Internal Revenue Bulletin 2010-22 (PDF rendition): IRS Announcements

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

Bulletin No. 201
0-22
June 1, 2010
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
Notice 2010–41, page 715.
This notice provides that the Treasury Department and the IRS
intend to issue regulations under section 7701(a)(4) of the
Code that will classify certain domestic partnerships as foreign,
solely for the purposes of identifying which U.S. shareholders
are required to include amounts in gross income under section
951(a).
Notice 2010–44, page 717.
Section 45R provides a federal income tax credit to certain
small employers that make nonelective contributions towards
their employees’ health insurance premiums under an arrange-
ment that meets certain requirements. This notice provides
guidance on the credit, including guidance for determining el-
igibility for the credit, calculating the credit, and claiming the
credit.
EMPLOYEE PLANS
T.D. 9482, page 698.
REG–114494–10, page 723.
Temporary and proposed regulations under section 9815 of
the Code provide guidance on the requirements imposed on
group health plans and health insurance issuers under the Pa-
tient Protection and Affordable Care Act to continue the depen-
dent coverage of children to age 26.
EXEMPT ORGANIZATIONS
Announcement 2010–40, page 725.
The IRS has revoked its determination that Action for Afford-
able Housing of Englewood, CO; All Gods Creatures Shelter for
Abused & Abandoned Animals of Tampa, FL; Carranor Hunt &
Polo Club of Perrysburg, OH; Debt Monster Credit Counseling
Services, Inc., of Rancho Santa Margarita, CA; Farm Mutual
Insurance of Baltic, SC; Germania Purchasing Group of Bren-
ham, TX; Orchard Living View, Inc., of Sterling Heights, MI;
Silver Ridge Park Golden Oldies of Toms River, NJ; WJ Con-
sumer Credit of Texas of Kyle, TX; Eastland Praise and Worship
of Aiken, NC; The Second Chance Foundation, Inc., of Vine-
yard Haven, MA; Currier Family Foundation of Salt Lake City,
UT; Chipper Preschool & Kindergarten of Chicago, IL; Desi-
lynn Multiple Sclerosis Foundation of Layton, UT; Hawaii Con-
sumer Credit Counseling Services of Honolulu, HI; The Leonard
& Beverly Graham Foundation for the Arts of Salt Lake City, UT;
Panther’s House of Pride, Inc., of Decatur, GA; Seed America
Foundation of Cummings, GA; Carey C. Jones Memorial Park of
Apex, NC; and the Capital Athletic Foundation of Silver Spring,
MD, qualify as organizations described in sections 501(c)(3)
and 170(c)(2) of the Code.
EXCISE TAX
T.D. 9482, page 698.
REG–114494–10, page 723.
Temporary and proposed regulations under section 9815 of
the Code provide guidance on the requirements imposed on
group health plans and health insurance issuers under the Pa-
tient Protection and Affordable Care Act to continue the depen-
dent coverage of children to age 26.
(Continued on the next page)
Actions Relating to Court Decisions is on the page following the Introduction.
Fi
nding Lists begin on page ii.
Index for January through June begins on page v.

ADMINISTRATIVE
Notice 2010–43, page 716.
The Department of Treasury and the Service invite public com-
ments on recommendations for items that should be included
on the 2010–2011 Guidance Priority List. Taxpayers may sub-
mit recommendations for guidance at any time during the year.
Recommendations submitted by June 11, 2010, will be re-
viewed for possible inclusion on the original 2010–2011 Guid-
ance Priority List. Recommendations received after June 11,
2010, will be reviewed for inclusion in the next periodic update.
Announcement 2010–39, page 724.
This document contains a correction to final regulations
(T.D. 9350, 2007–2 C.B. 614) that modify the rules relating to
the disclosure of reportable transactions under section 6011
of the Code.
June 1, 20102010–22 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2010–22 I.R.B.June 1, 2010

Actions Relati
ng to Decisions of the Tax Court
It is the policy
of the Internal Rev-
enue Service t
o announce at an early date
whether it wil
l follow the holdings in cer-
tain cases. An
Action on Decision is the
document maki
ng such an announcement.
An Action on De
cision will be issued at
the discreti
on of the Service only on unap-
pealed issue
s decided adverse to the gov-
ernment. Gen
erally, an Action on Decision
is issued whe
re its guidance would be help-
ful to Servi
ce personnel working with the
same or simi
lar issues. Unlike a Treasury
Regulation
or a Revenue Ruling, an Action
on Decision
is not an affirmative statement
of Service
position. It is not intended to
serve as pu
blic guidance and may not be
cited as pr
ecedent.
Actions on
Decisions shall be relied
upon withi
n the Service only as conclu-
sions appl
ying the law to the facts in the
particul
ar case at the time the Action on
Decision
was issued. Caution should be
exercise
d in extending the recommenda-
tion of th
e Action on Decision to similar
cases whe
re the facts are different. More-
over, th
e recommendation in the Action on
Decisio
n may be superseded by new legis-
lation,
regulations, rulings, cases, or Ac-
tions on
Decisions.
Prior to
1991, the Service published
acquies
cence or nonacquiescence only in
certain regula
r Tax Court opinions. The
Service has ex
panded its acquiescence
program to inc
lude other civil tax cases
where guidanc
e is determined to be help-
ful. Accordin
gly, the Service now may
acquiesce or n
onacquiesce in the holdings
of memorandu
m Tax Court opinions, as
well as those
of the United States District
Courts, Clai
ms Court, and Circuit Courts
of Appeal. Re
gardless of the court decid-
ing the case
, the recommendation of any
ActiononDe
cision will be published in
the Interna
l Revenue Bulletin.
The recomme
ndation in every Action
on Decision
will be summarized as ac-
quiescence
, acquiescence in result only,
or nonacqu
iescence. Both “acquiescence”
and “acqui
escence in result only” mean
that the Se
rvice accepts the holding of
the court i
n a case and that the Service
will foll
ow it in disposing of cases with
thesamec
ontrolling facts. However, “ac-
quiescen
ce” indicates neither approval
nor disap
proval of the reasons assigned
by the cou
rt for its conclusions; whereas,
“acquie
scence in result only” indicates
disagre
ement or concern with some or all
of those
reasons. “Nonacquiescence” sig-
nifies t
hat, although no further review was
sought,
the Service does not agree with
the hol
ding of the court and, generally,
will not follow
the decision in disposing
of cases invol
ving other taxpayers. In
reference to a
n opinion of a circuit court
of appeals, a “
nonacquiescence” indicates
that the Servi
ce will not follow the hold-
ingonanation
wide basis. However, the
Service will
recognize the precedential
impact of the
opinion on cases arising
within the ve
nue of the deciding circuit.
The Actions o
n Decisions published in
the weekly In
ternal Revenue Bulletin are
consolidate
d semiannually and appear in
the first Bu
lletin for July and the Cumula-
tive Bullet
in for the first half of the year. A
semiannual
consolidation also appears in
the first Bu
lletin for the following January
andintheC
umulative Bulletin for the last
half of the
year.
The Commis
sioner nonacquiesces in
the follow
ing decision:
Tidewater
Inc. and Subsidiaries and
Tidewater
Foreign Sales Corporation
v. United
States,
1
565 F. 3d. 2
99 (5th Cir. 2009),
aff’g No.
06-875, 2007 U.S. Dist.
LEXIS 771
47
(E.D. La.
October 17, 2007)
1
Nonacquiesces to whether certain charters entered into between members of Taxpayer’s controlled group and unrelated customers are leases under I.R.C. section 7701(e).
June 1, 20102010–22 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 9815.
—Eligibility of
Children Until at Least
Age 26
26 CFR 54.9815–2714T: Eligibility of children until
at least age 26 (temporary).
T.D. 9482
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 54 and 602
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
RIN 1210–AB41
DEPARTMENT OF HEALTH
AND HUMAN SERVICES
Office of the Secretary
OCIIO–4150–IFC
45 CFR Parts 144, 146, and
147
RIN 0991–AB66
Interim Final Rules for Group
Health Plans and Health
Insurance Issuers Relating
to Dependent Coverage of
Children to Age 26 under
the Patient Protection and
Affordable Care Act
AGENCIES:Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration, De-
partment of Labor; Office of Consumer
Information and Insurance Oversight, De-
partment of Health and Human Services.
ACTION:Interim final rules with request
for comments.
SUMMARY:This document contains in-
terim final regulations implementing the
requirements for group health plans and
health insurance issuers in the group and
individual markets under provisions of the
Patient Prote
ction and Affordable Care Act
regarding dep
endent coverage of children
who have not at
tained age 26.
DATES:Effective Date. These interim fi-
nal regulations are effective on July 12,
2010.
Comment date. Comments are due on
or before August 11, 2010.
Applicability date. These interim fi-
nal regulations generally apply to group
health plans and group health insurance is-
suers for plan years beginning on or after
September 23, 2010. These interim final
regulations generally apply to individual
health insurance issuers for policy years
beginning on or after September 23, 2010.
ADDRESSES:Written comments may be
submitted to any of the addresses specified
below. Any comment that is submitted to
any Department will be shared with the
other Departments. Please do not submit
duplicates.
All comments will be made available
to the public.WARNING: Do not in-
clude any personally identifiable informa-
tion (such as name, address, or other con-
tact information) or confidential business
information that you do not want publicly
disclosed. All comments are posted on the
Internet exactly as received, and can be
retrieved by most Internet search engines.
No deletions, modifications, or redactions
will be made to the comments received, as
they are public records. Comments may be
submitted anonymously.
Department of Labor. Comments to the
Department of Labor, identified by RIN
1210–AB41, by one of the following meth-
ods:
•FederaleRulemakingPortal:
http://www.regulations.gov. Follow
the instructions for submitting com-
ments.
•Email:E-OHPSCA.EBSA@dol.gov.
•Mail or Hand Delivery:Officeof
Health Plan Standards and Compliance
Assistance, Employee Benefits Secu-
rity Administration, Room N–5653,
U.S. Department of Labor, 200 Con-
stitution Avenue NW, Washington, DC
20210,Attention: RIN 1210–AB41.
Comments rece
ived by the Depart-
ment of Labor w
ill be posted with-
out change tow
ww.regulations.govand
www.dol.gov
/ebsa, and available for pub-
lic inspecti
on at the Public Disclosure
Room, N–1513
, Employee Benefits Se-
curity Admin
istration, 200 Constitution
Avenue, NW,
Washington, DC 20210.
Department o
f Health and Human Ser-
vices.Inco
mmenting, please refer to file
code OCIIO–
4150–IFC. Because of staff
and resourc
e limitations, we cannot accept
comments by
facsimile (FAX) transmis-
sion.
You may subm
it comments in one of
four ways (
please choose only one of the
ways liste
d):
1.Electro
nically. You may submit
electroni
c comments on this regulation to
http://ww
w.regulations.gov. Follow the
instructi
ons under the “More Search Op-
tions” ta
b.
2.By regul
ar mail.Youmaymail
written c
omments to the following address
ONLY:
Office of Consumer Information and
Insurance Oversight
Department of Health and Human
Services,
Attention: OCIIO–4150–IFC,
P.O. Box 8016,
Baltimore, MD 21244–1850.
Please allow sufficient time for mailed
comments to be received before the close
of the comment period.
3.By express or overnight mail.You
may send written comments to the follow-
ing address ONLY:
Off
ice of Consumer Information and
In
surance Oversight,
De
partment of Health and Human
Se
rvices,
At
tention: OCIIO–4150–IFC,
Ma
il Stop C4–26–05,
75
00 Security Boulevard,
B
altimore, MD 21244–1850.
4.By hand or courier. If you prefer,
you may deliver (by hand or courier) your
written comments before the close of the
comment period to either of the following
addresses:
2010–22 I.R.B.698June 1, 2010

a. For delivery in Washington, DC—
Office of Consumer Information and
Insurance Oversight,
Department of Health and Human
Services,
Room 445-G, Hubert H. Humphrey
Building,
200 Independence Avenue, SW,
Washington, DC 20201
(Because access to the interior of the
Hubert H. Humphrey Building is not read-
ily available to persons without Federal
government identification, commenters
are encouraged to leave their comments in
the OCIIO drop slots located in the main
lobby of the building. A stamp-in clock is
available for persons wishing to retain a
proof of filing by stamping in and retain-
ing an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD—
Centers for Medicare & Medicaid
Services,
Department of Health and Human
Services,
7500 Security Boulevard,
Baltimore, MD 21244–1850
If you intend to deliver your comments
to the Baltimore address, please call (410)
786–7195 in advance to schedule your ar-
rival with one of our staff members.
Comments mailed to the addresses in-
dicated as appropriate for hand or courier
delivery may be delayed and received after
the comment period.
Submission of comments on paperwork
requirements. You may submit comments
on this document’s paperwork require-
ments by following the instructions at the
end of the “Collection of Information Re-
quirements” section in this document.
Inspection of Public Comments:All
comments received before the close of the
comment period are available for view-
ing by the public, including any person-
ally identifiable or confidential business
information that is included in a comment.
We post all comments received before the
close of the comment period on the fol-
lowing website as soon as possible after
they have been received:http://www.regu-
lations.gov. Follow the search instructions
on that Web site to view public comments.
Comments received timely will also
be available for public inspection as
they are received, generally beginning
approximately three weeks after publica-
tion of a document, at the headquarters
of the Centers for Medicare & Med-
icaid Services, 7500 Security Boule-
vard, Baltimore, Maryland 21244, Mon-
day through Friday of each week from
8:30 a.m. to 4 p.m. EST. To schedule an
appointment to view public comments,
phone 1–800–743–3951.
Internal Revenue Service. Comments
to the IRS, identified by REG–114494–10,
by one of the following methods:
•FederaleRulemakingPortal:
http://www.regulations.gov. Follow
the instructions for submitting com-
ments.
•Mail:CC:PA:LPD:PR
(REG–114494–10), room 5205, Inter-
nal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044.
•Hand or courier delivery: Monday
through Friday between the hours of
8a.m.and4p.m.to:CC:PA:LPD:PR
(REG–114494–10), Courier’s Desk,
Internal Revenue Service, 1111
Constitution Avenue, NW, Washington
DC 20224.
All submissions to the IRS will be open
to public inspection and copying in room
1621, 1111 Constitution Avenue, NW,
Washington, DC from 9 a.m. to 4 p.m.
FOR FURTHER INFORMATION
CONTACT:Amy Turner or Beth Baum,
Employee Benefits Security Adminis-
tration, Department of Labor, at (202)
693–8335; Karen Levin, Internal Revenue
Service, Department of the Treasury, at
(202) 622–6080; Jim Mayhew, Office
of Consumer Information and Insurance
Oversight, Department of Health and Hu-
man Services, at (410) 786–1565.
CUSTOMERSERVICE
INFORMATION:Individuals inter-
ested in obtaining information from
the Department of Labor concerning
employment-based health coverage laws
may call the EBSA Toll-Free Hotline
at 1–866–444–EBSA (3272) or visit
the Department of Labor’s website
(http://www.dol.gov/ebsa).In addi-
tion, information from HHS on private
health insurance for consumers can
be found on the Centers for Medicare
& Medicaid Services (CMS) website
(http://www.cms.hhs.gov/HealthInsRe-
formforConsume/01_Overview.asp).
SUPPLEMENTARY INFORMATION:
I. Background
The Patient Protection and Affordable
CareAct(theAffordableCareAct),Pub-
lic Law 111–148, was enacted on March
23, 2010; the Health Care and Education
Reconciliation Act (the Reconciliation
Act), Public Law 111–152, was enacted
on March 30, 2010. The Affordable Care
Act and the Reconciliation Act reorganize,
amend, and add to the provisions of part A
of title XXVII of the Public Health Service
Act (PHS Act) relating to group health
plans and health insurance issuers in the
group and individual markets. The term
“group health plan” includes both insured
and self-insured group health plans.
1
The
Affordable Care Act adds section 715 to
the Employee Retirement Income Security
Act (ERISA) and section 9815 to the Inter-
nal Revenue Code (the Code) to make the
provisions of part A of title XXVII of the
PHS Act applicable under ERISA and the
Code to group health plans, and health in-
surance issuers providing health insurance
coverage in connection with group health
plans, as if those provisions of the PHS
Act were included in ERISA and the Code.
The PHS Act sections incorporated by this
reference are sections 2701 through 2728.
PHS Act sections 2701 through 2719A are
substantially new, though they incorporate
some provisions of prior law. PHS Act
sections 2722 through 2728 are sections of
prior law renumbered with some, mostly
minor, changes. Section 1251 of the Af-
fordable Care Act, as modified by section
10103 of the Affordable Care Act and
section 2301 of the Reconciliation Act,
specifies that certain plans or coverage
existing as of the date of enactment (i.e.,
grandfathered health plans) are subject to
only certain provisions.
1
The term “group health plan” is used in title XXVII of the PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is distinct from the term “health plan”,as used in other provisions of
title I of the Affordable Care Act. The term “health plan” does not include self-insured group health plans.
June 1, 20106992010–22 I.R.B.

Subtitles A and C of title I of the
Affordable Care Act amend the require-
ments of title XXVII of the PHS Act
(changes to which are incorporated into
ERISA section 715). The preemption pro-
visions of ERISA section 731 and PHS
Act section 2724
2
(implemented in 29
CFR 2590.731(a) and 45 CFR 146.143(a))
apply so that the requirements of the Af-
fordable Care Act are not to be “construed
to supersede any provision of State law
which establishes, implements, or contin-
ues in effect any standard or requirement
solely relating to health insurance issuers
in connection with group or individual
health insurance coverage except to the
extent that such standard or requirement
prevents the application of a requirement”
of the Affordable Care Act. Accordingly,
State laws that impose on health insurance
issuers stricter requirements than those
imposed by the Affordable Care Act will
not be superseded by the Affordable Care
Act.
The Departments of Health and Hu-
man Services, Labor, and the Treasury
(the Departments) expect to issue regula-
tions implementing the revised PHS Act
sections 2701 through 2719A in several
phases. The first publication in this series
was a Request for Information relating to
the medical loss ratio provisions of PHS
Act section 2718, published in theFederal
Registeron April 14, 2010 (75 FR 19297).
These interim final regulations are being
published to implement PHS Act section
2714 (requiring dependent coverage of
children to age 26). PHS Act section 2714
generally is effective for plan years (in the
individual market, policy years) beginning
on or after September 23, 2010, which is
six months after the March 23, 2010 date
of enactment of the Affordable Care Act.
3
The implementation of other provisions
of PHS Act sections 2701 through 2719A
and section 1251 of the Affordable Care
Act will be addressed in future regulations.
Because subtitles A and C of title I of
the Affordable Care Act contain require-
ments that are applicable to both the group
and individual health insurance markets, it
would be duplicative to insert the require-
ments into both the existing 45 CFR part
146 (Requirements for the Group Health
Insurance Market) and 45 CFR part 148
(Requirements for the Individual Health
Insurance Market). Accordingly, these in-
terim final regulations create a new part
147 in subchapter B of 45 CFR to imple-
ment the provisions of the Affordable Care
Act. The provisions of the Affordable Care
Act, to the extent that they apply to group
health plans and group health insurance
coverage, are also implemented under new
regulations added to 29 CFR part 2590 and
26 CFR part 54.
II. Overview of the Regulations
A.PHS Act Section 2714, Continued
Eligibility of Children until Age 26
(26 CFR 54.9815–2714, 29 CFR
2590.715–2714, 45 CFR 147.120)
Section 2714 of the PHS Act, as added
by the Affordable Care Act (and amended
by the Reconciliation Act), and these in-
terim final regulations provide that a plan
or issuer that makes available dependent
coverage
4
of children must make such
coverage available for children until at-
tainment of 26 years of age. The statute
also requires the issuance of regulations to
“define the dependents to which coverage
shall be made available” under this rule.
Many group health plans that provide
dependent coverage limit the coverage to
health coverage excludible from employ-
ees’ gross income for income tax purposes.
Thus, dependent coverage is limited to em-
ployees’ spouses and employees’ children
that qualify as dependents for income tax
purposes. Consequently, these plans often
condition dependent coverage, in addition
to the age of the child, on student status,
residency, and financial support or other
factors indicating dependent status. How-
ever, with the expansion of dependent cov-
erage required by the Affordable Care Act
to children until age 26, conditioning cov-
erage on whether a child is a tax dependent
or a student, or resides with or receives
financial support from the parent, is no
longer appropriate in light of the correla-
tion between age and these factors. There-
fore, these interim final regulations do not
allow plans or coverage to use these re-
quirements to deny dependent coverage to
children. Because the statute does not dis-
tinguish between coverage for minor chil-
dren and coverage for adult children under
age 26, these factors also may not be used
to determine eligibility for dependent cov-
erage for minor children.
Accordingly, these interim final regula-
tions clarify that, with respect to children
who have not attained age 26, a plan or
issuer may not define dependent for pur-
poses of eligibility for dependent coverage
of children other than in terms of the re-
lationship between the child and the par-
ticipant (in the individual market, the pri-
mary subscriber). Examples of factors that
cannot be used for defining dependent for
purposes of eligibility (or continued eligi-
bility) include financial dependency on the
participant or primary subscriber (or any
other person), residency with the partici-
pant or primary subscriber (or any other
person), student status, employment, eli-
gibility for other coverage, or any combi-
nation of these. These interim final reg-
ulations also provide that the terms of the
plan or policy for dependent coverage can-
not vary based on the age of a child, ex-
cept for children age 26 or older. Exam-
ples illustrate that surcharges for cover-
age of children under age 26 are not al-
lowed except where the surcharges apply
regardless of the age of the child (up to
age 26) and that, for children under age
26, the plan cannot vary benefits based on
the age of the child. The Affordable Care
Act, as originally enacted, required plans
and issuers to make dependent coverage
available only to a child “who is not mar-
ried.” This language was struck by section
2301(b) of the Reconciliation Act. Ac-
cordingly, under these interim final regu-
lations, plans and issuers may not limit de-
pendent coverage based on whether a child
is married. (However, a plan or issuer is
not required under these interim final reg-
ulations to cover the spouse of an eligible
child).
The statute and these interim final reg-
ulations provide that nothing in PHS Act
2
Code section 9815 incorporates the preemption provisions of PHS Act section 2724. Prior to the Affordable Care Act, there were no express preemption provisions in chapter 100 of the
Code.
3
Seesection 1004 of the Affordable Care Act.
4
For purposes of these interim final regulations, dependent coverage means coverage of any individual under the terms of a group health plan, or group or individual health insurance coverage,
because of the relationship to a participant (in the individual market, primary subscriber).
2010–22 I.R.B.700June 1, 2010

