Internal Revenue Bulletin 2010-33 (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
0-33
August 16, 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.
EMPLOYEE PLANS
T.D. 9492, page 242.
Final regulations under section 4965 and other sections of
the Code provide guidance relating to entity-level and man-
ager-level excise taxes with respect to prohibited tax shelter
transactions to which tax-exempt entities are parties; certain
disclosure obligations with respect to such transactions; and
the requirement of a return and time for filing with respect to
section 4965 taxes.
Notice 2010–55, page 253.
This notice provides guidance on filing Form 5500 and Sched-
ule SB for single-employer defined benefit plans for plan spon-
sors who are considering use of the special funding rules under
section 430(c)(2)(D) of the Code, as added by the Preservation
of Access to Care for Medicare Beneficiaries and Pension Re-
lief Act of 2010 (PRA 2010). New section 430(c)(2)(D) permits
a plan sponsor to reduce a plan’s minimum required contribu-
tion for certain years by electing to use an alternative shortfall
amortization schedule. This notice also describes anticipated
future guidance that will apply for sponsors of single-employer
defined benefit pension plans with respect to an election to use
these special funding rules.
Notice 2010–56, page 254.
This notice provides guidance on filing Form 5500 and Sched-
ule MB for multiemployer defined benefit plans for plan spon-
sors who are considering use of the special funding rules under
section 431(b)(8) of the Code, as added by the Preservation of
Access to Care for Medicare Beneficiaries and Pension Relief
Act of 2010 (PRA 2010), for a plan year for which the Form
5500 (and Schedule MB) is filed. This notice also describes
anticipated future guidance that will apply for sponsors of mul-
tiemployer defined benefit pension plans with respect to the
special funding rules.
EXEMPT ORGANIZATIONS
T.D. 9492, page 242.
Final regulations under section 4965 and other sections of
the Code provide guidance relating to entity-level and man-
ager-level excise taxes with respect to prohibited tax shelter
transactions to which tax-exempt entities are parties; certain
disclosure obligations with respect to such transactions; and
the requirement of a return and time for filing with respect to
section 4965 taxes.
ADMINISTRATIVE
REG–139343–08, page 256.
Proposed regulations under section 6109 of the Code amend
the regulations relating to the imposition of certain user fees
on certain tax practitioners. A public hearing is scheduled for
August 24, 2010.
Announcement 2010–50, page 260.
This document contains corrections to final regulations
(T.D. 9487, 2010–28 I.R.B. 48) regarding the treatment of
prepaid income under the built-in gain provisions of section
382(h).
A
ctions Relating to Court Decisions is on the page following the Introduction.
Announcements of Disbarments and Suspensions begin on page 261.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
August 16, 20102010–33 I.R.B.

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 acquiesces in result
but not the
reasoninginthefollowingde-
cision:
Xilinx, In
c. v.
Commissi
oner,
1
598 F.3d. 1
191 (9th Cir. 2010),
aff’g,125
T.C. 37 (2005).
1
Although the Service believes the Ninth Circuit’s opinion is erroneous, the Service acquiesces in the result of the decision with respect to employeestock options granted in taxable years
governed by the section 482 regulations in effectprior to their amendment in 2003 because the significance of the Ninth Circuit’s opinion is mooted bythe 2003 amendments to Treas. Reg.
§§ 1.482–1(b)(1) and 1.482–7(d).
2010–33 I.R.B.August 16, 2010

August 16, 20102010–33 I.R.B.
Place missing child here.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 4965.
—Excise Tax
on Certain Tax
-Exempt
Entities Entering into
Prohibited Tax Shelter
Transactions
26 CFR 53.4965–1: Definition of tax-exempt party to
a prohibited tax shelter transaction.
T.D. 9492
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1, 53, 54, 301
and 602
Excise Taxes on Prohibited
Tax Shelter Transactions
and Related Disclosure
Requirements; Disclosure
Requirements with Respect
to Prohibited Tax Shelter
Transactions; Requirement of
Return and Time for Filing
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains fi-
nal regulations that provide guidance un-
der section 4965 of the Internal Revenue
Code (Code), relating to entity-level and
manager-level excise taxes with respect to
prohibited tax shelter transactions to which
tax-exempt entities are parties; sections
6033(a)(2) and 6011(g), relating to certain
disclosure obligations with respect to such
transactions; and sections 6011 and 6071,
relating to the requirement of a return and
time for filing with respect to section 4965
taxes. This action is necessary to imple-
ment section 516 of the Tax Increase Pre-
vention Reconciliation Act of 2005. These
final regulations affect a broad array of tax-
exempt entities, including charities, state
and local government entities, Indian tribal
governments and employee benefit plans,
as well as entity managers of these entities.
DATES:Effect
ive Date:These regulations
are effective
July 6, 2010.
Applicabilit
yDate:For dates of appli-
cability, see
§§1.6033–5(f), 53.4965–9(b)
and (c), 53.60
71–1(h), 54.6011–1(d),
301.6011(g)
–1(j) and 301.6033–5(b).
FOR FURTHER INFORMATION
CONTACT: For questions concerning
these regulations, contact Benjamin Akins
at (202) 622–1124 or Michael Blumenfeld
at (202) 622–6070.For questions
specifically relating to qualified pension
plans, individual retirement accounts, and
similar tax-favored savings arrangements,
contact Cathy Pastor at (202) 622–6090
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–2079. The collection of
information in these final regulations is
in §301.6011(g)–1. The collection of in-
formation in §301.6011(g)–1 flows from
section 6011(g), which requires a taxable
party to a prohibited tax shelter transac-
tion to disclose to any tax-exempt entity
that is a party to the transaction that the
transaction is a prohibited tax shelter
transaction. The likely recordkeepers are
taxable entities or individuals that partici-
pate in prohibited tax shelter transactions.
The estimated number of recordkeepers
is between 1,250 and 6,500. The infor-
mation that is required to be collected for
purposes of §301.6011(g)–1 is a subset
of information that is required to be col-
lected in order to complete and file Form
8886,“Reportable Transaction Disclosure
Statement.”The estimated paperwork bur-
den for taxpayers filling out Form 8886 is
approved under OMB number 1545–1800.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid contro
l number assigned by the Of-
fice of Manage
ment and Budget.
Books and reco
rds relating to the col-
lection of inf
ormation must be retained as
long as their c
ontents may become mate-
rial in the ad
ministration of any internal
revenue law.
Generally, returns and return
information
are confidential, as required
by section 61
03.
Background
The Tax Incr
ease Prevention and Rec-
onciliatio
n Act of 2005, Public Law
109–222 (12
0 Stat. 345) (TIPRA), enacted
on May 17, 20
06, defines certain transac-
tions as pro
hibited tax shelter transactions
and imposes
excise taxes and disclosure
requireme
nts with respect to prohibited tax
shelter tr
ansactions to which a tax-exempt
entity is a
party. Section 516 of TIPRA
added new s
ection 4965 and amended sec-
tions 603
3(a)(2) and 6011(g) of the Code.
On July 6, 2
007, the IRS and the
Treasury
Department published final and
temporar
y regulations under sections
6011 and 6
071 (T.D. 9334, 2007–2 C.B.
382) and t
emporary regulations under
section
6033 (T.D. 9335, 2007–2 C.B.
380) in t
heFederal Register(72 FR
36869; 7
2 FR 36871). Also on July
6, 2007,
the IRS and the Treasury
Departm
ent issued a notice of proposed
rulema
king cross-referencing those
tempor
ary regulations (REG–142039–06,
2007–2
C.B. 415; REG–139268–06,
2007–2
C.B. 715) in theFederal Register
(72 FR 3
6927). This notice of proposed
rulem
aking also included proposed
regul
ations under sections 4965 and
6011(
g). On August 16, 2007, and August
31, 20
07, the IRS and the Treasury
Depar
tment issued corrections to T.D.
9334 (
72 FR 45894; 72 FR 50211). On
Augu
st 16, 2007, the IRS and the Treasury
Depa
rtment issued corrections to T.D.
9335
(72 FR 45890).
The I
RS did not receive any comments
or re
quests for a public hearing. Accord-
ingl
y, the proposed regulations are adopted
as fi
nal by this Treasury decision with cer-
tai
n revisions described below.
2010–33 I.R.B.242August 16, 2010

Explanation of Provisions
Definition of Party to a Prohibited Tax
Shelter Transaction
The proposed regulations set forth a
three-part definition of the term “party to
a prohibited tax shelter transaction.” Un-
der the proposed regulations, a tax-exempt
entityisapartytoaprohibitedtaxshel-
ter transaction if it: (1) facilitates a pro-
hibited tax shelter transaction by reason of
its exempt, tax indifferent or tax-favored
status; (2) enters into a listed transaction
and reflects on its tax return (whether an
original or an amended return) a reduction
or elimination of its liability for applicable
Federal employment, excise or unrelated
business income taxes that is derived di-
rectly or indirectly from tax consequences
or tax strategy described in the published
guidance that lists the transaction; or (3) is
identified in published guidance, by type,
class or role, as a party to a prohibited
tax shelter transaction. The final regula-
tions eliminate the second part of this def-
inition; therefore, a tax-exempt entity that
enters into a transaction to reduce or elimi-
nate its own tax liability generally will not
be considered a party to a prohibited tax
shelter transaction under these regulations.
However, under the third part of the defi-
nition in the proposed regulations, which
is retained in the final regulations, the IRS
and the Treasury Department may iden-
tify in published guidance specific transac-
tions or circumstances in which a tax-ex-
empt entity that enters into a transaction
to reduce or eliminate its own tax liability
will be treated as a party to a prohibited tax
shelter transaction for purposes of section
4965.
A variety of circumstances may arise in
which an entity generally exempt from tax
may nevertheless be subject to some form
of Federal taxation. When such circum-
stances arise, some tax-exempt entities
may seek ways to reduce or eliminate the
Federal tax as would a similarly situated
entity that is not exempt from tax. In
general, exempt status does not provide
additional opportunities or incentives for
a tax-exempt entity to engage in a listed
transaction to reduce or eliminate taxes
imposed upon it. Further, a tax-exempt
entity that engages in such transactions
is subject to the same disclosure rules
and increased penalties as other similarly
situated taxpayers (for example, sections
6011, 6707A, 6662, 6662A and 6663).
Accordingly, the IRS and the Treasury
Department believe that, as a general rule,
a tax-exempt entity that engages in a listed
transaction to reduce or eliminate its own
tax liability should not be considered a
party to a prohibited tax shelter transaction
for purposes of section 4965. The IRS and
the Treasury Department have retained the
ability to provide exceptions to this general
rule through published guidance that iden-
tifies, by type, class or role, a tax-exempt
entity as a party to a prohibited tax shelter
transaction, including a tax-exempt entity
that enters into a particular transaction to
reduce or eliminate its own tax liability.
Because the IRS and the Treasury De-
partment have eliminated the second part
of the definition of the term “party,” cer-
tain other conforming changes were made
to the regulations.
Timing for Disclosure by Taxable Party
to Tax-Exempt Party
The proposed regulations required a
taxable party to a prohibited tax shelter
transaction to disclose by statement to
each tax-exempt entity that the taxable
party knows or has reason to know is a
party to such transaction that the transac-
tion is a prohibited tax shelter transaction.
The proposed regulations required the tax-
able party to make the disclosure within
60 days after the last to occur of (1) the
date the person becomes a taxable party to
the transaction, or (2) the date the taxable
party knows or has reason to know that the
tax-exempt entity is a party to the transac-
tion. The proposed regulations provided
an exception if the person does not know
or have reason to know that the tax-ex-
empt entity is a party to the transaction
on or before the first date on which the
transaction is required to be disclosed by
the person under section 6011.
These final regulations modify the rule
governing the timing of this disclosure.
The taxable party now must make the dis-
closure within 60 days after the last to oc-
cur of (1) the date the person becomes a
taxable party to the transaction, (2) the
date the taxable party knows or has rea-
son to know that the tax-exempt entity is
a party to the transaction, or (3) July 6,
2010. These final regulations retain the ex-
ception for persons who do not know or
have reason to know that a tax-exempt en-
tity is a party to the transaction on or before
the first date on which the transaction is re-
quired to be disclosed by the person under
section 6011.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations. It is
hereby certified that the collection of infor-
mation in §301.6011(g)–1 will not have a
significant economic impact on a substan-
tial number of small entities. Accordingly,
a regulatory flexibility analysis under the
Regulatory Flexibility Act (5 U.S.C. 601)
(RFA) is not required. The effect of these
regulations on small entities flows directly
from the statutes these regulations imple-
ment. Section 6011(g), as amended by
TIPRA, requires any taxable party to a pro-
hibited tax shelter transaction to notify any
tax-exempt entity that is a party to such
transaction that the transaction is a prohib-
ited tax shelter transaction. In implement-
ing this statute, §301.6011(g)–1 of the reg-
ulations requires every taxable party to a
prohibited tax shelter transaction (or a sin-
gle taxable party acting by designation on
behalf of other taxable parties) to provide
to every tax-exempt entity that the taxable
party knows or has reason to know is a
party to the transaction a single statement
disclosing that the transaction is a prohib-
ited tax shelter transaction within 60 days
afterthelasttooccurof: (1)thedatethe
taxable person becomes a taxable party to
the transaction; (2) the date the taxable
party knows or has reason to know that the
tax-exempt entity is a party to the transac-
tion; or (3) July 6, 2010. These final reg-
ulations retain the exception for persons
who do not know or have reason to know
that a tax-exempt entity is a party to the
transaction on or before the first date on
whichthetransactionisrequiredtobedis-
closed by the person under section 6011.
Moreover, it is unlikely that a significant
number of small businesses will engage in
transactions that are subject to disclosure
under §301.6011(g).
August 16, 20102432010–33 I.R.B.

Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ing these regulations was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal authors of these regula-
tions are Benjamin Akins and Cathy Pas-
tor, Office of Division Counsel/Associate
Chief Counsel (Tax Exempt and Govern-
ment Entities). However, other personnel
from the IRS and the Treasury Department
participated in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 53, 54,
301, and 602 are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6033–5 is added to
read as follows:
§1.6033–5 Disclosure by tax-exempt
entities that are parties to certain
reportable transactions.
(a)In general. Every tax-exempt entity
(as defined in section 4965(c)) shall file
with the IRS on Form 8886–T,“Disclo-
sure by Tax-Exempt Entity Regarding Pro-
hibited Tax Shelter Transaction”(or a suc-
cessor form), in accordance with this sec-
tion and the instructions to the form, a dis-
closure of—
(1) Such entity’s being a party (as de-
fined in §53.4965–4 of this chapter) to a
prohibited tax shelter transaction (as de-
fined in section 4965(e)); and
(2) The identity of any other party
(whether taxable or tax-exempt) to such
transaction that is known to the tax-ex-
empt entity.
(b)Frequency of disclosure.Asingle
disclosure is required for each prohibited
tax shelter transaction.
(c)By whom disclosure is made—(1)
Tax-exempt entities referred to in section
4965(c)(1), (2) or (3). In the case of
tax-exempt entities referred to in section
4965(c)(1), (2) or (3), the disclosure re-
quired by this section must be made by the
entity.
(2)Tax-exempt entities referred to in
section 4965(c)(4), (5), (6) or (7).Inthe
case of tax-exempt entities referred to in
section 4965(c)(4), (5), (6) or (7), includ-
ing a fully self-directed qualified plan,
IRA, or other savings arrangement, the
disclosure required by this section must be
made by the entity manager (as defined in
section 4965(d)(2)) of the entity.
(d)Time and place for filing—(1)In
general. The disclosure required by this
section shall be filed on or before May 15
of the calendar year following the close
of the calendar year during which the tax-
exempt entity entered into the prohibited
tax shelter transaction.
(2)Subsequently listed transactions.In
the case of subsequently listed transactions
(as defined in section 4965(e)(2)), the dis-
closure required by this section shall be
filed on or before May 15 of the calen-
dar year following the close of the calen-
dar year during which the transaction was
identified by the Secretary as a listed trans-
action.
(3)Transition rule. If a tax-exempt en-
tity entered into a prohibited tax shelter
transaction after May 17, 2006, and before
January 1, 2007, the disclosure required
by this section shall be filed on or before
November 2, 2007.
(4)No disclosure. Disclosure is not re-
quired with respect to any prohibited tax
shelter transaction entered into by a tax-ex-
empt entity on or before May 17, 2006.
(e)Penalty for failure to provide disclo-
sure statement. See section 6652(c)(3) for
the penalty applicable to the failure to dis-
close a prohibited tax shelter transaction in
accordance withthis section.
(f)Effective date/applicability date.
This section applies with respect to trans-
actions entered into by a tax-exempt entity
after May 17, 2006.
§1.6033–5T [Removed].
Par. 3. Section 1.6033–5T is removed.
PART 53—FOUNDATION AND
SIMILAR EXCISE TAXES
Par. 4. The authority citation for part
53 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 5. Sections 53.4965–1 through
53.4965–9 are added to subpart K to read
as follows:
§53.4965–1 Overview.
(a)Entity-level excise tax. Section 4965
imposes two excise taxes with respect to
certain tax shelter transactions to which
tax-exempt entities are parties. Section
4965(a)(1) imposes anentity-level excise
tax on certain tax-exempt entities that are
parties to “prohibited tax shelter transac-
tions,” as defined in section 4965(e). See
§53.4965–2 for the discussion of covered
tax-exempt entities. See §53.4965–3 for
the definition of prohibited tax shelter
transactions. See §53.4965–4 for the defi-
nition of tax-exempt party to a prohibited
tax shelter transaction. The entity-level
excise tax under section 4965(a)(1) is im-
posed on a specified percentage of the
entity’s net income or proceeds that are
attributable to the transaction for the rel-
evant tax year (or a period within that
tax year). The rate of tax depends on
whether the entity knew or had reason to
know that the transaction was a prohib-
ited tax shelter transaction at the time the
entity became a party to the transaction.
See §53.4965–7(a) for the discussion of
the entity-level excise tax under section
4965(a)(1). See §53.4965–6 for the dis-
cussion of “knowing or having reason to
know.” See §53.4965–8 for the defini-
tion of net income and proceeds and the
standard for allocating net income and pro-
ceeds that are attributable to a prohibited
tax shelter transaction to various periods.
(b)Manager-level excise tax. Section
4965(a)(2) imposes a manager-level ex-
cise tax on “entity managers,” as defined
in section 4965(d), of tax-exempt entities
who approve the entity as a party (or other-
wise cause the entity to be a party) to a pro-
hibited tax shelter transaction and know
or have reason to know, at the time the
tax-exempt entity enters into the transac-
tion, that the transaction is a prohibited tax
shelter transaction. See §53.4965–5 for
the definition of entity manager and the
meaning of “approving or otherwise caus-
ing,” and §53.4965–6 for the discussion
of “knowing or having reason to know.”
See §53.4965–7(b) for the discussion of
the manager-level excise tax under section
4965(a)(2).
2010–33 I.R.B.244August 16, 2010

(c)Effective/applicability dates.See
§53.4965–9 for the discussion of the rel-
evant effective and applicability dates.
§53.4965–2 Covered tax-exempt entities.
(a)In general. Under section 4965(c),
the term “tax-exempt entity” refers to enti-
ties that are described in sections 501(c),
501(d), or 170(c) (other than the United
States), Indian tribalgovernments (within
the meaning of section 7701(a)(40)), and
tax-qualified pension plans, individual re-
tirement arrangements and similar tax-fa-
vored savings arrangements that are de-
scribed in sections 4979(e)(1), (2) or (3),
529, 457(b), or 4973(a). The tax-exempt
entities referred to in section 4965(c) are
divided into two broad categories, non-
plan entities and plan entities.
(b)Non-plan entities. Non-plan entities
are—
(1) Entities described in section 501(c);
(2) Religious or apostolic associa-
tions or corporations described in section
501(d);
(3) Entities described in section 170(c),
including states, possessions of the United
States, the District of Columbia, political
subdivisions of states and political subdi-
visions of possessions of the United States
(but not including the United States); and
(4) Indian tribal governments within the
meaning of section 7701(a)(40).
(c)Plan entities. Plan entities are—
(1) Entities described in section
4979(e)(1) (qualified plans under section
401(a), including qualified cash or de-
ferred arrangements under section 401(k)
(including a section 401(k) plan that al-
lows designated Roth contributions));
(2) Entities described in section
4979(e)(2) (annuity plans described in
section 403(a));
(3) Entities described in section
4979(e)(3) (annuity contracts described in
section 403(b), including a section 403(b)
arrangement that allows Roth contribu-
tions);
(4) Qualified tuition programs de-
scribedinsection529;
(5) Eligible deferred compensation
plans under section 457(b) that are main-
tained by a governmental employer as
defined in section 457(e)(1)(A);
(6) Arrangements described in section
4973(a) which include—
(i) Individual retirement plans defined
in section 408(a) and (b), including—
(A) Simplified employee pensions
(SEPs) under section 408(k);
(B) Simple individual retirement ac-
counts (SIMPLEs) under section 408(p);
(C) Deemed individual retirement ac-
counts or annuities (IRAs) qualified under
a qualified plan (deemed IRAs) under sec-
tion 408(q); and
(D)RothIRAsundersection408A.
(ii) Arrangements described in section
220(d) (Archer Medical Savings Accounts
(MSAs));
(iii) Arrangements described in section
403(b)(7) (custodial accounts treated as
annuity contracts);
(iv) Arrangements described in sec-
tion 530 (Coverdell education savings
accounts); and
(v) Arrangements described in section
223(d) (health savings accounts (HSAs)).
(d)Effective/applicability dates.See
§53.4965–9 for the discussion of the rel-
evant effective and applicability dates.
§53.4965–3 Prohibited tax shelter
transactions.
(a)In general. Under section 4965(e),
the termprohibited tax shelter transaction
means—
(1) Listed transactions within the mean-
ing of section 6707A(c)(2), including sub-
sequently listed transactions described in
paragraph (b) of this section; and
(2) Prohibited reportable transactions,
which consist of the following reportable
transactions within the meaning of section
6707A(c)(1)—
(i) Confidential transactions, as de-
scribed in §1.6011–4(b)(3) of this chapter;
or
(ii) Transactions with contractual pro-
tection, as described in §1.6011–4(b)(4) of
this chapter.
(b)Subsequently listed transactions.
A subsequently listed transaction for pur-
poses of section 4965 is a transaction that
is identified by the Secretary as a listed
transaction after the tax-exempt entity
has entered into the transaction and that
was not a prohibited reportable trans-
action (within the meaning of section
4965(e)(1)(C) and paragraph (a)(2) of this
section) at the time the entity entered into
the transaction.
(c)Cross-reference. The determination
of whether a transaction is a listed trans-
action or a prohibited reportable transac-
tion for section 4965 purposes shall be
made under the law applicable to section
6707A(c)(1) and (c)(2).
(d)Effective/applicability dates.See
§53.4965–9 for the discussion of the rel-
evant effective and applicability dates.
§53.4965–4 Definition of tax-exempt party
to a prohibited tax shelter transaction.
(a)In general. For purposes of sections
4965 and 6033(a)(2), a tax-exempt entity
is a party to a prohibited tax shelter trans-
action if the entity—
(1) Facilitates a prohibited tax shelter
transaction by reason of its tax-exempt, tax
indifferent or tax-favored status; or
(2) Is identified in published guidance,
by type, class or role, as a party to a pro-
hibited tax shelter transaction.
(b) Published guidance may identify
which tax-exempt entities, by type, class
or role, will not be treated as a party to a
prohibited tax shelter transaction.
(c)Example. The following example
illustrates the principle of paragraph (a)(1)
of this section:
Example. A tax-exempt entity enters into a trans-
action (Transaction A) with an S corporation. Trans-
action A is the same as or substantially similar to
the transaction identified by the Secretary as a listed
transaction in Notice 2004–30, 2004–1 C.B. 828. The
tax-exempt entity’s role in Transaction A is similar to
the role of the tax-exempt party, as described in No-
tice 2004–30. Under the terms of the transaction, as
described in Notice 2004–30, the tax-exempt entity
receives the S corporation stock and purports to aid
the S corporation and its shareholders in avoiding tax-
able income. The tax-exempt entity facilitates Trans-
action A by reason of its tax-exempt, tax indifferent
or tax-favored status. Accordingly, the tax-exempt
entity is a party to Transaction A for purposes of sec-
tions 4965 and 6033(a)(2). See §601.601(d)(2)(ii)(b)
of this chapter.
(d)Effective/applicability dates.See
§53.4965–9 for the discussion of the rel-
evant effective and applicability dates.
§53.4965–5 Entity managers and related
definitions.
(a)Entity manager of a non-plan
entity—(1)In general. Under sec-
tion 4965(d)(1), anentity manager of a
non-plan entityis—
(i) A person with the authority or re-
sponsibility similar to that exercised by an
August 16, 20102452010–33 I.R.B.

officer, director, or trustee of an organiza-
tion (that is, the non-plan entity); and
(ii) With respect to any act, the person
who has final authority or responsibility
(either individually or as a member of a
collective body) with respect to such act.
(2)Definition of officer. For purposes
of paragraph (a)(1)(i) of this section, a per-
sonisconsideredtobeanofficerofthe
non-plan entity (or to have similar author-
ity or responsibility) if the person—
(i) Is specifically designated as such
under the certificate of incorporation,
by-laws, or other constitutive documents
of the non-plan entity; or
(ii) Regularly exercises general author-
ity to make administrative or policy deci-
sions on behalf of the non-plan entity.
(3)Exception for actsrequiring ap-
proval by a superior. With respect to any
act, any person is not described in para-
graph (a)(2)(ii) of this section if the person
has authority merely to recommend partic-
ular administrative or policy decisions, but
not to implement them without approval
of a superior.
(4)Delegation of authority. A person
is an entity manager of a non-plan entity
within the meaning of paragraph (a)(1)(ii)
of this section if, with respect to any pro-
hibited tax shelter transaction, such person
has been delegated final authority or re-
sponsibility with respect to such transac-
tion (including by transaction type or dol-
lar amount) by a person described in para-
graph (a)(1)(i) of this section or the gov-
erning board of the entity. For example,
an investment manager is an entity man-
ager with respect to a prohibited tax shel-
ter transaction if the non-plan entity’s gov-
erning body delegated to the investment
manager the final authority to make certain
investment decisions and, in the exercise
of that authority, the manager committed
the entity to the transaction. To be consid-
ered an entity manager of a non-plan entity
within the meaning of paragraph (a)(1)(ii)
of this section, a person need not be an em-
ployee of the entity. A person is not de-
scribed in paragraph (a)(1)(ii) of this sec-
tion if the person is merely implementing
a decision made by a superior.
(b)Entity manager of a plan entity—(1)
In general. Under section 4965(d)(2), an
entity manager of a plan entityis the per-
son who approves or otherwise causes the
entitytobeapartytotheprohibitedtax
shelter transaction.
(2)Special rule for plan participants
and beneficiaries who have investment
elections—(i)Fully self-directed plans
or arrangements. In the case of a fully
self-directed qualified plan, IRA, or other
savings arrangement (including a case
where a plan participant or beneficiary is
given a list of prohibited investments, such
as collectibles), if the plan participant or
beneficiary selected a certain investment
and, therefore, approved the plan entity to
become a party to a prohibited tax shel-
ter transaction, the plan participant or the
beneficiary is an entity manager.
(ii)Plans or arrangements with limited
investment options. In the case of a quali-
fied plan, IRA, or other savings arrange-
ment where a plan participant or benefi-
ciary is offered a limited number of in-
vestment options from which to choose,
the person responsible for determining the
pre-selected investment options is an en-
tity manager and the plan participant or the
beneficiary generally is not an entity man-
ager.
(c)Meaning of “approves or otherwise
causes”—(1)In general.Apersonis
treated as approving or otherwise causing
a tax-exempt entity to become a party to
a prohibited tax shelter transaction if the
person has the authority to commit the en-
tity to the transaction, either individually
or as a member of a collective body, and
the person exercises that authority.
(2)Collective bodies. If a person shares
the authority described in paragraph (c)(1)
of this section as a member of a collec-
tive body (for example, board of trustees
or committee), the person will be consid-
ered to have exercised such authority if the
person voted in favor of the entity becom-
ing a party to the transaction. However, a
member of the collective body will not be
treated as having exercised the authority
described in paragraph (c)(1) of this sec-
tion if he or she voted against a resolu-
tion that constituted approval or an act that
caused the tax-exempt entity to be a party
to a prohibited tax shelter transaction, ab-
stained from voting for such approval, or
otherwise failed to vote in favor of such ap-
proval.
(3)Exceptions—(i)Successor in inter-
est. If a tax-exempt entity that is a party to
a prohibited tax shelter transaction is dis-
solved, liquidated, or merged into a suc-
cessor entity, an entity manager of the suc-
cessor entity will not, solely by reason of
the reorganization, be treated as approving
or otherwise causing the successor entity
to become a party to a prohibited tax shel-
ter transaction, provided that the reorgani-
zation of the tax-exempt entity does not re-
sult in a material change to the terms of
the transaction. For purposes of this para-
graph (c)(3)(i), a material change includes
an extension or renewal of the agreement
(other than an extension or renewal that re-
sults from another party to the transaction
unilaterally exercising an option granted
by the agreement) or a more than inci-
dental change to any payment under the
agreement. A change for the sole purpose
of substituting the successor entity for the
original tax-exempt party is not a material
change.
(ii)Exercise or nonexercise of options.
Nonexercise of an option pursuant to a
transaction involving the tax-exempt en-
tity generally will not constitute an act of
approving or causing the entity to be a
party to the transaction. If, pursuant to a
transaction involving the tax-exempt en-
tity, the entity manager exercises an option
(such as a repurchase option), the entity
manager will not be subject to the entity
manager-level tax if the exercise of the op-
tion does not result in the tax-exempt entity
becoming a party to a second transaction
that is a prohibited taxshelter transaction.
(4)Example. The following exam-
ple illustrates the principles of paragraph
(c)(3)(ii) of this section:
Example. In a sale-in, lease-out (SILO) transac-
tion described in Notice 2005–13, 2005–1 C.B. 630,
X, which is a non-plan entity, has purported to sell
property to Y, a taxable entity and lease it back for a
term of years. At the end of the basic lease term, X
has the option of “repurchasing” the property from Y
for a predetermined purchase price, with funds that
have been set aside at the inception of the transaction
for that purpose. The entity manager, by deciding to
exercise or not exercise the“repurchase” option is not
approving or otherwise causing the non-plan entity
to become a party to a second prohibited tax shelter
transaction. See §601.601(d)(2)(ii)(b) of this chapter.
(5)Coordination with the rea-
son-to-know standard. The determination
that an entity manager approved or caused
atax-exemptentitytobeapartytoapro-
hibited tax shelter transaction, by itself,
does not establish liability for the section
4965(a)(2) tax. For rules on determining
whether an entity manager knew or had
reason to know that the transaction was
a prohibited tax shelter transaction, see
§53.4965–6(b).
2010–33 I.R.B.246August 16, 2010

