Internal Revenue Bulletin 2006-44 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 200
6-44
October 30, 2006
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 2006–87, page 822.
This announcement for the 2007 IRS Individual e-file Partner-
ship Program solicits applications from potential partners for
participation in the program. The partnership opportunities are
a result of RRA ’98 which requires the IRS to receive 80 per-
cent of all returns electronically by 2007. RRA ’98 authorized
the IRS Commissioner to promote the benefits of and encour-
age the use of e-file products and services through partner-
ships with various entities that offer low cost tax preparation
and electronic filing of individual income tax returns for qualified
taxpayers. Those applicants that are accepted as partners will
have a link(s) and description(s) of their products and services
posted towww.irs.gov(Partners Page).
INCOME TAX
Rev. Rul. 2006–53, page 796.
LIFO; price indexes; department stores.The August 2006
Bureau of Labor Statistics price indexes are accepted for use
by department stores employing the retail inventory and last-in,
first-out inventory methods for valuing inventories for tax years
ended on, or with reference to, August 31, 2006.
REG–140379–02; REG–142599–02, page 808.
Generally, interest on a state or local bond is excluded from
gross income. However, the exclusion does not apply to a
private activity bond unless the bond is a qualified bond. Pro-
posed regulations under sections 141 and 145 of the Code pro-
vide general rules on the allocation of and accounting for bond
proceeds for purposes of the private activity bond restrictions
which apply to tax-exempt governmental bonds. Special rules
are also provided for certain projects that are used by both a
private business and government (mixed-use project). Finally,
the regulations provide that a partnership in which all the part-
ners are governmental persons are disregarded and any use
of the financed property by the partnership is treated as gov-
ernmental use. A public hearing is scheduled for January 11,
2007.
Notice 2006–93, page 798.
This notice provides guidance on the new information reporting
requirements in section 6049 of the Code for payments of
interest on state or local bonds that are excludable from gross
income under section 103 (tax-exempt interest).
Rev. Proc. 2006–44, page 800.
This procedure formally establishes the Appeals arbitration pro-
gram, which is designed to improve tax administration, provide
customer service, and reduce taxpayer burden. Arbitration is
available for cases within Appeals jurisdiction that meet the op-
eration requirements of the program. Generally, this program
is available for cases in which a limited number of factual issues
remain unresolved following settlement discussions in Appeals.
EXEMPT ORGANIZATIONS
Announcement 2006–81, page 821.
The IRS has revoked its determination that University
Lithotripsy Affiliates, Inc., of Newark, NJ, qualifies as an
organization described in sections 501(c)(3) and 170(c)(2) of
the Code.
(Continued on the next page)
Finding Lists begin on page ii.
Index for July through October begins on page v.

ADMINISTRATIVE
T.D. 9288, page 794.
Final regulations under 31 USC 9701 implement new user
fees for the special enrollment examination for enrolled agents
(SEE), the application for enrollment of enrolled agents, and the
renewal of such enrollment. The user fee that the IRS currently
charges applicants in order to take the SEE is being modified
to reflect the change in IRS costs of administering the exam
program as a result of the contracting out of the exam. Further-
more, the user fees that the IRS currently charges applicants
for the enrollment and renewal of enrollment process are less
than the actual cost of overseeing the enrollment process. The
regulations establish an $11 per part per applicant user fee for
the SEE and separate $125 user fees for the enrollment and
renewal of enrollment process.
Notice 2006
–93, page 798.
This notice
provides guidance on the new information reporting
requiremen
ts in section 6049 of the Code for payments of
interest on
stateorlocalbondsthatareexcludablefromgross
income und
er section 103 (tax-exempt interest).
Rev. Proc. 2006–44, page 800.
This procedure formally establishes the Appeals arbitration pro-
gram, which is designed to improve tax administration, provide
customer service, and reduce taxpayer burden. Arbitration is
available for cases within Appeals jurisdiction that meet the op-
eration requirements of the program. Generally, this program
is available for cases in which a limited number of factual issues
remain unresolved following settlement discussions in Appeals.
Announcement 2006–82, page 821.
This document contains corrections to final and temporary reg-
ulations (T.D. 9281, 2006–39 I.R.B. 517) relating to the deter-
mination of the interest expense deduction of foreign corpora-
tions and applies to foreign corporations engaged in a trade or
business within the United States.
Announc
ement 2006–83, page 822.
This docu
ment contains corrections to final regulations
(T.D. 92
76, 2006–37 I.R.B. 423) concerning the definition of
supplem
ental wages for income tax withholding purposes and
income t
ax requirements for employers making payments of
supplem
ental wages to employees.
Announcement 2006–89, page 826.
This document contains corrections to final regulations
(T.D. 9274, 2006–33 I.R.B. 244) relating to the disclosure of
return information pursuant to section 6103(k)(6) of the Code.
October 30, 20062006–44 I.R.B.

The IRS Mission
Provide America’s taxpayers top quality service by helping
them understand and 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 Sec-
retary (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.
2006–44 I.R.B.October 30, 2006

Place missing child here.
October 30, 20062006–44 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 330 (31
USC).—Best P
ractices
for Tax Advisors
T.D. 9288
DEPARTMENT OF
THE TREASURY
Internal Revenue Service
26 CFR Part 300
User Fees Relating to
Enrollment
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
amendments to the regulations relating to
user fees for the special enrollment ex-
amination to become an enrolled agent,
the application for enrollment of enrolled
agents, and the renewal of this enrollment.
The charging of user fees is authorized by
the Independent Offices Appropriations
Act (IOAA) of 1952.
DATES:Effective Date:November 6,
2006.
Applicability Date:For date of applica-
bility, see §300.0(c).
FOR FURTHER INFORMATION
CONTACT: Concerning cost methodol-
ogy, Eva Williams, (202) 622–6400; con-
cerning the regulations, Matthew Cooper,
(202) 622–4940 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document amends the regulations
relating to user fees for the special enroll-
ment examination to become an enrolled
agent, the application for enrollment of en-
rolled agents, and the renewal of this en-
rollment. The charging of user fees is au-
thorized by the IOAA of 1952, which is
codified at 31 U.S.C. 9701.
The IOAA of 1952 authorizes agen-
cies to prescribe regulations that estab-
lish charges for services provided by the
agency. The charges must be fair and be
based on the costs to the government, the
value of the service to the recipient, the
public policy or interest served, and other
relevant facts. The IOAA of 1952 pro-
vides that regulations implementing user
fees are subject to policies prescribed by
the President, which are currently set forth
in OMB Circular A–25, 58 FR 38142 (July
15, 1993) (the OMB Circular).
The OMB Circular encourages user
fees for government-provided services
that confer benefits on identifiable re-
cipients over and above those benefits
received by the general public. Under the
OMB Circular, an agency that seeks to
impose a user fee for Government-pro-
vided services must calculate its full cost
of providing those services. In general,
a user fee should be set at an amount in
order for the agency to recover the cost of
providing the special service, unless the
Office of Management and Budget grants
an exception.
On August 29, 2006, a notice of pro-
posed rulemaking (REG–145154–05,
2006–39 I.R.B. 567) was published in
theFederal Register.Approximately
40 written comments responding to the
proposed regulations were received. A
public hearing was held on September 29,
2006, but there were no requests to speak
at the hearing. After consideration of the
comments, the proposed regulations are
adopted by this Treasury decision.
Enrolled Agent Program
Section 330 of Title 31 of the United
States Code authorizes the Secretary of the
Treasury to regulate practice before the
Treasury Department. Pursuant to section
330 of Title 31, the Secretary has published
regulations governing practice before the
IRS in 31 CFR part 10 and reprinted them
as Treasury Department Circular No. 230
(Circular 230). These regulations are ad-
ministered by the IRS Office of Profes-
sional Responsibility (OPR).
Section 10.3 of Circular 230 generally
authorizes attorneys, certified public ac-
countants, enrolled agents and enrolled ac-
tuaries to practice before the IRS. An en-
rolled agent is defined as an individual en-
rolled as an agent pursuant to the provi-
sions of Circular 230. The provisions of
Circular 230 provide that an individual de-
siring to become an enrolled agent is eligi-
ble for enrollment through either the suc-
cessful passing of a written examination
or through demonstration of sufficient ex-
pertise in tax administration based on for-
mer employment with the IRS. Specifi-
cally, §10.4(a) authorizes the Director of
OPR to grant enrollment to an applicant
who demonstrates special competence in
tax matters by passing a written examina-
tion administered by, or administered un-
der the oversight of, the Director of OPR
and who has not engaged in any conduct
that would justify the censure, suspension,
or disbarment of any practitioner under the
provisions of Circular 230. Accordingly,
every year OPR develops and administers
a Special Enrollment Examination (SEE)
that is given to all applicants desiring to be-
come enrolled agents so that they can prac-
tice before the IRS. The IRS charged ap-
plicants a user fee of $55 ($45 if taking the
examination in parts) in order to take the
2005 SEE.
Section 10.4(b) authorizes the Director
of OPR to grant enrollment for former IRS
employees if the former employee meets
certain requirements, including length of
employment with the IRS and substantive
tax expertise. Application for enrollment
basedonformeremploymentwiththeIRS
must be made within three years from the
date of separation from such employment.
Once eligible for enrollment, by either
passing the examination or because of for-
mer employment with the IRS, an appli-
cant must file an application for enroll-
ment on Form 23, “Application for Enroll-
ment to Practice Before the Internal Rev-
enue Service,” with the Director of OPR.
As part of the application for enrollment
process, the applicant must enclose a check
or money order payable to the IRS in the
amount set forth on Form 23, which consti-
tutes a fee charged to each applicant for en-
rollment. The fee is nonrefundable regard-
less of whether the applicant is granted en-
rollment. The current user fee for enroll-
ment on the Form 23 (Rev. February 2005)
is $80. The Director of OPR will act upon
an application for enrollment and issue an
2006–44 I.R.B.794October 30, 2006

enrollment card to eachindividual whose
application for enrollment to practice be-
fore the IRS is approved.
Pursuant to §10.6(d), each individual,
once enrolled, is required to renew the en-
rollment every three years to maintain an
active enrollment to practice before the
IRS. In order to qualify for renewal, an ap-
plicant must certify the completion of the
continuing professional education require-
ments set forth in §10.6(e) of Circular 230.
A nonrefundable user fee of $80 is cur-
rently charged for each application for re-
newal of enrollment filed with the Direc-
tor of OPR on Form 8554, “Application for
RenewalofEnrollmenttoPracticeBefore
the Internal Revenue Service.”
Contracting Out of Special Enrollment
Examination
OPR has recently contracted out certain
functions pertaining to the SEE to a private
contractor. The contractor will furnish the
resources, facilities, and services neces-
sary to administer the entire SEE program,
which includes examination development,
administration of SEE, notification to IRS
of candidates who took the examination,
and the results of the examination. The
contractor will receive payment for its
services by charging a fee to examination
applicants. OPR will, nonetheless, still
maintain an oversight role with respect
to the SEE. The contractor will collect a
user fee on behalf of the IRS based on
the full costs incurred by the IRS. These
final regulations only establish a user fee
with respect to the government costs for
overseeing the SEE and do not include
any fee that the contractor may charge for
its services. Accordingly, while the user
fee imposed pursuant to these regulations
is less than the user fee that applicants
were charged in 2005, the total fee that
applicants will be charged is greater. The
IRS estimates that the efficiencies result-
ing from using a contractor will reduce the
total fees that would otherwise be charged
by the IRS in order to recover the full cost
of the IRS administering all aspects of the
SEE. Further information about the con-
tracting out of the SEE can be found
athttp://www.irs.gov/taxpros/agents/
index.html.
Summary of Comments
The final regulations establish an $11
per part user fee for the SEE. The final
regulations establish separate $125 user
fees for the enrollment and renewal of en-
rollment process. Most of the comments
on the proposed regulations did not favor
the higher fees. These comments focused
on the increased economic burden on en-
rolled agents resulting from the higher
fees. Several comments also stated that
the Request for Proposal (RFP) for the
examination implied that the IRS would
collect its fee from the amount that the
contractor is chargingfor its services. One
comment requested that the IRS publicly
release the costing methodology and the
schedule for reevaluating the user fees, as
well as provide a clarification of the “Spe-
cial Analyses” section of the preamble.
For the following reasons, these final reg-
ulations follow the proposed regulations
without change.
The OMB Circular requires the IRS to
calculate and recover its full cost of pro-
viding services under the enrolled agent
program. In accordance with the OMB
Circular, these final regulations increase
the fees to bring them in line with actual
costs based upon a recent review of the
enrolled agent program. The IRS is in
compliance with the OMB Circular in its
methodology for computation of the actual
cost and will follow the OMB Circular’s
direction providing for a biennial reevalu-
ation of the fees.
The IRS has determined that the full
cost to the IRS of overseeing the SEE is
$11 per part per applicant. This revised
user fee reflects the change in IRS costs
of administering theexamination program
as a result of contracting out of the exami-
nation to a private contractor. For the first
examination cycle (October 5, 2006 to De-
cember 1, 2006), the contractor is not col-
lecting any user fee on behalf of the IRS. In
future years, consistent with the RFP, the
contractor will collect the user fee based on
the full costs incurred by the IRS in over-
seeing the examination, which is separate
and distinct from the fee that the contractor
is charging for its services.
The IRS has determined that the full
cost of administering the enrollment and
renenrollment process is $125 per en-
rolled agent. Before this final regulation,
the most recent increase in user fees for
the enrollment and renewal of enrollment
process was in September 1995.
The Chief Counsel for Advocacy of
the Small Business Administration (SBA)
commented that the certification in the
proposed regulations regarding the eco-
nomic impact on small entities in the
“Special Analyses” section of the pre-
amble could be clearer. Specifically, the
SBA requested that the certification iden-
tify the number of enrolled agents and
the appropriate North American Industry
Classification System (NAICS) codes for
enrolled agents, estimate the percent of
enrolled agents that are operating as or
employed by small entities based upon the
small business size standards established
by the SBA, and further explain why the
increased fees are not economically sig-
nificant. The “Special Analyses” section
of the final regulations adopts these rec-
ommended changes.
Special Analyses
It has been determined that this final
rule is not a significant regulatory action
as defined in Executive Order 12866.
Therefore, a regulatory assessment is
not required. It is hereby certified that
these regulations will not have a signif-
icant economic impact on a substantial
number of small entities. Accordingly, a
regulatory flexibility analysis is not re-
quired. This certification is based on the
information that follows. This final rule
affects enrolled agents, of which there
are currently 45,261 active. The eco-
nomic impact of these regulations on any
small entity would result from a small
entity, including a sole proprietor, being
required to pay a fee prescribed by these
regulations in order to obtain a particular
service. The appropriate NAICS codes
for enrolled agents relate to tax prepara-
tion services (NAICS code 541213) and
other accounting services (NAICS code
541219). Entities identified under these
codes are considered small under the SBA
size standards (13 CFR 121.201) if their
annual revenue is less than $6.5 million
or $7.5 million respectively. The IRS es-
timates that 99 percent of enrolled agents
are operating as or employed by small en-
tities. Therefore, the IRS has determined
that this final rule will affect a substan-
tial number of small entities. The dollar
amounts of the increases in fees are not,
October 30, 20067952006–44 I.R.B.

however, substantial enough to have a
significant economic impact on any entity
subject to the fees. The amounts of the
fees are commensurate with, if not less
than, the amount of fees charged for other
professional examination and enrollment
fees. Persons who elect to take the exami-
nation and apply for enrollment or renewal
of enrollment also receive benefits from
obtaining the enrolled agent designation.
The Chief Counsel for Advocacy of the
Small Business Administration submitted
comments on the regulation, which are
discussed elsewhere in this preamble.
Drafting Information
The principal author of these regula-
tions is Matthew S. Cooper of the Office
of the Associate Chief Counsel (Procedure
& Administration), Administrative Provi-
sions & Judicial Practice Division.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR Part 300 is
amended as follows:
PART 300—USER FEES
Paragraph 1. The authority citation for
part 300 continues to read in part as fol-
lows:
Authority: 31 U.S.C. 9701.
Par. 2. Section 300.0 is amended as
follows:
1. Paragraphs (b)(4), (b)(5), and (b)(6)
are added.
2. Paragraph (c) is revised.
The additions and revision read as fol-
lows:
§300.0 User fees; in general.
*****
(b) * * *
(4) Taking the special enrollment exam-
ination to become an enrolled agent.
(5) Enrolling an enrolled agent.
(6) Renewing the enrollment of an en-
rolled agent.
(c)Effective date. This part 300 is ap-
plicable March 16, 1995, except that the
user fee for processing offers in compro-
mise is applicable November 1, 2003, and
the user fee for the special enrollment ex-
amination, enrollment, and renewal of en-
rollment for enrolled agents is applicable
November 6, 2006.
Par. 3. Section 300.4 is added to read
as follows:
§300.4 Special enrollment examination
fee.
(a)Applicability. This section applies
to the special enrollment examination to
become an enrolled agent pursuant to 31
CFR 10.4(a).
(b)Fee. The fee for taking the special
enrollment examination is $11 per part,
which is the government cost for oversee-
ing the examination and does not include
any fees charged by the examination ad-
ministrator.
(c)Person liable for the fee. The person
liable for the special enrollment examina-
tion fee is the applicant taking the exami-
nation.
Par. 4. Section 300.5 is added to read
as follows:
§300.5 Enrollment of enrolled agent fee.
(a)Applicability. This section applies
to the initial enrollment of enrolled agents
with the IRS Office of Professional Re-
sponsibility pursuant to 31 CFR 10.5(b).
(b)Fee. The fee for initially enrolling
as an enrolled agent with the IRS Office of
Professional Responsibility is $125.
(c)Person liable for the fee. The per-
son liable for the enrollment fee is the ap-
plicant filing for enrollment as an enrolled
agent with the IRS Office of Professional
Responsibility.
Par. 5. Section 300.6 is added to read
as follows:
§300.6 Renewal of enrollment of enrolled
agent fee.
(a)Applicability. This section applies
to the renewal of enrollment of enrolled
agents with the IRS Office of Profes-
sional Responsibility pursuant to 31 CFR
10.6(d)(6).
(b)Fee. The fee for renewal of enroll-
ment as an enrolled agent with the IRS Of-
fice of Professional Responsibility is $125.
(c)Person liable for the fee. The person
liable for the renewal of enrollment fee is
the person renewing their enrollment as
an enrolled agent with the IRS Office of
Professional Responsibility.
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
Approved October 2, 2006.
Eric Solomon,
Acting Deputy Assistant
Secretary for Tax Policy.
(Filed by the Office of the Federal Register on October 3,
2006, 10:00 a.m., and published in the issue of the Federal
Register for October 5, 2006, 71 F.R. 58740)
Section 472.—Last-in,
First-out Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores.The August 2006 Bureau of La-
bor Statistics price indexes are accepted
for use by department stores employing
the retail inventory and last-in, first-out
inventory methods for valuing inventories
for tax years ended on, or with reference
to, August 31, 2006.
Rev. Rul. 2006–53
The following Department Store Inven-
tory Price Indexes for August 2006 were
issued by the Bureau of Labor Statistics.
The indexes are accepted by the Inter-
nal Revenue Service, under § 1.472–1(k)
of the Income Tax Regulations and Rev.
Proc. 86–46, 1986–2 C.B. 739, for ap-
propriate application to inventories of
department stores employing the retail
inventory and last-in, first-out inventory
methods for tax years ended on, or with
reference to, August 31, 2006.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of depart-
ments, (b) three special combinations of
the major groups — soft goods, durable
goods, and miscellaneous goods, and (c) a
store total, which covers all departments,
including some not listed separately, ex-
cept for the following: candy, food, liquor,
tobacco, and contract departments.
2006–44 I.R.B.796October 30, 2006

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
GroupsAug 2005Aug 2006
Percent Change
from Aug 2005
to Aug 2006
1
1. PieceGoods .............................................486.8457.5-6.0
2. DomesticsandDraperies..................................512.2486.2-5.1
3. Women’sandChildren’sShoes ............................661.5671.91.6
4. Men’sShoes.............................................875.1877.50.3
5. Infants’Wear ............................................554.0563.91.8
6. Women’sUnderwear......................................542.8534.2-1.6
7. Women’sHosiery ........................................339.1340.60.4
8. Women’sandGirls’Accessories ...........................585.4531.7-9.2
9. Women’sOuterwearandGirls’Wear .......................331.2341.43.1
10. Men’sClothing ..........................................527.1517.3-1.9
11. Men’sFurnishings........................................557.0551.5-1.0
12. Boys’ClothingandFurnishings............................384.1384.30.1
13. Jewelry..................................................888.5916.93.2
14. Notions .................................................810.5823.51.6
15. ToiletArticlesandDrugs..................................998.0995.5-0.3
16. FurnitureandBedding ....................................598.5603.30.8
17. FloorCoverings..........................................614.0622.41.4
18. Housewares..............................................708.6697.7-1.5
19. MajorAppliances.........................................203.9203.5-0.2
20. RadioandTelevision......................................38.735.5-8.3
21. Recreation and Education
2
.................................77.376.3-1.3
22. Home Improvements
2
.....................................136.0140.33.2
23. Automotive Accessories
2
..................................115.9121.24.6
Groups1–15:SoftGoods .......................................544.8544.90.0
Groups16–20:DurableGoods...................................378.6373.1-1.5
Group
s 21–23: Misc. Goods
2
....................................
92.693.61.1
Store Total
3
..............................................485.7484.9-0.2
1
Absence of a minus sign before the percentage change in this column signifies a price increase.
2
In
dexes on a January 1986 = 100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor,
tobacco and contract departments.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Michael Burkom of the Office
of Associate Chief Counsel (Income Tax
and Accounting). For further informa-
tion regarding this revenue ruling, contact
Mr. Burkom at (202) 622–7924 (not a
toll-free call).
October 30, 20067972006–44 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Information Reporting
Requirements for Payments of
Interest on Tax-Exempt Bonds
Notice 2006–93
Section 1: Purpose
This notice provides guidance on the
new information reporting requirements in
section 6049 of the Internal Revenue Code
for payments of interest on State or local
bonds that are excludable from gross in-
come under section 103 of the Code (tax-
exempt interest). References to “tax-ex-
empt interest” herein also include exempt-
interest dividends under section 852(b)(5)
(exempt-interest dividends). This notice
provides transitional guidance for persons
(payors) required under section 6049, as
amended, to file with the Internal Rev-
enue Service and to furnish to payment re-
cipients (payees) information with respect
to payments of tax-exempt interest com-
mencing in 2006.
Pursuant to this notice, in order to sat-
isfy the requirements of section 6049 for
payments of tax-exempt interest made
in 2006, affected payors may file with
the Service and furnish to payees a Form
1099–INT,Interest Income, to report in-
formation regarding the aggregate amount
of tax-exempt interest paid in 2006 and, to
the extent possible after reasonable effort,
the separately-identified portion of the
tax-exempt interest that constitutes inter-
est on specified private activity bonds that
is an item of tax preference under section
57(a)(5) for purposes of the alternative
minimum tax (tax-exempt AMT interest).
Alternatively, to satisfy the requirements
of section 6049 for payments of tax-ex-
empt interest made in 2006, in lieu of filing
and furnishing Form 1099–INT, payors
may file with the Service and furnish to
payees a substitute statement containing
the information specified in Section 3 of
this notice (substitute statement).
This notice also provides that the Ser-
vice will not impose penalties for viola-
tions of section 6049 with respect to pay-
ments of tax-exempt interest in 2006 if a
payor satisfies the requirements of Section
3 of this notice. This notice further pro-
vides that the Service is providing transi-
tional relief from backup withholding un-
der section 3406 with respect to any pay-
ment of tax-exempt interest made in 2006
and in the first quarter of 2007. Section
5 of this notice defers reporting obliga-
tions with respect to certain tax-exempt
bearer bonds and original issue discount on
tax-exempt bonds.
Section 2: Background
On May 17, 2006, the Tax Increase Pre-
vention and Reconciliation Act of 2005,
Pub. L. No. 109–222, 120 Stat. 345
(TIPRA), was enacted into law. Section
502 of TIPRA amended section 6049 to re-
move “interest on any obligation if such in-
terest is tax-exempt under section 103(a)”
from the list of payments excluded from
the definition of “interest” for purposes of
information reporting. Section 6049 now
requires the reporting of tax-exempt in-
terest paid after December 31, 2005, in a
manner similar to reporting interest paid
on taxable obligations. Section 6049 pro-
vides, in relevant part, as follows:
Sec. 6049. Returns regarding payments
of interest
(a) Requirement of reporting.—Every
person—
(1) who makes payments of interest (as
definedinsubsection(b))aggregating$10
or more to any other person during any
calendar year, or
(2) who receives payments of interest
(as so defined) as a nominee and who
makes payments aggregating $10 or more
during any calendar year to any other per-
son with respect to the interest so received,
shall make a return according to the
forms or regulations prescribed by the
Secretary, setting forth the aggregate
amount of such payments and the name
and address of the person to whom paid.
(b) Interest defined.—
(1) General rule.—For purposes of sub-
section (a), the term “interest” means—
(A) interest on any obligation—
(i)issuedinregisteredform,or
(ii) of a type offered to the public,
other than any obligation with a matu-
rity (at issue) of not more than 1 year
which is held by a corporation...
Section 6049 requires payors of inter-
est to file information returns with the Ser-
vice and to furnish corresponding infor-
mation statements to payees named on the
information returns showing the informa-
tion that is reported to the Service. The
return and information statement are re-
quired to include information concerning
the aggregate amount of tax-exempt in-
terest and the separately-stated amount of
tax-exempt AMT interest that was paid by
the payor during the calendar year to assist
taxpayers and the Service in determining a
taxpayer’s correct tax liability for the cal-
endar year.
Payors have advised the Treasury De-
partment and the Service that the amend-
ment to section 6049 enacted by TIPRA
and which established January 1, 2006, as
the effective date by which payors must be-
gintocaptureinformationonpaymentsof
tax-exempt interest, provides insufficient
lead time for many payors to make the nec-
essary programming changes to comply
with the reporting and backup withhold-
ing requirements. In order to provide time
for payors to implement these program-
ming changes, the Service will not im-
pose penalties or backup withholding obli-
gations on payors that comply with the re-
quirements in the transition rules set forth
in Sections 3 and 4 of this notice. The
penalty and backup withholding relief un-
der this notice will allow additional time
for payors to make the necessary program-
ming changes to enable them to capture
information on, and report payments of,
tax-exempt interest made in 2006 and fu-
ture calendar years consistent with the re-
porting requirements of section 6049, as
amended.
Section 3: Transitional Information
Reporting Requirements for
Tax-exempt Interest Paid in 2006
and Related Penalty Relief
Section 3.1.Background. Section 6721
provides for a penalty in the case of any
failure by any person to file a correct in-
formation return reporting payments of
interest paid pursuant to section 6049.
Additionally, section 6722 provides for a
penalty in the case of any failure by any
person to furnish a correct corresponding
payee statement to each person whose
name is required to be reported as the re-
cipient of interest paid. Section 6011(e)
2006–44 I.R.B.798October 30, 2006

