Internal Revenue Bulletin 2012-13 (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
2-13
March 26, 2012
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2012–8, page 563.
Interest rates; underpayment and overpayments.The
rates for interest determined under section 6621 of the Code
for the calendar quarter beginning April 1, 2012, will be 3 per-
cent for overpayments (2 percent in the case of a corporation),
3 percent for the underpayments, and 5 percent for large cor-
porate underpayments. The rate of interest paid on the portion
of a corporate overpayment exceeding $10,000 will be 0.5
percent.
REG–110980–10, page 581.
Proposed regulations under section 417 of the Code provide
guidance relating to the minimum present value requirements
applicable to partial annuity distribution options under defined
benefit pension plans. The regulations would make changes un-
der section 417(e) that would permit plans to simplify the treat-
ment of certain optional forms of benefit that are paid partly in
the form of an annuity and partly in a more accelerated form.
A public hearing is scheduled for June 1, 2012.
Notice 2012–20, page 574.
This notice provides guidance relating to the portfolio inter-
est exception, the short term debt exception under regula-
tions section 1.6049–5(b)(10), and the excise tax under sec-
tion 4701 in connection with the repeal of section 163(f)(2)(B)
(the bearer debt repeal) of the Code. Notice 2006–99 super-
seded in part.
Notice 2012–22, page 576.
This notice advises State and local housing credit agencies that
allocate low-income housing tax credits under section 42 of
the Code, and States and other issuers of tax-exempt private
activity bonds under section 141, of the population figures to
use in calculating: (1) the 2012 calendar year population-based
component of the State housing credit ceiling (Credit Ceiling)
under section 42(h)(3)(C)(ii); (2) the 2012 calendar year volume
cap (Volume Cap) under section 146; and (3) the 2012 volume
limit (Volume Limit) under section 142(k)(5).
EMPLOYEE PLANS
REG–115809–11, page 598.
Proposed regulations under section 401 of the Code relate to
the purchase of longevity annuity contracts under tax-qualified
defined contribution plans under section 401(a), section 403(b)
plans, individual retirement annuities and accounts (IRAs) under
section 408, and eligible governmental section 457 plans. The
regulations will provide the public with guidance necessary to
comply with the required minimum distribution rules under sec-
tion 401(a)(9). The regulations will affect individuals for whom a
longevity annuity contract is purchased under these plans and
IRAs (and their beneficiaries), sponsors and administrators of
these plans, trustees and custodians of these IRAs, and insur-
ance companies that issue longevity annuity contracts under
these plans and IRAs. A public hearing is scheduled for June 1,
2012.
Notice 2012–24, page 578.
Weighted average interest rate update; corporate bond
indices; 30-year Treasury securities; segment rates.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in March 2012;
the 24-month average segment rates; the funding transitional
segment rates applicable for March 2012; and the minimum
present value transitional rates for February 2012.
(Continued on the next page)
Fi
nding Lists begin on page ii.
Index for January through March begins on page iv.

EXCISE TAX
REG–113770–10, page 587.
Proposed regulations under section 4191 of the Code pro-
vide guidance on the new excise tax on certain medical de-
vices. Specifically, the proposed rules clarify what constitutes
a “taxable medical device”, what types of devices are exempt
from the tax, and what types of sales of otherwise taxable de-
vices may be exempt from the tax if certain requirements are
met. Proposed regulations on the medical device excise tax,
when finalized, will affect medical device manufacturers and im-
porters, and some medical device distributors. A public hear-
ing is scheduled for May 16, 2012.
Notice 2012–20, page 574.
This notice provides guidance relating to the portfolio inter-
est exception, the short term debt exception under regula-
tions section 1.6049–5(b)(10), and the excise tax under sec-
tion 4701 in connection with the repeal of section 163(f)(2)(B)
(the bearer debt repeal) of the Code. Notice 2006–99 super-
seded in part.
ADMINISTRATIVE
Announcement 2012–11, page 611.
This announcement withdraws a notice of proposed regulation
(REG–208274–86, 1993–1 C.B. 822) under section 6039E of
the Code which specifies the information that must be included
and provide guidance on when the IRS may impose a $500
penalty for failure to provide that information. U.S. citizens who
apply for passports from the Department of State are required
by the IRS to provide certain information on the application
form.
March 26, 20122012–13 I.R.B.

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.
2012–13 I.R.B.March 26, 2012

March 26, 20122012–13 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 4221.
—Certain
Tax-Free Sale
s
A Notice of Pro
posed Rulemaking (NPRM) notes
that the exemp
tions described in section 4221(a)(3)
through (a)(6
) will not apply to the tax imposed by
section 4191
, enacted by section 1405 of the Health
Care and Reco
nciliation Act of 2010 (HCERA),
Public Law 11
1–152 (124 Stat. 1029 (2010)), in
conjunction
with the Patient Protection and Afford-
able Care Ac
t, Public Law 111–148 (124 Stat. 119
(2010)). HC
ERA amended section 4221(a) of the
Internal Re
venue Code to limit the types of sales
to be exempt
from the tax imposed by section 4191
(effective
for sales after December 31, 2012). See
REG-11377
0-10, page 587.
A Notice of
Proposed Rulemaking (NPRM) de-
scribes th
e circumstances under which the assembly
or product
ion of a “kit,” as defined in the proposed
regulatio
ns, constitutes further manufacture. See
REG-11377
0-10, page 587.
Section 6416.—Certain
Taxes on Sales and Services
A Notice of Proposed Rulemaking (NPRM) notes
that tax paid with respect to certain specified uses
and resales described in section 6416(a)(2) will
not be deemed overpayments in the case of the tax
imposed by section 4191, enacted by section 1405
of the Health Care and Reconciliation Act of 2010
(HCERA), Public Law 111–152 (124 Stat. 1029
(2010)), in conjunction with the Patient Protec-
tion and Affordable Care Act, Public Law 111–148
(124 Stat. 119 (2010)). HCERA amended section
6416(b)(2) of the Internal Revenue Code to limit the
types of sales and uses to be exempted from the tax
imposed by section 4191 (effective for sales after
December 31, 2012). SeeREG-113770-10, page
587.
Section 6621.—Determina-
tion of Rate of Interest
26 CFR 301.6621–1: Interest rate.
Inter
est rates; underpayment and
overp
ayments.The rates for interest de-
term
ined under section 6621 of the Code
for t
he calendar quarter beginning April 1,
2012
, will be 3 percent for overpayments
(2 pe
rcent in the case of a corporation), 3
perc
ent for the underpayments, and 5 per-
cen
t for large corporate underpayments.
The
rate of interest paid on the portion of a
cor
porate overpayment exceeding $10,000
wil
l be 0.5 percent.
Rev. Rul. 2012
–8
Section 6621 of
the Internal Revenue
Code establish
es the rates for interest
on tax overpaym
ents and tax underpay-
ments. Under s
ection 6621(a)(1), the
overpayment r
ate is the sum of the federal
short-term ra
te plus 3 percentage points
(2 percentag
e points in the case of a cor-
poration), e
xcept the rate for the portion
of a corporat
e overpayment of tax exceed-
ing $10,000 f
or a taxable period is the
sum of the fe
deral short-term rate plus
0.5 of a perc
entage point. Under section
6621(a)(2)
, the underpayment rate is the
sum of the fe
deral short-term rate plus 3
percentage
points.
Section 662
1(c) provides that for pur-
poses of in
terest payable under section
6601 on any
large corporate underpay-
ment, the u
nderpayment rate under section
6621(a)(2
) is determined by substituting
“5 percent
age points” for “3 percentage
points.” S
ee section 6621(c) and section
301.6621
–3 of the Regulations on Proce-
dure and A
dministration for the definition
of a large
corporate underpayment and
for the ru
les for determining the appli-
cable da
te. Section 6621(c) and section
301.662
1–3 are generally effective for
periods
after December 31, 1990.
Section
6621(b)(1) provides that the
Secreta
ry will determine the federal
short-t
erm rate for the first month in each
calenda
r quarter. Section 6621(b)(2)(A)
provid
es that the federal short-term rate
determ
ined under section 6621(b)(1) for
any mon
th applies during the first calen-
dar qua
rter beginning after that month.
Sectio
n 6621(b)(2)(B) provides that in de-
termi
ning the addition to tax under section
6654 f
or failure to pay estimated tax for
any ta
xable year, the federal short-term
rate t
hat applies during the third month
follo
wing the taxable year also applies
duri
ng the first 15 days of the fourth
mont
h following the taxable year. Sec-
tion
6621(b)(3) provides that the federal
shor
t-term rate for any month is the fed-
eral
short-term rate determined during that
mont
h by the Secretary in accordance with
sec
tion 1274(d), rounded to the nearest
ful
l percent (or, if a multiple of
1
/2of 1
percent, the r
ate is increased to the next
highest full p
ercent).
Notice 88–59,
1988–1 C.B. 546, an-
nounced that,
in determining the quarterly
interest rate
s to be used for overpayments
and underpay
ments of tax under section
6621, the Int
ernal Revenue Service will
use the feder
al short-term rate based on
daily compou
nding because that rate is
most consis
tent with section 6621 which,
pursuant to
section 6622, is subject to daily
compoundin
g.
The federal
short-term rate determined
in accordan
ce with section 1274(d) during
January 201
2 is the rate published in Rev-
enue Rulin
g 2012–7, 2012–6 I.R.B. 362,
to take eff
ect beginning February 1, 2012.
The federa
l short-term rate, rounded to the
nearest fu
ll percent, based on daily com-
pounding
determined during the month of
January 2
012 is 0 percent. Accordingly, an
overpaym
ent rate of 3 percent (2 percent
in the cas
e of a corporation) and an under-
payment r
ate of 3 percent are established
for the ca
lendar quarter beginning April 1,
2012. Th
e overpayment rate for the por-
tion of a
corporate overpayment exceeding
$10,000
for the calendar quarter beginning
April 1,
2012, is 0.5 percent. The under-
paymen
t rate for large corporate underpay-
ments f
or the calendar quarter beginning
April 1
, 2012, is 5 percent. These rates ap-
plytoa
mounts bearing interest during that
calend
ar quarter.
The 3 pe
rcent rate also applies to esti-
mated t
ax underpayments for the second
calen
dar quarter in 2012. And, under sec-
tion 6
621(b)(2)(B), the federal short term
rate o
f 3 percent applicable for March 2012
appli
es for the first 15 days in April 2012 to
estim
ated tax underpayments made by an
indi
vidual with a taxable year ending De-
cemb
er 31.
Inte
rest factors for daily compound in-
tere
st for annual rates of 0.5 percent are
publ
ished in Appendix A of this Revenue
Ruli
ng. Interest factors for daily com-
poun
d interest for annual rates of 2 percent,
3per
cent and 5 percent are published in Ta-
ble
s 57, 59, and 63 of Rev. Proc. 95–17,
199
5–1 C.B. 611, 613, and 617.
Ann
ual interest rates to be compounded
dai
ly pursuant to section 6622 that apply
2012–13 I.R.B.563March 26, 2012

for prior periods are set forth in the tables
accompanying this revenue ruling.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Deborah Colbert-James of the Office
of Associate Chief Counsel (Procedure &
Administration). For further information
regarding this revenue ruling, contact
Ms. Colbert-James at (202) 622–8143
(not a toll-free call).
APPENDIX A
365 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
10.000013699630.000863380
125
0.001713784
20.000027397640.000877091126
0.001727506
30.000041096
65
0.0008908011270.001741228
4
0.000054796
66
0.000904512
128
0.001754951
50.000068495
670.0009182231290.001768673
6
0.000082195
680.0009319341300.001782396
7
0.000095894
69
0.000945646
1310.001796119
8
0.000109594
70
0.000959357
1320.001809843
90.000123294710.000973069133
0.001823566
10
0.000136995
720.0009867811340.001837290
11
0.000150695
730.001000493
1350.001851013
120.000164396740.0010142061360.001864737
130.000178097
75
0.0010279181370.001878462
140.000191798760.0010416311380.001892186
150.000205499
77
0.001055344
139
0.001905910
160.00021920178
0.001069057
140
0.001919635
170.000232902790.0010827701410.001933360
180.000246604800.001096484142
0.001947085
190.000260306810.0011101971430.001960811
200.000274008820.001123911144
0.001974536
210.00028771183
0.001137625145
0.001988262
220.00030141384
0.001151339
1460.002001988
23
0.000315116850.001165054
147
0.002015714
240.000328819860.0011787681480.002029440
250.000342522
870.0011924831490.002043166
26
0.000356225
880.001206198
1500.002056893
270.000369929890.001219913
151
0.002070620
280.000383633900.001233629
152
0.002084347
290.000397336910.001247344
153
0.002098074
300.000411041920.001261060
154
0.002111801
31
0.000424745
930.001274776
1550.002125529
320.000438449940.001288492
1560.002139257
33
0.00045215495
0.001302208
1570.002152985
34
0.000465859
96
0.001315925158
0.002166713
350.000479564
970.001329641
159
0.002180441
360.00049326998
0.001343358
1600.002194169
37
0.000506974
99
0.001357075
1610.002207898
38
0.000520680
1000.0013707921620.002221627
39
0.000534386
101
0.001384510
163
0.002235356
40
0.000548092
1020.001398227164
0.002249085
41
0.000561798
103
0.0014119451650.002262815
42
0.000575504
104
0.001425663
166
0.002276544
43
0.000589211105
0.0014393811670.002290274
440.000602917106
0.001453100
1680.002304004
45
0.0006166241070.0014668181690.002317734
460.000630331108
0.001480537
170
0.002331465
470.000644039109
0.001494256
171
0.002345195
48
0.000657746
110
0.001507975
172
0.002358926
49
0.000671454
111
0.001521694
173
0.002372657
March 26, 20125642012–13 I.R.B.

365 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
500.000685161
112
0.001535414
1740.002386388
51
0.000698869113
0.001549133175
0.002400120
520.000712578
114
0.001562853
176
0.002413851
53
0.000726286
1150.001576573
177
0.002427583
540.000739995
116
0.001590293
178
0.002441315
550.000753703
1170.001604014179
0.002455047
56
0.0007674121180.0016177341800.002468779
57
0.000781121119
0.001631455
181
0.002482511
58
0.000794831120
0.001645176
1820.002496244
590.000808540
121
0.001658897
183
0.002509977
60
0.000822250
1220.001672619184
0.002523710
61
0.000835960
1230.001686340
620.0008496701240.001700062
366 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
10.000013661630.000861020
125
0.001709097
20.000027323640.0008746931260.001722782
30.000040984
65
0.0008883661270.001736467
4
0.000054646
660.000902040128
0.001750152
5
0.00006830867
0.000915713
1290.001763837
60.000081970680.000929387130
0.001777522
7
0.000095632
690.0009430611310.001791208
8
0.000109295
70
0.000956735
1320.001804893
9
0.000122958
710.000970409133
0.001818579
100.000136620720.000984084134
0.001832265
11
0.000150283
73
0.0009977581350.001845951
120.000163947740.001011433136
0.001859638
130.000177610
750.001025108
1370.001873324
140.000191274760.0010387831380.001887011
15
0.00020493877
0.001052459
1390.001900698
160.000218602780.001066134140
0.001914385
170.000232266790.0010798101410.001928073
18
0.000245930
800.0010934861420.001941760
19
0.000259595
810.001107162143
0.001955448
200.000273260820.0011208391440.001969136
210.00028692483
0.001134515145
0.001982824
22
0.000300590
840.001148192146
0.001996512
23
0.00031425585
0.0011618691470.002010201
240.00032792086
0.001175546
1480.002023889
250.000341586
870.001189223149
0.002037578
26
0.000355252
880.001202900
1500.002051267
270.00036891889
0.0012165781510.002064957
28
0.000382584
90
0.001230256152
0.002078646
29
0.000396251
910.001243934
153
0.002092336
300.00040991792
0.0012576121540.002106025
31
0.000423584
930.001271291
1550.002119715
32
0.000437251
940.001284969
1560.002133405
33
0.00045091895
0.001298648
157
0.002147096
34
0.000464586
960.001312327
158
0.002160786
350.000478253
970.001326006
159
0.002174477
360.00049192198
0.001339685
1600.002188168
37
0.000505589
99
0.001353365
161
0.002201859
38
0.000519257
1000.001367044162
0.002215550
2012–13 I.R.B.565March 26, 2012

366 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
39
0.000532925
1010.0013807241630.002229242
40
0.000546594
1020.0013944041640.002242933
41
0.000560262
103
0.0014080851650.002256625
42
0.000573931
104
0.001421765
1660.002270317
43
0.0005876001050.001435446
1670.002284010
440.0006012691060.0014491271680.002297702
45
0.0006149391070.001462808169
0.002311395
460.0006286081080.001476489170
0.002325087
470.0006422781090.0014901701710.002338780
48
0.000655948
110
0.001503852
172
0.002352473
490.000669618111
0.001517533
1730.002366167
50
0.000683289112
0.001531215
1740.002379860
510.000696959
113
0.0015448971750.002393554
52
0.000710630114
0.001558580
1760.002407248
53
0.000724301
1150.001572262
1770.002420942
54
0.000737972116
0.001585945
1780.002434636
550.000751643
117
0.001599628
1790.002448331
560.000765315
1180.001613311180
0.002462025
57
0.0007789861190.001626994181
0.002475720
580.000792658
1200.001640678182
0.002489415
59
0.000806330121
0.001654361
183
0.002503110
600.000820003122
0.001668045
184
0.002516806
61
0.000833675
1230.001681729
620.000847348124
0.001695413
TABLE OF INTEREST RATES
PERIODS BEFORE JUL. 1, 1975 — PERIODS ENDING DEC. 31, 1986
OVERPAYMENTS AND UNDERPAYMENTS
PERIODRATE
In 1995–1 C.B.
DAILY RATE TABLE
Before Jul. 1, 1975
6%
Table 2, pg. 557
Jul. 1, 1975—Jan. 31, 1976
9%
Table 4, pg. 559
Feb. 1, 1976—Jan. 31, 19787%
Table 3, pg. 558
Feb. 1, 1978—Jan. 31, 19806%
Table 2, pg. 557
Feb. 1, 1980—Jan. 31, 198212%
Table 5, pg. 560
Feb. 1, 1982—Dec. 31, 198220%
Table 6, pg. 560
Jan. 1, 1983—Jun. 30, 198316%
Table 37, pg. 591
Jul. 1, 1983—Dec. 31, 198311%
Table 27, pg. 581
Jan. 1, 1984—Jun. 30, 198411%
Table 75, pg. 629
Jul. 1, 1984—Dec. 31, 198411%
Table 75, pg. 629
Jan. 1, 1985—Jun. 30, 1985
13%
Table 31, pg. 585
Jul. 1, 1985—Dec. 31, 1985
11%
Table 27, pg. 581
Jan. 1, 1986—Jun. 30, 198610%
Table 25, pg. 579
Jul. 1, 1986—Dec. 31, 19869%
Table 23, pg. 577
March 26, 20125662012–13 I.R.B.

TABLE OF INTEREST RATES
FROM JAN. 1, 1987 — DEC. 31, 1998
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Jan. 1, 1987—Mar. 31, 19878%21
575
9%23
577
Apr. 1, 1987—Jun
. 30, 1987
8%21
575
9%23
577
Jul. 1, 1987—Sep. 30, 19878%21
575
9%23
577
Oct. 1, 1987—Dec. 31, 19879%23
577
10%
25579
Jan. 1, 1988—Ma
r. 31, 1988
10%7362711%
75
629
Apr. 1, 1988—Jun. 30, 19889%71
625
10%73627
Jul. 1, 1988—Sep. 30, 19889%71
625
10%73627
Oct. 1, 1988—D
ec. 31, 1988
10%7362711%
75
629
Jan. 1, 1989—Mar. 31, 198910%
25579
11%27
581
Apr. 1, 1989—Jun. 30, 198911%27
581
12%29
583
Jul. 1, 1989—
Sep. 30, 1989
11%27
581
12%29
583
Oct. 1, 1989—Dec. 31, 198910%
25579
11%27
581
Jan. 1, 1990—Mar. 31, 199010%
25579
11%27
581
Apr. 1, 1990
—Jun. 30, 1990
10%
25579
11%27
581
Jul. 1, 1990—Sep. 30, 199010%
25579
11%27
581
Oct. 1, 1990—Dec. 31, 199010%
25579
11%27
581
Jan. 1, 199
1—Mar. 31, 1991
10%
25579
11%27
581
Apr. 1, 1991—Jun. 30, 19919%23
577
10%
25579
Jul. 1, 1991—Sep. 30, 19919%23
577
10%
25579
Oct. 1, 19
91—Dec. 31, 1991
9%23
577
10%
25579
Jan. 1, 1992—Mar. 31, 19928%696239%71
625
Apr. 1, 1992—Jun. 30, 19927%676218%69623
Jul. 1, 1
992—Sep. 30, 1992
7%676218%69623
Oct. 1, 1992—Dec. 31, 19926%
65
6197%67621
Jan. 1, 1993—Mar. 31, 19936%17
571
7%19
573
Apr. 1,
1993—Jun. 30, 1993
6%17
571
7%19
573
Jul. 1, 1993—Sep. 30, 19936%17
571
7%19
573
Oct. 1, 1993—Dec. 31, 19936%17
571
7%19
573
Jan. 1,
1994—Mar. 31, 1994
6%17
571
7%19
573
Apr. 1, 1994—Jun. 30, 19946%17
571
7%19
573
Jul. 1, 1994—Sep. 30, 19947%19
573
8%21
575
Oct. 1
, 1994—Dec. 31, 1994
8%21
575
9%23
577
Jan. 1, 1995—Mar. 31, 1995
8%21
575
9%23
577
Apr.
1, 1995—Jun. 30, 1995
9%23
577
10%
25579
Jul. 1, 1995—Sep. 30, 1995
8%21
575
9%23
577
Oct. 1, 1995—Dec. 31, 1995
8%21
575
9%23
577
Jan. 1, 1996—Mar. 31, 19968%696239%71
625
Apr
. 1, 1996—Jun. 30, 1996
7%676218%69623
Jul. 1, 1996—Sep. 30, 19968%696239%71
625
Oct. 1, 1996—Dec. 31, 19968%696239%71
62
5
Ja
n. 1, 1997—Mar. 31, 1997
8%21
575
9%23
577
Apr. 1, 1997—Jun. 30, 19978%21
575
9%23
577
Jul. 1, 1997—Sep. 30, 19978%21
57
5
9%23
57
7
Oc
t. 1, 1997—Dec. 31, 1997
8%21
575
9%23
577
Jan. 1, 1998—Mar. 31, 19988%21
575
9%23
577
Apr. 1, 1998—Jun. 30, 19987%19
5
73
8%21
5
75
J
ul. 1, 1998—Sep. 30, 1998
7
%
1
9
573
8
%
2
1
575
Oct. 1, 1998—Dec. 31, 19987%19
573
8%21
575
2012–13 I.R.B.567March 26, 2012

TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT
NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
1995–1 C.B.
RATETABLEPG
Jan. 1, 1999—Mar. 31, 19997%19
573
Apr. 1, 1999—Jun. 30, 19998%21
575
Jul. 1, 1999—Sep. 30, 19998%21
575
Oct. 1, 1999—Dec. 31, 19998%21
575
Jan. 1, 2000—Mar. 31, 20008%69623
Apr. 1, 2000—Jun. 30, 20009%71
625
Jul. 1, 2000—Sep. 30, 20009%71
625
Oct. 1, 2000—Dec. 31, 20009%71
625
Jan. 1, 2001—Mar. 31, 20019%23
577
Apr. 1, 2001—Jun. 30, 20018%21
575
Jul. 1, 2001—Sep. 30, 20017%19
573
Oct. 1, 2001—Dec. 31, 20017%19
573
Jan. 1, 2002—Mar. 31, 20026%17
571
Apr. 1, 2002—Jun. 30, 20026%17
571
Jul. 1, 2002—Sep. 30, 20026%17
571
Oct. 1, 2002—Dec. 31, 20026%17
571
Jan. 1, 2003—Mar. 31, 2003
5%15569
Apr. 1, 2003—Jun. 30, 2003
5%15569
Jul. 1, 2003—Sep. 30, 2003
5%15569
Oct. 1, 2003—Dec. 31, 20034%13
567
Jan. 1, 2004—Mar. 31, 20044%61
615
Apr. 1, 2004—Jun. 30, 2004
5%
63617
Jul. 1, 2004—Sep. 30, 20044%61
615
Oct. 1, 2004—Dec. 31, 2004
5%
63617
Jan. 1, 2005—Mar. 31, 20055%15569
Apr. 1, 2005—Jun. 30, 2005
6%17
571
Jul. 1, 2005—Sep. 30, 2005
6%17
571
Oct. 1, 2005—Dec. 31, 2005
7%19
573
Jan. 1, 2006—Mar. 31, 20067%19
573
Apr. 1, 2006—Jun. 30, 20067%19
573
Jul. 1, 2006—Sep. 30, 20068%21
575
Oct. 1, 2006—Dec. 31, 20068%21
575
Jan. 1, 2007—Mar. 31, 20078%21
575
Apr. 1, 2007—Jun. 30, 20078%21
575
Jul. 1, 2007—Sep. 30, 20078%21
575
Oct. 1, 2007—Dec. 31, 20078%21
575
Jan. 1, 2008—Mar. 31, 20087%67621
Apr. 1, 2008—Jun. 30, 20086%
65
619
Jul. 1, 2008—Sep. 30, 2008
5%
63617
Oct. 1, 2008—Dec. 31, 20086%
65
619
Jan. 1, 2009—Mar. 31, 2009
5%15569
Apr. 1, 2009—Jun. 30, 20094%13
567
Jul. 1, 2009—Sep. 30, 20094%13
567
Oct. 1, 2009—Dec. 31, 20094%13
567
Jan. 1, 2010—Mar. 31, 20104%13
567
Apr. 1, 2010—Jun. 30, 20104%13
567
Jul. 1, 2010—Sep. 30, 20104%13
567
Oct. 1, 2010—Dec. 31, 20104%13
567
Jan. 1, 2011—Mar. 31, 20113%11
565
Apr. 1, 2011—June 30, 20114%13
567
Jul. 1, 2011—Sep. 30, 20114%13
567
Oct. 1, 2011—Dec. 31, 20113%11
565
Jan. 1, 2012—Mar. 31, 20123%
59
613
Apr. 1, 2012—Jun. 30, 20123%
59
613
March 26, 20125682012–13 I.R.B.

TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Jan. 1, 1999—Mar. 31, 19996%17
571
7%19
573
Apr. 1, 1999—Jun
. 30, 1999
7%19
573
8%21
575
Jul. 1, 1999—Sep. 30, 19997%19
573
8%21
575
Oct. 1, 1999—Dec. 31, 19997%19
573
8%21
575
Jan. 1, 2000—Ma
r. 31, 2000
7%676218%69623
Apr. 1, 2000—Jun. 30, 20008%696239%71
625
Jul. 1, 2000—Sep. 30, 20008%696239%71
625
Oct. 1, 2000—D
ec. 31, 2000
8%696239%71
625
Jan. 1, 2001—Mar. 31, 20018%21
575
9%23
577
Apr. 1, 2001—Jun. 30, 20017%19
573
8%21
575
Jul. 1, 2001—
Sep. 30, 2001
6%17
571
7%19
573
Oct. 1, 2001—Dec. 31, 20016%17
571
7%19
573
Jan. 1, 2002—Mar. 31, 2002
5%15569
6%17
571
Apr. 1, 2002
—Jun. 30, 2002
5%15569
6%17
571
Jul. 1, 2002—Sep. 30, 2002
5%15569
6%17
571
Oct. 1, 2002—Dec. 31, 2002
5%15569
6%17
571
Jan. 1, 200
3—Mar. 31, 2003
4%13
5675%15569
Apr. 1, 2003—Jun. 30, 20034%13
5675%15569
Jul. 1, 2003—Sep. 30, 20034%13
5675%15569
Oct. 1, 20
03—Dec. 31, 2003
3%11
565
4%13
567
Jan. 1, 2004—Mar. 31, 20043%
59
6134%61
615
Apr. 1, 2004—Jun. 30, 20044%61
6155%
63617
Jul. 1, 2
004—Sep. 30, 2004
3%
59
6134%61
615
Oct. 1, 2004—Dec. 31, 20044%61
6155%
63617
Jan. 1, 2
005—Mar. 31, 2005
4%13
5675%15569
Apr. 1, 2005—Jun. 30, 20055%15569
6%17
571
Jul. 1, 2005—Sep. 30, 20055%15569
6%17
571
Oct. 1,
2005—Dec. 31, 2005
6%17
571
7%19
573
Jan. 1,
2006—Mar. 31, 2006
6%17
571
7%19
573
Apr. 1, 2006—Jun. 30, 20066%17
571
7%19
573
Jul. 1, 2006—Sep. 30, 20067%19
573
8%21
575
Oct. 1
, 2006—Dec. 31, 2006
7%19
573
8%21
575
Jan. 1, 2007—Mar. 31, 20077%19
573
8%21
575
Apr. 1, 2007—Jun. 30, 20077%19
573
8%21
575
Jul.
1, 2007—Sep. 30, 2007
7%19
573
8%21
575
Oct. 1, 2007—Dec. 31, 20077%19
573
8%21
575
Jan. 1, 2008—Mar. 31, 20086%
65
6197%67621
Apr
. 1, 2008—Jun. 30, 2008
5%
636176%
65
619
Jul. 1, 2008—Sep. 30, 20084%61
6155%
63617
Oct. 1, 2008—Dec. 31, 2008
5%
636176%
65
619
Jan
. 1, 2009—Mar. 31, 2009
4%13
5675%15569
Apr. 1, 2009—Jun. 30, 20093%11
565
4%13
567
Jul. 1, 2009—Sep. 30, 20093%11
56
5
4%13
56
7
Oc
t. 1, 2009—Dec. 31, 2009
3%11
565
4%13
567
Jan. 1, 2010—Mar. 31, 20103%11
565
4%13
567
Apr. 1, 2010—Jun. 30, 20103%11
5
65
4%13
5
67
J
ul. 1, 2010—Sep. 30, 2010
3
%
1
1
565
4
%
1
3
567
Oct. 1, 2010—Dec. 31, 20103%11
565
4%13
567
Jan. 1, 2011—Mar. 31, 20112%9
563
3%11
565
Apr. 1, 2011—June 30, 20113%11
565
4%13
567
Jul. 1, 2011—Sep. 30, 20113%11
565
4%13
567
Oct. 1, 2011—Dec. 31, 20112%9
563
3%11
565
Jan. 1, 2012—Mar. 31, 20122%
57
6113%
59
613
2012–13 I.R.B.569March 26, 2012

TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT – Continued
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Apr. 1, 2012—Jun. 30, 20122%
57
6113%
59
613
TABLE OF INTEREST RATES FOR
LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991 — PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 1991—Mar
. 31, 1991
13%31
585
Apr. 1, 1991—Jun. 30, 199112%29
583
Jul. 1, 1991—Sep. 30, 199112%29
583
Oct. 1, 1991—De
c. 31, 1991
12%29
583
Jan. 1, 1992—Mar. 31, 199211%
75
629
Apr. 1, 1992—Jun. 30, 199210%73627
Jul. 1, 1992—S
ep. 30, 1992
10%73627
Oct. 1, 1992—Dec. 31, 19929%71
625
Jan. 1, 1993—Mar. 31, 19939%23
577
Apr. 1, 1993—
Jun. 30, 1993
9%23
577
Jul. 1, 1993—Sep. 30, 19939%23
577
Oct. 1, 1993—Dec. 31, 19939%23
577
Jan. 1, 1994
—Mar. 31, 1994
9%23
577
Apr. 1, 1994—Jun. 30, 19949%23
577
Jul. 1, 1994—Sep. 30, 199410%
25579
Oct. 1, 199
4—Dec. 31, 1994
11%27
581
Jan. 1, 1995—Mar. 31, 1995
11%27
581
Apr. 1, 19
95—Jun. 30, 1995
12%29
583
Jul. 1, 1995—Sep. 30, 1995
11%27
581
Oct. 1, 1995—Dec. 31, 1995
11%27
581
Jan. 1, 1996—Mar. 31, 199611%
75
629
Apr. 1, 1
996—Jun. 30, 1996
10%73627
Jul. 1, 1996—Sep. 30, 199611%
75
629
Oct. 1, 1996—Dec. 31, 199611%
75
629
Jan. 1, 1
997—Mar. 31, 1997
11%27
581
Apr. 1, 1997—Jun. 30, 199711%27
581
Jul. 1, 1997—Sep. 30, 199711%27
581
Oct. 1,
1997—Dec. 31, 1997
11%27
581
Jan. 1, 1998—Mar. 31, 199811%27
581
Apr. 1, 1998—Jun. 30, 199810%
25579
Jul. 1
, 1998—Sep. 30, 1998
10%
25579
Oct. 1, 1998—Dec. 31, 199810%
25579
Jan. 1, 1999—Mar. 31, 19999%23
577
Apr.
1, 1999—Jun. 30, 1999
10%
25579
Jul. 1, 1999—Sep. 30, 199910%
25579
Oct. 1, 1999—Dec. 31, 199910%
25579
Jan
. 1, 2000—Mar. 31, 2000
10%73627
Apr. 1, 2000—Jun. 30, 200011%
75
629
Jul. 1, 2000—Sep. 30, 200011%
75
629
Oct
. 1, 2000—Dec. 31, 2000
11%
75
629
Jan. 1, 2001—Mar. 31, 200111%27
581
Apr. 1, 2001—Jun. 30, 200110%
2557
9
Ju
l. 1, 2001—Sep. 30, 2001
9%23
577
Oct. 1, 2001—Dec. 31, 20019%23
577
March 26, 20125702012–13 I.R.B.

