Internal Revenue Bulletin 2010-46 (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.

Bulletin No. 201
0-46
November 15, 201
0
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
T.D. 9501, page 651.
Final regulations under section 6109 of the Code provide guid-
ance to tax return preparers on furnishing an identifying number
on tax returns and claims for refund of tax.
T.D. 9502, page 641.
Final regulations under section 883 of the Code include a new
rule permitting foreign corporations to include certain bearer
shares maintained in a dematerialized or immobilized book-en-
try system to determine whether the corporation can satisfy
one of the ownership tests of section 883(c).
Notice 2010–72, page 661.
2010 Section 43 inflation adjustment factor.This no-
tice announces the inflation adjustment factor and phase-out
amount for the enhanced oil recovery credit for taxable years
beginning in the 2010 calendar year. The notice also contains
the previously published figures for taxable years beginning in
the 1991 through 2009 calendar years.
Notice 2010–73, page 662.
2010 marginal production rates.This notice announces
the applicable percentage under section 613A of the Code to
be used in determining percentage depletion for marginal prop-
erties for the 2010 calendar year.
Rev. Proc. 2010–40, page 663.
Cost-of-living adjustments for 2011.This procedure sets
forth the cost-of-living adjustments to certain items for 2011
due to inflation as required under various provisions of the Code
and Service guidance. This procedure does not include the
following items: the tax rate tables under section 1, the child
tax credit under section 24, the Hope Scholarship and Lifetime
Learning Credits under section 25A, the earned income credit
under section 32, the standard deduction under section 63, the
overall limitation on itemized deductions under section 68, the
qualified transportation fringe under section 132, the personal
exemption under section 151, and the interest on education
loans under section 221. Those items will be addressed in
future guidance.
EXEMPT ORGANIZATIONS
Announcement 2010–89, page 669.
The IRS has revoked its determination that Consumer Debt
Management, Northeast, of Methuen, MA; Partners in Charity,
Inc., of West Dundee, IL; and Hope and Dreams Foundation of
Palo Alto, CA, qualify as organizations described in sections
501(c)(3) and 170(c)(2) of the Code
ESTATE TAX
T.D. 9501, page 651.
Final regulations under section 6109 of the Code provide guid-
ance to tax return preparers on furnishing an identifying number
on tax returns and claims for refund of tax.
(Continued on the next page)
Finding Lists begin on page ii.

Rev. Proc. 2010–40, page 663.
Cost-of-living adjustments for 2011.This procedure sets
forth the cost-of-living adjustments to certain items for 2011
due to inflation as required under various provisions of the Code
and Service guidance. This procedure does not include the
following items: the tax rate tables under section 1, the child
tax credit under section 24, the Hope Scholarship and Lifetime
Learning Credits under section 25A, the earned income credit
under section 32, the standard deduction under section 63, the
overall limitation on itemized deductions under section 68, the
qualified transportation fringe under section 132, the personal
exemption under section 151, and the interest on education
loans under section 221. Those items will be addressed in
future guidance.
GIFT TAX
T.D. 9501, page 651.
Final regulations under section 6109 of the Code provide guid-
ance to tax return preparers on furnishing an identifying number
on tax returns and claims for refund of tax.
Rev. Proc. 2010–40, page 663.
Cost-of-living adjustments for 2011.This procedure sets
forth the cost-of-living adjustments to certain items for 2011
due to inflation as required under various provisions of the Code
and Service guidance. This procedure does not include the
following items: the tax rate tables under section 1, the child
tax credit under section 24, the Hope Scholarship and Lifetime
Learning Credits under section 25A, the earned income credit
under section 32, the standard deduction under section 63, the
overall limitation on itemized deductions under section 68, the
qualified transportation fringe under section 132, the personal
exemption under section 151, and the interest on education
loans under section 221. Those items will be addressed in
future guidance.
EMPLOYMENT TAX
T.D. 9500, page 649.
REG–137486–09, page 668.
Final, temporary, and proposed regulations under section
6103(j)(1) of the Code authorizes the disclosure of additional
items of return information to the Bureau of the Census.
T.D. 9501, page 651.
Final regulations under section 6109 of the Code provide guid-
ance to tax return preparers on furnishing an identifying number
on tax returns and claims for refund of tax.
SELF-EMPLOYMENT TAX
T.D. 9500, page 649.
REG–137486–09, page 668.
Final, temporary, and proposed regulations under section
6103(j)(1) of the Code authorizes the disclosure of additional
items of return information to the Bureau of the Census.
T.D. 9501, page 651.
Final regulations under section 6109 of the Code provide guid-
ance to tax return preparers on furnishing an identifying number
on tax returns and claims for refund of tax.
EXCISE TAX
T.D. 9501, page 651.
Final regulations under section 6109 of the Code provide guid-
ance to tax return preparers on furnishing an identifying number
on tax returns and claims for refund of tax.
Rev. Proc. 2010–40, page 663.
Cost-of-living adjustments for 2011.This procedure sets
forth the cost-of-living adjustments to certain items for 2011
due to inflation as required under various provisions of the Code
and Service guidance. This procedure does not include the
following items: the tax rate tables under section 1, the child
tax credit under section 24, the Hope Scholarship and Lifetime
Learning Credits under section 25A, the earned income credit
under section 32, the standard deduction under section 63, the
overall limitation on itemized deductions under section 68, the
qualified transportation fringe under section 132, the personal
exemption under section 151, and the interest on education
loans under section 221. Those items will be addressed in
future guidance.
ADMINISTRATIVE
T.D. 9500, page 649.
REG–137486–09, page 668.
Final, temporary, and proposed regulations under section
6103(j)(1) of the Code authorizes the disclosure of additional
items of return information to the Bureau of the Census.
T.D. 9501, page 651.
Final regulations under section 6109 of the Code provide guid-
ance to tax return preparers on furnishing an identifying number
on tax returns and claims for refund of tax.
Notice 2010–74, page 663.
This notice informs taxpayers that there are no unused hous-
ing credit carryovers to be allocated to qualified states under
section 42(h)(3)(D) of the Code for calendar year 2010.
(Continued on the next page)
November 15, 20102010–46 I.R.B.

Rev. Proc. 2010–40, page 663.
Cost-of-living adjustments for 2011.This procedure sets
forth the cost-of-living adjustments to certain items for 2011
due to inflation as required under various provisions of the Code
and Service guidance. This procedure does not include the
following items: the tax rate tables under section 1, the child
tax credit under section 24, the Hope Scholarship and Lifetime
Learning Credits under section 25A, the earned income credit
under section 32, the standard deduction under section 63, the
overall limitation on itemized deductions under section 68, the
qualified transportation fringe under section 132, the personal
exemption under section 151, and the interest on education
loans under section 221. Those items will be addressed in
future guidance.
2010–46 I.R.B.November 15, 2010

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
November 15, 20102010–46 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 36C.—
Adoption
Expenses
The Service provides inflation adjustments to the
adoption credit allowed for the adoption of a child for
taxable years beginning in 2011. The Service also
provides inflation adjustments to the value used in
calculating the modified adjusted gross income lim-
itations used to determine the amount of adoption
credit that is allowed in taxable years beginning in
2011. See Rev. Proc. 2010-40, page 663.
Section 42.—Low-Income
Housing Credit
26 CFR 1.42–14: Allocation rules for post-1989
State housing credit ceiling amounts.
Guidance is provided totaxpayers regarding
unused housing credit carryovers under section
42(h)(3)(D) of the Internal Revenue Code. See No-
tice 2010-74, page 663.
The Service provides inflation adjustments to the
amounts used to calculate the State housing credit
ceiling used in determining the low-income housing
credit, and the per low-income unit qualified basis
amount, for calendar year 2011. See Rev. Proc.
2010-40, page 663.
Section 59.—Other
Definitions and Special
Rules for the Alternative
Minimum Tax
The Service provides an inflation adjustment to the
exemption amount used in computing the alternative
minimum tax for a minor child subject to the “kiddie
tax” for taxable years beginning in 2011. See Rev.
Proc. 2010-40, page 663.
Section 62.—Adjusted
Gross I
ncome Defined
The Ser
vice provides inflation adjustments to the
amount
s an eligible employer may pay in calendar
year 20
11 to certain welders and heavy equipment
mecha
nics for rig-related expenses that are deemed
subst
antiated under an accountable plan if paid in ac-
corda
nce with Rev. Proc. 2002–41, 2002–1 C.B.
1098.
See Rev. Proc. 2010-40, page 663.
Section 135.—
Income
from United St
ates Savings
Bonds Used to Pay Higher
Education Tuition and Fees
The Service provides inflation adjustments to the
limitation on the exclusion of income from United
States savings bonds for taxpayers who pay qualified
higher education expenses for taxable years begin-
ning in 2011. See Rev. Proc. 2010-40, page 663.
Section 137.—Adoption
Assistance Programs
The Service provides inflation adjustments to the
maximum amount that can be excluded from an em-
ployee’s gross income in connection with a qualified
adoption assistance programfor taxable years begin-
ning in 2011. The Service also provides inflation ad-
justments to the amount used to calculate the modi-
fied adjusted gross income limitations used to deter-
mine the amount that can be excluded from an em-
ployee’s gross income for taxable years beginning in
2011. See Rev. Proc. 2010-40, page 663.
Section 146.—Volume Cap
The Service provides inflation adjustments to the
amounts used to determine the State ceiling for the
volume cap of private activity bonds for calendar year
2011. See Rev. Proc. 2010-40, page 663.
Section 147.—Other
Requirements Applicable to
Certain Private Activity
Bonds
The Service provides an inflation adjustment to the
loan limit amount on agricultural bonds for first-time
farmers for calendar year 2011. See Rev. Proc. 2010-
40, page 663.
Section 148.—Arbitrage
26 CFR 1.148–5: Yield and valuation of investments.
The Service provides inflation adjustments for de-
termining in the calendar year 2011 whether a bro-
ker’s commission or similar fee with respect to the
acquisition of a guaranteed investment contract or in-
vestments purchased for a yield restricted defeasance
escrow is reasonable. The Service provides an infla-
tion adjustment to the computation credit determined
under section 1.148–3(d)(4) of the proposed Income
Tax Regulations for bond years ending in 2011. See
Rev. Proc. 2010-40, page 663.
Section 170.—
Charitable,
etc., Contributions and Gifts
The Service provides inflation adjustments to the
“insubstantial benefit” guidelines for calendar year
2011. Under the guidelines, a charitable contribu-
tion is fully deductible even though the contributor re-
ceives “insubstantial benefits” from the charity. See
Rev. Proc. 2010-40, page 663.
Section 213.—Medical,
Dental, etc., Expenses
The Service provides inflation adjustments to the
limitation on the amount of eligible long-term care
premiums includible in the term “medical care” for
taxable years beginning in 2011. See Rev. Proc.
2010-40, page 663.
Section 220.—Archer MSAs
The Service provides inflation adjustments to the
amounts used to determine whether a health plan is
a “high deductible health plan” for purposes of de-
termining whether an individual is eligible for a de-
duction for cash paid to a medical savings account
for taxable years beginning in 2011. See Rev. Proc.
2010-40, page 663.
Section 512.—Unrelated
Business Taxable Income
The Service provides an inflation adjustment to the
maximum amount of annual dues that can be paid
to certain agricultural or horticultural organizations
without any portion being treated as unrelated trade
or business income by reason of any benefits or priv-
ileges available to membersfor taxable years begin-
ning in 2011. See Rev. Proc. 2010-40, page 663.
Section 513.—Unrelated
Trade or Business
The Service provides an inflation adjustment to
the maximum cost of a “low cost article” for tax-
able years beginning in 2011. Funds raised through
a charity’s distribution of “low cost articles” will not
be treated as unrelated business income to the charity.
See Rev. Proc. 2010-40, page 663.
Section 877.—Expatriation
to Avoid Tax
The Service provides an inflation adjustment to
the amount used for calendar year 2011 to determine
whether an individual’s loss of United States citizen-
ship had the avoidance of United States tax as one of
2010–46 I.R.B.640November 15, 2010

its principal purposes. See Rev. Proc. 2010-40, page
663.
Section 877A.—Tax
Responsibilities of
Expatriation
The Service provides an inflation adjustment to the
amount that reduces the amount that would be in-
cludible in the gross income of a covered expatriate
for taxable years beginning in 2011. See Rev. Proc.
2010-40, page 663.
Section 883.—Exclusions
From Gross Income
26 CFR 1.883–1: Exclusion of income from the inter-
national operation of ships or aircraft.
T.D. 9502
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Exclusions from Gross Income
of Foreign Corporations
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains fi-
nal regulations under section 883(a) and
(c) of the Internal Revenue Code (Code),
concerning the exclusion from gross in-
come of income derived by certain foreign
corporations from the international opera-
tion of ships or aircraft. The final regu-
lations adopt the proposed regulations is-
sued on June 25, 2007, (REG–138707–06)
with certain modifications in response to
comments received, and remove the tem-
porary regulations published on the same
date (T.D. 9332).
DATES:Effective Date:These regulations
are effective September 17, 2010.
Applicability Date:For dates of appli-
cability, see §1.883–5(d).
FOR FURTHER INFORMATION
CONTACT: Patricia A. Bray, at (202)
622–3880 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information con-
tained in these final regulations have been
reviewed and approved by the Office
of Management and Budget in accor-
dance with the Paperwork Reduction Act
(44 U.S.C. 3507(d)), under control number
1545–1677.
The collections of information in these
final regulations are in §§1.883–2(f),
1.883–3(c) and (d), and 1.883–4(e). This
information is required to enable a foreign
corporation to determine if it is eligible to
exclude its income from the international
operation of ships or aircraft from gross
income on its U.S. Federal income tax
return. This information will also enable
the IRS to monitor compliance with the
regulations with respect to the stock own-
ership requirements of §1.883–1(c)(2),
and to make a preliminary determination
of whether the foreign corporation is el-
igible to claim such an exemption and is
accurately reporting income.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number assigned by the Office of
Management and Budget.
Books and records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and tax
return information are confidential, as re-
quired by 26 U.S.C. 6103.
Background
On June 25, 2007, temporary regula-
tions (T.D. 9332, 2007–2 C.B. 300) (2007
temporary regulations) under section
883(a) and (c) were published in theFed-
eral Register(72 FR 34600) revising final
regulations issued on August 26, 2003
in T.D. 9087, 2003–2 C.B. 781 (68
FR 51394) (2003 final regulations) as
amended by T.D. 9218, 2005–2 C.B. 503
(70 FR 45529). A notice of proposed
rulemaking (REG–138707–06, 2007–2
C.B. 342) cross-referencing the temporary
regulations was published in theFederal
Registeron the same date (72 FR 34650)
(proposed regulations).
The 2007 temporary regulations re-
vised the 2003 final regulations in several
respects. First, the 2007 temporary regu-
lations provide guidance concerning the
eligibility of certain controlled foreign
corporations to exclude from gross income
certain income from the international op-
eration of ships or aircraft (section 883
income) under section 883 (section 883
exclusion). Second, the 2007 temporary
regulations revised the provisions of the
2003 final regulations concerning the el-
igibility for the section 883 exclusion of
certain foreign corporations organized in
countries that provide an exemption from
taxation for income from the international
operation of ships or aircraft through an
income tax convention. Third, the 2007
temporary regulations identified certain
ground services as incidental to the in-
ternational operation of ships or aircraft
for purposes of the section 883 exclusion.
Finally, the 2007 temporary regulations
revised the provisions of the 2003 fi-
nal regulations concerning the reporting
requirements related to the qualified share-
holder stock ownership test. No public
hearing on the proposed regulations was
requested or held, however comments
were received on certain provisions of the
proposed regulations. After consideration
of all the comments, the proposed regu-
lations under section 883 are adopted as
revisedbythisTreasury decision, and the
corresponding temporary regulations are
removed.
Summary of Comments and
Explanation of Final Regulations
The comments received with respect to
the 2007 temporary regulations focused on
three areas: (1) the scope of activities con-
sidered incidental to the international op-
eration of a ship or aircraft (incidental ac-
tivities); (2) the treatment of bearer shares
for purposes of the stock ownership tests;
and (3) the reporting requirements of for-
eign corporations claiming the section 883
exclusion.
A.Incidental Activities
1.Treatment of “other services”
The 2003 final regulations provide that
certain activities of a foreign corporation
engaged in the international operation of
November 15, 20106412010–46 I.R.B.

ships or aircraft are so closely related to
such operation that those activities are
incidental to such operation, and there-
foretheincomederivedbytheforeign
corporation from such incidental activ-
ities is deemed to be derived from the
international operation of ships or air-
craft. The 2003 final regulations include
a non-exclusive list of incidental activities
eligible for the section 883 exclusion. See
§1.883–1(g)(1). The 2003 final regula-
tions, however, reserved on whether cer-
tain ground, maintenance or catering ser-
vices (collectively, ground services) con-
stitute incidental activities, and on whether
other services might also constitute in-
cidental activities. See §1.883–1(g)(3).
After considering comments received,
the 2007 temporary regulations removed
the reservation with respect to ground
services and identified three additional
categories of incidental activities. See
§1.883–1T(g)(ix) through (xi). The 2007
temporary regulations continue to reserve
on whether “other services” may consti-
tute incidental activities for this purpose.
Two commentators have recommended
that final regulations adopt a standard for
determining whether “other services” are
incidental activities based on the principles
articulated in paragraph 4.2 of the Com-
mentary to paragraph 1 of Article 8 of the
Organization for Economic Co-operation
and Development Model Tax Convention
on Income and Capital (OECD Model
Convention). Article 8 of the OECD
Model Convention covers profits directly
connected with the operation of an enter-
prise’s ships or aircraft in international
traffic and profits from activities “ancil-
lary” to such operation. Paragraph 4.2 of
the commentary to Article 8 of the OECD
Model Convention defines ancillary activ-
ities as those activities that an enterprise
“does not need to carry on for the purposes
of its own operation of ships or aircraft
in international traffic, but which make
a minor contribution relative to such op-
erationandaresocloselyrelatedtosuch
operation that they should not be regarded
as a separate business or source of income
of the enterprise.”
The Treasury Department and the IRS
considered but declined to adopt in the
2007 temporary regulations the standard
articulated in paragraph 4.2 of the com-
mentarytoArticle8oftheOECDModel
Convention out of concern that the stan-
dard could be interpreted in an inappro-
priately expansive manner. The Treasury
Department and the IRS remain concerned
and therefore the final regulations included
in this document do not modify the scope
of incidental activities. As noted, however,
the list of incidental activities included in
the regulations is non-exclusive, and there-
fore other activities not specifically identi-
fied may be incidental to the international
operation of ships or aircraft, depending on
the relevant facts and circumstances.
2.Relevance of definitions included in the
regulations to treaty interpretation
Several commentators have suggested
that the scope of incidental activities un-
der the regulations should be consistent
with the scope of “ancillary” services
for tax treaty purposes because the reg-
ulations could be used to determine the
meaning of the treaty provisions. The
Treasury Department and the IRS believe
this concern is sufficiently addressed by
§1.883–1(h)(3)(iv), which provides that
any definitions provided in §§1.883–1
through 1.883–5 shall not give meaning
to similar terms used in any income tax
convention, or provide guidance regard-
ing the scope of any exemption provided
by such convention, unless the income
tax convention entered into force after
August 26, 2003, and it, or its legislative
history, explicitly refers to section 883 and
guidance promulgated under that section
for its meaning.
3.Provision of equipment used in
connection with lighter vessels
Another commentator questioned
whether the use of equipment to transfer
crude oil from a host vessel to a lighter
vessel beyond the territorial waters of the
United States would constitute an inciden-
tal activity for purposes of the section 883
exclusion. As described above, the list of
incidental activities in the regulations is
not exclusive, and therefore activities not
specifically identified may be incidental
to the international operation of ships or
aircraft, depending on the relevant facts
and circumstances. Thus, for example,
the use of equipment to transfer crude oil
from a large oil tanker to a lighter vessel
beyond the territorial waters of the United
States would generally be considered inci-
dental to the international operation of the
lighter vessel for purposes of the section
883 exclusion.
B.Reliance on Bearer Shares to Satisfy
Ownership Tests
To qualify for the section 883, exclu-
sion a foreign corporation must satisfy
one of three stock ownership tests. Under
existing regulations, the foreign corpora-
tion cannot rely on bearer shares issued at
any level in the ownership chain to satisfy
any of the three stock ownership tests.
See, for example, §1.883–4(b)(1)(ii). Sev-
eral commentators have suggested that a
foreign corporation should be permitted
to consider bearer shares in determining
whether an ownership test is satisfied to
the extent the foreign corporation can
substantiate the ownership of the bearer
shares by qualified shareholders.
It has generally been difficult to re-
liably prove ownership of bearer shares,
particularly in prior periods. However,
the Treasury Department and the IRS un-
derstand that it has become increasingly
common for corporations (both publicly
traded and privately held) to use a demate-
rialized or immobilized book-entry system
for maintaining their registered and bearer
shares. The Treasury Department and the
IRS understand that under a dematerial-
ized book-entry system shares are repre-
sented only by book entries, and no phys-
ical certificates are issued or transferred,
and that in an immobilized book-entry sys-
tem the shareholder does not receive a
physical certificate upon the purchase of
shares but instead evidence of ownership
is maintained on the books and records of
a broker/financial institution or corporate
issuer. Because these systems provide the
ability to reliably identify the beneficial
owner of bearer shares, the Treasury De-
partment and the IRS have determined that
a foreign corporation that uses a demateri-
alized or immobilizedbook-entry system
to maintain its bearer shares should be per-
mitted to take into account the ownership
of bearer shares by qualified sharehold-
ers for determining whether a stock owner-
ship test is satisfied. Accordingly, the final
regulations permit a foreign corporation
to take into account ownership of bearer
shares for purposes of satisfying a stock
ownership test, when the bearer shares are
maintained in a dematerialized or immobi-
lized book-entry system. All other bearer
2010–46 I.R.B.642November 15, 2010

