Internal Revenue Bulletin 2002-49 (PDF rendition): IRS Revenue Procedures

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.

# Internal Revenue bulletin

Bulletin No. 2002-49
December 9, 2002

## 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. 2002-80, page 925.
Advance reimbursement of medical expenses. This ruling
amplifies Rev. Rul. 2002-3, 2002-3 I.R.B. 316, to clarify that
amounts paid to an employee as "advance reimbursements" or
"loans" without regard to whether the employee has suffered a
personal injury or sickness or incurred medical expenses are not
excludable from the employee's gross income under section
105(b), whether or not that employee incurs medical expenses
during the year.

Rev. Rul. 2002-81, page 928.
Federal rates; adjusted federal rates; adjusted federal long-
term rate and the long-term exempt rate. For purposes of
sections 382, 1274, 1288, and other sections of the Code,
tables set forth the rates for December 2002.

Rev. Rul. 2002-83, page 927.

Related party like-kind exchanges. Under the facts described,
a taxpayer who transfers relinquished property to a qualified in-
termediary in exchange for replacement property formerly owned
by a related party is not entitled to nonrecognition treatment un-
der section 1031(a) of the Code if, as part of the transaction,
the related party receives cash or other non-like-kind property for
the replacement property.

## EMPLOYEE PLANS

Rev. Proc. 2002-73, page 932.

Extensions. This procedure extends the time for amending pre-
approved plans to comply with GUST to September 30, 2003,
and also extends the time for making certain other plan amend-
ments. Notice 2001-37; Rev. Procs. 2000-20, 2002-6, and
2002-35; and Rev. Ruls. 2001-62 and 2002-27 modified.

## EXEMPT ORGANIZATIONS

Announcement 2002-109, page 952.

Institute of Marine Science of Lauderdale by the Sea, FL, no longer
qualifies as an organization to which contributions are deduct-
ible under section 170 of the Code.

## EMPLOYMENT TAX

Announcement 2002-108, page 952.

This document provides notice that the reporting of compensa-
tion resulting from employer-provided nonstatutory stock op-
tions in box 12 of the Form W-2, using Code V, is mandatory for
Forms W-2 issued for the year 2003 and subsequent years.

## ADMINISTRATIVE

REG-251003-96, page 935.

This document amends the Statement of Procedural Rules to re-
flect changes effected by the Electronic Freedom of Informa-
tion Act Amendments of 1996, to update organizational titles and
addresses, and to make certain changes in the IRS's proce-
dures for processing Freedom of Information Act (FOIA) re-
quests. These amendments conform to procedures set forth in
the Department of the Treasury's regulations on disclosure of
records under the FOIA. The rules affect persons requesting
records from the IRS.

Rev. Proc. 2002-72, page 931.

This procedure sets forth the maximum face amount of Quali-
fied Zone Academy Bonds that may be issued by each state, the
District of Columbia, and the possessions of the United States
during 2003.

Actions Relating to Court Decisions is on the page following the Introduction.
Finding Lists begin on page ii.

Department of the Treasury
Internal Revenue Service

## The IRS Mission

Provide America's taxpayers top quality service by helping them
understand and meet their tax responsibilities and by applying
the tax law with integrity and fairness to all.

### Introduction

The Internal Revenue Bulletin is the authoritative instrument of the
Commissioner of Internal Revenue for announcing official rul-
ings and procedures of the Internal Revenue Service and for pub-
lishing Treasury Decisions, Executive Orders, Tax Conventions,
legislation, court decisions, and other items of general inter-
est. It is published weekly and may be obtained from the Super-
intendent of Documents on a subscription basis. Bulletin contents
are consolidated 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, modify,
or amend any of those previously published in the Bulletin. All pub-
lished rulings apply retroactively unless otherwise indicated. Pro-
cedures relating solely to matters of internal management are
not published; however, statements of internal practices and pro-
cedures that affect the rights and duties of taxpayers are pub-
lished.

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 taxpay-
ers or technical advice to Service field offices, identifying de-
tails 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 re-
lied on, used, or cited as precedents by Service personnel in the
disposition of other cases. In applying published rulings and pro-
cedures, the effect of subsequent legislation, regulations, court

decisions, rulings, and procedures must be considered, and Ser-
vice personnel and others concerned are cautioned against reach-
ing the same conclusions in other cases unless the facts and
circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

#### Part I .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.

#### Part II .- Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.

Part III .- Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these sub-
jects are contained in the other Parts and Subparts. Also in-
cluded in this part are Bank Secrecy Act Administrative Rulings.
Bank Secrecy Act Administrative Rulings are issued by the De-
partment of the Treasury's Office of the Assistant Secretary (En-
forcement).

#### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.

The first 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 first Bulletin of the succeeding semiannual pe-
riod, respectively.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

### Actions Relating to Decisions of the Tax Court

It is the policy of the Internal Revenue
Service to announce at an early date
whether it will follow the holdings in cer-
tain cases. An Action on Decision is the
document making such an announcement.
An Action on Decision will be issued at the
discretion of the Service only on unap-
pealed issues decided adverse to the gov-
ernment. Generally, an Action on Decision
is issued where its guidance would be help-
ful to Service personnel working with the
same or similar issues. Unlike a Treasury
Regulation or a Revenue Ruling, an Ac-
tion on Decision is not an affirmative state-
ment of Service position. It is not intended
to serve as public guidance and may not be
cited as precedent.

Actions on Decisions shall be relied
upon within the Service only as conclu-
sions applying the law to the facts in the
particular case at the time the Action on De-
cision was issued. Caution should be ex-
ercised in extending the recommendation of
the Action on Decision to similar cases
where the facts are different. Moreover, the
recommendation in the Action on Deci-
sion may be superseded by new legisla-
tion, regulations, rulings, cases, or Actions
on Decisions.

Prior to 1991, the Service published ac-
quiescence or nonacquiescence only in cer-
tain regular Tax Court opinions. The Service
has expanded its acquiescence program to
include other civil tax cases where guid-
ance is determined to be helpful. Accord-
ingly, the Service now may acquiesce or
nonacquiesce in the holdings of memoran-
dum Tax Court opinions, as well as those
of the United States District Courts, Claims
Court, and Circuit Courts of Appeal. Re-
gardless of the court deciding the case, the
recommendation of any Action on Deci-
sion will be published in the Internal Rev-
enue Bulletin.

The recommendation in every Action on
Decision will be summarized as acquies-
cence, acquiescence in result only, or non-
acquiescence. Both "acquiescence" and
"acquiescence in result only" mean that the
Service accepts the holding of the court in
a case and that the Service will follow it
in disposing of cases with the same con-
trolling facts. However, "acquiescence" in-
dicates neither approval nor disapproval of
the reasons assigned by the court for its
conclusions; whereas, "acquiescence in re-
sult only" indicates disagreement or con-
cern with some or all of those reasons.
"Nonacquiescence" signifies that, although
no further review was sought, the Service
does not agree with the holding of the court
and, generally, will not follow the deci-
sion in disposing of cases involving other
taxpayers. In reference to an opinion of a
circuit court of appeals, a "nonacquies-
cence" indicates that the Service will not
follow the holding on a nationwide basis.
However, the Service will recognize the pre-

cedential impact of the opinion on cases
arising within the venue of the deciding cir-
cuit.

The Actions on Decisions published in
the weekly Internal Revenue Bulletin are
consolidated semiannually and appear in the
first Bulletin for July and the Cumulative
Bulletin for the first half of the year. A semi-
annual consolidation also appears in the first
Bulletin for the following January and in
the Cumulative Bulletin for the last half of
the year.

The Commissioner ACQUIESCES in the
following decision:

Robert L. Beck v. Commissioner,1
T.C. Memo 2001-198 (filed
July 30, 2001)
Dkt. Nos. 14577-98 and 14578-98
Decision Date: September 6, 2001

The Commissioner does NOT
ACQUIESCE in the following decision:

Curell v. United States2
2001-2 U.S.T.C. paragraph 50, 740
88 AFTR2d 2001-5001
(S.D. Ohio 2001)

1
Acquiescence, and withdrawal of the action on decision dated December 17, 2001, relating to whether the Tax Court has jurisdiction to review the Service's determination that a spouse is not entitled to equitable
relief under I.R.C. section 66(c) in a deficiency proceeding.

2 Nonacquiescence relating to whether an LL.M. in Taxation qualify as a "special factor" justifying an award of attorneys' fees to plaintiff's counsel in excess of the statutory rate under I.R.C. section 7430.

## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

### 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 December 2002. See Rev. Rul. 2002-81, page 928.

### Section 105 .- Amounts Received Under Accident and Health Plans

(Also Sections 125 and 106.)

Section 105 advance reimbursement of
medical expenses. This ruling amplifies
Rev. Rul. 2002-3, 2002-3 I.R.B. 316, to
clarify that amounts paid to an employee
as "advance reimbursements" or "loans"
without regard to whether the employee has
suffered a personal injury or sickness or in-
curred medical expenses are not exclud-
able from the employee's gross income
under section 105(d), whether or not that
employee incurs medical expenses during
the year.

### Rev. Rul. 2002-80

#### ISSUE

Whether, under the facts described,
amounts an employer pays to an employee
as "advance reimbursements" or "loans" are
excluded from gross income under § 105(b)
and from employment taxes under
§§ 3401(a), 3121(a), and 3306(b) of the In-
ternal Revenue Code.

#### FACTS

Situation (1). Employer M provides
health coverage for its employees through
a group health insurance policy. The cov-
erage constitutes accident or health cover-
age for purposes of the exclusion for
employer-provided accident or health cov-
erage under § 106(a).

M has a payroll arrangement under
which an employee's salary is reduced and
M applies the salary reduction amounts to
the payment of the premiums for the group
health insurance policy for the employee
during the year. The salary reduction used
to pay for the premiums is mandatory for
M's highly compensated employees. All
other employees elect whether to purchase

the group health insurance policy through
salary reduction. Thus, under M's plan, all
employees have a lower salary in exchange
for employer-provided group health insur-
ance coverage.

In addition to the group health insur-
ance policy, M has a plan under which M
reimburses the uninsured medical expenses
of employees. To ameliorate the salary re-
duction for the group health insurance
policy, M makes payments to an employee
in amounts that cause the employee's after-
tax pay from M to be the same or approxi-
mately the same as what it would have been
if there were no salary reduction to pay pre-
miums for the group health insurance policy.
M characterizes these payments as "ad-
vance reimbursements" of the uninsured
medical expenses.

During the year, the employee submits
to M claims for uninsured medical ex-
penses incurred by the employee, the em-
ployee's spouse, or the employee's
dependents. To the extent the employee sub-
mits claims for uninsured medical expenses
during the year, M excludes that amount of
the "advance reimbursement" payments
from the employee's gross income under
§ 105(b) and does not withhold income tax
or treat the amount as wages for Federal In-
surance Contribution Act (FICA) or Fed-
eral Unemployment Tax Act (FUTA)
purposes. To the extent an employee does
not have uninsured medical expenses equal
to the "advance reimbursements" made to
the employee by the end of the year or upon
the employee's termination of employ-
ment, M will often treat excess "advance
reimbursements" above uninsured medi-
cal expenses as forgiven and as additional
compensation includible in the employ-
ee's gross income.

Situation (2). The facts are the same as
in Situation (1), except that the Employer,
N, reimburses an employee's health insur-
ance premiums through purported "loans"
rather than "advance reimbursements." N
implements the plan by making "loans" to
the employee sufficient to cause the em-
ployee's after-tax pay to remain essen-
tially unchanged. The "loans," which may
or may not bear market rates of interest,
only become due and payable at the time
and to the extent that the employee sub-
mits to N claims for uninsured medical ex-
penses. Upon receipt of a medical expense

claim, N "reimburses" the medical ex-
pense and simultaneously offsets the "loan"
by retaining the amount of the "reimburse-
ment." The "reimbursments" and "loan" off-
sets are made through bookkeeping entries.
Thus, to the extent the employee submits
claims for uninsured medical expenses dur-
ing the year, N excludes that amount of the
"loans" from the employee's gross income
under § 105(b) and from the employment
taxes. To the extent an employee does not
have uninsured medical expenses equal to
the "loans," N forgives the "loans."

### LAW AND ANALYSIS

In general, § 106(a) provides that gross
income of an employee does not include
employer-provided coverage under an ac-
cident or health plan. Under § 106(a), an
employee may exclude premiums for ac-
cident or health insurance coverage that are
paid by an employer. Also, under § 105(b),
an employee may exclude amounts received
through employer-provided accident or
health insurance if those amounts are paid
to reimburse expenses incurred by the em-
ployee for medical care (of the employee,
the employee's spouse, or the employee's
dependents) for personal injuries or sick-
ness.

Section 105(e) provides that amounts re-
ceived under an accident or health plan for
employees are treated as amounts received
through accident or health insurance for pur-
poses of § 105(b). Section 1.105-5(a) of the
Income Tax Regulations defines an acci-
dent or health plan as an arrangement for
the payment of amounts to employees in the
event of personal injuries or sickness.

Section 1.105-2 provides that only
amounts that are paid specifically to reim-
burse the taxpayer for expenses incurred by
the taxpayer for the prescribed medical care
are excludable from gross income under
§ 105(b). Accordingly, § 105(b) does not ap-
ply to amounts that the taxpayer would be
entitled to receive irrespective of whether
or not the taxpayer incurs expenses for
medical care.

Amounts excluded from gross income
under § 105(b) are also excluded from in-
come tax withholding under § 3401(a). In
addition, amounts paid under a plan estab-
lished by an employer on account of ex-
penses incurred by the employee for
medical care (of the employee, the em-

ployee's spouse, or the employee's depen-
dents) are excluded from FICA and FUTA
taxes under §§ 3121(a) and 3306(b).

Under § 125, an employer may estab-
lish a cafeteria plan that permits an em-
ployee to choose among two or more
benefits, consisting of cash (generally, sal-
ary) and qualified benefits, including ac-
cident or health coverage. Pursuant to § 125,
the amount of an employee's salary reduc-
tion applied to purchase such coverage is
not included in gross income, even though
it is available to the employee and the em-
ployee could have chosen to receive cash
instead. If an employee elects salary re-
duction pursuant to § 125, the accident and
health coverage is excludable from gross in-
come under § 106 as employer-provided ac-
cident or health coverage.

In Rev. Rul. 2002-3, 2002-3 I.R.B. 316,
an employer applies salary reduction
amounts to the payment of health insur-
ance premiums for employees and then "re-
imburses" amounts to employees so that
employees' after-tax pay remains un-
changed. The ruling concludes that although
the salary reduction amounts used to pay
the premiums are excludable from the em-
ployees' gross income under § 106 be-
cause employer-paid, there are no employee-
paid premiums for the employer to
"reimburse." Thus, the reimbursements that
the employer makes to employees are not
excludable from gross income under
§ 105(b) because they do not reimburse em-
ployees for expenses incurred by the em-
ployees. In addition, the reimbursements are
not excluded from income tax withhold-
ing, FICA taxes, or FUTA taxes. The rul-
ing also states that the same conclusion
results when the salary reduction used to
pay for the health insurance premiums is
done without employee elections.

In Situation (1), although M purports to
treat the "advance reimbursements" as pay-
ments for uninsured medical expenses, those
amounts are paid to the employee regard-
less of whether the employee incurs ex-
penses for medical care or suffers a personal
injury or sickness during the year. Under
§ 1.105-5(a), M's "advance reimburse-
ment" plan is therefore not an accident or
health plan because it is not an arrange-
ment for the payment of amounts to em-
ployees in the event of personal injuries or
sickness. In addition, under § 1.105-2, the

exclusion from gross income under § 105(b)
applies only to amounts paid specifically to
reimburse medical care expenses and does
not apply to amounts that the employee
would be entitled to receive irrespective of
whether the employee incurs expenses for
medical care. Because an M employee is
not paid specifically to reimburse medi-
cal care expenses but is entitled to receive
the "advance reimbursements" irrespec-
tive of whether any medical expenses have
been incurred, none of those payments are
excludable from gross income under
§ 105(b) or from income tax withholding
under § 3401(a) whether or not the em-
ployee has actually incurred uninsured
medical expenses during the year. Finally,
because "advance reimbursements" under
M's plan are not made on account of ex-
penses incurred by the employee for medi-
cal care, the payments are subject to FICA
taxes under § 3121(a) and FUTA taxes un-
der § 3306(b).

In Situation (2), although N character-
izes the payments to the employee as
"loans," it is understood that the employee
will never become obligated to repay any
of the purported "loans" to N. Under N's
plan, when the employee submits unin-
sured medical claims, N treats the reim-
bursements as an offset against that amount
of the "loans." However, if the employee
does not submit claims, the outstanding
amounts of the "loans" never become due
and payable to N. (In addition, N may not
notify or obtain the employee's consent for
the purported loan arrangement, in which
event, the "loans" may be unenforceable un-
der applicable law.)

Accordingly, under the specific facts de-
scribed in Situation (2), the arrangement
does not constitute a loan and is, in sub-
stance, the same as Situation (1). Like the
transaction in Situation (1), the arrange-
ment in Situation (2) is neither an acci-
dent or health plan under § 1.105-5(a) nor
excludable from gross income under
§ 105(b) by reason of § 105-2 (either when
paid to the employee or when offset against
claims for uninsured medical expenses).

HOLDING

Under the facts described in Situations
(1) and (2), the exclusion from gross in-
come under § 105(b) does not apply to
amounts that an employer pays to an em-

ployee as "advance reimbursements" or
"loans," whether or not the employee in-
curs uninsured medical expenses during the
year. Moreover, in Situation (2), the
amounts paid to the employee do not con-
stitute loans. Accordingly, all of the "ad-
vance reimbursements" or "loans" are
included in the employee's gross income
under § 61 and are subject to employment
taxes under §§ 3401(a), 3121(a), and
3306(b).

### EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 2002-3 is amplified.
DRAFTING INFORMATION

The principal author of this Revenue
Ruling is Felix Zech of the Office of Di-
vision Counsel/Associate Chief Counsel
(Tax Exempt and Government Entities). For
further information regarding this Rev-
enue Ruling, contact him at (202) 622-
6080 (not a toll-free call).

## Section 106 .- Contributions by Employer to Accident and Health Plans

Advance reimbursements of medical expenses
made irrespective of whether the employee has in-
curred medical expenses are not excludable from the
employee's gross income under section 105(b) of the
Code even if the employee incurs expenses for medi-
cal care. See Rev. Rul. 2002-80, page 925.

## Section 125 .- Cafeteria Plans

## Section 280G .- Golden Para- chute Payments

Federal short-term, mid-term, and long-term rates
are set forth for the month of December 2002. See Rev.
Rul. 2002-81, page 928.

## Section 382 .- Limitation on Net Operating Loss Carryfor- wards and Certain Built-In Losses Following Ownership Change

The adjusted applicable federal long-term rate is
set forth for the month of December 2002. See Rev.
Rul. 2002-81, page 928.

### Section 401 .- Qualified Pen- sion, Profit-Sharing and Stock Bonus Plans

26 CFR 1.401(b)-1: Certain retroactive changes in
plan.

A revenue procedure extends the time for amend-
ing pre-approved plans to comply with GUST to Sep-
tember 30, 2003, and also extends the time for making
certain other plan amendments. See Rev. Proc. 2002-
73, page 932.

### Section 412 .- Minimum Funding Standards

The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2002. See Rev. Rul. 2002-81, page 928.

### Section 467 .- Certain Pay- ments for the Use of Property or Services

The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2002. See Rev. Rul. 2002-81, page 928.

### Section 468 .- 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 December 2002. See Rev. Rul. 2002-81, page 928.

### 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 December 2002. See Rev.
Rul. 2002-81, page 928.

### 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 December 2002. See Rev. Rul. 2002-81, page 928.

## Section 642 .- Special Rules for Credits and Deductions

Federal short-term, mid-term, and long-term rates
are set forth for the month of December 2002. See Rev.
Rul. 2002-81, page 928.

## Section 807 .- Rules for Cer- tain Reserves

The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2002. See Rev. Rul. 2002-81, page 928.