TABLE OF INTEREST RATES FOR
LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991 — PRESENT – Continued
1995–1 C.B.
RATETABLEPG
Jan. 1, 2002—Mar. 31, 20028%21
575
Apr. 1, 2002—Jun. 30, 20028%21
575
Jul. 1, 2002—Sep. 30, 20028%21
575
Oct. 1, 2002—Dec. 30, 20028%21
575
Jan. 1, 2003—Mar. 31, 20037%19
573
Apr. 1, 2003—Jun. 30, 20037%19
573
Jul. 1, 2003—Sep. 30, 20037%19
573
Oct. 1, 2003—Dec. 31, 20036%17
571
Jan. 1, 2004—Mar. 31, 20046%
65
619
Apr. 1, 2004—Jun. 30, 20047%67621
Jul. 1, 2004—Sep. 30, 20046%
65
619
Oct. 1, 2004—Dec. 31, 20047%67621
Jan. 1, 2005—Mar. 31, 2005
7%19
573
Apr. 1, 2005—Jun. 30, 2005
8%21
575
Jul. 1, 2005—Sep. 30, 2005
8%21
575
Oct. 1, 2005—Dec. 31, 2005
9%23
577
Jan. 1, 2006—Mar. 31, 20069%23
577
Apr. 1, 2006—Jun. 30, 20069%23
577
Jul. 1, 2006—Sep. 30, 200610%
25579
Oct. 1, 2006—Dec. 31, 200610%
25579
Jan. 1, 2007—Mar. 31, 200710%
25579
Apr. 1, 2007—Jun. 30, 200710%
25579
Jul. 1, 2007—Sep. 30, 200710%
25579
Oct. 1, 2007—Dec. 31, 200710%
25579
Jan. 1, 2008—Mar. 31, 20089%71
625
Apr. 1, 2008—Jun. 30, 20088%69623
Jul. 1, 2008—Sep. 30, 20087%67621
Oct. 1, 2008—Dec. 31, 20088%69623
Jan. 1, 2009—Mar. 31, 20097%19
573
Apr. 1, 2009—Jun. 30, 20096%17
571
Jul. 1, 2009—Sep. 30, 20096%17
571
Oct. 1, 2009—Dec. 31, 20096%17
571
Jan. 1, 2010—Mar. 31, 20106%17
571
Apr. 1, 2010—Jun. 30, 20106%17
571
Jul. 1, 2010—Sep. 30, 20106%17
571
Oct. 1, 2010—Dec. 31, 20106%17
571
Jan. 1, 2011—Mar. 31, 2011
5%15569
Apr. 1, 2011—Jun. 30, 20116%17
571
Jul. 1, 2011—Sep. 30, 20116%17
571
Oct. 1, 2011—Dec. 31, 2011
5%15569
Jan. 1, 2012—Mar. 31, 2012
5%
63617
Apr. 1, 2012—Jun. 30, 2012
5%
63617
TABLE OF INTEREST RATES FOR CORPORATE
OVERPAYMENTS EXCEEDING $10,000
FROM JANUARY 1, 1995 — PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 1995—Mar. 31, 19956.5%
18
572
Apr. 1, 1995—Jun. 30, 19957.5%
20
574
Jul. 1, 1995—Sep. 30, 19956.5%
18
572
Oct. 1, 1995—Dec. 31, 19956.5%
18
572
2012–13 I.R.B.571March 26, 2012

TABLE OF INTEREST RATES FOR CORPORATE
OVERPAYMENTS E
XCEEDING $10,000
FROM JANUARY 1, 1995 — PRESENT – Continued
1995–1 C.B.
RATETABLEPG
Jan. 1, 1996—Mar. 31, 1996
6.5%
66620
Apr. 1, 1996—Jun. 30, 1996
5.5%
64618
Jul. 1, 1996—Sep. 30, 1996
6.5%
66620
Oct. 1, 1996—Dec. 31, 1996
6.5%
66620
Jan. 1, 1997—Mar. 31, 1997
6.5%
18
572
Apr. 1, 1997—Jun. 30, 1997
6.5%
18
572
Jul. 1, 1997—Sep. 30, 1997
6.5%
18
572
Oct. 1, 1997—Dec. 31, 1997
6.5%
18
572
Jan. 1, 1998—Mar. 31, 1998
6.5%
18
572
Apr. 1, 1998—Jun. 30, 1998
5.5%
16
570
Jul. 1, 1998—Sep. 30, 1998
5.5%
16
570
Oct. 1, 1998—Dec. 31, 1998
5.5%
16
570
Jan. 1, 1999—Mar. 31, 1999
4.5%
14
568
Apr. 1, 1999—Jun. 30, 1999
5.5%
16
570
Jul. 1, 1999—Sep. 30, 1999
5.5%
16
570
Oct. 1, 1999—Dec. 31, 1999
5.5%
16
570
Jan. 1, 2000—Mar. 31, 2000
5.5%
64618
Apr. 1, 2000—Jun. 30, 2000
6.5%
66620
Jul. 1, 2000—Sep. 30, 2000
6.5%
66620
Oct. 1, 2000—Dec. 31, 2000
6.5%
66620
Jan. 1, 2001—Mar. 31, 2001
6.5%
18
572
Apr. 1, 2001—Jun. 30, 2001
5.5%
16
570
Jul. 1, 2001—Sep. 30, 2001
4.5%
14
568
Oct. 1, 2001—Dec. 31, 2001
4.5%
14
568
Jan. 1, 2002—Mar. 31, 2002
3.5%
12
566
Apr. 1, 2002—Jun. 30, 2002
3.5%
12
566
Jul. 1, 2002—Sep. 30, 2002
3.5%
12
566
Oct. 1, 2002—Dec. 31, 2002
3.5%
12
566
Jan. 1, 2003—Mar. 31, 2003
2.5%
10
564
Apr. 1, 2003—Jun. 30, 2003
2.5%
10
564
Jul. 1, 2003—Sep. 30, 2003
2.5%
10
564
Oct. 1, 2003—Dec. 31, 2003
1.5%
8
562
Jan. 1, 2004—Mar. 31, 2004
1.5%56
610
Apr. 1, 2004—Jun. 30, 2004
2.5%58
612
Jul. 1, 2004—Sep. 30, 2004
1.5%56
610
Oct. 1, 2004—Dec. 31, 2004
2.5%58
612
Jan. 1, 2005—Mar. 31, 20052.5%
10
564
Apr. 1, 2005—Jun. 30, 20053.5%
12
566
Jul. 1, 2005—Sep. 30, 20053.5%
12
566
Oct. 1, 2005—Dec. 31, 20054.5%
14
568
Jan. 1, 2006—Mar. 31, 2006
4.5%
14
568
Apr. 1, 2006—Jun. 30, 2006
4.5%
14
568
Jul. 1, 2006—Sep. 30, 2006
5.5%
16
570
Oct. 1, 2006—Dec. 31, 2006
5.5%
16
570
Jan. 1, 2007—Mar. 31, 2007
5.5%
16
570
Apr. 1, 2007—Jun. 30, 2007
5.5%
16
570
Jul. 1, 2007—Sep. 30, 2007
5.5%
16
570
Oct. 1, 2007—Dec. 31, 2007
5.5%
16
570
Jan. 1, 2008—Mar. 31, 2008
4.5%
62616
Apr. 1, 2008—Jun. 30, 2008
3.5%
60614
Jul. 1, 2008—Sep. 30, 2008
2.5%58
612
Oct. 1, 2008—Dec. 31, 2008
3.5%
60614
Jan. 1, 2009—Mar. 31, 2009
2.5%
10
564
Apr. 1, 2009—Jun. 30, 2009
1.5%
8
562
Jul. 1, 2009—Sep. 30, 2009
1.5%
8
562
March 26, 20125722012–13 I.R.B.

TABLE OF INTEREST RATES FOR CORPORATE
OVERPAYMENTS E
XCEEDING $10,000
FROM JANUARY 1, 1995 — PRESENT – Continued
1995–1 C.B.
RATETABLEPG
Oct. 1, 2009—Dec. 31, 2009
1.5%
8
562
Jan. 1, 2010—Mar. 31, 2010
1.5%
8
562
Apr. 1, 2010—Jun. 30, 2010
1.5%
8
562
Jul. 1, 2010—Sep. 30, 2010
1.5%
8
562
Oct. 1, 2010—Dec. 31, 2010
1.5%
8
562
Jan. 1, 2011—Mar. 31, 2011
0.5%*
Apr. 1, 2011—June 30, 2011
1.5%
8
562
Jul. 1, 2011—Sep. 30, 2011
1.5%
8
562
Oct. 1, 2011—Dec. 31, 2011
0.5%*
Jan. 1, 2012—Mar. 31, 2012
0.5%*
Apr. 1, 2012—Jun. 30, 2012
0.5%*
2012–13 I.R.B.573March 26, 2012

Part III. Administrative, Procedural, and Miscellaneous
Guidance Regarding the
Repeal of Section 163(f)(2)(B)
Notice 2012–20
PURPOSE
This notice provides guidance related to
the repeal of section 163(f)(2)(B) of the In-
ternal Revenue Code (Code) and related
provisions enacted by section 502 of the
Hiring Incentives to Restore Employment
Act of 2010, Pub. L. 111–147 (the HIRE
Act). The Department of the Treasury
(Treasury) and the Internal Revenue Ser-
vice (IRS) intend to issue regulations im-
plementing the guidance provided in this
notice.
SECTION 1. BACKGROUND
Issuers of debt obligations that are re-
quired to be in registered form but are not
issued in registered form are subject to the
disallowance of interest deductions under
section 163(f) and the imposition of an ex-
cise tax under section 4701. Any gain on
the sale or other disposition of such an
obligation is generally treated under sec-
tion 1287 as ordinary income rather than
capital gain, and, under section 165(j), no
deduction is permitted for any loss sus-
tained. In addition, the exception from
tax for U.S. source portfolio interest re-
ceived by a nonresident alien or foreign
corporation under section 871(h) and sec-
tion 881(c) (portfolio interest exception) is
generally not available with respect to in-
terest paid on debt that is not issued in reg-
istered form (bearer debt).
The foregoing rules generally do not ap-
ply with respect to bearer debt that com-
plies with the foreign-targeting rules of
section 163(f)(2)(B) and the regulations
thereunder. However, section 502 of the
HIRE Act generally eliminated the vari-
ous exceptions for foreign-targeted bearer
debt, effective for obligations issued after
March 18, 2012. As a result of this change
in law, with respect to obligations issued
after March 18, 2012, the portfolio interest
exception will be available only for obli-
gations issued in registered form.
In the case of debt obligations in regis-
tered form, the portfolio interest exception
is generally available only if the United
States person (U.S. person) who would
otherwise be required to deduct and with-
hold tax from the interest under section
1441(a) (U.S. withholding agent) receives
a statement (usually on Form W–8) in-
dicating that the beneficial owner of the
obligation is not a U.S. person. Under
section 871(h)(5), this statement gener-
ally may be made by either the beneficial
owner of the obligation or by a securities
clearing organization, bank, or other fi-
nancial institution that holds customers’
securities in the ordinary course of its
trade or business. With respect to obliga-
tions issued after March 18, 2012, section
871(h)(2)(B)(ii)(II) provides that the port-
folio interest exception is available in the
absence of such a statement if the Secre-
tary has determined that such a statement
is not required in order to carry out the
purposes of the portfolio interest excep-
tion.
Section 1.871–14(e) provides that the
portfolio interest exception is available
for debt obligations in registered form
that comply with certain foreign-targeting
requirements if (1) the registered owner
is a financial institution that holds cus-
tomers’ securities in the ordinary course
of its trade or business; and (2) the U.S.
withholding agent complies with certain
simplified procedures to obtain, either
from the financial institution or from a
beneficial owner that is a member of a
clearing organization, a certification that
the beneficial owner is not a U.S. person.
Notice 2006–99 announced, however, that
Treasury and the IRS intended to amend
§ 1.871–14(e) to eliminate this exception
for foreign-targeted registered obligations
(FTROs), retroactive to the date of the
notice. Notice 2006–99, 2006–2 C.B. 907.
Regulations implementing the guidance
provided in Notice 2006–99 have not been
issued.
SECTION2.INGENERAL
Treasury and the IRS have received
comments regarding issues arising from
the repeal of section 163(f)(2)(B), includ-
ing comments requesting guidance regard-
ing when obligations will be considered
to be in registered form and requesting
clarification with respect to certain collat-
eral consequences of the repeal of section
163(f)(2)(B). In addition, Treasury and
the IRS are aware that the implementation
of section 501 of the HIRE Act, which
added new sections 1471 to 1474 (com-
monly known as FATCA) to the Code,
may require changes to the documentation
collected by foreign financial institutions
(including qualified intermediaries) and
withholding agents with respect to payees
and account holders.
Section 3 of this notice provides guid-
ance addressing when obligations will
be considered to be in registered form.
Section 4 of this notice provides interim
guidance with respect to the application of
the portfolio interest exception to certain
obligations in registered form issued after
March 18, 2012, and before January 1,
2014. Section 5 of this notice addresses
the continued availability of the existing
exception from reporting of interest or
original issue discount under section 6049
for certain foreign-targeted short-term
obligations. Finally, section 6 of this no-
tice provides guidance with respect to
procedures requiredto comply with the
foreign-targeting rules of section 4701(b)
as amended by section 502 of the HIRE
Act.
SECTION 3. DEFINITION OF A
REGISTRATION SYSTEM
For purposes of determining whether a
bond is in registered form under section
163(f) and the portfolio interest exception,
the principles of section 149(a)(3) apply.
Section 163(f)(3). Section 149(a)(3) pro-
vides that a book entry bond is treated as in
registered form if the right to the principal
of, and stated interest on, the bond may be
transferred only through a book entry con-
sistent with regulations prescribed by the
Secretary. In addition, § 1.871–14(c) pro-
vides that for purposes of the portfolio in-
terest exception, the conditions for an obli-
gation to be considered in registered form
are identical to the conditions described in
§ 5f.103–1.
Generally under § 5f.103–1, an obliga-
tion is in registered form if: (i) the obliga-
tion is registered as to both principal and
any stated interest with the issuer (or its
agent) and any transfer of the obligation
may be effected only by surrender of the
old obligation and reissuance to the new
March 26, 20125742012–13 I.R.B.

holder; (ii) the right to principal and stated
interest with respect to the obligation may
be transferred only through a book en-
try system maintained by the issuer or its
agent; or (iii) the obligation is registered
as to both principal and stated interest with
the issuer or its agent and can be trans-
ferred both by surrender and reissuance
and through a book entry system. An obli-
gation is considered transferable through a
book entry system if the ownership of an
interest in the obligation is required to be
reflected in a book entry, whether or not
physical securities are issued. A “book en-
try” is a record of ownership that identi-
fies the owner of an interest in the obliga-
tion. An obligation that would otherwise
be considered to be in registered form is
notconsideredtobeinregisteredformas
of a particular time if it can be converted
at any time in the future into an obligation
that is not in registered form.
Notice 2006–99 addressed an arrange-
ment in which no physical certificates are
issued and under which ownership inter-
ests in bonds are required to be represented
only by book entries in a dematerialized
book entry system maintained by a clear-
ing organization. Notice 2006–99 pro-
vided that an obligation issued under such
an arrangement would be treated as in reg-
istered form notwithstanding the ability of
holders to obtain physical certificates in
nonregistered form upon the termination
of the business of the clearing organization
without a successor.
For obligations issued after March 18,
2012, section 163(f)(3) provides that for
purposes of section 163(f), a dematerial-
ized book entry system or other book en-
try system specifiedby the Secretary will
be treated as a book entry system described
in section 149(a)(3). Comments have ex-
pressed concern that the explicit reference
in new section 163(f)(3) to a “dematerial-
ized book entry system” may create un-
certainty with respect to obligations is-
sued in a manner not specifically described
in Notice 2006–99. In particular, com-
ments requested guidance with respect to
the treatment of obligations represented by
a physical global security that is nominally
in bearer form, but that is “immobilized”
in a clearing system. In addition, com-
ments have requested guidance regarding
whether an obligation will be considered
to be in registered form if holders may ob-
tain physical certificates in nonregistered
form in certain limited circumstances not
described in Notice 2006–99.
Treasury and the IRS intend to issue
regulations providing that an obligation
will be considered to be in registered
form if it is issued through: (i) a dema-
terialized book entry system in which
beneficial interests are transferable only
through a book entry system (as de-
fined in § 5f.103–1(c)(2)) maintained
by a clearing organization as defined in
§ 1.163–5(c)(2)(i)(B)(4) (or by an agent
of the clearing organization); or (ii) a
clearing system in which the obligation
is effectively immobilized. An obliga-
tion will be considered to be effectively
immobilized if: (1) the obligation is repre-
sented by one or more global securities in
physical form that are issued to and held
by a clearing organization as defined in
§ 1.163–5(c)(2)(i)(B)(4) (or by a custo-
dian or depository acting as an agent of
the clearing organization) for the benefit
of purchasers of interests in the obliga-
tion under arrangements that prohibit the
transfer of the global securities except to a
successor clearing organization subject to
the same terms; and (2) beneficial interests
in the underlying obligation are transfer-
able only through a book entry system
maintained by the clearing organization
(or an agent of the clearing organization).
An interest in an obligation will be con-
sidered to be transferable only through a
book entry system if the interest would be
considered transferable through a book en-
try system under § 5f.103–1(c)(2), except
that holders may obtain physical certifi-
cates in bearer form inthe following cir-
cumstances: (1) termination of the clear-
ing organization’s business without a suc-
cessor; (2) default by the issuer; or (3)
issuance of definitive securities at the is-
suer’s request upon a change in tax law
that would be adverse to the issuer but for
the issuance of physical securities in bearer
form. After the occurrence of one of the
above circumstances, any obligation with
respect to which a holder, or a group of
holders acting collectively, has a right to
obtain a physical certificate in bearer form
will no longer be in registered form, re-
gardless of whether any option to obtain a
physical certificate in bearer form has ac-
tually been exercised. Treasury and the
IRS request comments regarding whether
any exceptions should be provided to this
general rule.
SECTION 4. TEMPORARY
EXTENSION OF PORTFOLIO
INTEREST EXCEPTION TO
FOREIGN-TARGETED REGISTERED
OBLIGATIONS
As noted above, section 871(h)(2)(B)
provides that the portfolio interest excep-
tion is generally available for holders of
obligations in registered form only if a
U.S. withholding agent receives a state-
ment that the beneficial owner of the
obligation is not a U.S. person. Under
§ 1.871–14(c)(2), a U.S. withholding agent
generally is considered to have received
a statement that satisfies this requirement
if it receives a statement from the foreign
beneficial owner, or it receives a statement
from a withholding foreign partnership, a
qualified intermediary, or a U.S. branch
of a foreign bank or foreign insurance
company indicating that the payment will
be made to a foreign beneficial owner.
A U.S. withholding agent may also rely
upon a statement from a financial insti-
tution that holds customers’ securities in
the ordinary course of its trade or business
when the financial institution provides
a statement that it has received a with-
holding certificate on Form W–8 (or an
acceptable substitute form) from each ben-
eficial owner and attaches each form to
its statement (including certificates from
beneficial owners holding through other
financial institutions acting as intermedi-
aries with respect to the obligation). In
each such case, the U.S. withholding agent
must also satisfy the information reporting
requirements of § 1.1461–1(c)(2) with
respect to interest paid on the obligation.
See §§ 1.1461–1(c)(2)(i) and 1.1441–2(a).
Comments have noted that presently
there may be difficulties obtaining state-
ments satisfying the requirements of
§ 1.871–14(c)(2) in certain foreign mar-
kets in which issuers and intermediaries
have relied on the foreign-targeting rules
of § 1.163–5(c)(2)(i)(D) for issuances
of debt. In response to these comments,
this notice provides as a limited tran-
sition rule that, notwithstanding Notice
2006–99, a withholding agent (as defined
in § 1.1441–7(a)) paying interest on an
obligation issued in registered form after
March 18, 2012, and before January 1,
2014, may apply the foreign-targeted reg-
istered obligation rules of § 1.871–14(e)
if the obligation satisfies the requirements
2012–13 I.R.B.575March 26, 2012

of those rules. For this purpose, a fi-
nancial institution may certify that the
beneficial owner of a payment of interest
has not been a U.S. person (as described
in § 1.871–14(e)(3)(i)(A)(1)(i)) if the fi-
nancial institution has determined the
non-U.S. status of the beneficial owner of
interest on the obligation(s) covered by the
certificate by obtaining either (1) a Form
W–8 (or substitute form) satisfying the re-
quirements of § 1.1441–1(e)(4), or (2) doc-
umentary evidence satisfying the require-
ments of § 1.6049–5(c). A withholding
agent receiving such acertificate after the
time described in § 1.871–14(e)(4)(ii)(A)
may rely on the certificate to the extent
permitted under § 1.1441–1(b)(7). As
provided in § 1.871–14(e)(4)(i)(G), a
withholding agent who receives a valid
certificate described in § 1.871–14(e)(3)(i)
that applies to a payment of portfolio
interest on a foreign-targeted registered
obligation is not required to report the
interest payment on Form 1042–S.
SECTION 5. SHORT-TERM DEBT
OBLIGATIONS
Section 6049 provides an exception
from information reporting of interest or
original issue discount with respect to debt
obligations that have an original term of
183 days or less and that satisfy a number
of other requirements intended to ensure
that the debt is not held by U.S. non-ex-
empt persons. Those requirements are
provided in § 1.6049–5(b)(10) and include
the following: (1) payments on the in-
strument must be made outside the United
States by other than a U.S. middleman;
(2) the instrument must have a principal
amount of at least $500,000; (3) the in-
strument must satisfy the requirements of
sections 163(f)(2)(B)(i) and (ii)(I) and the
regulations thereunder; (4) the instrument
must bear a specified legend stating that
the holder represents that it is not, and does
not hold on behalf of, a U.S. person that
is a non-exempt recipient; and (5) if the
instrument is in registered form, it must
be registered in the name of an exempt
recipient.
Comments have requested clarification
on whether the short-term debt exception
provided by § 1.6049–5(b)(10) will con-
tinue to be available after March 18, 2012,
the effective date of the repeal of sec-
tion 163(f)(2)(B) under section 502 of the
HIRE Act. Treasury and the IRS intend to
clarify that this short-term debt exception
remains available by issuing regulations
incorporating the foreign-targeting rules of
§ 1.163–5(c)(2)(i) into the regulations un-
der section 6049 in place of the existing
reference to section 163(f)(2)(B).
SECTION 6. CLARIFICATION OF
EXCISE TAX EXCEPTION UNDER
SECTION 4701(B)
Section 4701 imposes an excise tax on
a “registration-required obligation” that is
not in registered form. The amount of the
excise tax is equal to one percent of the
principal amount multiplied by the num-
ber of calendar years until the obligation
reaches maturity. Prior to the enactment of
the HIRE Act, section 4701(b) provided
that the term “registration-required obli-
gation” generally had the same meaning
as when used in section 163(f), which
set forth the terms under which an issuer
would be entitled to claim a deduction
for interest paid on a registration-required
obligation.
In connection with repealing section
163(f)(2)(B), section 502 of the HIRE
Act amended section 4701(b) to provide
that registration would not be required
for obligations issued after March 18,
2012, that meet criteria similar to the
foreign targeting rules under existing sec-
tion 163(f)(2)(B). Comments requested
clarification regarding how closely the
procedures required under the new ex-
ception under section 4701(b) will mirror
the procedures required under section
163(f)(2)(B). Treasury and the IRS intend
to provide in regulations that rules identi-
cal to the rules that currently apply under
section 163(f)(2)(B) and the regulations
thereunder will apply for purposes of sec-
tion 4701(b) to obligations issued after
March 18, 2012.
EFFECT ON OTHER DOCUMENTS
Section 4 of Notice 2006–99, 2006–2
C.B. 907, is superseded.
EFFECTIVE DATE
The regulations incorporating the guid-
ance described in this notice will be effec-
tive for obligations issued after March 18,
2012.
DRAFTING INFORMATION
The principal author of this notice is
Susan E. Massey of the Office of Associate
Chief Counsel (International). For further
information regarding this notice, contact
John Sweeney at (202) 622–3840 (not a
toll-free call).
2012 Calendar Year Resident
Population Figures
Notice 2012–22
This notice advises State and local
housing credit agencies that allocate
low-income housing tax credits under § 42
of the Internal Revenue Code, and States
and other issuers of tax-exempt private
activity bonds under § 141, of the popula-
tion figures to use in calculating: (1) the
2012 calendar year population-based com-
ponent of the State housing credit ceiling
(Credit Ceiling) under § 42(h)(3)(C)(ii);
(2) the 2012 calendar year volume cap
(Volume Cap) under § 146; and (3) the
2012 volume limit (Volume Limit) under
§ 142(k)(5).
Generally, § 146(j) requires determin-
ing the population figures for the popula-
tion-based component of both the Credit
Ceiling and the Volume Cap for any cal-
endar year on the basis of the most recent
census estimate of the resident population
of a State (or issuing authority) released
by the U.S. Census Bureau before the be-
ginning of the calendar year. Similarly,
§ 142(k)(5) bases the Volume Limit on the
State population.
Sections 42(h)(3)(H) and 146(d)(2)
require adjusting for inflation the pop-
ulation-based component of the Credit
Ceiling and the Volume Cap. The ad-
justments for the 2012 calendar year are
in Rev. Proc. 2011–52, 2011–45 I.R.B.
701. Section 3.08 of Rev. Proc. 2011–52
provides that, for calendar year 2012, the
amount for calculating the Credit Ceiling
under § 42(h)(3)(C)(ii) is the greater of
$2.20 multiplied by the State population
or $2,525,000. Further, section 3.15 of
Rev. Proc. 2011–52 provides that the
amount for calculating the Volume Cap
under § 146(d)(1) for calendar year 2012
is the greater of $95 multiplied by the State
population or $284,560,000.
March 26, 20125762012–13 I.R.B.

For the 50 states, the District of Co-
lumbia, and Puerto Rico, the population
figures for calculating the Credit Ceil-
ing, the Volume Cap, and the Volume
Limit for the 2012 calendar year are the
resident population estimates released
electronically by the U.S. Census Bureau
on December 21, 2011, in Press Release
CB11–215. For American Samoa, Guam,
the Northern Mariana Islands, and the
U.S. Virgin Islands, the population figures
for the 2012 calendar year are the 2010
population counts released electronically
by the U.S. Census Bureau on August 24,
2011, in Press Releases CB11–CN.177,
CB11–CN.179, CB11–CN.178, and
CB11–CN.180, respectively.
For convenience, these figures are
reprinted below.
Resident Population Figures
Alabama4,802,740
Alaska722,718
American Samoa
55,519
Arizona
6,482,505
Arkansas2,937,979
California37,691,912
Colorado
5,116,796
Connecticut
3,580,709
Delaware
907,135
District of Columbia617,996
Florida
19,057,542
Georgia
9,815,210
Guam
159,358
Hawaii1,374,810
Idaho
1,584,985
Illinois
12,869,257
Indiana
6,516,922
Iowa3,062,309
Kansas2,871,238
Kentucky
4,369,356
Louisiana
4,574,836
Maine1,328,188
Maryland
5,828,289
Massachusetts
6,587,536
Michigan9,876,187
Minnesota
5,344,861
Mississippi
2,978,512
Missouri6,010,688
Montana998,199
Nebraska1,842,641
Nevada2,723,322
New Hampshire1,318,194
New Jersey
8,821,155
New Mexico2,082,224
New York
19,465,197
North Carolina
9,656,401
North Dakota683,932
Northern Mariana Islands
53,883
Ohio
11,544,951
Oklahoma
3,791,508
Oregon
3,871,859
Pennsylvania12,742,886
Puerto Rico3,706,690
Rhode Island
1,051,302
South Carolina4,679,230
South Dakota824,082
Tennessee
6,403,353
Texas
25,674,681
Utah2,817,222
Vermont626,431
Virginia8,096,604
Virgin Islands, U.S.
106,405
2012–13 I.R.B.577March 26, 2012

Resident Population Figures
Washington6,830,038
West Virginia
1,855,364
Wisconsin
5,711,767
Wyoming
568,158
The principal authors of this no-
tice are Julie Hanlon Bolton, Office
of the Associate Chief Counsel
(Passthroughs and Special Industries), and
Timothy L. Jones, Office of the Associate
Chief Counsel (Financial Institutions
and Products). For further information
regarding this notice, please contact
Ms. Hanlon Bolton at (202) 622–3040
(not a toll-free call).
Update for Weighted Average
Interest Rates, Yield Curves,
and Segment Rates
Notice 2012–24
This notice provides guidance as to the
corporate bond weighted average interest
rate and the permissible range of interest
rates specified under § 412(b)(5)(B)(ii)(II)
of the Internal Revenue Code as in ef-
fect for plan years beginning before 2008.
It also provides guidance on the cor-
porate bond monthly yield curve (and
the corresponding spot segment rates),
and the 24-month average segment rates
under § 430(h)(2). In addition, this no-
tice provides guidance as to the interest
rate on 30-year Treasury securities un-
der § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008, the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the min-
imum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007.
CORPORATE BOND WEIGHTED
AVERAGE INTEREST RATE
Sections412(b)(5)(B)(ii)and
412(l)(7)(C)(i), as amended by the Pen-
sion Funding Equity Act of 2004 and by
the Pension Protection Act of 2006 (PPA),
provide that the interest rates used to cal-
culate current liability and to determine
the required contribution under § 412(l)
for plan years beginning in 2004 through
2007 must be within a permissible range
based on the weighted average of the rates
of interest on amounts invested conser-
vatively in long term investment grade
corporate bonds during the 4-year period
ending on the last day before the beginning
of the plan year.
Notice 2004–34, 2004–1 C.B. 848, pro-
vides guidelines for determining the cor-
porate bond weighted average interest rate
and the resulting permissible range of in-
terest rates used to calculate current liabil-
ity. That notice establishes that the corpo-
rate bond weighted average is based on the
monthly composite corporate bond rate de-
rived from designated corporate bond in-
dices. The methodology for determining
the monthly composite corporate bond rate
as set forth in Notice 2004–34 continues to
apply in determining that rate. See Notice
2006–75, 2006–2 C.B. 366.
The composite corporate bond rate for
February 2012 is 4.49 percent. Pursuant
to Notice 2004–34, the Service has de-
termined this rate as the average of the
monthly yields for the included corporate
bond indices for that month.
The following corporate bond weighted
average interest rate was determined for
plan years beginning in the month shown
below.
For Plan Years
Beginning inPermissible Range
MonthYear
Corporate
Bond Weighted
Average90%to100%
March2012
5.615.055.61
YIELD CURVE AND SEGMENT
RATES
Generally for plan years beginning
after 2007 (except for delayed effective
dates for certain plans under sections 104,
105, and 106 of PPA), § 430 of the Code
specifies the minimum funding require-
ments that apply to single employer plans
pursuant to § 412. Section 430(h)(2) spec-
ifies the interest rates that must be used
to determine a plan’s target normal cost
and funding target. Under this provision,
present value is generally determined us-
ing three 24-month average interest rates
(“segment rates”), each of which applies
to cash flows during specified periods.
However, an election may be made under
§ 430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates. Sec-
tion 430(h)(2)G) set forth a transitional
rule applicable to plan years beginning in
2008 and 2009 under which the segment
rates were blended with the corporate bond
weighted average described above, includ-
ing an election under § 430(h)(2)(G)(iv)
foranemployertousethesegmentrates
without the transitional rule.
Notice 2007–81, 2007–2 C.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond
segment rates used to compute the tar-
get normal cost and the funding target.
Pursuant to Notice 2007–81, the monthly
corporate bond yield curve derived from
February 2012 data is in Table I at the end
of this notice. The spot first, second, and
third segment rates for the month of Feb-
ruary 2012 are, respectively, 1.56, 4.27,
and 5.08. The three 24-month average
corporate bond segment rates applicable
for March 2012 are as follows:
March 26, 20125782012–13 I.R.B.

