Internal Revenue Bulletin 2015-8 (PDF rendition): IRS Revenue Procedures

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

# Internal Revenue bulletin

## 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. Proc. 2015-18, page 620.

Publication 1167, General Rules and Specifications for Substi-
tute Forms and Schedules, provides guidelines and general
requirements for the development, printing, and approval of
substitute tax forms.

### Rev. Proc. 2015-19, page 656.

This revenue procedure provides the depreciation deduction
limitations for owners of passenger automobiles (including
trucks and vans) first placed in service during calendar year
2015 and amounts to be included in income by lessees of
passenger automobiles first leased during calendar year 2015.
This revenue procedure also provides revised tables of depre-
ciation limitations and lessee inclusion amounts for passenger
automobiles first placed in service or first leased during 2014
and to which the 50 percent additional first year depreciation
deduction applies.

### T.D. 9710, page 603.

The final regulations provide guidance under section 909 ad-
dressing situations in which foreign income taxes have been
separated from the related income.

## EXEMPT ORGANIZATIONS

### Announcement 2015-6, page 663.

Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the
organizations by individual donors are no longer deductible
under IRC 170(b)(1)(A).

## ADMINISTRATIVE

Notice 2015-11, page 618.

This notice sets forth the maximum face amount of Qualified
Zone Academy Bonds ("Bond" or "Bonds") that may be issued
for each State for the calendar year 2014. For this purpose,
"State" includes the District of Columbia and the possessions
of the United States.

IRS

## 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.

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

26 CFR Part 1: Foreign Tax Credit Splitting Events.

### T.D. 9710 Foreign Tax Credit Splitting Events

### DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Final regulations and removal
of temporary regulations.

SUMMARY: This document contains fi-
nal Income Tax Regulations with respect
to a provision of the Internal Revenue
Code (Code) that addresses situations in
which foreign income taxes have been
separated from the related income.
These regulations are necessary to pro-
vide guidance on applying the statutory
provision, which was enacted as part of
legislation commonly referred to as the
Education Jobs and Medicaid Assistance
Act (EJMAA) on August 10, 2010. These
regulations affect taxpayers claiming for-
eign tax credits or deducting foreign in-
come taxes.

DATES: Effective date: These regulations
are effective on February 10, 2015.

Applicability dates: For dates of appli-
cability, see §§ 1.704-1(b)(1)(ii)(b)(3),
1.909-1(e), 1.909-2(c), 1.909-3(c),
1.909-4(b), 1.909-5(c), and 1.909-6(h).

FOR FURTHER INFORMATION
CONTACT: Suzanne M. Walsh, (202)
317-6936 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

#### Background

On February 14, 2012, a notice of pro-
posed rulemaking by cross-reference to
temporary regulations (REG-132736-11)
under sections 909 and 704 of the Code
and temporary regulations (TD 9577)
(2012 temporary regulations) were pub-

lished in the Federal Register at [77 FR
8184] and [77 FR 8127], respectively.

Section 1.909-6T of the 2012 tempo-
rary regulations set forth an exclusive list
of splitter arrangements that applied to
foreign income taxes paid or accrued by a
section 902 corporation in a taxable year
beginning on or before December 31,
2010, comprised of reverse hybrid struc-
ture splitter arrangements, foreign consol-
idated group splitter arrangements, group
relief or other loss sharing regime splitter
arrangements, and hybrid instrument
splitter arrangements (pre-2011 splitter ar-
rangements).

For foreign income taxes paid or ac-
crued by any person in a taxable year
beginning on or after January 1, 2011,
§ 1.909-5T of the 2012 temporary regu-
lations adopted the same list of splitter
arrangements as § 1.909-6T, but added
partnership inter-branch payment splitter
arrangements to the list.

For foreign income taxes paid or ac-
crued by any person in a taxable year
beginning on or after January 1, 2012,
§ 1.909-2T adopted the list of splitter
arrangements applicable to prior taxable
years with certain changes. Because reg-
ulations under section 901 were modified
for taxable years beginning after February
14, 2012, to address the application of the
legal liability rule to combined income
regimes, consolidated group splitter ar-
rangements were removed from the list
(although § 1.909-5T applied the consol-
idated group splitter arrangement rules to
foreign income taxes paid or accrued by
any person in a taxable year beginning on
or after January 1, 2012, and on or before
February 14, 2012). In addition, the defi-
nitions of hybrid instrument splitter ar-
rangements and loss-sharing splitter ar-
rangements were expanded.

Sections 1.909-3T and 1.909-6T pro-
vided interim mechanical rules for track-
ing taxes paid or accrued with respect to a
splitter arrangement (split taxes) as well
as the related income with respect to such
taxes.

The 2012 temporary regulations also
removed the special rule for inter-branch

payments previously set forth in § 1.704-
1(b)(4)(viii)(d)(3).

A public hearing was not requested and
none was held. However, the IRS and the
Treasury Department received written
comments in response to the notice of
proposed rulemaking. After consideration
of all the comments, the proposed regula-
tions under section 909 are adopted as
amended by this Treasury decision. The
revisions are discussed in this preamble.
This Treasury decision also adopts the
proposed regulations under section 704
without amendment.

## Explanation of Revisions and Summary of Comments

### I. Splitter arrangements-in general

This Treasury decision makes clarify-
ing changes to certain of the definitions of
splitter arrangements in § 1.909-2T. It
also makes a clarifying change to the in-
terim mechanical rules for tracking split
taxes and related income. Apart from this
clarifying change, this Treasury decision
does not address mechanical issues, which
are still under consideration and will be
addressed in future guidance.

### II. Reverse hybrid splitter arrangements

Section 1.909-2T(b)(1) provides that a
splitter arrangement exists with respect to
a reverse hybrid entity when a payor pays
or accrues foreign income taxes with re-
spect to the income of the reverse hybrid.
The split taxes are the taxes paid or ac-
crued with respect to income of the re-
verse hybrid. The related income with re-
spect to such split taxes is the earnings
and profits of the reverse hybrid attribut-
able to the activities of the reverse hybrid
that gave rise to the foreign taxable in-
come with respect to which the split taxes
were paid or accrued.

A comment indicated that there is con-
fusion regarding the amount of the related
income with respect to a reverse hybrid
splitter arrangement in the case in which
the reverse hybrid subsequently incurs a
loss, causing its earnings and profits to
fluctuate over multiple taxable years. The

final regulations include two new exam-
ples at § 1.909-2(b)(1)(v) that clarify how
to determine the related income amount
with respect to split taxes from a reverse
hybrid splitter arrangement.

### III. Loss-sharing splitter arrangements

Section 1.909-2T(b)(2) provides that a
splitter arrangement exists to the extent
that the "usable shared loss" of a "U.S.
combined income group," which is an in-
dividual or corporation and all the entities
with which it combines items of income
and expense under U.S. federal income
tax law, is used to offset foreign taxable
income of another U.S. combined income
group. A usable shared loss is defined as a
shared loss of a U.S. combined income
group that could be used under foreign
law to offset the group's own income.

A comment requested that the defini-
tion of a usable shared loss be clarified to
exclude any shared loss that could not be
used within the U.S. combined income
group in a current foreign taxable year but
that could be used within a group by car-
rying the loss either forward or back to a
different foreign taxable year. The Trea-
sury Department and the IRS agree that
the usable shared loss definition should
not require a U.S. combined income group
to carry forward losses because it will not
necessarily be foreseeable whether the
group will have sufficient foreign taxable
income in a future taxable year to use a
loss that cannot be used currently or car-
ried back within the group. It would be too
unpredictable to adopt a "wait and see"
rule that required a taxpayer to forego the
opportunity to use a loss to reduce an
affiliate's foreign tax liability in a current
(or prior) foreign taxable year based on
the speculation that it may be able to use
the loss itself in a future foreign taxable
year.

It is appropriate, however, that the us-
able shared loss definition include a
shared loss that could be used to offset
foreign taxable income of the group in a
previous taxable year. Because taxpayers
can know in a current foreign taxable year
whether a loss can be carried back for
foreign law purposes within the U.S. com-
bined income group, they should not be
permitted to share such a loss in a way
that inappropriately separates foreign in-

come taxes from the related income. Al-
though this may require taxpayers to treat
taxes previously paid or accrued as split
taxes, this is an acceptable outcome in
light of the policy concerns that the loss-
sharing splitter rules are intended to ad-
dress. Furthermore, taxpayers can avoid
having to treat taxes as split taxes on a
retroactive basis by carrying back the loss.
Accordingly, the regulations modify the
definition to clarify that a usable shared
loss is a shared loss that could be used
under foreign tax law to offset income of
the U.S. combined income group in a cur-
rent or previous foreign taxable year.

Another comment recommended that
sharing a usable shared loss outside of a
U.S. combined income group should give
rise to a splitter arrangement only to the
extent that the gross amount of such a
usable shared loss shared away from the
U.S. combined income group exceeds the
gross amount of shared losses from other
U.S. combined income groups that are
received by the group. The Treasury De-
partment and the IRS have determined
that it is too burdensome to administer
such a netting rule, particularly in light of
the fact that the comment did not provide
a reason why a U.S. combined income
group would seek to use shared losses
from another U.S. combined income
group while sharing its own usable shared
loss outside the group, rather than using
its usable shared loss within the group.
Therefore, the comment is not adopted.

A further comment recommended that
a U.S. combined income group with split
taxes resulting from sharing a usable
shared loss away from the group in a prior
year be treated as receiving a distribution
of related income to the extent of any
shared loss received by it from a different
U.S. combined income group. The Trea-
sury Department and the IRS have deter-
mined that it is too burdensome to admin-
ister such a rule, which would entail
reconciling actual related income ac-
counts with deemed distributions of re-
lated income resulting from the receipt of
a shared loss from another U.S. combined
income group. Therefore, the comment is
not adopted.

A question has arisen about when ref-
erences to "income" in § 1.909-2T(b)(2)
are intended to refer to income for pur-
poses of U.S. federal income tax law or to

income for purposes of foreign tax law.
The regulations clarify that the reference
to the term "income" of that U.S. com-
bined income group in § 1.909-2(b)(2)(v)
refers to income for purposes of foreign
tax law.

### IV. Hybrid instrument splitter arrangements

Section 1.909-2T(b)(3)(i) provides
that there is a U.S. equity hybrid instru-
ment splitter arrangement if payments or
accruals with respect to a U.S. equity hy-
brid instrument (i) give rise to foreign
income taxes paid or accrued by the
owner of such instrument, (ii) are deduct-
ible by the issuer under the laws of its
foreign jurisdiction, and (iii) do not give
rise to income for U.S. federal income tax
purposes.

A question has arisen as to whether
there is a splitter arrangement if an accrual
for foreign law purposes with respect to a
U.S. equity hybrid instrument does not
give rise to income under U.S. law but a
separate payment of the accrued amount is
made that gives rise to income under U.S.
law equal to all or a portion of the amount
of the accrual. The reference to "payments
or accruals" created confusion regarding
the effect of a payment. The final regula-
tions are clarified to provide that if an
accrual under foreign law with respect to a
U.S. equity hybrid instrument gives rise to
a foreign-law deduction by the issuer, then
regardless of whether a payment is made
on the instrument, a splitter arrangement
exists whenever an accrual gives rise to
the imposition of foreign income taxes on
the instrument owner without giving rise
to income under U.S. federal income tax
law. Any actual payment of the accrued
amount, whether or not it is made period-
ically under the terms of the instrument,
does not prevent the hybrid instrument
from being a splitter arrangement. The
payments, however, may be treated as a
distribution of related income to the extent
provided by § 1.909-3 and § 1.909-6(d).
An example is added at § 1.909-
2(b)(3)(i)(E) to illustrate the application
of the rule.

V. Mechanical rules for tracking related
income and split taxes.

A comment recommended that the reg-
ulations should generally provide addi-
tional mechanical rules for tracking re-
lated income. The Treasury Department
and the IRS recognize that there are a
number of mechanical issues related to
tracking related income and split taxes
that are not fully addressed in § 1.909-
6T. Other mechanical issues are under
consideration and will be addressed in fu-
ture guidance.

One comment recommended revising
§ 1.909-6T(e)(3) to provide for the car-
ryover of split taxes in the circumstance in
which a payor of split taxes that is a
section 902 corporation combines with a
section 902 shareholder in a transaction
that is described in section 381. Section
1.909-6T(e)(3) provides that split taxes
that carry over to a foreign corporation
under section 381, § 1.367(b)-7, or simi-
lar rules retain their character as split
taxes and, consequently, the transferee
corporation is treated as the payor of the
split taxes. That provision does not, how-
ever, provide that split taxes carry over to
a domestic corporation in the case of a
foreign-to-U.S. liquidation or other in-
bound transaction described in section
381.

The Treasury Department and the IRS
have determined that it is not appropriate
to expand the scope of § 1.909-6T(e)(3)
as recommended by the comment. A car-
ryover rule for inbound section 381 trans-
actions would create preferential treat-
ment, in certain fact patterns, of split
foreign income taxes that are maintained
by a section 902 corporation in suspension
accounts rather than included in post-1986
foreign income tax pools, such as when
the section 902 corporation has a deficit in
post-1986 undistributed earnings and
profits. In addition, if suspended foreign
income taxes are carried over to a domes-
tic section 902 shareholder, currency ex-
change rate fluctuations could cause a dis-
parity between the dollar amount of
income included by the domestic section
902 shareholder in respect of the func-
tional currency amount of earnings and
profits used to make the suspended tax
payment and the creditable dollar amount
of the foreign income taxes that are un-

suspended. This disparity is inconsistent
with the inclusion that results from unsus-
pending split taxes at the level of the
payor section 902 corporation, deeming
such taxes to be paid by the section 902
shareholder, and including the dollar
amount of taxes in the shareholder's in-
come under the section 78 gross-up.
Moreover, taxpayers could choose to
avoid permanent suspension of split taxes
in an inbound transaction by, for example,
causing a distribution of the related in-
come to the payor of the split taxes before
the payor of the split taxes is liquidated or
otherwise combined with a domestic per-
son. For these reasons, the final regula-
tions do not modify § 1.909-6T(e)(3) to
treat split taxes as a carryover attribute in
inbound section 381 transactions.

Another comment addressed the fact
pattern in which a covered person with the
related income ceases to be a covered
person with respect to the payor of split
taxes and the payor does not take the
related income into account before, or in
connection with, the termination of the
covered person relationship, resulting in
the permanent suspension of split taxes.
The comment recommended that, in this
case, if the covered person is a direct or
indirect subsidiary of the payor of the split
taxes, the payor should be treated as hav-
ing paid the split taxes on behalf of the
covered person and as having made a cap-
ital contribution in the amount of the split
taxes to the covered person directly or
indirectly through a chain of subsidiaries,
thereby stepping up basis in the covered
person's stock. The comment also recom-
mended reducing the earnings and profits
of the covered person by the amount of
the split taxes as though the covered per-
son had paid the split taxes. Stepping up
the basis of the stock of the covered per-
son by the amount of the permanently
suspended split taxes and reducing its
earnings and profits by the same amount
would ensure that any inclusion attribut-
able to the earnings and profits or appre-
ciated assets of the departing or liquidat-
ing covered person is reduced by the
amount of the split taxes, effectively con-
verting the permanently suspended split
taxes into a deduction for the payor of the
split taxes.

Section 909 contemplates that split
taxes may remain permanently suspended

as a result of a disposition or liquidation
of the covered person. Section 909 pro-
vides that split taxes are suspended until
the related income is taken into account
generally by the payor of the split tax or
relevant section 902 shareholder, and does
not provide for a deduction of split taxes
in lieu of a credit. If the covered person
does not distribute the full amount of re-
lated income prior to the liquidation or
disposition of the covered person, and
such liquidation or disposition does not
result in the reflection of the related in-
come in the earnings and profits of the
payor of the split tax (or the relevant sec-
tion 902 shareholder), then the related in-
come is not taken into account as pre-
scribed by section 909. The Treasury
Department and the IRS, therefore, have
concluded that it is appropriate for split
taxes to remain suspended until and unless
the related income is taken into account.
Accordingly, the comment is not adopted.

VI. Taking related income into account
as a result of a transaction under
section 381

A comment incorrectly interpreted
§ 1.909-6T(d)(8)(ii) as providing that
when a payor section 902 corporation
with suspended split taxes combines with
the covered person with the related in-
come in a transaction described in section
381, all related income is treated as taken
into account even if the full amount of
related income is not reflected in the earn-
ings and profits of the payor section 902
corporation (or surviving corporation) as a
result of the transaction.

The Treasury Department and the IRS
did not intend for a transaction described
under section 381 to result in the unsus-
pension of split taxes if the transaction
does not cause the payor of the split taxes
to take into account earnings and profits of
the covered person equal to the amount of
related income specified in the relevant
splitter arrangement definition. Accord-
ingly, the final regulations clarify that split
taxes are unsuspended only when the ap-
propriate amount of related income is
taken into account by the payor section
902 corporation either as a result of a
distribution or inclusion out of the earn-
ings and profits of the covered person or
as a result of the combination of the payor

section 902 corporation and the covered
person in a transaction described in sec-
tion 381.

### VII. Additional splitter arrangement fact patterns

A comment recommended that the
U.S. debt hybrid instrument splitter ar-
rangement definition be expanded to in-
clude certain fact patterns in which the
instrument owner is not related to the is-
suer of the instrument. The Treasury De-
partment and the IRS have concluded that
it is not appropriate at this time to extend
the existing splitter arrangement list to
include transactions between unrelated
persons and do not adopt the comment.
The Treasury Department and the IRS
continue, however, to consider other ar-
rangements that inappropriately separate
foreign income taxes from the related in-
come, and the circumstances under which
a splitter arrangement described in regu-
lations or other guidance under section
909 should be applied to arrangements
between unrelated persons.

## Special Analyses

It has been determined that this Trea-
sury decision is not a significant 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 Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations.
Pursuant to section 7805(f) of the Internal
Revenue Code, the NPRM preceding this
regulation was submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small businesses.

## Drafting Information

The principal author of these regula-
tions is Suzanne M. Walsh of the Office of
Associate Chief Counsel (International).
However, other personnel from the IRS
and the Treasury Department participated
in their development.

** * * *

## List of Subjects in 26 CFR Part 1

Income taxes, Reporting and record-
keeping requirements.

## 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 is amended by adding an entry in
numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Sections 1.909-1 through 1.906-6

also issued under 26 U.S.C. 909(e). * * *

Par. 2. Section 1.704-1 is amended as
follows:

a. Paragraph (b)(0) is amended by add-
ing entries for § 1.704-1(b)(1)(ii)(b)(3)
and § 1.704-1(b)(4)(viii)(d)(3).

b. Paragraph (b)(1)(ii)(b)(3) is revised.

c. Paragraph (b)(4)(viii)(d)(3) is re-
vised.

d. Paragraph (b)(5), Example 24, is re-
vised.

The revisions read as follows:

§ 1.704-1. Partner's distributive share.

* * * * *

(b) Determination of partner's distrib-
utive share -(0) Cross-references.

Heading

Section

* * * * * * *

Special rules for certain interbranch payments. * * * * * * *

1.704-1(b)(1)(ii)(b)(3)

Special rules for certain interbranch payments * * * * * * *

1.704-1(b)(4)(viii)(d)(3)

(1) * * *

(ii) * * *

(b) * * *

(3) Special rules for certain inter-
branch payments-(A) In general. The
provisions of § 1.704-1(b)(4)(viii)(d)(3)
apply for partnership taxable years ending
after February 9, 2015. See 26 CFR
1.704-1T(b)(4)(viii)(d)(3) (revised as of
April 1, 2014) for rules applicable to tax-
able years beginning on or after January 1,
2012, and ending on or before February 9,
2015.

(B) Transition rule. Transition relief is
provided herein to partnerships whose
agreements were entered into prior to Feb-

ruary 14, 2012. In such cases, if there has
been no material modification to the part-
nership agreement on or after February
14, 2012, then the partnership may apply
the provisions of § 1.704-
1(b)(4)(viii)(c)(3)(ii) and § 1.704-
1(b)(4)(viii)(d)(3) (revised as of April 1,
2011). For purposes of this paragraph
(b)(1)(ii)(b)(3), any change in ownership
constitutes a material modification to the
partnership agreement. This transition
rule does not apply to any taxable year
in which persons bearing a relationship
to each other that is specified in section
267(b) or section 707(b) collectively
have the power to amend the partnership

agreement without the consent of any
unrelated party (and all subsequent tax-
able years).

* * * * *

(4) * * *

(vii) * * *

(d) * * *

(3) Special rules for inter-branch pay-
ments. For rules relating to foreign tax
paid or accrued in partnership taxable
years beginning before January 1, 2012, in
respect of certain inter-branch payments,
see 26 CFR 1.704-1(b)(4)(viii)(d)(3) (re-
vised as of April 1, 2011).

* * * * *

(b)

(5) * * *

Example 24. (i) The facts are the same as in
Example 21, except that businesses M and N are
conducted by entities (DE1 and DE2, respectively)
that are corporations for country X and Y tax pur-
poses and disregarded entities for U.S. Federal in-
come tax purposes. Also, assume that DE1 makes
payments of $75,000 during 2012 to DE2 that are
deductible by DE1 for country X tax purposes and
includible in income of DE2 for country Y tax pur-
poses. As a result of such payments, DE1 has taxable
income of $25,000 for country X purposes on which
$10,000 of taxes are imposed and DE2 has taxable
income of $125,000 for country Y purposes on
which $25,000 of taxes are imposed. For U.S. Fed-
eral income tax purposes, $100,000 of AB's income
is attributable to the activities of DE1 and $50,000 of
AB's income is attributable to the activities of DE2.
Pursuant to the partnership agreement, all partner-
ship items from business M, excluding CFTEs paid
or accrued by business M, are allocated 75% to A
and 25% to B, and all partnership items from busi-
ness N, excluding CFTEs paid or accrued by busi-
ness N, are split evenly between A and B (50%
each). Accordingly, A is allocated 75% of the in-
come from business M ($75,000), and 50% of the
income from business N ($25,000). B is allocated
25% of the income from business M ($25,000), and
50% of the income from business N ($25,000).

(ii) Because the partnership agreement provides
for different allocations of the net income attribut-
able to businesses M and N, the net income attrib-
utable to each of business M and business N is
income in separate CFTE categories. See paragraph
(b)(4)(viii)(c)(2) of this section. Under paragraph
(b)(4)(viii)(c)(3) of this section, the $100,000 of net
income attributable to business M is in the business
M CFTE category and the $50,000 of net income
attributable to business N is in the business N CFTE
category. Under paragraph (b)(4)(viii)(d)(1) of this
section, the $10,000 of country X taxes is allocated
to the business M CFTE category and $10,000 of the
country Y taxes is allocated to the business N CFTE
category. The additional $15,000 of country Y tax
imposed with respect to the inter-branch payment is
assigned to the business M CFTE category because
for U.S. Federal income tax purposes, the related
$75,000 of income that country Y is taxing is in the
business M CFTE category. Therefore, $25,000 of
taxes ($10,000 of country X taxes and $15,000 of the
country Y taxes) is related to the $100,000 of net
income in the business M CFTE category and the
other $10,000 of country Y taxes is related to the
$50,000 of net income in the business N CFTE
category. See paragraph (b)(4)(viii)(c)(1) of this sec-
tion. The allocations of country X taxes will be in
proportion to the distributive shares of income to
which they relate and will be deemed to be in ac-
cordance with the partners' interests in the partner-
ship if such taxes are allocated 75% to A and 25% to
B. The allocations of country Y taxes will be in
proportion to the distributive shares of income to
which they relate and will be deemed to be in ac-
cordance with the partners' interests in the partner-
ship if $15,000 of such taxes is allocated 75% to A
and 25% to B and the other $10,000 of such taxes is
allocated 50% to A and 50% to B. No inference is
intended with respect to the application of other

provisions to arrangements that involve disregarded
payments.

(iii) Assume that the facts are the same as in
paragraph (i) of this Example 24, except that in order
to reflect the $75,000 payment from DE1 to DE2, the
partnership agreement allocates $75,000 of the in-
come attributable to business M equally between A
and B (50% each). In order to prevent separating the
CFTEs from the related foreign income, the $75,000
payment is treated as a divisible part of the business
M activity and, therefore, a separate activity. See
paragraph (b)(4)(viii)(c)(2)(iii) of this section. Be-
cause items from the disregarded payment and busi-
ness N are both shared equally between A and B, the
disregarded payment activity and the business N
activity are treated as a single CFTE category. See
paragraph (b)(4)(viii)(c)(2)(i) of this section. Ac-
cordingly, $25,000 of net income attributable to
business M is in the business M CFTE category and
$75,000 of income of business M attributable to the
disregarded payment and the $50,000 of net income
attributable to business N are in the business N
CFTE category. Under paragraph (b)(4)(viii)(d)(1)
of this section, the $10,000 of country X taxes is
allocated to the business M CFTE category and all
$25,000 of the country Y taxes is allocated to the
business N CFTE category. The allocations of coun-
try X taxes will be in proportion to the distributive
shares of income to which they relate and will be
deemed to be in accordance with the partners' inter-
ests in the partnership if such taxes are allocated
75% to A and 25% to B. The allocations of country
Y taxes will be in proportion to the distributive
shares of income to which they relate and will be
deemed to be in accordance with the partners' inter-
ests in the partnership if such taxes are allocated
50% to A and 50% to B.

* * * * *

### § 1.704-1T [Removed]

Par. 3. Section 1.704-1T is removed.

Par. 4. Section 1.909-0 is added to
read as follows:

§ 1.909-0 Outline of regulation
provisions for section 909.

This section lists the headings for
§§ 1.909-1 through 1.909-6.

§ 1.909-1 Definitions and special rules.

(a) Definitions.

(b) Taxes paid or accrued by a partner-
ship, S corporation or trust.

(d) Application of section 909 to pre-
1987 accumulated profits and pre-1987
foreign income taxes.

(e) Effective/applicability date.

§ 1.909-2 Splitter arrangements.

(a) Foreign tax credit splitting event.

(1) In general.

(2) Split taxes not taken into account.