(d)Effective/applicability dates.See
§53.4965–9 for the discussion of the rel-
evant effective and applicability dates.
§53.4965–6 Meaning of “knows or has
reason to know”.
(a)Attribution to the entity.Anentity
will be treated as knowing or having rea-
son to know for section 4965 purposes if
one or more of its entity managers knew
or had reason to know that the transaction
was a prohibited tax shelter transaction at
the time the entity manager(s) approved
the entity as (or otherwise caused the en-
tity to be) a party to the transaction. The
entity shall be attributed the knowledge or
reason to know of any entity manager de-
scribed in §53.4965–5(a)(1)(i) even if that
entity manager does not approve the entity
as (or otherwise cause the entity to be) a
party to the transaction.
(b)Determining whether an entity man-
ager knew or had reason to know—(1)In
general. Whether an entity manager knew
or had reason to know that a transaction
is a prohibited tax shelter transaction is
based on all facts and circumstances. In
order for an entity manager to know or
have reason to know that a transaction is
a prohibited tax shelter transaction, the en-
tity manager must have knowledge of suf-
ficient facts that would lead a reasonable
person to conclude that the transaction is
a prohibited tax shelter transaction. An
entity manager will be considered to have
“reason to know” if a reasonable person in
the entity manager’s circumstances would
conclude that the transaction was a prohib-
ited tax shelter transaction based on all the
facts reasonably available to the manager
at the time of approving the entity as (or
otherwise causing the entity to be) a party
to the transaction. Factors that will be con-
sidered in determining whether a reason-
able person in the entity manager’s circum-
stances would conclude that the transac-
tion was a prohibited tax shelter transac-
tion include, but are not limited to—
(i) The presence of tax shelter indicia
(see paragraph (b)(2) of this section);
(ii) Whether the entity manager re-
ceived a disclosure statement prior to the
consummation of the transaction indicat-
ing that the transaction may be a prohib-
ited tax shelter transaction (see paragraph
(b)(3) of this section); and
(iii) Whether the entity manager made
appropriate inquiries into the transaction
(see paragraph (b)(4) of this section).
(2)Tax-shelter indicia. The presence
of indicia that a transaction is a tax shelter
will be treated as an indication that the en-
tity manager knew or had reason to know
that the transaction was a prohibited tax
shelter transaction. Tax shelter indicia in-
clude but are not limited to—
(i) The transaction is extraordinary for
the entity considering prior investment ac-
tivity;
(ii) The transaction promises an eco-
nomic return for the organization that is ex-
ceptional considering the amount invested
by, the participation of, or the absence of
risk to the organization; or
(iii) The transaction is of significant
size relative to the receipts of the entity.
(3)Effect of disclosure statements.Re-
ceipt by an entity manager of a statement,
including a statement described in section
6011(g), in advance of a transaction that
the transaction may be a prohibited tax
shelter transaction (or a statement that a
partnership, hedge fund or other invest-
ment conduit may engage in a prohibited
tax shelter transaction in the future) is
a factor relevant in the determination of
whether the entity manager knew or had
reason to know that the transaction is a
prohibited transaction. However, an entity
manager will not be treated as knowing or
having reason to know that the transaction
was a prohibited tax shelter transaction
solely because the entity manager receives
such a disclosure.
(4)Appropriate inquiries.Whatin-
quiries are appropriate will be determined
from the facts and circumstances of each
case. For example, if one or more tax shel-
ter indicia are present or if an entity man-
ager receives a disclosure statement de-
scribed in paragraph (b)(3) of this section,
an entity manager has a responsibility to
inquire further whether the transaction is a
prohibited tax shelter transaction.
(c)Reliance on professional ad-
vice—(1)In general. An entity manager
is not required to obtain the advice of
a professional tax advisor to establish
that the entity manager made appropriate
inquiries. Moreover, not seeking profes-
sional advice, by itself, shall not give rise
to an inference that the entity manager
had reason to know that a transaction is a
prohibited tax shelter transaction.
(2)Reliance on written opinion of pro-
fessional tax advisor. An entity manager
may establish that he or she did not have
a reason to know that a transaction was
a prohibited tax shelter transaction at the
time the tax-exempt entity entered into
the transaction if the entity manager rea-
sonably,andingoodfaith,reliedonthe
written opinion of a professional tax ad-
visor. Reliance on the written opinion
of a professional tax advisor establishes
that the entity manager did not have rea-
son to know if, taking into account all
the facts and circumstances, the reliance
was reasonable and the entity manager
acted in good faith. For example, the en-
tity manager’s education, sophistication,
and business experience will be relevant
in determining whether the reliance was
reasonable and made in good faith. In no
event will an entity manager be considered
to have reasonably relied in good faith
on an opinion unless the requirements of
this paragraph (c)(2) are satisfied. The
fact that these requirements are satisfied,
however, will not necessarily establish
that the entity manager reasonably relied
on the opinion in good faith. For exam-
ple, reliance may not be reasonable or in
good faith if the entity manager knew, or
reasonably should have known, that the
advisor lacked knowledge in the relevant
aspects of Federal tax law.
(i)All facts and circumstances consid-
ered. The advice must be based upon all
pertinent facts and circumstances and the
law as it relates to those facts and circum-
stances. The requirements of this para-
graph (c)(2) are not satisfied if the en-
tity manager fails to disclose a fact that it
knows, or reasonably should know, is rel-
evant to determiningwhether the transac-
tion is a prohibited tax shelter transaction.
(ii)No unreasonable assumptions.The
advice must not be based on unreasonable
factual or legal assumptions (including as-
sumptions as to future events) and must
not unreasonably rely on the representa-
tions, statements, findings, or agreements
of the entity manager or any other person
(including another party to the transaction
or a material advisor within the meaning of
sections 6111 and 6112).
(iii)“More likely than not” opinion.
The written opinion of the professional tax
advisor must apply the appropriate law to
the facts and, based on this analysis, must
conclude that the transaction was not a pro-
August 16, 20102472010–33 I.R.B.

hibited tax shelter transaction at a “more
likely than not” level of certainty at the
time the entity manager approved the en-
tity (or otherwise caused the entity) to be a
party to the transaction.
(3)Special rule. An entity manager’s
reliance on a written opinion of a profes-
sional tax advisor will not be considered
reasonable if the advisor is, or is related to
a person who is, a material advisor with re-
spect to the transaction within the meaning
of sections 6111 and 6112.
(d)Subsequently listed transactions.
An entity manager will not be treated as
knowing or having reason to know that
a transaction (other than a prohibited re-
portable transaction as defined in section
4965(e)(1)(C) and §53.4965–3(a)(2)) is
a prohibited tax shelter transaction if the
entity enters into the transaction before the
date on which the transaction is identified
by the Secretary as a listed transaction.
(e)Effective/applicability dates.See
§53.4965–9 for the discussion of the rel-
evant effective and applicability dates.
§53.4965–7 Taxes on prohibited tax
shelter transactions.
(a)Entity-level taxes—(1)In general.
Entity-level excise taxes apply to non-plan
entities (as defined in §53.4965–2(b)) that
are parties to prohibited tax shelter trans-
actions.
(i)Prohibited tax shelter transactions
other than subsequently listed transac-
tions—(A)Amount of tax if the entity did
not know and did not have reason to know.
If the tax-exempt entity did not know
and did not have reason to know that the
transaction was a prohibited tax shelter
transaction at the time the entity entered
into the transaction, the tax is the highest
rate of tax under section 11 multiplied by
the greater of—
(1) The entity’s net income with respect
to the prohibited tax shelter transaction (af-
ter taking into account any tax imposed by
Subtitle D, other than by this section, with
respect to such transaction) for the taxable
year; or
(2) 75 percent of the proceeds received
by the entity for the taxable year that are
attributable to such transaction.
(B)Amount of tax if the entity knew or
hadreasontoknow. If the tax-exempt
entity knew or had reason to know that
the transaction was a prohibited tax shelter
transaction at the time the entity entered
into the transaction, the tax is the greater
of—
(1) 100 percent of the entity’s net in-
come with respect to the transaction (af-
ter taking into account any tax imposed by
Subtitle D, other than by this section, with
respect to such transaction) for the taxable
year; or
(2) 75 percent of the proceeds received
by the entity for the taxable year that are
attributable to such transaction.
(ii)Subsequently listed transac-
tions—(A)In general. In the case of a
subsequently listed transaction (as defined
in section 4965(e)(2) and §53.4965–3(b)),
the tax-exempt entity’s income and pro-
ceeds attributable to the transaction are
allocated between the period before the
transaction became listed and the period
beginning on the date the transaction
became listed. See §53.4965–8 for the
standard for allocating net income or pro-
ceeds to various periods. The tax for each
taxable year is the highest rate of tax under
section 11 multiplied by the greater of—
(1) The entity’s net income with respect
to the subsequently listed transaction (af-
ter taking into account any tax imposed by
Subtitle D, other than by this section, with
respect to such transaction) for the taxable
year that is allocable to the period begin-
ning on the later of the date such transac-
tion is identified by the Secretary as a listed
transaction or the first day of the taxable
year; or
(2) 75 percent of the proceeds received
by the entity for the taxable year that are
attributable to such transaction and alloca-
ble to the period beginning on the later of
thedatesuchtransactionisidentifiedby
the Secretary as a listed transaction or the
first day of the taxable year.
(B)No increase in tax. The 100 per-
cent tax under section 4965(b)(1)(B) and
§53.4965–7(a)(1)(i)(B) does not apply
to any subsequently listed transaction
(as defined in section 4965(e)(2) and
§53.4965–3(b)) entered into by a tax-ex-
empt entity before the date on which the
transaction is identified by the Secretary
as a listed transaction.
(2)Taxable year. The excise tax im-
posed under section 4965(a)(1) applies for
the taxable year in which the entity be-
comes a party to the prohibited tax shel-
ter transaction and any subsequent taxable
year for which the entity has net income
or proceeds attributable to the transaction.
A taxable year for tax-exempt entities is
the calendar year or fiscal year, as applica-
ble, depending on the basis on which the
tax-exempt entity keeps its books for Fed-
eral income tax purposes. If a tax-exempt
entity has not established a taxable year for
Federal income tax purposes, the entity’s
taxable year for the purpose of determin-
ing the amount and timing of net income
and proceeds attributable to a prohibited
tax shelter transaction will be deemed to be
the annual period theentity uses in keeping
its books and records.
(b)Manager-level taxes—(1)Amount
of tax. If any entity manager approved
or otherwise caused the tax-exempt en-
tity to become a party to a prohibited tax
shelter transaction and knew or had rea-
son to know that the transaction was a
prohibited tax shelter transaction, such
entity manager is liable for the $20,000
tax. See §53.4965–5(d) for the meaning
of approved or otherwise caused. See
§53.4965–6 for the meaning of knew or
had reason to know.
(2)Timing of the entity manager tax.If
a tax-exempt entity enters into a prohib-
ited tax shelter transaction during a tax-
able year of an entity manager, then the
entity manager that approved or otherwise
caused the tax-exempt entity to become a
party to the transaction is liable for the en-
tity manager tax for that taxable year if
the entity manager knew or had reason to
know that the transaction was a prohibited
tax shelter transaction.
(3)Example. The application of para-
graph (b)(2) of this section is illustrated by
the following example:
Example. The entity manager’s taxable year is the
calendar year. On December 1, 2006, the entity man-
ager approved or otherwisecaused the tax-exempt en-
tity to become a party to a transaction that the entity
manager knew or had reason to know was a prohib-
ited tax shelter transaction. The tax-exempt entity en-
tered into the transaction on January 31, 2007. The
entity manager is liable for the entity manager level
tax for the entity manager’s2007 taxable year, during
which the tax-exempt entity entered into the prohib-
ited tax shelter transaction.
(4)Separate liability. If more than one
entity manager approved or caused a tax-
exempt entity to become a party to a pro-
hibited tax shelter transaction while know-
ing (or having reason to know) that the
transaction was a prohibited tax shelter
transaction, then each such entity manager
is separately (that is, not jointly and sever-
2010–33 I.R.B.248August 16, 2010

