayer to
comply with this APA, an independent certified public accountant must{use the following or an alternative}render an opinion
that Taxpayer’s Financial Statements present fairly, in all material respects, Taxpayer’s financial position under U.S. GAAP.
g. In accordance with section 11.04 of Revenue Procedure 2006–9, Taxpayer will (1) maintain its APA Records, and (2) make
them available to the IRS in connection with an examination under section 11.03. Compliance with this subparagraph constitutes
compliance with the record-maintenanceprovisions of I.R.C. sections 6038A and 6038C for the Covered Transactions for any
taxable year during the APA Term.
h. The True Taxable Income within the meaning of Treasury Regulations sections 1.482–1(a)(1) and (i)(9) of a member of an
affiliated group filing a U.S. consolidated return will be determined under the I.R.C. section 1502 Treasury Regulations.
i.{Optional for US Parent Signatories}To the extent that Taxpayer’s compliance with this APA depends on certain acts of
Foreign Group members, Taxpayer will ensure thateach Foreign Group member will perform such acts.
6.Critical Assumptions.This APA’s critical assumptions, within the meaning of Revenue Procedure 2006–9, section 4.05, appear
in Appendix B. If any critical assumption has not been met, then Revenue Procedure 2006–9, section 11.06, governs.
7.Disclosure.This APA, and any background information related to this APA or the APA Request, are: (1) considered “return
information” under I.R.C. section 6103(b)(2)(C); and (2) not subject to public inspection as a “written determination” under I.R.C.
section 6110(b)(1). Section 521(b) of Pub. L. 106–170 provides that the Secretary of the Treasury must prepare a report for public
disclosure that includes certain specifically designated information concerning all APAs, including this APA, in a form that does
not reveal taxpayers’ identities, trade secrets, and proprietary or confidential business or financial information.
8.Disputes.If a dispute arises concerning the interpretation of this APA, the Parties will seek a resolution by the IRS Associate
Chief Counsel (International) to the extent reasonably practicable, before seeking alternative remedies.
9.Materiality.In this APA the terms “material” and “materially” will be interpreted consistently with the definition of “material
facts” in Revenue Procedure 2006–9, section 11.06(4).
10.Section Captions.This APA’s section captions, which appear initalics, are for convenience and reference only. The captions
do not affect in any way the interpretation or application of this APA.
11.Terms and Definitions. Unless otherwise specified, terms in the plural include the singular and vice versa. Appendix D
contains definitions for capitalized terms not elsewhere defined in this APA.
12.Entire Agreement and Severability.This APA is the complete statement of the Parties’ agreement. The Parties will sever,
delete, or reform any invalid or unenforceable provision in this APA to approximate the Parties’ intent as nearly as possible.
13.Successor in Interest.This APA binds, and inures to the benefitof, any successor in interest to Taxpayer.
14.Notice.Any notices required by this APA or Revenue Procedure 2006–9 must be in writing. Taxpayer will send notices to the
IRS at the address and in the manner set forth in Revenue Procedure 2006–9, section 4.11. The IRS will send notices to:
April 13, 20097872009–15 I.R.B.

Taxpayer Corporation
Attn: Jane Doe, Sr. Vice President (Taxes)
1000 Any Road
Any City, USA 10000
(phone:
)
15.Effective Date and Counterparts.This APA is effective starting on the date, or later date of the dates, upon which all Parties
execute this APA. The Parties may execute this APA in counterparts, with each counterpart constituting an original.
WITNESS,
The Parties have executed this APA on the dates below.
[Taxpayer Name in all caps]
By:
Date:,20
Jane Doe
Sr. Vice President (Taxes)
IRS
By:
Date:,20
Craig A. Sharon
Director, Advance Pricing Agreement Program
APPENDIX A
COVERED TRANSACTIONS AND TRANSFER PRICING METHOD (TPM)
1. Covered Transactions.
[Define the Covered Transactions.]
2. TPM.
{Note: If appropriate, adapt language from the following examples.}
[The Tested Party is.]
•CUP Method
The TPM is the comparable uncontrolled price (CUP) method. The Arm’s Length Range of the price charged for
is betweenandper unit.
•CUT Method
The TPM is the CU
T Method. The Arm’s Length Range of the royalty charged for the license ofis between
%and%of[Taxp
ayer’s, Foreign Participants’, or other specified party’s] Net Sales Revenue. [Insert definition of net
sales revenue
or other royalty base.]
•Resale Price Method (RPM)
The TPM is the resale price method (RPM). The Tested Party’s Gross Margin for any APA Year is defined as follows: the
Tested Party’s gross profit divided by its sales revenue (as those terms are defined in Treasury Regulations sections 1.482–5(d)(1)
and (2)) for that APA Year. The Arm’s Length Range is between
%and%, and the Median of the Arm’s Length
Range is
%.
2009–15 I.R.B.788April 13, 2009

•Cost Plus Method
The TPM is the cost plus method. The Tested Party’s Cost Plus Markup is defined as follows for any APA Year: the Tested
Party’s ratio of gross profit to production costs (as those terms are defined in Treasury Regulations sections 1.482–3(d)(1)
and (2)) for that APA Year. The Arm’s Length Range is between
%and%, and the Median of the Arm’s Length
Range is
%.
•CPM with Berry Ratio PLI
The TPM is the comparable profits method (CPM). The profit level indicator is a Berry Ratio. The Tested Party’s Berry
Ratio is defined as follows for any APA Year: the Tested Party’s gross profit divided by its operating expenses (as those terms
are defined in Treasury Regulations sections 1.482–5(d)(2) and (3)) for that APA Year. The Arm’s Length Range is between
and, and the Median of the Arm’s Length Range is.
•CPM using an Operating Margin PLI
The TPM is the comparable profits method (CPM). The profit level indicator is an operating margin. The Tested Party’s
Operating Margin is defined as follows for any APA Year: the Tested Party’s operating profit divided by its sales revenue (as
those terms are defined in Treasury Regulations section 1.482–5(d)(1) and (4)) for that APA Year. The Arm’s Length Range is
between
%and%, and the Median of the Arm’s Length Range is%.
•CPM using a Three-year Rolling Average Operating Margin PLI
The TPM is the comparable profits method (CPM). The profit level indicator is an operating margin. The Tested Party’s
Three-Year Rolling Average operating margin is defined as follows for any APA Year: the sum of the Tested Party’s operating
profit (within the meaning of Treasury Regulations section 1.482–5(d)(4) for that APA Year and the two preceding years, divided
by the sum of its sales revenue (within the meaning of Treasury Regulations section 1.482–5(d)(1)) for that APA Year and the two
preceding years. The Arm’s Length Range is between
%and%, and the Median of the Arm’s Length Range is%.
•Residual Profit Split Method
The TPM is the residual profit split method. [Insert description of routine profit level determinations and residual
profit-split mechanism].
[Insert additional provisions as needed.]
3. Application of TPM.
For any APA Year, if the results of Taxpayer’s actual transactions produce a [price per unit, royalty rate for the Covered
Transactions] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating
Margin for the Tested Party] within the Arm’s Length Range, then the amounts reported on Taxpayer’s U.S. Return must
clearly reflect such results.
For any APA year, if the results of Taxpayer’s actual transactions produce a [price per unit, royalty rate] [or] [Gross Margin,
Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin for the Tested Party] outside
the Arm’s Length Range, then amounts reported on Taxpayer’s U.S. Return must clearly reflect anadjustment that brings the
[price per unit, royalty rate] [or] [Tested Party’s Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year
Rolling Average Operating Margin] to the Median.
For purposes of this Appendix A, the “results of Taxpayer’s actual transactions” means the results reflected in Taxpayer’s and
Tested Party’s books and records as computed under U.S. GAAP [insert another relevant accounting standard if applicable], with
the following adjustments:
(a) [The fair value of stock-based compensation as disclosed in the Tested Party’s audited financial statements shall be treated as
an operating expense]; and
(b) To the extent that the results in any prior APA Year are relevant (for example, to compute a multi-year average), such results
shall be adjusted to reflect the amount of any adjustment made for that prior APA Year under this Appendix A.
4. APA Revenue Procedure Treatment
If Taxpayer makes a primary adjustment under the terms of this Appendix A, Taxpayer mayelect APA Revenue Procedure
Treatment in accordance with section 11.02(3) of Revenue Procedure 2006–9.
[Insert additional provisions as needed.]
April 13, 20097892009–15 I.R.B.