provides rules regarding electronic filing
of tax returns. Under section 6049, as
amended by TIPRA, payments of tax-ex-
empt interest potentially are subject to
backup withholding under section 3406.
Section 3.2.Penalty Relief.TheSer-
vice will not impose penalties under sec-
tion 6721 or section 6722 for failure to
report payments attributable to tax-ex-
empt interest paid in calendar year 2006,
and waives any requirement under 6011(e)
to file such information returns reporting
only such payments in magnetic media if
payors comply with the requirements of
Sections 3.3 and 3.4 of this notice.
Section 3.3.Report Tax-exempt Interest
on Form 1099–INT or on Prescribed Sub-
stitute Statement. For tax-exempt inter-
est paid in 2006, payors may report infor-
mation regarding tax-exempt interest (in-
cluding exempt-interest dividends) and, to
the extent possible after reasonable effort,
tax-exempt AMT interest to the Service
and to payees on Form 1099–INT. Alter-
natively, in lieu of reporting tax-exempt in-
terest on Form 1099–INT, payors may re-
port information regarding tax-exempt in-
terest to the Service and to payees on a
substitute statement that meets the require-
ments described below.
The payor may report to the Service
and furnish to the payee a substitute state-
ment that provides information regarding
the amount of tax-exempt interest and, to
the extent possible after reasonable effort,
tax-exempt AMT interest paid in 2006.
The substitute statement must include, at
a minimum, the following information:
(a) Payor’s name, address and tele-
phone number;
(b) Payor’s federal employer identifica-
tion number;
(c) Payee’s name and address;
(d) Payee’s taxpayer identification
number (TIN), if available;
(e) Payee’s account number;
(f) The amount of tax-exempt interest
(including tax-exempt interest that is paid
as exempt-interest dividends);
(g) The amount of tax-exempt AMT in-
terest (including tax-exempt AMT interest
that is paid as exempt-interest dividends),
to the extent possible after reasonable ef-
fort; and
(h) Federal income tax withheld, if any.
The substitute statement must also indi-
cate that the amount of tax-exempt interest
paid in 2006 must be reported on the appli-
cable Form 1040,U.S. Individual Income
Tax Return, for 2006 and that the amount
of tax-exempt AMT interest paid in 2006
must be taken into account in computing
the alternative minimum tax reported on
Form 1040 for 2006. Payors are required
to retain records sufficient to show the
amounts reported to payees on the substi-
tute statements.
Section 3.4.Timing for Forms
1099–INT and Substitute Statements.For
tax-exempt interest paid in 2006, payors
must furnish Forms 1099–INT or substi-
tute statements to payees by January 31,
2007, and to the Service by February 28,
2007, if filed on paper or by magnetic
media, or by March 31, 2007, if filed elec-
tronically.
Section 4: Transitional Provisions
Regarding Backup Withholding
Section 4.1.Backup Withholding Re-
lief in General. The Service understands
that the programming changes necessary
to institute backup withholding for the
first time on accounts that pay tax-ex-
empt interest may require considerable
lead time to implement in many circum-
stances. In recognitionof this needed lead
time, the Service is providing transitional
relief from backup withholding under sec-
tion 3406 with respect to any payment
of tax-exempt interest made in 2006 and
in the first quarter of 2007 (i.e., between
January 1, 2006, and March 31, 2007).
Section 4.2.Existing Accounts: Spe-
cial Payee Certification Rules and Backup
Withholding after March 31, 2007.For
accounts established or instruments ac-
quired on or before October 30, 2006,
that involve the payment of tax-exempt
interest after March 31, 2007, the general
rules on backup withholding under section
3406 will apply to reportable payments of
tax-exempt interest made after March 31,
2007. For this purpose, a payee will be
treated as satisfying the payee certification
requirements under section 3406(d) if the
payor of tax-exempt interest obtains from
the payee, a valid TIN by any reason-
able manner, including by an uncertified
writing, by oral communication, or by a
completed, certified Form W–9,Request
for Taxpayer Identification Number and
Certification. Solely for purposes of relief
from the backup withholding requirements
that would otherwiseapply to payments
of tax-exempt interest by reason of payee
certification failure, this Section shall
continue to apply until the Treasury De-
partment and the Service provide further
guidance regarding payee certification un-
der section 3406(d) for these accounts and
instruments.
Section 4.3.New Accounts: General
Payee Certification Rules and Backup
Withholding after March 31, 2007.For
new accounts established or instruments
acquired after October 30, 2006, that
involve the payment of tax-exempt in-
terest after March 31, 2007, the general
rules on backup withholding under section
3406 will apply to reportable payments
of tax-exempt interest made after March
31, 2007. For this purpose, the general
rules on payee certification under section
3406(d) require that a payor obtain from
a payee a completed, certified Form W–9,
Request for TaxpayerIdentification Num-
ber and Certification.
Section 5: Tax-exempt Original Issue
Discount and Tax-exempt Bearer Bonds
This Section makesspecial provision
for “original issue discount” on tax-ex-
empt bonds within the meaning of section
1288 (tax-exempt OID) and for tax-ex-
empt interest on State or local bonds that
are not subject to the bond registration
requirement under section 149(a) (tax-ex-
empt bearer bonds). For tax-exempt OID
and tax-exempt bearer bonds, no infor-
mation reporting under section 6049 or
backup withholding under section 3406
will be required for calendar year 2006 or
thereafter until such time as the Service
and the Treasury Department provide fu-
ture guidance.
Section 6: Effective Date
This notice is effective as of October 30,
2006.
Section 7: Paperwork Reduction Act
The collection of information required
in connection with reporting of infor-
mation regarding tax-exempt interest on
Form 1099–INT, as referenced in this no-
tice, has been reviewed and approved by
the Office of Management and Budget
(OMB) in accordance with the Paper-
work Reduction Act of 1995 (44 U.S.C.
October 30, 20067992006–44 I.R.B.

3507(d)) under OMB control number
1545–0112. The provisions of Section 3
of this notice, which provide a permissive
alternative way to report information re-
garding tax-exempt interest on a substitute
statement, require the same kind of infor-
mation as required by Form 1099–INT
and do not impose any requirement to
report additional information beyond that
required by Form 1099–INT.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Of-
fice of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Section 8: Contact Information
The principal author of this notice is
Karen E. Briscoe of the Office of Associate
Chief Counsel (Procedure & Administra-
tion). For further information regarding
this notice, contact Mrs. Briscoe at (202)
622–8117 (not a toll-free call).
Appeals Arbitration Program
Rev. Proc. 2006–44
SECTION 1. PURPOSE
This revenue procedure formally es-
tablishes the Appeals arbitration program,
whichisdesignedtoimprovetaxad-
ministration, provide customer service
and reduce taxpayer burden. Arbitra-
tion is available for cases within Appeals
jurisdiction that meet the operational re-
quirements of the program. Generally, this
program is available for cases in which a
limited number of factual issues remain
unresolved following settlement discus-
sions in Appeals. Within Appeals, the
Office of Tax Policy and Procedure will
be responsible for the management of the
Appeals arbitration program.
SECTION 2. BACKGROUND
.01 Section 7123(b)(2) of the Internal
Revenue Code, as enacted by § 3465 of
the Internal Revenue Service Restructur-
ing and Reform Act of 1998, Pub. L.
No. 105–206, 112 Stat. 685, provides
that the Secretary shall establish a pilot
program under which a taxpayer and Ap-
peals may jointly request binding arbitra-
tion on certain unresolved issues. On Jan-
uary 18, 2000, Appeals began a two-year
test of an initial arbitration procedure.See
Announcement 2000–4, 2000–1 C.B. 317.
On July 1, 2003, Appeals completed an
additional one-year test of its arbitration
procedure.SeeAnnouncement 2002–60,
2002–2 C.B. 28. During these test periods,
the IRS allowed taxpayers to request arbi-
tration for certain factual issues that were
already subject to the Appeals administra-
tive process.
.02 This revenue procedure supersedes
Announcements 2000–4 and 2002–60.
SECTION 3. SCOPE OF ARBITRATION
.01 The arbitration procedure may be
used to resolve issues while a case is in Ap-
peals, after settlement discussions are un-
successful and, generally, when all other
issues are resolved but for the specific fac-
tual issue(s) for whicharbitration is being
requested.
.02 The arbitration procedure does not
create any special authority for settle-
ment by Appeals. During the arbitration
process, Appeals is still subject to the
procedures that would be applicable if
the issue were being considered by Ap-
peals, including procedures in the Internal
Revenue Manual and existing published
guidance.
.03 Arbitration is available:
(1) Only for factual issues;
(2) For factual issues for which a re-
quest for competent authority assistance
has not yet been filed. Taxpayers are cau-
tioned that if they enter into a settlement
with Appeals (including an Appeals set-
tlement through the arbitration process),
and then request competent authority as-
sistance, the U.S. competent authority will
endeavor only to obtain a correlative ad-
justment with the treaty country and will
not take any actions that would otherwise
change the settlement.Seesection7.05of
Rev. Proc. 2002–52, 2002–2 C.B. 242,
or the corresponding provision of any suc-
cessor guidance. If a taxpayer enters into
the Appeals arbitration program, the tax-
payer may not request competent author-
ity assistance until the arbitration process
is completed, unless the taxpayer demon-
strates that a request for competent author-
ity assistance is necessary to keep open a
statute of limitations in the treaty country.
If so, competent authority assistance may
be requested while arbitration is pending
and the U.S. competent authority will sus-
pend action on the case until arbitration is
completed; and
(3) For factual issues unresolved at the
conclusion of unsuccessful attempts to en-
ter into a closing agreement under I.R.C.
§ 7121.
.04 Arbitration will not be available for:
(1) Legal issues;
(2) Cases in which arbitration is not ap-
propriate under either 5 U.S.C. § 572 or
5 U.S.C. § 575, which provide the general
authority and guidelines for the use of al-
ternative of dispute resolution in the ad-
ministrative process.
(3) Issues docketed in any court;
(4) Issues in a taxpayer’s case desig-
nated for litigation;
(5) Compliance Coordinated (formerly
Industry Specialization Program) Issues
(CCI) or Appeals Coordinated Issues
(ACI) listed athttp://www.irs.gov/irs/
article/0,,id=128327,00.html;see
§§ 8.7.3.2.1 and 8.7.3.2.2 of the In-
ternal Revenue Manual, found at
http://www.irs.gov/irm/index.html;
(6) Issues for which a request for
competent authority assistance has been
filed under the provisions of Rev. Proc.
2002–52, or any successor guidance, in-
cluding issues in cases submitted to the
competent authority under the simultane-
ous appeals procedure. If the competent
authority declines assistance, the com-
petent authorities fail to agree, or if the
taxpayer does not accept the mutual agree-
ment reached by the competent authori-
ties, the taxpayer is permitted to refer the
unresolved issues to Appeals for further
consideration and may submit a request to
arbitrate unresolved factual issues under
this revenue procedure;
(7) Collection cases, except for those
involving: (i) an unsuccessful attempt
to enter into a compromise under I.R.C.
§ 7122; and (ii) trust fund recovery penalty
(TFRP) cases that involve whether a per-
2006–44 I.R.B.800October 30, 2006

son: (a) was required tocollect, truthfully
account for, and pay over income, em-
ployment, or excise taxes; (b) was willful
in attempting in any manner to evade
or defeat any aforementioned tax or the
payment thereof; and (c) is liable for the
TFRP under I.R.C. § 6672; as provided
for in any subsequent guidance issued by
the Service;
(8) Issues for which arbitration would
not be consistent with sound tax admin-
istration,e.g., issues governed by closing
agreements, byres judicata, or controlling
Supreme Court precedent;
(9) “Whipsaw” issues,i.e., issues for
which resolution with respect to one party
might result in inconsistent treatment in
the absence of the participation of another
party;
(10) Frivolous issues, such as, but not
limited to, those identified in Rev. Proc.
2001–41, 2001–2 C.B. 173, which defines
frivolous issues and sets forth the Service’s
policy against making technical rulings on
such issues.
(11) Cases in which the taxpayer did
not act in good faith during Appeals settle-
ment negotiations,e.g., failure to respond
to document requests, failure to respond
timely to offers to settle, failure to address
arguments and precedents raised by Ap-
peals; or
(12) Issues that have been otherwise
identified as excluded from the arbitration
program.
SECTION 4. APPLICATION PROCESS
.01 Arbitration is optional for both the
taxpayer and Appeals. Either the taxpayer
or Appeals may submit a request to arbi-
trate after consulting with the other party.
.02 A taxpayer may submit a request
to arbitrate by sending a written request
to the appropriate Appeals Team Manager
and a copy to the Chief, Appeals, 1099 14
th
Street, NW, Suite 4200East, Washington,
DC 20005, Attn: Office of Tax Policy and
Procedure. The requestto arbitrate should:
(1) Provide the taxpayer’s name, TIN,
address, and the name, title, address and
telephone number of a person to contact;
(2) Provide the Appeals Team Case
Leader’s, Appeals Officer’s, or Settle-
ment Officer’s name;
(3) Identify the taxable period(s) in-
volved;
(4) Describe the issue for which the tax-
payer is requesting arbitration, including
the dollar amount of the adjustment in dis-
pute; and
(5) Contain a representation that the is-
sue is not an excluded issue listed in sec-
tion 3.04, above.
.03 The Appeals Team Manager will
respond to the taxpayer and the Appeals
Team Case Leader, Appeals Officer, or
Settlement Officer, generally, within two
weeks after the Appeals Team Manager re-
ceives the taxpayer’s request for arbitra-
tion. The Appeals Team Manager will se-
cure the concurrence of the Chief, Appeals
— Office of Tax Policy and Procedure,
prior to notifying the taxpayer and the Ap-
peals Team Case Leader, Appeals Officer,
or Settlement Officer of the decision.
(1) If Appeals approves the request to
arbitrate, the Appeals Team Manager will
schedule a conference or conference call
that will include a representative from the
Chief, Appeals — Office of Tax Policy and
Procedure. This representative will act as
the Administrator to manage and supervise
the arbitration proceeding and to act as li-
aison between the taxpayer and Appeals
(the Parties) and between the Parties and
the Arbitrator. At a later date, pursuant to
section 6.02, the Parties may select another
Administrator, including non-IRS persons.
(2) Although no formal appeal proce-
dure exists for the denial of a request to
arbitrate, a taxpayer may request a confer-
ence with the Appeals Team Manager to
discuss the denial. The denial of a request
to arbitrate is not subject to judicial review.
SECTION 5. AGREEMENT TO
ARBITRATE
.01 Upon approval of the request to ar-
bitrate, the Parties will enter into a writ-
ten agreement to arbitrate.SeeExhibit 1 of
this revenue procedure for a model agree-
ment to arbitrate. The attached model
agreement is designed to serve as a basic
framework; if there is mutual agreement,
the Parties are free to eliminate or mod-
ify existing provisions and add new provi-
sions as necessary. Each Party enters an
agreement to arbitrate in reliance on the
other Party’s agreement to be bound by the
decision of the Arbitrator. The agreement
to arbitrate will, at minimum:
(1) Specify the issue(s) that the Parties
have agreed to arbitrate;
(2) Assign to the Arbitrator the pre-
scribed task of finding facts;
(3) Describe with precision the answer
the Parties seek;e.g., a specific dollar
amount, range of dollar values, a ‘yes’ or
‘no’ finding, etc.
(4) Describe and limit the kind of in-
formation the Arbitrator may consider,
e.g., the Parties’ agreement as to any legal
guidance the Arbitrator must rely upon in
reaching a decision;
(5) Contain an initial list of witnesses,
attorneys, representatives, and observers
for each Party (collectively known as Par-
ticipants);
(6) Provide that the time and place of
any hearing will be determined by mutual
agreement of the Parties, and;
(7) Prohibitex partecontacts between
the Arbitrator and the Parties.
.02 The agreement to arbitrate may
limit the number, identity and partici-
pation of Participants. In addition, the
agreement may stipulate the subsequent
tax or other treatment resulting from the
Arbitrator’s decisionand clarify any other
issues that may result from the Arbitra-
tor’s decision.
.03 The Appeals Team Manager, in
consultation with the Appeals Team Case
Leader, Appeals Officer, or Settlement Of-
ficer, will sign the agreement to arbitrate
on behalf of Appeals.
.04 Generally, the Parties will com-
plete the agreement to arbitrate within
four weeks after the taxpayer is notified
that Appeals has approved the request to
arbitrate, and proceed toarbitration within
90 days after signing the agreement to
arbitrate. A taxpayer’s inability to adhere
to these timeframes, without reasonable
cause, may result in Appeals’ withdrawal
from the arbitration process.
.05 In executing the agreement to arbi-
trate, the taxpayer consents to the disclo-
sure by the IRS of the taxpayer’s returns
and return information incident to the arbi-
tration to any Participant for the taxpayer
identified in the initial list of Participants
and to any Participants for the taxpayer
identified in writing by the taxpayer sub-
sequent to execution of the agreement to
arbitrate. If the agreement to arbitrate is
executed by a person pursuant to a power
of attorney executed by the taxpayer, that
power of attorney must clearly express the
taxpayer’s grant of authority to consent to
disclose the taxpayer’s returns and return
October 30, 20068012006–44 I.R.B.

information by the IRS to third parties, and
a copy of that power of attorney must be at-
tached to the agreement.
SECTION 6. ARBITRATION PROCESS
.01APartymustnotifytheotherParty
and the Administrator, in a signed writ-
ing, not later than thirty (30) days before
the arbitration session, of any change to
the initial list of Participants contained in
the agreement to arbitrate. The Parties, by
mutual agreement, may modify the list of
Participants at any time up to and includ-
ing the date of the arbitration session. The
Administrator will forward each Party’s
list(s) to the Arbitrator. Appeals reserves
the right to have an observer attend any
arbitration. If a taxpayer does not accept
observers, the taxpayer’s request for ar-
bitration may be denied. Taxpayers may
also have an observer attend any arbitra-
tion session. The identity and affiliation
of all observers will be established in the
agreement to arbitrate signed prior to the
arbitration session.Seesection 5.01(5);
section 2 of Exhibit 1. All observers af-
filiated with Appeals will be bound by the
confidentiality provisions of the Internal
Revenue Code.Seesection 9.01. Appeals
also reserves the right to have the Office of
Chief Counsel assist and participate in the
arbitration proceeding.
.02 The Parties, by mutual agreement,
may select an Arbitrator from Appeals, or
from any local or national organization that
provides a roster of neutrals. In the event
such local or national organization pro-
vides an Arbitrator, this organization may
also provide the Administrator for the ar-
bitration, in lieu of the Administrator from
the Chief, Appeals — Office of Tax Policy
and Procedure. In obtaining the services of
a non-IRS Arbitrator, the IRS will follow
all applicable provisions of the Federal Ac-
quisition Regulation.An Arbitrator shall
have no official, financial, or personal con-
flict of interest with respect to the Parties,
unless such interest is fully disclosed in
writing to the taxpayer and the Appeals
Team Manager and they agree that the Ar-
bitrator may serve.See5 U.S.C. § 573.
.03 If the Parties select a non-IRS Ar-
bitrator, the Parties will share equally the
compensation, expenses, and related fees
and costs of the Arbitrator, as well as
any reasonable costs for the services of a
non-IRS Administrator subject to applica-
ble rules and regulations for Government
procurement. The non-IRS Arbitrator and
non-IRS Administrator will be contractors
subject to the disclosure restrictions of
I.R.C. § 6103(n).
.04 If the Parties select an Appeals Ar-
bitrator, the Arbitrator shall be from an-
other Appeals office, or from the office of
the Chief, Appeals. Appeals will pay all
expenses associated with an Appeals Arbi-
trator. Due to the inherent conflict that re-
sults because the Appeals Arbitrator is an
employee of the IRS, the Appeals Arbitra-
tor will provide to the taxpayer a statement
confirming the proposed service as an Ar-
bitrator and status as a current employee of
the IRS, and that a conflict results from the
continued status as an IRS employee.
.05 Criteria for selecting an Arbitrator
may include some or all of the following:
completion of arbitration training, previ-
ous arbitration experience, a substantive
knowledge of tax law and knowledge of
industry practices. TheArbitrator’s quali-
fications and potentialconflicts of interest
should be thoroughly reviewed prior to se-
lection. The projectedtravel costs, hourly
fees and other expenses of a non-IRS Ar-
bitrator are subject to the applicable rules
and regulations for Government procure-
ment. The non-IRS Arbitrator shall look
solely to each Party for one-half of the
compensation, expenses and related rea-
sonable fees and costs.
SECTION 7. ARBITRATION SESSION
.01 Each Party will prepare a summary
of its position for consideration by the Ar-
bitrator. The Parties should submit their
summaries to the Administrator no later
than thirty (30) days before the scheduled
arbitration session.
.02 The Arbitrator will look solely to
the legal guidance identified by the Parties.
If the Arbitrator desires further legal guid-
ance, both Parties must agree to provide
theguidanceandthemannerinwhichitis
to be communicated to the Arbitrator.
.03 The arbitration process is confiden-
tial. Therefore, all information concerning
any dispute resolution communication re-
lated to the arbitration proceeding is con-
fidential and may not be disclosed by any
Party, Participant, or Arbitrator, except as
provided under 5 U.S.C § 574. A dispute
resolution communication includes all oral
or written communications prepared for
purposes of a dispute resolution proceed-
ing.See5 U.S.C. § 571(5).
.04 The Parties agree that there shall
be noex partecommunications between
the Arbitrator and either Party or agent for
a Party. In addition, the Arbitrator may
not have contact with any other individu-
als, including Participants, outside the ar-
bitration session, concerning the arbitra-
tion matter without the express approval
of the Parties. Any contact with the Arbi-
trator by either Party must be in the pres-
ence of the other Party and the Administra-
tor. Written submissions should be sent si-
multaneously to the Administrator and the
other Party. The Administrator will in turn
send the submissions to the Arbitrator.See
section 6 of Exhibit 1. Should the Parties
require additional information or clarifica-
tion regarding the arbitration process, they
shall contact the Administrator.
.05 By mutual agreement, the Parties
may withdraw from the arbitration process
to reach a final Appeals settlement at any
time prior to the date of the arbitration ses-
sion. Postponements for good cause shall
be determined by agreement between the
Parties.
SECTION 8. POST-SESSION
PROCEDURE
.01 Generally, no later than thirty (30)
days after completion of the arbitration
proceeding, the Arbitrator will prepare a
written report and submit a copy to the Ad-
ministrator. Because the Arbitrator is lim-
ited to the task of finding facts, the report
will not provide any decision or reasoning
that represents an interpretation of the law.
Neither Party may appeal the decision of
the Arbitrator or contest the decision in any
judicial proceeding, including, but not lim-
ited to, the Tax Court, United States Court
of Federal Claims or a federal district or
appellate court.
.02 Once the Arbitrator renders a deci-
sion on all or some issues through the ar-
bitration process, Appeals will use estab-
lished procedures to close the case, includ-
ing preparation of a specific matters clos-
ing agreement (Form 906). Delegation Or-
der 236 (Rev. 3), or any successor delega-
tion order, may apply to settlements result-
ing from the arbitration process.
.03 If applicable, Appeals will report a
settlement reached as a result of the arbi-
2006–44 I.R.B.802October 30, 2006

tration process to the Joint Committee on
Taxation in accordance with I.R.C. § 6405.
SECTION 9. GENERAL PROVISIONS
.01 All IRS and Treasury employees,
including the Appeals Administrator, who
participate in or observe in any way the
arbitration process and any person under
contract to the IRS as described in I.R.C.
§ 6103(n), including the non-IRS Arbitra-
tor and non-IRS Administrator will be sub-
ject to the confidentiality and disclosure
provisions of the Internal Revenue Code,
including I.R.C. §§ 6103, 7213, and 7431.
.02 Under I.R.C. § 7214(a)(8), IRS em-
ployees who have knowledge or informa-
tion of the violation of any revenue law
of the United States must report in writing
such knowledge or information to the Sec-
retary. The agreement to arbitrate will state
this duty and the Parties will acknowledge
it.
.03 The Arbitrator will be disqualified
from representing the taxpayer in any
pending or future action that involves the
transactions or issues that are the particular
subject matter of the arbitration. This dis-
qualification extends to representing any
other parties involved in the transactions
or issues that are the particular subject
matter of the arbitration. Moreover, the
Arbitrator’s firm will be disqualified from
representing the taxpayer or any other par-
ties involved in the transactions or issues
that are the particular subject matter of the
arbitration in an action that involves the
transactions or issues that are the particular
subject matter of the arbitration. The Arbi-
trator’s firm will not be disqualified from
representing the taxpayer or any other
parties in any future action that involves
the same transactions or issues that are the
particular subject matter of the arbitration,
provided that: (i) the Arbitrator disclosed
the potential of such representation prior
to the Parties’ acceptance of the Arbitra-
tor; (ii) such action relates to a taxable
year that is different from the taxable year
under arbitration; (iii) the firm’s internal
controls preclude the Arbitrator from any
form of participation in the matter; and
(iv) the firm does not allocate to the Ar-
bitrator any part of the fee therefrom. In
the event the Arbitrator has been selected
prior to learning the identity of any Party
involved in the arbitration, requirement (i)
will be deemed satisfied if the Arbitrator
promptly notifies the Parties of the poten-
tial representation.
.04 Although the Arbitrator may not re-
ceive a direct allocation of the fee from the
taxpayer (or other party) in the matter for
which the internal controls are in effect, the
Arbitrator will not be prohibited from re-
ceiving a salary, partnership share, or cor-
porate distribution established by prior in-
dependent agreement. The Arbitrator and
the firm are not disqualified from repre-
senting the taxpayer or any other parties
involved in the arbitration in any matters
unrelated to the transactions or issues that
are the particular subject matter of the ar-
bitration.
.05 The disqualifications described in
sections 9.03 and 9.04 only apply to rep-
resentations on matters before the IRS.
The provisions of these sections are in
addition to any other applicable disqualifi-
cation provisions including, for example,
the rules of the American Bar Association
Model Code of Professional Conduct and
the applicable canons of ethics.
.06 The decision by the Arbitrator will
neither be binding on nor otherwise con-
trol, the Parties for taxable years not cov-
ered by the arbitration. Except as provided
in the agreement to arbitrate, no Party may
use the arbitration findings as precedent.
SECTION 10. EFFECTIVE DATE
This revenue procedure is effective Oc-
tober 30, 2006.
SECTION 11. CONTACT
INFORMATION
For further information concerning the
drafting of this revenue procedure, please
contact Wendy Ryan, from the Chief,
Appeals — Office of Tax Policy and Pro-
cedure, (202) 435–5671 (not a toll-free
number) or Jason Spitzer, from the Office
of Chief Counsel, Procedure and Admin-
istration, Administrative Provisions and
Judicial Practice, (202) 622–7950 (not a
toll-free number). For further information
about the operation of the Appeals Ar-
bitration program, contact Sandy Cohen,
listed above.
October 30, 20068032006–44 I.R.B.