ally) liable for the entity manager-level tax
with respect to the transaction.
(c)Effective/applicability dates.See
§53.4965–9 for the discussion of the rel-
evant effective and applicability dates.
§53.4965–8 Definition of net income and
proceeds and standard for allocating net
income or proceeds to various periods.
(a)In general. For purposes of sec-
tion 4965(a), the amount and the timing of
the net income and proceeds attributable to
the prohibited tax shelter transaction will
be computed in a manner consistent with
the substance of the transaction. In de-
termining the substance of listed transac-
tions, the IRS will look to, among other
items, the listing guidance and any subse-
quent guidance published in the Internal
Revenue Bulletin relating to the transac-
tion.
(b)Definition of net income and pro-
ceeds—(1)Net income. A tax-exempt en-
tity’s net income attributable to a prohib-
ited tax shelter transaction is its gross in-
come derived from the transaction reduced
by those deductions that are attributable to
the transaction and that would be allowed
by chapter 1 of the Internal Revenue Code
if the tax-exempt entity were treated as a
taxable entity for this purpose, and further
reduced by taxes imposed by Subtitle D,
other than by this section, with respect to
the transaction.
(2)Proceeds—(i)Tax-exempt entities
that facilitate the transaction by reason of
their tax-exempt, tax indifferent or tax-fa-
vored status. Solely for purposes of sec-
tion 4965, in the case of a tax-exempt en-
tity that is a party to the transaction by
reason of §53.4965–4(a)(1) of this chap-
ter, the termproceedsmeans the gross
amount of the tax-exempt entity’s consid-
eration for facilitating the transaction, not
reduced for any costs or expenses attrib-
utable to the transaction. Published guid-
ance with respect to a particular prohibited
tax shelter transaction may designate addi-
tional amounts as proceeds from the trans-
action for section 4965 purposes.
(ii)Treatment of gifts and contribu-
tions. To the extent not otherwise included
in the definition of proceeds in paragraph
(b)(2)(i) of this section, any amount that
is a gift or a contribution to a tax-exempt
entity and is attributable to a prohibited
tax shelter transaction will be treated as
proceeds for section 4965 purposes, unre-
duced by any associated expenses.
(c)Allocation of net income and pro-
ceeds—(1)In general. For purposes
of section 4965(a), the net income and
proceeds attributable to a prohibited tax
shelter transaction must be allocated in
a manner consistent with the tax-exempt
entity’s established method of accounting
for Federal income tax purposes. If the
tax-exempt entity has not established a
method of accounting for Federal income
tax purposes, solely for purposes of section
4965(a) the tax-exempt entity must use the
cash receipts and disbursements method
of accounting (cash method) provided for
in section 446 of the Internal Revenue
Code to determine the amount and timing
of net income and proceeds attributable to
a prohibited tax shelter transaction.
(2)Special rule. If a tax-exempt en-
tity has established a method of account-
ing other than the cash method, the tax-
exempt entity may nevertheless use the
cash method of accounting to determine
the amount of the net income and pro-
ceeds—
(i) Attributable to a prohibited tax shel-
ter transaction entered into prior to the ef-
fective date of section 4965(a) tax and al-
locable to pre- and post-effective date pe-
riods; or
(ii) Attributable to a subsequently listed
transaction and allocable to pre- and post-
listing periods.
(d)Transition year rules. In the case of
the taxable year that includes August 16,
2006 (the transition year), the IRS will
treat the period beginning on the first
day of the transition year and ending on
August 15, 2006, and the period beginning
on August 16, 2006, and ending on the last
day of the transition year as short taxable
years. This treatment is solely for purposes
of allocating net income or proceeds under
section 4965. The tax-exempt entity
continues to file tax returns for the full
taxable year, does not file tax returns with
respect to these deemed short taxable
years and does not otherwise take the short
taxable years into account for Federal tax
purposes. Accordingly, the net income
or proceeds that are properly allocated to
the transition year in accordance with this
section will be treated as allocable to the
period—
(1) Ending on or before August 15,
2006 (and accordingly not subject to tax
under section 4965(a)) to the extent such
net income or proceeds would have been
properly taken into account in accordance
with this section by the tax-exempt en-
tity in the deemed short year ending on
August 15, 2006; and
(2) Beginning after August 15, 2006
(and accordingly subject to tax under sec-
tion 4965(a)) to the extent such income or
proceeds would have been properly taken
into account in accordance with this sec-
tion by the tax-exempt entity in the short
year beginning August 16, 2006.
(e)Allocation to pre- and post-list-
ing periods. If a transaction other than
a prohibited reportable transaction (as
defined in section 4965(e)(1)(C) and
§53.4965–3(a)(2)) to which the tax-ex-
empt entity is a party is subsequently
identified in published guidance as a listed
transaction during a taxable year of the
entity (the listing year) in which it has
net income or proceeds attributable to the
transaction, the net income or proceeds are
allocated between the pre- and post-listing
periods. The IRS will treat the period
beginning on the first day of the listing
year and ending on the day immediately
preceding the date of the listing, and the
period beginning on the date of the listing
and ending on the last day of the listing
year as short taxableyears. This treatment
is solely for purposes of allocating net in-
come or proceeds under section 4965. The
tax-exempt entity continues to file tax re-
turns for the full taxable year, does not file
tax returns with respect to these deemed
short taxable years and does not otherwise
take the short taxable years into account
for Federal tax purposes. Accordingly, the
net income or proceeds that are properly
allocated to the listing year in accordance
with this section will be treated as alloca-
ble to the period—
(1) Ending before the date of the listing
(and accordingly not subject to tax under
section 4965(a)) to the extent such net in-
come or proceeds would have been prop-
erly taken into account in accordance with
this section by the tax-exempt entity in the
deemed short year ending on the day im-
mediately preceding the date of the listing;
and
(2) Beginning on the date of the listing
(and accordingly subject to tax under sec-
tion 4965(a)) to the extent such income or
proceeds would have been properly taken
into account in accordance with this sec-
August 16, 20102492010–33 I.R.B.

tion by the tax-exempt entity in the short
year beginning on the date of the listing.
(f)Examples. The following examples
illustrate the allocation rules of this sec-
tion:
Example 1. (i) In 1999, X, a calendar year non-
plan entity using the cash method of accounting, en-
tered into a lease-in/lease-out transaction (LILO) sub-
stantially similar to the transaction described in No-
tice 2000–15, 2000–1 C.B. 826 (describing Rev. Rul.
99–14, 1999–1 C.B. 835, superseded by Rev. Rul.
2002–69, 2002–2 C.B. 760). In 1999, X purported to
lease property to Y pursuant to a “head lease,” and
Y purported to lease the property back to X pursuant
to a “sublease” of a shorter term. In form, X re-
ceived $268M as an advance payment of head lease
rent. Of this amount, $200M had been, in form, fi-
nanced by a nonrecourse loan obtained by Y. X de-
posited the $200M with a “debt payment undertaker.”
This served to defease both a portion of X’s rent obli-
gation under its sublease and Y’s repayment obliga-
tion under the nonrecourse loan. Of the remainder of
the $268M advance head lease rent payment, X de-
posited $54M with an “equity payment undertaker.”
This served to defease the remainder of X’s rent obli-
gation under the sublease as well as the exercise price
of X’s end-of-sublease term purchase option. This
amount inures to the benefit of Y and enables Y to
recover its investment in the transaction and a return
on that investment. In substance, the $54M is a loan
from Y to X. X retained the remaining $14M of the
advance head lease rent payment. In substance, this
represents a fee for X’s participation in the transac-
tion. See §601.601(d)(2)(ii)(b) of this chapter.
(ii) According to the substance of the transaction,
the head lease, sublease and nonrecourse debt will be
ignored for Federal income tax purposes. Therefore,
any net income or proceeds resulting from these ele-
ments of the transaction will not be considered net in-
come or proceeds attributable to the LILO transaction
for purposes of section 4965(a). The $54M deemed
loan from Y to X and the $14M fee are not ignored
for Federal income tax purposes.
(iii) Under X’s established cash basis method of
accounting, any net income received in 1999 and at-
tributable to the LILO transaction is allocated to X’s
December 31, 1999, tax year for purposes of section
4965. The $14M fee received in 1999, which consti-
tutes proceeds of the transaction, is likewise allocated
to that tax year. Because the 1999 tax year is before
the effective date of the section 4965 tax, X will not
be subject to any excise tax under section 4965 for the
amounts received in 1999.
(iv) Any earnings on the amount deposited with
the equity payment undertaker that constitute gross
income to X will be reduced by X’s original issue
discount deductions with respect to the deemed loan
from Y, in determining X’s net income from the trans-
action.
Example 2. B, a non-plan entity using the cash
method of accounting, has an annual accounting pe-
riod that ends on December 31, 2006. B entered into a
prohibited tax shelter transaction on March 15, 2006.
On that date, B received a payment of $600,000 as
a fee for its involvement in the transaction. B re-
ceived no other proceeds or income attributable to
this transaction in 2006. Under B’s method of ac-
counting, the payment received by B on March 15,
2006, is taken into account in the deemed short year
ending on August 15, 2006. Accordingly, solely for
purposes of section 4965, the payment is treated as
allocable solely to the period ending on or before Au-
gust 15, 2006, and is not subject to the excise tax im-
posed by section 4965(a).
Example 3. The facts are the same as inExample
2, except that B received an additional payment of
$400,000 on September 30, 2006. Under B’s method
of accounting, the paymentreceived by B on Septem-
ber 30, 2006, is taken into account in the deemed short
year beginning on August 16, 2006. Accordingly,
solely for purposes of section 4965, the $400,000
payment is treated as allocable to the period begin-
ning after August 15, 2006, and is subject to the ex-
cise tax imposed by section 4965(a).
Example 4. C, a non-plan entity using the cash
method of accounting, has an annual accounting pe-
riod that ends on December 31. C entered into a pro-
hibited tax shelter transaction on May 1, 2005. On
March 15, 2007, C received a payment of $580,000
attributable to the transaction. On June 1, 2007, the
transaction is identified by the IRS in published guid-
ance as a listed transaction. On June 15, 2007, C
received an additional payment of $400,000 attrib-
utable to the transaction. Under C’s method of ac-
counting, the payments received on March 15, 2007,
and June 15, 2007, are taken into account in 2007.
The IRS will treat the period beginning on January 1,
2007, and ending on May 31, 2007, and the period be-
ginning on June 1, 2007, and ending on December 31,
2007, as short taxable years. The payment received
by C on March 15, 2007, is taken into account in the
deemed short year ending on May 31, 2007. Accord-
ingly, solely for purposes of section 4965, the pay-
ment is treated as allocable solely to the pre-listing
period, and is not subject to the excise tax imposed
by section 4965(a). The payment received by C on
June 15, 2007, is taken into account in the deemed
short year beginning on June 1, 2007. Accordingly,
solely for purposes of section 4965, the payment is
treated as allocable to the post-listing period, and is
subject to the excise tax imposed by section 4965(a).
(g)Effective/applicability dates.See
§53.4965–9 for the discussion of the rel-
evant effective and applicability dates.
§53.4965–9 Effective/applicability dates.
(a)In general. The taxes under section
4965(a) and §53.4965–7 are effective for
taxable years ending after May 17, 2006,
with respect to transactions entered into
before, on or after that date, except that no
tax under section 4965(a) applies with re-
spect to income or proceeds that are prop-
erly allocable to any period ending on or
before August 15, 2006.
(b)Applicability of the regulations.As
of July 6, 2010, except as provided in
paragraph (c) of this section, §§53.4965–1
through 53.4965–8 of this chapter will
apply to taxable years ending after
July 6, 2007. A tax-exempt entity may rely
on the provisions of §§53.4965–1 through
53.4965–8 for taxable years ending on or
before July 6, 2007.
(c)Effective/applicability date with
respect to certain knowing transac-
tions—(1)Entity-level tax. The 100 per-
cent tax under section 4965(b)(1)(B) and
§53.4965–7(a)(1)(i)(B) does not apply to
prohibited tax shelter transactions entered
into by a tax-exempt entity on or before
May 17, 2006.
(2)Manager-level tax.TheIRSwill
not assert that an entity manager who ap-
proved or caused a tax-exempt entity to
become a party to a prohibited tax shelter
transaction is liable for the entity man-
ager tax under section 4965(b)(2) and
§53.4965–7(b)(1) with respect to the trans-
action if the tax-exempt entity entered into
such transaction prior to May 17, 2006.
Par. 6. Section 53.6071–1, paragraphs
(g) and (h) are revised to read as follows:
§53.6071–1 Time for filing returns.
*****
(g)Taxes imposed with respect to pro-
hibited tax shelter transactions to which
tax-exempt entities are parties—(1)Re-
turns by certain tax-exempt entities.A
Form 4720, “Return of Certain Excise
Taxes Under Chapters 41 and 42 of the
Internal Revenue Code,” required by
§53.6011–1(b) for a tax-exempt entity
described in section 4965(c)(1), (c)(2) or
(c)(3) that is a party to a prohibited tax
shelter transaction and is liable for tax im-
posed by section 4965(a)(1) shall be filed
on or before the due date (not including ex-
tensions) for filing the tax-exempt entity’s
annual information return under section
6033(a)(1). If the tax-exempt entity is
not required to file anannual information
return under section 6033(a)(1), the Form
4720 shall be filed on or before the 15
th
day of the fifth month after the end of
the tax-exempt entity’s taxable year or,
if the entity has not established a taxable
year for Federal income tax purposes, the
entity’s annual accounting period.
(2)Returnsbyentitymanagersof
tax-exempt entities described in section
4965(c)(1), (c)(2) or (c)(3). A Form 4720,
required by §53.6011–1(b) for an entity
manager of a tax-exempt entity described
in section 4965(c)(1), (c)(2) or (c)(3)
who is liable for tax imposed by section
4965(a)(2) shall be filed on or before the
15
th
day of the fifth month following the
2010–33 I.R.B.250August 16, 2010