## 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 December 2002. See Rev. Rul. 2002-81, page 928.

## Section 1031 .- Exchange of Property Held for Productive Use or Investment

26 CFR 1.1031(k)-1: Treatment of deferred ex-
changes.

Related party like-kind exchanges. Un-
der the facts described, a taxpayer who
transfers relinquished property to a quali-
fied intermediary in exchange for replace-
ment property formerly owned by a related
party is not entitled to nonrecognition treat-
ment under section 1031(a) of the Code if,
as part of the transaction, the related party
receives cash or other non-like-kind prop-
erty for the replacement property.

## Rev. Rul. 2002-83

### ISSUE

Under the facts described below, is a tax-
payer who transfers relinquished property
to a qualified intermediary in exchange for
replacement property formerly owned by a
related party entitled to nonrecognition treat-
ment under § 1031(a) of the Internal Rev-

enue Code if, as part of the transaction, the
related party receives cash or other non-
like-kind property for the replacement prop-
erty?

## FACTS

Individual A owns real property (Prop-
erty 1) with a fair market value of $150x
and an adjusted basis of $50x. Individual
B owns real property (Property 2) with a
fair market value of $150x and an adjusted
basis of $150x. Both Property 1 and Prop-
erty 2 are held for investment within the
meaning of § 1031(a). A and B are re-
lated persons within the meaning of
§ 267(b).

C, an individual unrelated to A and B,
wishes to acquire Property 1 from A. A en-
ters into an agreement for the transfers of
Property 1 and Property 2 with B, C, and
a qualified intermediary (QI). QI is unre-
lated to A and B.

Pursuant to their agreement, on Janu-
ary 6, 2003, A transfers Property 1 to QI
and QI transfers Property 1 to C for $150x.
On January 13, 2003, QI acquires Prop-
erty 2 from B, pays B the $150x sale pro-
ceeds from QI's sale of Property 1, and
transfers Property 2 to A.

## LAW AND ANALYSIS

Section 1031(a)(1) provides that no gain
or loss shall be recognized on the exchange
of property held for productive use in a
trade or business or for investment if the
property is exchanged solely for property
of a like kind that is to be held either for
productive use in a trade or business or for
investment. Under § 1031(d), the basis of
property acquired in a § 1031 exchange is
the same as the basis of the property ex-
changed, decreased by any money the tax-
payer receives and increased by any gain
the taxpayer recognizes.

Section 1031 and the regulations there-
under allow for deferred exchanges of prop-
erty. Under § 1031(a)(3) and § 1.1031(k)-
1(b) of the Income Tax Regulations,
however, the property to be received by a
taxpayer in the exchange (replacement prop-
erty) must be: (i) identified within 45 days
of the transfer of the property relinquished
in the exchange (relinquished property) and
(ii) received by the earlier of 180 days af-
ter the transfer of the relinquished prop-
erty or the due date (including extensions)

of the transferor's tax return for the tax-
able year in which the relinquished prop-
erty is transferred.

Section 1.1031(k)-1(g)(4) allows tax-
payers to use a qualified intermediary to fa-
cilitate a like-kind exchange. In the case of
a transfer of relinquished property involv-
ing a qualified intermediary, the taxpay-
er's transfer of relinquished property to a
qualified intermediary and subsequent re-
ceipt of like-kind replacement property from
the qualified intermediary is treated as an
exchange with the qualified intermediary.

Section 1031(f) provides special rules for
property exchanges between related par-
ties. Under § 1031(f)(1), a taxpayer ex-
changing like-kind property with a related
person cannot use the nonrecognition pro-
visions of § 1031 if, within 2 years of the
date of the last transfer, either the related
person disposes of the relinquished prop-
erty or the taxpayer disposes of the re-
placement property. The taxpayer takes any
gain or loss into account in the taxable year
in which the disposition occurs. For pur-
poses of § 1031(f), the term "related per-
son" means any person bearing a
relationship to the taxpayer described in
§ 267(b) or 707(b)(1).

Section 1031(f) is intended to deny non-
recognition treatment for transactions in
which related parties make like-kind ex-
changes of high basis property for low ba-
sis property in anticipation of the sale of the
low basis property. The legislative his-
tory underlying § 1031(f) states that "if a
related party exchange is followed shortly
thereafter by a disposition of the prop-
erty, the related parties have, in effect,
'cashed out' of the investment, and the
original exchange should not be accorded
nonrecognition treatment." H.R. Rep. No.
247, 101st Cong. 1st Sess. 1340 (1989).

To prevent related parties from circum-
venting the rules of § 1031(f)(1),
§ 1031(f)(4) provides that the nonrecogni-
tion provisions of § 1031 do not apply to
any exchange that is part of a transaction
(or a series of transactions) structured to
avoid the purposes of § 1031(f)(1). The leg-
islative history underlying § 1031(f)(4)
provides:

If a taxpayer, pursuant to a pre-arranged
plan, transfers property to an unrelated
party who then exchanges the prop-
erty with a party related to the taxpayer
within 2 years of the previous transfer
in a transaction otherwise qualifying un-

der section 1031, the related party will
not be entitled to nonrecognition treat-
ment under section 1031. Id. at 1341.
Accordingly, under § 1031(f)(4), if an un-
related third party is used to circumvent the
purposes of the related party rule in
§ 1031(f), the nonrecognition provisions of
§ 1031 do not apply to the transaction.

In the present case, A is using QI to cir-
cumvent the purposes of § 1031(f) in the
same way that the unrelated party was used
to circumvent the purposes of § 1031(f) in
the legislative history example. Absent
§ 1031(f)(1), A could have engaged in a
like-kind exchange of Property 1 for Prop-
erty 2 with B, and B could have sold Prop-
erty 1 to C. Under § 1031(f)(1), however,
the non-recognition provisions of § 1031(a)
do not apply to that exchange because A
and B are related parties and B sells the re-
placement property within 2 years of the ex-
change.

Accordingly, to avoid the application of
§ 1031(f)(1), A transfers low-basis Prop-
erty 1 to QI who sells it to C for cash. QI
acquires the high-basis replacement prop-
erty from B and pays B the cash received
from C. Thus, A engages in a like-kind ex-
change with QI, an unrelated third party, in-
stead of B. However, the end result of the
transaction is the same as if A had ex-
changed property with B followed by a sale
from B to C. This series of transactions al-
lows A to effectively cash out of the in-
vestment in Property 1 without the
recognition of gain.

A's exchange of property with QI, there-
fore, is part of a transaction structured to
avoid the purposes of § 1031(f) and, un-
der § 1031(f)(4), the non-recognition pro-
visions of § 1031 do not apply to the
exchange between A and QI. A's exchange
of Property 1 for Property 2 is treated as
a taxable transaction. Under § 1001(a), A
has gain of $100x, the difference between
A's amount realized on the exchange
($150x, the fair market value of Property
2) and A's adjusted basis in the property ex-
changed ($50x).

### HOLDING

Under the facts described above, a tax-
payer who transfers relinquished property
to a qualified intermediary in exchange for
replacement property formerly owned by a
related party is not entitled to nonrecogni-
tion treatment under § 1031(a) of the In-
ternal Revenue Code if, as part of the

transaction, the related party receives cash
or other non-like-kind property for the re-
placement property.

## DRAFTING INFORMATION

The principal author of this revenue rul-
ing is Martin Scully, Jr., of the Office of As-
sociate Chief Counsel (Income Tax and
Accounting). For further information re-
garding this revenue ruling, contact
Mr. Scully at (202) 622-4960 (not a toll-
free call).

## Section 1274 .- Determina- tion of Issue Price in the Case of Certain Debt Instruments 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, 1274, 1288, and other sec-
tions of the Code, tables set forth the rates
for December 2002.

## Rev. Rul. 2002-81

This revenue ruling provides various pre-
scribed rates for federal income tax pur-
poses for December 2002 (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 Inter-
nal Revenue Code. Table 2 contains the
short-term, mid-term, and long-term ad-
justed 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 appropriate per-
centages for determining the low-income
housing credit described in section 42(b)(2)
for buildings placed in service during the
current month. Table 5 contains the fed-
eral rate for determining the present value
of annuity, an interest for life or for a term
of years, or a remainder or a reversionary
interest for purposes of section 7520. Fi-
nally, Table 6 contains the 2003 interest rate
for sections 846 and 807.

REV. RUL. 2002-81 TABLE 1 Applicable Federal Rates (AFR) for December 2002 Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-Term

AFR

1.84%

1.83%

1.82%

110% AFR

2.02%

2.01%

2.00%

120% AFR

2.21%

2.20%

2.19%

130% AFR

2.39%

2.38%

2.37%

Mid-Term

AFR

3.31%

3.28%

3.27%

3.26%

110% AFR

3.64%

3.61%

3.59%

3.58%

120% AFR

3.98%

3.94%

3.92%

3.91%

130% AFR

4.31%

4.26%

4.24%

4.22%

150% AFR

4.98%

4.92%

4.89%

4.87%

175% AFR

5.82%

5.74%

5.70%

5.67%

Long-Term

AFR

4.92%

4.86%

4.83%

4.81%

110% AFR

5.42%

5.35%

5.31%

5.29%

120% AFR

5.91%

5.83%

5.79%

5.76%

130% AFR

6.42%

6.32%

6.27%

6.24%

REV. RUL. 2002-81 TABLE 2 Adjusted AFR for December 2002 Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-term adjusted AFR

1.92%

1.91%

1.90%

Mid-term adjusted AFR

3.16%

3.14%

3.13%

3.12%

Long-term adjusted AFR

4.65%

4.60%

4.57%

4.56%

REV. RUL. 2002-81 TABLE 3

Rates Under Section 382 for November 2002

Adjusted federal long-term rate for the current month
4.65%

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%

Appropriate Percentages Under Section 42(b)(2) for December 2002

Appropriate percentage for the 70% present value low-income housing credit
7.95%

Appropriate percentage for the 30% present value low-income housing credit

3.41%

# REV. RUL. 2002-81 TABLE 5

Rate Under Section 7520 for December 2002

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 interest

4.0%

REV. RUL. 2002-81 TABLE 6

Applicable rate of interest for 2003 for purposes of section 846 and 807

5.27%

# Section 1288 .- Treatment of Original Issue Discounts on Tax-Exempt Obligations

The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2002. See Rev. Rul. 2002-81, page 928.

# Section 1397E .- Credit to Holders of Qualified Zone Academy Bonds

What is the allocation for each State, the Dis-
trict of Columbia, and each possession of the United
States of the national limitation for Qualified Zone
Academy Bonds for calendar year 2003? See Rev.
Proc. 2002-72, page 931.

# Section 7520 .- Valuation Tables

The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2002. See Rev. Rul. 2002-81, page 928.

# Section 7872 .- Treatment of Loans With Below-Market In- terest Rates

The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2002. See Rev. Rul. 2002-81, page 928.

# Part III. Administrative, Procedural, and Miscellaneous

26 CFR 601.601: Rules and regulations.
(Also Part I, § 1397E.)

Rev. Proc. 2002-72

## SECTION 1. PURPOSE

Pursuant to § 1397E(e)(2) of the Inter-
nal Revenue Code, this revenue proce-
dure allocates among the States the national
limitation for Qualified Zone Academy
Bonds ("Bond" or "Bonds") for the calen-
dar year 2003. For this purpose "State" in-
cludes the District of Columbia and the
possessions of the United States.

## SECTION 2. BACKGROUND

.01 Section 226 of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, 111 Stat. 821
(1997), added § 1397E to the Internal Rev-
enue Code to provide a credit to holders of
Bonds under certain circumstances so that

the Bonds generally can be issued with-
out discount or interest. Ninety-five per-
cent of Bond proceeds are to be used for
qualified purposes, as defined by § 1397E
(d)(5), with respect to a qualified zone acad-
emy, as defined by § 1397E(d)(4).

.02 Section 1397E(e)(1), as amended by
§ 608 of the Job Creation and Worker As-
sistance Act of 2002, Pub. L. 107-147, 116
Stat. 21 (2002), provides that the national
limitation for Bonds that may be issued is
$400 million for each of the years 1998,
1999, 2000, 2001, 2002, and 2003. This
amount is to be allocated among the States
by the Secretary on the basis of their re-
spective populations below the poverty level
(as defined by the Office of Management
and Budget) and is to be further allocated
by each State to qualified zone academies
within the State.

.03 Section 1397E(e)(4), as amended, by
§ 509 of the Tax Relief Extension Act of
1999, Pub. L. 106-170, 113 Stat. 1860

(1999) provides that any carryforward of a
limitation amount may be carried forward
only to the first 2 years (3 years for car-
ryforwards from 1998 or 1999) following
the unused limitation year. For this pur-
pose, a limitation amount shall be treated
as used on a first-in first-out basis.

.04 Rev. Proc. 98-9, 1998-1 C.B. 341,
Rev. Proc. 98-57, 1998-2 C.B. 682, Rev.
Proc. 2000-10, 2000-1 C.B. 287, Rev. Proc.
2001-14, 2001-1 C.B. 343, and Rev. Proc.
2002-25, 2002-17 I.R.B. 800, allocated
among the States the national limitation for
1998, 1999, 2000, 2001, and 2002, respec-
tively.

SECTION 3. NATIONAL QUALIFIED
ZONE ACADEMY BOND
LIMITATION FOR 2003

The 2003 national limitation for Bonds
is $400 million. This amount is allocated
among the States as follows:

STATE

MAXIMUM FACE AMOUNT OF BONDS THAT MAY BE ISSUED PURSUANT TO THE CALENDAR YEAR 2003 LIMITATION (thousands of dollars)

Alabama

7,975

Alaska

619

Arizona

8,914

Arkansas

5,408

California

49,511

Colorado

4,388

Connecticut

2,853

Delaware

607

District of Columbia

1,157

Florida

23,799

Georgia

12,249

Hawaii

1,581

Idaho

1,730

Illinois

14,311

Indiana

5,855

Iowa

2,429

Kansas

3,059

Kentucky

5,763

Louisiana

8,124

Maine

1,512

Maryland

4,411

Massachusetts

6,428

Michigan

10,622

Minnesota

4,136

Mississippi

6,176

# MAXIMUM FACE AMOUNT OF BONDS THAT MAY BE ISSUED PURSUANT TO THE CALENDAR YEAR 2003 LIMITATION (thousands of dollars)

Missouri

6,153

Montana

1,364

Nebraska

1,810

Nevada

1,742

New Hampshire

928

New Jersey

7,826

New Mexico

3,701

New York

30,524

North Carolina

11,607

North Dakota

985

Ohio

13,452

Oklahoma

5,821

Oregon

4,675

Pennsylvania

13,269

Rhode Island

1,146

South Carolina

6,909

South Dakota

710

Tennessee

9,189

Texas

35,853

Utah

2,727

Vermont

676

Virginia

6,462

Washington

7,264

West Virginia

3,334

Wisconsin

4,847

Wyoming

481

American Samoa

470

Guam

412

Northern Marianas

390

Puerto Rico

21,209

Virgin Islands

447

## SECTION 4. EFFECTIVE DATE

This revenue procedure is effective as of
December 9, 2002, and applies to Bonds is-
sued pursuant to the national limitation for
calendar year 2003 on or after January 1,
2003.

## SECTION 5. DRAFTING INFORMATION

The principal author of this revenue pro-
cedure is Zoran Stojanovic of the Office of
Assistant Chief Counsel (Exempt Organ-
izations/Employment Tax/Government
Entities). For further information regard-
ing this revenue procedure, contact
Mr. Stojanovic at (202) 622-3980 (not a
toll-free call).

26 CFR 601.201: Rulings and determination letters
(Also, Part I, §§ 401; 1.401(b)-1.)

## Rev. Proc. 2002-73

# SECTION 1. PURPOSE

This revenue procedure extends the time
for making various amendments to quali-
fied retirement plans. First, the revenue pro-
cedure extends the time for amending pre-

approved plans to comply with GUST1 to
September 30, 2003. Second, the revenue
procedure extends the time for amending
plans to comply with Rev. Rul. 2001-62,
2001-2 C.B. 632, regarding changes to the
mortality tables under § 417(e) of the In-
ternal Revenue Code, and Rev. Rul. 2002-
27, 2002-20 I.R.B. 925, regarding the
incorporation of deemed § 125 compensa-
tion in a plan's § 415(c)(3) definition of
compensation. The time by which a plan
must be amended to comply with these rev-
enue rulings is extended to the end of the
plan's GUST remedial amendment period.
Finally, the revenue procedure extends the
time for amending plans to comply with
§ 314(e) of the Community Renewal Tax
Relief Act of 2000 ("CRA") to the latest of
the end of the first plan year beginning on
or after January 1, 2002, the end of the
plan's GUST remedial amendment period,
or June 30, 2003.

# SECTION 2. BACKGROUND

.01 Under § 401(b), plan sponsors have
a remedial amendment period in which to
adopt plan amendments for GUST. The end
of the GUST remedial amendment period
is the deadline for making all GUST plan
amendments and other plan amendments
specifically enumerated in Rev. Proc. 99-
23, 1999-1 C.B. 920. The GUST reme-
dial amendment period also applies with
respect to all disqualifying provisions of
new plans adopted or effective after De-
cember 7, 1994, and with respect to all plan
amendments adopted after December 7,
1994, that would cause an existing plan to
fail to be qualified.

.02 Rev. Proc. 2001-55, 2001-2 C.B.
552, provides that the GUST remedial
amendment period for nongovernmental
plans ends on the later of February 28,
2002, or the last day of the first plan year
beginning on or after January 1, 2001. This
is also the end of the remedial amend-
ment period for the Tax Reform Act of 1986
(TRA '86) for nonelecting church plans. The
GUST remedial amendment period for gov-

ernmental plans, as defined in § 414(d),
ends on the latest of (i) February 28, 2002,
(ii) the last day of the first plan year be-
ginning on or after January 1, 2001, or (iii)
the last day of the first plan year begin-
ning on or after the "2000 legislative date"
(that is, the 90th day after the opening of
the first legislative session beginning af-
ter December 31, 1999, of the governing
body with authority to amend the plan, if
that body does not meet continuously). This
is also the end of the TRA '86 remedial
amendment period for governmental plans.

.03 Rev. Proc. 2000-20, 2000-1 C.B.
553, as modified by Rev. Proc. 2000-27,
2000-1 C.B. 1272, Rev. Proc. 2001-55,
Rev. Proc. 2002-6, 2002-1 I.R.B. 203, Rev.
Proc. 2002-29, 2002-24 I.R.B. 1176, and
Notice 2001-42, 2001-2 C.B. 70, pro-
vides an extension of the GUST remedial
amendment period for employers who, by
the end of the GUST remedial amendment
period (determined without regard to the ex-
tension), have adopted a pre-approved plan
(that is, a master or prototype or volume
submitter plan) or certified their intent to
adopt such a plan. If the requirements for
the extension are satisfied, the GUST re-
medial amendment period for the employ-
er's plan will not end before the later of
December 31, 2002, or the end of the 12th
month beginning after the date on which the
Service issues a GUST opinion or advi-
sory letter for the pre-approved plan.

.04 Rev. Proc. 2002-6 contains the Ser-
vice's procedures for issuing determina-
tion letters on the qualified status of plans
under §§ 401(a), 403(a), 409, and 4975.

.05 Rev. Rul. 2001-62 describes changes
to the mortality tables under § 417(e). The
latest date by which a plan must be
amended to comply with Rev. Rul. 2001-62
is the last day of the plan year that in-
cludes the plan's 94 GAR effective date
(i.e., the effective date of the 1994 GAR
mortality table for the plan). A plan's 94
GAR effective date may be no later than
December 31, 2002. Thus, for example, a

calendar year plan must be amended by De-
cember 31, 2002, to comply with Rev. Rul.
2001-62.

.06 Rev. Rul. 2002-27 provides that a
definition of compensation that otherwise
satisfies § 415(c)(3) will not fail to sat-
isfy § 415(c)(3) merely because it is
amended to incorporate deemed § 125 com-
pensation, as provided in the revenue rul-
ing. The amendment must be adopted by
the later of the end of the 2002 plan year
and the end of the plan year in which the
changed definition is first effective. Thus,
if a plan has, in operation, included deemed
§ 125 compensation in § 415(c)(3) com-
pensation for a year prior to 2003, the plan
must be amended by the end of the 2002
plan year as provided in Rev. Rul. 2002-
27.

