Internal Revenue Bulletin 2012-51 (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
2-51
December 17, 201
2
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. 2012–33, page 710.
Section 1274A – inflation adjusted numbers for 2013.
This ruling provides the dollar amounts, increased by the 2013
inflation adjustment, for section 1274A of the Code. Rev. Rul.
2011–27 supplemented and superseded.
Notice 2012–69, page 712.
Leave-based donations programs to aid victims of Hurri-
cane Sandy.This notice provides guidance to employers and
employees regarding employer sponsored leave-based dona-
tion programs under which employees elect to forgo vacation,
sick, or personal leave in exchange for cash payments the em-
ployer makes to organizations described in section 170(c) of
theCodeforthereliefofvictimsofHurricaneSandy.
Notice 2012–73, page 713.
This notice announces that the Service and the Treasury De-
partment expect to issue final regulations under section 263 of
the code regarding the deduction and capitalization of expen-
ditures related to tangible property in 2013 and anticipate that
the final regulations will contain changes from the temporary
regulations (T.D. 9564, 76 Fed. Reg. 81060–01 [2012–14
I.R.B. 614]). In addition, the Service and the Treasury Depart-
ment will publish in the Federal Register a Treasury Decision
amending the temporary regulations to apply to taxable years
beginning on or after January 1, 2014, while permitting taxpay-
ers to apply the temporary regulations for taxable years begin-
ning on or after January 1, 2012, and before the applicability
date of the final regulations.
EMPLOYEE PLANS
Notice 2012–70, page 712.
This notice extends the deadline, as set forth in Notice
2011–96, 2011–52 I.R.B. 915, to amend a defined benefit
plan to satisfy the requirements of section 436 of the Code and
provides associated relief from the requirements of section
411(d)(6). Notice 2011–96 modified.
EMPLOYMENT TAX
Announcement 2012–43, page 723.
This document provides that the Service will not assert that
any taxpayer has understated liability for taxes under the Fed-
eral Insurance Contributions Act by reason of a failure to treat
services performed before January 1, 2015, in the Common-
wealth of the Northern Mariana Islands by a resident of the Re-
public of the Philippines as employment under section 3121(b)
of the Code.
Announcement 2012–45, page 724.
This announcement provides notice and information regarding
the revised Voluntary Classification Settlement Program (VCSP)
that provides partial relief from federal employment taxes for
eligible taxpayers that agree to prospectively treat workers as
employees.
(Continued on the next page)
Finding Lists begin on page ii.

Announcement 2012–46, page 725.
This document provides notice and information regarding a
temporary expansion of eligibility for the Voluntary Classifica-
tion Settlement Program (VCSP) that will be available through
June 30, 2013. The temporary eligibility expansion makes a
modified VCSP available to otherwise eligible taxpayers that
have not filed all required Forms 1099 for the previous three
years with respect to the workers to be reclassified. Eligible
taxpayers that take advantage of this limited, temporary eligi-
bility expansion agree to prospectively treat workers as em-
ployees and will receive partial relief from federal employment
taxes.
EXCISE TAX
Notice 2012–74, page 714.
This notice provides guidance on the branded prescription drug
fee under section 9008 of the ACA for the 2013 fee year re-
lated to (1) the submission of Form 8947, “Report of Branded
Prescription Drug Information,” (2) the time and manner for no-
tifying covered entities of their preliminary fee calculation, (3)
the time and manner for submitting error reports for the dis-
pute resolution process, and (4) the time for notifying covered
entities of their final fee calculation. Notice 2011–92 obso-
leted.
ADMINISTRATIVE
Notice 2012–75, page 715.
Application of general welfare exclusion to Indian tribal
government programs.This notice proposes a revenue pro-
cedure that would provide safe harbors under section 61 of the
Code for applying the general welfare exclusion to Indian tribal
government programs. Comments are requested by June 4,
2013.
Rev. Proc. 2012–51, page 719.
This procedure updates Rev. Proc. 2012–15, 2012–7 I.R.B.
369, and identifies circumstances under which the disclosure
on a taxpayer’s income tax return with respect to an item or po-
sition is adequate for the purpose of reducing the understate-
ment of income tax under section 6662(d) of the Code. Rev.
Proc. 2012–15 updated.
Announcement 2012–48, page 729.
This announcement contains corrections and an addition to
Publication 1179,General Rules and Specifications for Sub-
stitute Forms 1096, 1098, 1099, 5498, and Certain Other
Information Returns.Rev. Proc. 2012–38 corrected.
December 17, 20122012–51 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.
2012–51 I.R.B.December 17, 2012

December 17, 20122012–51 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 168.—
Accelerated
Cost Recovery
System
The Internal R
evenue Service and the Treasury
Department ex
pect to issue final regulations regard-
ing the deduct
ion and capitalization of expenditures
related to ta
ngible property in 2013 and anticipate
that the fina
l regulations will contain changes from
the temporar
y regulations (T.D. 9564, 76 Fed. Reg.
81060–01 [20
12–14 I.R.B. 614]). In addition, the
Service and
the Treasury Department will publish in
the Federal
Register a Treasury Decision amending
the tempora
ry regulations to apply to taxable years
beginning o
n or after January 1, 2014, while permit-
ting taxpay
ers to apply the temporary regulations for
taxable ye
ars beginning on or after January 1, 2012,
and before
the applicability date of the final regula-
tions. See
Notice 2012-73, page 713.
Section 483.—Interest on
Certain Deferred Payments
This ruling provides the dollar amounts, increased
by the 2013 inflation adjustment, for section 1274A
of the Code. Rev. Rul. 2011-27 supplemented and
superseded. See Rev. Rul. 2012-33, page 710.
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments Issued for Property
This ruling provides the dollar amounts, increased
by the 2013 inflation adjustment, for section 1274A
of the Code. Rev. Rul. 2011-27 supplemented and
superseded. See Rev. Rul. 2012-33, page 710.
Section 1274A.—Special
Rules for Certain
Transactions Where Stated
Principal Amount Does Not
Exceed $2,800,000
26 CFR 1.1274A–1: Special rules for certain trans-
actions where stated principal amount does not ex-
ceed $2,800,000.
(Also §§ 483, 1274.)
Secti
on 1274A – inflation adjusted
numbe
rs for 2013.This ruling provides
the dollar amo
unts, increased by the 2013
inflation adj
ustment, for section 1274A
of the Code. Re
v. Rul. 2011–27 supple-
mented and su
perseded.
Rev. Rul. 201
2–33
This revenue
ruling provides the dollar
amounts, inc
reased by the 2013 inflation
adjustment,
for § 1274A of the Internal
Revenue Code
.
BACKGROUND
In general,
§§ 483 and 1274 determine
the princip
al amount of a debt instrument
given in con
sideration for the sale or ex-
change of no
npublicly traded property. In
addition, a
ny interest on a debt instrument
subject to
§ 1274 is taken into account un-
der the ori
ginal issue discount provisions
of the Code
. Section 1274A, however,
modifies t
he rules under §§ 483 and 1274
for certa
in types of debt instruments.
In the case
of a “qualified debt instru-
ment,” th
e discount rate used for purposes
of §§ 483 a
nd 1274 may not exceed nine
percent,
compounded semiannually. Sec-
tion 1274
A(b) defines a qualified debt in-
strument
as any debt instrument given in
conside
ration for the sale or exchange of
propert
y(otherthannew§38property
within t
he meaning of § 48(b), as in effect
on the da
y before the date of enactment of
the Reve
nue Reconciliation Act of 1990)
if the s
tated principal amount of the instru-
ment do
es not exceed the amount specified
in § 127
4A(b). For debt instruments aris-
ing out
of sales or exchanges before Jan-
uary 1,
1990, this amount is $2,800,000.
In the c
ase of a “cash method debt in-
strume
nt,” as defined in § 1274A(c), the
borro
wer and lender may elect to use the
cash r
eceipts and disbursements method
of acc
ounting. In particular, for any cash
metho
d debt instrument, § 1274 does not
apply
, and interest on the instrument is ac-
coun
ted for by both the borrower and the
lender under t
he cash method of account-
ing. A cash met
hod debt instrument is
a qualified de
bt instrument that meets the
following ad
ditional requirements: (A) In
the case of in
struments arising out of sales
or exchanges
before January 1, 1990, the
stated princ
ipal amount does not exceed
$2,000,000
; (B) the lender does not use an
accrual met
hod of accounting and is not a
dealer with
respect to the property sold or
exchanged;
(C) § 1274 would have applied
to the debt i
nstrument but for an election
under § 127
4A(c); and (D) an election un-
der § 1274A
(c) is jointly made with respect
to the debt
instrument by the borrower and
the lender
. Section 1.1274A–1(c)(1) of
the Incom
e Tax Regulations provides rules
concerni
ng the time for, and manner of,
making th
is election.
Section 1
274A(d)(2) provides that, for
any debt i
nstrument arising out of a sale
or exchan
ge during any calendar year
after 198
9, the dollar amounts stated in
§ 1274A(
b) and § 1274A(c)(2)(A) are
increas
ed by the inflation adjustment for
the cale
ndar year. Any increase due to
the infl
ation adjustment is rounded to the
neares
t multiple of $100 (or, if the increase
is a mul
tiple of $50 and not of $100, the
increa
se is increased to the nearest mul-
tiple o
f $100). The inflation adjustment
for any
calendar year is the percentage (if
any) b
y which the CPI for the preceding
calen
dar year exceeds the CPI for calendar
year 1
988. Section 1274A(d)(2)(B) de-
fines
the CPI for any calendar year as the
avera
ge of the Consumer Price Index as of
the c
lose of the 12-month period ending
on Se
ptember 30 of that calendar year.
INFL
ATION-ADJUSTED AMOUNTS
UNDE
R § 1274A
For d
ebt instruments arising out of sales
or ex
changes after December 31, 1989, the
infl
ation-adjusted amounts under § 1274A
are s
hown in Table 1.
2012–51 I.R.B.710December 17, 2012