(b) Splitter arrangements.

(1) Reverse hybrid splitter arrange-
ments.

(i) In general.

(ii) Split taxes from a reverse hybrid
splitter arrangement.

(iii) Related income from a reverse hy-
brid splitter arrangement.

(iv) Reverse hybrid.

(v) Examples.

(2) Loss-sharing splitter arrangements.

(i) In general.

(ii) U.S. combined income group.

(iii) Income and shared loss of a U.S.
combined income group.

(iv) Split taxes from a loss-sharing
splitter arrangement.

(v) Related income from a loss-sharing
splitter arrangement.

(vi) Foreign group relief or other loss-
sharing regime.

(vii) Examples.

(3) Hybrid instrument splitter arrange-
ments.

(i) U.S. equity hybrid instrument split-
ter arrangement.

(ii) U.S. debt hybrid instrument splitter
arrangement.

(4) Partnership inter-branch payment
splitter arrangements.

(i) In general.

(ii) Split taxes from a partnership inter-
branch payment splitter arrangement.

(iii) Related income from a partnership
inter-branch payment splitter arrange-
ment.

#### § 1.909-3 Rules regarding related income and split taxes.

(a) Interim rules for identifying related
income and split taxes.

(b) Split taxes on deductible disre-
garded payments.

§ 1.909-4 Coordination rules.

(a) Interim rules.

(b) Effective/applicability date.

§ 1.909-5 2011 and 2012 splitter
arrangements.

(a) Taxes paid or accrued in taxable
years beginning in 2011.

(b) Taxes paid or accrued in certain
taxable years beginning in 2012 with re-
spect to a foreign consolidated group
splitter arrangement.

§ 1.909-6 Pre-2011 foreign tax credit
splitting events.

(a) Foreign tax credit splitting event.

(1) In general.

(2) Taxes not subject to suspension un-
der section 909.

(3) Taxes subject to suspension under
section 909.

(b) Pre-2011 splitter arrangements.

(1) Reverse hybrid structure splitter ar-
rangements.

(2) Foreign consolidated group splitter
arrangements.

(3) Group relief or other loss-sharing
regime splitter arrangements.

(i) In general.

(ii) Split taxes and related income.

(4) Hybrid instrument splitter arrange-
ments.

(i) In general.

(ii) U.S. equity hybrid instrument split-
ter arrangement.

(iii) U.S. debt hybrid instrument split-
ter arrangement.

(1) Annual determination.

(2) Separate categories.

(d) Special rules regarding related in-
come.

(1) Annual adjustments.

(2) Effect of separate limitation losses
and deficits.

(3) Pro rata method for distributions
out of earnings and profits that include
both related income and other income.

(4) Alternative method for distribu-
tions out of earnings and profits that in-
clude both related income and other in-
come.

(5) Distributions, deemed distributions,
and inclusions out of related income.

(6) Carryover of related income.

(7) Related income taken into account
by a section 902 shareholder.

(8) Related income taken into account
by a payor section 902 corporation.

(9) Related income taken into account
by an affiliated group of corporations that
includes a section 902 shareholder.

(10) Distributions of previously-taxed
earnings and profits.

(e) Special rules regarding pre-2011
split taxes.

(1) Taxes deemed paid pro rata out of
pre-2011 split taxes and other taxes.

(2) Pre-2011 split taxes deemed paid in
pre-2011 taxable years.

(3) Carryover of pre-2011 split taxes.

(4) Determining when pre-2011 split
taxes are no longer treated as pre-2011
split taxes.

(f) Rules relating to partnerships and
trusts.

(1) Taxes paid or accrued by partner-
ships.

(2) Section 704(b) allocations.

(3) Trusts.

(g) Interaction between section 909
and other Code provisions.

(1) Section 904(c).

(2) Section 905(a).

(3) Section 905(c).

(4) Other foreign tax credit provisions.

(h) Effective/applicability date.

§ 1.909-0T [Removed]

Par. 5. Section 1.909-0T is removed.

Par. 6. Sections 1.909-1 is added to
read as follows:

§ 1.909-1 Definitions and special rules.

(a) Definitions. For purposes of section
909, this section, and §§ 1.909-2 through
1.909-5, the following definitions apply:

(1) The term section 902 corporation
means any foreign corporation with re-
spect to which one or more domestic cor-
porations meet the ownership require-
ments of section 902(a) or (b).

(2) The term section 902 shareholder
means any domestic corporation that
meets the ownership requirements of sec-
tion 902(a) or (b) with respect to a section
902 corporation.

(3) The term payor means a person that
pays or accrues a foreign income tax
within the meaning of § 1.901-2(f), and
also includes a person that takes foreign

income taxes paid or accrued by a part-
nership, S corporation, estate or trust into
account pursuant to section 702(a)(6), sec-
tion 901(b)(5) or section 1373(a).

(4) The term covered person means,
with respect to a payor-

(i) Any entity in which the payor holds,
directly or indirectly, at least a 10 percent
ownership interest (determined by vote or
value);

(ii) Any person that holds, directly or
indirectly, at least a 10 percent ownership
interest (determined by vote or value) in
the payor; or

(iii) Any person that bears a relation-
ship that is described in section 267(b) or
707(b) to the payor.

(5) The term foreign income tax means
any income, war profits, or excess profits
tax paid or accrued to any foreign country
or to any possession of the United States.
A foreign income tax includes any tax
paid or accrued in lieu of such a tax within
the meaning of section 903.

(6) The term post-1986 foreign income
taxes has the meaning provided in
§ 1.902-1(a)(8).

(7) The term post-1986 undistributed
earnings has the meaning provided in
§ 1.902-1(a)(9).

(8) The term disregarded entity means
an entity that is disregarded as an entity
separate from its owner, as provided in
§ 301.7701-2(c)(2)(i) of this chapter.

(9) The term hybrid partnership means
a partnership that is subject to income tax
in a foreign country as a corporation (or
otherwise at the entity level) on the basis
of residence, place of incorporation, place
of management or similar criteria.

(b) Taxes paid or accrued by a part-
nership, S corporation or trust. Under
section 909(c)(1), section 909 applies at
the partner level, and similar rules apply
in the case of an S corporation or trust.
Accordingly, in the case of foreign in-
come taxes paid or accrued by a partner-
ship, S corporation or trust, taxes allo-
cated to one or more partners,
shareholders or beneficiaries (as the case
may be) will be treated as split taxes to the
extent such taxes would be split taxes if
the partner, shareholder or beneficiary had
paid or accrued the taxes directly on the
date such taxes are taken into account by
the partner under sections 702 and 706(a),
by the shareholder under section 1373(a),

or by the beneficiary under section
901(b)(5). Any such split taxes will be
suspended in the hands of the partner,
shareholder or beneficiary.

(c) Related income of a partnership, S
corporation or trust. For purposes of de-
termining whether related income is taken
into account by a covered person, related
income of a partnership, S corporation or
trust is considered to be taken into account
by the partner, shareholder or beneficiary
to whom the related income is allocated.

(d) Application of section 909 to pre-
1987 accumulated profits and pre-1987
foreign income taxes. Section 909 and
§§ 1.909-1 through 1.909-5 will apply to
pre-1987 accumulated profits (as defined
in § 1.902-1(a)(10)(i)) and pre-1987 for-
eign income taxes (as defined in § 1.902-
1(a)(10)(iii)) of a section 902 corporation
attributable to taxable years beginning on
or after January 1, 2012.

(e) Effective/applicability date. This
section applies to taxable years ending
after February 9, 2015. See 26 CFR
1.909-1T (revised as of April 1, 2014) for
rules applicable to taxable years begin-
ning on or after January 1, 2011, and
ending on or before February 9, 2015.

### § 1.909-1T [Removed]

Par. 7. Section 1.909-1T is removed.

Par. 8. Section 1.909-2 is added to
read as follows:

#### § 1.909-2 Splitter arrangements.

(a) Foreign tax credit splitting event-
(1) In general. There is a foreign tax credit
splitting event with respect to foreign in-
come taxes paid or accrued if and only if,
in connection with an arrangement de-
scribed in paragraph (b) of this section (a
splitter arrangement) the related income
was, is or will be taken into account for
U.S. Federal income tax purposes by a
person that is a covered person with re-
spect to the payor of the tax. Foreign
income taxes that are paid or accrued in
connection with a splitter arrangement are
split taxes to the extent provided in para-
graph (b) of this section. Income (or, as
appropriate, earnings and profits) that
was, is or will be taken into account by a
covered person in connection with a split-
ter arrangement is related income to the

extent provided in paragraph (b) of this
section.

(2) Split taxes not taken into account.
Split taxes will not be taken into account
for U.S. Federal income tax purposes be-
fore the taxable year in which the related
income is taken into account by the payor
or, in the case of split taxes paid or ac-
crued by a section 902 corporation, by a
section 902 shareholder of such section
902 corporation. Therefore, in the case of
split taxes paid or accrued by a section
902 corporation, split taxes will not be
taken into account for purposes of sec-
tions 902 or 960, or for purposes of deter-
mining earnings and profits under section
964(a), before the taxable year in which
the related income is taken into account
by the payor section 902 corporation, a
section 902 shareholder of the section 902
corporation, or a member of the section
902 shareholder's consolidated group. See
§ 1.909-3(a) for rules relating to when
split taxes and related income are taken
into account.

(b) Splitter arrangements. The arrange-
ments set forth in this paragraph (b) are
splitter arrangements.

(1) Reverse hybrid splitter arrange-
ments-(i) In general. A reverse hybrid is
a splitter arrangement when a payor pays
or accrues foreign income taxes with re-
spect to income of a reverse hybrid. A
reverse hybrid splitter arrangement exists
even if the reverse hybrid has a loss or a
deficit in earnings and profits for a partic-
ular year for U.S. Federal income tax pur-
poses (for example, due to a timing dif-
ference).

(ii) Split taxes from a reverse hybrid
splitter arrangement. The foreign income
taxes paid or accrued with respect to in-
come of the reverse hybrid are split taxes.

(iii) Related income from a reverse hy-
brid splitter arrangement. The related in-
come with respect to split taxes from a
reverse hybrid splitter arrangement is the
earnings and profits (computed for U.S.
Federal income tax purposes) of the re-
verse hybrid attributable to the activities
of the reverse hybrid that gave rise to
income included in the payor's foreign tax
base with respect to which the split taxes
were paid or accrued. Accordingly, re-
lated income of the reverse hybrid in-
cludes items of income or expense attrib-
utable to a disregarded entity owned by

the reverse hybrid only to the extent that
the income attributable to the activities
of the disregarded entity is included in the
payor's foreign tax base.

(iv) Reverse hybrid. The term reverse
hybrid means an entity that is a corpora-
tion for U.S. Federal income tax purposes
but is a fiscally transparent entity (under
the principles of § 1.894-1(d)(3)) or a
branch under the laws of a foreign country
imposing tax on the income of the entity.

(v) Examples. The following examples illustrate
the rules of paragraph (b)(1) of this section.

Example 1. (i) Facts. USP, a domestic corpora-
tion, wholly owns DE, a disregarded entity for U.S.
federal income tax purposes that is organized in
country A and treated as a corporation for country A
tax purposes. DE wholly owns RH, a corporation for
U.S. Federal income tax purposes that is organized
in country A and treated as a fiscally transparent
entity for country A tax purposes. Country A im-
poses an income tax at the rate of 30% on DE with
respect to the items of income earned by RH. Prior to
year 1, RH had no income for country A purposes
and had no post-1986 earnings and profits for U.S.
Federal income tax purposes. In year 1, RH earns
200u of income on which DE pays 60u of country A
tax. Pursuant to § 1.901-2(f)(4)(ii), USP is treated as
legally liable for the 60u of country A taxes paid by
DE. DE has no other income. In year 2, RH earns no
income and incurs no losses or expenses. At the end
of year 2, RH distributes 100u to DE.

(ii) Result. (A) Split taxes and related income.
Pursuant to § 1.909-2(b)(1)(iv), RH is a reverse
hybrid because it is a corporation for U.S. Federal
income tax purposes and a fiscally transparent entity
for country A purposes. Pursuant to § 1.909-2(b)(1),
RH is a covered person with respect to USP because
USP wholly owns RH for U.S. Federal income tax
purposes. Pursuant to § 1.909-2(b)(1)(i), there is a
splitter arrangement with respect to RH because USP
paid country A tax with respect to the income of RH.
All 60u of taxes paid by USP in year 1 with respect
to the income of RH are split taxes pursuant to
§ 1.909-2(b)(1)(ii). The post-1986 earnings and
profits of RH are 200u as of the end of year 1.
Pursuant to § 1.909-2(b)(1)(iii), the related income
in year 1 is the 200u of RH's earnings and profits
that are attributable to the activities that gave rise to
the split taxes. No additional split taxes or related
income arise in year 2.

(B) Distribution. Because DE is a disregarded
entity, the 100u distribution by RH at the end of year
2 is treated as a dividend to USP. Pursuant to
§ 1.909-6(d)(7) and § 1.909-3(a), 100u of the 200u
of related income of RH, or 50%, is taken into
account by USP by reason of the 100u dividend.
Accordingly, pursuant to § 1.909-6(e)(4) and
§ 1.909-3(a), a ratable portion of the split taxes, or
30u of taxes (50% of 60u), is no longer treated as
split taxes and is taken into account by USP for U.S.
Federal income tax purposes.

Example 2. (i) Facts. The facts are the same as in
Example 1, except that in year 2, RH has a 100u loss
for U.S. Federal income tax purposes as well as for
country A tax purposes. For country A tax purposes,

DE takes the 100u loss into account in year 2 and
may not carry back the 100u loss to offset its country
A taxable income for year 1. At the end of year 2,
RH distributes 100u to DE.

(ii) Result. (A) Split taxes and related income.
The split taxes and related income for year 1 are the
same as in Example 1. Pursuant to § 1.909-
2(b)(1)(iii), § 1.909-6(d)(1) and § 1.909-3(a), the
total related income of RH is reduced to 100u (200u
\- 100u) in year 2 because RH incurred a 100u loss in
year 2 attributable to the activities that are included
in DE's country A tax base.

(B) Distribution. Because DE is a disregarded
entity, the 100u distribution by RH at the end of year
2 is treated as a dividend to USP. Pursuant to
§ 1.909-6(d)(7) and § 1.909-3(a), 100u of the 100u
of related income of RH, or 100%, is taken into
account by USP by reason of the 100u dividend.
Accordingly, pursuant to § 1.909-6(e)(4) and
§ 1.909-3(a), a ratable portion of the split taxes, or
60u of taxes (100% of 60u), is no longer treated as
split taxes and is taken into account by USP for U.S.
Federal income tax purposes.

(2) Loss-sharing splitter arrange-
ments-(i) In general. A foreign group
relief or other loss-sharing regime is a
loss-sharing splitter arrangement to the
extent that a shared loss of a U.S. com-
bined income group could have been used
to offset income of that group in the cur-
rent or in a prior foreign taxable year
(usable shared loss) but is used instead to
offset income of another U.S. combined
income group.

(ii) U.S. combined income group. The
term U.S. combined income group means
an individual or a corporation and all en-
tities (including entities that are fiscally
transparent for U.S. Federal income tax
purposes under the principles of § 1.894-
1(d)(3)) that for U.S. Federal income tax
purposes combine any of their respective
items of income, deduction, gain or loss
with the income, deduction, gain or loss of
such individual or corporation. A U.S.
combined income group can arise, for ex-
ample, as a result of an entity being dis-
regarded or, in the case of a partnership or
hybrid partnership and a partner, as a re-
sult of the allocation of income or any
other item of the partnership to the part-
ner. For purposes of this paragraph
(b)(2)(ii), a branch is treated as an entity,
all members of a U.S. affiliated group of
corporations (as defined in section 1504)
that file a consolidated return are treated
as a single corporation, and two or more
individuals that file a joint return are
treated as a single individual. A U.S. com-
bined income group may consist of a sin-
gle individual or corporation and no other

entities, but cannot include more than one
individual or corporation. In addition, an
entity may belong to more than one U.S.
combined income group. For example, a
hybrid partnership with two corporate
partners that do not combine any of their
items of income, deduction, gain or loss
for U.S. Federal income tax purposes is in
a separate U.S. combined income group
with each of its partners.

(iii) Income and shared loss of a U.S.
combined income group-(A) Income.
Except as otherwise provided in this para-
graph (b)(2)(iii)(A), the income of a U.S.
combined income group is the aggregate
amount of taxable income recognized or
taken into account for foreign tax pur-
poses by those members that have positive
taxable income for foreign tax purposes.
In the case of an entity that is fiscally
transparent (under the principles of
§ 1.894-1(d)(3)) for foreign tax purposes
and that is a member of more than one
U.S. combined income group, the foreign
taxable income of the entity is allocated
between or among the groups under for-
eign tax law. In the case of an entity that
is not fiscally transparent for foreign tax
purposes and that is a member of more
than one U.S. combined income group,
the foreign taxable income of the entity is
allocated between or among those groups
based on U.S. Federal income tax princi-
ples. For example, in the case of a hybrid
partnership, the foreign taxable income of
the partnership is allocated between or
among the groups in the manner the part-
nership allocates the income under section
704(b). To the extent the foreign taxable
income would be income under U.S. Fed-
eral income tax principles in another year,
the income is allocated between or among
the groups based on how the hybrid part-
nership would allocate the income if the
income were recognized for U.S. Federal
income tax purposes in the year in which
the income is recognized for foreign tax
purposes. To the extent the foreign taxable
income would not constitute income un-
der U.S. Federal income tax principles in
any year, the income is allocated between
or among the groups in the same manner
as the partnership items attributable to the
activity giving rise to the foreign taxable
income.

(B) Shared loss. The term shared loss
means a loss of one entity for foreign tax

purposes that, in connection with a foreign
group relief or other loss-sharing regime,
is taken into account by one or more other
entities. Except as otherwise provided in
this paragraph (b)(2)(iii)(B), the amount
of shared loss of a U.S. combined income
group is the sum of the shared losses of all
members of the U.S. combined income
group. In the case of an entity that is
fiscally transparent (under the principles
of § 1.894-1(d)(3)) for foreign tax pur-
poses and that is a member of more than
one U.S. combined income group, the
shared loss of the entity is allocated be-
tween or among the groups under foreign
tax law. In the case of an entity that is not
fiscally transparent for foreign tax pur-
poses and that is a member of more than
one U.S. combined income group, the
shared loss of the entity will be allocated
between or among those groups based on
U.S. Federal income tax principles. For
example, in the case of a hybrid partner-
ship, the shared loss of the partnership
will be allocated between or among the
groups in the manner the partnership allo-
cates the loss under section 704(b). To the
extent the shared loss would be a loss
under U.S. Federal income tax principles
in another year, the loss is allocated be-
tween or among the groups based on how
the partnership would allocate the loss if
the loss were recognized for U.S. Federal
income tax purposes in the year in which
the loss is recognized for foreign tax pur-
poses. To the extent the shared loss would
not constitute a loss under U.S. Federal
income tax principles in any year, the loss
is allocated between or among the groups
in the same manner as the partnership
items attributable to the activity giving
rise to the shared loss.

(iv) Split taxes from a loss-sharing
splitter arrangement. Split taxes from a
loss-sharing splitter arrangement are for-
eign income taxes paid or accrued by a
member of the U.S. combined income
group with respect to income from the
current foreign taxable year, or, in the
case of a foregone carryback loss, from
the prior foreign taxable year, equal to the
amount of the usable shared loss of that
group that offsets income of another U.S.
combined income group.

(v) Related income from a loss-sharing
splitter arrangement. The related income
with respect to split taxes from a loss-

sharing splitter arrangement is an amount
of income of the individual or corporate
member of the U.S. combined income
group equal to the amount of income un-
der foreign tax law of that U.S. combined
income group that is offset by the usable
shared loss of another U.S. combined in-
come group.

(vi) Foreign group relief or other loss-
sharing regime. A foreign group relief or
other loss-sharing regime exists when an
entity may surrender its loss to offset the
income of one or more other entities. A
foreign group relief or other loss-sharing
regime does not include an allocation of
loss of an entity that is a partnership or
other fiscally transparent entity (under the
principles of § 1.894-1(d)(3)) for foreign
tax purposes or regimes in which foreign
tax is imposed on combined income (such
as a foreign consolidated regime), as de-
scribed in § 1.901-2(f)(3).

(vii) Examples. The following exam-
ples illustrate the rules of paragraph (b)(2)
of this section.

Example 1. (i) Facts. USP, a domestic corpora-
tion, wholly owns CFC1, a corporation organized in
country A. CFC1 wholly owns CFC2 and CFC3,
both corporations organized in country A. CFC2
wholly owns DE, an entity organized in country A.
DE is a corporation for country A tax purposes and
a disregarded entity for U.S. Federal income tax
purposes. Country A has a loss-sharing regime under
which a loss of CFC1, CFC2, CFC3 or DE may be
used to offset the income of one or more of the
others. Country A imposes an income tax at the rate
of 30% on the taxable income of corporations orga-
nized in country A. In year 1, before any loss shar-
ing, CFC1 has no income, CFC2 has income of 50u,
CFC3 has income of 200u, and DE has a loss of
100u. Under the provisions of country A's loss-
sharing regime, the group decides to use DE's 100u
loss to offset 100u of CFC3's income. After the loss
is shared, for country A's tax purposes, CFC2 still
has 50u of income on which it pays 15u of country
A tax. CFC3 has income of 100u (200u less the 100u
shared loss) on which it pays 30u of country A tax.
For U.S. Federal income tax purposes, the loss shar-
ing with CFC3 is not taken into account. Because DE
is a disregarded entity, its 100u loss is taken into
account by CFC2 and reduces its earnings and profits
for U.S. Federal income tax purposes. Accordingly,
before application of section 909, CFC2 has a loss
for earnings and profits purposes of 65u (50u income
less 15u taxes paid to country A less 100u loss of
DE). CFC2 also has the U.S. dollar equivalent of 15u
of foreign income taxes to add to its post-1986
foreign income taxes pool. CFC3 has earnings and
profits of 170u (200u income less 30u of taxes) and
the dollar equivalent of 30u of foreign income taxes
to add to its post-1986 foreign income taxes pool.

(ii) Result. Pursuant to § 1.909-2(b)(2)(ii),
CFC2 and DE constitute one U.S. combined income

group, while CFC1 and CFC3 each constitute sepa-
rate U.S. combined income groups. Pursuant to
§ 1.909-2(b)(2)(iii)(A), the income of the CFC2
U.S. combined income group is 50u (CFC2's coun-
try A taxable income of 50u). The income of the
CFC3 U.S. combined income group is 200u (CFC3's
country A taxable income of 200u). Pursuant to
§ 1.909-2(b)(2)(iii)(B), the shared loss of the CFC2
U.S. combined income group includes the 100u of
shared loss incurred by DE. The usable shared loss
of the CFC2 U.S. combined income group is 50u, the
amount of the group's shared loss that could have
otherwise offset CFC2's 50u of country A taxable
income that is included in the income of the CFC2
U.S. combined income group. There is a splitter
arrangement because the 50u usable shared loss of
the CFC2 U.S. combined income group was used
instead to offset income of CFC3, which is included
in the CFC3 U.S. combined income group. Pursuant
to § 1.909-2(b)(2)(iv), the split taxes are the 15u of
country A income taxes paid by CFC2 on 50u of
income, an amount of income of the CFC2 U.S.
combined income group equal to the amount of
usable shared loss of that group that was used to
offset income of the CFC3 U.S. combined income
group. Pursuant to § 1.909-2(b)(2)(v), the related
income is the 50u of CFC3's income that equals the
amount of income of the CFC3 U.S. combined in-
come group that was offset by the usable shared loss
of the CFC2 U.S. combined income group.

Example 2. (i) Facts. USP, a domestic corpora-
tion, wholly owns CFC1, a corporation organized in
country B. CFC1 wholly owns CFC2 and CFC3,
both corporations organized in country B. CFC2
wholly owns DE, an entity organized in country B.
DE is a corporation for country B tax purposes and
a disregarded entity for U.S. Federal income tax
purposes. CFC2 and CFC3 each own 50% of HP1,
an entity organized in country B. HP1 is a corpora-
tion for country B tax purposes and a partnership for
U.S. Federal income tax purposes. All items of in-
come and loss of HP1 are allocated for U.S. Federal
income tax purposes equally between CFC2 and
CFC3, and all entities use the country B currency "u"
as their functional currency. Country B has a loss-
sharing regime under which a loss of any of CFC1,
CFC2, CFC3, DE, and HP1 may be used to offset the
income of one or more of the others. Country B
imposes an income tax at the rate of 30% on the
taxable income of corporations organized in country
B. In year 1, before any loss sharing, CFC2 has
income of 100u, CFC1 and CFC3 have no income,
DE has a loss of 100u, and HP1 has income of 200u.
Under the provisions of country B's loss-sharing
regime, the group decides to use DE's 100u loss to
offset 100u of HP1's income. After the loss is
shared, for country B tax purposes, CFC2 has 100u
of income on which it pays 30u of country B income
tax, and HP1 has 100u of income (200u less the 100u
shared loss) on which it pays 30u of country B
income tax. For U.S. Federal income tax purposes,
the loss sharing with HP1 is not taken into account,
and, because DE is a disregarded entity, its 100u loss
is taken into account by CFC2 and reduces CFC2's
earnings and profits for U.S. Federal income tax
purposes. The 200u income of HP1 is allocated
50/50 to CFC2 and CFC3, as is the 30u of country B
income tax paid by HP1. Accordingly, before appli-

cation of section 909, for U.S. Federal income tax
purposes, CFC2 has earnings and profits of 55u
(100u income plus 100u share of HP1's income less
100u loss of DE less 30u country B income tax paid
by CFC2 less 15u share of HP1's country B income
tax) and the dollar equivalent of 45u of country B
income tax to add to its post-1986 foreign income
taxes pool. CFC3 has earnings and profits of 85u
(100u share of HP1's income less 15u share of
HP1's country B income taxes) and the dollar equiv-
alent of 15u of country B income tax to add to its
post-1986 foreign income taxes pool.

