Internal Revenue Bulletin 2008-40 (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
8-40
October 6, 2008
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2008–49, page 811.
Federal rates; adjusted federal rates; adjusted federal
long-termrateandthelong-termexemptrate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for October 2008.
REG–140029–07, page 828.
Proposed regulations under section 170 of the Code provide
guidance concerning the substantiation and reporting require-
ments for cash and noncash charitable contributions. The
regulations generally revise existing regulations to implement
changes to the substantiation and reporting rules made by the
American Jobs Creation Act of 2004 and the Pension Protec-
tion Act of 2006.
REG–149404–07, page 839.
Proposed regulations under section 45D of the Code provide
clarification of the redemption rules, the partnership redemp-
tion safe harbor, and the breadth of the reasonable expec-
tations test. The regulations also revise and clarify certain
rules relating to recapture of the new markets tax credit un-
der section 45D. A public hearing is scheduled for December
12, 2008.
Notice 2008–77, page 814.
This notice informs trustees and middlemen of widely held fixed
investment trusts (WHFITs) that the Service will not assert penal-
ties under regulations section 1.671–5(m) with respect to cal-
endar year 2008. The notice also informs trustees and mid-
dlemen of widely held mortgage trusts (WHMTs) that, pending
future published guidance, certain modifications of mortgages
held by a WHMT that has entered into a guarantee arrange-
ment are not required to be reported under the WHFIT report-
ing rules.
Notice 2008–79, page 815.
This notice provides guidance relating to amendments made by
certain provisions of the Housing Assistance Tax Act of 2008.
The notice provides allocations of the temporary increase in
volume cap, procedures for filing the carryforward elections
withrespecttothisvolumecapaswellasforreportingbonds
issued pursuant to this volume cap, and clarification that mort-
gage credit certificates may be used to refinance subprime
mortgage loans and may utilize the temporary increase in vol-
ume cap. The notice provides a list of certain military instal-
lations that are eligible for an exception from income determi-
nations of payments of the basic housing allowance. The no-
tice also provides guidance on the temporary exception from
the prohibition against federal guarantees of tax-exempt bonds
for guarantees provided by Federal Home Loan Banks. Notice
88–80 modified.
(Continued on the next page)
Announcement of Declaratory Judgment Proceedings Under Section 7428 begins on page 844.
Finding Lists begin on page ii.

Notice 2008–80, page 820.
This notice proposes a revenue procedure that would modify
Rev. Proc. 2003–84, 2003–2 C.B. 1159, by providing ad-
ditional criteria that must be met in order for tax-exempt bond
partnerships to be eligible to make an election that enables the
partners to take into account monthly the inclusions required
under sections 702 and 707(c) of the Code, including specify-
ing a minimum gain share that must be paid upon disposition
of the tax-exempt obligations and providing that the tax-exempt
bond partnership must provide certain partners a right, exercis-
ablebythedatethatrepresents80%oftheweightedaverage
maturity of the bonds, to require a sale, redemption, or other
disposition of the tax-exempt bonds held by the partnership.
The proposed revenue procedure would also provide certain
characteristics of tax-exempt bond partnerships, including not-
ing that the put rights or guarantees for the benefit of certain
partners of these partnerships are inapplicable in certain very
limited circumstances.
EMPLOYEE PLANS
T.D. 9419, page 790.
Final regulations under section 430 of the Code provide mor-
tality tables to be used in determining present value or making
any computation for purposes of applying the minimum funding
requirements for single employer qualified defined benefit pen-
sion plans pursuant to changes made by the Pension Protection
Act of 2006. The regulations provide generally applicable mor-
tality tables and also provide guidance regarding an employer’s
request to use plan-specific mortality tables.
Rev. Proc. 2008–56, page 826.
This procedure relaxes certain restrictions that now apply to
the issuance of opinion and advisory letters for new pre-ap-
proved plans under Rev. Proc. 2007–44. Those restrictions
effectively limit the ability of sponsors of pre-approved plans
(such as banks, insurance companies and law firms) to apply
for opinion and advisory letters for new plans after March 31,
2008, and also limit the ability of adopting employers to rely
on the letters issued for new plans. Rev. Proc. 2007–44 mod-
ified.
EXEMPT ORGANIZATIONS
Announcement 2008–86, page 843.
The IRS has revoked its determination that The Boston Group
Charitable Foundation of Sandy, UT, and Foresters Longhorn
Branch of Fort Worth, TX, qualify as organizations described in
sections 501(c)(3) and 170(c)(2) of the Code.
Announcement 2008–88, page 843.
The IRS has revoked its determination that Heaven in View,
Inc., of Woodbridge, VA; Pueblo of Laguna of Old Laguna, NM;
Gymnastics Foundation of Maui of Kahului, HI; God Financial
Plan, Inc., of Oakland, CA; Affordable Shelters, Inc., of South
Gate, CA; Debt Advocate of America, Inc., of Killeen, TX; Folk
Traditions Conservancy of Santa Barbara, CA; Individual Free-
dom Ministries Church of Orange City, FL; Gifts for Kids, Inc.,
of Erie, PA; Dabney & West Foundation, Inc., of Colbert, OK;
Institute for the Development of Human Resources of Wilm-
ington, DE; American Fund for Consumer Credit Counseling,
Inc., of Commack, NY; Institute of Prevention and Nutritional
Medicine, Inc., of Rocky Mount, NC; The Stephanie Mull
Foundation For Children’s Art of Portland, ME; and Arts Reach,
Inc., of Rochester, NY, qualify as organizations described in
sections 501(c)(3) and 170(c)(2) of the Code.
ADMINISTRATIVE
Announcement 2008–87, page 843.
This document announces the discontinuation of the publica-
tion of Legislative Cumulative Bulletins because this material is
readily available on various websites much earlier than when
this volume could be released for publication.
October 6, 20082008–40 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2008–40 I.R.B.October 6, 2008

October 6, 20082008–40 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 25.—I
nterest on
Certain Home M
ortgages
Guidance is pr
ovided for the issuance of mortgage
credit certif
icates. See Notice 2008-79, page 815.
Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
Guidance is provided for income determina-
tions for buildings located near certain qualified
military installations under section 142 for certain
low-income housing tax credit projects. See Notice
2008-79, page 815.
Section 103.
—Interest on
State and Loc
al Bonds
This notice p
rovides guidance relating to amend-
ments made by
certain provisions of the Housing As-
sistance Ta
x Act of 2008. The notice provides allo-
cations of t
he temporary increase in volume cap, pro-
cedures for
filing the carryforward elections with re-
spect to thi
s volume cap as well as for reporting bonds
issued purs
uant to this volume cap, and clarification
that mortg
age credit certificates may be used to refi-
nance subp
rime mortgage loans and may utilize the
temporary
increase in volume cap. The notice pro-
vides a lis
t of certain military installations that are el-
igible for
an exception from income determinations
of paymen
ts of the basic housing allowance. The no-
tice also
provides guidance onthe temporary excep-
tion from
the prohibition against federal guarantees of
tax-exem
pt bonds for guarantees provided by Federal
Home Loan
Banks. See Notice 2008-79, page 815.
Section 142.—Exempt
Facility Bond
Guidance is provided for the issuance of bonds to
finance residential rental projects and income deter-
minations for buildings located near certain qualified
military installations. See Notice 2008-79, page 815.
Section 143.—Mortgage
Revenue Bonds: Qualified
Mortgage Bond and
Qualified Veterans’
Mortgage Bond
Guidance is provided for the issuance of quali-
fied mortgage revenue bonds and the refinancing of
subprime mort
gage loans. See Notice 2008-79, page
815.
Section 146.—Volume Cap
Guidance is provided for the allocation of the $11
billion in volume cap provided by the Housing As-
sistance Tax Act of 2008. See Notice 2008-79, page
815.
Section 149.—Bonds
Must be Registered to
be Tax Exemp
t; Other
Requirements
Guidance is provided forthe temporary exception
from the prohibition against federal guarantees of
tax-exempt bonds for guarantees provided by Federal
Home Loan Banks. See Notice 2008-79, page 815.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of October 2008. See Rev.
Rul. 2008-49, page 811.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and Certain
Built-In Losses Following
Owners
hip Change
The adj
usted applicable federal long-term rate is
set for
th for the month of October 2008. See Rev.
Rul. 20
08-49, page 811.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
Section 430.—
Minimum
Funding Stand
ards for
Single-Employer Defined
Benefit Pension Plans
26 CFR 1.430(h)(3)–1: Mortality tables used to de-
termine present value.
T.D. 9419
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Mortality Tables for
Determining Present Value
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final
regulations providing guidance regarding
themortalitytablestobeusedindetermin-
ing present value or making any computa-
tion for purposes of applying certain pen-
sion funding requirements. These regula-
tions affect sponsors, administrators, par-
ticipants, and beneficiaries of certain re-
tirement plans.
DATES:Effective date:These regulations
are effective July 31, 2008.
Applicability date:Section
1.430(h)(3)–1, which provides generally
applicable mortality tables for single
employer defined benefit pension plans,
and §1.431(c)(6)–1, which provides for
the use of those mortality tables for mul-
tiemployer defined benefit pension plans,
apply to plan years beginning on or after
January 1, 2008. Section 1.430(h)(3)–2,
which provides rules regarding the ap-
proval and use of substitute mortality
tables for single employer defined benefit
pension plans, applies to plan years
beginning on or after January 1, 2009.
FOR FURTHER INFORMATION
CONTACT: Lauson C. Green or
Linda S. F. Marshall at (202) 622–6090
(not a toll-free number).
2008–40 I.R.B.790October 6, 2008

SUPPLEMENTARY INFORMATION:
Background
Section 412 provides minimum fund-
ing requirements for defined benefit pen-
sion plans. The Pension Protection Act
of 2006 (PPA), Public Law 109–280 (120
Stat. 780), makes extensive changes to
those minimum funding requirements that
generally apply for plan years beginning
on or after January 1, 2008. Section 430,
which was added by PPA, specifies the
minimum funding requirements that apply
to defined benefit plans that are not mul-
tiemployer plans.
1
Section 430(a) defines
the minimum required contribution for a
defined benefit plan that is not a multiem-
ployer plan by reference to the plan’s fund-
ing target for the plan year. Under section
430(d)(1), a plan’s funding target for a plan
year generally is the present value of all
benefits accrued or earned under the plan
as of the beginning of the plan year.
Section 430(h)(3) provides rules
regarding the mortality tables to be
used under section 430. Under section
430(h)(3)(A), except as provided in sec-
tion 430(h)(3)(C) or (D), the Secretary is
to prescribe by regulation mortality tables
to be used in determining any present
value or making any computation under
section 430. Those tables are to be based
on the actual experience of pension plans
and projected trends in such experience.
In prescribing those tables, the Secretary
is required to take into account results of
available independent studies of mortality
of individuals covered by pension plans.
This standard for issuing the mortality
table under section 430(h)(3)(A) is the
same as the standard for issuing updated
mortality tables pursuant to the review
under section 412(l)(7)(C)(ii)(III) of the
mortality table used in determining a
plan’s current liability pursuant to section
412(l)(7)(C)(ii)(I) for plan years before
theeffectivedateofthePPAchanges.
Section 430(h)(3)(C) provides rules for
a plan sponsor’s use of substitute mortality
tables. Upon the request of a plan sponsor
and approval by the Secretary, mortality ta-
bles that meet the requirements for substi-
tute mortality tables are used in determin-
ing present value or making any computa-
tion under section 430 during the period of
consecutive plan years (not to exceed 10)
specified in the request. Substitute mortal-
ity tables cease to be in effect as of the ear-
liest of the date on which there is a signif-
icant change in the participants in the plan
by reason of a plan spinoff or merger or
otherwise, or the date on which the plan
actuary determines that those tables do not
meet the requirements for substitute mor-
tality tables. The plan sponsor’s request
to use substitute mortality tables is to be
made at least 7 months before the first day
of the first plan year for which substitute
mortality tables are to apply. A request to
use substitute mortality tables is deemed
approved unless the Secretary denies ap-
proval for the use of those mortality tables
within 180 days of the request (subject to
extension of this period by mutual agree-
ment).
Mortality tables meet the requirements
for substitute mortality tables if the pen-
sion plan has a sufficient number of plan
participants and the plan has been main-
tained for a sufficient period of time in
order to have credible mortality experi-
ence, and such tables reflect the actual ex-
perience of the plan and projected trends
in general mortality experience of partici-
pants in pension plans. Except as provided
by the Secretary, a plan sponsor cannot use
substitute mortality tables for any plan un-
less substitute mortality tables are estab-
lished and used for each other plan main-
tained by the plan sponsor and the plan
sponsor’s controlled group.
Section 430(h)(3)(D) provides for the
use of separate mortality tables with re-
spect to certain individuals who are enti-
tled to benefits on account of disability.
These separate mortality tables are permit-
ted to be used with respect to disabled indi-
viduals in lieu of the generally applicable
mortality tables provided pursuant to sec-
tion 430(h)(3)(A) or the substitute mortal-
ity tables under section 430(h)(3)(C). The
Secretary is to establish separate tables
for individuals with disabilities occurring
in plan years beginning before January 1,
1995, and in later plan years, with the mor-
tality tables for individuals with disabili-
ties occurring in those later plan years ap-
plying only to individuals who are disabled
within the meaning of Title II of the Social
Security Act.
Section 431, which was added by PPA,
specifies the minimum funding require-
ments that apply to multiemployer plans.
Under section 431(c)(6)(B), a plan’s full
funding limitation cannot be less than
the excess (if any) of 90 percent of the
current liability of the plan (including
the expected increase in current liability
due to benefits accruing during the plan
year) over the value of the plan’s assets.
Section 431(c)(6)(D)(iv)(II) provides that
the Secretary may by regulation prescribe
mortality tables to be used in determin-
ing a plan’s current liability for purposes
of section 431(c)(6). The standards for
these mortality tables are the same as
the standards for mortality tables to be
prescribed under section 430(h)(3)(A).
Section 431(c)(6)(D)(iv)(I) provides that,
until mortality tables are prescribed under
section 431(c)(6)(D)(iv)(II), the mortality
table used in determining a plan’s current
liability for purposes of section 431(c)(6)
is the table prescribed by the Secretary that
is based on the prevailing commission-
ers’ standard table (described in section
807(d)(5)(A)) used to determine reserves
for group annuity contracts issued on Jan-
uary 1, 1993.
On February 2, 2007, the IRS issued
final regulations under section 412(l)(7)
(T.D. 9310, 2007–9 I.R.B. 601 [72 FR
4955]) setting forth mortality tables to be
used in determining a plan’s current lia-
bility with respect to nondisabled pension
plan participants during the 2007 plan year.
Those updated mortality tables were based
on the tables contained in the RP–2000
Mortality Tables Report.
2
Those regula-
tions permitted plans to use separate mor-
tality tables for nonannuitant and annuitant
periods, with different projection periods
for annuitants and nonannuitants based on
an estimate of the duration of the respec-
tive liabilities. Alternatively, plans were
permitted to use a combined table that ap-
1
Section 302 of the Employee Retirement Income Security Act of 1974, as amended (ERISA) sets forth funding rules that are parallel to those in section 412 of the Internal Revenue Code
(Code), and section 303 of ERISA sets forth additional funding rules for defined benefit plans (other than multiemployer plans) that are parallel to those in section 430 of the Code. Under
section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713) and section 302of ERISA, the Secretary of the Treasury has interpretive jurisdiction over the subject matter addressed in
these regulations for purposes of ERISA, as well as the Code. Thus, these Treasury regulations issued under section 430 of the Code apply as well for purposes of section 303 of ERISA.
2
The RP–2000 Mortality Tables Report was released bythe Society of Actuaries in July, 2000.Society ofActuaries, RP–2000 Mortality Tables Report, at
http://www.soa.org/ccm/content/research-publications/experience-studies-tools/the-rp–2000-mortality-tables/.
October 6, 20087912008–40 I.R.B.

plied the same mortality rates to both an-
nuitants and nonannuitants.
On May 29, 2007, the IRS issued pro-
posed regulations under section 430(h)(3)
(REG–143601–06, 2007–24 I.R.B. 1398
[72 FR 29456]). Those proposed regula-
tions provide guidance regarding the mor-
tality tables to be used for purposes of ap-
plying certain defined benefit plan funding
requirements, including §1.430(h)(3)–1,
which provides generally applicable mor-
tality tables, and §1.430(h)(3)–2, which
provides rules regarding the approval and
use of substitute mortality tables. On
May 31, 2007, the IRS issued Rev. Proc.
2007–37, 2007–1 C.B. 1433, which sets
forth procedures by which a plan sponsor
may request approval to use substitute
mortality tables in accordance with pro-
posed §1.430(h)(3)–2, including guide-
lines for the construction of substitute
mortality tables. See §601.601(d)(2)(ii)(b)
of this chapter.
On January 31, 2008, the IRS issued
Notice 2008–21, 2008–7 I.R.B. 431. See
§601.601(d)(2)(ii)(b) of this chapter. No-
tice 2008–21 provides that, when certain
pension funding regulations (including the
§1.430(h)(3)–2 regulations issued under
section 430(h)(3)(C) regarding substitute
mortality tables) are finalized, those final
regulations will not apply to plan years be-
ginning before January 1, 2009. For plan
years beginning during 2008, taxpayers
must follow applicable statutory provi-
sions and can rely on the proposed regula-
tions for compliance with those statutory
provisions. Under Notice 2008–21, the
IRS will not challenge a reasonable in-
terpretation of section 430 (taking into
account the items with respect to which
guidance is provided in Notice 2008–21)
for plan years beginning during 2008.
Several comments were received on the
proposed regulations, and no public hear-
ing was requested or held. After consid-
eration of the comments received, the IRS
and the Treasury Department are issuing
these final regulations to adopt the rules
set forth in the proposed regulations with
certain modifications that are noted in this
preamble.
Explanation of Provisions
Generally Applicable Mortality Tables
These regulations adopt the methodol-
ogy set forth in the proposed regulations
that the IRS will use to establish mor-
tality tables as provided under section
430(h)(3)(A) to be used for participants
and beneficiaries to determine present
value or make any computation under
section 430. These mortality tables apply
as well for purposes of determining the
current liability of a multiemployer plan
pursuant to section 431(c)(6)(D)(iv)(II).
In addition, pursuant to §1.412(l)(7)–1(a),
these regulations apply for purposes of
determining the current liability of a plan
for which application of the PPA changes
to section 412 is delayed (see sections 104
through 106 of PPA). Under these regu-
lations, mortality tables to be used with
respect to disabled individuals will be pro-
vided in guidance published in the Internal
Revenue Bulletin (IRB). This guidance has
been issued as Notice 2008–29, 2008–12
I.R.B. 637. See §601.601(d)(2)(ii)(b).
The new mortality tables under section
430(h)(3)(A) are based on the tables con-
tained in the RP–2000 Mortality Tables
Report because, as with the mortality ta-
bles used under section 412(l)(7)(C)(ii),
the IRS and the Treasury Department have
determined that the RP–2000 mortality
tables form the best available basis for
predicting mortality of pension plan par-
ticipants and beneficiaries (other than dis-
abled individuals) based on pension plan
experience, including expected trends.
Like the mortality tables provided in the
final section 412(l) regulations, the mor-
tality tables set forth in these regulations
are gender-distinctbecause of significant
differences between expected male mor-
tality and expected female mortality.
The mortality tables set forth in these
regulations provide separate mortality
rates for annuitants and nonannuitants.
This distinction has been made because
the RP–2000 Mortality Tables Report
indicates that these two groups have sig-
nificantly different mortality experience.
This is particularly true at typical ages
for early retirees, where the number of
health-induced earlyretirements results
in a population that has higher mortal-
ity rates than the population of currently
employed individuals. While the use of
separate mortality rates for these groups
of individuals will likely entail changes
in programming of actuarial software, the
IRS and the Treasury Department believe
that the improvementin accuracy resulting
from the use of separate mortality tables
for annuitants and nonannuitants more
than offsets the added complexity.
Under these regulations, the annuitant
mortality tables are applied to determine
the present value of benefits for annu-
itants. The annuitant mortality tables
are also used for nonannuitants (active
employees and terminated vested partici-
pants) for the periods beginning when the
nonannuitants are projected to commence
receiving benefits, while the nonannuitant
mortality tables are applied for the peri-
ods before nonannuitants are projected to
commence receiving benefits. For any
period in which an annuitant is projected
to be receiving benefits, the mortality ta-
ble applicable to any beneficiary of that
annuitant is the annuitant mortality table.
The RP–2000 Mortality Tables Report
sets forth mortality tables that reflect ex-
pected mortality as of 2000, along with
projection factors that are used to reflect
the impact of expected improvements in
mortality. Similarly, the mortality tables
set forth in these regulations are based
on expected mortality as of 2000 and re-
flect the impact of expected improvements
in mortality. The regulations permit plan
sponsors to apply the projection of mor-
tality improvement in either of two ways:
through use of static tables that are updated
annually to reflect expected improvements
in mortality, or through use of generational
tables.
The regulations set forth base tables for
annuitants and nonannuitants, as well as a
set of projection factors. The base tables
set forth in the regulations generally pro-
vide the same rates as the RP–2000 mor-
tality tables, except that they have been ex-
tended so that the annuitant and nonannui-
tant tables have mortality rates available at
each age. The RP–2000 Mortality Tables
Report did not develop annuitant rates be-
fore age 50 or nonannuitant rates after age
70. The extended nonannuitant tables in
these regulations were created by (1) us-
ing nonannuitant rates through age 70, (2)
using annuitant rates for ages over 80, and
(3) blending the rates to produce a smooth
transition between the two tables, using in-
creasing fractions. The total difference be-
2008–40 I.R.B.792October 6, 2008

tween the rates at ages 70 and 80 is divided
by 55; the rate at age 71 is set equal to the
rate at age 70 plus 1/55 of the total differ-
ence, the age 72 rate is equal to the rate at
age 71 plus 2/55 of the total difference, etc.
A similar approach was used to de-
velop the base tables for annuitants. For
male annuitants, annuitant rates from the
RP–2000 Mortality Tables Report were
used for ages 50 and over, nonannuitant
rates from the RP–2000 Mortality Tables
Report were used through age 40, and rates
between ages 41 and 49 were smoothed to
create a smooth transition using the same
methodology as was used for the nonan-
nuitant tables. For female annuitants,
annuitant rates from the RP–2000 Mortal-
ity Tables Report were used for ages 50
and over. However, to avoid anomalous
results, female nonannuitant rates were
used through age 46 (rather than age 40)
and, accordingly, rates were smoothed
between ages 47 and 49. The smoothing
methodology for the female annuitant ta-
bles was the same as that used for the male
tables but, because a shorter transition
period was used, the difference between
the age 46 and the age 50 mortality rates
was smoothed using a denominator of 10
instead of 55.
For a plan sponsor that chooses to use
the generational mortality tables, the mor-
tality rate for each particular age would be
projected for each individual participant to
reflect projected improvement for the pe-
riod of time until the participant reaches
the particular age using the applicable base
table along with the projection factors pro-
vided under the regulations. These pro-
jection factors are from Mortality Projec-
tion Scale AA, which was recommended
for use in the UP–94 Study
3
andinthe
RP–2000 Mortality Tables Report.
The static mortality tables that are per-
mitted to be used under the regulations
are constructed from the base table used
for purposes of the generational mortality
tables. The static mortality tables are pro-
jected from the base table for the year 2000
through the year of valuation with further
projection to reflect the approximate ex-
pected duration of liabilities. The static
mortality tables for annuitants under the
regulations reflect projection through the
year of valuation with a further projection
period of 7 years, and the static mortality
tables for nonannuitants under the regula-
tions reflect projection through the year of
valuation with a further projection period
of 15 years. These projection periods were
selected as the expected average duration
of liabilities. To be consistent with the
original construction of the RP–2000 mor-
tality tables, both the static annuitant and
nonannuitant tables use the rates from the
projected annuitant table for ages 80 and
over and from the projected nonannuitant
table for ages 40 and younger (ages 44
and younger for females). For a smooth
transition between the different projection
periods for annuitants versus nonannui-
tants, the nonannuitant rates for ages 71
through 79 and the annuitant rates for ages
41through49(ages45through49for
females) were smoothed using the same
technique as that used in constructing the
base tables.
The static mortality tables that apply
with respect to valuation dates occurring
during 2008 are set forth in these reg-
ulations, which also include an example
of how to apply the tables in that year.
The mortality tables to be used for val-
uation dates in subsequent years will be
published in the Internal Revenue Bulletin.
See §601.601(d)(2)(ii)(b). The IRS in-
tends to publish a notice in the near future
that provides a series of tables for valua-
tion dates occurring during 2009 through
2013.
These regulations provide an option
for smaller plans that choose to use static
mortality tables to use a single blended
static table for all participants — in lieu
of the separate tables for annuitants and
nonannuitants — in order to simplify the
actuarial valuation for these plans. The
final regulations provide that the smaller
plans to which this rule applies are plans
where the total of active and inactive par-
ticipants is 500 or fewer, and clarify that
this participant count is determined as of
the plan’s valuation date. The blended
table is constructed from the separate
nonannuitant and annuitant tables using
the nonannuitant/annuitant weighting fac-
tors published in the RP–2000 Mortality
Tables Report. However, because the
RP–2000 Mortality Tables Report does
not provide weighting factors before age
51 or after age 69, the IRS and the Trea-
sury Department have extended the table
of weighting factors (using straight-line
interpolation) for ages 41 through 50 (ages
45–50 for females) and for ages 70 through
79 in order to develop the blended table.
Since the publication of proposed regu-
lations under sections 430(h) and 430(d),
questions have arisen regarding whether
small plans are required to apply mortality
assumptions using the mortality tables pro-
vided under section 430(h) for the period
before a participant is projected to com-
mence receiving benefits under the plan.
Final regulations under section 430(d) are
expected to clarify that the mortality ta-
bles provided under section 430(h) must
be used to determine present values under
section 430 when mortality assumptions
are applied and that, in appropriate cases,
it is permissible to assume no mortality for
the period before a participant is projected
to commence receiving benefits under the
plan.
Substitute Mortality Tables
These regulations generally adopt the
methodology set forth in the proposed
regulations for the development and use
of substitute mortality tables upon written
request of the plan sponsor and approval
of the Commissioner. Pursuant to sec-
tion 430(h)(3)(C), substitute mortality
tables apply in lieu of the mortality tables
provided under section 430(h)(3)(A) and
§1.430(h)(3)–1 for purposes of making
present value determinations and other
computations.
Substitute mortality tables must reflect
the actual mortality experience of the pen-
sion plan for which the tables are to be
used, and that mortality experience must
be credible. Separate mortality tables must
be established for each gender under the
plan, and a substitute mortality table is per-
mitted to be established for a gender only if
the plan has credible mortality experience
with respect to that gender. If the mortal-
ity experience for one gender is credible
but the mortality experience for the other
gender is not credible, the substitute mor-
tality tables are used for the gender that
has credible mortality experience, and the
mortality tables under §1.430(h)(3)–1 are
used for the gender that does not have cred-
ible mortality experience. If separate mor-
tality tables under section 430(h)(3)(D) are
3
The UP–94 Study, prepared by the UP–94 Task Force of the Society of Actuaries, was published in the Transactions of the Society of Actuaries, Vol. XLVII(1995), p. 819.
October 6, 20087932008–40 I.R.B.

used for certain disabled individuals un-
der a plan, then those individuals are dis-
regarded for all purposes with respect to
substitute mortality tables under section
430(h)(3)(C). Thus, if the mortality tables
under section 430(h)(3)(D) are used for
certain disabled individuals under a plan,
mortality experience with respect to those
individuals must be excluded in determin-
ing mortality rates for substitute mortality
tables with respect to a plan.
The proposed regulations provided that
a substitute mortality table would be based
on credible mortality experience for a gen-
der within a plan if and only if the mortal-
ity experience were based on at least 1,000
deaths within that gender over the period
covered by the experience study. The pro-
posed regulations required that the expe-
rience study be based on mortality experi-
ence data over a 2, 3, or 4 consecutive year
period, the last day of which must be less
than 3 years before the first day of the first
plan year for which the substitute mortal-
ity tables are to apply.
Commentators requested an expansion
of this rule that would allow the plan to
demonstrate credibility on the basis of
divergence between the actual number of
deaths and the numberof deaths expected
under the standard mortality tables in
§1.430(h)(3)–1. The IRS and the Treasury
Department have rejected this sugges-
tion because, although such a measure of
divergence may show that the standard
mortality tables are not necessarily the best
estimate of future mortality under the plan,
the existence of this divergence does not
demonstrate that a particular alternative
table reflects the actual experience of the
pension plans maintained by the sponsor
unless the experience study data reflects a
sufficient number of deaths to support the
use of that alternative table.
The 1,000-death threshold in the pro-
posed regulations was set at a level so
that there is a high degree of confidence
that the plan’s past mortality experience
will be predictive of its future mortality,
and is consistent with relevant actuarial
literature (see, for example, Thomas N.
Herzog,Introduction to Credibility The-
ory(1999); Stuart A. Klugman,et al.,
Loss Models: From Data to Decisions
(2004)). A number of commentators re-
quested that substitute mortality tables be
made available to plans with fewer annual
deaths. For example, one commentator
requested an extension of the 4-year max-
imum period for the mortality experience
study in order to allow a smaller plan
to satisfy the 1,000-death threshold. In
response to these comments, these regu-
lations lengthen the maximum period for
the experience study and provide that the
experience study for purposes of demon-
strating 1,000 deaths within a gender can
be conducted over as long as a 5-year
period. In addition, in accordance with
the delegation of authority set forth in the
regulations, the Commissioner may, in
revenue rulings, notices or other guidance
published in the Internal Revenue Bulletin
(see §601.601(d)(2)(ii)(b)), provide for
further extensions of this maximum expe-
rience study period.
Development of a substitute mortality
table under the regulations requires cre-
ation of a base table and identification of
a base year, which are then used to de-
termine a substitute mortality table. The
base table must be developed from a study
of the mortality experience of the plan
using amounts-weighted data. The regu-
lations set forth rules regarding develop-
ment of amounts-weighted mortality rates
for an age. The regulations provide that
amounts-weighted mortality rates may be
derived from amounts-weighted mortality
rates for age groups. The regulations pro-
vide for grouping of ages and alternative
methods of graduation in order to simplify
the construction of substitute mortality ta-
bles. The regulations provide rules for de-
termination of the base year for a substi-
tute mortality table. These rules have been
modified from the rules set forth in the pro-
posed regulations to reflect the potential
for a longer experience study period than
permitted under the proposed regulations.
In general, substitute mortality tables
are permitted to be used for a plan for a
plan year only if, for that plan year, sub-
stitute mortality tables are also approved
and used for each other pension plan sub-
ject to the requirements of section 430
that is maintained by the plan sponsor or
by a member of the sponsor’s controlled
group. The final regulations clarify the
application of this rule where plans main-
tained within a controlled group have dif-
ferent plan years. In such a case, a plan
that uses substitute mortality tables for a
plan year satisfies the requirement that all
plans within the controlled group use sub-
stitute mortality tables for the plan year if
all plans within the controlled group use
substitute mortality tables for at least some
portion of the plan year. Under the regula-
tions, the use of substitute mortality tables
for one plan is not prohibited merely be-
cause another plan subject to section 430
that is maintained by the plan sponsor (or
by a member of the plan sponsor’s con-
trolled group) cannot use substitute mor-
tality tables because neither the males nor
the females under thatplan have credible
mortality experience for a plan year. Thus,
if a sponsor’s controlled group contains
two pension plans that are subject to sec-
tion 430, each of which has credible mor-
tality experience for at least one gender, ei-
ther both plans must obtain approval from
the Commissioner to use substitute mortal-
ity tables or neither plan may use substitute
mortality tables. By contrast, if for one
of those plans neither males nor females
have credible mortality experience, then
the plan without credible mortality expe-
rience will not interfere with the ability of
the plan with credible mortality experience
to use substitute mortality tables.
Under the regulations, the requirement
that the plan sponsor demonstrate the lack
of credible mortality experience for both
the male and female populations in other
plans maintained by the plan sponsor (and
by members of the plan sponsor’s con-
trolled group) for which substitute mortal-
ity tables are not used must be satisfied for
each plan year for which substitute mor-
tality tables are used. This demonstration
is made for a plan population by show-
ing that the population has not experienced
at least 1,000 deaths over a time period
that satisfies the requirements set forth in
the regulations. In general, for each plan
year in which a plan uses substitute mor-
tality tables, the demonstration that both
genders of another plan maintained by the
plan sponsor do not have credible mor-
tality experience is made by counting the
number of deaths for that plan population
over a 4-year period. However, if the ex-
perience study period for the experience
study on which the substitute mortality ta-
bles are based is longer than 4 years, the
demonstration that both genders of another
plan maintained by the plan sponsor do not
have credible mortality experience (that is,
there are less than 1,000 deaths within each
gender) must be made using a consecutive
period for mortality experience that is the
same length as the period of the experience
2008–40 I.R.B.794October 6, 2008

study. In either case, the period for mortal-
ity experience that is used to demonstrate
lack of credible mortality experience with
respect to a plan year must end less than 3
years before the first day of that plan year.
For example, a plan sponsor that re-
quests to use substitute mortality tables for
a plan for the plan year that begins January
1, 2009, using data obtained over a 4-year
experience study period must show, as part
of its submission to the Commissioner, that
both the male and female populations in
all other defined benefit plans of the plan
sponsor (and of members of the plan spon-
sor’s controlled group) that are subject to
section 430 and that do not use substitute
mortality tables do not have credible mor-
tality experience using a 4-year period that
ends no earlier than January 2, 2006 (that
is, each gender in those plans did not expe-
rience 1,000 deaths during that 4-year pe-
riod). If the plan sponsor chooses to use
the 4-year period from January 1, 2004,
through December 31, 2007, to demon-
strate the lack of credible mortality experi-
ence for the other plans, then the plan can
rely on this same data to demonstrate the
lack of credible mortality experience for
2010 as well because the less-than–3-years
requirement is still met with respect to the
2010 plan year. However, the plan cannot
use this same data to demonstrate lack of
credible mortality experience for the 2011
plan year because the last day of the ex-
perience study used for the demonstration
(the January 1, 2004 - December 31, 2007
period) is too distant in time (3 or more
years) from the first day of the plan year
(January 1, 2011).
Although the regulations permit a plan
sponsor to use a single experience study
to demonstrate a lack of credible mortal-
ity experience for a plan population for
multiple years, plansponsors are encour-
aged to update experience studies annu-
ally as new mortality data become avail-
able for the plan population. In such a
case, if an updated test reveals 1,000 or
more deaths for the more recent 4-year pe-
riod (or 5-year period in the case of a plan
using a 5-year experience study period),
the plan sponsor nonetheless will be able
to continue to use substitute mortality ta-
bles for one plan year by demonstrating
that the other plans in the controlled group
do not have credible mortality experience
based on the earlier experience study. This
will give the plan sponsor sufficient time to
develop substitute mortality tables for the
plan population with newly credible mor-
tality experience and to obtain the Com-
missioner’s approval to use those tables
prior to the first year substitute mortality
tables are to be used for that population.
Under the regulations, a plan’s substi-
tute mortality tables must be generational
mortality tables. Substitute mortality ta-
bles are determined using the base mor-
tality tables developed from the experi-
ence study and the projection factors pro-
vided in Projection Scale AA, as set forth
in §1.430(h)(3)–1(d). Under the genera-
tional mortality tables, the probability of
an individual’s death at a particular age is
determined as the individual’s base mortal-
ity rate (that is, the applicable base mortal-
ity rate from the base mortality table for the
age for which the probability of death is
being determined) multiplied by the mor-
tality improvement factor. The mortality
improvement factor is equal to (1 minus
the projection factor for that age)
n
,where
n is equal to the projection period (that is,
the number of years between the base year
for the base mortality table and the year for
which the probability of death is being de-
termined).
The regulations require separate tables
to be established for males and females un-
der a plan. Under the regulations, sepa-
rate substitute mortality tables are permit-
ted (but not required) to be established for
separate populations within a gender, such
as annuitants and nonannuitants or hourly
and salaried individuals. The regulations
provide that separate substitute mortality
tables are permitted to be used for a sep-
arate population within a gender under a
plan only if all individuals of that gender
in the plan are divided into separate popu-
lations, each separatepopulation has cred-
ible mortality experience (determined in
the same manner as determining whether a
gender has credible mortality experience),
and the separate substitute mortality ta-
ble for each separate population is devel-
oped using mortality experience data for
that population. For example, in the case
of a plan that has credible mortality expe-
rience data for both its male hourly and
male salaried populations, separate sub-
stitutemortalitytablescouldbeusedfor
those two separate populations. However,
if the plan does not have credible mortality
experience for its male salaried population,
it is not permissible to use substitute mor-
tality tables for its male hourly population
and the standard mortality tables described
in §1.430(h)(3)–1 for its male salaried pop-
ulation.
The requirement that each separate pop-
ulation have credible mortality experience
does not apply in the case of separate mor-
tality tables that are developed for annui-
tant and nonannuitant populations within
a gender. Thus, the regulations provide
that substitute mortality tables for sepa-
rate annuitant and nonannuitant popula-
tions may be used within a gender even
if only one of those separate populations
has credible mortality experience. Sim-
ilarly, if separate populations with cred-
ible mortality experience are established
within a gender, then any of those popu-
lations may be further subdivided into sep-
arate annuitant and nonannuitant subpopu-
lations, provided that at least one of the two
resulting subpopulations has credible mor-
tality experience. In such a case, the stan-
dard mortality tables under §1.430(h)(3)–1
must be used for a resulting subpopula-
tion that does not have credible mortality
experience. For example, in the case of
a plan that has credible mortality experi-
ence for both its male hourly and salaried
individuals, if the male salaried annuitant
population has credible mortality experi-
ence, the plan may use substitute mortal-
ity tables with respect to that population
even if the standard mortality tables un-
der §1.430(h)(3)–1 are used for the male
salaried nonannuitant population (because
that nonannuitant population does not have
credible mortality experience). For pur-
poses of demonstrating that an annuitant
or nonannuitant population within a gen-
der or within a separate population does
not have credible mortality experience, the
demonstration of lack of credible mortality
experience is made on the same basis as for
purposes of demonstrating a lack of credi-
ble mortality experience for a gender.
The proposed regulations provide a lim-
ited time period during which a newly ac-
quired plan that does not use substitute
mortality tables does not prevent another
plan from using substitute mortality tables.
The proposed regulations implied that this
exception applies only where a newly ac-
quired plan does not use substitute mor-
tality tables (and not to the case where a
plan that uses substitute mortality tables is
acquired by a plan sponsor that maintains
other plans for which substitute mortality
October 6, 20087952008–40 I.R.B.