.07 Notice 2001-37, 2001-1 C.B. 1340,
provides guidance relating to the amend-
ments made by § 314(e) of CRA to
§§ 403(b)(3), 414(s)(2), and 415(c)(3), re-
garding definitions of compensation in
qualified plans and § 403(b) plans. The
CRA amendments change the compensa-
tion definitions in these sections to re-
flect the amount of the compensation
reduction elected for qualified transporta-
tion fringes that is not includible in the em-
ployee's gross income by reason of
§ 132(f)(4). Notice 2001-37 provides that
a qualified plan must be amended to com-
ply with CRA by the end of the plan's
GUST remedial amendment period. No-
tice 2001-37 provides model amendments
that may be adopted to satisfy this require-
ment.

.08 Rev. Proc. 2002-35, 2002-24 I.R.B.
1187, contains streamlined procedures that
allow a plan that was not timely amended
for GUST, including CRA, to avoid loss of
qualification, provided a complete GUST
determination letter application for the plan
is filed with the Service by September 3,
2002, and the fee required by the proce-
dure is paid.

.09 Section 1.401(b)-1(f) of the Income
Tax Regulations provides that, at his dis-

1 "GUST" refers to the following:

· the Uruguay Round Agreements Act, Pub. L. 103-465;

· the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub. L. 103-353;

· the Small Business Job Protection Act of 1996, Pub. L. 104-188;

· the Taxpayer Relief Act of 1997, Pub. L. 105-34;

· the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206; and

· the Community Renewal Tax Relief Act of 2000, Pub. L. 106-554.

cretion, the Commissioner may extend the
remedial amendment period or may al-
low a particular plan to be amended after
the expiration of its remedial amendment
period and any applicable extension of such
period. In determining whether such an ex-
tension will be granted, the Commissioner
shall consider, among other factors, whether
substantial hardship to the employer would
result if such an extension were not granted,
whether such an extension is in the best in-
terest of plan participants, and whether the
granting of the extension is adverse to the
interests of the government.

.10 A number of sponsors of pre-
approved plans have informed the Ser-
vice that, due to unforeseeable business
circumstances, their clients will not be able
to adopt their GUST-approved plans within
the deadline under Rev. Proc. 2000-20, as
modified, and have requested a further ex-
tension. The Service has also been asked
to extend the time for adopting plan amend-
ments to comply with Rev. Rul. 2001-62
and Rev. Rul. 2002-27 so that in no case
will these amendments be required to be
adopted before the time a plan is required
to be amended for GUST. Finally, the Ser-
vice has been asked to extend the dead-
line for adopting plan amendments for CRA
in order to provide relief in situations where
a plan has otherwise been timely amended
for GUST. In response to these requests, this
revenue procedure provides these exten-
sions.

SECTION 3. EXTENSION OF GUST
REMEDIAL AMENDMENT PERIOD
UNDER REV. PROC. 2000-20

If the requirements for the extension of
the GUST remedial amendment period un-
der section 19 of Rev. Proc. 2000-20, as
modified, are satisfied, the GUST reme-
dial amendment period for the employ-
er's plan will not end before the later of
September 30, 2003, or the end of the 12th
month beginning after the date on which the
Service issues a GUST opinion or advi-
sory letter for the pre-approved plan. This
extension also applies to the TRA '86 re-
medial amendment period in the case of a
governmental or nonelecting church plan
that qualifies for extension of the GUST re-
medial amendment period under Rev. Proc.
2000-20.

SECTION 4. EXTENSION OF TIME
FOR AMENDING PLANS TO
COMPLY WITH REV. RUL. 2001-62
AND REV. RUL. 2002-27

.01 The time for amending a plan to
comply with Rev. Rul. 2001-62 is extended
to the later of the time determined under the
revenue ruling or the end of the plan's
GUST remedial amendment period.

.02 The time for amending a plan to
comply with Rev. Rul. 2002-27 is extended
to the later of the time determined under the
revenue ruling or the end of the plan's
GUST remedial amendment period.

# SECTION 5. EXTENSION OF TIME FOR AMENDING PLANS TO COMPLY WITH CRA

.01 The time for amending a plan to
comply with CRA is extended to the lat-
est of the end of the first plan year begin-
ning on or after January 1, 2002, the end
of the plan's GUST remedial amendment
period, or June 30, 2003.

.02 Upon resolution of a determina-
tion letter application filed under the pro-
cedures in Rev. Proc. 2002-35, the Service
will refund without interest the fee paid un-
der section 3.04 of that procedure if it de-
termines that, except for CRA, the plan was
otherwise amended for GUST within the
plan's GUST remedial amendment period.

SECTION 6. EFFECTIVE DATE

This revenue procedure is effective De-
cember 9, 2002.

## SECTION 7. EFFECT ON OTHER DOCUMENTS

Rev. Procs. 2000-20, 2002-6, and 2002-
35; Rev. Ruls. 2001-62 and 2002-27; and
Notice 2001-37 are modified.

## DRAFTING INFORMATION

The principal author of this revenue pro-
cedure is James Flannery of the Employee
Plans, Tax Exempt and Government Enti-
ties Division. For further information re-
garding this revenue procedure, please
contact the Employee Plans' taxpayer as-
sistance telephone service at 1-877-829-
5500 (a toll-free number), between the hours
of 8:00 a.m. and 6:30 p.m. Eastern Time,
Monday through Friday. Mr. Flannery may
be reached at 1-202-283-9888 (not a toll-
free number).

## Part IV. Items of General Interest

### Amendments to Statement of Procedural Rules

Statement of Procedural
Rules

#### REG-251003-96

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Amendments to Statement of
Procedural Rules.

SUMMARY: This document amends the
Statement of Procedural Rules to reflect
changes effected by the Electronic Free-
dom of Information Act Amendments of
1996, to update organizational titles and ad-
dresses, and to make certain changes in the
IRS's procedures for processing Freedom
of Information Act requests. The rules af-
fect persons requesting records from the
IRS.

DATES: Effective Date: November 18,
2002.

FOR FURTHER INFORMATION
CONTACT: Michael B. Frosch, (202) 622-
4590 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

##### Background

This document contains final rules
amending the Statement of Procedural Rules
(SPR) (26 CFR 601.701 and 26 CFR
601.702), issued under the authority con-
tained in 5 U.S.C. 301 and 552. The SPR
is being updated to reflect changes ef-
fected by the Electronic Freedom of Infor-
mation Act Amendments of 1996 (EFOIA),
Public Law 104-231, 110 Stat. 2422. Other
amendments conform to procedures set forth
in the Department of the Treasury's regu-
lations on disclosure of records under the
FOIA. 65 FR 40503 (June 30, 2000). Other
amendments reflect procedures hereto-
fore only available to the public in the In-
ternal Revenue Manual, which is maintained
in the IRS Freedom of Information Read-
ing Room. The SPR is also updated to re-
flect changes in title or nomenclature and
to reflect changes of addresses to be con-
tacted for Freedom of Information requests

in light of the IRS reorganization man-
dated by section 1001 of the Internal Rev-
enue Service Restructuring and Reform Act
of 1998 (RRA).

#### Discussion of Amendments in Section 601.701

Section 601.701 is removed and re-
served. Section 601.701 was simply a re-
statement of the statute as interpreted by the
courts and does not need to be repeated in
regulations.

#### Discussion of Amendments in Part 601.702

The amendments are described in the or-
der of the sections of the SPR being
amended.

Paragraph (a)(1) is amended to reflect
changes in nomenclature.

Paragraph (a)(2) is amended to reflect
changes in nomenclature.

Paragraph (b)(1) is amended to incor-
porate changes required by the Electronic
Freedom of Information Act Amendments
of 1996 (EFOIA). Specifically, this provi-
sion implements the new statutory require-
ment that any records that an agency
processes and discloses in response to a
FOIA request that the agency determines to
have become or are likely to become the
subject of subsequent requests for substan-
tially the same records be placed in pub-
lic reading rooms so that they are readily
available to potential FOIA requesters. This
provision also implements the statutory
mandate to enhance the availability of read-
ing room records by requiring: (1) that read-
ing room records created on or after
November 1, 1996, be available to the pub-
lic by electronic means, e.g., the Internet,
by November 1, 1997; and (2) an index of
reading room records shall be made avail-
able on the Internet by December 31, 1999.

Paragraph (b)(2) is amended to imple-
ment the EFOIA requirement that the ex-
tent of any deletion of information be
indicated on the portion of the record which
is made available or published, and where
technically feasible, that the deletion be in-
dicated at the place in the record where
made.

Paragraph (b)(3) is amended to reflect
a change in the room location of the Free-
dom of Information Reading Room at the
National Office. As a consequence of RRA,

the IRS no longer has regional offices, and,
therefore, the regional reading rooms have
been eliminated. Paragraph (b)(3)(iii) is re-
vised to clarify that fees shall not be charged
for copying materials in the Freedom of In-
formation Reading Room. Paragraph
(b)(3)(iv), pertaining to mailing reading
room material to other IRS office loca-
tions for personal inspection or directly to
the requester, is removed. Neither the FOIA
nor Department of the Treasury regula-
tions or policy requires the IRS to pro-
vide this assistance to persons unable or
unwilling to use the Freedom of Informa-
tion Reading Room. The IRS determined
that the administrative cost of providing
such assistance outweighed the marginal
public benefit, especially since all required
records are on the Internet.

Paragraph (c)(1) is amended to clarify
IRS practice regarding the processing of
valid FOIA requests within the statutory
time period. It explicitly provides that in-
valid requests are not subject to the time
constraints provided in paragraphs (c)(9)
through (11). Newly designated paragraph
(c)(1)(ii) reflects IRS practice that requests
for the continuing production of records cre-
ated after the date of receipt of the re-
quest shall not be honored.

Paragraph (c)(2), a new provision, cov-
ers electronic format records. It imple-
ments the EFOIA requirement that the
agency provide a requested record in any
form or format requested if the record is
readily reproducible by the agency in that
form or format. Furthermore, it directs the
IRS to make reasonable efforts to search for
records in electronic form or format.

Paragraph (c)(3), an amendment of
former paragraph (c)(2) relating to requests
for records not in control of the IRS, con-
tains only minor revisions of word usage
and cross references.

Paragraph (c)(4), an amendment of
former paragraph (c)(3), concerning the
form of a request, is revised to clarify the
procedures for making requests when the
requesters are uncertain as to which of-
fice they should submit their requests; and
to clarify IRS practice when requesters have
an outstanding FOIA fee balance when sub-
sequent requests are received.

Paragraph (c)(5), an amendment of
former paragraph (c)(4), dealing with rea-
sonable description of records and iden-

tity and legal entitlement of the requester,
is clarified to conform to section
6103(e)(1)(D) and the Conference and Prac-
tice requirements of 26 CFR 601.503 as to
who may make a request on behalf of a cor-
poration; to require the submission of the
taxpayer identification number where the re-
quest seeks tax information to ensure the
requester's legal entitlement to statutorily
protected records; and to conform to case
law which permits the submission of a
sworn statement, under penalty of per-
jury, in lieu of a notarized statement, as to
proof of identity.

Paragraph (c)(6), a new provision, imple-
ments the EFOIA requirement that agen-
cies provide for expedited processing in
cases where a requester demonstrates a
compelling need. The provision defines
compelling need; establishes the proce-
dures for requesting expedited process-
ing; sets a ten day time limit for determining
whether a request for expedited process-
ing will be granted; and sets a ten day time
limit for deciding appeals of initial deter-
minations to deny expedited processing.

Paragraph (c)(7), a revision of para-
graph (c)(5) concerning the date of re-
ceipt of a request, is amended to eliminate
the requirement that the disclosure office
issue a separate letter advising of the statu-
tory period for response, where the final de-
termination letter will be sent before the
expiration of the statutory period or where
a voluntary or statutory extension of time
letter is sent.

Paragraph (c)(8), a revision of para-
graph (c)(6), is amended: (1) to eliminate
language that the IRS is not required to
tabulate or compile information for the pur-
pose of creating a record (deemed confus-
ing in light of EFOIA); and (2) to clarify
that, as a general rule, only records in the
possession and control of the IRS on the
date of receipt of the FOIA request shall be
considered in determining records respon-
sive to the request.

Paragraph (c)(9), an amendment of para-
graph (c)(7), is revised to reflect nomen-
clature changes; to clarify IRS official's
discretion not to issue a statement of fees
before issuance of the determination let-
ter, but rather to disclose the records si-
multaneous with the issuance of the
determination letter under this provision; to

clarify that fees will be incurred for the pho-
tocopying of records being made avail-
able for inspection; and to establish that IRS
denial letters should identify the date the
request was received in the appropriate dis-
closure office and the number of pages at
issue.

Paragraph (c)(10), an amendment of
paragraph (c)(8) concerning administra-
tive appeals, is amended to clarify that ad-
ministrative appeals may be submitted from
denials of fee waiver or reduction requests,
as well as adverse fee category determina-
tions, in addition to denials of records, and
to reflect changes in nomenclature.

Paragraph (c)(11), an amendment of
paragraph (c)(9) relating to the unusual cir-
cumstances where extensions of time may
be granted and the aggregation of requests,
is amended to provide that consultations
with business submitters regarding requests
for disclosure of their information in
records, in conformance with new para-
graph (g), is one type of unusual circum-
stance; and to clarify that searches in
Federal Records Centers or other storage lo-
cations for IRS records stored in such fa-
cilities is another. New paragraph (c)(11)(ii)
is added to permit aggregation of requests,
as authorized in EFOIA.

Paragraph (c)(12), an amendment of
paragraph (c)(10) on failure to comply, is
amended in light of EFOIA to define the
exceptional circumstances under which a
court may retain jurisdiction and allow the
IRS additional time to complete its pro-
cessing of a FOIA request.

Paragraph (c)(13), an amendment of
paragraph (c)(11) relating to judicial re-
view, is revised to clarify that judicial re-
view may be sought from actual or
constructive denials of fee waiver or re-
duction requests, as well as adverse fee cat-
egory determinations, in addition to denials
of records; and to change the office to
which service of process on the IRS is to
be made, from General Legal Services
(GLS) to the Associate Chief Counsel (Pro-
cedure and Administration) (PA).

Paragraph (c)(14), an amendment of
paragraph (c)(12), contains no revisions.
Former paragraph (c)(13) is removed.

Paragraph (d) is amended to clarify that,
for those types of records described in para-
graphs (d)(1) through (8), requests denomi-

nated as Freedom of Information Act re-
quests shall be diverted to other proce-
dures provided for by the Internal Revenue
Code for their appropriate handling and fee
schedules, which procedures are gener-
ally as, or more expeditious than, han-
dling through FOIA.

Paragraph (d)(1) is amended to reflect
that fees to be charged for requests for pho-
tocopies of tax returns and certain tran-
scripts, made on IRS Form 4506, Request
for Copy or Transcript of Tax Form, will
be reasonable fees as determined by the
Commissioner from time to time.

Paragraph (d)(2) is amended to reflect
a change in citation form.

Paragraph (d)(3) is amended to reflect
changes in the manner in which members
of the public may obtain access to infor-
mation relating to certain tax exempt or-
ganizations and certain trusts, consistent
with section 6104.

Paragraph (d)(4) is amended to reflect
changes in the manner in which members
of the public may obtain access to appli-
cations of certain organizations for tax ex-
emption, consistent with section 6104.

Paragraph (d)(5) is amended to reflect
changes in which members of the public
may obtain access to information relating
to certain deferred compensation plans and
accounts, consistent with section 6104.

Paragraph (d)(7) is amended to clarify
that comments received in response to so-
licitations for public comments, prepubli-
cation comments, as well as comments
received in response to notices of pro-
posed rulemaking, are available for inspec-
tion upon written request as set forth in the
regulations; and to reflect changes in no-
menclature and mailing address.

Paragraph (d)(8) is amended to reflect
that Form 7249, Offer Acceptance Report,
is the form which records accepted offers-
in-compromise.

Paragraph (f)(1) is amended to reflect
changes in nomenclature.

Paragraph (f)(2) is amended to remove
redundant information and to clarify that ad-
ministrative appeals shall be received within
thirty-five (35) days of the date of the ini-
tial denial letter.

Paragraph (f)(3) is amended to clarify
that news media entities include comput-
erized news services; to clarify that the cat-
egory of educational institution requester
does not include individuals wanting records
for use in meeting individual academic re-
search requirements; to confirm that the IRS
shall determine the category of a requester
based upon a review of the requester's sub-
mission and the IRS' own records; and to
conform to Treasury regulations which per-
mit only duplication fees to be charged to
individual requesters seeking records about
themselves maintained in agency systems
of records.

Paragraph (f)(4) is reorganized and
amended to reflect changes in nomencla-
ture.

Paragraph (f)(5) is amended to clarify
that fees for searches for non-computerized
records are charged at the salary rate (ba-
sic pay plus 16 percent) of the employee
making the search; to clarify that searches
for computerized records are charged based
upon the actual direct cost of the search, in-
cluding computer search time, runs, and the
operator's salary; to clarify that services or
material requested under, but not required
by, the Freedom of Information Act may be
chargeable to the requester at the actual di-
rect cost in the discretion of the appropri-
ate agency official; to reflect that the actual
costs of duplicating videotapes and audio-
tapes will be borne by the requester; to con-
form the fees chargeable for certain
information relating to exempt organiza-
tions and deferred compensation plans to
the fees charged for material requested un-
der the Freedom of Information Act; to con-
form to case law that does not require
agency officials to create new records where
the condition of the existing record respon-
sive to the request does not enable leg-
ible copies to be duplicated.

Paragraph (f)(6) is amended to reflect
changes in nomenclature.

Paragraph (f)(7) is amended to reflect
changes in citation form.

Paragraph (f)(9) is amended to clarify
that, in the event previous fees have not
been paid in a timely fashion, or where es-
timated fees exceed $250, no processing of
subsequently received requests will occur
until such time as the requester remits all
past due fees, as well as the fees estimated
to be due as a result of the new request; and
to clarify that the IRS reserves the right to
require payment of fees after a request is

processed and before any records are re-
leased to a requester.

Paragraph (f)(10) is amended to reflect
changes in nomenclature.

Paragraph (g) has been amended to con-
tain the revised business information pro-
cedures which were previously detailed in
paragraph (h).

Paragraph (h) is amended to contain the
revised list of responsible officials and their
addresses previously contained in para-
graph (g).

#### Special Analyses

It has been determined that these rules
are not major rules as defined in Execu-
tive Order 12291. Therefore, a Regula-
tory Impact Analysis is not required. It also
has been determined that the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not
apply to these rules and therefore a Regu-
latory Flexibility Analysis is not required.
The IRS has not published a notice of pro-
posed rulemaking on these revisions, as al-
lowed by 5 U.S.C. 553 when the agency
determines, for good cause, that it is un-
necessary to publish a proposed rule and ob-
tain comments from interested persons. The
IRS has determined that publication of a
proposed rule is unnecessary inasmuch as
these revisions (1) generally involve revi-
sions consistent with the Department of the
Treasury's Title 31 revised FOIA regula-
tions (65 FR 40503 (June 30, 2000)); (2)
involve only nomenclature and address
changes; (3) merely represent the publica-
tion of existing procedures already in place
as set forth in the Internal Revenue Manual;
or (4) merely reflect procedures accepted
or required by the courts.

#### Drafting Information

The principal author of these rules is
Michael B. Frosch of the Office of the As-
sociate Chief Counsel (Procedure & Ad-
ministration), Disclosure & Privacy Law
Division
* * * * *

Amendments to the Statement of Pro-
cedural Rules

Accordingly, 26 CFR Part 601 is
amended as follows:

# PART 601-STATEMENT OF PROCEDURAL RULES

Paragraph 1. The authority citation for

Part 601 continues to read as follows:

Authority: 5 U.S.C. 301 and 552.

Par. 2. Section 601.701 is removed and
reserved.

Par. 3. Section 601.702 is revised to read
as follows:

§ 601.702 Publication, public inspection,
and specific requests for records.