(ii) U.S. combined income groups. Pursuant to
§ 1.909-2(b)(2)(ii), because the income and loss of
HP1 are combined in part with the income and loss
of both CFC2 and CFC3, it belongs to both of the
separate CFC2 and CFC3 U.S. combined income
groups. DE is a member of the CFC2 U.S. combined
income group.

(iii) Income of the U.S. combined income groups.
Pursuant to § 1.909-2(b)(2)(iii)(A), the income of
the CFC2 U.S. combined income group is the 200u
country B taxable income of the members of the
group with positive taxable incomes (CFC2's coun-
try B taxable income of 100u plus 50% of HP1's
country B taxable income of 200u, or 100u). Be-
cause DE does not have positive taxable income for
country B tax purposes, its 100u loss is not included
in the income of the CFC2 U.S. combined income
group. The income of the CFC3 U.S. combined
income group is 100u (50% of HP1's country B
taxable income of 200u, or 100u).

(iv) Shared loss of the U.S. combined income
groups. Pursuant to § 1.909-2(b)(2)(iii)(B), the
shared loss of the CFC2 U.S. combined income
group is the 100u loss incurred by DE that is used to
offset 100u of HP1's income. The CFC3 U.S. com-
bined income group has no shared loss. Pursuant to
§ 1.909-2(b)(2)(i), the usable shared loss of the
CFC2 U.S. combined income group is 100u, the full
amount of the group's 100u shared loss that could
have been used to offset income of the CFC2 U.S.
combined income group had the loss been used to
offset 100u of CFC2's country B taxable income.

(v) Income offset by shared loss. The shared loss
of the CFC2 combined income group is used to
offset 100u country B taxable income of HP1. Be-
cause the taxable income of HP1 is allocated 50/50
between the CFC2 and CFC3 U.S. combined income
groups, the shared loss is treated as offsetting 50u of
the CFC2 U.S. combined income group's income
and 50u of the CFC3 U.S. combined income group's
income.

(vi) Splitter arrangement. There is a splitter ar-
rangement because 50u of the 100u usable shared
loss of the CFC2 U.S. combined income group was
used to offset income of the CFC3 U.S. combined
income group. Pursuant to § 1.909-2(b)(2)(iv), the
split taxes are the 15u of country B income tax paid
by CFC2 on 50u of its income, which is equal to the
amount of the CFC2 U.S. combined income group's
usable shared loss that was used to offset income of
another U.S. combined income group. Pursuant to
§ 1.909-2(b)(2)(v), the related income is the 50u of
CFC3's income that was offset by the usable shared
loss of the CFC2 U.S. combined income group.

(3) Hybrid instrument splitter arrange-
ments-(i) U.S. equity hybrid instrument

splitter arrangement-(A) In general. A
U.S. equity hybrid instrument is a splitter
arrangement if:

(1) Under the laws of a foreign juris-
diction in which the instrument owner is
subject to tax, the instrument gives rise to
income includible in the instrument own-
er's income and such inclusion results in
foreign income taxes paid or accrued by
the instrument owner;

(2) Under the laws of a foreign juris-
diction in which the issuer is subject to
tax, the instrument gives rise to deduc-
tions that are incurred or otherwise taken
into account by the issuer; and

(3) The events that give rise to income
includible in the instrument owner's in-
come for foreign tax purposes as de-
scribed in paragraph (b)(3)(i)(A)(1) of this
section, and to deductions for the issuer
for foreign tax purposes as described in
paragraph (b)(3)(i)(A)(2) of this section,
do not result in an inclusion of income for
the instrument owner for U.S. federal in-
come tax purposes.

(B) Split taxes from a U.S. equity hy-
brid instrument splitter arrangement.
Split taxes from a U.S. equity hybrid in-
strument splitter arrangement equal the
total amount of foreign income taxes paid
or accrued by the owner of the hybrid
instrument less the amount of foreign in-
come taxes that would have been paid or
accrued had the owner of the U.S. equity
hybrid instrument not been subject to for-
eign tax on income from the instrument
with respect to the events described in
§ 1.909-2(b)(3)(i)(A).

(C) Related income from a U.S. equity
hybrid instrument splitter arrangement.
The related income with respect to split
taxes from a U.S. equity hybrid instru-
ment splitter arrangement is income of the
issuer of the U.S. equity hybrid instrument
in an amount equal to the amounts giving
rise to the split taxes that are deductible
by the issuer for foreign tax purposes,
determined without regard to the actual
amount of the issuer's income or earn-
ings and profits for U.S. Federal income
tax purposes.

(D) U.S. equity hybrid instrument. The
term U.S. equity hybrid instrument means
an instrument that is treated as equity for
U.S. Federal income tax purposes but for
foreign income tax purposes either is
treated as indebtedness or otherwise enti-

tles the issuer to a deduction with respect
to such instrument.

(E) Example. (i) Facts. USP, a domestic corpo-
ration, wholly owns CFC1, which wholly owns
CFC2. Both CFC1 and CFC2 are corporations orga-
nized in country A. CFC2 issues an instrument to
CFC1 that is treated as indebtedness for country A
tax purposes but equity for U.S. Federal income tax
purposes. Under country A's income tax laws, the
instrument accrues interest at the end of each month,
which results in a deduction for CFC2 and an income
inclusion and tax liability for CFC1 in country A.
The accrual of interest does not result in an inclusion
of income for CFC1 for U.S. Federal income tax
purposes. Pursuant to the terms of the instrument,
CFC2 makes a distribution at the end of the year
equal to the amounts of interest that have accrued
during the year, and such payment is treated as a
dividend that is included in the income of CFC1 for
U.S. Federal income tax purposes.

(ii) Result. Pursuant to § 1.909-2(b)(3)(i)(D),
because the instrument is treated as equity for U.S.
Federal income tax purposes but is treated as indebt-
edness for country A tax purposes, it is a U.S. equity
hybrid instrument. Pursuant to § 1.909-
2(b)(3)(i)(A)(3), because the accrual of interest un-
der foreign law does not result in an inclusion of
income of CFC1 for U.S. Federal income tax pur-
poses, there is a splitter arrangement. The fact that
the payment of the accrued amount at the end of the
year pursuant to the terms of the instrument gives
rise to a dividend that is included in income of CFC1
for U.S. Federal income tax purposes does not
change the result because it is the accrual of interest
and not the payment that gives rise to income or
deductions under foreign law. The payments will be
treated as a distribution of related income to the
extent provided by § 1.909-3 and § 1.909-6(d).

(ii) U.S. debt hybrid instrument splitter
arrangement-(A) In general. A U.S.
debt hybrid instrument is a splitter ar-
rangement if foreign income taxes are
paid or accrued by the issuer of a U.S.
debt hybrid instrument with respect to in-
come in an amount equal to the interest
(including original issue discount) paid or
accrued on the instrument that is deduct-
ible for U.S. Federal income tax purposes
but that does not give rise to a deduction
under the laws of a foreign jurisdiction in
which the issuer is subject to tax.

(B) Split taxes from a U.S. debt hybrid
instrument splitter arrangement. Split
taxes from a U.S. debt hybrid instrument
splitter arrangement are the foreign in-
come taxes paid or accrued by the issuer
on the income that would have been offset
by the interest paid or accrued on the U.S.
debt hybrid instrument had such interest
been deductible for foreign tax purposes.

brid instrument splitter arrangement is the
gross amount of the interest income rec-
ognized for U.S. Federal income tax pur-
poses by the owner of the U.S. debt hybrid
instrument, determined without regard to
the actual amount of the owner's income
or earnings and profits for U.S. Federal
income tax purposes.

(D) U.S. debt hybrid instrument. The
term U.S. debt hybrid instrument means
an instrument that is treated as equity for
foreign tax purposes but as indebtedness
for U.S. Federal income tax purposes.

(4) Partnership inter-branch payment
splitter arrangements-(i) In general. An
allocation of foreign income tax paid or
accrued by a partnership with respect to
an inter-branch payment as described in
§ 1.704-1(b)(4)(viii)(d)(3) (revised as of
April 1, 2011) (the inter-branch payment
tax) is a splitter arrangement to the extent
the inter-branch payment tax is not allo-
cated to the partners in the same propor-
tion as the distributive shares of income in
the CFTE category to which the inter-
branch payment tax is or would be as-
signed under § 1.704-1(b)(4)(viii)(d)
without regard to § 1.704-1(b)(4)(viii)(d)(3).

(ii) Split taxes from a partnership
inter-branch payment splitter arrange-
ment. The split taxes from a partnership
inter-branch splitter arrangement equal
the excess of the amount of the inter-
branch payment tax allocated to a partner
under the partnership agreement over the
amount of the inter-branch payment tax
that would have been allocated to the part-
ner if the inter-branch payment tax had
been allocated to the partners in the same
proportion as the distributive shares of
income in the CFTE category referred to
in paragraph (b)(4)(i) of this section.

(iii) Related income from a partnership
inter-branch payment splitter arrange-
ment. The related income from a partner-
ship inter-branch payment splitter ar-
rangement equals the amount of income
allocated to a partner that exceeds the
amount of income that would have been
allocated to the partner if income in the
CFTE category referred to in paragraph
(b)(4)(i) of this section in the amount of
the inter-branch payment had been allo-
cated to the partners in the same propor-
tion as the inter-branch payment tax was
allocated under the partnership agreement.

(c) Effective/applicability date. This
section applies to foreign income taxes
paid or accrued in taxable years ending
after February 9, 2015. However, a tax-
payer may choose to apply the provisions
of § 1.909-2T (as contained in 26 CFR
part 1, revised as of April 1, 2014) in lieu
of this section to foreign income taxes
paid or accrued in its first taxable year
ending after February 9, 2015, and in tax-
able years of foreign corporations with
respect to which the taxpayer is a domes-
tic shareholder (as defined in § 1.902-
1(a)) that end with or within that first
taxable year. See 26 CFR 1.909-2T (re-
vised as of April 1, 2014) for rules appli-
cable to foreign income taxes paid or ac-
crued in taxable years beginning on or
after January 1, 2012, and ending on or
before February 9, 2015.

#### § 1.909-2T [Removed]

Par. 9. Section 1.909-2T is removed.
Par.10. Section 1.909-3 is added to
read as follows:

##### § 1.909-3 Rules regarding related income and split taxes.

(a) Interim rules for identifying related
income and split taxes. The principles of
paragraphs (d) through (f) of § 1.909-6
apply to related income and split taxes in
taxable years beginning on or after Janu-
ary 1, 2011, except that the alternative
method for identifying distributions of re-
lated income described in § 1.909-
6(d)(4) applies only to identify the amount
of pre-2011 split taxes of a section 902
corporation that are suspended as of the
first day of the section 902 corporation's
first taxable year beginning on or after
January 1, 2011.

(b) Split taxes on deductible disre-
garded payments. Split taxes include taxes
paid or accrued in taxable years beginning
on or after January 1, 2011, with respect
to the amount of a disregarded payment
that is deductible by the payor of the dis-
regarded payment under the laws of a
foreign jurisdiction in which the payor of
the disregarded payment is subject to tax
on related income from a splitter arrange-
ment. The amount of the deductible dis-
regarded payment to which this paragraph
(b) applies is limited to the amount of

related income from such splitter arrange-
ment.

(c) Effective/applicability date. This
section applies to taxable years ending
after February 9, 2015. See 26 CFR
1.909-3T (revised as of April 1, 2014) for
rules applicable to taxable years begin-
ning on or after January 1, 2011, and
ending on or before February 9, 2015.

### § 1.909-3T [Removed]

Par. 11. Section 1.909-3T is removed.
Par. 12. Section 1.909-4 is added to
read as follows:

§ 1.909-4 Coordination rules.

(a) Interim rules. The principles of
paragraph (g) of § 1.909-6 apply to tax-
able years beginning on or after January 1,
2011.

(b) Effective/applicability date. This
section applies to taxable years ending
after February 9, 2015. See 26 CFR
1.909-4T (revised as of April 1, 2014) for
rules applicable to taxable years begin-
ning on or after January 1, 2011, and
ending on or before February 9, 2015.

#### § 1.909-4T [Removed]

Par. 13. Section 1.909-4T is removed.
Par. 14. Section 1.909-5 is added to
read as follows:

§ 1.909-5 2011 and 2012 splitter
arrangements.

(a) Taxes paid or accrued in taxable
years beginning in 2011. (1) Foreign in-
come taxes paid or accrued by any person
in a taxable year beginning on or after
January 1, 2011, and before January 1,
2012, in connection with a pre-2011 split-
ter arrangement (as defined in § 1.909-
6(b)), are split taxes to the same extent
that such taxes would have been treated as
pre-2011 split taxes if such taxes were
paid or accrued by a section 902 corpora-
tion in a taxable year beginning on or
before December 31, 2010. The related
income with respect to split taxes from
such an arrangement is the related income
described in § 1.909-6(b), determined as
if the payor were a section 902 corpora-
tion.

(2) Foreign income taxes paid or ac-
crued by any person in a taxable year
beginning on or after January 1, 2011, and
before January 1, 2012, in connection
with a partnership inter-branch payment
splitter arrangement described in § 1.909-
2(b)(4) are split taxes to the extent that
such taxes are identified as split taxes in
§ 1.909-2(b)(4)(ii). The related income
with respect to the split taxes is the related
income described in § 1.909-2(b)(4)(iii).

(b) Taxes paid or accrued in certain
taxable years beginning in 2012 with re-
spect to a foreign consolidated group
splitter arrangement. Foreign income
taxes paid or accrued by any person in a
taxable year beginning on or after January
1, 2012, and on or before February 14,
2012, in connection with a foreign consol-
idated group splitter arrangement de-
scribed in § 1.909-6(b)(2) are split taxes
to the same extent that such taxes would
have been treated as pre-2011 split taxes if
such taxes were paid or accrued by a sec-
tion 902 corporation in a taxable year be-
ginning on or before December 31, 2010.
The related income with respect to split
taxes from such an arrangement is the
related income described in § 1.909-
6(b)(2), determined as if the payor were a
section 902 corporation.

(c) Effective/applicability date. The
rules of this section apply to foreign in-
come taxes paid or accrued in taxable
years beginning on or after January 1,
2011, and on or before February 14, 2012.

### § 1.909-5T [Removed]

Par. 15. Section 1.909-5T is removed.
Par. 16. Sections 1.909-6 is added to
read as follows:

§ 1.909-6 Pre-2011 foreign tax credit
splitting events.

(a) Foreign tax credit splitting event-
(1) In general. This section provides rules
for determining whether foreign income
taxes paid or accrued by a section 902
corporation (as defined in section
909(d)(5)) in taxable years beginning on
or before December 31, 2010 (pre-2011
taxable years and pre-2011 taxes) are sus-
pended under section 909 in taxable years
beginning after December 31, 2010, (post-
2010 taxable years) of a section 902 cor-
poration. Paragraph (b) of this section

identifies an exclusive list of arrange-
ments that will be treated as giving rise to
foreign tax credit splitting events in pre-
2011 taxable years (pre-2011 splitter ar-
rangements). Paragraphs (c), (d), and (e)
of this section provide rules for determin-
ing the related income and pre-2011 split
taxes paid or accrued with respect to pre-
2011 splitter arrangements. Paragraph (f)
of this section provides rules concerning
the application of section 909 to partner-
ships and trusts. Paragraph (g) of this sec-
tion provides rules concerning the interac-
tion between section 909 and other
Internal Revenue Code (Code) provisions.

(2) Taxes not subject to suspension un-
der section 909. Pre-2011 taxes that will
not be suspended under section 909 or
paragraph (a) of this section are:

(i) Any pre-2011 taxes that were not
paid or accrued in connection with a pre-
2011 splitter arrangement identified in
paragraph (b) of this section;

(ii) Any pre-2011 taxes that were paid
or accrued in connection with a pre-2011
splitter arrangement identified in para-
graph (b) of this section (pre-2011 split
taxes) but that were deemed paid under
section 902(a) or 960 on or before the last
day of the section 902 corporation's last
pre-2011 taxable year;

(iii) Any pre-2011 split taxes if either
the payor section 902 corporation took the
related income into account in a pre-2011
taxable year or a section 902 shareholder
(as defined in § 1.909-1(a)(2)) of the rel-
evant section 902 corporation took the
related income into account on or before
the last day of the section 902 corpora-
tion's last pre-2011 taxable year; and

(iv) Any pre-2011 split taxes paid or
accrued by a section 902 corporation in
taxable years of such section 902 corpo-
ration beginning before January 1, 1997.

(3) Taxes subject to suspension under
section 909. To the extent that the section
902 corporation paid or accrued pre-2011
split taxes that are not described in para-
graph (a)(2) of this section, section 909
and the regulations under that section will
apply to such pre-2011 split taxes for pur-
poses of applying sections 902 and 960 in
post-2010 taxable years of the section 902
corporation. Accordingly, these taxes will
be removed from the section 902 corpo-
ration's pools of post-1986 foreign in-
come taxes and suspended under section

909 as of the first day of the section 902
corporation's first post-2010 taxable year.
There is no increase to a section 902 cor-
poration's earnings and profits for the
amount of any pre-2011 taxes to which
section 909 applies that were previously
deducted in computing earnings and prof-
its in a pre-2011 taxable year.

(b) Pre-2011 splitter arrangements.
The arrangements set forth in this para-
graph (b) are pre-2011 splitter arrange-
ments.

(1) Reverse hybrid structure splitter
arrangements. A reverse hybrid structure
exists when a section 902 corporation
owns an interest in a reverse hybrid. A
reverse hybrid is an entity that is a corpo-
ration for U.S. Federal income tax pur-
poses but is a pass-through entity or a
branch under the laws of a foreign country
imposing tax on the income of the entity.
As a result, the owner of the reverse hy-
brid is subject to tax on the income of the
entity under foreign law. A pre-2011 split-
ter arrangement involving a reverse hy-
brid structure exists when pre-2011 taxes
are paid or accrued by a section 902 cor-
poration with respect to income of a re-
verse hybrid that is a covered person with
respect to the section 902 corporation. A
pre-2011 splitter arrangement involving a
reverse hybrid structure may exist even if
the reverse hybrid has a deficit in earnings
and profits for a particular year (for exam-
ple, due to a timing difference). Such
taxes paid or accrued by the section 902
corporation are pre-2011 split taxes. The
related income is the earnings and profits
(computed for U.S. Federal income tax
purposes) of the reverse hybrid attribut-
able to the activities of the reverse hybrid
that gave rise to income included in the
foreign tax base with respect to which the
pre-2011 split taxes were paid or accrued.
Accordingly, related income of the re-
verse hybrid would not include any item
of income or expense attributable to a
disregarded entity (as defined in
§ 301.7701-2(c)(2)(i) of this chapter)
owned by the reverse hybrid if income
attributable to the activities of the disre-
garded entity is not included in the foreign
tax base.

(2) Foreign consolidated group splitter
arrangements. A foreign consolidated
group exists when a foreign country im-
poses tax on the combined income of two

or more entities. Tax is considered im-
posed on the combined income of two or
more entities even if the combined income
is computed under foreign law by attrib-
uting to one such entity the income of one
or more entities. A foreign consolidated
group is a pre-2011 splitter arrangement
to the extent that the taxpayer did not
allocate the foreign consolidated tax lia-
bility among the members of the foreign
consolidated group based on each mem-
ber's share of the consolidated taxable
income included in the foreign tax base
under the principles of § 1.901-2(f)(3)
(revised as of April 1, 2011). A pre-2011
splitter arrangement involving a foreign
consolidated group may exist even if one
or more members has a deficit in earnings
and profits for a particular year (for exam-
ple, due to a timing difference). Pre-2011
taxes paid or accrued with respect to the
income of a foreign consolidated group
are pre-2011 split taxes to the extent that
taxes paid or accrued by one member of
the foreign consolidated group are im-
posed on a covered person's share of the
consolidated taxable income included in
the foreign tax base. The related income is
the earnings and profits (computed for
U.S. Federal income tax purposes) of such
other member attributable to the activities
of that other member that gave rise to
income included in the foreign tax base
with respect to which the pre-2011 split
taxes were paid or accrued. No inference
should be drawn from the treatment of
foreign consolidated groups under section
909 as to the determination of the person
who paid the foreign income tax for U.S.
Federal income tax purposes.

(3) Group relief or other loss-sharing
regime splitter arrangements-(i) In gen-
eral. A foreign group relief or other loss-
sharing regime exists when one entity
with a loss permits the loss to be used to
offset the income of one or more entities
(shared loss). A pre-2011 splitter arrange-
ment involving a shared loss exists when
the following three conditions are met:

(A) There is an instrument that is
treated as indebtedness under the laws of
the jurisdiction in which the issuer is sub-
ject to tax and that is disregarded for U.S.
Federal income tax purposes (disregarded
debt instrument). Examples of a disre-
garded debt instrument include a debt ob-
ligation between two disregarded entities

that are owned by the same section 902
corporation, two disregarded entities that
are owned by a partnership with one or
more partners that are section 902 corpo-
rations, a section 902 corporation and a
disregarded entity that is owned by that
section 902 corporation, or a partnership
in which the section 902 corporation is a
partner and a disregarded entity that is
owned by such partnership.

(B) The owner of the disregarded debt
instrument pays a foreign income tax at-
tributable to a payment or accrual on the
instrument.

(C) The payment or accrual on the dis-
regarded debt instrument gives rise to a
deduction for foreign tax purposes and the
issuer of the instrument incurs a shared
loss that is taken into account under for-
eign law by one or more entities that are
covered persons with respect to the owner
of the instrument.

(ii) Split taxes and related income. In
situations described in paragraph (b)(3)(i)
of this section, pre-2011 taxes paid or
accrued by the owner of the disregarded
debt instrument with respect to amounts
paid or accrued on the instrument (up to
the amount of the shared loss) are pre-
2011 split taxes. The related income of a
covered person is an amount equal to the
shared loss, determined without regard to
the actual amount of the covered person's
earnings and profits.

(4) Hybrid instrument splitter arrange-
ments-(i) In general. A hybrid instru-
ment for purposes of this paragraph (b)(4)
is an instrument that either is treated as
equity for U.S. Federal income tax pur-
poses but is treated as indebtedness for
foreign tax purposes (U.S. equity hybrid
instrument), or is treated as indebtedness
for U.S. Federal income tax purposes but
is treated as equity for foreign tax pur-
poses (U.S. debt hybrid instrument).

(ii) U.S. equity hybrid instrument split-
ter arrangement. If the issuer of a U.S.
equity hybrid instrument is a covered per-
son with respect to a section 902 corpora-
tion that is the owner of the U.S. equity
hybrid instrument, there is a pre-2011
splitter arrangement with respect to the
portion of the pre-2011 taxes paid or ac-
crued by the owner section 902 corpora-
tion with respect to the amounts on the
instrument that are deductible by the is-
suer as interest under the laws of a foreign

jurisdiction in which the issuer is subject
to tax but that do not give rise to income
for U.S. Federal income tax purposes. Pre-
2011 split taxes paid or accrued by the
section 902 corporation equal the total
amount of pre-2011 taxes paid or accrued
by the section 902 corporation less the
amount of pre-2011 taxes that would have
been paid or accrued had the section 902
corporation not been subject to tax on
income from the U.S. equity hybrid in-
strument. The related income of the issuer
of the U.S. equity hybrid instrument is an
amount equal to the amounts that are de-
ductible by the issuer for foreign tax pur-
poses, determined without regard to the
actual amount of the issuer's earnings and
profits.

(iii) U.S. debt hybrid instrument split-
ter arrangement. If the owner of a U.S.
debt hybrid instrument is a covered person
with respect to a section 902 corporation
that is the issuer of the U.S. debt hybrid
instrument, there is a pre-2011 splitter ar-
rangement with respect to the portion of
the pre-2011 taxes paid or accrued by the
section 902 corporation on income in an
amount equal to the interest (including
original issue discount) paid or accrued on
the instrument that is deductible for U.S.
Federal income tax purposes but that does
not give rise to a deduction under the laws
of a foreign jurisdiction in which the is-
suer is subject to tax. Pre-2011 split taxes
are the pre-2011 taxes paid or accrued by
the section 902 corporation on the income
that would have been offset by the interest
paid or accrued on the U.S. debt hybrid
instrument had such interest been deduct-
ible for foreign tax purposes. The related
income with respect to a U.S. debt hybrid
instrument is the gross amount of the in-
terest income recognized for U.S. Federal
income tax purposes by the owner of the
U.S. debt hybrid instrument, determined
without regard to the actual amount of the
owner's earnings and profits.

(c) General rules for applying section
909 to pre-2011 split taxes and related
income-(1) Annual determination. The
determination of related income, other in-
come, pre-2011 split taxes, and other
taxes, and the portion of these amounts
that were distributed, deemed paid or oth-
erwise transferred or eliminated must be
made on an annual basis beginning with
the first taxable year of the section 902

corporation beginning after December 31,
1996 (post-1996 taxable year) in which
the section 902 corporation paid or ac-
crued a pre-2011 tax with respect to a
pre-2011 splitter arrangement and ending
with the section 902 corporation's last
pre-2011 taxable year. Annual amounts of
related income and pre-2011 split taxes
are aggregated for each separate pre-2011
splitter arrangement.

(2) Separate categories. The determi-
nation of annual and aggregate amounts of
related income and pre-2011 split taxes
with respect to each pre-2011 splitter ar-
rangement must be made for each separate
category as defined in § 1.904-4(m) of
the section 902 corporation, each covered
person, and any other person that succeeds
to the related income and pre-2011 split
taxes. In the case of a pre-2011 splitter
arrangement involving a shared loss (as
described in paragraph (b)(3) of this sec-
tion), the amount of the related income in
each separate category of the covered per-
son is equal to the amount of income in
that separate category that was offset by
the shared loss for foreign tax purposes. In
the case of a pre-2011 splitter arrange-
ment involving a U.S. equity hybrid in-
strument (as described in paragraph
(b)(4)(ii) of this section), the related in-
come is assigned to the issuer's separate
categories in the same proportions as the
pre-2011 split taxes. Earnings and profits,
including related income, are assigned to
separate categories under the rules of
§§ 1.904-4, 1.904-5, and 1.904-7. For-
eign income taxes, including pre-2011
split taxes, are assigned to separate cate-
gories under the rules of § 1.904-6. A
section 902 shareholder must consistently
apply methodologies for determining pre-
2011 split taxes and related income with
respect to all pre-2011 splitter arrange-
ments.