tables are not used). In response to com-
mentator concerns, the final regulations re-
place the term “newly acquired plan” with
the term “newly affiliated plan.” Thus, the
final regulations eliminate the implication
that this exception is unavailable in situa-
tions in which the acquiring plan sponsor
does not use substitute mortality tables for
its other plans but the acquired plan uses
substitute mortality tables.
Under the regulations, the use of sub-
stitute mortality tables for a plan is not
prohibited merely because a newly affili-
ated plan does not use substitute mortal-
ity tables, but only through the last day
of the plan year of the plan using substi-
tute mortality tables that contains the last
day of the transition period described in
section 410(b)(6)(C)(ii) (without regard to
any change in coverage during that pe-
riod) for either the newly affiliated plan
or the plan using substitute mortality ta-
bles, whichever is later. For the following
plan year, the mortality tables prescribed
under §1.430(h)(3)–1 apply with respect
to the plan (and all other plans within the
plan sponsor’s controlled group, includ-
ing the newly affiliated plan) unless ap-
proval to use substitute mortality tables has
been obtained with respect to the newly af-
filiated plan, or thenewly affiliated plan
cannot use substitute mortality tables be-
cause neither the males nor the females un-
der the plan have credible mortality expe-
rience. For example, if on September 1,
2009, a plan sponsor of a plan that uses
substitute mortality tables and that has a
calendar year plan year acquires a busi-
ness that maintains a plan that does not
use substitute mortality tables and that has
a plan year that ends June 30, the main-
tenance of the latter plan within the con-
trolled group will not impair the contin-
ued use of substitute mortality tables by
the former plan through the end of the
plan year that ends on December 31, 2011.
This is because December 31, 2010, is the
last day of the period described in section
410(b)(6)(C)(ii) for the plan using substi-
tute mortality tables, June 30, 2011, is the
last day of the period described in sec-
tion 410(b)(6)(C)(ii) for the newly affili-
ated plan that does not use substitute mor-
tality tables, and the last day of the plan
year of the plan using substitute mortality
tables that contains the later of those two
dates is December 31, 2011. Similarly, if
on September 1, 2009, a plan sponsor of
a plan that uses substitute mortality tables
and that has a calendar year plan year is
acquired by an employer that maintains a
plan that does not use substitute mortality
tables and that has a plan year that ends
June 30, the maintenance of the latter plan
within the controlled group will not impair
the continued use of substitute mortality
tables by the former plan through the end
of the plan year that ends on December 31,
2011.
Under the regulations, a plan is treated
as a newly affiliated plan if it becomes
maintained by the plan sponsor (or by a
member of the plan sponsor’s controlled
group) in connection with a merger, acqui-
sition, or similar transaction described in
§1.410(b)–2(f). The regulations provide
that a plan is also treated as a newly af-
filiated plan if it is established in connec-
tion with a transfer of assets and liabilities
from another employer’s plan in connec-
tion with a merger, acquisition, or similar
transaction described in §1.410(b)–2(f).
Inthecaseofanewlyaffiliatedplan
that does not use substitute mortality
tables, the demonstration of whether cred-
ible mortality experience exists for the
plan may be made by either including or
excluding mortalityexperience data for
the period prior to the date the plan be-
comes maintained within the controlled
group that includes the plan sponsor of
the plan that uses substitute mortality ta-
bles. If a plan sponsor excludes mortality
experience data prior to the date the plan
became maintained within the controlled
group that includes the plan sponsor of the
plan that uses substitute mortality tables,
the exclusion must apply for all popu-
lations within the plan. For example, it
is impermissible to include the data for
hourly individuals forthe pre-acquisition
period but exclude the data for salaried
individuals for that same period.
In order to demonstrate a lack of cred-
ible mortality experience with respect to
a gender for a plan year, a special rule
applies if the plan’s mortality experience
demonstration for a plan year is made by
excluding mortality experience for the pe-
riod prior to the date the newly affiliated
plan becomes maintained within the new
plan sponsor’s controlled group. In such a
case, an employer is permitted to demon-
strate a plan’s lack of credible mortality ex-
perience using an experience study period
of less than four years, provided that the
experience study period begins with the
date the plan becomes maintained within
the employer’s controlled group and ends
not more than one year and one day before
the first day of the plan year with respect
to which the lack of credible mortality ex-
perience demonstration is made.
The regulations provide rules for aggre-
gating plans for purposes of using substi-
tute mortality tables. Under the regula-
tions, in order to use a set of substitute mor-
tality tables for two or more plans, the rules
set forth in the regulations are applied by
treating those plans as a single plan. In
such a case, the substitute mortality tables
must be used for all such plans and must be
based on data collected with respect to all
such plans. Although plans generally are
not required to be aggregated, the regula-
tions require a plan to be aggregated with
any plan that was previously spun off from
that plan if one purpose of the spinoff was
to avoid the use of substitute mortality ta-
bles for any of the plans involved in the
spinoff.
Under the regulations, in order to use
substitute mortality tables with respect to a
plan, a plan sponsor must submit a written
request to the Commissioner that demon-
strates that those substitute mortality tables
comply with applicable requirements. A
request to use substitute mortality tables
must state the first plan year and the term
of years (not more than 10) that the tables
are requested to be used. In general, sub-
stitute mortality tables cannot be used for a
plan year unless the plan sponsor submits
the written request to use substitute mor-
tality tables at least 7 months prior to the
first day of the first plan year for which
the substitute mortality tables are to apply.
However, the timing of the written request
to use substitute mortality tables does not
prevent a plan from using substitute mor-
tality tables for a plan year if the written
request is submitted no later than October
1, 2007. This special rule, which was pro-
vided under the proposed regulations, al-
lowedplansponsorssufficienttimetore-
view the proposed regulations and other
guidance in order to prepare requests to
use substitute mortality tables for use in
2008. In addition, the timing of the written
request to use substitute mortality tables
does not prevent a plan from using sub-
stitute mortality tables for a plan year that
begins during 2009 if the written request
is submitted no later than October 1, 2008.
2008–40 I.R.B.796October 6, 2008

This special rule allows plan sponsors suf-
ficient time to review the final regulations
in order to prepare requests to use substi-
tute mortality tables for plan years that be-
gin during 2009.
Under the regulations, experience data
cannot be used to develop a base table if
the number of individuals in the popula-
tion covered by the table (for example, the
male annuitants) as of the last day of the
plan year before the year the request to use
substitute mortality tables is made (or a
reasonable estimate of that number), com-
pared to the average number of individuals
in that population over the years covered
by the experience study on which the sub-
stitute mortality tables are based, reflects
a difference of 20 percent or more, unless
it is demonstrated to the satisfaction of the
Commissioner that the experience data is
accurately predictive of future mortality of
that plan population (taking into account
the effect of the change in individuals) af-
ter appropriate adjustments to the data are
made (for example, excluding data from
individuals with respect to a spun-off por-
tion of the plan).
Under the regulations, the Commis-
sioner may, in revenue rulings and proce-
dures, notices or other guidance published
in the IRB (see §601.601(d)(2)(ii)(b)of
this chapter), provide additional guid-
ance regarding the approval and use of
substitute mortality tables under section
430(h)(3)(C) and related matters. The IRS
intends to publish a revenue procedure in
the near future that updates the require-
ments set forth in Rev. Proc. 2007–37
regarding approval to use substitute mor-
tality tables to reflect the provisions of
these final regulations.
In general, the Commissioner has a
180-dayperiodtoreviewarequestfor
the use of substitute mortality tables. If
the Commissioner does not issue a denial
within this 180-day period, the request
is deemed to have been approved unless
the Commissioner and the plan sponsor
have agreed to extend that period. The
Commissioner may request additional in-
formation with respect to a submission.
Failure to provide that information on a
timely basis is grounds for denial of the
plan sponsor’s request. In addition, the
Commissioner will deny a request if the
request fails to meet the requirements to
use substitute mortality tables or if the
Commissioner determines that a substitute
mortality table does not sufficiently reflect
the mortality experience of the applica-
ble plan population. One commentator
suggested that the 180-day period for ap-
proval of substitute mortality tables should
automatically be tolled during any period
between the time additional information is
requested and received, and should resume
after that information is received. These
regulations do not adopt this suggestion.
It is anticipated that the Commissioner
and the taxpayer willestablish a reason-
able period for the taxpayer to collect and
submit the requested data and extend the
180-day period to the extent necessary.
The regulations provide rules regard-
ing the duration of use of substitute mor-
tality tables. Under the regulations, sub-
stitute mortality tables generally are used
with respect to a plan for the term of con-
secutive plan years specified in the plan
sponsor’s written request to use such ta-
bles and approved by the Commissioner,
or such shorter period prescribed by the
Commissioner in the approval to use sub-
stitute mortality tables. If the term of use
of a substitute mortality table ends for any
reason, the mortality tables specified in
§1.430(h)(3)–1 will apply with respect to
the plan unless the plan sponsor has ob-
tained approval to use substitute mortal-
ity tables for a further term. The regula-
tions provide that a plan’s substitute mor-
tality tables cannot be used as of the earli-
est of the following: the second plan year
following the plan year in which there is
a significant change in the population cov-
ered by the substitute mortality table (gen-
erally, a change of at least 20% from the
average number of individuals included in
the experience study); or the plan year fol-
lowing the plan year in which a substi-
tute mortality table for a plan population
is no longer accurately predictive of fu-
ture mortality of that population, as deter-
mined by the Commissioner or as certified
by the plan’s actuary to the satisfaction of
the Commissioner. In addition, the regula-
tions provide that a plan’s substitute mor-
tality tables cannot be used after the date
specified in guidance published in the IRB
(see §601.601(d)(2)(ii)(b)) pursuant to a
replacement of mortality tables specified
under section 430(h)(3)(A) (other than an-
nual updates to the static mortality tables).
Effective/Applicability Date
Section 1.430(h)(3)–1, which provides
generally applicable mortality tables, ap-
plies to plan years beginning on or after
January 1, 2008. Section 1.430(h)(3)–2,
which provides rules regarding the ap-
proval and use of substitute mortality
tables, applies to plan years beginning on
or after January 1, 2009. Taxpayers may
rely on the provisions of §1.430(h)(3)–2
for plan years beginning during 2008. For
example, taxpayers can use the exceptions
contained in §1.430(h)(3)–2(d)(1) from
the general rule that all controlled group
members must use substitute mortality
tables in order for any controlled group
member to use substitute mortality tables.
Because section 430(h)(3) provides that
substitute mortality tables can be used only
if the use of those tables is approved by
the Secretary, taxpayers can use substitute
mortality tables forplan years beginning
during 2008 only if those mortality tables
were approved by the IRS under the pro-
cedures set forth in Rev. Proc. 2007–37.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It is hereby certified that
the collection of information contained in
this regulation will not have a significant
economic impact on a substantial number
of small entities. Pension plans of small
entities generally are precluded from re-
questing to use substitute mortality tables
pursuant to §1.430(h)(3)–2 because they
will not have 1,000 deaths for a permit-
ted population over a permissible mortal-
ity experience study period as required un-
der §1.430(h)(3)–2(c)(1)(ii) and, thus, will
not have credible mortality experience as
required by the regulation. Accordingly,
a regulatory flexibility analysis is not re-
quired. Pursuant to section 7805(f) of the
Internal Revenue Code, the notice of pro-
posed rulemaking preceding these regula-
tions was submitted to the Small Business
Administration for comment on its impact
on small business.
Drafting Information
The principal authors of these reg-
ulations are Lauson C. Green and
October 6, 20087972008–40 I.R.B.

Linda S. F. Marshall, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development of these regulations.
*****
Amendments t
otheRegulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.430(h)(3)–1 is added
to read as follows:
§1.430(h)(3)–1 Mortality tables used to
determine present value.
(a)Basis for mortality tables—(1)In
general. This section sets forth rules
for the mortality tables to be used in de-
termining present value or making any
computation under section 430. Generally
applicable mortality tables for participants
and beneficiaries are set forth in this sec-
tion pursuant to section 430(h)(3)(A). In
lieu of using the mortality tables provided
under this section with respect to par-
ticipants and beneficiaries, plan-specific
substitute mortality tables are permitted
to be used for this purpose pursuant to
section 430(h)(3)(C) provided that the
requirements of §1.430(h)(3)–2 are sat-
isfied. Mortality tables that may be used
with respect to disabled individuals are
to be provided in guidance published
in the Internal Revenue Bulletin. See
§601.601(d)(2)(ii)(b)ofthischapter.
(2)Static tables or generational ta-
bles permitted. The generally applicable
mortality tables provided under section
430(h)(3)(A) are the static tables described
in paragraph (a)(3) of this section and the
generational mortalitytables described in
paragraph (a)(4) of this section. A plan
is permitted to use either of those sets of
mortality tables with respect to partici-
pants and beneficiaries pursuant to this
section.
(3)Static tables. The static mortality
tables that are permitted to be used pur-
suant to paragraph (a)(2) of this section are
updated annually to reflect expected im-
provements in mortality experience as de-
scribed in paragraph (c)(2) of this section.
Static mortality tables that are to be used
with respect to valuation dates occurring
during 2008 are provided in paragraph (e)
of this section. The mortality tables to be
used with respect to valuation dates oc-
curring in later years are to be provided
in guidance published in the Internal Rev-
enue Bulletin. See §601.601(d)(2)(ii)(b)
of this chapter.
(4)Generational mortality tables—(i)
In general. The generational mortality ta-
bles that are permitted to be used pursuant
to paragraph (a)(2) of this section are de-
termined pursuant to this paragraph (a)(4)
using the base mortality tables and projec-
tion factors set forth in paragraph (d) of
this section. Under the generational mor-
tality tables, the probability of an individ-
ual’s death at a particular age is determined
as the individual’s basemortality rate (that
is, the applicable mortality rate from the ta-
ble set forth in paragraph (d) of this sec-
tion for the age for which the probabil-
ity of death is being determined) multi-
plied by the mortality improvement fac-
tor. The mortality improvement factor is
equal to (1 - projection factor for that age)
n
,
where n is equal to the projection period.
For this purpose, the projection period is
the number of years between 2000 and the
year for which the probability of death is
being determined.
(ii)Examples of calculation.Asanex-
ample of the use of generational mortal-
ity tables under paragraph (a)(4)(i) of this
section, for purposes of determining the
probability of death at age 54 for a male
annuitant born in 1974, the base mortal-
ity rate is .005797, the projection factor
is .020, and the projection period (the pe-
riod from the year 2000 until the year the
participant will attain age 54) is 28 years,
so that the mortality improvement factor
is .567976, and the probability of death at
age 54 is .003293. Similarly, under these
generational mortality tables, the probabil-
ityofdeathatage55forthesamemale
annuitant would be determined by using
the base mortality rate and projection fac-
tor at age 55, and a projection period of
29 years (the period from the year 2000
until the year the participant will attain
age 55). Thus, the base mortality rate is
.005905, the projection factor is .019, so
that the mortality improvement factor is
.573325 ((1-.019)
29
), and the probability
of death at age 55 is .003385 (.573325
times .005905). Because these genera-
tional mortality tables reflect expected im-
provements in mortality experience, no pe-
riodic updates are needed.
(b)Use of the tables—(1)Separate ta-
bles for annuitants and nonannuitants—(i)
In general. Separate tables are provided
for use for annuitants and nonannuitants.
The nonannuitant mortality table is applied
to determine the probability of survival for
a nonannuitant for the period before the
nonannuitant is projected to commence re-
ceiving benefits. The annuitant mortality
table is applied to determine the present
value of benefits for each annuitant, and
for each nonannuitant for the period begin-
ning when the nonannuitant is projected
to commence receiving benefits. For pur-
poses of this section, an annuitant means
a plan participant who has commenced re-
ceiving benefits and a nonannuitant means
a plan participant who has not yet com-
menced receiving benefits (for example,
an active employee or a terminated vested
participant). A participant whose bene-
fit has partially commenced is treated as
an annuitant with respect to the portion of
the benefit which has commenced and a
nonannuitant with respect to the balance of
the benefit. In addition, for any period in
which an annuitant is projected to be re-
ceiving benefits, any beneficiary with re-
spect to that annuitant is also treated as
an annuitant for purposes of this paragraph
(b)(1).
(ii)Examples of calculation.Asan
example of the use of separate annuitant
and nonannuitant tables under paragraph
(b)(1)(i) of this section, with respect to a
45-year-old active participant who is pro-
jected to commence receiving an annuity
at age 55, the funding target would be de-
termined using the nonannuitant mortality
tablefortheperiodbeforetheparticipant
attains age 55 (so that, if the static mortal-
ity tables are used pursuant to paragraph
(a)(3) of this section, the probability of an
active male participant living from age 45
to age 55 using the table that applies for
a plan year beginning in 2008 is 98.61%)
and the annuitant mortality table for the
period ages 55 and above. Similarly, if a
45-year-old terminated vested participant
is projected to commence an annuity at age
65, the funding target would be determined
using the nonannuitant mortality table for
2008–40 I.R.B.798October 6, 2008

the period before the participant attains age
65 and the annuitant mortality table for
ages 65 and above.
(2)Small plan tables. If static mortal-
ity tables are used pursuant to paragraph
(a)(3) of this section, as an alternative
to the separate static tables specified for
annuitants and nonannuitants pursuant to
paragraph (b)(1) of this section, a com-
bined static table that applies the same
mortality rates to both annuitants and
nonannuitants is permitted to be used for
a small plan. For this purpose, a small
plan is defined as a plan with 500 or fewer
participants (including both active and in-
active participants)on the valuation date.
(c)Construction of static tables—(1)
Source of basic rates. The static mortality
tables that are used pursuant to paragraph
(a)(3)ofthissectionarebasedonthebase
mortality tables set forth in paragraph (d)
of this section.
(2)Projected mortality improvements.
The mortality rates under the base mortal-
ity tables are projected to improve using
the projection factors provided in Projec-
tion Scale AA, as set forth in paragraph (d)
of this section. Using these projection fac-
tors, the mortality rate for an individual at
each age is determined as the individual’s
base mortality rate (that is, the applica-
blebasemortalityratefromthetableset
forth in paragraph (d) of this section for
the individual at that age) multiplied by
the mortality improvement factor. The
mortality improvement factor is equal to
(1 - projection factor for that age)
n
,where
n is equal to the projection period. The
annuitant mortality rates for a plan year are
determined using a projection period that
runs from the calendar year 2000 until 7
years after the calendar year that contains
the valuation date for the plan year. The
nonannuitant mortality rates for a plan
year are determined using a projection
period that runs from the calendar year
2000 until 15 years after the calendar year
that contains the valuation date for the
plan year. Thus, for example, for a plan
year with a January 1, 2012, valuation
date, the annuitant mortality rates are
determined using a projection period that
runs from 2000 until 2019 (19 years)
and the nonannuitant mortality rates are
determined using a projection period that
runs from 2000 until 2027 (27 years).
(3)Construction of combined tables for
small plans. The combined mortality ta-
bles that are permitted to be used for small
plans pursuant to paragraph (b)(2) of this
section are constructed from the separate
nonannuitant and annuitant tables using
the weighting factors for small plans that
are set forth in paragraph (d) of this sec-
tion. The weighting factors are applied
to develop these mortality tables using the
following equation: Combined mortality
rate = [nonannuitant rate * (1- weighting
factor)] + [annuitant rate * weighting fac-
tor].
(d)Base mortality tables and projec-
tion factors. The following base mortality
tables and projection factors are used to
determine generational mortality tables
for purposes of determining present value
or making any computation under section
430 as set forth in paragraph (a)(4) of this
section. In addition, the following base
mortality tables and projection factors
are used to determine the static mortality
tables that are used for purposes of de-
termining present value or making any
computation under section 430 as set forth
in paragraphs (a)(3) and (c) of this sec-
tion. See §1.430(h)(3)–2(c)(3) for rules
regarding the required use of the projec-
tion factors set forth in this paragraph (d)
in connection with a plan-specific substi-
tute mortality table.
MALEMALEMALEMALEFEMALEFEMALEFEMALEFEMALE
Age
Base Non-
Annuitant
Mortality
Rates (Year
2000)
Base
Annuitant
Mortality
Rates (Year
2000)
Scale AA
Projection
Factors
Weighting
Factors for
Small Plans
Base Non-
Annuitant
Mortality
Rates (Year
2000)
Base
Annuitant
Mortality
Rates (Year
2000)
Scale AA
Projection
Factors
Weighting
Factors for
Small Plans
10.0006370.0006370.020-
0.0005710.000571
0.020-
20.0004300.0004300.020-0.0003720.0003720.020-
3
0.0003570.000357
0.020-0.0002780.0002780.020-
40.0002780.0002780.020-0.0002080.0002080.020-
50.0002550.000255
0.020-0.0001880.0001880.020-
60.0002440.0002440.020-0.0001760.0001760.020-
70.0002340.0002340.020-
0.0001650.000165
0.020-
80.0002160.0002160.020-0.0001470.0001470.020-
90.0002090.0002090.020-0.0001400.0001400.020-
100.0002120.0002120.020-0.0001410.0001410.020-
110.0002190.0002190.020-0.0001430.0001430.020-
120.0002280.0002280.020-0.0001480.0001480.020-
130.0002400.0002400.020-
0.0001550.000155
0.020-
October 6, 20087992008–40 I.R.B.

MALEMALEMALEMALEFEMALEFEMALEFEMALEFEMALE
Age
Base Non-
Annuitant
Mortality
Rates (Year
2000)
Base
Annuitant
Mortality
Rates (Year
2000)
Scale AA
Projection
Factors
Weighting
Factors for
Small Plans
Base Non-
Annuitant
Mortality
Rates (Year
2000)
Base
Annuitant
Mortality
Rates (Year
2000)
Scale AA
Projection
Factors
Weighting
Factors for
Small Plans
14
0.0002540.000254
0.019-0.0001620.0001620.018-
15
0.0002690.0002690.019-0.0001700.0001700.016-
160.0002840.0002840.019-0.0001770.000177
0.015
-
170.0003010.0003010.019-0.0001840.0001840.014-
180.0003160.0003160.019-0.0001880.0001880.014-
190.0003310.0003310.019-0.0001900.000190
0.015
-
20
0.0003450.000345
0.019-0.0001910.0001910.016-
21
0.0003570.000357
0.018-0.0001920.0001920.017-
220.0003660.0003660.017-0.0001940.0001940.017-
230.0003730.000373
0.015
-0.0001970.0001970.016-
240.0003760.0003760.013-0.0002010.000201
0.015
-
25
0.0003760.0003760.010-0.0002070.0002070.014-
260.0003780.0003780.006-0.0002140.0002140.012-
270.0003820.000382
0.005
-0.0002230.0002230.012-
280.0003930.000393
0.005
-
0.0002350.000235
0.012-
290.0004120.000412
0.005
-0.0002480.0002480.012-
300.0004440.000444
0.005
-0.0002640.0002640.010-
310.0004990.000499
0.005
-0.0003070.0003070.008-
32
0.0005620.0005620.005
-
0.0003500.000350
0.008-
330.0006310.000631
0.005
-0.0003940.0003940.009-
340.0007020.000702
0.005
-
0.0004350.000435
0.010-
35
0.0007730.000773
0.005
-
0.0004750.000475
0.011-
360.0008410.000841
0.005
-
0.0005140.000514
0.012-
370.0009040.000904
0.005
-
0.0005540.000554
0.013-
380.0009640.0009640.006-
0.0005980.000598
0.014-
390.0010210.0010210.007-0.0006480.000648
0.015
-
400.0010790.0010790.008-0.0007060.000706
0.015
-
410.001142
0.001157
0.009
0.0045
0.0007740.000774
0.015
-
42
0.001215
0.0013120.0100.0091
0.0008520.0008520.015
-
430.001299
0.001545
0.0110.01360.0009370.000937
0.015
-
440.001397
0.001855
0.0120.01810.0010290.001029
0.015
-
450.001508
0.0022430.0130.02260.0011240.0011240.0160.0084
460.0016160.0027090.0140.02720.0012230.0012230.0170.0167
470.001734
0.0032520.015
0.03170.001326
0.001335
0.018
0.0251
480.0018600.0038730.0160.03620.001434
0.001559
0.018
0.0335
49
0.0019950.004571
0.0170.0407
0.001550
0.0018960.0180.0419
2008–40 I.R.B.800October 6, 2008

MALEMALEMALEMALEFEMALEFEMALEFEMALEFEMALE
Age
Base Non-
Annuitant
Mortality
Rates (Year
2000)
Base
Annuitant
Mortality
Rates (Year
2000)
Scale AA
Projection
Factors
Weighting
Factors for
Small Plans
Base Non-
Annuitant
Mortality
Rates (Year
2000)
Base
Annuitant
Mortality
Rates (Year
2000)
Scale AA
Projection
Factors
Weighting
Factors for
Small Plans
50
0.002138
0.005347
0.018
0.0453
0.0016760.0023440.017
0.0502
51
0.002288
0.005528
0.0190.04980.001814
0.002459
0.016
0.0586
52
0.002448
0.005644
0.0200.06860.0019670.0026470.0140.0744
53
0.002621
0.005722
0.020
0.09530.0021350.002895
0.0120.0947
54
0.002812
0.005797
0.0200.12880.0023210.0031900.0100.1189
55
0.003029
0.005905
0.0190.2066
0.0025260.003531
0.0080.1897
56
0.0033060.0061240.0180.3173
0.0027560.003925
0.006
0.2857
57
0.0036280.0064440.0170.37800.003010
0.0043850.005
0.3403
58
0.003997
0.006895
0.0160.44010.0032910.004921
0.005
0.3878
59
0.004414
0.007485
0.0160.4986
0.0035990.0055310.005
0.4360
600.0048780.0081960.016
0.5633
0.0039310.006200
0.0050.4954
61
0.005382
0.009001
0.015
0.6338
0.004285
0.006919
0.0050.5805
62
0.0059180.0099150.015
0.7103
0.004656
0.007689
0.0050.6598
630.006472
0.010951
0.0140.7902
0.0050390.0085090.0050.7520
640.0070280.0121170.014
0.83550.0054290.0093950.005
0.8043
650.007573
0.0134190.0140.8832
0.005821
0.010364
0.0050.8552
660.0080990.0148680.0130.93210.0062070.011413
0.005
0.9118
67
0.008598
0.0164600.013
0.95100.0065830.0125400.005
0.9367
680.0090690.0182000.0140.9639
0.006945
0.013771
0.0050.9523
69
0.0095100.020105
0.0140.97140.007289
0.0151530.005
0.9627
700.0099220.022206
0.015
0.97400.0076130.016742
0.005
0.9661
710.010912
0.0245700.015
0.97660.008309
0.018579
0.006
0.9695
720.0128920.027281
0.015
0.97920.009700
0.020665
0.0060.9729
73
0.015862
0.030387
0.015
0.98180.0117870.0229700.0070.9763
740.0198210.033900
0.015
0.9844
0.0145700.025458
0.0070.9797
75
0.0247710.0378340.0140.98700.0180490.0281060.0080.9830
760.0307100.0421690.0140.98960.0222240.0309660.0080.9864
770.0376400.0469060.0130.99220.027094
0.034105
0.0070.9898
78
0.0455590.052123
0.0120.99480.032660
0.037595
0.0070.9932
79
0.0544690.057927
0.0110.99740.038922
0.041506
0.0070.9966
800.0643680.0643680.0101.0000
0.0458790.045879
0.0071.0000
810.0720410.0720410.0091.0000
0.0507800.050780
0.0071.0000
820.0804860.0804860.0081.0000
0.0562940.056294
0.0071.0000
830.0897180.0897180.0081.0000
0.0625060.062506
0.0071.0000
840.0997790.0997790.0071.0000
0.0695170.069517
0.0071.0000
850.1107570.110757
0.0071.00000.0774460.0774460.0061.0000
October 6, 20088012008–40 I.R.B.

MALEMALEMALEMALEFEMALEFEMALEFEMALEFEMALE
Age
Base Non-
Annuitant
Mortality
Rates (Year
2000)
Base
Annuitant
Mortality
Rates (Year
2000)
Scale AA
Projection
Factors
Weighting
Factors for
Small Plans
Base Non-
Annuitant
Mortality
Rates (Year
2000)
Base
Annuitant
Mortality
Rates (Year
2000)
Scale AA
Projection
Factors
Weighting
Factors for
Small Plans
860.1227970.1227970.0071.00000.0863760.086376
0.005
1.0000
870.1360430.1360430.0061.00000.0963370.0963370.0041.0000
88
0.1505900.1505900.005
1.00000.1073030.1073030.0041.0000
890.1664200.166420
0.005
1.0000
0.1191540.119154
0.0031.0000
900.1834080.1834080.0041.00000.1316820.1316820.0031.0000
910.1997690.1997690.0041.00000.1446040.1446040.0031.0000
92
0.2166050.216605
0.0031.0000
0.1576180.157618
0.0031.0000
930.2336620.2336620.0031.00000.1704330.1704330.0021.0000
94
0.2506930.250693
0.0031.00000.1827990.1827990.0021.0000
95
0.2674910.2674910.0021.0000
0.1945090.194509
0.0021.0000
96
0.2839050.283905
0.0021.0000
0.2053790.205379
0.0021.0000
97
0.2998520.299852
0.0021.0000
0.2152400.215240
0.0011.0000
98
0.3152960.315296
0.0011.00000.2239470.2239470.0011.0000
990.3302070.3302070.0011.00000.2313870.2313870.0011.0000
100
0.3445560.344556
0.0011.00000.2374670.2374670.0011.0000
101
0.3586280.358628
0.0001.00000.2448340.2448340.0001.0000
102
0.3716850.371685
0.0001.0000
0.2544980.254498
0.0001.0000
1030.3830400.3830400.0001.00000.2660440.2660440.0001.0000
1040.3920030.3920030.0001.0000
0.2790550.279055
0.0001.0000
105
0.3978860.3978860.0001.00000.2931160.2931160.0001.0000
1060.4000000.4000000.0001.00000.3078110.3078110.0001.0000
1070.4000000.4000000.0001.0000
0.3227250.322725
0.0001.0000
1080.4000000.4000000.0001.00000.3374410.3374410.0001.0000
1090.4000000.4000000.0001.0000
0.3515440.351544
0.0001.0000
1100.4000000.4000000.0001.00000.3646170.3646170.0001.0000
1110.4000000.4000000.0001.00000.3762460.3762460.0001.0000
1120.4000000.4000000.0001.0000
0.3860150.386015
0.0001.0000
1130.4000000.4000000.0001.0000
0.3935070.393507
0.0001.0000
1140.4000000.4000000.0001.00000.3983080.3983080.0001.0000
115
0.4000000.4000000.0001.00000.4000000.4000000.0001.0000
1160.4000000.4000000.0001.00000.4000000.4000000.0001.0000
1170.4000000.4000000.0001.00000.4000000.4000000.0001.0000
1180.4000000.4000000.0001.00000.4000000.4000000.0001.0000
1190.4000000.4000000.0001.00000.4000000.4000000.0001.0000
1201.0000001.0000000.0001.00001.0000001.0000000.0001.0000
2008–40 I.R.B.802October 6, 2008

(e)Static mortality tables with respect
to valuation dates occurring during 2008.
The following static mortality tables are
used pursuant to paragraph (a)(3) of this
section for determining present value or
making any computation under section
430 with respect to valuation dates occur-
ring during 2008.
MALEMALEMALEFEMALEFEMALEFEMALE
Age
Non-Annuitant
Mortality Rates
Annuitant
Mortality Rates
Optional
Combined Table
for Small Plans
Non-Annuitant
Mortality Rates
Annuitant
Mortality Rates
Optional
Combined Table
for Small Plans
10.0004000.0004000.000400
0.0003590.0003590.000359
20.0002700.0002700.0002700.0002340.0002340.000234
30.0002240.0002240.000224
0.0001750.0001750.000175
4
0.0001750.0001750.000175
0.0001310.0001310.000131
5
0.0001600.0001600.0001600.0001180.0001180.000118
6
0.0001530.0001530.000153
0.0001110.0001110.000111
70.0001470.0001470.0001470.0001040.0001040.000104
80.0001360.0001360.0001360.0000920.0000920.000092
90.0001310.0001310.0001310.0000880.0000880.000088
100.0001330.0001330.0001330.0000890.0000890.000089
110.0001380.0001380.0001380.0000900.0000900.000090
120.0001430.0001430.0001430.0000930.0000930.000093
13
0.0001510.0001510.000151
0.0000970.0000970.000097
140.0001630.0001630.0001630.0001070.0001070.000107
15
0.0001730.0001730.0001730.0001170.0001170.000117
160.0001830.0001830.000183
0.0001250.0001250.000125
170.0001940.0001940.0001940.0001330.0001330.000133
180.0002030.0002030.0002030.0001360.0001360.000136
190.0002130.0002130.0002130.0001340.0001340.000134
200.0002220.0002220.0002220.0001320.0001320.000132
21
0.0002350.0002350.000235
0.0001290.0001290.000129
220.0002470.0002470.0002470.0001310.0001310.000131
230.0002630.0002630.0002630.0001360.0001360.000136
240.0002780.0002780.0002780.0001420.0001420.000142
25
0.0002980.0002980.000298
0.0001500.0001500.000150
260.0003290.0003290.0003290.0001620.0001620.000162
270.0003400.0003400.0003400.0001690.0001690.000169
28
0.0003500.0003500.000350
0.0001780.0001780.000178
290.0003670.0003670.0003670.0001880.0001880.000188
300.0003960.0003960.0003960.0002100.0002100.000210
31
0.0004450.0004450.0004450.0002550.0002550.000255
32
0.0005010.0005010.000501
0.0002910.0002910.000291
33
0.0005620.0005620.000562
0.0003200.0003200.000320
340.0006260.0006260.000626
0.0003450.0003450.000345
October 6, 20088032008–40 I.R.B.