First
Segment
Second
Segment
Third
Segment
1.93
4.95
6.07
The transitional rule of § 430(h)(2)(G)
does not apply to plan years beginning af-
ter December 31, 2009. Therefore, for a
plan year beginning after 2009 with a look-
back month to March 2012, the funding
segment rates are the three 24-month av-
erage corporate bond segment rates appli-
cable for March 2012, listed above without
blending for any transitional period.
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 417(e)(3)(A)(ii)(II) (prior to
amendment by PPA) defines the appli-
cable interest rate, which must be used
for purposes of determining the minimum
present value of a participant’s benefit
under § 417(e)(1) and (2), as the annual
rate of interest on 30-year Treasury se-
curities for the month before the date
of distribution or such other time as the
Secretary may by regulations prescribe.
Section 1.417(e)–1(d)(3) of the Income
Tax Regulations provides that the applica-
bleinterestrateforamonthistheannual
rate of interest on 30-year Treasury secu-
rities as specified by the Commissioner
for that month in revenue rulings, notices
or other guidance published in the Internal
Revenue Bulletin.
The rate of interest on 30-year Treasury
securities for February 2012 is 3.11 per-
cent. The Service has determined this rate
as the average of the yield on the 30-year
Treasury bond maturing in November
2041 determined each day through Febru-
ary 8, 2012, and the yield on the 30-year
Treasury bond maturing in February 2042
determined each day for the balance of the
month.
Generally for plan years beginning
after 2007, § 431 specifies the mini-
mum funding requirements that apply to
multiemployer plans pursuant to § 412.
Section 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation
described in section 431(c)(6)(A), based
on the plan’s current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 percent
below the weighted average of the rates of
interest on 30-year Treasury securities dur-
ing the four-year period ending on the last
day before the beginning of the plan year.
Notice 88–73, 1988–2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The following rates
were determined for plan years beginning
in the month shown below.
For Plan Years
Beginning inPermissible Range
MonthYear
30-Year
Treasury
Weighted
Average90%to105%
March20124.003.604.20
MINIMUM PRESENT VALUE
SEGMENT RATES
Generally for plan years beginning af-
ter December 31, 2007, the applicable in-
terest rates under § 417(e)(3)(D) are seg-
ment rates computed without regard to a
24-month average. For plan years begin-
ning in 2008 through 2011, the applica-
ble interest rates are the monthly spot seg-
ment rates blended with the applicable rate
under § 417(e)(3)(A)(ii)(II) as in effect
for plan years beginning in 2007. Notice
2007–81 provides guidelines for determin-
ing the minimum present value segment
rates. Pursuant to that notice, the min-
imum present value transitional segment
rates determined for February 2012, tak-
ing into account the February 2012 30-year
Treasury rate of 3.11 stated above, are as
follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
20111.874.044.69
2012
1.56
4.27
5.08
DRAFTING
INFORMATION
The princ
ipal author of this notice is
Tony Mont
anaro of the Employee Plans,
Tax Exemp
t and Government Entities
Division
. Mr. Montanaro may be e-mailed
atRetir
ementPlanQuestions@irs.gov.
2012–13 I.R.B.579March 26, 2012

Table I
Monthly Yield Curve for February 2012
DerivedfromFebruary2012Data
Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield
0.5
0.49
20.5
4.94
40.5
5.09
60.55.1680.5
5.19
1.0
0.79
21.04.9541.0
5.10
61.0
5.16
81.05.19
1.51.0621.54.9541.55.1061.55.1681.55.19
2.01.3122.04.9642.0
5.10
62.0
5.16
82.05.19
2.51.5322.5
4.96
42.55.1062.55.1682.5
5.19
3.01.7223.0
4.97
43.0
5.10
63.0
5.16
83.05.19
3.5
1.90
23.5
4.97
43.55.1063.55.1683.5
5.19
4.02.0824.0
4.98
44.0
5.11
64.0
5.16
84.05.19
4.52.2624.5
4.98
44.55.1164.55.1684.55.19
5.0
2.44
25.0
4.98
45.05.1165.05.1685.0
5.19
5.5
2.62
25.5
4.99
45.55.1165.55.1685.5
5.19
6.02.8126.0
4.99
46.0
5.12
66.0
5.17
86.05.19
6.5
2.99
26.55.0046.55.1266.55.1786.5
5.19
7.03.1727.0
5.00
47.0
5.12
67.0
5.17
87.05.19
7.53.3427.55.0147.55.1267.55.1787.55.19
8.0
3.51
28.0
5.01
48.0
5.12
68.0
5.17
88.05.19
8.5
3.67
28.55.0248.55.1268.55.1788.5
5.19
9.0
3.81
29.0
5.02
49.0
5.13
69.0
5.17
89.0
5.20
9.53.9529.5
5.02
49.5
5.13
69.5
5.17
89.5
5.20
10.04.0730.0
5.0350.05.13
70.0
5.17
90.0
5.20
10.5
4.19
30.55.0350.55.1370.55.1790.55.20
11.04.2931.0
5.0451.05.13
71.0
5.17
91.0
5.20
11.5
4.38
31.55.0451.55.1371.55.17
91.5
5.20
12.04.4632.0
5.0452.05.13
72.0
5.18
92.0
5.20
12.54.5332.55.0552.55.1372.55.18
92.5
5.20
13.04.6033.0
5.0553.05.14
73.0
5.18
93.0
5.20
13.54.6533.55.0553.55.1473.55.1893.55.20
14.04.7034.0
5.0654.05.14
74.0
5.18
94.0
5.20
14.5
4.74
34.55.0654.55.1474.55.18
94.5
5.20
15.0
4.78
35.05.0655.05.1475.05.18
95.0
5.20
15.5
4.81
35.55.0755.55.1475.55.18
95.5
5.20
16.04.8336.0
5.0756.05.15
76.0
5.18
96.0
5.20
16.54.8536.55.0756.55.1576.55.1896.55.20
17.04.8737.0
5.0857.05.15
77.0
5.18
97.0
5.20
17.5
4.89
37.55.0857.55.1577.55.18
97.5
5.20
18.0
4.90
38.0
5.0858.05.15
78.0
5.18
98.0
5.20
18.5
4.91
38.55.0858.55.1578.55.18
98.5
5.20
19.04.9239.0
5.0959.0
5.15
79.0
5.18
99.0
5.20
19.5
4.93
39.55.0959.55.1579.55.1899.55.20
20.04.9440.05.0960.0
5.15
80.05.19100.0
5.20
March 26, 20125802012–13 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking an
dNoticeof
Public Hearin
g
Modification
s to Minimum
Present Valu
e Requirements
for Partial A
nnuity Distribution
Options Und
er Defined Benefit
Pension Pla
ns
REG–110980
–10
AGENCY: In
ternal Revenue Service
(IRS), Tre
asury.
ACTION: No
tice of proposed rulemaking
and notice
of public hearing.
SUMMARY: T
his document contains pro-
posed regu
lations providing guidance re-
latingtot
he minimum present value re-
quiremen
ts applicable to certain defined
benefit p
ension plans. These proposed
regulati
ons would change the regulations
regardin
g the minimum present value re-
quiremen
ts for defined benefit plan dis-
tributi
ons to permit plans to simplify the
treatme
nt of certain optional forms of ben-
efit tha
t are paid partly in the form of
an annui
ty and partly in a more acceler-
ated for
m. These regulations would af-
fect sp
onsors, administrators, participants,
and ben
eficiaries of defined benefit pen-
sion pl
ans. This document also provides
anotic
e of a public hearing on these pro-
posed r
egulations.
DATES:
Written or electronic comments
must b
e received by May 3, 2012. Out-
lines
of topics to be discussed at the public
heari
ng scheduled for June 1, 2012, must
be rec
eivedbyMay11,2012.
ADDRE
SSES: Send submissions to:
CC:PA
:LPD:PR(REG–110980–10),
Room
5203, Internal Revenue Service, PO
Box 7
604, Ben Franklin Station, Wash-
ingt
on, DC 20044. Submissions may be
hand
-delivered Monday through Friday
betw
een the hours of 8 a.m. and 4 p.m.
to: C
C:PA:LPD:PR (REG–110980–10),
Cou
rier’s Desk, Internal Revenue Ser-
vic
e, 1111 Constitution Avenue, NW,
Washington, D
C, or sent electroni-
cally, via the
Federal eRulemaking Por-
tal athttp://
www.regulations.gov(IRS
REG–110980–1
0). The public hearing
will be held in
the IRS Auditorium,
Internal Rev
enue Building, 1111
Constitutio
n Avenue, NW, Washington,
DC.
FOR FURTHER I
NFORMATION
CONTACT: Con
cerning the regulations,
Peter J. Mar
ks or Linda S. F. Marshall at
(202) 622–6
090; concerning submissions
of comments
, the hearing, and/or being
placed on th
e building access list to attend
the hearin
g, Oluwafunmilayo (Funmi)
Taylor at (
202) 622–7180 (not toll-free
numbers).
SUPPLEMEN
TARY INFORMATION:
Backgroun
d
Section 40
1(a)(11) of the Internal Rev-
enue Code (
Code) provides that, in or-
der for a de
fined benefit plan to qualify
under sect
ion 401(a), and except as pro-
vided und
er section 417, in the case of a
vested pa
rticipant who does not die before
the annui
ty starting date, the accrued ben-
efit paya
ble to such participant must be
provided
in the form of a qualified joint
and surv
ivor annuity. In the case of a
vested p
articipant who dies before the an-
nuity st
arting date and who has a surviving
spouse,
a defined benefit plan must pro-
vide a qu
alified preretirement survivor an-
nuity t
o the surviving spouse of such par-
ticipa
nt, except as provided under section
417.
Sectio
n 417(e)(1) provides that a plan
may pro
vide that the present value of a
qualif
ied joint and survivor annuity or
aquali
fied preretirement survivor an-
nuity
will be immediately distributed if
that p
resent value does not exceed the
amoun
t that can be distributed without
the pa
rticipant’s consent under section
411(a
)(11). Section 417(e)(2) provides
that
, if the present value of the qualified
join
t and survivor annuity or the qualified
prer
etirement survivor annuity exceeds
the a
mount that can be distributed without
the p
articipant’s consent under section
411(a)(11), t
hen a plan may immediately
distribute th
e present value of a qualified
joint and surv
ivor annuity or the qualified
preretiremen
t survivor annuity only if the
participant a
nd the spouse of the partici-
pant (or wher
e the participant has died, the
surviving sp
ouse) consent in writing to the
distributio
n.
Section 417(
e)(3)(A) provides that the
present valu
e shall not be less than the
present valu
e calculated by using the ap-
plicable mo
rtality table and the applicable
interest ra
te.
1
Section 417
(e)(3)(B) of the Code, as
amended by s
ection 302 of Pension Pro-
tection Act
of 2006 (PPA ’06), Public
Law 109–280
, 120 Stat. 780 (2006), pro-
vides that
the term “applicable mortality
table” mea
ns a mortality table, modified
as appropr
iate by the Secretary, based on
the mortal
ity table specified for the plan
year unde
r section 430(h)(3)(A) (without
regard to
section 430(h)(3)(C) or (3)(D)).
Section 4
17(e)(3)(C) of the Code, as
amended b
ysection302ofPPA’06,pro-
vides tha
t the term “applicable interest
rate” mea
ns the adjusted first, second, and
third se
gment rates applied under rules
similar
to the rules of section 430(h)(2)(C)
of the Co
de for the month before the date
of the di
stribution or such other time as
the Secr
etary may prescribe by regula-
tions.
Under section 417(e)(3)(D), these
rates a
re to be determined using the av-
erage y
ields for a month, rather than the
24-mon
th average used under section
430(h)
(2)(D). Section 417(e)(3)(D) also
provid
es special rules applicable for plan
years
beginning in 2008 through 2011
under
which the applicable interest rate is
based
on a blend of the interest rates under
secti
on 417(e)(3)(C) and the previously
appli
cable 30-year Treasury rate.
Secti
on 411(a)(13) of the Code, as
added
by section 701(b) of PPA ’06, pro-
vide
s that an “applicable defined benefit
plan
” is not treated as failing to meet the
requ
irements of section 417(e) with re-
spec
t to accrued benefits derived from
empl
oyer contributions solely because
the
present value of a participant’s ac-
cru
ed benefit (or any portion thereof) may
be,
under the terms of the plan, equal to
1
Under section 411(a)(11)(B), the same actuarial assumptions are used for purposes of determining whether the present value of a participant’s nonforfeitable accrued benefit exceeds the
maximum amount that can be immediately distributed without the participant’s consent.
2012–13 I.R.B.581March 26, 2012

the amount expressed as the hypothetical
account balance or as an accumulated per-
centage of such participant’s final average
compensation. Section 411(a)(13)(C) de-
fines the term “applicable defined benefit
plan” to mean a defined benefit plan under
which the accrued benefit (or any por-
tion thereof) is calculated as the balance
of a hypothetical account maintained for
the participant or as an accumulated per-
centage of the participant’s final average
compensation.
Section 1107(a)(2) of PPA ’06 provides
that a pension plan does not fail to meet
the requirements of section 411(d)(6) by
reason of a plan amendment to which sec-
tion 1107 applies, except as provided by
the Secretary of the Treasury. Section
1107 of PPA ’06 applies to plan amend-
ments made pursuant to the provisions of
PPA ’06 or regulations issued thereunder
that are adopted no later than a specified
date, generally the last day of the first plan
year beginning on or after January 1, 2009.
Final regulations under section 417 re-
lating to the qualified joint and survivor
and qualified preretirement survivor annu-
ity requirements were issued on August 22,
1988. The final regulations were amended
on April 3, 1998, to reflect changes en-
acted by the Uruguay Round Agreements
Act, Public Law 103–465 (GATT).
Section 1.417(e)–1(d)(1) provides that
a defined benefit plan generally must pro-
vide that the present value of any accrued
benefit and the amount of any distribu-
tion, including a single sum, must not be
less than the amount calculated using the
specified applicableinterest rate and the
specified applicablemortality table. The
present value of any optional form of ben-
efit cannot be less than the present value
of the accrued benefit determined in accor-
dance with the preceding sentence.
Section 1.417(e)–1(d)(6) provides an
exception from the minimum present
value requirements of section 417(e) and
§1.417(e)–1(d). This exception applies
to the amount of a distribution paid in
the form of an annual benefit that either
does not decrease during the life of the
participant (or, in the case of a qualified
preretirement survivor annuity, the life of
the participant’s spouse), or that decreases
during the life of the participant merely
because of the death of the survivor annu-
itant(butonlyifthereductionistoalevel
not below 50 percent of the annual benefit
payable before the death of such survivor
annuitant) or the cessation or reduction of
Social Security supplements or qualified
disability benefits.
Notice 2007–81, 2007–2 C.B. 899
(2007), (see §601.601(d)(2)(ii)(b)ofthis
chapter) provides guidance on the cor-
porate bond yield curve and the segment
rates used under section 430, as well as the
interest rates for determining minimum
present values under section 417(e)(3), to
implement changes to the funding rules
and minimum present value requirements
made in PPA ’06.
Rev. Rul. 2007–67, 2007–2 C.B. 1047
(2007), (see §601.601(d)(2)(ii)(b)ofthis
chapter) provides that the applicable mor-
tality table for a given year applies to dis-
tributions with annuity starting dates that
occur during stability periods that begin
during that calendar year. Under Rev. Rul.
2007–67, the applicable mortality table for
2008 was based on a fixed blend of 50 per-
cent of the static male combined mortal-
ity rates and 50 percent of the static female
combined mortality rates promulgated un-
der §1.430(h)(3)–1(c)(3) of the proposed
regulations (which were later issued as fi-
nal regulations). Rev. Rul. 2007–67 pro-
vides that updated section 417(e)(3) ap-
plicable mortality tables will be published
for each calendar year in future guidance
and, except as provided in that future guid-
ance, will be determined from the section
430(h)(3)(A) tables on the same basis as
the applicable mortality table for 2008.
2
Rev. Rul. 2007–67 provides that an
amendment to determine the applicable in-
terest rate under the section 417(e)(3) rules
in effect for plan years beginning on or af-
ter January 1, 2008, will not violate section
411(d)(6) solely because of a reduction
in accrued benefits or a reduction in the
amount of any distribution with an annuity
starting date occurring during a plan year
beginning in 2008 or in a subsequent year
if the cause of such reduction is the substi-
tution of the modified segment rates for the
30-year Treasury rate for the same period.
Additionally, Rev. Rul. 2007–67 provides
that a plan amendment to incorporate by
reference the applicable mortality table un-
der section 417(e)(3) that is prescribed by
Rev. Rul. 2007–67 and by subsequent
guidance will not violate section 411(d)(6)
solely because of a reduction in accrued
benefits or a reduction in the amount of any
distribution with an annuity starting date
occurring during a plan year beginning in
2008 or in a subsequent year if the cause
of such reduction is the substitution of the
applicable section 417(e)(3) mortality ta-
ble for the prior applicable mortality table
under section 417(e)(3).
Rev. Rul. 2007–67 also pro-
vides guidance regarding the appli-
cable interest rate used under section
417(e)(3) pursuant to the PPA ’06
changes. Pursuant to Rev. Rul. 2007–67,
the rules of §§1.417(e)–1(d)(4) and
1.417(e)–1(d)(10)(ii) regarding the time
for determining the applicable interest rate
continue to apply for plan years beginning
on or after January 1, 2008, without regard
to the change in the basis for determining
the applicable interest rate.
The Worker, Retiree, and Employer Re-
covery Act of 2008, Public Law 109–280
(120 Stat. 780 (2008)), amended sec-
tion 415(b)(2)(E)(v) to provide that the
applicable mortality table under section
417(e)(3)(B) applies for purposes of ad-
justing a benefit or limitation pursuant to
section 415(b)(2)(B), (C), or (D).
Explanation of Provisions
Treatment of bifurcated accrued benefits
These proposed regulations would
amend the current final regulations under
section 417(e) to permit plans to sim-
plify the treatment of certain optional
forms of benefit that are paid partly in
the form of an annuity that is excepted
from the minimum present value require-
ments of section 417(e)(3) pursuant to
§1.417(e)–1(d)(6) and partly in a more
accelerated form. Where a defined benefit
plan offers a single-sum distribution or
other form of accelerated distribution as
an optional form of benefit in addition to
the required qualified joint and survivor
annuity, many participants have been re-
luctant to elect lifetime payments to insure
against unexpected longevity, choosing
instead an accelerated distribution form in
order to maximize their liquidity. How-
2
Notice 2008–85, 2008–2 C.B. 905, sets forth the section 417(e)(3) applicable mortality tables for distributions with annuity starting dates that occur during stability periods that begin during
calendar years 2009 through 2013.
March 26, 20125822012–13 I.R.B.

ever, participants who elect a single sum
or other accelerated form of distribution
may face a greater challenge in protecting
themselves against the risk of outliving
their retirement savings.
The IRS and the Treasury Department
believe that many participants would be
better served by having the opportunity
to elect to receive a portion of their re-
tirement benefits in annuity form (which
provides financial protection against un-
expected longevity) while receiving accel-
erated payments for the remainder of the
benefit to provide increased liquidity dur-
ing retirement. Under current regulations,
both portions of such a distribution option
are subject to the minimum present value
requirements of section 417(e)(3).
The proposed regulations would pro-
vide an exception to this rule in the case
of a plan with a bifurcated accrued bene-
fit as defined in the proposed regulations.
Under this exception, such a plan is permit-
ted to provide that, if a participant selects
two different distribution options with re-
spect to separate portions of the bifurcated
accrued benefit, then the two different dis-
tribution options are treated as two sepa-
rate optional forms of benefit for purposes
of applying the requirements of section
417(e)(3). Thus, if this rule applies to treat
two separate distribution options selected
with respect to separate portions of a bifur-
cated accrued benefit as two separate op-
tional forms of benefit, and one of those
separate optional forms of benefit is ex-
empt from the requirement to use the sec-
tion 417(e)(3) assumptions, then that ex-
emption would apply to that separate op-
tional form of benefit. In such a case,
the plan would have to apply the section
417(e)(3) assumptions only to the separate
optional form of benefit that is not so ex-
empted (rather than apply those assump-
tions to the entire optional form of bene-
fit).
The primary impact of this proposed
change would be to make it simpler and
easier for a plan to offer an optional form
of benefit that is a combination of a sin-
gle-sum payment and an annuity. Allow-
ing a plan to apply a bifurcated approach
would permit the plan to use the section
417(e)(3) assumptions for the single-sum
portion of the optional form and its usual
annuity equivalence factors for the annuity
portion(ratherthanbeingrequiredtomake
a special calculation of the annuity portion
using the section 417(e)(3) assumptions).
Not only would this be simpler administra-
tively, it would also yield a more intuitive
result.
One type of plan with a bifurcated ac-
crued benefit that would be eligible for
this treatment is a plan that provides for
two separate portions of the accrued ben-
efit that are determined without regard to
any election of optional form of benefit
and permits a participant to choose differ-
ent forms of benefit with respect to each
of those portions of the accrued benefit.
An example of such a plan is a plan that
has been amended to accrue benefits un-
der a different plan formula, where a par-
ticipant’s benefit is the sum of the partici-
pant’s accrued benefitfor years of service
before the amendment date, determined
under the pre-amendment plan terms, plus
the participant’s accrued benefit for years
of service after the amendment date, de-
termined under the post-amendment plan
terms, with no interaction between the two
formulas, and the plan permits a partici-
pant to make separate elections of optional
forms of benefit with respect to each of
those portions of the accrued benefit.
A second type of plan with a bifurcated
accrued benefit that would be eligible for
this treatment is a plan that provides for a
participant to apply different distribution
elections to different portions of the ac-
crued benefit so that the amount of the dis-
tribution, with respect to the distribution
election applied to its respective portion
of the accrued benefit, is thepro ratapor-
tion of the amount of the distribution that
would be determined if that distribution
election had been applied to the entire ac-
crued benefit. An example of such a plan
is a plan that provides both a single-sum
option and a joint and survivor option for
the entire benefit, but allows a participant
to select an optional form which is 25 per-
cent of the full lump sum and 75 percent of
the full joint and survivor annuity.
A third type of plan with a bifurcated
accrued benefit that would be eligible for
this treatment is a plan that provides a sin-
gle-sum distribution option with respect to
only a portion of the benefit and provides a
separate benefit election for the remainder
of the distribution. In order to satisfy the
requirements to be this type of plan with a
bifurcated accrued benefit, the amount of
the distribution that is not paid in a sin-
gle sum must be no less than the amount
that would be payable under the rules de-
scribed in the prior paragraph had a single
sum election been available with respect to
the entire accrued benefit, where the single
sum is determined as the present value of
the accrued benefit payable at normal re-
tirement age (or the immediate annuity if
the participant is older than normal retire-
ment age) determined using the applicable
interest rates and the applicable mortality
table. An example of such a plan is a plan
that provides that a participant can elect to
receive in a single sum an amount equal to
the employee contributions, accumulated
with interest, with the remainder of the ac-
crued benefit paid under one of the annuity
optional forms of benefit available under
the plan in an amount sufficient to satisfy
the requirements under the proposed regu-
lations.
As previously discussed, the proposed
regulations would make the bifurcation of
benefits for purposes of section 417(e)(3)
conditional on the existence of plan terms
that explicitly provide that, if a participant
selects two different distribution options
with respect to separate portions of the bi-
furcated accrued benefit, then the two dif-
ferent distribution options are treated as
two separate optional forms of benefit for
purposes of applying the requirements of
section 417(e)(3). To provide for such bi-
furcated treatment, a plan sponsor would
be required to amend its plan to provide for
use of the plan factors that generally ap-
ply to annuity distributions instead of the
section 417(e)(3) assumptions in these cir-
cumstances. Any plan amendment must
comply with the requirements of section
411(d)(6). See the discussion in this pre-
amble under the heading “Effective/Appli-
cability Date.”
The Treasury Department and the IRS
recognize that additional modifications
to the regulations under section 417(e)(3)
are needed in light of the enactment of
PPA ’06. It is expected that additional
proposed amendments to the regulations
under section 417(e)(3) will be issued to
reflect statutory changes and to make other
clarifications.
Effective/Applicability Date
These regulations are proposed to be
effective on the date of publication of the
Treasury decision adopting these rules as
final regulations in theFederal Register.
2012–13 I.R.B.583March 26, 2012

The changes under the proposed regula-
tions are proposed to apply to distributions
with annuity starting dates in plan years
beginning after the publication date of fi-
nal regulations. If the regulations are fi-
nalized as proposed and a plan that pre-
viously provided for a partial single-sum
distribution together with a specified an-
nuity distribution is amended to treat that
distribution form as abifurcated accrued
benefit (and applies less favorable actuar-
ial factors to the portion of the benefit that
is not subject to section 417(e)(3)), then
the plan must comply with the require-
ments of section 411(d)(6). This can be
done by providing that, after the applicable
amendment date under §1.411(d)–3(g)(4),
the amount of each portion of a distribution
is not less than the amount that would have
been payable under the plan provisions in
effect before the amendment applied to the
participant’s accrued benefit as of the ap-
plicable amendment date.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866. Therefore, a regula-
tory assessment is not required. It also has
been determined thatsection 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions, and because the proposed regulation
does not impose a collection of informa-
tion on small entities, the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6) does not
apply. 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 Ad-
ministration for comment on its impact on
small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to the
IRS. The Treasury Department and the
IRS request comments on all aspects of
these proposed regulations. In particu-
lar, the Treasury Department and the IRS
request comments regarding whether the
special rules in these proposed regula-
tions regarding bifurcated accrued benefits
should be extended to any types of ben-
efits that are not covered by the rules in
these proposed regulations. All comments
will be available for public inspection
or copying atwww.regulations.govor
upon request. A public hearing has been
scheduled for June 1, 2012, beginning
at 10 a.m. in the Auditorium, Internal
Revenue Service, 1111 Constitution
Avenue, NW, Washington, DC. Due to
building security procedures, visitors
must enter at the Constitution Avenue
entrance. In addition,all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted 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 theFOR FURTHER
INFORMATION CONTACTsection 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 by
May 3, 2012, and an outline of topics to be
discussed and the amount of time to be de-
voted to each topic (a signed original and
eight (8) copies) by May 11, 2012. A pe-
riod of 10 minutes will be allotted to each
person for making comments. An agenda
showing the scheduling of the speakers
will be prepared after the deadline for re-
ceiving outlines has passed. Copies of the
agenda will be available free of charge at
the hearing.
Drafting Information
The principal authors of these
regulations are Peter J. Marks and
Linda S. F. Marshall, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development of these regulations.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be 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 1.417(e)–1 is amended
by:
1. Redesignating paragraph (d)(1) as
newly-designated paragraph (d)(1)(i) and
revising the heading of the newly-desig-
nated paragraph (d)(1)(i).
2. Adding a new paragraph (d)(1)(ii).
3. Revising paragraphs (d)(7) and
(d)(8)(i).
4. Adding a new paragraph (d)(8)(v).
The additions and revisions read as fol-
lows:
§1.417(e)–1 Restrictions and valuations
of distributions from plans subject to
sections 401(a)(11) and 417
*****
(d)Present value requirement—(1)
General rule—(i)Defined benefit plans.
***
(ii)Defined contribution plans.Be-
cause the accrued benefit under a defined
contribution plan equals the account bal-
ance, a defined contribution plan is not
subject to the requirements of this para-
graph (d), regardless of whether the re-
quirements of section 401(a)(11) apply to
the plan.
*****
(7)Permitted bifurcation of certain op-
tional forms of benefit—(i)General rule.
A plan with a bifurcated accrued bene-
fit (as described in paragraph (d)(7)(ii) of
this section) is permitted to provide that,
if a participant selects two different dis-
tribution options with respect to separate
portions of the bifurcated accrued bene-
fit, then the two different distribution op-
tions are treated as two separate optional
forms of benefit for purposes of applying
the requirements of section 417(e)(3) and
this paragraph (d). Thus, if this paragraph
(d)(7) applies to treat two separate distri-
bution options selected with respect to sep-
arate portions of a bifurcated accrued ben-
efit as two separate optional forms of ben-
efit, and the exception from the applica-
tion of paragraph (d) of this section that
is contained in paragraph (d)(6) of this
section applies to one of those optional
forms of benefit, then this paragraph (d)
March 26, 20125842012–13 I.R.B.

applies only to the optional form of bene-
fit to which the exception under paragraph
(d)(6) of this section does not apply.
(ii)Bifurcated accrued benefit—(A)
In general. A plan provides a bifurcated
accrued benefit within the meaning of this
paragraph (d)(7)(ii) if the plan satisfies the
requirements of paragraph (d)(7)(iii) of
this section (relating to separately deter-
mined benefits), (d)(7)(iv) of this section
(relating to separate distribution options
for proportionate benefits), or (d)(7)(v) of
this section (relating to single sum with
separate distribution option for remain-
der).
(B)Rules of operation. If a plan pro-
vides a bifurcated accrued benefit within
the meaning of this paragraph (d)(7)(ii),
and one portion of the benefits under the
plan would itself be a bifurcated accrued
benefit if it were the entire accrued bene-
fit, then the rules of paragraph (d)(7)(i) of
this section may be re-applied to such por-
tion.
(iii)Separately determined benefits.A
plan satisfies the requirements of this para-
graph (d)(7)(iii) if the plan provides for
two separate portions of the accrued ben-
efit that are determined without regard to
any election of optional form of benefit
and permits a participant to select different
distribution options with respect to each of
those portions of the accrued benefit.
(iv)Separate elections for proportion-
ate benefits. A plan satisfies the require-
ments of this paragraph (d)(7)(iv) if—
(A) The plan provides for a participant
to select one distribution option with re-
spect to a portion of the accrued benefit
and a different distribution option with re-
spect to the remaining portion of the ac-
crued benefit;
(B) The distribution option selected
with respect to each of the separate por-
tions of the accrued benefit is available
with respect to the entire accrued benefit;
and
(C) The amount of the distribution with
respect to each distribution option applied
to its respective portion of the accrued ben-
efit is thepro rataportion of the amount of
the distribution that would be determined
if that distribution option had been applied
to the entire accrued benefit.
(v)Single sum with separate election
for remainder. A plan satisfies the require-
ments of this paragraph (d)(7)(v) if—
(A) The plan provides for a specified
amount to be distributed in a single sum,
with the remainder distributed as another
distribution option payable under the plan;
(B) A single-sum distribution is not
available with respect to the participant’s
entire accrued benefit; and
(C) The amount of the distribution that
is not paid in a single sum is not less than
the amount that would be payable if—
(1) A single sum election were available
with respect to the entire accrued benefit,
where the single sum is the present value of
the accrued benefit payable at normal re-
tirement age (or the immediate annuity if
the participant is older than normal retire-
ment age) determined using the applicable
interest rates and the applicable mortality
table;
(2) The participant elected to receive
the specified amount in a single sum; and
(3) The rules of paragraph (d)(7)(iv) of
this section were applied to determine the
amount of the distribution that is not paid
in a single sum.
(vi)Examples. The following exam-
ples illustrate the rules of this paragraph
(d)(7). Unless otherwise indicated, these
examples are based on the following as-
sumptions: each plan is a single-employer
defined benefit plan with a calendar-year
plan year, a one-year stability period coin-
ciding with the calendar year, and a one-
month lookback used for determining the
applicable interest rate. The normal retire-
ment age is 65, and all participant elec-
tions are made with proper spousal con-
sent. In addition, these examples reflect
the amendments to sections 417 and 411
that were made in the Pension Protection
Act of 2006, Public Law 109–280, 120
Stat. 780 (2006).
Example 1. (i) Plan B offers a number of op-
tional forms of payment, including a qualified joint
and survivor annuity and a single-sum payment. The
single-sum payment is equal to the present value of
the participant’s immediate benefit (but no less than
the present value of the participant’s accrued benefit)
using the applicable interest and mortality rates un-
der section 417(e)(3). The amount of the joint and
survivor annuity is determined using plan factors that
are not based on the applicable interest and mortality
rates under section 417(e)(3). Plan B permits a par-
ticipant to elect to receive a percentage of the accrued
benefit chosen by the participant as a single sum and
the remainder in any annuity form provided under the
plan, with both portions of the payment determined
by multiplying the amount that would be payable if
the entire benefit were paid in that form by the per-
centage that applies to that distribution option. Plan
B provides that, with respect to a distribution that is
paid partly in the form of a single sum and partly in
the form of an annuity, the single sum and the annuity
are treated as two separate optional forms of benefit
for purposes of applying the provisions of the plan
implementing the requirements of section 417(e)(3)
and §1.417(e)–1(d). Assume that the December 2012
segment rates are 3.21%, 5.19% and 5.67% for pur-
poses of this example.
(ii) Participant S retires at age 62 in 2013, with
an accrued benefit of $1,000 per month payable as a
straight life annuity at normal retirement age. Partic-
ipant S is eligible for an unreduced early retirement
benefit and can therefore collect a straight life annuity
benefit of $1,000 per month beginning immediately.
Alternatively, Participant S can elect to receive the
benefit in other forms, including a single-sum pay-
ment of $153,852 (based on the applicable interest
rate and mortality table under section 417(e), which
are the 2013 applicable mortality table and the De-
cember 2012 segment rates), or a 100% joint and sur-
vivor annuity of $850 per month (based on the plan’s
annuity conversion factors). Participant S elects to re-
ceive 25% of the benefit in the form of a single-sum
payment and the balance as a 100% joint and survivor
annuity.
(iii) In accordance with paragraph (d)(7)(iv) of
this section, Plan B provides for a bifurcated accrued
benefit because Plan B provides for a participant to
select a single-sum distribution with respect to a por-
tion of the accrued benefit and an annuity distribu-
tion option with respect to the remaining portion of
the accrued benefit. Each distribution option is avail-
able with respect to the entire accrued benefit, and
the amount of the distribution with respect to each
distribution option applied to its respective portion
of the accrued benefit is thepro rataportion of the
amount of the distribution that would be determined if
that distribution option had been applied to the entire
accrued benefit. Furthermore, Plan B provides that
the two different distribution options selected with re-
spect to each of those portions of the accrued benefit
are treated as two separate optional forms of benefit
for purposes of applying the provisions of Plan B im-
plementing the requirements of section 417(e)(3) and
§1.417(e)–1(d). Accordingly, Participant S receives
a single sum payment equal to 25% of the full sin-
gle sum amount, or $38,463. In addition, Participant
S receives a 100% joint and survivor annuity in the
amount of $637.50 per month, equal to 75% of the
full joint and survivor benefit of $850 per month oth-
erwise payable. The joint and survivor benefit is not
subject to the minimum present value requirements
of section 417(e)(3) becauseit is treated as a separate
optional form of benefit under paragraph (d)(7)(i) of
this section.
Example 2. (i) Plan C permits participants to elect
a partial single sum equal to employee contributions,
accumulated with interest. Any other amounts must
be paid in the form of an annuity. Under the terms
of Plan C, if a participant elects to receive this partial
single sum, the annuity benefit payable to the partici-
pant is at least as great as the minimum amount deter-
mined pursuant to paragraph (d)(7)(v)(C) of this sec-
tion. Plan C provides that, with respect to a distribu-
tion that is paid partly in the form of a single sum and
partly in the form of an annuity, the single sum and
the annuity are treated as two separate optional forms
of benefit for purposes of applying the provisions of
the plan implementing the requirements of section
2012–13 I.R.B.585March 26, 2012