close of the entity manager’s taxable year
during which the entity entered into the
prohibited tax shelter transaction.
(3)Transition rule. A Form 4720, for a
section 4965 tax that was due on or before
October 4, 2007, will be deemed to have
been filed on the due date if it was filed
by October 4, 2007, and if all section 4965
taxes required to be reported on that Form
4720 were paid by October 4, 2007.
(h)Effective/applicability date. Para-
graph (g) of this section is applicable on
July 6, 2007.
§53.6071–1T [Amended].
Par. 7. Section 53.6071–1T(g) & (h)
are removed.
PART 54—PENSION EXCISE TAXES
Par. 8. The authority citation for part
54 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 9. Section 54.6011–1, paragraphs
(c) and (d) are revised to read as follows:
§54.6011–1 General requirement of
return, statement or list.
*****
(c)Entity manager tax on prohibited
tax shelter transactions—(1)In general.
Any entity manager of a tax-exempt en-
tity described in section 4965(c)(4), (c)(5),
(c)(6), or (c)(7) who is liable for tax un-
der section 4965(a)(2) shall file a return on
Form 5330,“Return of Excise Taxes Re-
latedtoEmployeeBenefitPlans,”on or be-
fore the 15
th
day of the fifth month follow-
ing the close of such entity manager’s tax-
able year during which the entity entered
into the prohibited tax shelter transaction,
and shall include therein the information
required by such form and the instructions
issued with respect thereto.
(2)Transition rule. A Form 5330,“Re-
turn of Excise Taxes Related to Employee
Benefit Plans,”for an excise tax under sec-
tion 4965 that was due on or before Octo-
ber 4, 2007, will be deemed to have been
filed on the due date if it was filed by Octo-
ber 4, 2007, and if the section 4965 tax that
was required to be reported on that Form
5330 was paid by October 4, 2007.
(d)Effective/applicability date. Para-
graph (c) of this section is applicable on
July 6, 2007.
§54.6011–1T [Amended].
Par. 10. Section §54.6011–1T(c) & (d)
are removed.
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 11. The authority citation for part
301 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 12. Section 301.6011(g)–1 is
added to read as follows:
§301.6011(g)–1 Disclosure by taxable
party to the tax-exempt entity.
(a)Requirement of disclosure—(1)In
general. Except as provided in paragraph
(d)(2) of this section, any taxable party (as
defined in paragraph (c) of this section) to
a prohibited tax shelter transaction (as de-
fined in section 4965(e) and §53.4965–3 of
this chapter) must disclose by statement to
each tax-exempt entity (as defined in sec-
tion 4965(c) and §53.4965–2 of this chap-
ter) that the taxable party knows or has rea-
son to know is a party to such transaction
(as defined in paragraph (b) of this section)
that the transaction is a prohibited tax shel-
ter transaction.
(2)Determining whether a taxable
party knows or has reason to know.
Whether a taxable party knows or has rea-
son to know that a tax-exempt entity is a
party to a prohibited tax shelter transaction
is based on all the facts and circumstances.
If the taxable party knows or has reason to
know that a prohibited tax shelter transac-
tion involves a tax-exempt, tax indifferent
or tax-favored entity, relevant factors for
determining whether the taxable party
knows or has reason to know that a spe-
cific tax-exempt entity is a party to the
transaction include—
(i) The extent of the efforts made to de-
termine whether a tax-exempt entity is fa-
cilitating the transaction by reason of its
tax-exempt, tax indifferent or tax-favored
status (or is identified in published guid-
ance, by type, class or role, as a party to
the transaction); and
(ii) If a tax-exempt entity is facilitating
the transaction by reason of its tax-exempt,
tax indifferent or tax-favored status (or is
identified in published guidance, by type,
class or role, as a party to the transaction),
the extent of the efforts made to determine
the identity of the tax-exempt entity.
(b)Definition of tax-exempt party to a
prohibited tax shelter transaction. For pur-
poses of section 6011(g), a tax-exempt en-
tity is a party to a prohibited tax shelter
transaction if the entity is defined as such
under §53.4965–4 of this chapter.
(c)Definition of taxable party—(1)In
general. For purposes of this section, the
termtaxable partymeans—
(i) A person who has entered into and
participates or expects to participate in the
transaction under §§1.6011–4(c)(3)(i)(A),
(B), or (C), 20.6011–4, 25.6011–4,
31.6011–4, 53.6011–4, 54.6011–4, or
56.6011–4 of this chapter; or
(ii) A person who is designated as a
taxable party by the Secretary in published
guidance.
(2)Special rules—(i)Certain listed
transactions. If a transaction that was
otherwise not a prohibited tax shelter
transaction becomes a listed transaction
after the filing of a person’s tax return
(including an amended return) reflecting
either tax consequences or a tax strategy
described in the published guidance listing
the transaction (or a tax benefit derived
from tax consequences or a tax strategy
described in the published guidance listing
the transaction), the person is a taxable
party beginning on the date the transac-
tion is described as a listed transaction in
published guidance.
(ii)Persons designated as non-parties.
Published guidance may identify which
persons, by type, class or role, will not
be treated as a party to a prohibited tax
shelter transaction for purposes of section
6011(g).
(d)Time for providing disclosure state-
ment—(1)In general. A taxable party to
a prohibited tax shelter transaction must
make the disclosure required by this sec-
tion to each tax-exempt entity that the tax-
able party knows or has reason to know is
a party to the transaction within 60 days af-
ter the last to occur of—
(i) The date the person becomes a tax-
able party to the transaction within the
meaning of paragraph (c) of this section;
(ii) The date the taxable party knows or
has reason to know that the tax-exempt en-
tity is a party to the transaction within the
meaning of paragraph (b) of this section;
or
(iii) July 6, 2010.
(2)Termination of a disclosure obli-
gation. A person shall not be required
August 16, 20102512010–33 I.R.B.

to provide the disclosure otherwise re-
quired by this section if the person does
not know or have reason to know that
the tax-exempt entity is a party to the
transaction within the meaning of para-
graph(b)ofthissectiononorbefore
the first date on which the transaction is
required to be disclosed by the person
under §§1.6011–4, 20.6011–4, 25.6011–4,
31.6011–4, 53.6011–4, 54.6011–4, or
56.6011–4 of this chapter.
(3) Disclosure is not required with re-
spect to any prohibited tax shelter transac-
tion entered into by a tax-exempt entity on
or before May 17, 2006.
(e)Frequency of disclosure.Onedis-
closure statement is required per tax-ex-
empt entity per transaction. See paragraph
(h) of this section for rules relating to des-
ignation agreements.
(f)Form and content of disclosure state-
ment. The statement disclosing to the tax-
exempt entity that the transaction is a pro-
hibited tax shelter transaction must be a
written statement that—
(1) Identifies the type of prohibited
tax shelter transaction (including the pub-
lished guidance citation for a listed trans-
action); and
(2) States that the tax-exempt entity’s
involvement in the transaction may subject
either it or its entity manager(s) or both to
excise taxes under section 4965 and to dis-
closure obligations under section 6033(a)
of the Internal Revenue Code.
(g)To whom disclosure is made.The
disclosure statement must be provided—
(1) In the case of a non-plan entity as
defined in §53.4965–2(b) of this chapter,
to—
(i) Any entity manager of the tax-ex-
empt entity with authority or responsibil-
ity similar to that exercised by an officer,
director or trustee of an organization; or
(ii) If a person described in paragraph
(g)(1)(i) of this section is not known, to the
primary contact on the transaction.
(2) In the case of a plan entity as defined
in §53.4965–2(c) of this chapter, including
a fully self-directed qualified plan, IRA, or
other savings arrangement, to any entity
manager of the plan entity who approved
or otherwise caused the entity to become a
party to the prohibited tax shelter transac-
tion.
(h)Designation agreements.Ifmore
than one taxable party is required to dis-
close a prohibited tax shelter transaction
under this section, the taxable parties may
designate by written agreement a single
taxable party to disclose the transaction.
The transaction must then be disclosed in
accordance with this section. The desig-
nation of one taxable party to disclose the
transaction does not relieve the other tax-
able parties of their obligation to disclose
the transaction to a tax-exempt entity that
is a party to the transaction in accordance
with this section, if the designated taxable
party fails to disclose the transaction to the
tax-exempt entity in a timely manner.
(i)Penalty for failure to provide disclo-
sure statement. See section 6707A for the
penalty applicable to the failure to disclose
a prohibited tax shelter transaction in ac-
cordance with this section.
(j)Effective date/applicability date.
This section will apply with respect to
transactions entered into by a tax-exempt
entity after May 17, 2006.
Par. 13. Section 301.6033–5 is added
to read as follows:
§301.6033–5 Disclosure by tax-exempt
entities that are parties to certain
reportable transactions.
(a)In general. For provisions relating
to the requirement of the disclosure by a
tax-exempt entity that it is a party to certain
reportable transactions, see §1.6033–5 of
this chapter (Income Tax Regulations).
(b)Effective date/applicability date.
This section applies with respect to trans-
actions entered into by a tax-exempt entity
after May 17, 2006.
§301.6033–5T [Removed].
Par. 14. Section 301.6033–5T is re-
moved.
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 15. The authority citation for part
602 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 16. In §602.101, paragraph (b)
is amended by adding the following entry
in numerical order to the table to read as
follows:
§602.101 OMB Control Numbers.
*****
(b) * * *
CFR part or section where
Identified and described
Current OMB
Control No.
*****
301.6011(g)–1...........................................................
1545–2079
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved June 29, 2010.
Michael Mundaca,
Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 2, 2010,
8:45 a.m., and published in the issue of the Federal Register
for July
6, 2010, 75 F.R. 38700)
2010–33 I.R.B.252August 16, 2010

Part III. Administrative, Procedural, and Miscellaneous
Alternative Amortization
Schedule for Single-Employer
Plans Under PRA 2010
Notice 2010–55
PURPOSE
This notice provides guidance on the
availability of special funding rules for
single-employer defined benefit plans un-
der§430(c)(2)(D)oftheInternalRev-
enue Code (Code), as added by section
201(b)(1) of the Preservation of Access to
Care for Medicare Beneficiaries and Pen-
sion Relief Act of 2010 (PRA 2010), Pub.
L. No.111–192, for a plan year for which
the Form 5500 (and Schedule SB) has been
filed. This notice also describes antici-
pated future guidance that will apply for
sponsors of single-employer defined ben-
efit pension plans with respect to an elec-
tion to use these special funding rules.
BACKGROUND
Section 430 specifies the minimum
funding requirements that apply to sin-
gle-employer defined benefit pension
plans pursuant to § 412. For purposes of
calculating the minimum required con-
tribution, § 430 generally requires a plan
to establish a shortfall amortization base
with respect to a plan year for which the
value of a plan’s assets is less than the
amount of the plan’s funding target. Prior
to amendment by PRA 2010, § 430(c)(2)
provides for amortization of a shortfall
amortization base over 7 years.
In lieu of the otherwise applicable
amortization schedule, new § 430(c)(2)(D)
permits a plan sponsor to elect for cer-
tain plan years to amortize the short-
fall amortization base established for
the plan year under one of two alterna-
tive amortization schedules: the “2 plus
7-year” amortization schedule; and the
“15-year” amortization schedule. The
2 plus 7-year amortization schedule is
described in § 430(c)(2)(D)(ii) and the
15-year amortization schedule is de-
scribed in § 430(c)(2)(D)(iii). Under
§ 430(c)(2)(D)(iv)(II), if the plan sponsor
elects to use an alternative amortization
schedule for two plan years, the same
amortization schedule must be used for
both plan years. Section 430(c)(7), which
was added by section 201(b)(2) of PRA
2010, provides for an acceleration of the
required installments under an alternative
amortization schedule in the case of cer-
tain compensatory payments, dividends,
and stock redemptions.
Under § 430(c)(2)(D)(v), an election
to use an alternative amortization sched-
ule may only be made with respect to
one or two plan years that begin in 2008,
2009, 2010, or 2011. However, an elec-
tion may be made with respect to a plan
year only if the due date for the mini-
mum required contribution to the plan for
such plan year under § 430(j)(1) occurs
on or after June 25, 2010 (the date of
enactment of PRA 2010). For example, a
plan sponsor may not elect an alternative
amortization schedule for a plan year
beginning on October 1, 2008 and ending
September 30, 2009, because the due
date for contributions for that plan year
was June 15, 2010. In addition, under
§ 430(c)(2)(D)(iv), in the case of a plan
described in section 106 of the Pension
Protection Act of 2006 (PPA ’06), Pub. L.
No. 109–280, the only plan year for which
an election permissibly may be made is
the plan year beginning in 2011.
Section 430(c)(2)(D)(iv)(III) provides
that a plan sponsor’s election under
§430(c)(2)(D)istobemadeatsuchtime
and in such form and manner as is pre-
scribed by the Secretary of the Treasury.
Section 430(c)(2)(D)(iv)(III) provides fur-
ther that any such election may be revoked
only with the consent of the Secretary, af-
ter taking into account any comments from
the Pension Benefit Guaranty Corporation
(PBGC).
Pursuant to § 430(c)(2)(D)(vi), a plan
sponsor that makes an election under
§ 430(c)(2)(D) for a plan year is required
to give notice of the election to partici-
pants and beneficiaries of the plan and is
also required to inform the PBGC of such
election (in such form and manner as the
Director of the PBGC may prescribe).
Section 202(a) of PRA 2010 amends Ti-
tle I of PPA ’06 to allow a plan sponsor of
a plan described in sections 104 through
106 of PPA ’06 to elect, for certain plan
years, one of two alternative amortization
schedules with respect to a portion of the
plan’s unfunded new liability. The sched-
ules, set forth in sections 107(b) and 107(c)
of PPA ’06, as amended by PRA 2010,
are generally similar to the 2 plus 7-year
schedule and the 15-year schedule.
Section 303(c)(2) of the Employee
Retirement Income Security Act of
1974, as amended (ERISA), is parallel
to § 430(c)(2) of the Code and section
201(a)(1) of PRA 2010 amends section
303(c)(2) of ERISA in a manner parallel
to the amendments made to § 430(c)(2)
of the Code by section 201(b)(1) of PRA
2010. Section 201(a)(2) of PRA 2010
adds section 303(c)(7) of ERISA, which
is parallel to new section 430(c)(7) of the
Code. Under section 101 of Reorganiza-
tion Plan No. 4 of 1978 (43 FR 47713),
the Secretary of Treasury has interpretive
jurisdiction over the subject matter of this
notice for purposes of ERISA as well as
the Code. Thus, this notice applies for
both purposes.
ELECTIONS BY PLAN SPONSOR
The Service anticipates issuing future
guidance on the special funding rules un-
der PRA 2010 for single-employer plans
which may include guidance on (1) cal-
culation of the alternative amortization
schedules permitted under PRA 2010
(and the effect on funding balances), (2)
the rules relating to installment accel-
eration amounts under § 430(c)(7), (3)
the procedures for making the election
to use an alternative amortization sched-
ule, and (4) the notice requirements of
§ 430(c)(2)(D)(vi). In the case of a plan
year that ends before the guidance is is-
sued, the plan sponsor will be permitted
to elect to use an alternative amortization
schedule under PRA 2010 without regard
to whether the Form 5500 (and Schedule
SB) has been filed for that plan year. For
example, the sponsor of a plan with a
calendar year plan year will not be pre-
cluded from making the election for 2009
merely because the Form 5500 for that
plan year has been filed for that plan year.
Accordingly, such a plan sponsor should
file the Form 5500 (and Schedule SB) in
accordance with the applicable deadline,
taking into account the rules for obtaining
an extension. The future guidance will ad-
dress reporting requirements if the plan’s
August 16, 20102532010–33 I.R.B.