MALEMALEMALEFEMALEFEMALEFEMALE
Age
Non-Annuitant
Mortality Rates
Annuitant
Mortality Rates
Optional
Combined Table
for Small Plans
Non-Annuitant
Mortality Rates
Annuitant
Mortality Rates
Optional
Combined Table
for Small Plans
35
0.0006890.0006890.0006890.0003680.0003680.000368
360.0007490.0007490.0007490.0003890.0003890.000389
370.0008060.0008060.0008060.0004100.0004100.000410
380.0008390.0008390.0008390.0004320.0004320.000432
390.0008690.0008690.000869
0.0004580.0004580.000458
400.0008970.0008970.0008970.0004990.0004990.000499
410.000928
0.000955
0.000928
0.0005470.0005470.000547
420.0009640.001070
0.000965
0.0006020.0006020.000602
430.0010070.0012430.0010100.0006620.0006620.000662
44
0.001058
0.0014740.0010660.0007270.0007270.000727
45
0.0011160.0017630.0011310.0007760.0007790.000776
460.0011680.0021090.0011940.0008240.000882
0.000825
47
0.0012250.002513
0.0012660.0008730.0010370.000877
480.001284
0.0029750.001345
0.0009440.001244
0.000954
49
0.0013450.003495
0.0014330.001021
0.001502
0.001041
50
0.0014080.004072
0.001529
0.0011300.0018120.001164
51
0.0014720.004146
0.0016050.001252
0.0019310.001292
520.001538
0.0041680.0017180.0014220.0021420.001476
53
0.0016470.0042260.0018930.001617
0.002415
0.001693
54
0.0017670.0042810.0020910.0018420.0027440.001949
55
0.0019480.0044280.0024600.0021000.003130
0.002295
56
0.0021770.0046630.0029660.002400
0.003586
0.002739
57
0.0024460.004983
0.003405
0.0026820.004067
0.003153
580.0027580.005413
0.0039260.002933
0.0045650.003566
59
0.003046
0.0058760.004457
0.003207
0.0051300.004045
600.003366
0.0064350.0050950.0035030.005751
0.004617
610.003802
0.0071750.005940
0.0038180.006418
0.005327
620.0041800.007904
0.006825
0.0041490.0071320.006117
630.0046800.0088640.0079860.0044900.0078930.007049
64
0.005082
0.0098070.0090300.004838
0.0087150.007956
650.005476
0.0108610.010232
0.005187
0.0096130.008972
66
0.005994
0.012218
0.0117950.0055310.010586
0.010140
670.006363
0.013527
0.013176
0.005866
0.0116320.011267
68
0.006557
0.0147310.0144360.0061890.0127740.012460
690.0068760.0162730.016004
0.0064950.014055
0.013773
700.0070090.0177020.0174240.006784
0.0155290.015233
710.007888
0.019586
0.0193120.007411
0.016975
0.016683
2008–40 I.R.B.804October 6, 2008

MALEMALEMALEFEMALEFEMALEFEMALE
Age
Non-Annuitant
Mortality Rates
Annuitant
Mortality Rates
Optional
Combined Table
for Small Plans
Non-Annuitant
Mortality Rates
Annuitant
Mortality Rates
Optional
Combined Table
for Small Plans
720.0096460.021747
0.021495
0.0086660.0188810.018604
730.0122830.0242230.024006
0.010548
0.0206730.020433
74
0.015799
0.0270240.026849
0.013058
0.0229120.022712
750.020195
0.0306220.030486
0.016195
0.0249160.024768
76
0.025470
0.0341310.034041
0.0199590.027451
0.027349
770.031624
0.038547
0.038493
0.024351
0.0306940.030629
78
0.038657
0.0434890.0434640.029370
0.0338350.033805
79
0.046569
0.0490710.049064
0.0350170.037355
0.037347
80
0.0553600.0553600.055360
0.0412910.0412910.041291
81
0.0629050.0629050.0629050.0457020.0457020.045702
82
0.0713500.0713500.0713500.0506640.0506640.050664
83
0.0795340.0795340.0795340.0562550.0562550.056255
840.0898000.0898000.089800
0.0625650.0625650.062565
85
0.0996800.0996800.0996800.0707610.0707610.070761
86
0.1105160.1105160.110516
0.0801200.0801200.080120
870.1243000.1243000.1243000.0907160.0907160.090716
880.1396830.1396830.1396830.1010420.1010420.101042
89
0.1543660.1543660.154366
0.1139030.1139030.113903
900.1727060.1727060.172706
0.1258790.1258790.125879
910.1881130.1881130.1881130.1382320.1382320.138232
920.2070600.2070600.207060
0.1506720.1506720.150672
93
0.2233650.2233650.2233650.1653910.1653910.165391
940.2396460.2396460.2396460.1773910.1773910.177391
950.2595780.2595780.2595780.1887550.1887550.188755
96
0.2755060.2755060.275506
0.1993030.1993030.199303
970.2909810.2909810.2909810.2120340.2120340.212034
980.3106000.3106000.3106000.2206110.2206110.220611
99
0.3252880.3252880.325288
0.2279400.2279400.227940
1000.3394240.3394240.3394240.2339300.2339300.233930
101
0.3586280.3586280.358628
0.2448340.2448340.244834
102
0.3716850.3716850.3716850.2544980.2544980.254498
1030.3830400.3830400.3830400.2660440.2660440.266044
1040.3920030.3920030.392003
0.2790550.2790550.279055
105
0.3978860.3978860.3978860.2931160.2931160.293116
1060.4000000.4000000.4000000.3078110.3078110.307811
1070.4000000.4000000.400000
0.3227250.3227250.322725
1080.4000000.4000000.4000000.3374410.3374410.337441
October 6, 20088052008–40 I.R.B.

MALEMALEMALEFEMALEFEMALEFEMALE
Age
Non-Annuitant
Mortality Rates
Annuitant
Mortality Rates
Optional
Combined Table
for Small Plans
Non-Annuitant
Mortality Rates
Annuitant
Mortality Rates
Optional
Combined Table
for Small Plans
1090.4000000.4000000.400000
0.3515440.3515440.351544
1100.4000000.4000000.4000000.3646170.3646170.364617
1110.4000000.4000000.4000000.3762460.3762460.376246
1120.4000000.4000000.400000
0.3860150.3860150.386015
1130.4000000.4000000.400000
0.3935070.3935070.393507
1140.4000000.4000000.4000000.3983080.3983080.398308
115
0.4000000.4000000.4000000.4000000.4000000.400000
1160.4000000.4000000.4000000.4000000.4000000.400000
1170.4000000.4000000.4000000.4000000.4000000.400000
1180.4000000.4000000.4000000.4000000.4000000.400000
1190.4000000.4000000.4000000.4000000.4000000.400000
1201.0000001.0000001.0000001.0000001.0000001.000000
(f)Effective/Applicability date.This
section applies for plan years beginning on
or after January 1, 2008.
Par. 3. Section 1.430(h)(3)–2 is added
to read as follows:
§1.430(h)(3)–2 Plan-specific substitute
mortality tables used to determine present
value.
(a)In general. This section sets forth
rules for the use of substitute mortality
tables under section 430(h)(3)(C) in de-
termining any present value or making
any computation under section 430 in ac-
cordance with §1.430(h)(3)–1(a)(1). In
order to use substitute mortality tables, a
plan sponsor must obtain approval to use
substitute mortality tables for the plan in
accordance with the procedures set forth
in paragraph (b) of this section. Para-
graph (c) of this section sets forth rules for
the development of substitute mortality
tables, including guidelines for determin-
ing whether a plan has sufficient credible
mortality experienceto use substitute
mortality tables. Paragraph (d) of this
section sets forth special rules regarding
the use of substitute mortality tables. The
Commissioner may, in revenue rulings
and procedures, notices or other guidance
published in the Internal Revenue Bulletin
(see §601.601(d)(2)(ii)(b) of this chapter),
provide additional guidance regarding
approval and use of substitute mortality
tables under section 430(h)(3)(C) and re-
lated matters.
(b)Procedures for obtaining approval
to use substitute mortality tables—(1)
Written request to use substitute mortality
tables—(i)General requirements.Inorder
to use substitute mortality tables, a plan
sponsor must submit a written request to
the Commissioner that demonstrates that
those substitute mortality tables meet the
requirements of section 430(h)(3)(C) and
this section. This request must state the
first plan year and the term of years (not
more than 10) that the tables are requested
to be used.
(ii)Time for written request—(A)In
general. Except as provided in this para-
graph (b)(1)(ii), substitute mortality tables
cannot be used for a plan year unless the
plan sponsor submits the written request
described in paragraph (b)(1)(i) of this sec-
tion at least 7 months prior to the first day
of the first plan year for which the substi-
tute mortality tables are to apply.
(B)Special rule for requests submitted
on or before October 1, 2007. Notwith-
standing the rule of paragraph (b)(1)(ii)(A)
of this section, the timing of the written
request described in paragraph (b)(1)(i) of
this section does not prevent a plan from
using substitute mortality tables for a plan
year provided that the written request is
submitted no later than October 1, 2007.
(C)Special rule for requests submitted
on or before October 1, 2008, with re-
spect to plan years beginning during 2009.
Notwithstanding the rule of paragraph
(b)(1)(ii)(A) of this section, the timing of
the written request described in paragraph
(b)(1)(i) of this section does not prevent a
plan from using substitute mortality tables
for a plan year that begins during 2009
provided that the written request is sub-
mitted no later than October 1, 2008.
(2)Commissioner’s review of re-
quest—(i)In general. During the 180-day
period that begins on the date the plan
sponsor submits a request to use substi-
tute mortality tables for a plan pursuant to
this section, the Commissioner will deter-
mine whether the request to use substitute
mortality tables satisfies the requirements
of this section (including any published
guidance issued pursuant to paragraph (a)
of this section), and will either approve or
deny the request. The Commissioner will
deny a request if the request fails to meet
the requirements of this section or if the
Commissioner determines that a substitute
mortality table does not sufficiently reflect
the mortality experience of the applicable
plan population.
(ii)Request for additional information.
The Commissioner may request additional
information with respect to the submis-
sion. Failure to provide that information
on a timely basis constitutes grounds for
denial of the request.
(iii)Deemed approval. Except as pro-
vided in paragraph (b)(2)(iv) of this sec-
2008–40 I.R.B.806October 6, 2008

tion, if the Commissioner does not issue a
denial within the 180-day review period,
the request is deemed to have been ap-
proved.
(iv)Extension of time permitted.The
Commissioner and a plan sponsor may,
before the expiration of the 180-day re-
view period, agree in writing to extend that
period, provided that any such agreement
also specifies any revisions in the plan
sponsor’s request, including any change in
the requested term of use of the substitute
mortality tables.
(c)Development of substitute mortality
tables—(1)Mortality experience require-
ments—(i)In general. Substitute mortality
tables must reflect the actual mortality ex-
perience of the pension plan for which the
tables are to be used and that mortality ex-
perience must be credible mortality expe-
rience as described in paragraph (c)(1)(ii)
of this section. Separate mortality tables
must be established for each gender under
the plan, and a substitute mortality table
is permitted to be established for a gender
only if the plan has credible mortality ex-
perience with respect to that gender.
(ii)Credible mortality experience.
There is credible mortality experience
for a gender within a plan if and only if,
over the period covered by the experience
study described in paragraph (c)(2)(ii) of
this section, there are at least 1,000 deaths
within that gender.
(iii)Gender without credible mortality
experience—(A)In general.If,forthe
first year for which a plan uses substi-
tute mortality tables, one gender has credi-
ble mortality experience but the other gen-
der does not have credible mortality expe-
rience, the substitute mortality tables are
used for the gender that does have credible
mortality experience and the mortality ta-
bles under §1.430(h)(3)–1 are used for the
gender that does not have credible mortal-
ity experience. For a subsequent plan year,
the plan sponsor may continue to use sub-
stitute mortality tables for the gender with
credible mortality experience without us-
ing substitute mortality tables for the other
gender only if the other gender continues
to lack credible mortality experience for
that subsequent plan year.
(B)Demonstration of lack of credible
mortality experience for a gender.Ingen-
eral, in order to demonstrate that a gen-
der within a plan does not have credible
mortality experience for a plan year, the
demonstration that the gender population
within the plan has fewer than 1,000 deaths
over a 4-year period must be made us-
ing a 4-year period that ends less than 3
years before the first day of that plan year.
For example, if a plan uses substitute mor-
tality tables based on credible mortality
experience obtained over a 4-year expe-
rience study period for its male popula-
tion and the standard mortality tables un-
der §1.430(h)(3)–1 for its female popula-
tion, there must be a demonstration that the
plan’s female population does not have at
least 1,000 deaths in a 4-year period that
ends less than 3 years before the first day
of that plan year. However, if the expe-
rience study period described in paragraph
(c)(2)(ii)(A) of this section exceeds 4 years
then, in order to demonstrate that a gender
within a plan does not have credible mor-
tality experience for a plan year, the mor-
tality experience of that population must
be analyzed over a period that is the same
length as the experience study on which
the substitute mortality tables are based
and that ends less than 3 years before the
first day of that plan year.
(iv)Disabled individuals. Under sec-
tion 430(h)(3)(D), separate mortality ta-
bles are permitted to be used for certain
disabled individuals. If such separate mor-
tality tables are used for those disabled in-
dividuals, then those individuals are disre-
garded for all purposes under this section.
Thus, if the mortality tables under section
430(h)(3)(D) are used for disabled indi-
viduals under a plan, mortality experience
with respect to those individuals must be
excluded in developingmortality rates for
substitute mortality tables under this sec-
tion.
(2)Base table and base year—(i)In
general. Development of a substitute mor-
tality table under this section requires cre-
ation of a base table and identification of a
base year under this paragraph (c)(2). The
base table and base year are then used to
determine a substitute mortality table un-
der paragraph (c)(3) of this section.
(ii)Experience study and base table
requirements—(A)In general. The base
table for a plan population must be de-
veloped from an experience study of the
mortality experience of that plan popula-
tion that generates amounts-weighted mor-
tality rates based on experience data for
the plan that is collected over an experi-
ence study period. The minimum length
of the experience study period is 2 years.
The maximum length of the experience
study period is 5 years, but can be ex-
tended by the Commissioner in revenue
rulings, notices, or other guidance pub-
lished in the Internal Revenue Bulletin (see
§601.601(d)(2)(ii)(b) of this chapter). The
last day of the final year reflected in the
experience data must be less than 3 years
before the first day of the first plan year for
which the substitute mortality tables are to
apply. For example, if July 1, 2009, is the
first day of the first plan year for which
the substitute mortality tables will be used,
then an experience study using calendar
year data must include data collected for a
period that ends no earlier than December
31, 2006.
(B)Amounts-weighted mortality rates.
The amounts-weighted mortality rate for
an age is equal to the quotient determined
by dividing the sum of the accrued bene-
fits (or payable benefits, in the case of in-
dividuals in pay status) for all individuals
at that age at the beginning of the year who
died during the year, by the sum of the ac-
crued benefits (or payable benefits, in the
case of individuals in pay status) for all in-
dividuals at that age at the beginning of the
year, with appropriate adjustments for in-
dividuals who left the relevant plan pop-
ulation during the year for reasons other
than death. Becauseamounts-weighted
mortality rates for a plan cannot be deter-
mined without accrued (or payable) bene-
fits, the mortality experience study used to
develop a base table cannot include peri-
ods before the plan was established.
(C)Grouping of ages. Amounts-
weighted mortality rates may be derived
from amounts-weighted mortality rates
for age groups. The Commissioner, in
revenue rulings, notices, or other guid-
ance published in the Internal Revenue
Bulletin (see §601.601(d)(2)(ii)(b)ofthis
chapter), may specify grouping rules (for
example, 5-year age groups, except for
extreme ages such as ages above 100
or below 20) and methods for develop-
ing amounts-weighted mortality rates for
individual ages from amounts-weighted
mortality rates initially determined for
each age group.
(D)Base table construction.The
base tables must be constructed from the
amounts-weighted mortality rates deter-
mined in paragraph (c)(2)(ii)(B) of this
section. The base tables must be con-
October 6, 20088072008–40 I.R.B.

structed either directly through graduation
of the amounts-weighted mortality rates or
indirectly by applying a level percentage
to the applicable mortality table set forth in
§1.430(h)(3)–1, provided that the adjusted
table sufficiently reflects the mortality ex-
perience of the plan. The Commissioner
also may permit the use of other recog-
nized mortality tables in the construction
of base tables, applying a similar mortality
experience standard.
(iii)Base year requirements. The base
year is the calendar year that contains
the day before the midpoint of the expe-
rience study period. If the base table is
constructed by applying a level percent-
age to a table set forth in §1.430(h)(3)–1,
then the percentage must be applied to
the table under §1.430(h)(3)–1 after it
has been projected to the base year us-
ing Projection Scale AA, as set forth in
§1.430(h)(3)–1(d). Thus, for example, if
the base year of the mortality experience
study is 2005, the applicable base (year
2000) mortality rates must be projected 5
years prior to determining the level per-
centage to be applied to the applicable
projected base (year 2000) mortality rates.
(iv)Change in number of individuals
covered by table. Experience data cannot
be used to develop a base table if the num-
ber of individuals in the population cov-
ered by the table (for example, the male an-
nuitant population) as of the last day of the
plan year before the year the request to use
substitute mortality tables is made, com-
pared to the average number of individuals
in that population over the years covered
by the experience study on which the sub-
stitute mortality tables are based, reflects
a difference of 20 percent or more, unless
it is demonstrated to the satisfaction of the
Commissioner that the experience data is
accurately predictive of future mortality of
that plan population (taking into account
the effect of the change in individuals) af-
ter appropriate adjustments to the data are
made (for example, excluding data from
individuals with respect to a spun-off por-
tion of the plan). For this purpose, a rea-
sonable estimate of the number of individ-
uals in the population covered by the table
may be used, such as the estimated num-
ber of participants and beneficiaries used
for purposes of the PBGC Form 1-ES.
(3)Determination of substitute mortal-
ity tables—(i)In general. A plan’s substi-
tute mortality tables must be generational
mortality tables. Substitute mortality ta-
bles are determined using the base mortal-
ity tables developed pursuant to paragraph
(c)(2) of this section and the projection fac-
tors provided in Projection Scale AA, as
set forth in §1.430(h)(3)–1(d). Under the
generational mortality tables, the probabil-
ity of an individual’s death at a particu-
lar age is determined as the individual’s
base mortality rate (that is, the applicable
mortality rate from the base mortality ta-
ble for the age for which the probability
of death is being determined) multiplied
by the mortality improvement factor. The
mortality improvement factor is equal to
(1 - projection factor for that age)
n
,where
nisequaltotheprojectionperiod(the
number of years between the base year for
the base mortality table and the calendar
year in which the individual attains the age
for which the probability of death is being
determined).
(ii)Example of calculation.Asanex-
ample of the use of generational mortal-
ity tables under paragraph (c)(3)(i) of this
section, if approved substitute mortality
tables are based on data collected during
2005 and 2006, the base year would be
2005 because 2005 would be the year that
contains the day before the midpoint of
the experience study period. If the tables
show a base mortality rate of .006000 for
male annuitants at age 54, the probabil-
ity of death at age 54 for a male annu-
itant born in 1974 would be determined
using the base mortality rate of .006000,
the age–54 projection factor of .020 (pur-
suant to the Scale AA Projection Factors
set forth in §1.430(h)(3)–1(d)) and a pro-
jection period of 23 years. The projection
period is the number of years between the
base year of 2005 and the calendar year in
which the individual reaches age 54. Ac-
cordingly, the mortality improvement fac-
tor would be .628347 and the probability
of death at age 54 would be .003770.
(4)Separate tables for specified pop-
ulations—(i)In general. Except as pro-
vided in this paragraph (c)(4), separate
substitute mortality tables are permitted to
be used for separate populations within a
gender under a plan only if—
(A) All individuals of that gender in the
plan are divided into separate populations;
(B) Each separate population has cred-
ible mortality experience as provided in
paragraph (c)(4)(iii)ofthissection;and
(C) The separate substitute mortality ta-
ble for each separate population is devel-
oped using mortality experience data for
that population.
(ii)Annuitant and nonannuitant sepa-
rate populations. Notwithstanding para-
graph (c)(4)(i)(B) of this section, substitute
mortality tables for separate populations
of annuitants and nonannuitants within a
gendermaybeusedevenifonlyoneof
those separate populations has credible
mortality experience. Similarly, if sep-
arate populations that satisfy paragraph
(c)(4)(i)(B) of this section are established,
then any of those populations may be fur-
ther subdivided into separate annuitant
and nonannuitant subpopulations, pro-
vided that at least one of the two resulting
subpopulations has credible mortality ex-
perience. The standard mortality tables
under §1.430(h)(3)–1 are used for a re-
sulting subpopulation that does not have
credible mortality experience. For exam-
ple, in the case of a plan that has credible
mortality experience for both its male
hourly and salaried individuals, if the male
salaried annuitant population has credible
mortality experience, the plan may use
substitute mortality tables with respect to
that population even if the standard mor-
tality tables under §1.430(h)(3)–1 are used
for the male salaried nonannuitant popula-
tion (because that nonannuitant population
does not have credible mortality experi-
ence).
(iii)Credible mortality experience for
separate populations. In determining
whether a separate population within a
gender has credible mortality experience,
the requirements of paragraph (c)(1)(ii) of
this section must be satisfied but, in apply-
ing that paragraph (c)(1)(ii), the separate
population should be substituted for the
particular gender. In demonstrating that
an annuitant or nonannuitant population
within a gender or within a separate pop-
ulation does not have credible mortality
experience, the requirements of paragraph
(c)(1)(iii) of this section must be satisfied
but, in applying that paragraph, the annu-
itant (or nonannuitant) population should
be substituted for the particular gender.
(d)Special rules—(1)All plans in con-
trolled group must use substitute mortal-
ity tables—(i)In general. Except as oth-
erwise provided in this paragraph (d)(1),
substitute mortality tables are permitted to
be used for a plan for a plan year only if, for
2008–40 I.R.B.808October 6, 2008

that plan year (or any portion of that plan
year), substitute mortality tables are also
approved and used for each other pension
plan subject to the requirements of section
430 that is maintained by the sponsor and
by each member of the plan sponsor’s con-
trolled group. For purposes of this section,
the termcontrolled groupmeans any group
treated as a single employer under para-
graph (b), (c), (m), or (o) of section 414.
(ii)Plans without credible experi-
ence—(A)In general. For the first year
for which a plan uses substitute mortality
tables, the use of substitute mortality ta-
bles for the plan is not prohibited merely
because another plan described in para-
graph (d)(1)(i) of this section cannot use
substitute mortalitytables because neither
the males nor the females under that other
plan have credible mortality experience
for a plan year. For each subsequent plan
year, the plan sponsor may continue to
use substitute mortality tables for the plan
with credible mortality experience without
using substitute mortality tables for the
other plan only if neither the males nor the
females under that other plan have credible
mortality experience for that subsequent
plan year.
(B)Analysis of mortality experience.
For each plan year in which a plan uses
substitute mortality tables, in order to
demonstrate that the male and female pop-
ulations of another plan maintained by
the plan sponsor (or by a member of the
plan sponsor’s controlled group) do not
have credible mortality experience, the
requirements of paragraph (c)(1)(iii)(B) of
this section must be satisfied for that plan
year. Thus, a plan is not prohibited from
using substitute mortality tables for a plan
year merely because another plan in the
controlled group of the plan sponsor does
not have at least 1,000 male deaths and
does not have at least 1,000 female deaths
in a 4-year period (or a period that is the
length of the experience study period if the
experience study period under paragraph
(c)(2)(ii)(A) of this section is longer than
4 years) that ends less than 3 years before
the first day of that plan year.
(iii)Newly affiliated plans not using
substitute mortality tables—(A)In gen-
eral. The use of substitute mortality tables
for a plan is not prohibited merely because
a newly affiliated plan does not use substi-
tute mortality tables, but only through the
last day of the plan year of the plan using
substitute mortality tables that contains the
last day of the period described in section
410(b)(6)(C)(ii) for either the newly affili-
ated plan or the plan using substitute mor-
tality tables, whichever is later. Thus, for
the following plan year, the mortality ta-
bles prescribed under §1.430(h)(3)–1 ap-
plywithrespecttotheplan(andallother
plans within the plan sponsor’s controlled
group, including the newly affiliated plan)
unless—
(1) Approval to use substitute mortality
tables has been obtained with respect to the
newly affiliated plan pursuant to paragraph
(b)(1) of this section; or
(2) The newly affiliated plan cannot use
substitute mortalitytables because neither
the males nor the females under the plan
have credible mortality experience as de-
scribed in paragraph (c)(1)(ii) of this sec-
tion (as determined in accordance with the
rules of paragraph (d)(1)(iv) of this sec-
tion).
(B)Definition of newly affiliated plan.
Forpurposesofthissection,aplanis
treated as a newly affiliated plan if it be-
comes maintained by the plan sponsor
(or by a member of the plan sponsor’s
controlled group) in connection with a
merger, acquisition, or similar transac-
tion described in §1.410(b)–2(f). A plan
also is treated as a newly affiliated plan
for purposes of this section if the plan is
established in connection with a trans-
fer of assets and liabilities from another
employer’s plan in connection with a
merger, acquisition, or similar transaction
described in §1.410(b)–2(f).
(iv)Demonstration of credible mor-
tality experience for newly affiliated
plan—(A)In general. In general, in the
case of a newly affiliated plan described
in paragraph (d)(1)(iii) of this section, the
demonstration of whether credible mor-
tality experience exists for the plan for a
plan year may be made by either including
or excluding mortality experience data
for the period prior to the date the plan
becomes maintained by a member of the
new plan sponsor’s controlled group. If
a plan sponsor excludes mortality experi-
ence data for the period prior to the date
the plan becomes maintained within the
new plan sponsor’s controlled group, the
exclusion must apply for all populations
within the plan.
(B)Demonstration of credible mor-
tality experience. Regardless of whether
mortality experience data for the period
prior to the date a newly affiliated plan
becomes maintained within the new plan
sponsor’s controlled group is included or
excluded for a plan year, the provisions
of this section, including the demonstra-
tion of credible mortality experience in
accordance with paragraph (c)(1)(ii) of
this section, must be satisfied before sub-
stitute mortality tables may be used with
respect to the plan. Thus, for example,
the plan must meet the rule in paragraph
(c)(2)(ii)(A) of this section that the base
table be based on mortality experience
data for the plan over a 2-year or longer
consecutive period that ends less than 3
years before the first day of the plan year
for which substitute mortality tables will
be used.
(C)Demonstration of lack of credible
mortality experience. In the case of a
newly affiliated plan described in para-
graph (d)(1)(iii) of this section, in order
to demonstrate a lack of credible mortal-
ity experience with respect to a gender
for a plan year, the rules of paragraph
(c)(1)(iii)(B) of this section generally will
apply. However, a special rule applies if
the plan’s mortality experience demonstra-
tion for a plan year is made by excluding
mortality experience for the period prior
to the date the plan becomes maintained
by a member of the new plan sponsor’s
controlled group. In such a case, an em-
ployer is permitted to demonstrate a plan’s
lack of credible mortality experience us-
ing an experience study period of less than
four years, provided that the experience
study period begins with the date the plan
becomes maintained within the sponsor’s
controlled group and ends not more than
one year and one day before the first day of
the plan year with respect to which the lack
of credible mortality experience demon-
stration is made.
(D)Example. The following example
illustrates the application of this paragraph
(d)(1):
Example. (i) Employer A is a corporation and
maintains Plan M, which has a calendar year plan year
and has obtained approval to use substitute mortality
tables for 10 years beginning with the plan year that
begins on January 1, 2009. Employer B is a corpo-
ration and maintains Plan N, which does not use sub-
stitute mortality tables and has a calendar year plan
year. On July 1, 2010, Employer A acquires 100% of
the stock of Employer B.
(ii) Pursuant to paragraph (d)(1)(iii) of this sec-
tion, the maintenance of Plan N within the controlled
group that maintains Plan M does not impair the use
October 6, 20088092008–40 I.R.B.

of substitute mortality tables by Plan M through the
end of the plan year that ends on December 31, 2011.
(iii) Pursuant to paragraph (d)(1)(iii) of this sec-
tion, beginning with the plan year that begins on Jan-
uary 1, 2012, Plan M continues to use substitute mor-
tality tables only if either Plan N obtains approval
to use substitute mortality tables or Employer A can
demonstrate that Plan N does not have credible mor-
tality experience. Pursuant to paragraph (d)(1)(iv)(C)
of this section, Employer A is permitted to either
exclude mortality experience date for the period of
time before July 1, 2010 (the date Plan N became
maintained with Employer A’s controlled group), or
include that mortality experience data for purposes
of demonstrating that Plan N does not have credible
mortality experience. Thus, if there is an experience
study that shows that the male and female popula-
tions of Plan N each do not have 1,000 deaths during
theperiodfromJuly1,2010, through December 31,
2010, then the maintenance of Plan N within the Em-
ployer A’s controlled group does not impair Plan M’s
use of substitute mortality tables for Plan M’s 2012
plan year.
(iv) For Plan M’s 2013 plan year, pursuant to
paragraph (d)(1)(iv)(C) of this section, the main-
tenance of Plan N within Employer A’s controlled
group does not impair Plan M’s use of substitute
mortality tables if there is an experience study that
shows that the male and female populations of Plan
N each do not have 1,000 deaths during the period
from July 1, 2010, through December 31, 2011.
(2)Duration of use of tables. Except
as provided in paragraph (d)(4) of this sec-
tion, substitute mortality tables are used
with respect to a plan for the term of con-
secutive plan years specified in the plan
sponsor’s written request to use such ta-
bles under paragraph (b)(1) of this sec-
tion and approved by the Commissioner,
or such shorter period prescribed by the
Commissioner in the approval to use sub-
stitute mortality tables. Following the end
of such term of use, or following any early
terminationofusedescribedinparagraph
(d)(4) of this section, the mortality tables
specified in §1.430(h)(3)–1 apply with re-
spect to the plan unless approval under
paragraph (b)(1) of this section has been
received by the plan sponsor to use substi-
tute mortality tables for a further term.
(3)Aggregation—(i)Permissive aggre-
gation of plans. In order for a plan spon-
sor to use a set of substitute mortality ta-
bles with respect to two or more plans, the
rules of this section are applied by treating
those plans as a single plan. In such a case,
the substitute mortality tables must be used
for the aggregated plans and must be based
on data collected with respect to those ag-
gregated plans.
(ii)Required aggregation of plans.In
general, plans are not required to be aggre-
gated for purposes of applying the rules of
this section. However, for purposes of this
section, a plan is required to be aggregated
with any plan that was previously spun off
from that plan for purposes of this section
if the Commissioner determines that one
purpose of the spinoff is to avoid the use
of substitute mortality tables for any of the
plans that were involved in the spinoff.
(4)Early termination of use of ta-
bles—(i)General rule. A plan’s substitute
mortality tables cannot be used as of the
earliest of—
(A) The plan year in which the plan fails
to satisfy the requirements of paragraph
(c)(1) of this section (regarding credible
mortality experience requirements and
demonstrations);
(B) The plan year in which the plan fails
to satisfy the requirements of paragraph
(d)(1) of this section (regarding use of sub-
stitute mortality tables by controlled group
members);
(C) The second plan year following the
plan year in which there is a significant
change in individuals covered by the plan
as described in paragraph (d)(4)(ii) of this
section;
(D) The plan year following the plan
year in which a substitute mortality table
used for a plan population is no longer ac-
curately predictive of future mortality of
that population, as determined by the Com-
missioner or as certified by the plan’s ac-
tuarytothesatisfactionoftheCommis-
sioner; or
(E) The date specified in guidance pub-
lished in the Internal Revenue Bulletin (see
§601.601(d)(2)(ii)(b) of this chapter) pur-
suant to a replacement of mortality tables
specified under section 430(h)(3)(A) and
§1.430(h)(3)–1 (other than annual updates
to the static mortality tables issued pur-
suant to §1.430(h)(3)–1(a)(3)).
(ii)Significant change in cover-
age—(A)Change in coverage from time
of experience study. For purposes of ap-
plying the rules of paragraph (d)(4)(i)(C)
of this section, a significant change in the
individuals covered by a substitute mor-
tality table occurs if there is an increase or
decrease in the number of individuals of at
least 20 percent compared to the average
number of individuals in that population
over the years covered by the experience
study on which the substitute mortality
tables are based. However, a change in
coverage is not treated as significant if
the plan’s actuary certifies in writing to
the satisfaction of the Commissioner that
the substitute mortality tables used for the
plan population continue to be accurately
predictive of future mortality of that pop-
ulation (taking into account the effect of
the change in the population).
(B)Change in coverage from time of
certification. For purposes of applying the
rules of paragraph (d)(4)(i)(C) of this sec-
tion, a significant change in the individu-
als covered by a substitute mortality table
occurs if there is an increase or decrease
in the number of individuals covered by
a substitute mortality table of at least 20
percent compared to the number of indi-
viduals in a plan year for which a certifi-
cation described in paragraph (d)(4)(ii)(A)
of this section was made on account of
a prior change in coverage. However, a
change in coverage is not treated as signif-
icant if the plan’s actuary certifies in writ-
ing to the satisfaction of the Commissioner
that the substitute mortality tables used by
the plan with respect to the covered popu-
lation continue to beaccurately predictive
of future mortality of that population (tak-
ing into account the effect of the change in
the plan population).
(e)Effective/Applicability date.This
section applies for plan years beginning on
or after January 1, 2009.
Par. 4. Section 1.431(c)(6)–1 is added
to read as follows:
§1.431(c)(6)–1 Mortality tables used to
determine current liability.
(a)Mortality tables used to determine
current liability. The mortality assump-
tions that apply to a defined benefit plan
for the plan year pursuant to section
430(h)(3)(A) and §1.430(h)(3)–1(a)(2)
are used to determine a multiemployer
plan’s current liability for purposes of
applying the rules of section 431(c)(6).
A multiemployer plan is permitted to ap-
ply either the static mortality tables used
pursuant to §1.430(h)(3)–1(a)(3) or gen-
erational mortality tables used pursuant
to §1.430(h)(3)–1(a)(4) for this purpose.
However, for this purpose, a multiem-
ployer plan is not permitted to use substi-
tute mortality tables under §1.430(h)(3)–2.
(b)Effective/applicability date.This
section applies for plan years beginning on
or after January 1, 2008.
2008–40 I.R.B.810October 6, 2008

Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved July 20, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 30, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 31, 2008, 73 F.R. 44632)
Section 431.—Minimum
Funding Standards for
Multiemployer Plans
26 CFR 1.431(c)(6)–1: Mortality tables used to de-
termine current liability.
Final regulations provide guidance regarding the
mortality tables to be used in determining present
value or making any computation for purposes of
applying certain pension funding requirements. See
T.D. 9419, page 790.
Section 467
.—Certain
Payments fo
rtheUseof
Property or Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
Section 46
8.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
Federal short-term, mid-term, and long-term rates
are set forth for the month of October 2008. See Rev.
Rul. 2008-49, page 811.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
Section 642.—
Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of October 2008. See Rev.
Rul. 2008-49, page 811.
Section 706.—Taxable
Years of Partner and
Partnership
26 CFR 1.706–1: Taxable years of partner and part-
nership.
What criteria must be met in order for tax-exempt
bond partnerships to be eligible to make an election
that enables the partners to take into account monthly
the inclusions required under §§ 702 and 707(c) of
the Code. See Notice 2008-80, page 820.
Section 80
7.—Rules for
Certain Re
serves
The adjust
ed applicable federal short-term, mid-
term, and l
ong-term rates are set forth for the month
of October
2008. See Rev. Rul. 2008-49, page 811.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments Issued for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate and the
long-term exempt rate.For purposes of
sections 382, 642, 1274, 1288, and other
sections of the Code, tables set forth the
rates for October 2008.
Rev. Rul. 2008–49
This revenue ruling provides various
prescribed rates for federal income tax
purposes for October 2008 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month
for purposes of section 1274(d) of the
Internal Revenue Code. Table 2 contains
the short-term, mid-term, and long-term
adjusted applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the ap-
propriate percentages for determining the
low-income housing credit described in
section 42(b)(2) for buildings placed in
service during the current month. Finally,
Table 5 contains the federal rate for deter-
mining the present value of an annuity, an
interest for life or for a term of years, or
a remainder or a reversionary interest for
purposes of section 7520.
October 6, 20088112008–40 I.R.B.