Exhibit 1
Model Arbitration Agreement
1. THE ARBITRATION PROCESS. Arbitration is optional and will be used to assist [NAME OF TAXPAYER] and the Internal
Revenue Service—Appeals (the Parties) in resolving certain factual issues that are currently in the Appeals administrative
process. This arbitration process will be conducted pursuant to Rev. Proc. 2006–44, 2006–44 I.R.B. 800. The Parties to this
agreement will submit the issues for arbitration and agree to be bound by the Arbitrator’s findings on these issues. Each Party
enters this agreement in reliance on the other Party’s agreement to be bound by the decision of the Arbitrator. There can be noex
partecommunication between the Arbitrator and any Party, third party, witness, agent, or other person regarding the issues for
arbitration. All communications between the Arbitrator and either Party, including requesting and transferring documentation
and information, will be made through an Administrator.
2. PARTICIPANTS. The participants in the arbitration session will be:
For Taxpayer:
For Appeals:
Appeals reserves the right to have an observer attend any arbitration. Taxpayers ortheir representatives may also have an
observer attend the arbitration.
All witnesses, attorneys, representatives and observers (Participants) who will attend the arbitration on behalf of or at the request
of a Party must be set forth in the list of Participants. If a Party subsequently modifies its list, then, no later than thirty (30)
days before commencement of the arbitration session, such Party will submit to the Administrator a complete and final list of
Participants who will attend the arbitration session. The list must identify, for each Participant, his or her position with the Party
or other affiliation and address, telephone and fax numbers. The Administrator will simultaneously submit each Party’s list to the
other Party and to the Arbitrator by facsimile or other arrangement agreed to by the Parties. The Parties, by mutual agreement,
may modify the list of Participants in writing at any time up to and including the date of the commencement of the arbitration
session. Witnesses will be identified inaccordance with section 6 of this agreement.
3. SELECTION OF ARBITRATOR, COSTS. The Parties have agreed to select an Arbitrator from Appeals or from any local or
national organization that provides a roster of neutrals. On behalf of the Parties, the Administrator will arrange for the hiring of
the Arbitrator. The fees and costs of the Arbitrator will be shared equally by the taxpayer and Appeals, subject to applicable rules
and regulations for Government procurement.
4. ISSUES TO BE ARBITRATED. The Parties agree that the issuessubmitted for resolution by the Arbitrator are factual in
nature and do not require the Arbitrator to interpret any law, regulation, ruling or other legal authority. The following issues shall
be resolved separately for each of the taxable years at issue:
5. GUIDANCE FOR ARBITRATOR. The Arbitrator is not permitted to make any determinations of law or provide reasoning
that represents an interpretation of the law; however, it may be necessary for the Arbitrator to refer to the existing applicable
law in making a finding on the factual issues. In doing so, the Arbitrator shall look solely to the following legal guidance
specified by the Parties:
a. Findings of facts shall be consistent with the legal authorities identified in [Appendix A].
b. The Parties will follow the Federal Rules of Evidence when proffering testimonial and documentary evidence at the arbitration
session. The Arbitrator, in his or her sole discretion, shall apply the Rules with the objective of admitting only evidence that is
reliable and credible. The Arbitrator will make final rulings on evidentiary disputes. To the extent the conduct of the Arbitration
session is not governed by this agreement, the Partiesagree to follow the Federal Rules of Civil Procedure.
c. At the request of the Arbitrator, the Parties may agree to provide further legal guidance. The Administrator shall determine,
after consultation with the Arbitrator and the Parties, the appropriate manner (i.e., verbal or written form and timing) to submit
the further legal guidance to the Arbitrator. If no agreementcan be reached with respect to the further legal guidance and it is
determined by the Arbitrator that further guidance from the Parties is necessary to decide the matter, then the matter cannot be
arbitrated and this agreement will terminate.
d. When legal guidance provided by the Parties is in conflict, the Arbitrator, where practicable, will ignore the guidance and
decide the factual issue. If it is not practicable to set aside the Parties’ guidance, then during the arbitration session, the Parties
will attempt to agree on the guidance needed to resolve the issue. If the Parties cannot agree and the guidance is necessary to
decide the matter, then the matter cannot be arbitrated and this agreement will terminate.
2006–44 I.R.B.804October 30, 2006

6. SUBMISSION OF MATERIALS. Each Party agrees to provide a written summary of the case and their position (not to exceed
25 pages) to the Administrator at least thirty (30) days prior to the date of commencement of the arbitration session. On the due
date for the summaries, the Parties will simultaneously exchangethe summaries by facsimile or other arrangement agreed to by
the Parties and submit a copy to the Administrator for transmittal to the Arbitrator by facsimile or by means of an overnight
express delivery service. The Parties willsubmit testimonial and documentary evidence to the Arbitrator in accordance with the
procedures set forth in sections 6 a. and 6 b. below.
The Arbitrator may order a Party to produce a summary of their documents and other evidence which the Party intends to present
in support of its position and may order a Party to produce other documents, exhibits or evidence deemed necessary or appropriate.
Any and all information and materials that a Party provides must be submitted to the other Party and Administrator who will
simultaneously forward such to the Arbitrator.
The Parties will attempt to stipulate to as many facts, documents or conclusions as possible prior to the arbitration session. A
stipulation shall be submitted to the Arbitrator, through the Administrator, prior to the commencement of the arbitration session.
The Parties may jointly submit supplemental stipulations to the Arbitrator, through the Administrator, at any time prior to the date
that the report is issued pursuant to section 14.
a. The Parties may, with mutual agreement and the consent ofthe Arbitrator, offer witnesses at the arbitration session:
(1) Witnesses shall be subject to direct examination, cross examination and questions by the Arbitrator. In the discretion of the
Arbitrator, Parties may requestthe opportunity to redirect and recross a witness.The Parties shall submit to the Administrator a
listing of potential fact witnesses no later than thirty (30) daysprior to the date of commencement of the arbitration session. The
listing should include the name, current position (if an employee of [NAME OF COMPANY], current and former positions with
the applicable company and period such position(s) were held), and brief description of the anticipated testimony.
(2) The Administrator shall forward the witness lists to the Arbitrator and the opposing Party on the due date for such documents.
(3) Once the witness lists have been submitted to the Arbitrator, a Party shall not add additional persons except upon joint
agreement of both Parties. A witness will not be entitled to testify at the arbitration session if that person is not included on the
listing of witnesses timely submitted to the Administrator.
b. The Parties may, with mutual agreement, submit to the Arbitrator any reliable and credibledocuments that are relevant to
the issues to be decided by the Arbitrator. Issues of relevance, reliability and credibility shall be resolved by the Arbitrator. All
documents shall be based solely on information contained within the existing record.
(1) All documents to be submitted to the Arbitrator prior to the commencement of the arbitration session shall be by joint
agreement of the Parties, unless otherwise ordered by the Arbitrator. The time and manner of the submission shall be by joint
agreement of the Parties.
(2) All documents to be offered by a Party during the arbitration session shall be identified and, if not previously provided,
exchanged with the opposing Party no later than thirty (30) daysprior to the date of commencement of the arbitration session.
The Parties shall submit their documents to the Administrator who will immediately and simultaneously forward them to the
Arbitrator. The Parties shall exchange documents directly. Failure to timely exchange documents not previously provided shall
preclude the use of such document(s) in the arbitration session, except by a showing of good cause and lack of prejudice to the
opposing Party, as determined by the Arbitrator.
c. The Parties agree that the methodology to be used by the Arbitrator in deciding any issuedescribedinsection4ofthis
agreement must follow these principles:
[For example, language describing the answer sought by the Parties from the Arbitrator,e.g., a specific dollar value, a range of
values, a ‘yes’ or ‘no’ finding, etc.]
d. The Parties agree to clarify issues thatmay arise in calculating any deficiency or overpayment resulting from the Arbitrator’s
findings and agree to the tax treatment of the Arbitrator’s findings as follows:
[For example, the Parties should specify how to calculate the taxpayer’s deficiency based on the Arbitrator’s determination
of the value of a particular asset.]
7. CONTACT WITH ARBITRATOR. The Parties agree that there shall be noex partecommunication between the Arbitrator
and either Party or any Participant. In addition, the Arbitrator may not have contact with any other individuals, except the
Administrator, concerning the substance of the arbitration or thearbitration process without the express approval of the Parties.
Any contact with the Arbitrator by either Party must be in the presence of the other Party and such contact must be arranged
by the Administrator.
October 30, 20068052006–44 I.R.B.

8. ARBITRATION SESSION. Subject to the approval of the Arbitrator, the arbitration session will commence on the date and
time agreed to by the Parties. The procedures for the arbitration session shall be determined by the Arbitrator,e.g., length and
order of opening and closing statements, presentation of witnesses, etc. The postponement or continuance of the arbitration
session for good cause shall be determined by agreement betweenthe Parties, subject to the final approval of the Arbitrator.
9. PLACE OF ARBITRATION. The Parties prefer [NAME OF LOCATION] as the site for the arbitration session, subject to
change by agreement among the Parties and the Arbitrator.
10. CONFIDENTIALITY. IRS and Treasury employees who participate in any way in the arbitration process and any person
under contract to the IRS pursuant to Section 6103(n) of the Internal Revenue Code of 1986, as amended, including the
Arbitrator, that the IRS invites to participate will be subject to the confidentiality and disclosure provisions of the Internal
Revenue Code, including Sections 6103, 7213, and 7431. See also 5 U.S.C. § 574. All information concerning any dispute
resolution communication related to the arbitration proceeding is confidential and may not be disclosed by any Party, Participant,
Administrator, or Arbitrator except as provided under 5 U.S.C. § 574. A dispute resolution communication includes all oral or
written communications prepared for purposes of a dispute resolution proceeding. See 5 U.S.C. § 571(5).
[NAME OF TAXPAYER] consents to the disclosure by the IRS of thetaxpayer’s returns and return information incident to the
arbitration to any Participant for the taxpayer identified in theinitial list of Participants in section 2 of this agreement, to any
Participant identified in writing by the taxpayer subsequentto execution of this agreement, and to any other persons who
participate in this arbitration proceeding on behalf of either Party. If the arbitration agreement is executed by a person pursuant to
a power of attorney executed by [NAME OF TAXPAYER], that power of attorney must clearly express the grant of authority by
[NAME OF TAXPAYER] to consent to disclose the returns and return information of [NAME OF TAXPAYER] by the IRS to
third parties, and a copy of that power of attorney must be attached to this agreement.
11. I.R.C. SECTION 7214(a)(8) DISCLOSURE. The Parties acknowledge that IRS and all otherTreasury employees involved
in this arbitration are bound by Section 7214(a)(8) and must report information concerning violations of any revenue law to
the Secretary.
12. RECORD. The Arbitrator may request a stenographic or otherrecord of the arbitration session. If a record is requested, the
Administrator will make the arrangements and the Parties shall bear equally the costs of such record. The Parties agree that
any stenographic record orother recording of the arbitration proceeding shall remain confidential and shall be destroyed by the
Administrator following the issuance of the Arbitrator’s report pursuant to section 14.
13. WITHDRAWALS AND POSTPONEMENT. By mutual agreement,the Parties may withdraw from the arbitration process
in order to reach a final Appeals settlement any time before the scheduled arbitration session. Established Appeals procedures
apply to any resolution reached by the Parties. The Arbitrator may grant postponements for good cause after a hearing before
both Parties.
14. REPORT BY ARBITRATOR. The Arbitrator’s report will identify each issue described in section 4 of this agreement, will
state the findings of facts foreach issue for each tax year, and explain any methodology referred to in section 6 c. of this agreement
that was utilized in reaching such findings. The report shall be issued and submitted to the Administrator within thirty (30) days
after the conclusion of the arbitration session, unless the Arbitrator requests additional time and the Parties approve such request.
The Parties may not unreasonably withhold such approval. The Administrator shall forward the Arbitrator’s report to the Parties.
15. FINALITY OF ARBITRATOR’S DECISION. The Parties agree to be bound by the Arbitrator’s findings, as set forth in the
report described in section 14 and to incorporate those findings and the final computations determined under section 6 d. of this
agreement into an Appeals closing agreement that the Parties will execute. Delegation Order 236 (Rev. 3), or successor delegation
order, may apply to settlements resulting from the arbitration process. Neither Party may appeal the findings of the Arbitrator nor
contest the finding(s) in any judicial proceeding, including but not limited to the United States Tax Court, United States Court of
Federal Claims, or a federal district or federal appellate court.
2006–44 I.R.B.806October 30, 2006

16. PRECEDENTIAL USE. The findings by the Arbitrator will notbe binding on, or otherwise control, the Parties for taxable
years not covered by the arbitration. Except as provided in this agreement, the findings of facts made by the Arbitrator may not
be used as precedent by any Party.
INTERNAL REVE
NUE SERVICE, APPEALS
By:
Date:
[NAME OF TAXP
AYER]
By:
Date:
October 30, 20068072006–44 I.R.B.

Part IV. Items of General Interest
Notice of Proposed
Rulemaking and Notice of
Public Hearing
General Allocation and
Accounting Regulations Under
Section 141
REG–140379–02;
REG–142599–02
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed regulations on the allocation of, and
accounting for, tax-exempt bond proceeds
for purposes of the private activity bond
restrictions that apply under section 141
of the Internal Revenue Code (Code) and
that apply in modified form to qualified
501(c)(3) bonds under section 145 of the
Code. The proposed regulations provide
State and local governmental issuers of
tax-exempt bonds with guidance for apply-
ing the private activity bond restrictions.
This document also provides notice of a
public hearing on these proposed regula-
tions.
DATES: Written or electronic comments
must be received by December 26, 2006.
Requests to speak with outlines of top-
ics to be discussed at the public hearing
scheduled for January 11, 2007, must be
received by December 26, 2006.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–140379–02;
REG–142599–02), room 5203, Internal
Revenue Service, PO Box 7604, Ben
Franklin Station, Washington, DC 20044.
Submissions may be hand delivered Mon-
day through Friday between the hours of
8:00 a.m. to 4:30 p.m. to CC:PA:LPD:PR
(REG–140379–02; REG–142599–02), In-
ternal Revenue Service, Crystal Mall 4,
1941 Jefferson Davis Hwy., 1901 S. Bell
St., room 108, Arlington, Virginia 22202.
Alternatively, submissions may be made
electronically to the IRS Internet Site at
www.irs.gov/regsor via the Federal eRule-
making Portal atwww.regulations.gov
(IRS-REG–140379–02). The public hear-
ing will be held in the auditorium of the
New Carrollton Federal Building, 5000
Ellin Rd., Lanham, Maryland 20706.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Johanna Som de Cerff (202)
622–3980; concerning submissions and
the hearing, Kelly D. Banks, (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained
in this notice of proposed rulemaking has
been submitted to the Office of Manage-
ment and Budget for review in accordance
with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)). Comments on the
collection of information should be sent
to the Office of Management and Bud-
get, Attn: Desk Officer for the Depart-
ment of the Treasury, Office of Informa-
tion and Regulatory Affairs, Washington,
DC 20503, with copies to the Internal Rev-
enue Service, Attn: IRS Reports Clearance
Officer, SE:CAR:MP:T:T:SP, Washington,
DC 20224. Comments on the collection of
information should be received by Decem-
ber 26, 2006. Comments are specifically
requested concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the Internal
Revenue Service, including whether the
information will have practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with the
proposed collections of information may
be minimized, including through the appli-
cation of automated collection techniques
or other forms of information technology;
and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of service to provide information.
The recordkeeping requirement in this
proposed regulation is in §1.141–6(a)(4).
The recordkeeping requirement will apply
only to State and local governmental is-
suers of tax-exempt bonds used to finance
a facility that will be used for both gov-
ernmental use and more than ade min-
imisamount of private business use. The
recordkeeping is voluntary to obtain a ben-
efit. The records will enable the Service
to examine compliance by State and local
governmental issuers of tax-exempt bonds
used to finance a facility that will be used
for both governmental use and more than a
de minimisamount of private business use.
Estimated total annual recordkeeping
burden: 3000 hours.
Estimated average annual burden hours
per recordkeeper: 3 hours.
Estimated number of recordkeepers:
1000.
Estimated annual frequency of re-
sponses: the frequency of responses will
depend on how often the recordkeeper
issues tax-exempt bonds used to finance
a facility that will be used for both gov-
ernmental use and more than ade minimis
amount of private business use, which will
vary from rarely to a few times a year.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Of-
fice of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
This document contains proposed
amendments to 26 CFR part 1. Final
regulations (T.D. 8712, 1997–12 I.R.B.
35) under section 141 of the Internal Rev-
enue Code (Code) were published in the
Federal Registeron January 16, 1997 (62
FR 2275) (the 1997 Final Regulations)
to provide comprehensive guidance on
most aspects of the private activity bond
restrictions. The 1997 Final Regulations,
however, reserved most of the general al-
location and accountingrules for purposes
of section 141. An advance notice of pro-
posedrulemakingwaspublishedinthe
2006–44 I.R.B.808October 30, 2006

Federal Registeron September 23, 2002
(REG–142599–02, published in the I.R.B.
as Announcement 2002–91, 2002–2 C.B.
685) (67 FR 59767) (the 2002 Advance
Notice) regarding allocation and account-
ing rules for tax-exempt bond proceeds
used to finance mixed-use output facili-
ties.
This document amends the Income
Tax Regulations under section 141 by
proposing rules for the allocation of, and
accounting for, tax-exempt bond proceeds.
Special rules for allocating proceeds used
to finance mixed-use facilities and rules
regarding the treatment of partnerships
as owners or users of facilities for pur-
poses of section 141 are also included.
This document also amends regulations
under section 145 by proposing rules on
certain related matters that apply to qual-
ified 501(c)(3) bonds. These regulations
are published as proposed regulations (the
Proposed Regulations) to provide an op-
portunity for public review and comment.
Explanation of Provisions
I.Introduction
In general, the interest on State and
local governmental bonds is excludable
from gross income under section 103 of
the Code upon satisfaction of certain re-
quirements. Interest on a private activity
bond, other than a qualified private ac-
tivity bond within the meaning of section
141, is not excludable under section 103.
Section 141 provides certain tests used to
determine whether a State or local bond is
a private activity bond. These tests look
to whether the proceeds of tax-exempt
bonds comply with certain restrictions,
including private business use restrictions,
private payment restrictions, and private
loan restrictions. Similar restrictions ap-
ply in modified form to qualified 501(c)(3)
bonds under section 145.
In general, these private activity bond
restrictions permit certainde minimis
amounts of private business use for pro-
ceeds of tax-exemptgovernmental bonds
without causing such bonds to be classi-
fied as private activity bonds under section
141 (de minimispermitted private business
use).De minimispermitted private busi-
ness use generally means private business
use of not more than 10% of the proceeds.
Section 141(b)(3) further limits thisde
minimispermitted private business use
to a 5% amount for certain unrelated or
disproportionate use. Sections 141(b)(4)
and 141(b)(5) further limit thisde minimis
permitted private business use to a pre-
scribed $15 million nonqualified amount
for certain output facility issues generally
and for certain larger issues absent volume
cap allocations for private business use
in excess of the $15 million nonqualified
amount.
The Proposed Regulations provide
guidance regarding general allocation
and accounting rules for purposes of the
private activity bond restrictions under
section 141. The Proposed Regulations
provide guidance regarding allocations of
proceeds of an issue of tax-exempt bonds
(proceeds) and other funds to expenditures
(as contrasted with investments), to prop-
erty, and to uses (that is, governmental use
or private business use).
The Proposed Regulations include cer-
tain special accounting rules for projects
which have both governmental use and pri-
vate business use (mixed-use projects), as
described further herein. One purpose of
these special accounting rules is to provide
flexibility to allow issuers to use tax-ex-
empt governmental bonds to finance the
portion of a mixed-use project to be used
for governmental use where private busi-
ness use of the entire project may exceed
the amount ofde minimispermitted private
business use.
The Proposed Regulations provide sev-
eral general allocation rules. First, pro-
ceeds and other sources of funds gener-
ally may be allocated to expenditures us-
ing any reasonable, consistently applied
accounting method that is consistent with
how proceeds are allocated for purposes
of the arbitrage investment restrictions of
section 148. Second, under a generalpro
rataallocation method (which also applies
to mixed-use projects absent an election
to use one of two elective special alloca-
tion rules), proceeds and other sources al-
located to capital expenditures for a cap-
ital project generally are treated as allo-
cated ratably throughout the project in pro-
portion to the relative amounts of proceeds
and other funds spent on that project (gen-
eralpro rataallocation method). Third,
allocations of sources of funds to uses,
that is, governmental use and private busi-
ness use, generally are made in a manner
that reasonably corresponds to the relative
amounts of the sources of funding spent on
the property.
The Proposed Regulations provide spe-
cial elective allocation rules for mixed-use
projects. In general, the intent of these spe-
cial allocation rules is to provide reason-
able flexibility to allow issuers to finance
portions of projects that are reasonably
expected to be used for governmental use
with tax-exempt governmental bonds, pro-
vided that the portions can be reasonably
determined and measured in administrable
ways. In particular, the Proposed Regula-
tions provide two special elective alloca-
tion methods, the discrete physical portion
allocation method andthe undivided por-
tion allocation method. These two special
elective allocation methods permit pro-
ceeds to be allocated to a portion of a
mixed-use project using certain prescribed
reasonable, consistent allocation methods
that properly reflect the proportionate ben-
efit to be derived by the various users of
the mixed-use project. These two special
allocation methods for dividing mixed-use
projects for financing purposes are based
on principles similar to those used for
measuring ongoing use under §1.141–3(g)
and are closely coordinated with those
measurement rules. These methods may
be elected for mixed-use projects only if
they meet certain eligibility criteria. Ab-
sent a proper election to use one of these
two special elective allocation methods,
the generalpro rataallocation method ap-
plies to a mixed-use project. The special
allocation rules for mixed-use projects are
described further herein.
In addition to general allocation and ac-
counting rules and special allocation rules
for mixed-use projects, the Proposed Reg-
ulations also provide guidance on certain
related topics.
II.General Allocation Rules for Proceeds:
General Pro Rata Allocation Method
The Proposed Regulations provide a
generalpro rataallocation method un-
der which proceeds and other funds, if
any, allocated under section 148 and
§1.141–6(a)(1) to capital expenditures for
a project are treated as being allocated rat-
ably throughout the project in proportion
to the relative amounts of proceeds and
other funds spent on the project. Gen-
erally, the project is the bond-financed
property for purposes of section 141. Ex-
October 30, 20068092006–44 I.R.B.