417(e)(3) and §1.417(e)–1(d). Participant T retires
at age 60 in 2013 with an accrued benefit of $1,500
per month payable as a straight life annuity payable
at normal retirement age. Based on the plan’s early
retirement and optional form factors (which are not
based on the applicable interest and mortality rates
under section 417(e)(3)), Participant T’s benefit com-
mencing at age 60 in the form of a 10-year certain and
continuous annuity would be $925 per month. Par-
ticipant T elects to receive a single sum payment of
$32,000 equal to T’s accumulated contributions with
interest, and the remainder as a 10-year certain and
continuous annuity. Assume that the December 2012
segment rates are the same as those assumed inEx-
ample 1. Based on the applicable mortality table for
2013 and the December 2012 segment rates, the de-
ferred annuity factor at age 60 for lifetime payments
commencing at age 65 is 8.769.
(ii) In accordance with paragraph (d)(7)(v) of this
section, Plan C provides for a bifurcated accrued ben-
efit because Plan C provides for a specified amount
to be distributed in a single sum, with the remainder
distributed as another distribution option payable un-
der the plan, a single-sum distribution is not available
with respect to a participant’s entire accrued bene-
fit, and the amount of the distribution that is not paid
in a single sum meets the requirements of paragraph
(d)(7)(v)(C) of this section. Furthermore, Plan C pro-
vides that, with respect to a distribution that is paid
partly in the form of a single sum and partly in the
form of an annuity, the single sum and the annuity
are treated as two separate optional forms of benefit
for purposes of applying the provisions of the plan
implementing the requirements of section 417(e)(3)
and §1.417(e)–1(d). Accordingly, the rule for pro-
portional benefits under paragraph (d)(7)(iv) of this
section is applied to determine the minimum amount
of Participant T’s annuity as if a single sum payment
were available, equal to the present value of T’s full
accrued benefit. If Plan C had offered a single sum
payment option with respect to Participant T’s full
accrued benefit of $1,500 per month, the minimum
present value based on the applicable mortality ta-
ble for 2013 and the assumed December 2012 seg-
ment rates would have been $1,500 x 12 x the de-
ferred annuity factor of 8.769, or $157,842. The sin-
gle sum payment actually available to Participant T
under the provisions of Plan C is the amount of accu-
mulated contributions with interest, or $32,000 which
represents 20.27% of the single sum value of Partic-
ipant T’s full accrued benefit ($32,000 ÷ $157,842 =
20.27%).
(iii) Therefore, the portion of T’s accrued benefit
not payable as a single sum must be at least as great
as the amount based on the remaining 79.73% of T’s
benefit multiplied by the accrued benefit of $1,500
per month, or $1,195.95 per month payable at normal
retirement age. Based on Plan C’s early retirement
and optional form factors, the annuity benefit payable
to Participant T in the form of a 10-year certain and
continuous annuity beginning at age 60 cannot be less
than $925 times 79.73% or $737.50 per month. Par-
ticipant T receives this in addition to the single sum
payment of $32,000. The 10-year certain and con-
tinuous benefit is not subject to the minimum present
value requirements of section 417(e)(3) because it is
treated as a separate optional form of benefit under
paragraph (d)(7)(i) of this section.
Example 3. (i) Plan D permits participants to elect
a single-sum payment of up to $10,000 with the re-
maining benefit payable in the form of an annuity.
Under the terms of Plan D, if a participant elects to
receive this partial single sum, the annuity benefit
payable to the participant is at least as great as the
minimum amount determined pursuant to paragraph
(d)(7)(v)(C) of this section. Plan D provides that,
with respect to a distribution that is paid partly in the
form of a single sum and partly in the form of an annu-
ity, the single sum and the annuity are treated as two
separate optional forms of benefit for purposes of ap-
plying the provisions of the plan implementing the re-
quirements of section 417(e)(3) and §1.417(e)–1(d).
Participant W retires in 2013 at age 55 with an ac-
crued benefit of $1,000 per month payable at normal
retirement age. Participant W is eligible for an unre-
duced early retirement benefit of $1,000 per month
payable as a straight life annuity. Alternatively, based
on Plan D’s definition of actuarial equivalence (which
is not based on the applicable interest and mortality
rates under section 417(e)(3)), Participant W can re-
ceive an immediate benefit in the form of a 100%
joint-and-survivor annuity of $800 per month. Par-
ticipant W elects to receive a single sum payment of
$10,000, with the balance of the benefit payable as a
100% joint-and-survivor annuity beginning at age 55.
Assume that the December 2012 segment rates are the
same as those assumed inExample 1. Based on the
applicable mortality table for 2013 and the Decem-
ber 2012 segment rates, the deferred annuity factor at
age 55 for lifetime payments commencing at age 65
is 6.558.
(ii) In accordance with paragraph (d)(7)(v) of this
section, Plan D provides fora bifurcated accrued ben-
efit because Plan D provides for a specified amount
to be distributed in a single sum, with the remainder
distributed as another distribution option payable un-
der the plan, a single-sum distribution is not available
with respect to a participant’s entire accrued bene-
fit, and the amount of the distribution that is not paid
in a single sum meets the requirements of paragraph
(d)(7)(v)(C) of this section.
Furthermore, Plan D provides that, with respect
to a distribution that is paid partly in the form of a
single sum and partly in the form of an annuity, the
single sum and the annuityare treated as two sepa-
rate optional forms of benefit for purposes of apply-
ing the provisions of the plan implementing the re-
quirements of section 417(e)(3) and §1.417(e)–1(d).
Accordingly, the rule for proportional benefits under
paragraph(d)(7)(iv)ofthissectionisappliedtodeter-
mine the minimum amount of Participant W’s annu-
ity as if a single sum payment were available, equal
to the present value of W’s full accrued benefit.
(iii) If Plan D had offered a single sum payment
option with respect to Participant W’s full accrued
benefit of $1,000 per month, the minimum present
value based on the applicable mortality table for
2013 and the assumed December 2012 segment rates
would have been $1,000 x 12 x the deferred annuity
factor of 6.558, or $78,696. The single sum payment
actually available to Participant W under the provi-
sions of Plan D is $10,000, which represents 12.71%
of the single sum value of W’s full accrued benefit
($10,000 ÷ $78,696 = 12.71%).
(iv) Therefore, the portion of Participant W’s ac-
crued benefit not payable as a single sum must be
at least as great as the amount based on the remain-
ing 87.29% of W’s benefit multiplied by the accrued
benefit of $1,000 per month, or $872.90 per month
payable at normal retirement age. Based on Plan D’s
early retirement and optional form factors, the annu-
ity benefit payable to Participant W in the form of a
100% joint-and-survivor annuity beginning at age 55
is no less than 87.29% x $800, or $698.32 per month.
Participant W receives this in addition to the single
sum payment of $10,000. The joint and survivor an-
nuity benefit is not subject to the minimum present
value requirements of section 417(e)(3) because it is
treated as a separate optional form of benefit under
paragraph (d)(7)(i) of this section.
Example 4. (i) Plan E was amended to freeze ben-
efits under the traditional plan formula as of Decem-
ber 31, 2012, and to provide benefits under a cash
balance formula beginning January 1, 2013. The plan
provides that participants may elect separate distribu-
tion options for the portion of the benefit accrued un-
der the traditional formula as of December 31, 2012,
and the portion of the benefit earned under the cash
balance formula. Furthermore, the plan provides that
a participant may elect to receive a single-sum pay-
ment only with respect to the portion of the benefit
earned under the cash balance formula. Plan E pro-
vides that the two distribution options selected with
respect to the portion of the benefit accrued under the
traditional formula as ofDecember 31, 2012, and the
portion of the benefit earned under the cash balance
formula are treated as two separate optional forms
of benefit for purposes of applying the provisions
of Plan E implementing the requirements of section
417(e)(3) and §1.417(e)–1(d).
(ii) In accordance with paragraph (d)(7)(iii) of
this section, Plan E provides for a bifurcated accrued
benefit because the portion of the accrued benefit
determined under the traditional formula and the por-
tion of the accrued benefit determined under the cash
balance formula are determined separately without
regard to any election of optional form of benefit
and Plan E permits a participant to select different
distribution options with respect to both of those
portions of the accrued benefit. Furthermore, as
permitted by paragraph (d)(7)(i) of this section, Plan
E provides that the two different distribution options
selected with respect to each of those portions of
the accrued benefit are treated as two separate op-
tional forms of benefit for purposes of applying the
provisions of Plan E implementing the requirements
of section 417(e)(3) and §1.417(e)–1(d). Therefore,
whether a participant elects to receive a single sum
payment of the portion of the benefit earned under
the cash balance formula does not affect whether the
distribution elected with respect to the portion of the
benefit earned as of December 31, 2012, is subject to
the minimum present value requirements of section
417(e)(3).
Example 5. (i) The facts are the same as inEx-
ample 4, except that Plan E also permits a partici-
pant to elect, with respect to the cash balance por-
tion of the benefit, to receive a percentage of the ac-
crued benefit chosen by the participant as a single
sum and the remainder in any annuity form provided
under the plan, with both portions of the payment de-
termined by multiplying the amount that would be
payable if the entire benefit were paid in that form by
the percentage that applies to that distribution option.
Plan E provides that, with respect to such a distribu-
tion that is paid partly in the form of a single sum
March 26, 20125862012–13 I.R.B.

and partly in the form of an annuity, the single sum
and the annuity are treatedas two separate optional
forms of benefit for purposes of applying the provi-
sions of the plan implementing the requirements of
section 417(e)(3) and §1.417(e)–1(d). Participant X
retires at age 65, with an accrued benefit under the
traditional formula of $500 per month (earned as of
December 31, 2012), and a cash balance hypotheti-
cal account of $45,000. Based on Plan E’s actuarial
equivalence factors, Participant X’s accrued benefit
derived from the cash balance hypothetical account is
$320 per month, payable as a life annuity at normal
retirement. Participant Xelects to receive $15,000 of
the current hypothetical account balance in the form
of a single sum and to receive the remainder of the
total accrued benefit as a life annuity.
(ii) Under the analysis set forth inExample 4,
Plan E provides for a bifurcated accrued benefit in
accordance with paragraph (d)(7)(iv)(C) of this sec-
tion with respect to the portion of the accrued benefit
attributable to the benefit accrued as of December 31,
2012, and the portion of the accrued benefit attribut-
able to the benefit earned under the cash balance for-
mula.
Furthermore, Plan E provides that the two differ-
ent distribution options selected with respect to each
of those portions of the accrued benefit are treated
as two separate optional forms of benefit for pur-
poses of applying the provisions of Plan E imple-
menting the requirements of section 417(e)(3) and
§1.417(e)–1(d). Thus, a separate distribution option
may be chosen for each of these two portions, and
section 417(e)(3) applies separately to each portion.
(iii) In accordance with paragraphs (d)(7)(ii)(B)
and (d)(7)(iv) of this section, the portion of the ac-
crued benefit under Plan E earned under the cash bal-
ance formula is also a bifurcated accrued benefit be-
cause Plan E provides for a participant to select a sin-
gle-sum distribution with respect to a portion of the
cash balance formula accrued benefit and an annu-
ity distribution option with respect to the remaining
portion of the cash balance formula accrued benefit,
each distribution option is available with respect to
the entire cash balance formula accrued benefit, and
the amount of the distribution with respect to each
distribution option applied to its respective portion of
the cash balance formula accrued benefit is thepro
rataportion of the amount of the distribution that
would be determined if that distribution option had
been applied to the entire cash balance formula ac-
crued benefit. Furthermore, Plan E provides that the
two different distribution options selected with re-
spect to each of those portions of the cash balance
formula accrued benefit are treated as two separate
optional forms of benefit for purposes of applying the
provisions of Plan E implementing the requirements
of section 417(e)(3) and §1.417(e)–1(d). Thus, under
paragraph (d)(7)(iv) of this section, 1/3 of the cash
balance hypothetical account is paid as a single sum
(that is, $15,000 ÷ $45,000), and the remaining 2/3
of the cash balance hypothetical account, or $30,000,
is converted to an annuity benefit of 2/3 x $320, or
$213.33 per month.
(iv) Participant X therefore receives a single sum
payment of $15,000, representing the portion of the
current hypothetical account balance that X elected
to receive as a single sum. In addition, Participant X
receives a monthly life annuity of $713.33 per month
(equal to the $500 benefit attributable to the benefit
earned as of December 31, 2012, plus the $213.33
portion of the cash balance benefit paid as an an-
nuity). Participant X’s election to receive a single
sum payment of part of the benefit earned under the
cash balance formula does not affect whether the re-
mainder of Participant X’s distribution is subject to
the minimum present value requirements of section
417(e)(3).
(8)Effective/applicability date—(i)In
general. Except as otherwise provided in
this paragraph (d)(8), this paragraph (d)
applies to distributions with annuity start-
ing dates in plan years beginning on or af-
ter January 1, 1995.
*****
(v) Paragraph (d)(7) of this section ap-
plies to distributions with annuity starting
dates in plan years beginning on or after
the date final regulations that finalize these
proposed regulations are published in the
Federal Register.
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on February 2,
2012, 8:45 a.m., and published in the issue of the Federal
RegisterforFebruary3,2012,77F.R.5454)
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Taxable Medical Devices
REG–113770–10
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of Proposed Rulemaking
and Notice of Public Hearing.
SUMMARY: This document contains pro-
posed regulations that provide guidance on
the excise tax imposed on the sale of cer-
tain medical devices under section 4191 of
the Internal Revenue Code, enacted by the
Health Care and Education Reconciliation
Act of 2010 in conjunction with the Patient
Protection and Affordable Care Act. The
proposed regulations affect manufacturers,
importers, and producers of taxable medi-
cal devices. This document also provides a
notice of public hearing on these proposed
regulations.
DATES: Written or electronic comments
must be received by May 7, 2012. Out-
lines of topics to be discussed at the pub-
lic hearing scheduled for May 16, 2012, at
10 a.m., must be received by May 7, 2012.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–113770–10),
Room 5203, Internal Revenue Service, PO
Box7604,BenFranklinStation,Wash-
ington, DC 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–113770–10),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC, or sent electroni-
cally via the Federal eRulemaking Por-
tal athttp://www.regulations.gov(IRS
REG–113770–10). The public hearing
will be held on May 16, 2012, in the
IRS Auditorium, beginning at 10 a.m.,
at the Internal Revenue Building, 1111
Constitution Avenue, NW, Washington,
DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Natalie Payne or Stephanie
Bland, at (202) 622–3130; concerning
submission of comments, the public hear-
ing, and/or to be placed on the building
access list to attend the public hearing,
contact Oluwafunmilayo Taylor at (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Statutory Provisions
This document contains proposed regu-
lations that provide guidance on the excise
tax imposed on the sale of certain medi-
cal devices under section 4191 of the Inter-
nal Revenue Code (Code), enacted by sec-
tion 1405 of the Health Care and Education
Reconciliation Act of 2010, Public Law
111–152 (124 Stat. 1029 (2010)), in con-
junction with the Patient Protection and
Affordable Care Act, Public Law 111–148
(124 Stat. 119 (2010)) (jointly, the ACA).
Section 4191 imposes an excise tax on
the sale of certain medical devices by the
2012–13 I.R.B.587March 26, 2012

manufacturer, producer, or importer of the
device in an amount equal to 2.3 percent
of the sale price. Section 4191 applies
to sales of taxable medical devices after
December 31, 2012.
Section 4191(b)(1) provides that, in
general, a “taxable medical device” is
any device, as defined in section 201(h)
of the Federal Food, Drug & Cosmetic
Act (FFDCA), (codified as amended at
21 U.S.C. 301et seq.(2006)), that is
intended for humans. Section 201(h) of the
FFDCA provides generally that the term
“device” means an instrument, apparatus,
implement, machine, contrivance,
implant, in vitro reagent, or other similar or
related article, including any component,
part, or accessory, that is recognized in the
official National Formulary, or the United
States Pharmacopeia, or any supplement to
them; intended for use in the diagnosis of
disease or other conditions, or in the cure,
mitigation, treatment, or prevention of
disease; or intended to affect the structure
or any function of the body, and that does
not achieve its primary intended purposes
through chemical action within or on the
body and that is not dependent upon being
metabolized for the achievement of its
primary intended purposes.
Section 4191(b)(2) provides that the
term “taxable medical device” does not
include eyeglasses, contact lenses, hearing
aids, and any other medical device de-
termined by the Secretary to be of a type
that is generally purchased by the general
public at retail for individual use.
In addition, the ACA amended section
4221(a) to limit tax-free sales of taxable
medical devices to sales (i) for use by the
purchaser for further manufacture, or for
resale by the purchaser to a second pur-
chaser for use by such second purchaser
in further manufacture, and (ii) for ex-
port, or for resale by the purchaser to a
second purchaser for export. The ACA
makes a corresponding amendment to sec-
tion 6416(b)(2) with regard to claims for
refund.
Manufacturers Excise Tax Rules Generally
TheACAaddedsection4191tochap-
ter 32, subtitle D of the Code, which relates
to taxes imposed upon the sales of tax-
able articles by manufacturers, producers,
andimporters(commonlyreferredtoas
“manufacturers excise taxes”). Therefore,
the existing rules governing chapter 32 ap-
ply to section 4191. The substantive reg-
ulations relating to manufacturers excise
taxes are contained in part 48 (Manufactur-
ers and Retailers Excise Tax Regulations)
of Title 26 of the Code of Federal Regu-
lations (CFR). The procedural regulations
governing manufacturers excise taxes are
contained in part 40 (Excise Tax Proce-
dural Regulations) of 26 CFR.
The manufacturers excise tax rules
are discussed in Part VII under “Ex-
planation of Provisions,” in this pre-
amble. For additional information on
the manufacturers excise tax rules gen-
erally, see chapter 5 of IRS Publica-
tion 510, “Excise Taxes,” available at
http://www.irs.gov/publications/p510/ch05.html.
Notice 2010–89
On December 27, 2010, the IRS pub-
lished Notice 2010–89, 2010–52 I.R.B.
908, to request comments on the imple-
mentation and administration of the new
tax under section 4191. The IRS and the
Treasury Department received numerous
comments in response to the notice and
considered all comments in the drafting of
the proposed regulations. The comments
are discussed in more detail in this pream-
ble. The IRS and the Treasury Department
also consulted with the Food and Drug
Administration (FDA) and the Centers for
Medicare and Medicaid Services (CMS)
in developing these regulations.
Explanation of Provisions
I.Definition of “Taxable Medical Device”
Section 4191(b)(1) links the definition
of “taxable medical device” to the defini-
tion of “device” in section 201(h) of the
FFDCA. The FDA generally administers
the provisions of the FFDCA, including
section 201(h) and other provisions relat-
ing to medical devices.
The FDA generally requires owners
or operators of places of business (also
called establishments) that are located in
the United States, or in foreign countries
that export devices to the United States,
and that manufacture,prepare, propagate,
compound, assemble, process, repackage,
or relabel medical devices intended for
human use to register their establishments
and list their devices upon first entering
into operation, and to update this infor-
mation on an annual basis with the FDA.
See sections 510(a)-(d), (i), and (j) of the
FFDCA, 21 CFR 807.20, and 21 CFR
807.21.
Various commentators observed that
the statutory definition of “taxable medi-
cal device” leaves uncertainty as to which
devices are included in the definition. The
proposed regulations address this concern
by providing that for purposes of the med-
ical device excise tax, a device defined
in section 201(h) of the FFDCA that is
intended for humans means a device that
is listed as a device with the FDA under
section510(j)oftheFFDCAand21CFR
Part 807, pursuant to FDA requirements.
The FDA listing requirements are long-
standing. Further, device manufacturers
must comply with these requirements
as part of the FDA’s device regulation
process. Therefore, device manufacturers
can be expected to know which devices
fall within the definition.
The FDA has promulgated classifica-
tion regulations for approximately 1,700
different generic types of devices. Each
classification regulation includes one or
more product codes that describe a sub-
category of the device type described in
the regulation. Currently, manufacturers
may, in certain circumstances, list multi-
ple different devices that fall within the
same product code under a single listing.
Therefore, all devices that are listed under
a single product code listing in conjunc-
tion with the FDA’s device listing require-
ment are “taxable medical devices” unless
they fall within an exemption under sec-
tion 4191(b)(2).
The proposed regulations also provide
that if a device is not listed with the FDA
but the FDA later determines that the de-
vice should have been listed as a device,
the device will be deemed to have been
listed as a device with the FDA as of the
date the FDA notifies the manufacturer or
importer in writing that corrective action
with respect to listing is required.
II.The Retail Exemption
Section 4191(b)(2) provides that the
term “taxable medical device” does not
include eyeglasses, contact lenses, hearing
aids, and any other medical device de-
termined by the Secretary to be of a type
that is generally purchased by the general
March 26, 20125882012–13 I.R.B.

public at retail for individual use (the retail
exemption).
The FDA has grouped each of the 1,700
classification regulations into 16 medical
specialties (21 CFR, Parts 862–892). Each
of these generic types of devices is as-
signed to one (or sometimes more than
one) of three regulatory classes based on
the level of control necessary to assure the
safety and effectiveness of the device. The
three classes of FDA devices are Class I
(general controls),Class II (special con-
trols), and Class III (pre-market approval).
A number of device types that predate the
enactment of the Medical Device Amend-
ments to the Food, Drug, and Cosmetic Act
of 1976 remain unclassified.
With regard to the retail exemption, sec-
tion 4191 makes no reference to the three
regulatory classes. Further, the Joint Com-
mittee on Taxation’s Technical Explana-
tion of the ACA makes clear that the FDA
regulatory classes do not, by themselves,
determine whether a device falls within the
retail exemption. Specifically, the Techni-
cal Explanation states, “The exemption for
such items is not limited by device class
as defined in section 513 of the Federal
Food, Drug, and Cosmetic Act.” Rather,
the Technical Explanation notes that the
exemption could cover “Class I items such
as certain bandages and tipped applicators,
Class II items such as certain pregnancy
test kits and diabetes testing supplies, and
Class III items such as certain denture ad-
hesives and snake bite kits.” The Technical
Explanation also emphasizes that “items
would only be exempt if they are gener-
ally designed and sold for individual use.”
Joint Committee on Taxation, General Ex-
planation of Tax Legislation Enacted in the
111th Congress (JCS–2–11), March 2011,
at 366.
The proposed regulations provide a
facts and circumstances approach to eval-
uating whether a taxable medical device
is of a type that is generally purchased by
the general public at retail for individual
use. Under the proposed regulations, a
device is considered to be of a type gen-
erally purchased by the general public at
retail for individual use if (i) the device
is regularly available for purchase and
use by individual consumers who are not
medical professionals, and (ii) the device’s
design demonstrates that it is not primarily
intended for use in a medical institution
or office, or by medical professionals.
The proposed regulations provide a set of
non-exclusive factors for use in evaluating
whether a taxable medical device is of a
type that is generally purchased by the
general public at retail for individual use.
The proposed regulations also include a
safe harbor provision.
The proposed regulations provide a
non-exclusive list of factors to be con-
sidered in determining whether a device
is regularly available for purchase and
use by individual consumers who are not
medical professionals. Those factors are
(i) whether consumers who are not medi-
cal professionals can purchase the device
through retail businesses that also sell
items other than medical devices, includ-
ing drug stores, supermarkets, and similar
vendors; (ii) whether consumers who are
not medical professionals can safely and
effectively use the device for its intended
medical purpose with minimal or no train-
ing from a medical professional; and (iii)
whether the device is classified by the
FDA under Subpart D of 21 CFR Part 890
(Physical Medicine Devices).
The proposed regulations also provide
a non-exclusive list of factors to be con-
sidered in determining whether the design
of a device demonstrates that it is primar-
ily intended for use in a medical institu-
tion or office, or by medical profession-
als, and therefore not intended for purchase
and use by individual consumers. Those
factors are (i) whether the device generally
must be implanted, inserted, operated, or
otherwise administered by a medical pro-
fessional; (ii) whether the cost to acquire,
maintain, and/or use the device requires a
large initial investment and/or ongoing ex-
penditure that is not affordable for the av-
erage consumer; (iii) whether the device is
a Class III device under the FDA system
of classification; (iv) whether the device is
classified by the FDA under certain parts
or subparts of 21 CFR; and (v) whether the
device qualifies as durable medical equip-
ment, prosthetics, orthotics, and supplies
(DMEPOS) for which payment is avail-
able exclusively on a rental basis under
the Medicare Part B payment rules and is
an “item requiring frequent and substantial
servicing” as defined in 42 CFR 414.222.
With regard to the regulatory classifica-
tions incorporated into the fourth factor
described in this preamble, the IRS and
the Treasury Department have determined,
based on all the facts and circumstances,
that the overwhelming majority of product
codes that fall within these regulatory cat-
egories do not include devices that are of
a type generally purchased by the general
public at retail for individual use.
Whether a device is of a type generally
purchased by the general public at retail
for individual use is determined based on
all relevant facts and circumstances. Thus,
there may be relevant facts and circum-
stances in addition to the factors specif-
ically identified in the proposed regula-
tions.
To provide greater certainty, the pro-
posed regulations also include a safe
harbor provision that identifies certain
categories of taxable medical devices
that the IRS and the Treasury Depart-
ment have determined fall within the
retail exemption. The safe harbor in-
cludes (i) devices that are identified in the
FDA’s IVD Home Use Lab Tests (Over-
the-Counter Tests) database, available at
http://www.accessdata.fda.gov/scripts/cdrh/
cfdocs/cfIVD/Search.cfm
; (ii) devices
described as “OTC” or “over the counter”
devices in the relevant FDA classification
regulation heading; (iii) devices that
are described as “OTC” or “over the
counter” devices in the FDA’s product
code name, the FDA’s device classification
name, or the “classification name”
field in the FDA’s device registration
and listing database, available at
http://www.accessdata.fda.gov/scripts/cdrh/
cfdocs/cfrl/rl.cfm
; and (iv) certain devices
that qualify as DMEPOS for which
payment is available on a purchase basis
under Medicare Part B payment rules
in accordance withthe fee schedule
published by CMS.
The IRS and the Treasury Department
recognize the challenges involved in ap-
plying a facts and circumstances test to the
wide array of devices that are potentially
subject to the medical device excise tax,
including for smaller manufacturers or
importers for which the application of the
retail exemption may determine whether
they are subject to the tax at all. The
IRS and the Treasury Department intend
through the rulemaking process to con-
tinue their efforts to find ways to make the
test easier to apply to particular cases and
to provide certainty with respect to a sub-
stantial majority of devices. To that end,
comments are requested on additional fac-
tors, examples, or safe harbors that could
2012–13 I.R.B.589March 26, 2012

be added to provide greater certainty for
a larger number of devices. Comments
are particularly requested on how to pro-
vide greater clarity with respect to taxable
medical devices that are sold primarily or
exclusively through specialty medical re-
tailers that sell medical devices and related
materials. Comments are also requested
on whether the packaging and labeling of
a taxable medical device, the terms and
conditions of the manufacturer’s warranty
with respect to a device, and substantial
sales of a device over the internet would
be meaningful factors for use in estab-
lishing whether a device qualifies for the
retail exception, and if so, how any such
factor should be described and applied.
Comments are also requested on other
types of DMEPOS that should be consid-
ered for safe harbor treatment and how
those items can be consistently and specif-
ically identified. For example, “inexpen-
sive equipment,” as defined in 42 CFR
414.220(a)(1), appears to describe items
that may meet the retail exception under an
application of the facts and circumstances
test. However, comments are requested on
how devices that fall under the definition
would be identified given that the CMS
fee schedule categorizes “inexpensive
equipment” together with other medical
devices that appear not to fall within the
retail exception.
The IRS and the Treasury Department
received numerous comments suggesting
that it is not feasible to base the retail
exception on quantitative data that com-
pares the relative number of sales of a cer-
tain taxable medical device at retail to the
number of sales of the device to doctors’
offices, hospitals, and other medical and
health care providers and institutions. Sev-
eral commentators stated that for a given
device, numerical data on the proportion
of sales to retail purchasers and to non-re-
tail purchasers is often not available to
the manufacturers and importers of the de-
vice, even with respect to the devices that
they manufacture or import. Further, the
commentators noted that even if the data
is available, a rule that looks to industry-
wide data regarding the percentage of re-
tail and non-retail sales of a device would
require an ongoing, resource-intensive ef-
fort to collect industry-wide sales informa-
tion, and would not provide certainty to
stakeholders because the data may change
from year to year. In light of these difficul-
ties, the proposed regulations do not adopt
a market data approach to the retail excep-
tion.
One commentator suggested that the
IRS and the Treasury Department provide
a retail exception safe harbor based on a
manufacturer’s or importer’s proportion of
sales of a particular device at retail, com-
pared to that manufacturer’s or importer’s
overall sales of the device. Under this
suggestion, if the retail sales of a particular
device by a manufacturer or importer met
or exceeded a certain ratio or percentage,
as compared to overall sales by the man-
ufacturer or importer of that device, then
all sales of the device would be exempt
from tax. The proposed regulations do not
adopt this approach tothe retail exception
because the suggested safe harbor could
result in inconsistent treatment of different
manufacturers of the same device. The
language of section 4191 applies the re-
tail exception to types of devices, not to
manufacturers and importers based on the
nature of their distributions or sales.
Some commentators suggested that if
the manufacturer or importer is able to de-
termine that a particular taxable medical
device is sold to consumers at retail, no tax
should be imposed on any sale of that de-
vice, even if the device is not of a type that
is generally purchased by the general pub-
lic at retail for individual use. Such an ap-
proach would be contrary to the language
of the statute. Therefore, the proposed reg-
ulations do not adopt this approach.
III.Veterinary Devices
The definition of “device” in section
201(h) of the FFDCA includes devices
used in veterinary medicine. However,
the definition of “taxable medical de-
vice” under section 4191 limits taxable
medical devices to devices described in
section 201(h) of the FFDCA that are
“intended for humans.” The proposed
regulations further limit the definition of
“taxable medical device” to devices that
are listed with the FDA. Under existing
FDA regulations, a device intended for
use exclusively in veterinary medicine
must be labeled as such and is not sub-
ject to several pre-market and post-market
provisions of the FFDCA, including the
listing requirement. Therefore, under the
proposed regulations, devices intended for
use exclusively in veterinary medicine are
not “taxable medical devices.”
A commentator has noted, however,
that many medical devices used in vet-
erinary practices are also used in human
medicine. The commentator suggested
that if the manufacturer can demonstrate
that a device is sold for use in veteri-
nary medicine, the excise tax should not
be imposed on that sale. The proposed
regulations do not adopt this suggestion
because the statutory language does not
limit the definition of “taxable medical
device” to devices intended exclusively
for humans. Therefore, a device that is in-
tended for humans but that is also intended
for use or used in veterinary medicine is a
“taxable medical device” if it is listed as
adevicewiththeFDApursuanttoFDA
requirements, and does not fall within an
exemption under section 4191(b)(2), such
as the retail exemption.
IV.Dual Use Devices
Devices That Have Medical and
Non-Medical Uses
Many commentators expressed concern
over the potential taxation of devices that
have both medical and non-medical uses,
such as latex gloves, and requested that the
excise tax not be imposed on the sale of
devices for non-medical uses.
Section 4191 imposes a tax upon the
sale of a taxable medical device by the
manufacturer, unless the sale is for export
or further manufacture. In most instances,
the manufacturer does not sell directly to
the end user of the device. Therefore,
the manufacturer does not typically know
the identity of the end user at the time of
sale. Further, commentators suggest that
manufacturers would have difficulty track-
ing their products through the supply chain
and determining the ultimate destination of
their products once they are sold to a dis-
tributor. Commentators also stated that, in
some cases, after the manufacturer sells a
device to a distributor, the distributor may
package and label the device for sale for
non-medical uses.
Under the proposed regulations, the
definition of “taxable medical device” is
tied to the FDA’s listing requirements for
devices. Therefore, a device that is listed
with the FDA pursuant to FDA require-
ments is a “taxable medical device,” unless
March 26, 20125902012–13 I.R.B.