Rev. Rul. 2012–33 Table 1
Inflation-Adjusted Amounts Under Section 1274A
Calendar Year
of Sale
or Exchange
1274A(b) Amount
(qualified debt
instrument)
1274A(c)(2)(A) Amount
(cash method debt
instrument)
1990
$2,933,200$2,095,100
1991
$3,079,600$2,199,700
1992
$3,234,900$2,310,600
1993
$3,332,400$2,380,300
1994
$3,433,500$2,452,500
1995
$3,523,600$2,516,900
1996
$3,622,500$2,587,500
1997
$3,723,800$2,659,900
1998
$3,823,100$2,730,800
1999
$3,885,500$2,775,400
2000
$3,960,100$2,828,700
2001
$4,085,900$2,918,500
2002
$4,217,500$3,012,500
2003
$4,280,800$3,057,700
2004
$4,381,300$3,129,500
2005
$4,483,000$3,202,100
2006
$4,630,300$3,307,400
2007
$4,800,800$3,429,100
2008
$4,913,400$3,509,600
2009
$5,131,700$3,665,500
2010
$5,115,100$3,653,600
2011
$5,201,300$3,715,200
2012
$5,339,300$3,813,800
2013
$5,468,200$3,905,900
Note:These inflation adjustments were computed using the All-Urban, Consumer Price Index, 1982–1984 base, published
by the Bureau of Labor Statistics.
EFFECT ON OTHER DOCUMENTS
Rev. Rul. 2011–27, 2011–48 I.R.B.
805, is supplemented and superseded.
DRAFTING INFORMATION
The author of this revenue ruling is
Steven Harrison of the Office of Associate
Chief Counsel (Financial Institutions
& Products). For further information
regarding this revenue ruling, contact
Mr. Harrison at (202) 622–3930 (not a
toll-free call).
December 17, 20127112012–51 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Treatment of Certain Amounts
Paid to Section 170(c)
Organizations Under Certain
Employer Leave-Based
Donation Programs to Aid
Victims of Hurricane Sandy
Notice 2012–69
In view of the extreme need for chari-
table relief in the aftermath of Hurricane
Sandy, employers may have adopted or
may be considering adopting leave-based
donation programs to aid victims of this
hurricane. Under these programs employ-
ees elect to forgo vacation, sick, or per-
sonal leave in exchange for cash payments
an employer makes to organizations de-
scribed in § 170(c) of the Internal Revenue
Code (§ 170(c) organizations) for the re-
lief of victims of Hurricane Sandy. This
notice provides guidance on the treatment
of these payments for income and employ-
ment tax purposes.
Notice 2005–68, 2005–2 C.B. 622, pro-
vided similar guidance in view of the ex-
treme need for charitable relief follow-
ing Hurricane Katrina.See alsoNotice
2001–69, 2001–2 C.B. 491, as modified
and superseded by Notice 2003–1, 2003–1
C.B. 257, regarding charitable relief fol-
lowing the September 11, 2001, terrorist
attacks. This guidance is provided in view
of the extraordinary damage and destruc-
tion caused by Hurricane Sandy.
The Service will not assert that cash
payments an employer makes to § 170(c)
organizations in exchange for vacation,
sick, or personal leave that its employees
elect to forgo constitute gross income or
wages of the employees if the payments
are: (1) made to the § 170(c) organiza-
tions for the relief of victims of Hurricane
Sandy; and (2) paid to the § 170(c) orga-
nizations before January 1, 2014.
Similarly, the Service will not assert
that the opportunity to make such an elec-
tion results in constructive receipt of gross
income or wages for employees. Elect-
ing employees may not claim a charitable
contribution deduction under § 170 with
respect to the value of forgone leave ex-
cluded from compensation and wages.
The Service will not assert that an em-
ployer will be only permitted to deduct
these cash payments under the rules of
§ 170 rather than the rules of § 162. Cash
payments to which this guidance applies
need not be included in Box 1, 3 (if appli-
cable), or 5 of an employee’s Form W–2,
Wage and Tax Statement.
For further information, please contact
Sheldon A. Iskow of the Office of Asso-
ciate Chief Counsel (Income Tax and Ac-
counting) at (202) 622–4920 (not a toll-
free call).
Notic
e 2012–70
I. Purpose
This notice extends the deadline, as set
forth in Notice 2011–96, 2011–52 I.R.B.
915, to amend a defined benefit plan to sat-
isfy the requirements of § 436 of the Inter-
nal Revenue Code and provides associated
relief from the requirements of § 411(d)(6).
II. B
ackground
Section 401(b) provides a period dur-
ing which a plan may be amended retroac-
tively to comply with the Code’s qualifi-
cation requirements. Section 1.401(b)–1
and Rev. Proc. 2007–44, 2007–2 C.B.
54, describe the disqualifying provisions
that may be amended retroactively and the
remedial amendment period during which
retroactive amendments may be adopted.
The regulations also grant the Commis-
sioner the discretion to extend the remedial
amendment period.
Section 5.05 of Rev. Proc. 2007–44
provides that when there are statutory or
regulatory changes to the plan qualifica-
tion requirements that will impact provi-
sions of the written plan document, the
adoption of an interim amendment will
generally be required by the later of the end
of the plan year in which the change is first
effective or the due date of the employer’s
tax return for the tax year that includes the
date the change is first effective. Pursuant
to section 5.02 of Rev. Proc. 2007–44,
an interim amendment is an amendment
with respect to a plan provision that is a
disqualifying provision because the provi-
sion (1) causes the plan to fail to satisfy
the qualification requirements of the Code
by reason of a change in those require-
ments, or (2) is integral to a changed qual-
ification requirement, but only if the pro-
vision is also integral to a plan provision
that is a disqualifying provision under (1).
A change in a qualification requirement in-
cludes a statutory change or a change in
the requirements provided in regulations
or other guidance published in the Internal
Revenue Bulletin. A disqualifying provi-
sion includes the absence from a plan of a
provision required by or, if applicable, in-
tegral to the applicable change in the qual-
ification requirements of the Code.
The filing of a determination letter ap-
plication for an individually designed plan
generally requires the plan to be restated to
take into account changes in qualification
requirements and guidance that are listed
in the Cumulative List of Changes in Plan
Qualification Requirements in effect at the
time the application is filed. (See sections
4 and 12.03 of Rev. Proc. 2007–44.)
Section 411(d)(6) provides, generally,
that a plan will not satisfy § 401(a) if an
amendment to the plan decreases a par-
ticipant’s accrued benefit. For this pur-
pose, a plan amendment that has the effect
of eliminating or reducing an early retire-
ment benefit or a retirement-type subsidy
or eliminating an optional form of bene-
fit with respect to benefits attributable to
service before the amendment is treated as
reducing accrued benefits. Section 401(b)
does not relieve a plan of the requirement
to satisfy § 411(d)(6) with respect to any
amendment.
Section 1.411(d)–4, A–2(b)(2)(i), pro-
vides that a plan may be amended to elimi-
nate or reduce a § 411(d)(6) protected ben-
efit, within the meaning of § 1.411(d)–4,
A–1, if the following requirements are
met: the amendment constitutes timely
compliance with a change in law affecting
plan qualification; there is an exercise of
§ 7805(b) relief by the Commissioner; and
the elimination or reduction is made only
to the extent necessary to enable the plan
to continue to satisfy the requirements for
qualified plans.
Notice 2011–96 provides a sample plan
amendment that a sponsor of a single em-
ployer defined benefit plan may adopt to
amend the terms of the plan to satisfy the
requirements of § 436, relating to bene-
fit restrictions that apply to underfunded
2012–51 I.R.B.712December 17, 2012

plans. Notice 2011–96 also provides that
the deadline to adopt an interim amend-
ment for § 436 is the latest of:
(1) the last day of the first plan year that
begins on or after January 1, 2012,
(2) the last day of the plan year for
which § 436 is first effective for the plan,
or
(3) the due date (including extensions)
of the employer’s tax return for the tax
year (determined inaccordance with sec-
tion 5.06(2) of Rev. Proc. 2007–44, in the
case of a tax-exempt employer) that con-
tains the first day of the plan year for which
§ 436 is first effective for the plan.
However, if an application for a de-
termination letter for an individually de-
signedplanisfiledonorafterFebruary1,
2012 (or, in the case of an eligible coop-
erative, charity, or PBGC settlement plan
described in section 104 or 105 of the Pen-
sion Protection Act of 2006 (PPA ’06),
Pub. L. 109–280, as amended, the first
day of the plan year for which § 436 is
first effective for the plan, if later), Notice
2011–96 requires the restated plan submit-
ted with the application to incorporate an
interim amendment with respect to § 436.
Pursuant to § 7805(b) and § 1.411(d)–4,
A–2(b)(2)(i), Notice 2011–96 also pro-
vides that a plan amendment adopted with
respect to § 436 that eliminates or reduces
a § 411(d)(6) protected benefit does not
cause a plan to fail to meet the anti-cutback
requirements of § 411(d)(6) if the amend-
ment is adopted by the deadline described
above and the elimination or reduction
is made only to the extent necessary to
enable the plan to meet the requirements
of § 436.
Notice 2011–97, 2011–52 I.R.B. 923,
contains the Cumulative List of Changes
in Plan Qualification Requirements, as
describedinsection4ofRev. Proc.
2007–44, for 2011 (the “2011 Cumula-
tive List”). The 2011 Cumulative List
is to be used by plan sponsors and prac-
titioners submitting determination letter
applications for plans during the period
beginning February 1, 2012, and ending
January 31, 2013. The Service’s review
of plans submitted during this period will
take into account the changes in law and
guidance on the 2011 Cumulative List.
Footnote 2 of Notice 2011–97 provides
that the Service will not consider the
requirements of § 436 in its review of any
determination letter application submitted
during the period beginning February 1,
2012, and ending January 31, 2013.
III. Extension of Amendment Deadline
and Associated Reliefunder § 411(d)(6)
AsnotedinsectionIIofthisnotice,
pursuant to Notice 2011–96, an interim
amendment to satisfy the requirements of
§ 436 would generally be required to be
adopted by the last day of the first plan year
beginning on or after January 1, 2012. If
an application for a determination letter for
theplanwerefiledonorafterFebruary1,
2012, an amendment for § 436 generally
would need to be incorporated in the re-
stated plan that is submitted with the ap-
plication. However, an application for a
determination letter that is filed during the
12-month submission period beginning on
February 1, 2012, would not be reviewed
with respect to the requirements of § 436.
To ensure that a plan amendment for
§436isnotrequiredtobeincludedina
plan that is filed for a determination letter
with the Service when the Service will not
consider such an amendment in its review
of the determination letter application, No-
tice 2011–96 is modified. In particular, the
deadline to adopt aninterim amendment
for § 436 is extended to the latest of:
(a) the last day of the first plan year that
begins on or after January 1, 2013,
(b) the last day of the plan year for
which § 436 is first effective for the plan,
or
(c) the due date (including extensions)
of the employer’s tax return for the tax
year (determined in accordance with sec-
tion 5.06(2) of Rev. Proc. 2007–44, in the
case of a tax-exempt employer) that con-
tains the first day of the plan year for which
§ 436 is first effective for the plan.
However, if an application for a de-
termination letter for an individually de-
signed plan is filed on or after February 1,
2013 (or, in the case of a plan described in
section 104 or 105 of PPA ’06, as amended,
the first day of the plan year for which
§ 436 is first effective for the plan, if later),
the restated plan submitted with the ap-
plication must incorporate an amendment
with respect to § 436. As noted in section
12.03 of Rev. Proc. 2007–44, the filing of
a determination letter application may ac-
celerate the time by which the plan must
be amended to satisfy the requirements of
§ 436.
In addition, pursuant to § 7805(b) and
§ 1.411(d)–4, A–2(b)(2)(i), this notice also
provides that a plan amendment adopted
with respect to § 436 that eliminates or re-
duces a § 411(d)(6) protected benefit does
not cause the plan to fail to meet the anti-
cutback requirements of § 411(d)(6) if the
amendment is adopted by the deadline de-
scribed above and the elimination or re-
duction is made only to the extent neces-
sary to enable the plan to meet the require-
ments of § 436.
IV. Effect on Other Documents
Notice 2011–96 is modified.
Drafting Information
The principal author of this notice is
Angelique Carrington of the Employee
Plans, Tax Exempt and Government
Entities Division. Questions regarding this
revenue procedure may be sent via e-mail
toretirementplanquestions@irs.gov.
Guidance on Regulations
to be Issued Regarding the
Deduction and Capitalization
of Expenditures Related to
Tangible Property
Notice 2012–73
PURPOSE
This notice alerts taxpayers that the
Internal Revenue Service and the Treasury
Department expect to issue final regula-
tions regarding the deduction and capital-
ization of expenditures related to tangible
property in 2013, and that the Service and
the Treasury Department anticipate that
the final regulations will contain changes
from the temporary regulations (T.D.
9564, 76 Fed. Reg. 81060–01 [2012–14
I.R.B. 614]). The Service and the Trea-
sury Department anticipate that the final
regulations will apply to taxable years
beginning on or after January 1, 2014,
and will permit taxpayers to apply the fi-
nal regulations to taxable years beginning
on or after January 1, 2012. This notice
also advises taxpayers that shortly after
publication of this notice the Service and
the Treasury Department will publish in
the Federal Registera Treasury Decision
December 17, 20127132012–51 I.R.B.

amending the temporary regulations to ap-
ply to taxable years beginning on or after
January 1, 2014, while permitting taxpay-
ers to apply the temporary regulations for
taxable years beginning on or after Jan-
uary 1, 2012, and before the applicability
date of the final regulations.
BACKGROUND
On March 10, 2008, the Service and
the Treasury Department issued pro-
posed regulations regarding the deduc-
tion and capitalization of expenditures
related to tangible property (2008 pro-
posed regulations) in theFederal Reg-
ister(REG–168745–03, 73 Fed. Reg.
12838–01 [2008–18 I.R.B. 871]). The
Service and the Treasury Department re-
ceived numerous written comments on
the 2008 proposed regulations and held a
public hearing on June 24, 2008.
On December 27, 2011, after consid-
ering the written comments and the state-
ments at the public hearing, the Service
and the Treasury Department published
temporary regulations regarding the de-
duction and capitalization of expenditures
related to tangible property in theFederal
Register(T.D. 9564). The Service and the
Treasury Department also withdrew the
2008 proposed regulations and published
proposed regulations (REG–168745–03,
76 FR 81128–01 [2012–14 I.R.B. 718])
(the 2011 proposed regulations), which
cross-referenced the text of the temporary
regulations. The temporary regulations
generally apply to taxable years beginning
on or after January 1, 2012.
The Service and the Treasury Depart-
ment received numerous written com-
ments on the 2011 proposed regulations
and held a public hearing on May 9, 2012.
The Service and the Treasury Department
are considering the written comments re-
ceived as well as the statements from the
public hearing.
DISCUSSION
In 2013, the Service and the Treasury
Department expect to publish final regula-
tions on the tax treatment of amounts paid
to acquire, produce, or improve tangible
property under sections 162 and 263(a),
and on the accounting for, and disposition
of, property subject to section 168. The
Service and the Treasury Department ex-
pect the final regulations to apply to tax-
able years beginning on or after January 1,
2014, and to permit taxpayers to apply the
provisions of the final regulations to tax-
able years beginning on or after January 1,
2012.
Recognizing that taxpayers are expend-
ing resources to comply with the tempo-
rary regulations, the Service and the Trea-
sury Department are notifying taxpayers
that certain sections of the temporary regu-
lations, including the sections listed below,
may be revised in a manner that might af-
fect, and in certain cases simplify, taxpay-
ers’ implementation of the rules when the
regulations are issued in final form.
•De MinimisRule: § 1.263(a)–2T(g);
•Dispositions: §§ 1.168(i)–1T and
1.168(i)–8T; and
•Safe Harbor for Routine Maintenance:
§ 1.263(a)–3T(g).
The revisions being contemplated by
the Service and the Treasury Department
take into consideration all comments re-
ceived, including comments requesting re-
lief for small businesses.
Shortly after publication of this notice,
the Service and the Treasury Department
will publish in the Federal Register a Trea-
sury Decision amending the temporary
regulations to apply to taxable years be-
ginning on or after January 1, 2014, while
permitting taxpayers to choose to apply
the temporary regulations to taxable years
beginning on or after January 1, 2012, and
before the applicability date of the final
regulations.
Taxpayers choosing to apply the provi-
sions of the temporary regulations to tax-
able years beginning on or after January 1,
2012, and before the applicability date
of the final regulations may continue
to obtain the automatic consent of the
Commissioner of Internal Revenue to
change their methods of accounting under
Revenue Procedures 2012–19, 2012–14
I.R.B. 689, and 2012–20, 2012–14 I.R.B.
700. For taxpayers choosing to apply
the provisions of the final regulations
to taxable years beginning on or after
January 1, 2012, the Service and the
Treasury Department expect to publish
procedures for obtaining automatic
consent to change a method of accounting
when the final regulations are published.
CONTACT INFORMATION
For further information concerning
this notice, contact Merrill D. Feldstein
or Alan S. Williams, Office of
Associate Chief Counsel (Income Tax
& Accounting), (202) 622–4950 (not a
toll-free call).
Branded Prescription Drug
Fee; Guidance for the 2013
Fee Year
Notice 2012–74
Purpose
This notice provides guidance on the
brandedprescriptiondrugfeeforthe2013
fee year related to (1) the submission of
Form 8947, “Report of Branded Prescrip-
tion Drug Information,” (2) the time and
manner for notifying covered entities of
their preliminary fee calculation, (3) the
time and manner for submitting error re-
ports for the dispute resolution process,
and (4) the time for notifying covered en-
tities of their final fee calculation.
Background
An annual fee on covered entities en-
gaged in the business of manufacturing
or importing branded prescription drugs
is imposed by section 9008 of the Patient
Protection and Affordable Care Act, Pub-
lic Law 111–148 (124 Stat. 119 (2010)),
as amended by section 1404 of the Health
Care and Education Reconciliation Act of
2010, Public Law 111–152 (124 Stat. 1029
(2010)).
The Branded Prescription Drug Fee
Regulations in 26 C.F.R. Part 51, which
were published on August 18, 2011 (76 FR
51245), provide the method by which each
covered entity’s annual fee is calculated.
These regulations also define terms for
the administration of the fee. As relevant
for this notice, § 51.2T(g) definesfee year
as the calendar year in which the fee for
a particular sales year must be paid and
§ 51.2T(m) definessales yearas the sec-
ond calendar year preceding the fee year.
Section 51.3T provides that annually,
each covered entity may submit a com-
pleted Form 8947, “Report of Branded
Prescription Drug Information,” in accor-
dance with the instructions for the form.
2012–51 I.R.B.714December 17, 2012