cept where the issuer has elected to use
one of the special allocation methods per-
mitted for certain mixed-use projects, the
Proposed Regulations provide that a gen-
eralpro rataallocation method applies to
mixed-use projects. Except as otherwise
provided in the Proposed Regulations, if
financed property is financed with two or
more sources of funding (including two
or more tax-exempt governmental bond
issues), those sources of funding must be
allocated to multiple uses (that is, govern-
mental use and private business use) of
that financed property in proportion to the
relative amounts of those sources of fund-
ing expended on that financed property.
The Proposed Regulations prescribe
the manner and timing of elections to use
the special allocation rules for mixed-use
projects and rules regarding final alloca-
tions of sources of funding to a project
generally.
III.Mixed-use Projects
(A)In general
The Proposed Regulations provide two
special allocation methods that issuers
may elect to use for certain mixed-use
projects. Here, a mixed-use project refers
to a project (as defined in the Proposed
Regulations) that, absent the application
of the special proposed rules, is reasonably
expected to have both governmental use
and private business use, and where the
private business use is expected to be in
excess of the amount ofde minimisper-
mitted private business use under section
141 for a project financed with an issue of
tax-exempt governmental bonds.
The Proposed Regulations treat prop-
erty as part of the same defined project
if the property consists of capital projects
that have reasonable nexus characteristics
based upon functional and physical prox-
imity, time of placement in service, and
a common plan of financing for proceeds
and other sources of funds expended on the
capital projects.
The Proposed Regulations provide two
special elective methods of allocating pro-
ceeds of tax-exemptgovernmental bonds
and other funds, that is, proceeds of taxable
bonds and funds that are not derived from
proceeds of a borrowing(qualified equity),
to capital expenditures within mixed-use
projects: the discrete physical portion al-
location method and the undivided portion
allocation method. Absent eligibility and
aproperelectionbyanissuertouseone
of these special elective allocation meth-
ods for mixed-use projects, the generalpro
rataallocation method applies.
(B)Discrete physical portion allocation
method
In general, the discrete physical portion
allocation method allows allocations for a
mixed-use project based on dividing the
project into physically discrete portions.
Under the discrete physical portion allo-
cation method, the percentage of capital
expenditures that is allocable to a particu-
lar discrete portion of a mixed-use project
is determined using a reasonable, consis-
tently applied method that reflects the pro-
portionate benefit to be derived by the var-
ious users of the mixed-use project. The
Proposed Regulations provide several ob-
jective proportionate benchmarks (for ex-
ample, cost, space, or fair market value)
to determine the measure of a discrete por-
tion.
An anti-abuse rule requires use of rela-
tive fair market values to measure the dis-
crete portions when an allocation to a dis-
crete portion expected to be used by a pri-
vate business is significantly greater using
relative fair market values than such allo-
cation would be under the otherwise-cho-
sen measure. This anti-abuse rule is com-
parable to a similar existing anti-abuse rule
regarding the ongoing measurement of pri-
vate business use under §1.141–3(g)(4)(v).
The Treasury Department and the IRS so-
licit public comment on this anti-abuse
rule and whether quantifying the signifi-
cantly greater than under fair market value
standard (for example, an allocation un-
der the fair market value standard is sig-
nificantly greater if it exceeds an alloca-
tion made under another measure by more
than X percent) would assist taxpayers in
making effective use of the discrete physi-
cal portion allocation method.
In order to allow for targeting of tax-ex-
empt bond proceeds to governmental use,
an issuer generally may determine which
source or sources of funds spent on a
mixed-use project are allocated to a par-
ticular discrete portion. For example,
an issuer may allocate tax-exempt bond
proceeds to one discrete portion of a
mixed-use courthouse project which will
be used in public court proceedings for
governmental use and the issuer may al-
locate qualified equityto another discrete
portion of the courthouse which will be
used in private retail business operations
as a restaurant for private business use.
Further, while final allocations gener-
ally may not be changed, an issuer may re-
allocate funds from one discrete portion to
another if the discrete portions are compa-
rable under certain criteria. For adminis-
trability reasons, the Proposed Regulations
limit such reallocations to a frequency of
not more than once every five years.
(C)Undivided portion allocation method
In general, the undivided portion al-
location method permits separating a
mixed-use project into a governmen-
tal use portion and a private business
use portion, each of which represents a
fixed percentage of the use of the entire
mixed-use project (for example, a fixed
percentage of unreserved parking spaces
in a parking garage). Unlike the discrete
physical portion method, the undivided
portion allocation method involves the
allocation of a mixed-use project between
portions that are not physically distinct
but that can be notionally represented
by percentages based on objective pro-
portionate measures. Certain eligibility
conditions apply to the undivided portion
allocation method. This method may be
used only for mixed-use projects where
private business use and governmental
use may be measured under §1.141–3(g)
because that use occurs: (1) at the same
timeandonthesamebasis(withinthe
meaning of §1.141–3(g)(4)(iii)); or (2)
at different times (within the meaning of
§1.141–3(g)(4)(ii)). The issuer must rea-
sonably expect as of the issue date that the
undivided portion of the mixed-use project
to be financed with proceeds of tax-exempt
governmental bonds will not have private
business use in excess of the amount of
de minimispermitted private business
use. The total capital expenditures for the
mixed-use project are allocated between
two undivided portions based on measures
of the proportionate benefit to be derived
by the various users. The Proposed Reg-
ulations list some reasonable allocation
methods for determining the relative size
of the portions. The undivided portion
allocation method has an anti-abuse rule
2006–44 I.R.B.810October 30, 2006

similar to that described previously with
respect to the discrete physical portion
allocation method which requires use of
relative fair market values to measure the
portions in certaincircumstances.
Proceeds are allocated only to the undi-
vided portion that is reasonably expected
to be used for governmental use (and any
de minimispermitted private business use).
Qualified equity is allocated to the other
undivided portion.
A number of special rules apply to the
undivided portion allocation method for
purposes of allocating sources to uses.
In general, the entire mixed-use project
is treated as the bond-financed property
whose use must be measured. Also, in
measuring ongoing use of a mixed-use
project under the undivided portion allo-
cation method, the measurement rules in
§1.141–3(g) (or §1.141–7 in the case of
a mixed-use output facility) apply. The
issuer must use the same method for mea-
suring use that it used for determining the
allocation of funds to the undivided por-
tions of the mixed-use project. After use of
the entire mixed-useproject is measured,
however, the governmental use and pri-
vate business use are generally allocated to
the undivided portions financed with pro-
ceeds and qualified equity, respectively.
Generally, in any year, the percentage of
governmental use and private business use
that is specially allocated to an undivided
portion is limited. That percentage of use
cannot exceed the percentage of capital
expenditures for the mixed-use project
that makes up that undivided portion. For
example, the percentage of private busi-
ness use that is specially allocated to the
undivided portion financed with qualified
equity cannot exceed the percentage of
capital expenditures for the mixed-use
project that makes up that undivided por-
tion. In determiningwhether the private
business use test is met, only use of the
undivided portion to which proceeds are
allocated is taken into account.
(D)Operating rules for mixed-use projects
The Proposed Regulations provide cer-
tain general operating rules for mixed-use
project allocations. An issuer may elect
to apply the discrete physical portion al-
location method or the undivided portion
allocation method only if the mixed-use
project is wholly-owned by governmen-
tal persons. An exception to this rule
applies to certain mixed-use output facil-
ities. (See paragraph E.Special rules for
mixed-use output facilities.) Consistent
with §1.141–1(b), common areas can-
not be treated as discrete portions of the
project. Proceeds and other sources of
funds spent on common areas are allo-
cated to the discrete portions in the same
proportion as funds spent for the discrete
portions are allocated.
Under the Proposed Regulations, the
funds that may be allocated under the dis-
crete physical portion allocation method or
the undivided portion allocation method to
a particular mixed-useproject include pro-
ceeds of one or more issues of tax-exempt
governmental bonds and qualified equity.
If a project is financed with more than one
issue of governmental bonds, proceeds of
those issues are allocated ratably to a dis-
crete portion or undivided portion to which
any proceeds are allocated in proportion to
the amounts of proceeds from each issue
used for the project.
(E)Special rules for mixed-use output
facilities
The Proposed Regulations provide
special rules for the application of the
undivided portion allocation method to
mixed-use projects that are output facili-
ties. An issuer may apply the undivided
portion allocation method to a mixed-use
project that is an output facility if the fa-
cility is wholly-owned by governmental
persons or if undivided ownership interests
in the facility are owned by governmental
persons or private businesses, provided
that all owners of theundivided ownership
interests share the ownership, output, and
operatingexpensesinproportiontotheir
contributions to the costs of the facility.
The relative measures of the undivided
portions of a mixed-use output facility
are determined using the proportionate
benefit to be derived by the users of the
mixed-use project. For an output facility
in which private business use arises from
a private business owning an undivided
ownership interest in the facility (with
a governmental person owning the other
undivided portion of the facility), the undi-
vided portions are based on the ownership
percentages. This rule implements the
principles illustrated by §1.141–7(i),Ex-
ample 1. When private business use of a
facility solely owned by a governmental
person or of an undivided ownership inter-
est of a facility owned by a governmental
person arises from an output contract that
meets the benefits and burdens tests under
§1.141–7, the undivided portions of that
facility or ownership interest are deter-
mined by the proportionate shares of the
available output of that project to be used
for governmental use (and anyde minimis
permitted private business use) and for
private business use. Section 1.141–7(h)
controls allocation of output contracts to
output facilities.
IV.Redemption of bonds in anticipation
of nonqualified private business use
The Proposed Regulations provide a
new special rule which permits certain
proceeds of taxable bonds and certain
funds that are not derived from proceeds
of a borrowing that are used to retire
tax-exempt governmental bonds (antic-
ipatory redemption bonds) to be treated
as qualified equity. In prescribed cir-
cumstances, this new special rule allows
targeting of funds other than tax-exempt
bond proceeds to redeem outstanding
tax-exempt bonds and thereby to finance
portions of projects which are expected to
be used for nonqualified private business
use in the future. This special rule has
certain eligibility requirements. In gen-
eral, the intent of this proposed rule is to
encourage retirement of tax-exempt bonds
before the occurrence of unqualified use
to reduce the burden on the tax-exempt
market. The eligibility requirements for
this special rule address when the anticipa-
tory redemption bond must be retired, the
issuer’s reasonable expectations regarding
use of the project and actual use of the
project prior to the redemption, and the
length of the term of the issue of which the
anticipatory redemption bond is a part.
Amounts that are treated as qualified
equity under this special rule may be al-
located to a discrete portion or undivided
portion of the project in a manner pro-
vided in the discrete physical portion allo-
cation method or undivided portion alloca-
tion method if such allocation would have
satisfied the applicable allocation method
had that portion been identified for pur-
poses of financing it in a new issue at the
time of the retirement of the anticipatory
redemption bond.
October 30, 20068112006–44 I.R.B.

V.Allocations of private payments,
common costs, and bonds
The Proposed Regulations provide that
private payments generally are allocated in
accordance with §1.141–4, subject to cer-
tain special rules for allocating payments
under output contracts. Private payments
from output contracts that meet the ben-
efits and burdens test under §1.141–7
are allocated to the undivided portion
financed with qualified equity (notwith-
standing §1.141–4(c)(3)(v)) in the same
manner as is the private business use from
such contracts. Thus, private business use
and private payments arising under such
an output contract are both allocated to the
undivided portion financed with qualified
equity (to the extent all such contracts do
not exceed the percentage of such portion)
without regard to whether the qualified
equity consists of proceeds of taxable
bonds or funds that are not derived from
proceeds of a borrowing.
The Proposed Regulations provide rat-
able allocation rules for common costs (for
example, issuance costs).
The Proposed Regulations provide that
proceeds generally are allocated to bonds
in accordance with the rules for allocations
of proceeds to bonds in multipurpose is-
sues under §1.141–13(d). In the case of
an issue that is not a multipurpose issue,
proceeds are allocatedto bonds ratably in
a manner similar to the allocation of pro-
ceeds to projects under the generalpro rata
allocation method.
VI.Partnerships
The Proposed Regulations generally
treat a partnership as a separate entity that
is a nongovernmental person for purposes
of section 141. For purposes of section
141, a limited exception disregards a part-
nership as a separate entity if each of the
partners is a governmental person and
treats such a partnership as an aggregate
of its partners (that is, as governmental
persons) for these purposes. In applying
the private business tests for purposes of
qualified 501(c)(3) bonds, the Proposed
Regulations generally treat a partnership
as an aggregate if each of the partners is
either a governmental person or a section
501(c)(3) organization. The Proposed
Regulations, however, do not apply such
aggregate treatment for purposes of the
ownership test under section 145(a)(1).
In general, the proposed treatment of
partnerships reflectscertain administrabil-
ity concerns with partnerships which have
both governmental persons and private
businesses as partners and the associ-
ated potential for shifting allocations of
various partnership items. The Treasury
Department and the IRS understand that
governmental persons or section 501(c)(3)
organizations may be partners in partner-
ships that include private businesses. Per-
mitting tax-exempt bonds used to finance
facilities owned by such partnerships to
qualify as governmental bonds rather than
private activity bonds would raise ad-
ministrability issues, including but not
limited to, questions of how to measure
usebyanownerandquestionsregarding
common profit or cost reduction motives
and allocation of partnership items. Per-
mitting such ownership by partnerships
without administrable rules for tracking
these items has the potential to allow the
benefits of tax-exempt financing to inure
to private business users.
One limited circumstance in which the
Treasury Department and the IRS are con-
sidering favorable aggregate treatment for
partnerships (that is, disregarding eligible
partnerships as separate private business
entities) and are soliciting specific com-
ment is that of a partnership of governmen-
tal persons (or section 501(c)(3) organiza-
tions for 501(c)(3) bonds) and private busi-
nesses in which the respective partners re-
ceives the same distributive share of each
partnership item for Federal tax purposes
(including income, gain, deduction, loss,
credit and basis) as their respective inter-
ests in the partnership and this share re-
mains the same for the entire measurement
period for the bonds or the entire period
that the person is a partner. The Trea-
sury Department and the IRS solicit spe-
cific public comment regarding whether it
would be useful to treat such a partner-
ship as an aggregate in this limited circum-
stance involving straight-up allocations of
all partnership items in accordance with
constant percentage interests in the part-
nership.
The contemplated limited circumstance
in which the Treasury Department and the
IRS are considering aggregate treatment
for partnerships for private activity bond
purposes involves partnership allocations
similar to those treated as qualified alloca-
tions to tax-exempt entities for purposes of
the tax-exempt use property provisions un-
der section 168(h)(6).
VII.Multipurpose Issue Allocations
In general, §1.141–13(d) provides
guidance on multipurpose issue alloca-
tions for purposes of section 141. That
guidance was included as part of the fi-
nal regulations (T.D. 9234, 2006–4 I.R.B.
329) under section 141 that were published
in theFederal Registeron December 19,
2005 (70 FR 242) (the 2005 Final Refund-
ing Regulations) and that mainly provided
rules for refunding bonds.
The Proposed Regulations also make
a clarifying change to §1.141–13(d). In
response to the 2005 Final Refunding
Regulations, the Treasury Department and
the IRS have received comments seeking
clarification of how those multipurpose
rules work under section 141 in relation
to an existing general multipurpose is-
sue allocation rule under §1.150–1(c)(3).
The Proposed Regulations provide certain
clarifying guidance on the multipurpose
issue allocation rule under §1.141–13(d)
and provide an expanded example to il-
lustrate how those rules operate in various
circumstances.
In particular, the Proposed Regulations
modify §1.141–13(d) regarding multipur-
pose issue allocations to clarify how that
provision applies when an issuer wants to
elect the multi-purpose issue rule for an
issue that would consist of qualified pri-
vate activity bonds in part and governmen-
tal bonds in part with an appropriate allo-
cation. The Proposed Regulations amend
§1.141–13(d) to eliminate a requirement
that a multipurpose issue must consist of
tax-exempt bonds prior to being allocated
into separate issues. The Proposed Reg-
ulations retain the requirement that, after
the multipurpose issue allocation, each of
the separate issues must consist of tax-ex-
empt bonds. This proposed amendment
clarifies that an issuer may issue bonds
intended to be qualified private activity
bonds in part and governmental bonds in
part as one issue (within the meaning of
§1.150–1(c)(1)) and make allocations un-
der the section 141 multipurpose issue al-
location rule in §1.141–13(d) in conjunc-
tion with the general multipurpose issue al-
location rule in §1.150–1(c)(3), to treat the
2006–44 I.R.B.812October 30, 2006

qualified private activity bonds and gov-
ernmental bonds as separate issues, respec-
tively.
VIII.Proposed Effective Dates
The Proposed Regulations are proposed
to apply to bonds (1) that are sold on or
after the date that is 60 days after the date
of publication in theFederal Registerof
final regulations under §1.141–6 and (2)
that are subject to the 1997 Final Regula-
tions. Issuers may apply §§1.141–13(d)
and 1.141–13(g)Example 5of the Pro-
posed Regulations to bonds sold before
the date of publication of final regula-
tions in theFederal Registerto which
§1.141–13 applies. Except as otherwise
provided in the preceding sentence, issuers
maynotapplyorrelyupontherulescon-
tained in these Proposed Regulations until
these rules are adopted as final regulations
and made effective pursuant to a Treasury
decision published in theFederal Regis-
ter.
IX.Continued Reliance on Mixed-Use
Output Notice
Pursuant to the 2002 Advance Notice,
the Treasury Department and the IRS pro-
vided previous limited guidance regarding
certain allocation and accounting rules for
mixed-use output facilities. Issuers may
continue to rely on the rules in the 2002
Advance Notice for bonds sold before the
date of publication in theFederal Regis-
terof final regulations under §1.141–6 (or
such later effective date as may be speci-
fied in those final regulations or in future
proposed regulations).
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has alsobeen determined that
5 U.S.C. 553(b) does not apply to this no-
tice of proposed rulemaking. It is hereby
certified that the collection of information
(recordkeeping requirement) in this notice
of proposed rulemaking will not have a
significant economic impact on a substan-
tial number of small governmental juris-
dictions. This certification is based upon
the fact few small governmental jurisdic-
tions issue tax-exempt bonds to finance fa-
cilities that will be used for both govern-
mental use and more than the amount of
de minimispermitted private business use.
Also, the amount of time required to meet
the recordkeeping requirement is not sig-
nificant. Therefore, a Regulatory Flexibil-
ity Analysis under the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Code,
this notice of proposed rulemaking will be
submitted to the Small Business Adminis-
tration for comment on its impact on small
governmental jurisdictions.
Comments and Public Hearing
Before these Proposed Regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies) or electronic com-
ments that are submitted timely to the IRS.
The Treasury Department and IRS specif-
ically request comments on the clarity of
the proposed rules and how they may be
made easier to understand. All comments
will be available for public inspection and
copying.
A public hearing has been scheduled
for January 11, 2007 at 10:00 a.m., in
the auditorium of the New Carrollton Fed-
eral Building, 5000 Ellin Rd., Lanham,
Maryland 20706. Due to building secu-
rity procedures, visitors must enter at the
main entrance. In addition, all visitors
must present photo identification to enter
the building. Because of access restric-
tions, visitors will not be admitted beyond
the immediate entrance area more than 30
minutes before the hearing starts. For in-
formation about having your name placed
on the building access list to attend the
hearing, see the “FOR FURTHER INFOR-
MATION CONTACT” section of this pre-
amble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written or electronic comments by
December 26, 2006, and submit an out-
line of the topics to be discussed and the
amount of time to be devoted to each topic
(a signed original and eight (8) copies) by
December 26, 2006. A period of 10 min-
utes will be allotted to each person for
making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
Drafting Information
The principal authors of these
regulations are Rebecca L. Harrigal,
Johanna Som de Cerff, and
Michael P. Brewer, Office of Divi-
sion Counsel/Associate Chief Counsel
(Tax Exempt and Government Entities),
IRS. However, other personnel from the
IRS and Treasury Department participated
in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.141–0 is amended by
adding an entry for §1.141–1(e), revising
entries for §1.141–6, and adding an entry
for §1.141–15(k) and (l) as follows:
§1.141–0 Table of Contents
*****
§1.141–1 Definitions and rules of general
application
*****
(e) Partnerships.
(1) In general.
(2) Governmental partnerships.
*****
§1.141–6 Allocation and accounting rules
(a) Allocation of proceeds to expendi-
tures, property, and uses in general.
(1) Allocations to expenditures.
(2) Allocations within property; general
pro rataallocation method.
(3) Allocations of sources of funds to
ultimate uses of financed property.
(4)Mannerandtimeforelectingtoap-
ply special allocation methods for mixed-
use projects; final allocations generally.
(b) Special rules on reasonable propor-
tionate allocation methods for mixed-use
projects.
October 30, 20068132006–44 I.R.B.

(1) In general.
(2) Definition of a mixed-use project.
(c) The discrete physical portion alloca-
tion method.
(1) In general.
(2) The measure of a discrete portion.
(3) Allocations to expenditures for dis-
crete portions.
(4) Allocations of uses to discrete por-
tions.
(5) Certain reallocations among dis-
crete portions.
(d) The undivided portion allocation
method.
(1) In general.
(2) The measure of an undivided por-
tion.
(3) Allocations to expenditures for un-
divided portions.
(4) Allocations of uses to undivided
portions.
(e) Certain general operating rules for
mixed-use project allocations.
(1) In general.
(2) Governmental ownership require-
ment for undivided portion and discrete
portion allocations.
(3) Sources of funds for mixed-use
project allocations.
(4) Common areas.
(5) Allocations regarding multiple is-
sues.
(f) Special rules for bond redemptions
in anticipation of unqualified use.
(g) Special rules for applying the undi-
vided portion allocation method to mixed-
use output facilities.
(1) In general.
(2) Governmental ownership require-
ment for mixed-use output facilities.
(3) The measure of an undivided por-
tion of a mixed-use output facility.
(h) Allocations of private payments.
(i) Allocations of proceeds to common
costs of the issue.
(j) Allocations of proceeds to bonds.
(k) Examples.
§1.141–7 Special Rules for Output
Facilities
*****
§1.141–15 Effective dates
*****
(k) Effective date for certain regulations
related to allocation and accounting.
(l) Permissive retroactive application of
certain regulations.
*****
Par. 3. Section 1.141–1 is amended by
adding additional definitions under para-
graph (b) and by adding a new paragraph
(e) as follows:
§1.141–1 Definitions and rules of general
application
*****
(b)Certain general definitions
*****
De minimis permitted private business
usemeans the amount of private business
use permitted for proceeds of tax-exempt
bonds without causing such bonds to be
classified as private activity bonds under
section 141.
*****
Financed propertymeans, except as
otherwise provided, any project (as de-
fined in §1.141–6(b)(2)(ii)) to which pro-
ceeds of an issue of tax-exempt bonds are
allocated under §1.141–6.
*****
Governmental useorgovernment use
means any use that is not private business
use under §1.141–3.
*****
Private business usemeans use by a
person other than a governmental person
in a trade or business, as more particularly
defined in §1.141–3.
*****
(e)Partnerships—(1)In general.Ex-
cept as provided in paragraph (e)(2) of this
section, a partnership (as defined under
section 7701(a)(2)) is treated as a separate
entity that is a nongovernmental person for
purposes of section 141.
(2)Governmental partnerships.For
purposes of section 141, in the case
of a partnership (as defined in section
7701(a)(2)) in whicheach of the partners
is a governmental person (as defined in
§1.141–1(b)), the partnership is disre-
garded as a separate entity and is treated
as an aggregate of its partners.
Par. 4. Section 1.141–6 is revised to
read as follows:
§1.141–6 Allocation and accounting rules
(a)Allocations of proceeds to expendi-
tures, property, and uses in general—(1)
Allocations to expenditures. Except as
otherwise provided in this section, for
purposes of §§1.141–1 through 1.141–15,
the provisions of §1.148–6(d) apply for
purposes of allocating proceeds and other
sources of funds to expenditures (as con-
trasted with investments). Except as
otherwise provided in this section, allo-
cations of proceeds and other sources of
funds to expenditures generally may be
made using any reasonable, consistently
applied accountingmethod. Allocations
of proceeds to expenditures under section
141 and section 148 must be consistent
with each other. For purposes of the con-
sistency requirements in this paragraph
(a),itispermissibletoemployanalloca-
tion method under paragraph (a)(2), (c),
or (d) of this section (for example, the
generalpro rataallocation method under
paragraph (a)(2) of this section) to allocate
sources of funds within a particular project
for purposes of section 141 in conjunction
with an accounting method allowed un-
der §1.148–6(d) (for example, the first-in,
first-out method) to determine the alloca-
tion of proceeds or other sources of funds
to expenditures for that project.
(2)Allocations within property; the
general pro rata allocation method.Ex-
cept as otherwise provided in this section,
proceeds and other sources of funds allo-
cated to capital expenditures for a project
(as defined in paragraph (b)(2)(ii) of this
section) under section 148 and paragraph
(a)(1) of this section are treated as allo-
cated ratably throughout that project in
proportion to the relative amounts of pro-
ceeds and other funds spent on that project
(the generalpro rataallocation method).
For example, if a building is financed with
proceeds and other funds and the issuer
allocates the proceeds and other funds to
the capital expenditures of the building us-
ing a gross proceeds spent first allocation
method under section 148 and paragraph
(a)(1) of this section, the proceeds and
other sources of funds so allocated to the
building are treated as being allocated
ratably throughout the building under this
paragraph (a)(2).
(3)Allocations of sources of funds to
ultimate uses of financed property.Ex-
cept as otherwise provided in this section,
if financed property is financed with two
or more sources of funding (including two
or more tax-exempt governmental bond is-
sues), those sources of funding must be al-
2006–44 I.R.B.814October 30, 2006

located to multiple uses (for example, gov-
ernmental use and private business use) of
that financed property in proportion to the
relative amounts of those sources of fund-
ing expended on that financed property.
(4)Manner and time for electing to ap-
ply special allocation methods for mixed-
use projects; final allocations generally.
If an issuer is making an election under
paragraph (c) or (d) of this section to use
one of the special allocation methods for
mixed-use projects, the issuer must make
this election in writing by noting in its
records the method of allocation chosen
and the preliminary amounts and sources
of funds it expects to allocate to specific
discrete or undivided portions within the
mixed-use project. The time for mak-
ing this election is on or before the start
of the measurement period. An issuer
must make final allocations of proceeds
and other funds under this section by not-
ing in its records the final amounts of such
allocations. The time for making these fi-
nal allocations is set forth in the timing
rules under §1.148–6(d)(1)(iii). Except as
otherwise provided in this section, once
the time for making final allocations under
§1.148–6(d)(1)(iii) haspassed, allocations
cannot be changed.
(5)References to proceeds. For pur-
poses of this section, except where the con-
text clearly requires otherwise (for exam-
ple, in references to “proceeds” of tax-
able bonds) and regardless of whether ex-
pressly specified, references to proceeds
generally are intended to refer to proceeds
of tax-exempt governmental bonds.
(b)Special rules on reasonable pro-
portionate allocation methods for mixed-
use projects—(1)In general.Oncepro-
ceeds and other sources of funds are al-
located to a mixed-use project (as defined
in paragraph (b)(2) of this section) un-
der section 148 and paragraph(a)(1) of this
section, there are three methods for allo-
cating those proceeds and other sources
of funds to capital expenditures (as de-
fined in §1.150–1(b)) within the mixed-use
project. These methods are the general
pro rataallocation method in paragraph
(a)(2) of this section, the discrete physi-
cal portion allocation method, and the un-
divided portion allocation method. Al-
locations will be made under the general
pro rataallocation method unless the is-
suer elects to use either the discrete portion
method or the undivided portion method
and meets the requirements for making
such election under paragraph (a)(4) of this
section and using such a method. The dis-
crete portion and undivided portion allo-
cation methods are elective and permit, to
the extent provided, proceeds to be allo-
cated to a portion of a mixed-use project
based on a consistent application of a per-
mitted reasonable allocation method that
properly reflects the proportionate benefit
to be derived by the various users of those
portions of the mixed-use project. Para-
graph (c) of this section sets forth the rules
for the discrete physical portion allocation
method and paragraph (d) of this section
sets forth the rules for the undivided por-
tion allocation method. Paragraph (e) of
this section sets forth certain general oper-
ating rules for all mixed-use project allo-
cations. Paragraph (g) of this section pro-
vides special rules for applying the undi-
videdportionallocationmethodtooutput
facilities.
(2)Definition of a mixed-use
project—(i)In general. For purposes
of this section, the termmixed-use project
means a project (as defined in paragraph
(b)(2)(ii) of this section) that, absent the
application of the special elective alloca-
tion methods for mixed-use projects under
paragraphs (c) and (d) of this section, is
reasonably expected as of the issue date to
have private business use in excess ofde
minimispermitted private business use.
(ii)Definition of project—(A)In gen-
eral. For purposes of this section, the term
projectmeans one or more facilities or
capital projects, including land, buildings,
equipment, or other property, that meets
each of the following requirements:
(1) The facilities or capital projects are
functionally related or integrated and are
located on the same site or on reasonably
proximate adjacent sites;
(2) The facilities or capital projects are
reasonably expected to be placed in service
within the same 12-month period; and
(3) The proceeds and other sources of
funds that are expended on the facilities or
capital projects are expended pursuant to
the same plan of financing.
(B)Subsequent improvements or re-
placements. Subsequent improvements
and replacements of portions of a project
that are within the size, function, and
usable space of the original design of
the project are treated as part of that
same project even if placed in service be-
yond the 12-month period in paragraph
(b)(2)(ii)(A)(2) of this section. Thus, for
example, improvements and replacements
of damaged walls or worn-out fixtures
within an original building that do not ex-
pand the scope or function of usable space
are part of the original project.
(c)Discrete physical portion allocation
method—(1)In general. An issuer may
elect the discrete physical portion alloca-
tion method when a mixed-use project can
be separated into discrete portions (as de-
fined in §1.141–1(b)). With a proper elec-
tion, an issuer may use the discrete phys-
ical portion allocation method to allocate
proceeds and qualified equity to capital
expenditures for a discrete portion within
a mixed-use project and to allocate those
sources of funds to uses. The issuer must
use a reasonable, consistently applied al-
location method that reflects the propor-
tionate benefits to be derived by the var-
ious users of the discrete portions to de-
termine the aggregate amount of proceeds
and qualified equity allocable to a particu-
lar discrete portion in a mixed-use project.
(2)The measure of a discrete portion.
An issuer is treated as using a reasonable
allocation method that reflects the propor-
tionate benefits if the issuer determines
the amount of proceeds and qualified eq-
uity to be allocated to the discrete por-
tions based on reasonable discrete portion
benchmarks. These benchmarks generally
include expected actual costs of the dis-
crete portions, a percentage of total space
of the mixed-use project to be used in the
discrete portion, a percentage of the total
fair market value of the mixed-use project
that will be associated with the discrete
portion, or another objective measure that
is reasonable based on all the facts and cir-
cumstances. A discrete portion benchmark
other than relative fair market value may
notbeusedtomakeanallocationtoadis-
crete portion that is reasonably expected to
be used for private business use if an al-
location to that same discrete portion us-
ing relative fair market value, determined
as of the start of the measurement period,
would result in a significantly greater per-
centage of the total capital expenditures of
the project being allocated to such discrete
portion.
(3)Allocations to expenditures for dis-
crete portions. Except as otherwise pro-
vided in this section, an issuer may deter-
mine how each source of funds (for ex-
October 30, 20068152006–44 I.R.B.