(d) Special rules regarding related in-
come-(1) Annual adjustments. In the
case of each pre-2011 splitter arrangement
involving a reverse hybrid or a foreign
consolidated group (as described in para-
graphs (b)(1) and (2) of this section, re-
spectively), a covered person's aggregate
amount of related income must be ad-
justed each year by the net amount of
income and expense attributable to the
activities of the covered person that give
rise to income included in the foreign tax

base, even if the net amount is negative
and regardless of whether the section 902
corporation paid or accrued any pre-2011
split taxes in such year.

(2) Effect of separate limitation losses
and deficits. Related income is determined
without regard to the application of
§ 1.960-1(i)(4) (relating to the effect of
separate limitation losses on earnings and
profits in another separate category) or
section 952(c)(1) (relating to certain earn-
ings and profits deficits).

(3) Pro rata method for distributions
out of earnings and profits that include
both related income and other income. If
the earnings and profits of a covered per-
son include amounts attributable to both
related income and other income, includ-
ing earnings and profits attributable to tax-
able years beginning before January 1,
1997, then distributions, deemed distribu-
tions, and inclusions out of earnings and
profits (for example, under sections 301,
304, 367(b), 951(a), 964(e), 1248, or
1293) of the covered person are consid-
ered made out of related income and other
income on a pro rata basis. Any reduction
of a covered person's earnings and profits
that results from a payment on stock that
is not treated as a dividend for U.S. Fed-
eral income tax purposes (for example,
pursuant to section 312(n)(7)) will also
reduce related income and other income
on a pro rata basis.

(4) Alternative method for distributions
out of earnings and profits that include
both related income and other income.
Solely for purposes of identifying the
amount of pre-2011 split taxes of a section
902 corporation that are suspended as of
the first day of the section 902 corpora-
tion's first post-2010 taxable year, in lieu
of the rule set forth in paragraph (d)(3) of
this section, a section 902 shareholder
may choose to treat all distributions,
deemed distributions, and inclusions out
of earnings and profits of a covered person
as attributable first to related income. A
section 902 shareholder may choose to
use this alternative method on a timely
filed original income tax return for the
first post-2010 taxable year in which the
shareholder computes an amount of for-
eign income taxes deemed paid with re-
spect to a section 902 corporation that
paid or accrued pre-2011 split taxes. Such
choice by a section 902 shareholder is

evidenced by employing the method on its
income tax return; the section 902 share-
holder need not file a separate statement.
A section 902 shareholder that chooses
this alternative method must consistently
apply it with respect to all pre-2011 split-
ter arrangements.

(5) Distributions, deemed distribu-
tions, and inclusions of related income.
Distributions, deemed distributions, and
inclusions of related income (including
indirectly through a partnership) to per-
sons other than the payor section 902 cor-
poration retain their character as related
income with respect to the associated pre-
2011 split taxes.

(6) Carryover of related income. Re-
lated income carries over to other corpo-
rations in the same manner as earnings
and profits carry over under section 381,
§ 1.367(b)-7, or similar rules, and retains
its character as related income with re-
spect to the associated pre-2011 split
taxes.

(7) Related income taken into account
by a section 902 shareholder. Related in-
come will be considered taken into ac-
count by a section 902 shareholder to the
extent that the related income is recog-
nized as gross income by the section 902
shareholder, or by an affiliated corpora-
tion described in paragraph (d)(9) of this
section, upon a distribution, deemed dis-
tribution, or inclusion (such as under sec-
tion 951(a)) out of the earnings and profits
of the covered person attributable to such
related income.

(8) Related income taken into account
by a payor section 902 corporation. Re-
lated income will be considered taken into
account by a payor section 902 corpora-
tion to the extent that:

(i) The related income is reflected in
the earnings and profits of such section
902 corporation for U.S. Federal income
tax purposes by reason of a distribution,
deemed distribution, or inclusion out of
the earnings and profits of the covered
person attributable to such related income;
or

(ii) The related income is reflected as a
positive adjustment to the earnings and
profits of such section 902 corporation for
U.S. Federal income tax purposes by rea-
son of the section 902 corporation and the
covered person combining in a transaction
described in section 381(a)(1) or (a)(2).

(9) Related income taken into account
by an affiliated group of corporations that
includes a section 902 shareholder. A sec-
tion 902 shareholder will be considered to
have taken related income into account if
one or more members of an affiliated
group of corporations (as defined in sec-
tion 1504) that files a consolidated Federal
income tax return that includes the section
902 shareholder takes the related income
into account.

(10) Distributions of previously-taxed
earnings and profits. Distributions and
deemed distributions described in para-
graph (d) of this section (including in the
case of a section 902 shareholder that has
chosen the alternative method described
in paragraph (d)(4) of this section) do not
include distributions of amounts described
in section 959(c)(1) or (c)(2), which are
distributed before amounts described in
section 959(c)(3).

(e) Special rules regarding pre-2011
split taxes-(1) Taxes deemed paid pro-
rata out of pre-2011 split taxes and other
taxes. If the pre-2011 taxes of a section
902 corporation include both pre-2011
split taxes and other taxes, then foreign
income taxes deemed paid under section
902 or 960 or otherwise removed from
post-1986 foreign income taxes in pre-
2011 taxable years will be treated as at-
tributable to pre-2011 split taxes and other
taxes on a pro-rata basis.

(2) Pre-2011 split taxes deemed paid in
pre-2011 taxable years. Pre-2011 split
taxes deemed paid in pre-2011 taxable
years in connection with a dividend paid
to a shareholder described in section
902(b) retain their character as pre-2011
split taxes. The section 902(b) shareholder
will be treated as the payor section 902
corporation with respect to those pre-2011
split taxes.

(3) Carryover of pre-2011 split taxes.
Pre-2011 split taxes that carry over to
another foreign corporation, including un-
der section 381, § 1.367(b)-7 or similar
rules, retain their character as pre-2011
split taxes. The transferee foreign corpo-
ration will be treated as the payor section
902 corporation with respect to those pre-
2011 split taxes.

(4) Determining when pre-2011 split
taxes are no longer treated as pre-2011
split taxes. For each pre-2011 splitter ar-
rangement, as related income is taken into

account by the payor section 902 corpo-
ration or a section 902 shareholder as pro-
vided in paragraph (d) of this section, a
ratable portion of the associated pre-2011
split taxes will no longer be treated as
pre-2011 split taxes. In the case of a pre-
2011 splitter arrangement involving a re-
verse hybrid or a foreign consolidated
group (as described in paragraphs (b)(1)
and (2) of this section, respectively), if
aggregate related income is reduced to
zero (other than as a result of a distribu-
tion, deemed distribution, or inclusion de-
scribed in paragraph (d) of this section) or
less than zero, pre-2011 split taxes will
retain their character as pre-2011 split
taxes until the amount of aggregate related
income is positive and the related income
is taken into account by the payor section
902 corporation or a section 902 share-
holder as provided in paragraph (d) of this
section.

(f) Rules relating to partnerships and
trusts-(1) Taxes paid or accrued by part-
nerships. In the case of foreign income
taxes paid or accrued by a partnership, the
taxes will be treated as pre-2011 split
taxes to the extent such taxes are allocated
to one or more section 902 corporations and
would be pre-2011 split taxes if the partner
section 902 corporation had paid or accrued
the taxes directly on the date such taxes are
included by the section 902 corporation un-
der sections 702 and 706(a). Further, any
foreign income taxes subject to section 909
will be suspended in the hands of the partner
section 902 corporation.

(2) Section 704(b) allocations. Partner-
ship allocations that satisfy the require-
ments of section 704(b) and the regula-
tions thereunder will not constitute pre-
2011 splitter arrangements except to the
extent the arrangement is otherwise de-
scribed in paragraph (b) of this section
(for example, a payment or accrual on a
disregarded debt instrument that gives rise
to a shared loss).

(3) Trusts. Rules similar to the rules of
paragraph (f)(1) of this section will apply
in the case of any trust with one or more

beneficiaries that is a section 902 corpo-
ration.

(g) Interaction between section 909
and other Code provisions-(1) Section
904(c). Section 909 does not apply to ex-
cess foreign income taxes that were paid
or accrued in pre-2011 taxable years and
carried forward and deemed paid or ac-
crued under section 904(c) in a post-2010
taxable year.

(2) Section 905(a). For purposes of de-
termining in post-2010 taxable years the
allowable deduction for foreign income
taxes paid or accrued under section
164(a), the carryover of excess foreign
income taxes under section 904(c), and
the extended period for claiming a credit
or refund under section 6511(d)(3)(A),
foreign income taxes to which section 909
applies are first taken into account and
treated as paid or accrued in the year in
which the related income is taken into
account, and not in the earlier year to
which the tax relates (determined without
regard to section 909).

(3) Section 905(c). If a redetermination
of foreign income taxes claimed as a di-
rect credit under section 901 occurs in a
post-2010 taxable year and the foreign tax
redetermination relates to a pre-2011 tax-
able year, to the extent such foreign tax
redetermination increased the amount of
foreign income taxes paid or accrued with
respect to the pre-2011 taxable year (for
example, due to an additional assessment
of foreign tax or a payment of a previ-
ously accrued tax not paid within two
years), section 909 will not apply to such
taxes. If a redetermination of foreign tax
paid or accrued by a section 902 corpora-
tion occurs in a post-2010 taxable year
and increases the amount of foreign in-
come taxes paid or accrued by the section
902 corporation with respect to a pre-2011
taxable year (for example, due to an ad-
ditional assessment of foreign tax or a
payment of a previously accrued tax not
paid within two years), such taxes will be
treated as pre-2011 taxes. Section 909 will
apply to such taxes if they are pre-2011

split taxes and the taxes will be suspended
in the post-2010 taxable year in which
they would otherwise be taken into ac-
count as a prospective adjustment to the
section 902 corporation's pools of post-
1986 foreign income taxes.

(4) Other foreign tax credit provisions.
Section 909 does not affect the applicabil-
ity of other restrictions or limitations on
the foreign tax credit under existing law,
including, for example, the substantiation
requirements of section 905(b).

(h) Effective/applicability date. This
section applies to foreign income taxes paid
or accrued by section 902 corporations in
pre-2011 taxable years for purposes of com-
puting foreign income taxes deemed paid
with respect to distributions or inclusions
out of earnings and profits of section 902
corporations in taxable years of the section
902 corporation ending after February 9,
2015. See 26 CFR 1.909-6T (revised as of
April 1, 2014) for rules applicable to foreign
income taxes paid or accrued by section 902
corporations in pre-2011 taxable years for
purposes of computing foreign income taxes
deemed paid with respect to distributions or
inclusions out of earnings and profits of
section 902 corporations in taxable years of
the section 902 corporation beginning after
December 31, 2010, and ending on or be-
fore February 9, 2015.

### § 1.909-6T [Removed]

Par. 17. Section 1.909-6T is removed.

Rosemary Sereti,
Acting Deputy Commissioner
for Services and Enforcement.

Approved: February 4, 2015.

Mark J. Mazur,
Assistant Secretary
of the Treasury (Tax Policy).

## Part III. Administrative, Procedural, and Miscellaneous

### Qualified Zone Academy Bond Allocations for 2014

### Notice 2015-11

### SECTION 1. PURPOSE

This notice sets forth the maximum
face amount of Qualified Zone Academy
Bonds ("QZABs") that may be issued for
each State for the calendar year 2014 un-
der § 54E(c)(2) of the Internal Revenue
Code. Under § 54A(e)(3), the term State
includes the District of Columbia and any
possession of the United States.

### SECTION 2. BACKGROUND

#### .01 INTRODUCTION

Section 313 of the Tax Extenders and
Alternative Minimum Tax Relief Act of
2008, Div. C of Pub. L. No. 110-343, 122
Stat. 3765 (2008) ("Act") added new
§ 54E, which provides revised program
provisions for QZABs in lieu of the exist-
ing provisions under § 1397E, effective
for obligations issued after October 3,
2008. The Act amended § 54A(d)(1) to
provide that the term qualified tax credit
bond ("QTCB") means, in part, a qualified
zone academy bond which is part of an
issue that meets the requirements of
§§ 54A(d)(2), (3), (4), (5), and (6) regard-
ing expenditures of bond proceeds, infor-
mation reporting, arbitrage, maturity lim-
itations, and prohibitions against financial
conflicts of interest. The Act also
amended § 54A(d)(2)(C) to provide that,
for purposes of § 54A(d)(2), the term
"qualified purpose" for a QZAB means a
purpose specified in § 54E(a)(1), de-
scribed below.

The Act added § 54E(c)(1) to provide a
national zone academy bond limitation
authorization for QZABs of $400 million
for each of calendar years 2008 and 2009.
Section 1522 of Title I of Division B of
the American Recovery and Reinvestment
Act of 2009, Pub. L. No. 111-5, 123 Stat.
115 (2009) ("2009 Act") amended
§ 54E(c)(1) to provide an increased na-
tional zone academy bond limitation au-
thorization for QZABs of $1.4 billion for
each of calendar years 2009 and 2010.
Section 758 of the Tax Relief, Unemploy-

ment Insurance Reauthorization, and Job
Creation Act of 2010, Public L. No. 111-
312, 124 Stat. 3296 (2010) ("2010 Act")
amended § 54E(c)(1) to provide an autho-
rization for QZABs of $400 million for
calendar year 2011. Section 310 of the
American Taxpayer Relief Act of 2012,
Public L. No. 112-240, 126 Stat. 2313
(2012) ("2012 Act") amended § 54E(c)(1)
to provide authorization for QZABs of
$400 million for each of calendar years
2012 and 2013. Section 120 of the Tax
Increase Prevention Act of 2014, Public
L. No. 113-295 (2014) ("2014 Act")
amended § 54E(c)(1) to provide authori-
zation for QZABs of $400 million for
calendar year 2014. The amendment made
by § 120 of the 2014 Act applies to obli-
gations issued after December 31, 2013.
Section 202 of the 2014 Act also amended
§ 6431(f)(3)(A)(iii) to provide that the
direct-pay subsidy option does not apply
to any national zone academy bond limi-
tation for years after 2010 or any carry-
forward of any such limitation.

### .02 QUALIFIED ZONE ACADEMY BOND UNDER § 54E

Section 54E(d) defines "qualified zone
academy" as any public school (or aca-
demic program within a public school)
which is established by and operated un-
der the supervision of an eligible local
education agency to provide education or
training below the postsecondary level
provided: (A) the public school or pro-
gram is designed in cooperation with busi-
ness to enhance the academic curriculum,
increase graduation and employment rates
and prepare students for college and the
workforce; (B) students will be subject to
the same academic standards and assess-
ments as other students educated by the
eligible local education agency; (C) the
comprehensive education plan is ap-
proved by the eligible local education
agency; and (D)(i) such public school is
located in an empowerment zone or enter-
prise community including such desig-
nated after October 3, 2008; or (ii) there is
a reasonable expectation (as of the date of
bond issuance) that at least 35 percent of
the students will be eligible for free or
reduced cost lunches under the school

lunch program established under the Na-
tional School Lunch Act.

Section 54E(a) provides that a "quali-
fied zone academy bond" or QZAB means
any bond issued as part of an issue if: (1)
100 percent of the available project pro-
ceeds of such issue are to be used for a
qualified purpose with respect to a quali-
fied zone academy established by an eli-
gible local education agency; (2) the bond
is issued by a State or local government
within the jurisdiction of which such
academy is located, and (3) the issuer: (A)
designates such bond for purposes of this
section; (B) certifies that it has written
assurances that the private business con-
tribution requirement of § 54E(b) will be
met; and, (C) certifies that it has the writ-
ten approval of the eligible local educa-
tion agency for such bond issuance.

Section 54E(d)(3) provides that a qual-
ified purpose with respect to each acad-
emy means: (A) rehabilitating or repairing
the public school facility; (B) providing
equipment; (C) developing course materi-
als; and, (D) training teachers and other
school personnel. The private business
contribution requirement of § 54E(b) is
met if the eligible local education agency
that established the qualified zone acad-
emy has written commitments from pri-
vate entities to make qualified contribu-
tions having a present value (as of the date
of issuance of the issue) of not less than
10 percent of the proceeds of the issue.
Section 54E(d)(4) defines "qualified con-
tributions" as any contribution (of a type
and quality acceptable to the eligible local
education agency) of: (A) equipment for
use in the qualified zone academy (includ-
ing state-of-the-art technology and voca-
tional equipment); (B) technical assis-
tance in developing curriculum or in
training teachers to promote appropriate
market driven technology in the class-
room; (C) employees' services as volun-
teer mentors; (D) internships, field trips,
or other educational opportunities outside
the academy; or (E) any other property or
service specified by the eligible education
agency. Section 54E(d)(2) defines "eligi-
ble local education agency" as any local
educational agency as defined in § 9101 of
the Elementary and Secondary Education
Act of 1965.

Section 54E(c)(2) provides that the De-
partment of the Treasury shall allocate the
national zone academy bond limitation
among the States on the basis of their re-
spective populations of individuals below
the poverty line (as defined by the Office of
Management and Budget). The limitation
amount allocated to a State under the pre-
ceding sentence shall be allocated by the
State education agency to qualified zone
academies within such State.

Under § 54E(c)(3), the maximum ag-
gregate face amount of bonds issued dur-
ing any calendar year which may be des-
ignated as QZABs with respect to any
qualified zone academy shall not exceed
the limitation amount allocated to such
academy for such calendar year. How-
ever, under § 54E(c)(4)(A), if for any cal-
endar year the limitation amount for any
State exceeds the amount of bonds issued
during such year which are designated
QZABs with respect to qualified zone
academies within such State, the limita-
tion amount for such State for the follow-
ing calendar year shall be increased by the
amount of such excess. Under
§ 54E(c)(4)(B), however, any carryfor-
ward of a limitation amount may be car-
ried only to the first 2 years following the
unused limitation year. For these pur-
poses, the limitation amount shall be
treated as used on a first-in first-out basis.

Sections 1.1397E-1 (the “Final Regu-
lations") sets forth regulations that were
issued under § 1397E. For other guidance
concerning the applicability of the regula-
tions issued under § 1397E, the credit rate,
and the sinking fund yield see § 1.397E-
1(m), and Notice 2009-15, 2009-6
I.R.B. 449, Notice 2009-30, 2009-16
I.R.B. 852, Notice 2010-22, 2010-10
I.R.B. 435, and Rev. Proc. 2011-19,
2011-6 I.R.B. 465.

## SECTION 3. NATIONAL ZONE ACADEMY BOND LIMITATION FOR 2014

The national limitation for QZABs is-
sued under § 54E for calendar year 2014
is $400 million. This amount is allocated
among the States as follows:

### Qualified Zone Academy Bond Allocations (in dollars) by State or

Territory, 2014 State or Territory

QZAB Allocation

Alabama

$ 7,035,000

Alaska

$ 575,000

Arizona

$ 9,550,000

Arkansas

$ 4,410,000

California

$50,069,000

Colorado

$ 5,264,000

Connecticut

$ 2,954,000

Delaware

$ 916,000

$ 911,000

Florida

$25,858,000

Georgia

$14,637,000

Hawaii

$ 1,214,000

Idaho

$ 1,952,000

Illinois

$14,574,000

Indiana

$ 7,979,000

Iowa

$ 2,983,000

Kansas

$ 3,099,000

Kentucky

$ 6,354,000

Louisiana

$ 7,099,000

Maine

$ 1,435,000

Maryland

$ 4,680,000

Massachusetts

$ 6,100,000

Michigan

$13,024,000

Minnesota

$ 4,688,000

Mississippi

$ 5,476,000

Missouri

$ 7,349,000

Montana

$ 1,260,000

Nebraska

$ 1,857,000

Nevada

$ 3,428,000

New Hampshire

$ 911,000

New Jersey

$ 7,876,000

New Mexico

$ 3,465,000

New York

$24,276,000

North Carolina

$13,540,000

North Dakota

$ 641,000

Ohio

$14,191,000

Oklahoma

$ 4,939,000

Oregon

$ 5,044,000

Pennsylvania

$13,355,000

Rhode Island

$ 1,173,000

South Carolina

$ 6,793,000

South Dakota

$ 904,000

### Qualified Zone Academy Bond Allocations (in dollars) by State or Territory, 2014

State or Territory

QZAB Allocation

Tennessee

$ 8,930,000

Texas

$ 35,854,000

Utah

$ 2,849,000

Vermont

$ 585,000

Virginia

$ 7,446,000

Washington

$ 7,620,000

West Virginia

$ 2,624,000

Wisconsin

$ 5,963,000

Wyoming

$ 491,000

American Samoa

$ 247,000

Guam

$ 287,000

Northern Mariana Islands

$ 211,000

Puerto Rico

$ 12,872,000

U.S. Virgin Islands

$ 183,000

Total Allocation

$400,000,000

## SECTION 4. EFFECTIVE DATE OF NATIONAL ZONE ACADEMY BOND LIMITATIONS

The national limitation allocated in
section 3 for calendar year 2014 is effec-
tive for QZABs issued after December 31,
2013.

## SECTION 5. DRAFTING INFORMATION

The principal authors of this notice are
James A. Polfer and David E. White of the
Office of Associate Chief Counsel (Finan-
cial Institutions and Products). For further
information regarding this notice contact
David White or James Polfer at (202) 317-
6980 (not a toll-free call).

NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 1167, General Rules and Specifications
for Substitute Forms and Schedules.

Rev. Proc. 2015-18

TABLE OF CONTENTS

Part 1 - INTRODUCTION TO SUBSTITUTE FORMS

621

Section 1.1 - Overview of Revenue Procedure 2015-18

621

Section 1.2 - IRS Contacts

622

Section 1.3 - What's New

622

Section 1.4 - Definitions

623

Section 1.5 - Agreement

624

Part 2 - GENERAL GUIDELINES FOR SUBMISSIONS AND APPROVALS

625

Section 2.1 - General Specifications for Approval

625

Section 2.2 - Highlights of Permitted Changes and Requirements

626

Section 2.3 - Vouchers.

627

Section 2.4 - Restrictions on Changes

629

Section 2.5 - Guidelines for Obtaining IRS Approval

629

Section 2.6 - Office of Management and Budget (OMB) Requirements for All Substitute Forms

632

Part 3 - PHYSICAL ASPECTS AND REQUIREMENTS

633

Section 3.1 - General Guidelines for Substitute Forms

633

Section 3.2 - Paper

634

Section 3.3 - Printing

635

Section 3.4 - Margins

636

Section 3.5 - Examples of Approved Formats

636

Section 3.6 - Miscellaneous Information for Substitute Forms

637

Part 4 - ADDITIONAL RESOURCES

637

Section 4.1 - Guidance From Other Revenue Procedures

637

Section 4.2 - Electronic Tax Products.

638

Section 4.2 - System Requirements and Ordering Forms and Instructions

638

Part 5 - REQUIREMENTS FOR SPECIFIC TAX RETURNS

638

Section 5.1 - Tax Returns (Forms 1040, 1040A, 1120, etc.)

638

Section 5.2 - Changes Permitted to Graphics (Forms 1040A and 1040)

639

Section 5.3 - Changes Permitted to Form 1040A Graphics

640

Section 5.4 - Changes Permitted to Form 1040 Graphics

640

Part 6 - FORMAT AND CONTENT OF SUBSTITUTE RETURNS

641

Section 6.1 - Acceptable Formats for Substitute Forms and Schedules

641

Section 6.2 - Additional Instructions for All Forms.

642

Part 7 - MISCELLANEOUS FORMS AND PROGRAMS

643

Section 7.1 - Specifications for Substitute Schedules K-1

643

Section 7.2 - Guidelines for Substitute Forms 8655

648

Part 8 - ADDITIONAL INFORMATION

648

Section 8.1 - Forms for Electronically Filed Returns

648

Section 8.2 - Effect on Other Documents

649

## Part 1 Introduction to Substitute Forms

### Section 1.1 - Overview of Revenue Procedure 2015-18

#### 1.1.1 Purpose

The purpose of this revenue procedure is to provide guidelines and general requirements for the
development, printing, and approval of substitute tax forms. Approval will be based on these
guidelines. After review and approval, submitted forms will be accepted as substitutes for official
IRS forms.

#### 1.1.2 Unique Forms

Certain unique specialized forms require the use of other additional publications to supplement
this publication. See Part 4.

#### 1.1.3 Scope

The IRS accepts quality substitute tax forms that are consistent with the official forms and have
no adverse impact on our processing. The IRS Substitute Forms Unit administers the formal
acceptance and processing of these forms nationwide. While this program deals with paper
documents, it also reviews for approval other processing and filing forms such as those used in
electronic filing.

Only those substitute forms that comply fully with these requirements are acceptable. This
revenue procedure is updated as required to reflect pertinent tax year form changes and to meet
processing and/or legislative requirements.

#### 1.1.4 Forms Covered by This Revenue Procedure

The following types of forms are covered by this revenue procedure:

· IRS tax forms and their related schedules,

· Worksheets as they appear in instruction packages,

· Applications for permission to file returns electronically and forms used as required docu-
mentation for electronically filed returns,

· Powers of Attorney,

· Over-the-counter estimated tax payment vouchers, and

· Forms and schedules relating to partnerships, exempt organizations, and employee plans.

#### 1.1.5 Forms Not Covered by This Revenue Procedure

The following types of forms are not covered by this revenue procedure:

· W-2 and W-3 (see Publication 1141 for information on these forms),

· W-2c and W-3c (see Publication 1223 for information on these forms),

· 941, Schedule B (Form 941), Schedule D (Form 941), and Schedule R (Form 941) (see
Publication 4436 for information on these forms),

· 1096, 1097-BTC, 1098 series, 1099 series, 3921, 3922, 5498 series, W-2G, 1042-S, and
8935 (see Publication 1179 for information on these forms),

· 8027 (see Publication 1239 for information on this form),

· Forms 1040-ES (OCR) and 1041-ES (OCR), which may not be reproduced,

· Forms 5500 (for more information on these forms, see the Department of Labor website at
www.efast.dol.gov),

· Forms 5300, 5307, 8717, and 8905, bar-coded forms requiring separate approval,

· Requests for information or documentation initiated by the IRS,

· Forms used internally by the IRS,

· State tax forms,

· Forms developed outside the IRS, and

· General Instructions and Specific Instructions (these are not reviewed by the Substitute Forms
Program Unit).