APPENDIX B
CRITICAL ASSUMPTIONS
This APA’s critical assumptions are:
1. The business activities, functions performed, risks assumed,assets employed, and financial and tax accounting methods and
classifications [and methods of estimation]of Taxpayer in relation to the Covered Transactions will remain materially the same as
described or used in Taxpayer’s APA Request. A mere change in business results will not be a material change.
[Insert additional provisions as needed.]
APPENDIX C
APA RECORDS AND ANNUAL REPORT
APA RECORDS
The APA Records will consist of:
1. All documents listed below for inclusion in the Annual Report,as well as all documents, notes, work papers, records, or other
writings that support the information provided in such documents.
ANNUAL REPORT
The Annual Report will include two copies of a properly completed APA Annual Report Summary in the form of Exhibit E to this
APA, one copy of the form bound with, and one copy bound separately from, the rest of the Annual Report. In addition, the
Annual Report will include a table of contents and the information and exhibits identified below, organized as follows.
1. Statements that fully identify,describe, analyze, and explain:
a. All material differences between any of the U.S. Entities’ business operations (including functions, risks assumed, markets,
contractual terms, economic conditions, property, services, and assets employed) during the APA Year and the description of
the business operations contained in the APA Request. If there have been no material differences, the Annual Report will
include a statement to that effect.
b. All material changes in the U.S. Entities’ accounting methods and classifications, and methods of estimation, from those
described or used in Taxpayer’s request for this APA. If any such change was made to conform to changes in U.S. GAAP (or
other relevant accounting standards), Taxpayer will specifically identify such change. If there has been no material change in
accounting methods and classifications or methods of estimation, the Annual Report will include a statement to that effect.
c. Any change to the Taxpayer notice information in section 14 of this APA.
d. Any failure to meet any critical assumption. If there hasbeen no failure, the Annual Report will include a statement
to that effect.
e. Any change to any entity classification for federal income taxpurposes (including any change that causes an entity to be
disregarded for federal income tax purposes) of any Worldwide Group member that is a party to the Covered Transactions or
is otherwise relevant to the TPM.
f. The amount, reason for, and financial analysis of any compensating adjustments under paragraph 4 of Appendix A and
Revenue Procedure 2006–9, section 11.02(3), for the APA Year, including but not limited to:
i. the amounts paid or received by each affected entity;
ii. the character (such as capital, ordinary, income, expense) and country source of the funds transferred, and the specific
affected line item(s) of any affected U.S. Return; and
iii. the date(s) and means by which the payments are or will be made.
g. The amounts, description, reason for,and financial analysis of any book-tax difference relevant to the TPM for the APA
Year, as reflected on Schedule M–1 or Schedule M–3 of the U.S. Return for the APA Year.
2. The Financial Statements, and any necessary account detailto show compliance with the TPM, with a copy of the independent
certified public accountant’s opinion required by paragraph 5(f) of this APA.
2009–15 I.R.B.790April 13, 2009

3. A financial analysis that reflects Taxpayer’s TPM calculations for the APA Year. The calculations must reconcile with and
reference the Financial Statements in sufficient account detail to allow the IRS to determine whether Taxpayer has complied
with the TPM.
4. An organizational chart for the Worldwide Group, revised annually to reflect all ownership or structural changes of entities
that are parties to the Covered Transactions or are otherwise relevant to the TPM.
5. A copy of the APA.
APPENDIX D
DEFINITIONS
The following definitions control for all purposes of this APA. The definitions appear alphabetically below:
TermDefinition
Annual ReportA report within the meaning of Revenue Procedure 2006–9, section 11.01.
APAThis Advance Pricing Agreement, which is an “advance pricing agreement” within the
meaning of Revenue Procedure 2006–9, section 2.04.
APA RecordsThe records specified in Appendix C.
APA RequestTaxpayer’s request for this APA datedincluding any amendments or
supplemental or additional information thereto.
Covered Transaction(s)This term is defined in Appendix A.
Financial StatementsFinancial statements preparedin accordance with U.S. GAAP and stated in U.S. dollars.
Foreign GroupWorldwide Group members that are not U.S. persons.
Foreign Participants[namethe foreign entities involved in Covered Transactions].
I.R.C.The Internal Revenue Code of 1986, 26 U.S.C., as amended.
Pub. L. 106–170The Ticket to Work and Work Incentives Improvement Act of 1999.
Revenue Procedure 2006–9Rev. Proc. 2006–9, 2006–1 C.B. 278.
Transfer Pricing Method (TPM)Atransfer pricing method within the meaning of Treasury Regulations section 1.482–1(b)
and Revenue Procedure 2006–9, section 2.04.
U.S. GAAPU.S. generally-accepted accounting principles.
U.S. GroupWorldwide Group members that are U.S. persons.
U.S. ReturnFor each taxable year, the “returns with respect to income taxes under subtitle A” that
Taxpayer must “make” in accordance with I.R.C. section 6012. {Or substitute for
partnership:For each taxable year, the “return” that Taxpayer must “make” in accordance
with I.R.C. section 6031.}
Worldwide GroupTaxpayer and all organizations, trades, businesses, entities, or branches (whether or not
incorporated, organized in the United States,or affiliated) owned or controlled directly or
indirectly by the same interests.
April 13, 20097912009–15 I.R.B.