section 2714 requires a plan or issuer to
make available coverage for a child of a
child receiving dependent coverage.
Under section 1004(d) of the Recon-
ciliation Act and IRS Notice 2010–38
(released to the public on April 27, 2010
and scheduled to be published in 2010–20
Internal Revenue Bulletin, May 17, 2010),
employers may exclude from the em-
ployee’s income the value of any em-
ployer-provided health coverage for an
employee’s child for the entire taxable
year the child turns 26 if the coverage
continues until the end of that taxable
year. This means that if a child turns 26 in
March, but stays on the plan past Decem-
ber 31st (the end of most people’s taxable
year), the health benefits up to December
31st can be excluded for tax purposes.
Application to grandfathered health
plans. Under the statute and these interim
final regulations, the requirement to make
available dependent coverage for children
who have not attained age 26 generally
applies to all group health plans and health
insurance issuers offering group or indi-
vidual health insurance coverage whether
or not the plan or health insurance cov-
erage qualifies as a grandfathered health
plan
5
under section 1251 of the Affordable
Care Act, for plan years (in the individ-
ual market, policy years) beginning on or
after September 23, 2010. However, in
accordance with section 2301(a) of the
Reconciliation Act, for plan years begin-
ning before January 1, 2014, these interim
final regulations provide that a grandfa-
thered health plan that is a group health
plan that makes available dependent cov-
erage of children may exclude an adult
child who has not attained age 26 from
coverage only if the child is eligible to en-
roll in an employer-sponsored health plan
(as defined in section 5000A(f)(2) of the
Code) other than a group health plan of a
parent. In the case of an adult child who
is eligible for coverage under the plans of
the employers of both parents, neither plan
may exclude the adult child from coverage
based on the fact that the adult child is
eligible to enroll in the plan of the other
parent’s employer.
Regulations relating to grandfathered
health plans under section 1251 of the
Affordable Care Act are expected to be
published in the very near future. The De-
partments anticipate that the regulations
will make clear that changes to plan or pol-
icy terms to comply with PHS Act section
2714 and these interim final regulations,
including voluntary compliance before
plan years (in the individual market, pol-
icy years) beginning on or after September
23, 2010, will not cause a plan or health
insurance coverage to lose grandfathered
health plan status for any purpose under
theAffordableCareAct,asamended.
Transitional Rule. Prior to the applica-
bility date of PHS Act section 2714, a child
who was covered under a group health plan
or health insurance coverage as a depen-
dent may have lost eligibility under the
plan (or coverage) due to age prior to age
26. Moreover, if, when a parent first be-
came eligible for coverage, a child was un-
der age 26 but older than the age at which
the plan (or coverage) stopped covering
children, the child would not have become
eligible for the plan (or coverage). When
the provisions of section 2714 become ap-
plicable, a plan or issuer can no longer ex-
clude coverage for the child prior to age 26
irrespective of whether or when that child
was enrolled in the plan (or coverage).
Also, a child of a primary subscriber with
family coverage in the individual market
may be entitled to an opportunity to enroll
if the child previously lost coverage due to
age while other family members retained
the coverage.
6
Accordingly, these interim final regula-
tions provide transitional relief for a child
whose coverage ended, or who was denied
coverage (or was not eligible for coverage)
under a group health plan or health insur-
ance coverage because, under the terms of
the plan or coverage, the availability of de-
pendent coverage of children ended before
the attainment of age 26.
These interim final regulations require a
plan or issuer to give such a child an oppor-
tunity to enroll that continues for at least
30 days (including written notice of the op-
portunity to enroll), regardless of whether
the plan or coverage offers an open enroll-
ment period and regardless of when any
open enrollment period might otherwise
occur. This enrollment opportunity (in-
cluding the written notice) must be pro-
vided not later than the first day of the first
plan year (in the individual market, pol-
icy year) beginning on or after September
23, 2010. Thus, many plans can use their
existing annual enrollment periods (which
commonly begin and end before the start
of the plan year) to satisfy the enrollment
opportunity requirement. If the child is en-
rolled, coverage must begin not later than
the first day of the first plan year (in the in-
dividual market, policy year) beginning on
or after September 23, 2010, even if the re-
quest for enrollment is made after the first
day of the plan year. In subsequent years,
dependent coverage may be elected for an
eligible child in connection with normal
enrollment opportunities under the plan or
coverage.
Under these interim final regulations,
the notice may be provided to an em-
ployee on behalf of the employee’s child
(in the individual market, to a primary
subscriber on behalf of the primary sub-
scriber’s child). In addition, for a group
health plan or group health insurance cov-
erage, the notice may be included with
other enrollment materials that a plan
distributes to employees, provided the
statement is prominent. For a group health
plan or group health insurance coverage,
if a notice satisfying these requirements is
provided to an employee whose child is
entitled to an enrollment opportunity, the
obligation to provide the notice of enroll-
ment opportunity with respect to that child
is satisfied for both the plan and the issuer.
Any child enrolling in group health plan
coverage pursuant to this enrollment right
must be treated as a special enrollee, as
provided under the regulations interpret-
ing the HIPAA portability provisions.
7
Ac-
cordingly, the child must be offered all the
benefit packages available to similarly sit-
5
Section 1251 of the Affordable Care Act, as modifiedby section 10103 of the Affordable Care Act and section 2301 of the Reconciliation Act, specifies that certain plans or coverage existing
as of the March 23, 2010 date of enactment (i.e., grandfathered health plans) are subject to only certain provisions.
6
In the group market, section 9802(a) of the Code, section 702(a) of ERISA, and section 2705 of the PHS Act provide that a plan or issuer cannot impose any rule for eligibility for benefits
(including any rule excluding coverage) based on a health factor, including a preexisting condition. These rules were added by HIPAA and generally became applicable for group health
plans for plan years beginning on or after July 1, 1997. Similar guidance regarding re-enrollment rights for individuals previously denied coveragedue to a health factor was issued by the
Departments of the Treasury, Labor, and HHS on December 29, 1997, at62 FR 67689 and on January 8, 2001at 66 FR 1378, 1403, 1410, 1418.
7
HIPAA is the Health Insurance Portability and Accountability Act of 1996 (Public Law 104–191). Regulations regarding the treatment of HIPAA specialenrollees are included at 26 CFR
54.9801–6(d), 29 CFR 2590.701–6(d), and 45 CFR 146.117(d).
June 1, 20107012010–22 I.R.B.

uated individuals who did not lose cover-
age by reason of cessation of dependent
status. The child also cannot be required to
pay more for coverage than similarly situ-
ated individuals who did not lose coverage
by reason of cessation of dependent status.
The Departments have been informed
that many health insurance issuers have
announced that they will allow continued
coverage of adult children before such
coverage is required by the Affordable
Care Act. A plan or issuer that allows con-
tinued coverage of adult children before
beingrequiredtodosobytheAffordable
Care Act is not required to provide the
enrollment opportunity with respect to
children who do not lose coverage.
Examples in these interim final regu-
lations illustrate the application of these
transitional rules. One example illustrates
that, if a child qualifies for an enrollment
opportunity under this section and the par-
ent is not enrolled but is otherwise eligible
for enrollment, the plan must provide an
opportunity to enroll the parent, in addition
to the child. Similarly, another example il-
lustrates that, if a plan has more than one
benefit package option, a child qualifies
for enrollment under this section, and the
parent is enrolled in one benefit package
option, the plan must provide an opportu-
nity to enroll the child in any benefit pack-
age option for which the child is otherwise
eligible (thus allowing the parent to switch
benefit package options). Another exam-
ple illustrates that a child who qualifies for
an enrollment opportunity under this sec-
tion and who is covered under a COBRA
continuation provision must be given the
opportunity to enroll as a dependent of an
active employee (i.e., other than as a CO-
BRA-qualified beneficiary). In this situa-
tion, if the child loses eligibility for cov-
erage due to a qualifying event (including
aging out of coverage at age 26), the child
has another opportunity to elect COBRA
continuation coverage. (If the qualifying
event is aging out, the COBRA continua-
tion coverage could last 36 months from
the loss of eligibility that relates to turn-
ing age 26.) The final example in this
section illustrates that an employee who
joined a plan prior to the applicability date
of PHS Act section 2714, and has a child
who never enrolled because the child was
too old under the terms of the plan but has
not yet turned 26, must be provided an op-
portunity to enroll the child under this sec-
tion even though the child was not previ-
ously covered under the plan. If the parent
is no longer eligible for coverage under the
plan (for example, if the parent has ceased
employment with the plan sponsor) as of
the first date on which the enrollment op-
portunity would be required to be given,
the plan would not be required to enroll the
child.
B.Conforming Changes under the PHS
Act
1.References to the Public Health Service
Act
Conforming changes to references to
sections of title XXVII of the PHS Act are
made throughout parts 144 and 146 of title
45 of the Code of Federal Regulations to
reflect the renumbering of certain sections
by the Affordable Care Act.
2.Definitions (45 CFR 144.103)
These interim final regulations define
“policy year” as the 12-month period that
is designated in the policy documents of
individual health insurance coverage. If
the policy document does not designate a
policy year (or no such document is avail-
able), then the policy year is the deductible
or limit year used under the coverage. If
deductibles or other limits are not imposed
on a yearly basis, the policy year is the cal-
endar year. The Affordable Care Act uses
the term “plan year” in referring to the pe-
riod of coverage in both the individual and
group health insurance markets. The term
“plan year”, however, is generally used in
the group health insurance market. Ac-
cordingly, these interim final regulations
substitute the term “policy year” for “plan
year” in defining the period of coverage in
the individual health insurance market.
III. Interim Final Regulations and
Request for Comments
Section 9833 of the Code, section 734
ofERISA,andsection2792ofthePHS
Act authorize the Secretaries of the Trea-
sury, Labor, and HHS (collectively, the
Secretaries) to promulgate any interim fi-
nal rules that they determine are appropri-
ate to carry out the provisions of chapter
100 of the Code, part 7 of subtitle B of ti-
tle I of ERISA, and part A of title XXVII of
the PHS Act, which include PHS Act sec-
tions 2701 through 2728 and the incorpo-
ration of those sections into ERISA section
715 and Code section 9815.
In addition, under Section 553(b) of
the Administrative Procedure Act (APA)
(5 U.S.C. 551et seq.) a general notice
of proposed rulemaking is not required
when an agency, for good cause, finds
that notice and public comment thereon are
impracticable, unnecessary, or contrary to
the public interest. The provisions of the
APA that ordinarily require a notice of pro-
posed rulemaking do not apply here be-
cause of the specific authority granted by
section 9833 of the Code, section 734 of
ERISA, and section 2792 of the PHS Act.
However, even if the APA was applica-
ble, the Secretaries have determined that
it would be impracticable and contrary to
the public interest to delay putting the pro-
visions in these interim final regulations in
place until a full public notice and com-
ment process is completed. The statutory
requirement implemented in these interim
final regulations was enacted on March 23,
2010, and applies for plan years (in the in-
dividual market, policy years) beginning
on or after September 23, 2010. Having a
binding rule in effect is critical to ensuring
that individuals entitled to the new protec-
tions being implemented have these pro-
tections uniformly applied.
Moreover, the provisions in these in-
terim final regulations require lead time for
implementation. These interim final regu-
lations require that anenrollment period be
provided no later than the first day the obli-
gation to allow dependent children to en-
roll until attainment of age 26 takes effect.
Preparations presumably would have to be
made to put such an enrollment process
in place. Group health plans and health
insurance issuers also would have to take
the cost associated with this new obliga-
tion into account in establishing their pre-
miums, and in making other changes to the
designs of plan or policy benefits, and any
such premiums and changes would have to
receive necessary approvals in advance of
the plan or policy year in question.
For the foregoing reasons, the De-
partments have determined that it is es-
sential to provide certainty about what
will be required of group health plans
and health insurance issuers under the
statutory requirements implemented in
binding regulations as far in advance of
2010–22 I.R.B.702June 1, 2010

September 23, 2010 as possible. This
makes it impracticable to engage in full
notice and comment rulemaking before
putting regulations into effect, and in the
public interest to do so through interim
final regulations under which the public
will have an opportunity for comment,
but that opportunity will not delay putting
rules in effect (a delay that could possibly
last past September 23, 2010).
Issuance of proposed regulations would
not be sufficient because the proposed reg-
ulations would not be binding, and differ-
ent group health plans or health insurance
issuers could interpret the statutory lan-
guage in different ways. Had the Depart-
ments published a notice of proposed rule-
making, provided for a 60-day comment
period, and only then prepared final regu-
lations, which would be subject to a 60-day
delay in effective date, it is unlikely that
it would have been possible to have final
regulations in effect before late Septem-
ber, when these requirements could be in
effect for some plans or policies. It there-
fore is in the public interest that these in-
terim final regulations be in effect and ap-
ply when the statutory protections being
implemented apply.
IV. Economic Impact and Paperwork
Burden
A.Summary—Department of Labor
and Department of Health and Human
Services
As stated earlier in this preamble, these
interim final regulations implement PHS
Act section 2714, which requires plans
or issuers that make dependent coverage
available for children to continue to make
such coverage available for an adult child
until the attainment of age 26. The reg-
ulation also provides an enrollment op-
portunity to individuals who lost or were
not eligible for dependent coverage before
age 26.
8
This provision generally is effec-
tive for plan years (in the individual mar-
ket, policy years) beginning on or after
September 23, 2010, which is six months
after the March 23, 2010 date of enactment
of the Affordable Care Act.
The Departments have crafted these
interim final regulations to secure the pro-
tections intended by Congress in the most
economically efficient manner possible.
The Departments havequantified costs
where possible and provided a qualitative
discussion of the economic benefits and
some of the transfers and costs that may
stem from these interim final regulations.
B.Executive Order 12866—Department
of Labor and Department of Health and
Human Services
Under Executive Order 12866 (58 FR
51735), this regulatory action has been de-
termined “significant” and therefore sub-
ject to review by the Office of Manage-
ment and Budget (OMB). Section 3(f) of
the Executive Order defines a “significant
regulatory action” as an action that is likely
to result in a rule (1) having an annual ef-
fect on the economy of $100 million or
more in any one year, or adversely and ma-
terially affecting a sector of the economy,
productivity, competition, jobs, the envi-
ronment, public health or safety, or State,
local or tribal governments or communi-
ties (also referred to as “economically sig-
nificant”); (2) creating a serious inconsis-
tency or otherwise interfering with an ac-
tion taken or planned by another agency;
(3) materially altering the budgetary im-
pacts of entitlement grants, user fees, or
loan programs or the rights and obligations
of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal
mandates, the President’s priorities, or the
principles set forth in the Executive Order.
OMB has determined that this regulation is
economically significant within the mean-
ing of section 3(f)(1) of the Executive Or-
der, because it is likely to have an annual
effect on the economy of $100 million in
any one year. Accordingly, OMB has re-
viewed these rules pursuant to the Exec-
utive Order. The Departments provide an
assessment of the potential costs, benefits,
and transfers associated with the regula-
tory provision below. The Departments in-
vite comments on this assessment and its
conclusions.
1.Need for Regulatory Action
PHS Act section 2714, as added by the
Affordable Care Act and amended by the
Reconciliation Act requires group health
plans and health insurance issuers offering
group or individual health insurance cov-
erage that make dependent coverage avail-
able for children to continue to make cov-
erage available to such children until the
attainment of age 26. With respect to a
child receiving dependent coverage, cov-
erage does not have to be extended to a
child or children of the child or a spouse of
the child. In addition, as provided by the
Reconciliation Act, grandfathered group
health plans are not required to offer de-
pendent coverage to a child under 26 who
is otherwise eligible for employer-spon-
sored insurance other than a group health
plan of a parent for plan years beginning
before January 1, 2014. PHS Act section
2714 generally is effective for plan years
(in the individual market, policy years) be-
ginning on or after September 23, 2010.
Thus, these interim final regulations are
necessary to amend the Departments’ ex-
isting regulations to implement these statu-
torily mandated changes.
2.Summary of Impacts
In this section, the Departments esti-
mate the number of individuals affected
by these interim final regulations, and the
impact of the regulations on health insur-
ance premiums in the group and individ-
ual markets. Beginning with the popula-
tion of individuals age 19–25, the number
of individuals potentially affected is esti-
mated by applying several criteria includ-
ing whether their parents have existing em-
ployer-sponsored insurance (ESI) or an in-
dividual market policy; and whether the in-
dividuals are themselves uninsured, have
ESI, individual market policies or other
forms of coverage. A range of assump-
tions concerning the percentage of the po-
tentially affected individuals that will ac-
cept the offer of new dependent coverage
— “take-up” rates— is then applied to esti-
mate the number of newly covered individ-
uals. The premium impact is calculated by
using an estimated incremental insurance
cost per newly-covered individual as a per-
cent of average family premiums.
8
The Affordable Care Act adds section 715 and Code section to make the provisions of part A of title XXVII of the PHS Actapplicable to group health plans, and health insurance issuers
providing health insurance coverage in connection with group health plans, under ERISA and the Code as if those provisions of the PHS Act were includedin ERISA and the Code. The PHS
Act sections incorporated by this reference are sections 2701 through 2728. Section 1251 of the Affordable Care Act provides rules for grandfatheredhealth plans, and these rules are further
clarified in section 10103 of the Affordable CareActandsection2301oftheReconciliationAct.
June 1, 20107032010–22 I.R.B.

In accordance, with OMB Circular
A–4,
9
Table 1 below depicts an account-
ing statement showing the Departments’
assessment of the benefits, costs, and
transfers associated with this regulatory
action.
TABLE 1.—Accounting Table
Benefits
Annualized Quantified:low estimate0.19 million previously uninsured individuals gain coverage in 2011
mid-range estimate
0.65 million previously uninsured individuals gain coverage in 2011
high estimate1.64 million p
reviously uninsured individuals gain coverage in 2011
Qualitative: Expanding coverage options of the 19–25 population should decrease the number uninsured, which in turn should
decrease the cost-shifting of uncompensated care onto those withinsurance, increase the receiptof preventive health care and
provide more timely access to highquality care, resulting in a healthier population. Allowing extended dependent coverage will
also permit greater job mobility for this population as their insurance coverage will no longer be tied to their own jobs or student
status. Dependents aged 19–25 that have chronic or other serious health conditions would still be able to continue their current
coverage through a parent’s plan. To the extent there is an increase in beneficial utilization of healthcare, health could improve.
Costs
10
Low
Estimate
Mid-
range
Estimate
High
Estimate
Year
Dollar
Discount
Rate
Period
Covered
11
Annualized Monetized ($millions/year)
11.211.211.220107%2011–2013
10.410.410.420103%2011–2013
A one-time notice of right to enroll must be sent to those affected.
Qualitative: To the extent additional coverage increases utilization of health care services, there will be additional costs incurred
to achieve the health benefits.
Transfer
12
Annualized Monetized ($millions/year)
3,459.35,250.2
6,893.920107%2011–2013
3,482.55,274.56,895.4
20103%2011–2013
Qualitative: If the rule causes family health insurance premiums to increase, there will be a transfer from individuals with family
health insurance coverage who do not have dependents aged 19–25 to those individuals with family health insurance coverage that
have dependents aged 19–25. To the extent that these higher premiums result in lower profits or higher prices for the employer’s
product, then the higher premiums will result in a transfer either from stockholders or consumers.
3.Estimated Number of Affected
Individuals
The Departments’ estimates in this
section are based on the 2004–2006 Med-
ical Expenditure Panel Survey Household
Component (MEPS-HC) which was pro-
jected and calibrated to 2010 to be con-
sistent with the National Health Accounts
projections. The Departments estimate
that in 2010, there are approximately 29.5
million individuals aged 19–25 (young
adults) in the United States. Of those indi-
viduals, 9.3 million young adults (of whom
3.1 million are uninsured) do not have a
parent who has either ESI or non-group
insurance, and thus they have no access to
dependent coverage. As shown in Table 2,
amongtheremaining20.2millionyoung
adults whose parents are covered either by
ESIorbynon-groupinsurance:
•3.44 million are currently uninsured,
•2.42 million are covered by their own
non-group insurance,
•5.55 million are covered by their own
ESI,
•5.73 million are already on their par-
ent’s or spouse’s ESI, and
•3.01 million have some other form
of coverage such as Medicaid or
TRICARE.
9
Available at http://www.whitehouse.gov/omb/circulars/a004/a–4.pdf.
10
The cost estimates are annualize across the years 2011–2013, and reflects a single point estimate of the cost to send out a notice in the first year only.
11
The Departments limited the period covered by the RIA to 2011–2013, because it only has reliable data to make projections over this period due to the fact that in 2014, things will change
drastically when the subsidies and tax credits to offset premium increases and the exchanges are in effect.
12
The estimates in this table reflect the annualized discounted value in 2010 of the additional premium costs for family policies calculated as the product of the newly covered dependents in
each year from 2011–2013 (see below) and an incremental cost per newly-covered person in those years (see below).
2010–22 I.R.B.704June 1, 2010

Table 2.—Young Adults Aged 19–25 by Insurance Status
UninsuredNon-GroupOwn ESI
ESI as a
DependentOtherTotal
Total U.S. Population
Aged 19–256.592.69
6.98
5.757.529.5
All Young Adults in U.S. with a Parent with a Policy by Young Adult Insurance Status
Parents have ESI
3.282.035.325.73
2.9119.27
Parents have non-group
0.160.40
0.23—0.100.88
Subtotal A3.442.425.555.73
3.01
20.15
*Theboldednumbers are potentially affected by the regulation.
Source: MEPS 2004–2006 HC Surveys, controlled to 2010 consistent with the National Health Accounts. Note: Total number
of young adults, age 19–25 is 29.5 million; the 20.15 million in this Table are the subset whose parents have either ESI or
non-group coverage.
Initially, the subset of this group of
young adults that will be affected by these
interim final regulations are those who are
either uninsured (3.44 million) or covered
by individual coverage (2.42 million).
The statute does not require grandfathered
group health plans to offer coverage to
young adults who currently have their own
ESI or an offer of an ESI. For the purposes
of this analysis, it is assumed that all plans
begin 2011 with grandfathered status.
These impacts could change if plans lose
their Grandfathered status.
Of these 5.86 million young adults, as
shown in Table 3, 3.49 million are also un-
likely to switch to their parents’ coverage
because:
•They are already allowed to enroll
in extended dependent coverage for
young adults through their State’s ex-
isting laws, but have chosen not to
(2.61 million). Thirty-seven states
already have requirements concern-
ing dependent coverage in the group
market, although most of these are sub-
stantially more restrictive than those
contained in this regulation.
13
Using
information about State laws obtained
from the Kaiser Family Foundation,
14
aStatebyStateprofileofStatere-
quired coverage based on a person’s
State of residence, age, student status,
and living situation was developed.
This profile was then overlaid on
MEPS data to obtain an estimate of
the number of individuals that would
newly become eligible for coverage
due to these interim final regulations.
•They have an offer of ESI and have
parents who are covered by ESI (0.48
million). For the purposes of this reg-
ulatory impact statement, the Depart-
ments assume that the parents of these
young adults will be in grandfathered
group health plans, and thus that these
young adults will not be affected by the
provisions of these interim final regu-
lations. To the extent that some of the
coverage in which these parents are en-
rolled is not grandfathered, the effect
of these interim final regulations will
be larger than the estimates provided
here.
•Finally, there are 0.40 million young
adults who have non-group coverage
and whose parents have non-group
coverage.Because the parents’
non-group coverage is underwritten,
there is not likely to be any financial
benefit to the family in moving the
young adult onto the parents’ cover-
age, and the Departments assume that
these young adultswill not be affected
by the regulation.
13
Restrictions include requirements for financial dependency, student status, and age limits.
14
As described in Kaiser Family Foundation, Definition of Dependency by Age, 2010, KFF State Health Facts, at http://www.statehealthfacts.org/comparetable.jsp?ind=601&cat=7.
June 1, 20107052010–22 I.R.B.