shares issued by the foreign corporation or
any intermediary corporation in the chain
of ownership may not be relied on for pur-
poses of satisfying a stock ownership test.
Current §1.883–4(d)(2)(ii) provides
that a qualified shareholder ownership
statement remains valid until the earlier
of the last day of the third calendar year
following the year in which the owner-
ship statement is signed, or the day that
a change in circumstances occurs that
makes any information on the ownership
statement incorrect. For this purpose,
a change in circumstances that makes
information on an ownership statement
incorrect includes bearer shares ceasing
to be maintained in a dematerialized or
immobilized book-entry system.
C.Other Comments Received
One commentator requested that the
Treasury Department and the IRS clar-
ify the filing requirements under section
6038A for a foreign corporation that has
a permanent establishment in the United
States but that claims a U.S. tax exemption
under the shipping and air transport article
of an income tax treaty. Another com-
mentator requested that Form W–8BEN,
“Certificate of Foreign Status of Beneficial
Owner for United States Tax Withhold-
ing,”and Form W–8ECI,“Certificate of
Foreign Person’s Claim That Income Is
Effectively Connected With the Conduct of
a Trade or Business in the United States,”
be modified to apply to income that quali-
fies for the section 883 exclusion. Finally,
another commentator recommended that
the final regulations under section 1446 be
modified to clarify that a foreign corpo-
ration’s allocable share of the effectively
connected taxable income of a partnership
does not include income that is eligible
for the section 883 exclusion by reason
of an equivalent exemption referred to in
§1.883–1(h)(1). Each of these comments
is beyond the scope of the final regulations
included in this document, but is being
considered as part of separate guidance
projects.
Special Analysis
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Or-
der 12866. Therefore, a regulatory assess-
ment is not required. It is hereby cer-
tified that the collection of information
in these regulations will not have a sig-
nificant economic impact on a substan-
tial number of United States small busi-
ness entities. This certification is based
upon the fact that these regulations apply
to foreign corporations and impose only
a limited collection of information burden
on certain shareholders of such corpora-
tions. United States small business enti-
ties may be shareholders of foreign cor-
porations to which the regulations applies,
however, the Treasury Department and the
IRS do not anticipate the number of af-
fected small business entities to be sub-
stantial. Therefore, a Regulatory Flexibil-
ity Analysis under the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) is not re-
quired. It also has been determined that
section 553(b),(c) and (d) of the Adminis-
trative Procedure Act(5 U.S.C. chapter 5)
do not apply to these regulations.
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ing these regulations was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Draftin
g Information
The principal author of these regula-
tions is Patricia A. Bray of the Office of
Associate Chief Counsel (International).
However, other personnel from the Trea-
sury Department and the IRS participated
in the development of these regulations.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.883–0 is amended by:
1.Adding the entries for
§1.883–1(c)(3)(ii)(A) and (B).
2.Revising the entries for
§1.883–1(g)(3) and (h)(3).
3.Revising the entry for
§1.883–2(e)(2).
4. Revising the entries for §1.883–3.
5. Revising the entry for §1.883–5(d).
6. Removing the entry for §1.883–5(e).
The revisions and additions read as fol-
lows:
§1.883–0 Outline of major topics.
*****
§1.883–1 Exclusion of income from
the international operation of ships or
aircraft.
*****
(c) * * *
(3) * * *
(ii) * * *
(A) General rule.
(B) Names and permanent addresses of
certain shareholders.
*****
(g) * * *
(3) Other Services. [Reserved].
*****
(h) * * *
(3) Special rules with respect to income
tax conventions.
(i) Countries with only an income tax
convention.
(ii) Countries with both an income tax
convention and an equivalent exemption.
(A) General rule.
(B) Special rule for claiming simultane-
ous benefits under section883andanin-
come tax convention.
(iii) Participation in certain joint ven-
tures.
(iv) Independent interpretation of in-
come tax conventions.
*****
§1.883–2 Treatment of publicly-traded
corporations.
*****
(e) * * *
(2) Availability and retention of docu-
ments for inspection.
*****
§1.883–3 Treatment of controlled foreign
corporations.
(a) General rule.
(b) Qualified U.S. person ownership
test.
(1) General rule.
(2) Qualified U.S. person.
(3) Treatment of bearer shares.
November 15, 20106432010–46 I.R.B.

(4) Ownership attribution through cer-
tain domestic entities.
(5) Examples.
(c) Substantiation of CFC stock owner-
ship.
(1) In general.
(2) Ownership statements from quali-
fied U.S. persons.
(3) Ownership statements from inter-
mediaries.
(4) Three-year period of validity.
(5) Availability and retention of docu-
ments for inspection.
(d) Reporting requirements.
*****
§1.883–5 Effective/applicability dates.
*****
(d) Effective/applicability dates.
§1.883–0T [Removed]
Par. 3. Section 1.883–0T is removed.
Par. 4. Section 1.883–1 is amended
by revising paragraphs (c)(3)(i)(D),
(c)(3)(i)(G), (c)(3)(i)(H), (c)(3)(i)(I),
(c)(3)(ii), (g)(1)(ix), (g)(1)(x), (g)(1)(xi),
(g)(3), (h)(1)(ii), and (h)(3) to read as fol-
lows:
§1.883–1 Exclusion of income from
the international operation of ships or
aircraft.
*****
(c) * * *
(3) * * *
(i) * * *
(D) The applicable authority for an
equivalent exemption, for example, the
citation of a statute in the country where
the corporation is organized, a diplomatic
note between the United States and such
country, or an income tax convention be-
tween the United States and such country
in the case of a corporation described in
paragraphs (h)(3)(i), (ii) and (iii) of this
section;
*****
(G) A statement as to whether any
shares of the foreign corporation or of any
intermediary corporation that are relied
on to satisfy any stock ownership test de-
scribed in paragraph (c)(2) of this section
are issued in bearer form and whether the
bearer shares are maintained in a dema-
terialized book-entry system in which the
bearer shares are represented only by book
entries and no physical certificates are
issued or transferred, or in an immobilized
book-entry system in which evidence of
ownership is maintained on the books and
records of the corporate issuer or by a
broker or financial institution;
(H) Any other information required
under §1.883–2(f), §1.883–3(d), or
§1.883–4(e), as applicable; and
(I) Any other relevant information spec-
ified in Form 1120-F, “U.S. Income Tax Re-
turn of a Foreign Corporation,” and its ac-
companying instructions.
(ii)Further documentation—(A)Gen-
eral rule. Except as provided in paragraph
(c)(3)(ii)(B) of this section, if the Commis-
sioner requests in writing that the foreign
corporation provide documentation or sub-
stantiate any representations made under
paragraph (c)(3)(i) of this section, or under
§1.883–2(f), §1.883–3(d), or §1.883–4(e),
as applicable, the foreign corporation must
provide the requested documentation or
substantiation within 60 days of receiv-
ing the written request. If the foreign cor-
poration does not provide the requested
documentation or substantiation within the
60-day period, but demonstrates that the
failure was due to reasonable cause and
not willful neglect, the Commissioner may
grant the foreign corporation a 30-day ex-
tension to provide the requested documen-
tation or substantiation. Whether a failure
to provide the documentation or substan-
tiation in a timely manner was due to rea-
sonable cause and not willful neglect shall
be determined by the Commissioner based
on all the facts and circumstances.
(B)Names and permanent addresses
of certain shareholders.IftheCommis-
sioner requests the names and permanent
addresses of individual qualified share-
holders of a foreign corporation, as rep-
resented on each individual’s ownership
statement, to substantiate the requirements
of the exception to the closely-held test
in the publicly-traded test in §1.883–2(e),
the qualified shareholder stock ownership
test in §1.883–4(a), or the qualified U.S.
person ownership test in §1.883–3(b),
the foreign corporation must provide the
requested information within 30 days of
receiving the written request. If the foreign
corporation does not provide the requested
information within the 30-day period, but
demonstrates that the failure was due to
reasonable cause and not willful neglect,
the Commissioner may grant the foreign
corporation a 30-day extension to provide
the requested information. Whether a
failure to provide the requested informa-
tion was due to reasonable cause and not
willful neglect shall be determined by the
Commissioner based on all the facts and
circumstances.
*****
(g) * * *
(1) * * *
(ix) Arranging by means of a space or
slot charter for the carriage of cargo listed
on a bill of lading or airway bill or simi-
lar document issued by the foreign corpo-
ration on the ship or aircraft of another cor-
poration engaged in the international oper-
ation of ships or aircraft;
(x) The provision of containers and re-
lated equipment by the foreign corporation
in connection with the international car-
riage of cargo for use by its customers, in-
cluding short-term use within the United
States immediately preceding or following
the international carriage of cargo (for this
purpose, a period of five days or less shall
be presumed to be short-term); and
(xi) The provision of goods and ser-
vices by engineers, ground and equipment
maintenance staff, cargo handlers, catering
staff, and customer services personnel, and
the provision of facilities such as passen-
ger lounges, counter space, ground han-
dling equipment, and hangars.
*****
(3)Other services. [Reserved].
*****
(h) * * *
(1) * * *
(ii) Provides an exemption from tax
for income derived from the international
operation of ships or aircraft, either by
statute, decree, income tax convention, or
otherwise; or
*****
(3)Special rules with respect to income
tax conventions—(i)Countries with only
an income tax convention.Ifaforeign
country grants an exemption from tax for
profits from the international operation of
ships or aircraft only under an income tax
convention with the United States, that ex-
emption shall constitute an equivalent ex-
emption with respectto a foreign corpora-
tion organized in that country only if—
2010–46 I.R.B.644November 15, 2010

(A) The foreign corporation satisfies
the conditions for claiming benefits with
respect to such profits under the income
tax convention; and
(B) The profits that are exempt from tax
pursuant to the shipping and air transport
or gains article of the income tax conven-
tion and are described within a category
of income included in paragraphs (h)(2)(i)
through (viii) of this section.
(ii)Countries with both an income
tax convention and an equivalent ex-
emption—(A)General rule. If a foreign
country grants an exemption from tax for
profits from the international operation of
ships or aircraft under the shipping and
air transport or gains article of an income
tax convention with the United States and
also by some other means (for example,
by diplomatic note or domestic law of the
foreign country), a foreign corporation
may elect annually whether to claim an
exemption from tax under section 883
or the income tax convention. Except
as provided in paragraph (h)(3)(ii)(B) of
this section, the foreign corporation must
apply the elected exemption (section 883
or the income tax convention) to all cate-
gories of income described in paragraph
(h)(2) of this section. If the foreign cor-
poration elects to claim the exemption
under section 883, it must satisfy all of the
requirements for claiming the exemption
under section 883. If the foreign corpora-
tion elects to claim the exemption under
the income tax convention, it must satisfy
all of the requirements and conditions for
claiming benefits under the income tax
convention. See §1.883–4(b)(3) for rules
concerning relying on shareholders res-
ident in a foreign country that grants an
equivalent exemption under an income tax
convention to satisfy the stock ownership
test of paragraph (c)(2) of this section.
(B)Special rule for claiming simulta-
neous benefits under section 883 and an
income tax convention. If a foreign cor-
poration that is organized in a country that
grants an exemption from tax under an in-
come tax convention and also by some
other means (such as by diplomatic note or
domestic law of the foreign country) with
respect to a specific category of income
described in paragraph (h)(2) of this sec-
tion, and the foreign corporation elects to
claim the exemption under the income tax
convention, the foreign corporation may
nonetheless simultaneously claim an ex-
emption under section 883 with respect to
a category of income exempt from tax by
such other means if the foreign corpora-
tion—
(1) Satisfies the requirements of para-
graphs (h)(3)(i)(A) and (B) of this section
for each category of income;
(2) Satisfies one of the stock ownership
tests of paragraph (c)(2) of this section;
and
(3) Complies with the substantiation
and reporting requirements in paragraph
(c)(3) of this section.
(iii)Participation in certain joint ven-
tures. If a foreign country grants an
exemption for a category of income only
through an income tax convention, a for-
eign corporation that is organized in that
country and that derives income, directly
or indirectly, through a participation in
a pool, partnership, strategic alliance,
joint operating agreement, code-sharing
arrangement, or other joint venture de-
scribed in paragraph (e)(2) of this section,
may treat that exemption as an equivalent
exemption even if the foreign corporation
would not be eligible to claim benefits
under the income tax convention for that
category of income solely because the joint
venture was not fiscally transparent, within
the meaning of §1.894–1(d)(3)(iii)(A),
with respect to that category of income
under the income tax laws of the foreign
corporation’s country of residence.
(iv)Independent interpretation of in-
come tax conventions. Nothing in this
section nor §§1.883–2 through 1.883–5
affects the rights or obligations under
any income tax convention between the
United States and a foreign country. The
definitions provided in this section and
§§1.883–2 through 1.883–5 shall not give
meaning to similar or identical terms used
in an income tax convention, or provide
guidance regarding the scope of any ex-
emption provided by such convention,
unless the income tax convention entered
into force after August 26, 2003, and it,
or its legislative history, explicitly refers
to section 883 and guidance promulgated
under that section for its meaning.
*****
§1.883–1T [Removed]
Par. 5. Section 1.883–1T is removed.
Par. 6. Section 1.883–2 is amended
by revising paragraphs (d)(3)(ii), (e)(2),
(f)(3), and (f)(4)(ii) to read as follows:
§1.883–2 Treatment of publicly-traded
corporations.
*****
(d) * * *
(3) * * *
(ii)Exception. Paragraph (d)(3)(i) of
this section shall not apply to a class of
stock if the foreign corporation can estab-
lish that qualified shareholders, as defined
in §1.883–4(b), applying the attribution
rules of §1.883–4(c), own sufficient shares
in the closely-held block of stock to pre-
clude nonqualified shareholders in the
closely-held block of stock from owning
50 percent or more of the total value of the
class of stock of which the closely-held
block is a part for more than half the num-
ber of days during the taxable year. Any
shares that are owned, after application
of the attribution rules in §1.883–4(c),
by a qualified shareholder shall not also
be treated as owned by a nonqualified
shareholder in the chain of ownership for
purposes of the preceding sentence. A
foreign corporation must obtain the docu-
mentation described in §1.883–4(d) from
the qualified shareholders relied upon to
satisfy this exception. However, no person
otherwise treated as a qualified share-
holder under §1.883–4(b) may be treated
for purposes of this paragraph (d)(3) as a
qualified shareholder if such person’s in-
terest in the foreign corporation, or in any
intermediary corporation, is held through
bearer shares that are not maintained dur-
ing the relevant period in a dematerialized
or immobilized book-entry system, as de-
scribed in §1.883–1(c)(3)(i)(G).
(e) * * *
(2)Availability and retention of docu-
ments for inspection. A foreign corpora-
tion seeking qualified foreign corporation
status must retain the documentation de-
scribed in paragraph (e)(1) of this section
until the expiration of the statute of limita-
tions for its taxable year to which the docu-
mentation relates. The foreign corporation
must make such documentation available
for inspection at such time and such place
as the Commissioner requests in writing
under §1.883–1(c)(3)(ii)(A) or (B).
(f) * * *
November 15, 20106452010–46 I.R.B.