Generally, the form solicits information
from covered entities on National Drug
Codes, orphan drugs, designated entities,
rebates, and other information specified
by the form or its instructions. The form is
to be filed by the date prescribed in guid-
ance published in the Internal Revenue
Bulletin.
Section 51.6T provides that for each
sales year the IRS will make a prelimi-
nary fee calculation for each covered en-
tity and will notify each covered entity of
this calculation by the date prescribed in
guidance published in the Internal Rev-
enue Bulletin. This notification will also
include additional prescribed information.
As used in this notice, “notice of prelim-
inary fee calculation” includes the addi-
tional prescribed information.
Section 51.7T provides that upon re-
ceipt of its preliminary fee calculation,
each covered entity will have an op-
portunity to dispute this calculation by
submitting to the IRS an error report with
prescribed information. Sections 51.7T(b)
and (c) set out the information that a cov-
ered entity must submit to support each
asserted error. Section 51.7T(d) provides
that each covered entity must submit its
error report(s) in the form and manner that
is prescribed in guidance published in the
Internal Revenue Bulletin. This guidance
will also prescribe the date by which each
covered entity must submit its report(s).
Section 51.8T provides that the IRS will
send each covered entity its final fee calcu-
lation no later than August 31
st
of each fee
year and also provides that covered entities
must pay their fee by September 30
th
of the
fee year.
Submission of Form 8947
For the 2013 fee year, a covered entity
that chooses to submit Form 8947 must file
the form by December 17, 2012.
Time and manner for notifying covered
entities of their preliminary fee calculation
For the 2013 fee year, the IRS will
mail each covered entity a paper notice of
its preliminary fee calculation by April 1,
2013. This mailing will include a National
Drug Code (NDC) attachment (NDC at-
tachment) that lists the covered entity’s
NDCs and the sales data reported to the
IRS by each government program pursuant
to § 51.4T.
A covered entity may request that the
IRS send a CD-ROM with the NDC at-
tachment in Microsoft Excel format. The
covered entity must make this request by
March 15, 2013. This request must be
made either by telephone to Ingrid Tay-
lor at (908) 301–2118 or Mi Lim at (312)
292–3775 (not toll-free calls) or by email
toit.bpd.fee@irs.gov. If a covered entity
makes this request timely, the IRS will
mail the covered entity its notice of pre-
liminary fee calculation on paper and the
NDC attachment on paper and CD-ROM
by April 1, 2013.
Time and manner for submitting error
reports for the dispute resolution process
For the 2013 fee year, a covered en-
tity that chooses to submit an error re-
port regarding its preliminary fee calcula-
tion must mail the error report by May 16,
2013.
When the IRS mails each covered en-
tity a notice of its preliminary fee calcu-
lation by April 1, 2013, the IRS will also
send each covered entity a template on a
CD-ROM that the covered entity must use
to prepare its error report. All completed
templates and the supporting documenta-
tion must be submitted on a CD-ROM and
sent by mail to:
Department of the Treasury
Internal Revenue Service — Branded
Prescription Drug Fee
1973 N. Rulon White Boulevard, Mail
Stop 4916
Ogden, UT 84404
Notification of Final Fee Calculation
In accordance with § 51.8T(a), the IRS
will notify each covered entity of its final
fee calculation for 2013 by August 31,
2013. In accordance with § 51.8T(c),
each covered entity must pay this fee by
September 30, 2013.
Effect on Other Documents
Notice 2011–92, 2011–48 I.R.B. 809,
which provides guidance for the 2012 fee
year, is obsoleted.
Drafting Information
The principal author of this no-
tice is Celia Gabrysh of the Office of
Associate Chief Counsel (Passthroughs
& Special Industries).For further
information regarding this notice, contact
Celia Gabrysh at (202) 622–3130 (not a
toll-free call).
Application of the General
Welfare Exclusion to Indian
Tribal Government Programs
That Provide Benefits to Tribal
Members
Notice 2012–75
PURPOSE
This notice proposes a revenue proce-
dure that would describe general principles
for the general welfare exclusion and pro-
vide safe harbors under which the Inter-
nal Revenue Service would presume that
the individual need requirement of the gen-
eral welfare exclusion is met for benefits
provided under Indian tribal governmen-
tal programs described in sections 5.02
and 5.03 of the proposed revenue proce-
dure, and would not assert that benefits
provided under programs described in sec-
tion 5.03 represent compensation for ser-
vices. The proposed revenue procedure
provides certainty that the value of the ben-
efits described will be excluded from gross
income under the general welfare exclu-
sion, but does not limit the applicability
to Indian tribes of existing guidance hold-
ing that certain benefits are excluded from
gross income under the general welfare ex-
clusion.
Under the general welfare exclusion,
the Service has consistently concluded
that certain payments made to or on be-
half of individuals by governmental units
under legislatively provided social benefit
programs for the promotion of the general
welfare are not included in a recipient’s
gross income. Pursuant to Executive Or-
der 13175, representatives of the Service
and the Treasury Department consulted
with tribal leaders and members of Indian
tribes concerning the application of the
general welfare exclusion to programs
of Indian tribal governments. In Notice
2011–94, 2011–49 I.R.B. 834, the Ser-
vice invited comments concerning the
application of the general welfare exclu-
sion to Indian tribal government programs
that provide benefits to tribal members.
December 17, 20127152012–51 I.R.B.

The Service received over 85 comments
from Indian tribal governments and other
individuals and groups describing vari-
ous Indian tribal government programs
for tribal members and how the general
welfare exclusion should apply to those
programs.
The proposed revenue procedure re-
sponds to the issues addressed in the
written comments and discussed as part
of the consultation process, including the
requirement under the general welfare
exclusion to establish individual need.
Under the proposed revenue procedure,
the Service would conclusively presume
that the individual need requirement is met
for each tribal member, spouse, or depen-
dent receiving a benefit under the housing
programs, educational programs, elder and
disabled programs, other qualifying assis-
tance programs, and cultural and religious
programs described in sections 5.02 and
5.03 of the proposed revenue procedure.
For tribal members receiving a benefit
described in section 5.03, the Service also
would conclusively presume that the ben-
efit does not represent compensation for
services.
Pursuant to Executive Order 13175, the
Service and Treasury Department are is-
suing this proposed revenue procedure to
allow Indian tribes to review the guid-
ance and provide comments prior to the is-
suance of final guidance.
Accordingly, the Service and Treasury
Department request comments on the pro-
posed revenue procedure. Comments may
be submitted in writing on or before June 4,
2013. Comments should be submitted to
Internal Revenue Service, CC:PA:LPD:PR
(Notice 2012–75), Room 5203, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044, or electronically to
Notice.Comments@irscounsel.treas.gov.
Please include “Notice 2012–75”
in the subject line of any electronic
communications.Alternatively,
comments may be hand delivered
between the hours of 8:00 a.m. and
4:00 p.m.Monday to Friday to
CC:PA:LPD:PR (Notice 2012–75),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Ave., NW, Washington,
DC. All comments will be available for
public inspection and copying.
Although the revenue procedure is in
proposed form, until additional guidance
is published taxpayers may apply the pro-
posed revenue procedure in taxable years
for which the period of limitation on re-
fund or credit under § 6511 has not ex-
pired.
PROPOSED REVENUE PROCEDURE
SECTION 1. PURPOSE
This revenue procedure describes gen-
eral principles for the general welfare
exclusion and provides safe harbors under
which the Internal Revenue Service will
presume that the individual need require-
ment of the general welfare exclusion is
met for benefits provided under Indian
tribal governmental programs described
in sections 5.02 and 5.03 of this revenue
procedure, and will not assert that ben-
efits provided under programs described
in section 5.03 of this revenue procedure
represent compensation for services. Con-
sequently, under this revenue procedure,
the Service will not assert that members
of an Indian tribe or their spouses or de-
pendents must include the value of their
benefits described insection5.02or5.03
of this revenue procedure in gross income
under § 61 of the Internal Revenue Code
or that the benefits are subject to the infor-
mation reporting requirements of § 6041.
SECTION 2. BACKGROUND
.01Gross income. Under § 61(a), ex-
cept as otherwise provided in subtitle A,
gross income means all income from what-
ever source derived. Under § 61, Congress
intends to tax all gains or undeniable ac-
cessions to wealth, clearly realized, over
which taxpayers have complete dominion.
Commissioner v. Glenshaw Glass Co.,348
U.S. 426 (1955), 1955–1 C.B. 207.
Section 1.61–1(a) of the Income Tax
Regulations provides that gross income
includes income realized in any form,
whether in money, property, or services.
Income may be realized, therefore, in the
form of services, meals, accommodations,
or other property or in-kind benefits, as
well as in cash.
Indians are citizens subject to the pay-
ment of income taxes.Squire v. Capoe-
man, 351 U.S. 1, 6 (1956), 1956–1 C.B.
605, 607.
.02General welfare exclusion.Pay-
ments made to or on behalf of individuals
or other persons under governmental
programs are included within the broad
definition of gross income under § 61
unless an exclusion applies.SeeNotice
2003–18, 2003–1 C.B. 699; Rev. Rul.
79–356, 1979–2 C.B. 28. The Service
has consistently concluded, however, that
certain payments made to or on behalf of
individuals by governmental units under
legislatively provided social benefit pro-
grams for the promotion of the general
welfare are not included in a recipient’s
gross income (general welfare exclusion).
See,for example, Rev. Rul. 98–19,
1998–1 C.B. 840 (relocation payment au-
thorized by the Housing and Community
Development Act and made by a local
jurisdiction to an individual moving from
a flood-damaged residence to another res-
idence is not includible in the individual’s
gross income); Rev. Rul. 74–205, 1974–1
C.B. 20 (replacement housing payments
to aid individuals displaced from their
homes in acquiring decent, safe, and sani-
tary dwellings of modest standards are not
includible in gross income).
To qualify under the general welfare ex-
clusion, the payments must (1) be made
pursuant to a governmental program, (2)
be for the promotion of the general wel-
fare (that is, based on need), and (3) not
represent compensation for services. Rev.
Rul. 2005–46, 2005–2 C.B. 120; Rev.
Rul. 82–106, 1982–1 C.B. 16; Rev. Rul.
75–246, 1975–1 C.B. 24. Thus, the gen-
eral welfare exclusion applies if “the grant
[is] received under a program requiring the
individual recipient to establish need. [In-
ternal citations omitted.] Grants received
under social welfare programs that [do] not
require recipients to establish individual
need” do not qualify under the general wel-
fare exclusion.Bailey v. Commissioner,
88 T.C. 1293, 1300 (1987),acq.,1989–2
C.B. 1.
Whether a payment qualifies under the
general welfare exclusion is determined
under the federal income tax laws (includ-
ing provisions not in the Internal Revenue
Code), not under the laws of state, local,
sovereign tribal, or foreign governments,
or other federal laws. Thus, an incentive
payment that a United States citizen re-
ceived from the City of Berlin, Germany
under a program to encourage spending
and consumption was not excludable from
the recipient’s gross income simply be-
cause it was a program of a sovereign gov-
ernment when the program did not meet
2012–51 I.R.B.716December 17, 2012