REV. RUL. 2008–49 TABLE 1
Applicable Federal Rates (AFR) for October 2008
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR2.19%2.18%2.17%2.17%
110% AFR2.41%2.40%2.39%2.39%
120% AFR2.64%2.62%2.61%2.61%
130% AFR
2.85%
2.83%2.82%2.81%
Mid-term
AFR3.16%3.14%3.13%3.12%
110% AFR3.48%
3.45%
3.44%3.43%
120% AFR3.81%3.77%
3.75%
3.74%
130% AFR4.12%4.08%4.06%
4.05%
150% AFR
4.77%4.71%4.68%4.66%
175% AFR5.58%5.50%5.46%5.44%
Long-term
AFR4.32%4.27%
4.25%
4.23%
110% AFR4.76%4.70%4.67%
4.65%
120% AFR
5.19%5.12%5.09%5.07%
130% AFR
5.63%5.55%5.51%5.49%
REV. RUL. 2008–49 TABLE 2
Adjusted AFR for October 2008
Period for Compounding
AnnualSemiannua
l
QuarterlyMonthly
Short-term adjusted
AFR
1.75%
1.74%1.74%1.73%
Mid-term adjusted AFR2.97%
2.95%
2.94%2.93%
Long-term adjusted
AFR
4.45%
4.40%4.38%4.36%
REV. RUL. 2008–49 TABLE 3
Rates Under Section 382 for October 2008
Adjusted federal long-term rate for the current month
4.45%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)4.65%
REV. RUL. 2008–49 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for October 2008
Appropriate percentage for the 70% present value low-income housing credit7.87%
Appropriate percentage for the 30% present value low-income housing credit3.37%
2008–40 I.R.B.812October 6, 2008

REV. RUL. 2008–49 TABLE 5
Rate Under Section 7520 for October 2008
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest3.8%
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
Section 7872.—Treatment
of Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2008. See Rev. Rul. 2008-49, page 811.
October 6, 20088132008–40 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Guidance Regarding WHFITs
Notice 2008–77
SECTION I: PURPOSE
This notice informs trustees and mid-
dlemen of widely held fixed investment
trusts (WHFITs) that the Internal Revenue
Service (Service) will not assert penalties
under § 1.671–5(m) of the Income Tax
Regulations with respect to calendar year
2008. This notice also informs trustees and
middlemenofwidelyheldmortgagetrusts
(WHMTs) that, pending future published
guidance, certain modifications of mort-
gages held by a WHMT that has entered
into a guarantee arrangement are not re-
quired to be reported under the WHFIT re-
porting rules.
SECTION II: BACKGROUND
A WHFIT is an arrangement classified
as a trust under § 301.7701–4(c), provided
that: (i) the trust is a United States per-
son under § 7701(a)(30)(E); (ii) the ben-
eficial owners of the trust are treated as
owners under subpart E, part I, subchapter
J, chapter 1 of the Code; and (iii) at least
one interest in the trust is held by a mid-
dleman. See § 1.671–5(b)(22). A WHMT
is a WHFIT the assets of which consist
only of mortgages, regular interests in a
REMIC, interests in another WHMT, rea-
sonably required reserve funds, amounts
received with respect to these assets, and
during a brief initial funding period, cash
and short-term contracts to purchase these
assets. See § 1.671–5(b)(23).
SECTION III: PENALTY RELIEF
Section 1.671–5(n) provides that the
WHFIT reporting rules are applicable
January 1, 2007. The preamble to final
regulations under § 1.671–5 (T.D. 9308,
2007–8 I.R.B. 523 [71 FR 78351]) (De-
cember 29, 2006) informed trustees and
middlemen that the Service would not im-
pose any penalties that would otherwise
apply as a result of a failure to comply with
the WHFIT reporting rules with respect
to the 2007 calendar year in cases where
the trustee or middleman was unable to
change its information reporting systems
to comply with the WHFIT reporting rules.
Recent comments received by the
Service indicate that although WHFIT
trustees and middlemen have taken steps
to implement the WHFIT reporting rules,
additional time is needed to update the
computer and information systems of
trustees and middlemen to fully comply
with them. These commentators have
requested that the Service not assert penal-
ties under the WHFIT reporting rules
with respect to the 2008 calendar year. In
response to these requests, this notice in-
forms middlemen and trustees of WHFITs
that the Service will not assert penalties
as a result of a failure to comply with the
WHFIT reporting rules with respect to
calendar year 2008.
SECTION IV: REPORTING
EXCEPTION FOR CERTAIN
MORTGAGE MODIFICATIONS
The Treasury Department and the Ser-
vice have determined that pending the pub-
lication of future guidance certain modifi-
cations, under the circumstances described
below, that are made to mortgage loans
held by a WHMT need not be reported in
cases where a guarantee arrangement com-
pensates the trust or all the trust interest
holders for any shortfalls that would other-
wise be experienced as a result of the mod-
ification.
Specifically, this notice excepts from
reporting under § 1.671–5(c)(2)(iv) of the
WHFIT rules any modification made to
mortgage loans held by a WHMT if all of
the following conditions are satisfied:
(1) The WHMT directly holds mort-
gage loans that are secured by real prop-
erty;
(2) The WHMT modifies a mortgage
loan under circumstances that do not cause
the trust to be classified other than as a
trust as a result of the modification (a
“Modification”) (for example because the
Modification does not result in there be-
ing a power to vary the investment under
§ 301.7701–4(c));
(3) The WHMT has entered into a guar-
antee arrangement that requires the guar-
antor to pay to the WHMT any shortfalls
in payments from the mortgage loans held
by the WHMT (including as a result of a
Modification) to the extent that mortgage
loan payments are insufficient to make re-
quired distributions totrust interest hold-
ers under the governing documents of the
WHMT; and
(4) The Modification and the guaran-
tee arrangement, taken together, are such
that the stated interest rate and the aggre-
gate amount of the principal payments paid
with respect to every trust interest of the
WHMT is not altered by the Modification.
Any future guidance eliminating or
modifying this exception will allow rea-
sonable time for WHMT trustees and
middlemen to alter their computer and
information reporting systems to comply
with the change.
SECTION V: REQUEST FOR
COMMENTS
The Treasury Department and the
Service request comments regarding the
scope and description of the reporting ex-
ception described in SECTION IV in the
notice. Comments should be submitted on
or before November 1, 2008, and should
include a referenceto Notice 2008–77.
Send submissions to CC:PA:LPD:RU
(Notice 2008–77), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, D.C.
20044. Submissions may be hand-de-
livered Monday through Friday between
the hours of 8:00 a.m. and 4:00 p.m.
toCC:PA:LPD:RU(Notice
2008–77), Courier’s Desk, Internal
Revenue Service, 1111 Constitution
Avenue, NW, Washington, DC
20224,or sent electronically
via the following email address:
Comments@irscounsel.treas.gov.Please
include the notice number 2008–77
in the subject line of any electronic
communication. All materials submitted
will be available for public inspection and
copying.
SECTION VI: EFFECTIVE DATE
This notice is effective September 12,
2008. Trustees and middlemen may apply
Section IV of this notice as of January 1,
2007.
2008–40 I.R.B.814October 6, 2008

SECTION VII: DRAFTING
INFORMATION
The principal author of this notice is
Faith P. Colson of the Office of Associate
Chief Counsel (Passthroughs & Special In-
dustries). For further information regard-
ing this notice, contact Faith P. Colson at
(202) 622–3060 (not a toll-free call).
Tax-Exempt Housing Bonds
and 2008 Housing Legislation
Notice 2008–79
SECTION 1. Purpose
This notice provides guidance regard-
ing certain provisions affecting tax-exempt
bonds and related matters under the Hous-
ing Assistance Tax Act of 2008, Division
C of Pub. L. No. 110–289, enacted on
July 30, 2008 (“2008 Housing Act”). Sec-
tion 3021 of the 2008 Housing Act amends
§§ 143 and 146 of the Internal Revenue
Code (“Code”) to provide a temporary $11
billion increase in the annual private activ-
ity bond volume cap under § 146 for qual-
ified housing issues and to allow the use
of qualified mortgage bonds to refinance
certain subprime mortgage loans. (Except
as otherwise provided, section references
in this notice are to the Code.) This notice
provides guidance on allocations, carryfor-
wards, information reporting, and uses of
this additional bond volume cap, and guid-
ance on the use of qualified mortgage rev-
enue bonds to refinance certain subprime
mortgage loans. In addition, § 3005 of
the 2008 Housing Act amends § 142(d)(2)
of the Code to disregard basic housing al-
lowance payments to military members at
certain military bases for purposes of ap-
plicable low-income set-aside income lim-
itations under § 42 and § 142. This no-
tice lists certain affected military bases.
Section 3023 of the 2008 Housing Act
provides temporary authority to Federal
Home Loan Banks to guarantee certain
tax-exempt bonds. This notice provides
guidance on tax-exempt bonds eligible for
such guarantees.
SECTION 2. Background
Section 103(a) provides that interest on
bonds issued by States or political sub-
divisions thereof is excluded from gross
income upon satisfaction of certain re-
quirements. Sections 142(a)(7) and 142(d)
authorize the issuance of tax-exempt mul-
tifamily housing bonds to finance quali-
fied residential rental projects with certain
low-income set-aside limitations. Income
determinations for purposes of compliance
with these low-income set-aside limi-
tations are made under § 142(d)(2)(B).
Section 143 authorizes the issuance of
tax-exempt qualified mortgage bonds to
finance owner-occupied single-family
housing mortgages upon satisfaction of a
number of program requirements. Section
143(a)(2)(D) generally requires proceeds
of qualified mortgage bonds to be used
to originate loans within a 42-month pe-
riod after the issue date of the bonds and
unused proceeds remaining at the end of
such 42-month period to be used to redeem
bonds (the “42-month loan origination
period”). Section 146 imposes an annual
bond volume cap on most tax-exempt pri-
vate activity bonds, including qualified
mortgage bonds under § 143 and tax-ex-
empt bonds for qualified residential rental
projects under § 142(a)(7). Section 25
allows an issuer to exchange tax-exempt
bond volume cap under § 146 with respect
to qualified mortgage bonds under § 143
for authority to issue certain mortgage
credit certificates. Section 42 provides a
low-income housing tax credit for certain
projects which, among other things, meet
low-income set-aside limitations similar
to those applicable to tax-exempt bonds
for qualified residential rental projects
under § 142(d). Section 42(g)(4) provides
that § 142(d)(2)(B) applies for purposes
of determining whether a project qualifies
for the low-income housing tax credit.
SECTION 3. Allocation,
Carryforward, Use, and Reporting of
Additional Bond Volume Cap under
§ 3021(a) of the 2008 Housing Act
3.1General Volume Cap under § 146 of
the Code
Section 146 generally provides a uni-
fied annual state tax-exempt private ac-
tivity bond volume cap for most private
activity bonds and § 146(f) provides
a three-year carryforward mechanism
for unused bond volume cap. Section
146(d)(1) provides that the State ceiling
applicable to any State for any calendar
year is the greater of: (A) an amount equal
to $75 multiplied by the State popula-
tion, or (B) $225,000,000. Pursuant to
§ 103(c)(2), the term “State” includes the
District of Columbia and any possession
of the United States. Section 146(d)(2)
provides for inflation adjustments to the
amounts described in § 146(d)(1) for cal-
endar years after 2002. Section 146(d)(4)
provides for an adjustment to the bond
volume cap for certain United States pos-
sessions. For purposes of this notice, this
general bond volume cap or State ceil-
ing provided to States for private activity
bonds under § 146(d)(1) is referred to as
“General Volume Cap” to distinguish it
from “2008 Housing Act Volume Cap,” as
defined below.
3.22008 Housing Act Volume Cap
Section 3021(a)(1) of the 2008 Housing
Act adds new § 146(d)(5) which authorizes
a temporary increase in the annual State
private activity bond volume cap for 2008
(“2008 Housing Act Volume Cap”) for use
only for bonds for “qualified housing is-
sues” as defined below, that are issued af-
ter the date of enactment of the 2008 Hous-
ing Act and by the end of calendar year
2010. Section 146(d)(5)(A) provides that,
for calendar year 2008, the State ceiling for
each State shall be increased by an amount
equal to $11,000,000,000 multiplied by a
fraction: (i) the numerator of which is the
State ceiling for theState for calendar year
2008 (determined without regard to the in-
crease in § 146(d)(5)(A)), and (ii) the de-
nominator of which is the sum of the State
ceilings determined under clause (i) for all
States. Section 146(d)(5)(B)(i) provides
that the 2008 Housing Act Volume Cap
may be allocated only to finance “qualified
housing issues.” Section 146(d)(5)(B)(ii)
defines the term “qualified housing issue”
as: (I) an issue for qualified residential
rental projects under § 142(a)(7), or (II)
a qualified mortgage issue (determined by
substituting a 12-month origination period
for the 42-month origination period under
§ 143(a)(2)(D)(i)).
3.3Allocation of 2008 Housing Act
Volume Cap
Interpretative questions have arisen re-
garding allocations of the 2008 Housing
Act Volume Cap to each of the States and
whether and to what extent the District of
October 6, 20088152008–40 I.R.B.

Columbia and possessions of the United
States receive allocations of the 2008
Housing Act Volume Cap. In this regard,
§ 103(c)(2) defines a “State” for purposes
of the tax-exempt bond provisions of the
Code, including § 146, as amended by the
2008 Housing Act, to include the District
of Columbia and any possession of the
United States. Further, in determining
2008 General Volume Cap for this pur-
pose, although § 146(d)(4) provides an
adjustment for certain possessions, this
adjustment only affects the amount deter-
mined under § 146(d)(1)(A).
The following list provides the alloca-
tions of 2008 Housing Act Volume Cap to
the States, the District of Columbia, and
possessions of the United States. These
allocations are based on the 2008 General
Volume Cap, determined using the popu-
lation figures provided in Notice 2008–22,
2008–8 I.R.B. 465, and reflecting the Cost-
of-Living Adjustments for 2008 contained
in Rev. Proc. 2007–66, 2007–45 I.R.B.
970.
Area
Allocation
Alabama
144,908,544
Alaska
96,550,479
American Samoa
96,550,479
Arizona198,480,840
Arkansas
96,550,479
California
1,144,564,324
Colorado
152,225,095
Connecticut
109,665,263
Delaware
96,550,479
D.C.
96,550,479
Florida
571,487,942
Georgia298,867,838
Guam
96,550,479
Hawaii
96,550,479
Idaho
96,550,479
Illinois
402,442,519
Indiana
198,685,435
Iowa
96,550,479
Kansas
96,550,479
Kentucky132,810,201
Louisiana
134,429,985
Maine
96,550,479
Maryland
175,923,133
Massachusetts
201,956,503
Michigan
315,371,661
Minnesota162,749,339
Mississippi
96,550,479
Missouri
184,066,548
Montana
96,550,479
Nebraska
96,550,479
Nevada
96,550,479
New Hampshire
96,550,479
New Jersey
271,975,917
New Mexico
96,550,479
New York
604,255,799
North Carolina
283,721,527
North Dakota
96,550,479
Northern Mariana Islands
96,550,479
Ohio
359,055,260
Oklahoma113,266,394
Oregon117,341,342
Pennsylvania389,299,003
Puerto Rico123,416,049
Rhode Island
96,550,479
South Carolina
138,015,397
South Dakota
96,550,479
Tennessee192,780,879
Texas
748,500,523
U.S. Virgin Islands
96,550,479
Utah
96,550,479
2008–40 I.R.B.816October 6, 2008

Area
Allocation
Vermont
96,550,479
Virginia
241,483,115
Washington
202,541,072
West Virginia
96,550,479
Wisconsin
175,400,093
Wyoming
96,550,479
Total11,000,000,000
3.4Use and Carryforward of 2008
Housing Act Volume Cap
New § 146(f)(6), added by § 3021(a)(2)
of the 2008 Housing Act, provides that
any carryforwards of 2008 Housing Act
Volume Cap may be used only for quali-
fied housing issues that are issued by the
end of calendar year 2010. Certain inter-
pretive questions have arisen about alloca-
tions and carryforwards of 2008 Housing
Act Volume Cap in relation to General Vol-
ume Cap.
In order to facilitate prompt and flexi-
ble use of the 2008 Housing Act Volume
Cap to address challenges in the housing
market within the limited time-frame pro-
vided for this purpose, the Internal Rev-
enue Service will afford issuers flexibil-
ity in their use of 2008 Housing Act Vol-
ume Cap and in coordinating the use of
this volume cap with their General Vol-
ume Cap. Accordingly, the 2008 Housing
Act Volume Cap should be tracked and ac-
counted for separately from General Vol-
ume Cap. Further, in this regard, for pur-
poses of both initial allocations and car-
ryforwards of 2008 Housing Act Volume
Cap and General Volume Cap, including,
without limitation, the “first-in, first-out”
ordering rule for carryforwards of Gen-
eral Volume Cap under § 146(f)(3)(B), an
issuer may in its discretion utilize 2008
Housing Act Volume Cap or carryforwards
of 2008 Housing Act Volume Cap either
before or after the use of General Volume
Cap or carryforwards of General Volume
Cap.
In applying § 146(f)(2) regarding iden-
tification of carryforward purposes for
2008 Housing Act Volume Cap, it is suf-
ficient to identify such carryforwards for
use for “qualified housing issues.” Thus,
issuers retain the flexibility to use such
carryforwards for the different types of
qualified housing issues as needs dictate.
Further, in order to provide flexibility,
an issuer who files a proper carryforward
election for 2008 Housing Act Volume Cap
may assign any portion of that 2008 Hous-
ing Act Volume Cap to another eligible is-
suer in the state.
3.5Refinancing of Qualified Subprime
Loans under the 2008 Housing Act
Section 3021(b) of the 2008 Housing
Act provides temporary authority under
new § 143(k)(12) to refinance qualified
subprime loans with qualified mortgage
bonds under § 143 that are issued by the
end of calendar year 2010. This provi-
sion applies to qualified mortgage bonds
issued pursuant to General Volume Cap as
well as 2008 Housing Act Volume Cap.
Section 143(k)(12)(A) provides an excep-
tion to the new mortgage requirement un-
der § 143(i)(1) to allow such refinanc-
ings. Section 143(k)(12)(B) provides the
following special rules for such refinanc-
ings: (i) the general 42-month loan orig-
ination period under § 143(a)(2)(D)(i) is
shortened to 12 months; (ii) the rule un-
der § 143(d) limiting borrowers to those
who had no ownership interest in a home
in the preceding three years is inapplica-
ble; and (iii) the purchase price limitation
under § 143(e) applies based on the market
value of the residence at the time of refi-
nancinginlieuoftheacquisitioncost.
Section 143(k)(12)(C) defines the term
“qualified subprime loan” to mean an
adjustable rate single-family residential
mortgage loan made after December 31,
2001 and before January 1, 2008 that the
bond issuer determines would be reason-
ably likely to cause financial hardship to
the borrower if not refinanced. For this
purpose, issuers may base determinations
with respect to likely financial hardship to
borrowers on reasonable estimates made
in good faith.
For qualified subprime loan refinanc-
ings to be funded from qualified mortgage
bonds that have received an allocation of
General Volume Cap (as opposed to 2008
Housing Act Volume Cap), an issuer may
make proceeds of such bonds available for
use for qualified subprime loan refinanc-
ings during the permitted 12-month origi-
nation period for such loans, and then ei-
ther redeem bonds from unused proceeds
or make such proceeds available for regu-
lar qualified mortgage loans under § 143
for the balance of the permitted 42-month
origination period for such loans under the
general rules for qualified mortgage bonds
under § 143(a)(2)(D) before redemption of
bonds from unused proceeds. Qualified
mortgage bonds that receive an allocation
of 2008 Housing Act Volume Cap must ap-
ply all unused proceeds to the redemption
of bonds after the 12-month period as pro-
vided in § 146(d)(5)(B)(ii)(II), as added by
§ 3021(a) of the 2008 Housing Act.
3.6Information Reporting and
Carryforward Elections for Use of 2008
Housing Act Volume Cap
Subject to updated IRS information re-
porting forms or procedures, an issuer of
a qualified housing issue that uses 2008
Housing Act Volume Cap should make the
following modifications to the IRSInfor-
mation Return for Tax-Exempt Private Ac-
tivity Bond Issueson Form 8038 filed with
respect to the issue:
1. Report the bond issue on Line 20c of
IRS Form 8038;
2. If the bond issue is an issue described
in § 142(a)(7) (relating to qualified
residential rental projects), enter the
following description: “2008 Hous-
ing Act Qualified Housing Issue un-
der 142”;
3. If the bond issue is a qualified mort-
gage issue (determined by substitut-
ing “12-month period” for “42-month
October 6, 20088172008–40 I.R.B.

period” each place it appears in
§ 143(a)(2)(D)(i)), enter the follow-
ing description: “2008 Housing Act
Qualified Housing Issue under 143”;
4. Issuers of qualified housing issues that
use a carryforward of 2008 Housing
Act Volume Cap should complete line
44bbyattachingacopyoftheIRS
Carryforward Election of Unused Pri-
vate Activity Bond Volume Cap on
Form 8328 filed in accordance with
the procedures described in this notice
for the carryforward of such unused
2008 Housing Act Volume Cap.
Subject to updated IRS information re-
porting forms or procedures, an issuer that
has unused 2008 Housing Act Volume Cap
at the end of calendar year 2008 should
elect this carryforward amount by filing
a separate IRS Form 8328,Carryforward
Election of Unused Private Activity Bond
Volume Cap, on Form 8328 for such car-
ryforward as modified by the following in-
structions:
1. Write across the top of the IRS Form
8328 the following: “Carryforward of
2008 Housing Act Volume Cap”;
2. Complete Part I in accordance with
the instructions on the form, except
that, on line 9, under Report Number,
enter “99” after the preprinted “9”;
3. Complete Part II by entering the fol-
lowing amounts:
a. Line 1: Indicate total 2008 Hous-
ingActVolumeCapoftheissuer
as provided in this notice.
b. Line 2: Enter the aggregate
amount of qualified housing is-
sues issued in 2008 that were
taken into account for purposes
of the 2008 Housing Act Volume
Cap.
c. Line 3: Enter the total amount of
2008 Housing Act Volume Cap
exchanged for authority to issue
mortgage credit certificates.
d. Line 4: Skip this line.
e. Line 5: Add lines 2 and 3.
f. Line 6: Enter unused 2008 Hous-
ingActVolumeCap(line1minus
line 5).
g. Skip lines 7 through 10j.
h. Line 11: Enter the total carry-
forward amount of 2008 Housing
Act Volume Cap (not to exceed
line 6).
i. Under “Purpose of Form” in the
instructions, ignore references to
the use of the carryforward for
three calendar years. Carryfor-
wards of 2008 Housing Act Vol-
umeCapmayonlybeusedfor
bonds issued by December 31,
2010.
j. File the IRS Form 8328 by the
due date provided in the instruc-
tions.
Issuers who have both unused General
Volume Cap and 2008 Housing Act Vol-
ume Cap should file separate carryforward
elections for each of those carryforwards.
A carryforward election for General Vol-
ume Cap should follow the instructions
on IRS Form 8328 and a carryforward
election for 2008 Housing Act Volume
Cap should follow the instructions on IRS
Form 8328 with the modifications pro-
vided in this notice.
SECTION 4. Use of 2008 Housing
Act Volume Cap for Mortgage Credit
Certificates
In general, mortgagecredit certificates
under § 25 provide Federal subsidies to
borrowers in the form of Federal tax cred-
its with respect to eligible home mortgage
loans that are similar to the Federal subsi-
dies provided through qualified mortgage
loans at subsidized interest rates financed
with tax-exempt qualified mortgage bonds
under § 143. The program restrictions on
mortgage credit certificates under § 25 are
substantially identical to the program re-
strictions on qualified mortgage bonds un-
der § 143. Section 25(a) allows a taxpayer
a credit against income tax for any taxable
year in an amount equal to the product of
the certificate credit rate and the interest
paid or accrued by the taxpayer during the
taxable year on the remaining principal of
the certified indebtedness amount.
In addition, § 25(c)(2) basically allows
an issuer to elect to exchange unused tax-
exempt private activity bond volume cap
authority under § 146 with respect to qual-
ified mortgage bonds under § 143 for a
prescribed amount ofmortgage certificate
issuance authority.Section 146(n) pro-
vides that the applicable private activity
bond volume cap authority of any issuer
for any calendar year is reduced by the sum
of the amount of qualified mortgage bonds
that such issuer elects not to issue under
§ 25(c)(2)(A)(ii) during such year, plus the
amount of any reduction in such ceiling
under § 25(f) for noncompliance of such
issuer for such year.
An interpretive question has arisen re-
garding whether an issuer may elect to ex-
change unused authority to issue private
activity bonds with the 2008 Housing Act
Volume Cap under § 146 for authority to is-
sue mortgage credit certificates under § 25.
For calendar years 2008 through 2010, in
determining the amount of private activity
bonds that an issuer may otherwise issue
in such years, § 25(c)(2)(A)(ii) is applied
by taking into account any 2008 Housing
Act Volume Cap authority or carryforward
of such 2008 Housing Volume Cap author-
ity allocated to such issuer. Consequently,
for calendar years 2008 through 2010 an
issuer may elect to exchange such unused
2008 Housing Act Volume Cap authority
under § 146 for mortgage credit certificate
authority under § 25. Consistent with the
requirements of new § 146(d)(5)(B)(ii)(II)
added by § 3021(a) of the 2008 Hous-
ing Act, an issuer may elect to exchange
2008 Housing Act Volume Cap author-
ity for mortgage creditcertificate authority
only if the indebtedness to which the mort-
gage credit certificate relates is incurred
within 12 months of the date of the elec-
tion under § 25(c)(2)(A)(ii) not to issue an
amount of private activity bonds which it
may otherwise issue during the calendar
year under § 146.
In addition, an issuer may elect to issue
mortgage credit certificates to refinance
qualified subprime loans if it otherwise
satisfies the requirements of § 143(k)(12),
as added by § 3021(b) of the 2008 Hous-
ing Act. Any such qualified subprime
loan refinancing must be incurred within
12 months after such election. Further, an
issuer must make any such election with
respect to such mortgage credit certificates
by December 31, 2010.
SECTION 5. Information Reporting of
Subprime Refinancing Loans
Issuers who issue bonds under § 143
of the Code and expect to use the pro-
ceeds for the refinancing of qualified sub-
prime loans under § 143(k)(12), as added
by § 3021 of the 2008 Housing Act, should
attach a schedule to the IRS Form 8038
filed with respect to the issue that indi-
cates the amount of proceeds that are rea-
2008–40 I.R.B.818October 6, 2008

sonably expected to be used to refinance
qualified subprime loans. An issuer must
comply with this information reporting re-
quirement regardless of whether the bonds
are being issued using General Volume
Cap or 2008 Housing Act Volume Cap.
The issuer may determine the amount of
bond proceeds that it expects to use to
refinance qualified subprime loans under
§ 143(k) based on a reasonable good faith
estimate of the amount of bond proceeds
expected to be used for this purpose. Is-
suers who do not in fact utilize the full
amount indicated on the schedule to refi-
nance qualified subprime loans are permit-
ted to apply such unused amounts to the
financing of mortgage loans otherwise eli-
gible to be financed under § 143.
SECTION 6. Exclusion of Military
Basic Housing Allowances from Income
for Certain Purposes Under § 142 and
§42
In general, §§ 142(d) and 42(g) im-
pose similar low-income set-aside restric-
tions on incomes of eligible residents of
prescribed numbers of housing units in
qualified residential rental projects and
qualified low-income housing projects
for purposes of eligibility for tax-exempt
private activity bond financing under
§ 142(a)(7) and for low-income housing
tax credits under § 42, respectively. In
addition, § 142(d)(2)(B) applies to deter-
minations of income both for § 142 and
§42purposes.
Section 3005(a) of the 2008 Hous-
ing Act renumbered § 142(d)(2)(B)
as § 142(d)(2)(B)(i) and added new
§ 142(d)(2)(B)(ii), (iii) and (iv) to the
Code. Section 142(d)(2)(B)(ii) excludes
military basic allowance payments under
§ 403 of title 37, United States Code, from
income for purposes of income limitations
under § 142(d)(2)(B) for certain quali-
fied buildings. Section 142(d)(2)(B)(iii)
defines a “qualified building” to mean
a building located: (I) in any county in
which is located a qualified military instal-
lation to which the number of members of
the Armed Forces of the United States as-
signed to units based out of such qualified
military installation, as of June 1, 2008,
has increased by not less than 20 percent,
as compared to such number on December
31, 2005, or (II) in any county adjacent to
a county described in subclause (I). Sec-
tion 142(d)(2)(B)(iv) defines a “qualified
military installation” to mean any military
installation or facility that has at least one
thousand members of the Armed Forces of
the United States assigned to it as of June
1, 2008.
The following list identifies military in-
stallations that are deemed to be qualified
military installations that satisfy the 20
percent population increase requirement
under § 142(d)(2)(B)(iii)(I) for purposes of
the exclusion of basic housing allowance
payments to military members in deter-
mining income under § 142(d)(2)(B). The
Internal Revenue Service will update this
list if it receives additional information
indicating that other military installations
should receive the same treatment. Issuers
may rely on this list for income determi-
nations made after the date of enactment
of the 2008 Housing Act and before any
successor list is published. The follow-
ing list is not meant to be exclusive and
any qualified military installation within
the meaning of § 142(d)(2)(B)(iv) which
satisfies the percentage requirements of
§ 142(d)(2)(B)(iii)(I) would be eligible to
receive similar treatment regardless of its
failure to be included in this list or in any
future updates.
Name of Military Installation
State
U.S. Air Force AcademyColorado
Fort ShafterHawaii
Fort RileyKansas
Annapolis Naval Station (including U.S. Naval Academy)Maryland
Fort JacksonSouth Carolina
Fort BlissTexas
Fort HoodTexas
Dam Neck Training Center AtlanticVirginia
Naval Station BremertonWashington
Section 3005(b) of the 2008 Housing
Act limits the scope of application of this
exclusion of basic housing allowances
from income under § 142(d)(2) in a num-
ber of significant technical respects, as
described therein. Further, this exclusion
is inapplicable to tax-exempt bonds for
qualified residentialrental projects issued
under § 142(a)(7) unless the project also
receives low-income housing tax credits
under § 42.
SECTION 7. Temporary Authority
for Federal Home Loan Banks to
Guarantee Tax-Exempt Bonds
Section 3023 of the 2008 Housing
Act added new § 149(b)(3)(A)(iv) to
provide a temporary exception to the
general restriction against Federal guaran-
tees of tax-exempt bonds under § 149(b)
for certain guarantees made by Federal
Home Loan Banks. In particular, new
§ 149(b)(3)(A)(iv) provides that this Fed-
eral guarantee restriction is inapplicable
to a guarantee by a Federal Home Loan
Bank made in connection with the “origi-
nal issuance” (emphasis added) of a bond
during the period beginning on the date
of enactment of the 2008 Housing Act
and ending on December 31, 2010 (or
a renewal or extension of a guarantee
so made). Section 3023(b) of the 2008
Housing Act also adds new § 149(b)(3)(E)
which requires guarantees by a Federal
Home Loan Bank to meet certain safety
October 6, 20088192008–40 I.R.B.