(3) A description of each class of stock
relied upon to meet the requirements of
paragraph (d) of this section, including
whether the class is issued in registered or
bearer form and whether any such bearer
shares are maintained in a dematerialized
or immobilized book-entry system, as de-
scribed in §1.883–1(c)(3)(i)(G), the num-
ber of shares issued and outstanding in that
class as of the close of the taxable year, and
the relative value of each class in relation
to the total value of all shares of stock of
the corporation thatare outstanding as of
the close of the taxable year;
(4) * * *
(ii) With respect to all qualified share-
holders that own directly, or by applica-
tion of the attribution rules in §1.883–4(c),
shares of the closely-held block of stock
and that the foreign corporation relies on
to satisfy the exception provided by para-
graph (d)(3)(ii) of this section—
(A) The number of such qualified share-
holders;
(B) The total percentage of the value
of the shares owned, directly or indi-
rectly, by such qualified shareholders by
country of residence, determined under
§1.883–4(b)(2) (residence of individual
shareholders) or §1.883–4(d)(3) (special
rules for residence of certain sharehold-
ers); and
(C) The number days during the taxable
year of the foreign corporation that such
qualified shareholders owned, directly or
indirectly, their shares in the closely held
block of stock.
*****
§1.883–2T [Removed]
Par. 7. Section 1.883–2T is removed.
Par. 8. Section 1.883–3 is revised to
read as follows:
§1.883–3 Treatment of controlled foreign
corporations.
(a)General rule. A foreign corpora-
tion satisfies the stock ownership test of
§1.883–1(c)(2) if it satisfies the qualified
U.S. person ownership test in paragraph
(b) of this section and the substantiation
and reporting requirements of paragraphs
(c) and (d) of this section, respectively.
A foreign corporation that fails the qual-
ified U.S. person ownership test of para-
graph (b) of this section can satisfy the
stock ownership test of §1.883–1(c)(2) if
it meets either the publicly-traded test of
§1.883–2(a) or the qualified shareholder
stock ownership test of §1.883–4(a).
(b)Qualified U.S. person ownership
test—(1)General rule. A foreign corpo-
ration satisfies the qualified U.S. person
ownership test only if the following two
conditions are satisfied concurrently dur-
ing more than half the days in its taxable
year:
(i) The foreign corporation is a con-
trolled foreign corporation (within the
meaning of section 957(a)).
(ii) One or more qualified U.S. persons
own more than 50 percent of the total value
of all the outstandingstock of the foreign
corporation (within the meaning of section
958(a) and paragraph (b)(4) of this sec-
tion).
(2)Qualified U.S. person. For purposes
of this section, aqualified U.S. personis
a United States citizen or resident alien, a
domestic corporation, or a domestic trust
described in section 501(a), but only if the
person provides the controlled foreign cor-
poration an ownership statement described
in paragraph (c)(2) of this section, and the
controlled foreign corporation meets the
reporting requirements of paragraph (d) of
this section with respect to that person.
(3)Treatment of bearer shares. For pur-
poses of paragraph (b)(1)(ii) of this sec-
tion, any shares of the foreign corporation
or of any intermediary corporation that are
issued in bearer form, shall be treated as
not owned by qualified U.S. persons if the
bearer shares are not maintained in a dema-
terialized or immobilized book-entry sys-
tem, as described in §1.883–1(c)(3)(i)(G).
(4)Ownership attribution through cer-
tain domestic entities. For purposes of
paragraph (b)(1)(ii) of this section, stock
owned, directly or indirectly, by or for a
domestic partnership, a domestic trust not
described in section 501(a), or a domes-
tic estate, shall be treated as owned pro-
portionately by the partners, beneficiaries,
grantors, or other interest holders, respec-
tively, under the rules of section 958(a),
which shall be applied by treating each do-
mestic entity as a foreign entity. Stock that
is considered owned by a person under this
paragraph (b)(4) shall, for purposes of ap-
plying this paragraph (b)(4) to such person,
be treated as actually owned by such per-
son.
(5)Examples. The following examples
illustrate the qualified U.S. person owner-
ship test of paragraph (b)(1) of this section:
Example 1. Ship Co is a controlled foreign corpo-
ration (within the meaning of section 957(a)) for more
than half the days of its taxable year and is organized
in a qualified foreign country. A domestic partnership
owns all of the outstanding stock of Ship Co for the
entire taxable year. All of the partners in the domestic
partnership are residents of foreign countries and not
citizens of the United States. Ship Co does not satisfy
the qualified U.S. person ownership test of paragraph
(b)(1) of this section because qualified U.S. persons
do not own shares of Ship Co stock with a value that
is greater than 50 percent of the total value of the out-
standing stock of the corporation for at least half the
days of Ship Co’s taxable year. Therefore, to satisfy
the stock ownership test of §1.883–1(c)(2) and con-
stitute a qualified foreign corporation, Ship Co must
meet the qualified shareholder stock ownership test
of §1.883–4(a).
Example 2. Ship Co is a controlled foreign cor-
poration (within the meaning of section 957(a)) for
more than half the days of its taxable year and is or-
ganized in a qualified foreign country. Ship Co has a
single class of stock outstanding. For Ship Co’s entire
taxable year, a foreign corporation (Corp A), that is
wholly owned by a resident of a foreign country who
is not a U.S. citizen, owns 40 percent of the outstand-
ing Ship Co stock. During that same period, a domes-
tic partnership owns the remaining 60 percent of the
outstanding Ship Co stock. The domestic partnership
is wholly owned by 20 United States citizens, each of
whom owns a 5-percent partnership interest for Ship
Co’s entire taxable year. Ship Co meets the qualified
U.S. person ownership test of paragraph (b)(1) of this
section because during more than half the days in its
taxable year it was a controlled foreign corporation
within the meaning of section 957(a), and, applying
the ownership attribution rules of paragraph (b)(4) of
this section, qualified U.S. persons (the partners in
the domestic partnership) owned Ship Co stock with
a value that is greater than 50 percent of the total
value of all the outstanding Ship Co shares. There-
fore, Ship Co will meet the stock ownership test of
§1.883–1(c)(2) if it satisfies the substantiation and re-
porting requirements of paragraphs (c) and (d) of this
section with respect to the partners in the domestic
partnership. Alternatively, if four or more partners
in the domestic partnership were not qualified U.S.
persons, Ship Co would not meet the qualified U.S.
person ownership test of paragraph (b)(1) of this sec-
tion because, even though during more than half the
days in its taxable year it would have been a con-
trolled foreign corporation within the meaning of sec-
tion 957(a), qualified U.S. persons would not have
owned Ship Co stock with a value that is greater than
50 percent of the total value of all the outstanding
Ship Co shares during that period.
Example 3. Ship Co is a controlled foreign cor-
poration (within the meaning of section 957(a)) and
is organized in a qualified foreign country. Ship Co
has two classes of stock outstanding, Class A repre-
senting 60 percent of the vote and value and Class B
representing the remaining 40 percent of the vote and
value of all the shares outstanding of Ship Co. The
Class A stock is issued in bearer form and is main-
tained in a dematerialized book-entry system, as de-
scribed in §1.883–1(c)(3)(i)(G). The Class B stock is
2010–46 I.R.B.646November 15, 2010

also issued in bearer form, but is not maintained in
a dematerialized or immobilized book-entry system.
For Ship Co’s entire taxable year, a United States cit-
izen A holds all the Class A stock and nonresident
alien individual B owns all the Class B stock. Al-
though the Class A stock is issued in bearer form,
Ship Co will satisfy the qualified U.S. person own-
ership test of paragraph (b)(1) of this section because
the Class A stock is maintained in a dematerialized
book-entry system on behalf of A. The Class B stock
is not owned by a qualified U.S. person but is taken
into account in determining the total value of Ship
Co’s outstanding stock. Alternatively, if the Class B
stock were owned by a qualified U.S. person, the re-
sults would be similar. Class B stock would not be
taken into account in determining if the qualified U.S.
person ownership test were satisfied, but would be
taken into account in determining the total value of
Ship Co’s outstanding stock.
(c)Substantiation of CFC stock own-
ership—(1)In general. A controlled for-
eign corporation must establish all of the
facts necessary to demonstrate to the Com-
missioner that it satisfies the qualified U.S.
person ownership test of paragraph (b)(1)
of this section by obtaining a written own-
ership statement (described in paragraph
(c)(2) or (3) of this section, as applicable),
signed under penalties of perjury by an in-
dividual authorized to sign that person’s
Federal tax or information return, from—
(i) Each qualified U.S. person whose
ownership of stock of the controlled for-
eign corporation is taken into account for
purposes of meeting the qualified U.S. per-
son ownership test; and
(ii) Each domestic intermediary de-
scribed in paragraph (b)(4) of this section,
each foreign intermediary (including a
foreign corporation, partnership, trust, or
estate), and mere legal owners or record
holders acting as nominees in the chain
of ownership between each such qualified
U.S. person and the controlled foreign
corporation, if any.
(2)Ownership statements from quali-
fied U.S. persons. An ownership state-
ment from a qualified U.S. person must in-
clude—
(i) The qualified U.S. person’s name,
permanent address, and taxpayer identifi-
cation number;
(ii) If the qualified U.S. person directly
owns shares in the controlled foreign cor-
poration, the number of shares of each
class of stock of the controlled foreign
corporation owned by the qualified U.S.
person, whether any shares are issued in
bearer form, whether any bearer shares
are maintained in a dematerialized or
immobilized book-entry system, as de-
scribed in §1.883–1(c)(3)(i)(G), and the
period (or periods) in the taxable year of
the controlled foreign corporation during
which the qualified U.S. person owned the
shares;
(iii) If the qualified U.S. person indi-
rectly owns shares in the controlled foreign
corporation through a foreign or domes-
tic intermediary described in paragraph
(c)(1)(ii) of this section, the name of each
intermediary, the amount and nature of
the qualified U.S. person’s interest in each
intermediary, the period (or periods) in
the taxable year of the controlled foreign
corporation during which the qualified
U.S. person held such interest, and, with
respect to any intermediary foreign cor-
poration, whether any shares are issued in
bearer form and whether any such bearer
shares are maintained in a dematerialized
or immobilized book-entry system, as de-
scribed in §1.883–1(c)(3)(i)(G); and
(iv) Any other information specified in
published guidance by the Internal Rev-
enue Service (see §601.601(d)(2) of this
chapter).
(3)Ownership statements from interme-
diaries. An ownership statement from a
domestic or foreign intermediary must in-
clude:
(i) The intermediary’s name, permanent
address, and taxpayer identification num-
ber, if any.
(ii) If the intermediary directly owns
stock in the controlled foreign corpora-
tion, the number of shares of each class
of stock of the controlled foreign corpo-
ration owned by the intermediary, whether
such shares are issued in bearer form and
maintained in a dematerialized or immo-
bilized book-entry system, as described in
§1.883–1(c)(3)(i)(G), and the period (or
periods) in the taxable year of the con-
trolled foreign corporation during which
the intermediary owned the shares.
(iii) If the intermediary indirectly owns
the stock of the controlled foreign cor-
poration, the name and address of each
intermediary in the chain of ownership
between it and the controlled foreign cor-
poration, the period (or periods) in the
taxable year of the controlled foreign cor-
poration during which the intermediary
owned the shares, the percentage of its
indirect ownership interest in the con-
trolled foreign corporation, and, if any
intermediary in the chain of ownership is
a foreign corporation, whether any shares
of such intermediary are issued in bearer
form and if any such bearer shares are
maintained in a dematerialized or immo-
bilized book-entry system, as described in
§1.883–1(c)(3)(i)(G).
(iv) Any other information specified in
published guidance by the Internal Rev-
enue Service (see §601.601(d)(2) of this
chapter).
(4)Three-year period of validity.The
rules of §1.883–4(d)(2)(ii) shall apply for
determining the validity of the ownership
statements required under paragraph (c)(2)
of this section.
(5)Availability and retention of docu-
ments for inspection. The foreign corpo-
rationseekingqualifiedforeigncorpora-
tion status must retain the ownership state-
ments described in this paragraph (c) until
the expiration of the statute of limitations
for its taxable year to which the ownership
statements relate. The ownership state-
ments must be made available for inspec-
tion at such time and place as the Com-
missioner may request in writing in accor-
dance with §1.883–1(c)(3)(ii).
(d)Reporting requirements. A con-
trolled foreign corporation that relies on
this section to satisfy the stock ownership
test of §1.883–1(c)(2) must include the
following information (in addition to the
information required by §1.883–1(c)(3))
with its Form 1120-F,“U.S. Income Tax
Return of a Foreign Corporation”,filed
for its taxable year. This information must
be consistent with the ownership state-
ments obtained by the controlled foreign
corporation pursuant to paragraph (c) of
this section and must be current as of the
end of the corporation’s taxable year—
(1) The relative value of the shares of
the controlled foreign corporation that are
owned (directly, and indirectly applying
the rules of paragraph (b)(4) of this sec-
tion) by all qualified U.S. persons identi-
fied in paragraph (c)(2) of this section as
compared to the value of all outstanding
shares of the corporation;
(2) The period (or periods) in the tax-
able year during which such qualified U.S.
persons held such shares;
(3) The period (or periods) in the tax-
able year during which the foreign corpo-
ration was a controlled foreign corpora-
tion;
(4) A statement as to whether the
controlled foreign corporation or any in-
termediary corporation had bearer shares
November 15, 20106472010–46 I.R.B.

outstanding during the taxable year, and
whether any such bearer shares taken into
account for purposes of satisfying the
qualified U.S. person ownership test are
maintained in a dematerialized or immo-
bilized book-entry system, as described in
§1.883–1(c)(3)(i)(G); and
(5) Any other information specified
by Form 1120-F, and its accompanying
instructions, or in published guidance
by the Internal Revenue Service (see
§601.601(d)(2) of this chapter).
§1.883–3T [Removed]
Par. 9. Section 1.883–3T is removed.
Par. 10. Section 1.883–4 is amended
by revising paragraphs (b)(1)(ii), (c)(1),
(d)(1), (d)(4)(i)(C), (d)(4)(i)(D), (e)(2),
and (e)(3) to read as follows:
§1.883–4 Qualified shareholder stock
ownership test.
*****
(b) * * *
(1) * * *
(ii) Does not own its interest in the
foreign corporation through bearer shares,
either directly or by applying the at-
tribution rules of paragraph (c) of this
section, unless such bearer shares are
maintained in a dematerialized or immo-
bilized book-entry system, as described in
§1.883–1(c)(3)(i)(G); and
*****
(c) * * *
(1)General rules for attribution.For
purposes of applying paragraph (a) of
this section and the exception to the
closely-held test in §1.883–1(d)(3)(ii),
stock owned by or for a corporation, part-
nership, trust, estate, or mutual insurance
company or similar entity shall be treated
as owned proportionately by its share-
holders, partners, beneficiaries, grantors,
or other interest holders, as provided in
paragraphs (c)(2) through (7) of this sec-
tion. The proportionate interest rules of
this paragraph (c) shall apply successively
upward through the chain of ownership,
and a person’s proportionate interest shall
be computed for the relevant days or pe-
riod taken into account in determining
whether a foreign corporation satisfies the
requirements of paragraph (a) of this sec-
tion. Stock treated as owned by a person
by reason of this paragraph (c) shall be
treated as actually owned by such person
for purposes of this section. An owner
of an interest in an association taxable as
a corporation shall be treated as a share-
holder of such association for purposes of
this paragraph (c). Stock issued in bearer
form will not be treated as owned pro-
portionately by its shareholders unless the
shares are maintained in a dematerialized
or immobilized book-entry system, as de-
scribed in §1.883–1(c)(3)(i)(G).
*****
(d) * * *
(1)General rule. A foreign corpora-
tion that relies on this section to satisfy
the stock ownership test of §1.883–1(c)(2),
must establish all the facts necessary to sat-
isfy the Commissioner that more than 50
percent of the value of its shares is owned,
or treated as owned applying paragraph (c)
of this section, by qualified shareholders
for the relevant period. If a foreign cor-
poration relies upon bearer shares in the
chain of ownership to satisfy one of the
stock ownership tests, the foreign corpo-
ration must also establish all of the facts
necessary to satisfy the Commissioner that
such shares are maintained in a demateri-
alized book-entry system, as described in
§1.883–1(c)(3)(i)(G), for the benefit of the
relevant shareholder.
*****
(4) * * *
(i) * * *
(C) If the individual directly owns
shares of stock in thecorporation seeking
qualified foreign corporation status, the
name of the corporation, the number of
shares in each class of stock of the corpo-
ration owned by the individual, whether
any such shares are issued in bearer form
and maintained in a dematerialized or im-
mobilized book-entry system, as described
in §1.883–1(c)(3)(i)(G), and the period (or
periods) in the taxable year of the foreign
corporation during which the individual
owned the shares;
(D) If the individual directly owns an
interest in a corporation, partnership, trust,
estate, or other intermediary that directly
or indirectly owns stock in the corpora-
tion seeking qualified foreign corporation
status, the name of the intermediary, the
number and class of shares or the amount
and nature of the interest that the individ-
ual holds in such intermediary, and, if the
intermediary is a corporation, whether any
such shares are issued in bearer form and
maintained in a dematerialized or immo-
bilized book-entry system, as described in
§1.883–1(c)(3)(i)(G), and the period (or
periods) in the taxable year of the foreign
corporation seeking qualified foreign cor-
poration status during which the individual
held such interest;
*****
(e) * * *
(2) With respect to all qualified share-
holders relied upon to satisfy the 50 per-
cent ownership test of paragraph (a) of this
section, the total number of such qualified
shareholders as defined in paragraph (b)(1)
of this section; the total percentage of the
value of the outstanding shares owned, ap-
plying the attribution rules of paragraph
(c) of this section, by such qualified share-
holders by country of residence or organ-
ization, whichever is applicable; and the
period during the taxable year of the for-
eign corporation that such stock was held
by qualified shareholders; and
(3) Any other relevant information
specified by the Form 1120-F,“U.S. In-
come Tax Return of a Foreign Corpora-
tion,”and its accompanying instructions,
or in published guidance by the Internal
Revenue Service (see §601.601(d)(2) of
this chapter).
§1.883–4T [Removed]
Par. 11. Section 1.883–4T is removed.
Par. 12. Section 1.883–5 is amended
by revising paragraph (d) and removing
paragraph (e) to read as follows:
§1.883–5 Effective/applicability dates.
*****
(d)Effective/applicability date. Except
as otherwise provided in this paragraph
(d), §§1.883–1, 1.883–2, 1.883–3, and
1.883–4 apply to taxable years of the for-
eign corporation beginning after June 25,
2007, and may be applied to any open
taxable years of the foreign corporation
beginning on or after December 31, 2004.
The portion of any provision concerning
bearer shares maintained in a dematerial-
ized or immobilized book-entry system, as
described in §1.883–1(c)(3)(i)(G), applies
to taxable years of a foreign corporation
beginning on or after September 17, 2010.
2010–46 I.R.B.648November 15, 2010

§1.883–5T [Removed]
Par. 13. Section 1.883–5T is removed.
PART 602 — OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 14. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 15. In §602.101, paragraph
(b) is amended by removing the entries
for §§1.883–1T, 1.883–2T, 1.883–3T,
1.883–4T, and 1.883–5T from the table
and adding an entry for §1.883–0 to the
table in numerical order to read as follows:
§602.101 OMB Control Numbers.
*****
(b) * * *
CFR part or section where
identified and described
Current OMB
control No.
*****
§1.883–0...........................................................
1545–1677
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved September 3, 2010.
Michael Mundaca,
Assistant Secretary of
theTreasury(TaxPolicy).
Filed by the Office of the Federal Register on September 16,
2
010, 8:45 a.m., and published in the issue of the Federal
Register for September 17, 2010, 75 F.R. 56858)
S
ection 911.—Citizens or
R
esidents of the United
S
tates Living Abroad
T
he Service provides an inflation adjustment to
t
he amount of foreign earned income that may be ex-
c
luded from gross income for taxable years beginning
i
n 2011. See Rev. Proc. 2010-40, page 663.
Section 2032A.—Valuation
of Certain Farm, etc.,
Real Property
The Service provides an inflation adjustment to the
maximum amount by which the value of certain farm
and other qualified real property included in a dece-
dent’s gross estate may be decreased for purposes of
valuing the estate of a decedent dying in calendar year
2011. See Rev. Proc. 2010-40, page 663.
Section 2503.—Taxable
Gifts
The Service provides an inflation adjustment to the
amount of gifts that may be made to a person in a
calendar year without including the amount in taxable
gifts for calendar year 2011. See Rev. Proc. 2010-40,
page 663.
Section 2523.—Gift to
Spouse
The Service provides an inflation adjustment to the
amount of gifts that may be made in a calendar year
to a spouse who is not a citizen of the United States
without including the amount in taxable gifts for cal-
endar year 2011. See Rev. Proc. 2010-40, page 663.
Section 4161.—Imposition
of Tax
The Service provides an inflation adjustment to the
amount of excise tax imposed for calendar year 2011
on the first sale by a manufacturer, producer, or im-
porter of any shaft of a type used in the manufacture
of certain arrows. See Rev. Proc. 2010-40, page 663.
Section 6033.—Returns by
Exempt Organizations
The Service provides an inflation adjustment to
the amount of dues certain exempt organizations with
nondeductible lobbying expenditures can charge and
still be excepted from reporting requirements for tax-
able years beginning in 2011. See Rev. Proc. 2010-
40, page 663.
Section 6039F.—Notice of
Large Gifts Received From
Foreign Persons
The Service provides an inflation adjustment to the
amount of gifts received, in a taxable year from for-
eign persons, that triggers a reporting requirement for
a United States person for taxable years beginning in
2011. See Rev. Proc. 2010-40, page 663.
Section 6103.—Confi-
dentiality and Disclosure
of Returns and Return
Information
26 CFR 301.6103(j)(1)–1: Disclosure of return infor-
mation reflected on returns to officers and employees
of the Department of Commerce for certain statistical
purposes and related activities.
T.D. 9500
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 301
Disclosures of Return
Information Reflected on
ReturnstoOfficersand
Employees of the Department
of Commerce for Certain
Statistical Purposes and
Related Activities
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains
final and temporary regulations that au-
thorize the disclosure of certain items of
return information to the Bureau of the
Census (Bureau) in conformance with
section 6103(j)(1) of the Internal Revenue
Code (Code). The final and temporary
regulations are made pursuant to a request
from the Secretary of Commerce. These
November 15, 20106492010–46 I.R.B.