it falls within an exemption under section
4191(b)(2), such as the retail exemption.
“Research Use Only” Devices
Several commentators stated that they
manufacture devicesthat are used in clin-
ical medicine to diagnose disease in hu-
mans, as well as in industrial laboratory
work and laboratory research. Those com-
mentators further stated that when sold for
non-medical purposes, such devices are
labeled “Research Use Only.” The com-
ments suggest that, although the devices
labeled “Research Use Only” are physi-
cally suitable for clinical use, FDA regula-
tions prohibit the use of devices with this
label in a clinical setting for human medi-
cal purposes. The commentators requested
that sales of devices that are labeled “Re-
search Use Only” be exempt from the med-
ical device excise tax because of the in-
tended use of such devices.
The proposed regulations define “tax-
able medical device” as any device that
is listed as a device with the FDA pur-
suant to FDA requirements. Under
21 CFR 807.65(f) of the FDA regulations,
persons that “manufacture, prepare,
propagate, compound, or process devices
solely for use in research, teaching, or
analysis and do not introduce such devices
into commercial distribution” are exempt
from the FDA’s registration and listing
requirements. See section 510(g) of the
FFDCA. Accordingly, a device that is
sold for use in research that is not listed
because it satisfies the requirements of 21
CFR 807.65(f) is not a “taxable medical
device” under the proposed regulations.
In contrast, a device that is sold for use
in research that is listed with the FDA
pursuant to FDA requirements, such as
a device not solely used in research or
one that is introduced into commercial
distribution, is a “taxable medical device”
under the proposed regulations, unless it
falls within an exemption under section
4191(b)(2), such as the retail exemption.
V.Devices Approved by the FDA for
Limited Use — Investigational Devices
Several commentators requested an ex-
emption for devices that are subject to an
Investigational Device Exemption (IDE).
The FDA permits the distribution of cer-
tain devices that the FDA has not yet ap-
proved for marketing under an IDE. See
21 CFR Part 812 for the FDA’s regulatory
provisions regarding the IDE. Devices un-
der an IDE are exempt from the FDA’s list-
ing requirements. Accordingly, a device
subject to an IDE is not a “taxable medical
device” under the proposed regulations.
VI.Dental Instruments and Equipment
A commentator requested that the pro-
posed regulations provide a blanket ex-
clusion for dental instruments and equip-
ment. The proposed regulations do not
adopt this suggestion. There is no statutory
basis for treating dental devices differently
from other taxable medical devices. Many
dental instruments and equipment items
are subject to the FDA’s listing require-
ment. Accordingly, those devices that are
listed as devices with the FDA pursuant
to FDA requirements are “taxable medical
devices” under the proposed regulations,
unless they fall within an exemption under
section 4191(b)(2), such as the retail ex-
emption.
VII.Manufacturers Excise Tax Rules
Generally; Application to Taxable
Medical Devices
The ACA added section 4191 to chap-
ter 32; therefore, the existing rules govern-
ing chapter 32 apply to the medical device
excise tax. Those rules are longstanding.
They are contained in statutory and regula-
tory provisions, and have been developed
further through revenue rulings, other pub-
lished guidance, and case law.
Several commentators requested clar-
ification on the existing manufacturers
excise tax rules. This section provides an
overview of the rules and addresses some
of the manufacturers excise tax issues
raised by commentators.
Liability for Tax; Definition of
“Manufacturer” and “Importer”
In general, the manufacturer or im-
porter of a taxable article is liable for the
tax upon the sale of the article. Under
chapter 32, the lease or use of a taxable
article by the manufacturer is generally
treated as a sale.
The term “manufacturer” means any
person who produces a taxable article
from scrap, salvage, or junk material, or
from new or raw material, by processing,
manipulating, or changing the form of
an article or by combining or assembling
two or more articles. A manufacturer that
sells a taxable article in knockdown (that
is, unassembled) condition is considered
the manufacturer and is liable for tax on
the sale of the article. For chapter 32
purposes, the term “manufacturer” also
includes an “importer.” The importer of a
taxable article is any person who brings the
article into the United States from a source
outside the United States, or withdraws an
article from a customs bonded warehouse
for sale or use in the United States. See
§48.0–2(a)(4) for the definitions of the
terms “manufacturer” and “importer.”
If more than one person is involved in
the manufacture or importation of an item,
such as a contract manufacturing arrange-
ment, the determination of which person is
the manufacturer or the importer is based
on the facts and circumstances of the ar-
rangement. The substance rather than the
form of the transaction is determinative.
See Rev. Rul. 58–134, 1958–1 C.B. 395,
Rev. Rul. 60–42, 1960–1 C.B. 474, and
Polaroid v. U.S., 235 F2d. 276 (1st Cir.
1956), for rules regarding the determina-
tion of which party is the manufacturer
for chapter 32 purposes. See Rev. Rul.
68–197, 1968–1 C.B. 455, and Rev. Rul.
82–40, 1982–1 C.B. 175, for rules regard-
ing the determination of which party is the
importer for chapter 32 purposes.
Some commentators suggested that, in
determining who is liable for the tax, the
IRS and the Treasury Department should
apply either the section 954 contract man-
ufacturing rules or the FDA’s registration
and listing rules under 21 CFR Part 807.
The proposed regulations do not adopt
these suggestions. As noted above, the ex-
isting chapter 32 framework includes defi-
nitions of “manufacturer” and “importer.”
Section 4191 does not provide alternate
definitions for those terms. Accordingly,
the definitions of “manufacturer” and “im-
porter” under chapter 32 apply to section
4191.
Taxable event
Generally, the manufacturers excise tax
attaches when the title to the taxable arti-
cle passes from the manufacturer to a pur-
chaser. When title passes is dependent
upon the intention of the parties as gath-
ered from the contract of sale and the atten-
dant circumstances. In the case of a sale on
2012–13 I.R.B.591March 26, 2012

credit, the tax attaches whether or not the
purchase price is actually paid. In the case
of conditional or installment sales of a tax-
able article, the tax attaches to each partial
payment. See §48.0–2(b) for the general
rules regarding the attachment of tax.
Section 4218 imposes tax on certain
uses of an article by the article’s manu-
facturer. The tax attaches at the time the
use begins. Under §48.4218–1(b), gener-
ally, if the manufacturer of a taxable arti-
cle uses the article for any purpose other
than in the manufacture of another taxable
article, then the manufacturer is liable for
tax on the article as if the manufacturer had
sold it. However, if a manufacturer uses
a taxable article in the testing of another
article of its own manufacture, the use of
the taxable article by the manufacturer is
not a taxable use. See Rev. Rul. 76–119,
1976–1 C.B. 345. Section 48.4218–5 pro-
vides rules on how to calculate the price
on which the tax is imposed in cases of the
taxable use of an article by the manufac-
turer.
Several commentators requested guid-
ance on whether taxable medical devices
that are used as demonstration products
are subject to the medical device excise
tax. The provision or use of a taxable
medical device as a demonstration prod-
uct may constitute a taxable sale or use,
depending on the facts and circumstances
of the arrangement. For example, Rev.
Rul. 72–563, 1972–2 C.B. 568, holds that
a manufacturer has sold an article when it
provides the article “free of charge” to an-
other person for promotional purposes. In
addition, Rev. Rul. 60–290, 1960–2 C.B.
331, holds that the use of a taxable article
by its manufacturer for demonstration pur-
poses is a taxable use for purposes of sec-
tion 4218.
Leases
Under section 4217(a), the lease of a
taxable article by the manufacturer is con-
sidered a sale. If, at the time of making
the lease, the manufacturer is in the busi-
ness of selling the same type and model
of article in arm’s length transactions, the
tax attaches to each lease payment until
the cumulative total of the tax payments
equals the total tax. If, however, at the
time of making the lease, the manufacturer
is not engaged in the business of selling
the same type and model of article in arm’s
length transactions, the tax attaches to each
lease payment if the article is leased by the
manufacturer. See section 4216(c), section
4217(b), §48.4216(c)–1, and §48.4217–2
for the rules regarding the attachment and
payment of tax in the context of leases.
Under §48.4217–1, the term “lease”
means a contract or agreement, written or
verbal, that gives the lessee an exclusive,
continuous right to the possession or use
of a particular article for a period of time.
The term includes any renewal or exten-
sion of a lease, or any subsequent lease of
the article.
Sale price
The tax imposed under section 4191
is based on the price for which a taxable
medical device is sold. Under section
48.4216(a)–1(a), the price for which a
taxable article is sold includes the total
consideration paid forthe device, whether
that consideration is in the form of money,
services, or other things.
The taxable sale price of a taxable ar-
ticle also includes, among other things,
any charge for coverings or containers (re-
gardless of their nature), and any charge
incident to placing the article in a condi-
tion to be packed and ready for shipment.
However, the taxable sale price excludes
(i) the manufacturers excise tax, whether
ornotitisstatedasaseparatecharge;
(ii) the actual cost of transportation, de-
livery, insurance, installation, and other
expenses incurred by the manufacturer
or importer in placing the article in the
hands of the purchaser pursuant to abona
fidesale (the costs of transportation of
goods to a warehouse before theirbona
fidesale are not excludable); (iii) dis-
counts, rebates, and similar allowances
actually granted to the purchaser; (iv) local
advertising charges; and (v) charges for
warranty paid at the purchaser’s option.
See section 4216(a) and §48.4216(a)–1
for the rules regarding the charges in-
cluded in sale price. See sections 4216(a)
and (e), §48.4216(a)–2, §48.4216(e)–1,
§48.4216(e)–2, and §48.4216(e)–3 for the
rules regarding exclusions from sale price.
The basic sale price rules assume that
the manufacturer sells the taxable article
in an arm’s length transaction (that is, in a
transaction between two unrelated parties)
to a wholesale distributor that then sells
the taxable article to a retailer that resells
to consumers. However, if a manufac-
turer sells a taxable article other than to
a wholesale distributor or at less than a
fair market arm’s length price, the taxable
sale price is determined on a constructive
sale price rather than the actual sale price.
The constructive sale price rules are set
forth in section 4216(b), in §48.4216(b)–1,
§48.4216(b)–2, §48.4216(b)–3, and
§48.4216(b)–4 of the regulations, and in
numerous revenue rulings.
If a purchaser of a taxable article re-
turns the article to the manufacturer under
a warranty as to its quality or service and
the manufacturer replaces the article with
a new taxable article free of charge or at
a reduced price, the tax on the new article
is computed on the actual amount, if any,
paid to the manufacturer for the new arti-
cle. See §48.4216(a)–3(b) for the rules re-
garding replacements under warranty.
Several commentators requested clari-
fication on how the sale price rules work
in the context of taxable medical devices,
particularly with regard to “bonus” goods
and rebates. These commentators indi-
cated that rebates are a common practice
in the medical device industry. Under ex-
isting manufacturers tax rules, if a manu-
facturer sells taxable articles at the regu-
lar price and includes some of the same
articles as a bonus, the tax imposed un-
der section 4191 applies to the total price
charged for the entire order. With regard
to rebates, §48.4216(a)–3(c) provides that
the tax must be based on the original price
of the taxable article,unless the rebate has
been made prior to the close of the period
for which the tax is returned. However, if a
manufacturer subsequently allows a rebate
for taxable articles on which tax has been
paid, the manufacturer is entitled to a credit
or refund for that portion of the tax that is
proportionate to the part of the price that
is rebated. See Rev. Rul. 68–659, 1968–2
C.B. 511, and Rev. Rul. 69–73, 1969–1
C.B. 284, for applications of the rules re-
garding bonus goods, free goods, and re-
bates. See §48.4216(a)–3(c) for rules re-
garding readjustments in sale price for dis-
counts, rebates, and bonuses.
Sales by persons other than the
manufacturer
If title to, or ownership of, a taxable
article passes from the manufacturer to a
transferee by operation of law (such as
March 26, 20125922012–13 I.R.B.

through an inheritance or as part of the sale
of a business) or as a result of any trans-
action not taxable under chapter 32, tax
attaches to the sale of the article by the
transferee to the same extent and in the
same manner as if the transferee were the
manufacturer of the article. See section
4219 and §48.4219–1 for the rules regard-
ing transfers of title to taxable articles by
operation of law.
Tax-free sales for further manufacture and
export
Under section 4221(a), the tax imposed
by section 4191 does not apply to the sale
of taxable medical devices for use by the
purchaser for further manufacture (or for
resale by the purchaser to a second pur-
chaser for further manufacture) or for ex-
port (or for resale for export).
Under §48.4221–2(b), an article is sold
for use in further manufacture if the article
is sold for use by the purchaser as mate-
rial in the production of, or as a compo-
nent part of, another article taxable under
chapter 32. Section 48.4221–2 sets forth
rules governing tax-free sales of articles to
be used or resold for further manufacture.
Under §48.0–2(a)(10), an article is ex-
ported if the article is severed from the
mass of things belonging within the United
States with the intention of uniting it with
the mass of things belonging within some
foreign country or within a possession of
the United States. Section 48.4221–3 sets
forth rules regarding tax-free sales of arti-
cles for export.
To make a tax-free sale for further
manufacture or export, the manufacturer,
the first purchaser, and in some cases the
second purchaser must be registered by
the IRS. A manufacturer or purchaser
applies for registration by filing a Form
637, “Application for Registration (For
Certain Excise Tax Activities),” in accor-
dance with the instructions on the form.
See §48.4222(a)–1 for the registration
requirements for tax-free sales. Foreign
purchasers of articles sold or resold for
export are exempt from the registration
requirement. See §48.4222(b)–1(b).
Generally, the purchaser of a taxable
article must provide the purchaser’s reg-
istration number to the manufacturer and
certify the exempt purpose for which the
article will be used. The information
must be in writing and may be noted on
the purchase order or other document
furnished by the purchaser to the manu-
facturer in connection with the sale. See
§48.4221–1(c).
A credit or refund of the manufacturers
excise tax may be available if a tax-paid
article is exported or used for an exempt
purpose, such as further manufacture. See
6416 and the corresponding regulations for
the conditions to allowance of a claim for
credit or refund of tax and for the docu-
mentation required to support a claim for
credit or refund.
Procedural rules
Part 40 of 26 CFR contains the proce-
dural rules applicable to manufacturers ex-
cise taxes with regard to returns, deposits,
and payments.
Subtitle F of the Code contains the pro-
cedural rules applicable to “internal rev-
enue taxes” (including manufacturers ex-
cise taxes) with regard to assessment, col-
lection, penalties, overpayments, refunds,
and statutes of limitations.
VIII.Other Issues Raised in Comments
on Notice 2010–89
Kits
Several commentators requested clari-
fication on the taxation of kits, often re-
ferred to as “convenience kits.” In general,
a convenience kit is two or more different
medical devices, or a combination of med-
ical devices and other items, packaged to-
gether for the convenience of the user.
According to commentators, a number
of different types of businesses, including
device manufacturers and distributors, en-
gage in the practice of creating such con-
venience kits. A manufacturer may as-
semble a kit containing a combination of
items that it manufactures and items that
it purchases from other manufacturers, im-
porters, or distributors. A kit may also be
assembled by a distributor that purchases
the items contained in the kit from one or
more manufacturers or importers. Some
kits are designed to be used by medical
or health care professionals for the perfor-
mance of a particular medical procedure.
Other kits are available to the general pub-
lic at retail, such as first aid kits and home
pregnancy test kits.
Several commentators expressed con-
cern over the potential for double taxation
when one or more taxable medical devices
are included in a kit. Some commenta-
tors suggested that tax should not be im-
posed on both the taxable medical devices
used as components of the kit and the kit
itself. Other commentators recommended
imposing tax on the taxable medical de-
vices included in the kit, but not on the
assembled kit. Other commentators sug-
gested that the assembly of a kit does not
constitute manufacture because the items
included in the kit are not transformed.
Under the proposed regulations, a kit
is a “taxable medical device” if the kit is
listed as a device with the FDA pursuant
to FDA requirements. The proposed regu-
lations define “kit” as a set of two or more
articles packaged in a single bag, tray, or
box for the convenience of the end user.
Moreover, the existing manufacturers
excise tax rules apply to kits in determin-
ing who is liable for the tax and which
sale is subject to tax. Under these exist-
ing rules, if a manufacturer sells a taxable
medical device to a distributor that uses the
device to produce a kit that is a distinct tax-
able medical device, the distributor’s as-
sembly of the kit constitutes further manu-
facture because the distributor has created
a new taxable article. The proposed regu-
lations clarify that if a kit is a taxable med-
ical device, then the use of other taxable
medical devices in the assembly of the kit
constitutes further manufacture by the per-
son who assembles the kit.
In some circumstances, the manufac-
turer may make a tax-free sale of a tax-
able medical device to the distributor for
use in the production or assembly of a kit;
tax will attach, however, upon the sale of
the kit by the distributor. If the manufac-
turer sells a taxable medical device to the
distributor for use in the production or as-
sembly of a kit at a tax-included price, the
distributor may be eligible to claim a credit
or refund for the overpayment of tax pur-
suant to section 6416(b)(3). The rules re-
garding tax-free sales for further manufac-
ture and the credit and refund provisions of
section 6416(b)(3)provide a mechanism
for avoiding double taxation when a tax-
able medical device is included in a kit
that is also a taxable medical device. See
§48.4221–2(b) for the circumstances under
which a taxable article is sold for use in
further manufacture. See section 4221 and
§48.4221–1, §48.4221–2, §48.4222(a)–1,
2012–13 I.R.B.593March 26, 2012

and §48.4223–1 for the rules regarding
tax-free sales for further manufacture.
Generally, under §48.4216(a)–1(e), if
a taxable and nontaxable article are sold
by the manufacturer as a unit, the tax at-
taches to that portion of the unit that is
properly allocable to the taxable article.
In the case of a kit that is a separate tax-
able medical device, the taxable and non-
taxable articles used in the kit’s production
or assembly have lost their identity as sep-
arate articles. Accordingly, the proposed
regulations clarify that the provisions of
§48.4216(a)–1(e) do not apply to the sale
of kits that are separate taxable medical
devices. The proposed regulations further
clarify that under such circumstances, the
entire sale price of the kit is subject to tax
under section 4191.
Associated Devices and Components of
Devices
Several commentators requested clari-
fication on the tax treatment of an associ-
ated or secondary device that is sold with
a primary device, such as a monitor that is
sold as part of an x-ray system. Commen-
tators also requested information on the tax
treatment of components of a device.
Under the proposed regulations, the
definition of “taxable medical device” is
tied to the FDA’s listing requirements for
devices. Therefore, associated devices or
components that are listed as devices with
the FDA pursuant to FDA requirements
are “taxable medical devices” for purposes
of section 4191, unless they fall within an
exemption under section 4191(b)(2), such
as the retail exemption. However, if a
manufacturer uses an associated device or
component in creating a new device that
must be listed with the FDA, then the rules
under section 4221 and the corresponding
regulations regarding further manufacture
apply.
Combination products
Combination products are therapeu-
tic and diagnostic products that combine
drugs, devices, and/or biological prod-
ucts. See 21 CFR 3.2(e). The IRS and the
Treasury Department received a comment
regarding combination products consist-
ing of a device component and a drug
component, such as prefilled syringes and
inhalers. The commentator suggested that
the sale of a combination product should
not be subject to the medical device tax if
its drug component is taken into account in
computing the branded prescription drug
(BPD) fee enacted under section 9008 of
the ACA. The commentator suggested
that the combination product be subject
to either the BPD fee or the medical de-
vice tax, but not both, based on the FDA’s
determination of a combination product’s
primary mode of action.
The ACA enacted both the medical de-
vice excise tax and the BPD fee, but pro-
vided no coordination between the pro-
visions. Under the proposed regulations,
the definition of “taxable medical device”
is tied to the FDA’s listing requirements
for devices. In general, the annual BPD
fee is allocated among covered entities en-
gaged in the business of manufacturing
or importing branded prescription drugs
with aggregate branded prescription drug
sales of over $5 million to specified gov-
ernment programs. See section 9008 of
the ACA and 26 CFR Part 51. For this
purpose, each branded prescription drug
is identified based on its National Drug
Code (NDC). Based on consultation with
the FDA, the IRS and the Treasury De-
partment anticipate that few, if any, com-
bination products will be subject to both
the medical device excise tax and the BPD
fee. The IRS and the Treasury Department
request comments on the extent to which
combination products may be subject to
the medical device excise tax and taken
into account in computing the BPD fee,
and the mechanisms by which any such
impact could be avoided.
Contracts for medical software and IT
systems
A commentator requested transition re-
lief for sales contracts for medical software
and IT systems. According to the com-
mentator, sellers of software and IT sys-
tems frequently provide medical devices,
such as medical device data systems, un-
der long-term, multi-year contracts. Un-
der these contracts, the manufacturer often
delivers software and IT systems in stages,
with partial payments due at various times
during the contract term. The commen-
tator requested that contracts, leases, and
other agreements entered into before Jan-
uary 1, 2013, not be subject to the medical
device excise tax, even if payments on the
contract are received after December 31,
2012.
The proposed regulations apply the ex-
isting manufacturers excise tax rules for
sales contracts. Under section 4216 and
§48.4216(c)–1(b), generally, when a tax-
able article is sold under an installment
payment contract with title reserved in the
seller, or under another arrangement that
creates a security interest and under which
payments are to be made in installments,
tax is computed and paid on each payment
made by the purchaser. The tax payable
with each payment is a percentage of each
payment based on the rate of the tax, if any,
in effect on the date the payment is due.
The proposed regulations do not adopt
the request for transition relief. The statute
was enacted on March 30, 2010, with an
effective date of January 1, 2013. The
statute did not provide an exception or spe-
cial rule for sales pursuant to contracts in
existence prior to the effective date of the
tax. The proposed regulations track the
statute.
Availability of IRS Documents
The IRS notice and revenue rulings
cited in this preamble are published in the
Internal Revenue Cumulative Bulletin and
are available from the Superintendent of
Documents, P.O. Box 979050, St. Louis,
MO 63197–9000.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866, as supplemented by Execu-
tive Order 13563. Therefore, a regulatory
assessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations,
and because these regulations do not im-
pose a collection of information on small
entities, the provisions of the Regulatory
Flexibility Act (5 U.S.C. chapter 6) do not
apply. 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 Ad-
ministration for comment on its impact on
small business.
March 26, 20125942012–13 I.R.B.

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) or electronic com-
ments that are submitted timely to the IRS.
The IRS and the Treasury Department re-
quest comments on the clarity of the pro-
posed regulations and how they may be
made easier to understand. All comments
will be available for public inspection and
copying.
A public hearing has been scheduled
for May 16, 2012, at 10 a.m., in the IRS
Auditorium, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC. Due to building security
procedures, visitors must enter at the Con-
stitution Avenue entrance. In addition, all
visitors must presentphoto identification
to enter the building. Because of access
restrictions, visitors will not be admitted
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 FURTHER IN-
FORMATION CONTACT section 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 electronic or written comments by
May 7, 2012 and an outline of the topics
tobediscussedandthetimetobedevoted
to each topic (signed original and eight (8)
copies) by May 7, 2012. A period of 10
minutes will be allotted to each person for
making comments. An agenda showing
the schedule of speakers will be prepared
after the deadline for receiving outlines has
passed. Copies of the agenda will be avail-
able free of charge at the hearing.
Drafting Information
The principal author of these regu-
lations is Natalie Payne, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 48 is pro-
posed to be amended as follows:
PART 48—MANUFACTURERS AND
RETAILERS EXCISE TAXES
Paragraph 1. The authority citation for
part 48 is amended by adding entries in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Section 48.4191–1 also issued under
26 U.S.C. 4191.
Section 48.4191–2 also issued under
26 U.S.C. 4191(b)(2).
§48.0–1 [Amended]
Par. 2. The fourth sentence of §48.0–1
is amended by removing the language
“and sporting goods” and adding “sporting
goods, and taxable medical devices” in its
place.
Par. 3. Subpart L, consisting of
§§48.4191–1 and 48.4191–2, is added to
read as follows:
Subpart L — Taxable Medical De-
vices
Sec.
48.4191–1 Imposition and rate of tax.
48.4191–2 Taxable medical device.
§48.4191–1 Imposition and rate of tax.
(a)Imposition of tax. Under section
4191(a), tax is imposed on the sale of any
taxable medical device by the manufac-
turer, producer, or importer of the device.
For the definition of the termtaxable med-
ical device, see §48.4191–2.
(b)Rate of tax. Tax is imposed on
the sale of a taxable medical device at
the rate of 2.3 percent of the price for
which the device is sold. For the defini-
tion of the termprice, see section 4216 and
§§48.4216(a)–1 through 48.4216(e)–3.
(c)Liability for tax. The manufacturer,
producer, or importer making the sale of a
taxable medical device is liable for the tax
imposed by section 4191(a). For rules re-
lating to the determination of who the man-
ufacturer, producer, or importer is for pur-
poses of section 4191, see §48.0–2(a)(4).
For the definition of the termsale,see
§48.0–2(a)(5). For rules relating to the
lease of an article by the manufacturer,
producer, or importer, see section 4217
and §48.4217–1 through §48.4217–2. For
rules relating to the use of an article by
the manufacturer, producer, or importer,
see section 4218 and §48.4218–1 through
§48.4218–5.
(d)Procedural rules. For the proce-
dural rules relating to section 4191, see
part 40 of this chapter.
(e)Tax-free sales for further manufac-
ture or export. For rules relating to tax-free
sales of taxable medical devices for further
manufacture or export, see section 4221
and §48.4221–1 through §48.4221–3.
(f)Effective/applicability date.This
section applies to sales of taxable medical
devices on and after January 1, 2013.
§48.4191–2 Taxable medical device.
(a)Taxable medical device—(1)In gen-
eral. A taxable medical device is any de-
vice, as defined in section 201(h) of the
Federal Food, Drug, and Cosmetic Act,
that is intended for humans. For purposes
of this section, a device defined in sec-
tion 201(h) of the Federal Food, Drug, and
Cosmetic Act that is intended for humans
means a device that is listed as a device
with the Food and Drug Administration
(FDA)undersection510(j)oftheFederal
Food, Drug, and Cosmetic Act and 21 CFR
Part 807, pursuant to FDA requirements.
(2)Devices that should have been listed
with the FDA. If a device is not listed
as a device with the FDA but the FDA
determines that the device should have
been listed as a device, the device will be
deemed to be listed as a device with the
FDA as of the date the FDA notifies the
manufacturer or importer in writing that
corrective action with respect to listing is
required.
(b)Exemptions—(1)In general.The
term
taxable medical devicedoes not in-
clude eyeglasses, contact lenses, hearing
aids, and any other device of a type that is
generally purchased by the general public
at retail for individual use (the retail excep-
tion).
(2)Retail exemption. A device will be
considered to be of a type generally pur-
chased by the general public at retail for
individual use if it is regularly available for
purchase and use by individual consumers
who are not medical professionals, and if
the design of the device demonstrates that
it is not primarily intended for use in a
2012–13 I.R.B.595March 26, 2012

medical institution or office or by a med-
ical professional. Whether a device is of
a type described in the preceding sentence
is evaluated based on all the relevant facts
and circumstances. Factors relevant to this
evaluation are listed in paragraphs (b)(2)(i)
and (ii) of this section. There may be facts
and circumstances that are relevant in eval-
uating whether a device is of a type gener-
ally purchased by the general public at re-
tail for individual use in addition to those
described in paragraphs (b)(2)(i) and (ii) of
this section. The fact that a device is of
a type that requires a prescription is not a
factor in the determination of whether or
not the device falls under the retail exemp-
tion.
(i)Regularly available for purchase
and use by individual consumers.The
following factors suggest that a device is
of a type that is regularly available for
purchase and use by individual consumers
who are not medical professionals:
(A) Consumers who are not medical
professionals canpurchase the device
through retail businesses that also sell
items other than medical devices, such
as drug stores, supermarkets, and similar
vendors.
(B) Consumers who are not medical
professionals can use the device safely and
effectively for its intended medical pur-
pose with minimal or no training from a
medical professional.
(C) The device is classified by the FDA
under Subpart D of 21 CFR Part 890 (Phys-
ical Medicine Devices).
(ii)Primarily for use in a medical in-
stitution or office or by a medical profes-
sional. The following factors suggest that
the device is designed primarily for use in
a medical institution or office or by a med-
ical professional:
(A) The device generally must be im-
planted, inserted, operated, or otherwise
administered by a medical professional.
(B) The cost to acquire, maintain,
and/or use the device requires a large
initial investment and/or ongoing expen-
diture that is not affordable for the average
consumer.
(C) The device is a Class III device un-
der the FDA system of classification.
(D) The device is classified by the FDA
under—
(1) 21 CFR Part 862 (Clini-
cal Chemistry and Clinical Toxi-
cology Devices), 21 CFR Part 864
(Hematology and Pathology Devices),
21 CFR Part 866 (Immunology and
Microbiology Devices), 21 CFR Part 868
(Anesthesiology Devices), 21 CFR Part
870 (Cardiovascular Devices), 21 CFR
Part 874 (Ear, Nose, and Throat Devices),
21 CFR Part 876 (Gastroenterology —
Urology Devices), 21 CFR Part 878
(General and Plastic Surgery Devices),
21 CFR Part 882 (Neurological Devices),
21 CFR Part 886 (Ophthalmic Devices),
21 CFR Part 888 (Orthopedic Devices), or
21 CFR Part 892 (Radiology Devices);
(2) Subpart B, Subpart D, or Subpart E
of 21 CFR Part 872 (Dental Devices);
(3) Subpart B, Subpart C, Subpart D,
Subpart E, or Subpart G of 21 CFR Part
884 (Obstetrical and Gynecological De-
vices); or
(4) Subpart B of 21 CFR Part 890
(Physical Medicine Devices).
(E) The device qualifies as durable
medical equipment, prosthetics, orthotics,
and supplies for which payment is avail-
able exclusively on a rental basis under the
Medicare Part B payment rules, and is an
“item requiring frequent and substantial
servicing” as defined in 42 CFR 414.222.
(iii)Safe Harbor. The following de-
vices will be considered to be of a type
generally purchased by the general public
at retail for individual use:
(A) Devices that are included
in the FDA’s online IVD Home
Use Lab Tests (Over-the-Counter
Tests)database,availableat
http://www.accessdata.fda.gov/scripts/cdrh/
cfdocs/cfIVD/Search.cfm
.
(B) Devices that are described as
“OTC” or “over the counter” devices in
the relevant FDA classification regulation
heading.
(C) Devices that are described as
“OTC” or “over the counter” devices in
the FDA’s product code name, the FDA’s
device classification name, or the “classifi-
cation name” field in the FDA’s device reg-
istration and listing database, available at
http://www.accessdata.fda.gov/scripts/cdrh/
cfdocs/cfrl/rl.cfm
.
(D) Devices that qualify as durable
medical equipment, prosthetics, orthotics,
and supplies, as described in Subpart C
of 42 CFR Part 414 (Parenteral and En-
teral Nutrition) and Subpart D of 42 CFR
Part 414 (Durable Medical Equipment
and Prosthetic and Orthotic Devices), for
which payment is available on a purchase
basis under Medicare Part B payment
rules, and are—
(1) “Prosthetic and orthotic devices,” as
defined in 42 CFR 414.202, that do not re-
quire implantation or insertion by a medi-
cal professional;
(2) “Parenteral and enteral nutrients,
equipment, and supplies” as defined in
42 CFR 411.351 and described in 42 CFR
414.102(b);
(3) “Customized items” as described in
42 CFR 414.224;
(4) “Therapeutic shoes,” as described in
42 CFR 414.228(c); or
(5) Supplies necessary for the effective
use of DME, as described in section 110.3
of chapter 15 of the Medicare Benefit
Policy Manual (Centers for Medicare and
Medicaid Studies Publication 100–02).
(iv)Examples. The following examples
illustrate the rules of this paragraph (b).
Example 1. X manufactures non-sterile absorbent
tipped applicators. X sells the applicators to distrib-
utors Y and Z, which, in turn, sell the applicators
to medical institutions and offices, medical profes-
sionals, and to retail establishments. The FDA re-
quires manufacturers and importers of non-sterile ab-
sorbent tipped applicators to list the applicators as a
device with the FDA. The applicators are classified
by the FDA under 21 CFR Part 880 (General Hos-
pital and Personal Use Devices) and product code
KXF. Absorbent tipped applicators do not fall within
a retail exception safe harbor set forth in paragraph
(b)(2)(iii) of this section. Therefore, the determina-
tion of whether the absorbent tipped applicators are
devices of a type generally purchased by the gen-
eral public at retail for individual use must be made
on a facts and circumstances basis. Individual con-
sumers who are not medical professionals can reg-
ularly purchase the absorbent tipped applicators at
drug stores, supermarkets, cosmetic supply stores and
other similar establishments, and can use the applica-
tors safely and effectively for their intended medical
purpose without training from a medical professional.
Further, the absorbent tipped applicators do not need
to be implanted, inserted, operated, or otherwise ad-
ministered by a medical professional, do not require a
large investment and/or ongoing expenditure, are not
a Class III device, are not classified by the FDA un-
der a category described in paragraph (b)(2)(ii)(D) of
this section, and are not “items requiring frequent and
substantial servicing” as defined in 42 CFR 414.222.
Thus, the applicators have multiple factors that tend
to show they are regularlyavailable for purchase and
use by individual consumers and none of the factors
that tend to show they are designed primarily for use
in a medical institution or office or by medical pro-
fessionals. Based on the totality of the facts and cir-
cumstances, the applicators are devices that are of a
type that are generally purchased by the general pub-
lic at retail for individual use.
Example 2. X manufactures adhesive bandages.
X sells the adhesive bandages to distributors Y and Z,
which, in turn, sell the bandages to medical institu-
tions and offices, medical professionals, and to retail
March 26, 20125962012–13 I.R.B.

establishments. The FDA requires manufacturers and
importers of adhesive bandages to list the bandages
as a device with the FDA. The adhesive bandages are
classified by the FDA under 21 CFR Part 880 (Gen-
eral Hospital and Personal Use Devices) and prod-
uct code KGX. Adhesive bandages do not fall within
a retail exception safe harbor set forth in paragraph
(b)(2)(iii) of this section. Therefore, the determina-
tion of whether the adhesive bandages are devices of
a type generally purchased by the general public at
retail for individual use must be made on a facts and
circumstances basis. Individual consumers who are
not medical professionals can regularly purchase the
adhesive bandages at drug stores, supermarkets and
other similar establishments, and can use the adhe-
sive bandages safely and effectively for their intended
medical purpose without training from a medical pro-
fessional. Further, the adhesive bandages do not need
to be implanted, inserted, operated, or otherwise ad-
ministered by a medical professional, do not require a
large investment and/or ongoing expenditure, are not
Class III devices, are not classified by the FDA un-
der a category described in paragraph (b)(2)(ii)(D) of
this section, and are not “items requiring frequent and
substantial servicing” as defined in 42 CFR 414.222.
Thus, the bandages have multiple factors that tend to
show they are regularly available for purchase and
use by individual consumers and none of the factors
that tend to show they are designed primarily for use
in a medical institution or office or by medical pro-
fessionals. Based on the totality of the facts and cir-
cumstances, the adhesivebandages are devices that
are of a type that are generally purchased by the gen-
eral public at retail for individual use.
Example 3. X manufactures snake bite suction
kits. X sells the snake bite suction kits to distribu-
tors Y and Z, which, in turn, sell the kits to medical
institutions and offices, medical professionals, and to
retail establishments. The FDA requires manufactur-
ers and importers of snake bite suction kits to list the
kits as a device with the FDA. The FDA classifies the
snake bit suction kits under 21 CFR Part 880 (Gen-
eral Hospital and Personal Use Devices) and product
code KYP. Snake bite suction kits do not fall within
a retail exemption safe harbor set forth in paragraph
(b)(2)(iii) of this section. Therefore, the determina-
tion of whether the snake bite suction kits are devices
of a type generally purchased by the general public
at retail for individual use must be made on a facts
and circumstances basis. Individual consumers who
are not medical professionals can regularly purchase
the snake bite suction kits at sporting goods stores,
camping stores, and other similar establishments, and
can use the kits safely and effectively for their in-
tended medical purpose without training from a med-
ical professional. Further, the snake bite suction kits
do not need to be implanted, inserted, operated or
otherwise administered by a medical professional, do
not require a large investment and/or ongoing expen-
diture, are not Class III devices, are not classified
by the FDA under a category described in paragraph
(b)(2)(ii)(D) of this section, and are not “items requir-
ing frequent and substantial servicing” as defined in
42 CFR 414.222. Thus, the snake bite suction kits
have multiple factors that tend to show they are reg-
ularly available for purchase and use by individual
consumers and none of the factors that tend to show
they are designed primarily for use in a medical insti-
tution or office or by medical professionals. Based on
the totality of the facts and circumstances, the snake
bite suction kits are devices that are of a type that are
generally purchased by the general public at retail for
individual use.
Example 4. X manufactures denture adhesives.
X sells the denture adhesives to distributors Y and Z,
which, in turn, sell the adhesives to dental offices and
retail establishments. The FDA requires manufac-
turers and importers of denture adhesives to list the
adhesive as a device with the FDA. The FDA clas-
sifies the denture adhesives under 21 CFR Part 872
(Dental Devices) and product code KXX. The den-
ture adhesives do not fall within a retail exemption
safe harbor set forth in paragraph (b)(2)(iii) of this
section. Therefore, the determination of whether the
denture adhesives are devices of a type generally pur-
chased by the general public at retail for individual
use must be made on a facts and circumstances ba-
sis. Individual consumers who are not medical pro-
fessionals can regularly purchase the denture adhe-
sives at drug stores, supermarkets, and other simi-
lar establishments, and can use the adhesives safely
and effectively for their intended medical purpose
with minimal or no training from a medical profes-
sional. Further, the denture adhesives do not need
to be implanted, inserted, operated, or otherwise ad-
ministered by a medical professional, do not require a
large investment and/or ongoing expenditure, are not
Class III devices, are not classified by the FDA un-
der a category described in paragraph (b)(2)(ii)(D) of
this section, and are not “items requiring frequent and
substantial servicing” as defined in 42 CFR 414.222.
Thus, the denture adhesives have multiple factors that
tend to show they are regularly available for purchase
and use by individual consumers and none of the fac-
tors that tend to show they are designed primarily for
use in a medical institution or office or by medical
professionals. Based on the totality of the facts and
circumstances, the denture adhesives are devices that
are of a type that are generally purchased by the gen-
eral public at retail for individual use.
Example 5. X manufactures mobile x-ray sys-
tems. X sells the x-ray systems to distributors Y and
Z, which, in turn, sell the systems generally to med-
ical institutions and offices, and medical profession-
als. The FDA requires manufacturers and importers
of mobile x-ray systems to list the systems as a de-
vice with the FDA. The FDA classifies the mobile
x-ray systems under 21 CFR Part 892 (Radiology De-
vices) and product code IZL. Mobile x-ray systems
do not fall within a retail exemption safe harbor set
forth in paragraph (b)(2)(iii) of this section. There-
fore, the determination of whether the mobile x-ray
systems are devices of a type generally purchased by
the general public at retail for individual use must
be made on a facts and circumstances basis. Indi-
vidual consumers who are not medical profession-
als cannot regularly purchase the mobile x-ray sys-
tems at drug stores, supermarkets, and other simi-
lar establishments, and cannot use the x-ray systems
safely and effectively for their intended medical pur-
pose without training from a medical professional.
Although the mobile x-ray systems are not Class III
devices and are not “items requiring frequent and sub-
stantial servicing” as defined in 42 CFR 414.222, they
need to be operated by a medical professional, require
a large investment and/orongoing expenditure, and
are of a type classified by the FDA under 21 CFR Part
892 (Radiology Devices). Thus, the x-ray systems
do not meet any of the factors that tend to show that
they are regularly available for purchase and use by
individual consumers. However, the x-ray systems
do meet several of the factors that tend to show they
are designed primarily for use in a medical institu-
tion or office or by medical professionals. Based on
the totality of the facts and circumstances, the mo-
bile x-ray systems are not devices that are of a type
generally purchased by the general public at retail for
individual use.
Example 6. X manufactures pregnancy test kits.
X sells the kits to distributors Y and Z, which, in
turn, sell the pregnancy test kits to medical institu-
tions and offices, medical professionals, and to retail
establishments. The FDA requires manufacturers and
importers of pregnancy test kits to list the kits as a
device with the FDA. The FDA classifies the kits un-
der 21 CFR Part 862 (Clinical Chemistry and Clini-
cal Toxicology Devices) and product code LCX. The
pregnancy test kits are included in the FDA’s online
IVD Home Use Lab Tests (Over-the-Counter Tests)
database. Therefore, the over the counter pregnancy
test kits fall within the safe harbor set forth in para-
graph (b)(2)(iii)(A) of this section. Further, the FDA
product code name for LCX is “Kit, Test, Pregnancy,
HCG, Over The Counter.” Therefore, the pregnancy
test kits also fall within the safe harbor set forth in
paragraph (b)(2)(iii)(C) of this section. Accordingly,
the pregnancy test kits are devices that are of a type
generally purchased by the general public at retail for
individual use.
Example 7. X manufactures blood glucose mon-
itors, blood glucose test strips, and lancets. X sells
the blood glucose monitors, test strips and lancets to
distributors Y and Z, which, in turn, sell the mon-
itors, test strips, and lancets to medical institutions
and offices, medical professionals, and to retail es-
tablishments. The FDA requires manufacturers and
importers of blood glucose monitors, test strips, and
lancets to list the items as devices with the FDA. The
FDA classifies the blood glucose monitors under
21 CFR Part 862 (Clinical Chemistry and Clinical
Toxicology Devices) and product code NBW. The
FDA classifies the test strips under 21 CFR Part
862 (Clinical Chemistry and Clinical Toxicology
Devices) and product code NBW. The FDA classifies
the lancets under 21 CFR 878 (General and Plastic
Surgery Devices) and product code FMK. The
blood glucose monitors and test strips are included
in the FDA’s online IVD Home Use Lab Tests
(Over-the-Counter Tests) database. Therefore, the
blood glucose monitors and test strips fall within the
safe harbor set forth in paragraph (b)(2)(iii)(A) of
this section. Further, the FDA product code name
for NBW is “System, Test, Blood Glucose, Over the
Counter.” Therefore, the blood glucose monitors and
test strips also fall within the safe harbor set forth in
paragraph (b)(2)(iii)(C) of this section. In addition,
the lancets are supplies necessary for the effective use
of DME as described in chapter 15 of the Medicare
Policy Benefit Manual. Therefore, the lancets
fall within the safe harbor set forth in paragraph
(b)(2)(iii)(D)(5) of this section. Accordingly, the
blood glucose monitors, test strips, and lancets are
devices that are of a type generally purchased by the
general public at retail for individual use.
2012–13 I.R.B.597March 26, 2012

