Internal Revenue Bulletin 2014-5 (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.

HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2014–4, page 449.
Insurance companies; interest rate tables. Prevailing state as-
sumed interest rates are provided for the determination of
reserves under section 807 of the Internal Revenue Code for
contracts issued in 2013 and 2014. Rev. Rul. 92–19 is sup-
plemented in part.
Notice 2014–9, page 455.
This Notice provides guidance on current refunding of out-
standing prior issues of bonds that met the qualification re-
quirements for Recovery Zone Facility Bonds under § 1400U–3
of the Internal Revenue Code.
Rev. Proc. 2014–15, page 456.
This revenue procedure updates Rev. Proc. 2012–51,
2012–51 I.R.B. 719 and identifies circumstances under which
the disclosure on a taxpayer’s income tax return with respect
to an item or position is adequate for the purpose of reducing
the understatement of income tax under section 6662 (d) of
the Internal Revenue Code.
EMPLOYEE PLANS
Notice 2014–8, page 452.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in January 2014;
the 24 month average segment rates; the funding segment
rates applicable for January 2014; and the minimum present
value rates for December 2013. The rates in this notice reflect
certain changes implemented by the Moving Ahead for Prog-
ress in the 21st Century Act, Public Law 112–141 (MAP–21).
ADMINISTRATIVE
Rev. Proc. 2014–15, page 456.
This revenue procedure updates Rev. Proc. 2012–51,
2012–51 I.R.B. 719 and identifies circumstances under which
the disclosure on a taxpayer’s income tax return with respect
to an item or position is adequate for the purpose of reducing
the understatement of income tax under section 6662 (d) of
the Internal Revenue Code.
Finding Lists begin on page ii.
Index for July through January begins on page iv.
Bulletin No. 2014–5
January 27, 2014

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal 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, identify-
ing 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.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and 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 contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
January 27, 2014Bulletin No. 2014–5

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 807.—Rules for
Certain Reserves
Rev. Rul. 2014–4
For purposes of § 807(d)(4) of the In-
ternal Revenue Code, for taxable years
beginning after December 31, 2012, this
ruling supplements the schedules of pre-
vailing state assumed interest rates set
forth in Rev. Rul. 92–19, 1992–1 C.B.
227. This information is to be used by
insurance companies in computing their
reserves for (1) life insurance and supple-
mentary total and permanent disability
benefits, (2) individual annuities and pure
endowments, and (3) group annuities and
pure endowments. As § 807(d)(2)(B) re-
quires that the interest rate used to com-
pute these reserves be the greater of (1)
the applicable federal interest rate, or (2)
the prevailing state assumed interest rate,
the table of applicable federal interest
rates in Rev. Rul. 92–19 is also supple-
mented.
Following are supplements to sched-
ules A, B, C, and D to Part III of Rev. Rul.
92–19, providing prevailing state assumed
interest rates for insurance products with
different features issued in 2013 and 2014,
and a supplement to the table in Part IV of
Rev. Rul. 92–19, providing the applicable
federal interest rates under § 807(d) for
2013 and 2014. This ruling does not sup-
plement Parts I and II of Rev. Rul. 92–19.
This is the twenty-second supplement
to the interest rates provided in Rev. Rul.
92–19. Earlier supplements were pub-
lished in Rev. Rul. 93–58, 1993–2 C.B.
241 (interest rates for insurance products
issued in 1992 and 1993); Rev. Rul. 94–
11, 1994–1 C.B. 196 (1993 and 1994);
Rev. Rul. 95–4, 1995–1 C.B. 141 (1994
and 1995); Rev. Rul. 96–2, 1996–1 C.B.
141 (1995 and 1996); Rev. Rul. 97–2,
1997–1 C.B. 134 (1996 and 1997); Rev.
Rul. 98–2, 1998–1 C.B. 259 (1997 and
1998); Rev. Rul. 99–10, 1999–1 C.B. 671
(1998 and 1999); Rev. Rul. 2000–17,
2000–1 C.B. 842 (1999 and 2000); Rev.
Rul. 2001–11, 2001–1 C.B. 780 (2000 and
2001); Rev. Rul. 2002–12, 2002–1 C.B.
624 (2001 and 2002); Rev. Rul. 2003–24,
2003–1 C.B. 557 (2002 and 2003); Rev.
Rul. 2004–14, 2004–1 C.B. 511 (2003
and 2004); Rev. Rul. 2005–29, 2005–1
C.B. 1080 (2004 and 2005); Rev. Rul.
2006–25, 2006–1 C.B. 882 (2005 and
2006); Rev. Rul. 2007–10, 2007–1 C.B.
660 (2006 and 2007); Rev. Rul. 2008–19,
2008–1 C.B. 669 (2007 and 2008); Rev.
Rul. 2009–3, 2009–5 I.R.B. 382 (2008
and 2009); Rev. Rul. 2010–7, 2010–8
I.R.B. 417 (2009 and 2010); Rev. Rul.
2011–23, 2011–43 I.R.B. 585 (2010 and
2011); Rev. Rul. 2012–6, 2012–6 I.R.B.
349 (2011 and 2012); and Rev. Rul.
2013–4, 2013–9 I.R.B. 520 (2012 and
2013).
Part III. Prevailing State Assumed Interest Rates — Products Issued in Years After 1982.*
Schedule A
STATUTORY VALUATION INTEREST RATES
BASED ON THE 1980 AMENDMENTS TO THE
NAIC STANDARD VALUATION LAW
A. Life insurance valuation:
Guarantee Duration (years)
Calendar Year of Issue
2014
10 or fewer3.75**
More than 10 but not more than 203.75**
More than 203.50**
Source: Rates calculated from the monthly averages, ending June 30, 2013, of Moody’s Composite Yield on Seasoned
Corporate Bonds.
*The terms used in the schedules in this ruling and in Part III of Rev. Rul. 92–19 are those used in the Standard Valuation
Law; the terms are defined in Rev. Rul. 92–19.
**As these rates exceed the applicable federal interest rate for 2014 of 1.79 percent, the valuation interest rate to be used
for this product under § 807 is the applicable rate specified in this table.
Bulletin No. 2014–5January 27, 2014
449