regulations facilitate the assistance of the
IRS to the Bureau inits statistics pro-
grams and require no action by taxpayers
and have no effect on their tax liabilities.
The text of the temporary regulations also
serves as the text of the proposed regula-
tions [REG–137486–09] set forth in this
issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on August 26, 2010.
Applicability Date:For dates
of applicability for this regula-
tion, see §§301.6103(j)(1)–1(e) and
301.6103(j)(1)–T(e).
FOR FURTHER INFORMATION
CONTACT: Melissa Segal at (202)
622–7950 (not a toll-free call).
SUPPLEMENTARY INFORMATION:
Background
Section 6103(j)(1)(A) authorizes the
Secretary of Treasury to furnish, upon
written request by the Secretary of Com-
merce, such return or return information
as the Secretary of Treasury may prescribe
by regulation to officers and employees
of the Bureau of the Census (Bureau) for
the purpose of, but only to the extent nec-
essary in, the structuring of censuses and
conducting related statistical activities au-
thorized by law. Section 301.6103(j)(1)–1
of the regulations further defines such pur-
poses by reference to 13 U.S.C. chapter
5 and provides an itemized description of
the return information authorized to be
disclosed for such purposes.
This document adopts final regulations
that authorize the IRS to disclose an addi-
tional item of return information requested
by the Secretary of Commerce to assist
the Bureau in identifying companies that
are actively engaged in research and de-
velopment activities for the Bureau’s an-
nual Survey of Industrial Research and De-
velopment. In response to this request, on
December 31, 2007, the IRS and the Trea-
sury Department published temporary reg-
ulations under §6103(j)(1). See T.D .9373,
2008–1 C.B. 463 (72Federal Register
74192). Also on December 31, 2007, the
IRS and the Treasury Department issued a
notice of proposed rulemaking cross-refer-
encing those temporary regulations. See
REG–147832–07, 2008–1 C.B. 472 (72
Federal Register74246). No comments
were received and no public hearing was
requested or held. This Treasury decision
adopts the proposed rules with no change.
This Treasury decision also contains
temporary regulations that authorize the
disclosure of additional items of return
information requested by the Secretary of
Commerce on the ground that the infor-
mation is necessary to allow the Bureau
to study a developing trend of increased
use of contract workers. The text of the
temporary regulations also serves as the
text of the proposed regulations set forth
in the notice of proposed rulemaking on
this subject in this issue of the Bulletin.
Explanation of Provisions
By letter dated February 6, 2006, the
Secretary of Commerce requested that an
additional item of return information be
disclosed to the Bureau’s annual Survey of
Industrial Research and Development. As
duly requested by the Secretary of Com-
merce and set forth in the proposed regu-
lations, the final regulation authorizes the
disclosure of categorical information on
total qualified research expenses in three
ranges: greater than zero, but less than $1
million; greater than or equal to $1 million,
but less than $3 million; and, greater than
or equal to $3 million.
Separately, by letter dated July 24,
2009, the Secretary of Commerce re-
quested that additional items of return
information be disclosed to the Bureau
forpurposesofallowingtheBureauto
study a developing trend of increased use
of contract workers.Specifically, the Sec-
retary of Commerce requested disclosure
of the following additional items: (1) total
number of documents reported on Form
1096 transmitting Forms 1099-MISC and
(2) Total amount reported on Form 1096
transmitting Forms 1099-MISC.
Section 301.6103(j)(1)–1 of the reg-
ulations formerly permitted disclosure
of the total number of documents re-
ported on Form 1096 transmitting Forms
1099-MISC and the total amount re-
ported on Form 1096 transmitting Forms
1099-MISC. At the request of the Secre-
tary of Commerce, the Treasury Depart-
ment removed these items from the list of
items of return information authorized to
be disclosed (See TD 9372, 2008–1 C.B.
462 [72 F R 73262] [Dec. 27, 2007]). This
removal was consistent with the Secretary
of Commerce’s practice to seek revoca-
tion of authorizations for disclosure of
return information no longer considered
necessary for the structuring of censuses
or related statistical activity.
The Secretary of Commerce has since
determined that these items of return in-
formation are necessary for the structuring
of census and conducting related statistical
activities authorized by law because these
items provide critical data about contract
labor that is needed to estimate total em-
ployment and payroll in the United States.
The employment and compensation data
compiled by the Census Bureau are impor-
tant to analysts and policy makers in both
the public and private sectors. The Secre-
tary of Commerce asserts that, because of
the strong need for this data in order to ac-
curately reflect total employment and pay-
roll in the United States, good cause ex-
ists to amend Section 301.6103(j)(1)–1 of
the regulations to restore the items listed
in this section to the list of items of return
information that may be disclosed. The
Treasury Department and the IRS agree
that amending existing regulations to per-
mit disclosure of these items to the Bureau
is appropriate to meetthe analytical needs
of the Bureau.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been deter-
mined that section 553(b) of the Admin-
istrative Procedures Act (5 U.S.C. chapter
5) does not apply to these regulations. For
applicability of the Regulatory Flexibility
Act, please refer to the cross-referenced
notice of proposed rulemaking published
elsewhere in this Bulletin. Pursuant to sec-
tion 7805(f) of the Code, this regulation
has been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Drafting Information
The principal author of these regula-
tions is Melissa Segal, Office of the Asso-
ciate Chief Counsel (Procedure & Admin-
istration).
*****
2010–46 I.R.B.650November 15, 2010

Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
PART 301—PROCEDURE AND
ADMINISITRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6103(j)(1)–1 is
amended by adding paragraph (b)(3)(xxv)
and revising paragraph (e) to read as fol-
lows:
§301.6103(j)(1)–1 Disclosure of return
information reflected on returns to officers
and employees of the Department of
Commerce for certain statistical purposes
and related activities.
*****
(b) * * *
(3) * * *
(xxv) From Form 6765 (when filed with
corporation income tax returns) — total
qualified research expenses.
*****
(e)Effective/applicability date. Para-
graph (b)(3)(xxv) of this section is appli-
cable to disclosures to the Bureau of the
Census on or after August 26, 2010.
Par. 3. Section 301.6103(j)(1)–1T is
amended by:
1. Reserve paragraphs (b)(3)(xxvi)
through (b)(3)(xxviii).
2. Adding paragraphs (b)(3)(xxix) and
(b)(3)(xxx).
3. Revising paragraph (e).
4. Adding a sentence at the end of para-
graph (f).
§301.6103(j)(1)–1T Disclosures of return
information reflected on returns to officers
and employees of the Department of
Commerce, for certain statistical purposes
and related activities (temporary).
*****
(b)(3)(xxvi) through (b)(3)(xxviii)
[Reserved]. For further guidance, see
§301.6103(j)(1)–1(b)(3)(xxvi) through
(b)(3)(xxviii)
(xxix) Total number of documents re-
ported on Form 1096 transmitting Forms
1099-MISC.
(xxx) Total amount reported on Form
1096 transmitting Forms 1099-MISC.
*****
(e)Effective/applicability date.P
ara-
graph (b)(3)(xxix) through (b)(3)(x
xx) of
this section is applicable to disclo
sures to
the Bureau of the Census on or after Au
-
gust 26, 2010.
(f) * * * The applicability of paragr
aphs
(b)(3)(xxix) through (b)(3)(xxx)
of this
section expires on or before August
25,
2013.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved August 11, 2010.
Michael Mundaca,
Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on August 25,
2010, 8:45 a.m., and published in the issue of the Federal
Register for August 26, 2010, 75 F.R. 52458)
Section 6109.—Identifying
Numbers
26 CFR 1.6109–2: Tax return preparers furnishing
identifying numbers for returns or claims for refund
and related requirements.
T.D. 9501
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Furnishing Identifying Number
of Tax Return Preparer
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains final
regulations under section 6109 of the In-
ternal Revenue Code (Code) that provide
guidance on how the IRS will define the
identifying number of tax return preparers
and set forth requirements on tax return
preparers to furnish an identifying num-
ber on tax returns and claims for refund
of tax they prepare. Additional provisions
of the regulations provide that tax return
preparers must apply for and regularly re-
new their preparer identifying number as
the IRS may prescribe in forms, instruc-
tions, or other guidance.
DATES:Effective Date:These regulations
are effective on September 30, 2010.
Applicability Date:For dates of appli-
cability, see §1.6109–2(i).
FOR FURTHER INFORMATION
CONTACT: Stuart Murray at (202)
622–4940 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–2176. The collection of
information in these final regulations is in
§1.6109–2(d) and (e). This information
is required in order for the IRS to issue
identifying numbers to tax return prepar-
ers who are eligible to receive them.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
This document contains final amend-
ments to regulations under section 6109 of
the Code relating to furnishing a tax return
preparer’s identifying number on tax re-
turns and claims for refund of tax. Section
6109(a)(4) requires taxreturn preparers to
furnish on tax returns and claims for re-
fund of tax an identifying number, as pre-
scribed, to ensure proper identification of
the preparer, the preparer’s employer, or
both. In addition, section 6109(c) autho-
rizes the Secretary “torequire such infor-
mation as may be necessary to assign an
November 15, 20106512010–46 I.R.B.

identifying number to any person.” The re-
quirement to furnish an identifying num-
ber on tax returns and claims for refund
of tax applies to information returns de-
scribed in §301.7701–15(b)(4) and to elec-
tronically filed tax returns.
In 2009 the IRS conducted a compre-
hensive review of tax return preparers, cul-
minating in Publication 4832,Return Pre-
parer Review(Rev. 12–2009) (the Report).
The Report recommended that tax return
preparers be required to obtain and use a
preparer tax identification number (PTIN)
as the exclusive preparer identifying num-
ber. The Report also recommended that
the IRS establish new eligibility standards
to prepare tax returns — including test-
ing, continuing education, and Federal tax
compliance checks.The proposed regu-
lations adopted several of the recommen-
dations made in the Report. The Trea-
sury Department and the IRS conclude that
adopting these provisions in the final reg-
ulations will increase tax compliance and
help to ensure that tax return preparers are
knowledgeable, skilled, and ethical.
To implement recommendations made
in the Report, on March 26, 2010, the
Treasury Department and the IRS pub-
lished in theFederal Register(75 FR
14539) a notice of proposed rulemaking
(REG–134235–08, 2010–16 I.R.B. 596)
proposing amendments to §1.6109–2 re-
garding the identifying number that a tax
return preparer must furnishontaxreturns
and claims for refund of tax. A public
hearing was held on the proposed regula-
tions on May 6, 2010. The IRS received
written public comments responding to
the proposed regulations.
Summary of Comments and
Explanation of Revisions
Over 200 written comments were re-
ceived in response to the notice of pro-
posed rulemaking. All comments were
considered and are available for public in-
spection. Most of the comments are sum-
marized in this preamble.
1.Requiring the Use of PTINs
The final regulations adopt the pro-
posed amendments to §1.6109–2, which
provide that for tax returns or refund
claims filed after December 31, 2010, tax
return preparers must obtain and exclu-
sively use the identifying number pre-
scribed by the IRS in forms, instructions,
or other guidance, rather than a social
security number (SSN), as the identify-
ing number to be included with the tax
return preparer’s signatureonataxreturn
or claim for refund. Prior to these final
regulations, the identifying number of
a tax return preparer was the tax return
preparer’s SSN or an alternative number
as prescribed by the IRS. The alternative
number that the IRS has prescribed is a
PTIN. After December 31, 2010, tax re-
turn preparers can only use a PTIN (or
other number that the IRS prescribes in
the future as a replacement to the PTIN)
and may not use an SSN as a preparer
identifying number unless the IRS directs
otherwise. For tax returns or claims for
refund filed before January 1, 2011, the
identifying number of a tax return preparer
will remain the preparer’s SSN or PTIN.
The requirement to use a PTIN will al-
low the IRS to better identify tax return
preparers, centralize information, and ef-
fectively administer the rules relating to
tax return preparers. The final regulations
will also benefit taxpayers and tax return
preparers and help maintain the confiden-
tiality of SSNs. Most of the comments re-
ceived on the notice of proposed rulemak-
ing support the requirement to use a PTIN
as the exclusive identifying number for tax
return preparers beginning next year.
Under the final regulations, a tax return
preparer must sign and furnish a PTIN on
a tax return or claim for refund if the tax
return preparer has primary responsibility
for the overall substantive accuracy of the
preparation of the tax return or claim for
refund. If a signing tax return preparer
has an employment arrangement or associ-
ation with another person, then that other
person’s employer identification number
(EIN)mustalsobeincludedonthetaxre-
turn or refund claim.
Tax return preparers who are required
but fail to include a PTIN on a tax return
or refund claim, or fail to include the EIN
of any person with whom they have an em-
ployment arrangement or association, are
subject to a penalty under section 6695(c),
unless the failure to include an identifying
number is due to reasonable cause and not
due to willful neglect.
a.Supervised tax return preparers who do
not sign tax returns
The proposed regulations provided
that for purposes of the provisions of
§1.6109–2 that would be applicable after
December 31, 2010, the termtax return
preparermeans any individual who is
compensated for preparing, or assisting in
the preparation of, all or substantially all
of a tax return or claim for refund of tax.
The proposed regulations further provided
that a tax return preparer for purposes of
these provisions excludes an individual
who is not defined as a nonsigning tax
return preparer in §301.7701–15(b)(2). A
nonsigning tax return preparer is defined
in §301.7701–15(b)(2) as any tax return
preparer who, while not a signing tax
return preparer (the individual who has
the primary responsibility for the overall
substantive accuracy of the preparation of
a tax return or claim for refund of tax),
prepares all or a substantial portion of a
tax return or claim for refund.
Some commentators recommended that
individuals who prepare or assist in prepar-
ing all or substantially all of a tax return
or claim for refund should not be required
to obtain a PTIN if they do not sign the
tax return or claim for refund and if they
act under the supervision of another tax
return preparer who substantively reviews
the tax return or claim for refund and signs
it. Commentators explained, for exam-
ple, that in some accounting firms, em-
ployees who have passed the Uniform Cer-
tified Public Accountant Examination and
are working toward their license as a cer-
tified public accountant are often involved
in, or assist with, the preparation of tax re-
turns. Although these employees do not
sign tax returns or claims for refund as a
tax return preparer, under the regulations
as proposed, they are tax return preparers
who must have a PTIN after December 31,
2010, if they prepare all or substantially all
of a tax return or claim for refund. The
commentators proposed an exemption for
these individuals.
The Chief Counsel for Advocacy of
the Small Business Administration (SBA)
submitted similar comments, on behalf
of small businesses, on the proposed
amendments to §1.6109–2 as applied to
taxreturnpreparerswhodonotsigntax
returns or claims for refund, in particular
the provisions requiring tax return pre-
2010–46 I.R.B.652November 15, 2010

parers to obtain and renew a PTIN as the
IRS may prescribe. The SBA heard from
small accounting firms that those firms
would incur a substantial financial burden
if the regulations include certified public
accountant candidates and other parapro-
fessional employees who are involved in
tax return preparation under the supervi-
sion of a certified public accountant who
is a signing tax return preparer. The SBA
also observed that requiring these individ-
uals to register with the IRS as tax return
preparers would not improve the accuracy
of tax returns prepared in small account-
ing firms because the firms and certified
public accountants within these firms are
already subject to ethical and competency
rules administered by state boards of ac-
countancy, as well as Treasury Department
Circular No. 230, 31 CFR Part 10. The
SBA recommended that the regulations
either exclude outright employees of firms
engaged in certified public accountancy
who are nonsigning tax return preparers
or exclude these employees if they are su-
pervised by a certified public accountant,
attorney, or enrolled agent.
These final regulations are intended to
address two overarching objectives. The
first overarching objective is to provide
some assurance to taxpayers that a tax re-
turn was prepared by an individual who
has passed a minimum competency exam-
ination to practice before the IRS as a tax
return preparer, has undergone certain suit-
ability checks, and is subject to enforce-
able rules of practice. The second overar-
ching objective is to further the interests of
tax administration by improving the accu-
racy of tax returns and claims for refund
andbyincreasingoveralltaxcompliance.
The final regulations define atax return
preparerin §1.6109–2(g) as an individual
who prepares for compensation, or assists
in preparing, all or substantially all of a tax
return or claim for refund of tax. The fi-
nal regulations retain this definition from
the proposed regulations without including
the requested exemption. It is critical to
the IRS’s tax administration efforts that, in
the first instance, the IRS is readily able to
identify all individuals who are involved in
preparing all or substantially all of a tax re-
turn or claim for refund. Additionally, by
requiring regular renewal of a PTIN, tax
return preparers will confirm their contin-
uing competence and suitability to be tax
return preparers. Accordingly, were the
Treasury Department and the IRS to pro-
vide an exemption in these regulations for
a sizeable segment of tax return prepar-
ers, it would undercut effective oversight
by the IRS of the tax return preparer com-
munity. An exemption for some tax return
preparers, as requested in the comments,
would allow the exempt individuals to pre-
pare tax returns and claims for refund with-
out identifying themselves to the IRS as
tax return preparers and without undergo-
ing competency examinations and suitabil-
ity checks and being subject to enforceable
rules of practice.
b.Licensed tax return preparers, tax
return preparers of longstanding, and
those who prepare a small number of tax
returns
In the proposed regulations, no distinc-
tion was made between tax return prepar-
ers licensed by a state authority as tax re-
turn preparers and unlicensed tax return
preparers. A number of comments were
received from state-licensed tax return pre-
parers, particularly from those who are
Licensed Tax Preparers or Licensed Tax
Consultants in Oregon. These comments
almost uniformly requested that state-li-
censed tax return preparers be “grandfa-
thered” into the regulations and not be re-
quired to apply for a PTIN, renew an ex-
isting PTIN, or comply with requirements
that the IRS may prescribe to obtain or
renew a PTIN after December 31, 2010.
Other commentators asked that the IRS
consider an exemption from the regula-
tions for tax return preparers who have
been preparers for a certain period of years
or who prepare annually a volume of tax
returns below a certain (relatively small)
number. Some commentators, however,
were opposed to exemptions or grandfa-
ther provisions.
The Report discussed at some length
state licensing and regulation of tax re-
turn preparers, including state-by-state
descriptions, but in the Report’s recom-
mendations, exemptions were not made
for tax return preparers licensed or oth-
erwise regulated under a state program.
The Report also concluded that the IRS
would not provide “grandfather” exemp-
tions based on experience in preparing
tax returns. The proposed regulations,
consistent with the Report’s recommen-
dations, did not include any exemption
for state-based licensure, length of experi-
ence, or number of tax returns prepared.
After careful consideration of the com-
ments received on this issue, the final
regulations do not include any exemp-
tion for state-based licensure, length of
experience, or number of tax returns pre-
pared. The Treasury Department and the
IRS conclude that tax return preparers
who prepare tax returns and claims for
refund for compensation should be subject
to uniform standards of qualification and
practice. When obtaining the services of a
tax return preparation business, taxpayers
should be assisted by tax return preparers
subject to the same Federal regulations,
regardless of a taxpayer’s state of resi-
dence or variable circumstances such as
the size of the business or the number of
years a tax return preparer has been in the
industry.
c.Volunteers and other unpaid tax return
preparers
The proposed regulations did not in-
clude volunteers and other unpaid tax
return preparers as tax return preparers
required to obtain a PTIN. Consistent
with the definition of a tax return pre-
parer under section 7701(a)(36), which
requires a compensation element for an
individual to be a tax return preparer, the
definition oftax return preparerin the
proposed regulations excluded an individ-
ual described in §301.7701–15(f), which
lists, among others, any individual who
provides assistance in the preparation of
tax returns as part of a Volunteer Income
Tax Assistance (VITA), Tax Counseling
for the Elderly (TCE), or Low-Income
Taxpayer Clinic (LITC) program. Sec-
tion 301.7701–15(f)(1)(xii) also excludes
from the definition of a tax return preparer
anyone who prepares a tax return or claim
for refund without an explicit or implicit
agreement for compensation. An insub-
stantial gift, favor, or service received for
the preparation of a tax return or refund
claim is not considered compensation.
Several commentators recommended
that the final regulations require volun-
teer tax return preparers to obtain a PTIN.
According to the commentators, putting
volunteers under the regulations would
provide several benefits, including in-
creased tax compliance and improvement
of the volunteer programs. Although com-
November 15, 20106532010–46 I.R.B.