(a) Publication in the Federal Register-
(1) Requirement. (i) Subject to the appli-
cation of the exemptions and exclusions
described in the Freedom of Information
Act, 5 U.S.C. 552(b) and (c), and subject
to the limitations provided in paragraph
(a)(2) of this section, the IRS is required
under 5 U.S.C. 552(a)(1), to state sepa-
rately and publish currently in the Fed-
eral Register for the guidance of the public
the following information-

(A) Descriptions of its central and field
organization and the established places at
which, the persons from whom, and the
methods whereby, the public may obtain in-
formation, make submittals or requests, or
obtain decisions, from the IRS;

(B) Statement of the general course and
method by which its functions are chan-
neled and determined, including the na-
ture and requirements of all formal and
informal procedures which are available;

(C) Rules of procedure, descriptions of
forms available or the places at which forms
may be obtained, and instructions as to the
scope and contents of all papers, reports,
or examinations;

(D) Substantive rules of general appli-
cability adopted as authorized by law, and
statements of general policy or interpreta-
tions of general applicability formulated and
adopted by the IRS; and

(E) Each amendment, revision, or re-
peal of matters referred to in paragraphs
(a)(1)(i)(A) through (D) of this section.

(ii) Pursuant to the foregoing require-
ments, the Commissioner publishes in the
Federal Register from time to time a state-
ment, which is not codified in this chap-
ter, on the organization and functions of the
IRS, and such amendments as are needed
to keep the statement on a current basis. In
addition, there are published in the Fed-
eral Register the rules set forth in this Part
601 (Statement of Procedural Rules), such
as those in paragraph E of this section, re-
lating to conference and practice require-
ments of the IRS; the regulations in Part
301 of this chapter (Procedure and Admin-
istration Regulations); and the various sub-

stantive regulations under the Internal
Revenue Code of 1986, such as the regu-
lations in Part 1 of this chapter (Income Tax
Regulations), in Part 20 of this chapter (Es-
tate Tax Regulations) and, in Part 31 of this
chapter (Employment Tax Regulations).

(2) Limitations. (i) Incorporation by ref-
erence in the Federal Register. Matter
which is reasonably available to the class
of persons affected thereby, whether in a
private or public publication, shall be
deemed published in the Federal Regis-
ter for purposes of paragraph (a)(1) of this
section when it is incorporated by refer-
ence therein with the approval of the Di-
rector of the Office of the Federal Register.
The matter which is incorporated by ref-
erence must be set forth in the private or
public publication substantially in its en-
tirety and not merely summarized or printed
as a synopsis. Matter, the location and scope
of which are familiar to only a few per-
sons having a special working knowledge
of the activities of the IRS, may not be in-
corporated in the Federal Register by ref-
erence. Matter may be incorporated by
reference in the Federal Register only pur-
suant to the provisions of 5 U.S.C. 552(a)(1)
and 1 CFR Part 20.

(ii) Effect of failure to publish. Except
to the extent that a person has actual and
timely notice of the terms of any matter re-
ferred to in paragraph (a)(1) of this sec-
tion which is required to be published in the
Federal Register, such person is not re-
quired in any manner to resort to, or be ad-
versely affected by, such matter if it is not
so published or is not incorporated by ref-
erence therein pursuant to paragraph (a)(2)(i)
of this section. Thus, for example, any such
matter which imposes an obligation and
which is not so published or incorporated
by reference shall not adversely change or
affect a person's rights.

(b) Public inspection and copying-
(1) In general. (i) Subject to the applica-
tion of the exemptions described in 5 U.S.C.
552(b) and the exclusions described in 5
U.S.C. 552(c), the IRS is required under 5
U.S.C. 552(a)(2) to make available for pub-
lic inspection and copying or, in the alter-
native, to promptly publish and offer for
sale the following information:

(A) Final opinions, including concur-
ring and dissenting opinions, and orders, if
such opinions and orders are made in the
adjudication of cases;

(B) Those statements of policy and in-
terpretations which have been adopted by
the IRS but are not published in the Fed-
eral Register;

(D) Copies of all records, regardless of
form or format, which have been released
to any person under 5 U.S.C. 552(a)(3) and
which, because of the nature of their sub-
ject matter, the IRS determines have be-
come or are likely to become the subject
of subsequent requests for substantially the
same records. The determination that
records have become or may become the
subject of subsequent requests shall be
based on the following criteria:

(1) The subject matter is clearly of in-
terest to the public at large or to special in-
terest groups from which more than one
request is expected to be received; or

(2) When more than four requests for
substantially the same records have al-
ready been received.

(ii) The IRS is also required by 5 U.S.C.
552(a)(2) to maintain and make available
for public inspection and copying current
indexes identifying any matter described in
paragraphs (b)(1)(i)(A) through (C) of this
section which is issued, adopted, or pro-
mulgated after July 4, 1967, and which is
required to be made available for public in-
spection or published. In addition, the IRS
shall also promptly publish, quarterly or
more frequently, and distribute (by sale or
otherwise) copies of each index or supple-
ments thereto unless it determines by or-
der published in the Federal Register that
the publication would be unnecessary and
impracticable, in which case the IRS shall
nonetheless provide copies of such indexes
on request at a cost not to exceed the di-
rect cost of duplication. No matter de-
scribed in paragraphs (b)(1)(i)(A) through
(C) of this section which is required by this
section to be made available for public in-
spection or published may be relied upon,
used, or cited as precedent by the IRS
against a party other than an agency un-
less such party has actual and timely no-
tice of the terms of such matter or unless
the matter has been indexed and either made
available for inspection or published, as pro-
vided by this paragraph (b). This para-
graph (b) applies only to matters which
have precedential significance. It does not
apply, for example, to any ruling or advi-

sory interpretation issued to a taxpayer or
to a particular transaction or set of facts
which applies only to that transaction or set
of facts. Rulings, determination letters, tech-
nical advice memorandums, and Chief
Counsel advice are open to public inspec-
tion and copying pursuant to 26 U.S.C.
6110. This paragraph (b) does not apply to
matters which have been made available
pursuant to paragraph (a) of this section.

(iii) For records required to be made
available for public inspection and copy-
ing pursuant to 5 U.S.C. 552(a)(2) and para-
graphs (b)(1)(i)(A) through (D) of this
section, which are created on or after No-
vember 1, 1996, the IRS shall make such
records available on the Internet within one
year after such records are created.

(iv) The IRS shall make the index re-
ferred to in paragraph (b)(1)(ii) of this sec-
tion available on the Internet.

(2) Deletion of identifying details. To
prevent a clearly unwarranted invasion of
personal privacy, the IRS shall, in accor-
dance with 5 U.S.C. 552(a)(2), delete iden-
tifying details contained in any matter
described in paragraphs (b)(1)(i)(A) through
(D) of this section before making such mat-
ter available for inspection or publica-
tion. Such matters shall also be subject to
any applicable exemption set forth in 5
U.S.C. 552(b). In every case where iden-
tifying details or other matters are so de-
leted, the justification for the deletion shall
be explained in writing. The extent of such
deletion shall be indicated on the portion
of the record which is made available or
published, unless including that indica-
tion would harm an interest protected by the
exemption in 5 U.S.C. 552(b) under which
the deletion is made. If technically fea-
sible, the extent of the deletion shall be in-
dicated at the place in the record where the
deletion was made.

(3) Freedom of Information Reading
Room-(i) In general. The Headquarters
Disclosure Office of the IRS shall pro-
vide a reading room where the matters de-
scribed in paragraphs (b)(1)(i)(A) through
(D) of this section which are required to be
made available for public inspection, and
the current indexes to such matters, shall
be made available to the public for inspec-
tion and copying. The Freedom of Infor-
mation Reading Room shall contain other
matters determined to be helpful for the
guidance of the public, including a com-
plete set of rules and regulations (except

those pertaining to alcohol, tobacco, fire-
arms, and explosives) contained in this title,
any Internal Revenue matters which may
be incorporated by reference in the Fed-
eral Register (but not a copy of the Fed-
eral Register so doing) pursuant to
paragraph (a)(2)(i) of this section, a set of
Cumulative Bulletins, and copies of vari-
ous IRS publications. The public shall not
be allowed to remove any record from the
Freedom of Information Reading Room.

(ii) Location of Freedom of Informa-
tion Reading Room. The location of the
Headquarters Disclosure Office Freedom of
Information Reading Room is: IRS, 1111
Constitution Avenue, N.W., Room 1621,
Washington, D.C.

(iii) Copying facilities. The Headquar-
ters Disclosure Office shall provide facili-
ties whereby a person may obtain copies of
material located on the shelves of the Free-
dom of Information Reading Room.

(c) Specific requests for other records
(1) In general. (i) Subject to the appli-
cation of the exemptions described in 5
U.S.C. 552(b) and the exclusions described
in 5 U.S.C. 552(c), the IRS shall, in con-
formance with 5 U.S.C. 552(a)(3), make
reasonably described records available to a
person making a request for such records
which conforms in every respect with the
rules and procedures set forth in this sec-
tion. Any request or any appeal from the
initial denial of a request that does not com-
ply with the requirements set forth in this
section shall not be considered subject to
the time constraints of paragraphs (c)(9),
(10), and (11) of this section, unless and un-
til the request or appeal is amended to com-
ply. The IRS shall promptly advise the
requester in what respect the request or ap-
peal is deficient so that it may be resub-
mitted or amended for consideration in
accordance with this section. If a requester
does not resubmit a perfected request or ap-
peal within 35 days from the date of a com-
munication from the IRS, the request or
appeal file shall be closed. When the re-
submitted request or appeal conforms with
the requirements of this section, the time
constraints of paragraphs (c)(9), (10), and
(11) of this section shall begin.

(ii) Requests for the continuing produc-
tion of records created or for records cre-
ated after the date of receipt of the request
shall not be honored.

(iii) Specific requests under paragraph
(a)(3) for material described in paragraph

(a)(2)(A) through (C) and which is in the
Freedom of Information Reading Room
shall not be honored.

(2) Electronic format records. (i) The
IRS shall provide the responsive record or
records in the form or format requested if
the record or records are readily reproduc-
ible by the IRS in that form or format. The
IRS shall make reasonable efforts to main-
tain its records in forms or formats that are
reproducible for the purpose of disclo-
sure. For purposes of this paragraph, the
term readily reproducible means, with re-
spect to electronic format, a record or
records that can be downloaded or trans-
ferred intact to a floppy disk, computer disk
(CD), tape, or other electronic medium us-
ing equipment currently in use by the of-
fice or offices processing the request. Even
though some records may initially be readily
reproducible, the need to segregate ex-
empt from nonexempt records may cause
the releasable material to be not readily re-
producible.

(ii) In responding to a request for
records, the IRS shall make reasonable ef-
forts to search for the records in electronic
form or format, except where such efforts
would significantly interfere with the op-
eration of the agency's automated infor-
mation system(s). For purposes of this
paragraph (c), the term search means to lo-
cate, manually or by automated means,
agency records for the purpose of identi-
fying those records which are responsive to
a request.

(iii) Searches for records maintained in
electronic form or format may require the
application of codes, queries, or other mi-
nor forms of programming to retrieve the
requested records.

(3) Requests for records not in control
of the IRS. (i) Where the request is for a
record which is determined to be in the pos-
session or under the control of a constitu-
ent unit of the Department of the Treasury
other than the IRS, the request for such
record shall immediately be transferred to
the appropriate constituent unit and the re-
quester notified to that effect. Such refer-
ral shall not be deemed a denial of access
within the meaning of these regulations. The
constituent unit of the Department to which
such referral is made shall treat such re-
quest as a new request addressed to it and
the time limits for response set forth in para-
graphs (c)(9) and (c)(10) of this section shall
commence when the referral is received by

the designated office or officer of the con-
stituent unit. Where the request is for a
record which is of a type that is not main-
tained by any constituent unit of the De-
partment of the Treasury, the requester shall
be so advised.

(ii) Where the record requested was cre-
ated by another agency or constituent unit
of the Department of the Treasury and a
copy thereof is in the possession of the IRS,
the IRS official to whom the request is de-
livered shall refer the request to the agency
or constituent unit which originated the
record for direct reply to the requester. The
requester shall be informed of such refer-
ral. This referral shall not be considered a
denial of access within the meaning of these
regulations. Where the record is deter-
mined to be exempt from disclosure un-
der 5 U.S.C. 552, the referral need not be
made, but the IRS shall inform the origi-
nating agency or constituent unit of its de-
termination. Where notifying the requester
of its referral may cause a harm to the origi-
nating agency or constituent unit which
would enable the originating agency or con-
stituent unit to withhold the record under
5 U.S.C. 552, then such referral need not
be made. In both of these circumstances,
the IRS official to whom the request is de-
livered shall process the request in accor-
dance with the procedures set forth in this
section.

(iii) When a request is received for a
record created by the IRS (i.e., in its pos-
session and control) that includes informa-
tion originated by another agency or
constituent unit of the Department of the
Treasury, the record shall be referred to the
originating agency or constituent unit for
review, coordination, and concurrence prior
to being released to a requester. The IRS
official to whom the request is delivered
may withhold the record without prior con-
sultation with the originating agency or con-
stituent unit.

(4) Form of request. (i) Requesters are
advised that only requests for records which
fully comply with the requirements of this
section can be processed in accordance with
this section. Requesters shall be notified
promptly in writing of any requirements
which have not been met or any additional
requirements to be met. Every effort shall
be made to comply with the requests as
written. The initial request for records
must-

(A) Be made in writing and signed by
the individual making the request;

(B) State that it is made pursuant to the
Freedom of Information Act, 5 U.S.C. 552,
or regulations thereunder;

(C) Be addressed to and mailed to the
office of the IRS official who is respon-
sible for the control of the records requested
(see paragraph (h) of this section for the re-
sponsible officials and their addresses), re-
gardless of where such records are
maintained. Generally, requests for records
pertaining to the requester, or other mat-
ters of local interest, should be directed to
the office servicing the requester's geo-
graphic area of residence. Requests for
records maintained in the Headquarters of
the IRS and its National Office of Chief
Counsel, concerning matters of nation-
wide applicability, such as published guid-
ance (regulations and revenue rulings),
program management, operations, or poli-
cies, should be directed to the Headquar-
ters Disclosure Office. If the person making
the request does not know the official re-
sponsible for the control of the records be-
ing requested, the person making the request
may contact, by telephone or in writing, the
disclosure office servicing the requester's
geographic area of residence to ascertain the
identity of the official having control of the
records being requested so that the re-
quest can be addressed, and delivered, to
the appropriate responsible official. Mis-
directed requests that otherwise satisfy the
requirements of this section shall be im-
mediately transferred to the appropriate re-
sponsible IRS official and the requester
notified to that effect. Such transfer shall
not be deemed a denial of access within the
meaning of these regulations. The IRS of-
ficial to whom the request is redirected shall
treat such request as a new request ad-
dressed to it and the time limits for re-
sponse set forth in paragraphs (c)(9) and
(c)(11) of this section shall commence when
the transfer is received by the designated
office;

(D) Reasonably describe the records in
accordance with paragraph (c)(5)(i) of this
section;

(E) In the case of a request for records
the disclosure of which is limited by stat-
ute or regulations (as, for example, the Pri-
vacy Act of 1974 (5 U.S.C. 552a) or section
6103 and the regulations thereunder), es-
tablish the identity and the right of the per-
son making the request to the disclosure of

the records in accordance with paragraph
(c)(5)(iii) of this section;

(F) Set forth the address where the per-
son making the request desires to be noti-
fied of the determination as to whether the
request shall be granted;

(G) State whether the requester wishes
to inspect the records or desires to have a
copy made and furnished without first in-
specting them;

(H) State the firm agreement of the re-
quester to pay the fees for search, dupli-
cation, and review ultimately determined in
accordance with paragraph (f) of this sec-
tion, or, in accordance with paragraph
(c)(4)(ii) of this section, place an upper limit
for such fees that the requester is willing
to pay, or request that such fees be re-
duced or waived and state the justifica-
tion for such request; and

(I) Identify the category of the requester
and, with the exception of "other request-
ers," state how the records shall be used,
as required by paragraph (f)(3) of this sec-
tion.

(ii) As provided in paragraph (c)(4)(i)(H)
of this section, rather than stating a firm
agreement to pay the fee ultimately deter-
mined in accordance with paragraph (f) of
this section or requesting that such fees be
reduced or waived, the requester may place
an upper limit on the amount the requester
agrees to pay. If the requester chooses to
place an upper limit and the estimated fee
is deemed to be greater than the upper limit,
or where the requester asks for an esti-
mate of the fee to be charged, the requester
shall be promptly advised of the estimate
of the fee and asked to agree to pay such
amount. Where the initial request includes
a request for reduction or waiver of the fee,
the IRS officials responsible for the con-
trol of the requested records (or their del-
egates) shall determine whether to grant the
request for reduction or waiver in accor-
dance with paragraph (f) of this section and
notify the requester of their decisions and,
if their decisions result in the requester be-
ing liable for all or part of the fee nor-
mally due, ask the requester to agree to pay
the amount so determined. The require-
ments of this paragraph shall not be deemed
met until the requester has explicitly agreed
to pay the fee applicable to the request for
records, if any, or has made payment in ad-
vance of the fee estimated to be due. If the
requester has any outstanding balance of
search, review, or duplication fees, the re-

quirements of this paragraph shall not be
deemed met until the requester has remit-
ted the outstanding balance due.

(5) Reasonable description of records;
identity and right of the requester. (i) The
request for records must describe the records
in reasonably sufficient detail to enable the
IRS employees who are familiar with the
subject matter of the request to locate the
records without placing an unreasonable
burden upon the IRS. While no specific for-
mula for a reasonable description of a
record can be established, the requirement
shall generally be satisfied if the requester
gives the name, taxpayer identification num-
ber (e.g., social security number or em-
ployer identification number), subject matter,
location, and years at issue, of the requested
records. If the request seeks records per-
taining to pending litigation, the request
shall indicate the title of the case, the court
in which the case was filed, and the na-
ture of the case. It is suggested that the per-
son making the request furnish any
additional information which shall more
clearly identify the requested records. Where
the requester does not reasonably describe
the records being sought, the requester shall
be afforded an opportunity to refine the re-
quest. Such opportunity may involve a con-
ference with knowledgeable IRS personnel
at the discretion of the disclosure officer.
The reasonable description requirement shall
not be used by officers or employees of the
Internal Revenue as a device for improp-
erly withholding records from the public.

(ii) The IRS shall make a reasonable ef-
fort to comply fully with all requests for ac-
cess to records subject only to any
applicable exemption set forth in 5 U.S.C.
552(b) or any exclusion described in 5
U.S.C. 552(c). In any situation in which it
is determined that a request for volumi-
nous records would unduly burden and in-
terfere with the operations of the IRS, the
person making the request shall be asked
to be more specific and to narrow the re-
quest, or to agree on an orderly proce-
dure for the production of the requested
records, in order to satisfy the request with-
out disproportionate adverse effect on IRS
operations.

(iii) Statutory or regulatory restrictions-
(A) In the case of records containing in-
formation with respect to particular persons
the disclosure of which is limited by stat-
ute or regulations, persons making requests
shall establish their identity and right to ac-

cess to such records. Persons requesting ac-
cess to such records which pertain to
themselves may establish their identity by-

(1) The presentation of a single docu-
ment bearing a photograph (such as a pass-
port or identification badge), or the
presentation of two items of identifica-
tion which do not bear a photograph but do
bear both a name and signature (such as a
credit card or organization membership
card), in the case of a request made in per-
son,

(2) The submission of the requester's sig-
nature, address, and one other identifier
(such as a photocopy of a driver's license)
bearing the requester's signature, in the case
of a request by mail, or

(3) The presentation in person or the
submission by mail of a notarized state-
ment, or a statement made under penalty of
perjury in accordance with 28 U.S.C. 1746,
swearing to or affirming such person's iden-
tity.

(B) Additional proof of a person's iden-
tity shall be required before the requests
shall be deemed to have met the require-
ment of paragraph (c)(4)(i)(E) of this sec-
tion if it is determined that additional proof
is necessary to protect against unautho-
rized disclosure of information in a par-
ticular case. Persons who have identified
themselves to the satisfaction of IRS offi-
cials pursuant to this paragraph (c) shall be
deemed to have established their right to ac-
cess records pertaining to themselves. Per-
sons requesting records on behalf of or
pertaining to another person must pro-
vide adequate proof of the legal relation-
ship under which they assert the right to
access the requested records before the re-
quirement of paragraph (c)(4)(i)(E) of this
section shall be deemed met.