Part III, Schedule B
STATUTORY VALUATION INTEREST RATES
BASED ON THE 1980 AMENDMENTS TO THE
NAIC STANDARD VALUATION LAW
B. Single premium immediate annuities and annuity benefits involving life contingencies arising from other annuities with
cash settlement options and from guaranteed interest contracts with cash settlement options:
Calendar Year of Issue
Valuation Interest Rate
20134.00*
Source: Rates calculated from the monthly averages, ending June 30, 2013, of Moody’s Composite Yield on Seasoned
Corporate Bonds.
*As this prevailing state assumed interest rate exceeds the applicable federal interest rate for 2013 of 2.16 percent, the
valuation interest rate of 4.00 percent is to be used for this product under § 807.
Part III, Schedule C24 – 2013
STATUTORY VALUATION INTEREST RATES
BASED ON NAIC STANDARD VALUATION LAW
FOR 2013 CALENDAR YEAR BUSINESS
GOVERNED BY THE 1980 AMENDMENTS
C. Valuation interest rates for other annuities and guaranteed interest contracts that are valued on an issue year basis:
Cash
Settlement
Options?
Future
Interest
Guarantee?
Guarantee Duration
(years)
Valuation Interest Rate
For Plan Type
ABC
YesYes5 or fewer4.00*3.75*3.50*
More than 5, but
not more than 10
3.75*3.75*3.50*
More than 10, but
not more than 20
3.75*3.50*3.50*
More than 203.50*3.50*3.50*
YesNo5 or fewer4.00*3.75*3.75*
More than 5, but
not more than 10
4.00*3.75*3.75*
More than 10, but
not more than 20
3.75*3.75*3.50*
More than 203.50*3.50*3.50*
NoYes or No5 or fewer4.00*
More than 5, but
not more than 10
3.75*NOT
APPLICABLE
More than 10, but
not more than 20
3.75*
More than 203.50*
Source: Rates calculated from the monthly averages, ending June 30, 2013, of Moody’s Composite Yield on Seasoned
Corporate Bonds.
*As these rates exceed the applicable federal interest rate for 2013 of 2.16 percent, the valuation interest rate to be used
for this product under § 807 is the applicable rate specified in the above table.
January 27, 2014Bulletin No. 2014–5
450

Part III, Schedule D24 – 2013
STATUTORY VALUATION INTEREST RATES
BASED ON NAIC STANDARD VALUATION LAW
FOR 2013 CALENDAR YEAR BUSINESS
GOVERNED BY THE 1980 AMENDMENTS
D. Valuation interest rates for other annuities and guaranteed interest contracts that are contracts with cash settlement op-
tions and that are valued on a change in fund basis:
Cash
Settlement
Options?
Future
Interest
Guarantee?
Guarantee Duration
(years)
Valuation Interest Rate
For Plan Type
AB C
YesYes5 or fewer4.00*4.00*3.75*
More than 5, but
not more than 10
4.00*4.00*3.75*
More than 10, but
not more than 20
4.00*3.75*3.50*
More than 203.75*3.75*3.50*
YesNo5 or fewer4.25*4.00*3.75*
More than 5, but
not more than 10
4.00*4.00*3.75*
More than 10, but
not more than 20
4.00*4.00*3.75*
More than 203.75*3.75*3.50*
Source: Rates calculated from the monthly averages, ending June 30, 2013, of Moody’s Composite Yield on Seasoned
Corporate Bonds.
* As these rates exceed the applicable federal interest rate for 2013 of 2.16 percent, the valuation interest rate to be used
for this product under § 807 is the applicable rate specified in the above table.
Part IV. Applicable Federal Interest Rates.
TABLE OF
APPLICABLE FEDERAL INTEREST RATES
FOR PURPOSES OF § 807
YearInterest Rate
20132.16
20141.79
Sources: Rev. Rul. 2004–106, 2004–2 C.B. 893, for the 2005 rate; Rev. Rul. 2005–77, 2005–2 C.B. 1071, for the 2006
rate; Rev. Rul. 2006–61, 2006–2 C.B 1028 for the 2007 rate; Rev. Rul. 2007–70, 2007–2 C.B. 1158 for the 2008 rate;
Rev. Rul. 2008–53, 2008–2 C.B. 1231 for the 2009 rate; Rev. Rul. 2009–38, 2009–49 I.R.B. 736, for the 2010 rate; Rev.
Rul. 2010–29, 2010–50 I.R.B. 818 for the 2011 rate; Rev. Rul. 2011–31, 2011–49 I.R.B. 829 for the 2012 rate; Rev. Rul.
2012–31, 2012–49 I.R.B. 636 for the 2013 rate; and Rev. Rul. 2013–26, 2013–50 I.R.B. 628 for the 2014 rate.
EFFECT ON OTHER REVENUE
RULINGS
Rev. Rul. 92–19 is supplemented by
the addition to Part III of that ruling of
prevailing state assumed interest rates un-
der § 807 for certain insurance products
issued in 2013 and 2014 and is further
supplemented by an addition to the table
in Part IV of Rev. Rul. 92–19 listing ap-
plicable federal interest rates. Parts I and
II of Rev. Rul. 92–19 are not affected by
this ruling.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Alexis A. MacIvor of the Office of
Associate Chief Counsel (Financial Institu-
tions and Products). For further information
regarding this revenue ruling contact her at
(202) 317-6995 (not a toll-free number).
Bulletin No. 2014–5January 27, 2014
451

Part III. Administrative, Miscellaneous, and Procedural
Weighted Average Interest
Rates, Yield Curves, and
Segment Rates
Notice 2014–8
This notice provides guidance on the cor-
porate bond monthly yield curve (and the
corresponding spot segment rates), and the
24-month average segment rates under
§ 430(h)(2) of the Internal Revenue Code.
In addition, this notice provides guidance as
to the interest rate on 30-year Treasury se-
curities under § 417(e)(3)(A)(ii)(II) as in
effect for plan years beginning before 2008,
the 30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the mini-
mum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007. These rates reflect
certain changes implemented by the Moving
Ahead for Progress in the 21st Century Act,
Public Law 112–141 (MAP–21). MAP–21
provides that for purposes of § 430(h)(2),
the segment rates are limited by the appli-
cable maximum percentage or the applica-
ble minimum percentage based on the aver-
age of segment rates over a 25 year period.
YIELD CURVE AND SEGMENT
RATES
Generally, except for certain plans un-
der sections 104 and 105 of the Pension
Protection Act of 2006, § 430 of the Code
specifies the minimum funding require-
ments that apply to single employer plans
pursuant to § 412. Section 430(h)(2) spec-
ifies the interest rates that must be used to
determine a plan’s target normal cost and
funding target. Under this provision, pres-
ent value is generally determined using
three 24-month average interest rates
(“segment rates”),each of which applies to
cash flows during specified periods. To the
extent provided under § 430(h)(2)(C)(iv),
these segment rates are adjusted by the ap-
plicable percentage of the 25-year average
segment rates for the period ending Septem-
ber 30 of the year preceding the calendar
year in which the plan year begins. How-
ever, an election may be made under
§ 430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates.
Notice 2007–81, 2007–44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond seg-
ment rates used to compute the target nor-
mal cost and the funding target. Pursuant
to Notice 2007–81, the monthly corpo-
rate bond yield curve derived from De-
cember 2013 data is in Table I at the end
of this notice. The spot first, second, and
third segment rates for the month of
December 2013 are, respectively, 1.25,
4.57, and 5.60. For plan years beginning
on or after January 1, 2012, the 24-
month average segment rates deter-
mined under § 430(h)(2)(C)(iv) must be
adjusted by the applicable percentage of
the corresponding 25-year average seg-
ment rates. The 25-year average seg-
ment rates for plan years beginning in
2012, 2013, and 2014 were published in
Notice 2012–55, 2012–36 I.R.B. 332,
Notice 2013–11, 2013–11 I.R.B. 610,
and Notice 2013–58, 2013–40 I.R.B.
294, respectively. The three 24-month
average corporate bond segment rates
applicable for January 2014 without ad-
justment, and the adjusted 24-month av-
erage segment rates taking into account
the applicable percentages of the corre-
sponding 25-year average segment
rates, are as follows:
For Plan
Years
Beginning
In
24-Month Average Segment
Rates Not Adjusted
Adjusted 24-Month Average
Segment Rates, Based on Applicable
Percentage of 25-Year Average Rates
Applicable
Month
First
Segment
Second
Segment
Third
Segment
First
Segment
Second
Segment
Third
Segment
2012January20141.254.065.085.546.857.52
2013January20141.254.065.084.946.156.76
2014January20141.254.065.084.435.626.22
30-YEAR TREASURY SECURITIES
INTEREST RATES
Generally for plan years beginning af-
ter 2007, § 431 specifies the minimum
funding requirements that apply to mul-
tiemployer plans pursuant to § 412. Sec-
tion 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation de-
scribed in section 431(c)(6)(A), based on
the plan’s current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 per-
cent below the weighted average of the
rates of interest on 30-year Treasury se-
curities during the four-year period ending
on the last day before the beginning of the
plan year. Notice 88–73, 1988–2 C.B.
383, provides guidelines for determining
the weighted average interest rate. The
rate of interest on 30-year Treasury secu-
rities for December 2013 is 3.89 percent.
The Service has determined this rate as
the average of the daily determinations of
yield on the 30-year Treasury bond ma-
turing in November 2043. The following
rates were determined for plan years be-
ginning in the month shown below.
January 27, 2014Bulletin No. 2014–5
452