the requirements of the general welfare ex-
clusion under U.S. tax law.Foley v. Com-
missioner, 87 T.C. 605 (1986).
If the activity engaged in is basically the
performance of services, the payments are
compensation for services rendered and
are includible in the gross income of the
recipient under § 61. Thus, Rev. Rul.
74–413, 1974–2 C.B. 333, concludes that
payments to participants in a state program
that provided short-term employment in
disaster relief activities for unemployed in-
dividuals, but not any training or retraining
to help the participants obtain better em-
ployment opportunities, are compensation
includible in gross income under § 61.
In the context of job training programs,
however, the Service has held that pay-
ments that primarily provide job-training
skills to unemployed and underemployed
individuals to enhance their employability
are not compensation for services and,
therefore, are excluded from the gross
income of recipients under the general
welfare exclusion. For example, Rev.
Rul. 68–38, 1968–1 C.B. 446, concludes
that payments to participants in a program
sponsored by an Indian tribal council to
train underemployed and unemployed
residents of the Indian reservation in con-
struction skills to enhance employability
are excluded from the participants’ gross
income under the general welfare exclu-
sion because the basic purpose of the
program is training.
Payments under training programs that
include reasonable and limited allowances
for meals, travel, transportation, subsis-
tence, emergency, and other purposes also
are excluded from gross income under
the general welfare exclusion. Rev. Rul.
75–246(Situation 1). Allowances on the
basis of need to cover certain expenses
incident to the training (such as payments
for auto insurance or to make the trainee’s
presence possible, or expenditures for
work clothing, without which the trainee
could not engage in the work training
experience) also are excluded from gross
income under the general welfare exclu-
sion. Rev. Rul. 75–246(Situation 3).
Benefits qualify under the general wel-
fare exclusion only if they are not lav-
ish or extravagant. For example, replace-
ment housing payments to help displaced
individuals and families acquire dwellings
of modest standards qualify for exclusion
from gross income under the general wel-
fare exclusion. Rev. Rul. 74–205. As-
sistance to help disaster victims meet nec-
essary expenses or serious needs in the
categories of medical or dental, housing,
personal property, transportation, and fu-
neral expenses qualifies for exclusion from
gross income under the general welfare
exclusion, but assistance for nonessential,
luxurious, or decorative items does not
qualify. Rev. Rul. 76–144, 1976–1 C.B.
17. Payments to compensate individuals
for unreimbursed reasonable and neces-
sary personal, living, and family expenses
they incur due to a disaster or emergency
situation also are excluded from gross in-
come under the general welfare exclusion.
Notice 2002–76, 2002–2 C.B. 917 (Q&As
1 and 2).
In general, payments to businesses
do not qualify under the general welfare
exclusion because the payments are not
based on individual or family need.See
Rev. Rul. 2005–46; Notice 2003–18.
Rev. Rul. 77–77, 1977–1 C.B. 11, how-
ever, provides that nonreimbursable grants
made under the Indian Financing Act of
1974 to Indians to expand profit-making
Indian-owned economic enterprises on
or near reservations are excludable from
gross income under the general welfare
exclusion.
.03Application of the general welfare
exclusiontoprogramsofIndiantribalgov-
ernments. Indian tribal governments have
a unique legal status. They have inherent
sovereignty and a government-to-govern-
ment relationship with the United States.
Indian tribes have developed a broad range
of programs to address their unique social,
cultural, and economic issues. In devel-
oping these programs, Indian tribes give
significant consideration to the needs of
the entire community. The general welfare
exclusion applies to payments by Indian
tribal governments no less favorably than
it applies to payments by federal, state, lo-
cal, or foreign governments.
Payments by Indian tribal governments
qualify for the general welfare exclusion
if the payments are (1) made pursuant to
a governmental program of the tribe; (2)
for the promotion of general welfare (that
is, based on individual or family need,
and, uniquely in the case of programs of
Indian tribal governments, to help estab-
lish Indian-owned businesses on or near
a reservation); and (3) not compensation
for services. Rev. Rul. 2005–46; Notice
2003–18; Rev. Rul. 77–77; Rev. Rul.
75–246; Rev. Rul. 82–106. Payments un-
der Indian tribal governmental programs
meeting these requirements qualify for
the general welfare exclusion whether the
revenues that the Indian tribal government
uses to fund the programs derive from
levies, taxes, service fees, or revenues
from tribally-owned businesses. For ex-
ample, general welfare programs may be
funded from casino revenues. However,
per capitapayments to tribal members
of tribal gaming revenues that are subject
to the Indian Gaming Regulatory Act are
gross income under § 61, are subject to
the information reporting and withhold-
ing requirements of§§ 6041 and 3402(r),
and are not excludable from gross income
under the general welfare exclusion or
this revenue procedure.See25 U.S.C.
§§ 2701–2721 and 25 C.F.R. Part 290.
.04Benefits excluded generally from
§61.This revenue procedure does not
address benefits underIndian tribal gov-
ernmental programs that do not fall within
the definition of gross income under § 61.
For example, an Indian tribal govern-
ment may provide benefits in the form of
public libraries or recreational facilities,
which are available for the general public
use of members of the tribe. Like other
taxpayers, members of Indian tribes and
their dependents do not include the value
of these benefits in income regardless of
whether the requirements of the general
welfare exclusion are met because these
benefits are not gross income under § 61.
In addition, this revenue procedure does
not address payments under programs of
Indian tribal governments that qualify for
an exclusion from gross income under a
specific provision of the Internal Revenue
Code or other federal statute. For example,
§ 139D provides that gross income does
not include the value of any qualified In-
dian health care benefit. A qualified Indian
health care benefit includes amounts that
an Indian tribe (as defined in § 45A(c)(6))
provides for the medical care (as used in
§ 213) of a member of the tribe or the
member’s spouse or dependents. Thus,
a payment that an Indian tribe makes to
an Indian medicine man to use traditional
practices for the purpose of treating a tribal
member’s disease may be excludable from
the tribal member’s gross income under
§139D.See Tso v. Commissioner,T.C.M.
1980–399.
December 17, 20127172012–51 I.R.B.

SECTION 3. SCOPE
This revenue procedure applies to In-
dian tribal governments and members of
Indian tribes, their spouses, and depen-
dents.
SECTION 4. DEFINITIONS
The following definitions apply for pur-
poses of this revenue procedure.
.01Indian tribal government.The term
“Indian tribal government” has the same
meaning as in § 7701(a)(40) but for pur-
poses of this revenue procedure includes
agencies or instrumentalities of the Indian
tribal government.
.02Indian tribe.The term “In-
dian tribe” has the same meaning as in
§ 45A(c)(6).
.03Member of an Indian tribe.The
term “member of an Indian tribe” has the
same meaning as in 25 C.F.R. § 290.2.
.04Reservation. The term “reserva-
tion” has the same meaning as in § 168(j).
SECTION 5. APPLICATION
.01Application of general welfare ex-
clusion to Indian tribal government pro-
grams.If section 5.01(1) or 5.01(2) of
this revenue procedure applies, the Service
will not assert that members of an Indian
tribe or their spouses or dependents must
include the value of the applicable bene-
fits in gross income under § 61 or that the
benefits are subject to the information re-
porting requirements of § 6041.
(1) If an Indian tribal government pro-
vides a benefit (whether in cash or in kind)
meeting the criteriaspecified in section
5.02(1) of this revenue procedure and de-
scribed in section 5.02(2) of this revenue
procedure, the Service will conclusively
presume that individual need is met for
each tribal member, spouse, or dependent
of a tribal member receiving the benefit.
(2) If an Indian tribal government pro-
vides a benefit meeting the criteria speci-
fied in section 5.03, the Service will con-
clusively presume that individual need is
met for each tribal member, spouse, or de-
pendent receiving the benefit and that the
benefit does not represent compensation
for services.
.02Benefits provided by a tribe for
which individual need is presumed. Sec-
tion 5.01(1) of this revenue procedure
applies to benefits meeting the general
criteria of section 5.02(1) of this revenue
procedure and described in section 5.02(2)
of this revenue procedure.
(1)General criteria.To qualify for ex-
clusion under this revenue procedure, a
benefit described in section 5.02(2) of this
revenue procedure must meet the follow-
ing requirements—
(a) The benefit is provided pursuant to
a specific Indian tribal government pro-
gram;
(b) The program has written guidelines
that specify how individuals may qualify
for the benefit;
(c) The benefit is available to any tribal
member who satisfies the program guide-
lines;
(d) The distribution of benefits from
the program does not discriminate in favor
of members of the governing body of the
tribe;
(e) The benefit is not compensation for
services; and
(f) The benefit is not lavish or extrava-
gant.
(2)Specific benefits. Benefits provided
under the following programs are benefits
described in this section 5.02(2).
(a)Housing programs. Programs relat-
ing to principal residences that—
(i) Assist in making mortgage or rent
payments for residences on or near a reser-
vation;
(ii) Enhance habitability of housing,
such as by remedying water, sewage, sani-
tation service, or heating or cooling issues;
(iii) Provide basic housing repairs or re-
habilitation; and
(iv) Assist in paying utility bills and
charges (such as water, electricity, and
gas).
(b)Educational programs. Programs
to—
(i) Provide students (including
post-secondary students) transportation to
and from school, tutors, and supplies (in-
cluding clothing, backpacks, laptop com-
puters, musical instruments, and sports
equipment) for usein their studies;
(ii) Provide tuition payments for stu-
dents (including allowances for room and
board for the student, spouse, and de-
pendents) to attend an accredited college
or university, educational seminars, vo-
cational education, technical education,
adult education, continuing education, and
alternative education; and
(iii) Provide job counseling and pro-
grams for which the primary objective is
job placement or training, including al-
lowances for—
(A) Expenses for interviewing or train-
ing away from home (such as travel, auto
expenses, lodging, and food);
(B) Tutoring; and
(C) Necessary clothing for a job inter-
view or training (for example, an interview
suit or a uniform required during a period
of training).
(c)Elder and disabled programs.Pro-
grams for individuals who have attained
age 55 or are disabled that provide—
(i) Meals through home-delivered
meals programs or at a community center;
(ii) Home care such as assistance with
preparing meals or doing chores, or day
care outside the home;
(iii) Local transportation assistance;
(iv) Travel expenses for doctor appoint-
ments or other medical care;
(v) Transportation costs and admission
fees to attend educational, social, or cul-
tural programs offered by the tribe or an-
other tribe; and
(vi) Improvements to adapt housing
to special needs (such as grab bars and
ramps).
(d)Other qualifying assistance pro-
grams.Programs to—
(i) Pay bus, taxi, or public transporta-
tion fares from the Indian reservation to
public facilities (suchas medical facilities
and grocery stores);
(ii) Pay for the cost of transportation
and temporary meals and lodging of a
tribal member, spouse, or dependent while
the tribal member, spouse, or dependent is
receiving medical care away from home;
(iii) Provide assistance to individuals in
exigent circumstances (such as victims of
abuse), including the costs of food, cloth-
ing, shelter, transportation, auto repair
bills, and similar expenses;
(iv) Pay costs for temporary relocation
and shelter for individuals displaced from
their homes (for example, when a home is
destroyed by a fire or natural disaster);
(v) Provide emergency assistance in the
form of bus fare, a hotel room, or meals for
an individual who is stranded off the Indian
reservation; and
(vi) Provide or reimburse the cost of
nonprescription drugs.
(e)Cultural and religious programs.
Programs to—
2012–51 I.R.B.718December 17, 2012

(i) Pay or reimburse travel expenses
(transportation, food, and lodging) to at-
tend an Indian tribe’s cultural, social, or
community activities such as pow-wows,
ceremonies, and traditional dances;
(ii) Pay or reimburse travel expenses
(transportation, food, and lodging) to visit
other Indian reservations or sites that are
culturally and historically significant for
the tribe;
(iii) Pay or reimburse the costs of re-
ceiving instruction about an Indian tribe’s
culture, history, and traditions (for ex-
ample, traditional language, music, and
dances); and
(iv) Pay or reimburse funeral and burial
expenses and expenses of hosting or at-
tending wakes, funerals, burials, or similar
bereavement events.
.03Benefits provided by a tribe that
are presumed not to be compensation for
services.Except as provided in this sec-
tion 5.03, section 5.01 of this revenue
procedure does not apply to benefits that
are compensation for services. However,
section 5.01(2) of this revenue procedure
applies to benefits provided under an In-
dian tribal governmental program that are
items of cultural significance (not lavish
or extravagant) or nominal cash honoraria
provided to medicine men or women,
shamans, or similar religious or spiritual
officials to recognize their participation
in cultural, religious, and social events
(for example, pow-wows, rite of passage
ceremonies, or funerals, wakes, burials, or
other bereavement events). The Service
will conclusively presume that individual
need is met for the tribal officials receiving
these benefits and that the benefits do not
represent compensation for services.
SECTIO
N 6. EFFECTIVE DATE
This revenue procedure is effective for
benefits provided on or after December 6,
2012. Taxpayers may apply this revenue
procedure in taxable years for which the
period of limitation on refund or credit un-
der § 6511 has not expired.
DRAFTING INFORMATION
The principal author of this no-
tice is Sheldon Iskow of the Office of
Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue procedure, please
contact Mr. Iskow at (202) 622–4920 (not
a toll-free call).
26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of cor-
rect tax liability.
(Also: Part 1, §§ 6662, 6694, 1.6662–4, 1.6694–2)
Adequate Notice Revenue
Procedure Renewal
Rev. Proc. 2012–51
SECTION 1. PURPOSE
This revenue procedure updates Rev.
Proc. 2012–15, 2012–7 I.R.B. 369, and
identifies circumstances under which the
disclosure on a taxpayer’s income tax re-
turn with respect to an item or a position
is adequate for the purpose of reducing
the understatement of income tax under
section 6662(d) of the Internal Revenue
Code (relating to the substantial under-
statement aspect of the accuracy-related
penalty), and for the purpose of avoiding
the tax return preparer penalty under sec-
tion 6694(a) (relating to understatements
due to unreasonable positions) with re-
spect to income tax returns. This rev-
enue procedure does not apply with re-
spect to any other penalty provisions (in-
cluding the disregard provisions of the sec-
tion 6662(b)(1) accuracy-related penalty,
the section 6662(i) increased accuracy-re-
lated penalty in the case of nondisclosed
noneconomic substance transactions, and
the section 6662(j) increased accuracy-re-
lated penalty in the case of undisclosed for-
eign financial asset understatements). If
this revenue procedure does not include an
item, disclosure is adequate with respect to
that item only if made on a properly com-
pleted Form 8275 or 8275–R, as appropri-
ate, attached to the return for the year or to
a qualified amended return.
This revenue procedure applies to
any income tax return filed on 2012
tax forms for a taxable year beginning
in 2012, and to any income tax return
filed on 2012 tax forms in 2013 for short
taxable years beginning in 2013.
SECTION 2. CHANGES FROM REV.
PROC. 2012–15
Editorial changes have been made
throughout this revenue procedure. No
substantive changes have been made.
SECTION 3. BACKGROUND
.01 If section 6662 applies to any por-
tion of an underpayment of tax required
to be shown on a return, an amount equal
to 20 percent of the portion of the under-
payment to which the section applies is
added to the tax (the penalty rate is 40 per-
cent in the case of gross valuation misstate-
ments under section 6662(h), nondisclosed
noneconomic substance transactions under
section 6662(i), or undisclosed foreign fi-
nancial asset understatements under sec-
tion 6662(j)). Section 6662(b)(2) applies
to the portion of an underpayment of tax
that is attributable to a substantial under-
statement of income tax.
.02 Section 6662(d)(1) provides that
there is a substantial understatement of
income tax if the amount of the understate-
ment exceeds the greater of 10 percent of
the amount of tax required to be shown on
thereturnforthetaxable year or $5,000.
Section 6662(d)(1)(B) provides a special
rule for corporations. A corporation (other
than an S corporation or a personal holding
company) has a substantial understate-
ment of income tax if the amount of the
understatement exceeds the lesser of (i) 10
percent of the tax required to be shown on
the return for a taxable year (or, if greater,
$10,000) or (ii) $10,000,000. Section
6662(d)(2) defines an understatement as
the excess of the amount of tax required to
be shown on the return for the taxable year
over the amount of the tax that is shown
on the return reduced by any rebate.
.03 In the case of an item not at-
tributable to a tax shelter, section
6662(d)(2)(B)(ii) provides that, if there is
a reasonable basis for the tax treatment of
the item by taxpayer, the amount of the
understatement is reduced by the portion
of the understatement attributable to any
item with respect to which the relevant
facts affecting the item’s tax treatment are
adequately disclosed in the return or in a
statement attached to the return.
.04 Section 6694(a) imposes a penalty
on a tax return preparer who prepares
a return or claim for refund reflecting
December 17, 20127192012–51 I.R.B.