and soundness collateral requirements as
described therein.
An interpretive question has arisen
regarding the meaning of an “original is-
suance” during the relevant period and
whether both bonds for new money pur-
poses (e.g., to finance construction or
acquisition costs in the first instance) and
refunding bonds for refinancing purposes
may be treated as originally issued during
the relevant period and thereby be eligible
for Federal Home Loan Bank guarantees.
For this purpose, any tax-exempt bond,
including a bond for new money purposes
and a bond that is part of a refunding issue
(as defined in § 1.150–1(d) of the Income
Tax Regulations) that is issued during the
relevant period may be eligible for Federal
Home Loan Bank guarantees under new
§ 149(b)(3)(A)(iv).
SECTION 8. Effective Date
This notice is effective as of the date of
enactment of the 2008 Housing Act on July
30, 2008.
SECTION 9. Effect on Other
Documents
Notice 88–80, 1988–2 C.B. 396, is
modified to the extent provided by Section
6 of this notice for the periods applicable
under section 3005 of the 2008 Housing
Act.
SECTION 10. Paperwork Reduction
Act
The information collection contained in
this notice has been approved by the Of-
fice of Management and Budget (OMB) in
accordance with the Paperwork Reduction
Act (44 U.S.C. chapter 35) under control
number 1545–2119. Under the Paperwork
Reduction Act, an agency may not conduct
or sponsor and a person is not required to
respondtoacollectionofinformationun-
less it displays a valid OMB control num-
ber.
The collections of information in this
notice are in Section 3.6 and Section 5.
The information is required in order to
report tax-exempt bond issues that re-
ceive allocations of the 2008 Housing Act
Volume Cap, to report the carryforward
of unused amounts of 2008 Housing Act
Volume Cap, and to report the estimated
amount of proceeds expected to be used to
refinance qualified subprime loans. This
information will be used to quantify the
use and carryforward of 2008 Housing
Act Volume Cap and the refinancing of
qualified subprime loans. The collections
of information are mandatory. The likely
respondents are state or local governmen-
tal issuers of tax-exempt housing bonds.
We estimate the total number of respon-
dents to be 100 and the total annual re-
sponses to be 150. We estimate it will take
2 hours to comply. Estimates of the annu-
alized cost to respondents for the hour bur-
dens shown are not available at this time.
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 11. Drafting Information
The principal authors of this notice
are Aviva M. Roth and Carla Young of
the Office of Associate Chief Counsel
(Financial Institutions & Products). For
further information regarding this notice,
contact Aviva M. Roth or Carla Young at
(202) 622–3980 (not a toll-free call).
Tax-Exempt Bond
Partnerships: Eligibility
for Monthly Closing Elections
Notice 2008–80
SECTION 1. Purpose.
In order to provide greater adminis-
trative certainty in a major short-term
sector of the tax-exempt bond market in
response to taxpayerrequests and to pro-
mote stability in this sector of the market,
the Treasury Department and the Inter-
nal Revenue Service (“IRS”) propose to
issue a revenue procedure substantially
intheformincludedinsection5ofthis
notice. The proposed revenue procedure
would modify and supersede Rev. Proc.
2003–84, 2003–2 C.B. 1159. The pro-
posed revenue procedure would provide
certain more specific eligibility criteria
that partnerships that invest in tax-exempt
bonds must meet to qualify for monthly
closing elections to allow the partners to
take into account monthly the inclusions
required under §§ 702 and 707(c) of the In-
ternal Revenue Code of 1986, as amended
(the “Code”). The Treasury Department
and the IRS are issuing this guidance in
proposed form to afford an opportunity for
public comment and to limit any potential
impact on the current market.
SECTION 2. Request for Comments.
The Treasury Department and the IRS
seek public comments on all aspects of the
proposed revenue procedure, including
comments on ways to facilitate market
innovation consistent with promoting
administrative certainty and sound tax pol-
icy. The Treasury Department and the IRS
seek specific public comment on whether
or under what circumstances the proposed
revenue procedure should apply when the
variable interest holder has a minimum
gain share percentage of less than five
percent, such as circumstances in which
the variable-rate interest holders receive
particular rights to control sales of under-
lying tax-exempt bond assets held by a
tax-exempt bond partnership. The Trea-
sury Department and the IRS also seek
specific comment on whether or under
what circumstances the proposed revenue
procedure should be expanded to allow
qualifying income from assets beyond
original assets of the partnership referred
to in § 4.02(3) of the proposed revenue
procedure. The Treasury Department and
the IRS also seek specific comment on
whether or under what circumstances the
proposed revenue procedure should be
expanded to allow application to any other
types of transactions besides the contem-
plated tax-exempt bond partnerships.
Before the proposed revenue procedure
described in this notice is made effective,
consideration will be given to any written
public comments on this notice that are
submitted in a timely fashion by December
15, 2008. A signed original and eight (8)
copies of public comments should be sent
by mail to the IRS at CC:PA:LPD:PR (ref-
erence IRS Notice 2008–80), Room 5203,
Internal Revenue Service, PO Box 7604,
Ben Franklin Station, Washington, DC
20044. Public comments also may be sent
electronically, via the IRS Internet site at
www.irs.gov/regsor via the Federal eRule-
making portal atwww.regulations.gov
(reference IRS Notice 2008–80). All
2008–40 I.R.B.820October 6, 2008

comments will be available for public
inspection and copying.
SECTION3. EffectiveDateand
Immediate Elective Reliance.
This notice is effective on September
17, 2008. The proposed revenue procedure
is proposed to apply generally to tax-ex-
empt bond partnerships with a start-up date
that occurs on or after the date that is 30
days after the final revenue procedure is re-
leased to the public, subject to the special
rules set forth in the effective date provi-
sions in section 9 of the proposed revenue
procedure.
At their option, eligible tax-exempt
bond partnerships may rely immediately
on the proposed revenue procedure to
make monthly closing elections in accor-
dance with the proposed revenue proce-
dure effective with respect to any such
monthly closing elections that are made
on or after September 17, 2008. Eligible
tax-exempt bond partnerships also may
continue to rely on Rev. Proc. 2003–84
until the proposed revenue procedure is
finalized and made effective.
SECTION 4. Drafting Information.
The principal author of this notice is
Frank J. Fisher of the Office of Associate
Chief Counsel (Passthroughs & Special
Industries). For further information re-
garding this revenue procedure, contact
Frank J. Fisher at (202) 622–3050 (not a
toll-free call).
SECTION 5. Form of Proposed
Revenue Procedure.
Set forth below is the form of the pro-
posed revenue procedure that is proposed
in this notice:
Form of Proposed Revenue Procedure
Part III
Administrative, Procedural, and Miscella-
neous
26 CFR 1.706–1: Taxable years of partner
and partnership.
(Also Part I, Section(s) 103, 171, 702,
704, 706, 708, 851, 852, 1275, 6001,
6031, 6229, 6231, 6233, 6698, 6722;
301.6031(a)–1, 601.105.)
Rev. Proc. 2009–XX
SECTION 1. Purpose.
In order to provide greater administra-
tive certainty in a major short-term sector
of the tax-exempt bond market in response
to taxpayer requests and to promote stabil-
ity in this sector of the market, this rev-
enue procedure modifies and supersedes
Rev. Proc. 2003–84, 2003–2 C.B. 1159.
This revenue procedure provides certain
more specific eligibility criteria that part-
nerships that invest in tax-exempt bonds
must meet to qualify for monthly clos-
ing elections to allow the partners to take
into account monthly the inclusions re-
quired under §§ 702 and 707(c) of the In-
ternal Revenue Code of 1986, as amended
(the “Code”). (Except as noted, section
references in this revenue procedure are
to the Code and the Income Tax Regula-
tions.) This revenue procedure provides
rules for partnership income tax reporting
under § 6031 for such partnerships.
SECTION 2. Background.
This revenue procedure provides a
means for certain partnerships that invest
in state or local governmental debt obliga-
tions the interest on which is excludable
from gross income under § 103 (“tax-ex-
empt bonds”) to elect to allow the partners
to take into account monthly the inclu-
sions required under §§ 702 and 707(c).
This revenue procedure applies to certain
partnerships used to create the economic
equivalent of a variable-rate tax-exempt
bond. To create this instrument, a spon-
sor that holds a tax-exempt bond may
transfer the tax-exempt bond to an entity
that qualifies as a partnership for federal
tax purposes (“tax-exempt bond partner-
ship”). The tax-exempt bond partnership
issues two classes of equity interests: (1)
interests that are entitled to a preferred
variable return on its capital payable out
of partnership income (“variable-rate in-
terests”); and (2) interests that are entitled
to all of the remaining income of the
partnership (“inverse interests”). Own-
ers of variable-rate interests and inverse
interests are referred to as “variable-rate
interest holders” and “inverse interest
holders,” respectively.Thevariablereturn
on the variable-rate interests tracks current
short-term tax-exempt bond yields. Un-
der § 702(b), tax-exempt interest income
received by a partnership retains its char-
acter when the partnership allocates the
income to a partner.
Under § 706(a), a partner generally in-
cludes in income for a taxable year the
partner’s allocable share of items of part-
nership income, gain, loss, deduction, and
credit for the partnership’s taxable year
ending within or with the partner’s taxable
year. A partner must also include in in-
come for a taxable year guaranteed pay-
ments under § 707(c) that are taken into ac-
count by the partnership under its method
of accounting in the partnership’s taxable
year ending within or with the partner’s
taxable year. Moreover, for each taxable
year in which a partnership has income, de-
ductions, or credits, § 6031(a) and (b) re-
quires the partnership to file a Form 1065,
U.S. Return of Partnership Income,andto
issue Schedules K–1 (Form 1065) to each
partner.
Annual inclusion of income under
§ 706(a) can be incompatible with the
needs of money market funds and certain
other investors that invest in tax-exempt
bonds. To assist tax-exempt bond partner-
ships to meet the needs of the market for
tax-exempt bonds within the requirements
of the Code, the Treasury Department and
the Internal Revenue Service (“IRS”) are
issuing this revenue procedure to allow
partners in tax-exempt bond partnerships
to take into account on a monthly basis
their distributive shares of partnership
items (“monthly closing”) if the part-
nership has made an effective monthly
closing election with the consent of all
partners (“monthly closing election”). A
partnership may make a monthly closing
election by including a binding provision
to that effect in the partnership’s govern-
ing documents. A partnership that has a
monthly closing election in effect for the
partnership’s entire taxable year and that
meets the other applicable requirements
is not required to file a Form 1065,U.S.
Return of Partnership Income, or to issue
Schedules K–1 (Form 1065) to its partners
for the taxable year.
In the past, to resolve the annual in-
clusion of income problem, many tax-ex-
empt-bond partnerships attempted to make
an election under § 761(a) to be excluded
from the provisions of subchapter K. A
tax-exempt-bond partnership is not eli-
gible to elect to be wholly or partially
excluded from subchapter K, however, and
October 6, 20088212008–40 I.R.B.

an attempted election has no effect. Two
of the requirements for eligibility to make
an election under § 761(a) are that the
partners must own the partnership prop-
erty as co-owners and the partners must
be able to compute their income without
the necessity of computing partnership
taxable income. See § 1.761–2(a)(1) and
(2) of the Income Tax Regulations. If a
business entity (classified as a partner-
ship) owns a tax-exempt bond and issues
membership interests that apportion the
benefits and burdens of that bond to its
members in a manner that differs signifi-
cantly from direct investment in the bond,
the holders of those membership interests
do not satisfy the requirement that they
own the partnership property as co-own-
ers. Cf. § 301.7701–4(c) of the Procedure
and Administration Regulations. More-
over, if one class of partners has a right
to partnership income that is superior to
the right of another class of partners, then
the net partnership income or loss allo-
cated to the partners with inferior rights
to partnership income can be determined
only by computing the net income or loss
of the partnership and then by reducing
that net income by income allocable to
partners with superior rights to partnership
income. Such a partnership does not meet
the requirement of § 1.761–2(a)(1) that
the members of the organization be able to
compute their incomes without the neces-
sity of computing partnership income.
To assist tax-exempt-bond partnerships
to meet the needs of the market for tax-ex-
empt obligations within the requirements
of the Internal Revenue Code, the IRS pre-
viously issued three revenue procedures
on this topic of monthly closing elections.
Rev. Proc. 2002–16, 2002–1 C.B. 572,
was issued to allow money market fund
partners in tax-exempt-bond partnerships
to take into account on a monthly basis
their distributive shares of partnership
items (monthly closing) if the partner-
ship made an effective election under that
revenue procedure (monthly closing elec-
tion). Rev. Proc. 2002–68, 2002–2 C.B.
753, modified and superseded Rev. Proc.
2002–16 to extend the monthly closing
election to all partners in tax-exempt-bond
partnerships and established certain tran-
sition rules. Rev. Proc. 2003–84 modified
and superseded Rev. Proc. 2002–68 to
provide certain simplified income tax re-
porting procedures in response to public
comment. This revenue procedure modi-
fies and supersedes Rev. Proc. 2003–84
to provide certain additional eligibility
conditions and to promote greater admin-
istrative certainty.
This revenue procedure generally is in-
tended to cover tax-exempt bond partner-
ships with certain common characteristics.
These tax-exempt bond partnerships create
variable-rate interests that have character-
istics of investment grade, highly-liquid,
short-term tax-exempt bonds. These fea-
tures often are intended to make the vari-
able-rate interests eligible for investment
by money market funds under Rule 2a–7,
17 C.F.R. § 270.2a–7, under the Invest-
ment Company Act of 1940 (“Rule 2a–7”).
The holders of the variable-rate interests
generally invest a substantial majority of
the capital in the partnership (for example,
often 99 percent of such capital) and the
holders of the inverse interests invest the
balance of such capital.
In general, the variable-rate interest
holders are substantially protected against
risk of loss of their capital investment,
plus accrued distributive shares in the part-
nership by short-term tender option rights
(for example, seven-day demand purchase
options) supported by a creditworthy liq-
uidity provider. The liquidity provider
may be an unrelated third party, an affiliate
of the partnership’s sponsor, or the inverse
interest holder. If the liquidity provider
purchases variable-rate interests under the
liquidity facility, it typically has rights
to reimbursement either from the inverse
interest holder or from sales of partnership
assets in its capacity as a partner. The
variable-rate interest holders, however,
typically are not fully protected against
risk of loss of their capital investments
because such tender options terminate if
certain extraordinary events occur.
A tax-exempt bond partnership eligible
for simplified reporting under this revenue
procedure is a partnership whose primary
purpose is to invest in a relatively fixed
portfolio of investments in tax-exempt
bonds, as contrasted with a partnership
whose primary purpose is to engage in
an active bond trading business which
involves frequent tradingintax-exempt
bond investments.
Tax-exempt bond partnerships have
various unique features that provide broad
benefits to the investing public. Tax-ex-
empt bond partnerships efficiently respond
to a need in the tax-exempt bond mar-
ket to address an imbalance between the
traditional preferences of State and local
governments to issue long-term, fixed-rate
tax-exempt bonds and the significant
demands of institutional investors, partic-
ularly money market funds, to purchase
high-quality, short-term, variable-rate
tax-exempt bonds. Tax-exempt bond part-
nerships also expand the investor base in,
and enhance liquidity and investor pricing
to, the tax-exempt bond market.
SECTION 3. Summary of Changes.
This revenue procedure modifies and
supersedes Rev. Proc. 2003–84. This
section briefly summarizes the changes.
3.01Background. Section 2 of this rev-
enue procedure provides additional back-
ground regarding certain characteristics of
partnerships intended to be covered by this
revenue procedure.
3.02.Additional Eligibility Conditions.
Sections 4.01(5), (6),and (7), respectively,
of this revenue procedure provide addi-
tional conditions to eligibility for a part-
nership to make a monthly closing election
under § 4.01 of this revenue procedure, in-
cluding additional conditions with respect
to tender option termination events, five
percent minimum gain shares to the vari-
able-interest holders, and an eighty percent
weighted average bond maturity date by
which variable-interest holders must have
a right to realize any such gains.
3.03.Effective Dates. Section 9 of this
revenue procedure provides effective date
rules, including a general prospective ef-
fective date, a rule for certain existing part-
nerships which receive new capital, and
certain grandfathering rules.
SECTION 4. Scope.
This revenue procedure applies to eli-
gible partnerships under § 4.01 of this rev-
enue procedure that make a monthly clos-
ing election under § 5 of this revenue pro-
cedure).
4.01Eligible Partnership. An entity
is an eligible partnership for a calendar
month if all of the following conditions are
met:
(1)Test Dates for Income and Expense
Test. As of the election test date and as of
every operational test date that occurs on
or before the end of such calendar month,
the partnership satisfies both the income
2008–40 I.R.B.822October 6, 2008

test and the expense test. The test dates are
described in § 4.05 of this revenue proce-
dure, and the income test and the expense
test are described in §§ 4.02 and 4.03 of
this revenue procedure, respectively.
(2)Partnership Entity. The entity is a
partnership for federal tax purposes.
(3)Allocations. All allocations of in-
come, gain, loss, deduction, and credit of
the partnership are made in accordance
with § 704(b).
(4)Partnership Agreement. A written
partnership agreement (or other governing
document) provides that (a) the entity is
making the monthly closing election under
this revenue procedure; and (b) all partners
consent to the election.
(5)Tender option termination events.
The tender option or put option rights pro-
vided to the variable-rate interest holders
are subject to termination without notice
upon the occurrence of one of the follow-
ing events with respect to a tax-exempt
bond held by the partnership: (i) a bank-
ruptcy filing by or against a tax-exempt
bond issuer; (ii) a downgrade in the credit
rating of a tax-exempt bond and a down-
grade in the credit rating of any guarantor
of the tax-exempt bond, if applicable, to a
rating or ratings, as applicable, below in-
vestment grade; (iii) a payment default on
a tax-exempt bond; or (iv) a final judicial
determination or a final IRS administrative
determination of taxability of a tax-exempt
bond for Federal income tax purposes un-
der § 103.
(6)Share in Appreciation. Upon any
sale or other disposition of any tax-ex-
empt bond held by the partnership, the
variable-rate interest holders shall have the
right to receive a share of the gain from any
such sale or other disposition in an amount
equal to not less than five percent (5%) of
such gain. The partnership shall pay each
required gain share to the variable-rate in-
terest holders by distributing the proceeds
of the sale or other disposition within a rea-
sonable period.
(7)Gain Share Realization Event by
80 Percent of Remaining Weighted Aver-
age Maturity Date. In order to provide
variable-rate interest holders a reasonable
opportunity to realize potential appreci-
ation in the value of tax-exempt bonds
held by a tax-exempt bond partnership,
the partnership shall terminate or other-
wise provide to such holders a right to re-
quire a sale, redemption, or other disposi-
tion of such tax-exempt bonds, with atten-
dant gain share realization potential, by a
date that is no later than the date that repre-
sents 80 percent of the remaining weighted
average maturity of the tax-exempt bonds
held by the partnership, measured from
the date of the partnership’s acquisition
of the tax-exempt bonds, as determined
generally in any reasonable manner that
takes into account the parameters set forth
in this § 4.01(7) (the “80 percent WAM
test”). For this purpose, the weighted av-
erage maturity of applicable tax-exempt
bonds generally shall be determined in a
manner similar to the determination of the
weighted average maturity of tax-exempt
bonds under § 147(b), determined gener-
ally based on issue prices and mandatory
sinking fund redemptions, with further ad-
justments to take into account optional re-
demptions at the first optional par redemp-
tion date and to take into account the part-
nership’s date or dates of acquisition of
the tax-exempt bonds. Further, any rea-
sonable, consistently applied measure may
be used to weight the bonds in lieu of
issue price, if different than the partner-
ship’s acquisition price (for example, issue
price, principal amount, cost, or fair mar-
ket value). Further, for this purpose, a part-
nership may apply the 80 percent WAM
test either separately on a “bond-by-bond”
basis to each group of substantially iden-
tical tax-exempt bonds of the same matu-
rity within the same “issue” (as defined in
§ 1.150–1(c)) held by the partnership, or
collectively on a “portfolio” basis to all
tax-exempt bonds held by the partnership.
4.02Income Test. At least 95 percent of
the partnership’s gross income (computed
without regard to items described in § 4.04
of this revenue procedure) is or is reason-
ably expected to be from the following el-
igible sources:
(1)Tax-exempt Interest. Interest on
tax-exempt obligations as defined in
§ 1275(a)(3) and § 1.1275–1(e).
(2)Exempt-interest Dividends.“Ex-
empt-interest dividends,” as defined in
§ 852(b)(5), that are paid by a “regulated
investment company” (“RIC”), as defined
in § 851(a).
(3)Gains from Eligible Source Income.
Gains from the sale, redemption, or other
disposition of assets generating the income
described in §§ 4.02(1) and (2) of this rev-
enue procedure and income from the tem-
porary investment (for a period no greater
than 7 months) of the proceeds of such a
disposition; but only if the assets that are
sold, redeemed, or disposed are original
assets of the partnership. For this purpose,
an asset is an original asset of the part-
nership if the asset is contributed to the
partnership or is acquired with capital con-
tributed to the partnership (and not with the
proceeds of the sale, redemption, or other
disposition of a partnership asset).
4.03Expense Test. Substantially all
of the partnership’s expenses and deduc-
tions (computed without regard to items
described in § 4.04 of this revenue proce-
dure) are properly allocable to the follow-
ing eligible expense activities:
(1)Expenses for Certain Income.Pro-
ducing, collecting, managing, protecting,
and conserving the income described in
§§ 4.02(1), (2), or (3) of this revenue pro-
cedure or the assets generating the income.
(2)Expenses for Certain Property.
Acquiring, managing, conserving, main-
taining, or disposing of property held for
the production of the income described
in §§ 4.02(1), (2), or (3) of this revenue
procedure.
(3)Expenses for Servicing. Servicing
the equity in the partnership.
4.04Exclusion. For the purposes of
§§ 4.02 and 4.03 of this revenue procedure,
reasonable amounts charged to persons re-
questing information from the partnership
under § 8.03 of this revenue procedure and
the costs of collecting, managing, comput-
ing, and supplying the information are not
taken into account.
4.05Test Dates and Test Periods.The
income test described in § 4.02 of this rev-
enue procedure and the expense test de-
scribed in § 4.03 of this revenue procedure
must be satisfied both as of the first day of
the first month for which the partnership’s
monthly closing election is effective (the
“election test date”) and, beginning with
the fourth month after the partnership’s
monthly closing election becomes effec-
tive, on the last day of each month (the “op-
erational test date”). The partnership de-
termines whether the income test and the
expense test are satisfied as of the elec-
tion test date by reference to the election
test period. The partnership determines
whether the income test and expense test
are satisfied as of each operational test date
by reference to the operational test period.
In applying the income and expense tests
for a test period, a termination of the part-
October 6, 20088232008–40 I.R.B.

nership under § 708(b)(1)(B) during that
period is ignored.
(1)The Election Test Period and
Start-up Date. This § 4.05(1) defines the
terms “election test period” and “start-up
date.” The election test period differs de-
pending upon how long the partnership
has been in existence (determined from its
start-up date). A partnership’s “start-up
date” (“start-up date”) is the later of the
date the entity had more than one owner
and the date the entity had more than a
de minimisamount of assets. If, on the
election test date, the partnership has been
in existence for at least six full calendar
months, then the “election test period” is
the longer of the six full calendar months
preceding the election test date and the
portion of the partnership’s taxable year
that precedes the election test date. If, on
the election test date, the partnership has
not been in existence for at least six full
calendar months, then the “election test
period” is the first six full calendar months
of the partnership’s existence.
(2)The Operational Test Period.The
“operational test period” is the three-cal-
endar-month period consisting of the cal-
endar month within which the operational
test date falls and the preceding two calen-
dar months.
SECTION 5. Making a Monthly
Closing Election.
5.01.Manner of Making the Election.
An eligible partnership makes a monthly
closing election by providing in the en-
tity’s governing documents that (a) the
partnership is making a monthly closing
election that is effective as provided under
§ 5.02 of this revenue procedure, and (b)
all partners consent to the election.
5.02Effective Date of the Election.The
monthly closing election is effective on the
later of: (a) the start-up date of the partner-
ship (as defined in § 4.05(1) of this revenue
procedure); or (b) the first day of the month
in which the provision described in § 5.01
of this revenue procedure is first included
in the entity’s governing documents.
5.03Partnership Terminations under
§ 708(b)(1)(B). A termination of the part-
nership under § 708(b)(1)(B) does not
terminate the monthly closing election and
does not cause the partnership to close its
books under § 1.706–1(c) other than as
describedin§6ofthisrevenueprocedure.
SECTION 6. Monthly Closing of the
Books.
If, at the end of any calendar month,
an eligible partnership has a monthly clos-
ing election in effect, then, with respect
to each partner, the partnership must close
its books as described in § 1.706–1(c)(2)
as if each partner had sold its entire in-
terest in the partnership on the last day
of that month. Each partner must include
in its taxable income for that month both
the partner’s distributive share of items de-
scribed in § 702(a) with respect to the part-
ner that were earned by the partnership
since either the last closing of the books
or the first day of the partnership’s taxable
year (whichever is later) and any guaran-
teed payments under § 707(c) to the part-
ner that are taken into account by the part-
nership since the last closing of the books.
If a partner is on a 52–53 week taxable
year, then the provisions of § 1.441–2(e)
apply as if the last day of the month were
the last day of the partnership’s taxable
year.
SECTION 7. Termination of Monthly
Closing Election and Re-election after
Termination.
7.01.Termination of Monthly Closing
Election. A partnership’s monthly closing
election terminates as of the first day of
the month during which a partnership first
fails to be an eligible partnership under
§ 4.01 of this revenue procedure.
7.02.ConsentofCommissionerfor
Another Election. If the partnership’s
monthly closing election terminates, the
partnership may not make another monthly
closing election without the consent of the
Commissioner.
7.03.Revocation of Election with
Commissioner’s Consent. A partnership’s
monthly closing election may be revoked
only with the consent of the Commis-
sioner.
SECTION 8. Reporting Requirements.
8.01.Initial Filing Requirement.A
partnership must file an abbreviated Form
1065,U.S. Return of Partnership Income,
for the first taxable year during which the
monthly closing election was in effect.
The abbreviated Form 1065 must be filed
by the date that the partnership’s income
tax return for that taxable year would or-
dinarily be due and must be signed by a
person with the authority to sign the part-
nership’s Form 1065. The words “Filed in
Accordance with Rev. Proc. 2009–[IN-
SERT NUMBER OF THIS REVENUE
PROCEDURE]” must be typed or printed
across the top of the form. The partnership
is required to provide only the follow-
inginformationontheabbreviatedForm
1065:
(1) A statement that the partnership has
made an election under this revenue proce-
dure to which all present and future part-
ners consent;
(2) Identification of the partnership by
name, address, and EIN;
(3) The name, title, address, and phone
number of the contact person from whom
partners, beneficial owners, middlemen,
and the IRS may request information about
the partnership;
(4) The issue date of the partnership
interests and the CUSIP (Committee on
Uniform Securities Identification Proce-
dures) number or other identification of
each class of partnership interest;
(5) A statement that the entity’s govern-
ing documents expressly provide that the
entity is making a monthly closing elec-
tion; and
(6) The effective month of the election
and the start-up dateof the partnership.
See § 4.05(1) of this revenue procedure for
a definition of the start-up date.
8.02Annual Filing Requirements.
(1)Elimination of Annual Filing Re-
quirements. A partnership is not required
to file a Form 1065,U.S. Return of Part-
nership Income, or to issue Schedules K–1
(Form 1065) to its partners for any taxable
year if the following requirements are sat-
isfied:
(a) The partnership’s monthly closing
election is effective for the partnership’s
entire taxable year;
(b) The partnership makes the initial fil-
ing described in § 8.01 of this revenue pro-
cedure;
(c) A written partnership agreement (or
other governing document) provides that
(i) the entity and its partners will comply
with the reporting requirements of §§ 8.02,
8.03, and 8.04 of this revenue procedure in
lieu of complying with the requirements of
§ 6031(a) through (d); and (ii) all partners
consent to such reporting; and
2008–40 I.R.B.824October 6, 2008

(d) The partnership complies with the
requirements of §§ 8.03 and 8.04 of this
revenue procedure.
(2)Effect of Elimination of Annual Fil-
ing Requirement. Anentitythatisnotre-
quired to file a partnership return under
this revenue procedure is not required to
file a partnership return under § 6031(a)
and, as a result, is not a partnership as de-
fined under § 6231(a)(1). Consequently,
the entity and its members will not be sub-
ject to the provisions of subchapter C of
chapter 63. An abbreviated Form 1065
used to make the initial filing described in
§ 8.01 of this revenue procedure is not con-
sidered to be a partnership return for pur-
poses of § 6233.
(3)Monthly Closing Election Effective
for Portion of Taxable Year. A partnership
that makes a monthly closing election that
is effective after the first day of its taxable
year must comply with the partnership re-
porting rules of § 6031(a) for that taxable
year (but is still permitted to close its books
on a monthly basis). If the partnership also
makes the initial filing described in § 8.01
of this revenue procedure by the due date
for its return for the first full taxable year
during which the monthly closing election
is in effect, then the partnership qualifies
for elimination of annual filing require-
ments under § 8.01 of this revenue proce-
dure for subsequent taxable years.
(4)Annual Reporting Required. Failure
to qualify for the elimination of annual
filing requirements under § 8.02(1) of this
revenue procedure does not terminate the
partnership’s monthly closing election.
However, a partnership that fails to satisfy
all of the requirements of § 8.02(1) of
this revenue procedure is required to file
a complete (not abbreviated) Form 1065
andtoissueSchedulesK–1(Form1065)
to its partners as required by § 6031(a). A
partnership that fails to file a Form 1065
or to issue Schedules K–1 as required is
subject to the applicable penalties under
§§ 6698 and 6722 for failure to file a
partnership return and to furnish payee
statements, as well as any other applicable
penalties. Moreover, if a partnership is re-
quired to file a return under § 6031(a) but
fails to do so, the period of limitations on
assessment of tax attributable to items of
that partnership remains open indefinitely
under § 6229(a).
8.03.Requests for Information. Within
45 days of a request by the IRS or a part-
ner (or a beneficial owner or a nominee of
a beneficial owner), the partnership must
make available all the information nec-
essary to compute a partner’s taxable in-
come, tax-exempt income, gain, loss, de-
duction, or credit, including sufficient in-
formation for a partner to determine the
portion of the tax-exempt interest that may
be subject to the alternative minimum tax
and information regarding each partner’s
share of any bond premium amortization
under § 171, any market or original issue
discount, and capital gain or loss.
8.04.Nominee and Beneficial Owner-
ship Reporting.
(1) If an eligible electing partner-
ship complies with the requirements of
§§ 8.02 and 8.03 of this revenue proce-
dure, the nominee reporting requirements
of § 6031(c) and the regulations there-
under do not apply. In place of those
requirements, the partnership and the part-
ners must comply with this § 8.04. See
§ 1.6001–1(a) and (e) for rules that apply
to recordkeeping requirements.
(2) Any person on whose behalf another
person holds as a nominee an interest in an
eligible partnership (a beneficial owner),
other than a beneficial owner for which the
relevant advisor or manager agrees to com-
ply with § 8.04(3) of this revenue proce-
dure, shall notify the partnership of its ben-
eficial ownership status and provide the
partnership with:
(a) its name, address, and taxpayer
identification number and the name, ad-
dress, and taxpayer identification number
of its nominee; and
(b) the name of the partnership, its
CUSIP number or other information suf-
ficient to identify the partnership interest,
and the amount of the partnership interest.
(3) In the case of a group of RICs that
is managed or advised by a common, or
affiliated, manager or advisor (the man-
ager), the manager may elect to be respon-
sible for collecting, retaining, and provid-
ing the IRS upon demand the beneficial
ownership information. To make such an
election, the manager must provide each
eligible partnership in which any of the
RICs has an equity interest a statement in-
dicating that it is responsible for collect-
ing, retaining, and providing the IRS upon
demand the beneficial ownership informa-
tion that otherwise would be required to
be provided directly to the eligible partner-
ships by the beneficial owners. In addition,
the manager must provide the partnership
with:
(a) its name, address, and taxpayer
identification number and contact infor-
mation for the person from whom the IRS
can request beneficial ownership informa-
tion; and
(b) the name of the partnership, its
CUSIP number or other information suffi-
cient to identify the partnership interests,
and the amount of the partnership inter-
ests.
SECTION 9. Effective Date.
9.01.In General. Except as otherwise
expressly provided, this revenue proce-
dure applies prospectively to any tax-ex-
empt bond partnership with a “start-up
date” under § 4.05(1) of this revenue pro-
cedure (that is, generally the later of the
date the entity has more than one owner
or more than ade minimisamount of
assets) that occurs on or after[DATE
THAT IS 30 DAYS AFTER THE DATE
THAT THE FINAL VERSION OF THIS
DOCUMENT IS RELEASED TO THE
PUBLIC]. Further, except as otherwise
expressly provided, this revenue pro-
cedure applies to any tax-exempt bond
partnership without regard to its start-up
date if new capital is originally contributed
to the partnership on or after[DATE
THAT IS 30 DAYS AFTER THE DATE
THAT THE FINAL VERSION OF THIS
DOCUMENT IS RELEASED TO THE
PUBLIC]in an amount which has an ag-
gregate fair market value that is greater
than ten percent of the aggregate fair mar-
ket value of the total assets owned by
the partnership on the day before[DATE
THAT IS 30 DAYS AFTER THE DATE
THAT THE FINAL VERSION OF THIS
DOCUMENT IS RELEASED TO THE
PUBLIC]. For purposes of applying the
ten percent new capital test in the preced-
ing sentence, deemedcapital contributions
to a reconstituted partnership as a re-
sult of a partnership termination under
§ 708(b)(1)(B) upon the sale or exchange
of more than 50 percent of the total inter-
ests in a partnership’s capital and profits
within a 12-month period are disregarded.
The IRS will not challenge any tax-ex-
empt bond partnership’s eligibility to use
a monthly closing election on the grounds
that such partnership failed to follow spe-
cific modifications made to Rev. Proc.
October 6, 20088252008–40 I.R.B.