(c)Effective/applicability date.This
section applies to sales of taxable medical
devices on and after January 1, 2013.
Par. 4. Section 48.4221–1 is amended
by adding paragraph (a)(2)(vii) to read as
follows:
§48.4221–1 Tax-free sales; general rule.
(a) * * *
(2) * * *
(vii) The exemptions under section
4221(a)(3) through (a)(6) do not apply to
the tax imposed by section 4191 (medical
device tax).
*****
Par. 5. Section 48.4221–2 is amended
by adding headings to paragraphs (b)(1)
and (b)(2) and adding paragraph (b)(3).
The additions read as follows:
(b) * * *
(1)In general.***
(2)Material in the manufacture or pro-
duction of another article.***
(3)Kits—(i) The process of producing
or assembling a kit that is a taxable medi-
cal device (as defined in §48.4191–2) con-
stitutes further manufacture. Under such
circumstances, the taxable and nontaxable
articles used in the production or assem-
bly of the kit lose their identity as sep-
arate articles once they are incorporated
into the kit because the kit is a new tax-
able article. Accordingly, the provisions
of §48.4216(a)–1(e) do not apply upon the
sale of a kit that is a taxable medical de-
vice, and the entire sale price of the kit is
subject to tax under section 4191.
(ii) For purposes of this section, the
termkitmeans a set of two or more articles
that is enclosed in a single package, such as
a bag, tray, or box, for the convenience of
a medical or health care professional or the
end user. A kit may contain a combination
of one or more taxable medical devices and
other articles.
(iii) The following example illustrates
the rule of this paragraph (b)(3).
Example. X is a manufacturer of scalpels. X is
registered with the IRS as a manufacturer of taxable
medical devices in accordance with §48.4222(a)–1.
Y is a distributor of taxable medical devices. Y is
registered with the IRS as a manufacturer of taxable
medical devices and as a buyer of taxable medical
devices for use in further manufacture in accordance
with §48.4222(a)–1. Y purchases scalpels from X for
inclusion in surgical kits that Y produces. Both the
scalpels and the kits are “taxable medical devices”
as defined in §48.4191–2. Accordingly, X may sell
the scalpels to Y tax free, provided Y furnishes its
registration number to X and certifies in writing that
the scalpels will be used in further manufacture.
(iv) This paragraph (b)(3) applies to
sales of taxable medical devices on and af-
ter January 1, 2013.
*****
Par. 6. Section 48.6416(b)(2)–2 is
amended by adding paragraph (a)(4) to
read as follows:
§48.6416(b)(2)–2 Exportations, uses,
sales and resales included.
(a) * * *
(4) Beginning on January 1, 2013, sec-
tions 6416(b)(2)(B), (C), (D), and (E) do
not apply to any tax paid under section
4191 (medical device tax).
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on February 3,
2012, 11:15 a.m., and published in the issue of the Federal
RegisterforFebruary7,2012,77F.R.6028)
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Longevity Annuity Contracts
REG–115809–11
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed regulations relating to the pur-
chase of longevity annuity contracts under
tax-qualified defined contribution plans
under section 401(a) of the Internal Rev-
enue Code (Code), section 403(b) plans,
individual retirement annuities and ac-
counts (IRAs) under section 408, and
eligible governmental section 457 plans.
These regulations will provide the pub-
lic with guidance necessary to comply
with the required minimum distribution
rules under section 401(a)(9). The regu-
lations will affect individuals for whom
a longevity annuity contract is purchased
under these plans and IRAs (and their ben-
eficiaries), sponsors and administrators
of these plans, trustees and custodians of
these IRAs, and insurance companies that
issue longevity annuity contracts under
these plans and IRAs. This document also
provides a notice of a public hearing on
these proposed regulations.
DATES: Written or electronic comments
must be received by May 3, 2012. Out-
lines of topics to be discussed at the public
hearing scheduled for June 1, 2012 must
be received by May 11, 2012.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–115809–11), room
5203, 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–115809–11),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, N.W.,
Washington, D.C., or sent electroni-
cally via the Federal eRulemaking Por-
tal athttp://www.regulations.gov(IRS
REG–115809–11). The public hearing
will be held in the IRS Auditorium,
Internal Revenue Building, 1111
Constitution Avenue, N.W., Washington,
D.C.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Jamie Dvoretzky at (202) 622–6060;
concerning submission of comments,
the hearing, and/or being placed on the
building access list to attend the hearing,
Oluwafunmilayo (Funmi) Taylor) at (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained
in this notice of proposed rulemaking has
been submitted to the Office of Manage-
ment and Budget for review in accordance
with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)). The collection of
information in these proposed regulations
is in §1.401(a)(9)–6, A–17(a)(6) (disclo-
sure that a contract is intended to be a
qualifying longevity annuity contract) and
§1.6047–2 (an initial report must be pre-
pared and an initial disclosure statement
March 26, 20125982012–13 I.R.B.

must be furnished to qualifying longevity
annuity contract owners, and an annual
statement must be provided to qualifying
longevity annuity contract owners and
their surviving spouses containing infor-
mation required to be furnished to the
IRS). The information in §1.401(a)(9)–6,
A–17(a)(6), is required in order to notify
participants and beneficiaries, plan spon-
sors, and the IRS that the proposed regula-
tions apply to a contract. The information
in the annual statement in §1.6047–2 is
required in order to apply the dollar and
percentage limitations in §1.401(a)(9)–6,
A–17(b) and §1.408–8, Q&A–12(b) and
to comply with other requirements of the
proposed regulations, and the information
in the initial report and disclosure state-
ment in §1.6047–2 is required in order for
individuals to understand the features and
limitations of a qualifying longevity an-
nuity contract. The information would be
used by plans and individuals to comply
with the required minimum distribution
rules.
Comments on the collection of infor-
mation should be sent to theOffice of
Management and Budget, Attn: Desk
Officer for the Department of the Trea-
sury, Office of Information and Regu-
latory Affairs, Washington, DC 20503,
with copies to the Internal Revenue Ser-
vice, Attn: IRS Reports Clearance Offi-
cer, SE:W:CAR:MP:T:M:S; Washington,
DC 20224. Comments on the collec-
tion of information should be received by
April 3, 2012. Comments are specifically
requested concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the IRS, in-
cluding whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with the
proposed collections of information may
be minimized, including through the appli-
cation of automated collection techniques
or other forms of information technology;
and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of service to provide information.
Estimated total average annual record-
keeping burden: 35,661 hours.
Estimated average annual burden per
response: 10 minutes.
Estimated number of responses:
213,966.
Estimated number of recordkeepers:
150.
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 control number assigned by the Of-
fice of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
This document contains proposed
amendments to the Income Tax Reg-
ulations (26 CFR part 1) under sec-
tions 401(a)(9), 403(b)(10), 408(a)(6),
408(b)(3), 408A(c)(5), and 6047(d) of the
Code.
Section 401(a)(9) prescribes required
minimum distribution rules for a qualified
trust under section 401(a). In general, un-
der these rules, distribution of each partic-
ipant’s entire interest must begin by the re-
quired beginning date. The required be-
ginning date generallyis April 1 of the cal-
endar year following the later of (1) the
calendar year in which the participant at-
tains age 70
1
/2or (2) the calendar year in
which the participant retires. However, the
ability to delay distribution until the calen-
dar year in which a participant retires does
not apply in the case of a 5-percent owner
or an IRA owner.
If the entire interest of the participant is
not distributed by the required beginning
date, section 401(a)(9)(A) provides that
the entire interest of the participant must be
distributed, beginning not later than the re-
quired beginning date, in accordance with
regulations, over the life of the partici-
pant or lives of the participant and a des-
ignated beneficiary (or over a period not
extending beyond the life expectancy of
the participant or the life expectancy of the
participant and a designated beneficiary).
Section 401(a)(9)(B) prescribes required
minimum distribution rules that apply af-
ter the death of the participant. Section
401(a)(9)(G) provides that any distribution
required to satisfy the incidental death ben-
efit requirement of section 401(a) is treated
as a required minimum distribution.
Section 403(b) plans, IRAs described
in section 408, and eligible deferred com-
pensation plans under section 457(b)
also are subject to the required minimum
distribution rules of section 401(a)(9) pur-
suant to sections 408(a)(6) and (b)(3),
403(b)(10), and 457(d)(2), respectively,
and the regulations under those sections.
However, pursuant to section 408A(c)(5),
the minimum distribution and minimum
distribution incidental benefit (MDIB)
requirements do not apply to Roth IRAs
during the life of the participant.
Section 408(i) provides that the trustee
of an individual retirement account and the
issuer of an endowment contract or an in-
dividual retirement annuity must make re-
ports regarding such account, contract, or
annuity to the Secretary and to the indi-
viduals for whom the account, contract,
or annuity is maintained with respect to
such matters as the Secretary may require.
Pursuant to this provision, the IRS pre-
scribes Form 5498 (IRA Contribution In-
formation), which requires annual report-
ing with respect to an IRA, including a
statement of the fair market value of the
IRA as of the prior December 31. Section
6047(d) states that the Secretary shall by
forms or regulations require that the em-
ployer maintaining, or the plan administra-
tor of, a plan from which designated distri-
butions (as defined in section 3405(e)(1))
may be made, and any person issuing any
contract under which designated distribu-
tions may be made, make returns and re-
ports regarding the plan or contract to the
Secretary, to the participants and benefi-
ciaries of the plan or contract, and to such
other persons as the Secretary may by reg-
ulations prescribe. These sections also
provide that the Secretary may, by forms
or regulations, prescribe the manner and
time for filing these reports. Section 6693
prescribes monetary penalties for failure
to comply with section 408(i), and sec-
tions 6652 and 6704 prescribe monetary
penalties for failure to comply with section
6047(d).
Section 1.401(a)(9)–6 of the Income
Tax Regulations sets forth the minimum
distribution rules that apply to a defined
benefit plan and to annuity contracts un-
2012–13 I.R.B.599March 26, 2012

der a defined contribution plan. Under
§1.401(a)(9)–6, A–12, if an annuity con-
tract held under a defined contribution
plan has not yet been annuitized, the in-
terest of a participant or beneficiary under
that contract is treated as an individual
account for purposes of section 401(a)(9).
Thus, the value of that contract is included
in the account balance used to determine
required minimum distributions from the
participant’s individual account.
If an annuity contract has been annu-
itized, the periodic annuity payments must
be nonincreasing, subject to certain excep-
tions that are set forth in §1.401(a)(9)–6,
A–14. In addition, annuity payments must
satisfy the MDIB requirement of sec-
tion 401(a)(9)(G). Under §1.401(a)(9)–6,
A–2(b), if a participant’s sole beneficiary,
as of the annuity starting date, is his or
her spouse and the distributions satisfy
section 401(a)(9) without regard to the
MDIB requirement, the distributions to
the participant are deemed to satisfy the
MDIB requirement. However, if distribu-
tions are in the form of a joint and survivor
annuity for a participant and a non-spouse
beneficiary, the MDIB requirement is not
satisfied unless the periodic annuity pay-
ment payable to the survivor does not
exceed an applicablepercentage of the
amount that is payable to the participant,
with the applicable percentage to be deter-
mined using the table in §1.401(a)(9)–6,
A–2(c).
The regulations under sections
403(b)(10),408(a)(6),408(b)(3),
408A(c)(5), and 457(d)(2) prescribe how
the required minimum distribution rules
apply to other types of retirement plans
and accounts. Section 1.403(b)–6(e)(1)
provides that a section 403(b) contract
must meet the requirements of section
401(a)(9). Section 1.403(b)–6(e)(2) pro-
vides, with certain exceptions, that the
section 401(a)(9) required minimum dis-
tribution rules are applied to section
403(b) contracts in accordance with the
provisions in §1.408–8. Section 1.408–8,
Q&A–1, provides, with certain modifica-
tions, that an IRA is subject to the rules of
§§1.401(a)(9)–1 through 1.401(a)(9)–9.
Onesuchmodificationissetforthin
§1.408–8, Q&A–9, which prescribes a rule
under which an IRA generally does not fail
to satisfy section 401(a)(9) merely because
the required minimum distribution with
respect to the IRA is distributed instead
from another IRA. Section 1.408A–6,
Q&A–14(a), provides that no minimum
distributions are required to be made from
a Roth IRA during the life of the par-
ticipant. Section 1.408A–6, Q&A–15,
provides that a participant who is required
to receive minimum distributions from his
or her traditional IRA cannot choose to
take the amount of the required minimum
distributions from a Roth IRA. Section
1.457–6(d) provides that a section 457(b)
eligible plan must meet the requirements
of section 401(a)(9) and the regulations
under that section.
On February 2, 2010, the Department
of Labor, the IRS, and the Department of
the Treasury issued a Request for Infor-
mation Regarding Lifetime Income Op-
tions for Participants and Beneficiaries in
Retirement Plans in theFederal Register
(75 FR 5253). That Request for Infor-
mation included questions relating to how
the required minimum distribution rules
affect defined contribution plan sponsors’
and participants’ interest in the offering
and use of lifetime income. In particular,
the Request for Information asked whether
there were changes to the rules that could
or should be considered to encourage ar-
rangements under which participants can
purchase deferred annuities that begin at
an advanced age (sometimes referred to
as longevity annuities or longevity insur-
ance).
A number of commentators identified
the required minimum distribution rules as
an impediment to the utilization of these
types of annuities. One such impediment
that they noted is the requirement that,
prior to annuitization, the value of the
annuity be included in the account bal-
ance that is used to determine required
minimum distributions. This requirement
raises the risk that, if the remainder of the
account has been depleted, the participant
would have to commence distributions
from the annuity earlier than anticipated
in order to satisfy the required minimum
distribution rules. Some commentators
stated that if the deferred annuity permits
a participant to accelerate the commence-
ment of benefits, then, in order to take that
contingency into account, the premium
would be higher for a given level of an-
nuity income regardless of whether the
participant actually commences benefits at
an earlier date. Some commentators also
noted that longevity annuities often do
not provide a commutation benefit, cash
surrender value, or other similar feature.
The Treasury Department and the IRS
have concluded that there are substantial
advantages to modifying the required min-
imum distribution rules in order to facili-
tate a participant’s purchase of a deferred
annuity that is scheduled to commence at
an advanced age — such as age 80 or 85
— using a portion of his or her account.
Under the proposed amendments to these
rules, prior to annuitization, the partici-
pant would be permitted to exclude the
value of a longevity annuity contract that
meets certain requirements from the ac-
count balance used to determine required
minimum distributions. Thus, a partici-
pant would never need to commence dis-
tributions from the annuity contract before
the advanced age in order to satisfy the re-
quired minimum distribution rules and, ac-
cordingly, the contract could be designed
with a fixed annuity starting date at the ad-
vanced age (and would not need to provide
an option to accelerate commencement of
the annuity).
Purchasing longevity annuity contracts
could help participants hedge the risk of
drawing down their benefits too quickly
and thereby outliving their retirement
savings. This risk is of particular import
because of the substantial, and unpre-
dictable, possibility of living beyond one’s
life expectancy. Purchasing a longevity
annuitycontractwouldalsohelpavoid
the opposite concern that participants may
live beneath their means in order to avoid
outliving their retirement savings. If the
longevity annuity provides a predictable
stream of adequate income commencing
at a fixed date in the future, the partici-
pant would still face the task of managing
retirement income over that fixed period
until the annuity commences, but that task
generally is far less challenging than man-
aging retirement income over an uncertain
period.
The Treasury Department and the IRS
have concluded that any special treatment
under the required minimum distribution
rules to facilitate the purchase of such a
longevity annuity contract should be lim-
ited to a portion of a participant’s account
balance, such as 25 percent. A percentage
limit is necessary in order to be consistent
with section 401(a)(9)(A), which requires
the entire interest of each participant to
be distributed, beginning by the required
March 26, 20126002012–13 I.R.B.

beginning date, in accordance with reg-
ulations, over the life or life expectancy
of the participant (or the participant and
a designated beneficiary). The pattern of
required minimum payments implemented
in the existing regulations under section
401(a)(9) limits the extent to which tax-fa-
vored retirement savings can be used for
purposes other than retirement income
(such as transmitting accumulated wealth
to a participant’s heirs). Limiting the spe-
cial treatment for a longevity annuity to
those contracts purchased with no more
than 25 percent of the account balance
is consistent with the intent of section
401(a)(9)(A) because, for a typical par-
ticipant who will need to draw down the
entire account balance during the period
prior to commencement of the annuity,
the overall pattern of payments would not
provide more deferral than would other-
wise normally be available for lifetime
payments under the section 401(a)(9)(A)
rules.
However, because a participant is re-
quired to receive only required minimum
distributions during the period before the
annuity begins (and would not under these
proposed regulations be required to draw
down the entire remaining balance on an
accelerated basis), the Treasury Depart-
ment and the IRS have concluded that, in
addition to the percentage limitation, the
amount used to purchase an annuity for
which the minimum distribution require-
ments would be eased should be subject to
a dollar limitation, such as $100,000. This
dollar limitation would be applied in order
to constrain the extent to which the combi-
nation of payments from the account bal-
ance (determined by excluding the value
of the annuity before the annuity com-
mences) and later payments from the annu-
ity contract might result in an overall pat-
tern of payouts from the plan that permits
undue deferral of distribution of the partic-
ipant’s entire interest.
Such a limit would still allow signifi-
cant income to be provided beginning at
age 85. For example, if at age 70 a partic-
ipant used $100,000 of his or her account
balance to purchase an annuity that will
commence at age 85, the annuity could
provide an annual income that is estimated
to range between $26,000 and $42,000
(depending on the actuarial assumptions
used by the issuer and the form of the
annuity elected by the participant, such as
whether the form elected is a straight life
annuity or a joint and survivor annuity).
These illustrations assume a three-percent
interest rate, no pre-annuity-starting-date
death benefit, use of the Annuity 2000
Mortality Table for males and females,
1
no indexation for inflation, and no load for
expenses.
These amounts would be higher if the
interest rate used by the issuer to determine
the annuity amount were higher. For ex-
ample, the $42,000 amount would be in-
creased to approximately $50,000 if the
annuity were purchased assuming a four-
percent interest rate, rather than a three-
percent rate.
In addition, a participant who purchases
a contract before age 70 could obtain the
same income with a lower premium or
could obtain larger income with the same
premium. For example, even assuming
a three-percent interest rate, the $42,000
amount would be approximately $51,000
if the annuity were purchased at age 65
rather than age 70. Furthermore, a partic-
ipant who purchases increments of annu-
ities over his or her career could hedge the
risk of interest-rate fluctuation by purchas-
ing these increments in different interest
rate environments and effectively averag-
ing annuity purchase rates over time.
To facilitate compliance with the dol-
lar and percentage limitations and other
requirements that longevity annuity con-
tracts must satisfy in order to qualify for
the special treatment, certain disclosure
and reporting requirements would apply
for the issuers of these contracts. Because
longevity annuities would not begin un-
til contract owners reach an advanced age,
annual statements would also serve as an
important reminder to those owners (and
persons assisting them with their financial
affairs) of their right to receive the annu-
ities.
Explanation of Provisions
These proposed regulations would
modify the required minimum distribution
rules in order to facilitate the purchase
of deferred annuities that begin at an ad-
vanced age. The proposed regulations
would apply to contracts that satisfy cer-
tain requirements, including the require-
ment that distributions commence not later
than age 85. Prior to annuitization, the
value of these contracts, referred to as
“qualifying longevity annuity contracts”
(QLACs), would be excluded from the ac-
count balance used to determine required
minimum distributions.
I.Definition of QLAC
A.Limitations on premiums
The proposed regulations provide that,
in order to constitute a QLAC, the amount
of the premiums paid for the contract un-
der the plan on a given date may not ex-
ceed the lesser of a dollar or a percentage
limitation. The proposed regulations pre-
scribe rules for applying these limitations
to participants who purchase multiple con-
tracts or make multiple premium payments
for the same contract.
Under the dollar limitation, the amount
of the premiums paid for a contract un-
der the plan may not exceed $100,000. If,
on or before the date of a premium pay-
ment, an employee has paid premiums for
the same contract or for any other contract
that is intended to be a QLAC and that
is purchased for the employee under the
plan or under any other plan, annuity or
account, the $100,000 limit is reduced by
the amount of those other premium pay-
ments.
2
Under the percentage limitation, the
amount of the premiums paid for a contract
under the plan may not exceed an amount
equal to 25 percent of the employee’s ac-
count balance on the date of payment. If,
on or before the date of a premium pay-
ment, an employee has paid premiums for
the same contract or for any other contract
thatisintendedtobeaQLACandthatis
held or purchased for the employee under
the plan, the maximum amount under the
25-percent limit is reduced by the amount
of those other payments.
For purposes of determining whether
premiums for a contract exceed the dollar
or percentage limitation, unless the plan
administrator has actual knowledge to the
1
If the annuity is provided under an employer plan, unisex mortality assumptions would be required.
2
As discussed under the heading “II. IRAs,” a contract that is purchased or held under a Roth IRA is not treated as a contract that is intended to be a QLAC (even if it otherwise meets the
requirements to be a QLAC).
2012–13 I.R.B.601March 26, 2012

contrary, the plan administrator would
generally be permitted to rely on an em-
ployee’s representation of the amount of
premiums paid on or before that date un-
der any other contract that is intended to
be a QLAC and that is purchased for an
employee under any other plan, annuity,
or account. However, this reliance is not
available with respect to a plan, annuity, or
account that is maintained by an employer
(or an entity that is treated as a single
employer with the employer under sec-
tion 414(b), (c), (m), or (o)) with respect
to purchases for an employee under any
other plan, annuity, or account maintained
by that employer.
If a premium for a contract causes the
total premiums to exceed either the dol-
lar or percentage limitation, the contract
would fail to be a QLAC as of the date
on which the excess premiums were paid.
Thus, beginning on that date, the value of
the contract would no longer be excluded
from the account balance used to deter-
mine required minimum distributions.
For calendar years beginning on or
after January 1, 2014, the dollar limita-
tion would be adjusted at the same time
and in the same manner as under section
415(d), except that (1) the base period
would be the calendar year quarter begin-
ning July 1, 2012, and (2) any increase
that is not a multiple of $25,000 would
be rounded to the next lowest multiple
of $25,000. If a contract failed to be a
QLAC immediately before an adjustment
because the premiums exceeded the dollar
limitation, an adjustment of the dollar
limitation would not cause the contract to
become a QLAC.
B.Maximum age at commencement
The proposed regulations provide that,
in order to constitute a QLAC, the con-
tract must provide that distributions un-
der the contract commence not later than a
specified annuity starting date set forth in
the contract. The specified annuity start-
ing date must be no later than the first day
of the month coincident with or next fol-
lowing the employee’s attainment of age
85. This age reflects the approximate life
expectancy of an employee at retirement,
and was recommended in a number of the
comments received in response to the Re-
quest for Information. Any contract for
which premiums are paid after the latest
permissible specified annuity starting date
would not be a QLAC, because such a
contract could not require distributions to
commence by that date.
The proposed regulations would permit
a QLAC to allow a participant to elect an
earlier annuity starting date than the spec-
ified annuity starting date. For example, if
the specified annuity starting date under a
contract were the date on which a partici-
pant attains age 85, the contract would not
fail to be a QLAC solely because it allows
the participant to commence distributions
at an earlier date. On the other hand, these
rules would not require a QLAC to pro-
vide an option to commence distributions
before the specified annuity starting date,
so that a QLAC could provide that distri-
butions must commence only at the speci-
fied annuity starting date. For a given pre-
mium, such a contract could provide a sub-
stantially higher periodic annuity payment
beginning on the specified annuity start-
ing date than a contract with an accelera-
tion option. Similarly, premiums could be
lower for a given level of periodic annu-
ity payment, leaving a larger portion of the
remaining account balance for the partici-
pant to use for living expenses before the
specified annuitystarting date.
The proposed regulations provide that
the maximum age may also be adjusted
to reflect changes in mortality. The ad-
justed age (if any) would be prescribed
by the Commissioner in revenue rul-
ings, notices, or other guidance published
in the Internal Revenue Bulletin (see
§601.601(d)(2)(ii)(b)). The Treasury De-
partment and the IRS anticipate that such
changes will not occur more frequently
than the adjustment of the $100,000 limit
describedinsubheadingI.A.“Limitations
on premiums.” If a contract failed to be a
QLAC immediately before an adjustment
because it failed to provide that distribu-
tions must commence by the requisite age,
an adjustment of the age would not cause
the contract to become a QLAC.
C.Benefits payable after death of the
employee
Under a QLAC, the only benefit permit-
ted to be paid after the employee’s death is
a life annuity, payable to a designated ben-
eficiary, that meets certain requirements.
Thus, for example, a contract that provides
a distribution form with a period certain
or a refund of premiums in the case of an
employee’s death would not be a QLAC.
These types of payments are inconsistent
with the purpose of providing lifetime in-
come to employees and their beneficiaries,
as described in the Background section of
this preamble. A contract that provides a
given lifetime periodic annuity payment to
an employee would be less expensive if it
provided for a life annuity payable to a des-
ignated beneficiary upon the employee’s
death rather than additional features such
as an optional single-sum death benefit.
After paying a lower premium for such a
life annuity, the employee would be able to
retain a larger portion of his or her account,
maximizing the employee’s lifetime bene-
fits, while also leaving larger death bene-
fits for a beneficiary, from the remaining
amount of the account.
The proposed regulations provide that
if the sole beneficiary of an employee un-
der the contract is the employee’s surviv-
ing spouse, the only benefit permitted to be
paid after the employee’s death is a life an-
nuity payable to the surviving spouse that
does not exceed 100 percent of the annu-
ity payment payable to the employee. The
proposed regulations include a special ex-
ception that would allow a plan to comply
with any applicable requirement to provide
a qualified preretirement survivor annuity
3
(which would have an effect only if the em-
ployee has a substantially older spouse).
If the employee’s surviving spouse is
not the sole beneficiary under the con-
tract,
4
the only benefit permitted to be paid
after the employee’s death is a life annu-
ity payable to a designated beneficiary. In
order to satisfy the MDIB requirements of
section 401(a)(9)(G), the life annuity is not
3
A qualified preretirement survivor annuity is defined in section 417(c)(2) as an annuity for the life of the surviving spouse the actuarial equivalent of which is not less than 50 percent of
the portion of the account balance of the participant (as of the date of death) to which the participant had a nonforfeitableright (within the meaning of section 411(a) of the Code). Section
205(e)(2) of the Employee Retirement Income Security Act of 1974, Public Law 93–406 (88 Stat. 829 (1974)), as amended (ERISA), includes a parallel definition. See Rev. Rul. 2012–3 for
rules relating to qualified preretirement survivor annuities.
4
If the surviving spouse is one of the designated beneficiaries, this rule is applied as if the contract were a separate contract for the surviving beneficiary, but only if certain conditions are
satisfied, including a separate account requirement. See §1.401(a)(9)–8, A–2(a) and A–3.
March 26, 20126022012–13 I.R.B.