### Section 1.2 - IRS Contacts

#### 1.2.1 Where To Send Substitute Forms

Send your substitute forms for approval to the following offices (do not send forms with taxpayer
data):

Form

Office and Address

5500

Check EFAST2 information at the Department of Labor's website at www.efast.dol.gov

5300, 5307, 8717, and 8905

Sandra.K.Barnes@irs.gov

Software developer vouch- ers (see Sections 2.3.7 - 2.3.9)

Internal Revenue Service Attn: Doris Bethea, C5-226 5000 Ellin Road Lanham, MD 20706 Doris.E.Bethea@irs.gov

All others (except W-2, W-2c, W-3, W-3c, 941, Schedules B and R (Form 941), 1096, 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, 1042-S, 8027, and 8935) covered by this publication

Internal Revenue Service Attn: Substitute Forms Program 5000 Ellin Road, C6-440 Lanham, MD 20706

In addition, the Substitute Forms Program Unit can be contacted via email at
substituteforms@irs.gov. Please include "PDF Submissions" on the subject line.

For questions about Forms W-2 and W-3, refer to IRS Publication 1141, General Rules and
Specifications for Substitute Forms W-2 and W-3. For Forms W-2c and W-3c, refer to IRS
Publication 1223, General Rules and Specifications for Substitute Forms W-2c and W-3c. For
Form 941 and Schedules B, D, and R (Form 941), refer to IRS Publication 4436, General Rules
and Specifications for Substitute Form 941, Schedule B (Form 941) and Schedule R (Form 941).
For Forms 1096, 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, 1042-S, and 8935, refer to
IRS Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099,
5498, and Certain Other Information Returns. For Form 8027, refer to IRS Publication 1239,
Specifications for Filing Form 8027, Employer's Annual Information Return of Tip Income and
Allocated Tips, Electronically.

Section 1.3 - What's New

1.3.1
What's New

The following changes have been made to this year's revenue procedure.

. . 01 Substitute Forms Program address change. The mailing address for the Substitute
Forms Program has changed to:

Internal Revenue Service
Attn: Substitute Forms Program
5000 Ellin Road, C6-440
Lanham, MD 20706

. . 02 FinCEN Forms. All references to FinCEN forms have been removed from this Publi-
cation. Since all BSA forms are electronically filed and only accessible through the BSA
E-Filing System, substitute forms cannot be used or approved. The BSA forms are the BCTR,
BSAR, Registration of Money Services Business (RMSB), the Designation of Exempt Person
(DOEP), Form 8300, and the FBAR.

. . 03 Editorial Changes. We made editorial changes throughout and redundancies were
eliminated as much as possible.

### Section 1.4 - Definitions

#### 1.4.1 Substitute Form

A tax form (or related schedule) that differs in any way from the official version and is intended
to replace the form that is printed and distributed by the IRS. This term also covers those approved
substitute forms exhibited in this revenue procedure.

#### 1.4.2 Printed/ Preprinted Form

A form produced using conventional printing processes, or a printed form which has been
reproduced by photocopying or a similar process.

#### 1.4.3 Preprinted Pin-Fed Form

A printed form that has marginal perforations for use with automated and high-speed printing
equipment.

#### 1.4.4 Computer Prepared Substitute Form

A preprinted form in which the taxpayer's tax entry information has been inserted by a computer,
computer printer, or other computer-type equipment.

1.4.5
Computer Generated
Substitute Tax Return or
Form

A tax return or form that is entirely designed and printed using a computer printer on plain
white paper. This return or form must conform to the physical layout of the corresponding
IRS form, although the typeface may differ. The text should match the text on the officially
printed form as closely as possible. Condensed text and abbreviations will be considered on
a case-by-case basis.

Exception. All jurats (perjury statements) must be reproduced verbatim.

1.4.6
Manually Prepared Form

A preprinted reproduced form in which the taxpayer's tax entry information is entered by an
individual using a pen, pencil, typewriter, or other non-automated equipment.

#### 1.4.7 Graphics

Parts of a printed tax form that are not tax amount entries or required text. Examples of graphics
are line numbers, captions, shadings, special indicators, borders, rules, and strokes created by
typesetting, photographics, photocomposition, etc.

1.4.8
Acceptable Reproduced
Form

A legible photocopy or an exact replica of an original form.

1.4.9
Supporting Statement
(Supplemental Schedule)

A document providing detailed information to support a line entry on an official or approved
substitute form and filed with (attached to) a tax return.

Note. A supporting statement is not a tax form and does not take the place of an official form.

#### 1.4.10 Specific Form Terms

The following specific terms are used throughout this revenue procedure in reference to all
substitute forms: format, sequence, line reference, item caption, and data entry field.

#### 1.4.11 Format

The overall physical arrangement and general layout of a substitute form.

#### 1.4.12 Sequence

Sequence is an integral part of the total format requirement. The substitute form should show the
same numeric and logical placement order of data, as shown on the official form.

#### 1.4.13 Line Reference

The line numbers, letters, or alphanumerics used to identify each captioned line on an official
form. These line references are printed to the immediate left of each caption and/or data entry
field.

1.4.14
Item Caption

The text on each line of a form, which identifies the data required.

#### 1.4.15 Data Entry Field

Designated areas for the entry of data such as dollar amounts, quantities, responses, and
checkboxes.

#### 1.4.16 Advance Draft

A draft version of a new or revised form may be posted to the IRS website (www.irs.gov/ap/
picklist/list/draftTaxForms.html) for information purposes. Substitute forms may be submitted
based on these advance drafts, but any submitter that receives forms approval based on these early
drafts is responsible for monitoring and revising forms to mirror any revisions in the final forms
provided by the IRS.

#### 1.4.17 Approval

Generally, approval could be in writing or assumed after 20 business days from our receipt for
forms that have not been substantially changed by the IRS. Also, this does not apply to newly
created or substantially revised IRS forms.

### Section 1.5 - Agreement

#### 1.5.1 Important Stipulation of This Revenue Procedure

Any person or company who uses substitute forms and makes all or part of the changes specified
in this revenue procedure agrees to the following stipulations.

· The IRS presumes that any required changes are made in accordance with these procedures
and will not be disruptive to the processing of the tax return.

· Should any of the changes be disruptive to the IRS's processing of the tax return, the person
or company agrees to accept the determination of the IRS as to whether the form may
continue to be filed.

· The person or company agrees to work with the IRS in correcting noted deficiencies.
Notification of deficiencies may be made by any combination of letter, email, or phone
contact and may include the request for the re-submission of unacceptable forms.

#### 1.5.2 Response Policy and Stipulations

The Substitute Forms Unit (the Unit) will email confirmation of receipt of your forms submission,
if possible. Even if you do not receive emailed confirmation of receipt, you will receive an
emailed "submission receipt," which will provide feedback on your submission. Your submission
can be considered approved if you do not receive a response from the Unit within 20 business
days of the receipt date. If the Unit anticipates problems in completing the review of your
submission within the 20 business day period, the Unit will send an interim email notifying you
of the extended period for review.

Once the substitute forms have been approved by the Substitute Forms Unit, you can release them
after the final versions of the forms have been issued by the IRS. Before releasing the forms, you
are responsible for updating forms approved as draft and for making form changes we requested.

The policy has the following stipulations.

· This 20-day policy applies to electronic submissions only. It does not apply to substitute
forms submitted for approval by paper.

· The policy applies to submissions of 15 (optimal) or fewer items and submissions containing
75 pages or less. Submissions of more than 15 items may require additional review time.

· If you send a large number of submissions within a short period of time, processing may be
delayed.

· Delays in processing could occur if the Unit finds significant errors in your submission or has
experienced an increase in submissions. The Unit will send you an interim email in this case.

· Any anticipated problems in processing your submission within the 20-day period will
generate an interim email on or about the 15th business day.

· If any significant inaccuracies are discovered after the 20-day period, the Unit reserves the
right to inform you and will require that changes be made to correct the inaccuracies.

· The policy does not apply to substantially revised forms or to new forms created by the IRS
for which you have already made an initial submission.

## Part 2 General Guidelines for Submissions and Approvals

### Section 2.1 - General Specifications for Approval

#### 2.1.1 Overview

If you produce any tax forms following only those changes specifically outlined by the Substitute
Forms Unit, you can generate your own substitute forms without further approval. If your changes
are more extensive, you must get IRS approval before using substitute forms. More extensive
changes can include the use of typefaces and sizes other than those found on the official form and
the condensing of line item descriptions to save space.

Note. The 20-day turnaround policy may not apply to extensive changes.

#### 2.1.2 Email Submissions

The Substitute Forms Program accepts substitute forms submissions via email. The email address
is substituteforms@irs.gov. Please include the term "PDF Submissions" on the subject line.

Follow these guidelines.

· Your submission should include all the forms you wish to submit in one attached PDF file. Do not
email each form individually. Do not attach each individual form to an email.

· The emailed submission should include a maximum of 3 PDFs to include: a check sheet, a cover
letter or accompanying statement, and a single PDF that includes all of the forms listed on your
check sheet, cover letter, or accompanying statement.

· A submission should contain a maximum of 15 forms.

· An approval check sheet listing the forms you are submitting should always be included in the
PDF file along with the forms. Excluding the check sheet can slow the reviewing process down, which
can result in a delayed response to your submission. See a sample check sheet in Exhibit D.

· Optimize PDF files before submitting.

· The maximum allowable email attachment is 2.5 megabytes.

· The Substitute Forms Unit accepts zip files.

· To alleviate delays during the peak time of September through December, submit advance draft
forms as early as possible.

If the guidelines are not followed, you may need to resubmit.

Emailing PDF submissions will not expedite review and approval. Submitting your substitute
forms package via email is the preferred and suggested method for submitting forms for review.

If, for some reason, you are not able to email your submission(s), you can mail your
submission(s) to:

Internal Revenue Service
Attn: Substitute Forms Program
SE:W:CAR:MP:P:TP
5000 Ellin Road, C6-440
Lanham, MD 20706

2.1.3

Follow these basic guidelines for expediting the process: · Always include a check sheet for the Substitute Forms Unit's response. · Include an accompanying statement identifying most, if not all, of the deviations your substitute forms may include which the official IRS version of the form does not. · Follow the guidance in this publication for general substitute form guidelines. Follow the guidance in specialized publications produced by the Substitute Forms Unit for other specific forms. · To spread out the workload, send in draft versions of substitute forms when they are posted. Note. Be sure to make any changes to approved drafts before releasing final versions.

Expediting the Process

2.1.4 Schedules

Schedules are considered to be an integral part of a complete tax return. A schedule may be included as part of a form or printed separately.

2.1.5 Examples of Schedules That Must Be Submitted with the Return

Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is an example of this situation. Its Schedules A through U have pages numbered as part of the basic return. For Form 706 to be considered for approval, the entire form, including Schedules A through PC, must be submitted.

2.1.6 Examples of Schedules That Can Be Submitted Separately

However, Schedules C, D, E, and Form 1040 are examples of schedules that can be submitted separately. Although printed by the IRS as a supplement to Form 1040, none of these schedules are required to be filed with Form 1040. These schedules may be separated from Form 1040 and submitted as substitute forms.

2.1.7 Use and Distribution of Unapproved Forms

The IRS is continuing a program to identify and contact tax return preparers, forms developers, and software publishers who use or distribute unapproved forms that do not conform to this revenue procedure. The use of unapproved forms hinders the processing of the returns.

### Section 2.2 - Highlights of Permitted Changes and Requirements

#### 2.2.1 Methods of Reproducing Internal Revenue Service Forms

There are methods of reproducing IRS printed tax forms suitable for use as substitutes without
prior approval:

· You can photocopy most tax forms and use them instead of the official ones. The entire substitute
form, including entries, must be legible.

· You can reproduce any current tax form as cut sheets, snap sets, and marginally punched, pin-fed
forms as long as you use an official IRS version as the master copy.

. You can reproduce a form that requires a signature as a valid substitute form. Many tax forms
(including returns) have a taxpayer signature requirement as part of the form layout. The
jurat/perjury statement/signature line areas must be retained and worded exactly as on the official
form. The requirement for a signature, by itself, does not prohibit a tax form from being properly
computer-generated.

## Section 2.3 - Vouchers

## 2.3.1 Overview

All payment vouchers (Forms 940-V, 941-V, 943-V, 945-V, 1040-ES, 1040-V, 1041-V, and
2290-V) must be reproduced in conjunction with their forms. Substitute vouchers must be the
same size as the officially printed vouchers. Vouchers that are prepared for printing on a laser
printer may include a scan line.

## 2.3.2 Scan Line Specifications

Item:

NNNNNNNNN AA XXXX A B C

NN D

N NNNNNN NNN E F G

Social Security Number/Employer Identification Number (SSN/EIN) has 9 numeric (N) spaces.

Check Digits have 2 alpha (A) spaces.

Name Control has 4 alphanumeric (X) spaces. ☒

Master File Tax (MFT) Code has 2 numeric (N) spaces (see below).

Taxpayer Identification Number (TIN) Type has 1 numeric (N) space (see below).

Tax Period has 6 numeric (N) spaces in year/month format (YYYYMM).

Transaction Code has 3 numeric (N) spaces.

### 2.3.3 MFT Code

Code Number for Forms:

· 1040 (family) - 30,

· 940 - 10,

· 941 - 01,

· 943 - 11,

· 944 - 14,

· 945 - 16,

· 1041-V - 05,

· 2290 - 60, and

· 4868 - 30.

2.3.4 TIN Type

Type Number for: · Form 1040 (family), 4868 - 0, and · Forms 940, 941, 943, 944, 945, 1041-V, and 2290 - 2.

2.3.5

The voucher size must be exactly 8.0" X 3.25" (Forms 1040-ES and 1041-ES must be 7.625" X

Voucher Size

3.0"). The document scan line must be vertically positioned 0.25 inches from the bottom of the scan line to the bottom of the voucher. The last character on the right of the scan line must be placed 3.5 inches from the right leading edge of the document. The minimum required horizontal clear space between characters is .014 inches. The line to be scanned must have a clear band 0.25 inches in height from top to bottom of the scan line, and from border to border of the document. "Clear band" means no printing except for dropout ink.

2.3.6 Print and Paper Weight

Vouchers must be imaged in black ink using OCR A, OCR B, or Courier 10. These fonts may not be mixed in the scan line. The horizontal character pitch is 10 CPI. The preferred paper weight is 20 to 24 pound OCR bond.

## 2.3.7 Specifications for Software Developers

Certain vouchers may be reproduced for use in the IRS lockbox system. These include the
1040-V, 1040-ES, 1041-V, the 940 family, and 2290 vouchers. Software developers must
follow these specific guidelines to produce scannable vouchers strictly for lockbox purposes. Also
see Exhibit C:

· The total depth must be 3.25 inches.

· The scan line must be .5 inches from the bottom edge and 1.75 inches from the left edge of the
voucher and left-justified.

· Software developers vouchers must be 8.5 inches wide (instead of 8 inches with a cut line).
Therefore, no vertical cut line is required.

· Scan line positioning must be exact.

· Do not use the over-the-counter format voucher and add the scan line to it.

· All scanned data must be in 12-point OCR A font.

· The 4-digit NACTP ID code should be placed under the payment indicator arrow.

· Windowed envelopes must not display the scan line in order to avoid disclosure and privacy
issues.

Note. All software developers must ensure that their software uses OCR A font so taxpayers will
be able to print the vouchers in the correct font.

## 2.3.8 Specific Line Positions

Follow these line specifications for entering taxpayer data in the lockbox vouchers.

Start Row

Start Column

Width

End Column

Line Specifications for Taxpayer Data:

Taxpayer Name

Taxpayer Address, Apt.

Taxpayer City, State, ZIP

Foreign Country Name

Foreign Province/ Country

Foreign Postal Code

Line Specifications for

Mail To Data:

Mail Name

Mail Address

Mail City, State, ZIP

Line Specifications for:

Scan Line

n/a

2.3.9
How to Get Approval

To receive approval, please send in 25 voucher samples yearly for each form type or scenarios,
by December 12, 2014, for testing to the following address.

Internal Revenue Service
Attn: Doris Bethea, C5-226
5000 Ellin Road
Lanham, MD 20706

For further information, contact Doris Bethea, Doris.E.Bethea@irs.gov, at 240-613-5922.

## Section 2.4 - Restrictions on Changes

### 2.4.1 What You Cannot Do to Forms Suitable for Substitute Tax Forms

You cannot, without prior IRS approval, change any IRS tax form or use your own (non-
approved) versions including graphics, unless specifically permitted by this revenue procedure.
See Sections 2.5.7 to 2.5.11.

You cannot adjust any of the graphics on Forms 1040, 1040A, and 1040EZ (except in those areas
specified in Part 5 of this revenue procedure) without prior approval from the IRS Substitute
Forms Unit.

You cannot re-arrange or re-distribute data entry fields, and/or allow data entry fields to flow from
one page onto the next (i.e., each page of a substitute form must contain the exact number of data
entry fields as there are on the official IRS form). The order and flow of information on the
substitute form must be identical to the IRS version of the form.

Note. The 20-day turnaround policy may not apply to extensive changes.

## Section 2.5 - Guidelines for Obtaining IRS Approval

2.5.1 Basic Requirements

Preparers who submit substitute privately designed, privately printed, computer generated, or computer prepared tax forms must develop these substitutes using the guidelines established in this part. These forms, unless there is an exception outlined by the revenue procedure, must be approved by the IRS before being filed.

2.5.2 Conditional Approval Based on Advanced Drafts

The IRS cannot grant final approval of your substitute form until the official form has been published. However, the IRS posts advance draft forms on its website at: www.irs.gov/app/ picklist/list/draftTaxForms.html. We encourage submission of proposed substitutes of these advance draft forms and will grant conditional approval based solely on these early drafts. These advance drafts are subject to significant change before forms are finalized. If these advance drafts are used as the basis for your substitute forms, you will be responsible for subsequently updating your final forms to agree with the final official version. These revisions need not be resubmitted for further approval.

Note. Approval of forms based on advance drafts will not be granted after the final version of an official form is published.

2.5.3 Submission Procedures

Follow these general guidelines when submitting substitute forms for approval.

· Any alteration of forms must be within the limits acceptable to the IRS. It is possible that, from one filing period to another, a change in law or a change in internal need (processing, audit, compliance, etc.) may change the allowable limits for the alteration of the official form. · When approval of any substitute form (other than those exceptions specified in Part 1, Section 1.2 - IRS Contacts) is requested, a sample of the proposed substitute form should be forwarded for consideration via email or by letter to the Substitute Forms Unit at the address shown in Section 1.2.1.

· Schedules and forms (for example, Forms 3468, 4136, etc.) that can be used with more than one
type of return (for example, 1040, 1041, 1120, etc.) should be submitted only once for approval,
regardless of the number of different tax returns with which they may be associated. Also, all
pages of multi-page forms or returns should be submitted in the same package.

2.5.4 Approving Offices

Because only the Substitute Forms Unit is authorized to approve substitute forms, unnecessary delays may occur if forms are sent to the wrong office. You may receive an interim letter about the delay. The Substitute Forms Unit may then coordinate the response with the originator responsible for revising that particular form. Such coordination may include allowing the originator to officially approve the form. No IRS office is authorized to allow deviations from this revenue procedure.

2.5.5 IRS Review of Software Programs, etc.

The IRS does not review or approve the logic of specific software programs, nor does the IRS confirm the calculations on the forms produced by these programs. The accuracy of the program remains the responsibility of the software package developer, distributor, or user.

The Substitute Forms Unit is primarily concerned with the pre-filing quality review of the final forms that are expected to be processed by IRS field offices. For this purpose, you should submit forms without including any taxpayer information such as names, addresses, monetary amounts, etc.

2.5.6 When To Send Proposed Substitutes

Proposed substitutes, which are required to be submitted per this revenue procedure, should be sent as much in advance of the filing period as possible. This is to allow adequate time for analysis and response.

2.5.7 Accompanying Statement

When submitting sample substitutes, you should include an accompanying statement that lists each form number and its changes from the official form (position, arrangement, appearance, line numbers, additions, deletions, etc.). With each of the items you should include a detailed reason for the change.

When requesting approval, please include a check sheet. Check sheets expedite the approval process. The check sheet may look like the example in Exhibit D displayed in the back of this procedure or may be one of your own design. Please include your email address on the check sheet. If the Unit will need to fax the check sheet, the number will be requested at that time.

2.5.8 Approval/Non-Approval Notice

The Substitute Forms Unit will email the check sheet or an approval letter to the originator, unless: · The requester has asked for a faxed response or for a formal letter, or · Significant corrections to the submitted forms are required. Notice of approval may impose qualifications before using the substitutes. Notices of unapproved forms may specify the changes required for approval and require re-submission of the form(s) in question. When appropriate, you will be contacted by telephone.

2.5.9 Duration of Approval

Most signature tax returns and many of their schedules and related forms have the tax (liability) year printed in the upper right corner. Approvals for these annual forms are usually good for one calendar year (January through December of the year of filing). Quarterly tax forms in the 94X series and Form 720 require approval for any quarter in which the form has been revised.

Because changes are usually made to an annual form every year, each new filing season generally requires a new submission of a substitute form. Very rarely is updating the preprinted year the only change made to an annual form.

2.5.10 Limited Continued Use of an Approved Change

Limited changes approved for one tax year may be allowed for the same form in the following tax year. Examples are the use of abbreviated words, revised form spacing, compressed text lines, and shortened captions, etc., which do not change the integrity of lines or text on the official forms. If substantial changes are made to the form, new substitutes must be submitted for approval. If only minor editorial changes are made to the form, it is not subject to review. It is the responsibility of each vendor who has been granted permission to use substitute forms to monitor and revise forms to mirror any revisions to official forms made by the Service. If there are any questions, please contact the Substitute Forms Unit.

2.5.11 When Approval Is Not Required

If you received approval for a specific change on a form last year, you may make the same change this year if the item is still present on the official form:

· The new substitute form does not have to be submitted to the IRS and approval based on that change is not required. . However, the new substitute form must conform to the official current year IRS form in other respects: date, Office of Management and Budget (OMB) approval number, attachment sequence number, Paperwork Reduction Act Notice statement, arrangement, item caption, line number, line reference, data sequence, etc. · The new substitute form must also comply with changes to the guidelines in this revenue procedure. The procedure may have eliminated, added to, or otherwise changed the guideline(s) that affected the change approved in the prior year. · An approved change is authorized only for the period from a prior tax year substitute form to a current tax year substitute form.

Exception. Forms with temporary, limited, or interim approvals (or with approvals that state a change is not allowed in any other tax year) are subject to review in subsequent years.

2.5.12 Continuous-Use Forms

Forms without preprinted tax years are called "continuous-use" forms. Continuous-use forms are revised when a legislative change affects the form or a change will facilitate processing. These forms frequently have revision dates that are valid for longer than one year.

2.5.13 Required Copies

Generally, you must send us one copy of each form being submitted for approval. However, if you are producing forms for different computer systems (for example, Microsoft compatible vs. Apple) or different types of printers and these forms differ significantly in appearance, submit one copy for each type of system or printer.

2.5.14 Requestor's Responsibility

Following receipt of an initial approval for a substitute forms package or a software output program to print substitute forms, it is the responsibility of the originator (designer or distributor) to provide client firms or individuals with forms that meet the IRS's requirements for continuing acceptability. Examples of this responsibility include:

· Using the prescribed print paper, font size, legibility, state tax data deletion, etc., and · Informing all users of substitute forms of the legal requirements of the Paperwork Reduction Act Notice, which is generally found in the instructions for the official IRS forms.

## 2.5.15 Source Code

The Substitute Forms Unit will assign a unique source code to each firm that submits substitute
paper forms for approval. This source code will be a permanent identifier that must be used on
every submission by a particular firm.

The source code consists of three alpha characters and should generally be printed at the bottom
left margin area on the first page of every approved substitute form.

## Section 2.6 - Office of Management and Budget (OMB) Requirements for All Substitute Forms

2.6.1 OMB Requirements for All Substitute Forms

There are legal requirements of the Paperwork Reduction Act of 1995 (the Act). Public Law 104-13 requires the following.

· OMB approves all IRS tax forms that are subject to the Act. · Each IRS form contains (in the upper right corner) the OMB number, if assigned. · Each IRS form (or its instructions) states why the IRS needs the information, how it will be used, and whether or not the information is required to be furnished to the IRS.

This information must be provided to every user of official or substitute IRS forms or instructions.

2.6.2

On forms that have been assigned OMB numbers:

Application of the Paperwork Reduction Act

· All substitute forms must contain in the upper right corner the OMB number that is on the official form, and · The required format is: OMB No. 1545-XXXX (Preferred) or OMB # 1545-XXXX (Acceptable).

2.6.3 Required Explanation to Users

You must inform the users of your substitute forms of the IRS use and collection requirements stated in the instructions for official IRS forms.

· If you provide your users or customers with the official IRS instructions, each form must retain either the Paperwork Reduction Act Notice (or Disclosure, Privacy Act, and Paperwork Reduction Act Notice), or a reference to it as the IRS does on the official forms (usually in the lower left corner of the forms). · This notice reads, in part, "We ask for tax return information to carry out the tax laws of the United States .... "

Note. If no IRS instructions are provided to users of your forms, the exact text of the Paperwork Reduction Act Notice (or Disclosure, Privacy Act, and Paperwork Reduction Act Notice) must be furnished separately or on the form.

2.6.4 Finding the OMB Number and Paperwork Reduction Act Notice

The OMB number and the Paperwork Reduction Act Notice, or references to it, may be found printed on an official form (or its instructions). The number and the notice are included on the official paper format and in other formats produced by the IRS.