APPENDIX E
APA ANNUAL REPORT SUMMARY FORM
The APA Annual Report Summary on the next page is a required APA Record. The APA Team Leader has supplied some of
the information requested on the form. Taxpayer is to supply the remaining information requested by the form and submit the
form as part of its Annual Report.
APA Annual
Report
SUMMARY
Department of the Treasury—
Internal Revenue Service
Office of Associate Chief Counsel
(International)
Advance Pricing Agreement Program
APA no.
Team Leader
Economist
Intl Examiner
CA Analyst
Taxpayer Name:
Taxpayer EIN:NAICS:
APA Term: Taxable years endingto.
Original APA [ ] Renewal APA [ ]
Annual Report due dates:
,200for all APA Years through APA Year ending in 200; for each APA Year
thereafter, on
[month and day] immediately following the close of the APA Year.
Principal foreign country(ies) involved in covered transaction(s):
Type of APA: [ ] unilateral [ ] bilateral with
Tested party is [ ] US [ ] foreign [ ] both
Approximate dollar volume of covered transactions (on an annual basis) involving tangible goods
and services:
[ ] N/A [ ] <$50 million [ ] $50–100 million [ ] $100–250 million [ ] $250–500 million
[ ] >$500 million
APA tests on (check all that apply):
[]annualbasis[]multi-year basis [ ] term basis
APA provides (check all that apply) a:
[ ] range [ ] point [ ] floor only [ ] ceiling only [ ] other
APA Information
APA provides for adjustment (check all that apply) to:
[ ] nearest edge [ ] median [ ] other point
2009–15 I.R.B.792April 13, 2009

APA date executed:,200
This APA Annual Report Summary is for APA Year(s) ending in 200and was filed on,
200
Check here [ ] if Annual Report was filed after original due date but in accordance with extension.
Has this APA been amended or changed? [ ] yes [ ] noEffective Date:
Has Taxpayer complied with all APA terms and conditions? [ ] yes [ ] no
Were all the critical assumptions met? [ ] yes [ ] no
Has a Primary Compensating Adjustment been made in any APA Year covered by this Annual
Report?
[ ] yes [ ] noIf yes, which year(s): 200
Have any necessary Secondary Compensating Adjustments been made? [ ] yes [ ] no
Did Taxpayer elect APA Revenue Procedure treatment? [ ] yes [ ] no
Any change to the entity classification of a party to the APA? [ ] yes [ ] no
Taxpayer notice information contained in the APA remains unchanged? [ ] yes [ ] no
APA Annual
Report
Information
(to be completed
by the Taxpayer)
Taxpayer’s current US principalplace of business: (City, State)
Financial analysis reflecting TPM calculations[ ] yes [ ] no
Financial statements showing compliance with TPM(s)[ ] yes [ ] no
Schedule M–1 or M–3 book-tax differences[ ] yes [ ] no
Current organizational chart of relevant portion of world-wide group[ ] yes [ ] no
Attach copy of APA[ ] yes [ ] no
Other APA records and documents included:
[The information required in the following section should be tailored to the particular case]
[]yes[]no
[]yes[]no
[]yes[]no
[]yes[]no
APA Annual
Report
Checklist of
Key Contents
(to be completed
by the Taxpayer)
[]yes[]no
Authorized RepresentativePhoneNumberAffiliation and Address
Contact
Information
April 13, 20097932009–15 I.R.B.

ATTACHMENT B
EXAMPLE FORMULAS FOR BALANCE SHEET ADJUSTMENTS
The formulas below provide examples of the balance sheet adjustment formulas used in the APA Program’s CPM spreadsheet
model.
12
The formulas below are applicable to the operating margin profit level indicator. The APA Program’s calculations
measure balance sheet intensity by reference to the denominator of the profit level indicator (e.g., for the Berry ratio, the
denominator used is operating expenses). Therefore, the formulas vary for each profit level indicator.
D
efinitionsofVariables:
AP= average accounts payable
AR= average trade accounts receivable, net of allowance for bad debt
cogs= cost of goods sold
INV= average inventory, stated on FIFO basis
opex= operating expenses (general, sales, administrative, and depreciation expenses)
PPE= property, plant, and equipment,net of accumulated depreciation
sales= net sales
h= average accounts payable or trade accounts receivable holding period, stated as a fraction of a year
i= interest rate
t= entity being tested
c= comparable
E
quations:
Example Assuming Profit Level Indicator is Operating Margin:
Receivables Adjustment (“RA”):RA = {[(AR
t
/ sales
t
)xsales
c
]-AR
c
}x{i/[1+(ixh
c
)]}
Payables Adjustment (“PA”):PA = {[(AP
t
/ sales
t
)xsales
c
]-AP
c
}x{i/[1+(ixh
c
)]}
Inventory Adjustment (“IA”):IA = {[(INV
t
/ sales
t
)xsales
c
]-INV
c
}xi
PP&E Adjustment (“PPEA”):PPEA = {[(PPE
t
/ sales
t
)xsales
c
] - PPE
c
}xi
Then Adjust Comparables as Follows:
adjusted sales
c
= sales
c
+RA
adjusted cogs
c
= cogs
c
+PA-IA
adjusted opex
c
= opex
c
- PPEA
Guidance Regarding Foreign
Base Company Sales Income;
Correction
Announcement 2009–30
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to final and tempo-
rary regulations
SUMMARY: This document contains cor-
rections to final and temporary regulations
(T.D. 9438, 2009–5 I.R.B. 387) that were
published in the Federal Register on Mon-
day December 29, 2008 (73 FR 79334) re-
lating to foreign base company sales in-
come.
DATES: The corrections are effective July
1, 2009.
FOR FURTHER INFORMATION
CONTACT: Ethan Atticks, (202)
622–3840 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final and temporary regulations
that are subject to these corrections are
12
Copies of the APA Program’s CPM spreadsheet model are available from the APA Program by calling (202) 435–5220 (not a toll-free number) or by writing totheOfficeofAssociate
Chief Counsel (International), Advance Pricing Agreement Program, Attn: CC:INTL:APA, MA2–266, 1111 Constitution Ave. NW, Washington DC, 20224.
2009–15 I.R.B.794April 13, 2009