For Plan Years
Beginning in
30-Year
Treasury
Weighted
Average
Permissible Range
MonthYear90%to105%
January20143.463.123.64
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007–81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-
ment rates determined for December 2013
are as follows:
First
Segment
Second
Segment
Third
Segment
1.254.575.60
DRAFTING INFORMATION
The principal author of this notice is
Tony Montanaro of the Employee Plans,
Tax Exempt and Government Entities Di-
vision. Mr. Montanaro may be e-mailed at
RetirementPlanQuestions@irs.gov.
Bulletin No. 2014–5January 27, 2014
453

Table I
Monthly Yield Curve for December 2013
Derived from December 2013 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturity Yield
0.50.2720.55.3840.55.6260.55.7280.55.76
1.00.4421.05.3941.05.6361.05.7281.05.76
1.50.6321.55.4041.55.6361.55.7281.55.76
2.00.8422.05.4142.05.6362.05.7282.05.76
2.51.0822.55.4242.55.6462.55.7282.55.77
3.01.3323.05.4343.05.6463.05.7283.05.77
3.51.5923.55.4343.55.6463.55.7283.55.77
4.01.8624.05.4444.05.6564.05.7384.05.77
4.52.1224.55.4544.55.6564.55.7384.55.77
5.02.3725.05.4645.05.6565.05.7385.05.77
5.52.6225.55.4645.55.6565.55.7385.55.77
6.02.8626.05.4746.05.6666.05.7386.05.77
6.53.0926.55.4846.55.6666.55.7386.55.77
7.03.3127.05.4947.05.6667.05.7387.05.77
7.53.5227.55.4947.55.6667.55.7387.55.77
8.03.7128.05.5048.05.6768.05.7488.05.77
8.53.8928.55.5148.55.6768.55.7488.55.77
9.04.0529.05.5149.05.6769.05.7489.05.78
9.54.2129.55.5249.55.6769.55.7489.55.78
10.04.3530.05.5350.05.6870.05.7490.05.78
10.54.4730.55.5350.55.6870.55.7490.55.78
11.04.5931.05.5451.05.6871.05.7491.05.78
11.54.6931.55.5451.55.6871.55.7491.55.78
12.04.7832.05.5552.05.6872.05.7592.05.78
12.54.8732.55.5552.55.6972.55.7592.55.78
13.04.9433.05.5653.05.6973.05.7593.05.78
13.55.0033.55.5653.55.6973.55.7593.55.78
14.05.0634.05.5754.05.6974.05.7594.05.78
14.55.1134.55.5754.55.6974.55.7594.55.78
15.05.1535.05.5855.05.7075.05.7595.05.78
15.55.1935.55.5855.55.7075.55.7595.55.78
16.05.2236.05.5956.05.7076.05.7596.05.78
16.55.2536.55.5956.55.7076.55.7596.55.79
17.05.2737.05.6057.05.7077.05.7697.05.79
17.55.2937.55.6057.55.7177.55.7697.55.79
18.05.3138.05.6058.05.7178.05.7698.05.79
18.55.3338.55.6158.55.7178.55.7698.55.79
19.05.3439.05.6159.05.7179.05.7699.05.79
19.55.3639.55.6259.55.7179.55.7699.55.79
20.05.3740.05.6260.05.7180.05.76100.05.79
January 27, 2014Bulletin No. 2014–5
454