ample, proceeds or qualified equity) spent
on a mixed-use project is allocated among
discrete portions of that project. For exam-
ple, proceeds may be specially allocated to
capital expenditures for costs of a discrete
portion that is reasonably expected to be
used for governmental use (or forde min-
imispermitted private business use), and
qualified equity may be specially allocated
to capital expenditures for costs of a dis-
crete portion that is reasonably expected to
be used for private business use.
(4)Allocations of uses to discrete por-
tions. In applying the measurement rules
under §1.141–3(g) to measure ongoing
use of a discrete portion of a mixed-use
project, the measurement rules under
§1.141–3(g) generally apply to the same
extent and in the same manner that they
otherwise would. If an issuer properly
elects to apply the discrete physical por-
tion allocation method, the financed prop-
erty is limited to the discrete portion to
which any proceeds are allocated under
paragraph (c)(3) of this section, and under
§1.141–3(g)(4)(iv), the only use of the
mixed-use project that is taken into ac-
count is the use of the discrete portions to
which proceeds are specially allocated.
(5)Certain reallocations among dis-
crete portions. An issuer may reallocate
in whole, but not in part, proceeds and
qualified equity that it allocated to capital
expenditures for one discrete portion of a
mixed-use project under paragraph (c)(3)
of this section to another discrete portion
of the same mixed-use project if the pro-
portionate benefits to be derived by the
users of the two discrete portions are rea-
sonably comparable both at the time of the
original allocation and at the time of the
reallocation. For purposes of this para-
graph (c)(5), the proportionate benefits are
reasonably comparable only if the mea-
sures of the discrete portion benchmarks
are within five percent of each other. In de-
termining whether the proportionate ben-
efits of the discrete portions are reason-
ably comparable at the time of the real-
location, the same discrete portion bench-
mark used originally to determine the dis-
crete portions and the fair market value of
the discrete portions as of the time of the
reallocation must be used. Reallocations
under this paragraph (c)(5) may be made
only once every five years.
(d)The undivided portion allocation
method—(1)In general. An issuer may
elect the undivided portion allocation
method to make allocations with respect to
a mixed-use project, provided that the un-
divided portions to which the allocations
are made generally represent fixed per-
centages of the use of the entire mixed-use
project (for example, a fixed percentage
of unreserved parking spaces in a parking
garage). The measures of the undivided
portions may be based on physical or non-
physical characteristics of the project. In
addition, the undivided portion allocation
method may be applied separately to a dis-
crete portion within a mixed-use project
for which the issuer has elected to apply
the discrete physical portion allocation
method in which event the references in
this paragraph (d) to mixed-use project
generally shall be deemed to mean that
discrete portion within which the undi-
vided portion allocation method is applied
separately. Upon a proper election, an
issuer may, to the extent provided, use the
undivided portion allocation method both
to allocate proceeds or qualified equity
to capital expenditures for the undivided
portions and to allocate those sources of
funds to uses of the mixed-use project.
The issuer must use a reasonable con-
sistentlyappliedallocationmethodthat
properly reflects the proportionate benefit
to be derived by the various users of the
mixed-use project to determine the amount
of proceeds or qualified equity allocable to
a particular undivided portion of a mixed
use project. See paragraph (g) of this sec-
tion for special rules for output facilities.
To apply the undivided portion allocation
method, the following conditions must be
met:
(A) The issuer must reasonably ex-
pect as of the start of the measurement
period that private business use and gov-
ernmental use of the mixed-use project
will occur simultaneously and be on
the same basis (within the meaning
of §1.141–3(g)(4)(iii)) or will occur at
different times (within the meaning of
§1.141–3(g)(4)(ii)); and
(B) The issuer must reasonably expect
as of the start of the measurement period
that private business use allocated to the
proceeds under paragraph (d)(4) of this
section will not exceedde minimispermit-
ted private business use.
(2)The measure of an undivided por-
tion. An issuer is treated as using a rea-
sonable allocation method that reflects the
proportionate benefitsif the issuer deter-
mines the amount of proceeds and qual-
ified equity to be allocated to the undi-
vided portions based on reasonable undi-
vided portion benchmarks. Such bench-
marks generally include a measure of how
many units produced from the facility will
be used by the various users, a percent-
age of the space in the mixed-use project
to be used by the various users (for exam-
ple, a percentage of the number of park-
ing spaces or a percentage of square feet
of usable leased office space), a percentage
of the fair market value of the mixed-use
project that will be used by the various
users (for example, a dollar amount per
parking space for a percentage of a to-
tal number of parking spaces or a dollar
amount per square foot for a percentage of
usable leased office space), a percentage
of time that the project will be used by the
various users (determined in a manner con-
sistent with §1.141–3(g)(4)(ii)), or another
objective measure, which may include the
present value of reasonably expected rev-
enues associated with each user’s use in
circumstances in which no other measure
is reasonably workable (for example, ex-
pected revenues from space in a research
facility in which the qualified and nonqual-
ified research is operationally fungible),
that is reasonable based on all the facts
and circumstances. An undivided portion
benchmark other than relative fair market
value may not be used to make an alloca-
tion to an undivided portion that is reason-
ably expected to be used for private busi-
ness use if an allocation to that same un-
divided portion using relative fair market
values, determined as of the start of the
measurement period, would result in a sig-
nificantly greater percentage of the total
capital expenditures of the project being
allocated to such undivided portion. For
example, if a private business and a gov-
ernmental person use a financed facility
each for 50 percent of the time, but the rel-
ative fair market value of the private busi-
ness use is significantly greater than 50
percent because the private business uses
the facility during prime hours, the relative
fair market values of the undivided por-
tions must be used as the undivided portion
benchmark.
(3)Allocations to expenditures for un-
divided portions. Except as otherwise pro-
vided in this section, proceeds are specially
allocated to capital expenditures for costs
2006–44 I.R.B.816October 30, 2006

of an undivided portion that is reasonably
expected to be used for governmental use
(or forde minimispermitted private busi-
ness use). Qualified equity is specially
allocated to capital expenditures for costs
of an undivided portion of a mixed-use
project that is reasonably expected to be
used for private business use.
(4)Allocations of uses to undivided
portions—(i)General rule.Ifanissuer
elects to apply the undivided portion al-
location method, then for purposes of
section 141, the financed property is the
mixed-use project. In measuring on-
going use of a mixed-use project, the
measurement rules under §1.141–3(g)
(or §1.141–7 in the case of an undivided
portion of a mixed-use project that is an
output facility) apply to the same extent
and in the same manner that they oth-
erwise would to the mixed-use project.
However, under the undivided portion al-
location method, after measuring private
business use of the mixed-use project,
subject to the limits in paragraph (d)(4)(ii)
of this section, private business use of the
mixed-use project is specially allocated
to the undivided portion of that project
financed with qualified equity (as con-
trasted with the entire mixed-use project)
for purposes of determining whether the
issue meets the private business use test.
Corresponding allocation rules apply to
the undivided portion of a mixed-use
project that is financed with proceeds and
that is reasonably expected to be used for
governmental use (or forde minimisper-
mitted private business use). Thus, subject
to the limitations in paragraph (d)(4)(ii)
of this section, governmental use is spe-
cially allocated to the undivided portion
that is financed with proceeds. Private
business use of the mixed-use project that
is properly allocated under this paragraph
to an undivided portion financed with
qualified equity is not private business use
of proceeds. To determine whether the
undivided portion to which proceeds are
allocated is used for private business use,
the measurement rules under §1.141–3(g)
(or §1.141–7 for output facilities) apply,
taking into account the special allocation
rules for the undivided portion allocation
method under this section.
(ii)Limit on amount targeted.Inany
year, the percentage of private business use
of the mixed-use project, as determined
under the measurement rules for any one-
year period under §1.141–3(g)(4), that is
specially allocated to an undivided por-
tion financed with qualified equity cannot
exceed the percentage of capital expendi-
tures of the mixed-use project used to de-
termine that undivided portion and allo-
cated to that undivided portion. The per-
centage of governmental use (andde min-
imispermitted private business use), as de-
termined in the same manner, that is spe-
cially allocated to an undivided portion fi-
nanced with proceeds cannot exceed the
percentage of capital expenditures of the
mixed-use project used to determine that
undivided portion and allocated to that un-
divided portion. Similarly, for output facil-
ities, the percentage of private business use
of the mixed-use project, as determined
under §1.141–7, that may be targeted to
an undivided portion cannot exceed the
percentage of capital expenditures of the
mixed-use project allocated to that undi-
vided portion.
(iii)Consistency requirement.In
applying the measurement rules under
§1.141–3(g) to a mixed-use project for
which an issuer has employed the undi-
vided portion allocation method, the issuer
must use the same measurement method
(for example, costs, quantity, or fair mar-
ketvalue)thatitusedasitsbenchmark
measure to make the allocations to the un-
divided portions of the mixed-use project
under this section. For example, if the
issuer made an allocation to an undivided
portion using a time-based allocation, the
issuer must measure private business use
using a time-based allocation.
(e)Certain general operating rules for
mixed-use project allocations—(1)In gen-
eral. This paragraph (e) provides certain
general operating rules for allocations re-
garding mixed-use projects under this sec-
tion.
(2)Governmental ownership require-
ment for discrete physical portion and un-
divided portion allocation methods.Ex-
cept in the case of an output facility, an is-
suer may make an election to apply the dis-
crete physical portion or the undivided por-
tion allocation method only if the mixed-
use project is wholly-owned by govern-
mental persons. An issuer may elect to
apply the undivided portion method to a
mixed-use project thatis an output facility
in which non-governmental persons own
undivided ownership interests if those in-
terests meet the requirements of paragraph
(g)(2) of this section.
(3)Sources of funds for mixed-use
project allocations—(i)In general.For
purposes of applyingthe permitted alloca-
tion methods for mixed-use projects under
paragraphs (c) and (d) of this section, the
only sources of funds that may be allocated
to the mixed-use project are proceeds and
qualifiedequity(asdefinedinparagraph
(e)(3)(ii) of this section).
(ii)Definition of qualified equity.Ex-
cept as otherwise provided in special rules
for anticipatory redemption bonds in para-
graph (f) of this section, for purposes
of this section, the termqualified equity
means only proceeds of taxable bonds
and funds that are not derived from pro-
ceeds of a borrowing that are spent on the
same mixed-use project as the proceeds of
the applicable tax-exempt governmental
bonds. By contrast, for example, qualified
equity does not include equity interests in
real property or tangible personal prop-
erty. Further, qualified equity does not
include any funds spent on subsequent im-
provements and replacements (including
any subsequent improvements or replace-
ments described in paragraph (b)(2)(ii)(B)
of this section).
(4)Common areas. Common areas
may not be treated as separate discrete
portions of mixed-use projects. Proceeds
or qualified equity used to finance capital
expenditures for common areas are allo-
cated ratably to the discrete portions of the
mixed-use project in the same manner that
funds for other capital expenditures of the
mixed-use project are allocated.
(5)Allocations regarding multiple is-
sues. If proceeds of more than one issue
are allocated under section 148 and para-
graph (a)(1) of this section to capital ex-
penditures of a mixed-use project, and the
issuer elects to apply the discrete portion
or undivided portion allocation method to
such mixed-use project, then proceeds of
those issues are allocated ratably to cap-
ital expenditures for a discrete portion or
undivided portion to which any proceeds
are allocated in proportion to their relative
shares of the total proceeds of such issues
in the aggregate used for such mixed-use
project.
(f)Special rules for bond redemptions
in anticipation of unqualified use—(1)In
general. Amounts other than proceeds of
tax-exempt bonds that are used to retire a
October 30, 20068172006–44 I.R.B.

tax-exempt governmental bond (anticipa-
tory redemption bond) are treated as qual-
ified equity if the following requirements
are met:
(i) Allocations to anticipatory redemp-
tion bonds are made in a manner similar
to §1.141–12(j)(2), and the anticipatory re-
demption bonds are retired within the time
prescribed below in anticipation of a de-
liberate action that otherwise would cause
the project to have private business use
in excess ofde minimispermitted private
business use. An anticipatory redemption
bond is redeemed in anticipation of the de-
liberate act when it is retired at least five
years before its otherwise-scheduled ma-
turity date or mandatory sinking fund re-
demption date and it is retired within a pe-
riod that starts one year before the deliber-
ate act occurs and ends 91 days before the
deliberate act occurs;
(ii) The issuer must not reasonably ex-
pect at the start of the measurement pe-
riod that the project would be a mixed-use
project, and for the first five years of the
measurement period, the project must not
be used in a manner that would cause pri-
vate business use of the project to exceed
de minimispermitted private business use;
and
(iii) The term of the issue of which
the anticipatory redemption bond is a
part must be no longer than is reason-
ably necessary for the governmental pur-
pose of the issue (within the meaning of
§1.148–1(c)(4)).
(2)Allocation of qualified equity.
Amounts that are treated as qualified
equity under this paragraph (f) may be al-
located to a discrete portion or undivided
portion of a project in a manner provided
in the discrete physical portion allocation
method under paragraph (c) of this section
or the undivided portion allocation method
under paragraph (d) of this section if such
allocation would have satisfied the appli-
cable allocation method had that portion
been identified for purposes of financing it
in a new issue at the time of the retirement
of anticipatory redemption bond. Alloca-
tions under this paragraph (f) cannot later
be changed.
(3)Allocations of use. Use of a project
towhichthisparagraph(f)appliesisal-
located in accordance with the discrete
physical portion allocation method or
undivided portion allocation method, as
applied under the immediately preceding
paragraph.
(4)Relationship to §1.141–12.Antic-
ipatory redemption bonds that are treated
as qualified equity under this paragraph
(f) have a comparable effect on continu-
ing compliance as remedial actions under
§1.141–12 and need not be further remedi-
ated under §1.141–12.
(g)Special rules for applying the
undivided portion allocation method to
mixed-use output facilities—(1)In gen-
eral. This paragraph (g) sets forth certain
special rules regarding how to apply the
undivided portion allocation method to a
mixed-use project that is an output facility.
(2)Governmental ownership require-
ment for mixed-use output facilities.Anis-
suer may elect to apply the undivided por-
tion method to a mixed-use project that
is an output facility if it is wholly-owned
by governmental persons or if it has mul-
tiple undivided ownership interests which
are owned by governmental persons or pri-
vate businesses, provided that all owners
of the undivided ownership interests share
the ownership, output, and operating ex-
penses in proportion to their contributions
to the costs of the output facility.
(3)The measure of an undivided por-
tion of a mixed-use output facility.The
measure of an undivided portion of a
mixed-use project thatis an output facility
is based on a reasonable proportionate
allocation method that properly reflects
the proportionate benefit to be derived by
the various users of the mixed-use project.
For an output facility that has multiple
undivided ownership interests that meet
the requirements of paragraph (g)(2) of
this section, those undivided ownership
interests are treated as undivided portions.
In addition, for purposes of determining
the measure of proportionate benefit to be
derived from users of an output facility
(or of an undivided ownership interest in
an output facility treated as an undivided
portion) as a result of output contracts, the
measure of an undivided portion is based
on a benchmark equal to the proportionate
share of available output (as defined in
§1.141–7(b)(1)) to be received by the user.
For purposes of determining the measure
of an undivided portion of an output fa-
cility based on the proportionate share of
available output, the facts and circum-
stances test under §1.141–7(h) governs
allocations of output contracts to output
facilities.
(h)Allocations of private payments.
Private payments forfinanced property
are allocated in accordance with §1.141–4.
Thus, private payments for a mixed-use
project for which an election is made
to apply the discrete physical portion
allocation method are allocated under
§1.141–4(c)(3)(ii), and private payments
for a mixed-use project for which an
election is made to apply the undivided
portion allocation method are allocated
under 1.141–4(c)(3) without regard to
the undivided portions. However, pay-
ments under output contracts that result in
private business use are allocated to the
undivided portion financed with qualified
equity (notwithstanding §1.141–4(c)(3)(v)
(regarding certain allocations of private
payments to equity)) in the same manner
as the private business use from such con-
tracts is allocated to that undivided portion
under paragraph (d)(4) of this section.
(i)Allocations of proceeds to common
costs of an issue. Proceeds of tax-ex-
empt bonds allocated to expenditures for
common costs (for example, issuance
costs, qualified guarantee fees, or rea-
sonably required reserve or replacement
funds) are allocated in accordance with
§1.141–3(g)(6). Common costs allocable
to a mixed-use project for which an elec-
tion has been made to apply the undivided
portion or discrete physical portion allo-
cation method are allocated ratably to the
discrete portions or undivided portion of
the mixed-use project to which proceeds
are allocated.
(j)Allocations of proceeds to bonds.In
general, proceeds of tax-exempt bonds are
allocated to bonds in accordance with the
rules for allocations of proceeds to bonds
for separate purposes of multipurpose is-
sues in §1.141–13(d). In the case of an is-
sue that is not a multipurpose issue, pro-
ceeds are allocated to bonds ratably in a
manner similar to the allocation of pro-
ceeds to projects under the generalpro rata
allocation method in paragraph (a)(2) of
this section.
(k)Examples. The following examples
illustrate the application of this section:
Example 1.Discrete portions of a mixed-use
project. City A constructs a 10-story office building,
having 100x square foot of office space, and costing
$100x. Each floor has an equal amount of office
space. Assume the building has no common areas.
City A reasonably expects to use the first six floors
2006–44 I.R.B.818October 30, 2006

for governmental use (and possibly forde minimis
permitted private business use). City A will lease the
top four floors to Corporation B for private business
use. City A wants to divide the mixed-use project
into two discrete portions and to allocate proceeds
to the first six floors and qualified equity to the top
four floors. City A treats the first six floors as one
discrete portion (the Governmental Portion) and the
top four floors as another discrete portion (the Pri-
vate Business Portion). City A proposes to determine
how much of the $100x can be allocated to each
discrete portion using relative square feet of usable
office space. The percentage of the $100x that would
be allocated to the Private Business Portion using
relative fair market values, determined at the start of
the measurement period, would not be significantly
greater than the amount that will be allocated using
relative square footage. Relative square footage is
an appropriate discrete portion benchmark because
it is an objective measure that properly reflects the
proportionate benefit to be derived by the various
users. City A finances the costs of the Governmental
Portion ($60x) with proceeds of tax-exempt govern-
mental bonds (the Bonds) and the costs of the Private
Business Portion ($40x) with qualified equity which
consists of taxable bonds (the qualified equity). City
A allocates Bond proceeds to capital expenditures for
the costs of the Governmental Portion (that is, $60x
for capital costs of six specific floors of the build-
ing). City A allocates the qualified equity to capital
expenditures for the costs of the Private Business
Portion (that is, $40x for capital costs of four specific
floors of the building). The financed property to
which proceeds of the Bonds are allocated is the
Governmental Portion. For purposes of measuring
ongoing use of the Bond proceeds, use of the Private
Business Portion will be disregarded, but any private
business use of the six specific floors which comprise
the Governmental Portion will be taken into account
during the measurement period. The proceeds of
the Bonds are treated as used for the Governmental
Portion and ongoing compliance depends on the
amount of private business use of that Governmental
Portion over the term of the applicable measurement
period. Thus, if more than 10 percent of the specific
physically discrete floors which comprise the Gov-
ernmental Portion of the mixed-use project (that is,
more than $6x of the proceeds or 6x square feet of
the office space within the Governmental Portion)
were used for private business use during the mea-
surement period as a result of deliberate actions, then
the Bonds would violate the private business use test.
Example 2.Reallocations among discrete por-
tions. City A constructs a 10-story office building
having 100x square feet of office space, and costing
$100x. The top five floors are to be leased to a pri-
vate business, Corporation B. Before the start of the
measurement period, City A appropriately elected a
discrete physical portion allocation method using a
relative square footage measure and allocated $50x
of proceeds to the first five floors (the Governmen-
tal Portion) and $50x in qualified equity to the top
five floors (the Private Business Portion). After the
time for finalizing allocations has passed, Corpora-
tion B defaults on its lease for the top five floors of
the building and vacates the building. Corporation C,
another private business, expresses interest in leas-
ing office space, but Corporation C wants to lease
the first five floors of the building rather than the top
five floors previously leased by Corporation B. City
A wants to reallocate the proceeds used for the Pri-
vate Business Portion to the Governmental Portion.
City A plans to use the Private Business Portion for
governmental use. At the time of both the original
allocation and this reallocation the measures of the
Private Business Portion and Governmental Portion
under the applicable discrete portion benchmarks are
within five percent of each other. City A determines
that the measures of the two discrete portions are rea-
sonably comparable at the time of the reallocation by
using the benchmarks of relative square footage and
the then-current fair market values of the two discrete
portions. This reallocation between discrete portions
is permissible.
Example 3.Undivided portions of a mixed-use
project. City A constructs a 10-story office building,
having 100x square foot of office space, and costing
$100x. City A has not identified specific space to be
leased to any specific private business. Instead, City
A reasonably expects to use 70 percent of the office
space in the building for governmental use (or pos-
sibly forde minimispermitted private business use)
(the Governmental Portion). City A reasonably ex-
pects that it will lease out a maximum of 30 per-
cent of the office space to one or more private busi-
nesses in unspecified locations in the building (the
Private Business Portion). City A wants to allocate
this mixed-use project between two undivided por-
tions and target the expected private business use to
the undivided portion financed with qualified equity.
City A determines how much of the $100x can be fi-
nanced with tax-exempt governmental bonds based
on relative square feet of usable office space. This
undivided portion benchmark is an objective mea-
sure that properly reflects the proportionate benefit
to be derived by the various users. City A finances
70 percent of the costs of the building ($70x) with
proceeds (the Bonds) and 30 percent ($30x) of those
costs with qualified equity which consists of taxable
bonds (the Qualified Equity). Bond proceeds are allo-
cated to capital expenditures for the costs of the Gov-
ernmental Portion. Qualified Equity is allocated to
capital expenditures for the costs of the Private Busi-
ness Portion. For purposes of measuring ongoing use
of the mixed-use project, private business use and
governmental use of the entire 10-story office build-
ing is considered. As long as average private business
use of the mixed-use project under the measurement
rules does not exceed 30 percent in a particular year,
that private business use is allocated to the Private
Business Portion. Thus, none of that private busi-
ness use is allocated to the Governmental Portion, and
that private business use is disregarded for purposes
of determining whether there is private business use
of the proceeds allocated to the Governmental Por-
tion. If average private business use of the mixed-use
project increases to 45 percent in a subsequent year,
a maximum of 30 percent of that private business use
is properly allocable to the Private Business Portion
and thereby disregarded in determining ongoing use
of the Governmental Portion. Private business use in
excess of the 30 percent properly allocable to the Pri-
vate Business Portion (that is, 15 percent of private
business use) would be allocated to the Governmen-
tal Portion. Conversely, if private business use of the
mixed-use project in a subsequent year decreased to
20 percent, all 20 percent of the private use would be
allocated to the Private Business Portion and thereby
disregarded for purposes of measuring private use of
the proceeds in that year. Because there would be
governmental use in that year in excess of the 70 per-
cent that is properly allocable to the Governmental
use Portion, the governmental use in excess of 70 per-
cent (that is, 10 percent of governmental use) would
be allocated to the Private Business Portion.
Example 4.Revenue-based undivided portion of
research facility. University A is a state university.
University A owns and operates research facilities. In
2008, University A plans to build a new research fa-
cility (the 2008 Mixed-Use Research Project), which
it expects will be used for both qualified research
arrangements for governmental use (Governmental
Research) and nonqualified research arrangements
for private business use (Private Business Research).
University A wants to allocate the 2008 mixed-use
research facility between two undivided portions for
Governmental Research and for Private Business
Research and to target Private Business Research
to the undivided portion financed with equity. Uni-
versity A proposes to make this allocation using a
revenue-based undivided portion benchmark. All
of University A’s research activities will have the
following operational characteristics:
(i) The research facilities are continuously avail-
able for both Governmental Research and Private
Business Research;
(ii) Governmental Research and Private Business
Research take place simultaneously in the same re-
search facilities; and
(iii) The same research may relate to one or more
research projects involving both Governmental Re-
search and Private Business Research. University A
also has a reasonable basis for determining the per-
centage of revenues that will be derived from Pri-
vate Business Research and Governmental Research.
During the past five years, of the total revenues, net of
royalties and licenses, from University A’s research
facilities, the percentage of revenues from Govern-
mental Research and the percentage of revenues from
Private Business Research (on a present value basis)
have not changed. University A reasonably expects
that this split of revenues will continue with the 2008
Mixed-Use Research Project. Under all the facts and
circumstances, including, among other things, the na-
ture of the particular research arrangements (for ex-
ample, the governmental or private business nature
of particular research grantors or contractual terms
that result in governmental use or private business
use) and historic actual revenues and future expected
revenues from research arrangements of a particu-
lar nature, net of royalties and licenses, the only ob-
jective measurable benchmark that can reasonably
distinguish the Governmental Research portion from
the Private Business Research portion is the expected
percentage of revenues each will generate. There-
fore, University A will be using a reasonable method
for determining the undivided portions of the 2008
mixed-use research facility if it bases the portions on
the revenues each is expected to generate.
Example 5.Output facility. Authority A is a gov-
ernmental person that owns and operates an electric
transmission facility. Prior to 2009, Authority A used
its equity to pay capital expenditures of $1000x for
the facility. In 2009, Authority A wants to make
capital improvements to the facility in the amount
of $100x. Authority A reasonably expects that, af-
ter completion of such capital improvements, 54 per-
October 30, 20068192006–44 I.R.B.