2003–84 by this revenue procedure with
respect to additional eligibility conditions
added in §§ 4.01(5), (6), or (7) of this
revenue procedure (for example, the 5%
minimum gain share condition) to the
extent that such modifications are inappli-
cable to the partnershipunder the effective
date provisions in this § 9.
9.02Grandfathering Rules.
(1)Rev. Proc. 2003–84 Grandfather-
ing Rules. The grandfathering rules in
§ 9.02 of Rev. Proc. 2003–84 continue to
apply to matters covered by such grandfa-
thering rules.
(2)Partnerships under IRS Notice
2008–55. In the case of a partnership that
meets the requirements of § 3.8 of IRS
Notice 2008–55, 2008–27 I.R.B. 11 (July
7, 2008), regarding certain partnerships
that hold certain auction rate preferred
stock and that have certain prescribed liq-
uidity facilities, this revenue procedure
shall apply for purposes of § 3.8 of IRS
Notice 2008–55 as the successor to Rev.
Proc. 2003–84, and in applying this rev-
enue procedure to a partnership under
§ 3.8 of IRS Notice 2008–55, the partner-
ship eligibility conditions in § 4.01(5) and
§ 4.01(7) of this revenue procedure shall
be inapplicable.
SECTION 10. Effect on Other
Documents.
Rev. Proc. 2003–84 is modified and
superseded.
SECTION 11. Paperwork Reduction
Act.
The collection of information contained
in this revenue procedure, carried forward
without change from Rev. Proc. 2003–84,
has been reviewed and approved by the Of-
fice of Management and Budget in accor-
dance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–1768. An agency may not conduct
or sponsor, and a person is not required to
respond to, a collection of information un-
less the collection of information displays
a valid OMB control number. The collec-
tion of information is in section 8 of this
revenue procedure. The collection of in-
formation is required to obtain a benefit,
andisrequiredtoinformtheServicewhich
partnerships are making the monthly clos-
ing election. The likely respondents are
businesses. The estimated total annual re-
porting and recordkeeping burden is 500
hours. The estimated annual burden per re-
spondent/record keeper is
1
/2hour. The es-
timated number of respondents and record
keepers is 1,000. The estimated annual fre-
quency of responses (used for reporting re-
quirements only) is once. 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 re-
turns and tax return information are confi-
dential, as required by 26 U.S.C. 6103.
SECTION 12. No Inferences on Law.
This revenue procedure provides ad-
ministrative relief to address a special
need in the tax-exempt bond market in
furtherance of public policy. No infer-
ences should be drawn from this revenue
procedure regarding any general principle
of substantive law with respect to partner
status or the debt or equity character of
any security.
26 CFR 601.201: Rulings and determination letters.
(Also, Part I, §§ 401; 1.401(b)–1.)
Rev. Proc. 2008–56
SECTION 1. PURPOSE
This revenue procedure modifies Rev.
Proc. 2007–44, 2007–28 I.R.B. 54, with
respect to certain restrictions that apply to
the issuance of opinion and advisory letters
for new pre-approved plans. These restric-
tions were included in Rev. Proc. 2007–44
primarily to ensure that the use of Service
resources to administer the pre-approved
plan program does not adversely affect the
determination letter program. After fur-
ther evaluation and consideration of com-
ments from pre-approved plan sponsors,
the Service is relaxing these restrictions.
In general, the changes in this revenue pro-
cedure apply only to plans that are iden-
tical to mass submitter plans. Since the
plans affected by the changes have, in ef-
fect, already been reviewed and approved,
the Service is able to make the changes
without reducing resources needed for the
determination letter program.
SECTION 2. BACKGROUND
.01 Rev. Proc. 2007–44 provides a sys-
tem of cyclical remedial amendment peri-
ods under § 401(b) of the Internal Revenue
Code for amending plans qualified under
§ 401(a) and obtaining determination let-
ters. Under this system, every pre-ap-
proved plan (that is, a master and pro-
totype (M&P) or volume submitter (VS)
plan) must be submitted to the Service for
a new opinion or advisory letter every six
years, during the one-year submission pe-
riod at the beginning of the plan’s six-year
cycle. Pre-approved defined contribution
plans have a different six-year cycle than
pre-approved defined benefit plans. The
cycles and submission periods are set forth
in section 18 of Rev. Proc. 2007–44.
.02 After the Service issues a new opin-
ion or advisory letter, the pre-approved
plan’s adopting employers must adopt the
newly approved restatement of the plan
within the adoption period announced
by the Service. An eligible employer
that adopts the restated pre-approved
plan within the adoption period will have
adopted the plan within the employer’s
six-year remedial amendment cycle. In
Announcement 2008–23, 2008–14 I.R.B.
731, the Service announced that the adop-
tion period for pre-approved defined con-
tribution plans that have received opinion
or advisory letters under the Economic
Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107–16, (“EGTRRA”)
will end on April 30, 2010.
.03 Certain exceptions to the preceding
rules apply to new pre-approved plans. A
new pre-approved plan is one that is cre-
ated after the submission period for the
applicable six-year cycle. An application
for an opinion or advisory letter for a new
pre-approved plan that is submitted out-
side of the submission period within an ap-
plicable six-year cycle is filed “off-cycle.”
Section 20 of Rev. Proc. 2007–44 pro-
vides the following exceptions to the rules
described in sections 2.01 and 2.02, above:
(1) In order for the adopting employers
of a new pre-approved plan to be eligible
for an applicable six-year cycle, the pre-
approved plan must be submitted to the
Service for an opinion or advisory letter
prior to the beginning of the announced
adoption period for that cycle.
(2) The opinion or advisory letter with
respect to an off-cycle application is not
2008–40 I.R.B.826October 6, 2008

retroactive and may not be relied upon for
theperiodpriortothedateofsubmission
of the application.
(3) A sponsor or practitioner that sub-
mits an application for an opinion or ad-
visory letter within the submission period
for an applicable six-year cycle may not
also submit an off-cycle application for an
opinion or advisory letter.
In accordance with paragraph (2), some
EGTRRA opinion and advisory letters in-
clude a caveat stating that the letter is not
retroactive and may not be relied upon for
theperiodpriortothedateofsubmission
of the application.
.04 Rev. Proc. 2005–16, 2005–1 C.B.
674, which contains the Service’s proce-
dures for the issuance of opinion and ad-
visory letters, contains rules applicable to
“mass submitter” plans, that is, pre-ap-
proved plans that are submitted to the Ser-
vice on a word-for-word identical basis by
a minimum number of sponsoring organi-
zations or practitioners.
SECTION 3. MODIFICATION OF
REV. PROC. 2007–44
.01 Rev. Proc. 2007–44 is modified to
provide the following:
(1)Asponsororpractitionerisnotpre-
cluded from submitting an off-cycle appli-
cation for an opinion or advisory letter on
account of having also submitted an on-cy-
cle application, provided the new appli-
cation is for a plan that is word-for-word
identical to a mass submitter plan that has
received a favorable EGTRRA opinion or
advisory letter, or for which an application
for such a letter is pending, and the new
application is filedaccording to the proce-
dures governing mass submitter plans un-
der Rev. Proc. 2005–16.
(2) Adopting employers of a new pre-
approved plan that isword-for-word iden-
tical to a mass submitter plan will not fail
to be eligible for an applicable six-year cy-
cle merely because the pre-approved plan
is submitted to the Service for an opin-
ion or advisory letter after the beginning of
the announced adoption period for that cy-
cle. Regardless of when the application is
filed or when the opinion or advisory letter
is issued, however, the announced adop-
tion period for any applicable six-year cy-
cle will not be extended.
(3) An otherwise eligible adopting em-
ployer as described in section 17 of Rev.
Proc. 2007–44 may rely on a pre-approved
plan’s current opinionor advisory letter to
retroactively amend its plan under § 401(b)
and Rev. Proc. 2007–44 by adopting the
pre-approved plan within the announced
adoption period for the applicable six-year
cycle, regardless of whether the opinion or
advisory letter application for the plan was
filed off-cycle (and regardless of whether
the plan is word-for-word identical to a
mass submitter plan). Thus, for example,
an eligible employer may rely on a pre-ap-
proved plan’s EGTRRA opinion or advi-
sory letter to retroactively amend its plan
for EGTRRA and the other qualification
changes listed in Notice 2004–84, 2004–2
C.B. 1030, (“the 2004 Cumulative List”)
by adopting the pre-approved plan within
the adoption period ending on April 30,
2010, even if the application for the opin-
ion or advisory letter for the plan was sub-
mitted off-cycle. Any EGTRRA opinion
or advisory letters that have been issued
with a caveat prohibiting retroactive re-
liance will be reissued by the Service to re-
move the caveat.
.02 Until further notice, the Service
will continue to accept off-cycle appli-
cations for opinion or advisory letters
filed by M&P and VS mass submitters for
pre-approved plans that are word-for-word
identical to the mass submitter’s currently
approved plan or to a plan of the mass sub-
mitter for which an application is currently
pendingwiththeService. The Service
will not accept applications for opinion or
advisory letters for other plans submitted
after the beginning of the adoption period
announced by the Service for an applica-
ble six-year cycle because there will not
be sufficient time for the Service to review
the plans and for employers to then adopt
the plans before the end of the adoption
period.
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2007–44 is modified.
SECTION 5. EFFECTIVE DATE
The modification in this revenue proce-
dure will be treated as in effect as of the ef-
fective date of Rev. Proc. 2007–44, June
13, 2007.
DRAFTING INFORMATION
The principal author of this revenue
procedure is James P. Flannery of the
Employee Plans, Tax Exempt and Govern-
ment Entities Division. For further infor-
mation regarding this revenue procedure,
please contact Mr. Flannery via e-mail at
RetirementPlanQuestions@irs.gov.
October 6, 20088272008–40 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Substantiati
on and Reporting
Requirements
for Cash
and Noncash C
haritable
Contributio
n Deductions
REG–140029–
07
AGENCY: Inte
rnal Revenue Service
(IRS), Trea
sury.
ACTION: Not
ice of proposed rulemaking.
SUMMARY: Th
ese proposed regulations
provide gui
dance concerning substantia-
tion and rep
orting requirements for cash
and noncash
charitable contributions un-
der sectio
n 170 of the Internal Revenue
Code (Code
). The regulations reflect the
enactment
of provisions of the American
Jobs Creat
ion Act of 2004 and the Pension
Protectio
n Act of 2006. The regulations
provide g
uidance to individuals, partner-
ships, an
d corporations that make charita-
ble contr
ibutions, and will affect any donor
claiming
a deduction for a charitable con-
tributio
n after the date these regulations
are publ
ished as final regulations in the
Federal
Register.
DATES: W
ritten or electronic comments
and requ
ests for a public hearing must be
receive
d by November 5, 2008.
ADDRESS
ES: Send submissions to:
CC:PA:L
PD:PR (REG–140029–07), room
5203, I
nternal Revenue Service, P.O. Box
7604, B
en Franklin Station, Washing-
ton, DC
20044. Submissions may be
hand de
livered Monday through Friday
betwee
n the hours of 8 a.m. and 4 p.m.
to CC:P
A:LPD:PR (REG–140029–07),
Couri
er’s Desk, Internal Revenue Ser-
vice,
1111 Constitution Avenue, N.W.,
Washi
ngton, DC 20224, or sent elec-
troni
cally via the Federal eRulemak-
ing Po
rtal atwww.regulations.gov(IRS
REG–
140029–07).
FOR F
URTHER INFORMATION
CONT
ACT: Concerning the proposed
regu
lations, Susan J. Kassell at (202)
622–
5020; concerning submissions of
comments and r
equests for a hear-
ing, Oluwafun
milayo Taylor at (202)
622–7180 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collectio
ns of information con-
tained in this
notice of proposed rulemak-
ing have been
submitted to the Office of
Management a
nd Budget for review in
accordance w
ith the Paperwork Reduc-
tion Act of 19
95 (44 U.S.C. 3507(d)).
Comments on
the collections of infor-
mation shou
ld be sent to theOffice of
Management
and Budget,Attn: Desk
Officer for
the Department of the Trea-
sury, Offic
e of Information and Regulatory
Affairs, W
ashington, DC 20503, with
copies to t
heInternal Revenue Service,
Attn: IRS R
eports Clearance Officer,
SE:W:CAR:
MP:T:T:SP, Washington, DC
20224. Co
mments on the collections of
informat
ion should be received by Octo-
ber 6, 200
8. Comments are specifically
requeste
d concerning:
Whether t
he proposed collections of in-
formatio
n are necessary for the proper per-
formance
of the functions of the IRS, in-
cluding
whether the information will have
practic
al utility;
The accu
racy of the estimated burden
associa
ted with the proposed collections of
informa
tion;
How the q
uality, utility, and clarity of
the info
rmation to be collected may be en-
hanced;
How the b
urden of complying with the
propose
d collections of information may
be mini
mized, including through the appli-
cation
of automated collection techniques
or othe
r forms of information technology;
and
Estima
tes of capital or start-up costs
and cos
ts of operation, maintenance, and
purcha
se of services to provide informa-
tion.
The col
lections of informa-
tion i
n these proposed regulations
are in
§§1.170A–15(a) and (d)(2);
1.170
A–16(a), (b), (c), (d), (e), and
(f); 1
.170A–17(a)(3) and (a)(7); and
1.170
A–18(a)(2) and (b). These collec-
tion
s of information will help the IRS
dete
rmine if a taxpayer is entitled to a
claimed deduc
tion for a charitable contri-
bution. The co
llections of information are
requiredtoob
tain a benefit. The likely
respondents a
re individuals, partnerships,
and corporati
ons that claim a deduction
for a charita
ble contribution.
The collectio
ns of information may
vary dependi
ng on the item contributed,
the amount of
the deduction claimed for
the contribu
tion, and whether the taxpayer
claiming the
deduction is an individual,
partnershi
p, S corporation, C corporation
that is a per
sonal service corporation or
closely hel
d corporation, or other C cor-
poration.
The followi
ng estimates are based on
the informa
tion that is available to the IRS.
A responde
nt may require more or less
time, depe
nding on the circumstances.
The estima
ted total annual reporting
burden is 2
26,419 hours.
The estima
ted annual burden per re-
spondent v
aries from 5 minutes to 4 hours,
with an est
imated average annual burden
of slightl
y more than 1 hour. The estimated
number of
respondents is 201,920.
An agency
may not conduct or sponsor,
and a pers
on is not required to respond to, a
collecti
on of information unless it displays
a valid co
ntrol number assigned by the Of-
fice of Ma
nagement and Budget.
Books or r
ecords relating to a collection
of infor
mation must be retained as long as
their co
ntents may become material in the
adminis
tration of any internal revenue law.
General
ly, tax returns and return informa-
tion are
confidential, as required by section
6103.
Backgro
und
This doc
ument contains proposed
amendm
ents to the Income Tax Regula-
tions (
26 CFR part 1) for substantiating
and rep
orting deductions for charitable
contri
butions under section 170 of the In-
ternal
Revenue Code. Section 170(f)(11),
as add
ed by section 883 of the Ameri-
can Jo
bs Creation Act of 2004, Public
Law 10
8–357 (118 Stat. 1418) (Jobs
Act),
contains reporting and substantiation
requi
rements relating to deductions for
nonc
ash charitable contributions. Under
sect
ion 170(f)(11)(C), for contributions of
prop
erty for which a deduction of more
than
$5,000 is claimed, taxpayers are re-
2008–40 I.R.B.828October 6, 2008

quired to obtain a qualified appraisal of the
property. Under section 170(f)(11)(D), for
contributions of property for which a de-
duction of more than $500,000 is claimed,
taxpayers must attach a qualified appraisal
ofthepropertytothetaxreturnonwhich
the deduction is claimed.
For appraisals prepared with respect to
returns filed on or before August 17, 2006,
§1.170A–13(c) of the current regulations
provides definitions of the terms “quali-
fied appraisal” and “qualified appraiser”.
For appraisals prepared with respect to re-
turns filed after August 17, 2006, section
170(f)(11)(E), as added by the Jobs Act
andamendedbysection1219ofthePen-
sion Protection Act of 2006, Public Law
109–280 (120 Stat. 780) (PPA), provides
statutory definitions of the terms qualified
appraisal and qualified appraiser.
Section 170(f)(11)(E)(i) provides that
the termqualified appraisalmeans an
appraisal that is (1) treated as a quali-
fied appraisal under regulations or other
guidance prescribed by the Secretary, and
(2) conducted by a qualified appraiser in
accordance with generally accepted ap-
praisal standards and any regulations or
other guidance prescribed by the Secre-
tary.
Section 170(f)(11)(E)(ii) provides that
the termqualified appraisermeans an
individual who (1) has earned an ap-
praisal designation from a recognized
professional appraiser organization or has
otherwise met minimum education and
experience requirements set forth in reg-
ulations prescribedby the Secretary, (2)
regularly performs appraisals for which
the individual receives compensation,
and (3) meets such other requirements
as may be prescribed by the Secretary in
regulations or other guidance. Section
170(f)(11)(E)(iii) further provides that an
individual will not be treated as a qual-
ified appraiser unless that individual (1)
demonstrates verifiable education and ex-
perience in valuing the type of property
subject to the appraisal, and (2) has not
been prohibited from practicing before the
IRS by the Secretary under section 330(c)
of Title 31 of the United States Code at
any time during the 3-year period ending
on the date of the appraisal.
On October 19, 2006, the IRS and
the Treasury Department released No-
tice 2006–96, 2006–2 C.B. 902 (see
§601.601(d)(2)(ii)(b) of this chapter),
which provides transitional guidance re-
lating to section 170(f)(11)(E) as amended
by the PPA. Specifically, Notice 2006–96
provides transitional safe harbor defini-
tions for the terms “qualified appraisal”
(section 3.02(1)), “generally accepted
appraisal standards” (section 3.02(2)),
“appraisal designation” (section 3.03(1)),
“education and experience in valuing the
type of property” (section 3.03(2)), and
“minimum education and experience”
(section 3.03(3)). These definitions apply
to contributions of property for which a
deduction of more than $5,000 is claimed
on returns filed after August 17, 2006.
Notice 2006–96 solicited comments re-
garding the definitions of these terms. All
comments received were considered in
drafting these regulations.
Section 1216 of the PPA added section
170(f)(16), which provides that no deduc-
tion is allowed for a contribution of cloth-
ing or a household item unless the cloth-
ing or household item is in good used con-
dition or better. Section 1217 of the PPA
added section 170(f)(17), which imposes
a recordkeeping requirement for all cash
contributions, regardless of amount. Sec-
tion 1219 of the PPA added section 6695A,
which imposes penalties on appraisers in
certain circumstances. Regulations imple-
menting the penalty provisions of section
6695A will be published separately.
Section 170(f)(11)(H) authorizes the
Secretary to prescribe regulations as may
be necessary or appropriate to carry out
the purposes of section 170(f)(11), in-
cluding regulations that may provide that
some or all of the requirements of section
170(f)(11) do not apply in appropriate
cases. Other statutory authority to issue
regulations is in sections 170(f)(11)(B),
(C), (E)(i)(I) and (II), and (E)(ii)(I) and
(III).
Explanation of Provisions
I.In General
The proposed regulations generally
implement the Jobs Act and PPA changes
to the substantiation and reporting rules
for charitable contributions. For exam-
ple, the proposed regulations implement
the recordkeeping requirements imposed
by the PPA for all cash contributions
and the new definitions of a qualified
appraisal and qualified appraiser appli-
cable to all noncash contributions. The
proposed regulations also incorporate the
substantiation requirements for noncash
contributions imposed by the Jobs Act on
(1) a C corporation (other than a closely
held corporation or a personal service
corporation) claiming a deduction of more
than $5,000, and (2) any taxpayer claiming
a deduction in excess of $500,000.
The proposed regulations also gen-
erally incorporate many of the re-
quirements of §1.170A–13, except to
the extent §1.170A–13 is inconsistent
with the Jobs Act and PPA require-
ments. For example, many of the re-
quirements of §1.170A–13(c)(3) for a
qualified appraisal are incorporated in
proposed §1.170A–17(a); many of the
“appraisal summary” requirements of
§1.170A–13(c)(4) are incorporated in the
required entries for a completedForm
8283, “Noncash Charitable Contribu-
tions,”in proposed §1.170A–16; and many
of the requirements of §1.170A–13(c)(5)
for a qualified appraiser are incorporated
in proposed §1.170A–17(b).
The IRS and the Treasury Department
may propose additional changes to the sub-
stantiation regulations in the future and
hereby request comments concerning ad-
ditional issues that should be addressed.
II.Cash, check or other monetary gifts
Proposed §1.170A–15 implements the
requirements of section 170(f)(17), which
was added by the PPA and provides that no
deduction is allowed for any contribution
of a cash, check, or other monetary gift un-
less the donor maintains as a record of the
contribution a bank record or written com-
munication from the donee. Compare The
Check Clearing for the 21st Century Act,
Public Law 108–100, 117 Stat. 1178–1180
(12 U.S.C. 5002(16) and 5003(b)), which
provides guidance under the banking laws
regarding substitute checks. The bank
record or written communication must
showthenameofthedonee,thedateof
the contribution, and the amount of the
contribution.
After section 170(f)(17) was enacted,
the IRS and the Treasury Department re-
ceived questions and comments about the
new requirements. One commenter sug-
gested a “de minimisexception,” under
which donors of small amounts would not
be required to maintain bank records or
October 6, 20088292008–40 I.R.B.

written communications from the donee.
This suggestion was not adopted in the
proposed regulations because the excep-
tion would be contrary to the statute and
the express language in the legislative his-
tory that the provision applies “regardless
of the amount.” However, there is prece-
dent for exempting from the substantiation
requirements certain types of payments for
which a charitable beneficiary cannot pro-
vide a receipt, either because the chari-
table beneficiary has not yet been identi-
fied or because the charitable beneficiary
has no firsthand knowledge of the amount
of the payment. For example, a taxpayer
making a contribution in the form of a
transfer to a charitable remainder trust is
not required to obtain the contemporane-
ous written acknowledgment generally re-
quired under section170(f)(8). A simi-
lar exception is contained in the proposed
regulations for monetary contributions to
a charitable remainder trust of less than
$250. The proposed regulations also pro-
vide an exception from the substantiation
requirements for unreimbursed expenses
of less than $250 incurred incident to the
rendition of services to a charitable organi-
zation. Taxpayers claiming deductions for
monetary contributions to a charitable re-
mainder trust or for out of pocket expenses
incurred incident to the rendition of ser-
vices are advised to maintain records of the
gifts or expenses.
Some commenters asked how to com-
ply with section 170(f)(17) if a bank state-
ment does not include the name of the
donee. In this situation, a monthly bank
statement and a photocopy or image ob-
tained from the bank of the front of the
check indicating the name of the donee
would satisfy the provision.
III.Revised noncash substantiation
requirements
As under current rules, the proposed
regulations provide that donors who claim
deductions for noncash contributions of
less than $250 are required to obtain
a receipt from the donee or keep reli-
able records. The proposed regulations
provide that donors who make contribu-
tions of $250 or more but not more than
$500 are required to obtain only a con-
temporaneous written acknowledgment,
as provided under section 170(f)(8) and
§1.170A–13(f), and are not required to
obtain any other written records. No re-
visions to §1.170A–13(f) are proposed in
these proposed regulations. For claimed
contributions of more than $500 but not
more than $5,000, the donor must obtain
a contemporaneous written acknowledg-
ment and must file a completed Form 8283
(Section A) with the return on which the
deduction is claimed. For claimed contri-
butions of more than $5,000, in addition
to a contemporaneous written acknowl-
edgment, a qualified appraisal generally is
required, and either Section A or Section
B of Form 8283 (depending on the type
of property contributed) must be com-
pleted and filed withthereturnonwhich
the deduction is claimed. For claimed
contributions of more than $500,000, the
donor must attach a copy of the qualified
appraisal to the return. The proposed reg-
ulations also provide that the requirements
for substantiation that must be submitted
with a return also apply to the return for
any carryover year under section 170(d).
Section1.170A–16(c)and
§1.170A–16(d) of the proposed regu-
lations generally apply to deductions
claimed for contributions of motor ve-
hicles. Section 1.170A–16(c)(4) and
§1.170A–16(d)(2)(iii) explain the sub-
stantiation requirements for contributions
of motor vehicles described in section
170(f)(12)(A)(ii) (vehicles that the donee
organization sells without any significant
intervening use or material improvement).
These substantiation requirements are in
addition to the requirements imposed in
section 170(f)(12), as added by section
884 of the Jobs Act.
Section 170(f)(11)(A)(ii)(II), as added
by the PPA, provides that the requirements
of sections 170(f)(11)(B), (C), and (D)
do not apply if the donor shows that the
failure to meet these requirements is due
to reasonable cause and not to willful ne-
glect. Section 170(f)(11)(H) provides that
the Secretary may provide that some or all
of the requirements of section 170(f)(11)
do not apply in appropriate cases. The pro-
posed regulations provide that, to satisfy
the “reasonable cause” exception under
section 170(f)(11)(A)(ii)(II), the donor
must submit with the return a detailed
explanation of why the failure to com-
ply was due to reasonable cause and not
to willful neglect, and must have timely
obtained a contemporaneous written ac-
knowledgment and a qualified appraisal,
if applicable. The proposed regulations
supersede §1.170A–13(c)(4)(H), which
provides that a taxpayer who fails to file
an appraisal summary (Form 8283) with
the return is permitted to provide it within
90 days of a request from the IRS, and the
deduction will be allowed if the donor’s
original failure to file the appraisal sum-
mary is a “good faith omission.” Consis-
tent with the Congressional purpose for
enacting section 170(f)(11) of reducing
valuation abuses, the IRS and the Treasury
Department anticipate that the “reasonable
cause” exception will be strictly construed
to apply only when the donor meets the re-
quirements for the exception as specified
in the regulations.
IV.New requirements for qualified
appraisals and qualified appraisers
New definitions of qualified appraisal
and qualified appraiser, taking into ac-
count the PPA definitions of these terms
in section 170(f)(11)(E), are provided in
proposed §1.170A–17. Some new terms
to implement these new definitions are
also included.
A.Qualified appraisal
In proposed §1.170A–17(a), the pro-
posed regulations provide that aqualified
appraisalmeans an appraisal document
that is prepared by a qualified appraiser
in accordance with generally accepted
appraisal standards. Generally accepted
appraisal standards are defined in the pro-
posed regulations as the substance and
principles of the Uniform Standards of
Professional Appraisal Practice (USPAP),
as developed by the Appraisal Standards
Board of the Appraisal Foundation. See
Title XI of the Financial Institutions Re-
form, Recovery, and Enforcement Act of
1989, Public Law 101–73, 103 Stat. 183
(12 U.S.C. 3331–3351). The proposed
regulations are similar to section 3.02(2)
of Notice 2006–96, except that the pro-
posed regulations require compliance with
the substance and principles of USPAP.
Commenters suggested requiring that
appraisal documents be “in accordance
with published appraisal standards of
national professional appraisal credential-
ing organizations,”including references
to certain other specific standards such
as the Uniform Appraisal Standards for
Federal Land Acquisitions, and requiring
2008–40 I.R.B.830October 6, 2008

appraisers to include specific items in an
appraisal, such as all sales of the con-
tributed property within 18 months of the
appraisal date. The IRS and the Treasury
Department believe the “substance and
principles of USPAP” is broad enough
to include these suggestions. One com-
menter suggested that generally accepted
appraisal standards are satisfied by an ap-
praisal issued by a corporation or company
that is regularly engaged in the business of
producing appraisals, relies on the services
of specialist departments, is affiliated with
an auction house, dealer or association of
dealers that conducts at least 100 auctions
or sales per year, and regularly conducts
appraisals for estate, income and/or char-
itable donation purposes. This suggestion
was not incorporatedin the proposed reg-
ulations because it does not contain any
“appraisal standards.”
Application of the “substance and prin-
ciples of USPAP” rule provided in the
proposed regulations may be illustrated
by the following situation. The IRS is
aware that some appraisers of historic
conservation easements have stated that
local ordinances restricting modifications
of a façade should be disregarded because
local governments do not enforce these or-
dinances. Under applicable substance and
principles of USPAP, an appraiser must
identify and analyze any known restric-
tions, ordinances, or similar items, and the
likelihood of any modification to those
restrictions, in formulating a value opin-
ion. For example, see USPAP Standards
Rules 1–2(e)(iv), 1–3(a), and 2–2(vi). An
appraisal that does not take into account a
local ordinance is not consistent with the
substance and principles of USPAP. See
also §1.170A–14(h)(3)(ii).
In addition, some commenters re-
quested a specific reference to highest
and best use in the proposed regula-
tions. This suggestion was not incorpo-
rated in the proposed regulations because
USPAP Standards Rule 1–3(b) requires
an appraiser to “develop an opinion
of the highest and best use of the real
estate” when it is “necessary for credible
assignment results in developing a market
value opinion.” An appraisal that does
not include a development of highest
and best use when required by USPAP
is not consistent with the substance and
principles of USPAP.
The proposed regulations also clarify
the current rules. For example, the current
regulations require an appraisal to be made
no earlier than 60 days before the contri-
bution date. Under the proposed regula-
tions, thevaluation effective date,which
is the date to which the value opinion ap-
plies, generally must be the date of the con-
tribution. In cases where the appraisal is
prepared before the date of the contribu-
tion, the valuation effective date must be
no earlier than 60 days before the date of
the contribution and no later than the date
of the contribution. The date the appraiser
signs the appraisal report (appraisal report
date) must be no earlier than 60 days be-
fore the date of the contribution and no
later than the due date (including exten-
sions) of the return on which the deduction
is claimed or reported. As under current
regulations, if the deduction is claimed for
the first time on an amended return, the ap-
praisal report date must be no later than the
date the amended return is filed.
Several commenters requested clarifi-
cation of when a contribution is “made” for
purposes of determining the proper year of
the deduction and the timeliness of the ap-
praisal. Under §1.170A–1(b) of the cur-
rent regulations, generally a contribution
is made at the time delivery is effected.
The IRS and the Treasury Department in-
vite comments about when the contribu-
tion should be treated as “made” for sec-
tion 170 purposes if a donor contributes
a conservation easement to a qualified or-
ganization in a jurisdiction where a com-
pleted transfer requires execution, deliv-
ery, and recording of the transfer docu-
ments in the local governmental office, and
the parties deliver the fully executed ease-
ment documents to the appropriate govern-
mental office for recording in one year, but
the documents are not recorded until the
following year.
One commenter asked the IRS to state
that an appraisal prepared by an insurance
or real estate broker is not a qualified ap-
praisal. This recommendation was not
adopted in the proposed regulations be-
cause an insurance or real estate broker’s
appraisal, like any other appraisal, is a
qualified appraisal if it meets all of the re-
quirements for a qualified appraisal by a
qualified appraiser.
B.Qualified appraiser
Section 1.170A–17(b) of the proposed
regulations incorporates many of the re-
quirements from the current regulations,
but certain other provisions were modi-
fied. For example, the appraiser decla-
rations required in the appraisal and on
Form 8283 have been modified. In ad-
dition, the proposed regulations contain
several new terms implementing the PPA
requirements of a qualified appraiser un-
der section 170(f)(11)(E)(ii) and(iii). In
general, under the proposed regulations, a
“qualified appraiser” must be an individ-
ual with verifiable education and experi-
ence in valuing the relevant type of prop-
erty for which the appraisal is performed.
The PPA refers to two types of ed-
ucation and experience: Minimum
education and experience in section
170(f)(11)(E)(ii)(I) to establish quali-
fication as an appraiser generally, and
verifiable education and experience in
valuing the type of property subject to the
appraisal in section 170(f)(11)(E)(iii)(I) to
establish qualification as an appraiser for
a particular appraisal. The IRS and the
Treasury Department believe that it is suf-
ficient for an appraiser to satisfy the more
stringent requirement of verifiable educa-
tion and experience in valuing the type of
property subject to the appraisal. Satisfac-
tion of that requirement will also satisfy
the minimum education and experience re-
quirement of section 170(f)(11)(E)(ii)(I).
The proposed regulations provide that an
individual has verifiable education and ex-
perience if the individual has successfully
completed professional or college-level
coursework in valuing the relevant type of
property and has two or more years expe-
rience in valuing that type of property.
Furthermore, because significant edu-
cation and experience are required to ob-
tain a designation from a recognized pro-
fessional appraiser organization, under the
proposed regulations appraisers with these
designations are deemed to have demon-
strated sufficient verifiable education and
experience. One commenter asked about
the qualifications of organizations that
award designations and suggested that a
recognized professional appraisal organ-
ization should be one that, among other
things, offers comprehensive educational
programs in USPAP and principles of val-
uation, and requires qualification to be
October 6, 20088312008–40 I.R.B.

demonstrated through written exams and
peer reviews. The proposed regulations
incorporate some of these principles in the
definition of education and experience in
valuing the relevant type of property.
A number of comments focused on
education and experience. Several com-
menters suggested that an appraiser’s evi-
dence of education and experience should
be required to be verifiable as provided in
section 170(f)(11)(E)(iii)(I). The proposed
regulations incorporate this suggestion by
requiring a statement in the appraisal of
the appraiser’s specified education and
experience in valuing the relevant type of
property. The proposed regulations also
require the appraiser to complete course-
work in valuing the category of property
that is customary in the appraisal field for
an appraiser to value.
One commenter indicated that some of
its appraiser employees may have signif-
icant experience but lack formal educa-
tion, and suggested that “education and
experience” be interpreted as “education
or experience.” The commenter also asked
that the “education and experience” re-
quirement be applied to a group of ap-
praisers rather than individually. The pro-
posed regulations do not adopt these sug-
gestions because they are contrary to the
section 170(f)(11)(E) requirement that the
person who signs the appraisal report be
an individual with the requisite education
and experience in valuing the relevant type
of property. However, the proposed reg-
ulations define education broadly to in-
clude coursework obtained in an employ-
ment context, provided it is similar to an
educational program of an educational in-
stitution or a generally recognized profes-
sional appraisal organization.
Section 3.03(3)(a)(ii) of Notice
2006–96 provides that, for real estate ap-
praisers, education and experience are
sufficient if the appraiser holds a license
or certificate to value the relevant type of
property in the state in which the prop-
erty is located. This provision was not
incorporated in the proposed regulations,
which set forth more specific requirements
applicable to all appraisers.
Several commenters asked for a defini-
tion of “types of property” for purposes of
identifying the required education and ex-
perience. More education and experience
may be necessary and available for some
types of property than for others. There-
fore, the proposed regulations provide that
the relevant type of property is determined
by what is customary in the appraisal pro-
fession. The IRS and the Treasury Depart-
ment request suggestions for categorizing
types of property that would be helpful in
determining the qualification of apprais-
ers, for purposes of both the education and
experience requirements.
The IRS and the Treasury Depart-
ment believe that the term “regularly
performs appraisals for which the in-
dividual receives compensation” under
section 170(f)(11)(E)(ii)(II) is generally
encompassed by the experience require-
ment of section 170(f)(11)(E)(iii)(I) and
does not need to be separately met. One
corporate commenter was concerned that
its individual employees could never be
qualified appraisers, because the corpo-
ration receives the compensation, not the
individual employees. Similar comments
were received from otherwise qualified
individual appraisers who do not regularly
receive compensation. The proposed reg-
ulations address both of these concerns
by not separately stating a compensation
requirement.
Expressing concerns about iden-
tity theft, some commenters requested
elimination of the requirements of sup-
plying the appraiser’s taxpayer iden-
tification number on Form 8283 and
in the appraisal, as currently required
under §§1.170A–13(c)(3)(ii)(E) and
1.170A–13(c)(4)(ii)(I). The concern arises
from appraisers who do not have a tax-
payer identification number other than
a social security number. The pro-
posed regulations continue to require
this information because, pursuant to
§301.6109–1(a)(1)(ii)(D) of the Proce-
dure and Administration Regulations, an
appraiser may obtain an employer identi-
fication number even if the appraiser does
not have employees. This number may
be obtained by completing Form SS–4,
“Application for Employer Identification
Number.”See Pub. 1635,“Understanding
Your Employer Identification Number.”
If an appraiser is employed by a firm,
the firm’s employer identification number
should be used.
Taxpayers are reminded that the IRS
may challenge the amount of a claimed de-
duction, even if the donor substantiates the
amount of the deduction with a qualified
appraisal prepared by a qualified appraiser.
C.Clothing and household items
Section 1.170A–18 of the proposed reg-
ulations implements section 170(f)(16),
which provides that no deduction is al-
lowed for any contribution of clothing
or a household item unless it is in good
used condition or better. The purpose of
this provision relates to ensuring that do-
nated clothing and household items are
“of meaningful use to charitable organi-
zations.” Joint Committee on Taxation,
Technical Explanation of H.R. 4, the “Pen-
sion Protection Act of 2006” (Aug. 3,
2006). The IRS and the Treasury Depart-
ment are aware that a number of charities
publish donation guidelines listing items
the charity will and will not accept, and
believe that the guidelines are helpful in
ensuring that charities receive donations
of items that are of meaningful use to the
charity. The IRS and the Treasury Depart-
ment request comments regarding how
donation guidelines published by a charity
may relate to the “good used condition”
requirement in section 170(f)(16).
Under the proposed regulations, no de-
duction is allowed unless the clothing or
householditemisingoodusedcondition
or better at the time of the contribution.
The proposed regulations also provide that
this rule does not apply to a contribution
of a single item of clothing or a household
item for which a donor claims a deduc-
tion of more than $500 if the donor sub-
mits a qualified appraisal with the return
on which the deduction is claimed. Several
commenters questioned whether a quali-
fied appraisal is required for any contribu-
tion of an item of clothing or a household
item with a claimed value over $500. If
the item is not in good used condition or
better and a deduction in excess of $500 is
claimed, the taxpayer must obtain a qual-
ified appraisal and file a completed Form
8283 (Section B) with the return on which
the deduction is claimed. If the item is
in good used condition or better and a de-
duction in excess of $500 is claimed, the
taxpayer must file a completed Form 8283
(Section A or B depending on the type
of contribution and claimed amount), but
a qualified appraisal is required only if
the claimed contribution amount exceeds
$5,000.
If the donor claims a deduction of less
than $250, §1.170A–16(a) of the proposed
regulations requires that the donor obtain
2008–40 I.R.B.832October 6, 2008

a receipt from the donee or maintain re-
liable written records of the contribution.
A reliable written record for a contribution
of clothing or a household item must in-
clude a description of the condition of the
item. If the donor claims a deduction of
$250 or more, the donor must obtain from
the donee a receipt that meets the require-
ments of section 170(f)(8) (contemporane-
ous written acknowledgment).
Proposed Effective/Applicability Date
These proposed regulations are pro-
posed to apply to contributions occurring
after the date these regulations are pub-
lished as final regulations in theFederal
Register. Taxpayers should continue to
comply with the recordkeeping and re-
turn requirements in §1.170A–13 of the
existing regulations to the extent those
provisions are not superseded by the Jobs
Act or the PPA.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It is hereby cer-
tified that these regulations will not have
a significant economic impact on a sub-
stantial number of small entities. There-
fore, a regulatory flexibility analysis under
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. This certifica-
tion is based on the belief of the IRS and
the Treasury Department that these reg-
ulations reduce the burden on taxpayers
by clarifying and simplifying the existing
substantiation and reporting requirements
for charitable contributions. Furthermore,
to the extent these regulations contain re-
quirements that may impact small entities
that are not contained in the current sub-
stantiation and reporting rules, those ad-
ditional requirements are based on statu-
tory changes to the rules that are being in-
corporated intothe regulations. Pursuant
to section 7805(f) of the Internal Revenue
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small businesses.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timely to the IRS. The IRS and the Trea-
sury Department request comments on the
clarity of the proposed rules and how they
can be made easier to understand. All
comments will be available for public in-
spection and copying. A public hearing
will be scheduled if requested in writing
by any person that timely submits com-
ments. If a public hearing is scheduled, no-
tice of the date, time, and place for the pub-
lichearingwillbepublishedintheFederal
Register.
Drafting Information
The principal author of this regulation
is Susan J. Kassell of the Office of Asso-
ciate Chief Counsel (Income Tax and Ac-
counting). Other personnel from the IRS
and the Treasury Department participated
in its development.
*****
Partial Withdrawal of Proposed
Regulations
Accordingly, under the authority of
26 U.S.C. 7805, §1.170A–13 of the notice
of proposed rulemaking (LR–83–87,
1988–1 C.B. 930) that was published in
theFederal Registeron Thursday May 5,
1988 (53 FR 16156) is withdrawn.
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
part1isamendedbyaddingentriesinnu-
merical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
§1.170A–15 also issued under
26 U.S.C. 170(a)(1).
§1.170A–16 also issued under
26 U.S.C. 170(a)(1) and 170(f)(11).
§1.170A–17 also issued under
26 U.S.C. 170(a)(1) and 170(f)(11).
§1.170A–18 also issued under
26 U.S.C. 170(a)(1).
§§1.170–0 and 1.170–2 [Removed]
Par. 2. Sections 1.170–0 and 1.170–2
are removed.
§1.170A–13 [Amended]
Par. 3. In §1.170A–13, paragraphs
(a)(3), (b)(3)(i)(B), (b)(4), and (d) are re-
moved.
Par. 4. Section 1.170A–15 is added to
read as follows:
§1.170A–15 Substantiation requirements
for charitable contribution of a cash,
check, or other monetary gift.
(a)In general—(1)Bank record or writ-
ten communication required. No deduc-
tion is allowed under section 170(a) for
a charitable contribution in the form of a
cash, check, or other monetary gift (as de-
scribed in paragraph (b)(1) of this section)
unless the donor substantiates the deduc-
tion with a bank record (as described in
paragraph (b)(2) of this section) or a writ-
ten communication (as described in para-
graph (b)(3) of this section) from the donee
showing the name of the donee, the date
of the contribution, and the amount of the
contribution.
(2)Additional substantiation required
for contributions of $250 or more.Node-
duction is allowed under section 170(a) for
anycontributionof$250ormoreunless
the donor substantiates the contribution
with a contemporaneous written acknowl-
edgment (as described in section 170(f)(8)
and §1.170A–13(f)) from the donee.
(3)Single document may be used.The
requirements of paragraphs (a)(1) and
(a)(2) of this section may be met by a
single document that contains all the in-
formation required by paragraphs (a)(1)
and (a)(2) of this section, if the single
document is obtained by the donor no later
than the date prescribed by paragraph (c)
of this section.
(b)Terms—(1)Monetary giftincludes a
transfer of a gift card redeemable for cash,
and a payment made by credit card, elec-
tronic fund transfer (as described in section
5061(e)(2)), an online payment service, or
payroll deduction.
(2)Bank recordincludes a statement
from a financial institution, an electronic
October 6, 20088332008–40 I.R.B.