permitted to exceed an applicable percent-
age of the annuity payment payable to the
employee. The applicable percentage is
determined under one of two alternative ta-
bles, and the determination of which table
applies depends on the different types of
death benefits that are payable to the des-
ignated beneficiary.
Under the first alternative, the applica-
ble percentage is the percentage described
in the existing table in §1.401(a)(9)–6,
A–2(c). Because the existing applicable
percentage table does not take into account
the potential for a death benefit to be paid
to the non-spouse designated beneficiary
during the period between the required
beginning date and the annuity starting
date, this table is available only if, under
the contract, no death benefits are payable
to such a beneficiary if the employee dies
before the specified annuity starting date.
Furthermore, in order to address the pos-
sibility that an employee with a shortened
life expectancy could accelerate the an-
nuity starting date in order to avoid this
rule, this table is available only if, under
the contract, no benefits are payable in
any case in which the employee selects an
annuity starting date that is earlier than the
specified annuity starting date under the
contract and the employee dies less than
90 days after making that election, even
if the employee’s death occurs after his or
her selected annuity starting date.
Under the second alternative, the ap-
plicable percentage is the percentage de-
scribedinanewtablesetforthinthepro-
posed regulations. The table is available
for use when the contract provides a pre-
annuity-starting-date death benefit to the
non-spouse designated beneficiary. The
table takes into account that a significant
portion of the premium is used to provide
death benefits to a designated beneficiary
if death occurs during the deferral period
between age 70
1
/2and age 85. In order
to limit the portion of the premium that is
used to provide death benefits to a desig-
nated beneficiary, use of the table is limited
to contracts under which any non-spouse
designated beneficiary must be irrevoca-
bly selected as of the required beginning
date. Accordingly, the applicable percent-
ages in the table are based on the expected
longevity for the designated beneficiary,
determined as of the employee’s required
beginning date.
The Treasury Department and the IRS
considered whether to prescribe a special
rule under which a QLAC could provide
for a pre-annuity-starting-date death bene-
fit to a non-spouse designated beneficiary
and also allow the designated beneficiary
to be changed at any time before the an-
nuity starting date. However, in order
to satisfy the MDIB requirements in such
a case, the applicable percentages would
need to be much smaller than the percent-
ages set forth in the special table. This is
because a larger portion of the cost of the
contract would be allocable to death ben-
efits if, after the required beginning date
and before the annuity starting date, the
participant were able to replace a desig-
nated beneficiary who has died (or to re-
place a designated beneficiary who has a
short life expectancy with one who has a
longer life expectancy). Comments are re-
quested on whether the proposed regula-
tions should be modified to permit alterna-
tive death benefits that would be subject to
such lower applicable percentages.
Iftheemployeediesbeforethespeci-
fied annuity starting date under the con-
tract, the date by which benefits must com-
mence to the designated beneficiary de-
pends on whether the beneficiary is the
employee’s surviving spouse. If the sole
beneficiary under the contract is the em-
ployee’s surviving spouse, the life annu-
ity is not required to commence until the
employee’s specifiedannuity starting date
under the contract (in lieu of the otherwise
applicable rule that would require distribu-
tions to commence by the later of the end
of the calendar year following the calen-
dar year in which the employee died or the
end of the calendar year in which the em-
ployee would have attained age 70
1
/2). If
theemployee’ssolebeneficiary under the
contract is not the surviving spouse, the life
annuity payable to the designated benefi-
ciary must commence by the last day of
the calendar year immediately following
the calendar year of the employee’s death.
The proposed regulations include a rule
for applying the limitations on amounts
payable to a surviving spouse or a des-
ignated beneficiary in the event the em-
ployee dies before the annuity starting
date. Under this rule, if the contract does
not allow an employee to select an annuity
starting date that is earlier than the date
on which the annuity payable to the em-
ployee would have commenced under the
contract if the employee had not died, the
contract must nonetheless provide a way to
determine the periodic annuity payments
that would have been payable if payments
to the employee had commenced imme-
diately prior to the date on which benefit
payments to the designated beneficiary
commence.
D.Other QLAC requirements
Under the proposed regulations, a
QLAC would not include a variable con-
tract under section 817, equity-indexed
contract, or similar contract, because
the purpose of a QLAC is to provide a
participant with a predictable stream of
lifetime income. In addition, exposure to
equity-based returns is available through
control over the remaining portion of the
account balance so that a participant can
achieve adequate diversification.
The proposed regulations also provide
that, in order to be a QLAC, the contract is
not permitted to make available any com-
mutation benefit, cash surrender value, or
other similar feature. As in the case of
the limitations on benefits payable after
death, these limitations would allow an
annuity contract to maximize the annuity
payments that are made while a participant
or beneficiary is alive. In addition, having
a limited set of options available to pur-
chasers would make these contracts more
readily understandable and enhance pur-
chasers’ ability to compare products across
providers. Ease of comparison will be par-
ticularly important to the extent that con-
tracts provided under plans are priced on a
unisex basis, while contracts offered under
IRAs generally take gender into account in
establishing premiums.
The proposed regulations provide that
a contract is not a QLAC unless it states,
when issued, that it is intended to be a
“qualifying longevity annuity contract” or
a “QLAC.” This rule would ensure that the
issuer, participant, plan sponsor, and IRS
know that the rules applicable to QLACs
apply to this contract.
The proposed regulations provide that
distributions under a QLAC must satisfy
the generally applicable section 401(a)(9)
requirements relating to annuities at
§1.401(a)(9)–6, other than the require-
ment that annuity payments commence
on or before the employee’s required be-
ginning date. Thus, for example, the
2012–13 I.R.B.603March 26, 2012

limitation on increasing payments under
§1.401(a)(9)–6, A–1(a), applies to the
contract.
II.IRAs
The proposed regulations provide that,
in order to constitute a QLAC, the amount
of the premiums paid for the contract un-
der an IRA on a given date may not ex-
ceed $100,000. If, on or before the date
of a premium payment, a participant has
paid premiums for the same contract or for
any other contract that is intended to be a
QLAC and that is purchased for the par-
ticipant under the IRA or under any other
IRA, plan, or annuity, the $100,000 limit is
reduced by the amount of those other pre-
mium payments.
The proposed regulations also pro-
vide that in order to constitute a QLAC,
the amount of the premiums paid for the
contract under an IRA on a given date
generally may not exceed 25 percent of
a participant’s IRA account balances.
Consistent with the rule under which a
required minimum distribution from an
IRA could be satisfied by a distribution
from another IRA (applied separately to
traditional IRAs and Roth IRAs), the pro-
posed regulations would allow a QLAC
that could be purchased under an IRA
within these limitations to be purchased
instead under another IRA. Specifically,
the amount of the premiums paid for the
contract under an IRA may not exceed an
amount equal to 25 percent of the sum of
the account balances (as of December 31
of the calendar year before the calendar
year in which a premium is paid) of the
IRAs (other than Roth IRAs) that an indi-
vidual holds as the IRA owner. If, on or
before the date of a premium payment, an
individual has paid other premiums for the
same contract or for any other contract that
is intended to be a QLAC and that is held
or purchased for the individual under his
or her IRAs, the premium payment cannot
exceed the amount determined to be 25
percent of the individual’s IRA account
balances, reduced by the amount of those
other premiums.
The proposed regulations provide that,
for purposes of both the dollar and percent-
age limitations, unless the trustee, custo-
dian, or issuer of an IRA has actual knowl-
edge to the contrary, the trustee, custodian,
or issuer may rely on the IRA owner’s rep-
resentations of the amount of the premi-
ums (other than the premiums paid under
the IRA) and, for purposes of applying the
percentage limitation, the amount of the in-
dividual’s account balances (other than the
account balance under the IRA).
Under the proposed regulations, an an-
nuity purchased under a Roth IRA would
not be treated as a QLAC. This is because
aRothIRA(unlikeadesignatedRoth
account under a plan, as described in sec-
tion 402A) is not subject to the section
401(a)(9)(A) requirement that the indi-
vidual’s benefits commence and be paid
over the lives or life expectancy of the
individual and a designated beneficiary
(but, after the death of the individual, ben-
efits must be paid under the same section
401(a)(9)(B) rules that apply to tradi-
tional IRAs). Because the rules of section
401(a)(9)(A) do not apply to a Roth IRA
owner, a longevity annuity contract pur-
chased using a portion of the individual’s
Roth IRA would not need to provide the
right to accelerate payments in order to
ensure compliance with those rules. Thus,
there is no need to permit the value of a
longevity annuity contract to be excluded
from the account balance that is used to
determine required minimum distributions
during the life of a Roth IRA owner. Ac-
cordingly, the proposed regulations would
not apply the rules regarding QLACs to
Roth IRAs.
The proposed regulations would not
preclude the use of assets in a Roth IRA
to purchase a longevity annuity contract,
nor would such a contract be subject to
the same restrictions as a QLAC. For
example, a longevity annuity contract pur-
chased using assets of a Roth IRA could
have an annuity starting date that is later
than age 85 and offer features, such as a
cash surrender right, that are not permitted
under a QLAC. Although such a contract
could not be excluded from the account
balance used to determine required min-
imum distributions, this exclusion is not
necessary because the required minimum
distribution rules do not apply during the
life of a Roth IRA owner.
In addition, the dollar and percentage
limitations on premiums that apply to a
QLAC would not take into account premi-
ums paid for a contract that is purchased or
held under a Roth IRA, even if the contract
satisfies the requirements to be a QLAC. If
a QLAC is purchased or held under a plan,
annuity, contract, or traditional IRA that
is later rolled over or converted to a Roth
IRA, the QLAC would cease to be a QLAC
(and would cease to be treated as intended
to be a QLAC) after the date of the rollover
or conversion. In that case, the premiums
would then be disregarded in applying the
dollar and percentage limitations to premi-
ums paid for other contracts after the date
of the rollover or conversion.
5
Comments are requested on whether the
regulations should be modified to apply
the QLAC rules to a Roth IRA or to reduce
the availability of the section 401(a)(9) re-
lief for purchases of QLACs by the amount
of assets that the individual holds in a
Roth IRA. Comments are also requested as
to whether any special rules should apply
where a QLAC is purchased using assets
of a Roth IRA, such as special disclosure
in order to minimize any potential confu-
sion.
III.Section 403(b) plans
The proposed regulations apply the tax-
qualified plan rules, instead of the IRA
rules, to the purchase of a QLAC under
a section 403(b) plan. For example, the
25-percent limitation on premiums would
be separately determined for each section
403(b) plan in which an employee partici-
pates. The proposed regulations also pro-
vide that the tax-qualified plan rules relat-
ing to reliance on representations, rather
than the IRA rules, apply to the purchase
of a QLAC under a section 403(b) plan.
The proposed regulations provide that,
if the sole beneficiary of an employee un-
der a contract is the employee’s surviving
spouse and the employee dies before the
annuity starting date under the contract, a
life annuity that is payable to the surviv-
ing spouse after the employee’s death is
permitted to exceed the annuity that would
have been payable to the employee to the
extent necessary to satisfy the requirement
to provide a qualified preretirement sur-
5
Section 1.408A–4, Q&A–14, describes the amount includible in gross income when part or all of a traditional IRA that is an individual retirement annuity described in section 408(b) is
converted to a Roth IRA, or when a traditional IRA that is an individual retirement account described in section 408(a) holds an annuity contract as an account asset and the traditional IRA is
converted to a Roth IRA. Those rules would also apply when a contract is rolled over from a plan into a Roth IRA.
March 26, 20126042012–13 I.R.B.

vivor annuity (as discussed for qualified
plans under subheading I.C. “Benefits
payable after death of the employee”). A
section 403(b) plan may be subject to this
requirement under ERISA, whereas IRAs
are generally not subject to this require-
ment. See §1.401(a)–20, Q&A–3(d), and
§1.403(b)–5(e).
IV.Section 457(b) plans
Section 1.457–6(d) provides that an
eligible section 457(b) plan must meet the
requirements of section 401(a)(9) and the
regulations under section 401(a)(9). Thus,
these proposed regulations relating to the
purchase of a QLAC under a tax-qualified
defined contribution plan would automat-
icallyapplytoaneligiblesection457(b)
plan. However, the rule relating to QLACs
is limited to eligible governmental section
457(b) plans. Becausesection 457(b)(6)
requires that an eligible section 457(b)
plan that is not a governmental plan be un-
funded, the purchase of an annuity contract
under such a plan would be inconsistent
with this requirement.
V.Defined benefit plans
Although defined benefit plans are sub-
ject to the minimum required distribution
rules, they offer annuities which provide
longevity protection. Because this protec-
tion is therefore already available, these
proposed regulations would not apply to
defined benefit plans.
6
VI. Disclosure and annual reporting
requirements
Under the proposed regulations, the is-
suer of a QLAC would be required to cre-
ate a report containing the following infor-
mation about the QLAC:
•A plain-language description of the
dollar and percentage limitations on
premiums;
•The annuity starting date under the
contract, and, if applicable, a descrip-
tion of the employee’s ability to elect
to commence payments before the an-
nuity starting date;
•The amount (or estimated amount) of
the periodic annuity payment that is
payable after the annuity starting date
as a single life annuity (including, if an
estimated amount, the assumed interest
rate or rates used in making this deter-
mination), and a statement that there is
no commutation benefit or right to sur-
render the contract in order to receive
its cash value;
•A statement of any death benefit
payable under the contract, includ-
ing any differences between benefits
payable if the employee dies before
the annuity starting date and benefits
payable if the employee dies on or
after the annuity starting date;
•A description of the administrative
procedures associated with an em-
ployee’s elections under the contract,
including deadlines, how to obtain
forms, and where to file forms, and the
identity and contact information of a
person from whom the employee may
obtain additional information about
the contract; and
•Such other information that the Com-
missioner may require.
This report is not required to be filed
with the Internal Revenue Service. Each
issuer required to create a report would
be required to furnish to the individual
in whose name the contract has been
purchased a statement containing the in-
formation in the report. This statement
must be furnished prior to or at the time
of purchase. In addition, in order to
avoid duplicating state law disclosure re-
quirements, the statement would not be
required to include information that the
issuer has already provided to the em-
ployee in order to satisfy any applicable
state disclosure law. Comments are re-
quested on whether the information listed
is appropriate, and whether (and, if so, the
extent to which) this list would duplicate
disclosure requirements under existing
state law. Comments are also requested
on whether there is other information that
should be included in the disclosure, such
as the special tax attributes of a QLAC.
The proposed regulations prescribe an-
nual reporting requirements under section
6047(d) which would require any person
issuing any contract that states that it is in-
tended to be a QLAC to file annual calen-
dar-year reports and provide a statement to
the individual in whose name the contract
has been purchased regarding the status of
the contract. The Commissioner will pre-
scribe an applicableform and instructions
for this purpose, which will contain the fil-
ing deadline and other information.
The report will be required to identify
that the contract is intended to be a QLAC
and to include, at a minimum, the follow-
ing items of information:
•The name, address, and identifying
number of the issuer of the contract,
along with information on how to con-
tact the issuer for more information
about the contract;
•The name, address, and identifying
number of the individual in whose
name the contract has been purchased;
•If the contract was purchased under a
plan, the name of the plan, the plan
number, and the Employer Identifica-
tion Number (EIN) of the plan sponsor;
•If payments have not yet commenced,
the annuity starting date on which the
annuity is scheduled to commence, the
amount of the periodic annuity payable
on that date, and whether that date may
be accelerated; and
•The amount of each premium paid for
the contract, along with the date of pay-
ment.
7
Each issuer required to file the report
with respect to a contract would also be
required to provide to the individual in
whose name the contract has been pur-
chased a statement containing the informa-
tion that is required to be furnished in the
report. This requirement may be satisfied
by providing the individual with a copy of
the required form, or in another form that
contains the following language: “This in-
formationisbeingfurnishedtotheInter-
nal Revenue Service.”The statement is re-
quired to be furnished to the individual on
or before January 31 following the calen-
dar year for which the report is required.
An issuer that is subject to these annual
reporting requirements must comply with
6
See also Rev. Rul. 2012–4 (relating to rollovers to defined benefit plans).
7
For IRAs, the fair market value of the account on December 31 must be provided to the IRA owners by January 31 of the following year. Trustees, custodians, and issuers are responsible for
ensuring that all IRA assets (including those nottraded on an established securities market or with otherwise readily determinable value) are valued annually at their fair market value. This
includes the value of a contractthat is intended to be a QLAC.
2012–13 I.R.B.605March 26, 2012

the requirements for each calendar year be-
ginning with the year in which premiums
are first paid and ending with the earlier of
the year in which the individual for whom
the contract has been purchased attains age
85 (as adjusted in calendar years begin-
ning on or after January 1, 2014) or dies.
However, if the individual dies and the sole
beneficiary under the contract is the indi-
vidual’s spouse (so that the spouse’s annu-
ity might not commence until the individ-
ual would have attained age 85), the an-
nual reporting requirement continues until
the year in which the distributions to the
spouse commence.
Proposed Effective Date
The proposed regulations regarding
disclosure and reporting will be effective
upon publication in theFederal Register
of the Treasury decision adopting these
rules as final regulations. Otherwise, these
regulations are proposed to be effective
for contracts purchased on or after the date
of publication of the Treasury decision
adopting these rules as final regulations in
theFederal Registerand for determining
required minimum distributions for dis-
tribution calendar years beginning on or
after January 1, 2013. Until regulations
finalizing these proposed regulations are
issued, taxpayers may not rely on the rules
set forth in these proposed regulations (and
the existing rules under section 401(a)(9)
continue to apply).
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations.
It is hereby certified that the collection of
information in these proposed regulations
will not have a significant economic im-
pact on a substantial number of small en-
tities. This certification is based upon the
fact that an insubstantial number of entities
of any size will be impacted by the regula-
tion. In addition, IRS and Treasury expect
that any burden on small entities will be
minimal because required disclosures are
expected to take 10 minutes to prepare. In
addition, the entities that will be impacted
will be insurance companies, very few of
which are small entities. Therefore, a reg-
ulatory flexibility analysis under the Reg-
ulatory Flexibility Act (5 U.S.C. chapter 6)
is not required. Pursuant to section 7805(f)
of the Code, this notice of proposed rule-
making has been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments (a
signed original and eight (8) copies) or
electronic comments that are submitted
timely to the IRS. Comments are requested
on benefits payable to a non-spouse bene-
ficiary (under the subheading “C. Benefits
payable after death of the employee”),
Roth IRAs (under the heading “II. IRAs”),
and disclosure (under the heading “VI.
Disclosure and annual reporting require-
ments”). Comments are also requested
on whether an insurance product that
provides guaranteedlifetime withdrawal
benefits could constitute a QLAC, taking
into account the rules precluding the use
of a variable annuity and a commutation of
benefits and the rules relating to the provi-
sion of benefits to a designated beneficiary
after an employee’s death (under which
benefits can be paid only in the form of a
life annuity). The IRS and the Treasury
Department further request comments on
all aspects of the proposed rules.
All comments will be available
for public inspection and copying at
www.regulations.govor upon request.
A public hearing has been scheduled
for June 1, 2012, beginning at 1 p.m.
in the Auditorium, Internal Revenue
Service, 1111 Constitution Avenue,
N.W., Washington, D.C. Due to building
security procedures, visitors must enter
at the Constitution Avenue entrance.
In addition, all visitors must present
photo identification to enter the building.
Because of access restrictions, visitors
will not be admitted 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
theFOR FURTHER INFORMATION
CONTACTsection 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 by
May 3, 2012, and an outline of topics to be
discussed and the amount of time to be de-
voted to each topic (a signed original and
eight (8) copies) by May 11, 2012. A pe-
riod of 10 minutes will be allotted to each
person for making comments. An agenda
showing the scheduling of the speakers
will be prepared after the deadline for re-
ceiving outlines has passed. Copies of the
agenda will be available free of charge at
the hearing.
Drafting Information
The principal authors of these
regulations are Cathy Pastor and
Jamie Dvoretzky, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development ofthese regulations.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
Part 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding entries in nu-
merical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6047–2 is also issued under
26 U.S.C. 6047(d). * * *
Par. 2. Section 1.401(a)(9)–5 is
amended by:
1. Revising paragraph A–3(a).
2. Redesignating paragraph A–3(d) as
new paragraph A–3(e) and revising newly
designated paragraph A–3(e).
3. Adding new paragraph A–3(d).
The revisions and addition read as fol-
lows:
§1.401(a)(9)–5 Required minimum
distributions from defined contribution
plans
*****
A–3. (a) In the case of an individual ac-
count, the benefit used in determining the
March 26, 20126062012–13 I.R.B.

required minimum distribution for a distri-
bution calendar year is the account balance
as of the last valuation date in the calen-
dar year immediately preceding that dis-
tribution calendar year (valuation calen-
dar year) adjusted in accordance with para-
graphs (b), (c), and (d) of this A–3.
*****
(d) The account balance does not in-
clude the value of any qualifying longevity
annuity contract described in A–17 of
§1.401(a)(9)–6 that is held under the plan.
This paragraph (d) only applies for pur-
poses of determining required minimum
distributions for distribution calendar
years beginning on or after January 1,
2013.
(e) If an amount is distributed from a
plan and rolled over to another plan (re-
ceiving plan), A–2 of §1.401(a)(9)–7 pro-
vides additional rules for determining the
benefit and required minimum distribution
under the receiving plan. If an amount is
transferred from one plan (transferor plan)
to another plan (transferee plan) in a trans-
fer to which section 414(l) applies, A–3
and A–4 of §1.401(a)(9)–7 provide addi-
tional rules for determining the amount of
the required minimum distribution and the
benefit under both the transferor and trans-
feree plans.
*****
Par. 3. Section 1.401(a)(9)–6 is
amended by revising the last sentence in
A–12(a) and adding Q&A–17 to read as
follows:
§1.401(a)(9)–6 Required minimum
distributions for defined benefit plans and
annuity contracts.
*****
A–12. (a) * * * See A–1(e) of
§1.401(a)(9)–5 for rules relating to the
satisfaction of section 401(a)(9) in the
year that annuity payments commence,
A–3(d) of §1.401(a)(9)–5 for rules re-
lating to qualifying longevity annuity
contracts described in A–17 of this sec-
tion, and A–2(a)(3) of §1.401(a)(9)–8 for
rules relating to the purchase of an annuity
contract with a portion of an employee’s
account balance.
*****
Q–17. What is a qualifying longevity
annuity contract?
A–17. (a)Definition of qualifying
longevity annuity contract. A qualifying
longevity annuity contract (QLAC) is an
annuity contract (that is not a variable
contract under section 817, equity-indexed
contract, or similar contract) that is pur-
chased from an insurance company for
an employee and that satisfies each of the
following requirements—
(1) Premiums for the contract satisfy
the requirements of paragraph (b) of this
A–17;
(2) The contract provides that distribu-
tions under the contract must commence
not later than a specified annuity starting
date that is no later than the first day of
the month coincident with or next follow-
ing the employee’s attainment of age 85;
(3) The contract provides that, after dis-
tributions under the contract commence,
those distributions must satisfy the re-
quirements of this section (other than the
requirement in A–1(c) of this section that
annuity payments commence on or before
the required beginning date);
(4) The contract does not make avail-
able any commutation benefit, cash surren-
der right, or other similar feature;
(5) No benefits are provided under the
contract after the death of the employee
other than the life annuities payable to a
designated beneficiary that are described
in paragraph (c) of this A–17; and
(6) The contract, when issued, states
that it is intended to be a QLAC.
(b)Limitations on premium—(1)In
general. The premiums paid for the con-
tract on a date do not exceed the lesser of
the dollar limitation in paragraph (b)(2) of
this A–17 or the percentage limitation in
paragraph (b)(3) of this A–17.
(2)Dollar limitation. The dollar limita-
tion is an amount equal to the excess of—
(i) $100,000, over
(ii) The sum of—
(A) The premiums paid before that date
under the contract, and
(B) The premiums paid on or before that
date under any other contract that is in-
tended to be a QLAC and that is purchased
for the employee under the plan, or any
other plan, annuity, or account described
in section 401(a), 403(a), 403(b), or 408 or
eligible governmental section 457(b) plan.
(3)Percentage limitation. The percent-
age limitation is an amount equal to the ex-
cess of—
(i) 25 percent of the employee’s account
balance under the plan determined on that
date, over
(ii) The sum of—
(A) The premiums paid before that date
under the contract, and
(B) The premiums paid on or before
that date under any other contract that is
intended to be a QLAC and that is held or
was purchased for the employee under the
plan.
(c)Payments after death of the em-
ployee—(1)Surviving spouse is sole bene-
ficiary—(i)In general. Except as provided
in paragraph (c)(1)(ii)(B) of this A–17, if
the sole beneficiary of an employee under
the contract is the employee’s surviving
spouse, the only benefit permitted to be
paid after the employee’s death is a life
annuity payable to the surviving spouse
where the periodic annuity payment is not
in excess of 100 percent of the periodic
annuity payment that is payable to the em-
ployee (or, in the case of the employee’s
death before the employee’s annuity start-
ing date, the periodic annuity payment that
would have been payable to the employee
as of the date that benefits to the surviv-
ing spouse commence under paragraph
(c)(1)(ii)(A) of this A–17).
(ii)Death before employee’s annuity
starting date. If the employee dies before
the employee’s annuity starting date and
the employee’s surviving spouse is the sole
beneficiary under the contract—
(A) The life annuity, if any, payable
to the surviving spouse under paragraph
(c)(1)(i) of this A–17 must commence not
later than the date on which the annuity
payable to the employee would have com-
menced under the contract if the employee
had not died; and
(B) The amount of the periodic annuity
payment payable to the surviving spouse
is permitted to exceed 100 percent of the
periodic annuity payment that is payable
to the employee to the extent necessary to
satisfy the requirement to provide a quali-
fied preretirement survivor annuity (as de-
fined under section 417(c)(2) of the In-
ternal Revenue Code (Code) or section
205(e)(2) of the Employee Retirement In-
come Security Act of 1974, Public Law
93–406 (88 Stat. 829 (1974)), as amended
(ERISA)) pursuant to sections 401(a)(11)
and 417 of the Code or section 205(a)(2)
of ERISA.
2012–13 I.R.B.607March 26, 2012

(2)Surviving spouse is not sole desig-
nated beneficiary—(i)In general.Ifthe
employee’s surviving spouse is not the sole
beneficiary under the contract, the only
benefit permitted to be paid after the em-
ployee’s death is a life annuity payable
to a designated beneficiary where the pe-
riodic annuity payment is not in excess
of the applicable percentage (determined
under paragraph (c)(2)(iv) of this A–17)
of the periodic annuity payment that is
payable to the employee (or, in the case
of the employee’s death before the em-
ployee’s annuity starting date, the appli-
cable percentage of the periodic annuity
payment that would have been payable to
the employee as of the date that benefits
to the designated beneficiary commence
under this paragraph (c)(2)(i)). In addi-
tion,nobenefitispermittedtobepaidafter
the employee’s death unless the contract
satisfies the requirements of either para-
graph (c)(2)(ii) or paragraph (c)(2)(iii) of
this A–17. Moreover, except as provided
in paragraph (c)(1)(ii)(A) of this A–17, in
any case in which the employee dies before
the employee’s annuitystarting date, any
life annuity payable to a designated bene-
ficiary must commence by the last day of
the calendar year immediately following
the calendar year of the employee’s death.
(ii)No pre-annuity starting date death
benefit. The contract satisfies the require-
ments of this paragraph (c)(2)(ii) if the
contract provides that no benefit is permit-
tedtobepaidtoabeneficiaryotherthan
the employee’s surviving spouse after the
employee’s death—
(A) In any case in which the employee
dies before the selected annuity starting
date under the contract; and
(B) In any case in which the employee
selects an annuity starting date that is ear-
lier than the specified annuity starting date
under the contract and the employee dies
less than 90 days after making that elec-
tion.
(iii)Pre-annuity starting date death
benefit. The contract satisfies the require-
ments of this paragraph (c)(2)(iii) if the
contract provides that in any case in which
the beneficiary under the contract is not
the employee’s surviving spouse, benefits
are payable to the beneficiary only if the
beneficiary was irrevocably selected on or
before the employee’s required beginning
date.
(iv)Applicable percentage. If the con-
tract is described in paragraph (c)(2)(ii) of
this A–17, the applicable percentage is the
percentage described in the table in para-
graph A–2(c) of this section. If the con-
tract is described in paragraph (c)(2)(iii)
(and not in (c)(2)(ii)) of this A–17, the ap-
plicable percentage is the percentage de-
scribedinthetablesetforthinthispara-
graph (c)(2)(iv). The applicable percent-
age is based on the adjusted employee/ben-
eficiary age difference, determined in the
same manner as in paragraph A–2(c) of
this section.
Adjusted employee/beneficiary agedifferenceApplicable percentage
2 years or less100%
388%
478%
5
70%
663%
7
57%
8
52%
948%
1044%
1141%
1238%
1336%
1434%
15
32%
1630%
1728%
1827%
1926%
20
25%
2124%
2223%
2322%
2421%
25 and greater
20%
(3)Calculation of early annuity pay-
ments. For purposes of paragraphs
(c)(1)(i) and (c)(2)(i) of this A–17, to the
extent the contract does not provide an op-
tion for the employee to select an annuity
starting date that is earlier than the date on
which the annuity payable to the employee
would have commenced under the contract
if the employee had not died, the contract
must provide a way to determine the pe-
riodic annuity payment that would have
been payable if the employee were to have
an option to accelerate the payments and
the payments had commenced to the em-
ployee immediately prior to the date that
benefit payments to the surviving spouse
or designated beneficiary commence.
(d)Rules of application—(1)Reliance
on representations. For purposes of the
limitation on premiums described in para-
graphs (b)(2) and (b)(3) of this A–17,
unless the plan administrator has actual
knowledge to the contrary, the plan admin-
March 26, 20126082012–13 I.R.B.

istrator may rely on an employee’s repre-
sentation (made in writing or such other
form as may be prescribed by the Com-
missioner) of the amount of the premiums
described in paragraphs (b)(2)(ii)(B) and
(b)(3)(ii)(B) of this A–17, but only with
respect to premiums that are not paid
under a plan, annuity, or contract that is
maintained by the employer or an entity
that is treated as a single employer with
the employer under section 414(b), (c),
(m), or (o).
(2)Consequences of excess premiums.
If a contract fails to be a QLAC solely be-
cause a premium for the contract exceeds
thelimitsunderparagraph(b)ofthisA–17
on the date of the payment of that pre-
mium, the contract is not a QLAC begin-
ning on that date. In such a case, none
of the value of the contract may be disre-
garded under §1.401(a)(9)–5, Q&A–3(d),
as of the date on which the contract ceases
to be a QLAC.
(3)Dollar and age limitations subject
to adjustments—(i)Dollar limitation.In
the case of calendar years beginning on
or after January 1, 2014, the $100,000
amount under paragraph (b)(2)(i) of this
A–17 will be adjusted at the same time
and in the same manner as under section
415(d), except that the base period shall
be the calendar quarter beginning July 1,
2012, and any increase under this para-
graph (d)(3)(i) that is not a multiple of
$25,000 shall be rounded to the next low-
est multiple of $25,000.
(ii)Age limitation. The maximum age
set forth in paragraph (a)(2) of this A–17
may also be adjusted to reflect changes
in mortality, with any such adjusted age
to be prescribed by the Commissioner in
revenue rulings, notices, or other guidance
published in the Internal Revenue Bulletin
(see §601.601(d)(2)(ii)(b) of this chapter).
(iii)Prospective application of adjust-
ments. If a contract fails to be a QLAC
because it does not satisfy the dollar lim-
itation in paragraph (b)(2) of this A–17 or
the age limitation in paragraph (a)(2) of
this A–17, any subsequent adjustment that
is made pursuant to paragraph (d)(3)(i) or
paragraph (d)(3)(ii) of this A–17 will not
cause the contract to become a QLAC.
(4)Multiple beneficiaries.Ifanem-
ployee has more than one designated
beneficiary under a QLAC, the rules in
§1.401(a)(9)–8, A–2(a), apply for pur-
poses of paragraphs (c)(1)(i) and (c)(2)(i)
of this A–17.
(5)Roth IRAs. A contract that is pur-
chased under a Roth IRA is not treated as
a contract that is intended to be a QLAC
for purposes of applying the dollar and
percentage limitation rules in paragraphs
(b)(2)(ii)(B) and (b)(3)(ii)(B) of this A–17.
See §1.408A–6, A–14(d). If a QLAC is
purchased or held under a plan, annuity,
account, or traditional IRA, and that con-
tract is later rolled over or converted to a
Roth IRA, the contract is not treated as a
contract that is intended to be a QLAC af-
ter the date of the rollover or conversion.
Thus, premiums paid for the contract will
not be taken into account under paragraph
(b)(2)(ii)(B) or paragraph (b)(3)(ii)(B) of
this A–17 after the date of the rollover or
conversion.
(e)Effective/applicability date.This
Q&A–17 applies to contracts purchased on
or after the date of publication of the Trea-
sury decision adoptingthese rules as final
regulations in theFederal Registerand
for determining required minimum distri-
butions for distribution calendar years be-
ginning on or after January 1, 2013.
Par. 4. Section 1.403(b)–6 is amended
by adding paragraph (e)(9) to read as fol-
lows:
§1.403(b)–6 Timing of distributions and
benefits.
*****
(e) * * *
(9)Special rule for qualifying
longevity annuity contracts.Therules
in §1.401(a)(9)–6, A–17(b) (relating to
limitations on premiums for a qualifying
longevity annuity contract (QLAC), and
§1.401(a)(9)–6, A–17(d)(1) (relating to
reliance on representations with respect
to a QLAC), apply to the purchase of a
QLAC under a section 403(b) plan (rather
than the rules in §1.408–8, A–12(b) and
(c)).
*****
Par. 5. Section 1.408–8, Q&A–12, is
added to read as follows:
§1.408–8 Distribution requirements for
individual retirement plans.
*****
Q–12. How does the special rule in
§1.401(a)(9)–5, A–3(d), for a qualifying
longevity annuity contract (QLAC), de-
fined in §1.401(a)(9)–6, A–17, apply to an
IRA?
A–12. (a)General rule. The special
rule in §1.401(a)(9)–5, A–3, for a QLAC,
defined in §1.401(a)(9)–6, A–17, ap-
plies to an IRA, subject to the exceptions
set forth in this A–12. See §1.408A–6,
A–14(d) for special rules relating to Roth
IRAs.
(b)Limitations on premium—(1)In
general. In lieu of the limitations de-
scribed in §1.401(a)(9)–6, A–17(b), the
premiums paid for the contract on a date
are not permitted to exceed the lesser of
the dollar limitation in paragraph (b)(2) of
this A–12 or the percentage limitation in
paragraph (b)(3) of this A–12.
(2)Dollar limitation. The dollar limita-
tion is an amount equal to the excess of—
(i) $100,000, over
(ii) The sum of—
(A) The premiums paid before that date
under the contract, and
(B) The premiums paid on or before that
date under any other contract that is in-
tended to be a QLAC and that is purchased
for the IRA owner under the IRA, or any
other plan, annuity, or account described
in section 401(a), 403(a), 403(b), or 408 or
eligible governmental section 457(b) plan.
(3)Percentage limitation. The percent-
age limitation is an amount equal to the ex-
cess of—
(i) 25 percent of the total account bal-
ances of the IRAs (other than Roth IRAs)
that an individual holds as the IRA owner
as of December 31 of the calendar year im-
mediately preceding the calendar year in
which a premium is paid, over
(ii) The sum of—
(A) The premiums paid before that date
under the contract, and
(B) The premiums paid on or before
that date under any other contract that is
intended to be a QLAC and that is held
or was purchased for the individual under
those IRAs.
(c)Reliance on representations.For
purposes of the limitations described in
paragraphs (b)(2) and (b)(3) of this A–12,
unless the trustee, custodian, or issuer of
an IRA has actual knowledge to the con-
trary, the trustee, custodian, or issuer may
rely on the IRA owner’s representation
(madeinwritingorsuchotherformasmay
be prescribed by the Commissioner) of
the amount of the premiums described in
2012–13 I.R.B.609March 26, 2012

paragraphs (b)(2)(ii)(B) and (b)(3)(ii)(B)
of this A–12 that are not paid under the
IRA, and the amount of the account bal-
ances described in paragraph (b)(3)(i) of
this A–12, other than the account balance
under the IRA.
(d)Roth IRAs. A contract that is pur-
chased under a Roth IRA is not treated as
a contract that is intended to be a QLAC
for purposes of applying the dollar and
percentage limitation rules in paragraphs
(b)(2)(ii)(B) and (b)(3)(ii)(B) of this A–12.
See §1.408A–6, A–14(d). If a QLAC is
purchased or held under a plan, annuity,
account, or traditional IRA, and that con-
tractislaterrolledoverorconvertedtoa
Roth IRA, the contract is not treated as a
contract that is intended to be a QLAC af-
ter the date of the rollover or conversion.
Thus, premiums paid for the contract will
not be taken into account under paragraph
(b)(2)(ii)(B) or paragraph (b)(3)(ii)(B) of
this A–12 after the date of the rollover or
conversion.
(e)Effective/applicability date.This
Q&A–12 applies to contracts purchased on
or after the date of publication of the Trea-
sury decision adopting these rules as final
regulations in theFederal Registerand
for determining required minimum distri-
butions for distribution calendar years be-
ginning on or after January 1, 2013.
Par. 6. Section 1.408A–6 is amended
by adding paragraph A–14(d) to read as
follows:
§1.408A–6 Distributions.
*****
A–14. * * *
(d) The special rules in §1.401(a)(9)–5,
A–3, and §1.408–8, Q&A–12, for a
QLAC, defined in §1.401(a)(9)–6, A–17,
do not apply to a Roth IRA.
*****
Par. 7. Section 1.6047–2 is added to
read as follows:
§1.6047–2 Information relating to
qualifying longevity annuity contracts.
(a)Requirement and form of re-
port—(1)In general. Any person issuing
any contract that states that it is intended
to be a qualifying longevity annuity con-
tract (QLAC), defined in §1.401(a)(9)–6,
Q&A–17, shall make reports required by
this section. This requirement applies only
to contracts purchased or held under any
plan, annuity, or account described in sec-
tion 401(a), 403(a), 403(b), or 408 (other
than a Roth IRA) or eligible governmental
section 457(b) plan.
(2)Initial disclosure. The issuer shall
be required to prepare a report identify-
ing that the contract is intended to be a
QLAC and containing the following infor-
mation—
(i) A plain-language description of the
dollar and percentage limitations on pre-
miums;
(ii) The annuity starting date under the
contract, and, if applicable, a description
of the individual’s ability to elect to com-
mence payments before the annuity start-
ing date;
(iii) The amount (or estimated amount)
of the periodic annuity payment that is
payable after the annuity starting date as
a single life annuity (including, if an esti-
mated amount, the assumed interest rate or
rates used in making this determination),
and a statement that there is no commuta-
tion benefit or right to surrender the con-
tract in order to receive its cash value;
(iv) A statement of any death benefit
payable under the contract, including any
differences between benefits payable if the
individual dies before the annuity starting
date and benefits payable if the individual
dies on or after the annuity starting date;
(v) A description of the administrative
procedures associated with an individual’s
elections under the contract, including
deadlines, how to obtain forms, and where
to file forms, and the identity and contact
information of a person from whom the
individual may obtain additional informa-
tion about the contract; and
(vi) Such other information as the Com-
missioner may require.
(3)Annual report. The issuer shall
make annual calendar-year reports on the
applicable form prescribed by the Com-
missioner for this purpose concerning the
status of the contract. The report shall
identify that the contract is intended to be a
QLAC and shall contain the following in-
formation—
(i) The name, address, and identifying
number of the issuer of the contract, along
with information on how to contact the is-
suer for more information about the con-
tract;
(ii) The name, address, and identifying
number of the individual in whose name
the contract has been purchased;
(iii) If the contract was purchased under
a plan, the name of the plan, the plan num-
ber, and the Employer Identification Num-
ber (EIN) of the plan sponsor;
(iv) If payments have not yet com-
menced, the annuity starting date on which
the annuity is scheduled to commence, the
amount of the periodic annuity payable on
that date, and whether that date may be
accelerated;
(v) The amount of each premium paid
for the contract, along with the date of the
premium payment; and
(vi) Such other information as the Com-
missioner may require.
(b)Manner and time for filing—(1)Ini-
tial disclosure. The report required by
paragraph (a)(2) of this section shall not be
filed with the Internal Revenue Service.
(2)Annual report—(i)Timing.There-
port required by paragraph (a)(3) of this
section shall be filed in accordance with
the forms and instructions prescribed by
the Commissioner. Such a report must
be filed for each calendar year beginning
with the year in which premiums for a con-
tract are first paid and ending with the ear-
lier of the year in which the individual
in whose name the contract has been pur-
chased attains age 85 (as adjusted pursuant
to §1.401(a)(9)–6, A–17(d)(3)(ii)) or dies.
(ii)Surviving spouse. If the individual
dies and the sole beneficiary under the con-
tract is the individual’s spouse (in which
case the spouse’s annuity would not be re-
quired to commence until the individual
would have attained age 85), the report
must continue to be filed for each calen-
dar year until the calendar year in which
the distributions to the spouse commence
or in which the spouse dies, if earlier.
(c)Issuer statements.(1)Initial disclo-
sure. Each issuer required to make a report
required by paragraph (a)(2) of this sec-
tion shall furnish to the individual in whose
name the contract has been purchased a
statement containing the information in the
report. The statement shall be furnished at
the time of purchase. The statement is not
required to include information that the is-
suer has already provided to the individ-
ual in order to comply with any applicable
state disclosure law.
(2)Annual report. Each issuer required
to file the report required by paragraph
March 26, 20126102012–13 I.R.B.