## Part 3 Physical Aspects and Requirements

### Section 3.1 - General Guidelines for Substitute Forms

3.1.1 General Information

The official form is the standard. Because a substitute form is a variation from the official form, you should know the requirements of the official form for the year of use before you modify it to meet your needs. The IRS provides several means of obtaining the most frequently used tax forms. These include IRS.gov and ordering products by calling 1-800-TAX-FORMS (1-800-829-3676).

3.1.2 Design

Each form must follow the design of the official form as to format arrangement, item caption, line numbers, line references, and sequence.

3.1.3 State Tax Information Prohibited

Generally, state tax information must not appear on the federal tax return, associated form, or schedule that is filed with the IRS. Exceptions occur when amounts are claimed on, or required by, the federal return (for example, state and local income taxes, on Schedule A of Form 1040).

#### 3.1.4 Vertical Alignment of Amount Fields

IF a form is to be ...

THEN. . .

Manually prepared

1. The entry column must have a vertical line or some type of indicator in the amount field to separate dollars from cents.

2. The cents column must be at least 3/10" wide.

Computer generated

1. Vertically align the amount entry fields where possible. 2. Use one of the following amount formats: a) 0,000,000, or

b) 0,000,000.00.

Computer prepared

1. You may remove the vertical line in the amount field that separates dollars from cents.

2. Use one of the following amount formats: a) 0,000,000, or b) 0,000,000.00.

#### 3.1.5 Attachment Sequence Number

Many individual income tax forms have a required "attachment sequence number" located just
below the year designation in the upper right corner of the form. The IRS uses this number to
indicate the order in which forms are to be attached to the tax return for processing. Some of the
attachment sequence numbers may change from year to year.

The following applies to computer prepared forms.

· The sequence number may be printed in no less than 12-point boldface type and centered
below the form's year designation.

· The sequence number may also be placed following the year designation for the tax form and
separated with an asterisk.

· The actual number may be printed without labeling it the "Attachment Sequence Number."

#### 3.1.6 Assembly of Forms

When developing software or forms for use by others, please inform your customers/clients that
the order in which the forms are arranged may affect the processing of the package. A return must
be arranged in the order indicated below.

IF the form is ...

THEN the sequence is. . .

1040

· Form 1040, and . Schedules and forms in attachment sequence number order.

Any other tax return (Form 1120, 1120S, 1065, 1041, etc.)

· The tax returns, . Directly associated schedules (Schedule D, etc.), . Directly associated forms, · Additional schedules in al- phabetical order, and · Additional forms in numerical order.

Supporting statements should then follow in the same sequence as the forms they support.
Additional information required should be attached last.

In this way, the forms are received in the order in which they must be processed. If you do not
send returns to the IRS in order, processing may be delayed.

On Forms 1040EZ, 1040A, 1040, and 1120, etc., the "Paid Preparer Use Only" area may not be
rearranged or relocated. You may, however, add three extra lines to the paid preparer's address
area without prior approval. This applies to other tax forms as well.

#### 3.1.7 Paid Preparer's Information and Signature Area

#### 3.1.8 Some Common Reasons for Requiring Changes to Substitute Forms

Some reasons that substitute form submissions may require changes include the following.

· Failing to preprint certain amounts in entry spaces.

· Shading areas incorrectly.

· Failing to include a reference to the location of the Paperwork Reduction Act Notice.

· Not including parentheses for losses.

· Not including "Attach Statement" when appropriate.

· Including line references or entry spaces that do not match the official form.

· Printing text that is different from the official form.

· Altering the jurat (perjury statement).

#### Section 3.2 - Paper

##### 3.2.1 Paper Content

The paper must be:

· Chemical wood writing paper that is equal to or better than the quality used for the official form,

· At least 18 pound (17" × 22", 500 sheets), or

· At least 50 pound offset book (25" × 38", 500 sheets).

##### 3.2.2 Paper with Chemical Transfer Properties

There are several kinds of paper prohibited for substitute forms. These are:

1\. Carbon-bonded paper, and

2\. Chemical transfer paper except when the following specifications are met:

a. Each ply within the chemical transfer set of forms must be labeled, and

b. Only the top ply (ply one and white in color), the one that contains chemical on the back
only (coated back), may be filed with the IRS.

##### 3.2.3 Example

A set containing three plies would be constructed as follows: ply one (coated back), "Federal
Return, File with IRS"; ply two (coated front and back), "Taxpayer's copy"; and ply three (coated
front), "Preparer's copy."

The file designation, "Federal Return, File with IRS" for ply one, must be printed in the bottom
right margin (just below the last line of the form) in 12-point boldface type.

It is not mandatory, but recommended, that the file designation "Federal Return, File with IRS" be printed in a contrasting ink for visual emphasis.

3.2.4 Paper and Ink Color

It is preferred that the color and opacity of paper substantially duplicates that of the original form. This means that your substitute must be printed in black ink and may be on white or on the colored paper the IRS form is printed on. Forms 1040A and 1040 substitute reproductions may be in black ink without the colored shading. The only exception to this rule is Form 1041-ES, which should be printed with a PMS 100 yellow shading in the color screened area. This is necessary to assist us in expeditiously separating this form from the very similar Form 1040-ES.

3.2.5 Page Size

Substitute or reproduced forms and computer prepared/generated substitutes may be the same size as the official form or they may be the standard commercial size (8 1/2" × 11"). The thickness of the stock cannot be less than .003 inches.

Section 3.3 - Printing

3.3.1 Printing Medium

The private printing of all substitute tax forms must be by conventional printing processes, photocopying, computer graphics, or similar reproduction processes.

3.3.2 Legibility

All forms must have a high standard of legibility as to printing, reproduction, and fill-in matter. Entries of taxpayer data may be no smaller than eight points. The IRS reserves the right to reject those with poor legibility. The ink and printing method used must ensure that no part of a form (including text, graphics, data entries, etc.) develops "smears" or similar quality deterioration. This standard must be followed for any subsequent copies or reproductions made from an approved master substitute form, either during preparation or during IRS processing.

3.3.3 Type Font

Many federal tax forms are printed using "Helvetica" as the basic type font. It is preferred that you use this type font when composing substitute forms.

3.3.4 Print Spacing

Substitute forms should be printed using a 6 lines/inch vertical print option. They should also be printed horizontally in 10 pitch pica (that is, 10 print characters per inch) or 12 pitch elite (that is, 12 print positions per inch).

3.3.5 Image Size

The image size of a printed substitute form should be as close as possible to that of the official form. You may omit any text on both computer-prepared and computer-generated forms that is solely instructional.

3.3.6 Title Area Changes

To allow a large top margin for marginal printing and more lines per page, the title line(s) for all substitute forms (not including the form's year designation and sequence number, when present), may be photographically reduced by 40 percent or reset as one line of type. When reset as one line, the type size may be no smaller than 14-point. You may omit "Department of the Treasury-Internal Revenue Service" and all reference to instructions in the form's title area.

3.3.7 Remove Government Printing Office Symbol and IRS Catalog Number

When privately printing substitute tax forms, the Government Printing Office (GPO) symbol and/or jacket number must be removed. In the same place using the same type size, print the Employer Identification Number (EIN) of the printer or designer or the IRS assigned source code. (We prefer this last number be printed in the lower left area of the first page of each form.) Also, remove the IRS Catalog Number (Cat. No.) and the recycle symbol if the substitute is not produced on recycled paper.

##### 3.3.8 Printing on One Side of Paper

##### 3.3.9 Photocopy Equipment

Even though the IRS uses both sides of the paper for printing official paper forms or schedules,
the IRS will accept your forms if only one side of the paper is used.

The IRS does not undertake to approve or disapprove the specific equipment or process used in
reproducing official forms. Photocopies of forms must be entirely legible and satisfy the
conditions stated in this and other revenue procedures.

##### 3.3.10 Reproductions

Reproductions of official forms and substitute forms that do not meet the requirements of this
revenue procedure may not be filed instead of the official forms. Illegible photocopies are subject
to being returned to the filer for re-submission of legible copies.

###### 3.3.11 Removal of Instructions

Generally, you may remove references to instructions. No prior approval is needed. However, in
some instances, you may be requested to include references to instructions.

Exception. The words "For Paperwork Reduction Act Notice, see instructions" must be retained,
or a similar statement indicating the location of the Notice, must be provided on each form.

Section 3.4 - Margins

###### 3.4.1 Margin Size

The format of a reproduced tax form when printed on the page must have margins on all sides at
least as large as the margins on the official form. This allows room for IRS employees to make
necessary entries on the form during processing.

· A 1/2-inch to 1/4-inch margin must be maintained across the top, bottom, and both sides of all
substitute forms.

· The marginal, perforated strips containing pin-fed holes must be removed from all forms prior to
filing with the IRS.

###### 3.4.2 Marginal Printing

Prior approval is not required for the marginal printing allowed when printed on an official form
or on a photocopy of an official form.

· With the exception of the actual tax forms (for example, Forms 1040, 1040A, 1040EZ, 1120,
940, 941, etc.), you may print in the left vertical margin and in the left half of the bottom
margin.

· Printing is never allowed in the top right margin of the tax form (for example, Forms 1040,
1040A, 1040EZ, 1120, 940, 941, etc.). The Service uses this area to imprint a Document
Locator Number for each return. There are no exceptions to this requirement.

### Section 3.5 - Examples of Approved Formats

#### 3.5.1 Examples of Approved Formats From the Exhibits

Two sets of exhibits (Exhibits A-1 and 2; B-1 and 2) at the end of this revenue procedure are
examples of how these guidelines may be used. Vertical spacing is six (6) lines to the inch. A
combination of upper-case and lower-case print font is acceptable in producing substitute forms.

The same logic may be applied to any IRS form that is normally reproducible as a substitute form,
with the exception of the tax return forms as discussed elsewhere.

Note. These exhibits may be from a prior year and are not to be used as current substitute forms.

### Section 3.6 - Miscellaneous Information for Substitute Forms

#### 3.6.1 Filing Substitute Forms

To be acceptable for filing, a substitute form must print out in a format that will allow the filer
to follow the same instructions that accompany official forms. The form must be legible, must be
on the appropriately sized paper, and must include a jurat (perjury statement) where one appears
on the published form.

#### 3.6.2 Caution to Software Publishers

The IRS has received returns produced by software packages with approved output where either
the form heading was altered or the lines were spaced irregularly. This produces an illegible or
unrecognizable return or a return with the wrong number of pages. We realize that many of these
problems are caused by individual printer differences but they may delay input of return data and,
in some cases, generate correspondence to the taxpayer. Therefore, in the instructions to the
purchasers of your product, both individual and professional, please stress that their returns will
be processed more efficiently if they are properly formatted. This includes:

· Having the correct form numbers and titles at the top of the return, and

· Submitting the same number of pages as if the form were an official IRS form with the line items
on the proper pages.

#### 3.6.3 Caution to Producers of Software Packages

If you are producing a software package that generates name and address data onto the tax return,
do not under any circumstances program either the IRS preprinted check digits or a practitioner
derived name control to appear on any return prepared and filed with the IRS.

3.6.4
Programming to Print
Forms

Whenever applicable:

· Use only the following label information format for single filers: JOHN Q. PUBLIC 310 OAK
DRIVE HOMETOWN, STATE 94000

· Use only the following information for joint filers: JOHN Q. PUBLIC MARY I. PUBLIC 310
OAK DRIVE HOMETOWN, STATE 94000

Part 4
Additional Resources

### Section 4.1 - Guidance From Other Revenue Procedures

#### 4.1.1 General

The IRS publications listed below provide guidance for substitute tax forms not covered in this
revenue procedure. These publications are available on the IRS website. Identify the requested
document by the IRS publication number.

· Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3.

· Publication 1179, Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498,
W-2G, and 1042-S.

· Publication 1187, Specifications for Electronic Filing of Form 1042-S, Foreign Person's U.S.
Source Income Subject to Withholding.

· Publication 1220, Specifications for Electronic Filing of Form 1098,1099, 5498, and W2-G.

· Publication 1223, General Rules and Specifications for Substitute Forms W-2c and W-3c.

· Publication 1239, Specifications for Electronic Filing of Form 8027, Employer's Annual
Information Return of Tip Income and Allocated Tips.

· Publication 1345, Handbook for Authorized IRS e-file Providers of Individual Income Tax
Returns.

· Publication 4436, General Rules and Specifications for Substitute Form 941, Schedule B
(Form 941).

### Section 4.2 - Electronic Tax Products

#### 4.2.1 The IRS Website

#### 4.2.2 System Requirements and Ordering Forms and Instructions

Copies of tax forms with instructions, publications, draft forms, fillable forms, prior year forms
and publications, and other tax-related information may be found on the IRS website at IRS.gov.

For system requirements, contact the National Technical Information Service (NTIS) at www.
ntis.gov. Prices are subject to change.

You can order IRS forms and other tax material, online at IRS.gov. Click on the Forms and Pubs
link and then the Order Forms and Pubs link, or by calling 1-800-TAX-FORM (1-800-829-
3676).

Part 5
Requirements for Specific Tax Returns

### Section 5.1 - Tax Returns (Forms 1040, 1040A, 1120, etc.)

#### 5.1.1 Acceptable Forms

Tax forms (such as Forms 1040, 1040A, and 1120) require a signature and establish tax liability.
Computer-generated versions are acceptable under the following conditions.

· These substitute forms must be printed on plain white paper.

· Substitute forms must conform to the physical layout of the corresponding IRS form although the
typeface may differ. The text should match the text on the officially published form as closely as
possible. Condensed text and abbreviations will be considered on a case-by-case basis. Caution.
All jurats (perjury statements) must be reproduced verbatim. No text can be added, deleted, or
changed in meaning.

· Various computer graphic print media such as laser printing, inkjet printing, etc., may be used to
produce the substitute forms.

· The substitute form must be the same number of pages and contain the same line text as the
official form.

· All substitute forms must be submitted for approval prior to their original use. You do not need
approval for a substitute form if its only change is the preprinted year and you had received a prior
year approval letter. Exception. If the approval letter specifies a one-time exception for your form,
the next year's form must be approved.

#### 5.1.2 Prohibited Forms

The following are prohibited.

· Computer-generated tax forms (for example, Form 1040, etc.) on lined or color barred paper.

· Tax forms that differ from the official IRS forms in a manner that makes them non-standard or
unable to process.

#### 5.1.3 Changes Permitted to Forms 1040 and 1040A

Certain changes (listed in Sections 5.2 through 5.4) are permitted to the graphics of the form
without prior approval, but these changes apply to only acceptable preprinted forms. Changes not
requiring prior approval are good only for the annual filing period, which is the current tax year.
Such changes are valid in subsequent years only if the official form does not change.

#### 5.1.4 Other Changes Not Listed

All changes not listed in Sections 5.2 through 5.4 require approval from the IRS before the form
can be filed.

### Section 5.2 - Changes Permitted to Graphics (Forms 1040A and 1040)

5.2.1 Adjustments

You may make minor vertical and horizontal spacing adjustments to allow for computer or word processing printing. This includes widening the amount columns or tax entry areas if the adjustments comply with other provisions stated in revenue procedures. No prior approval is needed for these changes.

5.2.2 Name and Address Area

The horizontal rules and instructions within the name and address area may be removed and the entire area left blank. No line or instruction can remain in the area. The heavy ruled border (when present) that outlines the name, address area, and social security number must not be removed, relocated, expanded, or contracted.

5.2.3 Required Format

When the name and address area is left blank, the following format must be used when printing the taxpayer's name and address.

· 1st name line (35 characters maximum). · 2nd name line (35 characters maximum). · In-care-of name line (35 characters maximum). · City, state (25 characters maximum), one blank character, and ZIP code.

5.2.4 Conventional Name and Address Data

When there is no in-care-of name line, the name and address will consist of only three lines (single filer) or four lines (joint filer). Name and address (joint filer) with no in-care-of name line: JOHN Z. JONES MARY I. JONES 1234 ANYWHERE ST., APT. 111 ANYTOWN, STATE 12321

5.2.5

Name and address (single filer) with in-care-of name line:

Example of In-Care-Of Name Line

JOHN Z. JONES C/O THOMAS A. JONES 4311 SOMEWHERE AVE. SAMETOWN, STATE 54345

5.2.6 SSN and Employer Identification Number (EIN) Area

The broken vertical lines separating the format arrangement of the SSN/EIN may be removed. When the vertical lines are removed, the SSN and EIN formats must be 000-00-0000 or 00-0000000, respectively.

5.2.7

Cents Column

. You may remove the vertical rule that separates the dollars from the cents. · All entries in the amount column should have a decimal point following the whole dollar amounts whether or not the vertical line that separates the dollars from the cents is present. . You may omit printing the cents, but all amounts entered on the form must follow a consistent format. You are strongly urged to round off the figures to whole dollar amounts, following the official form instructions. · When several amounts are summed together, the total should be rounded off after addition (that is, individual amounts should not be rounded off for computation purposes). · When printing money amounts, you must use one of the following formats: (a) 0,000,000 .; (b) 0,000,000.00. · When there is no entry for a line, leave the line blank.

5.2.8
"Paid Preparer's Use
Only" Area

On all forms, the paid preparer's information area may not be rearranged or relocated. You may
add three lines and remove the horizontal rules in the preparer's address area.

## Section 5.3 - Changes Permitted to Form 1040A Graphics

5.3.1 General

No prior approval is needed for the following changes (for use with computer-prepared forms only).

5.3.2 Line 4 of Form 1040A

This line may be compressed horizontally (to allow for same line entry for the name of the qualifying child) by using the following caption: "Head of household; child's name" (name field).

5.3.3 Other Lines

Any line with text that takes up two or more vertical lines may be compressed to one line by using contractions, etc., and by removing instructional references.

5.3.4 Page 2 of Form 1040A

All lines must be present and numbered in the order shown on the official form. These lines may also be compressed.

5.3.5 Color Screening

It is not necessary to duplicate the color screening used on the official form. A substitute Form 1040A may be printed in black and white only with no color screening.

5.3.6 Other Changes Prohibited

No other changes to the Form 1040A graphics are allowed without prior approval except for the removal of instructions and references to instructions.

## Section 5.4 - Changes Permitted to Form 1040 Graphics

5.4.1
General

No prior approval is needed for the following changes (for use with computer-prepared forms
only). Specific line numbers in the following headings may have changed due to tax law changes.

5.4.2
Line 4 of Form 1040

This line may be compressed horizontally (to allow for a larger entry area for the name of the
qualifying child) by using the following caption: "Head of household; child's name" (name field).

5.4.3
The vertical lines separating columns (1) through (4) may be removed. The captions may be
Line 6c of Form 1040
shortened to allow a one-line caption for each column.

5.4.4
Other Lines

Any other line with text that takes up two or more vertical lines may be compressed to one line
by using contractions, etc., and by removing instructional references.

5.4.5
Line 21 - Other Income

The fill-in portion of this line may be expanded vertically to three lines. The amount entry box
must remain a single entry.

5.4.6
Line 44 of Form 1040 -
Tax

You may change the line caption to read "Tax" and computer print the words "Total includes tax
from" and either "Form(s) 8814" or "Form 4972" or "962 election." If both forms are used, print
both form numbers. This specific line number may have changed.

5.4.7 Line 54 of Form 1040 - Other Credits

You may change the caption to read: "Other credits from Form" and computer print only the form(s) that apply.

5.4.8

It is not necessary to duplicate the color screening used on the official form. A substitute Form 1040 may be printed in black and white only with no color screening.

Color Screening

5.4.9 Other Changes Prohibited

No other changes to the Form 1040 graphics are permitted without prior approval except for the removal of instructions and references to instructions. Part 6 Format and Content of Substitute Returns

Section 6.1 - Acceptable Formats for Substitute Forms and Schedules

6.1.1 Exhibits and Use of Acceptable Formats

Exhibits of acceptable formats for Schedule A, usually attached to the Form 1040, and Form 2106-EZ are shown in the exhibits section of this revenue procedure.

· If your computer-generated forms appear exactly like the exhibits, no prior authorization is needed. · You may computer-generate forms not shown here, but you must design them by following the manner and style of those in the exhibits section. · Take care to observe other requirements and conditions in this revenue procedure. The IRS encourages the submission of all proposed forms covered by this revenue procedure.

6.1.2 Instructions

The format of each substitute form or schedule must follow the format of the official form or schedule as to item captions, line references, line numbers, sequence, form arrangement and format, etc. Basically, try to make the form look like the official one, with readability and consistency being primary factors. You may use periods and/or other similar special characters to separate the various parts and sections of the form. Do not use alpha or numeric characters for these purposes. All line numbers and items must be printed even though an amount is not entered on the line.

6.1.3 Line Numbers

When a line on an official form is designated by a number or a letter, that designation (reference code) must be used on a substitute form. The reference code must be printed to the left of the text of each line and immediately preceding the data entry field, even if no reference code precedes the data entry field on the official form. If an entry field contains multiple lines and shows the line references once on the left and right side of the form, use the same number of line references on the substitute form.

In addition, the reference code that is immediately before the data field must either be followed by a period or enclosed in parentheses. There also must be at least two blank spaces between the period or the right parenthesis and the first digit of the data field. (See Section 6.1.4.)

6.1.4 Decimal Points

A decimal point (that is, a period) should be used for each money amount regardless of whether the amount is reported in dollars and cents or in whole dollars, or whether or not the vertical line that separates the dollars from the cents is present. The decimal points must be vertically aligned when possible.

### Example:

STATE &amp; LOCAL INC. TAXES.

495.00

REAL ESTATE TAXES

PERSONAL PROPERTY TAXES

198.00

STATE &amp; LOCAL INC. TAXES.

(5)

495.00

REAL ESTATE TAXES

(6)

PERSONAL PROPERTY TAXES

(7)

198.00

When submitting a multi-page form, send all its pages in the same package.

## 6.1.5 Multi-Page Forms

Exception. If you will not be producing certain pages, please note that in your cover letter.

## Section 6.2 - Additional Instructions for All Forms

### 6.2.1 Use of Your Own Internal Control Numbers and Identifying Symbols

You may show the computer-prepared internal control numbers and identifying symbols on the
substitute if using such numbers or symbols is acceptable to the taxpayer and the taxpayer's
representative. Such information must not be printed in the top 1/2 inch clear area of any form or
schedule requiring a signature. Except for the actual tax return form (Forms 1040, 11ID Number
on 20, 940, 941, etc.), you may print in the left vertical and bottom left margins. The bottom left
margin you may use extends 31/2 inches from the left edge of the form.

### 6.2.2 Required Software ID Number (Source Code) on Computer- Prepared Substitutes

In the February 2009 Government Accountability Office (GAO) report, "Many Taxpayers Rely
on Tax Software and IRS Needs to Assess Associated Risks" (GAO-09-297), GAO recommended
that IRS require a software identification number on all individual returns to specifically identify
the software package used to prepare each tax return. IRS already has this capability for all e-filed
returns. In addition, many tax preparation software firms already print an IRS-issued 3-letter
Source Code on paper returns that are generated by their individual tax software. This Source
Code was assigned when the firms were seeking substitute forms approval under this current
Publication.

In order to respond properly to this GAO recommendation, the IRS will require all tax preparation
software firms to include the 3-letter Source Code on all paper tax returns created by their
individual tax preparation software. The many firms that currently have and display their Source
Code on paper returns generated from their software should continue to do so, and no change is
necessary.

We have reviewed all software companies that passed PATS testing last filing season and have
determined that some firms do not currently have a Source Code. To save you the burden of
contacting us and for your convenience, we have assigned Source Codes to those firms.

You should program your Source Code to be placed in the bottom left-hand corner of page one
of each paper form that will be generated by your individual tax return package. You do not need
to apply for a new Source Code annually.

If you already use a 3-letter Source Code and we have issued you one in error, you are unsure if
you were ever issued one, or have other questions or concerns, you may contact Tax Forms and
Publications Special Services Section at substituteforms@irs.gov.

6.2.3 Descriptions for Captions, Lines, etc.

Descriptions for captions, lines, etc., appearing on the substitute forms may be limited to one print line by using abbreviations and contractions, and by omitting articles, prepositions, etc. However, sufficient key words must be retained to permit ready identification of the caption, line, or item.

6.2.4 Determining Final Totals

Explanatory detail and/or intermediate calculations for determining final line totals may be included on the substitute. We prefer that such calculations be submitted in the form of a supporting statement. If intermediate calculations are included on the substitute, the line on which they appear may not be numbered or lettered. Intermediate calculations may not be printed in the right column. This column is reserved only for official numbered and lettered lines that corre- spond to the ones on the official form. Generally, you may choose the format for intermediate calculations or subtotals on supporting statements to be submitted.

6.2.5 Instructional Text on the Official Form

Text on the official form, which is solely instructional (for example, "See instructions." etc.), may generally be omitted from the substitute form.

6.2.6 Mixing Forms on the Same Page Prohibited

You may not show more than one form or schedule on the same printout page. Both sides of the paper may be printed for multi-page official forms, but it is unacceptable to intermix single page schedules of forms. For instance, Schedule E can be printed on both sides of the paper because the official form is multi-page, with page 2 continued on the back. However, do not print Schedule E on the front page and Schedule SE on the back, or Schedule A on the front and Form 8615 on the back, etc. Both pages of a substitute form must match the official form. The back page may be left blank if the back page of the official form contains only the instructions.

6.2.7 Identifying Substitutes

Identify all computer-prepared substitutes clearly. Print the form designation 1/2 inch from the top margin and 11/2 inches from the left margin. Print the title centered on the first line of print. Print the taxable year and, where applicable, the sequence number on the same line 1/2 inch to 1 inch from the right margin. Include the taxpayer's name and SSN on all forms and attachments. Also, print the OMB number as reflected on the official form.

6.2.8 NegativeAmounts

Negative (or loss) amount entries should be enclosed in brackets or parentheses or include a minus sign. This assists in accurate computation and input of form data. The IRS pre-prints parentheses in negative data fields on many official forms. These parentheses should be retained or inserted on printouts of affected substitute forms.