(C) In the case of an attorney-in-fact, or
other person requesting records on behalf
of or pertaining to other persons, the re-
quester shall furnish a properly executed
power of attorney, Privacy Act consent, or
tax information authorization, as appropri-
ate. In the case of a corporation, if the re-
quester has the authority to legally bind the
corporation under applicable state law, such
as its corporate president or chief execu-
tive officer, then a written statement or tax
information authorization certifying as to
that person's authority to make a request on
behalf of the corporation shall be suffi-
cient. If the requester is any other officer

or employee of the corporation, then such
requester shall furnish a written statement
certifying as to that person's authority to
make a request on behalf of the corpora-
tion by any principal officer and attested to
by the secretary or other officer (other than
the requester) that the person making the
request on behalf of the corporation is prop-
erly authorized to make such a request. If
the requester is other than one of the above,
then such person may furnish a resolu-
tion by the corporation's board of direc-
tors or other governing body which provides
that the person making the request on be-
half of the corporation is properly autho-
rized to make such a request, or shall
otherwise satisfy the requirements set forth
in section 6103(e). A person requesting ac-
cess to records of a partnership or a sub-
chapter S Corporation shall provide a
notarized statement, or a statement made
under penalty of perjury in accordance with
28 U.S.C. 1746, that the requester was a
member of the partnership or subchapter S
corporation for a part of each of the years
included in the request.

(6) Requests for expedited processing. (i)
When a requester demonstrates compel-
ling need, a request shall be taken out of
order and given expedited treatment. A com-
pelling need involves-

(A) Circumstances in which the lack of
expedited treatment could reasonably be ex-
pected to pose an imminent threat to the life
or physical safety of an individual;

(B) An urgency to inform the public con-
cerning actual or alleged Federal govern-
ment activity, if made by a person primarily
engaged in disseminating information. A
person primarily engaged in disseminat-
ing information, if not a full-time repre-
sentative of the news media, as defined in
paragraph (f)(3)(ii)(B) of this section, must
establish that he or she is a person whose
main professional activity or occupation is
information dissemination, though it need
not be his or her sole occupation. A per-
son primarily engaged in disseminating in-
formation does not include individuals who
are engaged only incidentally in the dis-
semination of information. The standard of
urgency to inform requires that the records
requested pertain to a matter of current exi-
gency to the American public, beyond the
public's right to know about government ac-
tivity generally, and that delaying a re-
sponse to a request for records would

compromise a significant recognized inter-
est to and throughout the American gen-
eral public;

(ii) A requester who seeks expedited pro-
cessing must submit a statement, certified
to be true and correct to the best of his or
her knowledge and belief, explaining in de-
tail why there is a compelling need for ex-
pedited processing.

(iii) A request for expedited process-
ing may be made at the time of the initial
request for records or at any later time. For
a prompt determination, requests for ex-
pedited processing must be submitted to the
responsible official of the IRS who main-
tains the records requested except that a re-
quest for expedited processing under
paragraph (c)(6)(i)(B) of this section shall
be submitted directly to the Director, Com-
munications Division, whose address is Of-
fice of Media Relations, CL:C:M, Internal
Revenue Service, Room 7032, 1111 Con-
stitution Avenue, N.W., Washington, D.C.
20224.

(iv) Upon receipt by the responsible of-
ficial in the IRS, a request for expedited
processing shall be considered and a de-
termination as to whether to grant or deny
the request shall be made, and the requester
notified, within ten days of the date of the
request, provided that in no event shall the
IRS have less than five days (excluding Sat-
urdays, Sundays, and legal public holi-
days) from the date of the responsible
official's receipt of the request for such pro-
cessing. The determination to grant or deny
a request for expedited processing shall be
made solely on the information initially pro-
vided by the requester.

(v) An appeal of an initial determina-
tion to deny expedited processing must be
made within ten days of the date of the ini-
tial determination to deny expedited pro-
cessing, and must otherwise comply with
the requirements of paragraph (c)(10) of this
section. Both the envelope and the appeal
itself shall be clearly marked, "Appeal for
Expedited Processing."

(vi) IRS action to deny or affirm de-
nial of a request for expedited processing
pursuant to this paragraph, and IRS fail-
ure to respond in a timely manner to such
a request shall be subject to judicial re-
view, except that judicial review shall be
based on the record before the IRS at the

time of the determination. A district court
of the United States shall not have juris-
diction to review the IRS's denial of ex-
pedited processing of a request for records
after the IRS has provided a complete re-
sponse to the request.

(7) Date of receipt of request. (i) Re-
quests for records and any separate agree-
ment to pay, final notification of waiver of
fees, or letter transmitting payment, shall
be promptly stamped with the date of de-
livery to or dispatch by the office of the IRS
official responsible for the control of the
records requested. A request for records
shall be considered to have been received
on the date on which a complete request
containing the information required by para-
graphs (c)(4)(i)(A) through (I) has been re-
ceived by the IRS official responsible for
the control of the records requested. A de-
termination that a request is deficient in any
respect is not a denial of access, and such
determinations are not subject to adminis-
trative appeal.

(ii) The latest of such stamped dates shall
be deemed for purposes of this section to
be the date of receipt of the request, pro-
vided that the requirements of
paragraphs(c)(4)(i)(A) through (I) of this
section have been satisfied, and, where
applicable-

(A) The requester has agreed in writ-
ing, by executing a separate contract or oth-
erwise, to pay the fees for search,
duplication, and review determined due in
accordance with paragraph (f) of this sec-
tion, or

(B) The fees have been waived in ac-
cordance with paragraph (f) of this sec-
tion, or

(8) Search for records requested. (i)
Upon the receipt of a request, search ser-
vices shall be performed by IRS person-
nel to identify and locate the requested
records. Search time includes any and all
time spent looking for material respon-
sive to the request, including page-by-
page or line-by-line identification of material
within records. Where duplication of an en-
tire record would be less costly than a line-
by-line identification, duplication should be
substituted for this kind of search. With re-
spect to records maintained in computer-
ized form, a search shall include services
functionally analogous to a search for
records which are maintained on paper.

(ii) In determining which records are re-
sponsive to a request, the IRS official re-
sponsible for the control of the records
requested shall include only those records
within the official's possession and con-
trol as of the date of the receipt of the re-
quest by the appropriate disclosure officer.

(9) Initial determination. (i) Respon-
sible official.

(A) The Associate Director, Personnel
Security or delegate shall have the sole au-
thority to make initial determinations with
respect to requests for records under that
office's control.

(B) The Director of the Office of Gov-
ernmental Liaison and Disclosure or del-
egate shall have the sole authority to make
initial determinations with respect to all
other requests for records of the IRS main-
tained in the Headquarters and its National
Office of the Chief Counsel. For all other
records within the control of the IRS, the
initial determination with respect to re-
quests for records may be made either by
the Director, Office of Governmental Li-
aison and Disclosure, or by the IRS offi-
cials responsible for the control of the
records requested, or their delegates (see
paragraph (h) of this section).

(ii) Processing of request. The appro-
priate responsible official or delegate shall
respond in the approximate order of re-
ceipt of the requests, to the extent consis-
tent with sound administrative practice. In
any event, the initial determination shall be
made and notification thereof mailed within
twenty days (excepting Saturdays, Sun-
days, and legal public holidays) after the
date of receipt of the request, as deter-
mined in accordance with paragraph (c)(7)
of this section, unless the responsible of-
ficial invokes an extension pursuant to para-
graph (c)(11) of this section, the requester
otherwise agrees to an extension of the
twenty day time limitation, or the request
is an expedited request.

(iii) Granting of request. If the request
is granted in full or in part, and if the re-
quester wants a copy of the records, a state-
ment of the applicable fees, if there are any,
shall be mailed to the requester either at the
time of the determination or shortly there-
after. In the case of a request for inspec-
tion, the records shall be made available
promptly for inspection, at the time and
place stated, normally at the appropriate of-
fice where the records requested are con-
trolled. If the person making the request has

expressed a desire to inspect the records at
another office of the IRS, a reasonable ef-
fort shall be made to comply with the re-
quest. Records shall be made available for
inspection at such reasonable and proper
times so as not to interfere with their use
by the IRS or to exclude other persons from
making inspections. In addition, reason-
able limitations may be placed on the num-
ber of records which may be inspected by
a person on any given date. The person
making the request shall not be allowed to
remove the records from the office where
inspection is made. If, after making inspec-
tion, the person making the request de-
sires copies of all or a portion of the
requested records, copies shall be furnished
upon payment of the established fees pre-
scribed by paragraph (f) of this section.

(iv) Denial of request. If it is deter-
mined that some records shall be denied,
the person making the request shall be so
notified by mail. The letter of notifica-
tion shall specify the city or other loca-
tion where the requested records are
situated, contain a brief statement of the
grounds for not granting the request in full
including the exemption(s) relied upon, the
name and any title or position of the offi-
cial responsible for the denial, and advise
the person making the request of the right
to appeal to the Commissioner in accor-
dance with paragraph (c)(10) of this sec-
tion.

(A) In denying a request for records, in
whole or in part, the IRS shall include the
date that the request was received in the ap-
propriate disclosure office, and shall pro-
vide an estimate of the volume of the
denied matter to the person making the re-
quest, unless providing such estimate would
harm an interest protected by an exemp-
tion in 5 U.S.C. 552(b) or (c) pursuant to
which the denial is made; and

(B) The amount of information deleted
shall be indicated on the released portion
of the record, unless including that indi-
cation would harm an interest protected by
an exemption in 5 U.S.C. 552(b) under
which the deletion is made. If technically
feasible, the amount of the information de-
leted and the asserted exemption shall be
indicated at the place in the record where
such deletion is made.

(v) Inability to locate and evaluate within
time limits. Where the records requested
cannot be located and evaluated within the
initial twenty day period or any extension

December 9, 2002

thereof in accordance with paragraph (c)(11)
of this section, the search for the records
or evaluation shall continue, but the re-
quester shall be notified, and advised that
the requester may consider such notifica-
tion a denial of the request for records. The
requester shall be provided with a state-
ment of judicial rights along with the no-
tification letter. The requester may also be
invited, in the alternative, to agree to a vol-
untary extension of time in which to lo-
cate and evaluate the records. Such
voluntary extension of time shall not con-
stitute a waiver of the requester's right to
appeal or seek judicial review of any de-
nial of access ultimately made or the re-
quester's right to seek judicial review in the
event of failure to comply with the time ex-
tension granted.

(10) Administrative appeal. (i) The re-
quester may submit an administrative ap-
peal to the Commissioner of Internal
Revenue by letter that is postmarked within
35 days after the later of the date of any let-
ter of notification described in paragraph
(c)(9)(iv) of this section, the date of any let-
ter of notification of an adverse determi-
nation of the requester's category described
in paragraph (f)(3) of this section, the date
of any letter of notification of an adverse
determination of the requester's fee waiver
or reduction request described in para-
graph (f)(2) of this section, the date of any
letter determining that no responsive records
exist, or the date of the last transmission of
the last records released. An administra-
tive appeal for denial of a request for ex-
pedited processing must be made to the
Commissioner of Internal Revenue by let-
ter that is postmarked within ten days af-
ter the date of any letter of notification
discussed in paragraph (c)(6)(iv) of this sec-
tion.

(ii) The letter of appeal shall-(A) Be
made in writing and signed by the requester;

(B) Be addressed to the Commissioner
and mailed to IRS Appeals, 6377A River-
side Avenue, Suite 110, Riverside, Califor-
nia 92506-FOIA Appeal;

(C) Reasonably describe the records re-
quested to which the appeal pertains in ac-
cordance with paragraph (c)(5)(i) of this
section;

(D) Set forth the address where the ap-
pellant desires to be notified of the deter-
mination on appeal;

(E) Specify the date of the request, the
office to which the request was submit-

ted, and where possible, enclose a copy of
the initial request and the initial determi-
nation being appealed; and

(F) Ask the Commissioner to grant the
request for records, fee waiver, expedited
processing, or favorable fee category, as ap-
plicable, or verify that an appropriate search
was conducted and the responsive records
were either produced or an appropriate ex-
emption asserted. The person submitting the
appeal may submit any argument in sup-
port of the appeal in the letter of appeal.

(iii) Appeals shall be stamped promptly
with the date of their receipt in the Of-
fice of Appeals, and the later of this
stamped date or the stamped date of a docu-
ment submitted subsequently which supple-
ments the original appeal so that the appeal
satisfies the requirements set forth in para-
graphs (c)(10)(ii)(A) through (F) of this sec-
tion shall be deemed by the IRS to be the
date of receipt of the appeal for all pur-
poses of this section. The Commissioner or
a delegate shall acknowledge receipt of the
appeal and advise the requester of the date
of receipt and the date a response is due in
accordance with this paragraph. If an ap-
peal fails to satisfy any of the require-
ments of paragraph (c)(10)(ii)(A) through
(F) of this section, the person making the
request shall be advised promptly in writ-
ing of the additional requirements to be met.
Except for appeals of denials of expedited
processing, the determination to affirm the
initial denial (in whole or in part) or to grant
the request for records shall be made and
notification of the determination shall be
mailed within twenty days (exclusive of Sat-
urdays, Sundays, and legal public holi-
days) after the date of receipt of the appeal
unless extended pursuant to paragraph
(c)(11)(i) of this section. Appeals of ini-
tial determinations to deny expedited pro-
cessing must be made within ten calendar
days of the determination to deny the ex-
pedited processing. If it is determined that
the appeal from the initial denial is to be
denied (in whole or in part), the requester
shall be notified in writing of the denial, the
reasons therefor, the name and title or po-
sition of the official responsible for the de-
nial on appeal, and the provisions of 5
U.S.C. 552(a)(4) for judicial review of that
determination.

(11) Time extensions. (i) Unusual cir-
cumstances. (A) In unusual circumstances,
the time limitations specified in paragraphs
(c)(9) and (10) of this section may be ex-

tended by written notice from the official
charged with the duty of making the de-
terminations to the person making the re-
quest or appeal setting forth the reasons for
this extension and the date on which the de-
termination is expected to be sent. As used
in this paragraph, the term unusual circum-
stances means, but only to the extent rea-
sonably necessary to the proper processing
of the particular request:

(1) The need to search for and collect the
requested records from field facilities or
other establishments that are separate from
the office processing the request;

(2) The need to search for, collect, and
appropriately examine a voluminous amount
of separate and distinct records which are
demanded in a single request;

(3) The need for consultation, which
shall be conducted with all practicable
speed, with another agency having a sub-
stantial interest in the determination of the
request or among two or more constitu-
ent units of the Department of the Trea-
sury having substantial subject matter
interest therein; and

(4) The need for consultation with busi-
ness submitters to determine the nature and
extent of proprietary information in accor-
dance with this section.

(B) Any extension or extensions of time
for unusual circumstances shall not cumu-
latively total more than ten days (exclu-
sive of Saturday, Sunday and legal public
holidays). If additional time is needed to
process the request, the IRS shall notify the
requester and provide the requester an op-
portunity to limit the scope of the request
or arrange for an alternative time frame for
processing the request or a modified re-
quest. The requester shall retain the right
to define the desired scope of the request,
as long as it meets the requirements con-
tained in this section.

(ii) Aggregation of requests. If more than
one request is received from the same re-
quester, or from a group of requesters act-
ing in concert, and the IRS believes that
such requests constitute a single request
which would otherwise satisfy the unusual
circumstances specified in subparagraph
(c)(11)(i) of this section, and the requests
involve clearly related matters, the IRS may
aggregate these requests for processing pur-
poses. Multiple requests involving unre-
lated matters shall not be aggregated.

(12) Failure to comply. If the IRS fails
to comply with the time limitations speci-

fied in paragraphs (c)(9), (10), or para-
graph (c)(11)(i) of this section, any person
making a request for records satisfying the
requirements of paragraphs (c)(4)(i)(A)
through (I) of this section, shall be deemed
to have exhausted administrative remedies
with respect to such request. Accordingly,
this person may initiate suit in accordance
with paragraph (c)(13) of this section.

(13) Judicial review. If an administra-
tive appeal pursuant to paragraph (c)(10) of
this section for records or fee waiver or re-
duction is denied, or if a request for expe-
dited processing is denied and there has
been no determination as to the release of
records, or if a request for a favorable fee
category under paragraph (f)(3) of this sec-
tion is denied, or a determination is made
that there are no responsive records, or if
no determination is made within the twenty
day periods specified in paragraphs (c)(9)
and (10) of this section, or the period of any
extension pursuant to paragraph (c)(11)(i)
of this section, or by grant of the requester,
respectively, the person making the re-
quest may commence an action in a United
States district court in the district in which
the requester resides, in which the request-
er's principal place of business is located,
in which the records are situated, or in the
District of Columbia, pursuant to 5 U.S.C.
552(a)(4)(B). The statute authorizes an ac-
tion only against the agency. With respect
to records of the IRS, the agency is the IRS,
not an officer or an employee thereof. Ser-
vice of process in such an action shall be
in accordance with the Federal Rules of
Civil Procedure (28 U.S.C. App.) appli-
cable to actions against an agency of the
United States. Delivery of process upon the
IRS shall be directed to the Commissioner
of Internal Revenue, Attention: CC:PA, 1111
Constitution Avenue, N.W., Washington,
D.C. 20224. The IRS shall serve an an-
swer or otherwise plead to any complaint
made under this paragraph within 30 days
after service upon it, unless the court oth-
erwise directs for good cause shown. The
district court shall determine the matter de
novo, and may examine the contents of the
IRS records in question in camera to de-
termine whether such records or any part
thereof shall be withheld under any of the
exemptions described in 5 U.S.C. 552(b)
and the exclusions described in 5 U.S.C.
552(c). The burden shall be upon the IRS
to sustain its action in not making the re-
quested records available. The court may

assess against the United States reason-
able attorney fees and other litigation costs
reasonably incurred by the person mak-
ing the request in any case in which the
complainant has substantially prevailed.

(14) Preservation of records. All corre-
spondence relating to the requests received
by the IRS under this chapter, and all
records processed pursuant to such requests,
shall be preserved, until such time as the
destruction of such correspondence and
records is authorized pursuant to Title 44
of the United States Code. Under no cir-
cumstances shall records be destroyed while
they are the subject of a pending request,
appeal, or lawsuit under 5 U.S.C. 552.

(d) Rules for disclosure of certain speci-
fied matters. Requests for certain speci-
fied categories of records shall be processed
by the IRS in accordance with other es-
tablished procedures.

(1) Inspection of tax returns and attach-
ments or transcripts. The inspection of re-
turns and attachments is governed by the
provisions of the internal revenue laws and
regulations thereunder promulgated by the
Secretary of the Treasury. See section 6103
and the regulations thereunder. Written re-
quests for a copy of a tax return and at-
tachments or a transcript of a tax return
shall be made using IRS Form 4506, Re-
quest for Copy or Transcript of Tax Form.
A reasonable fee, as the Commissioner may
from time to time establish, may be charged
for such copies.

(2) Record of seizure and sale of real es-
tate. Subject to the rules on disclosure set
forth in section 6103, Record 21, Part 2,
"Record of seizure and sale of real es-
tate", is available for public inspection in
the local IRS office where the real estate
is located. Copies of Record 21, Part 2 shall
be furnished upon written request. Mem-
bers of the public may call the toll-free IRS
Customer Service number, 1-800-829-
1040, to obtain the address of the appro-
priate local office. Record 21 does not list
real estate seized for use in violation of the
internal revenue laws (see section 7302).