mentators suggested that the PTIN and
other requirements applicable to paid tax
return preparers also apply to volunteers,
it was noted that associated fees could be
waived for volunteers. The comments also
noted that extending the regulations to all
taxreturnpreparerswhoholdthemselves
out to the public as tax return preparers
would unambiguously include individu-
als who prepare tax returns for customers
purportedly for “free” but incident to a
customer’s purchase of a product or other
service.
The final regulations adopt the same
definition of tax return preparer as in the
proposed regulations. The Treasury De-
partment and the IRS conclude that the fi-
nal regulations are properly limited to paid
taxreturnpreparers. Thefocusonpaid
tax return preparation in the Report and
in these regulations is consistent with both
the current reality of tax return preparation
and applicable legal provisions, including
§301.7701–15(f). As noted by the figures
in the Report, volunteer tax return prepar-
ers are a small fraction of all tax return pre-
parers and the tax returns prepared by vol-
unteers are a small fraction of all prepared
tax returns.
Only volunteers or other truly unpaid
tax return preparers, however, are not tax
return preparers for purposes of these reg-
ulations. As an example, individuals who
prepare tax returns without compensation
for relatives or friends as a personal favor
are not within the definition of the termtax
return preparer.
The Treasury Department and the IRS
conclude that arrangements for tax return
preparation as part of a sales transaction
are inherently agreements to prepare tax
returns for compensation under these reg-
ulations, notwithstanding any claim by
tax return preparers that the tax return
or refund claim preparation is not sepa-
rately compensated. No change in these
regulations is necessary to reflect this re-
sult. As a result, an individual who, in
connection with a sale of goods or ser-
vices, prepares all or substantially all of a
tax return or claim for refund filed after
December 31, 2010, and who does not
furnish a valid PTIN on the tax return
or claim for refund may be liable for
the section 6695(c) penalty, unless the
failure to furnish a valid PTIN was due
to reasonable cause and not due to willful
neglect.
d.Tax return preparation software
The proposed regulations did not
specifically includeany provisions on
commercially available tax return prepa-
ration software or software developers.
Several commentators expressed the con-
cern that some tax return preparers use
tax return preparation software to pre-
pare multiple “self-prepared” tax returns
for clients in order to hide the tax return
preparers’ involvement and avoid identi-
fying themselves on the tax returns. The
commentators proposed that the final reg-
ulations include limits on the purchase
or use of software, such as a requirement
built into the software to enter a PTIN to
use the software to prepare more than one
tax return.
The final regulations do not include any
provisions with respect to software. Soft-
ware developers are not tax return pre-
parers for purposes of these final regula-
tions, and the regulation of software is be-
yond the scope of these amendments to
§1.6109–2.
e.Requiring the use of a PTIN after
December 31, 2010
Under the proposed regulations, the
amendments to §1.6109–2 would apply
to tax returns and claims for refund filed
after December 31, 2010. For tax re-
turns and claims for refund filed before
then, the existing provisions of §1.6109–2
apply. Some commentators questioned
whether, as a matter of implementation,
January 1, 2011, is a realistic date for the
requirements of these regulations. The
final regulations maintain the distinction
between tax returns and claims for refund
filed on or before December 31, 2010, and
those filed after that date. To the extent a
transitional period may be necessary, the
Treasury Department and the IRS may,
under §1.6109–2(h) of the final regula-
tions, prescribe in other guidance interim
procedures for tax return preparers to ap-
ply for a PTIN or register with the IRS.
2.Eligibility to Receive a PTIN
a.Foreign tax return preparers
The proposed regulations did not
specifically address foreign tax return pre-
parers who prepare tax returns or refund
claims. A frequent question in the public
comments was whether the regulations as
proposed would apply to foreign tax return
preparers. These commentators also asked
whether foreign tax return preparers who
do not have an SSN will be eligible for a
PTIN. Currently, both Form W–7P, “Ap-
plication for Preparer Tax Identification
Number,” and the existing online process
atwww.irs.govthat can be used to apply
for a PTIN require an applicant to provide
the applicant’s SSN. Many foreign tax re-
turn preparers are uncertain as to how they
will obtain a PTIN, if they are required to
have a PTIN.
The final regulations apply to tax re-
turn preparers regardless of United States
or foreign citizenship or residency. The
IRS will establish a process to obtain a
PTIN for tax return preparers who do not
have SSNs. The Treasury Department and
the IRS intend to issue transitional guid-
ance before December 31, 2010, which de-
scribes the process to obtain a PTIN for
foreign and other tax return preparers who
do not have SSNs.
b.User fees
The proposed regulations provided that,
in applying for a PTIN, tax return preparers
must pay a user fee that the IRS prescribes
in forms, instructions, or other guidance.
The proposed regulations also provided for
the IRS to prescribe the manner for renew-
ing a PTIN, including the payment of a
user fee. Some commentators objected to
the proposed requirement of a user fee to
obtain or renew a PTIN.Soleproprietors
and small preparation firms commented
that a user fee, combined with the poten-
tial costs of minimum competency testing
and for continuing education, would mate-
rially increase their business expenses.
The final regulations adopt the pro-
posed provisions under which the IRS
may prescribe requirements to apply for
or renew a PTIN, including the payment
of a user fee. By statute (31 U.S.C. 9701),
Congress authorized Federal agencies to
establish user fees. The Treasury De-
partment and the IRS will prescribe in
regulations the requirement to pay a user
fee, the amount of any fee, and the time
and manner of payment. A user fee to ob-
tain or renew a PTIN will be necessary to
recover the costs that the IRS will incur to
implement and administer the processes to
apply for and renew a PTIN. The amount
2010–46 I.R.B.654November 15, 2010

of a user fee will be reasonable and based
on accepted methods of calculation that
reflect the costs to the government, the
value of the service to the recipient, the
public policy or interest served, and other
relevant factors.
3.Terminology
a.Preparation of all or substantially all
of a tax return or claim for refund
The requirement to obtain a PTIN ap-
plies to individuals who for compensation
prepare, or assist in preparing, all or sub-
stantially all of a tax return or claim for
refund. Section 1.6109–2(g) of the pro-
posed regulations identified the following
non-exclusive list of factors to determine
whether an individual prepared or assisted
in preparing all or substantially all of a tax
return or claim for refund:
The complexity of the work performed
by the individual relative to the overall
complexity of the tax return or claim for
refund of tax;
The amount of the items of income, de-
ductions, or losses attributable to the work
performed by the individual relative to the
total amount of income, deductions, or
losses required to be correctly reported on
the tax return or claim for refund of tax;
and
The amount of tax or credit attributable
to the work performed by the individual
relative to the total tax liability required to
be correctly reported on the tax return or
claim for refund of tax.
Examples are included in the proposed
regulations to illustrate the provisions of
paragraph (g). The final regulations retain
these provisions, including the examples,
consistent with the definition of a tax re-
turn preparer adopted in paragraph (g)
of the final regulations. As explained,
this definition of tax return preparer for
purposes of these regulations is necessary
for meaningful oversight of tax return
preparation. The factors in paragraph (g)
provide guidance for applying the test of
whether an individual has prepared or as-
sisted with preparing all or substantially
allofataxreturnorclaimforrefund.
Paragraph (g) of the final regulations,
however, also adds a sentence not in the
proposed regulations to clarify that the
preparation of a form, statement, or sched-
ule, such as Schedule EIC (Form 1040),
“Earned Income Credit,” may constitute
the preparation of all or substantially all of
a tax return or claim for refund based on
the application of the factors in paragraph
(g).
Paragraph (h) of the final regulations
clarifies that the IRS may specify in other
appropriate guidance the returns, sched-
ules, and other forms to which these reg-
ulations will apply.
b.Registered tax return preparers
As provided in the proposed regula-
tions, to obtain a PTIN or other prescribed
identifying number, a tax return preparer
must be an attorney, certified public ac-
countant, enrolled agent, or registered tax
return preparer authorized to practice be-
fore the IRS under 31 U.S.C. 330 and Cir-
cular 230. This requirement will apply
after December 31, 2010, unless the IRS
prescribes exceptions, such as for a tran-
sitional period, as necessary for effective
tax administration. A number of the com-
ments noted a concern that the termregis-
tered tax return prepareris likely to cause
confusion in the marketplace for tax re-
turn preparation. The commentators are
concerned that this designation for a cer-
tain group of tax return preparers, when
listed with attorneys, certified public ac-
countants, and enrolled agents, may lead
the public to mistakenly infer that regis-
tered tax return preparers have credentials
and qualifications similar to those of attor-
neys, certified public accountants, and en-
rolled agents. Several commentators ob-
served that some registered tax return pre-
parers might even attempt to exploit this
confusion to their commercial advantage.
To avoid the potential for misperception,
the commentators advocate that the IRS
explain the distinctions between registered
tax return preparers and other practitioners
authorized to practicebeforetheIRSun-
der Circular 230. At least one commenta-
toralsorecommendedchangingtheterm
to “authorized tax return preparers.”
The final regulations adopt the term
registered tax return preparer. The Trea-
sury Department and the IRS conclude
that the term does not reasonably imply
that registered tax return preparers are au-
thorized to practice law or certified public
accountancy or act as enrolled agents or
that the term will cause material confusion
or misunderstanding by the public.
The role of registered tax return prepar-
ers and their authority to practice before
the IRS will be addressed in amendments
to Circular 230. The requirements and
process to become a registered tax return
preparer will be set forth in forms, instruc-
tions, and other appropriate guidance. In
that regard, some commentators that em-
ploy tax return preparers requested that the
IRS allow the employers to mass regis-
ter their employees (with a means for em-
ployers to subsequently validate through
the IRS an employee’s standing as a reg-
istered tax return preparer with a current
PTIN). The purpose of these final regula-
tions, however, is not to provide guidance
on the specific process for registration.
Special Analyses
It has been determined that these fi-
nal regulations are not a significant regu-
latory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations.
It has been determined that a final reg-
ulatory flexibility analysis under 5 U.S.C.
604 is required for this final rule. The anal-
ysis is set forth under the heading, “Final
Regulatory Flexibility Analysis.”
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ing these final regulations was submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business. The
Chief Counsel for Advocacy submitted
comments on the notice of proposed rule-
making, which are discussed elsewhere in
this preamble.
Final Regulatory Flexibility Analysis
When an agency either promulgates a
final rule that follows a required notice
of proposed rulemaking or promulgates a
final interpretative rule involving the inter-
nal revenue laws as described in 5 U.S.C.
603(a), the Regulatory Flexibility Act
(5 U.S.C. chapter 6) requires the agency
to “prepare a final regulatory flexibility
analysis.” A final regulatory flexibility
analysis must, pursuant to 5 U.S.C. 604(a),
contain the five elements listed in this
final regulatory flexibility analysis. For
November 15, 20106552010–46 I.R.B.

purposes of this final regulatory flexibility
analysis, a small entity is defined as a small
business, small nonprofit organization,
or small governmental jurisdiction.
5 U.S.C. 601(3)-(6). The Treasury
Department and the IRS conclude that
the final regulations (together with other
contemplated guidance provided for in
these regulations) will impact a substantial
number of small entities and the economic
impact will be significant.
A statement of the need for, and the
objectives of, the final rule
The final regulations are necessary for
tax administration. The final regulations
are needed to identify tax return preparers
and the tax returns and claims for refund
that they prepare, to aid the IRS’s over-
sight of tax return preparers, and to admin-
ister requirements intended to ensure that
tax return preparers are competent, trained,
and conform to rules of practice. Man-
dating a single type of identifying number
for all tax return preparers and assigning
a prescribed identifying number to regis-
tered tax return preparers is critical to ef-
fective oversight.
Taxpayers’ reliance on paid tax return
preparers has grown steadily in recent
decades, and a large number of U.S. tax-
payers rely on paid tax return preparers
for assistance in meeting the taxpayers’
income tax filing obligations. Beyond
preparing tax returns, tax return preparers
also help educate taxpayers about the tax
laws and facilitate electronic filing. Tax
return preparers provide advice to taxpay-
ers, identify items or issues for which the
law or guidance is unclear, and inform
taxpayers of the benefits and risks of po-
sitions taken on a tax return, and the tax
treatment or reporting of items and trans-
actions. Competent tax return preparers
who are well educated in the rules and
subject matter of their field can prevent
costly errors, potentially saving a taxpayer
from unwanted problems later on and re-
lieving the IRS from expending valuable
examination and collection resources.
Given the important role that tax re-
turn preparers play in Federal tax admin-
istration, the IRS has a significant inter-
est in being able to accurately identify tax
return preparers and monitor their tax re-
turn preparation activities. The final regu-
lations, therefore, enable the IRS to more
accurately identify taxreturn preparers and
improve the IRS’s ability to associate filed
tax returns and refund claims with the re-
sponsible tax return preparer. The final
regulations are intended to accomplish this
result, and thereby advance tax administra-
tion, by requiring all individuals who are
paid to prepare all or substantially all of
a tax return or claim for refund of tax to
obtain a preparer identifying number pre-
scribed by the IRS. Pursuant to the final
regulations, the IRS will require individu-
als who sign tax returns or claims for re-
fund to furnish the tax return preparer’s
PTIN on a tax return or claim for refund
when the return or refund claim is signed.
The final regulations also provide that the
IRS may require tax return preparers to ap-
ply for, and regularly renew, their PTINs.
Under the final regulations, the IRS may
prescribe a user fee payable when apply-
ing for a number and for renewal.
Summaries of the significant issues raised
in the public comments responding to the
initial regulatory flexibility analysis and
of the agency’s assessment of the issues,
and a statement of any changes made to
the rule as a result of the comments
The IRS did not receive specific com-
ments from the public responding to the
initial regulatory flexibility analysis in the
proposed regulations that preceded these
final regulations. The IRS did receive
comments from the public on the proposed
amendments to §1.6109–2. A summary of
the comments is set forth elsewhere in this
preamble, along with the Treasury Depart-
ment’s and the IRS’s assessment of the is-
sues raised in the comments and descrip-
tions of any revisions resulting from the
comments.
A description and an estimate of the
number of small entities to which the rule
will apply or an explanation of why an
estimate is not available
The final regulations apply to individ-
uals who prepare tax returns and claims
for refund of tax. The estimated number
of paid tax return preparers is as high as
1.2 million, which means the final regula-
tions are likely to impact a large number
of individuals. Most paid tax return pre-
parers are employed by firms. A substan-
tial number of paid tax return preparers are
employed at small tax return preparation
firms or are self-employed tax return pre-
parers. Any economic impact of these reg-
ulations on small entities generally will be
on self-employed tax return preparers who
prepare and sign tax returns or on small
businesses that employ one or more indi-
viduals who prepare tax returns.
The appropriate NAICS codes for
PTINs are those that relate to tax prepa-
ration services (NAICS code 541213),
other accounting services (NAICS code
541219), offices of lawyers (NAICS code
541110), and offices of certified public ac-
countants (NAICS code 541211). Entities
identified as tax preparation services and
offices of lawyers are considered small
under the SBA’s size standards (13 CFR
121.201) if their annual revenue is less
than $7 million. Entities identified as
other accounting services and offices of
certified public accountants are consid-
ered small under the SBA’s size standards
if their annual revenue is less than $8.5
million. The IRS estimates that approxi-
mately 70 to 80 percent of the individuals
subject to these final regulations are tax
return preparers operating as, or employed
by, small entities.
A description of the projected reporting,
recordkeeping, and other compliance
requirements of the rule, including an
estimate of the classes of small entities
subject to the requirements and the
type of professional skills necessary for
preparation of a report or record
The final regulations do not directly
impose any reporting, recordkeeping, or
similar requirements on any small entities.
Rather, the final regulations provide that
the IRS may prescribe in forms, instruc-
tions, or other guidance (including regu-
lations) requirements for PTINs issued to
tax return preparers, regular renewal of
PTINs, and payment of a user fee when
applying for or renewing a PTIN. In ad-
dition, other guidance may require cer-
tain tax return preparers to complete com-
petency testing, complete continuing edu-
cation courses, and adhere to established
rules of practice governing attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, and enrolled retirement
plan agents.
Applying for a PTIN and subsequent
renewal will require reporting of certain
2010–46 I.R.B.656November 15, 2010