TABLE 3.—“Uninsured” and “Non-group” Young Adults Unlikely to be Affected by Extending Dependent Coverage to Age 26
UninsuredNon-Group CoverageTotal
1) Young adults potentially covered by parent ESI
due to state law
1.301.312.61
2) Young adults with an offer of ESI whose parents
have ESI
0.310.170.48
3) Young adults with non-group coverage whose
parents have non-group coverage
0.400.40
Subtotal B1.611.883.49
As shown in Table 4, this leaves ap-
proximately 2.37 million young adults
who might be affected by this provision,
or approximately eight percent of the 29.5
million young adults in the age group.
Among the approximately 2.37 million
youngadultswhoareestimatedtobe
potentially affected by this provision, ap-
proximately 1.83 million are currently
uninsured, and 0.55 million are currently
covered by their own non-group coverage.
TABLE 4 .—Youn
g Adults Potentially Affected by Extending Dependent Coverage to Age 26
UninsuredNon-Group Cov
erage
Total
Parents have E
SI
1.67
0.55
2.21
Parents have non-group0.160.16
Total (Subtotal A-Subtotal B)*1.83
0.55
2.37
Source: MEPS 2004–2006 HC Surveys, controlled to 2010 consistent with projections of the National Health Accounts.
*Subtotal A is in Table 2 and Subtotal B is in Table 3.
It is difficult to estimate precisely what
fraction of the 2.37 million young adults
who might potentially be affected by the
provision will actually enroll on their par-
ents’ coverage. A study by Monheit and
Cantor of the early experience in States
that have extended coverage to dependents
suggests that few uninsured children in
these States shift to their parents’ policy.
15
However, data and methodological diffi-
culties inevitably lead to substantial uncer-
tainty about the finding.
The Departments considered two other
points of reference to estimate take-up
rates. One is the work that has analyzed
take-up rates among people made newly
eligible for public coverage by Medic-
aid expansions. These studies suggest
take-up rates in the range of 10–34 per-
cent.
16
However, the populations eligible
for these expansions have different so-
cio-demographic compositions than those
eligible for the dependent coverage pro-
visions covered under these interim final
regulations, and the decision to take-up
Medicaid is clearly different than the deci-
sion to cover a child on a parent’s private
insurance policy. A second point of refer-
ence are estimates from the Kaiser/HRET
Employer Health benefits Survey
17
which
suggest that, depending on the size of the
worker contribution, between 77 percent
and 90 percent of employees accept offers
of family policies. Again, these estimates
would be based on a group that differs
in characteristics from those eligible for
new dependent coverage. These concerns
notwithstanding, the analyses of Medicaid
expansions and employee take-up of em-
ployer sponsored coverage provide useful
points of reference.
Recognizing the uncertainty in the
area, the Departments produced a range
of assumptions concerning take-up rates.
In developing the range of take-up rates,
the Departments assume that these rates
will vary by the following factors: (1)
the young adult’s current health coverage
status (uninsured young adults are less
likely to take advantage of the depen-
dent coverage option than young adults
15
Monheit, A., J. Cantor, et al, “State Policies Expanding Dependent Coverage to Young Adults in Private Health Insurance Plans,” presented at the Academy Health State Health Research
and Policy Interest Group Meeting, Chicago IL, June 27, 2009.
16
Bansak, Cynthia and Steven Raphael. “The Effects of State Policy Design Features on Take-Up and Crowd-out Rates fro the State Children’s Health Insurance Program.” Journal of Policy
Analysis and Management, Vol. 26, No. 1, 149–175. 2006. Find that for the time period 1998–2002 take-up rates for SCHIP were about 10 percent.
Currie, Janet and Jonathan Gruber. “Saving babies:The Efficacy and Cost of Recent Changes in Medicaid Eligibility of Pregnant Women.” The Journal ofPolitical Economy, Vol. 104,
No. 6, Dec. 1996, pp. 1263–1296. Find for Medicaid expansions during the 1979–1992 period the take-up rate for eligible pregnant women was 34 percent.
Cutler, David and Jonathan Gruber. “Does Public Insurance Crowd Out Private Insurance?” The Quarterly Journal of Economics, Vol. 111, No. 2, May 1996, pp. 391–430. Find that for
the Medicaid expansions from 1987–1992 the take-up rate for the uninsured is close to 30 percent, while for pregnant women it was seven percent.
Gruber, Jonathan and Kosali Simon. “Crowd-Out Tenyears Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?” NBERWorking Paper 12858.
January 2007. Find that for the Medicaid expansions during 1996–2002 the take-up rate was 7 percent across all children, but nearly one-third for uninsured children.
17
Found at http://www.kff.org/insurance/snapshot/chcm020707oth.cfm
2010–22 I.R.B.706June 1, 2010

already covered by non-group insurance,
because young adults who have purchased
non-group insurance have shown a strong
preference for coverage, and can almost
always save money and get better cover-
age by switching to their parents’ policy);
(2) the young adult’s health status (young
adults in fair or poor health are more likely
to take advantage of the option than those
in excellent, very good or good health),
and (3) the young adult’s living situation
(those living with their parents are more
likely to take up the option than those not
living with their parents).
The almost fully covered or “high”
take-up rate scenario assumes that re-
gardless of health or insurance status, 95
percent of young adults living at home
and 85 percent of thosenot living at home
would move to dependent coverage. For
the mid-range scenario, the Departments
assume that relative to the high take-up
rate scenario, 90 percent of the uninsured
whose health status was fair or poor health
and50percentofthoseingoodtoex-
cellent health would move to dependent
coverage. In the low take-up rate scenario,
the Departments adjusted the percentages
to 80 percent and 10 percent of the high
take-up rate scenario. In all three sce-
narios, the same assumptions apply to
individuals with non-group policies whose
parents have ESI — 95 percent of those
living at home and 85 percent of those liv-
ing elsewhere would move to dependent
coverage.
In the low take-up rate scenario, the as-
sumptions lead to the result that approxi-
mately 30 percent of eligibles will enroll in
dependent coverage. In the mid-range sce-
nario, they result in an approximate 50 per-
cent take-up rate, and in the high take-up
scenario, they result in an approximate 90
percent take-up rate. The Departments are
uncertain regarding which of these scenar-
ios is most likely but are confident that
they bracket the expected outcome.
Table 5.—Number of Individuals with New Dependent Coverage and Impact on Group Insurance Premiums, 2011–2013
Low EstimateMid-range EstimateHigh Estimate
201120122013201120122013201120122013
Individuals with
New Dependent
Coverage
(millions)0.680.971.081.241.601.652.122.071.98
From Uninsured
(millions)0.190.290.330.650.940.911.641.421.21
Incremental
Premium Cost
Per Individual
Coverage$3,670$3,800$4,000$3,380$3,500$3,690$3,220$3,340$3,510
Impact on
Group Insurance
Premiums (%)0.50.70.70.71.01.01.21.21.1
These take-up rate assumptions are then
applied to the number of potentially af-
fected individuals displayed in Table 3.
The resulting number of individuals with
new dependent coverage is summarized in
Table 5. Under the mid-range take-up rate
assumption, the Departments estimate that
in 2011, 1.24 million young adults will
newly be covered by their parents’ ESI
or non group market policies, of whom
0.65 million were previously uninsured,
and 0.6 million were previously covered
by non-group coverage. The number of in-
dividuals newly covered by their parents’
plans would be 0.7 and 2.12 million under
the high and low take-up rate assumptions
respectively, with 0.2 and 1.64 million of
these individuals being previously unin-
sured. Relative to the individuals covered
under the high take-up rate assumption,
higher proportions of the low- and mid-
range assumption groups are accounted for
by people who previously had non-group
coverage (72 percent and 48 percent re-
spectively in contrast to 23 percent for the
high take-up rate group). This difference
is a result of the Departments’ assumption
for the low- and mid-range take-up rates
that people with non-group coverage will
be more likely than healthy people who
were uninsured to take advantage of the
dependent coverage option.
Under the mid-range take-up rate as-
sumptions, the estimated number of young
adults covered by their parents’ plans in
2012 increases somewhat over the 2011 es-
timate to 1.6 million in total, of whom ap-
proximately 0.9 million would have been
uninsured. The increase in the estimate
for 2012 results from the assumption that
as children reach the age that would have
caused them to be excluded from their
parents’ policy before the implementation
of these interim final regulations, a large
fraction of them now will remain on their
parents’ policy. Similarly, the estimated
number of young adults enrolling in their
parents’ non-group policy increases from
just under 75,000 in 2011 to approximately
100,000 in 2012, and 120,000 in 2013.
4.Benefits
The benefits of these interim final regu-
lations are expected to outweigh the costs
to the regulated community. In the mid-
range take-up rate assumption, the Depart-
ments estimate that in 2011, 0.65 million
June 1, 20107072010–22 I.R.B.

previously uninsured individuals will now
be covered on their parents policies due
to these interim final regulations and 1.24
million individuals total will now be cov-
ered on their parent’s coverage. Expand-
ing coverage options for the 19–25 pop-
ulation should decrease the number unin-
sured, which in turn should decrease the
cost-shifting of uncompensated care onto
those with coverage, increase the receipt
of preventive health care and provide more
timely access to high quality care, result-
ing in a healthier population. In partic-
ular, children with chronic conditions or
other serious health issues will be able to
continue coverage through a parent’s plan
until age 26. Allowing extended depen-
dent coverage also will permit greater job
mobility for this population as their health
coverage will no longer be tied to their own
jobs or student status.
5.Costs and Transfers Associated with
the Rule
Estimates for the incremental annual
premium costs for the newly covered
individuals are developed based on ex-
penditure data from MEPS and vary based
on the take-up rate assumptions. These
incremental costs are lowest for the high
take-up rate assumption since the newly
covered group would contain a relatively
high percentage of individuals whose
health status was good to excellent. Con-
versely, the low take-up rate assumption
results in the highest incremental costs
because a higher percentage of the newly
covered individuals would be those whose
health status was fair to poor. For those en-
rolling in their parents’ ESI, the expected
annual premium cost under the mid-range
take-up rate assumption would be $3,380
in 2011, $3,500 in 2012 and $3,690 in
2013. If these costs were distributed
among all family ESI plans, family pre-
miums would be expected to rise by 0.7
percent in 2011, 1.0 percent in 2012, and
1.0 percent in 2013 due to these interim
final regulations.
18
The comparable incre-
mental costs and premium effects for the
low and high take-up rate assumptions are
summarized in Table 5. To the extent that
these increases are passed on to workers
in the form of higher premiums for all
workers purchasing family policies or in
the form of lower wages for all workers,
there will be a transfer from workers who
do not have newly covered dependents
to those who do. To the extent that these
higher premiums result in lower profits or
higher prices for the employer’s product,
the higher premiums will result in a trans-
fer either from stockholders or consumers.
In addition, to the extent that these in-
terim final regulations result in a decrease
in the number of uninsured, the Depart-
ments expect a reduction in uncompen-
sated care, and a reduction in liability for
those who fund uncompensated care, in-
cluding public programs (primarily Med-
icaid and State and local general revenue
support for public hospitals), as well as the
portion of uncompensated care that is paid
for by the cost shift from private premium
payers. Such effects would lead to lower
premiums for the insured population, both
with or without newly covered children.
Forthesmallnumberofchildren
(75,000 in 2011) enrolling in their par-
ents’ non-group insurance policy under
the mid-range take-up assumption, the
Departments expect estimated annual pre-
mium cost to be $2,360 in 2011, $2,400
in 2012 and $2,480 in 2013. To a large
extent, premiums in the non-group mar-
ket are individually underwritten, and the
Departments expect that most of the pre-
mium cost will be borne by the parents
whoarepurchasingthepolicytowhich
their child is added. If, instead, these costs
were distributed over the entire individual
market (as would be the case in a pure
community-rated market), then individual
premiums would be expected to rise 0.7
percent in 2011, 1.0 percent in 2012, and
1.2 percent in 2013 due to these interim
final regulations. However, the Depart-
ments expect the actual increase across
the entire individual market, if any, will
be much smaller than these estimates, be-
cause they expect that the costs largely
will be borne by the subscribers who are
directly affected rather than distributed
across the entire individual market.
6.Enrollment Opportunity
These interim final regulations provide
an enrollment opportunity for children
excluded from coverage because of age
before the effective date of the rule. The
Departments estimate that this informa-
tion collection request will result in ap-
proximately 105,000,000 notices being
distributed with an hour burden of approx-
imately 1,100,000 hours and cost burden
of approximately $2,010,500. For a dis-
cussion of this enrollment opportunity, see
the Paperwork Reduction Act section later
in this preamble.
7.Regulatory Alternatives
Section 6(a)(3)(C)(iii) of Executive Or-
der 12866 requires an economically sig-
nificant regulation to include an assess-
ment of the costs and benefits of poten-
tially effective and reasonable alternatives
to the planned regulation, and an expla-
nation of why the planned regulatory ac-
tion is preferable to the potential alterna-
tives. The Departments carefully consid-
ered limiting the flexibility of plans and
policies to define who is a child. How-
ever, the Departments concluded, as they
have in other regulatory contexts, that plan
sponsors and issuers should be free to de-
termine whether to cover children or which
children should be covered by their plans
and policies (although they must comply
with other applicable Federal or State law
mandating coverage, such as ERISA sec-
tion 609). Therefore, these interim fi-
nal regulations have not limited a plan’s
or policy’s flexibility to define who is a
child for purposes of the determination of
children to whom coverage must be made
available.
C.Regulatory Flexibility
Act—Department of Labor and
Department of Health and Human
Services
The Regulatory Flexibility Act
(5 U.S.C. 601et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the notice
and comment requirements of section
553(b) of the APA (5 U.S.C. 551et seq.)
and that are likely to have a significant
economic impact on a substantial number
of small entities. Under Section 553(b)
of the APA, a general notice of proposed
rulemaking is not required when an
agency, for good cause, finds that
notice and public comment thereon are
18
For purposes of this regulatory impact analysis, the Departments assume that there would be no effect on premiums for employee-only policies.
2010–22 I.R.B.708June 1, 2010

impracticable, unnecessary, or contrary
to the public interest. These interim final
regulations are exempt from APA, because
the Departments made a good cause
finding that a general notice of proposed
rulemaking is not necessary earlier in this
preamble. Therefore, the RFA does not
apply and the Departments are not required
to either certify that the regulations would
not have a significant economic impact on
a substantial number of small entities or
conduct a regulatory flexibility analysis.
Nevertheless, the Departments care-
fully considered the likely impact of the
regulations on small entities in connection
with their assessment under Executive
Order 12866. Consistent with the policy
of the RFA, the Departments encourage
the public to submit comments that sug-
gest alternative rules that accomplish the
stated purpose of PHS Act section 2714
and minimize the impact on small entities.
D.Special Analyses-Department of the
Treasury
Notwithstanding the determinations of
the Department of Labor and Department
of Health and Human Services, for pur-
poses of the Department of the Treasury, it
has been determined that this Treasury de-
cision is not a significant regulatory action
for purposes of Executive Order 12866.
Therefore, a regulatory assessment is not
required. It has alsobeen determined that
section 553(b) of the APA (5 U.S.C. chap-
ter 5) does not apply to these interim fi-
nal regulations. For the applicability of the
RFA, refer to the Special Analyses section
in the preamble to the cross-referencing
notice of proposed rulemaking published
elsewhere in this issue of the Bulletin. Pur-
suant to section 7805(f) of the Code, these
temporary regulations have been submit-
ted to the Chief Counsel for Advocacy
of the Small BusinessAdministration for
comment on their impact on small busi-
nesses.
E.Paperwork Reduction Act
1.Department of Labor and Department
of Treasury: Affordable Care Act
Enrollment Opportunity Notice Relating
to Extended Dependent Coverage
As part of their continuing efforts to
reduce paperwork and respondent burden,
the Departments conduct a preclearance
consultation program to provide the gen-
eral public and federal agencies with an
opportunity to comment on proposed
and continuing collections of information
in accordance with the Paperwork Re-
duction Act of 1995 (PRA) (44 U.S.C.
3506(c)(2)(A)). This helps to ensure that
requested data can be provided in the de-
sired format, reporting burden (time and
financial resources) is minimized, collec-
tion instruments are clearly understood,
and the impact of collection requirements
on respondents can be properly assessed.
As discussed earlier in this preamble,
prior to the applicability date of PHS Act
section 2714, a child who was covered un-
der a group health plan (or group health
insurance coverage) may have lost eligi-
bility for coverage under the plan due to
age before age 26. Moreover, if a child
was under age 26 when a parent first be-
came eligible for coverage, but older than
the age at which the plan stopped covering
children, the child would not have become
eligible for coverage. When the provisions
of PHS Act section 2714 become applica-
ble to the plan (or coverage), the plan or
coverage can no longer exclude coverage
for the individual until age 26.
Accordingly, these interim final regu-
lations require plans to provide a notice
of an enrollment opportunity to individu-
als whose coverage ended, or who were
denied coverage (or was not eligible for
coverage) under a group health plan or
health insurance coverage because, under
the terms of the plan or coverage, the avail-
ability of dependent coverage of children
ended before the attainment of age 26. The
enrollment opportunity must continue for
at least 30 days, regardless of whether the
plan or coverage offers an open enrollment
period and regardless of when any open
enrollment period might otherwise occur.
This enrollment opportunity must be pre-
sented not later than the first day of the first
plan year (in the individual market, pol-
icy year) beginning on or after September
23, 2010 (which is the applicability date
of PHS Act section 2714). Coverage must
begin not later than the first day of the first
plan year (in the individual market, policy
year) beginning on or after September 23,
2010.
19
The Affordable Care Act dependent
coverage enrollment opportunity notice is
an information collection request (ICR)
subject to the PRA. Currently, the De-
partments are soliciting public comments
for 60 days concerning these disclosures.
The Departments have submitted a copy
of these interim final regulations to OMB
in accordance with 44 U.S.C. 3507(d) for
review of the information collections. The
Departments and OMB are particularly
interested in comments that:
•Evaluate whether the collection of in-
formation is necessary for the proper
performance of the functions of the
agency, including whether the infor-
mation will have practical utility;
•Evaluate the accuracy of the agency’s
estimate of the burden of the collection
of information, including the validity
of the methodology and assumptions
used;
•Enhance the quality, utility, and clarity
of the information to be collected; and
•Minimize the burden of the collection
of information on those who are to re-
spond, including through the use of
appropriate automated, electronic, me-
chanical, or other technological collec-
tion techniques or other forms of in-
formation technology, for example, by
permitting electronic submission of re-
sponses.
Comments should be sent to the Office
of Information and Regulatory Affairs,
Attention: Desk Officer for the Employee
Benefits Security Administration either
by fax to (202) 395–7285 or by email to
oira_submission@omb.eop.gov.Acopy
oftheICRmaybeobtainedbycontact-
ing the PRA addressee: G. Christopher
Cosby, Office of Policy and Research,
U.S. Department of Labor, Employee
Benefits Security Administration, 200
Constitution Avenue, NW, Room N–5718,
Washington, DC 20210. Telephone:
(202) 693–8410; Fax: (202) 219–4745.
These are not toll-free numbers. E-mail:
19
Any individual enrolling in coverage pursuant to this enrollment right must be treated as a special enrollee, as provided under HIPAA portability rules. Accordingly, the individual must be
offered all the benefit packages available to similarly situated individuals who did not lose coverage by reason of cessation of dependent status. The individual also cannot be required to pay
more for coverage than similarly situated individuals who didnot lose coverage by reason of cessation of dependent status.
June 1, 20107092010–22 I.R.B.