Current Refundings of
Recovery Zone Facility Bonds
Notice 2014–9
SECTION 1. PURPOSE
This Notice provides guidance on “cur-
rent refunding issues” (as defined in
§ 1.150–1(d)(3) of the Income Tax Reg-
ulations) that refund outstanding prior is-
sues of bonds that qualify as Recovery
Zone Facility Bonds (Recovery Zone Fa-
cility Bonds) under § 1400U–3 of the In-
ternal Revenue Code (“Code”). In partic-
ular, this Notice applies to current
refunding issues that are used (directly or
indirectly in a series of current refunding
issues) to refund original tax-exempt
bonds issued before January 1, 2011 (the
“Applicable Deadline”), that met the qual-
ification requirements for qualified Re-
covery Zone Facility Bonds. These origi-
nal qualified tax-exempt bonds are
referred to in this Notice as “Qualified
Bonds.”
SECTION 2. BACKGROUND
Section 1401 of the American Recov-
ery and Reinvestment Act of 2009, Pub.
L. No. 111–5, 123 Stat. 115, 348 (2009)
(“ARRA”), added §§ 1400U–1 and
1400U–3 to the Code to authorize State
and local governments to issue Recovery
Zone Facility Bonds. Section 1400U–
1(a)(4)(B) imposes a national bond vol-
ume limitation of $15 billion for Recovery
Zone Facility Bonds. Section 1400U–
1(a)(1)(A) provides that the Secretary
shall allocate the national recovery zone
facility bond limitation among the States
in the proportion that each such State’s
2008 State employment decline bears to
the aggregate of 2008 State employment
declines for all of the States. Notice
2009–50, 2009–26 I.R.B. 1118 (June 29,
2009), provides guidance regarding the
maximum face amount of Recovery Zone
Facility Bonds that may be issued by each
State and counties and large municipali-
ties within each State as provided in
§ 1400U–1(a).
In general, Recovery Zone Facility
Bonds may be used to finance certain
property, referred to as “recovery zone
property,” for use within certain desig-
nated zones, referred to as “recovery
zones.” Section 1400U–1(b) provides
that, for purposes of §§ 1400U–1 through
1400U–3, the term “recovery zone”
means: (1) any area designated by the
issuer as having significant poverty, un-
employment, rate of home foreclosures, or
general distress; (2) any area designated
by the issuer as economically distressed
by reason of the closure or realignment of
a military installation pursuant to the De-
fense Base Closure and Realignment Act
of 1990; and (3) any area for which a
designation as an empowerment or re-
newal community is in effect as of the
effective date of ARRA, which is Febru-
ary 17, 2009.
Section 1400U–3(c)(1) defines the
term “recovery zone property” to mean
any property in a recovery zone to which
§ 168 (relating to the accelerated cost re-
covery system) applies (or would apply
but for § 179 (relating to the election to
expense certain depreciable business as-
sets)) if: (A) such property was con-
structed, reconstructed, renovated, or ac-
quired by purchase (as defined in
§ 179(d)(2)) by the taxpayer after the date
on which the designation of the recovery
zone took effect; (B) the original use of
which in the recovery zone commences
with the taxpayer; and (C) substantially all
of the use of which is in the recovery zone
and is in the active conduct of a qualified
business (as defined in § 1400U–3(c)(2))
by the taxpayer in the recovery zone. Sec-
tion 1400U–3(d) provides in part that
§ 146 (relating to volume cap) and
§ 147(d) (relating to prohibition against
acquisition of existing property) shall not
apply to any Recovery Zone Facility
Bond.
Section 141(e) provides that an “ex-
empt facility bond”under §142 is one type
of qualified private activity bond that may
be issued with interest that is excludable
from gross income under §103(a). Section
1400U–3(a) provides that, forpurposes of
§§ 141 through 150, the term “exempt
facility bond” includes any Recovery
Zone Facility Bond. Section 1400U–
3(b)(1) defines the term “Recovery Zone
Facility Bond” to mean any bond issued
as part of an issue if (A) 95 percent or
more of the net proceeds (as defined in
§ 150(a)(3)) of such issue are to be used
for recovery zone property; (B) such bond
is issued before the Applicable Deadline;
and (C) the issuer designates such bond
for purposes of § 1400U–3.
The statutory provisions relating to
Recovery Zone Facility Bonds are silent
regarding the permissibility of current re-
fundings of these bonds after the Applica-
ble Deadline. Under similar provisions for
exempt facility bonds for disaster relief,
the Treasury Department and the IRS
have previously provided guidance per-
mitting current refundings within certain
size limitations for purposes of bond issu-
ance deadlines applicable to those bonds.
SeeNotice 2012–3, 2012–3 I.R.B. 289
(January 17, 2012) (permitting current re-
fundings of outstanding prior issues of
Gulf Opportunity Zone Bonds issued un-
der § 1400N and outstanding prior issues
under certain other disaster relief bond
programs) and Notice 2003–40, 2003–27
I.R.B. 10, at Question 5 (July 7, 2003)
(permitting current refundings of qualified
New York Liberty Bonds issued under
§ 1400L).
SECTION 3. SCOPE AND
APPLICATION
.01Guidance and Reliance. Pending
the promulgation and effective date of fu-
ture administrative or regulatory guid-
ance, taxpayers may rely on the guidance
provided in this Notice.
.02Scope of Application. This Notice
applies to any current refunding issue that
is used (directly or indirectly in a series of
current refunding issues) to refund Qual-
ified Bonds described in Section 1 of this
Notice if the following requirements are
met:
(1) The original Qualified Bonds were
issued before the Applicable Deadline, or
any statutory extension of such deadline.
(2) Except as provided herein, the “is-
sue price” (as defined in § 1.148–1(b)) of
the current refunding issue is no greater
than the outstanding stated principal
amount of the refunded bonds. For re-
funded bonds originally issued with more
than a de minimis amount of original issue
discount or premium (as defined in
§ 1.148–1(b)), the present value of the
refunded bonds (as determined under
§ 1.148–4(e)) must be used in lieu of the
outstanding stated principal amount to de-
termine the maximum issue price of the
current refunding issue.
Bulletin No. 2014–5January 27, 2014
455