## Part 7 Miscellaneous Forms and Programs

### Section 7.1 - Specifications for Substitute Schedules K-1

#### 7.1.1 Requirements for Schedules K-1 That Accompany Forms 1041, 1065, 1065-B, and 1120S

Because of significant changes to improve processing, prior approval is now required for
substitute Schedules K-1 that accompany Form 1041 (for estates and trusts), Form 1065 (for
partnerships), Form 1065-B (for electing large partnerships), or Form 1120S (for S corporations).
Substitute Schedules K-1 should be as close as possible to exact replicas of copies of the official
IRS schedules and follow the same process for submitting other substitute forms and schedules.
Before releasing their substitute forms, software vendors are responsible for making any subse-
quent changes that have been made to the final official IRS forms after the draft forms have been
posted.

You must include all information on the form. Submit Schedules K-1 to the IRS at
substituteforms@irs.gov with "Attn: PDF Submissions" on the subject line or at:

Internal Revenue Service
Attn: Substitute Forms Program
5000 Ellin Road, C6-440
Lanham, MD 20706

Include the 6-digit form ID code in the upper right of Schedules K-1 of Forms 1041, 1065, and
1120S. Please allow white space around the 6-digit code.

· 661114 for Form 1041,

· 651114 for Form 1065, and

· 671114 for Form 1120S.

Schedules K-1 that accompany Forms 1041, 1065, 1065-B, or 1120S must meet all specifica-
tions. The specifications include, but are not limited to, the following requirements.

. You will no longer be able to produce Schedules K-1 that contain only those lines or boxes
that taxpayers are required to use. All lines must be included.

· The words "*See attached statement for additional information." must be preprinted in the
lower right-hand side on Schedules K-1 of Forms 1041, 1065, and 1120S.

· All K-1s that are filed with the IRS should be printed on standard 8.5" X 11" paper (the
international standard (A4) of 8.27" × 11.69" may be substituted).

· Each recipient's information must be on a separate sheet of paper. Therefore, you must
separate all continuously printed substitutes, by recipient, before filing with the IRS.

· No carbon copies or pressure-sensitive copies will be accepted.

· The Schedule K-1 must contain the name, address, and SSN or EIN of both the entity (estate,
trust, partnership, or S corporation) and the recipient (beneficiary, partner, or shareholder).

· The Schedule K-1 must contain the tax year, the OMB number, the schedule number (K-1), the
related form number (1041, 1065, 1065-B, or 1120S), and the official schedule name in
substantially the same position and format as shown on the official IRS schedule.

· The Schedule K-1 must contain all the line items as shown on the official form, except for the
instructions, if any are printed on the back of the official Schedule K-1.

· The line items or boxes must be in the same order and arrangement as those on the official form.

· The amount of each recipient's share of each item must be shown. A partial percent should be
reflected as a decimal (example: 50 1/2% should be 50.5%). Furnishing a total amount of each item
and a percentage (or decimal equivalent) to be applied to such total amount by the recipient does
not satisfy the law and the specifications of this revenue procedure.

· State or local tax-related information may not be included on the Schedules K-1 filed with the IRS.

· The entity may have to pay a penalty if substitute Schedules K-1 are filed that do not conform to
specifications.

. Additionally, the IRS may consider the Schedules K-1 that do not conform to specifications as not
being able to be processed and may return Forms 1041, 1065, 1065-B, or 1120S to the filer to be
filed correctly.

Schedules K-1 that are 2-D bar-coded will continue to require prior approval from the IRS (see
Sections 7.1.3 through 7.1.5).

7.1.2
Special Requirements for
Recipient Copies of
Schedules K-1

Standardization for reporting information is required for recipient copies of substitute Schedules
K-1 of Forms 1041, 1065, 1065-B, and 1120S. Uniform visual standards are provided to increase
compliance by allowing recipients and practitioners to more easily recognize a substitute Sched-
ule K-1. The entity must furnish to each recipient a copy of Schedule K-1 that meets the
following requirements.

· Include the 6-digit form ID code in the upper right of Schedules K-1 of Forms 1041, 1065, and
1120S. Please allow white space around the 6-digit code.

· 661114 for Form 1041,

· 651114 for Form 1065, and

· 671114 for Form 1120S.

. You will no longer be able to produce Schedules K-1 that contain only those lines or boxes
that taxpayers are required to use. All lines must be included.

· The words "*See attached statement for additional information." must be preprinted in the
lower right-hand side on Schedules K-1 of Forms 1041, 1065, and 1120S.

· The Schedule K-1 must contain the name, address, and SSN or EIN of both the entity and
recipient.

· The Schedule K-1 must contain the tax year, the OMB number, the schedule number (K-1),
the related form number (1041, 1065, 1065-B, or 1120S), and the official schedule name in
substantially the same position and format as shown on the official IRS schedule.

· All applicable amounts and information required to be reported must be titled and numbered
in the same manner as shown on the official IRS schedule. The line items or boxes must be
in the same order and arrangement and must be numbered like those on the official IRS
schedule.

· The Schedule K-1 must contain all items required for use by the recipient. The instructions
to the schedule must identify the line or box number and code, if any, for each item as shown
in the official IRS schedule.

· The amount of each recipient's share of each item must be shown. A partial percent should
be reflected as a decimal (example 50 1/2% should be 50.5%). Furnishing a total amount of
each line item and a percentage (or decimal equivalent) to be applied to such total amount by
the recipient does not satisfy the law and the specifications of this revenue procedure.

· Instructions to the recipient that are substantially similar to those on or accompanying the
official IRS schedule must be provided to aid in the proper reporting of the items on the
recipient's income tax return. Where items are not reported to a recipient because they do not
apply, the related instructions may be omitted.

· The quality of the ink or other material used to generate recipients' schedules must produce
clearly legible documents. In general, black chemical transfer inks are preferred.

· In order to assure uniformity of substitute Schedules K-1, the paper size should be standard
8.5" X 11" (the international standard (A4) of 8.27" × 11.69" may be substituted.)

· The paper weight, paper color, font type, font size, font color, and page layout must be such
that the average recipient can easily decipher the information on each page. The preferred font
is "Helvetica" and a minimal of 10pt. font.

· State or local tax-related information may be included on recipient copies of substitute
Schedules K-1. All non-tax-related information should be separated from the tax information
on the substitute schedule to avoid confusion for the recipient.

· The legend "Important Tax Return Document Enclosed" must appear in a bold and conspic-
uous manner on the outside of the envelope that contains the substitute recipient copy of
Schedule K-1.

· The entity may have to pay a penalty if a substitute Schedule K-1 furnished to any recipient
does not conform to the specifications of this revenue procedure and results in impeding
processing.

7.1.3
Requirements for
Schedules K-1 with Two-
Dimensional (2-D) Bar
Codes

Electronic filing is now and will continue to be the preferred method of filing; however, 2-D bar
code is the best alternative method for paper processing.

In an effort to improve efficiency and at the same time increase data accuracy, the IRS partnered
with the tax software development community on a two-dimensional bar code project in 2003.
Certain tax software packages have been modified to generate 2-D bar codes on Schedules K-1.
As a result, when K-1s are printed using these programs, a bar code will print on the page.

Rather than manually transcribe information from the Schedule K-1, the IRS will scan the bar
code and electronically upload the information from the K-1. The results will be more efficient
operation within the IRS and fewer transcription errors for your clients.

Note. If software vendors do not want to produce bar-coded Schedules K-1, they may produce
the official IRS Schedules K-1 but cannot use the expedited process for approving bar-coded
K-1s and their parent returns as outlined in Section 7.1.6.

In addition to the requirements in Sections 7.1.1 and 7.1.2, the bar-coded Schedules K-1 must
meet the following specifications.

· The bar code should print in the space labeled "For IRS Use Only" on each Schedule K-1. The
entire bar code must print within the "For IRS Use Only" box surrounded by a white space of at
least 1/4 inch.

· Bar codes must print in PDF 417 format.

· The bar codes must always be in the specified format with every field represented by at least a field
delimiter (carriage return). Leaving out a field in a bar code will cause every subsequent field to
be misread.

. Be sure to include the 6-digit form ID code in the upper right of Schedules K-1 of Forms 1041,
1065, and 1120S. Please allow white space around the 6-digit code.

· 661114 for Form 1041,

· 651114 for Form 1065, and

· 671114 for Form 1120S.

7.1.4
2-D Bar Code
Specifications for Schedules
K-1

Follow these general specifications for preparing all 2-D bar-coded Schedules K-1:

· Numeric fields -

· Do not include leading zeros (except Taxpayer Identification Numbers, Zip Codes, and
percentages).

· If negative value, the minus sign "-" must be present immediately to the left of the number
and part of the 12 position field.

· Do not use non-numeric characters except that the literal "STMT" can be put in money fields.

· All money fields should be rounded to the nearest whole dollar amount - if a money amount ends
in 00 to 49 cents, drop the cents; if it ends in 50 to 99 cents, truncate the cents and increment the
dollar amount by one. Use the same rounding technique for the bar-coded and the printed K-1s.

· All numeric-only fields are right justified (except Taxpayer Identification Numbers and Zip Codes).

· All field lengths are expressed as maximum lengths. If the value in the field has fewer
positions or the software program does not support that many positions, put in the bar code
only those positions actually used.

· Alpha fields -

· Do not include leading blanks (left justified).

· Do not include trailing blanks.

· Use uppercase alpha characters only.

· Variable fields -

· Do not include leading blanks (left justified).

· Do not include trailing blanks.

· Use uppercase alpha characters, numerics, and special characters as defined in each field.

· Delimit each field with a carriage return.

· Express percentages as 6-digit numbers without the percent sign. Left justify with leading
zero(s) (for percentages less than 100%) and no decimal point (decimal point is assumed
between 3rd and 4th positions).

· Examples: 25.32% expressed as "025320"; 105% expressed as "105000"; 8.275% expressed
as "008275"; 10.24674% expressed as "010247".

· It is vital that the print routine reinitialize the bar code prior to printing each succeeding K-1.
Failure to do this will result in each K-1 for a parent return having the same bar code as the
document before it.

7.1.5
Approval Process for Bar-
Coded Schedules K-1

Prior to releasing commercially available tax software that creates bar-coded Schedules K-1, the
printed schedule and the bar code must both be tested. If your company is creating bar-coded
Schedules K-1, you must receive certification for both the printed K-1, as well as the bar code before
offering your product for sale. Bar-code testing must be done using the final official IRS Schedule
K-1. Bar-code approval requests must be resubmitted for any subsequent changes to the official IRS
form that would affect the bar code. Below are instructions and a sequence of events that will comprise
the testing process.

· The IRS has released the final Schedule K-1 bar-code specifications by publishing them on the
IRS.gov website (see www.irs.gov/uac/Schedule- K-1,-Two-Dimensional-Bar-Code-
Specifications-and-Certification- Process).

· The IRS will publish a set of test documents that will be used to test the ability of tax preparation
software to create bar codes in the correct format.

· Software developers will submit two identical copies of the test documents - one to the IRS and
one to a contracted testing vendor.

· The IRS will use one set to ensure the printed schedules comply with standard substitute forms
specifications.

. If the printed forms fail to meet the substitute form criteria, the IRS will inform the software
developer of the reason for noncompliance.

· The software developer must resubmit the Schedule(s) K-1 until they pass the substitute forms
criteria.

· The testing vendor will review the bar codes to ensure they meet the published bar-code
specifications.

· If the bar code(s) does not meet published specifications, the testing vendor will contact the
software developer directly informing them of the reason for noncompliance.

· Software developers must submit new bar-coded schedules until they pass the bar-code test.

· When the bar code passes, the testing vendor will inform the IRS that the developer has passed
the bar-code test and the IRS will issue an overall approval for both the substitute form and the
bar code.

· After receiving this consolidated response, the software vendor is free to release software for tax
preparation as long as any subsequent revisions to the schedules do not change the fields.

· Find the mailing address for the testing vendor below. Separate and simultaneous mailings to the
IRS and the vendor will reduce testing time.

#### 7.1.6 Procedures for Reducing Testing Time

In order to help provide incentives to the software development community to participate in the
Schedule K-1 2-D project, the IRS has committed to expediting the testing of bar-coded
Schedules K-1 and their associated parent returns. To receive this expedited service, follow the
instructions below.

· Mail the parent returns (Forms 1065, 1120S, 1041) and associated bar-coded Schedule(s) K-1 to
the appropriate address below in a separate package from all other approval requests.

Internal Revenue Service
Attn: Bar-Coded K-1
SE:W:CAR:MP:T:M:S, IR 6526
1111 Constitution Avenue, NW
Washington, DC 20224

. Mail one copy of the parent form(s) and Schedule(s) K-1 to the IRS and another copy to the
testing vendor at the address below.

Northrop Grumman Information Systems
Attn: Cecilia Siamundo/Elizabeth Ragonese
7555 Colshire Drive
McLean, VA 22102
Phone: 703-556-3619

· Include multiple email and phone contact points in the packages.

· While the IRS can expedite bar-coded Schedules K-1 and their associated parent returns, it cannot
expedite the approval of non-associated tax returns.

· Vendors should comply with all NACTP guidelines especially in regards to mil size and
error-correction level.

· Submissions should include vendor ID code printed and in the bar code. If a change is made to
the bar code after approval, be sure to increment the version number.

### Section 7.2 - Guidelines for Substitute Forms 8655

#### 7.2.1 Increased Standardization for Forms 8655

#### 7.2.2 Requirements for Substitute Forms 8655

Increased standardization for reporting information on substitute Forms 8655 is now required
to aid in processing and for compliance purposes. Please follow the guidelines in Section
7.2.2.

Please follow these specific requirements when producing substitute Forms 8655.

· The first line of the title must be "Reporting Agent Authorization."

· If you want to include a reference to "State Limited Power of Attorney," it can be in parentheses
under the title. "State" must be the first word within the parentheses.

· You must include "Form 8655" on the form.

· While the line numbers do not have to match the official form, the sequence of the information
must be in the same order.

· The size of any variable data must be printed in a font no smaller than 10-point.

· For adequate disclosure checks, the following must be included for each taxpayer:

· Name,

· EIN, and

· Address.

. At this time, Form 944 will not be required if Form 941 is checked. Only those forms that the
reporting agent company supports need to be listed.

· The jurat (perjury statement) must be identical with the exception of references to line
numbers.

· A contact name and number for the reporting agent is not required.

· You must include line 17, or the equivalent line, and it must include two checkboxes.

· Any state information included should be contained in a separate section of the
substitute form. Preferably this information will be in the same area as line 19 of the
official form.

· All substitute Forms 8655 must be approved by the Substitute Forms Unit as outlined in the
Form 8655 specifications in this current Publication.

· If you have not already been assigned a 3-letter Source Code, you will be given one when
your substitute form is submitted for approval. This Source Code should be included in the
lower left corner of the form.

· The 20-day assumed approval policy does not apply to Form 8655 approvals.

## Part 8 Additional Information

### Section 8.1 - Forms for Electronically Filed Returns

8.1.1 Electronic Filing Program

Electronic filing is a method by which authorized providers transmit tax return information to an IRS Service Center in the format of the official IRS forms. The IRS accepts both refund and balance due forms that are filed electronically.

8.1.2 Applying to Participate in IRS e-file

Anyone wishing to participate in IRS e-file of tax returns must submit an e-file application. The application can be completed and submitted electronically on the IRS website at IRS.gov after first registering for e-services on the website.

## 8.1.3 Obtaining the Taxpayer Signature/ Submission of Required Paper Documents

Taxpayers choosing to electronically prepare and file their return will be required to use the
Self-Select PIN method as their signature.

Electronic Return Originators (EROs) can e-file individual income tax returns only if the returns
are signed electronically using either the Self-Select or Practitioner PIN method.

Taxpayers must use Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return,
to send supporting documents that are required to be submitted to the IRS.

For specific information about electronic filing, refer to Publication 1345, Handbook for Autho-
rized IRS e-file Providers of Individual Income Tax Returns.

## 8.1.4 Guidelines for Preparing Substitute Forms in the Electronic Filing Program

A participant in the electronic filing program who wants to develop a substitute form should
follow the guidelines throughout this publication and send a sample form for approval to the
Substitute Forms Unit at the address in Part 1. If you do not prepare Substitute Form 8453 using
a font in which all IRS wording fits on a single page, the form will not be accepted.

Note. Use of unapproved forms could result in suspension of the participant from the electronic
filing program.

## Section 8.2 - Effect on Other Documents

### 8.2.1 Effect on Other Documents

This revenue procedure supersedes Revenue Procedure 2013-17, 2013-11, I.R.B. 612.

# Schedule A (Preferred Format)

## Exhibit A-1 (Preferred Format)

### SCHEDULE A (Form 1040)

Itemized Deductions

OMB No. 1545-0074

2014

Department of the Internal Revenue

Treasury Service

(99) Information about Schedule A and its separate instructions is at Attach to Form 1040.

www.irs.gov/schedulea.

Attachment Sequence No. 07

Name(s) shown on

Form

1040

Your

social security number

Caution. Do not include expenses reimbursed or paid by others.

Medical

Medical and dental expenses (see instructions)

and

Enter amount from Form 1040, line 38 2

Dental

Multiply line 2 by 10% (.10). But if either you or your spouse was

Expenses

born before January 2, 1950, multiply line 2 by 7.5% (.075) instead

Subtract line 3 from line 1. If line 3 is more than line 1, enter -0-

Taxes You

State and local (check only one box):

Paid

a ☐ Income taxes, or

} b ☐ General sales taxes

Real estate taxes (see instructions)

Personal property taxes

Other taxes. List type and amount

Add lines 5 through 8

Interest

Home mortgage interest and points reported to you on Form 1098

You Paid

Home mortgage interest not reported to you on Form 1098. If paid

to the person from whom you bought the home, see instructions

Note.

and show that person's name, identifying no., and address

Your mortgage

interest

deduction may

be limited (see instructions).

Points not reported to you on Form 1098. See instructions for special rules

Mortgage insurance premiums (see instructions)

Investment interest. Attach Form 4952 if required. (See instructions.)

Add lines 10 through 14

Gifts to

Gifts by cash or check. If you made any gift of $250 or more,

Charity

see instructions

If you made a

Other than by cash or check. If any gift of $250 or more, see

gift and got a

instructions. You must attach Form 8283 if over $500

beneft for it,

Carryover from prior year

see instructions.

Add lines 16 through 18

Casualty and

Theft Losses

Casualty or theft loss(es). Attach Form 4684. (See instructions.)

Job Expenses

Unreimbursed employee expenses-job travel, union dues,

and Certain

job education, etc. Attach Form 2106 or 2106-EZ if required.

Miscellaneous

(See instructions.)

Deductions

Tax preparation fees

Other expenses-investment, safe deposit box, etc. List type

and amount

Add lines 21 through 23

Enter amount from Form 1040, line 38 25

Multiply line 25 by 2% (.02)

Subtract line 26 from line 24. If line 26 is more than line 24, enter

-0-

Other

Other-from list in instructions. List type and amount 0

Miscellaneous

Deductions

Total

Is Form 1040, line 38, over $152,525?

Itemized

☐ No. Your deduction is not limited. Add the amounts in the far

right

column

Deductions

for lines 4 through 28. Also, enter this amount on Form 1040,

line

40.

☐ Yes. Your deduction may be limited. See the Itemized Deductions

Worksheet in the instructions to fgure the amount to enter.

If you elect to itemize deductions even though they are less

than

your standard

deduction, check here

☒

☐

For Paperwork Reduction Act Notice, see Form 1040 instructions.

Cat. No. 17145C

Schedule A (Form 1040) 2014

# Schedule A (Acceptable Format)

## Exhibit A-2 (Acceptable Format)

### SCHEDULE A

OMB No. 1545-0074

(Form 1040)

Itemized Deductions Information about Schedule A and its separate instructions is at www.irs.gov/schedulea. Attach to Form 1040.

2014 Attachment

Department of the

Treasury

(99)

Internal Revenue

Service

Sequence No. 07

Name(s) shown on

Form

1040

Your social security number

Caution. Do not include expenses reimbursed or paid by others.

Medical

Medical and dental expenses (see instructions)

and

Enter amount from Form 1040, line 38 2

Dental

Multiply line 2 by 10% (.10). But if either you or your spouse was

Expenses

born before January 2, 1950, multiply line 2 by 7.5% (.075) instead

Subtract line 3 from line 1. If line 3 is more than line 1, enter -0-

Taxes You

State and local (check only one box):

Paid

☐ Income taxes, or }

b ☐ General sales taxes

Real estate taxes (see instructions)

Personal property taxes

Other taxes. List type and amount ?

Add lines 5 through 8

Interest

Home mortgage interest and points reported to you on Form 1098

You Paid

Home mortgage interest not reported to you on Form 1098. If paid the person from whom you bought the home, see instructions

Note.

and show that person's name, identifying no., and address

Your mortgage

interest

deduction may

be limited (see instructions).

Points not reported to you on Form 1098. See instructions for special rules

Mortgage insurance premiums (see instructions)

Investment interest. Attach Form 4952 if required. (See instructions.)

Add

lines 10 through 14

Gifts to Charity

Gifts by cash or check. If you made any gift of $250 or more, see instructions

If you made a

Other than by cash or check. If any gift of $250 or more, see

gift and got a

instructions. You must attach Form 8283 if over $500

beneft for it,

Carryover from prior year

see instructions.

Add

lines 16 through 18

Casualty and

Theft Losses

Casualty or theft loss(es). Attach Form 4684. (See instructions.)

Job Expenses and Certain

job

Unreimbursed employee expenses-job travel, union dues, education, etc. Attach Form 2106 or 2106-EZ if required.

Miscellaneous

(See instructions.) 2

Deductions

Tax

preparation fees

Other expenses-investment, safe deposit box, etc. List type

and amount ?

Add lines 21 through 23

Enter amount from Form 1040, line 38 25

Multiply line 25 by 2% (.02)

Subtract line 26 from line 24. If line 26 is more than line 24, enter

-0-

Other

Other-from list in instructions. List type and amount 2

Miscellaneous

Deductions

Total

Is Form 1040, line 38, over $152,525?

Itemized

☐

No. Your deduction is not limited. Add the amounts in the far

right

column

Deductions

for lines 4 through 28. Also, enter this amount on Form 1040,

line 40.

☐ Yes. Your deduction may be limited. See the Itemized Deductions

Worksheet in the instructions to fgure the amount to enter.

If you elect to itemize deductions even though they are less

than your

standard

deduction, check here

☐

For Paperwork Reduction Act Notice, see Form 1040 instructions.

Cat. No. 17145C

Schedule A (Form 1040) 2014

## Form 2106-EZ (Preferred Format) Exhibit B-1 (Preferred Format)

Form
2106-EZ

Department of the Treasury
Internal Revenue Service (99)

Unreimbursed Employee Business Expenses

Information about Form 2106 and its separate instructions is available at www.irs.gov/form2106.
Attach to Form 1040 or Form 1040NR.

OMB No. 1545-0074

2014
Attachment
Sequence No.

129A

Your name

Occupation in which you incurred expenses

Social security number

You Can Use This Form Only if All of the Following Apply.

· You are an employee deducting ordinary and necessary expenses attributable to your job. An ordinary expense is one that is
common and accepted in your feld of trade, business, or profession. A necessary expense is one that is helpful and appropriate for
your business. An expense does not have to be required to be considered necessary.

. You do not get reimbursed by your employer for any expenses (amounts your employer included in box 1 of your Form W-2 are not
considered reimbursements for this purpose).

. If you are claiming vehicle expense, you are using the standard mileage rate for 2014.

Caution: You can use the standard mileage rate for 2014 only if: (a) you owned the vehicle and used the standard mileage rate for the first year
you placed the vehicle in service, or (b) you leased the vehicle and used the standard mileage rate for the portion of the lease period after 1997.

Part I Figure Your Expenses

Complete Part II. Multiply line 8a by 56¢ (.56). Enter the result here

2 Parking fees, tolls, and transportation, including train, bus, etc., that did not involve overnight travel or commuting to and from work

3 Travel expense while away from home overnight, including lodging, airplane, car rental, etc. Do not include meals and entertainment

4 Business expenses not included on lines 1 through 3. Do not include meals and entertainment

5 Meals and entertainment expenses: $ × 50% (.50). (Employees subject to Department of Transportation (DOT) hours of service limits: Multiply meal expenses incurred while away from home on business by 80% (.80) instead of 50%. For details, see instructions.)

6 Total expenses. Add lines 1 through 5. Enter here and on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). (Armed Forces reservists, fee-basis state or local government offcials, qualifed performing artists, and individuals with disabilities: See the instructions for special rules on where to enter this amount.)

### Part II Information on Your Vehicle. Complete this part only if you are claiming vehicle expense on line 1.

7
When did you place your vehicle in service for business use? (month, day, year)
1
/

8 Of the total number of miles you drove your vehicle during 2014, enter the number of miles you used your vehicle for:

Business b Commuting (see instructions) c Other

Was your vehicle available for personal use during off-duty hours? ☐ Yes ☐ No

Do you (or your spouse) have another vehicle available for personal use? ☐ Yes ☐ No

11a

Do you have evidence to support your deduction? ☐ Yes ☐ No

If "Yes," is the evidence written? ☐ Yes ☐ No

For Paperwork Reduction Act Notice, see your tax return instructions.
Cat. No. 20604Q

orm 2106-EZ
(2014)

## Form 2106-EZ (Acceptable Format) Exhibit B-2 (Acceptable Format)

Form
2106-EZ

Department of the Treasury
Internal Revenue Service (99)

Unreimbursed Employee Business Expenses
Attach to Form 1040 or Form 1040NR.
Information about Form 2106 and its separate instructions is available at www.irs.gov/form2106.

OMB No. 1545-0074

2014
Attachment
Sequence No.

129A

Your name

Occupation in which you incurred expenses

Social security number

You Can Use This Form Only if All of the Following Apply.

. You are an employee deducting ordinary and necessary expenses attributable to your job. An ordinary expense is one that is
common and accepted in your feld of trade, business, or profession. A necessary expense is one that is helpful and appropriate for
your business. An expense does not have to be required to be considered necessary.

. You do not get reimbursed by your employer for any expenses (amounts your employer included in box 1 of your Form W-2 are not
considered reimbursements for this purpose).