information, but they are not expected
to require recordkeeping. No particu-
lar or special professional skills will be
necessary. These activities also will not
require the purchase or use of any special
business equipment or software. To the
extent it will be necessary to apply for a
PTIN (or similar identifying number that
may subsequently replace a PTIN) online
atwww.irs.gov,mostifnotalltaxreturn
preparation businesses have computers
and Internet access. The IRS estimates
that applying for a PTIN will take 10 to 20
minutes per individual, with an average of
15 minutes per individual.
Under amendments to Circular 230 that
the IRS will issue to implement recom-
mendations in the Report, tax return pre-
parers who apply to be registered tax re-
turn preparers and who regularly renew
their status may be subject to recordkeep-
ing requirements because they may be re-
quired to maintain specified records, such
as documentation and educational materi-
als relating to completion of continuing ed-
ucation courses. These requirements do
not involve any specific professional skills
other than general recordkeeping abilities
already needed to own and operate a small
business or to competently act as a tax re-
turn preparer. It is estimated that tax re-
turn preparers will annually spend approx-
imately 30 minutes to 1 hour in maintain-
ing records relating to the continuing ed-
ucation requirements, depending on indi-
vidual circumstances.
A separate regulation addressing rea-
sonable user fees has been proposed. Tax
return preparers may be required to pay a
user fee when first applying for a PTIN and
at every renewal. Small entities may be af-
fected by these costs if the entities choose
to pay some or all of these fees for their
employees.
Under the amendments to Circular
230, tax return preparers may also incur
costs for commercial continuing education
courses and minimum competency exam-
inations, plus incidental costs, such as for
travel and accommodations, in order to
maintain their status as registered tax re-
turn preparers under Circular 230. Course
prices can vary greatly, from free to hun-
dreds of dollars. Many small tax return
preparation firms may choose, as with the
user fee, to bear these costs for their em-
ployees. In some cases, small entities may
lose sales and profits while their employed
tax return preparers attend training or edu-
cational classes or are studying and sitting
for examinations. Some small entities
that employ tax return preparers may even
need to alter their business operations if a
significant number of their employees can-
not satisfy the necessary registration and
competency requirements. The Treasury
Department and the IRS conclude, how-
ever, that only a small percentage of small
entities, if any, may need to cease doing
business or radically change their business
model due to the final regulations.
Although each of the reporting and
recordkeeping requirements and the costs
identified above (in connection with the
final regulations and the other anticipated
guidance necessary to implement the Re-
port) is not expected to singly result in
a significant economic impact, taken to-
gether it is anticipated that they may have
a significant economic impact on a sub-
stantial number of small entities.
A description of the steps the agency has
taken to minimize the significant economic
impact on small entities consistent with the
stated objectives of applicable statutes,
including a statement of the factual,
policy, and legal reasons for selecting
any alternative adopted in the final rule
and why other significant alternatives
affecting the impact on small entities that
the agency considered were rejected
The Treasury Department and the IRS
are not aware of any steps that could be
taken to minimize the economic impact on
small entities that would also be consistent
with the objectives of these final regula-
tions. These regulations do not impose any
more requirements onsmall entities than
are necessary to effectively administer the
internal revenue laws. Further, the regu-
lations do not subject small entities to any
requirements that are not also applicable to
larger entities covered by the regulations.
The Treasury Department and the IRS
have determined that there are no viable
alternatives to the final regulations that
would enable the IRS to accurately iden-
tify tax return preparers, other than through
the use of a PTIN, as provided in the reg-
ulations.
The Treasury Department and the IRS
considered alternatives at multiple points.
These final regulations are, in large mea-
sure, an outgrowth of, and in part carry
out, the Report, which extensively re-
viewed different approaches to improving
how the IRS oversees and interacts with
tax return preparers. As part of the Re-
port, the IRS received a large volume of
comments on the issue of increased over-
sight of tax return preparers generally and
on the proposed recommendation requir-
ing tax return preparers to use a uniform
prescribed identifying number. The com-
ments were received from all categories
of interested stakeholders, including tax
professional groups representing large and
small entities, IRS advisory groups, tax
return preparers, and the public. The in-
put received from this large and diverse
community overwhelmingly expressed
support for the proposed requirements.
Among the alternatives contemplated at
the time were:
(1) Requiring all paid tax return prepar-
ers to comply with the ethical standards in
Circular 230 or an ethics code similar to
Circular 230, but not requiring any paid
preparers to demonstrate their qualifica-
tion and competency;
(2) Requiring tax return preparers who
are not currently authorized to practice be-
fore the IRS to register with the IRS, com-
plete annual continuing education require-
ments, and meet certain ethical standards,
but not to pass a minimum competency ex-
amination;
(3) Requiring all paid tax return prepar-
ers to pass a minimum competency exami-
nation and meet other registration require-
ments; and
(4) Requiring all paid tax return pre-
parers who are not currently authorized to
practice before the IRS to pass a minimum
competency examination and meet other
registration requirements, but “grandfather
in” tax return preparers who have accu-
rately and competently prepared tax re-
turns for a certain period of years.
These and other issues were raised
in the public comments to the proposed
regulations and were carefully consid-
ered in developing the final regulations.
After consideration of all of the various
alternatives and the responses received
in the public comment process, the Trea-
sury Department and the IRS conclude
that the provisions of the final regulations
will most effectively promote sound tax
administration. Establishing a single, pre-
scribed identifying number for tax return
preparers will enable the IRS to accurately
November 15, 20106572010–46 I.R.B.

identify tax return preparers, match pre-
parers with the tax returns and claims for
refund they prepare, and better adminis-
ter the tax laws with respect to tax return
preparers and their clients.
Under the final regulations and the
additional guidance described, the IRS
will establish a process intended to assign
PTINs only to qualified, competent, and
ethical tax return preparers. The testing
requirements that may be set forth in other
guidance will establish a benchmark of
minimum competency necessary for tax
return preparers to obtain their profes-
sional credentials, while the purpose of
the continuing education provisions is to
require tax return preparers to remain cur-
rent on the Federal tax laws and continue
to develop their tax knowledge. The ex-
tension in other, prospective guidance of
the rules in Circular 230 to any paid tax
return preparer will require all practition-
ers to meet certain ethical standards and
allow the IRS to suspend or otherwise ap-
propriately discipline tax return preparers
who engage in unethical or disreputable
conduct. Accordingly,the implementation
of qualification and competency standards
is expected to increase tax compliance and
allow taxpayers to be confident that the
tax return preparers to whom they turn for
assistance are knowledgeable, skilled, and
ethical.
Drafting Information
The principal author of these final regu-
lations is Stuart Murray of the Office of the
Associate Chief Counsel, Procedure and
Administration.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6109–2 also issued under
26 U.S.C. 6109(a). * * *
Par. 2. Section 1.6109–2 is amended
by revising the section heading, revising
paragraphs (a)(2) and (d), and adding para-
graphs (e), (f), (g), (h), and (i) to read as
follows:
§1.6109–2 Tax return preparers
furnishing identifying numbers for
returns or claims for refund and related
requirements.
(a) * * *
(2)(i) For tax returns or claims for re-
fund filed on or before December 31, 2010,
the identifying number of an individual tax
return preparer is that individual’s social
security number or such alternative num-
ber as may be prescribed by the Internal
Revenue Service in forms, instructions, or
other appropriate guidance.
(ii) For tax returns or claims for re-
fund filed after December 31, 2010, the
identifying number of a tax return preparer
is the individual’s preparer tax identifica-
tion number or such other number pre-
scribed by the Internal Revenue Service
in forms, instructions, or other appropriate
guidance.
*****
(d) Beginning after December 31, 2010,
all tax return preparers must have a pre-
parer tax identification number or other
prescribed identifying number that was ap-
plied for and received at the time and in the
manner, including the payment of a user
fee, as may be prescribed by the Internal
Revenue Service in forms, instructions, or
other appropriate guidance. Except as pro-
vided in paragraph (h) of this section, be-
ginning after December 31, 2010, to ob-
tain a preparer tax identification number or
other prescribed identifying number, a tax
return preparer must be an attorney, certi-
fied public accountant, enrolled agent, or
registered tax return preparer authorized to
practice before the Internal Revenue Ser-
vice under 31 U.S.C. 330 and the regula-
tions thereunder.
(e) The Internal Revenue Service may
designate an expiration date for any pre-
parer tax identification number or other
prescribed identifying number and may
further prescribe the time and manner
for renewing a preparertax identification
number or other prescribed identifying
number, including the payment of a user
fee, as set forth in forms, instructions, or
other appropriate guidance. The Internal
Revenue Service may provide that any
identifying number issued by the Internal
Revenue Service prior to the effective date
of this regulation will expire on Decem-
ber 31, 2010, unless properly renewed as
set forth in forms, instructions, or other
appropriate guidance, including these reg-
ulations.
(f) As may be prescribed in forms, in-
structions, or other appropriate guidance,
the IRS may conduct a Federal tax com-
pliance check on a tax return preparer who
applies for or renews a preparer tax identi-
fication number or other prescribed identi-
fying number.
(g) Only for purposes of paragraphs (d),
(e), and (f) of this section, the termtax re-
turn preparermeans any individual who
is compensated for preparing, or assist-
ing in the preparation of, all or substan-
tially all of a tax return or claim for re-
fund of tax. Factors to consider in de-
termining whether an individual is a tax
return preparer under this paragraph (g)
include, but are not limited to, the com-
plexity of the work performed by the in-
dividual relative to the overall complex-
ity of the tax return or claim for refund
of tax; the amount of the items of in-
come, deductions, or losses attributable to
the work performed by the individual rel-
ative to the total amount of income, de-
ductions, or losses required to be correctly
reportedonthetaxreturnorclaimforre-
fund of tax; and the amount of tax or credit
attributable to the work performed by the
individual relative to the total tax liabil-
ityrequiredtobecorrectlyreportedonthe
tax return or claim for refund of tax. The
preparation of a form, statement, or sched-
ule, such as Schedule EIC (Form 1040),
“Earned Income Credit,” may constitute
the preparation of all or substantially all
of a tax return or claim for refund based
on the application of the foregoing fac-
tors. A tax return preparer does not in-
clude an individual who is not otherwise a
tax return preparer as that term is defined
in §301.7701–15(b)(2), or who is an indi-
vidual described in §301.7701–15(f). The
provisions of this paragraph (g) are illus-
trated by the following examples:
Example 1. Employee A, an individual employed
byTaxReturnPreparerB,assistsTaxReturnPreparer
B in answering telephone calls, making copies, in-
putting client tax information gathered by B into the
data fields of tax preparation software on a computer,
and using the computer to file electronic returns of tax
prepared by B. Although Employee A must exercise
judgment regarding which data fields in the tax prepa-
2010–46 I.R.B.658November 15, 2010

ration software to use, A does not exercise any discre-
tion or independent judgment as to the clients’ under-
lying tax positions. Employee A, therefore, merely
provides clerical assistanceor incidental services and
is not a tax return preparer required to apply for a
PTIN or other identifying number as the Internal Rev-
enue Service may prescribe in forms, instructions, or
other appropriate guidance.
Example 2. ThefactsarethesameasinExam-
ple 1, except that Employee A also interviews B’s
clients and obtains from them information needed for
the preparation of tax returns. Employee A deter-
mines the amount and character of entries on the re-
turns and whether the information provided is suf-
ficient for purposes of preparing the returns. For at
least some of B’s clients, A obtains information and
makes determinations that constitute all or substan-
tially all of the tax return. Employee A is a tax return
preparer required to apply for a PTIN or other iden-
tifying number as the Internal Revenue Service may
prescribe in forms, instructions, or other appropriate
guidance. Employee A is a tax return preparer even
if Employee A relies on tax preparation software to
prepare the return.
Example 3. C is an employee of a firm that
prepares tax returns and claims for refund of tax
for compensation. C is responsible for preparing a
Form 1040, “U.S. Individual Income Tax Return,”
for a client. C obtains the information necessary
for the preparation of the tax return during a meet-
ing with the client, and makes determinations with
respect to the proper application of the tax laws to
the information in order to determine the client’s tax
liability. C completes the tax return and sends the
completedreturntoemployeeD,whoreviewsthe
return for accuracy before signing it. Both C and D
are tax return preparers required to apply for a PTIN
or other identifying number as the Internal Revenue
Service may prescribe in forms, instructions, or other
appropriate guidance.
Example 4. E is an employee at a firm which pre-
pares tax returns and claims for refund of tax for com-
pensation. The firm is engaged by a corporation to
prepare its Federal income tax return on Form 1120,
“U.S. Corporation Income Tax Return.” Among the
documentation that the corporation provides to E in
connection with the preparation of the tax return is
documentation relating to the corporation’s potential
eligibility to claim a recently enacted tax credit for the
taxable year. In preparing the return, and specifically
for purposes of the new tax credit, E (with the cor-
poration’s consent) obtains advice from F, a subject
matter expert on this and similar credits. F advises
E as to the corporation’s entitlement to the credit and
provides his calculation of the amount of the credit.
Based on this advice from F, E prepares the corpora-
tion’s Form 1120 claiming the tax credit in the amount
recommended by F. The additional credit is one of
many tax credits and deductions claimed on the tax
return, and determining the credit amount does not
constitute preparation of all or substantially all of the
corporation’s tax return under this paragraph (g). F
will not be considered to have prepared all or substan-
tially all of the corporation’s tax return, and F is not
a tax return preparer required to apply for a PTIN or
other identifying number as the Internal Revenue Ser-
vice may prescribe in forms, instructions, or other ap-
propriate guidance. The analysis is the same whether
or not the tax credit is a substantial portion of the re-
turn under §301.7701–15 of this chapter (as opposed
to substantially all of the return), and whether or not
F is in the same firm with E. E is a tax return preparer
required to apply for a PTIN or other identifying num-
ber as the Internal Revenue Service may prescribe in
forms, instructions, or other appropriate guidance.
(h) The Internal Revenue Service,
through forms, instructions, or other ap-
propriate guidance, may prescribe excep-
tions to the requirements of this section,
including the requirement that an individ-
ual be authorized to practice before the
Internal Revenue Service before receiving
a preparer tax identification number or
other prescribed identifying number, as
necessary in the interest of effective tax
administration. The Internal Revenue Ser-
vice, through other appropriate guidance,
may also specify specific returns, sched-
ules, and other forms that qualify as tax
returns or claims for refund for purposes
of these regulations.
(i)Effective/applicability date. Para-
graph (a)(1) of this section is applicable to
tax returns and claims for refund filed after
December 31, 2008. Paragraph (a)(2)(i)
of this section is applicable to tax returns
and claims for refund filed on or before
December 31, 2010. Paragraph (a)(2)(ii)
of this section is applicable to tax returns
and claims for refund filed after Decem-
ber 31, 2010. Paragraph (d) of this sec-
tion is applicable to tax return preparers
after December 31, 2010. Paragraphs (e)
through (h) of this section are effective af-
ter September 30, 2010.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION
ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 USC 7805.
Par. 4. In §602.101, paragraph (b)
is amended by revising the entry for
“1.6109–2” in the table to read as follows:
§601.101 OMB Control numbers.
*****
(b) * * *
CFR part or section where
identified and described
Current OMB
control No.
*****
1.6109–2...........................................................
1545–2176
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved August 11, 2010.
Michael Mundaca,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on September 28,
2010, 11:15 a.m., and published in the issue of the Federal
Register for September 30, 2010, 75 F.R. 60309)
Section 6323.—Validity
and Priority Against
Certain Persons
The Service provides inflation adjustments for cal-
endar year 2011 to (1) the maximum amount of a ca-
sual sale of personal property below which a federal
tax lien will not be valid against a purchaser of the
property and (2) the maximum amount of a contract
for the repair or improvement of certain residential
property at or below which a federal tax lien will not
be valid against a mechanic’s lienor. See Rev. Proc.
2010-40, page 663.
Sectio
n 6334.—Property
Exempt From Levy
The Service provides inflation adjustments to the
value of certain property exempt from levy (fuel, pro-
visions, furniture, household personal effects, arms
for personal use, livestock, poultry, and books and
tools of a trade, business or profession) for calendar
year 2011. See Rev. Proc. 2010-40, page 663.
November 15, 20106592010–46 I.R.B.

Section 6601.—Interest
on Underpayment,
Nonpayment or Extension
of Time for Payment, of Tax
The Service provides an inflation adjustment to
the amount used to determine the amount of interest
charged on a certain portion of the estate tax payable
in installments for the estate of a decedent dying in
calendar year 2011. See Rev. Proc. 2010-40, page
663.
Section 7430.—Awarding
of Costs and Certain Fees
The Service provides an inflation adjustment to
the hourly limit on attorney fees incurred in calen-
dar year 2011 that may be awarded in a judgement or
settlement of an administrative or judicial proceeding
concerning the determination, collection, or refund of
tax, interest, or penalty. See Rev. Proc. 2010-40,
page 663.
Section 7702B.—Treatment
of Qualified Long-Term
Care Insurance
The Service provides an inflation adjustment to the
stated dollar amount for calendar year 2011 of theper
diemlimitation regarding periodic payments received
under a qualified long-term care insurance contract
or periodic payments received under a life insurance
contract that are treated aspaid by reason of the death
of a chronically ill individual. See Rev. Proc. 2010-
40, page 663.
2010–46 I.R.B.660November 15, 2010

Part III. Administrative, Procedural, and Miscellaneous
2010 Section 43 Inflation
Adjustment
Notice 2010–72
Section 43(b)(3)(B) of the Internal
Revenue Code requires the Secretary to
publish an inflation adjustment factor.
The enhanced oil recovery credit under
§ 43 for any taxable year is reduced if
the “reference price,” determined under
§ 45K(d)(2)(C), for the calendar year
preceding the calendar year in which the
taxable year begins is greater than $28
multiplied by the inflation adjustment fac-
tor for that year. The credit is phased out
in any taxable year in which the reference
price for the preceding calendar year ex-
ceeds $28 (as adjusted) by at least $6.
The term “inflation adjustment factor”
means, with respect to any calendar year,
a fraction the numerator of which is the
GNP implicit price deflator for the preced-
ing calendar year and the denominator of
which is the GNP implicit price deflator
for 1990.
Because the reference price for the 2009
calendar year ($56.39) exceeds $28 mul-
tiplied by the inflation adjustment factor
for the 2009 calendar year ($42.57) by
$13.82, the enhanced oil recovery credit
for qualified costs paid or incurred in 2010
is phased out completely.
Table 1 contains the GNP implicit price
deflator used for the 2010 calendar year,
as well as the previously published GNP
implicit price deflators used for the 1991
through 2009 calendar years.
Notice 2010–72 TABLE 1
GNP IMPLICIT PRICE DEFLATORS
CalendarYearGNPImplicitPriceDeflator
1990112.9 (used for 1991)
1991117.0 (used for 1992)
1992120.9 (used for 1993)
1993124.1 (used for 1994)
1994
126.0 (used for 1995)*
1995107.5 (used for 1996)
1996109.7 (used for 1997)**
1997
112.35 (used for 1998)
1998112.64 (used for 1999)***
1999
104.
59 (used for 2000)
2000106.89 (used for 2001)
2001109.
31 (used for 2002)
2002110.63 (used for 2003)
2003
105.67 (used for 2004)****
2004
108.23 (used for 2005)
20
05
112.129 (used for 2006)
2006116.036 (used for 2007)
2
007
119.656 (used for 2008)
2008122.407 (used for 2009)
2009109.764 (used for 2010)*****
* Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price
deflator used to compute the 1996 § 43 inflation adjustment factor is 93.6.
** Beginning in 1997, two digits follow the decimal pointin the GNP implicit price deflator. The 1990 GNP price
deflator used to compute the 1998 § 43 inflation adjustment factor is 93.63.
*** Beginning in 1999, the GNP implicit price deflator was rebased relative to 1996. The 1990 GNP implicit price
deflator used to compute the 2000 § 43 inflation adjustment factor is 86.53.
**** Beginning in 2003, the GNP implicit price deflatorwas rebased, and the 1990 GNP implicit price deflator
used to compute the 2004 § 43 inflation adjustment factor is 81.589.
***** Beginning in 2009, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator
used to compute the 2010 § 43 inflation adjustment factor is 72.199.
Table 2 contains the inflation adjust-
ment factor and the phase-out amount
for taxable years beginning in the 2010
calendar year as well as the previously
published inflation adjustment factors and
phase-out amounts for taxable years be-
ginning in the 1991 through 2009 calendar
years.
November 15, 20106612010–46 I.R.B.