(3) The current refunding issue meets
all applicable requirements for the issu-
ance of tax-exempt private activity bonds
as Qualified Bonds (other than the Appli-
cable Deadline), including, without limi-
tation, the requirement under § 147(b) that
the average maturity of the bonds issued
as part of such issue be no longer than 120
percent of the average reasonably ex-
pected economic life of the facilities fi-
nanced or refinanced with the net pro-
ceeds of such issue.
.03Guidance. A current refunding is-
sue that meets the requirements of section
3.02 of this Notice may be issued after the
Applicable Deadline for the issuance of
the original Qualified Bonds and will be
treated as an issue of Qualified Bonds. In
addition, in the case of such a current
refunding issue, the designation of the
original Qualified Bonds by a specified
State or local governmental official or
state bond commission that meets the des-
ignation requirement of § 1400U–
3(b)(1)(C) for Recovery Zone Facility
Bonds is treated as meeting this designa-
tion requirement for the current refunding
issue without further designation or fur-
ther official State or local governmental
action.
.04No Inferences. Other than bonds
issued to currently refund Qualified
Bonds, to which this Notice expressly ap-
plies, no inference should be drawn from
this Notice that bonds issued to refund
other types of bonds, such as build Amer-
ica bonds under § 54AA, after their stat-
utory deadline for issuance meet the qual-
ifications for such types of bonds.
SECTION 4. DRAFTING
INFORMATION
The principal author of this Notice is
Zoran Stojanovic of the Office of Associ-
ate Chief Counsel (Financial Institutions
& Products). For further information re-
garding this Notice, contact Mr. Sto-
janovic at (202) 317-6980 (not a toll-free
number).
26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of
correct tax liability.
(Also: Part 1, §§ 6662, 6694, 1.6662–4, 1.6694–2)
Rev. Proc. 2014–15
SECTION 1. PURPOSE
This revenue procedure updates Rev.
Proc. 2012–51, 2012–51 I.R.B. 719 and
identifies circumstances under which the
disclosure on a taxpayer’s income tax re-
turn with respect to an item or position is
adequate for the purpose of reducing the
understatement of income tax under sec-
tion 6662(d) of the Internal Revenue Code
(relating to the substantial understatement
aspect of the accuracy-related penalty),
and for the purpose of avoiding the tax
return preparer penalty under section
6694(a) (relating to understatements due
to unreasonable positions) with respect to
income tax returns. This revenue proce-
dure does not apply with respect to any
other penalty provisions, including any
other provision of the section 6662
accuracy-related penalty. If this revenue
procedure does not include an item, dis-
closure is adequate with respect to that
item only if made on a properly completed
Form 8275 or 8275–R, as appropriate, at-
tached to the return for the year or to a
qualified amended return.
This revenue procedure applies to any
income-tax return filed on 2013 tax forms
for a taxable year beginning in 2013, and
to any income-tax return filed in 2014 on
2013 tax forms for short taxable years
beginning in 2014.
SECTION 2. CHANGES FROM REV.
PROC. 2012–51
Editorial changes have been made
throughout this revenue procedure. No
substantive changes have been made.
SECTION 3. BACKGROUND
.01 If section 6662 applies to any por-
tion of an underpayment of tax required to
be shown on a return, an amount equal to
20 percent of the portion of the underpay-
ment is added to the tax. The penalty rate
increases to 40 percent in the case of
gross-valuation misstatements under sec-
tion 6662(h), nondisclosed noneconomic-
substance transactions under section
6662(i), or undisclosed foreign financial-
asset understatements under section
6662(j). Section 6662(b)(2) applies to the
portion of an underpayment of tax that is
attributable to a substantial understate-
ment of income tax.
.02 There is a substantial understate-
ment of income tax if the amount of the
understatement exceeds the greater of 10
percent of the amount of tax required to be
shown on the return for the taxable year or
$5,000. Section 6662(d)(1). Section
6662(d)(1)(B) provides a special rule for
corporations. A corporation (other than an
S corporation or a personal holding com-
pany) has a substantial understatement of
income tax if the amount of the under-
statement exceeds the lesser of (i) 10 per-
cent of the tax required to be shown on the
return for a taxable year (or, if greater,
$10,000) or (ii) $10,000,000. An under-
statement is the excess of the amount of
tax required to be shown on the return for
the taxable year over the amount of the tax
that is shown on the return reduced by any
rebate. Section 6662(d)(2).
.03 In the case of an item not attribut-
able to a tax shelter, if the taxpayer has a
reasonable basis for the tax treatment of
the item, the amount of the understate-
ment is reduced by the portion of the
understatement attributable to any item
with respect to which the relevant facts
affecting the item’s tax treatment are ad-
equately disclosed in the return or in a
statement attached to the return. Section
6662(d)(2)(B)(ii).
.04 Section 6694(a) imposes a penalty
on a tax-return preparer who prepares a
return or claim for refund reflecting an
understatement of liability due to an “un-
reasonable position” if the tax return pre-
parer knew (or reasonably should have
known) of the position. Aposition (other
than a position with respect to a tax
shelter or a reportable transaction to
which section 6662A applies) is gener-
ally treated as unreasonable unless (i)
there is or was substantial authority for
the position, or (ii) the position was
properly disclosed in accordance with
section 6662(d)(2)(B)(ii)(I) and had a
reasonable basis. If the position is with
respect to a tax shelter (as defined in
section 6662(d)(2)(C)(ii)) or a report-
able transaction to which section 6662A
applies, the position is treated as unrea-
sonable unless it is reasonable to believe
January 27, 2014Bulletin No. 2014–5
456

that the position would more likely than
not be sustained on the merits.SeeNo-
tice 2009–5, 2009–3 I.R.B. 309 (Janu-
ary 21, 2009) for interim penalty com-
pliance rules for tax shelter transactions.
.05 In general, this revenue procedure
provides guidance for determining when
disclosure by return is adequate for pur-
poses of section 6662(d)(2)(B)(ii) and
section 6694(a)(2)(B). For purposes of
this revenue procedure, the taxpayer must
furnish all required information in accor-
dance with the applicable forms and in-
structions, and the money amounts en-
tered on these forms must be verifiable.
.06 Fiscal- and short tax-year returns.
(a) In general. This revenue procedure
may apply to a return for a fiscal tax year
that begins in 2013 and ends in 2014. This
revenue procedure may also apply to a
short year return for a period beginning in
2014 if the return is to be filed before the
2014 forms are available. (Note that indi-
viduals are generally not put in this posi-
tion, as the only situation in which a short
year arises is when filing a decedent’s
final return for a fractional part of a year,
which is due the fifteenth day of the fourth
month following the close of the 12-
month period that began with the first day
of such fractional part of the year (after
the 2014 form is available).SeeTreas.
Reg. § 1.6072–1(b).) In the case of fiscal-
year and short-year returns, the taxpayer
must take into account any tax law
changes that are effective for tax years
beginning after December 31, 2013, even
though these changes are not reflected on
the form.
(b) Tax law changes effective after De-
cember 31, 2013. This document does not
take into account the effect of tax law
changes effective for tax years beginning
after December 31, 2013. If a line refer-
enced in this revenue procedure is af-
fected by such a change and requires ad-
ditional reporting, a taxpayer may have to
file Form 8275,Disclosure Statement,or
Form 8275–R,Regulation Disclosure
Statement, until the Service prescribes cri-
teria for complying with the requirement.
.07 A complete and accurate disclosure
of a tax position on the appropriate year’s
Schedule UTP,Uncertain Tax Position
Statement, will be treated as if the corpo-
ration filed a Form 8275 or Form 8275–R
regarding the tax position. The filing of a
Form 8275 or Form 8275–R, however,
will not be treated as if the corporation
filed a Schedule UTP.
SECTION 4. PROCEDURE
.01 General
(1) Additional disclosure of facts rele-
vant to, or positions taken with respect to,
issues involving any of the items set forth
below is unnecessary for purposes of re-
ducing any understatement of income tax
under section 6662(d) (except as other-
wise provided in section 4.02(3) concern-
ing Schedules M–1 and M–3), provided
that the forms and attachments are com-
pleted in a clear manner and in accordance
with their instructions.
(2) The money amounts entered on the
forms must be verifiable, and the informa-
tion on the return must be disclosed in the
manner described below. For purposes of
this revenue procedure, a number is veri-
fiable if, on audit, the taxpayer can prove
the origin of the amount (even if that
number is not ultimately accepted by the
Internal Revenue Service) and the tax-
payer can show good faith in entering that
number on the applicable form.
(3) The disclosure of an amount as
provided in section 4.02 below is not ad-
equate when the understatement arises
from a transaction between related parties.
If an entry may present a legal issue or
controversy because of a related-party
transaction, then that transaction and the
relationship must be disclosed on a Form
8275 or Form 8275–R.
(4) When the amount of an item is
shown on a line that does not have a
preprinted description identifying that
item (such as on an unnamed line under an
“Other Expense” category), the taxpayer
must clearly identify the item by including
the description on that line. For example,
to disclose a bad debt for a sole propri-
etorship, the words “bad debt” must be
written or typed on the line of Schedule C
that shows the amount of the bad debt.
Also, for Schedule M–3 (Form 1120), Part
II, line 25, Other income (loss) items with
differences, or Part III, line 37, Other ex-
pense/deduction items with differences,
the entry must provide descriptive lan-
guage; for example, “Cost of non-compete
agreement deductible not capitalizable.” If
space limitations on a form do not allow
for an adequate description, the descrip-
tion must be continued on an attachment.
(5) Although a taxpayer may literally
meet the disclosure requirements of this
revenue procedure, the disclosure will
have no effect for purposes of the section
6662 accuracy-related penalty if the item
or position on the return: (1) does not have
a reasonable basis as defined in Treas.
Reg. § 1.6662–3(b)(3); (2) is attributable
to a tax shelter item as defined in section
6662(d)(2); or (3) is not properly substan-
tiated or the taxpayer failed to keep ade-
quate books and records with respect to
the item or position.
(6) Disclosure also will have no effect
for purposes of the section 6694(a) pen-
alty as applicable to tax-return preparers if
the position is with respect to a tax shelter
(as defined in section 6662(d)(2)(C)(ii)) or
a reportable transaction to which section
6662A applies.
.02 Items
(1) Form 1040, Schedule A,Itemized
Deductions:
(a) Medical and Dental Expenses:
Complete lines 1 through 4, supplying all
required information.
(b) Taxes: Complete lines 5 through 9,
supplying all required information. Line 8
must list each type of tax and the amount
paid.
(c) Interest Expenses: Complete lines
10 through 15, supplying all required in-
formation. This section 4.02(1)(c) does
not apply to (i) amounts disallowed under
section 163(d) unless Form 4952,Invest-
ment Interest Expense Deduction, is com-
pleted, or (ii) amounts disallowed under
section 265.
(d) Contributions: Complete lines 16
through 19, supplying all required infor-
mation. Enter the amount of the contribu-
tion reduced by the value of any substan-
tial benefit (goods or services) provided
by the donee organization in consider-
ation, in whole or in part, for the contri-
bution. Entering the contribution’s value,
unreduced by the value of the benefit re-
ceived, will not constitute adequate dis-
closure. If a contribution of $250 or more
is made, this section will not apply unless
a contemporaneous written acknowledg-
ment, as required by section 170(f)(8), is
obtained from the donee organization. If a
contribution of cash of less than $250 is
made, this section will not apply unless a
Bulletin No. 2014–5January 27, 2014
457