ebsa.opr@dol.gov. ICRs submitted to
OMB also are available at reginfo.gov
(http://www.reginfo.gov/public/do/PRA-
Main).
The Departments assume that
2,800,000 ERISA covered plans will
send the enrollment opportunity notice
to all 79,573,000 employees eligible for
group health insurance coverage. The
Departments estimate that preparing the
enrollment notice will require 30 minutes
of legal professional time at a labor rate of
$119 per hour
20
and one minute of clerical
time at $26 per hour per paper notice to
distribute the notices.
21
This results in an
hour burden of nearly 822,000 hours and
an associated equivalent cost of nearly
$21,513,000.
The Departments estimate that the cost
burden associated with distributing the
approximately 79,573,000 notices will
be approximately $2,467,000 based on
one minute of clerical time, and $.05 per
page for material and printing costs. The
Departments assumed that 38 percent of
the notices would be sent electronically.
22
In addition, plans can send these notices
with other plan documents, such as open
enrollment materials. Therefore, the De-
partments have not included postage costs
in this estimate. The Departments note
that persons are not required to respond
to, and generally are not subject to any
penalty for failing to comply with, an ICR
unless the ICR has a valid OMB control
number.
23
These paperwork burden estimates are
summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security
Administration, Department of Labor; In-
ternal Revenue Service, U.S. Department
of the Treasury.
Title: Affordable Care Act Enrollment
Opportunity Notice Relating to Extended
Dependent Coverage.
OMB Number:1210–0139;
1545–2172.
Affected Public: Business or other for-
profit; not-for-profit institutions.
Total Respondents:2,800,000.
Total Responses:79,573,000.
Frequency of Response:One-time.
Estimated Total Annual Burden Hours:
411,000 hours (Employee Benefits Secu-
rity Administration); 411,000 hours (Inter-
nal Revenue Service).
Estimated Total Annual Burden Cost:
$1,233,500 (Employee Benefits Secu-
rity Administration); $1,233,500 (Internal
Revenue Service).
2.Department of Health and Human
Services: Affordable Care Act Enrollment
Opportunity Notice Relating to Extended
Dependent Coverage
We are soliciting public comment on
the following sections of this document
that contain information collection re-
quirements (ICR) regarding the Affordable
Care Act — ICR Relating to Enrollment
Opportunity Notice — Dependent Cover-
age. As discussed earlier in this preamble,
the Affordable Care Act and these interim
final regulations require issuers in the in-
dividual market and group health plans
sponsored by State and local governments
to notify participants regarding an enroll-
ment opportunity related to the extension
of dependent coverage. Prior to the ap-
plicability date of PHS Act section 2714,
a child who was covered under a group
health plan (or group health insurance
coverage) as a dependent may have lost
eligibility for coverage under the plan due
to age before age 26. Moreover, if, when a
parent first became eligible for coverage,
a child was under age 26 but older than
the age at which the plan stopped covering
children, the child would not have become
eligible for coverage. When the provi-
sions of PHS Act section 2714 become
applicable to the plan (or coverage), the
plan or coverage can no longer exclude
coverage for the individual until age 26.
Accordingly, these interim final regula-
tions require issuers in the individual insur-
ance market and group health plans spon-
soredbyStateandlocalgovernmentsto
provide a notice of an enrollment opportu-
nity to individuals whose coverage ended,
or who was denied coverage (or was not
eligible for coverage) under a group health
plan or group health insurance coverage
because, under the terms of the plan or cov-
erage, the availability of dependent cov-
erage of children ended before the attain-
ment of age 26. The enrollment opportu-
nity must continue for at least 30 days, re-
gardless of whether the plan or coverage
offers an open enrollment period and re-
gardless of when any open enrollment pe-
riod might otherwise occur. This enroll-
ment opportunity must be presented not
later than the first day of the first plan year
(in the individual market, policy year) be-
ginning on or after September 23, 2010
(which is the applicability date of PHS Act
section 2714). Coverage must begin not
later than the first day of the first plan year
(in the individual market, policy year) be-
ginning on or after September 23, 2010.
24
The Department estimates that 126,000
State and local governmental plans would
have to send 19,627,000 notices to eligible
employees and 490 insurers in the indi-
vidual market would have to send approx-
imately 5,444,000 notices to individuals
with policies covering dependents.
25
For
purposes of this estimate, the Department
assumesthatitwilltakealegalprofes-
20
Hourly wage estimates are based on data from the Bureau of Labor Statistics Occupational Employment Survey (May 2008) and the Bureau of Labor Statistics Employment Cost Index (June
2009). All hourly wage rates include wages and benefits. Clerical wage and benefits estimates are based on metropolitan wage rates for executive secretaries and administrative assistants.
Legal professional wage and benefits estimates are based on metropolitan wage rates for lawyers.
21
While plans could prepare their own notice, the Departments assume that the notices will be prepared by service providers. The Departments have previously estimated that there are
630 health insurers (460 providing coverage in the group market, and 490 providing coverage in the individual market.). These estimates are from NAIC2007 financial statements data
and the California Department of Managed Healthcare (2009), at http://wpso.dmhc.ca.gov/hpsearch/viewall.aspx. Because the hour and cost burdenis shared between the Departments of
Labor/Treasury and the Department of Health and Human Services, the burdento prepare the notices is calculated using half the number of insurers (315).
22
For purposes of this burden estimate, the Departments assume that 38 percent of the disclosures will be provided through electronic means in accordance with the Department of Labor’s
standards for electronic communication of required information provided under 29 CFR 2520.104b–1(c).
23
5 CFR 1320.1 through 1320.18.
24
Any individual enrolling in coverage pursuant to this enrollment right must be treated as a special enrollee, as provided under HIPAA portability rules. Accordingly, the individual must be
offered all the benefit packages available to similarly situated individuals who did not lose coverage by reason of cessation of dependent status. The individual also cannot be required to pay
more for coverage than similarly situated individuals who didnot lose coverage by reason of cessation of dependent status.
25
The number of individual insurance notices was based on the number of individual policy holders with dependents on that policy according to the 2009 March Current Population Survey
(CPS).
2010–22 I.R.B.710June 1, 2010

sional, on average, 30 minutes to prepare
the notice at a labor rate of $119 per hour
26
,
and one minute, on average, of a clerical
professional’s time at $26 per hour to copy
and mail the notice.
27
While plans could
prepare their own notice, the Department
assumes that the notices will be prepared
by service providers. The Department has
previously estimated that there are 630
health insurers
28
(460 providing coverage
in the group market, and 490 providing
coverage in the individual market.). Be-
cause the hour and cost burden is shared
among the Departments of Labor/Treasury
and the Department of Health and Human
Services, the burden to prepare the notices
is calculated using half the number of
insurers (315). The Department assumes
that 38 percent of the notices would be sent
electronically.
29
Notices that are sent elec-
tronically do not require any of the clerical
worker’s time to mail the notice. This
resultsinanhourburdenofapproximately
259,000 hours and an associated equiva-
lent cost of about $6,791,000 to prepare
and distribute 25,071,000 notices. The
Department estimates that the cost burden
associated with distributing the notices
will be approximately $777,000.
30
The
Department assumes that 38 percent of
the notices would be sent electronically.
31
In addition, plans and issuers can send
these notices with other plan documents
(for example, during open enrollment for
the government plans, or other commu-
nication at reenrollment in the individual
market). Therefore, the Department did
not include postage costs in this estimate.
The Department notes that persons are not
required to respond to, and generally are
not subject to any penalty for failing to
comply with, an ICR unless the ICR has a
valid OMB control number.
32
These paperwork burden estimates are
summarized as follows:
Type of Review: New collection.
Agency: Department of Health and Hu-
man Services.
Title: Notice of Special Enrollment Op-
portunity under the Affordable Care Act
Relating to Dependent Coverage.
OMB Number: 0938–1089.
Affected Public: Business; State, Local,
or Tribal Governments.
Respondents: 126,000.
Responses: 25,071,000.
Frequency of Response:One-time.
Estimated Total Annual Burden Hours:
259,000 hours.
Estimated Total Annual Burden Cost:
$777,000.
If you comment on this information col-
lection and recordkeeping requirements,
please do either of the following:
1. Submit your comments electroni-
cally as specified in the ADDRESSES sec-
tion of this proposed rule; or
2. Submit your comments to the Office
of Information and Regulatory Affairs, Of-
fice of Management and Budget,
Attention:CMS Desk Officer,
4140–IFC
Fax: (202) 395–6974; or
Email:OIRA_submis-
sion@omb.eop.gov
F.Congressional Review Act
These interim final regulations are
subject to the Congressional Review Act
provisions of the Small Business Regula-
tory Enforcement Fairness Act of 1996 (5
U.S.C. 801et seq.) and have been trans-
mitted to Congress and the Comptroller
General for review.
G.Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of
1995 (Public Law 104–4) requires agen-
cies to prepare severalanalytic statements
before proposing any rules that may re-
sult in annual expenditures of $100 mil-
lion (as adjusted for inflation) by State, lo-
cal and tribal governments or the private
sector. These interim final regulations are
not subject to the Unfunded Mandates Re-
form Act, because they are being issued
as an interim final regulation. However,
consistent with the policy embodied in the
Unfunded Mandates Reform Act, these in-
terim final regulations have been designed
to be the least burdensome alternative for
State, local and tribal governments, and the
private sector, while achieving the objec-
tives of the Affordable Care Act.
H.Federalism Statement—Department
of Labor and Department of Health and
Human Services
Executive Order 13132 outlines fun-
damental principles of federalism, and
requires the adherence to specific criteria
by Federal agencies in the process of their
formulation and implementation of poli-
cies that have ’’substantial direct effects’’
on the States, the relationship between the
national government and States, or on the
distribution of power and responsibilities
among the various levels of government.
Federal agencies promulgating regulations
that have these federalism implications
must consult with Stateand local officials,
and describe the extent of their consulta-
tion and the nature of the concerns of State
and local officials in the preamble to the
regulation.
In the Departments’ view, these interim
final regulations have federalism impli-
cations, because they have direct effects
on the States, the relationship between
the national government and States, or on
the distribution of power and responsibili-
ties among various levels of government.
However, in the Departments’ view, the
federalism implications of these interim fi-
nal regulations are substantially mitigated
because, with respect to health insurance
issuers, the Departments expect that the
majority of States will enact laws or take
other appropriate action resulting in their
meeting or exceeding the Federal stan-
dard.
In general, through section 514, ERISA
supersedes State laws to the extent that
they relate to any covered employee ben-
efit plan, and preserves State laws that
regulate insurance, banking, or securities.
While ERISA prohibits States from regu-
26
Estimates of labor rates include wages, other benefits, and overhead based on the National Occupational Employment Survey (May 2008, Bureau of LaborStatistics) and the Employment
Cost Index June 2009, Bureau of Labor Statistics).
27
These estimates are from NAIC 2007 financial statements data and the California Department of Managed Healthcare (2009), at http://wpso.dmhc.ca.gov/hpsearch/viewall.aspx.
28
For purposes of this burden estimate, the Department assumes that 38 percent of the disclosures will be provided through electronic means.
29
This estimate is based on an average document size of one page and $.05 cents per page for material and printing costs.
30
For purposes of this burden estimate, the Department assumes that 38 percent of the disclosures will be provided through electronic means.
31
5 CFR 1320.1 through 1320.18.
June 1, 20107112010–22 I.R.B.

lating a plan as an insurance or investment
company or bank, the preemption pro-
visions of ERISA section 731 and PHS
Act section 2724 (implemented in 29
CFR 2590.731(a) and 45 CFR 146.143(a))
apply so that the HIPAA requirements (in-
cluding those of the Affordable Care Act)
are not to be ’’construed to supersede any
provision of State law which establishes,
implements, or continues in effect any
standard or requirement solely relating
to health insurance issuers in connection
with group health insurance coverage ex-
cept to the extent that such standard or
requirement prevents the application of a
requirement’’ of a federal standard. The
conference report accompanying HIPAA
indicates that this is intended to be the
’’narrowest’’ preemption of State laws.
(See House Conf. Rep. No. 104–736, at
205, reprinted in 1996 U.S. Code Cong. &
Admin. News 2018.) States may continue
to apply State law requirements except to
the extent that such requirements prevent
the application of the Affordable Care
Act requirements that are the subject of
this rulemaking. State insurance laws
that are more stringent than the Federal
requirements are unlikely to ’’prevent the
application of’’ the Affordable Care Act,
and be preempted. Accordingly, States
have significant latitude to impose require-
ments on health insurance issuers that are
more restrictive than the Federal law.
In compliance with the requirement of
Executive Order 13132 that agencies ex-
amine closely any policies that may have
federalism implications or limit the policy
making discretion of the States, the De-
partments have engaged in efforts to con-
sultwithandworkcooperativelywithaf-
fected State and local officials, including
attending conferences of the National As-
sociation of Insurance Commissioners and
consulting with State insurance officials on
an individual basis. It is expected that the
Departments will act in a similar fashion in
enforcing the Affordable Care Act require-
ments. Throughout the process of devel-
oping these interim final regulations, to the
extent feasible within the specific preemp-
tion provisions of HIPAA as it applies to
the Affordable Care Act, the Departments
have attempted to balance the States’ in-
terests in regulating health insurance is-
suers, and Congress’ intent to provide uni-
form minimum protections to consumers
in every State. By doing so, it is the De-
partments’ view that they have complied
with the requirements of Executive Order
13132.
Pursuant to the requirements set forth
in section 8(a) of Executive Order 13132,
and by the signatures affixed to these reg-
ulations, the Departments certify that the
Employee Benefits Security Administra-
tion and the Office of Consumer Informa-
tion and Insurance Oversight have com-
plied with the requirements of Executive
Order 13132 for the attached regulation in
a meaningful and timely manner.
V. Statutory Authority
The Department of the Treasury tem-
porary regulations are adopted pursuant to
the authority contained in sections 7805
and 9833 of the Code.
The Department of Labor interim final
regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1027,
1059, 1135, 1161–1168, 1169, 1181–1183,
1181 note, 1185, 1185a, 1185b, 1191,
1191a, 1191b, and 1191c; sec. 101(g),
Pub. L.104–191, 110 Stat. 1936; sec.
401(b), Pub. L. 105–200, 112 Stat. 645
(42 U.S.C. 651 note); sec. 512(d), Pub. L.
110–343, 122 Stat. 3881; sec. 1001, 1201,
and 1562(e), Pub. L. 111–148, 124 Stat.
119, as amended by Pub. L. 111–152, 124
Stat. 1029; Secretary of Labor’s Order
6–2009, 74 FR 21524 (May 7, 2009).
The Department of Health and Hu-
man Services interim final regulations are
adopted pursuant to the authority con-
tained in sections 2701 through 2763,
2791, and 2792 of the PHS Act (42 USC
300gg through 300gg–63, 300gg–91, and
300gg–92), as amended.
*****
Health care, Health insurance, Report-
ing and recordkeeping requirements, and
State regulation of health insurance.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement,
Internal Revenue Service.
Approved May 7, 2010.
Michael F. Mundaca,
Acting Secretary
oftheTreasury(TaxPolicy).
Signed this6
th
day ofMay, 2010.
Phyllis C. Borzi
Assistant Secretary
Employee Benefits Security Administration
Department of Labor
Approved:May 4, 2010
Jay Angoff,
Director,
Office of Consumer Information and Insurance Oversight.
Approved:May 7, 2010
Kathleen Sebelius,
Secretary.
2010–22 I.R.B.712June 1, 2010

Internal Revenue Service
26 CFR Chapter 1
Accordingly, 26 CFR Parts 54 and 602
are amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation for
part 54 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 54.9815–2714T is
added to read as follows:
§54.9815–2714T Eligibility of children
untilatleastage26(temporary).
(a)In general—(1) A group health
plan, or a health insurance issuer offer-
ing group health insurance coverage, that
makes available dependent coverage of
children must make such coverage avail-
able for children until attainment of 26
years of age.
(2) The rule of this paragraph (a) is il-
lustrated by the following example:
Example.(i)Facts. For the plan year
beginning January 1, 2011, a group health
plan provides health coverage for employ-
ees, employees’ spouses, and employees’
children until the child turns 26. On the
birthday of a child of an employee, July 17,
2011, the child turns 26. The last day the
plan covers the child is July 16, 2011.
(ii)Conclusion.InthisExample,the
plan satisfies the requirement of this para-
graph (a) with respect to the child.
(b)Restrictions on plan definition of de-
pendent. With respect to a child who has
not attained age 26, a plan or issuer may
not define dependent for purposes of eligi-
bility for dependent coverage of children
other than in terms of a relationship be-
tween a child and the participant. Thus, for
example, a plan or issuer may not deny or
restrict coverage for a child who has not at-
tained age 26 based on the presence or ab-
sence of the child’s financial dependency
(upon the participant or any other person),
residency with the participant or with any
other person, student status, employment,
or any combination of those factors. In ad-
dition, a plan or issuer may not deny or re-
strict coverage of a child based on eligi-
bility for other coverage, except that para-
graph (g) of this section provides a special
rule for plan years beginning before Jan-
uary 1, 2014 for grandfathered health plans
that are group health plans. (Other require-
ments of Federal or State law, including
section 609 of ERISA or section 1908 of
the Social Security Act, may mandate cov-
erage of certain children.)
(c)Coverage of grandchildren not re-
quired. Nothing in this section requires a
plan or issuer to make coverage available
for the child of a child receiving dependent
coverage.
(d)Uniformity irrespective of age.The
terms of the plan or health insurance cover-
age providing dependent coverage of chil-
dren cannot vary based on age (except for
children who are age 26 or older).
(e)Examples. The rules of paragraph
(d) of this section are illustrated by the
following examples:
Example 1.(i)Facts. A group health plan offers a
choice of self-only or family health coverage. Depen-
dent coverage is provided under family health cover-
age for children of participants who have not attained
age 26. The plan imposes an additional premium sur-
charge for children who are older than age 18.
(ii)Conclusion. In thisExample 1, the plan vio-
lates the requirement of paragraph (d) of this section
because the plan varies the terms for dependent cov-
erage of children based on age.
Example 2.(i)Facts. A group health plan offers a
choice among the following tiers of health coverage:
self-only, self-plus-one, self-plus-two, and self-plus-
three-or-more. The cost of coverage increases based
on the number of covered individuals. The plan pro-
vides dependent coverage of children who have not
attained age 26.
(ii)Conclusion.InthisExample 2, the plan does
not violate the requirement of paragraph (d) of this
section that the terms of dependent coverage for chil-
dren not vary based on age. Although the cost of cov-
erage increases for tiers with more covered individu-
als, the increase applies without regard to the age of
any child.
Example 3.(i)Facts. A group health plan offers
two benefit packages — an HMO option and an in-
demnity option. Dependent coverage is provided for
children of participants who have not attained age 26.
The plan limits children who are older than age 18 to
the HMO option.
(ii)Conclusion. In thisExample 3, the plan vio-
lates the requirement of paragraph (d) of this section
because the plan, by limiting children who are older
than age 18 to the HMO option, varies the terms for
dependent coverage of children based on age.
(f)Transitional rules for individuals
whose coverage ended by reason of reach-
ing a dependent eligibility threshold—(1)
In general. The relief provided in the tran-
sitional rules of this paragraph (f) applies
with respect to any child—
(i) Whose coverage ended, or who was
denied coverage (or was not eligible for
coverage) under a group health plan or
group health insurance coverage because,
under the terms of the plan or coverage, the
availability of dependent coverage of chil-
dren ended before the attainment of age 26
(which, under this section, is no longer per-
missible); and
(ii) Who becomes eligible (or is re-
quired to become eligible) for coverage
under a group health plan or group health
insurance coverage on the first day of
the first plan year beginning on or after
September 23, 2010 by reason of the ap-
plication of this section.
(2)Opportunity to enroll required.(i)If
a group health plan, or group health insur-
ance coverage, in which a child described
in paragraph (f)(1) of this section is eli-
gible to enroll (or is required to become
eligible to enroll) is the plan or coverage
in which the child’s coverage ended (or
did not begin) for the reasons described in
paragraph (f)(1)(i) of this section, and if
the plan, or the issuer of such coverage,
is subject to the requirements of this sec-
tion, the plan and the issuer are required
to give the child an opportunity to enroll
that continues for at least 30 days (includ-
ing written notice of the opportunity to en-
roll). This opportunity (including the writ-
ten notice) must be provided beginning not
later than the first day of the first plan year
beginning on or after September 23, 2010.
(ii) The written notice must include a
statement that children whose coverage
ended, or who were denied coverage (or
were not eligible for coverage), because
the availability of dependent coverage of
children ended before attainment of age
26 are eligible to enroll in the plan or
coverage. The notice may be provided to
an employee on behalf of the employee’s
child. In addition, the notice may be in-
cluded with other enrollment materials that
a plan distributes to employees, provided
the statement is prominent. If a notice
satisfying the requirements of this para-
graph (f)(2) is provided to an employee
whose child is entitled to an enrollment
opportunity under this paragraph (f), the
obligation to provide the notice of enroll-
ment opportunity under this paragraph
(f)(2) with respect to that child is satisfied
for both the plan and the issuer.
(3)Effective date of coverage.Inthe
case of an individual who enrolls under
paragraph (f)(2) of this section, coverage
must take effect not later than the first day
of the first plan year beginning on or after
September 23, 2010.
June 1, 20107132010–22 I.R.B.