under section 954 of the Internal Revenue
Code.
Need for Correction
As published the final and temporary
regulations (T.D. 9438) contain errors that
may prove to be misleading and are in need
of correction.
Correction of Publication
Accordingly, the publication of the final
and temporary regulations (T.D. 9438) that
were the subject of FR Doc. E8–30727 is
corrected as follows:
1. On page 79340, column 2, in the pre-
amble under paragraph caption Determi-
nation of Hypothetical Effective Tax Rate,
the first paragraph, line 8 of the paragraph,
the language “effective tax rate of tax.” is
corrected to read “effective tax rate.”.
2. On page 79340, column 3, in the
preamble under paragraph caption Deter-
mination of Hypothetical Effective Tax
Rate, lines 2, 3, and 4, the language “In
contrast, if a sales affiliate in the country
of manufacturing cantheoretically receive
certain tax relief by” is corrected to read
“In contrast, if a manufacturing branch
could receive tax relief with respect to
sales income derived from sources within
the country in whichthe manufacturing
branch is located by”.
3. On page 79341, column 3, in the
preamble, the first paragraph, the language
“Under the temporary regulations, if a
demonstrably greater amount of manufac-
turing activity with respect to the personal
property occurs in jurisdictions without
tax rate disparity relative to the sales or
purchase branch, the location of the sales
or purchase branch will be deemed to be
the location of manufacture of the per-
sonal property. In that case, the purchase
or sales activities with respect to the prop-
erty purchased or sold by or through the
sales or purchase branch of the CFC will
not, for purposes of determining FBCSI in
connection with the sale of that property,
be deemed to have substantially the same
tax effect as if a branch were a wholly
owned subsidiary corporation of the CFC.
Otherwise, the location of manufacture of
the personal property will be deemed to
be the location of a manufacturing branch
(or remainder) that has tax rate disparity
relative to the sales or purchase branch. In
that case, the purchase or sales activities
with respect to the property purchased or
sold by or through the sales or purchase
branch of the CFC will be deemed to have
substantially the same tax effect as if a
branch were a wholly owned subsidiary
corporation of the CFC, and that branch
will be treated as a separate corporation
for purposes of applying the regulations.”
is corrected to read “Under the tempo-
rary regulations, if a demonstrably greater
amount of manufacturing activity with
respect to the income derived by a sales
or purchase branch with respect to the
personal property occurs in jurisdictions
without tax rate disparity relative to that
sales or purchase branch, the location
of that sales or purchase branch will be
deemed to be the location of manufacture
of the personal property with respect to
the income derived by that sales or pur-
chase branch from the purchase or sale of
the property. In that case, the use of the
purchase or sales branch for purchase or
sales activities with respect to the prop-
erty purchased or sold by or through that
sales or purchase branch of the CFC will
not, for purposes of determining FBCSI
in connection with the income derived
by that sales or purchase branch from
the purchase or sale of that property, be
deemed to have substantially the same
tax effect as if a branch were a wholly
owned subsidiary corporation of the CFC.
Otherwise, the location of manufacture of
the personal property with respect to the
income derived by that sales or purchase
branch from the purchase or sale of that
property will be deemed to be the location
of a manufacturing branch (or remainder)
that has tax rate disparity relative to that
sales or purchase branch. In that case, the
use of the purchase or sales branch for pur-
chase or sales activities with respect to the
property purchased or sold by or through
that sales or purchase branch of the CFC
will, for purposes of determining FBCSI
in connection with the income derived by
that sales or purchase branch from the pur-
chase or sale of that property, be deemed to
have substantially the same tax effect as if
a branch were a wholly owned subsidiary
corporation of the CFC, and that branch
will be treated as a separate corporation
for purposes of applying the regulations.”.
4. On page 79342, column 1, in the pre-
amble under the paragraph caption Clar-
ifying Application of the Rule for Deter-
mining the Remainder of the CFC When
Activities are Performed in Multiple Lo-
cations, the first paragraph, line 18 of the
paragraph, the language “the CFC when
activities are preformed” is corrected to
read “the CFC when activities are per-
formed”.
§1.954–3 [Corrected].
5. On page 79344, column 1, under
amendatory instruction paragraph 2, item
3, line 5, the language “Example (3).” is
corrected to read “Examples (3),(6),and
(7).”.
6. On page 79345, column 3, paragraph
(a)(4)(iv)(d),Example 1(ii), line 3, the
language “to sale were undertaken by FS
through the” is corrected to read “to sale
had been undertaken by FS through the”.
7. On page 79346, column 1, paragraph
(a)(4)(iv)(d),Example 2(ii), line 3, the
language “to sale were undertaken by FS
through the” is corrected to read “to sale
had been undertaken by FS through the”.
8. On page 79346, column 1, paragraph
(a)(4)(iv)(d),Example 3(i), line 11, the
language “FS for use outside of FS’s coun-
try of” is corrected to read “FS to a related
person for use outside of FS’s country of”.
9. On page 79346, column 1, paragraph
(a)(4)(iv)(d),Example 3(ii), line 3, the
language “to sale were undertaken by FS
through the” is corrected to read “to sale
had been undertaken by FS through the”.
10. On page 79346, column 2, para-
graph (a)(4)(iv)(d),Example 4(ii), line 3,
the language “to sale were undertaken by
FS through the” is corrected to read “to
sale had been undertaken by FS through
the”.
11. On page 79346, column 3, para-
graph (a)(4)(iv)(d),Example 5(ii), line 3,
the language “to sale were undertaken by
FS through the” is corrected to read “to
sale had been undertaken by FS through
the”.
12. On page 79346, column 3, para-
graph (a)(4)(iv)(d),Example 6(ii), line 3,
the language “to sale were undertaken by
FS through the” is corrected to read “to
sale had been undertaken by FS through
the”.
13. On page 79347, column 1, para-
graph (a)(4)(iv)(d),Example 7(ii), line 3,
the language “to sale were undertaken by
FS through the” is corrected to read “to
sale had been undertaken by FS through
the”.
April 13, 20097952009–15 I.R.B.

14. On page 79347, column 2, para-
graph (a)(4)(iv)(d),Example 8(ii), line 1,
the language “to sale were undertaken by
FS through the” is corrected to read “to
sale had been undertaken by FS through
the”.
15. On page 79347, column 2, para-
graph (a)(4)(iv)(d),Example 8(ii), line 9,
the language “X, it is irrelevant to the sub-
stantial” is corrected to read “X, it is not
important to the substantial”.
16. On page 79347, column 2, para-
graph (a)(4)(iv)(d),Example 9(ii), line 3,
the language “to sale were undertaken by
FS1 or FS2” is corrected to read “to sale
had been undertaken by FS1 or FS2”.
17. On page 79347, column 3, para-
graph (a)(4)(iv)(d),Example 10(ii), line
3, the language “to sale were undertaken
by FS through the” is corrected to read “to
sale had been undertaken by FS through
the”.
18. On page 79348, column 1, para-
graph (a)(4)(iv)(d),Example 11(ii), line
3, the language “to sale were undertaken
by FS through the” is corrected to read “to
sale had been undertaken by FS through
the”.
19. On page 79348, column 1, para-
graph (b)(2)(i)(d), the language “[Re-
served]. For further guidance, see
§1.954–3(b)(2)(i)(d).” is corrected to read
“[Reserved].”.
20. On page 79348, column 2, fol-
lowing the language “Example (3).
[Reserved]. For further guidance, see
§1.954–3(b)(4)Example (3).”, the lan-
guage “Example (6). [Reserved].” is added
on the next line.
21. On page 79348, column 2, follow-
ing the new language “Example (6).[Re-
served].”, the language “Example (7).[Re-
served].” is added on the next line.
22. On page 79348, column 2, para-
graph (d), the last two lines, the language
“subsequent taxable years of the taxpayer.”
is corrected to read “subsequent taxable
years.”.
§1.954–3T [Corrected].
23. On page 79349, column 2, in para-
graph (b)(1)(ii)(c)(2),Example(i), line 18,
the language “effective rate imposed in
Country M on the” is corrected to read “ef-
fective rate of tax imposed in Country M
on the”.
24. On page 79349, column 3, para-
graph (b)(1)(ii)(c)(3)(i), a new sentence
is added after the first sentence to read
“This paragraph (b)(1)(ii)(c)(3)isapplied
separately with respect to the income de-
rived by each purchasing or selling branch
(or similar establishment) or purchasing or
selling remainder of the controlled foreign
corporation as provided under paragraphs
(b)(1)(i) and (b)(1)(ii) of this section and
§§ 1.954–3(b)(1)(i) and (b)(1)(ii).”.
25. On page 79350, column 2, line 2,
in paragraph (b)(1)(ii)(c)(3)(iii), the lan-
guage “construction with respect to that”
is corrected to read “construction with re-
spect to the income derived by a purchas-
ing or selling branch (or similar establish-
ment) or the purchasing or selling remain-
der of the controlled foreign corporation
in connection with the purchase or sale of
that”.
26. On page 79350, column 2, line 15,
in paragraph (b)(1)(ii)(c)(3)(iii), the lan-
guage “any, and that would, after apply-
ing” is corrected to read “any, that would,
after applying”.
27. On page 79350, column 2,
the second full sentence, in paragraph
(b)(1)(ii)(c)(3)(
iii), the language “The
tested sales location is the location where
the branch (or similar establishment) or
the remainder of the controlled foreign
corporation purchases or sells the per-
sonal property.” is corrected to read “The
tested sales location is the location of the
purchasing or selling branch (or similar
establishment) or the remainder of the con-
trolled foreign corporation by or through
which the purchasing or selling activities
are carried on with respect to the personal
property.”.
28. On page 79350, column 2, the
last line, in paragraph (b)(1)(ii)(c)(3)(iii),
the language “(b)(1)(ii)(c)(3)(v)Exam-
ples 4,5,and6of” is corrected to read
“(b)(1)(ii)(c)(3)(v)Examples 3,4,5,and
6of”.
29. On page 79350, column 3,
lines 13, 14, and 15, in paragraph
(b)(1)(ii)(c)(3)(iii), the language “apply
with respect to the sales income related to
that property and the use of the purchasing
or selling branch (or” is corrected to read
“apply with respect totheincomederived
by the tested sales location in connection
with the purchase or sale of that property
and the use of that purchasing or selling
branch (or”.
30. On page 79351, column 1, line
4, in paragraph (b)(1)(ii)(c)(3)(v),Exam-
ple 1(i), the language “branches. Employ-
ees of FS located in” is corrected to read
“branches. The activities of the remain-
der of FS in Country M do not indepen-
dently satisfy §1.954–3(a)(4)(i). Employ-
ees of FS located in”.
31. On page 79351, column 2, para-
graph (b)(1)(ii)(c)(3)(v),Example 3(ii),
lines 14, 15, 16, and 17, the language
“(b)(1)(ii)(c)(3)(iii)ofthissectionThe
tested sales location is Country M because
the remainder of FS performs the selling
activities with respect to Product X. The”
is corrected to read “(b)(1)(ii)(c)(3)(iii)of
this section. The tested sales location is
Country M because the selling activities
with respect to Product X are carried on
by the remainder of FS. The”.
32. On page 79351, column 3, para-
graph (b)(1)(ii)(c)(3)(v),Example 4,the
paragraph heading, the language “Manu-
facturing activities performed by multiple
branches, no branch independently sat-
isfies §1.954–3(a)(4)(i), selling activities
performed by remainder of the controlled
foreign corporation, remainder contri-
bution includes branch manufacturing
activities.” is corrected to read “Manu-
facturing activities performed by multiple
branches, no branch independently sat-
isfies §1.954–3(a)(4)(i), selling activities
carried on by remainder of the controlled
foreign corporation, remainder contri-
bution includes branch manufacturing
activities.”.
33. On page 79351, column 3, para-
graph (b)(1)(ii)(c)(3)(v),Example 4(ii),
the fourth sentence, the language “The
tested sales location is Country M because
the remainder of FS performs the selling
activities with respect to Product X.” is
corrected to read “The tested sales location
is Country M because the selling activities
with respect to Product X are carried on
by the remainder of FS.”.
34. On page 79351, column 3, para-
graph (b)(1)(ii)(c)(3)(v),Example 4(ii),
the last sentence, the language “There-
fore, the rules of paragraph (b)(1)(ii)(a)
of this section will not apply and neither
Branch A nor Branch B will be treated
as a separate corporation for purposes
of paragraph (b)(2)(ii) of this section
and §1.954–3(b)(2)(ii).” is corrected to
read “Therefore, the rules of paragraph
(b)(1)(ii)(a) of this section will not ap-
2009–15 I.R.B.796April 13, 2009