bank record or written communication
from the donee organization, as required
by section 170(f)(17), is obtained. If a
contribution of property other than cash is
made and the amount claimed as a deduc-
tion exceeds $500, attach a properly com-
pleted Form 8283,Noncash Charitable
Contributions, to the return. In addition to
the Form 8283, if a contribution of a qual-
ified motor vehicle, boat, or airplane has a
value of more than $500, this section will
not apply unless a contemporaneous writ-
ten acknowledgment, as required by sec-
tion 170(f)(12), is obtained from the do-
nee organization and attached to the
return. An acknowledgment under section
170(f)(8) is not required if an acknowl-
edgment under section 170(f)(12) is
required.
(e) Casualty and Theft Losses: Com-
plete Form 4684,Casualties and Thefts,
and attach to the return. Each item or
article for which a casualty or theft loss is
claimed must be listed on Form 4684.
(2) Certain Trade or Business Ex-
penses (including, for purposes of this
section, the following six expenses as they
relate to the rental of property):
(a) Casualty and Theft Losses: The
procedure outlined in section 4.02(1)(e)
must be followed.
(b) Legal Expenses: The amount
claimed must be stated. This section does
not apply, however, to amounts properly
characterized as capital expenditures, per-
sonal expenses, or non-deductible lobby-
ing or political expenditures, including
amounts that are required to be (or that
are) amortized over a period of years.
(c) Specific Bad Debt Charge-off: The
amount written off must be stated.
(d) Reasonableness of Officers’ Com-
pensation: Form 1125–E,Compensation
of Officers, must be completed when re-
quired by its instructions. The time de-
voted to business must be expressed as a
percentage as opposed to “part” or “as
needed.” This section does not apply to
“golden parachute” payments, as defined
under section 280G. This section will not
apply to the extent that remuneration paid
or incurred exceeds the employee-
remuneration deduction limitations under
section 162(m), if applicable.
(e) Repair Expenses: The amount
claimed must be stated. This section does
not apply, however, to any repair ex-
penses properly characterized as capital
expenditures or personal expenses.
(f) Taxes (other than foreign taxes):
The amount claimed must be stated.
(3) Differences in book and income tax
reporting.
For Schedule M–1 and all Schedules
M–3, including those listed in (a)–(f) be-
low, the information provided must rea-
sonably apprise the Service of the poten-
tial controversy concerning the tax
treatment of the item. If the information
provided does not so apprise the Service,
a Form 8275 or Form 8275–R must be
used to adequately disclose the item (see
Part II of the instructions for those forms).
Note: An item reported on a line
with a pre-printed description,
shown on an attached schedule or
“itemized” on Schedule M–1, may
represent the aggregate amount of
several transactions producing that
item (i.e.,a group of similar items,
such as amounts paid or incurred for
supplies by a taxpayer engaged in
business). In some instances, a po-
tentially controversial item may in-
volve a portion of the aggregate
amount disclosed on the schedule.
The Service will not be reasonably
apprised of a potential controversy
by the aggregate amount disclosed.
In these instances, the taxpayer
must use Form 8275 or Form
8275–R regarding that portion of
the item.
Combining unlike items, whether on
Schedule M–1 or Schedule M–3 (or on an
attachment when directed by the instruc-
tions), will not constitute an adequate dis-
closure.
Additionally, for taxpayers that file the
Schedule M–3 (Form 1120), Schedule B,
Additional Information for Schedule M–3
Filers,must also be completed. For tax-
payers that file the Schedule M–3 (Form
1065), Schedule C,Additional Informa-
tion for Schedule M–3 Filers, must also be
completed. When required, these Sched-
ules are necessary to constitute adequate
disclosure.
(a) Form 1065. Schedule M–3 (Form
1065),Net Income (Loss) Reconciliation
for Certain Partnerships: Column (a),In-
come (Loss) per Income Statement, of Part
II (reconciliation of income (loss) items)
and Column (a),Expense per Income
Statement, of Part III (reconciliation of
expense/deduction items); Column (b),
Temporary Difference, and Column (c),
Permanent Difference, of Part II (recon-
ciliation of income (loss) items) and Part
III (reconciliation of expense/deduction
items); and Column (d),Income (Loss)
per Tax Return, of Part II (reconciliation
of income (loss) items) and Column (d),
Deduction per Tax Return, of Part III (rec-
onciliation of expense/deduction items).
(b) Form 1120. (i) Schedule M–1,Rec-
onciliation of Income (Loss) per Books
With Income per Return.
(ii) Schedule M–3 (Form 1120),Net
Income (Loss) Reconciliation for Corpo-
rations with Total Assets of $10 Million or
More: Column (a),Income (Loss) per In-
come Statement, of Part II (reconciliation
of income (loss) items) and Column (a),
Expense per Income Statement, of Part III
(reconciliation of expense/deduction
items); Column (b),Temporary Differ-
ence, and Column (c),Permanent Differ-
ence, of Part II (reconciliation of income
(loss) items) and Part III (reconciliation of
expense/deduction items) and Column
(d),Income (Loss) per Tax Return, of Part
II (reconciliation of income (loss) items);
and Column (d),Deduction per Tax Re-
turn
, of Part III (reconciliation of expense/
deduction items).
(c) Form 1120–L. Schedule M–3
(Form 1120–L),Net Income (Loss) Rec-
onciliation for U.S. Life Insurance Com-
panies With Total Assets of $10 Million or
More: Column (a),Income (Loss) per In-
come Statement, of Part II (reconciliation of
income (loss) items) and Column (a),Ex-
pense per Income Statement, of Part III (rec-
onciliation of expense/deduction items);
Column (b),Temporary Difference, and
Column (c),Permanent Difference, of Part
II (reconciliation of income (loss) items)
and Part III (reconciliation of expense/
deduction items); and Column (d),Income
(Loss) per Tax Return, of Part II (reconcil-
iation of income (loss) items) and Column
(d),Deduction per Tax Return, of Part III
(reconciliation of expense/deduction items).
(d) Form 1120–PC. Schedule M–3
(Form 1120–PC),Net Income (Loss)
Reconciliation for U.S. Property and
Casualty Insurance Companies With To-
tal Assets of $10 Million or More: Col-
umn (a),Income (Loss) per Income
Statement, of Part II (reconciliation of
income (loss) items) and Column (a),
January 27, 2014Bulletin No. 2014–5
458