(4)Treatment of enrollees in a group
health plan. Any child enrolling in a group
health plan pursuant to paragraph (f)(2) of
this section must be treated as if the child
were a special enrollee, as provided un-
der the rules of §54.9801–6(d). Accord-
ingly, the child (and, if the child would not
be a participant once enrolled in the plan,
the participant through whom the child is
otherwise eligible for coverage under the
plan) must be offered all the benefit pack-
ages available to similarly situated indi-
viduals who did not lose coverage by rea-
son of cessation of dependent status. For
this purpose, any difference in benefits
or cost-sharing requirements constitutes a
different benefit package. The child also
cannot be required to pay more for cover-
age than similarly situated individuals who
did not lose coverage by reason of cessa-
tion of dependent status.
(5)Examples. Therulesofthispara-
graph (f) are illustrated by the following
examples:
Example 1.(i)Facts. Employer Y maintains a
group health plan with a calendar year plan year. The
plan has a single benefit package. For the 2010 plan
year, the plan allows children of employees to be cov-
ered under the plan until age 19, or until age 23 for
children who are full-time students. Individual B,
an employee of Y, and Individual C, B’s child and a
full-time student, were enrolled in Y’s group health
plan at the beginning of the2010planyear.OnJune
10, 2010, C turns 23 years old and loses dependent
coverage under Y’s plan. On or before January 1,
2011, Y’s group health plan gives B written notice
that individuals who lost coverage by reason of ceas-
ing to be a dependent before attainment of age 26 are
eligible to enroll in the plan, and that individuals may
request enrollment for such children through Febru-
ary 14, 2011 with enrollment effective retroactively
to January 1, 2011.
(ii)Conclusion. In thisExample 1, the plan has
complied with the requirements of this paragraph (f)
by providing an enrollment opportunity to C that lasts
at least 30 days.
Example 2.(i)Facts. Employer Z maintains a
group health plan with a plan year beginning October
1 and ending September 30. Prior to October 1, 2010,
the group health plan allows children of employees to
be covered under the plan until age 22. Individual D,
an employee of Z, and Individual E, D’s child, are
enrolled in family coverage under Z’s group health
plan for the plan year beginning on October 1, 2008.
On May 1, 2009, E turns 22 years old and ceases to
be eligible as a dependent under Z’s plan and loses
coverage. D drops coverage but remains an employee
of Z.
(ii)Conclusion.InthisExample 2, not later than
October 1, 2010, the plan must provide D and E an
opportunity to enroll (including written notice of an
opportunity to enroll) that continues for at least 30
days, with enrollment effective not later than October
1, 2010.
Example 3.(i)Facts. Same facts asExample
2, except that D did not drop coverage. Instead, D
switched to a lower-cost benefit package option.
(ii)Conclusion.InthisExample 3, not later than
October 1, 2010, the plan must provide D and E an
opportunity to enroll in any benefit package available
to similarly situated individuals who enroll when first
eligible.
Example 4.(i)Facts. Same facts asExample 2,
except that E elected COBRAcontinuation coverage.
(ii)Conclusion.InthisExample 4, not later than
October 1, 2010, the plan must provide D and E an op-
portunity to enroll other than as a COBRA qualified
beneficiary (and must provide, by that date, written
notice of the opportunity to enroll) that continues for
at least 30 days, with enrollment effective not later
than October 1, 2010.
Example 5. (i)Facts. Employer X maintains
a group health plan with a calendar year plan year.
Prior to 2011, the plan allows children of employees
to be covered under the plan until the child attains age
22. During the 2009 plan year, an individual with a
22-year old child joins the plan; the child is denied
coverage because the child is 22.
(ii)Conclusion. In thisExample 5, notwithstand-
ing that the child was not previously covered under
the plan, the plan must provide the child, not later
than January 1, 2011, an opportunity to enroll (in-
cluding written notice to the employee of an oppor-
tunity to enroll the child) that continues for at least
30 days, with enrollment effective not later than Jan-
uary 1, 2011.
(g)Special rule for grandfathered
group health plans—(1) For plan years
beginning before January 1, 2014, a group
health plan that qualifies as a grandfa-
thered health plan under section 1251 of
the Patient Protection and Affordable Care
Act and that makes available dependent
coverage of children may exclude an adult
child who has not attained age 26 from
coverage only if the adult child is eligible
to enroll in an eligible employer-spon-
sored health plan (as defined in section
5000A(f)(2)) other than a group health
plan of a parent.
(2) For plan years beginning on or after
January 1, 2014, a group health plan that
qualifies as a grandfathered health plan un-
der section 1251 of the Patient Protection
and Affordable Care Act must comply with
the requirements of paragraphs (a) through
(f) of this section.
(h)Applicability date. The provisions
of this section apply for plan years begin-
ning on or after September 23, 2010.
(i)Expiration date. This section expires
on or before May 13, 2013.
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 4. In §602.101, paragraph (b) is
amended by adding the following entry in
numerical order to the table:
§602.101 OMB Control numbers.
*****
(b) * * *
CFR part or section where
Identified and described
Current OMB
control No.
*****
54.9815–2714T
...........................................................
1545–2172
*****
(Filed by the Office of the Federal Register on May 10, 2010,
4:15 p.m., and published in the issue of the Federal Register
for Ma
y 13, 2010, 75 F.R. 27121)
2010–22 I.R.B.714June 1, 2010

Part III. Administrative, Procedural, and Miscellaneous
Definition of Foreign
Partnership — Sections
7701(a) and 7805
Notice 2010–41
SECTION 1. OVERVIEW
The Treasury Department and Internal
Revenue Service (IRS) intend to issue reg-
ulations that will classify certain domes-
tic partnerships as foreign for purposes of
identifying the United States shareholders
(as defined in § 951(b) of the Internal Rev-
enue Code (Code)) of a controlled foreign
corporation (as defined in § 957(a)) that
are required to include in gross income the
amounts specified under § 951(a) of such
controlled foreign corporation. The regu-
lations to be issued pursuant to this notice
shall apply to taxable years of a domes-
tic partnership ending on or after May 14,
2010.
SECTION 2. TRANSACTION AT
ISSUE
On December 29, 2008, the Trea-
sury Department and the IRS issued
Notice 2009–7, 2009–3 I.R.B. 312, iden-
tifying the following transaction (and
substantially similar transactions) as a
transaction of interest for purposes of
§ 1.6011–4(b)(6) and §§ 6111 and 6112
of the Code. A United States taxpayer
(Taxpayer) wholly owns two controlled
foreign corporations (CFC1 and CFC2),
each of which owns 50 percent of another
controlled foreign corporation (CFC3)
through a domestic partnership. CFC3 has
amounts described in § 951(a)(1). Tax-
payer takes the position that it does not
have an income inclusion under § 951(a)
with respect to CFC3 because the domes-
tic partnership is the first United States
person in the chain of ownership of CFC3.
As stated in Notice 2009–7, the Treasury
Department and IRS believe that Tax-
payer’s position is contrary to the purpose
and intent of § 951 of the Code.
SECTION 3. BACKGROUND
Section 951(a) provides that if a foreign
corporation is a CFC for an uninterrupted
period of 30 days or more during any tax-
able year, then each United States share-
holder (as defined in § 951(b)) of such
corporation that owns, within the mean-
ing of § 958(a), stock in the corporation
on the last day in such year on which it
is a CFC must include in gross income its
pro rata share of the corporation’s subpart
F income (as defined in § 952) as well
as any amount determined under § 956
with respect to such shareholder. See also
§ 951(a)(1)(A)(ii) and (iii) for other re-
quired inclusions.
Section 951(b) defines a United States
shareholder, with respect to any foreign
corporation, as a United States person (as
defined in § 957(c)) that owns (within the
meaning of § 958(a)) or is considered as
owning under § 958(b), 10 percent or more
of the total combined voting power of all
classes of stock entitled to vote of the for-
eign corporation.
With certain modifications, § 957(c) de-
fines a United States person by reference
to § 7701(a)(30). Section 7701(a)(30)(B)
defines a United States person to include a
domestic partnership. Section 7701(a)(5)
defines the term foreign when applied to a
corporation or partnership as a corporation
or partnership that is not domestic. Sec-
tion 7701(a)(4) provides that the term do-
mestic when applied to a corporation or
partnership means created or organized in
the United States or under the law of the
United States or of any State unless, in the
case of a partnership, the Secretary pro-
vides otherwise by regulations. However,
§ 7701(a) provides that any general defini-
tion included therein does not apply where
such definition is manifestly incompatible
with the intent of the relevant Code provi-
sion.
SECTION 4. REGULATIONS
CONCERNING THE DEFINITION OF
A FOREIGN PARTNERSHIP UNDER
SECTION 7701
If the general definition of a
United States person provided by
§ 7701(a)(30)(B) (which incorporates the
general definition of a domestic partner-
ship under § 7701(a)(4)) applies to the
facts described above in Section 2 (and in
Notice 2009–7), the domestic partnership
is the United States shareholder required
to include in gross income the amounts
determined under § 951(a) with respect
to CFC3. However, the domestic partner-
ship’s gross income inclusion may have
little or no tax consequences, depending on
the treatment of each partner’s (CFC1 and
CFC2) distributive share of such income.
As stated in Notice 2009–7, the Treasury
Department and the IRS believe that the
Taxpayer’s position in the transaction de-
scribed therein is contrary to the purpose
and intent of § 951. Therefore, consistent
with § 7701(a), the Treasury Department
and the IRS have determined that the gen-
eral definition of a domestic partnership
under § 7701(a)(4), in the case of certain
partnerships owned wholly or partly by
foreign corporations, is manifestly incom-
patible with the intent of § 951.
SECTION 4.01. DOMESTIC
PARTNERSHIP TREATED AS
FOREIGN FOR CERTAIN PURPOSES
The Treasury Department and the IRS
intend to issue regulations that, under
certain circumstances, will classify an
otherwise domestic partnership as for-
eign solely for purposes of identifying
the United States shareholders of a CFC
required to include in gross income the
amounts determined under § 951(a) with
respect to such CFC. Specifically, the reg-
ulations to be issued shall treat a domestic
partnership as foreign for this purpose if
the following conditions are satisfied:
1. The partnership is a United States
shareholder of a foreign corporation
that is a CFC (within the meaning of
§ 957(a) or 953(c)); and
2. If the partnership were treated as for-
eign,
a. That foreign corporation would
continue to be a CFC; and
b. At least one United States share-
holder of the CFC,
i. Would be treated under
§ 958(a) as indirectly own-
ing stock of the CFC owned
by the partnership that is in-
directly owned by a foreign
corporation; and
ii. Would be required to include
an amount in gross income
June 1, 20107152010–22 I.R.B.

under § 951(a) with respect
to the CFC.
The regulations to be issued will pro-
vide similar results in the case of tiered-
partnership structures.
SECTION 4.02. SCOPE OF
TREATMENT AS A FOREIGN
PARTNERSHIP
The regulations to be issued shall clas-
sify a domestic partnership described in
§ 4.01 of this notice as foreign solely for
purposes of identifying the United States
shareholders of a CFC required to include
in gross income the amounts determined
under § 951(a) with respect to such CFC.
Therefore, a domestic partnership to which
the regulations to be issued apply shall
continue to be classified as domestic for all
other purposes of the Code. For example,
the regulations to be issued shall not oth-
erwise affect the classification of the part-
nership as domestic for purposes of deter-
mining the source of income and expenses,
the definition of “United States property”
under § 956(c)(1)(C), and the application
of § 1248(a). Similarly, the partnership re-
mains a domestic partnership for purposes
of determining its information reporting
obligations, including the filing of a Form
1065,U.S. Return of Partnership Income,
and Form 5471,Information Return of U.S.
Persons With Respect To Certain Foreign
Corporations.
The following demonstrates the ap-
plication of the regulations described in
this Notice to the facts described above
in Section 2. Under the regulations to
be issued, the domestic partnership de-
scribed in Notice 2009–7 and in Section 2
above would be treated as foreign because
the partnership would be a United States
shareholder of a foreign corporation that
is a CFC (CFC3) if the regulations to be
issued did not apply; and if the domestic
partnership were treated as foreign, (1)
CFC3 would continue to be a CFC, and (2)
under § 958(a) Taxpayer (a United States
shareholder of CFC3) would be treated
as indirectly owning the stock of CFC3
owned by the partnership that is indirectly
owned by CFC1 and CFC2, and would
be required to include in gross income the
amounts determined under § 951(a) with
respect to CFC3. The result would be the
same if the Taxpayer were a partner in
thepartnership(inadditiontoCFC1and
CFC2), or also owned directly stock of
CFC3.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Notice 2009–7 shall continue to apply,
as appropriate.
SECTION 6. EFFECTIVE DATE
The regulations to be issued as de-
scribedinthisnoticeshallapplytotaxable
years of a domestic partnership ending on
or after May 14, 2010. No inference is
intended as to the treatment of a domestic
partnership for any taxable year ending
before May 14, 2010. As stated in No-
tice 2009–7, the IRS may challenge the
positions taken by taxpayers with respect
to such transactions, including under the
provisions of subpart F and subchapter K
of the Code, or under judicial doctrines
including the sham transaction, substance
over form, and economic substance doc-
trines.
SECTION 7. DRAFTING
INFORMATION
For further information regarding this
notice, contact Susan E. Massey at (202)
622–3840 (not a toll-free call).
Public Comment Invited
on Recommendations for
2010–2011 Guidance Priority
List
Notice 2010–43
The Department of Treasury and Inter-
nal Revenue Service invite public com-
ment on recommendations for items that
should be included on the 2010–2011
Guidance Priority List.
The Treasury Department’s Office of
Tax Policy and the Service use the Guid-
ance Priority List each year to identify
and prioritize the tax issues that should
be addressed through regulations, revenue
rulings, revenue procedures, notices, and
other published administrative guidance.
The 2010–2011 Guidance Priority List will
establish the guidance that the Treasury
DepartmentandtheServiceintendtoissue
from July 1, 2010, through June 30, 2011.
The Treasury Department and the Service
recognize the importance of public input
to formulate a Guidance Priority List that
focuses resources on guidance items that
are most important to taxpayers and tax
administration. Published guidance plays
an important role in increasing voluntary
compliance by helping to clarify ambigu-
ous areas of the tax law.
As is the case whenever significant leg-
islation is enacted, the Treasury Depart-
ment and the Service have continued to
dedicate substantial resources during the
current plan year to published guidance
projects necessary to implement the pro-
visions of the multitude of Tax Acts that
have been enacted over the past several
years including, but not limited to, the Pen-
sion Protection Act of 2006, Pub. L. No.
109–280, 120 Stat. 780, which was en-
acted on August 17, 2006; the Emergency
Economic Stabilization Act of 2008, En-
ergy Improvement and Extension Act of
2008, and Tax Extenders and Alternative
Minimum Tax Relief Act of 2008, Pub. L.
No. 110–343, 122 Stat. 3765, which were
enacted on October 3, 2008; the Ameri-
can Recovery and Reinvestment Tax Act
of 2009, Pub. L. No. 111–5, 123 Stat.
115, which was enacted on February 17,
2009; the Hiring Incentives to Restore Em-
ployment Act, Pub. L. No. 111–147, 124
Stat. 71, which was enacted on March 18,
2010; the Patient Protection and Afford-
able Care Act, Pub. L. No. 111–148, 124
Stat. 119, which was enacted on March 23,
2010; and the Health Care and Education
Reconciliation Act, Pub. L. 111–152, 124
Stat. 1029, which was enacted on March
30, 2010. The Treasury Department and
the Service will continue to evaluate the
priority of each guidance project in light
of the above-mentioned tax legislation and
other developments occurring during the
2010–2011 plan year.
In reviewing recommendations and
selecting projects for inclusion on the
2010–2011 Guidance Priority List, the
Treasury Department and the Service will
consider the following:
1. Whether the recommended guid-
ance resolves significant issues relevant to
many taxpayers;
2. Whether the recommended guidance
promotes sound tax administration;
3. Whether the recommended guidance
can be drafted in a manner that will enable
taxpayers to easily understand and apply
the guidance;
2010–22 I.R.B.716June 1, 2010

4. Whether the Service can administer
the recommended guidance on a uniform
basis; and
5. Whether the recommended guidance
reduces controversy and lessens the bur-
den on taxpayers or the Service.
Taxpayers may submit recommenda-
tions for guidance at any time during the
year. Please submit recommendations by
June 11, 2010, for possible inclusion on
the original 2010–2011 Guidance Priority
List. The Treasury Department and the
Service may update the 2010–2011 Guid-
ance Priority List periodically to reflect
additional guidancethat the Treasury De-
partment and the Service intend to publish
during the plan year. The periodic updates
allow the Treasury Department and the
Service to respond to the need for addi-
tional guidance that may arise during the
plan year. Recommendations for guidance
received after June 11, 2010, will be re-
viewed for inclusion in the next periodic
update.
Taxpayers are not required to submit
recommendations for guidance in any par-
ticular format. Taxpayers should, how-
ever, briefly describe the recommended
guidance and explain the need for the guid-
ance. In addition, taxpayers may include
an analysis of how the issue should be re-
solved. It would be helpful if taxpayers
suggesting more than one guidance project
prioritize the projects by order of impor-
tance. If a large number of projects are be-
ing suggested, it also would be helpful if
the projects were grouped in terms of high,
medium or low priority.
Taxpayers should send written com-
ments to:
Internal Revenue Service
Attn: CC:PA:LPD:PR
(Notice 2010–43)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044
or hand deliver comments Monday
through Friday between the hours of
8a.m.and4p.m.to:
Courier’s Desk
Internal Revenue Service
Attn: CC:PA:LPD:PR
(Notice 2010–43)
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
Alternatively, taxpayers may sub-
mit comments electronically via
e-mail to the following address:
Notice.Comments@irscounsel.treas.gov.
Taxpayers should include “Notice
2010–43” in the subject line. All
comments submitted by the public will
be available for public inspection and
copying in their entirety.
For further information regarding this
notice, contact Henry Schneiderman of
the Office of Associate Chief Counsel
(Procedure and Administration) at (202)
622–3400 (not a toll-free call).
Tax Credit for Employee
Health Insurance Expenses of
Small Employers
Notice 2010–44
I. PURPOSE AND BACKGROUND
Section 45R of the Internal Revenue
Code (Code) offers a tax credit to certain
small employers that provide health in-
surance coverage to their employees. It
is effective for taxable years beginning in
2010. Both taxable employers and em-
ployers that are organizations described in
section 501(c) that are exempt from tax
under section 501(a) (tax-exempt employ-
ers) may be eligible for the section 45R
credit. Employers that satisfy the require-
ments for the credit are referred to in this
notice as “eligible small employers.”
Section 45R was added to the Code
by section 1421 of the Patient Protection
and Affordable Care Act (Affordable Care
Act), enacted March 23, 2010, Pub. L. No.
111–148. This notice provides guidance
on section 45R as in effect for taxable years
beginning before January 1, 2014, and also
includes transition relief for taxable years
beginningin2010withrespecttothere-
quirements for a qualifying arrangement
under section 45R.
II. EMPLOYERS ELIGIBLE FOR THE
CREDIT
A. Overview of Requirements for
Eligibility
In order to be an eligible small em-
ployer, (1) the employer must have fewer
than 25 full-time equivalent employees
(FTEs) for the taxable year; (2) the av-
erage annual wages of its employees for
the year must be less than $50,000 per
FTE; and (3) the employer must maintain
a “qualifying arrangement.”
1
Aqualify-
ing arrangement is an arrangement under
which the employer pays premiums for
each employee enrolled in health insur-
ance coverage offered by the employer in
an amount equal to a uniform percentage
(not less than 50 percent) of the premium
cost of the coverage (but see section V of
this notice for transition relief for taxable
years beginning in 2010 with respect to
the requirements for a qualifying arrange-
ment). An employer that is an agency or
instrumentality of the federal government,
or of a State, local or Indian tribal govern-
ment, is not an eligible small employer for
purposes of section 45R unless it is an or-
ganization described in section 501(c) that
is exempt from tax under section 501(a).
The following steps must be followed to
determine whether an employer is eligible
for a credit under section 45R:
1. Determine the employees who are
taken into account for purposes of the
credit.
2. Determine the number of hours of
service performed by those employees.
3. Calculate the number of the em-
ployer’s FTEs.
4. Determine the average annual wages
paid per FTE.
5. Determine the premiums paid by the
employer that are taken into account for
purposes of the credit. Specifically, the
premiums must be paid by an employer
under a qualifying arrangement and must
be paid for health insurance that meets the
requirements of section 45R.
The remainder of this section II ex-
plains the steps involved in determining
whether an employer is eligible for the
credit. Section III of this notice explains
how to calculate the credit, and section IV
1
Although the term “eligible small employer” is defined in section 45R(d)(1) to include employers with “no more than” 25 FTEs and average annual wages that “do not exceed” $50,000, the
phaseout of the credit amount under section 45R(c) operates in such a way that an employer with exactly 25 FTEs or with average annual wages exactly equal to $50,000 is not in fact eligible
for the credit.
June 1, 20107172010–22 I.R.B.

explains how to claim the credit. Finally,
section V provides transition relief for tax-
able years beginning in 2010 with respect
to certain requirements for qualifying ar-
rangements.
B. Determining the Employees Taken into
Account
In general, employees who perform ser-
vices for the employer during the taxable
year are taken into account in determin-
ing the employer’s FTEs, average wages,
and premiums paid, with certain individu-
als excluded and with employees of certain
related employers included. This section
describes these rules.
Partners in a business and certain own-
ers are not taken into account as employees
for purposes of section 45R. Specifically,
sole proprietors, partners in a partnership,
shareholders owning more than two per-
cent of an S corporation, and any owners
of more than five percent of other busi-
nesses are not taken into account as em-
ployees for purposes of the credit. Fam-
ily members of these owners and partners
are also not taken into account as employ-
ees. For purposes of section 45R, a fam-
ily member is defined as a child (or de-
scendant of a child); a sibling or step-sib-
ling; a parent (or ancestor of a parent); a
step-parent; a niece or nephew; an aunt or
uncle; or a son-in-law, daughter-in-law, fa-
ther-in-law, mother-in-law, brother-in-law
or sister-in-law. Finally, any other member
of the household of these owners and part-
ners who qualifies as a dependent under
section 152(d)(2)(H) is not taken into ac-
count as an employee for purposes of sec-
tion 45R.
Accordingly, the wages and hours of
these business owners and partners, and of
their family members and dependent mem-
bers of their household, are disregarded
in determining FTEs and average annual
wages, and the premiums paid on their be-
half are not counted in determining the
amount of the section 45R credit.
Seasonal workers are disregarded in
determining FTEs and average annual
wages unless the seasonal worker works
for the employer on more than 120 days
during the taxable year, although premi-
ums paid on their behalf may be counted
in determining the amount of the section
45R credit.
All employers treated as a single em-
ployer under section 414(b), (c), (m) or (o)
are treated as a single employer for pur-
poses of section 45R. Thus, all employ-
ees of a controlled group under section
414(b) or (c), or an affiliated service group
under section 414(m) (except employees
not taken into account as described above),
and all wages paid to, and premiums paid
for, employees by the members of the con-
trolled group or affiliated service group
(except employees not taken into account
as described above), are taken into account
in determining whether any member of the
controlled group or affiliated service group
is an eligible small employer.
C. Determining the Number of Hours of
Service Worked by Employees for the
Taxable Year
An employee’s hours of service for a
year include the following: (1) each hour
for which an employee is paid, or enti-
tled to payment, for the performance of du-
ties for the employer during the employer’s
taxable year; and (2) each hour for which
an employee is paid, or entitled to pay-
ment, by the employer on account of a pe-
riod of time during which no duties are
performed due to vacation, holiday, ill-
ness, incapacity (including disability), lay-
off, jury duty, military duty or leave of ab-
sence (except that no more than 160 hours
of service are required to be counted for
an employee on account of any single con-
tinuous period during which the employee
performs no duties).
In calculating the total number of hours
of service which must be taken into ac-
count for an employee for the year, the em-
ployermayuseanyofthefollowingmeth-
ods: (1) determine actual hours of service
from records of hours worked and hours
for which payment is made or due (pay-
ment is made or due for vacation, holi-
day, illness, incapacity, etc., as described
above); (2) use a days-worked equivalency
whereby the employee is credited with 8
hours of service for each day for which the
employee would be required to be credited
with at least one hour of service under rule
(1) or (2) in the preceding paragraph; or (3)
use a weeks-worked equivalency whereby
theemployeeiscreditedwith40hoursof
service for each week for which the em-
ployee would be required to be credited
with at least one hour of service under rule
(1) or (2) in the preceding paragraph.
Examples. In all of the examples in
this notice, none of the employees is an
owner, partner in a business or otherwise
excluded from being taken into account
under section 45R.
Example 1 — Counting hours of service by hours
actually worked or for which payment is made or due.
(i) For the 2010 taxable year, an employer’s payroll
records indicate that Employee A worked 2,000 hours
and was paid for an additional 80 hours on account of
vacation, holiday and illness. The employer counts
hours actually worked.
(ii) Under this method of counting hours, Em-
ployee A must be credited with 2,080 hours of service
(2,000 hours worked and 80 hours for which payment
was made or due).
Example 2 — Counting hours of service under
weeks-worked equivalency. (i) For the 2010 taxable
year, Employee B worked 49 weeks, took 2 weeks of
vacation with pay, and took 1 week of leave without
pay. The employer uses the weeks-worked equiva-
lency.
(ii) Under this method of counting hours, Em-
ployee B must be credited with 2,040 hours of service
(51 weeks multiplied by 40 hours per week).
D. Determining the Number of an
Employer’s FTEs
The number of an employer’s FTEs is
determined by dividing (1) the total hours
of service, determined in accordance with
section II.C of this notice, credited during
the year to employees taken into account
under section II.B of this notice (but not
more than 2,080 hours for any employee)
by (2) 2,080. The result, if not a whole
number, is then rounded to the next lowest
whole number. In some circumstances,
an employer with 25 or more employees
may qualify for the credit if some of its
employees work part-time. For example,
an employer with 46 half-time employees
(meaning they are paid wages for 1,040
hours) has 23 FTEs and, therefore, may
qualify for the credit.
Example 3 — Determining the number of FTEs.
(i) For the 2010 taxable year, an employer pays 5
employees wages for 2,080 hours each, 3 employees
wages for 1,040 hours each, and 1 employee wages
for 2,300 hours. The employer does not use an equiv-
alency method to determine hours of service for any
of these employees.
(ii) The employer’s FTEs would be calculated as
follows:
(1) Total hours of service not exceeding 2,080 per
employee is the sum of:
a. 10,400 hours of service for the 5 employees
paid for 2,080 hours each (5 x 2,080)
b. 3,120 hours of service for the 3 employees paid
for 1,040 hours each (3 x 1,040), and
2010–22 I.R.B.718June 1, 2010