ply with respect to the income derived
by the remainder of FS in connection
with the sale of Product X, and neither
Branch A nor Branch B will be treated
as a separate corporation for purposes of
paragraph (b)(2)(ii) of this section and
§1.954–3(b)(2)(ii).”.
35. On page 79351, column 3, para-
graph (b)(1)(ii)(c)(3)(v),Example 5,the
paragraph heading, the language “Man-
ufacturing activities performed by mul-
tiple branches, no branch independently
satisfies §1.954–3(a)(4)(i), selling ac-
tivities performed by remainder of the
controlled foreign corporation and a sales
branch.” is corrected to read “Manufac-
turing activities performed by multiple
branches, no branch independently sat-
isfies §1.954–3(a)(4)(i), selling activities
carried on by remainder of the controlled
foreign corporation and a sales branch.”.
36. On page 79352, column 1, para-
graph (b)(1)(ii)(c)(3)(v),Example 5(i), the
first sentence, the language “The facts are
thesameasExample 3, except that selling
activities are also performed by Branch D
in Country D, and Country D imposes a
16% effective rate of tax on sales income.”
is corrected to read “The facts are the same
asExample 3, except that sales of Product
X are also carried on through Branch D in
Country D, and Country D imposes a 16%
effective rate of tax on sales income.”.
37. On page 79352, column 1, para-
graph (b)(1)(ii)(c)(3)(v),Example 5(ii),
the fifth sentence, the language “The re-
sults with respect to the remainder of FS in
thisExample 6are the same as inExample
3.” is corrected to read “The results with
respect to income derived by the remainder
of FS in connection with the sale of Prod-
uct X in thisExample 5are the same as in
Example 3.”.
38. On page 79352, column 1, in para-
graph (b)(1)(ii)(c)(3)(v),Example 5(ii),
the sixth sentence, the language “However,
paragraph (b)(1)(ii)(c)(3)(iii)ofthissec-
tion must also be applied with respect to
Branch D because Branch D performs sell-
ing activities with respect to Product X.”
is corrected to read “However, paragraph
(b)(1)(ii)(c)(3)(iii) of this section must also
be applied with respect to Branch D be-
cause the sale of Product X is also carried
on through Branch D.”.
39. On page 79352, column 1, para-
graph (b)(1)(ii)(c)(3)(v),Example 5(ii),
line 29, the language “rate of tax imposed
on the Branch D’s sales” is corrected to
read “rate of tax imposed on Branch D’s
sales”.
40. On page 79352, column 1, para-
graph (b)(1)(ii)(c)(3)(
v),Example 5(ii),
the last sentence, the language “Therefore,
the rules of paragraph (b)(1)(ii)(a)ofthis
section will not apply to Branch D and
neither Branch A nor Branch D will be
treated as a separate corporation for pur-
poses of paragraph (b)(2)(ii) of this sec-
tion and §1.954–3(b)(2)(ii).” is corrected
to read “Therefore, the rules of paragraph
(b)(1)(ii)(a) of this section will not ap-
ply with respect to the income derived by
Branch D in connection with the sale of
Product X and the use of Branch D to sell
Product X will not result in a branch being
treated as a separate corporation for pur-
poses of paragraph (b)(2)(ii) of this section
and §1.954–3(b)(2)(ii).”.
41. On page 79352, column 2, para-
graph (b)(1)(ii)(c)(3)(v),Example 6(ii),
the fourth sentence, the language “The
tested sales location is Country M because
the remainder of FS performs the selling
activities with respect to Product X.” is
corrected to read “The tested sales location
is Country M because the selling activities
with respect to Product X are carried on
by the remainder of FS.”.
42. On page 79352, column 3, para-
graph (b)(2)(i)(b) is corrected to read as
follows:
“(b)Activities treated as performed on
behalf of the remainder of corporation.(1)
With respect to purchasing or selling activ-
ities performed by or through the branch
or similar establishment, such purchas-
ing or selling activities will, with respect
to personal propertymanufactured, pro-
duced, constructed, grown, or extracted
by the remainder of the controlled foreign
corporation, be treated as performed on
behalf of the remainder of the controlled
foreign corporation.
(2) With respect to purchasing or sell-
ing activities performed by or through
the branch or similar establishment,
such purchasing or selling activities will,
with respect to personal property (other
than property described in paragraph
(b)(2)(i)(b)(1) of this section) purchased
or sold, or purchased and sold, by the
remainder of the controlled foreign cor-
poration (or any branch treated as the
remainder of the controlled foreign corpo-
ration), be treated as performed on behalf
of the remainder of the controlled foreign
corporation.”.
43. On page 79352, column 3, para-
graph (b)(2)(i)(c), the language “(c)
[Reserved]. For further guidance, see
§1.954–3(b)(2)(i)(c).” is corrected to read
“(c) through (e) [Reserved]. For further
guidance, see §1.954–3(b)(2)(i)(c)and
(e).”.
44. On page 79352, column 3, para-
graph (b)(2)(i)(d) is removed.
45. On page 79353, column 1, para-
graph (b)(2)(i)(e) is removed.
46. On page 79353, columns 1 and 2,
paragraph (b)(2)(ii)(b) is corrected to read
as follows:
“(b)Activities treated as performed on
behalf of the remainder of corporation.(1)
With respect to purchasing or selling activ-
ities performed by or through the branch
or similar establishment, such purchas-
ing or selling activities will, with respect
to personal property manufactured, pro-
duced, constructed, grown, or extracted
by the remainder of the controlled foreign
corporation, be treated as performed on
behalf of the remainder of the controlled
foreign corporation.
(2) With respect to purchasing or sell-
ing activities performed by or through
the branch or similar establishment,
such purchasing or selling activities will,
with respect to personal property (other
than property described in paragraph
(b)(2)(ii)(b)(1) of this section) purchased
or sold, or purchased and sold, by the
remainder of the controlled foreign cor-
poration (or any branch treated as the
remainder of the controlled foreign corpo-
ration), be treated as performed on behalf
of the remainder of the controlled foreign
corporation.”.
47. On page 79353, column 3, para-
graph (b)(4),Examples (4)through(7),
the language “[Reserved]. For further
guidance, see §1.954–3(b)(4)Examples
(4)through(7).” is corrected to read
“[Reserved]. For further guidance, see
§1.954–3(b)(4)Examples (4)and(5).”.
48. On page 79353, column 3, para-
graph (b)(4),Example 8(i), line 13, the
language “located in Country M perform
only sales” is corrected to read “located in
Country M carry on only sales”.
49. On page 79354, column 1, para-
graph (b)(4),Example 9, the paragraph
heading, the language “Manufactur-
ing activities performed by multiple
April 13, 20097972009–15 I.R.B.