an understatement of liability due to an
“unreasonable position” if the tax return
preparer knew (or reasonably should have
known) of the position. A position (other
than a position with respect to a tax shelter
or a reportable transaction to which sec-
tion 6662A applies) is generally treated as
unreasonable unless (i) there is or was sub-
stantial authority for the position, or (ii)
the position was properly disclosed in ac-
cordance with section 6662(d)(2)(B)(ii)(I)
and had a reasonable basis. If the posi-
tion is with respect to a tax shelter (as
defined in section 6662(d)(2)(C)(ii)) or
a reportable transaction to which section
6662A applies, the position is treated
as unreasonable unless it is reasonable
to believe that the position would more
likely than not be sustained on the merits.
SeeNotice 2009–5, 2009–3 I.R.B. 309
(January 21, 2009), for interim penalty
compliance rules for tax shelter transac-
tions.
.05 In general, this revenue procedure
provides guidance for determining when
disclosure by return is adequate for pur-
poses of section 6662(d)(2)(B)(ii) and sec-
tion 6694(a)(2)(B). For purposes of this
revenue procedure, the taxpayer must fur-
nish all required information in accordance
with the applicable forms and instructions,
and the money amounts entered on these
forms must be verifiable.
.06 Fiscal and short tax year returns. (a)
In general. This revenue procedure may
apply to a return for a fiscal tax year that
begins in 2012 and ends in 2013. This rev-
enue procedure may also apply to a short
year return for a period beginning in 2013
if the return is to be filed before the 2013
forms are available. (Note that individuals
are generally not put in this position, as the
only situation in which a short year arises
is when filing a decedent’s final return for
a fractional part of a year, which is due the
fifteenth day of the fourth month following
the close of the 12-month period that began
with the first day of such fractional part of
the year (after the 2013 form is available).
SeeTreas. Reg. § 1.6072–1(b).) In the
case of fiscal year and short year returns,
the taxpayer must take into account any tax
law changes that are effective for tax years
beginning after December 31, 2012, even
though these changes are not reflected on
the form.
(b) Tax law changes effective after De-
cember 31, 2012. This document does
not take into account the effect of tax law
changes effective for tax years beginning
after December 31, 2012. If a line ref-
erenced in this revenue procedure is af-
fected by such a change and requires ad-
ditional reporting, a taxpayer may have
to file Form 8275,Disclosure Statement,
or Form 8275–R,Regulation Disclosure
Statement, until the Service prescribes cri-
teria for complying with the requirement.
.07 A complete and accurate disclo-
sure of a tax position on the appropriate
year’s Schedule UTP,Uncertain Tax Po-
sition Statement, will be treated as if the
corporation filed a Form 8275 or Form
8275–R regarding the tax position. The fil-
ing of a Form 8275 or Form 8275–R, how-
ever, will not be treated as if the corpora-
tion filed a Schedule UTP.
SECTION 4. PROCEDURE
.01 General
(1) Additional disclosure of facts rel-
evant to, or positions taken with respect
to, issues involving any of the items set
forth below is unnecessary for purposes
of reducing any understatement of income
tax under section 6662(d) (except as other-
wise provided in section 4.02(3) concern-
ing Schedules M–1 and M–3), provided
that the forms and attachments are com-
pleted in a clear manner and in accordance
with their instructions.
(2) The money amounts entered on the
forms must be verifiable, and the informa-
tion on the return must be disclosed in the
manner described below. For purposes of
this revenue procedure, a number is veri-
fiable if, on audit, the taxpayer can prove
the origin of the amount (even if that num-
ber is not ultimately accepted by the Inter-
nal Revenue Service) and the taxpayer can
show good faith in entering that number on
the applicable form.
(3) The disclosure of an amount as pro-
videdinsection4.02belowisnotade-
quate when the understatement arises from
a transaction between related parties. If an
entry may present a legal issue or contro-
versy because of a related-party transac-
tion, then that transaction and the relation-
ship must be disclosed on a Form 8275 or
Form 8275–R.
(4) When the amount of an item is
shown on a line that does not have a
preprinted description identifying that
item (such as on an unnamed line under an
“Other Expense” category), the taxpayer
must clearly identify the item by including
the description on that line. For example,
to disclose a bad debt for a sole propri-
etorship, the words “bad debt” must be
written or typed on the line of Schedule
C that shows the amount of the bad debt.
Also, for Schedule M–3 (Form 1120),
Part II, line 25, Other income (loss) items
with differences, or Part III, line 37, Other
expense/deduction items with differences,
the entry must provide descriptive lan-
guage; for example, “Cost of non-compete
agreement deductible not capitalizable.”
If space limitations on a form do not allow
for an adequate description, the descrip-
tion must be continued on an attachment.
(5) Although a taxpayer may literally
meet the disclosure requirements of this
revenue procedure, the disclosure will
have no effect for purposes of the section
6662 accuracy-related penalty if the item
or position on the return: (1) does not have
a reasonable basis as defined in Treas.
Reg. § 1.6662–3(b)(3); (2) is attributable
to a tax shelter item as defined in section
6662(d)(2); or (3) is not properly sub-
stantiated or the taxpayer failed to keep
adequate books and records with respect
to the item or position.
(6) Disclosure also will have no effect
forpurposesofthesection6694(a)penalty
as applicable to tax return preparers if the
position is with respect to a tax shelter
(as defined in section 6662(d)(2)(C)(ii)) or
a reportable transaction to which section
6662A applies.
.02 Items
(1) Form 1040, Schedule A,Itemized
Deductions:
(a) Medical and Dental Expenses:
Complete lines 1 through 4, supplying all
required information.
(b) Taxes: Complete lines 5 through 9,
supplying all required information. Line 8
must list each type of tax and the amount
paid.
(c) Interest Expenses: Complete lines
10 through 15, supplying all required in-
formation. This section 4.02(1)(c) does
not apply to (i) amounts disallowed under
section 163(d) unless Form 4952,Invest-
ment Interest Expense Deduction,iscom-
pleted, or (ii) amounts disallowed under
section 265.
2012–51 I.R.B.720December 17, 2012

(d) Contributions: Complete lines 16
through 19, supplying all required infor-
mation. Enter the amount of the contribu-
tion reduced by the value of any substan-
tial benefit (goods or services) provided by
the donee organization in consideration, in
whole or in part. Entering the value of
the contribution unreduced by the value
of the benefit received will not constitute
adequate disclosure. If a contribution of
$250 or more is made,this section will
not apply unless a contemporaneous writ-
ten acknowledgment, as required by sec-
tion 170(f)(8), is obtained from the donee
organization. If a contribution of cash of
less than $250 is made, this section will
not apply unless a bank record or writ-
ten communication from the donee, as re-
quired by section 170(f)(17), is obtained
from the donee organization. If a contri-
bution of property other than cash is made
and the amount claimed as a deduction ex-
ceeds $500, attach a properly completed
Form 8283,Noncash Charitable Contri-
butions, to the return. In addition to the
Form 8283, if a contribution of a quali-
fied motor vehicle, boat, or airplane has a
value of more than $500, this section will
not apply unless a contemporaneous writ-
ten acknowledgment, as required by sec-
tion 170(f)(12), is obtained from the donee
organization and attached to the return. An
acknowledgment under section 170(f)(8)
is not required if an acknowledgment un-
der section 170(f)(12) is required.
(e) Casualty and Theft Losses: Com-
plete Form 4684,Casualties and Thefts,
and attach to the return. Each item or ar-
ticle for which a casualty or theft loss is
claimed must be listed on Form 4684.
(2) Certain Trade or Business Expenses
(including, for purposes of this section, the
following six expenses as they relate to the
rental of property):
(a) Casualty and Theft Losses: The pro-
cedure outlined in section 4.02(1)(e) must
be followed.
(b) Legal Expenses: The amount
claimed must be stated. This section does
not apply, however, to amounts prop-
erly characterized ascapital expenditures,
personal expenses, or non-deductible lob-
bying or political expenditures, including
amounts that are required to be (or that
are) amortized over a period of years.
(c) Specific Bad Debt Charge-off: The
amount written off must be stated.
(d) Reasonableness of Officers’ Com-
pensation: Form 1125–E,Compensation
of Officers, must be completed when re-
quired by its instructions. The time de-
voted to business must be expressed as
a percentage as opposed to “part” or “as
needed.” This section does not apply to
“golden parachute” payments, as defined
under section 280G. This section will not
apply to the extent that remuneration paid
or incurred exceeds the employee-remu-
neration deduction limitations under sec-
tion 162(m), if applicable.
(e) Repair Expenses: The amount
claimed must be stated. This section does
not apply, however, to any repair expenses
properly characterized as capital expendi-
tures or personal expenses.
(f) Taxes (other than foreign taxes): The
amount claimed must be stated.
(3) Differences in book and income tax
reporting.
For Schedule M–1 and all Schedules
M–3,includingthoselistedin(a)-(f)be-
low, the information provided must rea-
sonably apprise the Service of the poten-
tial controversy concerning the tax treat-
ment of the item. If the information pro-
vided does not so apprise the Service, a
Form 8275 or Form 8275–R must be used
to adequately disclose the item (see Part II
of the instructions for those forms).
Note: Anitemreportedonalinewith
a pre-printed description, shown on
an attached schedule or “itemized” on
Schedule M–1, may represent the ag-
gregate amount of several transactions
producing that item (i.e., a group of
similar items, such as amounts paid or
incurred for supplies by a taxpayer en-
gaged in business). In some instances,
a potentially controversial item may in-
volve a portion of the aggregate amount
disclosed on the schedule. The Service
will not be reasonably apprised of a
potential controversy by the aggregate
amount disclosed. In these instances,
the taxpayer must use Form 8275 or
Form 8275–R regarding that portion of
the item.
Combining unlike items, whether on
Schedule M–1 or Schedule M–3 (or on an
attachment when directed by the instruc-
tions), will not constitute an adequate dis-
closure.
Additionally, for taxpayers that file the
Schedule M–3 (Form 1120), Schedule B,
Additional Information for Schedule M–3
Filers,must also be completed. For tax-
payers that file the Schedule M–3 (Form
1065), Schedule C,Additional Informa-
tion for Schedule M–3 Filers,mustalsobe
completed. When required, these Sched-
ules are necessary to constitute adequate
disclosure.
(a) Form 1065. Schedule M–3 (Form
1065),Net Income (Loss) Reconciliation
for Certain Partnerships:Column(a),
Income (Loss) per Income Statement,of
Part II (reconciliation of income (loss)
items) and Column (a),Expense per In-
come Statement, of Part III (reconciliation
of expense/deduction items); Column (b),
Temporary Difference, and Column (c),
Permanent Difference,ofPartII(recon-
ciliation of income (loss) items) and Part
III (reconciliation of expense/deduction
items); and Column (d),Income (Loss)
per Tax Return, of Part II (reconciliation
of income (loss) items) and Column (d),
Deduction per Tax Return, of Part III (rec-
onciliation of expense/deduction items).
(b) Form 1120. (i) Schedule M–1,Rec-
onciliation of Income (Loss) per Books
With Income per Return.
(ii) Schedule M–3 (Form 1120),Net
Income (Loss) Reconciliation for Corpo-
rations with Total Assets of $10 Million
or More: Column (a),Income (Loss) per
Income Statement,ofPartII(reconcilia-
tion of income (loss) items) and Column
(a),Expense per Income Statement,of
Part III (reconciliation of expense/de-
duction items); Column (b),Temporary
Difference, and Column (c),Permanent
Difference, of Part II (reconciliation of
income (loss) items) and Part III (recon-
ciliation of expense/deduction items) and
Column (d),Income (Loss) per Tax Re-
turn, of Part II (reconciliation of income
(loss) items); and Column (d),Deduction
per Tax Return, of Part III (reconciliation
of expense/deduction items).
(c) Form 1120–L. Schedule M–3 (Form
1120–L),Net Income (Loss) Reconcilia-
tion for U.S. Life Insurance Companies
With Total Assets of $10 Million or More:
Column (a),Income (Loss) per Income
Statement, of Part II (reconciliation of
income (loss) items) and Column (a),
Expense per Income Statement,ofPart
III (reconciliation of expense/deduction
items); Column (b),Temporary Differ-
ence, and Column (c),Permanent Differ-
ence, of Part II (reconciliation of income
(loss) items) and Part III (reconciliation
December 17, 20127212012–51 I.R.B.