c. 2,080 hours of service for the 1 employee paid
for 2,300 hours (lesser of 2,300 and 2,080).
d. The sum of a, b and c equals 15,600 hours of
service.
(2) FTEs equal 7 (15,600 divided by 2,080 = 7.5,
rounded to the next lowest whole number).
Example 4 — Determining the number of FTEs:
(i) For the 2010 taxable year, an employer has 26
FTEs with average annual wages of $23,000 per FTE.
Only 20 of the employer’s employees are enrolled in
the employer’s health insurance plan.
(ii) The hours of service and wages of all em-
ployees are taken into consideration in determining
whether the employer is an eligible small employer
for purposes of the credit.Because the employer does
not have fewer than 25 FTEs for the taxable year, the
employer is not an eligible small employer for pur-
poses of the credit.
E. Determining the Employer’s Average
Annual Wages for the Taxable Year
The average annual wages paid by an
employer for a taxable year is determined
by dividing (1) the total wages paid by
the employer during the employer’s tax-
able year to employees taken into account
under section II.B of this notice by (2) the
number of the employer’s FTEs for the
year. The result is then rounded down to
the nearest $1,000 (if not otherwise a mul-
tiple of $1,000). For purposes of determin-
ing the employer’s average annual wages
for the taxable year, only wages that are
paid for hours of service determined un-
der section II.C of this notice are taken into
account. Wages for this purpose means
wages as defined under section 3121(a) for
purposes of the Federal Insurance Contri-
butions Act (FICA), determined without
regard to the wage base limitation under
section 3121(a)(1).
Example 5 — Determining the amount of average
annual wages. (i) For the 2010 taxable year, an em-
ployer pays $224,000 in wages and has 10 FTEs.
(ii) The employer’s average annual wages is:
$22,000 ($224,000 divided by 10 = $22,400, rounded
down to the nearest $1,000).
F. Premium Payments by the Employer
for the Taxable Year
Only premiums paid by the employer
for health insurance coverage are counted
in calculating the credit. If an employer
pays only a portion of the premiums for
the coverage provided to employees (with
employees paying the rest), only the por-
tion paid by the employer is taken into ac-
count. For example, if an employer pays
80 percent of the premiums for employees’
coverage (with employees paying the other
20 percent), the 80 percent paid by the em-
ployer is taken into account in calculating
the credit. For purposes of this credit, any
premium paid pursuant to a salary reduc-
tion arrangement under a section 125 cafe-
teria plan is not treated as paid by the em-
ployer. In calculatingthe credit for a tax-
able year beginning in 2010, an employer
may count all premiums paid by the em-
ployer in the 2010 tax year, including pre-
miums that were paid in the 2010 tax year
before the Affordable Care Act was en-
acted.
G. Premiums for Health Insurance
Coverage under a Qualifying Arrangement
An employer’s premium payments are
not taken into account for purposes of the
section 45R credit unless they are paid for
health insurance coverage under a qualify-
ing arrangement. As noted in section II.A
of this notice, a qualifying arrangement is
an arrangement under which the employer
pays premiums for each employee enrolled
in health insurance coverage offered by the
employer in an amount equal to a uniform
percentage (not less than 50 percent) of the
premium cost of the coverage (but see sec-
tion V of this notice for transition relief for
taxable years beginning in 2010 with re-
spect to certain requirements for a qualify-
ing arrangement).
For years prior to 2014, health insur-
ance coverage for purposes of the credit
means benefits consisting of medical care
(provided directly, through insurance or
reimbursement, or otherwise) under any
hospital or medical service policy or cer-
tificate, hospital or medical service plan
contract, or health maintenance organiza-
tion contract offered by a health insurance
issuer. See section 9832(b)(1). Health
insurance coverage for purposes of the sec-
tion 45R credit also includes the following
plans described in section 9832(c)(2), (3)
and (4): limited scope dental or vision;
long-term care, nursing home care, home
health care, community-based care, or
any combination thereof; coverage only
for a specified disease or illness; hospital
indemnity or other fixed indemnity insur-
ance; and Medicare supplemental health
insurance; certain other supplemental cov-
erage, and similar supplemental coverage
provided to coverage under a group health
plan. Health insurance coverage does
not include the benefits listed in section
9832(c)(1).
2
If an eligible small employer
offers any of the plans described in sec-
tion 9832(b)(1) or 9832(c)(2), (3) or (4),
the premiums paid by the employer for
that plan can be countedin calculating the
credit if the premiums are paid under a
qualifying arrangement.
Different types of health insurance
plans are not aggregated for purposes
of meeting the qualifying arrangement
requirement. So, for example, if an em-
ployer offers a major medical insurance
plan and a stand-alone vision plan, the
employer must separately satisfy the re-
quirements for a qualifying arrangement
with respect to each type of coverage.
The amount of an employer’s premium
payments that are taken into account in
calculating the credit is limited to the
premium payments the employer would
have made under the same arrangement if
the average premium for the small group
market in the State (or an area within
the State) in which the employer offers
coverage were substituted for the actual
premium. For example, if an eligible small
employer pays 80 percent of the premiums
for coverage provided to employees (and
employees pay the other 20 percent), the
premiums taken into account for purposes
of the credit are the lesser of 80 percent
of the total actual premiums paid or 80
percent of the premiums that would have
been paid for the coverage if the average
premium for the small group market in the
State (or an area within the State) were
substituted for the actual premium. See
Rev. Rul. 2010–13, 2010–21 I.R.B. 691,
for the average premium for the small
group market in a State for the 2010 tax-
able year.
The average premium for the small
group market in the State does not apply
separately to each type of coverage de-
scribed in section 9832(b)(1), (c)(2), (c)(3)
and (c)(4), but rather provides an overall
2
Section 9832(c)(1) includes the following benefits: (A) coverage only for accident, or disability income insurance, or any combination thereof; (B) coverage issued as a supplement to
liability insurance; (C) liability insurance, including general liability insurance and automobile liability insurance; (D) worker’s compensation or similar insurance; (E) automobile medical
payment insurance; (F) credit-only insurance; (G) coverage for on-site medical clinics; and (H) other similar insurance coverage, specified in regulations, under which benefits for medical
care are secondary or incidental to other insurance benefits.
June 1, 20107192010–22 I.R.B.

cap for all health insurance coverage pro-
vided by an eligible small employer.
Example 6 — Determining amount of premium
payments for purposes of the credit. (i) For the 2010
taxable year, an eligible small employer offers a
health insurance plan with single and family cov-
erage. Employer has 9 FTEs with average annual
wages of $23,000 per FTE. Four employees are en-
rolled in single coverage and 5 are enrolled in family
coverage.
(ii) The employer pays 50% of the premiums for
all employees enrolled in single coverage and 50%
of the premiums for all employees enrolled in fam-
ily coverage (and the employee is responsible for the
remainder in each case). The premiums are $4,000 a
year for single coverage and $10,000 a year for family
coverage. The average premium for the small group
market in employer’s State is $5,000 for single cov-
erage and $12,000 for family coverage.
(iii) The employer’s premium payments for each
FTE ($2,000 for single coverage and $5,000 for fam-
ily coverage) do not exceed 50% of the average pre-
mium for the small group market in employer’s State
($2,500 for single coverage and $6,000 for family
coverage).
(iv) Thus, the amount of premiums paid by the
employer for purposes of computing the credit equals
$33,000 ((4 x $2,000) plus (5 x $5,000)).
Example 7 — Premium payments exceeding aver-
age premium for small group market. (i) Same facts
asExample 6, except that the premiums are $6,000
for single coverage and $14,000 for family coverage.
(ii) The employer’s premium payments for each
employee ($3,000 for single coverage and $7,000
for family coverage) exceed 50% of the average pre-
mium for the small group market in the employer’s
State ($2,500 for single coverage and $6,000 for
family coverage).
(iii) Thus, the amount of premiums paid by the
employer for purposes of computing the credit equals
$40,000 ((4 x $2,500) plus (5 x $6,000)).
Example 8 — Offering health insurance plan and
dental plan. (i) For the 2010 taxable year, an eligi-
ble small employer offers a major medical plan and a
dental plan. The employer pays 50% of the premium
cost for single coverage for all employees enrolled in
the major medical plan and 50% of the premium cost
for single coverage for all employees enrolled in the
dental plan.
(ii) For purposes of calculating the credit, the em-
ployer can take into consideration the premiums paid
by the employer for both the major medical plan and
the dental plan, but only up to 50% of the amount of
the average premium for single coverage for the small
group market in the employer’s State.
Example 9 — Meeting qualifying arrangement re-
quirement. (i) Same facts asExample 8, except that
the employer pays 40% of the premium cost for sin-
gle coverage for all employees enrolled in the dental
plan.
(ii) For purposes of calculating the credit, the em-
ployer can take into consideration only the premiums
paid by the employer for the major medical plan, and
only up to 50% of the amount of the average premium
for single coverage for the small group market in the
employer’s State. The employer cannot take into con-
sideration premiums paid for the dental plan.
III. CALCULATING THE CREDIT
A. In General
The following steps are followed to cal-
culate the section 45R credit:
1. Calculate the maximum amount of
the credit (section III.B);
2. Reduce the maximum credit in step 1
in accordance with the phaseout rule (sec-
tion III.C), if necessary; and
3. For employers receiving a State
credit or subsidy for health insurance, de-
termine the employer’s actual premium
payment (section III.D).
B. Maximum Credit
For taxable years beginning in 2010
through 2013, the maximum credit is 35
percent of a taxable eligible small em-
ployer’s premium payments taken into ac-
count for purposes of the credit. For a tax-
exempt eligible small employer for those
years, the maximum credit is 25 percent of
the employer’s premium payments taken
into account for purposes of the credit.
However, for a tax-exempt employer, the
amount of the credit cannot exceed the to-
tal amount of income tax under section
3402 and Medicare (i.e., Hospital Insur-
ance) tax under section 3101(b) that the
employer is required to withhold from em-
ployees’ wages for the year and the em-
ployer share of Medicare tax under section
3111(b) on employees’ wages for the year.
C. Credit Phaseout
The credit phases out gradually (but not
below zero) for eligible small employers
if the number of FTEs exceeds 10 or if
the average annual wages exceed $25,000.
If the number of FTEs exceeds 10, the
reduction is determined by multiplying
the otherwise applicable credit amount
by a fraction, the numerator of which is
the number of FTEs in excess of 10 and
the denominator of which is 15. If av-
erage annual wages exceed $25,000, the
reduction is determined by multiplying
the otherwise applicable credit amount by
a fraction, the numerator of which is the
amount by which average annual wages
exceed $25,000 and the denominator of
which is $25,000. In both cases, the result
of the calculation issubtracted from the
otherwise applicable credit to determine
the credit to which the employer is en-
titled. For an employer with both more
than 10 FTEs and average annual wages
exceeding $25,000, the total reduction is
the sum of the two reductions. This may
reduce the credit to zero for some employ-
ers with fewer than 25 FTEs and average
annual wages of less than $50,000.
Example 10 — Calculating the maximum credit
for a taxable eligible small employer. (i) For the 2010
taxable year, a taxable eligible small employer has
9 FTEs with average annual wages of $23,000 per
FTE. The employer pays $72,000 in health insurance
premiums for those employees (which does not ex-
ceed the average premium for the small group mar-
ket in the employer’s State) and otherwise meets the
requirements for the credit.
(ii) The credit for 2010 equals $25,200 (35% x
$72,000).
Example 11 — Calculating the maximum credit
for a tax-exempt eligible small employer.(i)For
the 2010 taxable year, a tax-exempt eligible small
employer has 10 FTEs with average annual wages
of $21,000 per FTE. The employer pays $80,000 in
health insurance premiums for its employees (which
does not exceed the average premium for the small
group market in the employer’s State) and otherwise
meets the requirementsfor the credit. The total
amount of the employer’s income tax and Medicare
tax withholding plus the employer’s share of the
Medicare tax equals $30,000 in 2010.
(ii) The credit is calculated as follows:
(1) Initial amount of credit determined before any
reduction: (25% x $80,000) = $20,000
(2) Employer’s withholding and Medicare taxes:
$30,000
(3) Total 2010 tax credit equals $20,000 (the
lesser of $20,000 and $30,000).
Example 12 — Calculating the credit phase-out
if the number of FTEs exceeds 10 or average annual
wages exceed $25,000. (i) For the 2010 taxable year,
a taxable eligible small employer has 12 FTEs and av-
erage annual wages of $30,000. The employer pays
$96,000 in health insurance premiums for its employ-
ees (which does not exceed the average premium for
the small group market in the employer’s State) and
otherwise meets the requirements for the credit.
(ii) The credit is calculated as follows:
(1) Initial amount of credit determined before any
reduction: (35% x $96,000) = $33,600
(2) Credit reduction for FTEs in excess of 10:
($33,600 x 2/15) = $4,480
(3) Credit reduction for average annual wages in
excess of $25,000: ($33,600 x $5,000/$25,000) =
$6,720
(4) Total credit reduction: ($4,480 + $6,720) =
$11,200
(5) Total 2010 tax credit equals $22,400 ($33,600
- $11,200).
D. State Credits and State Subsidies for
Health Insurance
Some States offer tax credits to cer-
tain small employers that provide health
insurance to their employees. Some of
these are refundable credits and others are
2010–22 I.R.B.720June 1, 2010

nonrefundable credits. In addition, some
States offer premium subsidy programs for
certain small employers under which the
State makes a payment equal to a portion
of the employees’ health insurance premi-
ums under the employer-provided health
insurance plan. Generally, the State pays
this premium subsidy either directly to the
employer or to the employer’s insurance
company (or another entity licensed un-
der State law to engage in the business
of insurance). If the employer is enti-
tled to a State tax credit (whether refund-
able or nonrefundable) or a premium sub-
sidy that is paid directly to the employer,
the premium payment made by the em-
ployer is not reduced by the credit or sub-
sidy for purposes of determining whether
the employer has satisfied the “qualify-
ing arrangement” requirement to pay an
amount equal to a uniform percentage (not
less than 50 percent) of the premium cost.
Also, except as described below in this
section III.D, the maximum amount of the
section 45R credit is not reduced by reason
of a State tax credit (whether refundable or
nonrefundable) or by reason of payments
by a State directly to an employer.
Generally, if a State makes payments
directly to an insurance company (or an-
other entity licensed under State law to en-
gage in the business of insurance) to pay a
portion of the premium for coverage of an
employee under employer-provided health
insurance (State direct payments), the
State is treated as making these payments
on behalf of the employer for purposes
of determining whether the employer has
satisfied the “qualifying arrangement”
requirement to pay an amount equal to
a uniform percentage (not less than 50
percent) of the premium cost of coverage.
Also, except as described below in this
section III.D, these premium payments by
the State are treated as an employer con-
tribution under section 45R for purposes
of calculating the credit.
Although State tax credits and pay-
ments to an employer generally do not
reduce an employer’s otherwise applica-
ble credit under section 45R, and although
State direct payments are generally treated
as paid on behalf of an employer, in no
event may the amount of the section 45R
credit exceed the amount of the employer’s
net premium payments. In the case of a
State tax credit for an employer or a State
subsidy paid directly to an employer, the
employer’s net premium payments are cal-
culated by subtracting the State tax credit
or subsidy from the employer’s actual
premium payments. In the case of a State
payment directly to an insurance company
(or another entity licensed under State law
to engage in the business of insurance),
the employer’s net premium payments are
the employer’s actual premium payments.
If a State-administered program (such
as Medicaid or another program that
makes payments directly to a health care
provider or insurance company on be-
half of individuals and their families who
meet certain eligibility guidelines) makes
payments that are not contingent on the
maintenance of an employer-provided
group health plan, those payments are
not taken into account in determining the
credit under section 45R.
Example 13 — State premium subsidy paid di-
rectly to employer. (i) Employer’s State provides a
health insurance premium subsidy of up to 40% of
the health insurance premiums for each eligible em-
ployee. The State pays the subsidy directly to the em-
ployer.
(ii) Employer has one employee, Employee D.
Employee D’s health insurance premiums are $100
per month and are paid as follows: $80 by the em-
ployer and $20 by Employee D through salary reduc-
tions to a cafeteria plan. The State pays Employer $40
per month as a subsidy for Employer’s payment of
insurance premiums on behalf of Employee D. Em-
ployer is otherwise an eligible small employer that
meets the requirements for the section 45R credit.
(iii) For purposes of the requirements for a qual-
ifying arrangement, and for purposes of calculating
the amount of the section 45R credit, the amount of
premiums paid by the employer is $80 per month (the
premium payment by the Employer without regard to
the subsidy from the State).
Example 14 — State premium subsidy paid
directly to employer’s insurance company.(i)Em-
ployer’s State provides a health insurance premium
subsidy of up to 50% for each eligible employee. The
State pays the premium directly to the employer’s
health insurance provider.
(ii) Employer has one employee, Employee E.
Employee E is enrolled in single coverage under Em-
ployer’s health insurance plan.
(iii) Employee E’s health insurance premiums are
$100 per month and are paid as follows: $30 by the
employer; $50 by the State and $20 by the employee.
The State pays the $50 per month directly to the in-
surance company and the insurance company bills
the employer for the employer and employee’s share,
which equal $50 per month. Employer is otherwise
an eligible small employer that meets the require-
ments for the section 45R credit.
(iv) For purposes of the requirements for a qual-
ifying arrangement, and for purposes of calculating
the amount of the section 45R credit, the amount of
premiums paid by the employer is $80 per month (the
sum of the employer’s payment and the State’s pay-
ment).
Example 15 — Credit limited by employer’s net
premium payment. (i) Employer’s State provides a
health insurance premium subsidy of up to 50% for
each eligible employee. The State pays the premium
directly to the employer’s health insurance provider.
Employer has one employee, Employee F. Employee
F is enrolled in single coverage under Employer’s
health insurance plan. Employee F’s health insurance
premiums are $100 per month and are paid as follows:
$20 by the employer; $50 by the State and $30 by the
employee. The State pays the $50 per month directly
to the insurance company and the insurance company
bills the employer for the employer’s and employee’s
shares, which total $50 per month. Employer is oth-
erwise an eligible small employer that meets the re-
quirements for the section 45R credit.
(ii) The amount of premiums paid by the em-
ployer for purposes of determining whether the em-
ployer meets the qualifying arrangement requirement
(the sum of the employer’s payment and the State’s
payment) is $70 per month, which is more than 50%
of the $100 monthly premium payment. The amount
of the premium for calculating the maximum section
45R credit is also $70 per month. The maximum
credit is $24.50 ($70 x 35%).
(iii) The employer’s net premium payment is $20
(the amount actually paid by the employer excluding
the State subsidy). After applying the limit for the
employer’s net premium payment , the section 45R
credit is $20 per month, (the lesser of $24.50 or $20).
IV. CLAIMING THE CREDIT AND
EFFECT ON ESTIMATED TAX,
ALTERNATIVE MINIMUM TAX AND
DEDUCTIONS
The section 45R credit is claimed on an
eligible small employer’s annual income
tax return and offsets an employer’s ac-
tual tax liability for the year. For a tax-
exempt eligible small employer, the IRS
will provide further information on how to
claim the credit. For an eligible small em-
ployer that is not a tax-exempt employer,
the credit is a general business credit and,
thus, any unused credit amount can be car-
ried back one year and carried forward 20
years (however, because an unused credit
amount cannot be carried back to a year be-
fore the effective date of the credit, any un-
used credit amounts for taxable years be-
ginning in 2010 can only be carried for-
ward). For a tax-exempt eligible small em-
ployer, the credit is a refundable credit,
so that even if the employer has no tax-
able income, the employer may receive a
refund (so long as it does not exceed the
tax-exempt eligible small employer’s total
income tax withholding and Medicare tax
liability for the year).
The credit can be reflected in determin-
ing estimated tax payments for the year
in which the credit applies in accordance
June 1, 20107212010–22 I.R.B.