branches, no branch independently sat-
isfies §1.954–3(a)(4)(i), selling activities
performed by remainder of the controlled
foreign corporation, branch manufac-
turing activities included in remainder
contribution.” is corrected to read “Manu-
facturing activities performed by multiple
branches, no branch independently sat-
isfies §1.954–3(a)(4)(i), selling activities
carried on by remainder of the controlled
foreign corporation, some branch manu-
facturing activities included in remainder
contribution.”.
50. On page 79354, column 1, para-
graph (b)(4),Example 9(i), the first sen-
tence, the language “FS, a controlled for-
eign corporation organized in Country M,
has two branches, Branch A and Branch
B, located in Country A and Country B
respectively.” is corrected to read “FS, a
controlled foreign corporation organized
in Country M, has three branches, Branch
A, Branch B, and Branch C, located in
Country A, Country B, and Country C re-
spectively.”.
51. On page 79354, column 1, para-
graph (b)(4),Example 9(i), line 33, the
language “Country B, provides quality
control and” is corrected to read “Country
B, provides quality control. Branch C,
through the activities of employees of FS
located in Country C, provides”.
52. On page 79354, column 1, para-
graph (b)(4),Example 9(i), the eleventh
sentence, the language “Country A im-
poses an effective rate of tax on sales in-
come of 12%, and Country B imposes an
effective rate of tax on sales income of
24%.” is corrected to read “Country A im-
poses an effective rate of tax on sales in-
come of 12%, Country B imposes an ef-
fective rate of tax on sales income of 24%,
and Country C imposes an effective rate of
tax on sales income of 25%.”.
53. On page 79354, column 1, para-
graph (b)(4),Example 9(i), the twelfth
sentence, the language “None of the re-
mainder of FS, Branch A, or Branch B in-
dependently satisfies §1.954–3(a)(4)(i).”
is corrected to read “None of the remainder
of FS, Branch A, Branch B, or Branch C in-
dependently satisfies §1.954–3(a)(4)(i).”.
54. On page 79354, column 1, para-
graph (b)(4),Example 9(i), the fourteenth
sentence, the language “Under the facts
and circumstances of the business, the ac-
tivities of the remainder of FS and Branch
A, if considered together, would not pro-
vide a demonstrably greater contribution
to the manufacture of Product X than the
activities of Branch B.” is corrected to read
“Under the facts and circumstances of the
business, the activities of the remainder of
FSandBranchA,ifconsideredtogether,
would not provide a demonstrably greater
contribution to the manufacture of Prod-
uct X than the activities of Branch B and
Branch C, if considered together.”.
55. On page 79354, columns 1 and
2, paragraph (b)(4),Example 9(ii), the
second sentence, the language “The re-
mainder of FS, Branch A, and Branch B
each provide a contribution through the ac-
tivities of employees to the manufacture
of Product X.” is corrected to read “The
remainder of FS, Branch A, Branch B,
and Branch C each provide a contribution
through the activities of employees to the
manufacture of Product X.”.
56. On page 79354, column 2, para-
graph (b)(4),Example 9(ii), the fourth sen-
tence, the language “The tested sales loca-
tion is Country M because the remainder
of FS performs the selling activities with
respect to Product X.” is corrected to read
“The tested sales location is Country M be-
cause the selling activities with respect to
Product X are carried on by the remainder
of FS.”.
57. On page 79354, column 2, para-
graph (b)(4),Example 9(ii), the fifth
sentence, the language “The location of
Branch B is the tested manufacturing lo-
cation because the effective rate of tax
imposed on FS’s sales income by Country
M (10%) is less than 90% of, and at least
5 percentage points less than, the effective
rate of tax that would apply to such income
in Country B (24%): and Branch B is the
only manufacturing branch that would,
after applying §1.954–3(b)(1)(ii)(b), be
treated as a separate corporation.” is cor-
rected to read “The location of Branch B
is the tested manufacturing location be-
cause the effective rate of tax imposed on
FS’s sales income by Country M (10%)
is less than 90% of, and at least 5 per-
centage points less than the effective rate
of tax that would apply to such income
in Country B (24%), and Country B has
the lowest effective rate of tax among the
manufacturing branches that would, after
applying §1.954–3(b)(1)(ii)(b), be treated
as a separate corporation.”.
58. On page 79354, column 2, para-
graph (b)(4),Example 9(ii), line nineteen
from the top of the column, the language
“Country A will be included in the” is cor-
rected to read “Country A by Branch A,
will be included in the”.
59. On page 79354, column 2, para-
graph (b)(4),Example 9(ii), a new sen-
tence is added between the sixth and sev-
enth sentences to read “The manufactur-
ing activities performed in Country C by
Branch C will be included in the contribu-
tion of Branch B for purposes of determin-
ing the location of manufacture of Product
X because the effective rate of tax imposed
on the sales income by Country M (10%) is
less than 90% of, and at least 5 percentage
points less than, the effective rate of tax
that would apply to such income in Coun-
try C (25%).”.
60. On page 79354, column 2, para-
graph (b)(4),Example 9(ii), the seventh
sentence, the language “Under the facts
and circumstances of the business, the
manufacturing activities of the remainder
of FS and Branch A, considered together,
would not provide a demonstrably greater
contribution to the manufacture of Prod-
uct X than the activities of Branch B.”
is corrected to read “Under the facts and
circumstances of the business, the manu-
facturing activities of the remainder of FS
and Branch A, considered together, would
not provide a demonstrably greater con-
tribution to the manufacture of Product X
than the activities of Branch B and Branch
C, considered together.”.
Guy R. Traynor,
Federal Register Liaison,
Publications & Regulations Br.,
Associate Chief Counsel
Procedure & Administration.
(Filed by the Office of the Federal Register on March 19,
2009, 8:45 a.m., and published in the issue of the Federal
Register for March 20, 2009, 74 F.R. 11843)
Guidance Regarding Foreign
Base Company Sales Income
Announcement 2009–31
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions and notice of public hearing; correc-
tion.
2009–15 I.R.B.798April 13, 2009