Expense per Income Statement, of Part
III (reconciliation of expense/deduction
items); Column (b),Temporary Differ-
ence, and Column (c),Permanent Dif-
ference, of Part II (reconciliation of in-
come (loss) items) and Part III
(reconciliation of expense/deduction
items); and Column (d),Income (Loss)
per Tax Return, of Part II (reconciliation
of income (loss) items) and Column (d),
Deduction per Tax Return, of Part III
(reconciliation of expense/deduction
items).
(e) Form 1120–S. Schedule M–3
(Form 1120–S),Net Income (Loss) Rec-
onciliation for S Corporations With Total
Assets of $10 Million or More: Column
(a),Income (Loss) per Income Statement,
of Part II (reconciliation of income (loss)
items) and Column (a),Expense per In-
come Statement, of Part III (reconciliation
of expense/deduction items); Column (b),
Temporary Difference, and Column (c),
Permanent Difference, of Part II (recon-
ciliation of income (loss) items) and Part
III (reconciliation of expense/deduction
items); and Column (d),Income (Loss)
per Tax Return, of Part II (reconciliation
of income (loss) items) and Column (d),
Deduction per Tax Return, of Part III (rec-
onciliation of expense/deduction items).
(f) Form 1120–F. Schedule M–3
(Form 1120–F),Net Income (Loss) Rec-
onciliation for Foreign Corporations With
Total Assets of $10 Million or More: Col-
umn (b),Temporary Difference, Column
(c),Permanent Difference, and Column
(d),Other Permanent Differences for Al-
locations to Non-ECI and ECI,of Part II
(reconciliation of income (loss) items) and
Part III (reconciliation of expense/deduc-
tion items).
(4) Foreign Tax Items:
(a) International Boycott Transactions:
Transactions disclosed on Form 5713,In-
ternational Boycott Report; Schedule A,
International Boycott Factor (Section
999(c)(1)); Schedule B,Specifically At-
tributable Taxes and Income (Section
999(c)(2)); and Schedule C,Tax Effect of
the International Boycott Provisions,
must be completed when required by their
instructions.
(b) Treaty-Based Return Position:
Transactions and amounts under section
6114 or section 7701(b) as disclosed on
Form 8833,Treaty-Based Return Position
Disclosure Under Section 6114 or
7701(b), must be completed when re-
quired by its instructions.
(5) Other:
(a) Moving Expenses: Complete Form
3903,Moving Expenses, and attach to the
return.
(b) Employee Business Expenses:
Complete Form 2106,Employee Business
Expenses, or Form 2106–EZ,Unreim-
bursed Employee Business Expenses, and
attach to the return. This section does not
apply to club dues or to travel expenses
for any non-employee accompanying the
taxpayer on the trip.
(c) Fuels Credit: Complete Form 4136,
Credit for Federal Tax Paid on Fuels, and
attach to the return.
(d) Investment Credit: Complete Form
3468,Investment Credit, and attach to the
return.
SECTION 5. EFFECTIVE DATE
This revenue procedure applies to any
income-tax return filed on a 2013 tax form
for a taxable year beginning in 2013 and
to any income tax return filed on a 2013
tax form in 2014 for a short taxable year
beginning in 2014.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Larry Pounders of the Office
of Associate Chief Counsel (Procedure &
Administration). For further information
regarding this revenue procedure, contact
Branch 1 of Procedure and Administration
at (202) 317-6845 (not a toll free number).
Bulletin No. 2014–5January 27, 2014
459

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
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
with amplified andclarified, 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
being stated in a new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
supersededdescribes 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
published 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
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
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 following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
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—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE
—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Bulletin No. 2014–5January 27, 2014
i