(3) Public inspection of certain infor-
mation returns, notices, and reports fur-
nished by certain tax-exempt organizations
and certain trusts. Subject to the rules on
disclosure set forth in section 6104: Infor-
mation furnished on any Form 990 series
or Form 1041-A returns, pursuant to sec-
tions 6033 and 6034, shall be made avail-
able for public inspection and copying, upon

written request; information furnished by or-
ganizations exempt from tax under sec-
tion 527 on Forms 8871, Political
Organization Notice of Section 527 Sta-
tus, and Forms 8872, Political Organiza-
tion Report of Contributions and
Expenditures, are available for public in-
spection and copying from the IRS web-
site at www.eforms.irs.gov. In addition,
Forms 8871 and 8872 shall be made avail-
able for public inspection and copying, upon
written request; and information furnished
by organizations exempt from tax under sec-
tion 527 on Form 1120-POL pursuant to
section 6012(a)(6) shall be made avail-
able for public inspection and copying upon
written request. Written requests to in-
spect or obtain copies of any of the infor-
mation described in this paragraph (d)(3)
shall be made using Form 4506-A, "Re-
quest for Public Inspection or Copy of Ex-
empt or Political Organization IRS Form,"
and be directed to the appropriate address
listed on Form 4506-A.

(4) Public inspection of applications and
determinations of certain organizations for
tax exemption. Subject to the rules on dis-
closure set forth in section 6104, applica-
tions, including Forms 1023 and 1024, and
certain papers submitted in support of such
applications, filed by organizations de-
scribed in section 501(c) or (d) and deter-
mined to be exempt from taxation under
section 501(a), and any letter or other docu-
ment issued by the IRS with respect to such
applications, shall be made available for
public inspection and copying, upon writ-
ten request. Written requests to inspect or
obtain copies of this information shall be
made using Form 4506-A, "Request for
Public Inspection or Copy of Exempt or Po-
litical Organization IRS Form," and be di-
rected to the appropriate address listed on
Form 4506-A.

(5) Public inspection of applications and
annual returns with respect to certain de-
ferred compensation plans and accounts and
employee plans. Subject to the rules on dis-
closure set forth in section 6104; forms, ap-
plications, and papers submitted in support
of such applications, with respect to the
qualification of a pension, profit sharing, or
stock bonus plan under sections 401(a),
403(a), or 405(a), an individual retirement
account described in section 408(a), an in-
dividual retirement annuity described in sec-
tion 408(b), or with respect to the
exemption from tax of an organization

December 9, 2002

forming part of such a plan or account, and
any document issued by the IRS dealing
with such qualification or exemption, shall
be open to public inspection and copying
upon written request. This paragraph shall
not apply with respect to plans with no
more than 25 plan participants. Written re-
quests to inspect or obtain copies of such
material shall be directed to IRS Customer
Service-Tax Exempt & Government En-
tities Division (TEGE), P.O. Box 2508,
Room 2023, Cincinnati, Ohio 45201; and
information furnished on the Form 5500 se-
ries of returns, pursuant to section 6058,
shall be made available for public inspec-
tion and copying upon written request. Ex-
cept for requests for Form 5500-EZ, written
requests to inspect or to obtain a copy of
this information shall be directed to the De-
partment of Labor, Public Disclosure, Room
N-5638, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210. Written requests
to inspect or to obtain a copy of Form
5500-EZ shall be directed to the Internal
Revenue Service Center, P.O. Box 9941,
Stop 6716, Ogden, Utah 84409.

(6) Publication of statistics of income.
Statistics with respect to the operation of
the income tax laws are published annu-
ally in accordance with section 6108 and
§ 301.6108-1.

(7) Comments received in response to a
notice of proposed rulemaking, a solicita-
tion for public comments, or prepublica-
tion comments. Written comments received
in response to a notice of proposed rule-
making, a solicitation for public comments,
or prepublication comments, may be in-
spected, upon written request, by any per-
son upon compliance with the provisions
of this paragraph. Comments may be in-
spected in the Freedom of Information
Reading Room, IRS, 1111 Constitution Av-
enue, N.W., Room 1621, Washington, D.C.
The request to inspect comments must be
in writing and signed by the person mak-
ing the request and shall be addressed to the
Commissioner of Internal Revenue, Attn:
CC:ITA:RU, P.O. Box 7604, Ben Frank-
lin Station, Washington, D.C. 20044. The
person submitting the written request may
inspect the comments that are the subject
of the request during regular business hours.
If the requester wishes to inspect the docu-
ments, the requester shall be contacted by
IRS Freedom of Information Reading Room
personnel when the documents are avail-
able for inspection. Copies of comments

may be made in the Freedom of Informa-
tion Reading Room by the person mak-
ing the request or may be requested, in
writing, to the Commissioner of Internal
Revenue, Attn: CC:ITA:RU, P.O. Box 7604,
Ben Franklin Station, Washington, D.C.
20044. The IRS shall comply with requests
for records under the paragraph within a
reasonable time. The provisions of para-
graph (f)(5)(iii) of this section, relating to
fees for duplication, shall apply with re-
spect to requests made in accordance with
this paragraph.

(8) Accepted offers in compromise. For
one year after the date of execution, a copy
of the Form 7249, "Offer Acceptance Re-
port," for each accepted offer in compro-
mise with respect to any liability for a tax
imposed by Title 26 shall be made avail-
able for inspection and copying in the lo-
cation designated by the Compliance Area
Director or Compliance Services Field Di-
rector within the Small Business and Self-
Employed Division (SBSE) of the
taxpayer's geographic area of residence.

(9) Public inspection of written deter-
minations. Certain rulings, determination let-
ters, technical advice memorandums, and
Chief Counsel advice are open to public in-
spection pursuant to section 6110.

(e) Other disclosure procedures. For pro-
cedures to be followed by officers and em-
ployees of the IRS upon receipt of a request
or demand for certain internal revenue
records or information the disclosure pro-
cedure for which is not covered by this sec-
tion, see § 301.9000-1.

(f) Fees for services-(1) In general. Ex-
cept as otherwise provided, the fees to be
charged for search, duplication, and re-
view services performed by the IRS, with
respect to the processing of Freedom of In-
formation Act requests, shall be determined
and collected in accordance with the pro-
visions of this subsection. A fee shall not
be charged for monitoring a requester's in-
spection of records which contains ex-
empt matter. The IRS may recover the
applicable fees even if there is ultimately
no disclosure of records. Should services
other than the services described in this
paragraph be requested and rendered, which
are not required by the Freedom of Infor-
mation Act, fees shall be charged to re-
cover the actual direct cost to the IRS.

(2) Waiver or reduction of fees. (i) The
fees authorized by this paragraph may be
waived or reduced on a case-by-case ba-

sis in accordance with this subsection by
any IRS official who is authorized to make
the initial determination pursuant to para-
graph (c)(9) of this section. Fees shall be
waived or reduced by such official when it
is determined that disclosure of the re-
quested information is in the public inter-
est because it is likely to contribute
significantly to public understanding of the
operations or activities of the IRS and is not
primarily in the commercial interest of the
requester. Such officials shall consider sev-
eral factors, including, but not limited to,
paragraphs (f)(2)(i) through (vi), in deter-
mining requests for waiver or reduction of
fees-

(A) Whether the subject of the releas-
able records concerns the agency's opera-
tions or activities;

(B) Whether the releasable records are
likely to contribute to an understanding of
the agency's operations or activities;

(C) Whether the releasable records are
likely to contribute to the general pub-
lic's understanding of the agency's opera-
tions or activities (e.g., how will the
requester convey the information to the gen-
eral public);

(D) The significance of the contribu-
tion to the general public's understanding
of the agency's operations or activities (e.g.,
is the information contained in the releas-
able records already available to the gen-
eral public);

(E) The existence and magnitude of the
requester's commercial interest, as that term
is used in paragraph (f)(3)(i)(A) of this sec-
tion, being furthered by the releasable
records; and

(F) Whether the magnitude of the re-
quester's commercial interest is sufficiently
large in comparison to the general pub-
lic's interest.

(ii) Requesters asking for reduction or
waiver of fees must state the reasons why
they believe disclosure meets the stan-
dards set forth in paragraph (f)(2)(ii) of this
section in a written request signed by the
requester.

(iii) The indigence of the requester shall
not be considered as a factor to determine
if the requester is entitled to a reduction or
waiver of fees.

(iv) Normally, no charge shall be made
for providing records to federal, state, lo-
cal, or foreign governments, or agencies or
offices thereof, or international govern-
mental organizations.

(v) The initial request for waiver or re-
duction of fees shall be addressed to the of-
ficial of the IRS to whose office the request
for disclosure is delivered pursuant to para-
graph (c)(4)(i)(C) of this section. Appeals
from denials of requests for waiver or re-
duction of fees shall be decided by the
Commissioner's delegate in accordance with
the criteria set forth in paragraph (f)(2)(ii)
of this section. Appeals shall be received
by the Commissioner's delegate within 35
days of the date of the letter of notifica-
tion denying the initial request for waiver
or reduction and shall be decided promptly.
See paragraph (c)(10)(ii)(B) of this sec-
tion for the appropriate address. Upon re-
ceipt of the determination on appeal to deny
a request for waiver of fees, the requester
may initiate an action in a United States dis-
trict court to review the request for waiver
of fees. In such action, the court shall con-
sider the matter de novo, except that the
court's review of the matter shall be lim-
ited to the record before the IRS official to
whose office the request for waiver is de-
livered. In such action, the court shall con-
sider the matter under the arbitrary and
capricious standard.

(3) Categories of requesters-(i) Attes-
tation. A request for records under this sec-
tion shall include an attestation as to the
status of the requester for use by the IRS
official to whose office the request is de-
livered in determining the appropriate fees
to be assessed. No attestation is required for
a requester who falls within paragraph
(f)(3)(ii)(E) (an "other requester").

(ii) Categories. (A) Commercial use re-
quester. Any person who seeks informa-
tion for a use or purpose that furthers the
commercial, trade, or profit interests of the
requester or the person on whose behalf the
request is made.

(B) News media requester. Any person
actively gathering news for an entity that
is organized and operated to publish or
broadcast news (i.e., information about cur-
rent events or of current interest to the pub-
lic) to the public. News media entities
include, but are not limited to, television or
radio stations broadcasting to the public at
large, publishers of periodicals, to the ex-
tent they disseminate news, who make their
periodicals available for purchase or sub-
scription by the general public, computer-
ized news services and telecommunications.
Free lance journalists shall be included as
media requesters if they can demonstrate a

solid basis for expecting publication through
a qualifying news entity (e.g., publication
contract, past publication record). Special-
ized periodicals, although catering to a nar-
rower audience, may be considered media
requesters so long as they are available to
the public generally, via newsstand or sub-
scription.

(C) Educational institution requester. Any
person who, on behalf of a preschool, pub-
lic or private elementary or secondary
school, institution of undergraduate or
graduate higher education, institution of pro-
fessional or vocational education, which op-
erates a program or programs of scholarly
research, seeks records in furtherance of the
institution's scholarly research and is not for
a commercial use. This category does not
include requesters wanting records for use
in meeting individual academic research or
study requirements.

(D) Noncommercial scientific institu-
tion requester. Any person on behalf of an
institution that is not operated on a com-
mercial basis, that is operated solely for the
purpose of conducting scientific research
whose results are not intended to promote
any particular product or industry.

(E) Other requester. Any requester who
does not fall within the categories described
in paragraphs (f)(3)(ii)(A) through (D).

(iii) Determination of proper category.
Where the IRS has reasonable cause to
doubt the use to which a requester shall put
the records sought, or where that use is not
clear from the record itself, the IRS shall
seek additional clarification from the re-
quester before assigning the request to a
specific category. In any event, a determi-
nation of the proper category of requester
shall be based upon a review of the re-
quester's submission and may also be based
upon the IRS' own records.

(iv) Allowable charges. (A) Commer-
cial use requesters. Records shall be pro-
vided to commercial use requesters for the
cost of search, duplication, and review (in-
cluding doing all that is necessary to ex-
cise and otherwise prepare records for
release) of records. Commercial use re-
questers are not entitled to two hours of free
search time or 100 pages of free duplica-
tion.

(B) News media, educational institu-
tion, and noncommercial scientific institu-
tion requesters. Records shall be provided
to news media, educational institution, and
noncommercial scientific institution re-

questers for the cost of duplication alone,
excluding fees for the first 100 pages.

(C) Other requesters. Requesters who do
not fit into any of the above categories shall
be charged fees that shall cover the full ac-
tual direct cost of searching for and dupli-
cating records, except that the first two
hours of search time and first 100 pages of
duplication shall be furnished without
charge. Requests from individuals for
records about themselves maintained in the
IRS's systems of records shall continue to
be treated under the fee provisions of the
Privacy Act of 1974, which permits fees
only for duplication after the first 100 pages
are furnished free of charge.

(4) Avoidance of unexpected fees. (i) In
order to protect requesters from unexpected
fees, all requests for records shall state the
agreement of the requesters to pay the fees
determined in accordance with paragraph
(f)(5) of this section or state the upper limit
they are willing to pay to cover the costs
of processing their requests.

(ii) When the fees for processing re-
quests are estimated by the IRS to exceed
the upper limit agreed to by a requester, or
when a requester has failed to state a limit
and the costs are estimated to exceed $250,
and the IRS has not then determined to
waive or reduce the fees, a notice shall be
sent to the requester. This notice shall-

(A) Inform the requester of the esti-
mated costs;

(B) Extend an offer to the requester to
confer with agency personnel in an at-
tempt to reformulate the request in a man-
ner which shall reduce the fees and still
meet the needs of the requester;

(C) If the requester is not amenable to
reformulation, which would reduce fees to
under $250, then advance payment of the
estimated fees shall be required; and

(D) Inform the requester that the time
period, within which the IRS is obliged to
make a determination on the request, shall
not begin to run, pending a reformulation
of the request or the receipt of advance pay-
ment from the requester, as appropriate.

(5) Fees for services. The fees for ser-
vices performed by the IRS shall be im-
posed and collected as set forth in this
paragraph. No fees shall be charged if the
costs of routine collecting and processing
the fees allowable under 5 U.S.C.
552(a)(4)(A) are likely to equal or ex-
ceed the amount of the fee.

(i) Search services. Fees charged for
search services are as follows:

(A) Searches for records other than com-
puterized records. The IRS shall charge for
search services at the salary rate(s) (i.e., ba-
sic pay plus 16 percent) of the employ-
ee(s) making the search. An average rate for
the range of grades typically involved may
be established. Fees may be charged for
search time as prescribed in this section
even if the time spent searching does not
yield any records, or if records are de-
nied.

(B) Searches for computerized records.
Actual direct cost of the search, includ-
ing computer search time, runs, and the op-
erator's salary. The fee for computer output
shall be actual direct costs. For request-
ers in the "other requester" category, the
charge for the computer search shall be-
gin when the cost of the search (includ-
ing the operator time and the cost of
operating the computer) equals the equiva-
lent dollar amount of two hours of the sal-
ary of the person performing the search.

(C) Searches requiring travel or trans-
portation. Shipping charges to transport
records from one location to another, or for
the transportation of an employee to the site
of requested records when it is necessary
to locate rather than examine the records,
shall be at the rate of the actual cost of such
shipping or transportation.

(ii) Review Services-(A) Review de-
fined. Review is the process of examin-
ing records in response to a commercial use
requester, as that term is defined in para-
graph (f)(3)(i)(A), upon initial consider-
ation of the applicability of an exemption
described in 5 U.S.C. 552(b) or an exclu-
sion described in 5 U.S.C. 552(c) to the re-
quested records, be it at the initial request
or administrative appeal level, to deter-
mine whether any portion of any record re-
sponsive to the request is permitted to be
withheld. Review includes doing all that is
necessary to excise and otherwise pre-
pare the records for release. Review does
not include the time spent on resolving gen-
eral legal or policy issues regarding the ap-
plicability of exemptions to the requested
records.

(B) Fees charged for review services.
The IRS shall charge commercial use re-
questers for review of records at the ini-
tial determination stage at the salary rate(s)
(i.e., basic pay plus 16 percent) of the em-
ployee(s) making the review. An average

rate for the range of grades typically in-
volved may be established by the Com-
missioner.

(iii) Duplication other than for tax re-
turns and attachments. (A) Duplication fees
charged for copies of paper records shall be
a reasonable fee, as the Commissioner may
from time to time establish.

(B) The actual direct cost of duplica-
tion for photographs, films, videotapes, au-
diotapes, compact disks, and other materials
shall be charged.

(C) Records may be provided to a pri-
vate contractor for copying and the re-
quester shall be charged for the actual cost
of duplication charged by the private con-
tractor.

(D) When other duplication processes not
specifically identified above are requested
and provided pursuant to the Freedom of
Information Act, their actual direct cost to
the IRS shall be charged.

(E) Where the condition of the record
does not enable the IRS to make legible
copies, the IRS shall not attempt to recon-
struct it. The official having jurisdiction over
the record shall furnish the best copy that
is available and advise the requester of this
fact.

(iv) Charges for copies of tax returns
and attachments, and transcripts of tax re-
turns. A charge shall be made for each copy
of a tax return and its attachments, and tran-
scripts of tax returns, supplied in response
to a Form 4506, Request for Copy of Tax
Form. The amount of the charge shall be
a reasonable fee as computed by the Com-
missioner from time to time, and as set forth
on Form 4506.

(v) Other services. Other services and
materials requested (e.g., certification, ex-
press mailing) which are not specifically
covered by this part and/or not required by
the Freedom of Information Act are pro-
vided at the discretion of the IRS and are
chargeable at the actual direct cost to the
IRS.

(6) Printed material. Certain relevant
government publications which shall be
placed on the shelves of the Freedom of In-
formation Reading Room shall not be sold
at that location. Copies of pages of these
publications may be duplicated on the pre-
mises and a fee for such service may be
charged in accordance with paragraph
(f)(5)(iii) of this section. A person desir-
ing to purchase the complete publication,
for example, an Internal Revenue Bulle-

tin, should contact the Superintendent of
Documents, U.S. Government Printing Of-
fice, Washington, D.C. 20402.

(7) Search, duplication, and deletion ser-
vices with respect to records open to pub-
lic inspection pursuant to section 6110. Fees
charged for searching for, making dele-
tions in, and copies of records subject to
public inspection pursuant to section 6110
only upon written request shall be at the ac-
tual cost, as the Commissioner may from
time to time establish.

(8) Form of payment. Payment shall be
made by check or money order, payable to
the order of the Treasury of the United
States.

(9) Advance payments. (i) If previous
fees have not been paid in a timely fash-
ion, as defined in paragraph (f)(10) of this
section, or where the estimated fees ex-
ceed $250, the IRS shall require payment
in full of any outstanding fees and all es-
timated fees prior to processing a request.
Additionally, the IRS reserves the right to
require payment of fees after a request is
processed and before any records are re-
leased to a requester. For purposes of this
paragraph, a requester is the individual in
whose name a request is made; however,
where a request is made on behalf of an-
other individual, and previous fees have not
been paid within the designated time pe-
riod by either the requester or the indi-
vidual on whose behalf the request is made,
then the IRS shall require payment in full
of all outstanding fees and all estimated fees
before processing the request.

(ii) When the IRS acts pursuant to para-
graph (f)(9)(i) of this section, the admin-
istrative time limits prescribed in paragraphs
(c)(9) and (10) of this section, plus per-
missible extensions of these time limits as
prescribed in paragraph (c)(11)(i) of this
section, shall begin only after the IRS of-
ficial to whom the request is delivered has
received the fees described above in para-
graph (f)(9)(i) of this section.

(10) Interest. Interest shall be charged to
requesters who fail to pay the fees in a
timely fashion; that is, within 30 days fol-
lowing the day on which the statement of
fees as set forth in paragraph (c)(9)(i) of this
section was sent by the IRS official to
whom the request was delivered. When-
ever interest is charged, the IRS shall be-
gin assessing interest on the 31st day
following the date the statement of fees was
mailed to the requester. Interest shall be at

the rate prescribed in 31 U.S.C. 3717. In
addition, the IRS shall take all steps au-
thorized by the Debt Collection Act of 1982,
including administrative offset, disclosure
to consumer reporting agencies, and use of
collection agencies, as otherwise autho-
rized by law to effect payment.

(11) Aggregating requests. When the IRS
official to whom a request is delivered rea-
sonably believes that a requester or group
of requesters is attempting to break down
a request into a series of requests for the
purpose of evading the assessment of fees,
the IRS shall aggregate such requests and
charge accordingly, upon notification to the
requester and/or requesters.