SUMMARY: This document contains cor-
rections to a notice of proposed rulemak-
ing (REG–150066–08, 2009–5 I.R.B. 423)
and notice of public hearing that was pub-
lished in theFederal Registeron Monday,
December 29, 2008 (73 FR 79421), relat-
ing to foreign base company sales income.
FOR FURTHER INFORMATION
CONTACT: Ethan Atticks, (202)
622–3840 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The notice of proposed rulemaking and
notice of public hearing that is subject to
these corrections are under section 954 of
the Internal Revenue Code.
Need for correction
As published the notice of proposed
rulemaking and notice of public hearing
contains errors that may prove to be mis-
leading and are in need of correction.
Correction of Publication
Accordingly, the publication of the no-
tice of proposed rulemaking and notice of
public hearing (REG–150066–08), which
was the subject of FR Doc. E8–30729, is
corrected as follows:
1. On page 79422, column 1, in the
preamble under the heading Background
and Explanation of Provision, the last sen-
tence, the language “The preamble to the
temporary regulationsexplains these pro-
posed regulations.” is corrected to read
“The preamble to the temporary regula-
tions explains the amendments.”
2. On page 79422, column 2, in the pre-
amble under the heading Comments and
Public Hearing, the first paragraph, line 3
the language “consideration will be give to
any written” is corrected to read “consider-
ation will be given to any written”.
3. On page 79422, column 3, in the pre-
amble under the heading Part 1—Income
Taxes, instructional paragraph 2, lines 5
and 6, the language “(b)(2)(ii)(e), (b)(4)
Example (3),(c),and(d),andaddingEx-
amples 8and9to” is corrected to read
“(b)(2)(ii)(e) and (b)(4)Example (3),and
addingExamples (8)and (9)to”.
4. On page 79423, column 1, §1.954–3,
the third line ofExample (8), the language
“(8)is the same as the text of §1.954–3T”
is corrected to read “(8) is the same as the
text of §1.954–3T(b)(4)”.
5. On page 79423, column 1, §1.954–3,
thethirdlineofExample (9), the lan-
guage “(9)is the same as the text of
§1.954–3T(b)(4)”.
Guy R. Traynor,
Federal Register Liaison,
Procedure & Administration,
Associate Chief Counsel
Publications & Regulations.
(Filed by the Office of the Federal Register on March 19,
2009, 8:45 a.m., and published in the issue of the Federal
Register for March 20, 2009, 74 F.R. 11888)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2009–32
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on April 13, 2009,
and would end on the date the court first
determines that the organization is not de-
scribed in section 170(c)(2) as more partic-
ularly set forth in section 7428(c)(1). For
individual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were the
basis for revocation.
Financially Strong America, Inc.
(fka Consumer Debt Solutions, Inc.)
Highland, NY
Section 7428(c) Validation
of Certain Contributions
Made During Pendency
of Declaratory Judgment
Proceedings
Announcement 2009–33
This announcement serves notice to po-
tential donors that the organization listed
below has recently filed a timely declara-
tory judgment suit under section 7428 of
the Code, challenging revocation of its
status as an eligibledonee under section
170(c)(2).
Protection under section 7428(c) of the
Code begins on the date that the notice
of revocation is published in the Internal
Revenue Bulletin and ends on the date
on which a court first determines that an
organization is not described in section
170(c)(2), as more particularly set forth in
section 7428(c)(1).
In the case of individual contributors,
the maximum amount of contributions
protected during this period is limited to
$1,000.00, with a husband and wife being
treated as one contributor. This protec-
tion is not extended to any individual who
was responsible, in whole or in part, for
the acts or omissions of the organization
that were the basis for the revocation.
This protection also applies (but without
limitation as to amount) to organizations
described in section 170(c)(2) which are
exempt from tax under section 501(a). If
the organization ultimately prevails in its
declaratory judgment suit, deductibility
of contributions would be subject to the
April 13, 20097992009–15 I.R.B.

normal limitations set forth under section
170.
Capital Gymnastics Booster Club, Inc.
Springfield, GA
2009–15 I.R.B.800April 13, 2009

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
April 13, 2009i2009–15 I.R.B.