with regular estimated tax rules. The credit
can also be used to offset an employer’s
alternative minimum tax (AMT) liability
for the year, subject to certain limitations
based on the amount of an employer’s reg-
ular tax liability, AMT liability and other
allowable credits. Seesection 38(c)(1), as
modified by section 38(c)(4)(B)(vi). How-
ever, because the credit applies against in-
come tax, an employer may not reduce em-
ployment tax (i.e., withheld income tax,
social security tax under sections 3101(a)
and 3111(a), and Medicare tax) deposits
and payments during the year in anticipa-
tion of the credit. Finally, no deduction
is allowed for the employer under section
162 for that portion of the health insurance
premiums which is equal to the amount of
the section 45R credit.
V. TRANSITION RELIEF FOR
TAXABLE YEARS BEGINNING IN
2010
Because the section 45R credit applies
to taxable years beginning in 2010 (includ-
ing the period in 2010 before enactment of
the Affordable Care Act), an employer that
satisfies the requirements for the transition
relief in this section V will be deemed to
satisfy the requirement for a qualifying ar-
rangement that the employer pay a uni-
form percentage (not less than 50 percent)
of the premium cost of the health insur-
ance coverage (uniformity requirement).
Specifically, for taxable years beginning
in 2010, an employer that pays an amount
equal to at least 50 percent of the pre-
mium for single (employee-only) coverage
for each employee enrolled in coverage of-
fered to employees by the employer will be
deemed to satisfy the uniformity require-
ment for a qualifying arrangement, even if
the employer does not pay the same per-
centage of the premium for each such em-
ployee. Thus, an employer will be deemed
to satisfy the uniformity requirement for a
qualifying arrangement if it pays at least 50
percent of the premium for single coverage
for each employee receiving single cover-
age, and, if the employer offers coverage
that is more expensive than single cover-
age (such as family or self-plus-one cov-
erage), if it pays an amount for each em-
ployee receiving thatmore expensive cov-
erage that is no less than 50 percent of the
premium for single coverage for that em-
ployee (even if it is less than 50 percent of
the premium for the more expensive cov-
erage the employee is actually receiving).
Example 16 — Transition relief rule for a quali-
fying arrangement. (i) For the 2010 taxable year, an
eligible small employer has 9 FTEs with average an-
nual wages of $23,000 per FTE. Six employees are
enrolled in single coverage and 3 employees are en-
rolled in family coverage.
(ii) The premiums are $8,000 for single coverage
for the year and $14,000 for family coverage for the
year (which do not exceed the average premiums for
the small group market in the employer’s State). The
employer pays 50% of the premium for single cov-
erage for each employee enrolled in single or fam-
ily coverage (50% x $8,000 = $4,000 for each em-
ployee).
(iii) Thus, the employer pays $4,000 of the pre-
mium for each of the 6 employees enrolled in single
coverage and $4,000 of the premium for each of the
3 employees enrolled in family coverage.
(iv) The employer is deemed to satisfy the unifor-
mity requirement for a qualifying arrangement under
the transition relief rule.
Example 17 — Arrangement that does not satisfy
requirement for transition relief. (i) Same facts asEx-
ample 16, except that the employer pays 50% of the
premium for employees enrolled in single coverage
($4,000 for each of those 6 employees) but pays none
of the premium for employees enrolled in family cov-
erage.
(ii) The employer does not satisfy the uniformity
requirement for a qualifying arrangement.
VI. EFFECTIVE DATE
Section 45R is effective for taxable
years beginning after December 31, 2009.
REQUEST FOR COMMENTS
The IRS and Treasury intend to issue
future guidance that will address addi-
tional issues under section 45R, including
the application of the uniformity require-
ment and the 50-percent requirement for
taxable years beginning after 2010. Com-
ments are requested on issues that should
be addressed in that future guidance.
Comments should be submitted on or
before September 1, 2010, and should
include a referenceto Notice 2010–44.
Send submissions to CC:PA:LPD:PR
(Notice 2010–44), Room 5203, Inter-
nal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044. Submissions may be hand de-
liveredMonday through Fridaybe-
tween the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (Notice 2010–44),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC 20044, or sent electron-
ically, via the following e-mail address:
Notice.comments@irscounsel.treas.gov.
Please include “Notice 2010–44” in
the subject line of any electronic
communication. All material submitted
will be available for public inspection and
copying.
DRAFTING INFORMATION
The principal author of this notice is
Mireille Khoury of the Office of Division
Counsel/Associate Chief Counsel (Tax Ex-
empt and Government Entities). For fur-
ther information regarding this notice, con-
tact Ms. Khoury at (202) 622–6080 (not a
toll-free call).
2010–22 I.R.B.722June 1, 2010

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking by
Cross-Refere
nce to
Temporary Re
gulations
Group Health
Plans and Health
Insurance Is
suers Providing
Dependent C
overage of
Children to
Age 26 under
the Patien
tProtectionand
Affordabl
eCareAct
REG–114494–10
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Not
ice of proposed rulemaking
by cross-r
eference to temporary regula-
tions.
SUMMARY: Elsewhere in this issue of the
Bulletin, the IRS is issuing temporary reg-
ulations (T.D. 9482) under the provisions
of the Patient Protection and Affordable
Care Act (the Affordable Care Act) deal-
ing with coverage of dependent children to
age26. TheIRSisissuingthetemporary
regulations at the same time that the Em-
ployee Benefits Security Administration
of the U.S. Department of Labor and the
Office of Consumer Information and In-
surance Oversight of the U.S. Department
of Health and Human Services are issu-
ing substantially similar interim final reg-
ulations with respect to group health plans
and health insurance coverage offered in
connection with a group health plan under
the Employee Retirement Income Security
Act of 1974 and the Public Health Ser-
vice Act. The temporary regulations pro-
vide guidance to employers, group health
plans, and health insurance issuers provid-
ing group health insurance coverage. The
text of those temporary regulations also
serves as the text of these proposed regu-
lations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by August, 11. 2010.
ADDRE
SSES: Send submissions to:
CC:PA
:LPD:PR(REG–114494–10),
room 5205, Int
ernal Revenue Service,
P.O. Box 7604,
BenFranklinSta-
tion, Washing
ton, DC 20044. Sub-
missions may b
e hand-delivered to:
CC:PA:LPD:PR
(REG–114494–10),
Courier’s De
sk, Internal Revenue Ser-
vice, 1111 Co
nstitution Avenue, NW,
Washington D
C 20224. Alternatively,
taxpayers ma
y submit comments elec-
tronically
via the Federal eRulemaking
Portal atht
tp://www.regulations.gov(IRS
REG–114494
–10).
FOR FURTHER
INFORMATION
CONTACT: Co
ncerning the regula-
tions, Kar
en Levin at 202–622–6080;
concernin
g submissions of comments,
Richard.A
.Hurst@irscounsel.treas.gov,
202–622–7
180 (not toll-free numbers) .
SUPPLEMEN
TARY INFORMATION:
Paperwork
Reduction Act
The collec
tion of information contained
in this not
ice of proposed rulemaking has
been subm
itted to the Office of Manage-
ment and B
udget for review in accordance
with the P
aperwork Reduction Act of 1995
(44 U.S.C
. 3507(d)). Comments on the
collect
ion of information should be sent to
theOffi
ce of Management and Budget,
Attn: De
sk Officer for the Department
of the Tr
easury, Office of Information
and Regu
latory Affairs, Washington, DC
20503,
with copies to theInternal Rev-
enue Se
rvice, Attn: IRS Reports Clear-
ance Of
ficer, SE:W:CAR:MP:T:T:SP,
Washin
gton, DC 20224. Comments on
the col
lection of information should be
recei
ved by July 12, 2010. Comments are
speci
fically requested concerning:
•Wheth
er the proposed collection of
infor
mation is necessary for the proper
perfo
rmance of the functions of the
Inter
nal Revenue Service, including
wheth
er the information will have
prac
tical utility;
•The ac
curacy of the estimated burdens
asso
ciated with the proposed collec-
tion
of information (see the preamble
to th
e temporary regulations published
else
where in this issue of the Bulletin);
•How t
o enhance the quality, utility, and
clar
ityoftheinformationtobecol-
lect
ed;
•How to minimiz
e the burden of com-
plying with th
e proposed collection of
information,
including the application
of automated c
ollection techniques or
other forms of
information technology;
and
•Estimates of c
apital or start-up costs
and costs of o
peration, maintenance,
and purchase
of services to provide in-
formation.
The collecti
on of information is in
§54.9815–27
14T(f) (see the temporary
regulation
s published elsewhere in this
issue of the
Bulletin). The temporary reg-
ulations re
quire that group health plans
and group he
alth insurance coverage offer
an enrollme
nt opportunity (including writ-
ten notice o
f the enrollment opportunity)
to certain
individuals who did not obtain
coverage u
nder a group health plan or
group heal
th insurance coverage prior to
the effect
ive date of amendments made by
the Affor
dable Care Act to section 2714 of
the Publi
c Health Service Act (which is in-
corporat
ed by reference into section 9815
of the Cod
e). The individuals to whom
the enro
llment opportunity must be given
are thos
e who were not eligible for depen-
dent cov
erage of a child below the age of
26 but, a
fter the effective date of section
2714 of t
he Public Health Service Act, are
entitl
ed to be eligible for coverage under
agroup
health plan or group health insur-
ance co
verage. The likely respondents are
busine
ss or other for-profit institutions,
and non
profit institutions. Responses to
this co
llection of information are manda-
tory.
An age
ncy may not conduct or sponsor,
and a p
erson is not required to respond to, a
colle
ction of information unless it displays
avali
d control number assigned by the Of-
fice o
f Management and Budget.
Books
or records relating to a collection
of inf
ormation must be retained as long
as th
eir contents may become material in
the a
dministration of any internal revenue
law.
Generally tax returns and tax return
info
rmation are confidential, as required
by 26
U.S.C. 6103.
Back
ground
The t
emporary regulations published
else
whereinthisissueoftheBulletinadd
June 1, 20107232010–22 I.R.B.

§54.9815–2714T to the Miscellaneous Ex-
cise Tax Regulations. The proposed and
temporary regulationsare being published
as part of a joint rulemaking with the De-
partment of Labor and the Department
of Health and Human Services (the joint
rulemaking). The text of those temporary
regulations also serves as the text of these
proposed regulations. The preamble to the
temporary regulationsexplains the tempo-
rary regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It has also been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to this proposed reg-
ulation. It is hereby certified that the col-
lection of information contained in this no-
tice of proposed rulemaking will not have a
significant impact on a substantial number
of small entities. Accordingly, a regulatory
flexibility analysis is not required. The
temporary regulations require both group
health insurance issuers and group health
plans to provide a notice of opportunity to
enroll to certain individuals who, prior to
the effective date of the amendments made
to section 2714 of the Public Health Ser-
vice Act, were not eligible to enroll for de-
pendent coverage of children but who are
eligible after those amendments take ef-
fect. Under the temporary regulations, if a
health insurance issuer satisfies this notice
obligation, it is satisfied not just for the is-
suer but also for the group health plan. For
group health plans maintained by small en-
tities, it is anticipated that the health insur-
ance issuer will satisfy this notice obliga-
tion for both the plan and the issuer in al-
most all cases. For this reason, the infor-
mation collection requirement will not im-
pose a significant impact on a substantial
number of small entities. For further infor-
mation and for analyses relating to the joint
rulemaking, see the preamble to the joint
rulemaking. Pursuant to section 7805(f) of
the Internal Revenue Code, this regulation
has been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timely to the IRS. Comments are specifi-
cally requested on the clarity of the pro-
posed regulations and how they may be
made easier to understand. All comments
will be available for public inspection and
copying. A public hearing may be sched-
uled if requested in writing by a person
that timely submits written comments. If
a public hearing is scheduled, notice of the
date, time, and place for the hearing will
be published in theFederal Register.
Drafting Information
The principal author of these pro-
posed regulations is Karen Levin, Office
of the Division Counsel/Associate Chief
Counsel (Tax Exempt and Government
Entities), IRS. The proposed regulations,
as well as the temporary regulations,
have been developed in coordination with
personnel from the U.S. Department of
Labor and the U.S. Department of Health
and Human Services.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 54 is pro-
posed to be amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation for
part 54 is amended by adding an entry in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 54.9815–2714 also issued un-
der 26 U.S.C. 9833. * * *
Par. 2. Section 54.9815–2714 is added
to read as follows:
§54.9815–2714 Eligibility of children
untilatleastage26.
[The text of proposed §54.9815–2714 is
the same as the text of §54.9815–2714T
published elsewhere in this issue of the
Bulletin].
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on May 10, 2010,
4:15 p.m., and published in the issue of the Federal Register
for May 13, 2010, 75 F.R. 27141)
AJCA Modifications to the
Section 6011 Regulations;
Correction
Announcement 2010–39
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correcting amendment.
SUMMARY: This document contains a
correction to final regulations (T.D. 9350,
2007–2 C.B. 614) which were published in
theFederal Registeron Friday, August 3,
2007 (72 FR 43146) that modify the rules
relating to the disclosure of reportable
transactions under section 6011.
DATES: This correction is effective on
May 11, 2010, and is applicable on August
3, 2007.
FOR FURTHER INFORMATION
CONTACT: Charles D. Wien or
Michael H. Beker, (202) 622–3070 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (T.D. 9350) that
are the subject of this document are under
section 6011 of the Internal Revenue Code.
Need for Correction
As published, the final regulations
(T.D. 9350) contain an error that may
prove to be misleading and is in need of
clarification.
*****
Correction of Publication
Accordingly, 26 CFR part 1 is cor-
rected by making the following correcting
amendment:
2010–22 I.R.B.724June 1, 2010

PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6011–4 is amended
by revising the fifth sentence of paragraph
(e)(1) to read as follows:
§1.6011–4 Requirement of statement
disclosing participation in certain
transactions by taxpayers.
*****
(e) * * *
(1)***Inthecaseofataxpayerthatis
a partnership, an S corporation, or a trust,
the disclosure statement for a reportable
transaction must be attached to the part-
nership, S corporation, or trust’s tax return
for each taxable year in which the part-
nership, S corporation, or trust participates
in the transaction under the rules of para-
graph (c)(3)(i) of this section. * * *
LaNita Van Dyke,
Chief, Publications and
Regulations Branch,
Legal Processing Division,
Associate Chief Counsel,
(Procedure and Administration).
(Filed by the Office of the Federal Register on May 10, 2010,
8:45 a.m., and published in the issue of the Federal Register
for May 11, 2010, 75 F.R. 26061)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2010–40
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin onJune 1, 2010and
would end on the date the court first deter-
mines that the organization is not described
in section 170(c)(2) asmore particularly set
forth in section 7428(c)(1). For individual
contributors, the maximum deduction pro-
tected is $1,000, with a husband and wife
treated as one contributor. This benefit is
not extended to any individual, in whole
or in part, for the acts or omissions of the
organization that were the basis for revo-
cation.
Action for Affordable Housing
Englewood, CO
All Gods Creatures Shelter for Abused &
Abandoned Animals
Tampa, FL
Carranor Hunt & Polo Club
Perrysburg, OH
Debt Monster Credit Counseling Services,
Inc.
Rancho Santa Margarita, CA
Farm Mutual Insurance
Baltic, SC
Germania Purchasing Group
Brenham, TX
Orchard Living View, Inc.,
Sterling Heights, MI
Silver Ridge Park Golden Oldies
Toms River, NJ
WJ Consumer Credit of Texas
Kyle, TX
Eastland Praise and Worship
Aiken, NC
The Second Chance Foundation, Inc.
Vineyard Haven, MA
Currier Family Foundation
Salt Lake City, UT
Chipper Preschool & Kindergarten
Chicago, IL
Desilynn Multiple Sclerosis Foundation
Layton, UT
Hawaii Consumer Credit Counseling
Honolulu, HI
The Leonard & Beverly Graham
Foundation for the Arts
Salt Lake City, UT
Panther’s House of Pride, Inc.,
Decatur, GA
Seed America Foundation
Cummings, GA
Carey C. Jones Memorial Park
Apex, NC
Capital Athletic Foundation
Silver Spring, MD
June 1, 20107252010–22 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2010–22 I.R.B.iJune 1, 2010

Numerical Finding List
1
Bulletins 2010–1 through 2010–22
Announcements:
2010-1, 2010-4 I.R.B.333
2010-2, 2010-2 I.R.B.271
2010-3, 2010-4 I.R.B.333
2010-4, 2010-5 I.R.B.384
2010-5, 2010-6 I.R.B.402
2010-6, 2010-6 I.R.B.402
2010-7, 2010-6 I.R.B.403
2010-8, 2010-7 I.R.B.408
2010-9, 2010-7 I.R.B.408
2010-10, 2010-7 I.R.B.410
2010-11, 2010-10 I.R.B.438
2010-12, 2010-7 I.R.B.410
2010-13, 2010-8 I.R.B.426
2010-14, 2010-11 I.R.B.449
2010-15, 2010-10 I.R.B.438
2010-16, 2010-11 I.R.B.450
2010-17, 2010-13 I.R.B.515
2010-18, 2010-12 I.R.B.460
2010-19, 2010-14 I.R.B.529
2010-20, 2010-15 I.R.B.551
2010-21, 2010-15 I.R.B.551
2010-22, 2010-16 I.R.B.602
2010-23, 2010-16 I.R.B.602
2010-24, 2010-15 I.R.B.587
2010-25, 2010-15 I.R.B.588
2010-26, 2010-16 I.R.B.604
2010-27, 2010-18 I.R.B.657
2010-28, 2010-17 I.R.B.616
2010-29, 2010-17 I.R.B.616
2010-30, 2010-19 I.R.B.668
2010-31, 2010-19 I.R.B.681
2010-32, 2010-19 I.R.B.681
2010-33, 2010-18 I.R.B.658
2010-34, 2010-20 I.R.B.685
2010-35, 2010-20 I.R.B.685
2010-36, 2010-21 I.R.B.696
2010-37, 2010-20 I.R.B.685
2010-38, 2010-21 I.R.B.696
2010-39, 2010-22 I.R.B.724
2010-40, 2010-22 I.R.B.725
Notices:
2010-1, 2010-2 I.R.B.251
2010-2, 2010-2 I.R.B.251
2010-3, 2010-2 I.R.B.253
2010-4, 2010-2 I.R.B.253
2010-5, 2010-2 I.R.B.256
2010-6, 2010-3 I.R.B.275
2010-7, 2010-3 I.R.B.296
2010-8, 2010-3 I.R.B.297
2010-9, 2010-3 I.R.B.298
Notices— Continued:
2010-10, 2010-3 I.R.B.299
2010-11, 2010-4 I.R.B.326
2010-12, 2010-4 I.R.B.326
2010-13, 2010-4 I.R.B.327
2010-14, 2010-5 I.R.B.344
2010-15, 2010-6 I.R.B.390
2010-16, 2010-6 I.R.B.396
2010-17, 2010-14 I.R.B.519
2010-18, 2010-14 I.R.B.525
2010-19, 2010-7 I.R.B.404
2010-20, 2010-8 I.R.B.422
2010-21, 2010-12 I.R.B.451
2010-22, 2010-10 I.R.B.435
2010-23, 2010-11 I.R.B.441
2010-24, 2010-12 I.R.B.452
2010-25, 2010-14 I.R.B.527
2010-26, 2010-14 I.R.B.527
2010-27, 2010-15 I.R.B.531
2010-28, 2010-15 I.R.B.541
2010-29, 2010-15 I.R.B.547
2010-30, 2010-18 I.R.B.650
2010-31, 2010-16 I.R.B.594
2010-32, 2010-16 I.R.B.594
2010-33, 2010-17 I.R.B.609
2010-34, 2010-17 I.R.B.612
2010-35, 2010-19 I.R.B.660
2010-36, 2010-17 I.R.B.612
2010-37, 2010-18 I.R.B.654
2010-38, 2010-20 I.R.B.682
2010-40, 2010-21 I.R.B.693
2010-41, 2010-22 I.R.B.715
2010-43, 2010-22 I.R.B.716
2010-44, 2010-22 I.R.B.717
Proposed Regulations:
REG-132232-08, 2010-6 I.R.B.401
REG-134235-08, 2010-16 I.R.B.596
REG-137036-08, 2010-6 I.R.B.398
REG-101896-09, 2010-5 I.R.B.347
REG-117501-09, 2010-11 I.R.B.442
REG-131028-09, 2010-4 I.R.B.332
REG-148681-09, 2010-11 I.R.B.443
REG-114494-10, 2010-22 I.R.B.723
Revenue Procedures:
2010-1, 2010-1 I.R.B.1
2010-2, 2010-1 I.R.B.90
2010-3, 2010-1 I.R.B.110
2010-4, 2010-1 I.R.B.122
2010-5, 2010-1 I.R.B.165
2010-6, 2010-1 I.R.B.193
2010-7, 2010-1 I.R.B.231
2010-8, 2010-1 I.R.B.234
2010-9, 2010-2 I.R.B.258
2010-10, 2010-3 I.R.B.300
Revenue Procedures— Continued:
2010-11, 2010-2 I.R.B.269
2010-12, 2010-3 I.R.B.302
2010-13, 2010-4 I.R.B.329
2010-14, 2010-12 I.R.B.456
2010-15, 2010-7 I.R.B.404
2010-16, 2010-19 I.R.B.664
2010-17, 2010-8 I.R.B.425
2010-18, 2010-9 I.R.B.427
2010-19, 2010-13 I.R.B.469
2010-20, 2010-14 I.R.B.528
2010-21, 2010-13 I.R.B.473
Revenue Rulings:
2010-1, 2010-2 I.R.B.248
2010-2, 2010-3 I.R.B.272
2010-3, 2010-3 I.R.B.272
2010-4, 2010-4 I.R.B.309
2010-5, 2010-4 I.R.B.312
2010-6, 2010-6 I.R.B.387
2010-7, 2010-8 I.R.B.417
2010-8, 2010-10 I.R.B.432
2010-9, 2010-13 I.R.B.461
2010-10, 2010-13 I.R.B.461
2010-11, 2010-14 I.R.B.516
2010-12, 2010-18 I.R.B.617
2010-13, 2010-21 I.R.B.691
Tax Conventions:
2010-2, 2010-2 I.R.B.271
2010-26, 2010-16 I.R.B.604
2010-27, 2010-18 I.R.B.657
Treasury Decisions:
9474, 2010-4 I.R.B.322
9475, 2010-4 I.R.B.304
9476, 2010-5 I.R.B.336
9477, 2010-6 I.R.B.385
9478, 2010-4 I.R.B.315
9479, 2010-18 I.R.B.618
9480, 2010-11 I.R.B.439
9481, 2010-17 I.R.B.605
9482, 2010-22 I.R.B.698
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin
2009–52, dated December 28, 2009.
June 1, 2010ii2010–22 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–1 through 2010–22
Announcements:
2009-23
Corrected by
Ann. 2010-29, 2010-17 I.R.B.616
2009-51
Supplemented and superseded by
Ann. 2010-16, 2010-11 I.R.B.450
2010-4
Corrected by
Ann. 2010-10, 2010-7 I.R.B.410
2010-22
Corrected by
Ann. 2010-34, 2010-20 I.R.B.685
Notices:
2005-88
Superseded by
Notice 2010-13, 2010-4 I.R.B.327
2006-87
Superseded by
Notice 2010-27, 2010-15 I.R.B.531
2007-25
Superseded by
Notice 2010-27, 2010-15 I.R.B.531
2007-77
Superseded by
Notice 2010-27, 2010-15 I.R.B.531
2008-14
Modified and superseded by
Notice 2010-33, 2010-17 I.R.B.609
2008-41
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-55
Modified by
Notice 2010-3, 2010-2 I.R.B.253
2008-88
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-107
Superseded by
Notice 2010-27, 2010-15 I.R.B.531
2008-113
Modified by
Notice 2010-6, 2010-3 I.R.B.275
Notices— Continued:
2008-115
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2008-116
Modified and superseded by
Notice 2010-32, 2010-16 I.R.B.594
2009-11
Amplified by
Notice 2010-9, 2010-3 I.R.B.298
2009-13
Obsoleted by
T.D. 9478, 2010-4 I.R.B.315
REG-131028-09, 2010-4 I.R.B.332
2009-35
Supplemented by
Notice 2010-17, 2010-14 I.R.B.519
2009-38
Amplified and superseded by
Notice 2010-2, 2010-2 I.R.B.251
2009-62
Modified and supplemented by
Notice 2010-23, 2010-11 I.R.B.441
Proposed Regulations:
REG-127270-06
Hearing scheduled by
Ann. 2010-6, 2010-6 I.R.B.402
REG-134235-08
Hearing scheduled by
Ann. 2010-33, 2010-18 I.R.B.658
Revenue Procedures:
80-59
Modified and superseded by
Rev. Proc. 2010-11, 2010-2 I.R.B.269
87-35
Obsoleted by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2001-18
Superseded by
Rev. Proc. 2010-16, 2010-19 I.R.B.664
2008-14
Updated by
Rev. Proc. 2010-15, 2010-7 I.R.B.404
2009-1
Superseded by
Rev. Proc. 2010-1, 2010-1 I.R.B.1
2009-2
Superseded by
Rev. Proc. 2010-2, 2010-1 I.R.B.90
Revenue Procedures— Continued:
2009-3
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-4
Superseded by
Rev. Proc. 2010-4, 2010-1 I.R.B.122
2009-5
Superseded by
Rev. Proc. 2010-5, 2010-1 I.R.B.165
2009-6
Superseded by
Rev. Proc. 2010-6, 2010-1 I.R.B.193
2009-7
Superseded by
Rev. Proc. 2010-7, 2010-1 I.R.B.231
2009-8
Superseded by
Rev. Proc. 2010-8, 2010-1 I.R.B.234
2009-9
Superseded by
Rev. Proc. 2010-9, 2010-2 I.R.B.258
2009-15
Amplified and superseded by
Rev. Proc. 2010-12, 2010-3 I.R.B.302
2009-17
Superseded by
Rev. Proc. 2010-21, 2010-13 I.R.B.473
2009-25
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-55
Corrected by
Ann. 2010-11, 2010-10 I.R.B.438
2010-1
Corrected by
Ann. 2010-5, 2010-6 I.R.B.402
Revenue Rulings:
67-436
Obsoleted by
REG-101896-09, 2010-5 I.R.B.347
92-19
Supplemented in part by
Rev. Rul. 2010-7, 2010-8 I.R.B.417
2008-52
Supplemented and superseded by
Rev. Rul. 2010-2, 2010-3 I.R.B.272
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,
2009.
2010–22 I.R.B.iiiJune 1, 2010