fund transfer receipt, a canceled check, a
scanned image of both sides of a canceled
check obtained froma bank website, or a
credit card statement.
(3)Written communicationincludes
electronic mail correspondence.
(c)Deadline for receipt of substantia-
tion. The substantiation described in para-
graph (a) of this section must be received
by the donor on or before the earlier of—
(1) The date the donor files the original
return for the taxable year in which the
contribution was made; or
(2) The due date (including extensions)
for filing the donor’s original return for
that year.
(d)Distributing organizations as
donees—(1)In general.Thefollowing
organizations are treated as donees for pur-
poses of section 170(f)(17) and paragraph
(a) of this section, even if the organization
(pursuant to the donor’s instructions or
otherwise) distributes the amount received
to one or more organizations described in
section 170(c):
(i) An organization described in section
170(c).
(ii) An organization described in
5 C.F.R. 950.105 (a Principal Combined
Fund Organization for purposes of the
Combined Federal Campaign) and acting
in that capacity.
(2)Contributions made by payroll de-
duction. In the case of a charitable contri-
bution made by payroll deduction, a donor
is treated as meeting the requirements of
section 170(f)(17) and paragraph (a) of this
section if, no later than the date described
in paragraph (c) of this section, the donor
obtains—
(i) A pay stub, Form W–2,“Wage and
Tax Statement,”or other employer-fur-
nished document that sets forth the amount
withheld during the taxable year for pay-
ment to a donee; and
(ii) A pledge card or other document
prepared by or at the direction of the donee
that shows the name of the donee.
(e)Substantiation of out-of-pocket ex-
penses. Paragraph (a)(1) of this section
does not apply to a donor who incurs un-
reimbursed expenses of less than $250
incident to the rendition of services,
within the meaning of §1.170A–1(g).
For substantiation of unreimbursed
out-of-pocket expenses of $250 or more,
see §1.170A–13(f)(10).
(f)Charitable contributions made by
partnership or S corporation. If a partner-
ship or an S corporation makes a charitable
contribution, the partnership or S corpora-
tion is treated as the donor for purposes of
section 170(f)(17) and paragraph (a) of this
section.
(g)Transfers to certain trusts.The
requirements of section 170(f)(17) and
paragraph (a)(1) of this section do not ap-
ply to a transfer of a cash, check, or other
monetary gift to a trust described in section
170(f)(2)(B), a charitable remainder annu-
ity trust (as defined in section 664(d)(1)),
or a charitable remainder unitrust (as de-
fined in section 664(d)(2) or (d)(3) or
§1.664–3(a)(1)(i)(b)). The requirements
of section 170(f)(17) and paragraphs (a)(1)
and (a)(2) of this section do apply, how-
ever, to a transfer to a pooled income fund
(as defined in section 642(c)(5)). For con-
tributions of $250 or more, see section
170(f)(8) and §1.170A–13(f)(13).
(h)Effective/applicability date.This
section applies to contributions made after
the date these regulations are published as
final regulations in theFederal Register.
Par. 5. Section 1.170A–16 is added to
read as follows:
§1.170A–16 Substantiation and reporting
requirements for noncash charitable
contributions.
(a)Substantiation of charitable contri-
butions of less than $250—(1)Individuals,
partnerships, and certain corporations re-
quired to obtain receipt. Except as pro-
vided in paragraph (a)(2) of this section, no
deduction is allowed under section 170(a)
for a noncash charitable contribution of
less than $250 by an individual, partner-
ship, S corporation, or C corporation that
is a personal service corporation or closely
held corporation unless the donor main-
tains for each contribution a receipt from
the donee showing the following informa-
tion:
(i) The name and address of the donee;
(ii) The date of the contribution;
(iii) A description of the property in suf-
ficient detail under the circumstances (tak-
ing into account the value of the property)
for a person who is not generally familiar
with the type of property to ascertain that
the described property is the contributed
property; and
(iv) In the case of securities, the
name of the issuer, the type of security,
and whether the securities are publicly
traded securities within the meaning of
§1.170A–13(c)(7)(xi).
(2)Substitution of reliable written
records—(i)In general. If it is impractical
to obtain a receipt (for example, a donor
deposits canned food at a donee’s unat-
tended drop site), the donor may satisfy
the recordkeeping rules of this paragraph
(a)(2)(i) by maintaining reliable writ-
ten records (as described in paragraphs
(a)(2)(ii) and (a)(2)(iii) of this section) for
the contributed property.
(ii)Reliable written records. The relia-
bility of written records is to be determined
on the basis of all of the facts and circum-
stances of a particular case, including the
contemporaneous nature of the writing ev-
idencing the contribution.
(iii)Contents of reliable written
records. Reliable written records must
include—
(A) The information required by para-
graph (a)(1) of this section;
(B) The fair market value of the prop-
erty on the date the contribution was made;
(C) The method used in determining the
fair market value; and
(D) In the case of a contribution of
clothing or a household item as defined in
§1.170A–18(c), the condition of the item.
(3)Additional substantiation rules may
apply. For additional substantiation rules,
see paragraph (f) of this section.
(b)Substantiation of charitable contri-
butions of $250 or more but not more than
$500. No deduction is allowed under sec-
tion 170(a) for a noncash charitable con-
tribution of $250 or more but not more
than $500 unless the donor substantiates
the contribution with a contemporaneous
written acknowledgment (as described in
section 170(f)(8) and §1.170A–13(f)).
(c)Substantiation of charitable contri-
butions of more than $500 but not more
than $5,000—(1)In general. No deduc-
tion is allowed under section 170(a) for a
noncash charitable contribution of more
than $500 but not more than $5,000 unless
the donor substantiates the contribution
with a contemporaneous written acknowl-
edgment (as described in section 170(f)(8)
and §1.170A–13(f)) and meets the appli-
cable requirements of this section.
(2)Individuals, partnerships, and cer-
tain corporations also required to file
2008–40 I.R.B.834October 6, 2008

Form 8283 (Section A). No deduction is
allowed under section 170(a) for a non-
cash charitable contribution of more than
$500 but not more than $5,000 by an in-
dividual, partnership, S corporation, or
C corporation that is a personal service
corporation or closely held corporation
unless the donor—
(i) Substantiates the contribution with
a contemporaneous written acknowledg-
ment (as described in section 170(f)(8) and
§1.170A–13(f)); and
(ii) Completes Form 8283 (Section
A), “Noncash Charitable Contributions”
(as provided in paragraph (c)(3) of this
section), or a successor form, and files it
with the return on which the deduction is
claimed.
(3)Completion of Form 8283 (Section
A). A completed Form 8283 (Section A)
includes—
(i) The donor’s name and taxpayer iden-
tification number (social security number
if the donor is an individual or employer
identification number if the donor is a part-
nership or corporation);
(ii) The name and address of the donee;
(iii) The date of the contribution;
(iv) The following information about
the contributed property:
(A) A description of the property in suf-
ficient detail under the circumstances (tak-
ing into account the value of the property)
for a person who is not generally familiar
with the type of property to ascertain that
the described property is the contributed
property;
(B) In the case of real or personal prop-
erty, the condition of the property;
(C) In the case of securities, the
name of the issuer, the type of security,
and whether the securities are publicly
traded securities within the meaning of
§1.170A–13(c)(7)(xi); and
(D) The fair market value of the prop-
erty on the date the contribution was made
and the method used in determining the
fair market value;
(v) The manner of acquisition (for ex-
ample, by purchase, gift, bequest, inheri-
tance, or exchange), and the approximate
date of acquisition of the property by the
donor (except that in the case of a contri-
bution of publicly traded securities as de-
fined in §1.170A–13(c)(7)(xi), a represen-
tation that the donor held the securities for
more than one year is sufficient) or, if the
property was created, produced, or manu-
factured by or for the donor, the approx-
imate date the property was substantially
completed;
(vi) The cost or other basis, adjusted as
provided by section 1016, of the property
(except that the cost or basis is not required
for contributions of publicly traded secu-
rities (as defined in §1.170A–13(c)(7)(xi))
that if sold on the contribution date would
have resulted in long term capital gain);
(vii) In the case of tangible personal
property, whether the donee has certified it
for a use related to the purpose or function
constituting the donee’s basis for exemp-
tion under section 501 (or in the case of
a governmental unit,an exclusively public
purpose); and
(viii) Any other information required by
Form 8283 (Section A) or the instructions
to Form 8283 (Section A).
(4)Additional requirement for certain
motor vehicle contributions. In the case
of a contribution of a qualified vehicle
describedinsection170(f)(12)(A)(ii)for
which an acknowledgment under section
170(f)(12)(B)(iii) isprovided to the IRS by
the donee organization, the donor must at-
tach a copy of the acknowledgment to the
Form 8283 (Section A) for the return on
which the deduction is claimed.
(5)Additional substantiation rules may
apply. For additional substantiation rules,
see paragraph (f) of this section.
(d)Substantiation of charitable con-
tributions of more than $5,000—(1)In
general. Except as provided in paragraph
(d)(2) of this section, no deduction is
allowed under section 170(a) for a non-
cash charitable contribution of more than
$5,000 unless the donor—
(i) Substantiates the contribution with
a contemporaneous written acknowledg-
ment (as described in section 170(f)(8) and
§1.170A–13(f));
(ii) Obtains a qualified appraisal (as
defined in §1.170A–17(a)(1)) prepared
by a qualified appraiser (as defined in
§1.170A–17)(b)(1)); and
(iii) Completes Form 8283 (Section B)
(as provided in paragraph (d)(3) of this
section), or a successor form, and files it
with the return on which the deduction is
claimed.
(2)Exception for certain noncash con-
tributions. A qualified appraisal is not
required, and a completed Form 8283
(Section A) (containing the information
required in paragraph (c)(3) of this sec-
tion) meets the requirements of paragraph
(d)(1)(iii) of this section for contributions
of—
(i) Publicly traded securities as defined
in §1.170A–13(c)(7)(xi);
(ii) Property described in section
170(e)(1)(B)(iii) (certain intellectual prop-
erty);
(iii) A qualified vehicle described
in section 170(f)(12)(A)(ii) for which
an acknowledgment under section
170(f)(12)(B)(iii)is provided to the IRS
by the donee organization and attached to
the Form 8283 (Section A) by the donor;
and
(iv) Property described in section
1221(a)(1) (inventory and property held by
the donor primarily for sale to customers
in the ordinary course of the donor’s trade
or business).
(3)Completed Form 8283 (Section B).
A completed Form 8283 (Section B) in-
cludes—
(i) The donor’s name and taxpayer iden-
tification number (social security number
if the donor is an individual or employer
identification number if the donor is a part-
nership or corporation);
(ii) The donee’s name, address, tax-
payer identification number, and signature,
the date signed by the donee, and the date
the donee received the property;
(iii) The appraiser’s name, address,
taxpayer identification number, appraiser
declaration (as described in paragraph
(d)(4) of this section), signature, and the
date signed by the appraiser;
(iv) The following information about
the contributed property:
(A) The fair market value on the
valuation effective date (as defined in
§1.170A–17(a)(5)(i)).
(B) A description in sufficient detail un-
der the circumstances (taking into account
the value of the property) for a person
who is not generally familiar with the type
of property to ascertain that the described
property is the contributed property.
(C) In the case of real or tangible per-
sonal property, the condition of the prop-
erty;
(v) The manner of acquisition (for
example, by purchase, gift, bequest, inher-
itance, or exchange), and the approximate
date of acquisition of the property by the
donor, or, if the property was created,
produced, or manufactured by or for the
October 6, 20088352008–40 I.R.B.

donor, the approximate date the property
was substantially completed;
(vi) The cost or other basis, adjusted as
provided by section 1016;
(vii) A statement explaining whether
the charitable contribution was made by
means of a bargain sale and, if so, the
amount of any consideration received from
the donee for the contribution; and
(viii) Any other information required by
Form 8283 (Section B) or the instructions
to Form 8283 (Section B).
(4)Appraiser declaration.Theap-
praiser declaration referred to in paragraph
(d)(3)(iii) of this section must include the
following statement: “I understand that
my appraisal will be used in connection
with a return or claim for refund. I also
understand that, if a substantial or gross
valuation misstatement of the value of the
property claimed on the return or claim for
refund results from my appraisal, I may be
subject to a penalty under section 6695A
of the Internal Revenue Code, as well as
other applicable penalties. I affirm that I
have not been barred from presenting evi-
dence or testimony before the Department
of the Treasury or the Internal Revenue
Service pursuant to 31 U.S.C. section
330(c).”
(5)Donee signature—(i)Person autho-
rizedtosign. The person who signs Form
8283 for the donee must be either an of-
ficial authorized to sign the tax or infor-
mation returns of the donee, or a person
specifically authorized to sign Forms 8283
by that official. In the case of a donee
that is a governmental unit, the person who
signs Form 8283 for the donee must be an
official of the governmental unit.
(ii)Effect of donee signature. The sig-
nature of the donee on Form 8283 does
not represent concurrence in the appraised
value of the contributed property. Rather,
it represents acknowledgment of receipt of
the property described in Form 8283 on
the date specified in Form 8283 and that
the donee understands the information re-
porting requirements imposed by section
6050L and §1.6050L–1.
(iii)Certain information not required
on Form 8283 before donee signs.Before
Form 8283 is signed by the donee, Form
8283 must be completed (as described in
paragraph (d)(3) of this section), except
that it is not required to contain the follow-
ing:
(A) Information about the qualified ap-
praiser or the appraiser declaration.
(B) The manner or date of acquisition.
(C) The cost or other basis of the prop-
erty.
(D) The appraised fair market value of
the contributed property.
(E) The amount claimed as a charitable
contribution.
(6)Additional substantiation rules may
apply. For additional substantiation rules,
see paragraph (f) of this section.
(e)Substantiation of noncash char-
itable contributions of more than
$500,000—(1)In general. Except as pro-
vided in paragraph (e)(2) of this section, no
deduction is allowed under section 170(a)
for a noncash charitable contribution of
more than $500,000 unless the donor—
(i) Substantiates the contribution with
a contemporaneous written acknowledg-
ment (as described in section 170(f)(8) and
§1.170A–13(f));
(ii) Obtains a qualified appraisal (as
defined in §1.170A–17(a)(1)) prepared
by a qualified appraiser (as defined in
§1.170A–17(b)(1));
(iii) Completes (as described in para-
graph (d)(3) of this section) Form 8283
(Section B) and files it with the return on
which the deduction is claimed; and
(iv) Attaches the qualified appraisal of
thepropertytothereturnonwhichthede-
duction is claimed.
(2)Exception for certain noncash con-
tributions. For contributions of property
described in paragraph (d)(2) of this sec-
tion, a qualified appraisal is not required,
and a completed Form 8283 (Section A)
(containing the information required in
paragraph (c)(3) of this section) meets the
requirements of paragraph (e)(1)(iii) of
this section.
(3)Additional substantiation rules may
apply. For additional substantiation rules,
see paragraph (f) of this section.
(f)Additional substantiation require-
ments that may be applicable to any non-
cash contribution—(1)Signed Form 8283
furnished by donor to donee. A donor
who presents a Form 8283 to a donee for
signature must furnish to the donee a copy
of Form 8283 as signed by the donee.
(2)Number of Forms 8283—(i)In gen-
eral. For each item of contributed property
for which a Form 8283 is required under
paragraphs (c), (d), or (e) of this section, a
donor must attach a separate Form 8283 to
the return on which the deduction for the
item is claimed.
(ii)Exception for similar items.The
donor may attach a single Form 8283 for
all similar items of property (as defined
in §1.170A–13(c)(7)(iii)) contributed to
the same donee during the donor’s taxable
year, if the donor includes on Form 8283
the information required by paragraph
(c)(3) or (d)(3) of this section for each
item of property.
(3)Substantiation requirements for
carryovers of noncash contribution deduc-
tions. The rules in paragraphs (c)(2)(ii),
(d)(1)(iii), (d)(2), (e)(1)(iii) and (e)(1)(iv)
of this section (regarding substantiation
that must be submitted with a return) apply
to the return for any carryover year under
section 170(d).
(4)Partners and S corporation share-
holders—(i)Form 8283 must be provided
to partners and S corporation sharehold-
ers. If the donor is a partnership or S cor-
poration, the donor must provide a copy of
the completed Form 8283 to every partner
or shareholder who receives an allocation
of a charitable contribution deduction un-
der section 170 for the property described
in Form 8283.
(ii)Partners and S corporation share-
holders must attach Form 8283 to return.
A partner of a partnership or shareholder
of an S corporation who receives an al-
location of a deduction under section 170
for a charitable contribution of property to
which paragraphs (c), (d), or (e) of this
section applies must attach a copy of the
partnership’s or S corporation’s completed
Form 8283 to the return on which the de-
duction is claimed.
(5)Determination of deduction amount
for purposes of substantiation rules—(i)
In general. In determining whether the
amount of a donor’s deduction exceeds the
amounts set forth in section 170(f)(11)(B)
(noncash contributions exceeding $500),
170(f)(11)(C) (noncash contributions ex-
ceeding $5,000), or 170(f)(11)(D) (non-
cash contributionsexceeding $500,000),
the rules of paragraphs (f)(5)(ii) and
(f)(5)(iii) of this section apply.
(ii)Similar items of property must be
aggregated. Under section 170(f)(11)(F),
the donor must aggregate the amount
claimed as a deduction for all simi-
lar items of property (as defined in
§1.170A–13(c)(7)(iii)) contributed dur-
ing the taxable year. For rules re-
2008–40 I.R.B.836October 6, 2008

garding the number of qualified ap-
praisals and Forms 8283 required if
similar items of property are con-
tributed, see §§1.170A–13(c)(3)(iv)(A)
and 1.170A–13(c)(4)(iv)(B).
(iii)For contributions of certain in-
ventory and scientific property, excess
of amount claimed over cost of goods
sold taken into account.(A)In general.
In determining the amount of a donor’s
contribution of property to which section
170(e)(3) or (4) applies, the donor must
take into account only the excess of the
amount claimed as a deduction over the
amount that would have been treated as
the cost of goods sold if the donor had sold
the contributed property to the donee.
(B)Example. The following exam-
ple illustrates the rule of this paragraph
(f)(5)(iii):
Example.XCorporation makes a contribution
to which section 170(e)(3) applies of clothing for
the care of the needy. The cost of the property to
XCorporation is $5,000, and, pursuant to section
170(e)(3)(B),XCorporation claims a charitable con-
tribution deduction of $8,000. The amount taken
into account for purposes of determining the $5,000
threshold of paragraph (d) of this section is $3,000
($8,000-$5,000).
(6)Failure due to reasonable cause.If
a donor fails to meet the requirements of
paragraphs (c), (d), or (e) of this section,
the donor’s deduction will be disallowed
unless the donor establishes that the fail-
ure was due to reasonable cause and not
to willful neglect. The donor may estab-
lish that the failure was due to reasonable
cause and not to willful neglect only if the
donor—
(i) Submits with the return a detailed
explanation that the failure to meet the re-
quirements of this section was due to rea-
sonable cause and not to willful neglect;
(ii) Obtained a contemporaneous writ-
ten acknowledgment (as required by sec-
tion 170(f)(8) and §1.170A–13(f)(3)); and
(iii) Obtained a qualified appraisal
(as defined by section 170(f)(11)(E)(i)
and §1.170A–17(a)(1)) prepared by
a qualified appraiser (as defined
by section 170(f)(11)(E)(ii) and
§1.170A–17(b)(1)) within the dates speci-
fied in §1.170A–17(a)(4), if required.
(7)Additional requirement for re-
turns claiming conservation easements for
buildings in registered historic districts.
[Reserved]
(g)Effective/applicability date.This
section applies to contributions made after
the date these regulations are published as
final regulations in theFederal Register.
Par. 6. Section 1.170A–17 is added to
read as follows:
§1.170A–17 Qualified appraisal and
qualified appraiser.
(a)Qualified appraisal—(1)Def-
inition.For purposes of section
170(f)(11) and §§1.170A–16(d)(1)(ii) and
1.170A–16(e)(1)(ii), the termqualified
appraisalmeans an appraisal document
that is prepared by a qualified appraiser
(as defined in paragraph (b)(1) of this
section) in accordance with generally ac-
cepted appraisal standards (as defined in
paragraph (a)(2) of this section) and oth-
erwise complies with the requirements of
this paragraph (a).
(2)Generally accepted appraisal stan-
dards defined. For purposes of paragraph
(a)(1) of this section,generally accepted
appraisal standardsmeans the substance
and principles of the Uniform Standards of
Professional Appraisal Practice, as devel-
oped by the Appraisal Standards Board of
the Appraisal Foundation.
(3)Contents of qualified appraisal.A
qualified appraisal must include—
(i) The following information about the
contributed property:
(A) A description in sufficient detail
under the circumstances (taking into ac-
count the value of the property) for a per-
son who is not generally familiar with the
type of property to ascertain that the ap-
praised property is the contributed prop-
erty.
(B) In the case of real or personal tangi-
ble property, the condition of the property.
(C) The valuation effective date (as de-
fined in paragraph (a)(5)(i) of this section).
(D) The fair market value (within the
meaning of §1.170A–1(c)(2)) of the con-
tributed property on the valuation effective
date;
(ii) The terms of any agreement or un-
derstandingbyoronbehalfofthedonor
and donee that relates to the use, sale, or
other disposition of the contributed prop-
erty, including, for example, the terms of
any agreement or understanding that—
(A) Restricts temporarily or perma-
nently a donee’s right to use or dispose of
the contributed property;
(B) Reserves to, or confers upon, any-
one (other than a donee or an organization
participating with a donee in cooperative
fundraising) any right to the income from
the contributed property or to the posses-
sion of the property, including the right to
vote contributed securities, to acquire the
property by purchase or otherwise, or to
designate the person having income, pos-
session, or right to acquire; or
(C) Earmarks contributed property for a
particular use;
(iii) The date (or expected date) of the
contribution to the donee;
(iv) The following information about
the appraiser:
(A) Name, address, and taxpayer iden-
tification number.
(B) Qualifications to value the type of
property being valued, including the ap-
praiser’s education and experience.
(C) If the appraiser is acting in his or her
capacity as a partner in a partnership, an
employee of any person (whether an indi-
vidual, corporation, or partnership), or an
independent contractor engaged by a per-
son other than the donor, the name, ad-
dress, and taxpayer identification number
of the partnership or the person who em-
ploys or engages the qualified appraiser;
(v) The signature of the appraiser and
the date signed by the appraiser (appraisal
report date);
(vi) The following declaration by the
appraiser: “I understand that my appraisal
will be used in connection with a return or
claim for refund. I also understand that,
if a substantial or gross valuation misstate-
ment of the value of the property claimed
on the return or claim for refund results
from my appraisal, I may be subject to a
penalty under section 6695A of the Inter-
nal Revenue Code, as well as other appli-
cable penalties. I affirm that I have not
been barred from presenting evidence or
testimony before the Department of the
Treasury or the Internal Revenue Service
pursuant to 31 U.S.C. section 330(c);”
(vii) A statement that the appraisal was
prepared for income tax purposes;
(viii) The method of valuation used to
determine the fair market value, such as
the income approach, the market-data ap-
proach, or the replacement-cost-less-de-
preciation approach; and
(ix) The specific basis for the valuation,
such as specific comparable sales transac-
tions or statistical sampling, including a
justification for using sampling and an ex-
October 6, 20088372008–40 I.R.B.

planation of the sampling procedure em-
ployed.
(4)Timely appraisal report. A qualified
appraisal must be signed and dated by the
qualified appraiser no earlier than 60 days
before the date of the contribution and no
later than—
(i) The due date (including extensions)
of the return on which the deduction for the
contribution is first claimed;
(ii) In the case of a donor that is a part-
nership or S corporation, the due date (in-
cluding extensions) of the return on which
the deduction for the contribution is first
reported; or
(iii) In the case of a deduction first
claimedonanamendedreturn,thedateon
which the amended return is filed.
(5)Valuation effective date—(i)Defini-
tion.Thevaluation effective dateis the
date to which the value opinion applies.
(ii)Timely valuation effective date.
For an appraisal report dated before the
date of the contribution (as described in
§1.170A–1(b)), the valuation effective
date must be no earlier than 60 days before
the date of the contribution and no later
than the date of the contribution. For an
appraisal report dated on or after the date
of the contribution, the valuation effective
date must be the date of the contribution.
(6)Exclusion for donor knowledge of
falsity. An appraisal is not a qualified ap-
praisal for a particular contribution, even
if the requirements of this paragraph (a)
are met, if a reasonable person would con-
clude that the donor failed to disclose or
misrepresented facts that would cause the
appraiser to overstate the value of the con-
tributed property.
(7)Number of appraisals required.
A donor must obtain a separate quali-
fied appraisal for each item of property
for which an appraisal is required under
paragraphs (c), (d), or (e) of this section
and that is not included in a group of
similar items of property (as defined in
§1.170A–13(c)(7)(iii)). For rules regard-
ing the number of appraisals required if
similar items of property are contributed,
see §1.170A–13(c)(3)(iv)(A).
(8)Prohibited appraisal fees.Thefee
for a qualified appraisal cannot be based
to any extent on the appraised value of
theproperty. Forexample,afeeforan
appraisal will be treated as based on the
appraised value of the property if any part
of the fee depends on the amount of the
appraised value that is allowed by the IRS
after an examination.
(9)Retention of qualified appraisal.
The donor must retain the qualified ap-
praisal for so long as it may be relevant in
the administration of any internal revenue
law.
(10)Appraisal disregarded pursuant to
31 U.S.C. 330(c). If an appraisal is disre-
garded pursuant to 31 U.S.C. 330(c), it has
no probative effect as to the value of the
appraised property and does not satisfy the
appraisal requirements of paragraphs (d)
and (e) of this section, unless the appraisal
and Form 8283 include the appraiser sig-
nature, the date signed by the appraiser,
and the appraiser declaration described in
paragraphs (a)(3)(v) and (a)(3)(vi) of this
section and §§1.170A–16(d)(3)(iii) and
(d)(4), and the donor had no knowledge
that the signature, date, or declaration was
false when the appraisal and Form 8283
were signed by the appraiser.
(11)Partial interest. If the contributed
property is a partial interest, the appraisal
must be of the partial interest.
(b)Qualified appraiser—(1)Def-
inition.For purposes of section
170(f)(11) and §§1.170A–16(d)(1)(ii) and
1.170A–16(e)(1)(ii), the termqualified
appraisermeans an individual with verifi-
able education and experience in valuing
the relevant type of property for which
the appraisal is performed (as described
in paragraphs (b)(2) through (b)(4) of this
section).
(2)Education and experience in valu-
ing relevant type of property.(i)In gen-
eral. An individual is treated as having ed-
ucation and experience in valuing the rel-
evant type of property within the meaning
of paragraph (b)(1) of this section if, as of
the date the individual signs the appraisal,
the individual has—
(A) Successfully completed (for exam-
ple, received a passing grade on a final
examination) professional or college-level
coursework (as described in paragraph
(b)(2)(ii) of this section) in valuing the
relevant type of property (as described in
paragraph (b)(3) of this section), and has
two or more years of experience in valuing
the relevant type of property (as described
in paragraph (b)(3) of this section); or
(B) Earned a recognized appraisal
designation (as described in paragraph
(b)(2)(iii) of this section) for the relevant
type of property (as described in paragraph
(b)(3) of this section).
(ii)Coursework must be obtained from
professional or college-level educational
institution, appraisal organization, or em-
ployer educational program. For purposes
of paragraph (b)(2)(i)(A) of this section,
the coursework must be obtained from—
(A) A professional or college-level ed-
ucational organization described in section
170(b)(1)(A)(ii);
(B) A generally recognized profes-
sional appraisal organization that regularly
offers educational programs in the princi-
ples of valuation; or
(C)Anemployeraspartofanem-
ployee apprenticeship or educational
program substantially similar to the edu-
cational programs described in paragraphs
(b)(2)(ii)(A) and (B) of this section.
(iii)Recognized appraisal designation
defined.Arecognized appraisal designa-
tion
means a designation awarded by a rec-
ognized professionalappraiser organiza-
tion on the basis of demonstrated compe-
tency. For example, an appraiser who has
earned a designation similar to the Mem-
ber of the Appraisal Institute (MAI), Se-
nior Residential Appraiser (SRA), Senior
Real Estate Appraiser (SREA), or Senior
Real Property Appraiser (SRPA) member-
ship designation has earned a recognized
appraisal designation.
(3)Relevant type of property de-
fined—(i)In general. The relevant type of
property means the category of property
customary in the appraisal field for an
appraiser to value.
(ii)Examples. The following examples
illustrate the rule of paragraph (b)(3)(i) of
this section:
Example (1).Coursework in valuing relevant type
of property. There are very few professional-level
courses offered in widget appraising, and it is cus-
tomary in the appraisal field for personal property
appraisers to appraise widgets. AppraiserAhas
successfully completed professional-level course-
work in valuing personal property generally but has
completed no coursework in valuing widgets. The
coursework completed by AppraiserAis for the
relevant type of property under paragraphs (b)(2)(i)
and (b)(3)(i) of this section.
Example (2).Experience in valuing relevant type
of property. It is customary for professional antique
appraisers to appraise antique widgets. AppraiserA
has 2 years of experience in valuing antiques gener-
ally and is asked to appraise an antique widget. Ap-
praiserAhas obtained experience in valuing the rel-
evant type of property under paragraphs (b)(2)(i) and
(b)(3)(i) of this section.
2008–40 I.R.B.838October 6, 2008