2010–72 TABLE 2
INFLATION ADJUSTMENT FACTORS AND PHASE-OUT AMOUNTS
Calendar
Year
InflationAdjustment
Factor
Phase-out
Amount
19911.00000
19921.03630
19931.07080
19941.09920
1995
1.11600
1996
1.1485
0
19971.17200
19981.19990
19991.20300
20001.20870
2001
1.2353
0
20021.26330
2003
1.2785
0
2004
1.2952
0
2005
1.32660
20061.3743100 perce
nt
20071.4222100 percent
20081.4666100 percent
2009
1.5003
100 percent
2010
1.5203
100 percent
DRAFTING INFORMATION
The principal author of this notice
is Martha S. McRee of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further in-
formation regarding this notice, contact
Ms. McRee at (202) 622–3110 (not a
toll-free call).
2010 Marginal Production
Rates
Notice 2010–73
This notice announces the applicable
percentage under § 613A of the Internal
Revenue Code to be used in determining
percentage depletion for marginal proper-
ties for the 2010 calendar year.
Section 613A(c)(6)(C) defines the term
“applicable percentage” for purposes of
determining percentage depletion for oil
and gas produced from marginal proper-
ties. The applicable percentage is the per-
centage (not greater than 25 percent) equal
to the sum of 15 percent, plus one per-
centage point for each whole dollar by
which $20 exceeds the reference price (de-
termined under § 45K(d)(2)(C)) for crude
oil for the calendar year preceding the cal-
endar year in which the taxable year be-
gins. The reference price determined un-
der § 45K(d)(2)(C) for the 2009 calendar
year is $56.39.
Table 1 contains the applicable percent-
ages for marginal production for taxable
years beginning in calendar years 1991
through 2010.
2010–46 I.R.B.662November 15, 2010

Notice 2010–73 Table 1
APPLICABLE PERCENTAGE FOR MARGINAL PRODUCTION
CalendarYearApplicablePercentage
1991
15 percent
199218 percent
199319 percent
199420 percent
1995
21 percent
199620 percent
199716 percent
199817 percent
199924 percent
200019 percent
2001
15 percent
2002
15 percent
2003
15 percent
2004
15 percent
200515 percent
2006
15 percent
2007
15 percent
2008
15 percent
2009
15 percent
2010
15 perc
ent
The principal author of this notice
is Martha S. McRee of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further in-
formation regarding this notice, contact
Ms. McRee at (202) 622–3110 (not a
toll-free call).
2010 National Pool
Notice 2010–74
This notice informs taxpayers that there
is no unused housing credit carryover
amount to be allocated to qualified states
under § 42(h)(3)(D) of the Internal Rev-
enue Code for calendar year 2010.
Rev. Proc. 92–31, 1992–1 C.B. 775,
provides guidance tostate housing credit
agencies of qualified states on the pro-
cedure for requesting an allocation of
unused housing credit carryovers under
§ 42(h)(3)(D). Section 4.06 of Rev. Proc.
92–31 provides that the Internal Rev-
enue Service will publish in the Internal
Revenue Bulletin the amount of unused
housing credit carryovers allocated to
qualified states for a calendar year from
a national pool of unused credit authority
(the National Pool). Qualified states are
states that have allocated all their credits
in a calendar year and who request, by
May 1st of the following calendar year,
to receive an allocation of credit from the
National Pool determined in the year of
the request.
For 2010 there is no unused housing
credit carryover amount assigned to the
National Pool. Consequently, there is no
National Pool amount from which credits
can be redistributed to qualified states.
The principal author of this notice is
Christopher J. Wilson of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further in-
formation regarding this notice, contact
Mr. Wilson at (202) 622–3040 (not a
toll-free call).
26 CFR 601.602: Tax forms and instructions.
(Also Part I, §§ 1, 36C, 42, 59, 62, 135, 137, 146,
147, 148, 170, 213, 220, 512, 513, 877, 877A, 911,
2032A, 2503, 2523, 4161, 6033, 6039F, 6323, 6334,
6601, 7430, 7702B; 1.148–3, 1.148–5.)
Rev. Proc. 2010–40
Table of Contents
SECTION 1. PURPOSE
SECTION 2. CHANGES
SECTION 3. 2011 ADJUSTED ITEMS
C
odeSection
.01UnearnedIncomeofMinorChildrenTaxedasifParent’sIncome(“KiddieTax”) ................ 1(g)
November 15, 20106632010–46 I.R.B.

.02AdoptionCredit.......................................................................... 36C
.03RehabilitationExpendituresTreatedasSeparateNewBuilding ................................ 42(e)
.04Low-IncomeHousingCredit .............................................................. 42(h)
.05AlternativeMinimumTaxExemptionforaChildSubjecttothe“KiddieTax”................... 59(j)
.06 Transportation Mainline Pipeline ConstructionIndustry Optional Expense Substantiation Rules for
PaymentstoEmployeesunderAccountablePlans ............................................... 62(c)
.07 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education
Expenses................................................................................... 135
.08AdoptionAssistancePrograms ............................................................ 137
.09PrivateActivityBondsVolumeCap........................................................ 146(d)
.10LoanLimitsonAgriculturalBonds......................................................... 147(c)(2)
.11GeneralArbitrageRebateRules............................................................ 148(f)
.12 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments
PurchasedforaYieldRestrictedDefeasanceEscrow............................................. 148
.13EligibleLong-TermCarePremiums........................................................ 213(d)(10)
.14MedicalSavingsAccounts ................................................................ 220
.15TreatmentofDuesPaidtoAgriculturalorHorticulturalOrganizations.......................... 512(d)
.16 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising
Campaigns ................................................................................. 513(h)
.17ExpatriationtoAvoidTax................................................................. 877
.18TaxResponsibilitiesofExpatriation........................................................ 877A
.19ForeignEarnedIncomeExclusion.......................................................... 911
.20 Valuation of Qualified Real Property in Decedent’s Gross Estate............................... 2032A
.21AnnualExclusionforGifts................................................................
2503 & 2523
.22TaxonArrowShafts...................................................................... 4161
.23 Reporting Exception for Certain Exempt Organizationswith Nondeductible Lobbying Expenditures 6033(e)(3)
.24 Notice of Large Gifts Received from Foreign Persons........................................ 6039F
.25PersonsAgainstWhomaFederalTaxLienIsNotValid....................................... 6323
.26PropertyExemptfromLevy............................................................... 6334
.27InterestonaCertainPortionoftheEstateTaxPayableinInstallments.......................... 6601(j)
.28AttorneyFeeAwards..................................................................... 7430
.29 Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or under Certain
LifeInsuranceContracts...................................................................... 7702B(d)
SECTION 4. EFFECTIVE DATE
SECTION 5. DRAFTING INFORMATION
SECTION 1. PURPOSE
This revenue procedure sets forth infla-
tion adjusted items for 2011.
SECTION 2. CHANGES
.01 This revenue procedure does not in-
clude the following items: the tax rate ta-
bles under § 1 of the Internal Revenue
Code (Code), the child tax credit under
§ 24, the Hope Scholarship and Lifetime
Learning Credits under § 25A, the earned
income credit under § 32, the standard de-
duction under § 63, the overall limitation
on itemized deductions under § 68, the
qualified transportation fringe under § 132,
the personal exemption under § 151, and
the interest on education loans under § 221.
Those items will be addressed in future
guidance.
.02 Sections 10909(a)(1) and (b) of the
Patient Protection and Affordable Care
Act of 2010, Pub. L. No. 111–148, 124
Stat. 119 (PPACA), redesignated § 23
of the Code as § 36C, made the adoption
credit refundable, and for taxable years be-
ginning in 2010, increased the maximum
adoption credit from $10,000 (as adjusted
2010–46 I.R.B.664November 15, 2010

for inflation under former § 23(h)) to
$13,170. For taxable years beginning
after December 31, 2010, the maximum
adoption credit amounts in § 36C(a)(3)
and (b)(1) are adjusted for inflation under
§ 36C(h). (See section 3.02 of this rev-
enue procedure and Rev. Proc. 2010–35,
2010–42 I.R.B. 438).
.03 For taxable years beginning in
2010, § 10909(a)(2) of PPACA increased
the maximum adoption assistance exclu-
sion under § 137(a)(2) and (b)(1) of the
Code from $10,000 (as adjusted for infla-
tion under former § 137(f)) to $13,170,
and amended the inflation adjustment
provisions of § 137(f). For taxable years
beginning after December 31, 2010, the
amounts under § 137(a)(2) and (b)(1)
are adjusted for inflation under amended
§ 137(f). (See section 3.08 of this revenue
procedure and Rev. Proc. 2010–35.)
.04 For taxable years beginning af-
ter December 31, 2009, and before
January 1, 2011, § 201(a) of the Hiring
Incentives to Restore Employment Act
of 2010, Pub. L. No. 111–147, 124
Stat. 71 (HIRE), amended § 179(b) of the
Code to temporarily increase the amount
of § 179 property placed into service
during the taxable year that a taxpayer
may elect to expense. In addition, for
taxable years beginning after December
31, 2009, § 201(a) of HIRE eliminated the
inflation adjustment to the dollar amounts
under § 179(b)(1) and (2). Accordingly,
those amounts are no longer included in
this revenue procedure. (See Rev. Proc.
2010–24, 2010–25 I.R.B. 764.)
.05 The passenger air transportation ex-
cise taxes imposed under § 4261(b) and
(c), as extended by § 2(b)(1) of the Airport
and Airway Extension Act of 2010, Part
III, Pub. L. No. 111–249, 124 Stat. 2627,
apply to transportation taken through De-
cember 31, 2010, and to amounts paid on
or before December 31, 2010, for trans-
portation beginningafter that date. Ac-
cordingly, the amounts in § 4261(b) and (c)
are not included in this revenue procedure.
SECTION 3. 2011 ADJUSTED ITEMS
.01Unearned Income of Minor
Children Taxed as if Parent’s Income
(the “Kiddie Tax”). For taxable years
beginning in 2011, the amount in
§ 1(g)(4)(A)(ii)(I), which is used to reduce
the net unearned income reported on the
child’s return that is subject to the “kiddie
tax,” is $950. The same $950 amount is
used for purposes of § 1(g)(7) (that is,
to determine whether a parent may elect
to include a child’s gross income in the
parent’s gross income and to calculate the
“kiddie tax”). For example, one of the re-
quirements for the parental election is that
a child’s gross income is more than the
amount referenced in § 1(g)(4)(A)(ii)(I)
but less than 10 times that amount; thus,
a child’s gross income for 2011 must be
more than $950 but less than $9,500.
.02Adoption Credit. For taxable years
beginning in 2011, under § 36C(a)(3)
the credit allowed for an adoption of a
child with special needs is $13,360. For
taxable years beginning in 2011, under
§ 36C(b)(1) the maximum credit allowed
for other adoptions is the amount of quali-
fied adoption expenses up to $13,360. The
available adoption credit begins to phase
out under § 36C(b)(2)(A) for taxpayers
with modified adjusted gross income in
excess of $185,210 and is completely
phased out for taxpayers with modified
adjusted gross income of $225,210 or
more. (See section 3.08 of this revenue
procedure for the adjusted items relating
to adoption assistance programs.)
.03Rehabilitation Expenditures
Treated as Separate New Building.For
calendar year 2011, the per low-in-
come unit qualified basis amount under
§ 42(e)(3)(A)(ii)(II) is $6,100.
.04Low-Income Housing Credit.For
calendar year 2011, the amount used un-
der § 42(h)(3)(C)(ii) to calculate the State
housing credit ceiling for the low-income
housing credit is the greater of (1) $2.15
multiplied by the State population, or (2)
$2,465,000.
.05Alternative Minimum Tax Exemp-
tion for a Child Subject to the “Kiddie
Tax.”For taxable years beginning in 2011,
for a child to whom the § 1(g) “kiddie tax”
applies, the exemption amount under §§ 55
and 59(j) for purposes of the alternative
minimum tax under § 55 may not exceed
the sum of (1) the child’s earned income
for the taxable year, plus (2) $6,800.
.06Transportation Mainline Pipeline
Construction Industry Optional Expense
Substantiation Rules for Payments to Em-
ployees under Accountable Plans.For
calendar year 2011, an eligible employer
may pay certain welders and heavy equip-
ment mechanics an amount of up to $16
per hour for rig-related expenses that is
deemed substantiated under an account-
able plan if paid in accordance with Rev.
Proc. 2002–41, 2002–1 C.B. 1098. If the
employer provides fuel or otherwise reim-
burses fuel expenses, up to $10 per hour
is deemed substantiated if paid under Rev.
Proc. 2002–41.
.07Income from United States Savings
Bonds for Taxpayers Who Pay Qualified
Higher Education Expenses. For taxable
years beginning in 2011, the exclusion un-
der § 135, regarding income from United
States savings bonds for taxpayers who
pay qualified higher education expenses,
begins to phase out for modified adjusted
gross income above $106,650 for joint
returns and $71,100 for other returns.
The exclusion is completely phased out
for modified adjusted gross income of
$136,650 or more for joint returns and
$86,100 or more for other returns.
.08Adoption Assistance Programs.For
taxable years beginning in 2011, under
§ 137(a)(2) the amount that can be ex-
cluded from an employee’s gross income
for the adoption of a child with special
needs is $13,360. For taxable years be-
ginning in 2011, under § 137(b)(1) the
maximum amount that can be excluded
from an employee’s gross income for the
amounts paid or expenses incurred by an
employer for qualified adoption expenses
furnished pursuant to an adoption assis-
tance program for other adoptions by the
employee is $13,360. The amount exclud-
able from an employee’s gross income be-
gins to phase out under § 137(b)(2)(A) for
taxpayers with modified adjusted gross in-
come in excess of $185,210 and is com-
pletely phased out for taxpayers with mod-
ified adjusted gross income of $225,210 or
more. (See section 3.02 of this revenue
procedure for the adjusted items relating to
the adoption credit.)
.09Private Activity Bonds Volume Cap.
For calendar year 2011, the amounts used
under § 146(d)(1) to calculate the State
ceiling for the volume cap for private
activity bonds is the greater of (1) $95
multiplied by the State population, or (2)
$277,820,000.
.10Loan Limit on Agricultural Bonds.
For calendar year 2011, the loan limit
amount on agricultural bonds under
§ 147(c)(2)(A) for first-time farmers is
$477,000.
November 15, 20106652010–46 I.R.B.

.11General Arbitrage Rebate Rules.
For bond years ending in 2011, the amount
of the computation credit determined
under § 1.148–3(d)(4) of the proposed
Income Tax Regulations is $1,520.
.12Safe Harbor Rules for Broker
Commissions on Guaranteed Invest-
ment Contracts or Investments Purchased
for a Yield Restricted Defeasance Es-
crow. For calendar year 2011, under
§ 1.148–5(e)(2)(iii)(B)(1), a broker’s com-
mission or similar fee for the acquisition
of a guaranteed investment contract or in-
vestments purchased for a yield restricted
defeasance escrow is reasonable if (1) the
amount of the fee that the issuer treats as
a qualified administrative cost does not
exceed the lesser of (A) $36,000, and (B)
0.2 percent of the computational base (as
defined in § 1.148–5(e)(2)(iii)(B)(2)) or,
if more, $4,000; and (2) the issuer does
not treat more than $101,000 in brokers’
commissions or similar fees as qualified
administrative costs for all guaranteed
investment contracts and investments for
yield restricted defeasance escrows pur-
chased with gross proceeds of the issue.
.13Eligible Long-Term Care Premi-
ums. For taxable years beginning in 2011,
the limitations under § 213(d)(10), re-
garding eligible long-term care premiums
includible in the term “medical care,” are
as follows:
Attained Age Before the Close of the Taxable YearLimitation on Premiums
40 or less
$340
More than 40 b
ut not more than 50
$640
More than 50 but not more than 60
$1,270
More than 60
but not more than 70
$3,390
More than 70
$4,240
.14Medical Savings Accounts.
(1)Self-only coverage. For taxable
years beginning in 2011, the term “high
deductible health plan” as defined in
§ 220(c)(2)(A) means,for self-only cov-
erage, a health plan that has an annual
deductible that is not less than $2,050 and
not more than $3,050, and under which the
annual out-of-pocket expenses required
to be paid (other than for premiums) for
covered benefits do not exceed $4,100.
(2)Family coverage. For taxable years
beginning in 2011, the term “high de-
ductible health plan” means, for family
coverage, a health plan that has an annual
deductible that is not less than $4,100 and
not more than $6,150, and under which the
annual out-of-pocket expenses required
to be paid (other than for premiums) for
covered benefits do not exceed $7,500.
.15Treatment of Dues Paid to Agricul-
tural or Horticultural Organizations.For
taxable years beginning in 2011, the limi-
tation under § 512(d)(1), regarding the ex-
emption of annual dues required to be paid
by a member to an agricultural or horticul-
tural organization, is $148.
.16Insubstantial Benefit Limitations
for Contributions Associated with Chari-
table Fund-Raising Campaigns.
(1)Low cost article. For taxable years
beginning in 2011, the unrelated business
income of certain exempt organizations
under § 513(h)(2) does not include a “low
cost article” of $9.70 or less.
(2)Other insubstantial benefits.For
taxable years beginning in 2011, the $5,
$25, and $50 guidelines in section 3 of
Rev. Proc. 90–12, 1990–1 C.B. 471 (as
amplified by Rev. Proc. 92–49, 1992–1
C.B. 987, and modified by Rev. Proc.
92–102, 1992–2 C.B. 579), for disregard-
ing the value of insubstantial benefits
received by a donor in return for a fully
deductible charitable contribution under
§ 170, are $9.70, $48.50, and $97, respec-
tively.
.17Expatriation to Avoid Tax.For
calendar year 2011, an individual with
“average annual netincome tax” of more
than $147,000 for the five taxable years
ending before the date of the loss of United
States citizenship under § 877(a)(2)(A)
is a covered expatriate for purposes of
§ 877A(g)(1).
.18Tax Responsibilities of Expatria-
tion. For taxable years beginning in 2011,
the amount that would be includible in the
gross income of a covered expatriate by
reason of § 877A(a)(1) is reduced (but not
below zero) by $636,000.
.19Foreign Earned Income Exclusion.
For taxable years beginning in 2011, the
foreign earned income exclusion amount
under § 911(b)(2)(D)(i) is $92,900.
.20Valuation of Qualified Real Prop-
erty in Decedent’s Gross Estate.Foran
estate of a decedent dying in calendar year
2011, if the executor elects to use the spe-
cial use valuation method under § 2032A
for qualified real property, the aggregate
decrease in the value of qualified real prop-
erty resulting from electing to use § 2032A
for purposes of the estate tax cannot ex-
ceed $1,020,000.
.21Annual Exclusion for Gifts.
(1) For calendar year 2011, the first
$13,000 of gifts to any person (other than
gifts of future interests in property) are
not included in the total amount of taxable
gifts under § 2503 made during that year.
(2) For calendar year 2011, the first
$136,000 of gifts to a spouse who is not
a citizen of the United States (other than
gifts of future interests in property) are
not included in the total amount of taxable
gifts under §§ 2503 and 2523(i)(2) made
during that year.
.22Tax on Arrow Shafts. For calen-
dar year 2011, the tax imposed under
§ 4161(b)(2)(A) on the first sale by the
manufacturer, producer, or importer of any
shaft of a type used in the manufacture of
certain arrows is $0.45 per shaft.
.23Reporting Exception for Certain
Exempt Organizations with Nondeductible
Lobbying Expenditures. For taxable years
beginning in 2011, the annual per per-
son, family, or entity dues limitation to
qualify for the reporting exception under
§ 6033(e)(3) (and section 5.05 of Rev.
Proc. 98–19, 1998–1 C.B. 547), regarding
certain exempt organizations with nonde-
ductible lobbying expenditures, is $103 or
less.
.24Notice of Large Gifts Received from
Foreign Persons. For taxable years begin-
ning in 2011, recipients of gifts from cer-
tainforeignpersonsmayberequiredtore-
port these gifts under § 6039F if the ag-
2010–46 I.R.B.666November 15, 2010