cent of the available output from the facility, as de-
termined under §1.141–7, will be sold under output
contracts for governmental use and that 46 percent of
such available output will be sold under output con-
tracts for private business use. Authority A wants to
allocate this 2009 project for capital improvements
(the 2009 Mixed-Use Output Project) between two
undivided portions based on proportionate measures
of available output and to finance the maximum eli-
gible undivided portion with tax-exempt governmen-
tal bonds (assuming use of the maximum 10 percent
de minimisamount of private business use permit-
ted for tax-exempt governmental bonds). Authority
A treats a 60 percent undivided portion of the 2009
Mixed-Use Output Project as one undivided portion
(the Governmental Portion), which it reasonably ex-
pects to use for output contracts involving 90 per-
cent governmental use (representing 54 percent of the
available output), plus 10 percent private business use
(representing 6 percent of the available output). Au-
thority A treats a 40 percent undivided portion of the
2009 Mixed-Use Output Project as another undivided
portion (the Private Business Portion), which it rea-
sonably expects to use for output contracts involv-
ing private business use. Authority A determines the
measures of these two undivided portions based on
relative shares of available output, as determined un-
der §1.141–7. This measure uses a reasonable pro-
portionate allocation method which properly reflects
the proportionate benefit to be derived by the various
users. On January 1, 2009, Authority A issues bonds
with proceeds of $60x (the Bonds) to finance the
Governmental Portion of the 2009 Mixed-Use Out-
put Project and uses $40 million of funds that are not
derived from proceeds of a borrowing (the Qualified
Equity) to finance the Private Business Portion of the
2009 Mixed-Use Output Project. Authority A allo-
cates Bond proceeds to capital expenditures for the
costs of the Governmental Portion and Qualified Eq-
uity to capital expenditures for the costs of the Private
Business Portion. For purposes of measuring ongo-
ing use of the Governmental Portion financed with
the Bond proceeds, use of the Private Business Por-
tion is disregarded, but any private business use of
the Governmental Portion will be taken into account
during the measurement period. So long as the actual
amount of private business use of the Governmental
Portion’s share of available output does not exceed 6
percent, the Bonds will not be private activity bonds.
Example 6.Treatment of retirement of bonds.
City B issues bonds to build a parking garage (the
Garage), costing $100x, that it will own and operate.
At the start of the measurement period, City B rea-
sonably expects that the only use of the garage will be
governmental use. The term of the issue is no longer
than reasonably necessary for the governmental pur-
pose of the issue. During the first six years of the
measurement period, the garage is used as the issuer
expected. In year seven of the measurement period,
however, City B expects that in less than one year it
will enter into a contract with Corporation C, a private
business, which will cause 20 percent of the Garage
to be used for private business use. More than 90 days
before entering into a binding contract with Corpora-
tion C, City B uses $20x of funds other than proceeds
of tax-exempt bonds to retire bonds and City B deter-
mines the bonds to be retired on apro ratabasis. The
applicable bonds will be retired at least 5 years prior
to their scheduled maturity dates. As of the date of
the anticipatory redemption, the Garage qualifies as
a mixed-use project, and City B applies paragraph (f)
of this section and allocates the $20x that was used
to redeem the bonds to an undivided portion to which
the private business use will be allocated. If City B
failed to meet the requirements of paragraph (f) of
this section, amounts that City B used to redeem the
bonds would not be qualified equity.
Par. 5. Section 1.141–13 is amended
by revising paragraph (d)(1) and paragraph
(g)Example 5to read as follows:
§1.141–13 Refunding issues
*****
(d)Multipurpose issue allocations—(1)
In general. For purposes of section 141,
unless the context clearly requires other-
wise, §1.148–9(h) applies to allocations
of multipurpose issues (as defined in
§1.148–1(b)), including allocations in-
volving the refunding purposes of the
issue. An allocation under this paragraph
(d) may be made at any time, but once
made may not be changed. An allocation
is not reasonable under this paragraph
(d) if it achieves more favorable results
under section 141 than could be achieved
with actual separate issues. Each of the
separate issues under the allocation must
consist of one or more tax-exempt bonds.
Allocations made under this paragraph (d)
and §1.148–9(h) must be consistent for
purposes of section 141 and section 148.
*****
(g)Examples.***
Example 5.Multipurpose issue. (i) In 2006, State
D issues bonds to finance the construction of two of-
fice buildings, Building 1 and Building 2. D expends
an equal amount of the proceeds on each building. D
enters into arrangements that result in private busi-
ness use of 8 percent of Building 1 and 12 percent
of Building 2 during the measurement period under
§1.141–3(g). In addition, D enters into arrangements
that result in private payments in percentages equal
to that private business use. These arrangements re-
sult in a total of 10 percent of the proceeds of the
2006 bonds being used for a private business use and
for private payments. In 2007, D purports to make
a multipurpose issue allocation under paragraph (d)
of this section of the outstanding 2006 bonds, al-
locating the issue into two separate issues of equal
amounts with one issue allocable to Building 1 and
the second allocable to Building 2. An allocation is
unreasonable under paragraph (d) of this section if
it achieves more favorable results under section 141
than could be achieved with actual separate issues.
D’s allocation is unreasonable because, if permitted,
it would allow more favorable results under section
141 for the 2006 bonds (that is, private business use
and private payments which exceeds the aggregate 10
percent permittedde minimisamounts for the 2006
bonds allocable to Building 2) than could be achieved
with actual separate issues. In addition, if D’s pur-
ported allocation was intended to result in two sep-
arate issues of tax-exempt governmental bonds (ver-
sus tax-exempt private activity bonds), the allocation
would violate paragraph (d) of this section in the first
instance because the allocation to the separate issue
forBuilding2wouldfailtoqualifyseparatelyasan
issue of tax-exempt governmental bonds as a result
of its 12 percent of private business use and private
payments, which exceed the 10 percent permittedde
minimisamounts.
(ii) The facts are the same as in paragraph (i) of
thisExample 5, except that D enters into arrange-
ments that result in 8 percent private business use for
Building 1, and it expects no private business use of
Building 2. In 2007, D allocates an equal amount of
the outstanding 2006 bonds to Building 1 and Build-
ing 2. D selects particular bonds for each separate
issue such that the allocation does not achieve a more
favorable result than could have been achieved by is-
suing actual separate issues. D uses the same alloca-
tion for purposes of both section 141 and 148. D’s
allocation is reasonable.
(iii) The facts are the same as in paragraph (ii)
of thisExample 5, except that as part of the same
issue, D issues bonds for a privately used airport.
The airport bonds if issued as a separate issue would
be qualified private activity bonds. The remaining
bonds if issued separately from the airport bonds
would be governmental bonds. Treated as one is-
sue, however, the bonds are taxable private activity
bonds. Therefore, D makes its allocation of the
bonds under §§1.141–13(d) and 1.150–1(c)(3) into 3
separate issues on or before the issue date. Assuming
all other applicable requirements are met, the bonds
of the respective issues will be tax-exempt qualified
private activity bonds or governmental bonds.
*****
Par. 6. Section 1.141–15 is amended by
revising paragraph (a) and (i) and adding
paragraphs (k) and (l) to read as follows:
§1.141
–15 Effective Dates
(a)Scope. The effective dates of this
section apply for purposes of §§1.141–1
through 1.141–14, 1.145–1 through
1.145–2, 1.150–1(a)(3) and the defini-
tion of bond documents contained in
§1.150–1(b).
*****
(i)Permissive application of certain
regulations relating to output facilities.
(1) Issuers may apply §1.141–7(f)(3)
and §1.141–7(g) to any bonds used to fi-
nance output facilities.
(2) Issuers may apply §1.141–6 to any
bonds used to finance output facilities that
are sold on or after the date that is 60 days
after the date of publication of the Treasury
decisions adopting these rules as final reg-
ulations in theFederal Register
*****
2006–44 I.R.B.820October 30, 2006

(k)Effective date for certain regu-
lations relating to allocation and ac-
counting. Except as otherwise provided
in this section, §§1.141–1(e), 1.141–6,
1.141–13(d), and 1.145–2(b)(4), (b)(5),
and (c)(3) apply to bonds that are sold
on or after the date that is 60 days after
the date of publication of the Treasury
decisions adopting these rules as final reg-
ulations in theFederal Registerand that
are subject to the 1997 Final Regulations.
(l)Permissive retroactive applica-
tion of certain regulations. Issuers may
apply §1.141–13(d) to bonds to which
§1.141–13 applies.
Par. 7. Section 1.145–2 is amended by
adding paragraphs (b)(4), (b)(5), and (c)(3)
to read as follows:
§1.145–2 Application of Private Activity
Bond Regulations
*****
(b) * * *
(4) References togovernmental bonds
in §1.141–6 mean qualified 501(c)(3)
bonds.
(5) References toownership by govern-
mental personsin §1.141–6 mean owner-
ship by governmental persons or 501(c)(3)
organizations.
(c) * * *
(3)Partnerships. Section 1.141–1(e)(2)
does not apply for purposes of sec-
tion 145(a)(1). For purposes of section
145(a)(2), in the case of a partnership (as
defined in section 7701(a)(2)) in which
each of the partners is a governmental
person or a section 501(c)(3) organization,
the partnership is disregarded as a separate
entity and is treated as an aggregate of its
partners.
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on September
25, 2006, 8:45 a.m., and published in the issue of the Federal
Register for September 26, 2006, 71 F.R. 56072)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2006–81
The Internal Revenue Service has re-
voked its determination that the organiza-
tion listed below qualifies as an organi-
zation 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 June 27, 2005, and
would end on the date the court first deter-
mines that the organization is not described
in section 170(c)(2) as more particularly
set forth in section 7428(c)(1). For indi-
vidual contributors, the maximum deduc-
tion protected is $1,000, with a husband
and wife treated as one contributor. This
benefit is not extended to any individual, in
wholeorinpart,fortheactsoromissions
of the organization that were the basis for
revocation.
University Lithotripsy Affiliates, Inc.
Newark, NJ
Determination of Interest
Expense Deduction of Foreign
Corporations; Correction
Announcement 2006–82
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to final and tempo-
rary regulations.
SUMMARY: This document contains a
correction to final and temporary regu-
lations (T.D. 9281, 2006–39 I.R.B. 517),
that were published in theFederal Reg-
isteron Thursday, August 17, 2006 (71
FR 47443). This regulation revised the
Income Tax Regulations relating to the
determination of the interest expense de-
duction of foreign corporations and applies
to foreign corporations engaged in a trade
or business within the United States.
DATES: This correction is effective Au-
gust 17, 2006.
FOR FURTHER INFORMATION
CONTACT: Gregory Spring or
Paul Epstein, (202) 622–3870 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final and temporary regulations
(T.D. 9281) that is the subject of this cor-
rection are under sections 882 and 884 of
the Internal Revenue Code.
Need for Correction
As published, T.D. 9281 contains an er-
ror that may prove to be misleading and is
in need of clarification.
Correction of Publication
Accordingly, the publication of the
final and temporary regulations (T.D.
9281), that were the subject of FR Doc.
E6–13402, is corrected as follows:
On page 47443, column 1, in the pream-
ble under the caption “DATES:Effective
Date:”, lines 1 through 5, the language,
“These regulations are effective starting
October 30, 20068212006–44 I.R.B.

the tax year end for which the original
tax return due date (including extensions)
is after August 17, 2006.” is corrected to
read “These regulations are effective Au-
gust 17, 2006.”.
Cynthia E. Grigsby,
Senior Federal Register Liaison Officer,
Publications and Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on September
27, 2006, 8:
45 a.m., and published in the issue of the Federal
Register for September 28, 2006, 71 F.R. 56868)
Flat Rate Supplemental Wage
Withholding; Correction
Announcement 2006–83
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to final regulations.
SUMMARY: This document contains a
correction to final regulations (T.D. 9276,
2006–37 I.R.B. 423), that were published
in theFederal Registeron Tuesday, July
25, 2006 (71 FR 142). These regulations
apply to all employers and others making
supplemental wage payments to employ-
ees.
DATES: This correction is effective Jan-
uary 1, 2007.
FOR FURTHER INFORMATION
CONTACT: A. G. Kelley, (202) 622–6040
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (T.D. 9276) that is
the subject of this correction are under sec-
tions 3401 and 3402 of the Internal Rev-
enue Code.
Need for Correction
As published, T.D. 9276 contains an er-
ror that may prove to be misleading and is
in need of clarification.
Correction of Publication
Accordingly, the publication of the fi-
nal regulations (T.D. 9276), that were the
subject of FR Doc. E6–11764, is corrected
as follows:
On page 42051, column 2, in the pre-
amble under the paragraph heading “Spe-
cial Rules for Determining Applicability
of Mandatory Flat Rate Withholding”,
lines 2 and 3 from the top of the column,
the language, “the final regulations and
the revenue procedure provide employers
with a” is corrected to read “the final reg-
ulations provide employers with a”.
Cynthia E. Grigsby,
Senior Federal Register Liaison Officer,
Publications and Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on October 2,
2006, 8:45 a.m., and published in the issue of the Federal
Register for October 3, 2006, 71 F.R. 58276)
Request for Applications to
Participate in the 2007 IRS
Individual e-file Partnership
Program
Announcement 2006–87
The Stakeholder Partnerships, Educa-
tion and Communication (SPEC) function
within the Internal Revenue Service (IRS)
is continuing its efforts to establish IRS
e-file partnerships with various entities.
The IRS is seeking non-monetary e-file
partnerships for Filing Season 2007. No
applications for funding (monetary com-
pensation) will be considered. A com-
mercial business, non-profit organization,
state government or local government
may submit applications. Applications are
not solicited from other Federal govern-
ment agencies. The program is an annual
program and covers the periodJanuary
through October 15, 2007.All prior
year partners must reapply for Filing
Season 2007.
BACKGROUND
The IRS Restructuring and Reform Act
of 1998 (RRA 98) requires the IRS to re-
ceive 80 percent of all returns electron-
ically by 2007. RRA 98 authorized the
IRS Commissioner to promote the bene-
fits of and encourage the use of e-file ser-
vices. RRA 98 enables the IRS to enter
into non-monetary partnerships with busi-
nesses to offer low cost income tax prepa-
ration and electronic filing for qualified
taxpayers.
Continued opportunities for growth in
electronic tax administration are evident.
For Filing Season 2006, the IRS received
more than 72 million electronically filed
returns, an increase of 6.26% over the
previous year. Visit the IRS web site,
http://www.irs.gov, for the most current
results from market research on individual
taxpayers, including demographic data
and psychographic studies. This research
includes attitudinal surveys, customer
satisfaction surveys, Public Service com-
munications, tracking studies and any
focus group results.
The IRS accepts many forms and sched-
ules for electronic filing. Visit the IRS
web site for a complete listing of accepted
forms and schedules.
FILING SEASON 2007
For Filing Season 2007, the IRS will
focus on the 1040 series income tax re-
turns covering “IRSe-fileUsing a Tax Pre-
parer” and “IRSe-fileUsing a Personal
Computer.” Additional emphasis contin-
ues to be placed on the following features:
electronic signature options, Federal/State
e-file, and electronic payment options for
balance due and estimated payment op-
tions.
A major area of emphasis is to reach
those taxpayers who continue to file com-
puter prepared paper returns (v-code). Re-
search indicates that the number of v-code
returns continues to increase (76% of all
v-code returns are prepared by paid prepar-
ers). Emphasis should be placed on con-
verting v-code filers to electronically file
their returns through advertising the bene-
fits of e-file.
Participants should also reach those in-
dividuals eligible for the Earned Income
Tax Credit (EITC). It’s important to note
that military families may qualify for EITC
since supplemental payments and combat
pay are exempt from the income calcula-
tions.
Participants are encouraged to focus on
reducing the number of errors made on
electronically filed returns, including those
2006–44 I.R.B.822October 30, 2006

returns claiming EITC. The “EITC Assis-
tant” is an interactive web-based tool de-
signed to help tax professionals determine
whether or not their clients are eligible for
EITC, and why. The “EITC Assistant” is
a step taken by the IRS to maximize tax-
payer participation, minimize EITC errors
while increasing compliance. You can find
the “EITC Assistant” on the IRS web site
athttp://www.irs.gov/eitc.
The Hispanic population is the fastest
growing minority segment in the U.S. Par-
ticipants are encouraged to market their
e-file services to this segment and offer the
Spanish versions for online filing and/or
downloadable software.
The IRS expects all accepted partners
to market, promote and offer e-file product
and services through October 15, 2007.
The IRS will supply the partners with
the key marketing messages that support
electronic filing during the Filing Sea-
son (January through April 16, 2007) and
post-Filing Season (April through Octo-
ber 15, 2007). These messages should be
used in your promotion of electronic filing
and displayed on the web sites of Partici-
pants. Utilization of these messages will
ensure uniformity and maximize public
awareness. For additional information on
the various e-file programs, features, and
market research, visit the IRS web site at
http://www.irs.gov.
Participants will receive hyperlinks
from the IRS web site —irs.gov(Partners
Page) — to the Participant’s web site. Po-
tential Participants may request links for
the following categories:
•IRSe-filePartners for Taxpayers
•IRSe-filePartners for Tax Profession-
als
•IRSe-filePartners for Financial Insti-
tutions/Employers
•IRSe-filePartners for Credit Card Pay-
ment Options.
Safeguarding Taxpayer Data
The security of taxpayer accounts and
personal information is a top priority for
the IRS. Tax professionals must imple-
ment safeguards to protect taxpayer’s
data. It is not only the law, but it is good
business practice, as it increases customer
confidence and trust. Refer to Publica-
tion 4557,Safeguarding Taxpayer Data,
a Guide for Your Business,whichde-
scribes the various security provisions
and rules that impact tax professionals.
The document assists tax professionals
in understanding their requirements for
protecting the privacy and confidentiality
of taxpayer data, and provides guidance
on implementing the necessary security
controls within their business to satisfy
these requirements. Publication 4557 can
be accessed athttp://www.irs.gov.
PARTICIPATION STANDARDS &
REQUIREMENTS
Participants will abide by the following
standards and requirements, if applicable:
•The Participant was actively engaged
in the electronic tax preparation and
filing industry in 2005 and 2006.
•The Participant (Electronic Return
Originator, Intermediate Service
Provider, Software Developer, and
Transmitter) must be in good standing
with the IRS, comply with the e-file re-
quirements stated in the IRS Revenue
Procedure 2005–60, current versions
of Publications 1345, 1345A, 3112,
and pass the annual Suitability and Par-
ticipants Acceptance Testing (PATS)
conducted by the IRS. You can find
the IRS e-file technical publications on
the IRS web site athttp://www.irs.gov.
•The Participant will comply with the
privacy provisions of 26 U.S.C. § 7216
and U.S.C. § 6103.
•The Participant will be required to
prove and display third-party certifica-
tions for the privacy/security/authen-
ticity of its online service. The Par-
ticipant’s web site should display the
third-party certification and privacy
seals. Participants must use software
that will enable their web sites to state
their privacy practices in a standard
machine-readable format that can be
retrieved automatically and interpreted
easily by users.
•Participants will comply with the se-
curity provisions in applicable De-
partment of Treasury/IRS rules in-
cluding, but not limited to, 31 C.F.R.
Part 10, IRS Rev. Proc. 2005–60,
current versions of IRS Publications
1345, 1345A, and 3112, and 26 U.S.C.
§ 7216. In addition, Participants must
comply with the Federal Trade Com-
mission’s Gramm-Leach-Bliley Act
to protect the security of taxpayer
information. Refer to Publication
4557,Safeguarding Taxpayer Data,
a Guide for Your Business, for guid-
ance on various security rules and
provisions that impact tax profession-
als. The document can be accessed at
http://www.irs.gov.
•The Participant will offer their prod-
ucts and services to filers of the 1040
Series returns, including complex
returns, balance due returns, Fed-
eral/State returns, and 1040EZ returns.
•The Participant will clearly disclose its
customer service support options (in-
cluding associated fees, if any) and pri-
vacy policy on the landing page of its
web site. Participants must provide
taxpayers with a business contact point
by on-line form, email, mail, facsimile
or telephone number which the Partic-
ipant maintains and reviews.
•The Participant is encouraged to of-
fer the Spanish versions for online
filing and/or downloadable software.
The Participant who offers Spanish
versions for online filing and/or down-
loadable software will have customer
service support to assist Hispanic tax-
payers.
•The Participant will target v-coders
and individuals eligible for EITC.
•The Participant will focus on reduc-
ing the number of errors on electroni-
cally prepared returns, including those
returns claiming EITC.
•The Participant will offer a variety of
e-file features including the Self-Se-
lect PIN, Electronic Payment Options,
Federal/State e-file, Direct Deposit of
Refunds, etc.
•The Participant will market, promote
and offer e-file services through Octo-
ber 15, 2007. The Participant should
use the key marketing messages, pro-
vided by the IRS, for the promotion
of Filing Season and Post Filing Sea-
son electronic filing and place them on
your web site.
•The Participant may choose to offer ei-
ther free tax preparation or free e-file
services, but not both.
•The Participant will be permitted only
one (1)hyperlink on the IRSe-file
Partners Page per category:
•IRSe-filePartners for Taxpayer
•IRSe-filePartners for Tax Profes-
sionals
•IRSe-filePartners for Financial In-
stitutions/Employers
October 30, 20068232006–44 I.R.B.