of expense/deduction items); and Col-
umn (d),Income (Loss) per Tax Return,
of Part II (reconciliation of income (loss)
items) and Column (d),Deduction per
Tax Return, of Part III (reconciliation of
expense/deduction items).
(d) Form 1120–PC. Schedule M–3
(Form 1120–PC),Net Income (Loss) Rec-
onciliation for U.S. Property and Casualty
Insurance Companies With Total Assets
of $10 Million or More:Column(a),In-
come (Loss) per Income Statement,of
Part II (reconciliation of income (loss)
items) and Column (a),Expense per In-
come Statement, of Part III (reconciliation
of expense/deduction items); Column (b),
Temporary Difference, and Column (c),
Permanent Difference, of Part II (recon-
ciliation of income (loss) items) and Part
III (reconciliation of expense/deduction
items); and Column (d),Income (Loss)
per Tax Return, of Part II (reconciliation
of income (loss) items) and Column (d),
Deduction per Tax Return, of Part III (rec-
onciliation of expense/deduction items).
(e) Form 1120–S. Schedule M–3 (Form
1120–S),Net Income (Loss) Reconcilia-
tion for S Corporations With Total Assets
of $10 Million or More:Column(a),In-
come (Loss) per Income Statement,of
Part II (reconciliation of income (loss)
items) and Column (a),Expense per In-
come Statement, of Part III (reconciliation
of expense/deduction items); Column (b),
Temporary Difference, and Column (c),
Permanent Difference, of Part II (recon-
ciliation of income (loss) items) and Part
III (reconciliation of expense/deduction
items); and Column (d),Income (Loss)
per Tax Return, of Part II (reconciliation
of income (loss) items) and Column (d),
Deduction per Tax Return, of Part III (rec-
onciliation of expense/deduction items).
(f) Form 1120–F. Schedule M–3 (Form
1120–F),Net Income (Loss) Reconcilia-
tion for Foreign Corporations With Total
Assets of $10 Million or More: Column
(b),Temporary Difference,Column(c),
Permanent Difference,andColumn(d),
Other Permanent Differences for Allo-
cations to Non-ECI and ECI,of Part II
(reconciliation of income (loss) items) and
Part III (reconciliation of expense/deduc-
tion items).
(4) Foreign Tax Items:
(a) International Boycott Transactions:
Transactions disclosed on Form 5713,
International Boycott Report; Schedule
A,International Boycott Factor (Sec-
tion 999(c)(1)); Schedule B,Specifically
Attributable Taxes and Income (Section
999(c)(2)); and Schedule C,Tax Effect
of the International Boycott Provisions,
must be completed when required by their
instructions.
(b) Treaty-Based Return Position:
Transactions and amounts under section
6114 or section 7701(b) as disclosed on
Form 8833,Treaty-Based Return Posi-
tion Disclosure Under Section 6114 or
7701(b), must be completed when required
by its instructions.
(5) Other:
(a) Moving Expenses: Complete Form
3903,Moving Expenses, and attach to the
return.
(b) Employee Business Expenses:
Complete Form 2106,Employee Business
Expenses, or Form 2106–EZ,
Unreim-
bursed Employee Business Expenses,and
attach to the return. This section does not
apply to club dues, or to travel expenses
for any non-employee accompanying the
taxpayer on the trip.
(c) Fuels Credit: Complete Form 4136,
Credit for Federal Tax Paid on Fuels,and
attach to the return.
(d) Investment Credit: Complete Form
3468,Investment Credit, and attach to the
return.
SECTION 5. EFFECTIVE DATE
This revenue procedure applies to any
income tax return filed on a 2012 tax form
for a taxable year beginning in 2012, and
to any income tax return filed on a 2012
taxformin2013forashorttaxableyear
beginning in 2013.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Elizabeth Cowan of the Office
of Associate Chief Counsel (Procedure &
Administration). For further information
regarding this revenue procedure, contact
Branch 2 of Procedure and Administration
at (202) 622–4940 (not a toll-free call).
2012–51 I.R.B.722December 17, 2012

Part IV. Items o
fGeneralInterest
FICA Taxes on W
ages Paid to
Residents of t
he Philippines
for Services P
erformed in
the Commonwe
alth of the
Northern Mar
iana Islands
Announceme
nt 2012–43
This docume
nt provides that the IRS
will not ass
ert that any taxpayer has under-
stated liab
ility for taxes under the Federal
Insurance C
ontributions Act (FICA) by
reason of a f
ailure to treat services per-
formed bef
ore January 1, 2015, in the
Commonwea
lth of the Northern Mari-
ana Island
s (CNMI) by a resident of the
Republic o
f the Philippines as employ-
ment unde
r section 3121(b) of the Internal
Revenue C
ode (Code). Employers must
withhold
and pay FICA taxes on remuner-
ation pai
d to residents of the Philippines
whodono
t hold an H–2 status for services
perform
ed as employees in the CNMI
after De
cember 31, 2014, unless those
workers
are eligible for FICA exemption
based on
some circumstances other than
the exe
mption in section 3121(b)(18).
Section
s 3101 and 3111 of the Code im-
pose FI
CA taxes on wages with respect to
employ
ment. FICA taxes consist of the
Old-Ag
e, Survivors and Disability Insur-
ance ta
x (social security tax) and the Hos-
pital I
nsurance tax (Medicare tax). These
taxes
are imposed on both the employee
and th
e employer. I.R.C. §§ 3101 and
3111.
The te
rm “wages” is defined in sec-
tion 3
121(a) for FICA purposes as all
remun
eration for employment, with cer-
tain s
pecific exceptions. Section 3121(b)
defi
nes the term “employment” to in-
clud
e any service, of whatever nature,
perf
ormed within the United States by an
empl
oyee for the person employing him,
irre
spective of the citizenship or residence
of e
ither, with certain specific exceptions.
The
CNMI is included in the definition
of t
he United States for FICA purposes.
I.R
.C. § 3121(e); Article 6, Section 601(c),
Cov
enant to Establish a Commonwealth of
the
Northern Mariana Islands in Political
Un
ion with the United States (Covenant),
Pu
b. L. No. 94–241, 90 Stat. 263 (cod-
if
ied as amended) at 48 U.S.C. § 1801
no
te (2006);Zhang v. United States,640
F.3d 1358 (Fed
.Cir.2011),cert. denied,
132 S.Ct. 2375
(2012).
Under section
3121(b)(18) of the Code,
services that
residents of the Philippines
perform while
temporarily admitted to
Guam under sec
tion 101(a)(15)(H)(ii)
of the U.S. Imm
igration and Nationality
Act (U.S. INA
) (H–2 status), 8 U.S.C.
§ 1101(a)(15
)(H)(ii), are excepted from
employment f
or FICA tax purposes. Sec-
tion 601(c) o
f the Covenant provides that
“[r]eferen
ces in the Internal Revenue Code
to Guam will
be deemed also to refer to
the Norther
n Mariana Islands, where not
otherwise d
istinctly expressed or mani-
festly inc
ompatible with the intent thereof
or of this C
ovenant.” Section 606(b) of
the Covena
nt states that “those laws of the
United Sta
tes which impose excise and
self-empl
oyment taxes to support or which
provide b
enefits from the United States
Social Se
curitySystem...willbecome
applicab
le to the Northern Mariana Islands
as they ap
ply to Guam.” Therefore, sec-
tion 312
1(b)(18), in combination with the
Covenan
t, provides an exception from em-
ploymen
t for FICA purposes for services
perform
ed by residents of the Philippines
tempora
rily in the CNMI in H–2 status.
Prior to
November 28, 2009, the CNMI
had its o
wn immigration laws with its own
immigr
ation categories, and the U.S. INA
did not
apply in the CNMI (except for very
limite
d purposes not relevant for purposes
of FICA
tax). However, CNMI immi-
gratio
nlawsprovidedaCNMItemporary
work s
tatus under the Northern Mariana
Islan
ds Commonwealth Code, 3 C.M.C.
secti
on 4303(q)(8)(B), which was similar
in som
e ways to H–2 status. Both laws
simil
arly defined a nonimmigrant worker
as on
e temporarily in the United States
or th
e CNMI to perform temporary ser-
vice
s or labor. Therefore, the IRS de-
term
ined that the exemption from FICA
unde
r section 3121(b)(18) applied to res-
ide
nts of the Philippines admitted to the
CNM
IonthesimilarCNMItemporarysta-
tus
and amended Publication 80,Federal
Tax
Guide for Employers in the U.S. Vir-
gin
Islands, Guam, American Samoa, and
the
Commonwealth of the Northern Mari-
an
a Islands, to reflect this position.
On M
ay 8, 2008, Congress enacted the
Co
nsolidated Natural Resources Act of
2008 (CNRA), P
ub. L. 110–229, 122 Stat.
854, which ext
ended federal immigration
laws to the CNM
I. The transition period
for implement
ation of the United States
immigration l
aw in the CNMI began on
November 28,
2009, and is scheduled to
end on Decemb
er 31, 2014. As a result of
the CNRA, CNM
I immigration laws no
longer apply
andCNMIworkpermitsno
longer exis
t. Nonresidents in the CNMI
must apply f
or a federal immigration sta-
tus if they w
ishtoremainintheCNMI.
The CNRA aut
horized nonresidents to
work in the C
NMI for a two-year period
beginning N
ovember 28, 2009, and ending
November 2
7, 2011, if they had received a
transitio
nal conditional permit (commonly
referred t
oasan“umbrellapermit”)from
the CNMI go
vernment as of November 28,
2009. Addi
tionally, the CNRA established
anewComm
onwealth Only Transitional
Worker (C
W) nonimmigrant visa classifi-
cation fo
r workers in the CNMI. The CW
visa clas
sification enables workers who
are inel
igible for other employment-based
nonimmi
grant U.S. visa classifications
(e.g.,H
–2 status) to continue working in
the CNMI
through the end of the transition
period o
n December 31, 2014 (or longer
if the U
.S. Secretary of Labor extends
the CW p
rogram, as is authorized by the
CNRA).
Sectio
n 3121(b)(18) provides an ex-
ceptio
n from “employment” for temporary
servic
es that residents of the Philippines
perfor
m only in H–2 status. Residents of
the Ph
ilippines temporarily present in the
CNMI u
nder any immigration status other
than H
–2 status, including the CW visa
class
ification, are not eligible for the FICA
exemp
tion in section 3121(b)(18). Unless
an in
dividual is eligible for FICA exemp-
tion
based on some other circumstances,
FICA
taxes will apply to remuneration
paid
to residents of the Philippines per-
form
ing services as employees.
Howe
ver, many residents of the Philip-
pine
s currently employed in the CNMI
hav
e been seeking to determine their
pro
per immigration status. As a result,
the
se workers and their employers have
bee
n or are uncertain about their immigra-
tio
n status. For this reason, and in order
to e
ase the CNMI’s transition to federal
im
migration law, the IRS will not assert
December 17, 20127232012–51 I.R.B.