Form 5500 (and Schedule SB) for the plan
year has been filed.
DRAFTING INFORMATION
The principal author of this notice is
Carolyn Zimmerman of the Employee
Plans, Tax Exempt and Government
Entities Division. Questions regarding
this notice may be sent via e-mail to
RetirementPlanQuestions@irs.gov.
Special Funding Rules for
Multiemployer Plans Under
PRA 2010
Notice 2010–56
PURPOSE
This notice provides guidance on the
availability of special funding rules for
multiemployer defined benefit plans under
§ 431(b)(8) of the Internal Revenue Code
(Code), as added by section 211(a)(2) of
the Preservation of Access to Care for
Medicare Beneficiaries and Pension Re-
lief Act of 2010 (PRA 2010), Pub. L. No.
111–192, for a plan year for which the
Form 5500 (and Schedule MB) has been
filed. This notice also describes antici-
pated future guidance that will apply for
sponsors of multiemployer defined benefit
pension plans with respect to the special
funding rules under § 431(b)(8).
BACKGROUND
Section 431 specifies the mini-
mum funding requirements that apply
to multiemployer defined benefit pen-
sion plans pursuant to § 412. Section
431(b)(2)(B)(iii) provides for a 15-year
amortization of net experience loss
with respect to a plan. New section
431(b)(8)(A) provides a special amortiza-
tion rule for certain net investment losses
in the case of a multiemployer plan that
meets a solvency test. The special rule ap-
plies to the portion of the plan’s experience
loss or gain attributable to net investment
losses (if any) incurred in either or both
of the first two plan years ending after
August 31, 2008 (an applicable plan year).
This portion is amortized over the period
beginning with the plan year in which it
is first recognized in the actuarial value of
assets and ending with the last plan year
in the 30-plan-year period beginning with
the plan year in which the net investment
loss was incurred.
Section 431(b)(8)(B) provides a special
asset valuation rule in the case of a multi-
employer plan that meets the solvency test.
The special rule permits a multiemployer
plan to change its asset valuation method
in a manner that (1) spreads the difference
between expected returns and actual re-
turns for either or both of the applicable
plan years over a period of not more than
10 years, (2) provides that, for either or
both of the first two plan years beginning
after August 31, 2008, the value of plan as-
sets at any time cannot be less than 80 per-
cent or greater than 130 percent of the fair
market value of the assets at that time, or
(3) provides for both (1) and (2).
Section 431(b)(8)(C) describes the sol-
vency test that a multiemployer plan must
meet in order for either or both of the spe-
cial funding rules to apply. The solvency
test is met only if the plan actuary certi-
fies that the plan is projected to have suf-
ficient assets to timely pay expected bene-
fits and anticipated expenditures over the
amortization period, taking into account
the changes in the funding standard ac-
count under § 431(b)(8).
In addition, under § 431(b)(8)(D), if ei-
ther or both of the special funding rules ap-
ply for any plan year, a special restriction
on benefit increases applies in addition to
any other applicablerestrictions on ben-
efit increases. Under the special restric-
tion, a plan amendment increasing bene-
fits may not go into effect during either of
the two plan years immediately following
a plan year for which the special funding
rules apply unless (1) the plan actuary cer-
tifies that the increase is paid for out of ad-
ditional contributions not allocated to the
plan immediately before the application to
the plan of the special amortization rule for
certain net investment losses or the special
asset valuation rule and the plan’s funded
percentage and projected credit balances
for the two plan years are reasonably ex-
pected to be at least as high as they would
have been if the benefit increase had not
been adopted, or (2) the amendment is re-
quired as a condition of qualification under
the Code or to comply with other applica-
ble law.
Under § 431(b)(8)(E), the plan spon-
sor of a multiemployer plan to which ei-
ther or both of the special funding rules ap-
ply must give notice thereof to plan partic-
ipants and beneficiaries. In addition, the
plan sponsor must inform the Pension Ben-
efit Guaranty Corporation (PBGC) that the
special funding rules apply in such form
and manner as the Director of the PBGC
may prescribe.
Under section 211(b) of PRA 2010,
§ 431(b)(8) takes effect as of the first
day of the first plan year ending af-
ter August 31, 2008. However, if the
application of the special funding rules
affects the plan’s funding standard account
for the first plan year beginning after
August 31, 2008, the special rules are
disregarded for purposes of applying
§ 432 and section 305 of the Employee
Retirement Income Security Act of
1974, as amended (ERISA) (relating to
multiemployer plans in endangered or
critical status). In addition, the restriction
on plan amendments under § 431(b)(8)(D)
is effective on June 25, 2010, the date of
the enactment of PRA 2010.
Section 304(b)(8) of ERISA, which was
added by section 211(a)(1) of PRA 2010,
is parallel to § 431(b)(8) of the Code. Un-
der section 101 of Reorganization Plan No.
4 of 1978 (43 FR 47713), the Secretary
of Treasury has interpretive jurisdiction
over the subject matter of this notice for
purposes of ERISA as well as the Code.
Thus, this notice applies to the provisions
of section 304(b)(8) of ERISA as well as
§ 431(b)(8) of the Code.
ANTICIPATED FUTURE GUIDANCE
AND APPLICATION OF SPECIAL
RULES
The Service anticipates issuing future
guidance on the special funding rules un-
der PRA 2010 for multiemployer plans
which may include guidance on (1) de-
termination of the portion of the experi-
ence loss or gain attributable to net invest-
ment losses incurred in either or both of
the first two plan years ending after Au-
gust 31, 2008, (2) the requirement under
§ 431(b)(8)(E) to notify participants and
beneficiaries of application of the special
rules, and (3) the effect of application of
the special rules on the certification of a
multiemployer plan’s status (i.e.,endan-
gered, critical or neither) under § 432(b),
including certifications already made.
In the case of an applicable plan
year that ends before guidance under
2010–33 I.R.B.254August 16, 2010

§ 431(b)(8) is issued, the special rules may
be applied for the applicable plan year
(subject to the requirements of § 431(b)(8),
including the restriction on plan amend-
ments under § 431(b)(8)(D)) without re-
gard to whether the plan sponsor has filed
the Form 5500 (and Schedule MB) for that
plan year. For example, the sponsor of a
multiemployer plan with a calendar year
plan year will not be precluded from ap-
plying the special rules to the plan for 2009
(subject to the requirements of § 431(b)(8),
including the restriction on plan amend-
ments under § 431(b)(8)(D)) merely be-
cause the Form 5500 (and Schedule MB)
for 2009 has been filed for that plan year.
Accordingly, such a plan sponsor should
file the Form 5500 (and Schedule MB) in
accordance with the applicable deadline,
taking into account the rules for obtain-
ing an extension. The Service anticipates
issuing future guidance on reporting re-
quirements if the special rules are applied
for a plan year after the plan’s Form 5500
(and Schedule MB) for the plan year has
been filed.
DRAFTING INFORMATION
The principal author of this no-
tice is Yaguo Zhang of the Employee
Plans, Tax Exempt and Government
Entities Division. Questions regarding
this notice may be sent via e-mail to
RetirementPlanQuestions@irs.gov.
August 16, 20102552010–33 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Proposed
Rulemaking and Notice of
Public Hearing
User Fees Relating to
Enrollment and Preparer
Tax Identification Numbers
REG–139343–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed amendments to the regulations
relating to the imposition of certain user
fees on certain tax practitioners. The pro-
posed regulations establish a new user fee
for individuals who apply for or renew a
preparer tax identification number (PTIN).
The proposed regulations affect individu-
als who apply for or renew a PTIN. The
charging of user fees is authorized by the
Independent Offices Appropriations Act
of 1952.
DATES: Written or electronic comments
must be received by August 23, 2010. Out-
lines of topics to be discussed at the public
hearing scheduled for Tuesday, August 24,
2010, at 10 a.m. must be received by Mon-
day, August 23, 2010.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–139343–08), room
5205, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, D.C. 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–139343–08),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, D.C., or sent electroni-
cally via the Federal eRulemaking Por-
tal athttp://www.regulations.gov(IRS
REG–139343–08). The public hearing
will be held in the Auditorium of the Inter-
nal Revenue Building, 1111 Constitution
Avenue, NW, Washington, D.C.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Emily M. Lesniak at (202)
622–4940; concerning cost methodol-
ogy, Eva J. Williams at (202) 435–5514;
concerning submission of comments,
the public hearing, or to be placed on
the building access list to attend the
public hearing, Richard A. Hurst at
Richard.A.Hurst@irscounsel.treas.govor
(202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 330 of title 31 of the United
States Code authorizes the Secretary of the
Treasury to regulate the practice of rep-
resentatives before the Treasury Depart-
ment. Pursuant to section 330 of title
31, the Secretary has published regulations
governing practice before the IRS in 31
CFR part 10 and reprinted the regulations
as Treasury Department Circular No. 230
(Circular 230). Circular 230 is adminis-
tered by the IRS Office of Professional Re-
sponsibility (OPR).
User Fee for PTINs
Section 6109 of the Internal Revenue
Code (Code) authorizes the Secretary to
prescribe regulationsfor the inclusion of
a tax return preparer’s identifying num-
ber on a return, statement, or other docu-
ment required to be filed with the IRS. Sec-
tion 6109(c) further authorizes the Secre-
tary “to require such information as may be
necessary to assign an identifying number
to any person.” As currently prescribed in
regulations, the identifying number of a tax
return preparer who is an individual is the
tax return preparer’s social security num-
ber (SSN) or alternative number as pre-
scribedbytheIRS.
Proposed regulations under section
6109 (REG–134235–08, 2010–16 I.R.B.
596) were published in theFederal Reg-
ister(75 FR 14539) on March 26, 2010,
and provide that, for returns or claims
for refund filed after December 31, 2010,
the identifying number of a tax return
preparer is the individual’s PTIN or such
other number prescribed by the IRS in
forms, instructions, or other appropriate
guidance. The proposed regulations under
section 6109 require a tax return preparer
who prepares all or substantially all of
a return or claim for refund of tax after
December 31, 2010 to have a PTIN. The
proposed regulations also state that the
IRS will provide through other guidance
(including forms and instructions) guid-
ance regarding how to apply for a PTIN
or other prescribed preparer identifying
number, for the regular renewal of a PTIN
or other prescribed preparer identifying
number, and for the payment of a user fee.
Only attorneys, certified public accoun-
tants, enrolled agents, and registered tax
return preparers will be eligible to apply
for a PTIN. The requirements to become
a registered tax return preparer will be
provided in future Circular 230 guidance.
A third party vendor will administer the
PTIN application and renewal process and
will charge a reasonable fee that is inde-
pendent of the user fee charged by the
government. The vendor will develop a
web-based database that individuals will
usetoapplyfororrenewaPTINand
will process paper PTIN applications. The
database also will be used for applications
to become registered tax return preparers,
to renew the registered tax return prepar-
ers’ status, to self-certify continuing pro-
fessional education credits for registered
tax return preparers, and to pay applicable
user fees.
Proposed §300.9 establishes a $50
user fee to apply for or renew a PTIN.
The $50 user fee is based on an annual
PTIN renewal period, and the procedures
for renewing a PTIN will be provided
in other guidance, including forms and
instructions. The user fee is nonrefund-
able regardless of whether the applicant
receives a PTIN.
PTINswerepreviouslyissuedtotaxre-
turn preparers solely for the convenience
of the tax return preparers, providing an al-
ternative to using the tax return preparers’
social security numbers. Requiring regis-
tration through the use of PTINs will en-
able the IRS to better collect and track data
on tax return preparers. This data will al-
low the IRS to track the number of per-
sons who prepare returns, track the qual-
ifications of those who prepare returns,
track the number of returns each person
prepares, and more easily locate and re-
view returns prepared by a tax return pre-
2010–33 I.R.B.256August 16, 2010

parer when instances of misconduct are de-
tected.
The user fee to apply for or renew a
PTIN recovers the costs that the govern-
ment incurs to administer the PTIN appli-
cation process. These costs include the
development and maintenance of the IRS
information technology system that inter-
faces with the vendor and the develop-
ment and maintenanceof internal applica-
tions that will have the capacity to process
and administer the anticipated increase in
applications for a PTIN. It is anticipated
that the number of individuals requesting
PTINs will increase to as many as 1.2 mil-
lion individuals, and all individuals who
receive PTINs will be required to renew
their PTINs. The anticipated increase in
demand for PTINs will require the IRS
to expend more resources. The user fee
will recover the cost of IRS customer ser-
vice support activities, which include web-
site development and maintenance and call
center staffing to respond to questions re-
garding PTIN usage and renewal. The
user fee also will recover costs for person-
nel, administrative, and management sup-
port needed to evaluate and address tax
compliance issues of individuals applying
for and renewing a PTIN, to investigate
and address conduct and suitability issues,
and otherwise supportand enforce the pro-
grams that require an individual to apply
for and renew a PTIN.
The IRS currently issues PTINs to tax
return preparers without charging a user
fee. The PTIN application, issuance, and
renewal process, however, will become
significantly more expansive and intricate
with the implementation of the registered
tax return preparer program. Federal tax
compliance checks will be performed on
all individuals who apply for or renew
a PTIN. Suitability checks will be per-
formed. The IRS will further investigate
individuals when the compliance or suit-
ability check suggests that the individual
maybeunfittopracticebeforetheIRS.
These checks were not previously per-
formed as a prerequisite to obtaining a
PTIN.
Additionally, the IRS will establish and
implement a reconsideration process for
individuals who apply to become a regis-
tered tax return preparer and are denied a
PTIN upon initial application or renewal.
The IRS will incur costs to apply existing
Circular 230 procedures when those indi-
viduals who are certified public accoun-
tants, attorneys, enrolled agents, or regis-
tered tax return preparers are denied re-
newal of a PTIN.
Coordination With Other User Fees
Additional user fees related to the pro-
grams for regulating enrolled agents, en-
rolled retirement plan agents, and regis-
tered tax return preparers will be estab-
lished in future regulations as those pro-
grams are implemented. These future reg-
ulations will address user fees associated
with taking the registered tax return pre-
parer examination and providing continu-
ing education programs. The user fee for
taking a registered tax return preparer ex-
amination will recover the costs to the gov-
ernment for creating, administering, and
reviewing the examination. The user fee
for providing continuing education pro-
grams will recover the costs to the govern-
ment for the review, approval, and over-
sight of continuing education providers to
ensure their compliance with program re-
quirements for continuing education pro-
grams. The vendor also will charge a rea-
sonable fee to take the registered tax return
preparer examination.
Future regulations also will coordinate
the enrollment and renewal user fees im-
posed on enrolled agents and enrolled re-
tirement plan agents with the PTIN user
fees because the costs to the government
to process an enrollment application are
substantially the same as the costs to the
government to process a PTIN application.
For example, the IRS generally may con-
duct only a single background check and
compliance check for an individual who
applies to become an enrolled agent and
applies to obtain a PTIN, and therefore the
enrollment application fee and the PTIN
application fee must be coordinated to pre-
vent the collection of excessive fees. It
is currently anticipated that future regula-
tions will require enrolled agents to obtain
a PTIN and pay the associated application
or renewal fee, in which case the enroll-
ment and renewal fees for enrolled agents
will be substantially reduced.
Effective/Applicability Dates
These regulations reorganize the effec-
tive dates for the user fees found in Trea-
sury Regulations part 300. Currently, all of
the user fee effective dates are contained in
§300.0 paragraph (c). This reorganization
relocates the effective date sections to the
appropriate regulation implementing each
user fee. This relocation will simplify the
process for updating the effective dates as
the user fee regulations are revised.
Authority
The charging of user fees is authorized
by the Independent Offices Appropriations
Act (IOAA) of 1952, which is codified
at 31 U.S.C. 9701. The IOAA authorizes
agencies to prescribe regulations that es-
tablish charges for services provided by
the agency. The charges must be fair and
must be based on the costs to the govern-
ment, the value of the service to the recip-
ient, the public policy or interest served,
and other relevant facts. The IOAA pro-
vides that regulations implementing user
fees are subject to policies prescribed by
the President; these policies are currently
set forth in the Office of Management
and Budget Circular A–25, 58 FR 38142
(July 15, 1993) (the OMB Circular).
The OMB Circular encourages user
fees for government-provided services
that confer benefitson identifiable re-
cipients over and above those benefits
received by the general public. Under
the OMB Circular, an agency that seeks
to impose a user fee for government-pro-
vided services must calculate the full cost
of providing those services. In general, a
user fee should be set at an amount that
allows the agency to recover the full cost
of providing the special service, unless the
Office of Management and Budget grants
an exception.
Pursuant to the guidelines in the OMB
Circular, the IRS has calculated its cost of
providing services under the PTIN appli-
cation and renewal process. The govern-
ment will charge the full cost of adminis-
tering these programs and will implement
the proposed user fees under the authority
of the IOAA and the OMB Circular.
Proposed Effective/Applicability Date
The Administrative Procedure Act pro-
vides that substantive rules will not be ef-
fective until thirty days after the final reg-
ulations are published in theFederal Reg-
ister(5 U.S.C. 553(d)). Final regulations
may be effective prior to thirty days after
publication if the publishing agency finds
August 16, 20102572010–33 I.R.B.