•IRSe-filePartners for Electronic
Payment Options
•The Participant will provide the
IRS with a description (not to ex-
ceed 200 characters including
spaces) for each hyperlink placed
on the IRSe-filePartners Page.
The hyperlink description may de-
scribe multiple offers/services.
•The Participant will not have a URL(s)
containing the word “IRS.”
•The Participant will be required to sup-
ply the IRS with a link to their web site
in their application orno less than ten
(10) business daysbefore the site is
expected to go live (start date of elec-
tronic filing). All sites must be exam-
ined before they can be posted on the
IRSe-filePartners Page. The purpose
of the review is to ensure each Partici-
pant’s web site complies with the stan-
dards and requirements set forth in this
announcement.
•The Participant’s web site will not con-
tain inappropriate content. Participant
web sites must meet the following cri-
teria:
•The site clearly relates to and com-
plements existing information,
products and services on irs.gov.
•The site contains relevant and use-
ful content that will benefit our
customers.
•The site contains accurate and
timely information.
•The site provides information at no
cost. The Participant will not link
to sites whose primary purpose is
to sell products or services (unless
it is part of an approved agreement
with IRS).
•The site has an excellent overall
quality and professional image.
•The site is easy to navigate.
•The site is a credible source for
information.Thesitemustbefree
of typos and errors so that it does
not detract from the readability of
the site.
•The site does not exhibit hate, bias,
or discrimination.
•The site does not contain mislead-
ing or unsubstantiated claims or
conflict with the mission of the
IRS.
•A Participant’s web site must be func-
tionally adequate and consistent with
the Participant’s offer in permitting a
taxpayer to complete their return. Fail-
ure to comply may result in the Partici-
pant’s removal from the Partners Page.
•The Participant will adhere to industry
best practices to ensure the taxpayer re-
turn information entrusted to them is
secure and the privacy of such infor-
mation is maintained. In any instance
where a Participant contracts with a
service provider to obtain technology
services, it will adhere to this standard.
To the extent multiple Participants rely
on a single service provider for front
or back office services (not ISP ser-
vices), it is even more critical that such
taxpayer security and privacy be main-
tained with respect to others who share
these services.
•Whenever taxpayers are requested or
required to provide their SSN, it must
be part of a secure session. Participants
are not permitted to use SSNs as a re-
quested field for registration purposes
or for establishing a taxpayer account
on-line.
•The Participant will display the IRS
e-filelogo on the landing page of
its web site. The e-file logo and
guidelines can be downloaded from
http://www.irs.gov.
•The Participant will have a link(s) to
the IRS web site,http://www.irs.gov,
from its web site.
•The Participant must provide taxpay-
ers a method to obtain the status of
their tax return. Taxpayers can be di-
rected to“Where’s My Tax Refund?”
located on the Homepage of the IRS
web site athttp://www.irs.gov.
•The Participant will prominently dis-
play on the landing page of its web site
the promotion of income tax prepara-
tion and electronic filing for individu-
als eligible for EITC.
•The Participant is encouraged to offer
a monetary incentive (reduced return
preparation and electronic filing costs)
to attract taxpayers.
•The Participant will disclose limita-
tions in the forms and schedules that
are likely to be needed to support
their offerings. The Participant should
clearly display a listing of the forms
and schedules that will be offered
either visible or accessible from the
Participant’s landing page.
•The Participant willclearly disclose a
listing of the States that their software
supports either visible or accessible
from the Participant’s landing page.
•The Participant is permitted to of-
fer commercial products and services
consistent with obtaining the posi-
tive consent of the user as described
in 26 U.S.C. 7616 before offering
fee-based products and services not
related to tax preparation.
•The Participant will include a feature
in their tax preparation software that
will “time out” the session after no
changes are made for a period of time
consistent with best practices approved
by privacy seal certification programs.
•The Participant that learns of an in-
appropriate disclosure of a taxpayer’s
return information to an unauthorized
Person must report the unauthorized
disclosure to the IRS immediately but
no later than five (5) hours after de-
tection; and immediately shut down its
program at the time of detection.
•The Participant will submit written
notification (e.g.,email)totheIRS
of changes, additions and deletions to
URLs, link descriptions, etc.
•The Participant will submit Perfor-
mance Reports to the IRS Point of
covering Filing Season and post Filing
Season activity. The reports will cover
information such as e-file statistics,
web site activity and anything else the
IRS deems necessary. The IRS Point
of Contact will provide written report-
ing instructions and requirements to
accepted Participants.
PERFORMANCE STANDARDS
•The IRS will have the accepted Par-
ticipant’s hyperlink(s) available on the
IRS web site for the start of electronic
filing, subject to the participant’s pass-
ing of the annual Suitability, PATS test-
ing, and web site review. Hyperlinks
will remain on the IRSe-filePartners
Page throughOctober 15, 2007, or at
the discretion of the IRS.
•The IRS will randomize on a daily ba-
sis the Participants’ offers listed on the
IRSe-filePartners Page.
•The IRS may establish a link from the
IRSe-filePartners Page to the Free File
web page.
•The IRS will accept,if appropriate,
the Participant’s written request for
2006–44 I.R.B.824October 30, 2006

changes/additions/deletions to a URL,
link description, etc.
•The IRS will review the Participant’s
web site(s) at any time to ensure that
participation requirements are met.
•The IRS will not endorse specific of-
ferings or products, but will promote
the IRSe-filePartners Page. A “Site
Disclaimer” will be displayed upon ex-
iting the IRS web site before the user
enters the Participant’s web site.
PARTICIPATION TERMS
The IRS Individuale-filePartnership
Program is an annual program, and all
prospective Participants, including re-
turning Participants, must reapply each
year following the guidelines in the In-
ternal Revenue Bulletin announcement
advertised onhttp://www.irs.gov.Ifthe
IRS determines that the Participant is not
meeting the “Participation Standards &
Requirements,” the IRS may terminate its
partnership with the Participant and re-
move the participant’s hyperlink(s) from
the IRSe-filePartners Page.
•The Participant will notify the IRS im-
mediately if it wishes to terminate its
partnership with the IRS. The notifica-
tion should be submitted through email
to the IRS Point of Contact or sent
to the Point of Contact’s address in-
dicated below in “IRS Point of Con-
tact/Application Submission.”
APPLICATION PROCESS
Applications should contain the follow-
ing information,if applicable:
•Provide Primary and Secondary Points
of Contact (name, title, address,
cell/telephone number, fax number
and email address) for discussion of
your application and program partici-
pation.
•Identify the Applicant’s secure web
site.
•Identify the Applicant’s tax prepara-
tion software and the States it will sup-
port.
•Identify the IRS forms and schedules
that support your offering(s).
•Include the Applicant’s Electronic
Filer Identification Number(s) (EFIN)
and/or Electronic Transmitter Identifi-
cation Number (ETIN).
•Indicate if the Applicant will offer
the Spanish versions for online filing
and/or downloadable software. De-
scribe customer service support for
assisting Hispanic taxpayers.
•Identify the Applicant’s hyperlink(s)
and provide a short description(not
to exceed 200 characters including
spaces)of the services and products
to be promoted on the IRSe-filePart-
ners Page. In addition, the Applicant
should provide the associated URL(s).
The URL(s) cannot contain the word
“IRS.”Indicate the category for each
hyperlink:
•IRSe-filePartners for Taxpayers
•IRSe-filePartners for Tax Profes-
sionals
•IRSe-filePartners for Financial In-
stitutions/Employers
•IRSe-filePartners for Electronic
Payment Options.
•Identify the Applicant’s third party
administrators (i.e., VeriSign, Thawte,
Truste) that certify the privacy/secu-
rity/authenticity of its online service
and provide certification that the Ap-
plicant’s current status is active and in
good standing.
•Identify the Applicant’s communica-
tion vehicle(s) (i.e.,website,market-
ing/promotional products, etc.) to mar-
ket and promote your products and ser-
vices and IRSe-file. Describe the in-
centives, discounts, offers, benefits to
taxpayers or other specific approaches
to increasee-filevolumes.
•Describe steps the Applicant will take
to reach taxpayers that claim EITC.
This can include marketing/promo-
tional efforts, monetary incentives
(reduced return preparation and elec-
tronic filing costs).
•Describe steps the Applicant will take
to reduce errors on electronically filed
returns, including those returns claim-
ing EITC.
•Certify the Applicant’s compliance
with the privacy and disclosure provi-
sions of 26 U.S.C. 7216 and 26 U.S.C.
6103.
•Certify the Applicant’s compliance
with the Federal Trade Commission’s
Gramm-Leach-Bliley (GLB) Act of
1999, FinancialPrivacy Rule and
Safeguard Rules.
IRS POINT OF
CONTACT/APPLICATION
SUBMISSION
Applications to participate in the
IRS Individuale-filePartnership
Program should be submitted as a
Word document through email at
*WIe-filepartners@irs.gov(Please make
sure there is an asterisk before the WI
(Wage and Investment) when submitting
an application.) An application may also
be sent to:
Internal Revenue Service
5000 Ellin Road
Lanham, MD 20706
Attention: Karen Bradley C4–132
SE:W:CAR:SPEC:FO:IMS
Ifyouwishtohaveahyperlink(s)
on the IRSe-filePartners Page for the
start of electronic filing, your applica-
tion must be submitted by November 30,
2006. If your application is received after
the deadline, there is no guarantee that it
will be accepted by the IRS.
Any questions regarding the devel-
opment of applications, the submis-
sion of Performance Reports, or any
other type of contact for this program
should be directed to Karen Bradley
at (202) 283–7034 or through email to
*WIe-filepartners@irs.gov. Please make
sure there is an asterisk (*) before the WI
(Wage and Investment) for any type of
email contact.
APPLICATION EVALUATION
All applications will be evaluated based
on the required information provided to
the IRS and the applicant’s ability to ful-
fill their responsibilities. Prior year perfor-
mance will also be considered when evalu-
ating applications fromreturning partners.
ACCEPTANCE/DENIAL OF
APPLICATION
If your application is accepted, you
will receive written notification from the
IRS. If your application is denied, you will
receive written notification from the IRS
with an explanation of the denial.
e-Help
If you have any questions related to
e-products/electronic filing, you can
October 30, 20068252006–44 I.R.B.

contact the e-Help Desk toll-free at
1–866–255–0654. The e-Help desk assis-
tors are ready to respond to non-account
related questions and issues. You can also
go tohttp://www.irs.govwhere the IRS
houses a variety of information which im-
pacts the tax professional.
Disclosure of Return
Information by Certain
Officers and Employees
for Investigative Purposes;
Correction
Announcement 2006–89
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correcting amendment.
SUMMARY: This document corrects fi-
nal regulations (T.D. 9274, 2006–33 I.R.B.
244) that were published in theFederal
Registeron Tuesday, July 11, 2006 (71 FR
38985). The document contains final reg-
ulations relating to the disclosure of return
information pursuant to section 6103(k)(6)
of the Internal Revenue Code.
DATES: This correcting amendment is ef-
fective October 17, 2006.
FOR FURTHER INFORMATION
CONTACT: Helene R. Newsome, (202)
622–4570 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The notice of final regulations (T.D.
9274) that is the subject of these correc-
tions is under section 6103(k)(6) of the In-
ternal Revenue Code.
Need for Correction
As published, T.D. 9274 contains errors
that may prove to be misleading and are in
need of clarification.
*****
Correction of Publication
Accordingly, 26 CFR Part 301 is cor-
rected by making the following correcting
amendments:
Paragraph 1.On page 38985, col-
umn 1, in the preamble, under the caption
“DATES”, second line, the language “are
effective July 11, 2006.” is corrected to
read “are effective July 6, 2006.”.
Par. 2.On page 38986, column 2, in
the preamble, under the paragraph head-
ing “Special Analyses”, sixth line from the
top of the column, the language “and be-
cause the regulation does not” is corrected
to read “and because the regulations do
not”.
Part 301—PROCEDURE AND
ADMINISTRATION
Par. 3.The authority citation for part 1
continues to read in part as follows:
Authority:26USC7805***
Par. 4.Section 301.6103(k)(6)–1(e) is
revised to read as follows:
§ 301.6103(k)(6)–1 Disclosure of return
information by certain officers and
employees for investigative purposes.
*****
(e)Effective date. This section is appli-
cable on July 6, 2006.
Guy R. Traynor,
Chief, Publications and
Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on October 16,
2006, 8:45 a.m., and published in the issue of the Federal
Register for October 17, 2006, 71 F.R. 60827)
2006–44 I.R.B.826October 30, 2006

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 rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The 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.
October 30, 2006i2006–44 I.R.B.

Numerical Finding List
1
Bulletins 2006–27 through 2006–44
Announcements:
2006-42, 2006-27 I.R.B.48
2006-43, 2006-27 I.R.B.48
2006-44, 2006-27 I.R.B.49
2006-45, 2006-31 I.R.B.121
2006-46, 2006-28 I.R.B.76
2006-47, 2006-28 I.R.B.78
2006-48, 2006-31 I.R.B.135
2006-49, 2006-29 I.R.B.89
2006-50, 2006-34 I.R.B.321
2006-51, 2006-32 I.R.B.222
2006-52, 2006-33 I.R.B.254
2006-53, 2006-33 I.R.B.254
2006-54, 2006-33 I.R.B.254
2006-55, 2006-35 I.R.B.342
2006-56, 2006-35 I.R.B.342
2006-57, 2006-35 I.R.B.343
2006-58, 2006-36 I.R.B.388
2006-59, 2006-36 I.R.B.388
2006-60, 2006-36 I.R.B.389
2006-61, 2006-36 I.R.B.390
2006-62, 2006-37 I.R.B.444
2006-63, 2006-37 I.R.B.445
2006-64, 2006-37 I.R.B.447
2006-65, 2006-37 I.R.B.447
2006-66, 2006-37 I.R.B.448
2006-67, 2006-38 I.R.B.509
2006-68, 2006-38 I.R.B.510
2006-69, 2006-37 I.R.B.449
2006-70, 2006-40 I.R.B.629
2006-71, 2006-40 I.R.B.630
2006-72, 2006-40 I.R.B.630
2006-73, 2006-42 I.R.B.745
2006-74, 2006-42 I.R.B.746
2006-75, 2006-42 I.R.B.746
2006-76, 2006-42 I.R.B.746
2006-77, 2006-42 I.R.B.748
2006-78, 2006-42 I.R.B.748
2006-79, 2006-43 I.R.B.792
2006-81, 2006-44 I.R.B.821
2006-82, 2006-44 I.R.B.821
2006-83, 2006-44 I.R.B.822
2006-87, 2006-44 I.R.B.822
2006-89, 2006-44 I.R.B.826
Notices:
2006-56, 2006-28 I.R.B.58
2006-57, 2006-27 I.R.B.13
2006-58, 2006-28 I.R.B.59
2006-59, 2006-28 I.R.B.60
2006-60, 2006-29 I.R.B.82
2006-61, 2006-29 I.R.B.85
Notices— Continued:
2006-62, 2006-29 I.R.B.86
2006-63, 2006-29 I.R.B.87
2006-64, 2006-29 I.R.B.88
2006-65, 2006-31 I.R.B.102
2006-66, 2006-30 I.R.B.99
2006-67, 2006-33 I.R.B.248
2006-68, 2006-31 I.R.B.105
2006-69, 2006-31 I.R.B.107
2006-70, 2006-33 I.R.B.252
2006-71, 2006-34 I.R.B.316
2006-72, 2006-36 I.R.B.363
2006-73, 2006-35 I.R.B.339
2006-74, 2006-35 I.R.B.339
2006-75, 2006-36 I.R.B.366
2006-76, 2006-38 I.R.B.459
2006-77, 2006-40 I.R.B.590
2006-78, 2006-41 I.R.B.675
2006-79, 2006-43 I.R.B.763
2006-80, 2006-40 I.R.B.594
2006-81, 2006-40 I.R.B.595
2006-82, 2006-39 I.R.B.529
2006-83, 2006-40 I.R.B.596
2006-84, 2006-41 I.R.B.677
2006-85, 2006-41 I.R.B.677
2006-86, 2006-41 I.R.B.680
2006-87, 2006-43 I.R.B.766
2006-88, 2006-42 I.R.B.686
2006-89, 2006-43 I.R.B.772
2006-90, 2006-42 I.R.B.688
2006-91, 2006-42 I.R.B.688
2006-92, 2006-43 I.R.B.774
2006-93, 2006-44 I.R.B.798
2006-94, 2006-43 I.R.B.777
Proposed Regulations:
REG-208270-86, 2006-42 I.R.B.698
REG-121509-00, 2006-40 I.R.B.602
REG-135866-02, 2006-27 I.R.B.34
REG-140379-02, 2006-44 I.R.B.808
REG-142599-02, 2006-44 I.R.B.808
REG-146893-02, 2006-34 I.R.B.317
REG-159929-02, 2006-35 I.R.B.341
REG-148864-03, 2006-34 I.R.B.320
REG-168745-03, 2006-39 I.R.B.532
REG-105248-04, 2006-43 I.R.B.787
REG-109512-05, 2006-30 I.R.B.100
REG-142270-05, 2006-43 I.R.B.791
REG-145154-05, 2006-39 I.R.B.567
REG-148576-05, 2006-40 I.R.B.627
REG-109367-06, 2006-41 I.R.B.683
REG-112994-06, 2006-27 I.R.B.47
REG-118775-06, 2006-28 I.R.B.73
REG-118897-06, 2006-31 I.R.B.120
REG-120509-06, 2006-39 I.R.B.570
REG-124152-06, 2006-36 I.R.B.368
Proposed Regulations— Continued:
REG-125071-06, 2006-36 I.R.B.375
Revenue Procedures:
2006-29, 2006-27 I.R.B.13
2006-30, 2006-31 I.R.B.110
2006-31, 2006-27 I.R.B.32
2006-32, 2006-28 I.R.B.61
2006-33, 2006-32 I.R.B.140
2006-34, 2006-38 I.R.B.460
2006-35, 2006-37 I.R.B.434
2006-36, 2006-38 I.R.B.498
2006-37, 2006-38 I.R.B.499
2006-38, 2006-39 I.R.B.530
2006-39, 2006-40 I.R.B.600
2006-40, 2006-42 I.R.B.694
2006-41, 2006-43 I.R.B.777
2006-44, 2006-44 I.R.B.800
Revenue Rulings:
2006-35, 2006-28 I.R.B.50
2006-36, 2006-36 I.R.B.353
2006-37, 2006-30 I.R.B.91
2006-38, 2006-29 I.R.B.80
2006-39, 2006-32 I.R.B.137
2006-40, 2006-32 I.R.B.136
2006-41, 2006-35 I.R.B.331
2006-42, 2006-35 I.R.B.337
2006-43, 2006-35 I.R.B.329
2006-44, 2006-36 I.R.B.361
2006-45, 2006-37 I.R.B.423
2006-46, 2006-39 I.R.B.511
2006-47, 2006-39 I.R.B.511
2006-48, 2006-39 I.R.B.516
2006-49, 2006-40 I.R.B.584
2006-50, 2006-41 I.R.B.672
2006-51, 2006-41 I.R.B.632
2006-52, 2006-43 I.R.B.761
2006-53, 2006-44 I.R.B.796
Treasury Decisions:
9265, 2006-27 I.R.B.1
9266, 2006-28 I.R.B.52
9267, 2006-34 I.R.B.313
9268, 2006-30 I.R.B.94
9269, 2006-30 I.R.B.92
9270, 2006-33 I.R.B.237
9271, 2006-33 I.R.B.224
9272, 2006-35 I.R.B.332
9273, 2006-37 I.R.B.394
9274, 2006-33 I.R.B.244
9275, 2006-35 I.R.B.327
9276, 2006-37 I.R.B.424
9277, 2006-33 I.R.B.226
9278, 2006-34 I.R.B.256
9279, 2006-36 I.R.B.355
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2006–1 through 2006–26 is in Internal Revenue Bulletin
2006–26, dated June 26, 2006.
2006–44 I.R.B.iiOctober 30, 2006

Treasury Decisions— Continued:
9280, 2006-38 I.R.B.450
9281, 2006-39 I.R.B.517
9282, 2006-39 I.R.B.512
9283, 2006-41 I.R.B.633
9284, 2006-40 I.R.B.582
9285, 2006-41 I.R.B.656
9286, 2006-43 I.R.B.750
9288, 2006-44 I.R.B.794
October 30, 2006iii2006–44 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2006–27 through 2006–44
Announcements:
2005-59
Updated and superseded by
Ann. 2006-45, 2006-31 I.R.B.121
Notices:
2002-45
Amplified by
Rev. Rul. 2006-36, 2006-36 I.R.B.353
2006-20
Supplemented and modified by
Notice 2006-56, 2006-28 I.R.B.58
2006-53
Modified by
Notice 2006-71, 2006-34 I.R.B.316
2006-67
Modified and superseded by
Notice 2006-77, 2006-40 I.R.B.590
Proposed Regulations:
REG-135866-02
Corrected by
Ann. 2006-64, 2006-37 I.R.B.447
Ann. 2006-65, 2006-37 I.R.B.447
REG-134317-05
Corrected by
Ann. 2006-47, 2006-28 I.R.B.78
REG-112994-06
Corrected by
Ann. 2006-79, 2006-43 I.R.B.792
REG-118775-06
Corrected by
Ann. 2006-71, 2006-40 I.R.B.630
Revenue Procedures:
99-35
Modified and superseded by
Rev. Proc. 2006-40, 2006-42 I.R.B.694
2002-9
Modified and amplified by
Notice 2006-67, 2006-33 I.R.B.248
Notice 2006-77, 2006-40 I.R.B.590
2004-63
Superseded by
Rev. Proc. 2006-34, 2006-38 I.R.B.460
2005-41
Superseded by
Rev. Proc. 2006-29, 2006-27 I.R.B.13
Revenue Procedures— Continued:
2005-49
Superseded by
Rev. Proc. 2006-33, 2006-32 I.R.B.140
2005-67
Superseded by
Rev. Proc. 2006-41, 2006-43 I.R.B.777
2006-12
Modified by
Rev. Proc. 2006-37, 2006-38 I.R.B.499
2006-33
Updated and clarified by
Ann. 2006-73, 2006-42 I.R.B.745
2006-35
Modified by
Notice 2006-90, 2006-42 I.R.B.688
Revenue Rulings:
72-238
Obsoleted by
REG-109367-06, 2006-41 I.R.B.683
73-558
Obsoleted by
REG-109367-06, 2006-41 I.R.B.683
75-296
Distinguished by
Rev. Rul. 2006-52, 2006-43 I.R.B.761
80-31
Distinguished by
Rev. Rul. 2006-52, 2006-43 I.R.B.761
81-35
Amplified and modified by
Rev. Rul. 2006-43, 2006-35 I.R.B.329
81-36
Amplified and modified by
Rev. Rul. 2006-43, 2006-35 I.R.B.329
87-10
Amplified and modified by
Rev. Rul. 2006-43, 2006-35 I.R.B.329
2002-41
Amplified by
Rev. Rul. 2006-36, 2006-36 I.R.B.353
2003-43
Amplified by
Notice 2006-69, 2006-31 I.R.B.107
2005-24
Amplified by
Rev. Rul. 2006-36, 2006-36 I.R.B.353
Treasury Decisions:
9254
Corrected by
Ann. 2006-44, 2006-27 I.R.B.49
Ann. 2006-66, 2006-37 I.R.B.448
9258
Corrected by
Ann. 2006-46, 2006-28 I.R.B.76
9260
Corrected by
Ann. 2006-67, 2006-38 I.R.B.509
9262
Corrected by
Ann. 2006-56, 2006-35 I.R.B.342
9264
Corrected by
Ann. 2006-46, 2006-28 I.R.B.76
9272
Corrected by
Ann. 2006-68, 2006-38 I.R.B.510
9274
Corrected by
Ann. 2006-89, 2006-44 I.R.B.826
9276
Corrected by
Ann. 2006-83, 2006-44 I.R.B.822
9277
Corrected by
Ann. 2006-72, 2006-40 I.R.B.630
9280
Corrected by
Ann. 2006-78, 2006-42 I.R.B.748
9281
Corrected by
Ann. 2006-82, 2006-44 I.R.B.821
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2006–1 through 2006–26 is in Internal Revenue Bulletin 2006–26, dated June 26, 2006.
2006–44 I.R.B.ivOctober 30, 2006

INDEX
Internal Revenue Bulletins 2006–27 through
2006–44
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parenthesis refers to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Anti-cutback rules, section 411(d)(6) protected benefits (TD
9280) 38,450;correction(Ann78)42,748
Disaster relief, additional postponement under section 7508A for
filing certain 2004 and 2005 individual tax returns by certain
taxpayers affected by Hurricane Katrina (Notice 56) 28,58
Employee stock ownership plan (ESOP), disallowance of deduc-
tion for reacquisition payments (TD 9282) 39,512
Exempt organization employees, minimum coverage require-
mentsofsection410(b)(TD9275)35,327
Full funding limitations, weighted average interest rate:
For July 2006 (Notice 66) 30,99
For August 2006 (Notice 74) 35,339
For September 2006 (Notice 80) 40,594
For October 2006 (Notice 94) 43,777
Pension Protection Act of 2006 modifications (Notice 75) 36,
366
Indian tribal government, Pension Protection Act of 2006 (Notice
89) 43,772
Minimum funding standards, alternative funding schedule (Ann
70) 40,629
Nonbank trustee and nonbank custodian, approval list (Ann 45)
31,122
Qualified retirement plans:
Government pick-up plans, employer contributions (RR 43)
35,329
Prohibited transaction excise tax, amount involved in elective
deferral (RR 38) 29,80
Regulations:
26 CFR 1.410(b)–0, –6, –10, amended; exclusion of employ-
ees of 501(c)(3) organizations in 401(k) and 401(m) plans
(TD 9275) 35,327
EMPLOYEE PLANS—Cont.
26 CFR 1.411(a)–8, amended; 1.411(d)–3, amended; section
411(d)(6) protected benefits (TD 9280) 38,450; correction
(Ann 78) 42,748
26 CFR 1.162(k)–1, added; 1.404(k)–3, added; dividends
paid deduction for stock held in employee stock ownership
plan (TD 9282) 39,512
Roth IRAs, distributions of designated Roth contributions, public
hearing on REG–146459–05 (Ann 42) 27,48
Transition relief under section 409A, additional relief (Notice 79)
43,763
EMPLOYMENT TAX
Bankruptcy estate in chapter 11 cases filed on or after October 17,
2005, post-petition income of individual debtor (Notice 83) 40,
596
Controlled services transactions under section 482, treatment, al-
location of income and deductions from intangibles, and stew-
ardship expense (TD 9278) 34,256; (REG–146893–02) 34,
317
Disaster relief:
Additional postponement under section 7508A for filing cer-
tain 2004 and 2005 individual tax returns by certain taxpay-
ers affected by Hurricane Katrina (Notice 56) 28,58
Leave-sharing plans (Notice 59) 28,60
Disclosure of return information, Bureau of Economic Analysis
(TD 9267) 34,313; (REG–148864–03) 34,320
Federal Insurance Contributions Act (FICA), application to pay-
ments made for certain services (TD 9266) 28,52
Offers in compromise, nonrefundable down payments required
(Notice 68) 31,105
Proposed Regulations:
26 CFR 31.3121(s)–1, amended; treatment of services under
section 482, allocation of income and deductions from in-
tangibles, stewardship expense (REG–146893–02) 34,317
26 CFR 301.6103(j)(1)–1, amended; disclosure of re-
turn information to the Bureau of Economic Analysis
(REG–148864–03) 34,320
Regulations:
26 CFR 31.3102–1, amended; 31.3121(a)–2, (a)(7)–1,
(a)(8)–1, (i)–1, amended; 31.3121(a)(10)–1, revised; ap-
plication of the Federal Insurance Contributions Act to
payments made for certain services (TD 9266) 28,52
26 CFR 31.3121(s)–1, amended; 31.3121(s)–1T, added; treat-
ment of services under section 482, allocation of income
and deductions from intangibles, stewardship expense (TD
9278) 34,256
26 CFR 31.3401(a)–1, –4, amended; 31.3402(g)–1, amended;
31.3402(j)–1, amended; 31.3402(n)–1, revised; flat rate
supplemental wage withholding (TD 9276) 37,423;cor-
rection(Ann83)44,822
26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T,
added; disclosure of return information to the Bureau of
Economic Analysis (TD 9267) 34,313
October 30, 2006v2006–44 I.R.B.