gregate value of gifts received in a taxable
year exceeds $14,375.
.25Persons Against Whom a Federal
Tax Lien Is Not Valid. For calendar year
2011, a federal tax lien is not valid against
(1) certain purchasers under § 6323(b)(4)
who purchased personal property in a
casual sale for less than $1,400, or (2)
a mechanic’s lienor under § 6323(b)(7)
that repaired or improved certain residen-
tial property if the contract price with the
owner is not more than $6,990.
.26Property Exempt from Levy.For
calendar year 2011, the value of property
exempt from levy under § 6334(a)(2) (fuel,
provisions, furniture, and other household
personal effects, as well as arms for per-
sonal use, livestock, and poultry) cannot
exceed $8,370. The value of property ex-
empt from levy under § 6334(a)(3) (books
and tools necessary for the trade, business,
or profession of the taxpayer) cannot ex-
ceed $4,180.
.27InterestonaCertainPortionofthe
Estate Tax Payable in Installments.Foran
estate of a decedent dying in calendar year
2011, the dollar amount used to determine
the “2-percent portion” (for purposes of
calculating interest under § 6601(j)) of the
estate tax extended as provided in § 6166
is $1,360,000.
.28Attorney Fee Awards. For fees
incurred in calendar year 2011, the
attorney fee award limitation under
§ 7430(c)(1)(B)(iii) is $180 per hour.
.29Periodic Payments Received un-
der Qualified Long-Term Care Insurance
Contracts or under Certain Life Insur-
ance Contracts. For calendar year 2011,
the stated dollar amount of theper diem
limitation under § 7702B(d)(4), regarding
periodic payments received under a qual-
ified long-term care insurance contract or
periodic payments received under a life
insurance contract that are treated as paid
by reason of the death of a chronically ill
individual, is $300.
SECTION 4. EFFECTIVE DATE
.01General Rule. Except as provided
in section 4.02, this revenue procedure ap-
plies to taxable years beginning in 2011.
.02Calendar Year Rule.Thisrev-
enue procedure applies to transactions or
events occurring in calendar year 2011
for purposes of sections 3.03 (rehabil-
itation expenditures treated as separate
new building), 3.04 (low-income hous-
ing credit), 3.06 (transportation mainline
pipeline construction industry optional
expense substantiation rules for payments
to employees under accountable plans),
3.09 (private activity bonds volume cap),
3.10 (loan limit on agricultural bonds),
3.11 (general arbitrage rebate rules), 3.12
(safe harbor rules for broker commissions
on guaranteed investment contracts or in-
vestments purchased for a yield restricted
defeasance escrow), 3.17 (expatriation to
avoid tax), 3.20 (valuation of qualified
real property in decedent’s gross estate),
3.21 (annual exclusion for gifts), 3.22 (tax
on arrow shafts), 3.25 (persons against
whom a federal tax lien is not valid), 3.26
(property exempt from levy), 3.27 (inter-
est on a certain portion of the estate tax
payable in installments), 3.28 (attorney
fee awards), and 3.29 (periodic payments
received under qualified long-term care
insurance contracts or under certain life
insurance contracts).
SECTION 5. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Christina M. Glendening of
the Office of Associate Chief Counsel
(Income Tax & Accounting). For further
information regarding this revenue pro-
cedure, contact Ms. Glendening at (202)
622–4920 (not a toll-free call).
November 15, 20106672010–46 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking by
Cross-Refere
nce to
Temporary Re
gulation
Disclosures
of Return
Information
Reflected on
Returns to O
fficers and
Employees o
ftheDepartment
of Commerc
eforCertain
Statistic
al Purposes and
Related A
ctivities
REG–1374
86–09
AGENCY: I
nternal Revenue Service
(IRS), Tr
easury.
ACTION: N
otice of proposed rulemaking
by cross-
reference to temporary regula-
tion.
SUMMARY:
In this issue of the Bulletin,
the IRS i
s issuing final and temporary reg-
ulation
s (T.D. 9500) to disclose return in-
formati
on to the Bureau of the Census.
The text
of the temporary regulations pub-
lished i
n this issue of the Bulletin serves as
the tex
t of these proposed regulations.
DATES:
Written and electronic comments
and req
uests for a public hearing must be
receiv
ed by November 24, 2010.
ADDRES
SES: Send submissions to:
CC:PA:
LPD:PR (REG–137486–09), room
5203, I
nternal Revenue Service, PO Box
7604,
Ben Franklin Station, Washing-
ton, D
C 20044. Submissions may be
hand-
delivered Monday through Friday
betwe
en the hours of 8 a.m. and 4 p.m.
to CC:
PA:LPD:PR (REG–137486–09),
Cour
ier’s Desk, Internal Revenue Ser-
vice
, 1111 Constitution Avenue, NW,
Wash
ington, DC or sent electronically,
via t
he Federal eRulemaking Portal at
www.
regulations.gov(indicate IRS and
REG–
137486–09).
FOR F
URTHER INFORMATION
CON
TACT: Concerning the proposed reg-
ula
tions, Melissa Segal, (202) 622–7950;
con
cerning submissions of comments,
Reg
ina Johnson, (202) 622–7180 (not
tol
l-free numbers).
SUPPLEMENTAR
Y INFORMATION:
Background
This document
contains proposed
amendments to
the Procedure and Admin-
istration reg
ulations [26 CFR Part 301]
relating to se
ction 6103(j)(1)(A) of the
Internal Rev
enue Code (Code). Section
6103(j)(1)(
A) of the Code authorizes the
Secretary of
the Treasury to furnish, upon
written requ
est by the Secretary of Com-
merce, such r
eturns or return information
as the Secre
tary of Treasury may prescribe
by regulati
on to officers and employees
of the Burea
u of the Census (Bureau) for
the purpose
of, but only to the extent nec-
essary in,
the structuring of censuses and
conductin
g related statistical activities au-
thorized b
y law. Section 301.6103(j)(1)–1
of the regu
lations provides an itemized de-
scriptio
n of the items of return information
authoriz
ed to be disclosed for this pur-
pose. Thi
s document contains proposed
regulati
ons authorizing the disclosure of
addition
al items requested by the Secre-
tary of Co
mmerce. The text of temporary
regulat
ions published in this issue of the
Bulleti
n also serves as the text of these
propose
d regulations. The preamble to the
tempora
ry regulations explains the tempo-
rary re
gulations.
Specia
lAnalyses
It has b
een determined this notice of
propos
ed rulemaking is not a significant
regula
tory action as defined in Executive
Order 1
2866. Therefore, a regulatory
assess
ment is not required. It also has
been d
etermined that section 553(b) of the
Admin
istrative Procedures Act (5 U.S.C.
chapt
er 5) does not apply to these regu-
latio
ns, and because the regulation does
not im
pose a collection of information on
small
entities, the Regulatory Flexibility
Act (
5 U.S.C. chapter 6) does not apply.
Purs
uant to section 7805(f) of the Code,
this
regulation has been submitted to the
Chie
f Counsel for Advocacy of the Small
Busi
ness Administration for comment on
its
impact on small business.
Comments and R
equests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and 8 copies) or electronic com-
ments that are timely submitted to the IRS.
The IRS and Treasury Department request
comments on the clarity of the proposed
rules and how they can be made easier to
understand. All comments will be avail-
able for public inspection and copying.
A public hearing will be scheduled if
requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hearing
will be published in theFederal Register.
Drafting Information
The prin
cipal author of these proposed
regulat
ions is Melissa Segal, Office of the
Associa
te Chief Counsel (Procedure &
Admini
stration).
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
PART
301—PROCEDURE AND
ADMI
NISTRATION.
Paragraph 1. The authority for part 301
continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6103(j)(1)–1
is amended by adding paragraphs
(b)(3)(xxix) and (b)(3)(xxx), and revising
paragraph (e) to read as follows:
§301.6103(j)(1)–1 Disclosures of return
information reflected on returns to officers
and employees of the Department of
Commerce, for certain statistical purposes
and related activities.
*
****
(
b) * * *
(
3) * * *
(x
xix) [The text of proposed
§
301.6103(j)(1)–1(b)(3)(xxix) is the
s
ameasthetextof
2010–46 I.R.B.668November 15, 2010

§301.6103(j)(1)–1T(b)(3)(xxix) published
elsewhere in this issue of the Bulletin].
(xxx)[Thetextofproposed
§301.6103(j)(1)–1(b)(3)(xxx) is the
sameasthetextof
§301.6103(j)(1)–1T(b)(3)(xxx) published
elsewhere in this issue of the Bulletin].
*****
(e)Effective/applicability date. Para-
graph (b)(3)(xxix) through (b)(3)(xxx) of
this section is applicable to disclosures to
the Bureau of the Census on or after the
date final regulations are published in the
Federal Register.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on August 25,
2010, 8:45 a.m., and published in the issue of the Federal
Register for August 26, 2010, 75 F.R. 52486)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2010–89
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed,
contributions from individuals and orga-
nizations described in section 170(c)(2)
that are otherwise allowable will continue
to be deductible. Protection under section
7428(c) would begin on November 15,
2010, and would end on the date the court
first determines that the organization is
not described 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.
Consumer Debt Management, Northeast
Methuen, MA
Partners in Charity, Inc
West Dundee, IL
Hope and Dreams Foundation
Palo Alto, CA
November 15, 20106692010–46 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2010–46 I.R.B.iNovember 15, 2010

Numerical Finding List
1
Bulletins 2010–27 through 2010–46
Announcements:
2010-43, 2010-27 I.R.B.42
2010-44, 2010-28 I.R.B.54
2010-45, 2010-29 I.R.B.87
2010-46, 2010-29 I.R.B.87
2010-47, 2010-30 I.R.B.173
2010-48, 2010-32 I.R.B.234
2010-49, 2010-34 I.R.B.272
2010-50, 2010-33 I.R.B.260
2010-51, 2010-33 I.R.B.261
2010-52, 2010-36 I.R.B.315
2010-53, 2010-36 I.R.B.323
2010-54, 2010-38 I.R.B.386
2010-55, 2010-37 I.R.B.346
2010-56, 2010-39 I.R.B.398
2010-57, 2010-38 I.R.B.386
2010-58, 2010-38 I.R.B.387
2010-59, 2010-39 I.R.B.399
2010-60, 2010-40 I.R.B.417
2010-61, 2010-40 I.R.B.417
2010-62, 2010-40 I.R.B.417
2010-63, 2010-40 I.R.B.417
2010-64, 2010-40 I.R.B.418
2010-65, 2010-40 I.R.B.418
2010-66, 2010-40 I.R.B.418
2010-67, 2010-40 I.R.B.418
2010-68, 2010-40 I.R.B.418
2010-69, 2010-40 I.R.B.418
2010-70, 2010-40 I.R.B.418
2010-71, 2010-40 I.R.B.418
2010-72, 2010-40 I.R.B.419
2010-73, 2010-40 I.R.B.419
2010-74, 2010-40 I.R.B.419
2010-75, 2010-41 I.R.B.428
2010-76, 2010-41 I.R.B.432
2010-77, 2010-41 I.R.B.433
2010-78, 2010-41 I.R.B.433
2010-79, 2010-42 I.R.B.475
2010-80, 2010-45 I.R.B.638
2010-81, 2010-45 I.R.B.638
2010-82, 2010-42 I.R.B.476
2010-84, 2010-44 I.R.B.603
2010-85, 2010-44 I.R.B.604
2010-86, 2010-44 I.R.B.604
2010-87, 2010-43 I.R.B.557
2010-89, 2010-46 I.R.B.669
Notices:
2010-48, 2010-27 I.R.B.9
2010-49, 2010-27 I.R.B.10
2010-50, 2010-27 I.R.B.12
2010-51, 2010-29 I.R.B.83
Notices— Continued:
2010-52, 2010-30 I.R.B.88
2010-53, 2010-31 I.R.B.182
2010-54, 2010-40 I.R.B.403
2010-55, 2010-33 I.R.B.253
2010-56, 2010-33 I.R.B.254
2010-57, 2010-34 I.R.B.267
2010-58, 2010-37 I.R.B.326
2010-59, 2010-39 I.R.B.396
2010-60, 2010-37 I.R.B.329
2010-61, 2010-40 I.R.B.408
2010-62, 2010-40 I.R.B.411
2010-63, 2010-41 I.R.B.420
2010-64, 2010-41 I.R.B.421
2010-65, 2010-41 I.R.B.424
2010-66, 2010-42 I.R.B.437
2010-67, 2010-43 I.R.B.529
2010-68, 2010-44 I.R.B.576
2010-69, 2010-44 I.R.B.576
2010-70, 2010-44 I.R.B.576
2010-72, 2010-46 I.R.B.661
2010-73, 2010-46 I.R.B.662
2010-74, 2010-46 I.R.B.663
Proposed Regulations:
REG-138637-07, 2010-44 I.R.B.581
REG-139343-08, 2010-33 I.R.B.256
REG-119921-09, 2010-45 I.R.B.626
REG-137486-09, 2010-46 I.R.B.668
REG-142800-09, 2010-44 I.R.B.580
REG-144762-09, 2010-45 I.R.B.637
REG-151605-09, 2010-31 I.R.B.184
REG-153340-09, 2010-42 I.R.B.469
REG-112841-10, 2010-27 I.R.B.41
REG-118412-10, 2010-29 I.R.B.85
REG-119046-10, 2010-40 I.R.B.415
REG-120391-10, 2010-35 I.R.B.310
REG-120399-10, 2010-32 I.R.B.239
REG-125592-10, 2010-43 I.R.B.556
Revenue Procedures:
2010-25, 2010-27 I.R.B.16
2010-26, 2010-30 I.R.B.91
2010-27, 2010-31 I.R.B.183
2010-28, 2010-34 I.R.B.270
2010-29, 2010-35 I.R.B.309
2010-30, 2010-36 I.R.B.316
2010-31, 2010-40 I.R.B.413
2010-32, 2010-36 I.R.B.320
2010-33, 2010-38 I.R.B.347
2010-34, 2010-41 I.R.B.426
2010-35, 2010-42 I.R.B.438
2010-36, 2010-42 I.R.B.439
2010-37, 2010-42 I.R.B.440
2010-38, 2010-43 I.R.B.530
2010-39, 2010-42 I.R.B.459
Revenue Procedures— Continued:
2010-40, 2010-46 I.R.B.663
Revenue Rulings:
2010-18, 2010-27 I.R.B.1
2010-19, 2010-31 I.R.B.174
2010-20, 2010-36 I.R.B.312
2010-21, 2010-39 I.R.B.388
2010-22, 2010-39 I.R.B.388
2010-23, 2010-39 I.R.B.388
2010-24, 2010-40 I.R.B.400
2010-25, 2010-44 I.R.B.571
2010-26, 2010-44 I.R.B.573
2010-27, 2010-45 I.R.B.620
Tax Conventions:
2010-48, 2010-32 I.R.B.234
2010-52, 2010-36 I.R.B.315
Treasury Decisions:
9486, 2010-27 I.R.B.3
9487, 2010-28 I.R.B.48
9488, 2010-28 I.R.B.51
9489, 2010-29 I.R.B.55
9490, 2010-31 I.R.B.176
9491, 2010-32 I.R.B.186
9492, 2010-33 I.R.B.242
9493, 2010-35 I.R.B.273
9494, 2010-43 I.R.B.500
9495, 2010-43 I.R.B.477
9496, 2010-43 I.R.B.484
9497, 2010-44 I.R.B.558
9498, 2010-45 I.R.B.605
9499, 2010-45 I.R.B.622
9500, 2010-46 I.R.B.649
9501, 2010-46 I.R.B.651
9502, 2010-46 I.R.B.641
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin
2010–26, dated June 28, 2010.
November 15, 2010ii2010–46 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–27 through 2010–46
Notices:
96-53
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2003-19
Revoked by
Notice 2010-53, 2010-31 I.R.B.182
2004-2
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2004-50
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2005-90
Supplemented by
Notice 2010-65, 2010-41 I.R.B.424
2006-69
Amplified by
Notice 2010-59, 2010-39 I.R.B.396
2008-51
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2008-52
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2009-47
Obsoleted by
Rev. Proc. 2010-28, 2010-34 I.R.B.270
2009-80
Corrected by
Ann. 2010-59, 2010-39 I.R.B.399
2009-90
Superseded by
Notice 2010-54, 2010-40 I.R.B.403
Proposed Regulations:
REG-115037-00
Withdrawn by
Ann. 2010-60, 2010-40 I.R.B.417
REG-146893-02
Withdrawn by
Ann. 2010-60, 2010-40 I.R.B.417
Revenue Procedures:
81-18
Obsoleted by
Rev. Proc. 2010-27, 2010-31 I.R.B.183
Revenue Procedures— Continued:
2007-44
Modified by
Notice 2010-48, 2010-27 I.R.B.9
2008-49
Superseded by
Rev. Proc. 2010-38, 2010-43 I.R.B.530
2009-18
Obsoleted in part by
Rev. Proc. 2010-25, 2010-27 I.R.B.16
2009-30
Superseded by
Rev. Proc. 2010-26, 2010-30 I.R.B.91
2009-35
Superseded by
Rev. Proc. 2010-33, 2010-38 I.R.B.347
2009-46
Superseded by
Rev. Proc. 2010-37, 2010-42 I.R.B.440
2009-47
Superseded by
Rev. Proc. 2010-39, 2010-42 I.R.B.459
2009-50
Modified by
Rev. Proc. 2010-35, 2010-42 I.R.B.438
2010-3
Modified by
Notice 2010-62, 2010-40 I.R.B.411
Revenue Rulings:
2003-102
Obsoleted by
Rev. Rul. 2010-23, 2010-39 I.R.B.388
Treasury Decisions:
9487
Corrected by
Ann. 2010-50, 2010-33 I.R.B.260
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin 2010–26, dated June 28, 2010.
2010–46 I.R.B.iiiNovember 15, 2010

November 15, 20102010–46 I.R.B.

INTERNAL REVENUE BULLETIN
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