that there is good cause for an earlier ef-
fective date.
The IRS is implementing the recom-
mendations in Publication 4832,“Return
Preparer Review”, which was published
on January 4, 2010, to be effective for
the 2011 Federal tax filing season (Jan-
uary-April 2011). The IRS and the Trea-
sury Department find that there is good
cause for these regulations to be effective
upon the publication of a Treasury decision
adopting these rules as final regulations in
theFederal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is a significant
regulatory action as defined in Executive
Order 12866.
It has been determined that an initial
regulatory flexibility analysis is required
for this notice of proposed rulemaking un-
der 5 U.S.C. 603. This analysis is set
forth under the heading “Initial Regulatory
Flexibility Analysis.”
Pursuant to section 7805(f) of the Code,
this notice of proposed rulemaking has
been submitted to the Chief Counsel for
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business.
Initial Regulatory Flexibility Analysis
When an agency issues a rulemaking
proposal, the Regulatory Flexibility Act
(5 U.S.C. chapter 6) (RFA) requires the
agency “to prepare and make available for
public comment an initial regulatory flex-
ibility analysis” that will “describe the im-
pact of the proposed rule on small enti-
ties.” See 5 U.S.C. 603(a). Section 605 of
the RFA provides an exception to this re-
quirement if the agency certifies that the
proposed rulemaking will not have a sig-
nificant economic impact on a substantial
number of small entities. A small entity
is defined as a small business, small non-
profit organization, or small governmental
jurisdiction. See 5 U.S.C. 601(3) through
(6). The IRS and the Treasury Department
conclude that the proposed rule, if promul-
gated, will have a significant economic im-
pact on a substantial number of small enti-
ties. As a result, an initial regulatory flex-
ibility analysis is required.
Description of the reasons why action by
the agency is being considered
The IRS and the Treasury Department
are implementing regulatory changes that
increase the oversight of the tax return
preparer industry based upon findings and
recommendations made by the IRS in Pub-
lication 4832,“Return Preparer Review,”
which was published on January 4, 2010.
These regulatory changes include imple-
menting a registered tax return preparer
program and requiring all individuals who
prepare all or substantially all of a tax re-
turn or claim for refund to use a PTIN as an
identifying number. Except as provided in
any transitional period, only attorneys, cer-
tified public accountants, enrolled agents,
or registered tax return preparers may ap-
ply for a PTIN. Thus, only attorneys, cer-
tified public accountants, enrolled agents,
and registered tax return preparers will be
eligible to prepare all or substantially all
of a tax return or claim for refund. By lim-
iting the individuals who may prepare all
or substantially all of a tax return or claim
for refund to individuals who have a PTIN,
the IRS is providing a special benefit to the
individuals who obtain a PTIN. There are
costs to the IRS that are associated with
processing a PTIN application and provid-
ing the special benefits associated with the
PTIN.
Future regulations will establish ad-
ditional user fees related to the enrolled
agent and enrolled retirement plan agent
program, and registered tax return preparer
program. The additional user fees will
recover the costs to the government that
result from providing the special benefits
associated with taking the registered tax
return preparer examination and provid-
ing continuing education programs. The
cost to the government for administering
and reviewing the registered tax return
preparer examination will be recovered
in a user fee for taking the registered tax
return preparer examination. The cost
to the government to verify compliance
with requirements for continuing educa-
tion programs will be recovered in a user
fee for qualifying continuing education
programs. Each continuing education
provider may charge a fee to attend a qual-
ified continuing education program. The
third party vendor also will charge a rea-
sonable fee to take a registered tax return
preparer examination.
A succinct statement of the objectives of,
and legal basis for, the proposed rule
The objective of the proposed regula-
tions is to recover the costs to the govern-
ment associated with providing the special
benefits that an individual receives upon
applying for or renewing a PTIN. These
costs include the development and main-
tenance of the IRS information technology
system that interfaces with the vendor; the
development and maintenance of internal
applications; IRS customer service support
activities, which include development and
maintenance of an IRS website and call
center staffing; and personnel, administra-
tive, and management support needed to
evaluate and address tax compliance is-
sues, investigate and address conduct and
suitability issues, and otherwise support
and enforce the programs that require indi-
viduals to apply for or renew a PTIN. The
OMB Circular encourages user fees when
special benefits are conferred on identifi-
able recipients. Individuals who obtain a
PTIN receive the ability to prepare all or
substantially all of a tax return or claim for
refund. The ability to prepare all or sub-
stantially all of a tax return or claim for re-
fund is a special benefit.
The legal basis for these requirements
is contained in section 9701 of title 31.
A description of and, where feasible, an
estimate of the number of small entities to
which the proposed rule will apply
The proposed regulations affect all in-
dividuals who want to become a registered
tax return preparer under the new oversight
rules in Circular 230. Only individuals,
not businesses, can practice before the IRS
or become a registered tax return preparer.
Thus, the economic impact of these regu-
lations on any small entity generally will
be a result of applicants and registered tax
return preparers owning a small business
or a small entity employing applicants or
registered tax return preparers.
The proposed regulations further affect
all individual tax return preparers who are
required to apply for or renew a PTIN.
Only individuals, not businesses, can ap-
ply for or renew a PTIN. Thus, the eco-
nomic impact of these regulations on any
small entity generally will be a result of
an individual tax return preparer who is re-
quired to apply for or renew a PTIN own-
2010–33 I.R.B.258August 16, 2010

ing a small business or a small business
otherwise employing an individual tax re-
turn preparer who is required to apply for
or renew a PTIN to prepare all or substan-
tially all of a tax return or claim for refund.
The appropriate NAICS codes for the
registered tax return preparer program and
PTINs are those that relate to tax prepa-
ration services (NAICS code 541213),
other accounting services (NAICS code
541219), offices of lawyers (NAICS code
541110), and offices of certified public ac-
countants (NAICS code 541211). Entities
identified as tax preparation services and
offices of lawyers are considered small
under the Small Business Administration
size standards (13 CFR 121.201) if their
annual revenue is less than $7 million.
Entities identified as other accounting
services and offices of certified public
accountants are considered small under
the Small Business Administration size
standards if their annual revenue is less
than $8.5 million. The IRS estimates that
approximately 70 to 80 percent of the
individuals subject to these proposed reg-
ulations are tax return preparers operating
as or employed by small entities.
A description of the projected reporting,
recordkeeping and other compliance
requirements of the proposed rule,
including an estimate of the classes of
small entities which will be subject to the
requirement and the type of professional
skills necessary for preparation of the
report or record
No reporting or recordkeeping require-
ments are projected to be associated with
this proposed regulation.
An identification, to the extent practicable,
of all relevant Federal rules which may
duplicate, overlap, or conflict with the
proposed rule
The IRS is not aware of any Federal
rules that duplicate, overlap, or conflict
with the proposed rule.
A description of any significant
alternatives to the proposed rule which
accomplish the stated objectives of
applicable statutes and which minimize
any significant economic impact of the
proposed rule on small entities
TheIOAAauthorizesthechargingof
user fees for agency services, subject to
policies designated by the President. The
OMB Circular implements presidential
policies regarding user fees and encour-
ages user fees when a government agency
provides a special benefit to a member of
the public. As Congress has not appro-
priated funds to the registered tax return
preparer program or PTIN application
process, there are no viable alternatives to
the imposition of user fees.
While the IRS previously issued PTINs
to tax return preparers without charging a
user fee, the registered tax return preparer
program and the issuance of the new regu-
lations under section 6109 will increase the
number of PTIN applications to as many as
1.2 million applications and significantly
increase the intricacy of the application
process. Additionally, PTINs were previ-
ously issued solely for the convenience of
taxreturnpreparerstoprovideanalterna-
tive to using the tax return preparers’ social
security numbers as an identifying num-
ber on prepared returns. PTINs will now
be used to collect and track data on tax re-
turn preparers. This data will provide im-
portant benefits to the IRS, such as allow-
ing the IRS to track the number of persons
who prepare returns, track the qualifica-
tions of those persons who prepare returns,
track the number of returns each person
prepares, and, when instances of miscon-
duct are detected, locate and review returns
prepared by a specific tax return preparer.
This anticipated increase in PTIN appli-
cations and the revised purpose of a PTIN
will require the IRS to develop and main-
tain a website and train call center staff to
respond to PTIN-related questions. Fur-
ther, the IRS will now perform Federal
tax compliance checks and perform suit-
ability checks prior to the issuance of a
PTIN. Previously, neither of these checks
was performed before a PTIN was issued.
When the initial compliance and suitabil-
ity checks suggest that the individual ap-
plying for a PTIN may not be fit to prac-
tice before the IRS, the IRS will conduct
an investigation. For individuals who are
found unfit to receive a PTIN, the IRS will
develop and implement a reconsideration
process. Similarly, the IRS will provide
due process procedures for those individ-
uals who are certified public accountants,
attorneys, enrolled agents, or registered tax
return preparers and are denied renewal of
their PTIN.
Thus, due to the increased costs to the
government to process the application for
a PTIN, the anticipated increase in PTIN
applications, and the lack of appropriated
funds,thereisnoviablealternativetoim-
posing a user fee.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies)orelectroniccom-
ments that are submitted timely to the IRS.
The IRS and Treasury Department request
comments on the clarity of the proposed
regulations and how they can be made eas-
ier to understand. All comments that are
submitted by the public will be made avail-
able for public inspection and copying.
A public hearing has been scheduled for
Tuesday, August 24, 2010, beginning at
10:00 a.m. in the Auditorium of the Inter-
nal Revenue Building, 1111 Constitution
Avenue, NW, Washington, D.C. Due to
building security procedures, visitors must
enter at the Constitution Avenue entrance.
All visitors must present photo identifica-
tion to enter the building. Because of ac-
cess restrictions, visitors will not be ad-
mitted beyond the immediate entrance area
more than 30 minutes before the hearing
starts. For information about having your
name placed on the building access list
to attend the hearing, see the FOR FUR-
THER INFORMATION CONTACT sec-
tion of this preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written or electronic comments and
an outline of the topics to be discussed and
the time to be devoted to each topic by
Monday, August 23, 2010. A period of
10 minutes will be allocated to each per-
son for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receivingoutlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
August 16, 20102592010–33 I.R.B.