EMPLOYMENT TAX—Cont.
Supplemental wages, withholding (TD 9276) 37,423; correction
(Ann 83) 44,822
Tip reporting, Attributed Tip Income Program (ATIP) (RP 30)
31,110
ESTATE TAX
Disaster relief, additional postponement under section 7508A for
filing certain 2004 and 2005 individual tax returns by certain
taxpayers affected by Hurricane Katrina (Notice 56) 28,58
Disclosure of return information, Bureau of Economic Analysis
(TD 9267) 34,313; (REG–148864–03) 34,320
Offers in compromise, nonrefundable down payments required
(Notice 68) 31,105
Proposed Regulations:
26 CFR 301.6103(j)(1)–1, amended; disclosure of re-
turn information to the Bureau of Economic Analysis
(REG–148864–03) 34,320
Regulations:
26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T,
added; disclosure of return information to the Bureau of
Economic Analysis (TD 9267) 34,313
EXCISE TAX
Alternative fuel and alternative fuel mixtures claims, exemptions
for blood collector organizations (Notice 92) 43,774
Disaster relief, additional postponement under section 7508A for
filing certain 2004 and 2005 individual tax returns by certain
taxpayers affected by Hurricane Katrina (Notice 56) 28,58
Disclosure of return information, Bureau of Economic Analysis
(TD 9267) 34,313; (REG–148864–03) 34,320
Disclosure requirements with respect to prohibited tax shelter
transactions to which tax-exempt entities are parties (Notice
65) 31,102
Excise taxes with respect to prohibited tax shelter transactions to
which tax-exempt entities are parties (Notice 65) 31,102
Health Savings Accounts (HSAs) under section 4980G, em-
ployer comparable contributions (TD 9277) 33,226
Offers in compromise, nonrefundable down payments required
(Notice 68) 31,105
Proposed Regulations:
26 CFR 301.6103(j)(1)–1, amended; disclosure of re-
turn information to the Bureau of Economic Analysis
(REG–148864–03) 34,320
Regulations:
26 CFR 54.4980G–0 thru –5, added; employer comparable
contributions to Health Savings Accounts under section
4980G (TD 9277) 33,226
26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T,
added; disclosure of return information to the Bureau of
Economic Analysis (TD 9267) 34,313
Tickets for taxable transportation purchased from third party in-
termediaries, determination of tax base on amounts paid (RR
52) 43,761
EXEMPT ORGANIZATIONS
Disaster relief, additional postponement under section 7508A for
filing certain 2004 and 2005 individual tax returns by certain
taxpayers affected by Hurricane Katrina (Notice 56) 28,58
Disclosure requirements with respect to prohibited tax shelter
transactions to which tax-exempt entities are parties (Notice
65) 31,102
Excise taxes with respect to prohibited tax shelter transactions to
which tax-exempt entities are parties (Notice 65) 31,102
List of organizations classifiedas private foundations (Ann 51)
32,222;(Ann76)42,746
Revocations (Ann 48) 31,136;(Ann54)33,254; (Ann 55) 35,
342;(Ann60)36,389; (Ann 69) 37,449; (Ann 75) 42,746;
(Ann 81) 44,821
GIFT TAX
Disaster relief, additional postponement under section 7508A for
filing certain 2004 and 2005 individual tax returns by certain
taxpayers affected by Hurricane Katrina (Notice 56) 28,58
Disclosure of return information, Bureau of Economic Analysis
(TD 9267) 34,313; (REG–148864–03) 34,320
Offers in compromise, nonrefundable down payments required
(Notice 68) 31,105
Proposed Regulations:
26 CFR 301.6103(j)(1)–1, amended; disclosure of re-
turn information to the Bureau of Economic Analysis
(REG–148864–03) 34,320
Regulations:
26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T,
added; disclosure of return information to the Bureau of
Economic Analysis (TD 9267) 34,313
INCOME TAX
Accounting methods:
Advance consent to change procedures (RP 37) 38,499
Nonaccrual-experience method (TD 9285) 41,656
Revised instructions for Form 3115, Application for Change
inAccountingMethod(Ann52)33,254
Accounts and notes receivable, section 1221(a)(4) capital asset
exclusion (REG–109367–06) 41,683
Allocation and accounting regulations under section 141, general
(REG–140379–02; REG–142599–02) 44,808
Appeals arbitration program, establishment (RP 44) 44,800
Bankruptcy estate in chapter 11 cases filed on or after October 17,
2005, post-petition income of individual debtor (Notice 83) 40,
596
Bond issue, administrative appeal of proposed adverse determi-
nation of tax-exempt status (RP 40) 42,694
Capitalization of amounts paid to acquire, produce, or improve
tangible property (REG–168745–03) 39,532
Collection, IRS’s use of private collection agencies (PCAs) in
2006 (Ann 63) 37,445
2006–44 I.R.B.viOctober 30, 2006

INCOME TAX—Cont.
Computer software, domestic production activities deduction un-
der section 199(c)(5)(B):
ChangeinhearinglocationforREG–111578–06(Ann53)33,
254
CorrectiontoTD9262(Ann56)35,342
Conservation Security Program (CSP), cost-share payments (RR
46) 39,511
Consolidated returns, basis reallocation, loss suspension, and ex-
piration of losses on certain stock dispositions, correction to
TD 9254 (Ann 44) 27,49;correction(Ann66)37,448
Controlled services cost methodunder section 482 regulations,
identification of specified eligible covered services (Ann 50)
34,321
Controlled services transactionsunder section 482, treatment, al-
location of income and deductions from intangibles, and stew-
ardship expense (TD 9278) 34,256; (REG–146893–02) 34,
317
Corporations:
Attribution of earnings and profits to stock of controlled
foreign corporations (REG–135866–02) 27,34; correction
(Ann 64) 37,447; additional corrections (Ann 65) 37,447
Distributions of interests in a loss corporation from qualified
trusts (TD 9269) 30,92
Elections, spin-offs, corporate distributions, section
355(b)(3)(C) elections, corporate reorganizations (No-
tice 81) 40,595
Exclusion from gross income ofpreviously taxed earnings and
profits and related basis adjustments (REG–121509–00) 40,
602
Foreign corporation interest expense allocations, branch
profits tax election, branch profits tax liability reduc-
tion (TD 9281) 39,517; correction (Ann 82) 44,821;
(REG–120509–06) 39,570
Information returns required with respect to certain foreign
corporations and certain foreign-owned domestic corpora-
tions (TD 9268) 30,94; (REG–109512–05) 30,100
Inversions, surrogate foreign corporations (Notice 70) 33,252
Look-through treatment of dividends from noncontrolled sec-
tion 902 corporations, correction to TD 9260 (Ann 67) 38,
509
Property used to purchase parent stock in certain triangular
reorganizations involving foreign corporations (Notice 85)
41,677
Surrogate foreign corporation status for purposes of section
7874 (TD 9265) 27,1; (REG–112994–06) 27,47; correc-
tion (Ann 79) 43,792
Credits:
Alternative fuel motor vehicle credit (Notice 78) 41,675
Electricity produced from certain renewable resources, open-
loop biomass (Notice 88) 42,686
Enhanced oil recovery credit, 2006 inflation adjustment (No-
tice 62) 29,86
For income, war profits, excess profits taxes paid to foreign
country or U.S. possession (REG–124152–06) 36,368
INCOME TAX—Cont.
Low-income housing credit:
Carryovers to qualified states, 2006 National Pool (RP 38)
39,530
Satisfactory bond, “bond factor” amounts for the period:
January through September 2006 (RR 37) 30,91
January through December 2006 (RR 51) 41,632
New markets tax credit, low-income community business
(Notice 60) 29,82
Nonbusiness energy property, siding not component specifi-
cally and primarily designedto reduce heat loss or gain of
dwelling (Notice 71) 34,316
Railroad track maintenance credit (TD 9286) 43,750;
(REG–142270–05) 43,791
Work opportunity and welfare-to-work tax credits (Ann 49)
29,89
Debit cards used to reimburse participants in self-insured medical
reimbursement plans and dependent care assistance programs
(Notice 69) 31,107
Depreciation, additional first year depreciation deduction (TD
9283) 41,633
Disaster relief:
Additional postponement under section 7508A for filing cer-
tain 2004 and 2005 individual tax returns by certain taxpay-
ers affected by Hurricane Katrina (Notice 56) 28,58
Casualty and theft loss deductions attributable to Hurricanes
Katrina, Rita, and Wilma, safe harbor methods for individ-
uals, personal-use residential real property and certain per-
sonal belongings (RP 32) 28,61
Depreciation, Gulf Opportunity(GO) Zone additional first
year depreciation deduction (Notice 67) 33,248; modified
and superseded (Notice 77) 40,590
Leave-sharing plans (Notice 59) 28,60
Disciplinary actionsinvolving attorneys,certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 57) 35,343
Disclosure of return information:
Bureau of Economic Analysis (TD 9267) 34,313;
(REG–148864–03) 34,320
By certain officers and employees for investigative purposes
(TD 9274) 33,244; correction (Ann 89) 44,826
E-file:
Guidance necessary to facilitatebusiness electronic filing and
burden reduction, correction to TD 9264 (Ann 46) 28,76;
correction to REG–134317–05 (Ann 47) 28,78
Request for applications to participate in the 2007 IRS Indi-
vidual e-file Partnership Program (Ann 87) 44,822
Effect of elections in certain multi-step transactions (TD 9271)
33,224
Employee stock ownership plan (ESOP), disallowance of deduc-
tion for reacquisitionpayments (TD 9282) 39,512
Exempt organization employees, minimum coverage require-
ments of section 410(b) (TD 9275) 35,327
Fast Track Settlement (FTS) for SB/SE taxpayers to expedite
case resolution (Ann 61) 36,390
October 30, 2006vii2006–44 I.R.B.

INCOME TAX—Cont.
Forms:
1042-S, Foreign Person’s U.S. Source Income Subject to
Withholding, specificationsfor filing electronically or
magnetically (RP 34) 38,460
1098, 1099, 5498 and W-2G, requirements for filing electron-
ically or magnetically (revised 8-2006) (RP 33) 32,140;
update to Publication 1220 affecting tax year 2006 filing of
information returns (Ann 73) 42,745
3115, Application for Change in Accounting Method, instruc-
tions revised May 2006 (Ann 52) 33,254
8027, Employer’s Annual Information Return of Tip Income
and Allocated Tips, specifications for filing electronically
or magnetically (RP 29) 27,13
8802, Application for United States Residency Certification,
user fees for processing (RP 35) 37,434
8830, Enhanced Oil Recovery Credit, credit phased out for
2006 (Ann 62) 37,444
8840, Closer Connection Exception Statement for Aliens, re-
vision (Notice 73) 35,339
8898, Statement for Individuals Who Begin or End Bona Fide
Residence in a U.S. Possession, postponement of filing date
for tax years 2001 through 2005 (Notice 57) 27,13;revision
(Notice 73) 35,339
Health reimbursement arrangements, taxable benefits of benefi-
ciaries (RR 36) 36,353
Health Savings Accounts (HSAs) under section 4980G, em-
ployer comparable contributions (TD 9277) 33,226; correc-
tion (Ann 72) 40,630
Housing cost amount eligible for exclusion or deduction, deter-
mination (Notice 87) 43,766
Income and currency gain or loss with respect to a section 987
qualified business unit (QBU) (REG–208270–86) 42,698
Income earned from a restricted country (Notice 84) 41,677
Indian tribal governments, limitation on issuance of tax-ex-
empt bonds, advance notice of proposed rulemaking
(REG–118788–06) (Ann 59) 36,388
Information reporting:
For payments to attorneys, reporting of gross proceeds pay-
ments (TD 9270) 33,237
Requirements for:
Payments of interest on tax-exempt bonds (Notice 93) 44,
798
Qualified tuition and related expenses (Notice 72) 36,363
Installment agreement user fees (REG–148576–05) 40,627
Institute on Current Issues in International Taxation (Ann 77) 42,
748
Insurance companies:
Life-nonlife tacking rule, correction to TD 9258 (Ann 46) 28,
76
Net investment income included by foreign insurance com-
pany on U.S. income tax return, guidance regarding com-
putation of amount (RP 39) 40,600
Recomputed differential earnings rate for 2004 (RR 45) 37,
423
INCOME TAX—Cont.
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
July 2006 (RR 35) 28,50
August 2006 (RR 39) 32,137
September 2006 (RR 44) 36,361
October 2006 (RR 50) 41,672
Portfolio interest rules as appliedtopaymentsmadetopart-
nerships and simple or grantor trusts (REG–118775–06) 28,
73; hearing rescheduled (Ann 58) 36,388; hearing can-
celled (Ann 71) 40,630
Rates:
Underpayments and overpayments, quarter beginning:
October 1, 2006 (RR 49) 40,584
Inventory:
LIFO, price indexes used by department stores for:
May 2006 (RR 40) 32,136
June 2006 (RR 41) 35,331
July 2006 (RR 48) 39,516
August 2006 (RR 53) 44,796
Involuntary conversions, livestock sold on account of drought:
Extension of replacement period (Notice 82) 39,529
List of affected counties, extension of replacement period
(Notice 91) 42,688
Levy, use of superpriority lien arguments as a defense to (RR 42)
35,337
Marginal production rates, 2006 (Notice 61) 29,85
Nonqualified deferred compensation, permitted accelerated pay-
ment (Notice 64) 29,88
Offers in compromise, nonrefundable down payments required
(Notice 68) 31,105
Partnerships, portfolio interest rules as applied to payments made
to partnerships and simple or grantor trusts (REG–118775–06)
28,73
Per diem allowances (RP 41) 43,777
Postponement of filing date forForm 8898, Statement for Indi-
viduals Who Begin or End Bona Fide Residence in a U.S. Pos-
session, for tax years 2001 through 2005 (Notice 57) 27,13
Private foundations, organizations now classified as (Ann 51) 32,
222; (Ann 76) 42,746
Procedures for requesting specialstatistical studies and compila-
tions involving return information (RP 36) 38,498
Proposed Regulations:
26 CFR 1.45G–0, –1, added; railroad track maintenance credit
(REG–142270–05) 43,791
26 CFR 1.141–0, –1, –13, –15, amended; 1.141–6, re-
vised; 1.145–2, amended; general allocation and account-
ing regulations under section 141 (REG–140379–02;
REG–142599–02) 44,808
26 CFR 1.162–4, revised; 1.263(a)–0, amended; 1.263(a)–1
thru –3, revised; guidance regarding deduction and cap-
italization of expenditures related to tangible property
(REG–168745–03) 39,532
2006–44 I.R.B.viiiOctober 30, 2006

INCOME TAX—Cont.
26 CFR 1.367(b)–2, –4, revised; 1.1248–1, –2, –3, –7, re-
vised; 1.1248–8, added; section 1248 attribution principles
(REG–135866–02) 27,34; correction (Ann 64) 37,447;ad-
ditional corrections (Ann 65) 37,447
26 CFR 1.482–0, –1, –2, –4, –6, –8, amended; 1.482–9,
added; 1.861–8, amended; 1.6038A–3(a)(3), amended;
1.6662–6, amended; treatment of services under section
482, allocation of income and deductions from intangibles,
stewardship expense (REG–146893–02) 34,317
26 CFR 1.671–5, amended; reporting rules for widely held
fixed investment trusts (REG–125071–06) 36,375
26 CFR 1.706–1, amended; 1.901–2, revised; definition of
taxpayer for purposes of section 901 and related matters
(REG–124152–06) 36,368
26 CFR 1.853–1 thru –4, amended; elimination of country-by-
country reporting to shareholders of foreign taxes paid by
regulated investment companies (RICs) (REG–105248–04)
43,787
26 CFR 1.860A–1, amended; 1.860G–3, amended; 1.863–1,
amended; 1.1441–2, amended; REMIC residual interests-
accounting for REMIC net income (including any excess
inclusions (foreign holders) (REG–159929–02) 35,341
26 CFR 1.861–9T, amended; 1.985–1, amended; 1.985–5,
revised; 1.987–1 thru –4, –6 thru –11, added; 1.987–5,
revised, 1.988–1, –4, amended; 1.989(a)–1, amended;
1.989(c)–1, removed; incomeand currency gain or loss
with respect to a section 987 qualified business unit (QBU)
(REG–208270–86) 42,698
26 CFR 1.871–14, amended; 1.881–2, amended; revisions to
regulations relating to repeal of tax on interest of nonres-
ident alien individuals and foreign corporations received
from certain portfolio debt investments (REG–118775–06)
28,73; hearing rescheduled (Ann 58) 36,388; hearing can-
celled (Ann 71) 40,630
26 CFR 1.882–5, amended; 1.884–1, amended; determina-
tion of interest expense deduction of foreign corporations
(REG–120509–06) 39,570
26 CFR 1.959–1 thru –4, revised; 1.961–1, –2, revised;
1.961–3, –4, added; 1.1502–12, –32, revised; exclusion
from gross income of previously taxed earnings and prof-
its, and adjustments to basis of stock in controlled foreign
corporations and of other property (REG–121509–00) 40,
602
26 CFR 1.985–3, amended; United States dollar approximate
separate transactions method (REG–118897–06) 31,121
26 CFR 1.1221–1, amended; section 1221(a)(4) capital asset
exclusion accounts and notesreceivable (REG–109367–06)
41,683
26 CFR 1.6038–2, amended; 1.6038A–2, amended; informa-
tion returns required with respect to certain foreign cor-
porations and certain foreign-owned domestic corporations
(REG–109512–05) 30,100
26 CFR 1.7874–2, added; guidance regarding expatriated en-
tities and their foreign parents (REG–112994–06) 27,47;
correction (Ann 79) 43,792
INCOME TAX—Cont.
26 CFR 300.0, amended; 300.4, .5, .6, added; user fees relat-
ing to enrollment (REG–145154–05) 39,567
26 CFR 300.1(b), .2(b), amended; user fees for processing
installment agreements (REG–148576–05) 40,627
26 CFR 301.6103(j)(1)–1, amended; disclosure of re-
turn information to the Bureau of Economic Analysis
(REG–148864–03) 34,320
Publications:
1187, Specifications for Filing Form 1042-S, Foreign Per-
son’s U.S. Source Income Subject to Withholding, Elec-
tronically or Magnetically, revised (RP 34) 38,460
1220, Specifications for Filing Forms 1098, 1099, 5498 and
W-2G Electronically or Magnetically, 2006 revision (RP
33) 32,140; updates affecting taxyear 2006 filing of in-
formation returns (Ann 73) 42,745
1239, Specifications for Filing Form 8027, Employer’s An-
nual Information Return of TipIncome and Allocated Tips,
Electronically or Magnetically, revised (RP 29) 27,13
Qualifying child, definition andtie-breaking rule (Notice 86) 41,
680
Real Estate Investment Trust (REIT) income tests, rents from real
property (Notice 58) 28,59
Real Estate Mortgage Investment Conduit (REMIC), allocation
of income to foreign persons by certain entities (TD 9272) 35,
332; correction (Ann 68) 38,510; (REG–159929–02) 35,341
Record retention requirements for tax-exempt bonds (Notice 63)
29,87
Regulated investment companies (RICs), foreign taxes
(REG–105248–04) 43,787
Regulations:
26 CFR 1.45G-0T, –1T, added; 602.101, amended; railroad
track maintenance credit (TD 9286) 43,750
26 CFR 1.48–12, amended; 1.167(a)–14, amended;
1.167(a)–14T, removed;1.168(d)–1, amended;
1.168(d)–1T, amended; 1.168(i)–6T, amended; 1.168(k)–0,
–1, added; 1.168(k)–0T, –1T, removed; 1.169–3, amended;
1.169–3T, removed; 1.312–15, amended; 1.1400L(b)–1,
added; 1.1400L(b)–1T, removed; special depreciation
allowance (TD 9283) 41,633
26 CFR 1.162(k)–1, added; 1.404(k)–3, added; dividends
paid deduction for stock held in employee stock ownership
plan (TD 9282) 39,512
26 CFR 1.199–3T, –8T, amended; computer software under
section199(c)(5)(B),correctiontoTD9262(Ann56)35,
342
26 CFR 1.338–3, amended; 1.338(h)(10)–1, amended;
1.338(h)(10)–1T, removed; effect of elections in certain
multi-step transactions (TD 9271) 33,224
26 CFR 1.367(b)–0 thru –3, amended; 1.367(b)–6, revised;
1.367(b)–7, –8, –9, added; 1.381(a)–1, revised; stock trans-
fer rules, carryover of earnings and taxes (TD 9273) 37,394
26 CFR 1.382–1, amended; 1.382–10, added; 1.382–10T, re-
moved; distributions of interests in a loss corporation from
qualified trusts (TD 9269) 30,92
October 30, 2006ix2006–44 I.R.B.

INCOME TAX—Cont.
26 CFR 1.410(b)–0, –6, –10, amended; exclusion of employ-
ees of 501(c)(3) organizations in 401(k) and 401(m) plans
(TD 9275) 35,327
26 CFR 1.448–2, added; 1.448–2T, removed; 602.101,
amended; nonaccrual-experience method of accounting
under section 448(d)(5) (TD 9285) 41,656
26 CFR 1.482–0, –1, –2, –4, –6, –8, amended; 1.482–0T, –1T,
–2T, –4T, –6T, –8T, –9T, added; 1.861–8, –8T, amended;
1.6038–3(a)(3), amended; 1.6038A–3T, added; 1.6662–6,
amended; 1.6662–6T, added; treatment of services under
section 482, allocation of income and deductions from in-
tangibles, stewardship expense (TD 9278) 34,256
26 CFR 1.671–5, amended; 1.671–5T, added; reporting rules
for widely held fixed investment trusts (TD 9279) 36,355
26 CFR 1.860A–0, –1, amended; 1.860A–1T, added;
1.860G–3, amended; 1.860G–3T, added; 1.863–0, –1,
amended; 1.863–1T, added; 1.1441–0, –2, amended;
1.1441–2T, added; REMIC residual interests-accounting
for REMIC net income (including any excess inclusions)
(foreign holders) (TD 9272) 35,332; correction (Ann 68)
38,510
26 CFR 1.882–0, –5, amended; 1.882–5T, added; 1.884–1,
amended; 1.884–1T, added; 602.101, amended; determina-
tion of interest expense deduction of foreign corporations
(TD 9281) 39,517; correction (Ann 82) 44,821
26 CFR 1.904–4, amended; application of separate limitations
to dividends from noncontrolled section 902 corporations,
correctiontoTD9260(Ann67)38,509
26 CFR 1.1502–35, amended; suspension of losses on certain
stock dispositions, correction to TD 9254 (Ann 44) 27,49;
correction (Ann 66) 37,448
26 CFR 1.1502–76T, amended; 1.1563–1, amended; 602.101,
amended; amendment of tacking rule requirements of life-
nonlife consolidated regulations, and guidance necessary to
facilitate business electronic filing and burden reduction,
correction to TD 9258 and TD 9264 (Ann 46) 28,76
26 CFR 1.6038–2, –2T, amended; 1.6038A–2, –2T, amended;
602.101(b), amended; information returns required with re-
spect to certain foreign corporations and certain foreign-
owned domestic corporations (TD 9268) 30,94
26 CFR 1.6041–1, –3, amended; 1.6045–5, added; reporting
of gross proceeds payments to attorneys (TD 9270) 33,237
26 CFR 1.7874–2T, added; guidance regarding expatriated
entities and their foreign parents (TD 9265) 27,1
26 CFR 54.4980G–0 thru –5, added; employer comparable
contributions to Health Savings Accounts under section
4980G (TD 9277) 33,226; correction (Ann 72) 40,630
26 CFR 300.0, amended; 300.4, .5, .6, added; user fees relat-
ing to enrollment (TD 9288) 44,794
26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T,
added; disclosure of return information to the Bureau of
Economic Analysis (TD 9267) 34,313
INCOME TAX—Cont.
26 CFR 301.6103(k)(6)–1, added; 301.6103(k)(6)–1T, re-
moved; disclosure of return information by certain officers
and employees for investigative purposes (TD 9274) 33,
244; correction (Ann 89) 44,826
26 CFR 301.6502–1, revised; collection after assessment (TD
9284) 40,582
Return transcripts or records, request for copy, Income Verifica-
tion Express Service (IVES) program (Ann 74) 42,746
Revocations, exempt organizations (Ann 48) 31,136; (Ann 54)
33,254;(Ann55)35,342; (Ann 60) 36,389;(Ann69)37,
449; (Ann 75) 42,746;(Ann81)44,821
Revoking an election under section 83(b) (RP 31) 27,32
Standard Industry Fare Level (SIFL) formula (RR 47) 39,511
Statute of limitations for collection, extension (TD 9284) 40,582
Stock transfer rules, carryover of earnings and taxes (TD 9273)
37,394
Tax Exempt Bond (TEB) Mediation Pilot Program, one-year re-
newal (Ann 43) 27,48
Transition relief under section 409A, additional relief (Notice 79)
43,763
Tuition and related expenses, qualified, information reporting re-
quirements (Notice 72) 36,363
United States dollar approximate separate transactions method
(DASTM) (REG–118897–06) 31,121
U.S. possessions, examples for determining whether income is
U.S. possession source or effectively connected with trade or
business in U.S. possession (Notice 76) 38,459
User fees:
Enrollment examinations, enrollment of enrolled agents, re-
newal of enrollment (REG–145154–05) 39,567; (TD 9288)
44,794
Installment agreement (REG–148576–05) 40,627
Processing Form 8802, Application for United States Resi-
dency Certification (RP 35) 37,434; delay in the effective
date of new user fees (Notice 90) 42,688
Widely held fixed investment trusts (WHFITs), reporting re-
quirements (TD 9279) 36,355; (REG–125071–06) 36,375
SELF-EMPLOYMENT TAX
Bankruptcy estate in chapter 11 cases filed on or after October 17,
2005, post-petition income of individual debtor (Notice 83) 40,
596
Disaster relief, additional postponement under section 7508A for
filing certain 2004 and 2005 individual tax returns by certain
taxpayers affected by Hurricane Katrina (Notice 56) 28,58
Offers in compromise, nonrefundable down payments required
(Notice 68) 31,105
2006–44 I.R.B.xOctober 30, 2006

October 30, 20062006–44 I.R.B.

2006–44 I.R.B.October 30, 2006

October 30, 20062006–44 I.R.B.

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