. If you are claiming vehicle expense, you are using the standard mileage rate for 2014.

Part I Figure Your Expenses

Complete Part II. Multiply line 8a by 56¢ (.56). Enter the result here

2 Parking fees, tolls, and transportation, including train, bus, etc., that did not involve overnight travel or commuting to and from work

3 Travel expense while away from home overnight, including lodging, airplane, car rental, etc. Do not include meals and entertainment

4 Business expenses not included on lines 1 through 3. Do not include meals and entertainment

### Part II Information on Your Vehicle. Complete this part only if you are claiming vehicle expense on line 1.

7 When did you place your vehicle in service for business use? (month, day, year)
/
/

8 Of the total number of miles you drove your vehicle during 2014, enter the number of miles you used your vehicle for:

a Business

b Commuting (see instructions)
C
Other

Was your vehicle available for personal use during off-duty hours?

☐ Yes ☐ No

Do you (or your spouse) have another vehicle available for personal use?

☐ Yes ☐ No

11a Do you have evidence to support your deduction?

☐ Yes ☐ No

b If "Yes," is the evidence written?

☐ Yes ☐ No

For Paperwork Reduction Act Notice, see your tax return instructions.
Cat. No. 20604Q

## Exhibit C Software Developers Voucher

Form
1040-ES
Department of the Treasury
Internal Revenue Service

2012 Estimated Tax

Payment
Voucher
1
OMB No. 1545-0074

Detach Coupon Below
Before Mailing

Tear off here

Form

1040-ES
Department of the Treasury
Internal Revenue Service

2012 Estimated Tax

Payment
Voucher
1
OMB No. 1545-0074

File only if you are making a payment of estimated tax by check or money order. Mail this
voucher with your check or money order payable to "United States Treasury." Write your
social security number and "2012 Form 1040-ES" on your check or money order. Do not send
cash. Enclose, but do not staple or attach, your payment with this voucher.

Calendar year-Due April 17, 2012

Amount of estimated tax you are paying

by check or money order.

Dollars 1,425

Cents

XXXX

William T THOMAS
511 JONATHAN CAROL BLVD
JEWELL, OH 43530

PO BOX 970006
ST. LOUIS, MO 63197-0006

400011018 HT THOM 30 0 201012 430

Exhibit D

Check Sheet of IRS Substitute Forms
20 :
Submitted on

Company:
Contact:
Phone:

Fax:

Source Code:

Form Number

Approved

Approved With Corrections

Comments

Authorized Name:

Title:

Reviewer's Name:

Telephone:

Date:

26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also: Part I, §§ 280F; 1.280F-7.)

# Rev. Proc. 2015-19

## SECTION 1. PURPOSE

This revenue procedure provides: (1)
limitations on depreciation deductions for
owners of passenger automobiles first
placed in service by the taxpayer during
calendar year 2015, including separate ta-
bles of limitations on depreciation deduc-
tions for trucks and vans; (2) amounts that
must be included in income by lessees of
passenger automobiles first leased by the
taxpayer during calendar year 2015, in-
cluding a separate table of inclusion
amounts for lessees of trucks and vans;
and (3) revised tables of depreciation limi-
tations and lessee inclusion amounts for pas-
senger automobiles that were first placed in
service or first leased by the taxpayer, re-
spectively, during 2014 and to which the 50
percent additional first year depreciation de-
duction under § 168(k)(1)(A) of the Internal
Revenue Code applies as extended by
§ 125(a) of the Tax Increase Prevention Act
of 2014, Pub. L. No. 113-295, __ Stat.
(December 19, 2014) (the "Act"). The ta-
bles detailing these depreciation limitations
and lessee inclusion amounts reflect the au-
tomobile price inflation adjustments re-
quired by § 280F(d)(7).

## SECTION 2. BACKGROUND

.01 For owners of passenger automo-
biles, § 280F(a) imposes dollar limitations
on the depreciation deduction for the year
the taxpayer places the passenger automo-
bile in service and for each succeeding
year. For passenger automobiles placed in
service after 1988, § 280F(d)(7) requires
the Internal Revenue Service to increase
the amounts allowable as depreciation de-
ductions by a price inflation adjustment
amount. The method of calculating this
price inflation amount for trucks and vans
placed in service in or after calendar year
2003 uses a different CPI "automobile
component" (the "new trucks" compo-
nent) than that used in the price inflation
amount calculation for other passenger
automobiles (the "new cars" component),
resulting in somewhat higher depreciation
deductions for trucks and vans. This

change reflects the higher rate of price
inflation for trucks and vans since 1988.

.02 Section 125(a) of the Act extended
the 50 percent additional first year depre-
ciation deduction under § 168(k) to qual-
ified property (as defined in § 168(k)(2))
acquired by the taxpayer after December
31, 2007, and before January 1, 2015, if
no written binding contract for the acqui-
sition of the property existed before Jan-
uary 1, 2008, and if the taxpayer places
the property in service generally before
January 1, 2015. Section 168(k)(2)(F)(i)
increases the first year depreciation al-
lowed under § 280F(a)(1)(A)(i) by $8,000
for passenger automobiles to which the
additional first year depreciation deduc-
tion under § 168(k) (hereinafter, referred
to as "§ 168(k) additional first year depre-
ciation deduction") applies. Accordingly,
this revenue procedure updates Rev. Proc.
2014-21, 2014-11 I.R.B. 641, to provide
tables for passenger automobiles placed in
service during calendar year 2014 for
which the § 168(k) additional first year
depreciation deduction applies.

.03 Section 280F(c) requires a reduc-
tion in the deduction allowed to the lessee
of a leased passenger automobile. The re-
duction must be substantially equivalent
to the limitations on the depreciation deduc-
tions imposed on owners of passenger auto-
mobiles. Under § 1.280F-7(a) of the In-
come Tax Regulations, this reduction
requires a lessee to include in gross income
an amount determined by applying a for-
mula to the amount obtained from a table.
One table applies to lessees of trucks and
vans and another table applies to all other
passenger automobiles. Each table shows
inclusion amounts for a range of fair market
values for each taxable year after the pas-
senger automobile is first leased.

## SECTION 3. SCOPE

.01 The limitations on depreciation de-
ductions in section 4.01(2) of this revenue
procedure apply to passenger automobiles
(other than leased passenger automobiles)
that are placed in service by the taxpayer
in calendar year 2015, and continue to
apply for each taxable year that the pas-
senger automobile remains in service.

.02 The tables in section 4.02 of this
revenue procedure apply to leased passen-
ger automobiles for which the lease term
begins during calendar year 2015. Lessees

of these passenger automobiles must use
these tables to determine the inclusion
amount for each taxable year during
which the passenger automobile is leased.
See Rev. Proc. 2010-18, 2010-09 I.R.B.
427, as amplified and modified by section
4.03 of Rev. Proc. 2011-21, 2011-12 I.R.B.
560, for passenger automobiles first leased
during calendar year 2010; Rev. Proc.
2011-21, for passenger automobiles first
leased during calendar year 2011; Rev. Proc.
2012-23, 2012-14 I.R.B. 712, for passenger
automobiles first leased during calendar year
2012; Rev. Proc. 2013-21, 2013-12 I.R.B.
660, for passenger automobiles first leased
during calendar year 2013; and Rev. Proc.
2014-21, 2014-11 I.R.B. 641, as amplified
and modified by section 4.03 of this revenue
procedure, for passenger automobiles first
leased during calendar year 2014.

## SECTION 4. APPLICATION

.01 Limitations on Depreciation De-
ductions for Certain Automobiles.

(1) Amount of the inflation adjustment.

(a) Passenger automobiles (other than
trucks or vans). Under § 280F(d)(7)(B)(i),
the automobile price inflation adjustment
for any calendar year is the percentage (if
any) by which the CPI automobile com-
ponent for October of the preceding cal-
endar year exceeds the CPI automobile
component for October 1987. Section
280F(d)(7)(B)(ii) defines the term "CPI
automobile component" as the automobile
component of the Consumer Price Index
for all Urban Consumers published by the
Department of Labor. The new car com-
ponent of the CPI was 115.2 for October
1987 and 144.131 for October 2014. The
October 2014 index exceeded the October
1987 index by 28.931. Therefore, the au-
tomobile price inflation adjustment for
2015 for passenger automobiles (other
than trucks and vans) is 25.1 percent
(28.931/115.2 × 100%). The dollar limi-
tations in § 280F(a) are multiplied by a
factor of 0.251, and the resulting in-
creases, after rounding to the nearest
$100, are added to the 1988 limitations to
give the depreciation limitations applica-
ble to passenger automobiles (other than
trucks and vans) for calendar year 2015.
This adjustment applies to all passenger
automobiles (other than trucks and vans)
that are first placed in service in calendar
year 2015.

(b) Trucks and vans. To determine the
dollar limitations for trucks and vans first
placed in service during calendar year
2015, the Service uses the new truck com-
ponent of the CPI instead of the new car
component. The new truck component of
the CPI was 112.4 for October 1987 and
153.902 for October 2014. The October
2014 index exceeded the October 1987
index by 41.502. Therefore, the automo-
bile price inflation adjustment for 2015 for

trucks and vans is 36.9 percent (41.502/
112.4 x 100%). The dollar limitations in
§ 280F(a) are multiplied by a factor of
0.369, and the resulting increases, after
rounding to the nearest $100, are added to
the 1988 limitations to give the deprecia-
tion limitations for trucks and vans. This
adjustment applies to all trucks and vans
that are first placed in service in calendar
year 2015.

(2) Amount of the limitation. Tables 1
and 2 contain the dollar amount of the
depreciation limitation for each taxable
year for passenger automobiles a taxpayer
places in service in calendar year 2015.
Use Table 1 for a passenger automobile
(other than a truck or van), and Table 2 for
a truck or van, placed in service in calen-
dar year 2015.

REV. PROC. 2015-19 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2015

Tax Year

Amount

1st Tax Year

$ 3,160

2nd Tax Year

$ 5,100

3rd Tax Year

$ 3,050

Each Succeeding Year

$ 1,875

REV. PROC. 2015-19 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2015

Tax Year

Amount

1st Tax Year

$ 3,460

2nd Tax Year

$ 5,600

3rd Tax Year

$ 3,350

Each Succeeding Year

$ 1,975

.02 Inclusions in Income of Lessees of
Passenger Automobiles.

A taxpayer must follow the proce-
dures in § 1.280F-7(a) for determining

the inclusion amounts for passenger au-
tomobiles first leased in calendar year
2015. In applying these procedures, les-
sees of passenger automobiles other

than trucks and vans should use Table 3
of this revenue procedure, while lessees
of trucks and vans should use Table 4 of
this revenue procedure.

REV. PROC. 2015-19 TABLE 3 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2015

Fair Market Value of Passenger Automobile

Tax Year During Lease

Over

Not Over

1 st

2nd

3rd

4th

5th &amp; later

$17,500

$18,000

18,000

18,500

19,000

19,500

20,000

20,500

21,000

21,500

### REV. PROC. 2015-19 TABLE 3 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2015

Fair Market Value of Passenger Automobile

Tax Year During Lease

Over

Not Over

1 st

2nd

3rd

4th

5th &amp; later

21,500

22,000

23,000

24,000

25,000

26,000

27,000

28,000

29,000

30,000

31,000

32,000

100

32,000

33,000

107

33,000

34,000

114

34,000

35,000

104

120

35,000

36,000

110

126

36,000

37,000

116

133

37,000

38,000

102

121

139

38,000

39,000

106

127

146

39,000

40,000

110

132

153

40,000

41,000

115

138

159

41,000

42,000

120

143

166

42,000

43,000

125

149

172

43,000

44,000

129

155

179

44,000

45,000

134

161

185

45,000

46,000

139

166

191

46,000

47,000

143

172

198

47,000

48,000

100

148

177

205

48,000

49,000

103

153

183

210

49,000

50,000

106

158

188

218

50,000

51,000

109

162

194

224

51,000

52,000

112

167

200

230

52,000

53,000

115

172

205

237

53,000

54,000

119

176

211

243

54,000

55,000

122

180

217

250

55,000

56,000

125

186

222

256

56,000

57,000

128

191

227

263

57,000

58,000

131

195

234

269

58,000

59,000

135

199

239

276

59,000

60,000

137

205

244

283

60,000

62,000

142

212

253

292

62,000

64,000

149

220

265

304

64,000

66,000

155

230

275

318

66,000

68,000

162

239

287

331

#### REV. PROC. 2015-19 TABLE 3 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2015 Tax Year During Lease

Fair Market Value of Passenger Automobile

Over

Not Over

1 st

2nd

3rd

4th

5th &amp; later

68,000

70,000

168

249

298

343

70,000

72,000

174

258

309

357

72,000

74,000

180

268

320

370

74,000

76,000

186

277

332

383

76,000

78,000

193

286

343

396

78,000

80,000

199

296

354

408

80,000

85,000

210

312

374

431

85,000

90,000

103

226

335

402

464

90,000

95,000

110

242

359

430

496

95,000

100,000

117

258

382

458

529

100,000

110,000

128

281

418

500

577

110,000

120,000

142

313

464

556

643

120,000

130,000

157

344

511

613

707

130,000

140,000

171

376

558

668

772

140,000

150,000

185

408

604

725

837

150,000

160,000

200

439

651

781

902

160,000

170,000

214

470

699

837

966

170,000

180,000

228

502

745

894

1,031

180,000

190,000

243

533

792

950

1,096

190,000

200,000

257

565

839

1,006

1,161

200,000

210,000

271

597

886

1,061

1,226

210,000

220,000

286

628

933

1,118

1,290

220,000

230,000

300

660

979

1,174

1,356

230,000

240,000

315

691

1,026

1,231

1,420

240,000

and over

329

723

1,073

1,286

1,485

REV. PROC. 2015-19 TABLE 4 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2015 Fair Market Value of Truck or Van Tax Year During Lease

Over

Not Over

1 st

2nd

3rd

4th

5th &amp; later

$18,500

$19,000

19,000

19,500

20,000

20,500

21,000

21,500

22,000

23,000

24,000

25,000

26,000

# REV. PROC. 2015-19 TABLE 4 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2015

Fair Market Value of Truck or Van

Tax Year During Lease

Over

Not Over

1 st

2nd

3rd

4th

5th &amp; later

26,000

27,000

28,000

29,000

30,000

31,000

32,000

33,000

34,000

104

34,000

35,000

111

35,000

36,000

101

118

36,000

37,000

108

124

37,000

38,000

113

131

38,000

39,000

119

137

39,000

40,000

103

124

144

40,000

41,000

108

130

150

41,000

42,000

113

135

157

42,000

43,000

118

141

163

43,000

44,000

122

147

169

44,000

45,000

127

153

176

45,000

46,000

131

158

183

46,000

47,000

136

163

189

47,000

48,000

141

169

195

48,000

49,000

145

175

202

49,000

50,000

101

151

180

208

50,000

51,000

104

155

186

215

51,000

52,000

108

159

192

221

52,000

53,000

110

165

197

228

53,000

54,000

114

169

203

234

54,000

55,000

117

174

208

241

55,000

56,000

120

178

214

248

56,000

57,000

123

183

220

254

57,000

58,000

126

188

225

261

58,000

59,000

130

192

231

267

59,000

60,000

133

197

236

273

60,000

62,000

137

204

245

283

62,000

64,000

144

213

256

296

64,000

66,000

150

223

268

308

66,000

68,000

157

232

278

322

68,000

70,000

163

241

290

335

70,000

72,000

169

251

301

348

72,000

74,000

175

261

312

361

74,000

76,000

182

269

324

374

76,000

78,000

188

279

335

386

## REV. PROC. 2015-19 TABLE 4 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2015 Tax Year During Lease

Fair Market Value of Truck or Van

Over

Not Over

1 st

2nd

3rd

4th

5th &amp; later

78,000

80,000

194

288

346

400

80,000

85,000

205

305

366

422

85,000

90,000

101

221

328

394

455

90,000

95,000

108

237

351

422

488

95,000

100,000

115

253

375

450

519

100,000

110,000

126

276

410

492

569

110,000

120,000

140

308

457

548

633

120,000

130,000

155

339

504

604

698

130,000

140,000

169

371

551

660

763

140,000

150,000

183

403

597

717

827

150,000

160,000

198

434

644

773

893

160,000

170,000

212

466

691

829

957

170,000

180,000

226

497

738

885

1,023

180,000

190,000

241

528

785

942

1,087

190,000

200,000

255

560

832

997

1,152

200,000

210,000

269

592

878

1,054

1,217

210,000

220,000

284

623

925

1,110

1,282

220,000

230,000

298

655

972

1,166

1,346

230,000

240,000

312

687

1,019

1,222

1,411

240,000

and over

327

718

1,066

1,278

1,476

.03 Revised Amounts for Passenger
Automobiles Placed in Service During
2014.

(1) Calculation of the Revised Amount.
The revised depreciation limits provided
in this section 4.03 were calculated by
increasing the existing limitations on the
first year allowance in Rev. Proc.
2014-21 by $8,000 as provided in
§ 168(k)(2)(F)(i).

(2) Amount of the Revised Limitation.
For passenger automobiles (that are not

trucks or vans) placed in service by the
taxpayer in calendar year 2014 for which
the § 168(k) additional first year depreci-
ation deduction applies, Table 5 of this
revenue procedure contains the revised
dollar amount of the depreciation limita-
tions for each taxable year. For trucks or
vans placed in service by the taxpayer in
calendar year 2014 for which the § 168(k)
additional first year depreciation deduc-
tion applies, Table 6 of this revenue pro-
cedure contains the revised dollar amount

of the depreciation limitations for each
taxable year. If the § 168(k) additional
first year depreciation deduction does not
apply to a passenger automobile placed in
service by the taxpayer in calendar year
2014, the depreciation limitations for each
taxable year in Tables 1 and 2 of Rev.
Proc. 2014-21 apply.

## REV. PROC. 2015-19 TABLE 5 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2014 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES

Tax Year

Amount

1st Tax Year

$11,160

2nd Tax Year

$ 5,100

3rd Tax Year

$ 3,050

Each Succeeding Year

$ 1,875

## REV. PROC. 2015-19 TABLE 6

# DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2014 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES

Tax Year

Amount

1st Tax Year

$11,460

2nd Tax Year

$ 5,500

3rd Tax Year

$ 3,350

Each Succeeding Year

$ 1,975

(3) Modification to lease inclusion
amounts for 2014. The lease inclusion
amounts in Tables 3 and 4 of Rev. Proc.
2014-21 are modified by striking the first
line of the inclusion amounts in each ta-
ble. Consequently, Table 3 of Rev. Proc.
2014-21 applies to passenger automo-
biles (other than trucks and vans) that are
first leased by the taxpayer in calendar
year 2014 with a fair market value over
$19,000, and Table 4 of Rev. Proc.
2014-21 applies to trucks and vans that
are first leased by the taxpayer in calendar
year 2014 with a fair market value over
$19,500.

## SECTION 5. EFFECTIVE DATE

This revenue procedure, with the ex-
ception of section 4.03, applies to passen-
ger automobiles that a taxpayer first
places in service or first leases during cal-
endar year 2015. Section 4.03 of this rev-
enue procedure applies to passenger auto-
mobiles that a taxpayer first places in
service or first leases during calendar year
2014.

## SECTION 7. DRAFTING INFORMATION

The principal author of this revenue
procedure is Bernard P. Harvey of the
Office of Associate Chief Counsel (In-
come Tax & Accounting). For further in-
formation regarding this revenue proce-
dure, contact Mr. Harvey at (202) 317-
7005 (not a toll-free number).

## SECTION 6. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2014-21 is amplified and
modified.

# Part IV. Items of General Interest

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

## Announcement 2015-6

The Internal Revenue Service has re-
voked its determination that the organiza-
tions listed below qualify as organizations
described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.

Generally, the IRS 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 IRS is not pre-
cluded from disallowing a deduction for
any contributions made after an organiza-
tion ceases to qualify under section
170(c)(2) if the organization has not
timely filed a suit for declaratory judg-
ment under section 7428 and if the con-
tributor (1) had knowledge of the revoca-
tion 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 omis-
sions of the organization that brought
about this revocation.

If on the other hand a suit for declara-
tory judgment has been timely filed, con-

tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on February 23,
2015 and would end on the date the court
first determines the organization is not
described in section 170(c)(2) as more
particularly set for 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.

NAME OF ORGANIZATION

Effective Date of Revocation

LOCATION

ELC Foundation

January 1, 2008

Honolulu, HI

Organization for Entrepreneurial Development

January 1, 2009

Rockaway, NJ

# Definition of Terms

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

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle 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).

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

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

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

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).

Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published 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.

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

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

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

Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.

# Abbreviations

The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

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

GE-Grantee.

TFE-Transferee.

CFR-Code of Federal Regulations.

GP-General Partner.

TFR-Transferor.

CI-City.

GR-Grantor.

T.I.R .- Technical Information Release.

COOP-Cooperative.

IC-Insurance Company.

TP-Taxpayer.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

TR-Trust.

CY-County.

LE-Lessee.

TT-Trustee.

D-Decedent.

LP-Limited Partner.

U.S.C .- United States Code.

DC-Dummy Corporation.

X-Corporation.

DE-Donee.

Del. Order-Delegation Order.

Nonacq .- Nonacquiescence.

O Organization.

DR-Donor.

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.

BK-Bank.

T-Target Corporation.

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

T.C .- Tax Court.

C-Individual.

T.D .- Treasury Decision.

C.B .- Cumulative Bulletin.

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.

LR-Lessor.

M-Minor.

Y-Corporation.

Z-Corporation.

DISC-Domestic International Sales Corporation.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

Numerical Finding List1

Treasury Decisions:

Bulletin 2015-1 through 2015-8

9707, 2015-2 I.R.B. 247 9708, 2015-5 I.R.B. 337

Announcements:

9709, 2015-7 I.R.B. 593

9710, 2015-8 I.R.B. 603

2015-2, 2015-3 I.R.B. 324
2015-3, 2015-3 I.R.B. 328
2015-4, 2015-5 I.R.B. 565
2015-5, 2015-7 I.R.B. 602
2015-6, 2015-8 I.R.B. 663

## Proposed Regulations:

REG-109187-11, 2015-2 I.R.B. 277
REG-132751-14, 2015-2 I.R.B. 279
REG-145878-14, 2015-2 I.R.B. 290
REG-153656-3, 2015-5 I.R.B. 566

## Notices:

2015-1, 2015-2 I.R.B. 249
2015-2, 2015-4 I.R.B. 334
2015-3, 2015-6 I.R.B. 583
2015-4, 2015-5 I.R.B. 407
2015-5, 2015-5 I.R.B. 408
2015-6, 2015-5 I.R.B. 412
2015-7, 2015-6 I.R.B. 585
2015-8, 2015-6 I.R.B. 589
2015-9, 2015-6 I.R.B. 590
2015-11, 2015-8 I.R.B. 618

## Revenue Procedures:

2015-1, 2015-1 I.R.B. 1
2015-2, 2015-1 I.R.B. 105
2015-3, 2015-1 I.R.B. 129
2015-4, 2015-1 I.R.B. 144
2015-5, 2015-1 I.R.B. 186
2015-6, 2015-1 I.R.B. 194
2015-7, 2015-1 I.R.B. 231
2015-8, 2015-1 I.R.B. 235
2015-9, 2015-2 I.R.B. 249
2015-10, 2015-2 I.R.B. 261
2015-12, 2015-2 I.R.B. 265
2015-13, 2015-5 I.R.B. 419
2015-14, 2015-5 I.R.B. 450
2015-15, 2015-5 I.R.B. 564
2015-16, 2015-7 I.R.B. 596
2015-17, 2015-7 I.R.B. 599
2015-18, 2015-8 I.R.B. 620
2015-19, 2015-8 I.R.B. 656

## Revenue Rulings:

2015-1, 2015-4 I.R.B. 331
2015-2, 2015-3 I.R.B. 321
2015-3, 2015-6 I.R.B. 580

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2014-27 through 2014-52 is in Internal Revenue Bulletin
2014-52, dated December 28, 2014.

# Finding List of Current Actions on Previously Published Items1

Bulletin 2015-1 through 2015-8

## Announcements:

2010-3
Amplified by
Ann. 2015-3, 2015-3 I.R.B. 328

## Revenue Procedures:

2014-01
Superseded by
Rev. Proc. 2015-01, 2015-01 I.R.B. 1

2014-02
Superseded by
Rev. Proc. 2015-02, 2015-01 I.R.B. 105

2014-03
Superseded by
Rev. Proc. 2015-03, 2015-01 I.R.B. 129

2014-04
Superseded by
Rev. Proc. 2015-04, 2015-01 I.R.B. 144

2014-05
Superseded by
Rev. Proc. 2015-05, 2015-01 I.R.B. 186

2014-06
Superseded by
Rev. Proc. 2015-06, 2015-01 I.R.B. 194

2014-07
Superseded by
Rev. Proc. 2015-07, 2015-01 I.R.B. 231

2014-08
Superseded by
Rev. Proc. 2015-08, 2015-01 I.R.B. 235

2014-10
Superseded by
Rev. Proc. 2015-10, 2015-2 I.R.B. 261

2003-63
Superseded by
Rev. Proc. 2015-12, 2015-2 I.R.B. 265

2011-14
Modified by
Rev. Proc. 2015-12, 2015-2 I.R.B. 265

2011-14
Modified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

Revenue Procedures-Continued:

2011-14
Amplified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

2011-14
Clarified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

1997-27
Clarified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

1997-27
Modified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

2012-11
Superseded by
Rev. Proc. 2015-17, 2015-7 I.R.B. 599

2015-9
Modified by
Rev. Proc. 2015-17, 2015-7 I.R.B. 599

Revenue Rulings:

92-19
Supplemented by
Rev. Rul. 2015-02, 2015-3 I.R.B. 321

1A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2014-27 through 2014-52 is in Internal Revenue Bulletin 2014-52, dated December 28,
2014.

# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# 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 at www.irs.gov/irb/.

## 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 Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.

Internal Revenue Bulletin 2015-8 (PDF rendition): IRS Revenue Procedures

Poursuivez vos recherches dans ChatGPT ou Claude