Treasury Decisions:
9350
Corrected by
Ann. 2010-38, 2010-21 I.R.B.696
Ann. 2010-39, 2010-22 I.R.B.724
9424
Corrected by
Ann. 2010-18, 2010-12 I.R.B.460
9443
Corrected by
Ann. 2010-8, 2010-7 I.R.B.408
9458
Corrected by
Ann. 2010-7, 2010-6 I.R.B.403
June 1, 2010iv2010–22 I.R.B.

INDEX
Internal Revenue Bulletins 2010–1 through
2010–22
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parenthesis refers to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Correction of certain failures of nonqualified deferred compen-
sation plans to comply with the plan document requirements
of section 409A (Notice 6) 3,275
Defined benefit plans, determination letters (Ann 20) 15,551
Dependent coverage of children under group health plans to age
26 (TD 9482) 22,698; (REG–114494–10) 22,723
Determination letters, issuing procedures (RP 6) 1,193
FBAR administrative relief forsignature authority and certain
commingled funds (Notice 23) 11,441
FBAR filing requirements (Ann 16) 11,450
Full funding limitations, weighted average interest rates, seg-
ment rates for:
January 2010 (Notice 14) 5,344
February 2010 (Notice 20) 8,422
March 2010 (Notice 24) 12,452
April 2010 (Notice 36) 17,612
May2010(Notice40)21,693
Health care benefits with respect to children under age 27, tax
treatment (Notice 38) 20,682
Letter rulings:
And determination letters, areas which will not be issued
from:
Associates Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,110
Associate Chief Counsel (International) (RP 7) 1,231
And general information letters, procedures (RP 4) 1,122
User fees, request for letter rulings (RP 8) 1,234
Parity in mental health and substance use disorder benefits under
group health plans (TD 9479) 18,618
EMPLOYEE PLANS—Cont.
Proposed regulations:
26 CFR 54.9815–2714, added; dependent coverage of chil-
dren under group health plans to age 26 (REG–114494–10)
22,723
Regulations:
26 CFR 54.9812–1T, revised; 602.101, amended; interim
final rules under the Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction Equity Act of 2008
(MHPAEA) (TD 9479) 18,618
26 CFR 54.9815–2714T, added; 602.101, amended; depen-
dent coverage of children under group health plans to age
26 (TD 9482) 22,698
Technical advice to IRS employees (RP 5) 1,165
Qualified plans:
Changes in funding method (Ann 3) 4,333
Military services, HEART Act (Notice 15) 6,390
EMPLOYMENT TAX
Definition of last known address (RP 16) 19,664
Designation of section 3504 agent for FUTA tax purposes
(REG–137036–08) 6,398
Frivolous tax return positions (Notice 33) 17,609
Furnishing identifying number of tax return preparer
(REG–134235–08) 16,596
Health care benefits with respect to children under age 27, tax
treatment (Notice 38) 20,682
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1;correction(Ann5)6,402
Proposed regulations:
26 CFR 1.6109–2, amended; furnishing identifying number
of tax return preparer (REG–134235–08) 16,596
26 CFR 31.3504, revised; section 3504 agent employment tax
liability (REG–137036–08) 6,398
Technical Advice Memoranda (TAMs) (RP 2) 1,90
ESTATE TAX
Definition of last known address (RP 16) 19,664
FBAR administrative relief for signature authority and certain
commingled funds (Notice 23) 11,441
FBAR filing requirements (Ann 16) 11,450
Frivolous tax return positions (Notice 33) 17,609
Furnishing identifying number of tax return preparer
(REG–134235–08) 16,596
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1;correction(Ann5)6,402
Proposed regulations:
26 CFR 1.6109–2, amended; furnishing identifying number
of tax return preparer (REG–134235–08) 16,596
Technical Advice Memoranda (TAMs) (RP 2) 1,90
2010–22 I.R.B.vJune 1, 2010

EXCISE TAX
Dependent coverage of children under group health plans to age
26 (TD 9482) 22,698; (REG–114494–10) 22,723
FBAR administrative relief forsignature authority and certain
commingled funds (Notice 23) 11,441
Frivolous tax return positions (Notice 33) 17,609
Furnishing identifying number of tax return preparer
(REG–134235–08) 16,596
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1;correction(Ann5)6,402
Parity in mental health and substance use disorder benefits under
group health plans (TD 9479) 18,618
Proposed regulations:
26 CFR 1.6109–2, amended; furnishing identifying number
of tax return preparer (REG–134235–08) 16,596
26 CFR 54.9815–2714, added; dependent coverage of chil-
dren under group health plans to age 26 (REG–114494–10)
22,723
Technical Advice Memoranda (TAMs) (RP 2) 1,90
Regulations:
26 CFR 54.9812–1T, revised; 602.101, amended; interim
final rules under the Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction Equity Act of 2008
(MHPAEA) (TD 9479) 18,618
26 CFR 54.9815–2714T, added; 602.101, amended; depen-
dent coverage of children under group health plans to age
26 (TD 9482) 22,698
EXEMPT ORGANIZATIONS
Definition of last known address (RP 16) 19,664
FBAR administrative relief forsignature authority and certain
commingled funds (Notice 23) 11,441
FBAR filing requirements (Ann 16) 11,450
Frivolous tax return positions (Notice 33) 17,609
Letters rulings:
And determination letters:
Areas which will not be issued from Associates Chief
Counsel and Division Counsel (TE/GE) (RP 3) 1,110
Exemption application determination letter rulings under sec-
tions 501 and 521 (RP 9) 2,258
And general information letters, procedures (RP 4) 1,122
User fees, request for letter rulings (RP 8) 1,234
List of organizations classifiedas private foundations (Ann 23)
16,602; (Ann 29) 17,616; (Ann 31) 19,681;(Ann36)21,696
Procedures for charitable trusts to obtain Type III supporting or-
ganization classification rulings and refunds of section 4940
taxes for 2008 (Ann 19) 14,529
Revocations (Ann 1) 4,333;(Ann4)5,384;correction(Ann10)
7,410;(Ann13)8,426; (Ann 15) 10,438; (Ann 24) 15,587;
(Ann 28) 17,616; (Ann 35) 20,685; (Ann 40) 22,725
Technical advice to IRS employees (RP 5) 1,165
GIFT TAX
Definition of last known address (RP 16) 19,664
FBAR administrative relief for signature authority and certain
commingled funds (Notice 23) 11,441
FBAR filing requirements (Ann 16) 11,450
Frivolous tax return positions (Notice 33) 17,609
Furnishing identifying number of tax return preparer
(REG–134235–08) 16,596
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1;correction(Ann5)6,402
Proposed regulations:
26 CFR 1.6109–2, amended; furnishing identifying number
of tax return preparer (REG–134235–08) 16,596
Technical Advice Memoranda (TAMs) (RP 2) 1,90
Treatment of transfers made in trust during 2010 (Notice 19) 7,
404
INCOME TAX
American Jobs Creation Act (AJCA) modification to the Section
6011 regulations, correction (Ann 38) 21,696; additional cor-
rection (Ann 39) 22,724
Accounting methods, December 2009 revision of Form 3115
(Ann 32) 19,681
Advance Pricing Agreement (APA) program, 2009 (Ann 21) 15,
551
Apportionment of tax items among the members of a controlled
group of corporations (TD 9476) 5,336
Arbitrage treatment of certain perpetual funds (Notice 5) 2,256
Basis reporting by securities brokers and basis determination for
stock (REG–101896–09) 5,347
Bonds:
Allocation of qualified school construction bonds (QSCBs),
national limitation for 2010 (Notice 17) 14,519
Midwestern Disaster Area Bonds, Hurricane Ike Bonds, Gulf
Opportunity Zone Bonds (Notice 10) 3,299
Qualified zone academy bond limitation for year 2010 (Notice
22) 10,435
Reissuance of tax-exempt bonds (Notice 7) 3,296
Consumer Price Index (CPI) adjustments, certain loans under
section 1274A for 2010 (RR 2) 3,272
Corporations:
Nonshareholder contribution to capital, Smart Grid Invest-
ment Grant (RP 20) 14,528
Reorganizations, distributionunder sections 368(a)(1)(D) and
354(b)(1)(B) (TD 9475) 4,304
Credits:
Section 45R:
Average premium for the small group market (RR 13) 21,
691
Tax credit for employee health insurance expenses of small
employers (Notice 44) 22,717
Low-income housing tax credit:
2010 population figures usedfor calculation (Notice 21)
12,451
June 1, 2010vi2010–22 I.R.B.

INCOME TAX—Cont.
American Recovery and Reinvestment Tax Act of 2009
clarifications (Notice 18) 14,525
Nonconventional source fuel credit, inflation adjustment fac-
tor and phase-out amount for CY 2009 (Notice 31) 16,594
Renewable electricity, refined coal, and Indian coal produc-
tion credit, 2010 inflation adjustment (Notice 37) 18,654
Specified tax credit bonds (Notice 35) 19,660
Stripping transactions for qualified tax credit bonds (Notice
28) 15,541
Damages received on account of personal physical injuries or
physical sickness, hearing on REG–127270–06 (Ann 6) 6,402
Deemed dispositions by individuals emigrating from Canada (RP
19) 13,469
Definition of last known address (RP 16) 19,664
Definition of foreign partnership, sections 7701(a)(4),
7701(a)(5), and 7805 (Notice 41) 22,715
Depreciation, 2010 limitations on depreciation deductions for
passenger automobiles (RP 18) 9,427
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 12) 7,410;
(Ann 25) 15,588; (Ann 37) 20,685
Disclosure of activity grouping under Code section 469 (RP 13)
4,329
Disclosure or use of information by return preparers:
Amendments to section 7216 regulations (TD 9478) 4,315;
(REG–131028–09) 4,332
In communicating with taxpayers (RR 4) 4,309
In connection with professional liability insurance (RR 5) 4,
312
Draft schedule and instructionsfor uncertain tax positions pro-
posal (Ann 30) 19,668
Electronic filing, waiver request procedures (Notice 13) 4,327
Employer-provided vehicles,cents-per-mile rule, maximum
2010 values for vehicle (RP 10) 3,300
Expenses, housing cost amounts eligible for exclusion or deduc-
tion, 2010 (Notice 27) 15,531
Extension of interim guidance on section 67 limitation on estates
or trusts (Notice 32) 16,594
Extension of timeframe for disclosures to persons designated in a
written request or consent pursuant to section 6103(c) (Notice
8) 3,297
Extension of time to submit comments on Announcement
2010–9 regarding reporting uncertain tax positions, draft
schedule, and implementation date (Ann 17) 13,515
FATCA, implementation and request for comments (Ann 22) 16,
602; correction (Ann 34) 20,685
FBAR administrative relief forsignature authority and certain
commingled funds (Notice 23) 11,441
FBAR filing requirements (Ann 16) 11,450
Foreign earned income exclusion (RP 17) 8,425
Frivolous tax return positions (Notice 33) 17,609
Furnishing identifying number of tax return preparer
(REG–134235–08) 16,596
Guidance priority list, recommendations for 2010–2011 (Notice
43) 22,716
INCOME TAX—Cont.
Health care benefits with respect to children under age 27, tax
treatment (Notice 38) 20,682
Information reporting, deadline to furnish payee statements (No-
tice 9) 3,298
Insurance companies:
Interest rate tables (RR 7) 8,417
Life insurance reserves, actuarial guideline XLIII, AG 43,
CARVM (Notice 29) 15,547
Loss payment patterns and discount factors for the 2009 acci-
dent year, correction to RP 2009–55 (Ann 11) 10,438
Interest:
Certain applicable high yield discount obligations issued in
2010 (Notice 11) 4,326
Investment:
Federal short-term, mid-term, and long-term rates for:
January 2010 (RR 1) 2,248
February 2010 (RR 6) 6,387
March 2010 (RR 8) 10,432
April 2010 (RR 11) 14,516
May 2010 (RR 12) 18,617
Rates:
Underpayments and overpayments, quarter beginning:
April 1, 2010 (RR 9) 13,461
Investment in U.S. property, extension of regulations (Notice 12)
4,326
Letter rulings:
And determination letters, areas which will not be issued
from:
Associate Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,110
Associates Chief Counsel(International) (RP 7) 1,231
And information letters issued byAssociate Offices, determi-
nation letters issued by Operating Divisions (RP 1) 1,1;
correction (Ann 5) 6,402
Like-kind exchanges (RP 14) 12,456
Military Spouses Residency Relief Act (MSRRA), transitional
guidance for taxpayers claiming relief (Notice 30) 18,650
Modification to consolidated return regulation (TD 9458) per-
mitting an election to treat a liquidation of a target, followed
by a recontribution to a new target, as a cross-chain reorgani-
zation(Ann7)6,403
Penalties, substantial understatement, preparer penalty (RP 15)
7,404
Personal exemption, additional for Hurricane Katrina displaced
individual (TD 9474) 4,322
PFIC shareholder reporting under new section 1298(f) for tax
years beginning before March 18, 2010 (Notice 34) 17,612
Postponement of certain tax-related deadlines by reason of a fed-
erally declared disaster or terroristic or military action, correc-
tiontoTD9443(Ann8)7,408
Private foundations, organizations now classified as (Ann 23) 16,
602;(Ann29)17,616; (Ann 31) 19,681; (Ann 36) 21,696
Proposed Regulations:
26 CFR 1.304–4 revised; use of controlled corporations to
avoid the application of section 304 (REG–132232–08) 6,
401
2010–22 I.R.B.viiJune 1, 2010

INCOME TAX—Cont.
26 CFR 1.408–7, amended; 1.1012–1, amended; 1.6039–2,
amended; 1.6042–4, amended; 1.6044–5, amended;
1.6045–1 thru –5, amended; 1.6045A–1, added;
1.6045B–1, added; 1.6049–6, amended; 31.3406(b)(3)–2,
amended; 31.6051–4, amended; 301.6721–1, amended;
301.6722–1, amended; basis reporting by securities bro-
kers and basis determination for stock (REG–101896–09)
5,347
26 CFR 1.6109–2, amended; furnishing identifying number
of tax return preparer (REG–134235–08) 16,596
26 CFR 1.6654–2, amended; reduced 2009 estimated income
tax payments for individuals with small business income
(REG–117501–09) 11,442
26 CFR 301.7216–2, amended; amendments to section 7216
regulations-disclosure or use of information by preparers of
returns (REG–131028–09) 4,332
Publications:
1167, General Rules and Specifications for Substitute Forms
and Schedules (RP 21) 13,473
Qualified disasters:
Chile earthquake occurring in February 2010 (Notice 26) 14,
527
Haiti earthquake occurring in January 2010 (Notice 16) 6,396
Reduced 2009 estimated income tax payments for indi-
viduals with small business income (TD 9480) 11,439;
(REG–117501–09) 11,442
Regulations:
26 CFR 1.162–24, added; 301.9100–4T; amended; 602.101,
amended; travel expenses of state legislators (TD 9481) 17,
605
26 CFR 1.304–4, added; 1.304–4T, revised; use of controlled
corporations to avoid the application of section 304 (TD
9477) 6,385
26 CFR 1.358–2, amended; 1.368–2, amended; 1.368–2T,
removed; 1.1502–13, amended; corporate reorganizations,
distribution under sections 368(a)(1)(D) and 354(b)(1)(B)
(TD 9475) 4,304
26 CFR 1.924(a), amended; 1.1502–43, amended;
1.1502–43T, removed; 1.1502–47, amended; 1.1502–47T,
removed; 1.561–0 thru –3, added;1.1561–0T thru –3T,
removed; apportionment of tax items among the members
of a controlled groups of corporation (TD 9476) 5,336
26 CFR 1.1502–13T, amended; modification to consolidated
return regulation permitting an election to treat a liquidation
of a target, followed by a recontribution to a new target, as
a cross-chain reorganization; correction to TD 9458 (Ann
7) 6,403
26CFR1.6011–4,revised;correctiontoTD9350(Ann39)
22,724
26 CFR 1.6654–2, amended; 1.6654–2T, added; reduced 2009
estimated income tax payments for individuals with small
business income (TD 9480) 11,439
26 CFR 1.9300–1, added; 1.9300–1T, removed; reduction in
taxable income for housing Hurricane Katrina displaced in-
dividuals (TD 9474) 4,322
INCOME TAX—Cont.
26 CFR 301.7216–0, –2, amended; 301.7216–0T, –2T, added;
amendments to section 7216 regulations-disclosure or use
of information by preparers of returns (TD 9478) 4,315
Requirements, trustee of a blind trust (RP 11) 2,269
Revocations, exempt organizations (Ann 1) 4,333;(Ann4)5,
384; correction (Ann 10) 7,410; (Ann 13) 8,426; (Ann 15)
10,438;(Ann24)15,587; (Ann 28) 17,616;(Ann35)20,
685; (Ann 40) 22,725
Section 305 distributions of stock (RP 12) 3,302
Section 338 election, qualified foreign contract (Notice 1) 2,251
Section 368 reorganizations, continuity of interest (Notice 25)
14,527
Section 382 limitation, ownership changes, pre-change losses
(Notice 2) 2,251
Section 385, auction rate preferred stock (Notice 3) 2,253
Section 1256(g)(7)(C) qualified board or exchange (RR 3) 3,272
Standard Industry Fare Level (SIFL) formula (RR 10) 13,461
State legislators, section 162(h) election to deduct deemed living
expenses (TD 9481) 17,605
Substitute forms and schedules, general rules and specifications
(RP 21) 13,473
Technical Advice Memoranda (TAMs) (RP 2) 1,90
Tax conventions:
U.S.-Belgium Tax Convention,agreement on pension plans
under Article 17 (Ann 27) 18,657
U.S.-Canada Tax Convention,Article XIII(7) election (RP
19) 13,469
U.S.-Germany agreement with respect to consular employees
(Ann 2) 2,271
U.S.-Netherlands agreement with respect to the elimination of
the Dutch “qualification” certification (Ann 26) 16,604
Transfers of stock or securities to foreign corporations under sec-
tion 304 (TD 9477) 6,385; (REG–132232–08) 6,401
Uncertain tax positions, policy of restraint (Ann 9) 7,408
Unified rule for loss on subsidiary stock (Ann 18) 12,460
Widely held fixed investment trusts (WHIFT) transition guid-
ance (Notice 4) 2,253
SELF-EMPLOYMENT TAX
Frivolous tax return positions (Notice 33) 17,609
Furnishing identifying number of tax return preparer
(REG–134235–08) 16,596
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1;correction(Ann5)6,402
Proposed regulations:
26 CFR 1.6109–2, amended; furnishing identifying number
of tax return preparer (REG–134235–08) 16,596
Technical Advice Memoranda (TAMs) (RP 2) 1,90
June 1, 2010viii2010–22 I.R.B.

2010–22 I.R.B.June 1, 2010

June 1, 20102010–22 I.R.B.

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