Example (3).No experience in valuing relevant
type of property. It is not customary for profes-
sional antique appraisers to appraise new widgets.
AppraiserAhas experience in appraising antiques
generally but no experience in appraising new wid-
gets. AppraiserAis asked to appraise a new widget.
AppraiserAdoes not have experience in valuing the
relevant type of property under paragraphs (b)(2)(i)
and (b)(3)(i) of this section.
(4)Verifiable. For purposes of para-
graph(b)(1)ofthissection, education and
experience in valuing the relevant type
of property are verifiable if the appraiser
specifies in the appraisal the appraiser’s
education and experience in valuing the
relevant type of property (as described
in paragraphs (b)(2) and (b)(3) of this
section), and the appraiser makes a dec-
laration in the appraisal that, because of
the appraiser’s education and experience
described in this paragraph (b)(4), the ap-
praiser is qualified to make appraisals of
the relevant type of property being valued.
(5)Individuals who are not qualified
appraisers. The following individuals
cannot be qualified appraisers for the ap-
praised property:
(i) An individual who receives a fee
prohibited by paragraph (a)(8) of this sec-
tion.
(ii) The donor of the property.
(iii)Apartytothetransactioninwhich
the donor acquired the property (for exam-
ple, the individual who sold, exchanged,
or gave the property to the donor, or any
individual who acted as an agent for the
transferor or for the donor for the sale, ex-
change, or gift), unless the property is con-
tributed within 2 months of the date of ac-
quisition and its appraised value does not
exceed its acquisition price.
(iv) The donee of the property.
(v) Any individual who is either—
(A) Related (within the meaning of sec-
tion 267(b)) to, or an employee of, any
of the individuals described in paragraphs
(b)(5)(ii), (b)(5)(iii), or (b)(5)(iv) of this
section, or married to an individual who
is in a relationship described in section
267(b) with any of the foregoing individ-
uals; or
(B) An independent contractor who is
regularlyusedasanappraiserbyanyof
the individuals described in paragraphs
(b)(5)(ii), (b)(5)(iii), or (b)(5)(iv) of this
section, and who does not perform a ma-
jority of his or her appraisals for others
during the taxable year.
(vi) An individual who is prohib-
ited from practicing before the Internal
Revenue Service by the Secretary un-
der 31 U.S.C. section 330(c) at any time
during the 3-year period ending on the date
the appraisal is signed by the individual.
(c)Effective/applicability date.This
section applies to contributions made after
the date these regulations are published as
final regulations in theFederal Register.
Par. 7. Section 1.170A–18 is added to
read as follows:
§1.170A–18 Contributions of clothing
and household items—(a)In general.Ex-
cept as provided in paragraph (b) of this
section, no deduction is allowed under sec-
tion 170(a) for a contribution of clothing
or a household item (as described in para-
graph (c) of this section) unless—
(1) The item is in good used condition
or better at the time of the contribution; and
(2) The donor meets the substantiation
requirements of §1.170A–16.
(b)Certain contributions of clothing
or household items with claimed value of
more than $500. The rule described in
paragraph (a)(1) of this section does not
apply to a contribution of a single item of
clothing or a household item for which a
deduction of more than $500 is claimed, if
the donor submits with the return on which
the deduction is claimed a qualified ap-
praisal (as defined in §1.170A–17(a)(1))
ofthepropertypreparedbyaqualifiedap-
praiser (as defined in §1.170A–17(b)(1))
and a completed Form 8283 (Section B)
(as described in §1.170A–16(d)(3)).
(c)Definition of household items.For
purposes of section 170(f)(16) and this
section, the termhousehold itemsincludes
furniture, furnishings, electronics, appli-
ances, linens, and other similar items.
Food, paintings, antiques, and other ob-
jects of art, jewelry, gems, and collections
are not household items.
(d)Effective/applicability date.This
section applies to contributions made after
the date these regulations are published as
final regulations in theFederal Register.
Sherri L. Brown,
Acting Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on August 6,
2008, 8:45 a.m., and published in the issue of the Federal
Register for August 7, 2008, 73 F.R. 45908)
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Amendments to New Markets
Tax Credit Regulations
REG–149404–07
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed regulations relating to the new mar-
kets tax credit under section 45D of the
Internal Revenue Code (Code). The pro-
posed regulations revise and clarify cer-
tain rules relating to recapture of the new
markets tax credit and will affect certain
taxpayers claiming the new markets tax
credit. This document also provides a no-
tice of a public hearing on these proposed
regulations.
DATES: Written or electronic comments
must be received by November 10, 2008.
Outlines of topics to be discussed at the
public hearing scheduled for December 12,
2008, at 10:00 a.m. must be received by
November 3, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–149404–07), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to: CC:PA:LPD:PR (REG–149404–07),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC, or sent electroni-
cally, via the Federal eRulemaking Por-
tal at http://www.regulations.gov(IRS
REG–149404–07). The public hearing
will be held in the IRS Auditorium,
Internal Revenue Building, 1111
Constitution Avenue, NW, Washington,
DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Julie Hanlon-Bolton, (202)
622–7028; concerning submission of com-
ments, the hearing, and/or to be placed
October 6, 20088392008–40 I.R.B.

on the building access list to attend the
hearing, Regina Johnson, (202) 622–7180
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document amends 26 CFR part 1
to provide and clarify rules relating to the
new markets tax credit under section 45D
of the Code. Section 45D was added to the
Code by section 121 of the Community
Renewal Tax Relief Act of 2000, Public
Law 106–554 (114 Stat. 2763 (2000)) and
amended by section 221 of the American
Jobs Creation Act of 2004, Public Law
108–357 (118 Stat. 1418 (2004)), section
101 of the Gulf Opportunity Zone Act of
2005, Public Law 109–135 (119 Stat. 25
(2005)), and Division A, section 102 of the
Tax Relief and Health Care Act of 2006,
Public Law 109–432 (120 Stat. 2922
(2006)). On December 28, 2004, the IRS
and the Treasury Department published
final regulations under section 45D (T.D.
9171, 2005–1 C.B. 452 [69 FR 77625]),
with corrections on January 28, 2005 (70
FR 4012).
Groups and organizations representing
investors, qualified community devel-
opment entities, businesses, and other
entities involved with the new markets
tax credit program have since submitted
comments requesting further guidance on
the recapture of the credit. The commen-
tators suggested that revising the final
regulations to reduce recapture uncertainty
would encourage investors to bring in-
creased amounts of capital to low-income
communities.
General Overview
Section 45D(a)(1) provides a new mar-
kets tax credit on a taxpayer’s qualified
equity investment (QEI) in a qualified
community development entity (CDE).
To qualify for the credit, among other
requirements, substantially all of the tax-
payer’s cash must be used by the CDE to
make qualified low-income community
investments (QLICIs) pursuant to section
45D(b)(1)(B).
A CDE is any domestic corporation or
partnership if, among other requirements,
the primary mission of the entity is serving,
or providing investment capital for, low-
income communities or low-income per-
sons pursuant to section 45D(c)(1). Sec-
tion 45D(d)(1) provides that a QLICI is:
(A) any capital or equity investment in,
or loan to, any qualified active low-in-
come community business (QALICB); (B)
the purchase from another CDE of any
loan made by the entity that is a QLICI;
(C) financial counseling and other services
to businesses located in, and residents of,
low-income communities; and (D) any eq-
uity investment in, or loan to, any CDE.
A QALICB is any corporation or partner-
ship in which at least 50 percent of the total
gross income of the entity is derived from
the active conduct of a qualified business
within any low-income community, pro-
vided certain other requirements are met
pursuant to section 45D(d)(2).
Section 45D(g)(1) provides that, if
there is a recapture event at any time dur-
ing the 7-year period beginning on the date
of the original issue of a QEI in a CDE,
then the tax imposed by this chapter for
the taxable year in which the event occurs
must be increased by the credit recapture
amount. Section 45D(g)(3) provides that
a recapture event occurs with respect to
an equity investment in a CDE if (A) such
entity ceases to be a CDE, (B) the pro-
ceeds of the investment cease to be used
to make QLICIs as required by section
45D(b)(1)(B), or (C) the QEI is redeemed
by the CDE.
Explanation of Provisions
Redemption Safe Harbor for Partnership
CDEs
Section 1.45D–1(e)(3)(iii) provides
that, in the case of an equity investment
that is a capital interest in a CDE that is
a partnership for Federal tax purposes, a
pro ratacashdistributionbytheCDEto
its partners based on each partner’s capital
interest in the CDE during the taxable
year will not be treated as a redemption
for purposes of §1.45D–1(e)(2)(iii) if the
distribution does not exceed the CDE’s
operating income for the taxable year.
In addition, a non-pro rata de minimis
cash distribution by a CDE to a partner or
partners during the taxable year will not
be treated as a redemption provided the
distribution does not exceed the lesser of
5 percent of the CDE’s operating income
for that taxable year or 10 percent of the
partner’s capital interest in the CDE.
Commentators expressed the concern
that a CDE may not be able to calculate
its operating income in time to make a dis-
tribution during the taxable year. Because
most CDEs will make a low estimate of op-
erating income in order to lessen the risk
of not satisfying the requirements of the
redemption safe harbor, many CDEs may
not distribute the entire amount of operat-
ing income during the taxable year. In re-
sponse to this concern, the proposed regu-
lations provide that, in the case of an eq-
uity investment that is a capital interest
in a CDE that is a partnership for Fed-
eral tax purposes, apro ratacash distri-
butionbytheCDEtoitspartnersbased
on each partner’s capital interest in the
CDE during the taxable year will not be
treated as a redemption for purposes of
§1.45D–1(e)(2)(iii) if the distribution does
not exceed the sum of the CDE’s operating
income for the taxable year and the CDE’s
undistributed operating income (if any) for
the prior taxable year.
Additionally, for purposes of the re-
demption safe harbor for partnership
CDEs, §1.45D–1(e)(3)(iii) definesop-
erating incomeas the sum of (A) the
CDE’s taxable income as determined un-
der section 703 (except that (1) the items
described in section 703(a)(1) shall be
aggregated with the non-separately stated
tax items of the partnership; and (2)any
gain resulting from the sale of a capital as-
set under section 1221(a) or section 1231
property shall not be included in taxable
income); (B) deductions under section 165
(but only to the extent the losses were real-
ized from QLICIs under §1.45D–1(d)(1));
(C) deductions under sections 167 and 168
(including the additional first-year depre-
ciation under section 168(k)); (D) start-up
expenditures amortized under section 195;
and (E) organizational expenses amor-
tized under section 709. The proposed
regulations add tax-exempt income under
section 103 and any other depreciation and
amortization deductions under the Code
to the list of Code sections that determine
the amount of operating income.
Commentators have indicated that
some CDEs are adding their distribu-
tive share of the deductions listed in
§1.45D–1(e)(3)(iii) from another partner-
ship to the CDE’s calculation of operat-
2008–40 I.R.B.840October 6, 2008

ing income. For example, some CDEs
are adding their distributive share of
the amortization and depreciation de-
ductions under sections 167 and 168
from another partnership to the CDE’s
calculation of operating income. The
proposed regulations clarify that a CDE
may rely on §1.704–1(b)(1)(vii) to de-
termine its allocable share of the deduc-
tions listed in §1.45D–1(e)(3)(iii) from
another partnership to the CDE’s calcula-
tion of its operating income. Therefore,
§1.704–1(b)(1)(vii) applies to treat an al-
location to a partner of its share of partner-
ship net or “bottom line” taxable income
or loss as an allocation to such partner of
the same share of each item of income,
gain, loss, and deduction that is taken into
account in computing the partner’s net or
“bottom line” taxable income or loss.
Termination of a Partnership CDE under
Section 708(b)(1)(B)
Under section 708(b)(1)(B), a partner-
ship is considered as terminated if within a
twelve-month period there is a sale or ex-
change of 50 percent or more of the total
interest in partnership capital and profits.
Section 1.708–1(b)(4) provides, in part,
that if a partnership is terminated by a sale
or exchange of an interest, the following
is deemed to occur: the partnership con-
tributes all of its assets and liabilities to a
new partnership in exchange for an inter-
est in the new partnership; and, immedi-
ately thereafter, the terminated partnership
distributes interests in the new partnership
to the purchasing partner and the other re-
maining partners in proportion to their re-
spective interests in the terminated partner-
ship in liquidation of the terminated part-
nership, either for the continuation of the
business by the new partnership or for its
dissolution and winding up.
If the terminating partnership is a CDE,
because of the deemed distribution of
interests in that new partnership to the
purchasing partner and the other remain-
ing partners, a recapture event may be
triggered under section 45D(g)(3)(C) and
§1.45D–1(e)(2)(iii). However, because
the sale of a QEI is not a recapture event
under section 45D(g)(3) and because the
remaining partner or partners are not being
cashed out, the IRS and the Treasury De-
partment do not believe that the sale of a
QEI that causes the termination of a CDE
partnership under section 708(b)(1)(B)
should trigger recapture. Accordingly, the
proposed regulations provide that a ter-
mination under section 708(b)(1)(B) of a
CDE partnership is not a recapture event.
Reasonable Expectations
Section 1.45D–1(d)(6)(i) provides that
an entity is generally treated as a QALICB
for the duration of the CDE’s investment in
the entity if the CDE reasonably expects,
at the time the CDE makes the capital or
equity investment in, or loan to, the entity,
that the entity will satisfy the requirements
to be a QALICB under §1.45D–1(d)(4)(i)
throughout the entire period of the invest-
ment or loan.
The proposed regulations clarify
how the reasonable expectations rule of
§1.45D–1(d)(6)(i) applies when a CDE
makesaninvestmentinorloantoanother
CDE. The proposed regulations provide
thataCDEmayrelyon§1.45D–1(d)(6)(i)
to treat an entity as a QALICB even if
the CDE’s investment in or loan to the
entity is made through other CDEs under
§1.45D–1(d)(1)(iv)(A).
Commentators indicated that some
CDEs are unsure whether they may rely
on §1.45D–1(d)(6)(i) if their investments
involve the portions of business rule
under section 45D(d)(2)(C), the rental
to others of real property under sec-
tions 45D(d)(3)(A), and the exclusions
from the definition of a qualified busi-
ness under §1.45D–1(d)(5)(iii). Section
1.45D–1(d)(6)(i) already applies to all
of these rules in determining whether
an entity meets the requirements to be a
QALICB under §1.45D–1(d)(4)(i). Nev-
ertheless, the proposedregulations clarify
thatCDEsmayrelyontheseruleswhen
applying §1.45D–1(d)(6)(i).
Proposed Effective Date
The rules contained in these regulations
are proposed to apply to taxable years end-
ing on or after the date of publication of the
Treasury decision adopting these rules as
final regulations in theFederal Register.
Request for Comments
The IRS and the Treasury Department
invite taxpayers to submit comments on
issues relating to this notice of proposed
rulemaking. In particular, the IRS and the
Treasury Department encourage taxpayers
to submit comments on how to define, un-
der §1.45D–1(d)(2)(i), the dollar amounts
received by a CDE “in payment of, or for,
capital, equity, or principal” that are set
aside either for financial counseling and
other services, for an equity investment,
or as principal received on a loan. Sec-
tion 1.45D–1(d)(2)(i) provides that such
amounts must be reinvested by the CDE in
a QLICI no later than twelve months from
the date of receipt to be treated as contin-
uously invested in a QLICI. Commenta-
tors suggested defining amounts received
“in payment of, or for, capital, equity, or
principal” by using the same rules and re-
demption safe harbor in §1.45D–1(e)(3),
which defines when an investment is re-
deemed or otherwise cashed out by a CDE.
The proposed regulations do not adopt this
suggestion. The IRS and the Treasury De-
partment believe this approach may be in-
appropriate because redeeming one dol-
lar of an equity investment is a recapture
event under section 45D(g)(3)(C), while
failing to reinvest one dollar in a QLICI
under §1.45D–1(d)(2)(i) lowers the dol-
lar amount treated as meeting the substan-
tially-all requirement by one dollar.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these reg-
ulations, and because the regulations do
not impose a collection of information
on small entities, the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
for Advocacy of the Small Business
Administration for comment on its impact
on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timely to the IRS. Comments are requested
October 6, 20088412008–40 I.R.B.

on all aspects of the proposed regulations.
All comments will be available for public
inspection and copying.
A public hearing has been scheduled for
December 12, 2008, beginning at 10:00
a.m. in the IRS Auditorium, Internal Rev-
enue Building, 1111 Constitution Avenue,
NW, Washington, DC. Due to building se-
curity procedures, visitors must enter at the
Constitution Avenue entrance. In addition,
all visitors must present photo identifica-
tion to enter the building. Because of ac-
cess restrictions, visitors will not be ad-
mitted beyond the immediate entrance area
more than 30 minutes before the hearing
starts. For information about having your
name placed on the building access list
to attend the hearing, see the FOR FUR-
THER INFORMATION CONTACT sec-
tion of this preamble.
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 electronic or written comments by
November 10, 2008. Outline of the topics
tobediscussedandthetimetobedevoted
to each topic (a signed original and eight
(8) copies) by November 3, 2008. A pe-
riod of 10 minutes will be allotted to each
person for making comments. An agenda
showing the scheduling of the speakers
will be prepared after the deadline for re-
ceiving outlines has passed. Copies of the
agenda will be available free of charge at
the hearing.
Drafting Information
The principal author of these regu-
lations is Julie Hanlon-Bolton with the
Office of the Associate Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the IRS
and the 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 1.45D–1 is amended by:
1. Redesignating the paragraph (a) en-
tries for paragraphs (e)(4), (e)(5), (e)(6),
and (e)(7) as paragraphs (e)(5), (e)(6),
(e)(7), and (e)(8), respectively, adding a
new entry for paragraph (e)(4), and revis-
ingtheentryforparagraph(h)(2).
2. Revising paragraph (d)(6)(i).
3. Revising paragraph (e)(3)(iii) intro-
ductory text.
4.Redesignating paragraphs
(e)(3)(iii)(B), (e)(3)(iii)(C), (e)(3)(iii)(D),
and (e)(3)(iii)(E) as paragraphs
(e)(3)(iii)(C), (e)(3)(iii)(D), (e)(3)(iii)(E),
and (e)(3)(iii)(F), respectively, and adding
new paragraph (e)(3)(iii)(B).
5. Revising newly-designated para-
graph (e)(3)(iii)(D).
6. Redesignating paragraphs (e)(4),
(e)(5), (e)(6), and (e)(7) as paragraphs
(e)(5), (e)(6), (e)(7), and (e)(8), respec-
tively, and adding new paragraph (e)(4).
7. Revising the heading for paragraph
(h)(2) and adding a sentence at the end of
the paragraph.
The additions and revisions read as fol-
lows:
§1.45D–1 New markets tax credit.
(a) * * *
(e) * * *
(4) Section 708(b)(1)(B) termination.
*****
(h) * * *
(2) Exception for certain provisions.
*****
(a) * * *
(d) * * *
(6)***(i)***Exceptasprovidedin
paragraph (d)(6)(ii) of this section, an en-
tity is treated as a qualified active low-in-
come community business for the dura-
tion of the qualified community develop-
ment entity’s (CDE’s) investment in the
entity if the CDE reasonably expects, at
the time the CDE makes the capital or eq-
uity investment in, or loan to, the entity,
that the entity will satisfy the requirements
to be a qualified active low-income com-
munity business under paragraphs (d)(4)(i)
and (d)(5) of this section (including, if ap-
plicable, portions of business under para-
graph (d)(4)(iii) of this section) through-
out the entire period of the investment or
loan. A CDE may rely on this paragraph
(d)(6)(i) to treat an entity as a qualified ac-
tive low-income community business even
if the CDE’s investment in or loan to the
entity is made through other CDEs under
paragraph (d)(1)(iv)(A) of this section.
(e) * * *
(3) * * *
(iii)Capital interest in a partnership.In
the case of an equity investment that is a
capital interest in a CDE that is a partner-
ship for Federal tax purposes, apro rata
cash distribution by the CDE to its part-
ners based on each partner’s capital inter-
est in the CDE during the taxable year will
not be treated as a redemption for purposes
of paragraph (e)(2)(iii) of this section if
the distribution does not exceed the sum
of the CDE’s “operating income” for the
taxable year and the CDE’s undistributed
“operating income” (if any) for the prior
taxable year. For purposes of this para-
graph (e)(3)(iii), §1.704–1(b)(1)(vii) ap-
plies to treat an allocation to a partner of
its share of partnership net or “bottom line”
taxable income or loss as an allocation to
such partner of the same share of each item
of income, gain, loss, and deduction that is
taken into account in computing the part-
ner’s net or “bottom line” taxable income
or loss. In addition, a non-pro rata“de
minimis” cash distribution by a CDE to a
partner or partners during the taxable year
will not be treated as a redemption. A
non-pro rata“de minimis” cash distribu-
tion may not exceed the lesser of 5 percent
of the CDE’s “operating income” for that
taxable year or 10 percent of the partner’s
capital interest in the CDE. For purposes
of this paragraph (e)(3)(iii), with respect to
any taxable year, “operating income” is the
sum of:
*****
(B) Tax-exempt income under section
103;
*****
(D) Deductions under sections 167 and
168, including the additional first-year
depreciation under section 168(k), and
any other depreciation and amortization
deductions under the Code;
*****
(e) * * *
(4)Section 708(b)(1)(B) termination.A
termination under section 708(b)(1)(B) of
a CDE that is a partnership is not a recap-
ture event.
*****
(h) * * *
2008–40 I.R.B.842October 6, 2008

(2)Exception for certain provisions.
* * * Paragraph (d)(6)(i) of this section
as it relates to a CDE’s investment
under paragraph (d)(1)(iv)(A), paragraph
(e)(3)(iii) of this section as it relates to the
distribution of undistributed “operating
income” for the prior taxable year and
to the application of §1.704–1(b)(1)(vii),
paragraph (e)(3)(iii)(B) of this section,
paragraph (e)(3)(iii)(D) of this section as
it relates to any other depreciation and
amortization deductions under the Code,
and paragraph (e)(4) of this section apply
to taxable years ending on or after the date
of publication of the Treasury decision
adopting these rules as final regulation in
theFederal Register.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on August 8,
2008, 8:45 a.m., and published in the issue of the Federal
Register for August 11, 2008, 73 F.R. 46572)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2008–86
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on October 6, 2008,
andwouldendonthedatethecourtfirst
determines that the organization is not de-
scribed in section 170(c)(2) as more partic-
ularly set forth in section 7428(c)(1). For
individual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were the
basis for revocation.
The Boston Group Charitable Foundation
Sandy, UT
Foresters Longhorn Branch
Fort Worth, TX
Discontinuation of Publication
of Legislative Cumulative
Bulletins
Announcement 2008–87
The IRS has discontinued publication
of the Legislative Cumulative Bulletins.
This information is readily available on
various websites much earlier than when
this volume could be released for publica-
tion. Below is a list of online sources in
which legislative information can be ob-
tained.
http://thomas.loc.gov/
http://www.reginfo.gov/public/
http://uscode.house.gov/
http://www.gpoaccess.gov/fr/index.html
The last Legislative Bulletin was pub-
lished for 2003 legislation because our re-
sources no longer support its publication.
If you have any comments or questions,
please contact the Tax Forms and Publica-
tions Division attaxforms@irs.gov,orat
SE:W:CAR:MP:T, Room 6526, 1111 Con-
stitution Avenue, NW, Washington, DC
20224.
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2008–88
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletinthatanorganizationnolonger
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 October 6, 2008,
and would end on the date the court first
determines that the organization is not de-
scribed in section 170(c)(2) as more partic-
ularly set forth in section 7428(c)(1). For
individual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were the
basis for revocation.
Heaven in View, Inc.
Woodbridge, VA
Pueblo of Laguna
Old Laguna, NM
Gymnastics Foundation of Maui
Kahului, HI
October 6, 20088432008–40 I.R.B.

God Financial Plan, Inc.
Oakland, CA
Affordable Shelters, Inc.
South Gate, CA
Debt Advocate of America, Inc.
Killeen, TX
Folk Traditions Conservancy
Santa Barbara, CA
Individual Freedom Ministries Church
Orange City, FL
Gifts for Kids, Inc.
Erie, PA
Dabney & West Foundation, Inc.
Colbert, OK
Institute for the Development of
Human Resources
Wilmington, DE
American Fund for Consumer Credit
Counseling, Inc.
Commack, NY
Institute of Prevention and Nutritional
Medicine, Inc.
Rocky Mount, NC
The Stephanie Mull Foundation For
Children’s Art
Portland, ME
Arts Reach, Inc.
Rochester, NY
Section 7428(c) Validation
of Certain Contributions
Made During Pendency
of Declaratory Judgment
Proceedings
Announcement 2008–89
This announcement serves notice to po-
tential donors that the organization listed
below has recently filed a timely declara-
tory judgment suit under section 7428 of
the Code, challenging revocation of its
status as an eligible donee under section
170(c)(2).
Protection under section 7428(c) of the
Code begins on the date that the notice
of revocation is published in the Internal
Revenue Bulletin and ends on the date
on which a court first determines that an
organization is not described in section
170(c)(2), as more particularly set forth in
section 7428(c)(1).
In the case of individual contributors,
the maximum amount of contributions
protected during this period is limited to
$1,000.00, with a husband and wife being
treated as one contributor. This protec-
tion is not extended to any individual who
was responsible, in whole or in part, for
the acts or omissions of the organization
that were the basis for the revocation.
This protection also applies (but without
limitation as to amount) to organizations
described in section 170(c)(2) which are
exempt from tax under section 501(a). If
the organization ultimately prevails in its
declaratory judgment suit, deductibility
of contributions would be subject to the
normal limitations set forth under section
170.
The Dowd Foundation
Wilkes-Barre, PA
National Credit Counseling Services
Orlando, FL
2008–40 I.R.B.844October 6, 2008

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
October 6, 2008i2008–40 I.R.B.

Numerical Finding List
1
Bulletins 2008–27 through 2008–40
Announcements:
2008-62, 2008-27 I.R.B.74
2008-63, 2008-28 I.R.B.114
2008-64, 2008-28 I.R.B.114
2008-65, 2008-31 I.R.B.279
2008-66, 2008-29 I.R.B.164
2008-67, 2008-29 I.R.B.164
2008-68, 2008-30 I.R.B.244
2008-69, 2008-32 I.R.B.318
2008-70, 2008-32 I.R.B.318
2008-71, 2008-32 I.R.B.321
2008-72, 2008-32 I.R.B.321
2008-73, 2008-33 I.R.B.391
2008-74, 2008-33 I.R.B.392
2008-75, 2008-33 I.R.B.392
2008-76, 2008-33 I.R.B.393
2008-77, 2008-33 I.R.B.394
2008-78, 2008-34 I.R.B.453
2008-79, 2008-35 I.R.B.568
2008-80, 2008-37 I.R.B.706
2008-81, 2008-37 I.R.B.706
2008-82, 2008-37 I.R.B.708
2008-83, 2008-37 I.R.B.709
2008-84, 2008-38 I.R.B.748
2008-85, 2008-38 I.R.B.749
2008-86, 2008-40 I.R.B.843
2008-87, 2008-40 I.R.B.843
2008-88, 2008-40 I.R.B.843
2008-89, 2008-40 I.R.B.844
Notices:
2008-55, 2008-27 I.R.B.11
2008-56, 2008-28 I.R.B.79
2008-57, 2008-28 I.R.B.80
2008-58, 2008-28 I.R.B.81
2008-59, 2008-29 I.R.B.123
2008-60, 2008-30 I.R.B.178
2008-61, 2008-30 I.R.B.180
2008-62, 2008-29 I.R.B.130
2008-63, 2008-31 I.R.B.261
2008-64, 2008-31 I.R.B.268
2008-65, 2008-30 I.R.B.182
2008-66, 2008-31 I.R.B.270
2008-67, 2008-32 I.R.B.307
2008-68, 2008-34 I.R.B.418
2008-69, 2008-34 I.R.B.419
2008-70, 2008-36 I.R.B.575
2008-71, 2008-35 I.R.B.462
2008-73, 2008-38 I.R.B.717
2008-74, 2008-38 I.R.B.718
2008-75, 2008-38 I.R.B.719
2008-76, 2008-39 I.R.B.768
Notices— Continued:
2008-77, 2008-40 I.R.B.814
2008-79, 2008-40 I.R.B.815
2008-80, 2008-40 I.R.B.820
Proposed Regulations:
REG-161695-04, 2008-37 I.R.B.699
REG-164965-04, 2008-34 I.R.B.450
REG-143453-05, 2008-32 I.R.B.310
REG-146895-05, 2008-37 I.R.B.700
REG-155087-05, 2008-38 I.R.B.726
REG-142680-06, 2008-35 I.R.B.565
REG-120476-07, 2008-36 I.R.B.679
REG-120844-07, 2008-39 I.R.B.770
REG-129243-07, 2008-27 I.R.B.32
REG-138355-07, 2008-32 I.R.B.311
REG-140029-07, 2008-40 I.R.B.828
REG-142040-07, 2008-34 I.R.B.451
REG-149404-07, 2008-40 I.R.B.839
REG-149405-07, 2008-27 I.R.B.73
REG-100464-08, 2008-32 I.R.B.313
REG-101258-08, 2008-28 I.R.B.111
REG-102122-08, 2008-31 I.R.B.278
REG-102822-08, 2008-38 I.R.B.744
REG-103146-08, 2008-37 I.R.B.701
REG-106251-08, 2008-39 I.R.B.774
REG-115457-08, 2008-33 I.R.B.390
REG-121698-08, 2008-29 I.R.B.163
Revenue Procedures:
2008-32, 2008-28 I.R.B.82
2008-33, 2008-28 I.R.B.93
2008-34, 2008-27 I.R.B.13
2008-35, 2008-29 I.R.B.132
2008-36, 2008-33 I.R.B.340
2008-37, 2008-29 I.R.B.137
2008-38, 2008-29 I.R.B.139
2008-39, 2008-29 I.R.B.143
2008-40, 2008-29 I.R.B.151
2008-41, 2008-29 I.R.B.155
2008-42, 2008-29 I.R.B.160
2008-43, 2008-30 I.R.B.186
2008-44, 2008-30 I.R.B.187
2008-45, 2008-30 I.R.B.224
2008-46, 2008-30 I.R.B.238
2008-47, 2008-31 I.R.B.272
2008-48, 2008-36 I.R.B.586
2008-49, 2008-34 I.R.B.423
2008-50, 2008-35 I.R.B.464
2008-51, 2008-35 I.R.B.562
2008-52, 2008-36 I.R.B.587
2008-53, 2008-36 I.R.B.678
2008-54, 2008-38 I.R.B.722
2008-55, 2008-39 I.R.B.768
2008-56, 2008-40 I.R.B.826
Revenue Rulings:
2008-32, 2008-27 I.R.B.6
2008-33, 2008-27 I.R.B.8
2008-34, 2008-28 I.R.B.76
2008-35, 2008-29 I.R.B.116
2008-36, 2008-30 I.R.B.165
2008-37, 2008-28 I.R.B.77
2008-38, 2008-31 I.R.B.249
2008-39, 2008-31 I.R.B.252
2008-40, 2008-30 I.R.B.166
2008-41, 2008-30 I.R.B.170
2008-42, 2008-30 I.R.B.175
2008-43, 2008-31 I.R.B.258
2008-44, 2008-32 I.R.B.292
2008-45, 2008-34 I.R.B.403
2008-46, 2008-36 I.R.B.572
2008-47, 2008-39 I.R.B.760
2008-48, 2008-38 I.R.B.713
2008-49, 2008-40 I.R.B.811
Treasury Decisions:
9401, 2008-27 I.R.B.1
9402, 2008-31 I.R.B.254
9403, 2008-32 I.R.B.285
9404, 2008-32 I.R.B.280
9405, 2008-32 I.R.B.293
9406, 2008-32 I.R.B.287
9407, 2008-33 I.R.B.330
9408, 2008-33 I.R.B.323
9409, 2008-29 I.R.B.118
9410, 2008-34 I.R.B.414
9411, 2008-34 I.R.B.398
9412, 2008-37 I.R.B.687
9413, 2008-34 I.R.B.404
9414, 2008-35 I.R.B.454
9415, 2008-36 I.R.B.570
9417, 2008-37 I.R.B.693
9418, 2008-38 I.R.B.713
9419, 2008-40 I.R.B.790
9420, 2008-39 I.R.B.750
9421, 2008-39 I.R.B.755
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin
2008–26, dated June 30, 2008.
2008–40 I.R.B.iiOctober 6, 2008

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–27 through 2008–40
Announcements:
2008-64
Corrected by
Ann. 2008-71, 2008-32 I.R.B.321
2008-72
Corrected by
Ann. 2008-78, 2008-34 I.R.B.453
Notices:
88-80
Modified by
Notice 2008-79, 2008-40 I.R.B.815
99-48
Superseded by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2000-9
Obsoleted by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
2004-2
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2004-50
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2006-88
Modified and superseded by
Notice 2008-60, 2008-30 I.R.B.178
2007-22
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2007-36
Clarified, modified, and amplified by
Rev. Proc. 2008-54, 2008-38 I.R.B.722
Proposed Regulations:
REG-129243-07
Corrected by
Ann. 2008-75, 2008-33 I.R.B.392
REG-151135-07
Hearing scheduled by
Ann. 2008-64, 2008-28 I.R.B.114
REG-101258-08
Corrected by
Ann. 2008-73, 2008-33 I.R.B.391
Revenue Procedures:
92-25
Superseded by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
Revenue Procedures— Continued:
92-83
Obsoleted by
Rev. Proc. 2008-37, 2008-29 I.R.B.137
2001-10
Section 6.02(1)(a) modified and amplified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2001-42
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2002-9
Clarified, modified, amplified, and superseded by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
Modified and amplified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
2002-28
Section 7.02(1)(a) modified and amplified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2002-64
Superseded by
Rev. Proc. 2008-55, 2008-39 I.R.B.768
2005-29
Superseded by
Rev. Proc. 2008-49, 2008-34 I.R.B.423
2006-27
Modified and superseded by
Rev. Proc. 2008-50, 2008-35 I.R.B.464
2006-29
Superseded by
Rev. Proc. 2008-34, 2008-27 I.R.B.13
2006-34
Superseded by
Rev. Proc. 2008-44, 2008-30 I.R.B.187
2007-14
Superseded by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2007-19
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2007-42
Superseded by
Rev. Proc. 2008-32, 2008-28 I.R.B.82
2007-43
Superseded by
Rev. Proc. 2008-33, 2008-28 I.R.B.93
2007-44
Modified by
Rev. Proc. 2008-56, 2008-40 I.R.B.826
2007-49
Section 3 modified and superseded by
Rev. Proc. 2008-50, 2008-35 I.R.B.464
Revenue Procedures— Continued:
2007-50
Superseded by
Rev. Proc. 2008-36, 2008-33 I.R.B.340
2007-66
Modified and superseded by
Rev. Proc. 2008-54, 2008-38 I.R.B.722
2007-70
Modified by
Ann. 2008-63, 2008-28 I.R.B.114
2007-72
Amplified and superseded by
Rev. Proc. 2008-47, 2008-31 I.R.B.272
2008-12
Modified and superseded by
Rev. Proc. 2008-35, 2008-29 I.R.B.132
2008-43
Modified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2008-52
Modified by
Ann. 2008-84, 2008-38 I.R.B.748
Revenue Rulings:
67-213
Amplified by
Rev. Rul. 2008-40, 2008-30 I.R.B.166
71-234
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
76-273
Obsoleted by
T.D. 9414, 2008-35 I.R.B.454
77-480
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
82-105
Obsoleted by
T.D. 9414, 2008-35 I.R.B.454
91-17
Amplified by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
Rev. Proc. 2008-42, 2008-29 I.R.B.160
Superseded in part by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2005-6
Amplified by
Rev. Proc. 2008-38, 2008-29 I.R.B.139
2006-57
Modified by
Notice 2008-74, 2008-38 I.R.B.718
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin 2008–26, dated June 30, 2008.
October 6, 2008iii2008–40 I.R.B.

Revenue Rulings— Continued:
2008-12
Amplified by
Rev. Rul. 2008-38, 2008-31 I.R.B.249
Clarified by
Ann. 2008-65, 2008-31 I.R.B.279
Treasury Decisions:
9391
Corrected by
Ann. 2008-74, 2008-33 I.R.B.392
2008–40 I.R.B.ivOctober 6, 2008

October 6, 20082008–40 I.R.B.

2008–40 I.R.B.October 6, 2008

October 6, 20082008–40 I.R.B.

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