(g) Business information and contrac-
tor proposal procedures- (1) In general.
Business information provided to the IRS
by a business submitter shall not be dis-
closed pursuant to a Freedom of Informa-
tion Act request except in accordance with
this section.

(2) Definition. Business information is
any trade secret or other confidential fi-
nancial or commercial (including research)
information.

(3) Notice to business submitters. Ex-
cept where it is determined that the infor-
mation is covered by paragraph (g)(9), the
official having control over the requested
records, which includes business informa-
tion, shall provide a business submitter with
prompt written notice of a request encom-
passing its business information when-
ever required in accordance with paragraph
(g)(4) of this section. Such written notice
shall either describe the exact nature of the
business information requested or pro-
vide copies of the records or portions
thereof containing the business informa-
tion.

(4) When notice is required. (i) For busi-
ness information submitted to the IRS prior
to October 13, 1987, the official having con-
trol over the requested records shall pro-
vide a business submitter with notice of a
request whenever-

(A) The business information was sub-
mitted to the IRS upon a commitment of
confidentiality; or

(B) The business information was vol-
untarily submitted and it is of a kind that
would customarily not be released to the
public by the person from whom it was ob-
tained; or

commercial or financial injury to the busi-
ness submitter.

(ii) For business information submit-
ted to the IRS on or after October 13, 1987,
the IRS shall provide a business submit-
ter with notice of a request whenever-

(A) The business submitter has desig-
nated the information as commercially or
financially sensitive information; or

(B) The official has reason to believe that
disclosure of the information may result in
commercial or financial injury to the busi-
ness submitter.

(iii) The business submitter's designa-
tion that the information is commercially
or financially sensitive information should
be supported by a statement or certifica-
tion by an officer or authorized represen-
tative of the business providing specific
justification that the information in ques-
tion is, in fact, confidential commercial or
financial information and has not been dis-
closed to the public.

(iv) Notice of a request for business in-
formation falling within paragraph
(g)(4)(ii)(A) of this section shall be re-
quired for a period of not more than ten
years after the date of submission unless the
business submitter requests, and provides
acceptable justification for, a specific no-
tice period of greater duration.

(5) Opportunity to object to disclosure.
Through the notice described in paragraph
(g)(3) of this section, the official having
control over the requested records shall af-
ford a business submitter ten days (except-
ing Saturdays, Sundays and legal public
holidays) within which to provide the of-
ficial with a detailed statement of any ob-
jection to disclosure. Such statement shall
specify all grounds for withholding any of
the information, with particular attention to
why the information is claimed to be trade
secret or commercial or financial informa-
tion that is privileged and confidential. In-
formation provided by a business submitter
pursuant to this paragraph may itself be sub-
ject to disclosure under 5 U.S.C. 552.

(6) Notice of intent to disclose. The IRS
shall consider a business submitter's ob-
jections and specific grounds for nondis-
closure prior to determining whether to
disclose business information. Whenever the
official having control over the requested
records decides to disclose business infor-
mation over the objection of a business sub-

mitter, the official shall forward to the
business submitter a written notice which
shall include-

(i) A statement of the reasons for which
the business submitter's disclosure objec-
tions were not sustained;

(ii) A description of the business infor-
mation to be disclosed; and

(iii) A specified disclosure date, which
is ten days (excepting Saturdays, Sundays
and legal public holidays) after the notice
of the final decision to release the requested
records has been mailed to the submitter.
Except as otherwise prohibited by law, a
copy of the disclosure notice shall be for-
warded to the requester at the same time.

(7) Judicial review. (i) In general. The
IRS' disposition of the request and the sub-
mitter's objections shall be subject to ju-
dicial review under paragraph (c)(14) of this
section. A requester is not required to ex-
haust administrative remedies if a com-
plaint has been filed under this paragraph
by a business submitter of the informa-
tion contained in the requested records.
Likewise, a business submitter is not re-
quired to exhaust administrative remedies
if a complaint has been filed by the re-
quester of these records.

(ii) Notice of FOIA lawsuit. Whenever
a requester brings suit seeking to compel
disclosure of business information cov-
ered by paragraph (g)(4) of this section, the
official having control over the requested
records shall promptly provide the busi-
ness submitter with written notice thereof.

(iii) Exception to notice requirement. The
notice requirements of this paragraph shall
not apply if-

(A) The official having control over the
records determines that the business infor-
mation shall not be disclosed;

(B) The information lawfully has been
published or otherwise made available to
the public; or

(8) Appeals. Procedures for administra-
tive appeals from denials of requests for
business information are to be processed in
accordance with paragraph (c)(10) of this
section.

(9) Contractor Proposals. (i) Pursuant
to 41 U.S.C. 253b(m), the IRS shall not re-
lease under the Freedom of Information Act
any proposal submitted by a contractor in
response to the requirements of a solicita-
tion for a competitive proposal, unless that

proposal is set forth or incorporated by ref-
erence in a contract entered into between
the IRS and the contractor that submitted
the proposal. For purposes of this para-
graph, the term proposal means any pro-
posal, including a technical, management,
or cost proposal, submitted by a contrac-
tor in response to the requirements of a so-
licitation for a competitive proposal.

(ii) A copy of the FOIA request for in-
formation protected from disclosure un-
der this paragraph shall be furnished to the
contractor who submitted the proposal.

(h) Responsible officials and their ad-
dresses. For purposes of this section, the
IRS officials in the disclosure offices listed
below are responsible for the control of
records within their geographic area. In the
case of records of the Headquarters Of-
fice (including records of the National Of-
fice of the Office of Chief Counsel), except
as provided in paragraph (c)(9)(i)(A), the
Director, Office of Governmental Liaison
and Disclosure, or delegate, is the respon-
sible official. Requests for these records
should be sent to:

IRS FOIA Request
Headquarters Disclosure Office
CL:GLD:D
1111 Constitution Avenue, N.W.
Washington, D.C. 20224

For Personnel Background Investiga-
tion Records, the address of the respon-
sible official is:

Internal Revenue Service
Attn: Associate Director, Personnel
Security
Room 4244, A:PS:PSO
1111 Constitution Avenue N.W.
Washington, D.C. 20224

For records of the Office of Chief Coun-
sel other than those located in the Head-
quarters or Division Counsel immediate
offices, records shall be deemed to be un-
der the jurisdiction of the local area Dis-
closure Office. Requesters seeking records
under this section should send their re-
quests to the local area Disclosure Office
address listed for the state where the re-
quester resides or any activity associated
with the records occurred (for states with
multiple offices, the request should be sent
to the nearest office):

Alabama
IRS FOIA Request
New Orleans Disclosure Office
Mail Stop 40
600 S. Maestri Place
New Orleans, LA 70130

Alaska
IRS FOIA Request
Oakland Disclosure Office
1301 Clay Street, Suite 840-S
Oakland, CA 94612-5210

Arkansas
IRS FOIA Request
Nashville Disclosure Office
MDP 44
801 Broadway, Room 480
Nashville, TN 37203

Arizona
IRS FOIA Request
Phoenix Disclosure Office
Mail Stop 7000 PHX
210 E. Earll Drive
Phoenix, AZ 85012

California
IRS FOIA Request
Laguna Niguel Disclosure Office
24000 Avila Road, M/S 2201
Laguna Niguel, CA 92677-0207

IRS FOIA Request
Los Angeles Disclosure Office
Mail Stop 1020
300 N. Los Angeles Street
Los Angeles, CA 90012-3363

IRS FOIA Request
Oakland Disclosure Office
1301 Clay Street, Suite 840-S
Oakland, CA 94612

IRS FOIA Request
San Jose Disclosure Office
Mail Stop HQ-4603
55 South Market Street
San Jose, CA 95113

Colorado
IRS FOIA Request
Denver Disclosure Office
Mail Stop 7000 DEN
600 17th Street
Denver, CO 80202-2490

Connecticut
IRS FOIA Request
Hartford Disclosure Office
William R. Cotter F.O.B.
Mail Stop 140
135 High Street
Hartford, CT 06103

Delaware
IRS FOIA Request
Baltimore Disclosure Office
George Fallon Fed. Bldg.
31 Hopkins Plaza, Room 1210
Baltimore, MD 21201

District of Columbia
IRS FOIA Request
Baltimore Disclosure Office
George Fallon Fed. Bldg.
31 Hopkins Plaza, Room 1210
Baltimore, MD 21201

Florida
IRS FOIA Request
Fort Lauderdale Disclosure Off.
Mail Stop 4030
7850 SW 6th Court, Rm. 260
Plantation, FL 33324-3202

IRS FOIA Request
Jacksonville Disclosure Office
MS 4030
400 West Bay Street
Jacksonville, FL 32202-4437

Georgia
IRS FOIA Request
Atlanta Disclosure Office
Mail Stop 602D, Room 1905
401 W. Peachtree Street, NW
Atlanta, GA 30308

Hawaii

Maine

Montana

IRS FOIA Request

Laguna Niguel Disclosure Office

Boston Disclosure Office

Denver Disclosure Office

24000 Avila Road, M/S 2201

Mail Stop 41150

Mail Stop 7000 DEN

Laguna Niguel, CA 92677-0207

Post Office Box 9112

600 17th Street

JFK Building

Denver, CO 80202-2490

Idaho

Boston, MA 02203

IRS FOIA Request

Nebraska

Seattle Disclosure Office

Maryland

IRS FOIA Request

Mail Stop W625

IRS FOIA Request

St. Paul Disclosure Office

915 2nd Avenue

Baltimore Disclosure Office

Stop 7000

Seattle, WA 98174

George Fallon Fed. Bldg.

316 N. Robert Street

31 Hopkins Plaza, Room 1210

St. Paul, MN 55101

Illinois

Baltimore, MD 21201

IRS FOIA Request

Nevada

Chicago Disclosure Office

Massachusetts

IRS FOIA Request

Mail Stop 7000 CHI, Room 2820

IRS FOIA Request

Phoenix Disclosure Office

230 S. Dearborn Street

Boston Disclosure Office

Mail Stop 7000 PHX

Chicago, IL 60604

Mail Stop 41150

210 E. Earll Drive

Post Office Box 9112

Phoenix, AZ 85012

Indiana

JFK Building

IRS FOIA Request

Boston, MA 02203

New Hampshire

Indianapolis Disclosure Office

IRS FOIA Request

Mail Stop CL 658

Michigan

Boston Disclosure Office

575 N. Penn. Street

IRS FOIA Request

Mail Stop 41150

Indianapolis, IN 46204

Detroit Disclosure Office

Post Office Box 9112

Mail Stop 11

JFK Building

Iowa

Post Office Box 330500

Boston, MA 02203

IRS FOIA Request

Detroit, MI 48232-6500

St. Paul Disclosure Office

New Mexico

Stop 7000

Minnesota

IRS FOIA Request

316 N. Robert Street

IRS FOIA Request

Phoenix Disclosure Office

St. Paul, MN 55101

St. Paul Disclosure Office

Mail Stop 7000 PHX

Stop 7000

210 E. Earll Drive

Kansas

316 N. Robert Street

Phoenix, AZ 85012

IRS FOIA Request

St. Paul, MN 55101

St. Louis Disclosure Office

New Jersey

Mail Stop 7000 STL

Mississippi

IRS FOIA Request

P.O. Box 66781

IRS FOIA Request

Springfield Disclosure Office

St. Louis, MO 63166

New Orleans Disclosure Office

P. O. Box 748

Mail Stop 40

Springfield, NJ 07081-0748

Kentucky

600 S. Maestri Place

IRS FOIA Request

New Orleans, LA 70130

New York (Brooklyn, Queens, and the

Cincinnati Disclosure Office

counties of Nassau and Suffolk)

Post Office Box 1818, Rm. 7019

Missouri

IRS FOIA Request

Cincinnati, OH 45201

IRS FOIA Request

Brooklyn Disclosure Office

St. Louis Disclosure Office

10 Metro Tech Center

Louisiana

Mail Stop 7000 STL

625 Fulton Street

IRS FOIA Request

P. O. Box 66781

4th Floor, Suite 611

New Orleans Disclosure Office

St. Louis, MO 63166

Brooklyn, NY 11201-5404

Mail Stop 40

600 S. Maestri Place
New Orleans, LA 70130

December 9, 2002

New York (Manhattan, Staten Island, the

Rhode Island

Vermont

Bronx, and the counties of Rockland and

IRS FOIA Request

Westchester)

Hartford Disclosure Office

Boston Disclosure Office

IRS FOIA Request

William R. Cotter F.O.B.

Mail Stop 41150

Manhattan Disclosure Office

Mail Stop 140

Post Office Box 9112

110 W. 44th Street

135 High Street

JFK Building

New York, NY 10036

Hartford, CT 06103

Boston, MA 02203

New York (all other counties)

South Carolina

Virginia

IRS FOIA Request

Buffalo Disclosure Office

Greensboro Disclosure Office

Richmond Disclosure Office

111 West Huron St., Room 505

320 Federal Place, Room 409

P. O. Box 10107

Buffalo, NY 14202

Greensboro, NC 27401

Richmond, VA 23240

North Carolina

South Dakota

Washington

IRS FOIA Request

Greensboro Disclosure Office

St. Paul Disclosure Office

Seattle Disclosure Office

320 Federal Place, Room 409

Stop 7000

Mail Stop 625

Greensboro, NC 27401

316 N. Robert Street

915 2nd Avenue

St. Paul, MN 55101

Seattle, WA 98174

North Dakota

IRS FOIA Request

Tennessee

West Virginia

St. Paul Disclosure Office

IRS FOIA Request

Stop 7000

Nashville Disclosure Office

Cincinnati Disclosure Office

316 N. Robert Street

MDP 44

Post Office Box 1818, Rm. 7019

St. Paul, MN 55101

801 Broadway, Room 480

Cincinnati, OH 45201

Nashville, TN 37203

Ohio

Wisconsin

IRS FOIA Request

Texas

IRS FOIA Request

Cincinnati Disclosure Office

IRS FOIA Request

Milwaukee Disclosure Office

Post Office Box 1818, Rm. 7019

Austin Disclosure Office

Mail Stop 7000 MIL

Cincinnati, OH 45201

Mail Stop 7000 AUS

310 W. Wisconsin Avenue

300 East 8th Street, Room 262

Milwaukee, WI 53203-2221

Oklahoma

Austin, TX 78701

IRS FOIA Request

Wyoming

Oklahoma City Disclosure Office

IRS FOIA Request

Mail Stop 7000 OKC

Dallas Disclosure Office

Denver Disclosure Office

55 N. Robinson

Mail Stop 7000 DAL

Mail Stop 7000 DEN

Oklahoma City, OK 73102

1100 Commerce Street

600 17th Street

Dallas, TX 75242

Denver, CO 80202-2490

Oregon

IRS FOIA Request

All APO and FPO addresses

Seattle Disclosure Office

Houston Disclosure Office

IRS FOIA Request

Mail Stop W625

Mail Stop 7000 HOU

Headquarters Disclosure Office

915 2nd Avenue

1919 Smith Street

CL:GLD:D

Seattle, WA 98174

Houston, TX 77002

1111 Constitution Avenue, N.W. Washington, DC 20224

Pennsylvania

Utah

IRS FOIA Request

Philadelphia Disclosure Office

Denver Disclosure Office

600 Arch Street, Room 3214

Mail Stop 7000 DEN

Philadelphia, PA 19106

600 17th Street

Denver, CO 80202-2490

David Mader,
Assistant Deputy Commissioner of
Internal Revenue.

(Filed by the Office of the Federal Register on November 18,
2002, 8:45 a.m., and published in the issue of the Federal Reg-
ister for November 19, 2002, 67 F.R. 69673)

# Separate Reporting of Nonstatutory Stock Option Income in Box 12 of the Form W-2, Using Code V, Mandatory for Year 2003

## Announcement 2002-108

### I. PURPOSE

This announcement reminds taxpayers
that as provided in Announcement 2001-
92, 2001-2 C.B. 301, the reporting of com-
pensation resulting from employer-provided
nonstatutory stock options in box 12 of the
Form W-2, using Code V, is mandatory for
Forms W-2 issued for the year 2003 and
subsequent years. This announcement is
consistent with the 2003 Form W-2 and its
instructions that the Service intends to pub-
lish near the same time as the publication
of this announcement.

### II. BACKGROUND

When an employee (or former employee)
exercises nonstatutory stock options, em-
ployers are required to report the excess of
the fair market value of the stock received
upon exercise of the option over the amount
paid for that stock. That amount is reported
on Form W-2 in boxes 1, 3 (up to the so-
cial security wage base), and 5.

Announcement 2000-97, 2000-2 C.B.
557, advised employers that, beginning for
2001 Forms W-2, income from the exer-
cise of nonstatutory stock options would
also be required to be reported in box 12
and identified by a new code, Code V -
Income from the exercise of nonstatutory
stock options.

In response to employer concerns, An-
nouncement 2001-7, 2001-1 C.B. 357, sub-
sequently provided the relief that the use
of Code V would be optional for the 2001
Forms W-2. Announcement 2001-92 ex-
tended the relief so that the use of Code V
would be optional for the 2002 Forms W-2.

Announcement 2001-92 further re-
quested public comment and suggestions re-
garding potential methods that would enable
more efficient and cost effective means of
collecting the information that would be re-
ported using Code V. Specifically, An-
nouncement 2001-92 requested proposals
for better and less burdensome methods of
collecting the information about employee
income that arises from the exercise of non-
statutory stock options, including informa-
tion about the presence and amount of
nonstatutory stock option income on an em-
ployee (or former employee) basis. An-
nouncement 2001-92 noted that absent
further guidance, the Code V reporting re-
quirement would be mandatory for 2003
Forms W-2.

#### III. FORM W-2, CODE V REPORTING MANDATORY FOR 2003 FORMS W-2

Treasury and the Service determined that
none of the alternatives suggested in the
comments received would provide com-
plete and accurate information of the type
that will be reported through the use of
Code V. Accordingly, consistent with An-
nouncement 2001-92, the reporting of com-
pensation resulting from employer-provided
nonstatutory stock options in box 12 of the
Form W-2, using Code V, is mandatory for
Forms W-2 issued for the year 2003 and
subsequent years in accordance with the
Form W-2 and its instructions.

## IV. DRAFTING INFORMATION

The principal author of this announce-
ment is Stephen Tackney of the Office of
Division Counsel/Associate Chief Coun-
sel (Tax Exempt and Government Enti-
ties). For further information regarding this
announcement, contact Stephen Tackney at
(202) 622-6040 (not a toll-free number).

Deletions From Cumulative
List of Organizations
Contributions to Which are
Deductible Under Section 170
of the Code

### Announcement 2002-109

The name of an organization that no
longer qualifies as an organization described

in section 170(c)(2) of the Internal Rev-
enue Code of 1986 is listed below.

Generally, the Service will not disal-
low 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 pre-
cluded from disallowing a deduction for any
contributions made after an organization
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 determina-
tion letter, (2) was aware that such revo-
cation was imminent, or (3) was in part
responsible for or was aware of the activi-
ties 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 organizations
described in section 170(c)(2) that are oth-
erwise allowable will continue to be de-
ductible. Protection under section 7428(c)
would begin on October 28, 2002, and
would end on the date the court first de-
termines that the organization is not de-
scribed in section 170(c)(2) as more
particularly set forth in section 7428(c)(1).
For individual contributors, the maximum
deduction 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.

Institute of Marine Science

Lauderdale by the Sea, FL

## Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.

Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it

applies to both A and B, the prior ruling
is modified because it corrects a pub-
lished position. (Compare with amplified
and clarified, above).

Obsoleted describes 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
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.

Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the

new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case,
the previously published ruling is first
modified and then, as modified, is super-
seded.

Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is used in rare situations to
show that the previous published 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 following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

FPH-Foreign Personal Holding Company.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign Corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

COOP-Cooperative.

GR-Grantor.

Ct.D .- Court Decision.

IC-Insurance Company.

CY-County.

I.R.B .- Internal Revenue Bulletin.

D-Decedent.

LE-Lessee.

TP-Taxpayer.

DC-Dummy Corporation.

LP-Limited Partner.

LR-Lessor.

TT-Trustee.

U.S.C .- United States Code.

DISC-Domestic International Sales Corporation.

DR-Donor.

O Organization.

Y-Corporation.