Numerical Finding List
1
Bulletins 2009–1 through 2009–15
Announcements:
2009-1, 2009-1 I.R.B.242
2009-2, 2009-5 I.R.B.424
2009-3, 2009-6 I.R.B.459
2009-4, 2009-8 I.R.B.597
2009-5, 2009-8 I.R.B.569
2009-6, 2009-9 I.R.B.643
2009-7, 2009-10 I.R.B.663
2009-8, 2009-8 I.R.B.598
2009-9, 2009-9 I.R.B.643
2009-10, 2009-9 I.R.B.644
2009-11, 2009-10 I.R.B.663
2009-12, 2009-11 I.R.B.686
2009-13, 2009-11 I.R.B.686
2009-14, 2009-11 I.R.B.687
2009-15, 2009-11 I.R.B.687
2009-16, 2009-11 I.R.B.691
2009-17, 2009-12 I.R.B.714
2009-18, 2009-12 I.R.B.714
2009-19, 2009-12 I.R.B.715
2009-20, 2009-12 I.R.B.716
2009-21, 2009-13 I.R.B.730
2009-22, 2009-13 I.R.B.731
2009-23, 2009-13 I.R.B.731
2009-24, 2009-13 I.R.B.732
2009-25, 2009-14 I.R.B.755
2009-26, 2009-14 I.R.B.755
2009-27, 2009-14 I.R.B.756
2009-28, 2009-15 I.R.B.760
2009-29, 2009-14 I.R.B.757
2009-30, 2009-15 I.R.B.794
2009-31, 2009-15 I.R.B.798
2009-32, 2009-15 I.R.B.799
2009-33, 2009-15 I.R.B.799
Notices:
2009-1, 2009-2 I.R.B.250
2009-2, 2009-4 I.R.B.344
2009-3, 2009-2 I.R.B.250
2009-4, 2009-2 I.R.B.251
2009-5, 2009-3 I.R.B.309
2009-6, 2009-3 I.R.B.311
2009-7, 2009-3 I.R.B.312
2009-8, 2009-4 I.R.B.347
2009-9, 2009-5 I.R.B.419
2009-10, 2009-5 I.R.B.419
2009-11, 2009-5 I.R.B.420
2009-12, 2009-6 I.R.B.446
2009-13, 2009-6 I.R.B.447
2009-14, 2009-7 I.R.B.516
2009-15, 2009-6 I.R.B.449
2009-16, 2009-8 I.R.B.572
Notices— Continued:
2009-17, 2009-8 I.R.B.575
2009-18, 2009-10 I.R.B.648
2009-19, 2009-10 I.R.B.660
2009-20, 2009-12 I.R.B.711
2009-21, 2009-13 I.R.B.724
2009-22, 2009-14 I.R.B.741
2009-25, 2009-15 I.R.B.758
Proposed Regulations:
REG-144615-02, 2009-7 I.R.B.561
REG-148568-04, 2009-5 I.R.B.421
REG-160872-04, 2009-4 I.R.B.358
REG-158747-06, 2009-4 I.R.B.362
REG-116699-07, 2009-13 I.R.B.727
REG-138326-07, 2009-9 I.R.B.638
REG-143686-07, 2009-8 I.R.B.579
REG-150670-07, 2009-4 I.R.B.378
REG-113462-08, 2009-4 I.R.B.379
REG-147636-08, 2009-9 I.R.B.641
REG-150066-08, 2009-5 I.R.B.423
Revenue Procedures:
2009-1, 2009-1 I.R.B.1
2009-2, 2009-1 I.R.B.87
2009-3, 2009-1 I.R.B.107
2009-4, 2009-1 I.R.B.118
2009-5, 2009-1 I.R.B.161
2009-6, 2009-1 I.R.B.189
2009-7, 2009-1 I.R.B.226
2009-8, 2009-1 I.R.B.229
2009-9, 2009-2 I.R.B.256
2009-10, 2009-2 I.R.B.267
2009-11, 2009-3 I.R.B.313
2009-12, 2009-3 I.R.B.321
2009-13, 2009-3 I.R.B.323
2009-14, 2009-3 I.R.B.324
2009-15, 2009-4 I.R.B.356
2009-16, 2009-6 I.R.B.449
2009-17, 2009-7 I.R.B.517
2009-18, 2009-11 I.R.B.670
2009-19, 2009-14 I.R.B.747
2009-20, 2009-14 I.R.B.749
Revenue Rulings:
2009-1, 2009-2 I.R.B.248
2009-2, 2009-2 I.R.B.245
2009-3, 2009-5 I.R.B.382
2009-4, 2009-5 I.R.B.408
2009-5, 2009-6 I.R.B.432
2009-6, 2009-12 I.R.B.694
2009-7, 2009-13 I.R.B.717
2009-8, 2009-10 I.R.B.645
2009-9, 2009-14 I.R.B.735
2009-10, 2009-14 I.R.B.738
Tax Conventions:
2009-5, 2009-8 I.R.B.569
Treasury Decisions:
9434, 2009-4 I.R.B.339
9435, 2009-4 I.R.B.333
9436, 2009-3 I.R.B.268
9437, 2009-4 I.R.B.341
9438, 2009-5 I.R.B.387
9439, 2009-5 I.R.B.416
9440, 2009-5 I.R.B.409
9441, 2009-7 I.R.B.460
9442, 2009-6 I.R.B.434
9443, 2009-8 I.R.B.564
9444, 2009-9 I.R.B.603
9445, 2009-9 I.R.B.635
9446, 2009-9 I.R.B.607
9447, 2009-12 I.R.B.694
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin
2008–52, dated December 29, 2008.
2009–15 I.R.B.iiApril 13, 2009

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2009–1 through 2009–15
Notices:
99-35
Obsoleted by
Notice 2009-15, 2009-6 I.R.B.449
2001-55
Modified by
Notice 2009-1, 2009-2 I.R.B.250
2002-27
Modified by
Notice 2009-9, 2009-5 I.R.B.419
2005-74
Obsoleted by
T.D. 9446, 2009-9 I.R.B.607
2007-26
Modified by
Notice 2009-15, 2009-6 I.R.B.449
2007-54
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-11
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-12
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-13
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
List of forms modified and superseded by
Rev. Proc. 2009-11, 2009-3 I.R.B.313
Modified and clarified by
Notice 2009-5, 2009-3 I.R.B.309
2008-46
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-100
Amplified and superseded by
Notice 2009-14, 2009-7 I.R.B.516
Proposed Regulations:
REG-144615-02
Corrected by
Ann. 2009-19, 2009-12 I.R.B.715
REG-149519-03
Withdrawn by
Ann. 2009-4, 2009-8 I.R.B.597
Proposed Regulations— Continued:
REG-148326-05
Corrected by
Ann. 2009-14, 2009-11 I.R.B.687
REG-158747-06
Hearing scheduled by
Ann. 2009-29, 2009-14 I.R.B.757
REG-150066-08
Corrected by
Ann. 2009-31, 2009-15 I.R.B.798
Revenue Procedures:
2007-17
Superseded by
Rev. Proc. 2009-14, 2009-3 I.R.B.324
2007-68
Superseded by
Rev. Proc. 2009-17, 2009-7 I.R.B.517
2007-71
Modified by
Notice 2009-3, 2009-2 I.R.B.250
2008-1
Superseded by
Rev. Proc. 2009-1, 2009-1 I.R.B.1
2008-2
Superseded by
Rev. Proc. 2009-2, 2009-1 I.R.B.87
2008-3
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-4
Superseded by
Rev. Proc. 2009-4, 2009-1 I.R.B.118
2008-5
Superseded by
Rev. Proc. 2009-5, 2009-1 I.R.B.161
2008-6
Superseded by
Rev. Proc. 2009-6, 2009-1 I.R.B.189
2008-7
Superseded by
Rev. Proc. 2009-7, 2009-1 I.R.B.226
2008-8
Superseded by
Rev. Proc. 2009-8, 2009-1 I.R.B.229
2008-9
Superseded by
Rev. Proc. 2009-9, 2009-2 I.R.B.256
2008-17
Obsoleted in part by
Rev. Proc. 2009-18, 2009-11 I.R.B.670
Revenue Procedures— Continued:
2008-61
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-65
Amplified and supplemented by
Rev. Proc. 2009-16, 2009-6 I.R.B.449
2008-68
Amplified and superseded by
Rev. Proc. 2009-15, 2009-4 I.R.B.356
Revenue Rulings:
65-286
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
71-381
Obsoleted in part by
Rev. Rul. 2009-9, 2009-14 I.R.B.735
76-54
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
92-19
Supplemented by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
2008-19
Modified by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
Treasury Decisions:
9436
Corrected by
Ann. 2009-15, 2009-11 I.R.B.687
9438
Corrected by
Ann. 2009-30, 2009-15 I.R.B.794
9439
Corrected by
Ann. 2009-12, 2009-11 I.R.B.686
9441
Corrected by
Ann. 2009-18, 2009-12 I.R.B.714
9442
Corrected by
Ann. 2009-13, 2009-11 I.R.B.686
Ann. 2009-20, 2009-12 I.R.B.716
9446
Corrected by
Ann. 2009-23, 2009-13 I.R.B.731
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin 2008–52, dated December 29,
2008.
April 13, 2009iii2009–15 I.R.B.

2009–15 I.R.B.April 13, 2009

April 13, 20092009–15 I.R.B.

INTERNAL REVENUE BULLETIN
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