that any taxpayer has understated liability
for FICA taxes by reason of a failure to
treat services performed before January 1,
2015, in the CNMI by a resident of the
Republic of the Philippines as employment
under section 3121(b) of the Code.
However, employers must withhold and
pay FICA taxes on wages paid to residents
of the Philippines who do not hold an H–2
status for services performed in the CNMI
after December 31, 2014, unless those
workers are eligible for FICA exemption
based on some circumstances other than
the exemption at section 3121(b)(18).
The principal author of this announce-
ment is Don Parkinson of the Office of
Associate Chief Counsel (Tax Exempt
& Government Entities). For further
information regarding this announcement,
contact Mr. Parkinson at (202) 622–6040
(not a toll-free call).
Voluntary Classification
Settlement Program
Announcement 2012–45
This document provides notice and
information regarding the revised Volun-
tary Classification Settlement Program
(VCSP) that provides partial relief from
federal employment taxes for eligible tax-
payers that agree to prospectively treat
workers as employees.
I. PURPOSE
This announcement modifies and
supersedes Announcement 2011–64,
2011–41 I.R.B. 503.
In light of feedback received from tax-
payers and taxpayer representatives, the
Internal Revenue Service (IRS) has mod-
ified the VCSP, described in Announce-
ment 2011–64. The VCSP has been modi-
fied to: (1) permit a taxpayer under IRS au-
dit, other than an employment tax audit, to
be eligible to participate in the VCSP; (2)
clarify the current eligibility requirement
that a taxpayer that is a member of an af-
filiated group within the meaning of sec-
tion 1504(a) is not eligible to participate
in the VCSP if any member of the affili-
ated group is under employment tax audit;
(3) clarify that a taxpayer is not eligible to
participate in the VCSP if the taxpayer is
contesting in court the classification of the
class or classes of workers from a previous
audit by the IRS or the Department of La-
bor; and (4) eliminate the requirement that
a taxpayer agree to extend the period of
limitations on assessment of employment
taxes as part of the VCSP closing agree-
ment with the IRS.
The VCSP permits eligible taxpayers
to voluntarily reclassify workers as em-
ployees for federalemployment tax pur-
poses and obtain relief similar to that ob-
tained through the current Classification
Settlement Program (CSP). The VCSP is
optional and provides taxpayers with an
opportunity to voluntarily reclassify their
workers as employees for future tax peri-
ods with limited federal employment tax
liability for the past nonemployee treat-
ment. To participate, the taxpayer must
meet certain eligibility requirements, ap-
plytoparticipateintheVCSP,andenter
into a closing agreement with the IRS.
II. BACKGROUND
Whether a worker is performing ser-
vices as an employee or as an indepen-
dent contractor depends upon the facts and
circumstances and is generally determined
under the common law test of whether the
service recipient has the right to direct and
control the worker as to how to perform the
services. In some factual situations, the de-
termination of the proper worker classifi-
cation status under the common law may
not be clear. For taxpayers under IRS
examination, the current CSP is available
to resolve federal employment tax issues
related to worker misclassification if cer-
tain criteria are met. The CSP permits the
prospective reclassification of workers as
employees, with reduced federal employ-
ment tax liabilities for past nonemployee
treatment. The CSP allows businesses and
tax examiners to resolve the worker clas-
sification issues as early in the administra-
tive process as possible, thereby reducing
taxpayer burden and providing efficiencies
for both the taxpayer and the government.
In order to facilitate voluntary res-
olution of worker classification issues
and achieve the benefits of increased tax
compliance and certainty for taxpayers,
workers and the government, the IRS de-
termined that it would be beneficial to
provide taxpayers with a program that
allows for voluntary reclassification of
workers as employees outside of the ex-
amination context and without the need to
go through normal administrative correc-
tion procedures applicable to employment
taxes. Accordingly, the VCSP was estab-
lished on September 21, 2011, through
Announcement 2011–64.
The VCSP has been well-received and
the IRS has received many applications to
date. Taxpayers and taxpayer represen-
tatives have provided feedback regarding
certain requirements that limit or discour-
age participation in the program. In par-
ticular, they requested that the IRS recon-
sider the requirement that a taxpayer not
currently be under any IRS audit in order to
be eligible and the requirement that a tax-
payer agree to extend the period of limi-
tations on assessment as part of the VCSP
closing agreement with the IRS. The IRS
is modifying these VCSP requirements for
future applications.
III. ELIGIBILITY
The VCSP is available for taxpay-
ers who want to voluntarily change the
prospective classification of their work-
ers. The program applies to taxpayers
who are currently treating their workers
(or a class of workers) as independent
contractors or other nonemployees and
want to prospectively treat the workers
as employees. To be eligible, a taxpayer
must have consistently treated the workers
as nonemployees, and must have filed all
required Forms 1099, consistent with the
nonemployee treatment, for the previous
three years with respect to the workers
to be reclassified. The taxpayer cannot
currently be under employment tax audit
by the IRS. A taxpayer that is a member
of an affiliated group within the meaning
of section 1504(a) is considered to be un-
der employment tax audit for purposes of
the VCSP if any member of the affiliated
group is under employment tax audit. Fur-
thermore, the taxpayer cannot be currently
under audit concerning the classification
of the class or classes of workers by the
Department of Labor or by a state govern-
ment agency.
A taxpayer who was previously audited
by the IRS or the Department of Labor
concerning the classification of the class
or classes of workers is eligible for the
VCSP if the taxpayer has complied with
2012–51 I.R.B.724December 17, 2012

the results of that audit and is not currently
contesting the classification in court.
IV. EFFECT OF THE VCSP
A taxpayer who participates in the
VCSP agrees to prospectively treat the
class or classes of workers identified in
the application as employees for future tax
periods. In exchange, the taxpayer pays
10 percent of the employment tax liability
that would have been due on compensa-
tion paid to the workers being reclassified
for the most recent tax year if those work-
ers were classified as employees for such
year, determined under the reduced rates
of section 3509(a); is not liable for any
interest and penalties on the liability; and
is not subject to an employment tax audit
with respect to the worker classification
of the class or classes of workers for prior
years.
V. APPLICATION PROCESS
Eligible taxpayers who wish to par-
ticipate in the VCSP must submit an
application for participation in the pro-
gram using Form 8952,Application for
Voluntary Classification Settlement Pro-
gram (VCSP).Information about the
VCSP and the application is available on
www.irs.gov. Along with the application,
the taxpayer may provide the name of a
contact or an authorized representative
with a valid Power of Attorney (Form
2848). The IRS retains discretion whether
to accept a taxpayer’s application for the
VCSP. The IRS will contact the taxpayer
or authorized representative to complete
the process once it has reviewed the appli-
cation and verified the taxpayer’s eligibil-
ity. Taxpayers whose application has been
accepted enter into a closing agreement
with the IRS to finalize the terms of the
VCSP and must simultaneously make full
and complete payment of any amount due
under the closing agreement.
VI. DRAFTING INFORMATION
The principal author of this announce-
ment is Ligeia M. Donis of the Office
of the Division Counsel/Associate Chief
Counsel (Tax Exempt & Government
Entities).For further information
regarding this announcement, contact
Don Parkinson at 202–622–6040 (not a
toll-free call).
Voluntary Classification
Settlement Program
— Temporary Eligibility
Expansion
Announcement 2012–46
This document provides notice and in-
formation regarding a temporary expan-
sion of eligibility for the Voluntary Classi-
fication Settlement Program (VCSP) that
will be available through June 30, 2013.
The temporary eligibility expansion makes
a modified VCSP available to taxpayers
who would otherwise be eligible for the
current VCSP but have not filed all re-
quired Forms 1099 for the previous three
years with respect to the workers to be re-
classified. Eligible taxpayers that take ad-
vantage of this limited, temporary eligibil-
ity expansion agree to prospectively treat
workers as employees and will receive par-
tial relief from federal employment taxes.
I. PURPOSE
The Internal Revenue Service (IRS) has
developed a new, temporary initiative to
permit taxpayers who are otherwise eligi-
ble for the VCSP, but have not filed all re-
quired Forms 1099 for the previous three
years with respect to the workers to be re-
classified, to apply for a modified version
of the VCSP, the VCSP Temporary Eligi-
bility Expansion. The VCSP Temporary
Eligibility Expansion is available through
June 30, 2013.
Like the VCSP, the VCSP Temporary
Eligibility Expansion permits eligible tax-
payers to voluntarily reclassify their work-
ers as employees for federal employment
tax purposes and obtain relief similar to
that obtained through the current Classi-
fication Settlement Program (CSP). The
VCSP Temporary Eligibility Expansion is
optional and provides taxpayers with an
opportunity to voluntarily reclassify their
workers as employees for future tax peri-
ods with limited federal employment tax
liability for the past nonemployee treat-
ment. Payment under the VCSP Tempo-
rary Eligibility Expansion is higher than
the payment under the VCSP, but the ben-
efits are otherwise the same for taxpay-
ers that want to voluntarily reclassify their
workers but have not filed all required
Forms 1099 for those workers. To partic-
ipate, the taxpayer must meet certain eli-
gibility requirements, apply to participate
in the VCSP Temporary Eligibility Expan-
sion, and enter into a closing agreement
with the IRS.
II. BACKGROUND
Whether a worker is performing ser-
vices as an employee or as an indepen-
dent contractor depends upon the facts and
circumstances and is generally determined
under the common law test of whether the
service recipient has the right to direct and
control the worker as to how to perform the
services. In some factual situations, the de-
termination of the proper worker classifi-
cation status under the common law may
not be clear. For taxpayers under IRS
examination, the current CSP is available
to resolve federal employment tax issues
related to worker misclassification if cer-
tain criteria are met. The CSP permits the
prospective reclassification of workers as
employees, with reduced federal employ-
ment tax liabilities for past nonemployee
treatment. The CSP allows businesses and
tax examiners to resolve the worker clas-
sification issues as early in the administra-
tive process as possible, thereby reducing
taxpayer burden and providing efficiencies
for both the taxpayer and the government.
In order to facilitate voluntary res-
olution of worker classification issues
and achieve the benefits of increased tax
compliance and certainty for taxpayers,
workers, and the government, the IRS
determined that it would be beneficial to
provide taxpayers with a program that
allows for voluntary reclassification of
workers as employees outside of the ex-
amination context and without the need to
go through normal administrative correc-
tion procedures applicable to employment
taxes. Accordingly, the VCSP was estab-
lished on September 21, 2011, through
Announcement 2011–64, 2011–41 I.R.B.
503. In response to feedback from tax-
payers and taxpayer representatives, the
VCSP is modifiedunder Announcement
2012–45, 2012–51 I.R.B. 724, to (1) per-
mit a taxpayer under IRS audit, other than
an employment tax audit, to be eligible to
participate in the VCSP; (2) clarify the cur-
rent eligibility requirement that a taxpayer
December 17, 20127252012–51 I.R.B.

that is a member of an affiliated group
within the meaning of section 1504(a) is
not eligible to participate in the VCSP if
any member of the affiliated group is un-
der employment tax audit; (3) clarify that a
taxpayer is not eligible to participate in the
VCSP if the taxpayer is contesting in court
the classification of the class or classes
of workers from a previous audit by the
IRS or the Department of Labor; and (4)
eliminate the requirement that a taxpayer
agree to extend the period of limitations on
assessment of employment taxes as part of
the VCSP closing agreement with the IRS.
To be eligible under the VCSP, a tax-
payer must meet certain requirements,
including having consistently treated the
workers as nonemployees and having filed
all required Forms 1099, consistent with
the nonemployee treatment, for the previ-
ous three years with respect to the workers
to be reclassified. Taxpayers that do not
qualify under the VCSP because they have
not filed all required Forms 1099 for the
previous three years requested a similar
program. The IRS decided to provide this
limited, temporary eligibility expansion
through June 30, 2013, to permit taxpay-
ers that have not filed all required Forms
1099 to agree to voluntarily reclassify
their workers prospectively and file and
furnish any required Forms 1099 with re-
spect to the workers being reclassified for
the previous three years.
III. ELIGIBILITY
The VCSP Temporary Eligibility Ex-
pansion is available for taxpayers who
want to voluntarily change the prospec-
tive classification oftheirworkers. The
program applies to taxpayers who are cur-
rently treating their workers (or a class
of workers) as independent contractors or
other nonemployees and want to prospec-
tively treat the workers as employees. To
be eligible, a taxpayer must have consis-
tently treated the workers as nonemploy-
ees. The taxpayer cannot currently be
under employment tax audit by the IRS.
A taxpayer that is a member of an affili-
ated group within the meaning of section
1504(a) is considered to be under employ-
ment tax audit for purposes of the VCSP
Temporary Eligibility Expansion if any
member of the affiliated group is under
employment tax audit. Furthermore, the
taxpayer cannot be currently under audit
concerning the classification of the class
or classes of workers by the Department
of Labor or by a state government agency.
A taxpayer who was previously audited
by the IRS or the Department of Labor
concerning the classification of the class
or classes of workers is eligible for the
VCSP Temporary Eligibility Expansion if
the taxpayer has complied with the results
of that audit and is not currently contesting
the classification in court.
In addition, in order to be eligible to
participate in the VCSP Temporary Eligi-
bility Expansion, a taxpayer must furnish
to the workers and electronically file all
required Forms 1099, consistent with the
nonemployee treatment, with respect to the
workers being reclassified for the previous
three years prior to executing the VCSP
Temporary Eligibility Expansion closing
agreement with the IRS. Taxpayers must
electronically file such Forms 1099 in ac-
cordance with IRS instructions, which will
be provided once the IRS has reviewed the
application and verified that the taxpayer
is otherwise eligible for the VCSP Tempo-
rary Eligibility Expansion, as indicated in
Section V, Application Process.
Taxpayers seeking to participate in the
VCSP Temporary Eligibility Expansion
must submit an application, as indicated
below in Section V, Application Process,
on or before June 30, 2013.
IV. EFFECT OF THE VCSP
TEMPORARY ELIGIBILITY
EXPANSION
A taxpayer who participates in the
VCSP Temporary Eligibility Expansion
agrees to prospectively treat the class or
classes of workers identified in the appli-
cation as employees for future tax periods.
In exchange, the taxpayer pays 25 per-
cent of the employment tax liability that
would have been due on compensation
paid to the workers being reclassified for
the most recent tax year if those workers
were classified as employees for such year,
determined under the reduced rates of sec-
tion 3509(b); pays a reduced penalty, as
discussed below, for unfiled Forms 1099
for the previous three years with respect to
the workers being reclassified; is not liable
for any interest and penalties on the liabil-
ity; and is not subject to an employment
tax audit with respect to the worker classi-
fication of the class or classes of workers
for prior years. The taxpayer must certify
as part of the VCSP Temporary Eligibility
Expansion closing agreement with the IRS
that it has furnished to the workers and
has electronically filed all required Forms
1099 for the previous three years with
respect to the workers being reclassified.
Under the VCSP Temporary Eligibility
Expansion, the penalty for unfiled Forms
1099 is graduated, based on the number of
required Forms 1099 that were not filed for
the previous three years with respect to the
workers being reclassified, up to a max-
imum amount. The worksheet provided
with this announcement provides further
details regarding how the penalty is calcu-
lated.
V. APPLICATION PROCESS
Eligible taxpayers who wish to partic-
ipate in the VCSP Temporary Eligibility
Expansion must submit an application
on or before June 30, 2013, for partici-
pation in the program using Form 8952,
Application for Voluntary Classification
Settlement Program (VCSP). However,
taxpayers seeking to participate in the
VCSP Temporary Eligibility Expansion
should write “VCSP Temporary Eligibility
Expansion” at the top of Form 8952.
Taxpayers seeking to participate in the
VCSP Temporary Eligibility Expansion
must complete all parts of Form 8952,
with the following modifications:
(1) Taxpayers should put a line through
Part V, Line A3, to indicate that Taxpayer
has not satisfied all Form 1099 require-
ments for each of the workers for the 3
preceding calendar years ending before the
date of the application; and
(2) Taxpayers should not complete Part
IV, Payment Calculation, of Form 8952.
Instead, taxpayers should use the work-
sheet provided in this announcement to
calculate their payment under the VCSP
Temporary Eligibility Expansion. Taxpay-
ers should attach the completed worksheet
provided in this announcement to Form
8952.
Information about the VCSP Tempo-
rary Eligibility Expansion and the appli-
cation is available onwww.irs.gov.Along
with the application, the taxpayer may pro-
vide the name of a contact or an autho-
rized representative with a valid Power of
Attorney (Form 2848). The IRS will con-
tact the taxpayer or authorized representa-
2012–51 I.R.B.726December 17, 2012