Drafting Information
The principal author of these regula-
tions is Emily M. Lesniak, Office of the
Associate Chief Counsel (Procedure and
Administration).
*****
Proposed Amendments to the
Regulations
Paragraph 1. The authority citation for
part 300 continues to read in part as fol-
lows:
Authority: 31 U.S.C. 9701.
Accordingly, 26 CFR part 300 is pro-
posedtobeamendedasfollows:
Par. 2. Section 300.0 is amended by
1. Adding paragraph (b)(9).
2. Removing paragraph (c).
The additions read as follows:
§300.0 User fees; in general.
*****
(b) * * *
(9) Applying for a preparer tax identifi-
cation number.
Par. 3. Section 300.1 is amended by
adding paragraph (d) to read as follows:
§300.1 Installment agreement fee.
*****
(d)Effec
tive/applicability date.This
section
is applicable beginning March 16,
1995, ex
cept that the user fee for enter-
ing into
installment agreements on or after
January
1, 2007, is applicable January 1,
2007.
Par. 4. S
ection 300.2 is amended by
adding p
aragraph (d) to read as follows:
§300.2 Restructuring or reinstatement of
installment agreement fee.
*****
(d)Effective/applicability date.This
section is applicable beginning March 16,
1995, except that the user fee for restruc-
turing or reinstatement of an installment
agreement on or after January 1, 2007, is
applicable January 1, 2007.
Par. 5. Section 300.3 is amended by
adding paragraph (d) to read as follows:
§300.3 Offer to compromise fee.
*****
(d)Effective/applicability date.
This section is applicable beginning
November 1, 2003.
Par. 6. Section 300.4 is amended by
adding paragraph (d) to read as follows:
§300.4 Special enrollment examination
fee.
*****
(d)Effective/applicability date.
This section is applicable beginning
November 6, 2006.
Par. 7. Section 300.5 is amended by
adding paragraph (d) to read as follows:
§300.5 Enrollment of enrolled agent fee.
*****
(d)Effective/applicability date.
This section is applicable beginning
November 6, 2006.
Par. 8. Section 300.6 is amended by
adding paragraph (d) to read as follows:
§300.6 Renewal of enrollment of enrolled
agent fee.
*****
(d)Effective/applicability date.
This section is applicable beginning
November 6, 2006.
Par. 9. Section 300.7 is amended by
adding paragraph (d) to read as follows:
§300.7 Enrollment of enrolled actuary fee.
*****
(d)Effective/applicability date.This
section is applicable beginning January 22,
2008.
Par. 10. Section 300.8 is amended by
adding paragraph (d) to read as follows:
§300.8 Renewal of enrollment of enrolled
actuary fee.
*****
(d)Effective/applicability dat
e.This
section is applicable beginning
January 22,
2008.
Par. 11. Section 300.9 is added to
read
as follows:
§300.9 Fee for obtaining a preparer tax
identification number.
(a)Applicability. This section applies
to the application for and renewal of a pre-
parer tax identification number pursuant to
26 CFR 1.6109–2(d).
(b)Fee. The fee to apply for or re-
new a preparer tax identification number is
$50 per year, which is the cost to the gov-
ernment for processing the application for
a preparer tax identification number and
does not include any fees charged by the
vendor.
(c)Person liable for the fee. The indi-
vidual liable for the application or renewal
fee is the individual applying for and re-
newing a preparer tax identification num-
ber from the IRS.
(d)Effective/applicability date.This
section will be applicable on the date of
publication of a Treasury decision adopt-
ing these rules as final regulations in the
Federal Register.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 21, 2010,
4:15 p.m., and published in the issue of the Federal Register
for July 23, 2010, 75 F.R. 43110)
Built-in Gains and Losses
Under Section 382(h);
Correction
Announcement 2010–50
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correcting amendment.
SUMMARY: This document contains cor-
recting amends to IRS’ regulations pro-
viding guidance regarding the treatment of
prepaid income under the built-in gain pro-
visions of section 382(h). These errors
were made when the agency published fi-
nal regulations (T.D. 9487, 2010–28 I.R.B.
48) in theFederal Registeron Wednes-
day, June 16, 2010 (75 FR 33990).
DATES: This correction is effective
on July 28, 2010, and is applicable on
June 16, 2010.
FOR FURTHER INFORMATION
CONTACT: Keith E. Stanley, (202)
622–7750 (not a toll-free number).
2010–33 I.R.B.260August 16, 2010

SUPPLEMENTARY INFORMATION:
Background
The final regulations (T.D. 9487) that
are the subject of this document are under
section 382 of the Internal Revenue Code.
Need for Correction
As published, the final regulations
(T.D. 9487) contain errors that may prove
to be misleading and are in need of clarifi-
cation.
*****.
Correction of Publication
Accordingly, 26 CFR part 1 is cor-
rected by making the following correcting
amendments:
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 1.382–2T is amended
by revising the headings of paragraph
(h)(4)(vii)(A) and paragraph (h)(4)(x)(J)
to read as follows:
§1.382–2T Definition of ownership
change under section 382, as amended by
the tax Reform Act of 1986 (temporary).
*****
(h) * * *
(4) * * *
(vii)***
(A) Right or obligation to issue stock.
*****
(x) * * *
(J) Title 11 or similar case.
*****
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 July 27, 2010,
8:45 a.m., and published in the issue of the Federal Register
for July 28, 2010, 75 F.R. 44138)
Announcement of Disciplinary Sanctions From the Office
of Professional Responsibility
Announcement 2010-51
TheOfficeofProfessionalResponsi-
bility (OPR) announcesrecent disciplinary
sanctions involving attorneys, certified
public accountants, enrolled agents, en-
rolled actuaries, enrolled retirement plan
agents, and appraisers. These individuals
are subject to the regulations governing
practice before the Internal Revenue Ser-
vice (IRS), which are set out in Title 31,
Code of Federal Regulations, Part 10, and
which are published in pamphlet form as
Treasury Department Circular No. 230.
The regulations prescribe the duties and
restrictions relating to such practice and
prescribe the disciplinary sanctions for
violating the regulations.
The disciplinary sanctions to be im-
posed for violation of the regulations are:
Disbarred from practice before the
IRS—An individual who is disbarred is
not eligible to represent taxpayers before
the IRS.
Suspended from practice before the
IRS—An individual who is suspended is
not eligible to represent taxpayers before
the IRS during the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
to represent taxpayers before the IRS, but
OPR may subject the individual’s future
representations to conditions designed to
promote high standards of conduct.
Monetary penalty—A monetary
penalty may be imposed on an individual
who engages in conduct subject to sanc-
tion or on an employer, firm, or entity
if the individual was acting on its behalf
and if it knew, or reasonably should have
known, of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Under the regulations, attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, and enrolled retirement
plan agents may not assist, or accept assis-
tance from, individuals who are suspended
or disbarred with respect to matters consti-
tuting practice (i.e., representation) before
the IRS, and they may not aid or abet sus-
pended or disbarred individuals to practice
before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision after hearing,
Suspended by decision after hearing,
Censured by decision after hearing,
Monetary penalty imposed after hear-
ing, and Disqualified after hearing—An
administrative law judge (ALJ) conducted
an evidentiary hearing upon OPR’s com-
plaint alleging violation of the regulations
and issued a decision imposing one of
these sanctions. After 30 days from the
issuance of the decision, in the absence of
an appeal, the ALJ’s decision became the
final agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured by
default decision, Monetary penalty im-
posed by default decision, and Disqual-
ified by default decision—An ALJ, after
finding that no answer to OPR’s complaint
had been filed, granted OPR’s motion for a
default judgment and issued a decision im-
posing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on ap-
peal, and Disqualified by decision on
appeal—The decision of the ALJ was
appealed to the agency appeal authority,
acting as the delegate of the Secretary
of the Treasury, and the appeal authority
August 16, 20102612010–33 I.R.B.

issued a decision imposing one of these
sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—In lieu of a
disciplinary proceeding being instituted
or continued, an individual offered a con-
sent to one of these sanctions and OPR
accepted the offer. Typically, an offer
of consent will provide for: suspension
for an indefinite term; conditions that the
individual must observe during the sus-
pension; and the individual’s opportunity,
after a stated number of months, to file
with OPR a petition for reinstatement af-
firming compliance with the terms of the
consent and affirming current eligibility
to practice (i.e., an active professional
license or active enrollment status). An
enrolled agent or an enrolled retirement
plan agent may also offer to resign in order
to avoid a disciplinary proceeding.
Suspended by decision in expedited
proceeding, Suspended by default de-
cision in expedited proceeding, Sus-
pended by consent in expedited pro-
ceeding—OPR instituted an expedited
proceeding for suspension (based on cer-
tain limited grounds, including loss of a
professional licenseand criminal convic-
tions).
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a decision
on or after September 26, 2007, which was
theeffectivedateofamendmentstothe
regulations that permit making such deci-
sions publicly available; (2) the individual
has settled a disciplinary case by signing
OPR’s “consent to sanction” form, which
requires consenting individuals to admit to
one or more violations of the regulations
and to consent to the disclosure of the in-
dividual’s own return information related
to the admitted violations (for example,
failure to file Federal income tax returns);
or (3) OPR has issued a decision in an
expedited proceeding for suspension.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by the names of states and sec-
ond by the last names of individuals. Un-
less otherwise indicated, section numbers
(e.g., §10.51) refer to the regulations.
City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Alabama
DecaturHall, III, Garland C.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
June 18, 2010
Arizona
MesaGoodmansen, Allen P. CPASuspended by default
decision in expedited
proceeding under §10.82
(suspension of CPA
license)
Indefinite from
June 18, 2010
California
San BernardinoCollins, Richard S.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
June 7, 2010
CarsonStaten, Jacqueline.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
June 7, 2010
2010–33 I.R.B.262August 16, 2010

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Florida
MariannaJohnston, EvelynEnrolled AgentSuspended by
decision in expedited
proceeding under §10.82
(preliminarily enjoined by
U.S. district court from
preparing any federal
tax returns related to
claims for original issue
discount (OID) income,
withholding, or refund
claims, providing advice
or services of any kind
pertaining to claims for
OID income, withholding,
or refund claims; from
ignoring the implications
of questionable or
suspicious information
provided by customers as
prohibited by Treas. Reg.
1.6694–1(e), Circular
230, and 26 U.S.C.
6694(a); and from other
tax-related activities)
Indefinite from
June 23, 2010
Illinois
MolineKoenig, Phillip E.AttorneySuspended by decision
on appeal for violation
of § 10.51 (failure to file
individual income tax
returns for five years and
failure to pay/timely pay
individual income taxes
for five years)
Indefinite from
May 26, 2010, but
at least 48 months
Iowa
BettendorfSimmons, Neil A.Enrolled AgentCensured by consent for
admitted violations of
§ 10.51 (failure to pay
sufficient estimated taxes
on his self-employment
for seven years)
June 21, 2010
August 16, 20102632010–33 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Kansas
Garden CityMcCall, Michael W.AttorneySuspended by consent
for admitted violations
of § 10.22 (1994) (in
that practitioner did not
exercise due diligence
in regard to a municipal
finance bond transaction
where purported Federal
tax-exempt interest
on the issued bonds
was later determined
by the IRS to be not
exempt from Federal
taxation); and § 10.51(j)
(1994)/10.51(a)(13)
(2008) (in that practitioner
rendered written advice
including false opinions,
knowingly, recklessly, or
through gross negligence
in regard to a municipal
finance bond transaction
where purported Federal
tax-exempt interest on the
issued bonds was later
determined by the IRS
to be not exempt from
Federal taxation)
Indefinite from
May 10, 2010
Arkansas CityParman, Jon P.CPAReinstated
July 27, 2009
Louisiana
Lake CharlesJudice, Gregory V.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
June 10, 2010
Massachusetts
South DeerfieldPepyne, Jr., EdwardW. AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
June 10, 2010
NeedhamSpector, David L.AttorneySuspended by decision
in expedited proceeding
under §10.82 (attorney
disbarment)
Indefinite from
June 10, 2010
2010–33 I.R.B.264August 16, 2010

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Mississippi
RichtonHinton, Angelia P.CPASuspended by default
decision in expedited
proceeding under § 10.82
(revocation of CPA
license in Oklahoma)
Indefinite from
June 21, 2010
Nebraska
GothenburgRaymond, Robert C.CPASuspended by default
decision in expedited
proceeding under § 10.82
(revocation of CPA
license)
Indefinite from
June 10, 2010
New Jersey
ElizabethFishman, Mitchell E.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
June 10, 2010
Cliffside ParkGold, Mark E.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
June 10, 2010
New York
HempsteadHibner, John R.AttorneySuspended by decision
in expedited proceeding
under §10.82 (suspension
of attorney license)
Indefinite from
June 7, 2010
CopiagueMcCarthy,
Christopher P.
AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
June 10, 2010
Huntington StationWhittlesey, JoAnn C.CPADisbarred by decision on
appeal for violation of
§ 10.51 (willful failure to
timely file five Federal
individual income tax
returns)
Indefinite from
July 18, 2008
(erroneously listed
as July 18, 2009,
in IRB 2009–42)
August 16, 20102652010–33 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Ohio
ColumbusMcCord, MichaelAttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
June 21, 2010
WickliffePrince, Paul W.CPASuspended by default
decision in expedited
proceeding under §10.82
(revocation of CPA
license)
Indefinite from
June 21, 2010
CantonSchiller, Glenn M.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
June 21, 2010
Oklahoma
BartlesvilleShambles, Joey M.CPASuspended by default
decision in expedited
proceeding under §10.82
(revocation of CPA
license)
Indefinite from
June 21, 2010
Hinton, Angelia P., See
Mississippi
Tennessee
MemphisHoots, James M.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
June 21, 2010
Texas
AustinDerkunt, Mustafa E.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
June 21, 2010
2010–33 I.R.B.266August 16, 2010

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.
August 16, 2010i2010–33 I.R.B.

Numerical Finding List
1
Bulletins 2010–27 through 2010–33
Announcements:
2010-43, 2010-27 I.R.B.42
2010-44, 2010-28 I.R.B.54
2010-45, 2010-29 I.R.B.87
2010-46, 2010-29 I.R.B.87
2010-47, 2010-30 I.R.B.173
2010-48, 2010-32 I.R.B.234
2010-50, 2010-33 I.R.B.260
2010-51, 2010-33 I.R.B.261
Notices:
2010-48, 2010-27 I.R.B.9
2010-49, 2010-27 I.R.B.10
2010-50, 2010-27 I.R.B.12
2010-51, 2010-29 I.R.B.83
2010-52, 2010-30 I.R.B.88
2010-53, 2010-31 I.R.B.182
2010-55, 2010-33 I.R.B.253
2010-56, 2010-33 I.R.B.254
Proposed Regulations:
REG-139343-08, 2010-33 I.R.B.256
REG-151605-09, 2010-31 I.R.B.184
REG-112841-10, 2010-27 I.R.B.41
REG-118412-10, 2010-29 I.R.B.85
REG-120399-10, 2010-32 I.R.B.239
Revenue Procedures:
2010-25, 2010-27 I.R.B.16
2010-26, 2010-30 I.R.B.91
2010-27, 2010-31 I.R.B.183
Revenue Rulings:
2010-18, 2010-27 I.R.B.1
2010-19, 2010-31 I.R.B.174
Tax Conventions:
2010-48, 2010-32 I.R.B.234
Treasury Decisions:
9486, 2010-27 I.R.B.3
9487, 2010-28 I.R.B.48
9488, 2010-28 I.R.B.51
9489, 2010-29 I.R.B.55
9490, 2010-31 I.R.B.176
9491, 2010-32 I.R.B.186
9492, 2010-33 I.R.B.242
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin
2010–26, dated June 28, 2010.
2010–33 I.R.B.iiAugust 16, 2010

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–27 through 2010–33
Notices:
2003-19
Revoked by
Notice 2010-53, 2010-31 I.R.B.182
Revenue Procedures:
81-18
Obsoleted by
Rev. Proc. 2010-27, 2010-31 I.R.B.183
2007-44
Modified by
Notice 2010-48, 2010-27 I.R.B.9
2009-18
Obsoleted in part by
Rev. Proc. 2010-25, 2010-27 I.R.B.16
2009-30
Superseded by
Rev. Proc. 2010-26, 2010-30 I.R.B.91
Treasury Decisions:
9487
Corrected by
Ann. 2010-50, 2010-33 I.R.B.260
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin 2010–26, dated June 28, 2010.
August 16, 2010iii2010–33 I.R.B.

2010–33 I.R.B.August 16, 2010

August 16, 20102010–33 I.R.B.

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