(a)(3) of this section shall furnish to the
individual in whose name the contract has
been purchased a statement containing the
informationrequiredtobefurnishedinthe
report,exceptthatsuchstatementshallbe
furnished to a surviving spouse to the ex-
tent that the report is required to be filed
under paragraph (b)(2)(ii) of this section.
A copy of the required form may be used
to satisfy the statement requirement of this
paragraph (c)(2). If a copy of the re-
quired form is not used to satisfy the state-
ment requirement of this paragraph (c)(2),
the statement shall contain the following
language: “This information is being fur-
nished to the Internal Revenue Service.”
The statement required by this paragraph
(c)(2) shall be furnished on or before Jan-
uary 31 following the calendar year for
which the report required by paragraph
(a)(3) of this section is required.
(d)Effective/applicability date.This
section applies on or after the date of pub-
lication of the Treasury decision adopting
these rules as final regulations in theFed-
eral Register.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on February 2,
2012, 8:45 a.m., and published in the issue of the Federal
Register for February 3, 2012, 77 F.R. 5443)
Information Reporting
by Passport Applicants;
Withdrawal
Announcement 2012–11
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of notice of pro-
posed rulemaking; notice of proposed rule-
making.
SUMMARY: This document contains pro-
posed regulations that provide information
reporting rules for certain passport appli-
cants. These regulations do not provide
information reporting rules for individuals
applying to become permanent residents
(green card holders). This document also
withdraws the notice of proposed rulemak-
ing (57 FR 61373) published in theFed-
eral Registeron December 24, 1992.
DATES: Comments and requests for
a public hearing must be received by
April 25, 2012.
ADDRESSES: Send submissions to
CC:PA:LPD:PR (REG–208274–86), room
5205, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to CC:PA:LPD:PR (REG–208274–86),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC, or sent electroni-
cally via the Federal eRulemaking Por-
tal athttp://www.regulations.gov(IRS
REG–208274–86).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed reg-
ulations, Lynn Dayan or Quyen Huynh
at (202) 622–3880; concerning submis-
sions of comments and requests for public
hearing, Oluwafunmilayo Taylor, (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information con-
tained in this notice of proposed rulemak-
ing have been submitted to the Office of
Management and Budget for review in
accordance with the Paperwork Reduc-
tion Act of 1995 (44 U.S.C. 3507(d)) and,
pending receipt and evaluation of public
comments approved by the Office of Man-
agement and Budget under control number
1545–1359. Comments on the collections
of information should be sent to theOf-
fice of Management and Budget, Attn:
Desk Officer for the Department of the
Treasury, Office of Information and Reg-
ulatory Affairs, Washington, DC 20503,
with copies to theInternal Revenue Ser-
vice, Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:M:S, Washington, DC
20224. Comments on the collection of in-
formation should be received by March 26,
2012.
Comments are specifically requested
concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the duties of the Internal Rev-
enue Service, including whether the infor-
mation will have practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with the
proposed collection of information may be
minimized, including through the appli-
cation of automated collection techniques
or other forms of information technology;
and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of service to provide information.
The collection of information
in these proposed regulation is in
§ 301.6039E–1(b). The information is
required to be provided by individuals
who apply for a United States passport
or a renewal of a United States passport.
The information provided by passport ap-
plicants will be used by the IRS for tax
compliance purposes.
Estimated total annual reporting bur-
den: 1,213,354 hours.
Estimated average annual burden hours
per respondent: four to ten minutes.
Estimated number of respondents:
12,133,537.
Estimated annual frequency of re-
sponses: one.
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 control number assigned by the Of-
fice of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
This document contains proposed
amendments to 26 CFR part 301 under sec-
tion 6039E of the Internal Revenue Code.
Section 6039E provides rules concerning
information reporting by U.S. passport
and permanent resident applicants, and
requires specified federal agencies to pro-
vide certain information to the IRS.
On December 24, 1992, the Trea-
sury Department and the IRS pub-
lished a notice of proposed rulemaking
2012–13 I.R.B.611March 26, 2012

(REG–208274–86, 1993–1 C.B. 822) in
theFederal Register(57 FR 61373) under
section 6039E (the 1992 proposed regu-
lations). The 1992 proposed regulations
provided guidance for both passport and
permanent resident applicants to comply
with information reporting rules under
section 6039E, and indicated the respon-
sibilities of specified federal agencies to
provide certain information to the IRS.
No requests were received to testify on
the 1992 proposed regulations and, ac-
cordingly, no public hearing was held.
One written comment letter responding
to the 1992 proposed regulations was
received, which recommended modifica-
tions to Form 9003, “Additional Questions
to be Completed by All Applicants for Per-
manent Residence in the United States”.
Because Form 9003 is no longer in use and
these proposed regulations do not address
information reporting rules for permanent
resident applicants, the comment was not
considered in drafting these regulations.
The proposed regulations do not provide
rules concerning information reporting by
individuals applying to become perma-
nent residents; therefore such individuals
are not within the scope of the proposed
regulations.
The information required to be pro-
vided by passport applicants under section
6039E is collected on the U.S. passport
application form submitted by such appli-
cants to the Department of State.
The proposed regulations also with-
draw the 1992 proposed regulations.
Explanation of Provisions
The proposed regulations set forth rules
concerning information reporting by pass-
port applicants under section 6039E. Sec-
tion 301.6039E–1(a) requires an individ-
ual applying for a U.S. passport (passport
applicant), other than an individual who
applies for an official passport, diplomatic
passport or passport for use on other offi-
cial U.S. governmentbusiness, to provide
certain information with his or her passport
application.
Section 301.6039E–1(b)(1) describes
the required information to be provided
by passport applicants: the applicant’s full
name and, if applicable, previous name;
address of regular or principal place of
residence within the country of residence
and, if different, mailing address; taxpayer
identifying number (TIN); and date of
birth. Section 301.6039E–1(b)(2) pro-
vides that the required information must
be submitted with the passport application,
regardless of where the applicant resides
at the time it is submitted.
Section 301.6039E–1(c) provides guid-
ance on the circumstances under which the
IRS may impose a $500 penalty amount on
any passport applicant who fails to provide
the required information.
Section 301.6039E–1 is proposed to be
applicable to passport applications submit-
ted after the date of publication of the Trea-
sury decision adoptingthese rules as final
regulations in theFederal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these reg-
ulations, and because the regulations do
not impose a collection of information
on small entities, the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Internal Revenue Code, this regulation
has been submitted to the Chief Counsel
for Advocacy of the Small Business
Administration for comment on its impact
on small business.
Comments and Request for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are sub-
mitted timely to the IRS as prescribed in
this preamble under the “Addresses” head-
ing. The IRS and the Treasury Depart-
ment request comments on all aspects of
the proposed rules. All comments will be
available for public inspection and copy-
ing. A public hearing will be scheduled
if requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hearing
will be published in theFederal Register.
Drafting Information
The principal author of these regula-
tions is Quyen P. Huynh of the Office of
Associate Chief Counsel (International).
However, other personnel from the IRS
and the Treasury Department participated
in their development.
*****
Withdrawal of Proposed Regulations
Accordingly, under the author-
ity of 26 U.S.C. 7805, the notice of
proposed rulemaking (INTL–978–86;
REG–208274–86) that was published in
theFederal Registeron December 24,
1992 (57 FR 61373) is withdrawn.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
PART 301— PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 is amended by adding an entry in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6039E–1 also issued under
26 U.S.C. 6039E.
Par. 2. Section 301.6039E–1 is added
to read as follows:
§ 301.6039E–1 Information reporting by
passport applicants.
(a)In general. Every individual who
applies for a U.S. passport (passport appli-
cant), other than an individual who applies
for a U.S. passport for use in diplomatic,
military, or other official U.S. government
business, shall include with his or her pass-
port application the information described
in paragraph (b) of this section.
(b)Required information—(1)In gen-
eral. The information required under para-
graph (a) of this section shall include the
following information:
(i) The passport applicant’s full name
and, if applicable, previous name;
(ii) Address of the passport applicant’s
regular or principal place of residence
within the country of residence and, if
different, mailing address;
March 26, 20126122012–13 I.R.B.

(iii) The passport applicant’s taxpayer
identifying number (TIN), if such a num-
ber has been issued to the passport appli-
cant. A TIN means the individual’s social
security number (SSN) issued by the So-
cial Security Administration. A passport
applicant who does not have an SSN must
enter zeros in the appropriate space on the
passport application; and
(iv) The passport applicant’s date of
birth.
(2)Time for furnishing information.A
passport applicant must provide the infor-
mation required by this section at the time
of submitting his or her passport applica-
tion, whether by personal appearance or
mail, to the Department of State (includ-
ing United States Embassies and Consular
posts abroad).
(c)Penalties—(1)In general.Ifthein-
formation required by paragraph (b)(1) of
this section is incomplete or incorrect, or
the information is not timely filed, then
the passport applicant shall be subject to
a penalty equal to $500 per application.
Before assessing a penalty under this sec-
tion, the IRS will ordinarily provide to the
passport applicant written notice of the po-
tential assessment of the $500 penalty, re-
questing the information being sought, and
offering the applicant an opportunity to ex-
plain why such information was not pro-
vided at the time the passport application
was submitted. A passport applicant has
60 days (90 days if the notice is addressed
to an applicant outside the United States)
to respond to the notice. If, after consider-
ing all the surrounding circumstances, the
passport applicant demonstrates to the sat-
isfaction of the Commissioner or his del-
egate that the failure is due to reasonable
cause and not due to willful neglect, then
the IRS will not assess the penalty.
(2)Example. The following example
illustrates the provisions of paragraph (c)
this section.
Example. C, a citizen of the United States, makes
an error in supplying information on his passport ap-
plication. Based on the nature of the error and C’s
timely response to correct the error after being con-
tacted by the IRS, and considering all the surround-
ing circumstances, the Commissioner concludes that
the mistake is due to reasonable cause and not due to
willful neglect. Accordingly, no penalty is assessed.
(d)Effective/applicability date.The
rules of this section apply to passport
applications submitted after the date of
publication of the 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 January 25,
2012, 8:45 a.m., and published in the issue of the Federal
Register for January 26, 2012, 77 F.R. 3964)
2012–13 I.R.B.613March 26, 2012

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.
March 26, 2012i2012–13 I.R.B.

Numerical Finding List
1
Bulletins 2012–1 through 2012–13
Announcements:
2012-1, 2012-1 I.R.B.249
2012-2, 2012-2 I.R.B.285
2012-3, 2012-4 I.R.B.335
2012-4, 2012-4 I.R.B.335
2012-5, 2012-5 I.R.B.348
2012-6, 2012-6 I.R.B.366
2012-7, 2012-6 I.R.B.367
2012-8, 2012-7 I.R.B.373
2012-9, 2012-7 I.R.B.377
2012-11, 2012-13 I.R.B.611
2012-12, 2012-12 I.R.B.562
Notices:
2012-1, 2012-2 I.R.B.260
2012-3, 2012-3 I.R.B.289
2012-4, 2012-3 I.R.B.290
2012-5, 2012-3 I.R.B.291
2012-6, 2012-3 I.R.B.293
2012-7, 2012-4 I.R.B.308
2012-8, 2012-4 I.R.B.309
2012-9, 2012-4 I.R.B.315
2012-10, 2012-5 I.R.B.343
2012-11, 2012-5 I.R.B.346
2012-12, 2012-6 I.R.B.365
2012-13, 2012-9 I.R.B.421
2012-14, 2012-8 I.R.B.411
2012-15, 2012-9 I.R.B.424
2012-16, 2012-9 I.R.B.427
2012-17, 2012-9 I.R.B.430
2012-18, 2012-10 I.R.B.438
2012-19, 2012-10 I.R.B.440
2012-20, 2012-13 I.R.B.574
2012-21, 2012-10 I.R.B.450
2012-22, 2012-13 I.R.B.576
2012-23, 2012-11 I.R.B.483
2012-24, 2012-13 I.R.B.578
Proposed Regulations:
REG-109369-10, 2012-9 I.R.B.434
REG-110980-10, 2012-13 I.R.B.581
REG-113770-10, 2012-13 I.R.B.587
REG-113903-10, 2012-11 I.R.B.486
REG-120282-10, 2012-11 I.R.B.487
REG-130302-10, 2012-8 I.R.B.412
REG-149625-10, 2012-2 I.R.B.279
REG-102988-11, 2012-4 I.R.B.326
REG-115809-11, 2012-13 I.R.B.598
REG-124627-11, 2012-8 I.R.B.417
REG-130777-11, 2012-5 I.R.B.347
REG-135071-11, 2012-12 I.R.B.561
REG-145474-11, 2012-11 I.R.B.495
Revenue Procedures:
2012-1, 2012-1 I.R.B.1
2012-2, 2012-1 I.R.B.92
2012-3, 2012-1 I.R.B.113
2012-4, 2012-1 I.R.B.125
2012-5, 2012-1 I.R.B.169
2012-6, 2012-1 I.R.B.197
2012-7, 2012-1 I.R.B.232
2012-8, 2012-1 I.R.B.235
2012-9, 2012-2 I.R.B.261
2012-10, 2012-2 I.R.B.273
2012-11, 2012-7 I.R.B.368
2012-12, 2012-2 I.R.B.275
2012-13, 2012-3 I.R.B.295
2012-14, 2012-3 I.R.B.296
2012-15, 2012-7 I.R.B.369
2012-16, 2012-10 I.R.B.452
2012-17, 2012-10 I.R.B.453
2012-18, 2012-10 I.R.B.455
2012-21, 2012-11 I.R.B.484
Revenue Rulings:
2012-1, 2012-2 I.R.B.255
2012-2, 2012-3 I.R.B.286
2012-3, 2012-8 I.R.B.383
2012-4, 2012-8 I.R.B.386
2012-5, 2012-5 I.R.B.337
2012-6, 2012-6 I.R.B.349
2012-7, 2012-6 I.R.B.362
2012-8, 2012-13 I.R.B.563
2012-9, 2012-11 I.R.B.475
Treasury Decisions:
9559, 2012-2 I.R.B.252
9560, 2012-4 I.R.B.299
9561, 2012-5 I.R.B.341
9562, 2012-5 I.R.B.339
9563, 2012-6 I.R.B.354
9565, 2012-8 I.R.B.378
9566, 2012-8 I.R.B.389
9567, 2012-8 I.R.B.395
9568, 2012-12 I.R.B.499
9569, 2012-11 I.R.B.465
9570, 2012-11 I.R.B.477
9571, 2012-11 I.R.B.468
9572, 2012-11 I.R.B.471
9573, 2012-12 I.R.B.498
9574, 2012-12 I.R.B.559
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–27 through 2011–52 is in Internal Revenue Bulletin
2011–52, dated December 27, 2011.
2012–13 I.R.B.iiMarch 26, 2012

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–1 through 2012–13
Announcements:
2002-44
Supplemented by
Notice 2012-13, 2012-9 I.R.B.421
2010-19
Obsoleted by
Ann. 2012-12, 2012-12 I.R.B.562
2011-63
Corrected by
Ann. 2012-9, 2012-7 I.R.B.377
Notices:
2006-87
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2006-99
Superseded in part by
Notice 2012-20, 2012-13 I.R.B.574
2007-25
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2007-77
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2008-107
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2010-27
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2010-88
As modified by Ann. 2011-40, is superseded by
Notice 2012-1, 2012-2 I.R.B.260
2011-8
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2011-28
Superseded by
Notice 2012-9, 2012-4 I.R.B.315
Proposed Regulations:
REG-208274-86
Withdrawn by
Ann. 2012-11, 2012-13 I.R.B.611
Revenue Procedures:
2000-43
Amplified, modified and superseded by
Rev. Proc. 2012-18, 2012-10 I.R.B.455
2003-61
Superseded by
Notice 2012-8, 2012-4 I.R.B.309
2007-44
Modified by
Ann. 2012-3, 2012-4 I.R.B.335
2011-1
Superseded by
Rev. Proc. 2012-1, 2012-1 I.R.B.1
2011-2
Superseded by
Rev. Proc. 2012-2, 2012-1 I.R.B.92
2011-3
Superseded by
Rev. Proc. 2012-3, 2012-1 I.R.B.113
2011-4
Superseded by
Rev. Proc. 2012-4, 2012-1 I.R.B.125
2011-5
Superseded by
Rev. Proc. 2012-5, 2012-1 I.R.B.169
2011-6
Superseded by
Rev. Proc. 2012-6, 2012-1 I.R.B.197
2011-7
Superseded by
Rev. Proc. 2012-7, 2012-1 I.R.B.232
2011-8
Superseded by
Rev. Proc. 2012-8, 2012-1 I.R.B.235
2011-9
Superseded by
Rev. Proc. 2012-9, 2012-2 I.R.B.261
2011-10
Superseded by
Rev. Proc. 2012-10, 2012-2 I.R.B.273
2011-37
Obsoleted in part by
Rev. Proc. 2012-16, 2012-10 I.R.B.452
2011-40
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-49
Modified by
Ann. 2012-3, 2012-4 I.R.B.335
Revenue Procedures— Continued:
2011-50
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-51
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2012-8
Corrected by
Ann. 2012-7, 2012-6 I.R.B.367
Revenue Rulings:
92-19
Supplemented in part by
Rev. Rul. 2012-6, 2012-6 I.R.B.349
2008-40
Modified by
Notice 2012-6, 2012-3 I.R.B.293
2011-1
Modified by
Notice 2012-6, 2012-3 I.R.B.293
Treasury Decision:
9517
Corrected by
Ann. 2012-4, 2012-4 I.R.B.335
Ann. 2012-5, 2012-5 I.R.B.348
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–27 through 2011–52 is in Internal Revenue Bulletin 2011–52, dated December 27,
2011.
March 26, 2012iii2012–13 I.R.B.

INDEX
Internal Revenue Bulletins 2012–1 through
2012–13
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parentheses refer to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Determination letters, issuing procedures (RP 6) 1,197
Full funding limitations, weighted average interest rates, seg-
ment rates for:
January 2012 (Notice 10) 5,343
February 2012 (Notice 16) 9,498
March 2012 (Notice 24) 13,578
Letter rulings:
And determination letters, areas which will not be issued
from:
Associates Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,113
Associate Chief Counsel (International) (RP 7) 1,232
And general information letters, procedures (RP 4) 1,125
User fees, request for letter rulings (RP 8) 1,235; correction
(Ann 7) 6,367
Longevity annuity contracts (REG–115809–11) 13,598
Modifications to minimum present value requirements for par-
tial annuity distribution options under defined benefit pension
plans (REG–110980–10) 13,581
Proposed Regulations:
26 CFR 1.401(a)(9)–5, –6, amended; 1.403(b)–6, amended;
1.408–8, amended; 1.408A–6, amended; 1.6047–2, added;
longevity annuity contracts (REG–115809–11) 13,598
26 CFR 1.417(e)–1, amended; modifications to mini-
mum present value requirements for partial annuity
distribution options under defined benefit pension plans
(REG–110980–10) 13,581
Qualified plans:
Accrued benefits (RR 4) 8,386
Determination letters (Ann 3) 4,335
Group trusts (Notice 6) 3,293
Qualified joint and survivors annuities (RR 3) 8,383
EMPLOYEE PLANS—Cont.
Retirement plans, covered compensation, permitted disparity
(RR 5) 5,337
Technical advice to IRS employees (RP 5) 1,169
EMPLOYMENT TAX
Employer’s annual federal tax return and modifications to the
deposit rules (TD 9566) 8,389
Interim guidance for cost of health care coverage reporting on
Form W-2 (Notice 9) 4,315
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Regulations:
26 CFR 31.6011(a)–1, –4, amended; 31.6011(a)–1T, –4T, re-
moved; 31.6071(a)–1, amended; 31.6302–0, –1, amended;
31.6302–0T, –1T, removed; employer’s annual federal tax
return and modifications to the deposit rules (TD 9566) 8,
389
Technical Advice Memoranda (RP 2) 1,92
Work opportunity tax credit (WOTC) (Notice 13) 9,492
ESTATE TAX
Extension of time to file estate tax return to elect portability of
a deceased spousal unused exclusion amount under section
2010(c) (Notice 21) 10,450
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Technical Advice Memoranda (RP 2) 1,92
EXCISE TAX
Frequently asked questions, Patient Protection and Affordable
Care Act (Notice 17) 9,501
Guidance regarding the repeal of section 163(f)(2)(B) (Notice
20) 13,574
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Proposed Regulations:
26 CFR 48.4191–1, –2, added; 48.4221–1, –2, amended;
48.6416(b)(2)–2, amended; taxable medical devices
(REG–113770–10) 13,587
Taxable medical devices (REG–113770–10) 13,587
Technical Advice Memoranda (RP 2) 1,92
EXEMPT ORGANIZATIONS
Annual notice to donors regarding pending and settled declara-
tory judgment suits (Ann 1) 1,249
Application for recognition as a 501(c)(29) organization (TD
9574) 12,559; (REG–135071–11) 12,561
2012–13 I.R.B.ivMarch 26, 2012

EXEMPT ORGANIZATIONS—Cont.
Certain filing changes for tax-exempt organizations (Notice 4) 3,
290
Letter rulings:
And determination letters:
Areas which will not be issued from Associates Chief
Counsel and Division Counsel (TE/GE) (RP 3) 1,113
Qualified nonprofit health insurance issuers, procedures
(RP 11) 7,368
And general information letters, procedures (RP 4) 1,125
Exemption application determination letter rulings under sec-
tions 501, 509, 4940, and 4942 (RP 10) 2,273
Exemption application determination letter rulings under sec-
tions 501 and 521 (RP 9) 2,261
User fees, request for letter rulings (RP 8) 1,235; correction
(Ann 7) 6,367
Procedures for charitable trusts to obtain Type III supporting or-
ganization classification rulings (Ann 12) 12,562
Proposed Regulations:
26 CFR 1.501(c)(29)–1, added; application for recognition as
a 501(c)(29) organization (REG–135071–11) 12,561
Regulations:
26 CFR 1.1501(c)(29)–1T, added;application for recognition
as a 501(c)(29) organization (TD 9574) 12,559
Technical advice to IRS employees (RP 5) 1,169
GIFT TAX
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,92
INCOME TAX
Adequate notice revenue procedure renewal (RP 15) 7,369
Allocation and apportionment of interest expense (TD 9571) 11,
468; (REG–113903–10) 11,486
Application of the segregation rules to small shareholders
(REG–149625–10) 2,279
Basis reporting by securities brokers and basis determination for
debt instruments and options (REG–102988–11) 4,326
Bonds, national and area median gross income figures guidance
for 2012 (RP 16) 10,452
Changes affecting tax year 2011 filing of information returns
(Ann 6) 6,366
Conduit financing arrangements (TD 9562) 5,339
Continuing education provider and accrediting organization (RP
12) 2,275
Corporate reorganization, guidance on the measurement of con-
tinuity of interest (TD 9565) 8,378; (REG–124627–11) 8,417
Credits:
Iowa credit disaster relief (Notice 7) 4,308
New markets tax credit (TD 9560) 4,299
INCOME TAX—Cont.
Reimbursements under section 1603 of American Recovery
and Reinvestment Tax Act (ARRTA) of 2009 (Notice 23)
11,483
Low-income housing credit:
2012 population figures used for calculations (Notice 22)
13,576
Work opportunity tax credit (WOTC) (Notice 13) 9,492
Current refundings of tax-exemptbonds in certain disaster relief
bond programs (Notice 3) 3,289
Damages received on account of personal physical injuries or
physical sickness (TD 9573) 12,498
Determination of housing cost amounts eligible for exclusion or
deduction for 2012 (Notice 19) 10,440
Disciplinary actions involving attorneys, certified public ac-
counts, enrolled agents, and enrolled actuaries (Ann 8) 7,373
Dividend equivalents from sources within the United States (TD
9527) 11,471; (REG–120282–10) 11,487
Electronic filing of K–1s (RP 17) 10,453
Equitable relief under section 66(c) or section 6015(f) (Notice 8)
4,309
Ex parte communications between appeals and other Internal
Revenue Service employees (RP 18) 10,455
Extension of time to file estate tax return to elect portability of
a deceased spousal unused exclusion amount under section
2010(c) (Notice 21) 10,450
Foreign earned income exclusion, 2011 update (RP 21) 11,484
Forms:
1097, 1098, 3921, 3922, 5498, 8935, and W-2, requirements
for filing electronically; correction to Rev. Proc. 2011–40
(Ann 2) 2,285
Gross income, exclusions, restitution payments under the Traf-
ficking Victims Protection Act of 2000 (Notice 12) 6,365
Guidance regarding foreign base company sales income (TD
9563) 6,354
Guidance regarding the repeal of section 163(f)(2)(B) (Notice
20) 13,574
Health savings accounts (HSAs),Indian health service (Notice
14) 8,411
Information reporting by passport applicants (Ann 11) 13,611
Insurance tax, insurance companies, interest rate tables (RR 6) 6,
349
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
January (RR 2) 3,286
February (RR 7) 6,362
March (RR 9) 11,475
Rates:
Underpayment and overpayments, quarter beginning:
April 1, 2012 (RR 8) 13,563
Letters rulings:
And determination letters, areas which will not be issued
from:
Associate Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,113
Associate Chief Counsel (International) (RP 7) 1,232
March 26, 2012v2012–13 I.R.B.

INCOME TAX—Cont.
And information letters issued by Associate Offices, determi-
nation letters issued by Operating Divisions (RP 1) 1,1
Maximum vehicle values, specialvaluation rules, 2012 (RP 13)
3,295
Physical inspection pilot program (Notice 18) 10,438
Proposed Regulations:
26 CFR 1.275–7, revised; treasury inflation-protected securi-
ties issued at a premium (REG–130777–11) 5,347
26 CFR 1.368–1, amended; corporate reorganizations,
guidance on the measurement of continuity of interest
(REG–124627–11) 8,417
26 CFR 1.382–3, amended; application of section 382 seg-
regation rules to small shareholders (REG–149625–10) 2,
279
26 CFR 1.469–0, amended; 1.469–5, –5T, –9, revised; mate-
rial participation of limited partners (REG–109369–10) 9,
434
26 CFR 1.482–7, amended; use of differential income stream
as an application of the income method and as a consider-
ation in assessing the best method (REG–145474–11) 11,
495
26 CFR 1.861–9, –11, revised; allocation and apportionment
of interest expense (REG–113903–11) 11,486
26 CFR 1.863–7, amended; 1.871–15, –16, added; 1.881–2,
added; 1.892–3, added; 1.894–1, added; 1.1441–2, –3, –4,
–6, –7, amended; 1.1461.1, amended; dividend equivalents
from sources within the United States (REG–120282–10)
11,487
26 CFR 1.6038D–0 thru –8, added; reporting of specified for-
eign financial assets (REG–130302–10) 8,412
26 CFR 1.6045–1, amended; 1.6045A–1, amended;
1.6045B–1, amended; basis reporting by securities brokers
and basis determination for debt instruments and options
(REG–102988–11) 4,326
Publications:
1187, specifications for filing Form 1040–S, foreign person’s
U.S. source income subject to withholding, electronically;
correction (Ann 6) 6,366
1220, specifications for filing Forms 1097, 1098, 3921, 3922,
5498, 8935, and W-2 electronically; correction to Rev.
Proc. 2011–40 (Ann 2) 2,285; correction (Ann 6) 6,366
1239, specifications for filing Form 8027, employer’s annual
information return of tip income and allocated tips, elec-
tronically; correction (Ann 6) 6,366
Recurring item exception (RR 1) 2,255
Regulations:
26 CFR 1.45D–1, added; 1.45D–1, amended; new markets
tax credit (TD 9560) 4,299
26 CFR 1.104–1, revised; damages received on account of
personal physical injuries or physical sickness (TD 9573)
12,498
26 CFR 1.275–7T, added; treasury inflation-protected securi-
ties issued at a premium (TD 9561) 5,341
26 CFR 1.367(a)–1, –1T, amended; 1.482–0, –1, –2, –4, –5,
–8, –9, amended; 1.482–0T, –1T, –2T, –4T, –7T, –8T, –9T,
removed; 1.482–7, added; 1.861–17, amended; 1.6662–6,
INCOME TAX—Cont.
amended; 301.7701–1, amended; 602.101, revised; section
482, methods to determine taxable income in connection
with a cost sharing arrangement (TD 9568) 12,499
26 CFR 1.368–1, amended; 1.368–1T, removed; corporate
reorganizations, guidance on the measurement of continuity
of interest (TD 9565) 8,378
26 CFR 1.482–7, amended; 1.482–7T, added; use of differen-
tial income stream as an application of the income method
and as a consideration in assessing the best method (TD
9569) 11,465
26 CFR 1.861–9T, amended; 1.861–11T, amended; reduc-
tion of foreign tax credit limitation categories under section
904(d) (TD 9571) 11,468
26 CFR 1.863–7, amended; 1.863–7T, added; 1.871–15T,
added; 1.871–16T, added; 1.881–2, amended; 1.881–2T,
added; 1.1441–2, –3, –4, –7, amended; 1.144–2T, –3T, –4T,
–7T, added; 1.1461–1, amended; 1.1461–1T, added; divi-
dend equivalents from sources within the United States (TD
9572) 11,471
26 CFR 1.881–3, amended; conduit financing arrangements
(TD 9562) 5,339
26 CFR 1.954–3, amended; 1.954–3T, removed; guidance re-
garding foreign base company sales income (TD 9563) 6,
354
26 CFR 300.0, amended; 300.12, revised; 300.13, added; user
fee to take the registered tax return preparer competency
examination (TD 9559) 2,252
26 CFR 901.11, amended; regulations governing the perfor-
mance of actuarial services under the Employee Retirement
Income Security Act (ERISA)of 1974; correction (Ann 4)
4,335;correction(Ann5)5,348
26 CFR 1.6038D–0T, thru –8T, added; reporting of specified
foreign financial assets (TD 9567) 8,395
26 CFR 1.6695–2, revised; tax return preparer penalties under
section 6695 (TD 9570) 11,479
Regulations governing the performance of actuarial services un-
der the Employee Retirement Income Security Act (ERISA) of
1974; correction (Ann 4) 4,335; correction (Ann 5) 5,348
Reporting of specified foreign financial assets (TD 9567) 8,395;
(REG–130302–10) 8,412
Safe harbor reporting:
Eligible REMICs required to report on Schedule Q informa-
tion with respect to REMIC assets (Notice 5) 3,291
Guidance for REIT investing in certain REMIC regular and
residual interests (RP 14) 3,296
Section 304 transactions (Notice 15) 9,495
Section 482, methods to determine taxable income in connection
with a cost sharing arrangement (TD 9568) 12,499
Standard mileage rates, 2012 (Notice 1) 2,260
Tax return preparer penalties under section 6695 (TD 9570) 11,
479
Technical Advice Memoranda (TAMs) (RP 2) 1,92
Transitional relief for section 6045B issuer returns and state-
ments for 2011 organizational actions (Notice 11) 5,346
Treasury inflation-protected securities issued at a premium (TD
9561) 5,341; (REG–130777–11) 5,347
2012–13 I.R.B.viMarch 26, 2012

INCOME TAX—Cont.
Use of differential income streamas an application of the income
method and as a consideration in assessing the best method
(TD 9569) 11,465; (REG–145474–11) 11,495
User fee to take the registered tax return preparer competency
examination (TD 9559) 2,252
SELF-EMPLOYMENT TAX
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,92
March 26, 2012vii2012–13 I.R.B.

Internal Revenue Service
W
ashington,DC20224
Official Business
Penalty for Private Use, $300
INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-
tendent of Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly
Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET
You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select
More Topics. Then select Internal Revenue Bulletins.
INTERNAL REVENUE BULLETINS ON CD-ROM
Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be
purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, P.O. Box 979050, St. Louis, MO 63197–9000. Please allow two to
six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE INTERNAL
REVENUE BU
LLETIN
If you have
comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be p
leased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov)
or write t
o the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224.