E-Estate.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.
PR-Partner.

PRS Partnership.

PTE-Prohibited Transaction Exemption.

Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S Subsidiary.

S.P.R .- Statements of Procedural Rules.
Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

T.D .- Treasury Decision.

TFE-Transferee.

TFR-Transferor.

T.I.R .- Technical Information Release.

TR-Trust.

DE-Donee.

Del. Order-Delegation Order.

M-Minor.

Nonacq .- Nonacquiescence.

X-Corporation.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.

EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

C.B .- Cumulative Bulletin.

CFR-Code of Federal Regulations.

CI-City.

Z-Corporation.

Numerical Finding List1

Notices-Continued:

Proposed Regulations-Continued:

Bulletin 2002-26 through 2002-48

2002-45, 2002-28, I.R.B. 93

REG-124667-02, 2002-44 I.R.B. 791

2002-46, 2002-28 I.R.B. 96

REG-131478-02, 2002-47 I.R.B. 892

Announcements:

2002-47, 2002-28 I.R.B. 97

REG-133254-02, 2002-34 I.R.B. 412

2002-48, 2002-29 I.R.B. 130

REG-134026-02, 2002-40 I.R.B. 684

2002-59, 2002-26 I.R.B. 28

2002-49, 2002-29 I.R.B. 130

REG-141832-02, 2002-48 I.R.B. 921

2002-60, 2002-26 I.R.B. 28

2002-50, 2002-28 I.R.B. 98

REG-143321-02, 2002-48 I.R.B. 922

2002-61, 2002-27 I.R.B. 72

2002-51, 2002-29 I.R.B. 131

2002-62, 2002-27 I.R.B. 72

2002-52, 2002-30 I.R.B. 187

Revenue Procedures:

2002-63, 2002-27 I.R.B. 72

2002-53, 2002-30 I.R.B. 187

2002-43, 2002-28 I.R.B. 99

2002-64, 2002-27 I.R.B. 72

2002-54, 2002-30 I.R.B. 189

2002-44, 2002-26 I.R.B. 10

2002-65, 2002-29 I.R.B. 182

2002-55, 2002-36 I.R.B. 481

2002-45, 2002-27 I.R.B. 40

2002-66, 2002-29 I.R.B. 183

2002-56, 2002-32 I.R.B. 319

2002-46, 2002-28 I.R.B. 105

2002-67, 2002-30 I.R.B. 237

2002-57, 2002-33 I.R.B. 379

2002-47, 2002-29 I.R.B. 133

2002-68, 2002-31 I.R.B. 283

2002-58, 2002-35 I.R.B. 432

2002-48, 2002-37 I.R.B. 531

2002-69, 2002-31 I.R.B. 283

2002-59, 2002-36 I.R.B. 481

2002-49, 2002-29 I.R.B. 172

2002-70, 2002-31 I.R.B. 284

2002-60, 2002-36 I.R.B. 482

2002-50, 2002-29 I.R.B. 173

2002-71, 2002-32 I.R.B. 323

2002-61, 2002-38 I.R.B. 563

2002-51, 2002-29 I.R.B. 175

2002-72, 2002-32 I.R.B. 323

2002-62, 2002-39 I.R.B. 574

2002-52, 2002-31 I.R.B. 242

2002-73, 2002-33 I.R.B. 387

2002-63, 2002-40 I.R.B. 644

2002-53, 2002-31 I.R.B. 253

2002-74, 2000-33 I.R.B. 387

2002-64, 2002-41 I.R.B. 690

2002-54, 2002-35 I.R.B. 432

2002-75, 2002-34 I.R.B. 416

2002-65, 2002-41 I.R.B. 690

2002-55, 2002-35 I.R.B. 435

2002-76, 2002-35 I.R.B. 471

2002-66, 2002-42 I.R.B. 716

2002-56, 2002-36 I.R.B. 483

2002-77, 2002-35 I.R.B. 471

2002-67, 2002-42 I.R.B. 716

2002-57, 2002-39 I.R.B. 575

2002-78, 2002-36 I.R.B. 514

2002-68, 2002-43 I.R.B. 730

2002-58, 2002-40 I.R.B. 644

2002-79, 2002-36 I.R.B. 515

2002-69, 2002-43 I.R.B. 730

2002-59, 2002-39 I.R.B. 615

2002-80, 2002-36 I.R.B. 515

2002-70, 2002-44 I.R.B. 765

2002-60, 2002-40 I.R.B. 645

2002-81, 2002-37 I.R.B. 533

2002-71, 2002-45 I.R.B. 830

2002-61, 2002-39 I.R.B. 616

2002-82, 2002-37 I.R.B. 533

2002-72, 2002-46 I.R.B. 843

2002-62, 2002-40 I.R.B. 683

2002-83, 2002-38 I.R.B. 564

2002-73, 2002-46 I.R.B. 844

2002-63, 2002-41 I.R.B. 691

2002-84, 2002-37 I.R.B. 533

2002-74, 2002-47 I.R.B. 884

2002-64, 2002-42 I.R.B. 718

2002-85, 2002-39 I.R.B. 624

2002-75, 2002-47 I.R.B. 884

2002-65, 2002-41 I.R.B. 700

2002-86, 2002-39 I.R.B. 624

2002-76, 2002-48 I.R.B. 917

2002-66, 2002-42 I.R.B. 725

2002-87, 2002-39 I.R.B. 624

2002-78, 2002-48 I.R.B. 919

2002-67, 2002-43 I.R.B. 733

2002-88, 2002-38 I.R.B. 564

2002-68, 2002-43 I.R.B. 753

2002-89, 2002-39 I.R.B. 626

Proposed Regulations:

2002-69, 2002-45 I.R.B. 831

2002-90, 2002-40 I.R.B. 684

2002-70, 2002-46 I.R.B. 845

2002-91, 2002-40 I.R.B. 685

REG-209116-89, 2002-47 I.R.B. 889

I.R.B. 850

2002-92, 2002-41 I.R.B. 709

REG-248110-96, 2002-26 I.R.B. 19

2002-71, 2002-48

2002-93, 2002-41 I.R.B. 709

REG-110311-98, 2002-28 I.R.B. 109

Revenue Rulings:

2002-94, 2002-42 I.R.B. 728

REG-103823-99, 2002-27 I.R.B. 44

2002-95, 2002-42 I.R.B. 728

REG-103829-99, 2002-27 I.R.B. 59

2002-38, 2002-26 I.R.B. 4

2002-96, 2002-43 I.R.B. 756

REG-103735-00, 2002-28 I.R.B. 109

2002-39, 2002-27 I.R.B. 33

2002-97, 2002-43 I.R.B. 757

REG-103735-00, 2002-45 I.R.B. 832

2002-40, 2002-27 I.R.B. 30

2002-98, 2002-43 I.R.B. 758

REG-103736-00, 2002-45 I.R.B. 834

2002-41, 2002-28 I.R.B. 75

2002-99, 2002-43 I.R.B. 758

REG-106457-00, 2002-26 I.R.B. 23

2002-42, 2002-28 I.R.B. 76

2002-100, 2002-44 I.R.B. 799

REG-106871-00, 2002-30 I.R.B. 190

2002-43, 2002-28 I.R.B. 85

2002-101, 2002-44 I.R.B. 800

REG-106876-00, 2002-34 I.R.B. 392

2002-44, 2002-28 I.R.B. 84

2002-102, 2002-44 I.R.B. 802

REG-106879-00, 2002-34 I.R.B. 402

2002-45, 2002-29 I.R.B. 116

2002-103, 2002-45 I.R.B. 836

REG-107524-00, 2002-28 I.R.B. 110

2002-46, 2002-29 I.R.B. 117

2002-104, 2002-45 I.R.B. 836

REG-112306-00, 2002-44 I.R.B. 767

2002-47, 2002-29 I.R.B. 119

2002-105, 2002-46 I.R.B. 872

REG-115285-01, 2002-27 I.R.B. 62

2002-48, 2002-31 I.R.B. 239

2002-106, 2002-46 I.R.B. 872

REG-115781-01, 2002-33 I.R.B. 380

2002-49, 2002-32 I.R.B. 288

2002-107, 2002-48 I.R.B. 923

REG-116644-01, 2002-31 I.R.B. 268

2002-50, 2002-32 I.R.B. 292

REG-123345-01, 2002-32 I.R.B. 321

2002-51, 2002-33 I.R.B. 327

Court Decisions:

REG-126024-01, 2002-27 I.R.B. 64

2002-52, 2002-34 I.R.B. 388

REG-136311-01, 2002-36 I.R.B. 485

2002-53, 2002-35 I.R.B. 427

2075, 2002-38 I.R.B. 548

REG-150313-01, 2002-44 I.R.B. 777

2002-54, 2002-37 I.R.B. 527

2076, 2002-47 I.R.B. 875

REG-164754-01, 2002-30 I.R.B. 212

2002-55, 2002-37 I.R.B. 529

Notices:

REG-165868-01, 2002-31 I.R.B. 270

2002-56, 2002-37 I.R.B. 526

REG-103777-02, 2002-47 I.R.B. 889

2002-57, 2002-37 I.R.B. 526

2002-42, 2002-27 I.R.B. 36

REG-106359-02, 2002-34 I.R.B. 405

2002-58, 2002-38 I.R.B. 541

2002-43, 2002-27 I.R.B. 38

REG-122564-02, 2002-26 I.R.B. 25

2002-59, 2002-38 I.R.B. 557

2002-44, 2002-27 I.R.B. 39

REG-123305-02, 2002-26 I.R.B. 26

2002-60, 2002-40 I.R.B. 641

REG-124256-02, 2002-33 I.R.B. 383

2002-61, 2002-40 I.R.B. 639

1 A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2002-1 through 2002-25 is
in Internal Revenue Bulletin 2002-26, dated July 1, 2002.

Revenue Rulings-Continued:

2002-62, 2002-42 I.R.B. 710
2002-63, 2002-45 I.R.B. 803

2002-64, 2002-41 I.R.B. 688

2002-65, 2002-43 I.R.B. 729
2002-66, 2002-45 I.R.B. 812
2002-67, 2002-47 I.R.B. 873

2002-68, 2002-45 I.R.B. 808
2002-69, 2002-44 I.R.B. 760

2002-71, 2002-44 I.R.B. 763
2002-72, 2002-44 I.R.B. 759
2002-73, 2002-45 I.R.B. 805
2002-74, 2002-45 I.R.B. 814

2002-75, 2002-45 I.R.B. 812

2002-76, 2002-46 I.R.B. 840

2002-77, 2002-45 I.R.B. 806

2002-78, 2002-48 I.R.B. 915

2002-79, 2002-48 I.R.B. 908

Social Security Contribution and
Benefit Base; Domestic Employee
Coverage Threshold:

2002-46, I.R.B. 871

Treasury Decisions:

8997, 2002-26 I.R.B. 6

8998, 2002-26 I.R.B. 1

8999, 2002-28 I.R.B. 78

9000, 2002-28 I.R.B. 87

9001, 2002-29 I.R.B. 128

9002, 2002-29 I.R.B. 120

9003, 2002-32 I.R.B. 294
9004, 2002-33 I.R.B. 331

9005, 2002-32 I.R.B. 290
9006, 2002-32 I.R.B. 315

9007, 2002-33 I.R.B. 349

9008, 2002-33 I.R.B. 335

9009, 2002-33 I.R.B. 328
9010, 2002-33 I.R.B. 341
9011, 2002-33 I.R.B. 356
9012, 2002-34 I.R.B. 389
9013, 2002-38 I.R.B. 542
9014, 2002-35 I.R.B. 429
9015, 2002-40 I.R.B. 642
9016, 2002-40 I.R.B. 628
9017, 2002-45 I.R.B. 815
9018, 2002-45 I.R.B. 823

9019, 2002-47 I.R.B. 874
9020, 2002-48 I.R.B. 907
9022, 2002-48 I.R.B. 909

Finding List of Current Actions
on Previously Published Items1
Bulletin 2002-26 through 2002-48

Announcements:

98-99
Superseded by
Rev. Proc. 2002-44, 2002-26 I.R.B. 10

2000-4
Modified by
Ann. 2002-60, 2002-26 I.R.B. 28

2001-9
Superseded by
Rev. Proc. 2002-44, 2002-26 I.R.B. 10

Notices:

89-25
Modified by
Rev. Rul. 2002-62, 2002-42 I.R.B. 710
97-26
Modified and superseded by
Notice 2002-62, 2002-39 I.R.B. 574
2001-6
Superseded by

Notice 2002-63, 2002-40 I.R.B. 644

2001-62
Modified and superseded by
Notice 2002-62, 2002-39 I.R.B. 574
2002-92
Corrected by
Ann. 2002-103, 2002-45 I.R.B. 836

Proposed Regulations:

EE-79-89
Withdrawn by
REG-209116-89, 2002-47 I.R.B. 889

REG-208280-86
Withdrawn by
REG-136311-01, 2002-36 I.R.B. 485

REG-209114-90
Corrected by
Ann. 2002-65, 2002-29 I.R.B. 182

REG-209813-96
Withdrawn by
REG-106871-00, 2002-30 I.R.B. 190

REG-103823-99
Corrected by
Ann. 2002-67, 2002-30 I.R.B. 237

Ann. 2002-79, 2002-36 I.R.B. 515

REG-103829-99
Corrected by

Ann. 2002-82, 2002-37 I.R.B. 533
Ann. 2002-95, 2002-42 I.R.B. 728

REG-105885-99
Corrected by
Ann. 2002-67, 2002-30 I.R.B. 237

Proposed Regulations-Continued:

Revenue Procedures-Continued:

REG-105369-00

91-23

Clarified by

Modified and superseded by

Notice 2002-52, 2002-30 I.R.B. 187

Rev. Proc. 2002-52, 2002-31 I.R.B. 242

Corrected by

Ann. 2002-67, 2002-30 I.R.B. 237

91-26

Modified and superseded by

REG-106879-00

Rev. Proc. 2002-52, 2002-31 I.R.B. 242

Corrected by

Ann. 2002-100, 2002-44 I.R.B. 799

95-18 Superseded by

REG-118861-00

Rev. Proc. 2002-51, 2002-29 I.R.B. 175

Corrected by

Ann. 2002-67, 2002-30 I.R.B. 237

96-13

Modified and superseded by

REG-126100-00

Rev. Proc. 2002-52, 2002-31 I.R.B. 242

Withdrawn by

REG-133254-02, 2002-34 I.R.B. 412

96-14

Modified and superseded by

REG-136193-01

Rev. Proc. 2002-52, 2002-31 I.R.B. 242

Corrected by

Ann. 2002-67, 2002-30 I.R.B. 237

96-53 Amplified by

REG-136311-01

Corrected by

Rev. Proc. 2002-52, 2002-31 I.R.B. 242

Ann. 2002-94, 2002-42 I.R.B. 728

2001-12

Ann. 2002-102, 2002-44 I.R.B. 802

Obsoleted by

REG-161424-01

T.D. 9004, 2002-33 I.R.B. 331

Corrected by

2001-15

Ann. 2002-67, 2002-30 I.R.B. 237

Superseded by

REG-165706-01

Rev. Proc. 2002-64, 2002-42 I.R.B. 718

Corrected by

2001-17

Ann. 2002-67, 2002-30 I.R.B. 237 REG-165868-01

Modified and superseded by Rev. Proc. 2002-47, 2002-29 I.R.B. 133

Corrected by

2001-26

Ann. 2002-93, 2002-41 I.R.B. 709

Superseded by

REG-102740-02

Rev. Proc. 2002-53, 2002-31 I.R.B. 253

Corrected by

2001-45

Ann. 2002-67, 2002-30 I.R.B. 237

Superseded by

REG-106359-02

Rev. Proc. 2002-60, 2002-40 I.R.B. 645

Corrected by

2001-46

Ann. 2002-81, 2002-37 I.R.B. 533

Modified and amplified by

REG-108697-02

Rev. Proc. 2002-65, 2002-41 I.R.B. 700

Corrected by

2001-47

Ann. 2002-84, 2002-37 I.R.B. 533

Superseded by

REG-123305-02

Rev. Proc. 2002-63, 2002-41 I.R.B. 691

Corrected by

2001-50

Ann. 2002-69, 2002-31 I.R.B. 283

Superseded by

Revenue Procedures:

Rev. Proc. 2002-57, 2002-39 I.R.B. 575

66-50

2001-52

Modified, amplified, and superseded by

Updated by

Notice 2002-75, 2002-47 I.R.B. 884

Rev. Proc. 2002-66, 2002-42 I.R.B. 725

81-40

2001-53

Modified and superseded by

Superseded by

Notice 2002-75, 2002-47 I.R.B. 884

Rev. Proc. 2002-71, 2002-46 I.R.B. 850

88-10

2001-54

Superseded by

Rev. Proc. 2002-48, 2002-37 I.R.B. 531

Rev. Proc. 2002-61, 2002-39 I.R.B. 616

1 A cumulative list of current actions on previously published
items in Internal Revenue Bulletins 2002-1 through 2002-25 is
in Internal Revenue Bulletin 2002-26, dated July 1, 2002.

### Revenue Procedures-Continued:

2002-9
Modified and amplified by

Rev. Proc. 2002-46, 2002-28 I.R.B. 105

Rev. Proc. 2002-65, 2002-41 I.R.B. 700
Rev. Rul. 2002-73, 2002-45 I.R.B. 805
Amplified, clarified, and modified by
Rev. Proc. 2002-54, 2002-35 I.R.B. 432

2002-13
Modified by
Rev. Proc. 2002-45, 2002-27 I.R.B. 40

2002-15
Modified and superseded by
Rev. Proc. 2002-59, 2002-39 I.R.B. 615

2002-16
Modified and superseded by
Rev. Proc. 2002-68, 2002-43 I.R.B. 753

2002-19
Amplified and clarified by

Rev. Proc. 2002-54, 2002-35 I.R.B. 432

2002-37
Clarified and modified by

Notice 2002-72, 2002-46 I.R.B. 843

2002-38

Clarified and modified by
Notice 2002-72, 2002-46 I.R.B. 843

2002-39
Clarified and modified by
Notice 2002-72, 2002-46 I.R.B. 843

#### Revenue Rulings:

54-571
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341
55-534
Distinguished by
Rev. Rul. 2002-60, 2002-40 I.R.B. 641

55-606
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341
59-328
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341
64-36
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341
65-129
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341
67-197
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341

69-259
Modified and superseded by
Rev. Rul. 2002-50, 2002-32 I.R.B. 292

69-595
Obsoleted in part by
T.D. 9010, 2002-33 I.R.B. 341

Revenue Rulings-Continued:

70-608
Obsoleted in part by
T.D. 9010, 2002-33 I.R.B. 341

73-232
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341

76-225
Revoked by
REG-115781-01, 2002-33 I.R.B. 380

77-53
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341

85-50
Obsoleted by
T.D. 2002-33 I.R.B. 341

92-17
Amplified by
Rev. Rul. 2002-49, 2002-32 I.R.B. 288

92-75
Clarified by
Rev. Proc. 2002-52, 2002-31 I.R.B. 242
93-70
Obsoleted by
T.D. 9010, 2002-33 I.R.B. 341

94-76
Amplified by
Rev. Rul. 2002-42, 2002-28 I.R.B. 76

99-14
Modified and superseded by
Rev. Rul. 2002-69 2002-44 I.R.B. 760

2001-64
Supplemented and superseded by
Rev. Rul. 2002-78, 2002-48 I.R.B. 915

2001-65
Supplemented and superseded by
Rev. Rul. 2002-79, 2002-48 I.R.B. 908

2002-46
Modified by
Rev. Rul. 2002-73, 2002-45 I.R.B. 805

Treasury Decisions:

8869
Corrected by
Ann. 2002-106, 2002-46 I.R.B. 872

8925
Corrected by
Ann. 2002-89, 2002-39 I.R.B. 626

8997
Corrected by
Ann. 2002-68, 2002-31 I.R.B. 283

8999
Corrected by
Ann. 2002-71, 2002-32 I.R.B. 323

9013
Corrected by
Ann. 2002-83, 2002-38 I.R.B. 564

Internal Revenue Bulletin 2002-49 (PDF rendition): IRS Revenue Procedures

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