tive with instructions on how to electroni-
cally file Forms 1099 once it has reviewed
the application and verified that the tax-
payer is otherwise eligible. The IRS re-
tains discretion whether to accept a tax-
payer’s application for the VCSP Tempo-
rary Eligibility Expansion. The taxpayer
must contact the IRS to provide confir-
mation that the taxpayer has electronically
filed Forms 1099 and furnished the forms
to the workers being reclassified. The IRS
will then contact the taxpayer to complete
the process. Taxpayers whose applica-
tion has been accepted enter into a clos-
ing agreement with the IRS to finalize the
terms of the VCSP Temporary Eligibility
Expansion and must simultaneously make
full and complete payment of any amount
due under the closing agreement.
VI. DRAFTING INFORMATION
The principal drafter of this announce-
ment is Ligeia M. Donis of the Office
of the Division Counsel/Associate Chief
Counsel (Tax Exempt & Government En-
tities). For further information regarding
this announcement, contact Ligeia Donis
at 202–622–6040 (not a toll-free call).
December 17, 20127272012–51 I.R.B.

2012–51 I.R.B.728December 17, 2012

Corrections and an Addition
to Publication 1179,General
Rules and Specifications for
Substitute Forms 1096, 1098,
1099, 5498, and Certain
Other Information Returns
Announcement 2012–48
The following announcement lists cor-
rections and one addition for items in Pub-
lication 1179,General Rules and Specifi-
cations for Substitute Forms 1096, 1098,
1099, 5498, and Certain Other Informa-
tion Returns,Revised November 26, 2012.
Corrections
Title of Form 1099–K in subsection
1.1.2 — Which Forms are Covered?
(page 577)
The correct title of the 2012 Form
1099–K is “Payment Card and Third Party
Network Transactions.”
Measurements underExceptionsin
Part 2.1.7 (page 585)
The first sentence in the first complete
paragraph should read “There is a .33 inch
top margin from the top of the corrected
box,anda.2to.25inchrightmargin,with
a +/- 1/20 (0.05) inch tolerance for the right
margin.”
The first sentence in the third complete
paragraph should read “The depth of the
individual trim size of each form on a page
must be 3 2/3 inches, the same depth as the
official form.”
Specification forTypographyin Part
3.2.1 (page 587)
The second sentence should read “All
rules on the document are either 1/2 point
(.007 inch), 1 point (0.015 inch), or 3 point
(0.045).”
Form 1099–B in Part 4.1.2 (page 589)
In section 4.1.2, the 3rd sentence in the
first paragraph of theForm 1099–Bsec-
tion should read “For 2012 dispositions,
the substitute Forms 1099–B may have
up to five separate sections, each with a
heading identifying which securities are
included in the list, and each separately to-
taled.”
Subsection numbers for Section 4.6
— Electronic Delivery of Recipient
Statements (page 597)
TheConsentsubsection under Section
4.6 should be numbered “4.6.2.”
TheFormat, Posting, and Notification
subsection under Section 4.6 should be
numbered “4.6.3.”
Addition
Addition toOMB requirementsunder
subsection 5.2.1 (page 600)
The following 3 numbered statements
are added after the second bullet:
(1) Why the IRS needs the information,
(2) How it will be used, and
(3) Whether or not the information is
required to be furnished to the IRS.
December 17, 20127292012–51 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2012–51 I.R.B.iDecember 17, 2012

Numerical Finding List
1
Bulletins 2012–27 through 2012–51
Announcements:
2012-26, 2012-27 I.R.B.8
2012-27, 2012-27 I.R.B.10
2012-28, 2012-27 I.R.B.10
2012-29, 2012-42 I.R.B.500
2012-30, 2012-34 I.R.B.314
2012-31, 2012-34 I.R.B.315
2012-32, 2012-35 I.R.B.325
2012-33, 2012-35 I.R.B.325
2012-34, 2012-36 I.R.B.334
2012-35, 2012-38 I.R.B.356
2012-36, 2012-46 I.R.B.547
2012-37, 2012-45 I.R.B.543
2012-38, 2012-43 I.R.B.527
2012-39, 2012-48 I.R.B.635
2012-40, 2012-47 I.R.B.556
2012-41, 2012-44 I.R.B.532
2012-42, 2012-47 I.R.B.561
2012-43, 2012-51 I.R.B.723
2012-44, 2012-49 I.R.B.663
2012-45, 2012-51 I.R.B.724
2012-46, 2012-51 I.R.B.725
2012-47, 2012-49 I.R.B.664
2012-48, 2012-51 I.R.B.729
Notices:
2012-2, 2012-45 I.R.B.538
2012-39, 2012-31 I.R.B.95
2012-44, 2012-28 I.R.B.45
2012-45, 2012-29 I.R.B.59
2012-46, 2012-30 I.R.B.86
2012-47, 2012-31 I.R.B.98
2012-48, 2012-31 I.R.B.102
2012-49, 2012-31 I.R.B.119
2012-50, 2012-31 I.R.B.121
2012-51, 2012-33 I.R.B.150
2012-52, 2012-35 I.R.B.317
2012-53, 2012-35 I.R.B.317
2012-55, 2012-36 I.R.B.332
2012-56, 2012-39 I.R.B.370
2012-57, 2012-40 I.R.B.424
2012-58, 2012-41 I.R.B.436
2012-59, 2012-41 I.R.B.443
2012-60, 2012-41 I.R.B.445
2012-61, 2012-42 I.R.B.479
2012-62, 2012-42 I.R.B.489
2012-63, 2012-42 I.R.B.496
2012-64, 2012-44 I.R.B.528
2012-66, 2012-49 I.R.B.639
2012-67, 2012-50 I.R.B.671
2012-68, 2012-48 I.R.B.574
2012-69, 2012-51 I.R.B.712
Notices— Continued:
2012-70, 2012-51 I.R.B.712
2012-71, 2012-50 I.R.B.672
2012-72, 2012-50 I.R.B.673
2012-73, 2012-51 I.R.B.713
2012-74, 2012-51 I.R.B.714
2012-75, 2012-51 I.R.B.715
Proposed Regulations:
REG-126770-06, 2012-38 I.R.B.347
REG-138367-06, 2012-40 I.R.B.426
REG-101812-07, 2012-34 I.R.B.311
REG-134042-07, 2012-27 I.R.B.5
REG-140668-07, 2012-43 I.R.B.501
REG-153627-08, 2012-29 I.R.B.60
REG-136491-09, 2012-35 I.R.B.321
REG-138489-09, 2012-38 I.R.B.355
REG-125570-11, 2012-30 I.R.B.93
REG-130266-11, 2012-32 I.R.B.126
REG-134935-11, 2012-29 I.R.B.64
REG-141832-11, 2012-28 I.R.B.54
REG-107889-12, 2012-28 I.R.B.53
REG-113738-12, 2012-29 I.R.B.66
REG-134974-12, 2012-47 I.R.B.553
Revenue Procedures:
2012-28, 2012-27 I.R.B.4
2012-29, 2012-28 I.R.B.49
2012-30, 2012-33 I.R.B.165
2012-31, 2012-33 I.R.B.256
2012-32, 2012-34 I.R.B.267
2012-33, 2012-34 I.R.B.272
2012-34, 2012-34 I.R.B.280
2012-35, 2012-37 I.R.B.341
2012-36, 2012-39 I.R.B.374
2012-37, 2012-41 I.R.B.449
2012-38, 2012-48 I.R.B.575
2012-39, 2012-41 I.R.B.470
2012-40, 2012-40 I.R.B.424
2012-41, 2012-45 I.R.B.539
2012-42, 2012-46 I.R.B.545
2012-43, 2012-49 I.R.B.643
2012-44, 2012-49 I.R.B.645
2012-45, 2012-49 I.R.B.656
2012-46, 2012-50 I.R.B.673
2012-49, 2012-50 I.R.B.681
2012-50, 2012-50 I.R.B.709
2012-51, 2012-51 I.R.B.719
Revenue Rulings:
2012-19, 2012-28 I.R.B.16
2012-20, 2012-27 I.R.B.1
2012-21, 2012-32 I.R.B.123
2012-22, 2012-48 I.R.B.565
2012-23, 2012-39 I.R.B.359
2012-24, 2012-36 I.R.B.329
Revenue Rulings— Continued:
2012-25, 2012-37 I.R.B.337
2012-26, 2012-39 I.R.B.358
2012-27, 2012-41 I.R.B.435
2012-28, 2012-42 I.R.B.476
2012-29, 2012-42 I.R.B.475
2012-30, 2012-45 I.R.B.534
2012-31, 2012-49 I.R.B.636
2012-33, 2012-51 I.R.B.710
Treasury Decisions:
9591, 2012-28 I.R.B.32
9592, 2012-28 I.R.B.41
9593, 2012-28 I.R.B.17
9594, 2012-29 I.R.B.57
9595, 2012-30 I.R.B.71
9596, 2012-30 I.R.B.84
9597, 2012-34 I.R.B.258
9598, 2012-38 I.R.B.343
9599, 2012-40 I.R.B.417
9600, 2012-47 I.R.B.548
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin
2012–26, dated June 25, 2012.
December 17, 2012ii2012–51 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–27 through 2012–51
Announcements:
83-196
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
85-141
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
2008-105
Modified and superseded by
Ann. 2012-34, 2012-36 I.R.B.334
2012-29
Corrected by
Ann. 2012-41, 2012-44 I.R.B.532
2012-38
Corrected by
Ann. 2012-41, 2012-44 I.R.B.532
Notices:
2009-24
Amplified by
Notice 2012-51, 2012-33 I.R.B.150
2011-81
Superseded by
Notice 2012-63, 2012-42 I.R.B.496
2011-92
Obsoleted by
Notice 2012-74, 2012-51 I.R.B.714
2011-96
Modified by
Notice 2012-70, 2012-51 I.R.B.712
2012-1
Superseded by
Notice 2012-72, 2012-50 I.R.B.673
2012-51
Amplified by
Notice 2012-51, 2012-33 I.R.B.150
Proposed Regulations:
REG-100276-97
Withdrawn by
Ann. 2012-27, 2012-27 I.R.B.10
REG-136491-09
Hearing cancelled by
Ann. 2012-39, 2012-48 I.R.B.635
REG-130266-11
Hearing scheduled by
Ann. 2012-29, 2012-42 I.R.B.500
Ann. 2012-38, 2012-43 I.R.B.527
Proposed Regulations— Continued:
Hearing rescheduled by
Ann. 2012-41, 2012-44 I.R.B.532
Revenue Procedures:
94-22
Modified and superseded by
Rev. Proc. 2012-35, 2012-37 I.R.B.341
95-15
Superseded by
Rev. Proc. 2012-31, 2012-33 I.R.B.256
97-27
Modified by
Rev. Proc. 2012-39, 2012-41 I.R.B.470
98-32
Modified and superseded by
Rev. Proc. 2012-33, 2012-34 I.R.B.272
2007-38
Modified and superseded by
Rev. Proc. 2012-32, 2012-34 I.R.B.267
2007-44
Modified by
Rev. Proc. 2012-50, 2012-50 I.R.B.709
2010-38
Superseded by
Rev. Proc. 2012-49, 2012-50 I.R.B.681
2011-14
Clarified and modified by
Rev. Proc. 2012-39, 2012-41 I.R.B.470
2011-39
Superseded by
Rev. Proc. 2012-46, 2012-50 I.R.B.673
2011-40
Superseded by
Rev. Proc. 2012-30, 2012-33 I.R.B.165
2011-50
Superseded by
Rev. Proc. 2012-36, 2012-39 I.R.B.374
2011-60
Superseded by
Rev. Proc. 2012-38, 2012-48 I.R.B.575
2012-15
Updated by
Rev. Proc. 2012-51, 2012-51 I.R.B.719
2012-30
Corrected and clarified by
Ann. 2012-36, 2012-46 I.R.B.547
2012-38
Corrected by
Ann. 2012-48, 2012-51 I.R.B.729
Revenue Rulings:
2011-27
Supplemented and superseded by
Rev. Rul. 2012-33, 2012-51 I.R.B.710
Treasury Decisions:
9752
Corrected by
Ann. 2012-35, 2012-38 I.R.B.356
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin 2012–26, dated June 25, 2012.
2012–51 I.R.B.iiiDecember 17, 2012

Internal Revenue Service
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