Numerical Finding List
1
Bulletins 2014–1 through 2014–5
Announcements
2014-1, 2014-2 I.R.B.393
2014-2, 2014-4 I.R.B.448
Notices
2014-1, 2014-2 I.R.B.270
2014-2, 2014-3 I.R.B.407
2014-3, 2014-3 I.R.B.408
2014-4, 2014-2 I.R.B.274
2014-5, 2014-2 I.R.B.276
2014-6, 2014-2 I.R.B.279
2014-7, 2014-4 I.R.B.445
2014-8, 2014-5 I.R.B.452
2014-9, 2014-5 I.R.B.455
Proposed Regulations
REG-159420-04, 2014-2 I.R.B.374
REG-140974-11, 2014-3 I.R.B.438
REG-136984-12, 2014-2 I.R.B.378
REG-113350-13, 2014-3 I.R.B.440
REG-143172-13, 2014-2 I.R.B.383
Revenue Procedures
2014-1, 2014-1 I.R.B.1
2014-2, 2014-1 I.R.B.90
2014-3, 2014-1 I.R.B.111
2014-4, 2014-1 I.R.B.125
2014-5, 2014-1 I.R.B.169
2014-6, 2014-1 I.R.B.198
2014-7, 2014-1 I.R.B.238
2014-8, 2014-1 I.R.B.242
2014-9, 2014-2 I.R.B.281
2014-10, 2014-2 I.R.B.293
2014-11, 2014-3 I.R.B.411
2014-12, 2014-3 I.R.B.415
2014-13, 2014-3 I.R.B.419
2014-14, 2014-2 I.R.B.295
2014-15, 2014-5 I.R.B.456
Revenue Rulings
2014-1, 2014-2 I.R.B.263
2014-2, 2014-2 I.R.B.255
2014-3, 2014-2 I.R.B.259
2014-4, 2014-5 I.R.B.449
Treasury Decisions
9649, 2014-2 I.R.B.265
9650, 2014-3 I.R.B.394
9651, 2014-4 I.R.B.441
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2013–27 through 2013–52 is in Internal Revenue Bulletin
2013–52, dated December 23, 2013.
January 27, 2014Bulletin No. 2014–5
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2014–1 through 2014–5
Notices:
2006-109
Modified by
Notice 2014-4, 2014-2 I.R.B.274
2013-17
Amplified by
Notice 2014-1, 2014-2 I.R.B.270
Revenue Procedures:
2003-49
Modified and superseded by
Rev. Proc. 2014-14, 2014-2 I.R.B.295
2011-44
Modified and Superseded by
Rev. Proc. 2014-11, 2014-3 I.R.B.411
2011-49
Modified by
Rev. Proc. 2014-6, 2014-1 I.R.B.198
2013-1
Superseded by
Rev. Proc. 2014-1, 2014-1 I.R.B.1
2013-2
Superseded by
Rev. Proc. 2014-2, 2014-1 I.R.B.90
2013-3
Superseded by
Rev. Proc. 2014-3, 2014-1 I.R.B.111
2013-4
Superseded by
Rev. Proc. 2014-4, 2014-1 I.R.B.125
2013-5
Superseded by
Rev. Proc. 2014-5, 2014-1 I.R.B.169
2013-6
Superseded by
Rev. Proc. 2014-6, 2014-1 I.R.B.198
2013-7
Superseded by
Rev. Proc. 2014-7, 2014-1 I.R.B.238
2013-8
Superseded by
Rev. Proc. 2014-8, 2014-1 I.R.B.242
Revenue Procedures—Continued:
2013-9
Superseded by
Rev. Proc. 2014-9, 2014-2 I.R.B.281
2013-10
Superseded by
Rev. Proc. 2014-10, 2014-2 I.R.B.293
2013-32
Superseded in part by
Rev. Proc. 2014-1, 2014-1 I.R.B.1,and
Rev. Proc. 2014-3, 2014-1 I.R.B.111
Proposed Regulations:
209054-87
A portion withdrawn by
REG-113350-13 2014-3 I.R.B.440
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2013–27 through 2013–52 is in Internal Revenue Bulletin 2013–52, dated December 23,
2013.
Bulletin No. 2014–5January 27, 2014
iii

INDEX
Internal Revenue Bulletins 2014–1 through
2014–2
The abbreviation and number in parenthesis following the index
entry refer to the specific item; numbers in roman and italic type
following the parentheses refer to the Internal Revenue Bulletin in
which the item may be found and the page number on which it
appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Excepted benefits (REG–143172–13) 2,383
Letter rulings and general information letters (RP 4) 1,125
Letter rulings or determination letters (RP 1) 1,1
Qualification, determination letters (RP 6) 1,198
Qualified plans discrimination (Notice 5) 2,276
Qualified retirement plans covered compensation, permitted dis-
parity (RR 3) 2,259
Rulings and determination letters, user fees (RP 8) 1,242
Technical advice memorandum or TAM (RP 2) 1,90
Technical advice procedures (RP 5) 1,169
Weighted average interested rates segment rates for January
2014 (Notice 8) 5,452
EMPLOYMENT TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Employment tax liability of agents authorized under section 3504
(TD 9649) 2,265
Letter rulings or determination letters (RP 1) 1,1
[Insert Prime Key]
Technical advice memorandum or TAM (RP 2) 1,90
[Insert Prime Key]
ESTATE TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Letter rulings or determination letters (RP 1) 1,1
[Insert Prime Key]
Technical advice memorandum or TAM (RP 2) 1,90
[Insert Prime Key]
EXCISE TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Interim guidance regarding supporting organizations (Notice 4)
2,274
Letter rulings or determination letters (RP 1) 1,1
[Insert Prime Key]
[Insert Prime Key]
Technical advice memorandum or TAM (RP 2) 1,90
[Insert Prime Key]
EXEMPT ORGANIZATIONS
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Interim guidance regarding supporting organizations (Notice 4)
2,274
Letter rulings and general information letters, procedures (RP 4)
1,125
Letter rulings (RP 10) 2,293; (RP 9) 2,281
Letter rulings or determination letters (RP 1) 1,1
Proposed procedures for charitable hospitals to correct and dis-
close failures to meet section 501(r) (Notice 3) 3,408
Reliance on proposed regulations for tax-exempt hospitals (No-
tice 2) 3,407
Rulings and determination letters, user fees (RP 8) 1,242
Technical advice memorandum or TAM (RP 2) 1,90
Technical advice procedures (RP 5) 1,169
INCOME TAX
Adequate Disclosure Revenue Procedure (RP 15) 5,456
Allocation of section 47 credits by a partnership to its partners
(RP 12) 3,415
Allocation of section 752 recourse liabilities among related par-
ties (REG–136984–12) 2,378
Areas in which rulings will not be issued; Associate Chief
Counsel (International) (RP 7) 1,238
Cafeteria plans, FSA reimbursements, and HSA contribution
limits for same-sex spouses (Notice 1) 2,270
Current refunding of recovery Zone facility bonds (Notice 9) 5,
455
Definitions applicable to U.S. persons owning interests in passive
foreign investment companies (REG–113350–13) 3,440
Determination of ownership in a passive foreign investment
company; annual filing requirements for shareholders of pas-
sive foreign investment companies; filing requirements for
constructive owners in certain foreign corporations (REG–
140974–11) 3,438; (TD 9650) 3,394
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
FATCA financial institution registration update (Ann 1) 2,393
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
January 2014 (RR 1) 2,263
January 27, 2014Bulletin No. 2014–5
iv

INCOME TAX—Cont.
Final FFI agreement for participating FFI and reporting Model 2
FFI (RP 13) 3,419
Guidance regarding resinstatement following auto revocation of
tax-exempt status under section 6033(j) (RP 11) 3,411
Intra-group gross receipts (REG 159420–04) 2,374
Insurance Tax; Insurance companies; interest rate tables (RR 4)
5,449
Letter rulings or determination letters (RP 1) 1,1
Principal residence, treatment of National Mortgage Settlement
payments (RR 2) 2,255
Qualified census tracts (RP 14) 2,295
Technical advice memorandum or TAM (RP 2) 1,90
Transition relief for the tax credit for employee health insurance
expenses of certain small employers (Notice 6) 2,279
Bulletin No. 2014–5January 27, 2014
v

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available atwww.irs.gov/irb/.
CUMULATIVE BULLETINS
The contents of the weekly Bulletins were consolidated semiannually into permanent, indexed, Cumulative Bulletins through the
2008–2 edition.
INTERNAL REVENUE BULLETINS ON CD-ROM
Internal Revenue Bulletins are available annually as part of Publication 1796 (Tax Products CD-ROM). The CD-ROM can be
purchased from National Technical Information Service (NTIS) on the Internet atwww.irs.gov/cdorders(discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
We Welcome Comments About the Internal Revenue Bulletin
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the IRS Bulletin Unit, SE:W:CAR:MP:P:SPA, Washington, DC 20224.
Internal Revenue Service
Washington, DC 20224
Official Business
Penalty for Private Use, $300